10-K 1 iare1231201210-k.htm 10-K IARE 12.31.2012 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
 
 
 
FORM 10-K
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE TRANSITION PERIOD FROM            TO          

COMMISSION FILE NUMBER: 000-51609
 
 
 
 
 
 
Inland American Real Estate Trust, Inc.
(Exact name of registrant as specified in its charter)
Maryland
 
34-2019608
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
2901 Butterfield Road, Oak Brook, Illinois
 
60523
(Address of principal executive offices)
 
(Zip Code)
630-218-8000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $0.001 par value per share
(Title of Class)
 
 
 
 
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x   No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. (See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act).
Large accelerated filer
¨
  
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
x
  
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
There is no established market for the registrant’s shares of common stock. The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2012 (the last business day of the registrant’s most recently completed second quarter) was approximately $6,327,641,846, based on the estimated per share value of $7.22, as established by the registrant on December 29, 2011.
As of March 1, 2013, there were 892,531,979 shares of the registrant’s common stock outstanding.


INLAND AMERICAN REAL ESTATE TRUST, INC.
TABLE OF CONTENTS
 
 
 
 
 
 
Page
 
 
 
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
 
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
 
 
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
 
 
 
Item 15.
 
This Annual Report on Form 10-K includes references to certain trademarks. Courtyard by Marriott®, Marriott®, Marriott Suites®, Residence Inn by Marriott® and SpringHill Suites by Marriott® trademarks are the property of Marriott International, Inc. (“Marriott”) or one of its affiliates. Doubletree®, Embassy Suites®, Hampton Inn®, Hilton Garden Inn®, Hilton Hotels® and Homewood Suites by Hilton® trademarks are the property of Hilton Hotels Corporation (“Hilton”) or one or more of its affiliates. Hyatt Place® trademark is the property of Hyatt Corporation (“Hyatt”). Intercontinental Hotels ® trademark is the property of IHG. Wyndham ® and Baymont Inn & Suites ® trademarks are the property of Wyndham Worldwide. Comfort Inn ® trademark is the property of Choice Hotels International. Fairmont Hotels and Resorts is a trademark. The Aloft service name is the property of Starwood. For convenience, the applicable trademark or service mark symbol has been omitted but will be deemed to be included wherever the above-referenced terms are used.
 



PART I

Item 1. Business
General
Inland American Real Estate Trust, Inc., a Maryland corporation, was incorporated in October 2004. We have elected to be taxed, and currently qualify, as a real estate investment trust (“REIT”) for federal tax purposes. We acquire, own, operate and develop a diversified portfolio of commercial real estate, including retail, multi-family, industrial, lodging, and office properties, located in the United States. In addition, we own assets through joint ventures in which we do not own a controlling interest, as well as properties in development. We also invest in marketable securities and other assets.
As of December 31, 2012, our portfolio was comprised of 794 properties representing 45.6 million square feet of retail, office and industrial space, 5,311 multi-family units, 5,212 student housing beds and 16,345 hotel rooms. We believe that a diversified portfolio balances our risk exposure compared to a portfolio with a single asset class. During the economic recession and ongoing sluggish recovery, we believe that a diversified portfolio like ours provides our stockholders with significant benefits and reduces their risk relative to a portfolio concentrated on one property sector or properties located in one geographical area or region. Because we believe that most real estate markets are cyclical in nature, we plan to maintain our diversified portfolio but focus on three specific real estate segments, lodging, student housing and multi-tenant retail. We believe our diversity and size will allow us to continue to effectively deploy capital into sectors and locations where the underlying investment fundamentals are relatively strong. The following chart depicts the allocation of our real estate assets for each segment, as of December 31, 2012, based on undepreciated assets within our property portfolio.

Strategy and Objectives
We have defined our long-term portfolio strategy by focusing our diversified assets in three specific real estate asset classes - retail, lodging and student housing. We believe this strategy presents the best opportunity to capitalize on current market trends in commercial real estate and realize income growth in these sectors. A key outcome of our strategy will be an opportunity to explore multiple liquidity events by segment.
Also part of our strategy is to improve the overall quality of our retail, lodging and student housing segments for long-term growth through selective asset acquisition and sales. We continue to use our expertise to capitalize on opportunities in the real estate industry. We believe our capacity to identify and react to investment opportunities is one of our biggest strengths. This strategy will take time as we dispose of less strategic assets and rotate capital into our targeted segments. Our focus has been, and will continue to be, maximizing stockholder value over the long-term.
During the execution of our strategy, we will focus on maintaining a stable income stream to provide a sustainable monthly distribution to our shareholders.

1

Our three objectives in the execution of our strategy are:
•
Sustaining a monthly stockholder distribution while maintaining capital preservation
•
Tailoring our portfolio to lodging, student housing and retail by expanding and enhancing these growth portfolios
•
Positioning for stockholder liquidity through multiple liquidity events by segment type
2012 Highlights
Distributions
We have paid a monthly cash distribution to our stockholders which totaled in the aggregate $439.2 million for the year ended December 31, 2012, which was equal to $0.50 per share for 2012, assuming that a share was outstanding the entire year. The distributions paid for the year ended December 31, 2012 were funded from cash flow from operations, distributions from unconsolidated joint ventures and gains on sale of properties.
Investing Activities
Our acquisition and disposition activities in 2012 highlight our move to divesting of less strategic assets and redeploying the capital into our long-term strategic segments, lodging, student housing and multi-tenant retail. We acquired seven upper upscale lodging properties consisting of 2,624 rooms for $525.1 million. We acquired two student housing properties and placed two student housing properties into service for a total of 2,566 beds for $171.9 million. In addition, we acquired two multi-tenant retail properties and expanded two existing multi-tenant retail properties consisting of 554,026 square feet for $106.9 million. As part of our strategy to realign our asset segments with higher performing assets, we sold 166 properties for a gross disposition price of $603.5 million, including 143 bank branches (142 retail branches and one office branch), four retail properties, thirteen midscale lodging properties, two industrial properties, and four multi-family properties.
Financing Activities
We successfully refinanced our 2012 maturities of approximately $671.4 million and placed debt on new and existing properties. We were able to obtain favorable rates while still maintaining a manageable debt maturity schedule for future years. As of December 31, 2012, we had mortgage debt of approximately $5.9 billion and have a weighted average interest rate of 5.1% per annum. Our debt maturities for 2013 are $882.9 million.
Operating Results
We experienced organic growth in our lodging and multi-family segments as our same store net operating income results increased 6.7% and 9.2%, respectively, from the year ended December 31, 2011 to 2012. These increases are due to high occupancy and RevPAR and rental rate increases, in the lodging and multi-family segments, respectively. Our retail and industrial segments improved slightly due to maintaining occupancy rates and contractual rental rates. Our office segment remained unchanged as compared to the prior year with a stable occupancy rate.

The following table represents our same store net operating income for the years ended December 31, 2012 and 2011. Net operating income is calculated in Item 7 of this Annual Report on Form 10-K.
 
2012 Net
operating
income
 
2011 Net
operating
income
 
Increase
(decrease)
 
Increase
(decrease)
 
Economic
Occupancy
as of
December 31,
2012
 
Economic
Occupancy
as of
December 31,
2011
Retail
$
254,082

 
$
250,385

 
$
3,697

 
1.5
%
 
93
%
 
94
%
Lodging
169,532

 
158,817

 
10,715

 
6.7
%
 
73
%
 
72
%
Office
132,229

 
132,050

 
179

 
0.1
%
 
93
%
 
93
%
Industrial
77,094

 
75,988

 
1,106

 
1.5
%
 
97
%
 
98
%
Multi-family
46,949

 
42,984

 
3,965

 
9.2
%
 
93
%
 
93
%
 
$
679,886

 
$
660,224

 
$
19,662

 
3.0
%
 
 
 
 

In 2013, we expect similar increases in operating results compared to 2012 in our lodging and multi-family portfolios due to the growth projected in these segments. As occupancy rates increase close to peak levels in lodging and multi-family, the ability to increase rooms rates and rental rates, respectively, will help grow our revenue for each segment in 2013. We believe that our

2

stable occupancy in our retail, office, and industrial portfolios will result in consistent operating performances in these segments.

Effective July 1, 2012, the Company entered into new master management agreements with its property managers, and the subsidiaries of the Company that directly own its properties entered into new property management agreements with the property managers. Each agreement has an initial term ending December 31, 2013, which term will automatically be renewed until June 30, 2015 unless either party to the agreement provides written notice of cancellation before June 30, 2013. Under the agreements, the Company will pay the property managers monthly management fees by property type, as follows: (i) for any bank branch facility (office or retail), 2.50% of the gross income generated by the property; (ii) for any multi-tenant industrial property, 4.00% of the gross income generated by the property; (iii) for any multi-family property, 3.75% of the gross income generated by the property; (iv) for any multi-tenant office property, 3.75% of the gross income generated by the property; (v) for any multi-tenant retail property, 4.50% of the gross income generated by the property; (vi) for any single-tenant industrial property, 2.25% of the gross income generated by the property; (vii) for any single-tenant office property, 2.90% of the gross income generated by the property; and (viii) for any single-tenant retail property, 2.90% of the gross income generated by the property.
Segment Data
We have five business segments: Retail, Lodging, Office, Industrial, and Multi-family. We evaluate segment performance primarily based on net operating income. Net operating income of the segments does not include interest expense, depreciation and amortization, general and administrative expenses, or interest and other investment income from corporate investments. The non-segmented assets include our cash and cash equivalents, investment in marketable securities, construction in progress, and investment in unconsolidated entities. Information related to our business segments, including a measure of profits or loss and revenues from external customers for each of the last three fiscal years and total assets for each of the last two fiscal years, is set forth in Note 14 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.
Significant Tenants
For the year ended December 31, 2012, we generated more than 18% of our rental revenue (excluding lodging, multi-family, and development properties) from two tenants, SunTrust Banks, Inc. and AT&T, Inc. SunTrust Banks, Inc. leases multiple properties that we own and that are located throughout the United States. These properties collectively generated approximately 10% of our rental revenue for the year ended December 31, 2012. For the year ended December 31, 2012, approximately 8% of our rental revenue was generated by three properties leased to AT&T, Inc.
Tax Status
We have elected to be taxed as a REIT, under Sections 856 through 860 of the Internal Revenue Code of 1986 as amended (the “Code”) beginning with the tax year ended December 31, 2005. Because we qualify for taxation as a REIT, we generally will not be subject to federal income tax on taxable income that is distributed to stockholders. If we fail to qualify as a REIT in any taxable year, without the benefit of certain relief provisions, we will be subject to federal and state income tax on our taxable income at regular corporate rates. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income, property or net worth, respectively, and to Federal income and excise taxes on our undistributed income.
Competition
The commercial real estate market is highly competitive. We compete for tenants in all of our markets with other owners and operators of commercial properties. We compete based on a number of factors that include location, rental rates, security, suitability of the property’s design to tenants’ needs and the manner in which the property is operated and marketed. The number of competing properties in a particular market could have a material effect on a property’s occupancy levels, rental rates and operating income.

We compete with many third parties engaged in real estate investment activities including other REITs, including other REITs sponsored by our sponsor, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, hedge funds, governmental bodies and other entities. There are also other REITs with investment objectives similar to ours and others may be organized in the future. In addition, these same entities seek financing through the same channels that we do. Therefore, we compete for funding in a market where funds for real estate investment may decrease, or grow less than the underlying demand.


3

Employees
As of December 31, 2012, we have 88 full-time individuals employed primarily by our multi-family subsidiaries.
We do not employ our executive officers and they do not receive any compensation from us for their services as such officers. Our executive officers are officers of one or more of The Inland Group, Inc.’s affiliated entities, including our business manager, and are compensated by these entities, in part, for their services rendered to us. We do not reimburse the business manager for any compensation paid to persons serving as one of our executive officers or as an executive officer of the business manger or property managers. For the purposes of reimbursement, our secretary is not considered an “executive officer.”
We have entered into a business management agreement with Inland American Business Manager & Advisor, Inc. pursuant to which it serves as our business manager, with responsibility for overseeing and managing our day-to-day operations. We have also entered into property management agreements with each of our property managers. We pay fees to our business manager and our property managers in consideration for the services they perform for us pursuant to these agreements. Except as noted above, we also reimburse these entities for the expenses they incur in performing services for us including the compensation expenses for persons providing services to us.
Conflicts of Interest
Our governing documents require a majority of our directors to be independent. Further, any transactions between The Inland Group, Inc. or its affiliates, including our business manager and property managers, and us must be approved by a majority of our independent directors.
Environmental Matters
Compliance with federal, state and local environmental laws has not had a material adverse effect on our business, assets, or results of operations, financial condition and ability to pay distributions, and we do not believe that our existing portfolio will require us to incur material expenditures to comply with these laws and regulations. However, we cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on our properties.
Seasonality
The lodging segment is seasonal in nature, reflecting higher revenue and operating income during the second and third quarters. This seasonality can be expected to cause fluctuations in our net operating income for the lodging segment. None of our other segments are seasonal in nature.
Access to Company Information
We electronically file our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports with the Securities and Exchange Commission (“SEC”). The public may read and copy any of the reports that are filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at (800)-SEC-0330. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically.
We make available, free of charge, by responding to requests addressed to our customer relations group, the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports on our website, www.inland-american.com. These reports are available as soon as reasonably practicable after such material is electronically filed or furnished to the SEC.
Certifications
We have filed with the Securities and Exchange Commission the principal executive officer and principal financial officer certifications required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, which are attached as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K.





4


Item 1A. Risk Factors

The occurrence of any of the risks discussed below could have a material adverse effect on our business, financial condition, results of operations and ability to pay distributions to our stockholders.
Risks Related to Our Business
Disruptions in the financial markets or economic conditions could adversely affect our ability to refinance or secure additional debt financing at attractive terms
Credit markets are subject to rapid changes from macro economic factors, including rising interest rates, perceptions of the overall health in the US economy and real estate in particular, and the health and regulatory environment in which our lenders operate and the overall availability of lending sources.
In addition, disruptions in the financial markets or economic conditions may negatively impact commercial real estate fundamentals which could have various negative impacts on the value of our investments including:
•
a decrease in the values of our investments in commercial properties, below the amounts paid for these investments; or
•
a decrease in revenues from our properties, due to lower occupancy and rental rates, which may make it more difficult for us to pay distributions or meet our debt service obligations on debt financing.

Our ongoing strategy depends, in part, upon future acquisitions, and we may not be successful in identifying and consummating these transactions.
Our long-term business strategic plan is to refine our diversified portfolio of assets and to focus on the retail, lodging, and student housing sectors. As we continue to execute on this strategy, we will rotate capital out of our other asset classes - such as multi-family, office and industrial - to enhance and expand our strategic holdings. There is no assurance we will be able to sell assets at acceptable prices or identify suitable replacement assets on satisfactory terms, if at all. We may also face delays in reinvesting net sales proceeds in new assets which would impact the return we earn on our assets.
We face significant competition for attractive investment opportunities from an indeterminate number of other real estate investors, including investors with significant capital resources such as domestic and foreign corporations and financial institutions, publicly traded and privately held REITs, private institutional investment funds, investment banking firms, life insurance companies and pension funds. As a result of competition, we may be unable to acquire additional properties as we desire or the purchase price may be significantly elevated.
In light of current market conditions and real estate values, we may face significant competition to acquire stabilized properties, or have to accept lease-up risk associated with properties that have lower occupancy. As market conditions and real estate values recover, more properties may become available for acquisition, but we can provide no assurances that these properties will meet our investment objectives or that we will be successful in acquiring these properties. If we are unable to acquire sufficient debt financing at suitable rates or at all, we may be unable to acquire as many additional properties as we anticipate.

Our ongoing strategy involves the disposition of properties; however, we may be unable to sell a property at acceptable terms and conditions, if at all.
As we execute on our long-term strategy we will rotate capital out of certain asset classes, such as multi-family, office and industrial to reinvest into retail, lodging or student housing. Besides executing on our strategy, it may make economic sense to sell properties in any asset class when we believe the value of the leases in place at a property will significantly decline over the remaining lease term, or when the property has limited or no equity with a near-term debt maturity, or when a property has equity but the projected returns do not justify further investment, or when the equity in a property can be redeployed in the portfolio in order to achieve better returns or strategic goals. As we engage to sell these properties, general economic conditions along with property specific issues, such as vacancies, lease terminations and debt defeasance, may negatively affect the value of our properties and therefore reducing our return on the investment or prevent us from selling the property on acceptable terms. Real estate investments often cannot be sold quickly. As a result economic conditions may prevent potential purchasers from obtaining financing on acceptable terms, if at all, thereby delaying our ability to sell our properties.

5


We are the subject of an ongoing investigation by the SEC and have received two related derivative demands by stockholders to conduct investigations. The SEC's investigation, the derivative demands, or both could have a material adverse impact on our business.
We have learned that the SEC is conducting a non-public, formal, fact-finding investigation (the “Investigation”) to determine whether there have been violations of certain provisions of the federal securities laws related to the business management fees, property management fees, transactions with affiliates, timing and amount of distributions paid to investors, determination of property impairments, and any decision regarding whether the Company might become a self-administered REIT.
Our business manager offered to the extent allowed by law or governmental regulation to reduce its business management fee in an aggregate amount necessary to reimburse us for any costs, fees, fines, or assessments, if any, that we may incur as a result of the pending Investigation, other than legal fees incurred by us or fees and costs otherwise covered by insurance. The business manager also offered to waive its reimbursement of legal fees or costs that the business manager incurs in connection with the Investigation. In the event that the business management agreement is terminated or expires in accordance with its terms prior to the conclusion of the pending Investigation or prior to us realizing the full benefit of the business manager's offer to reduce its business management fee in the event that we realize costs, fees, fines or assessments in connection with the Investigation, then we will be required to pay any such costs, fees, fines or assessments. In the event of a termination of the business management agreement, we may not be able to execute our business plan and may suffer losses, which could materially decrease cash available for distribution to our stockholders and have a material adverse impact on our business and financial condition.
We have also received two related demands (“Derivative Demands”) by stockholders to conduct investigations regarding claims that the officers, the board of directors, the business manager, and the affiliates of the business manager (the “Inland American Parties”) breached their fiduciary duties to us in connection with the matters that we disclosed are subject to the Investigation. The first demand claims that the Inland American Parties (i) falsely reported the value of our common stock until September 2010; (ii) caused us to purchase shares of our common stock from stockholders at prices in excess of their value; and (iii) disguised returns of capital paid to stockholders as REIT income resulting in the payment of fees to the business manager for which it was not entitled. The three stockholders in that demand contend that legal proceedings should seek recovery of damages in an unspecified amount allegedly sustained by us. The second demand by another shareholder makes similar claims and further alleges that the Inland American Parties (i) caused us to engage in transactions that unduly favored related parties, (ii) falsely disclosed the timing and amount of distributions, and (iii) falsely disclosed whether we might become a self-administered REIT. A special litigation committee has been formed by the board to investigate the matters related to the Investigation and the Derivative Demands. That investigation is ongoing.
We cannot reasonably estimate the timing or outcome of either the Investigation or the investigation by the special litigation committee, nor can we predict whether or not any of these items may have a material adverse effect on our business. These items may cause us to incur significant legal expense, both directly and as the result of any indemnification obligations. In addition, the Investigation and the Derivative Demands may also divert management's attention from our ordinary business operations or may also limit our ability to obtain financing to fund our on-going operating requirements, which could cause our business to suffer. Adverse findings by the SEC or the special litigation committee, future litigation related thereto, or the incurrence of costs, fees, fines or penalties that are not reimbursed by our business manager by reducing its business management fee or reimbursed by insurance policies, could have a material adverse impact on our business.
We depend on our business manager and our property managers and may not find a suitable replacement if our business management agreement or the property management agreements are terminated.
Most of our officers and our staff are employees of the business manager. We rely on our business manager and our property managers, to design and implement our operating policies and strategies. The agreement with the business manager is terminable upon 60 days' notice by either party or whose term expires July 31, 2013. The agreement with the property manager has a term until December 31, 2013 and will extend for an additional eighteen months unless terminated on or before June 30, 2013. If we, or they, terminate the agreements, or permit them to expire in accordance with their terms, we may not be able to execute our business plan and may suffer losses.

If we lose or are unable to obtain key personnel, our ability to implement our investment strategies could be delayed or hindered.
Our success depends to a significant degree upon the contributions of our executive officers and other key personnel of our business manager and property managers. If any of the key personnel of our business manager or property managers were to cease their

6


affiliation with our business manager or property managers, respectively, our operating results could suffer. Further, we do not separately maintain “key person” life insurance that would provide us with proceeds in the event of death or disability of these persons. We believe our future success depends, in part, upon the ability of our business manager and property managers to hire and retain highly skilled managerial, operational and marketing personnel. Competition for such personnel is intense, and we cannot assure you that our business manager or property managers will be successful in attracting and retaining skilled personnel.
We may internalize or partially internalize our management functions and your interests could be diluted.
We may internalize some or all of the functions performed for us by our business manager and/or property managers and the method by which we could internalize these functions could take many forms. For example, we could acquire the business manager and/or property managers through a merger or by purchasing their stock or assets and the consideration we would pay may be cash, shares of our common stock or promissory notes. Issuing shares of common stock would reduce the percentage ownership of our existing stockholders and issuing notes or incurring debt could reduce our cash flow from operating activities or our ability to borrow additional funds.
Internalization transactions involving the acquisition of advisors affiliated with entity sponsors have also, in some cases, been the subject of litigation. Even if these claims are without merit, we could be forced to spend significant amounts of money defending claims.
If we internalize some or all of our management functions, the nature of our costs will change.
If we internalize our management functions, we will likely become directly responsible for the expenses currently paid by the business manager or property manager. Although we currently reimburse our business manager and property managers for most of the general and administrative expenses they incur on our behalf, we cannot be certain that once we internalize these functions our costs will not be higher than the amounts would be if we did not internalize. Further, although we would no longer be required to pay fees for the functions that are internalized, we would expect to incur additional compensation and benefits costs of our officers that are now paid by our business manager and its affiliates and which we do not reimburse. We may also issue equity awards to officers, employees and consultants. Although we would expect that the total compensation and benefits paid to our executive officers will be less than the fees we no longer would have to pay, there is no assurance of this outcome.
If we internalize some or all of our management functions, we could have difficulty integrating these functions as a stand-alone entity, and we may fail to properly identify the appropriate mix of personnel and capital needs to operate as a stand-alone entity. An inability to manage an internalization transaction effectively could, therefore, result in our incurring additional costs and/or experiencing other difficulties. Such difficulties could cause us to incur additional costs, and our management's attention could be diverted from most effectively managing our business and properties.
There is no assurance that we will reach an agreement with our business manager or property managers on the terms of an internalization transaction.
Our business manager and property managers are not obligated to enter into an internalization transaction with us or to do so at any particular price. Our independent directors, as a whole, or a committee thereof, would have to negotiate the specific terms and conditions of any agreement or agreements to acquire these entities, including the actual purchase price. There is no assurance that we will be able to enter into an agreement with the business manager and/or property managers on mutually acceptable terms and in that case, we would have to seek alternative courses of actions to internalize our management functions.
If we seek to internalize our management functions, other than by acquiring our business manager and/or property managers, we could incur greater costs and lose key personnel.
We may decide to pursue an internalization by hiring our own group of executives and other employees or entering into an agreement with a third party, such as a merger, instead of by acquiring our business manager and property managers. The costs that we would incur in this case are uncertain and may be substantial. In addition, certain key personnel of the business manager and/or property managers have employment agreements with those entities, which could restrict our ability to retain such personnel if we do not acquire the business manager and property managers. Further, we would lose the benefit of the experience of the business manager and property managers.

7


The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions and make additional investments.
We have deposited our cash and cash equivalents in several banking institutions in an attempt to minimize exposure to the failure or takeover of any one of these entities. However, the Federal Insurance Deposit Corporation, or “FDIC,” generally only insures limited amounts per depositor per insured bank. At December 31, 2012 we had cash and cash equivalents and restricted cash deposited in interest bearing transaction accounts at certain financial institutions exceeding these federally insured levels. If any of the banking institutions in which we have deposited funds ultimately fails, we may lose our deposits over the federally insured levels. The loss of our deposits could reduce the amount of cash we have available to distribute or invest.
Risks Related to our Real Estate Assets
There are inherent risks with real estate investments.
Investments in real estate assets are subject to varying degrees of risk. For example, an investment in real estate cannot generally be quickly converted to cash, limiting our ability to promptly vary our portfolio in response to changing economic, financial and investment conditions. Investments in real estate assets also are subject to adverse changes in general economic conditions which, for example, reduce the demand for rental space.
Among the factors that could impact our real estate assets and the value of an investment in us are:
•
local conditions such as an oversupply of space or reduced demand for real estate assets of the type that we own or seek to acquire, including, with respect to our lodging facilities, quick changes in supply of and demand for rooms that are rented or leased on a day-to-day basis;
•
inability to collect rent from tenants;
•
vacancies or inability to rent space on favorable terms;
•
inflation and other increases in operating costs, including insurance premiums, utilities and real estate taxes;
•
increases in energy costs or airline fares or terrorist incidents which impact the propensity of people to travel and therefore impact revenues from our lodging facilities, although operating costs cannot be adjusted as quickly;
•
adverse changes in the federal, state or local laws and regulations applicable to us, including those affecting rents, zoning, prices of goods, fuel and energy consumption, water and environmental restrictions;
•
the relative illiquidity of real estate investments;
•
changing market demographics;
•
an inability to acquire and finance, or refinance, properties on favorable terms, if at all;
•
acts of God, such as earthquakes, floods or other uninsured losses;
•
changes or increases in interest rates and availability of financing locally or world-wide.

In addition, periods of economic slowdown or recession, or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in rents or increased defaults under existing leases. We have experienced these impacts in the last few years. There is no assurance that conditions will improve or that these impacts will not occur in the future.
We depend on tenants for our revenue, and accordingly, lease terminations, tenant default, and bankruptcies could adversely affect the income produced by our properties.
The success of our investments depends on the financial stability of our tenants. Certain economic conditions may adversely affect one or more of our tenants. For example, business failures and downsizings can affect the tenants of our office and industrial properties. Reduced consumer demand for retail products and services may affect the tenants of our retail properties. In addition, our retail shopping center properties typically are anchored by large, nationally recognized tenants, any of which may experience a downturn in their business that may weaken significantly their financial condition. Further, mergers or consolidations among large retail establishments could result in the closure of existing stores or duplicate or geographically overlapping store locations, which could include tenants at our retail properties.
As a result of these factors, our tenants may delay lease commencements, decline to extend or renew their leases upon expiration, fail to make rental payments when due, or declare bankruptcy. Any of these actions could result in the termination of the tenants' leases, the expiration of existing leases without renewal, or the loss of rental income attributable to the terminated or expired leases. In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as a landlord and may incur substantial costs in protecting our investment and re-leasing our property. Specifically, a bankruptcy filing by, or relating to, one of our tenants or a lease guarantor would bar efforts by us to collect pre-bankruptcy debts from that tenant or lease guarantor,

8


or its property, unless we receive an order permitting us to do so from the bankruptcy court. In addition, we cannot evict a tenant solely because of bankruptcy. The bankruptcy of a tenant or lease guarantor could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude collection of these sums. If a lease is assumed by the tenant in bankruptcy, all pre-bankruptcy balances due under the lease must be paid to us in full. If, however, a lease is rejected by a tenant in bankruptcy, we would have only a general, unsecured claim for damages. An unsecured claim would only be paid to the extent that funds are available and only in the same percentage as is paid to all other holders of general, unsecured claims. Restrictions under the bankruptcy laws further limit the amount of any other claims that we can make if a lease is rejected. As a result, it is likely that we would recover substantially less than the full value of the remaining rent during the term.
Geographic concentration also exposes us to risks of oversupply and competition in these markets. Significant increases in the supply of certain property types, including hotels, without corresponding increases in demand could have a material adverse effect on our financial condition, results of operations and our ability to pay distributions.
As of December 31, 2012, approximately, 4%, 5%, 7% and 12% of our base rental income of our consolidated portfolio, excluding our lodging facilities, was generated by a certain property located in the Minneapolis, Dallas, Chicago and Houston metropolitan areas, respectively. Additionally, at December 31, 2012, forty-four of our lodging facilities, or approximately 50% of our lodging portfolio, were located in Washington D.C. and the ten eastern seaboard states ranging from Connecticut to Florida, including seven hotels in North Carolina and seventeen properties in Texas.
Two of our tenants generated a significant portion of our revenue, and rental payment defaults by these significant tenants could adversely affect our results of operations.
For the year ended December 31, 2012, approximately 10% of our rental revenue was generated by over 400 retail banking properties leased to SunTrust Banks, Inc.. Also, for the year ended December 31, 2012, approximately 8% of our rental revenue was generated by three properties leased to AT&T, Inc. The leases for two of the AT&T properties, with approximately 1.7 million and 1.5 million square feet, expire in 2016 and 2017, respectively. As a result of the concentration of revenue generated from these properties, if either SunTrust or AT&T were to cease paying rent or fulfilling its other monetary obligations, we could have significantly reduced rental revenues or higher expenses until the defaults were cured or the properties were leased to a new tenant or tenants.
Leases representing approximately 5.8% of the rentable square feet of our retail, office, and industrial portfolio are scheduled to expire in 2013. We may be unable to renew leases or lease vacant space at favorable rates or at all.
As of December 31, 2012, leases representing approximately 5.8% of the 45,552,250 rentable square feet of our retail, office, and industrial portfolio were scheduled to expire in 2013 and an additional 5.9% of the square footage of our retail, office, and industrial portfolio was available for lease. We may be unable to extend or renew any of these leases, or we may be able to lease these spaces only at rental rates equal to or below existing rental rates. In addition, some of our tenants have leases that include early termination provisions that permit the lessee to terminate all or a portion of its lease with us after a specified date or upon the occurrence of certain events with little or no liability to us. We may be required to offer substantial rent abatements, tenant improvements, early termination rights or below-market renewal options to retain these tenants or attract new ones. Portions of our properties may remain vacant for extended periods of time. Further, some of our leases currently provide tenants with options to renew the terms of their leases at rates that are less than the current market rate or to terminate their leases prior to the expiration date thereof. If we are unable to obtain new rental rates that are on average comparable to our asking rents across our portfolio, then our ability to generate cash flow growth will be negatively impacted.
We may be required to make significant capital expenditures to improve our properties in order to retain and attract tenants.
We expect that, upon the expiration of leases at our properties, we may be required to provide rent or other concessions to tenants, accommodate requests for renovations, build-to-suit remodeling and other improvements or provide additional services to our tenants. As a result, we may have to pay for significant leasing costs or tenant improvements in order to retain tenants whose leases are expiring and to attract new tenants in sufficient numbers. Additionally, we may need to raise capital to fund these expenditures. If we are unable to do so, or if capital is otherwise unavailable, we may be unable to fund the required expenditures. This could result in non-renewals by tenants upon expiration of their leases or the ability to attract new tenants, which would result in declines in revenues from operations.

9



We face significant competition in the leasing market, which may decrease or prevent increases in the occupancy and rental rates of our properties.
We own properties located throughout the United States. We compete with numerous developers, owners and operators of commercial properties, many of which own properties similar to, and in the same market areas as, our properties. If our competitors offer space at rental rates below current market rates, or below the rental rates we currently charge our tenants, we may lose existing or potential tenants and we may be pressured to reduce our rental rates below those we currently charge in order to attract new tenants and retain existing tenants when their leases expire. Also, if our competitors develop additional properties in locations near our properties, there may be increased competition for creditworthy tenants, which may require us to make capital improvements to properties that we would not have otherwise made.
Acts of God, such as earthquakes, floods or other uninsured losses may make us susceptible to adverse economic developments from the effects of these natural disasters in those areas.
Because our properties are concentrated in certain geographic areas, our operating results are likely to be impacted by economic changes affecting the real estate markets in those areas. Adverse events such as hurricanes, floods, wildfires, earthquakes, blizzards or other natural disasters, could cause a loss of revenues at our real estate properties. Elements such as water, wind, hail, or fire damage can increase or accelerate wear on our properties' weatherproofing, and mechanical, electrical and other systems, and cause mold issues. As a result, we may incur additional operating costs and expenditures for capital improvements at these properties.
To qualify as a REIT, we must rely on third parties to operate our hotels.
To continue qualifying as a REIT, we may not, among other things, operate any hotel, or directly participate in the decisions affecting the daily operations of any hotel. Thus, we have retained third party managers to operate our hotel properties. We do not have the authority to directly control any particular aspect of the daily operations of any hotel, such as setting room rates. Thus, even if we believe our hotels are being operated in an inefficient or sub-optimal manner, we may not be able to require an immediate change to the method of operation. Our only alternative for changing the operation of our hotels may be to replace the third party manager of one or more hotels in situations where the applicable management agreement permits us to terminate the existing manager. Certain of these agreements may not be terminated without cause, which generally requires fraud, misrepresentation and other illegal acts. Even if we terminate or replace any manager, there is no assurance that we will be able to find another manager or that we will be able to enter into new management agreements favorable to us. Any change of hotel management would disrupt operations, which could have an adverse material effect on our operating results and financial condition.
Conditions of franchise agreements could adversely affect us.
Our lodging properties are operated pursuant to agreements with nationally recognized franchisors including Marriott International, Inc., Hilton Hotels Corporation, Intercontinental Hotels Group PLC, Hyatt Corporation, and Wyndham Worldwide Corporation. These agreements generally contain specific standards for, and restrictions and limitations on, the operation and maintenance of a hotel in order to maintain uniformity within the particular franchisor's system. These standards are subject to change, in some cases at the discretion of the franchisor, and may restrict our ability to make improvements or modifications to a hotel without the consent of the franchisor. Conversely, these standards may require us to make certain improvements or modifications to a hotel, even if we do not believe the capital improvements are necessary or desirable or will result in an acceptable return on our investment.
These agreements also permit the franchisor to terminate the agreement in certain cases such as a failure to pay royalties and fees or to perform covenants continued in the franchise agreement, bankruptcy, abandonment of the franchise, commission of a felony, assignment of the franchise without the consent of the franchisor or failure to comply with applicable law or maintain applicable standards in the operation and condition of the relevant hotel. If a franchise license terminates due to our failure to comply with the terms and conditions of the agreement, we may be liable to the franchisor for a termination payment. These payments vary. Also, these franchise agreements do not renew automatically. If we were to lose a franchise agreement, there is no assurance that we would be able to enter into an agreement with a different franchisor. Loss of a franchise agreement could have a material adverse effect on our results of operations and financial condition.
Actions of our joint venture partners could negatively impact our performance.
As of December 31, 2012 we had entered into joint venture agreements with nine entities to fund investment is in office, industrial/distribution, retail, lodging, and mixed use properties. The carrying value of our investment in these joint ventures, which we do

10


not consolidate for financial reporting purposes, was $253.4 million. For the year ended December 31, 2012, we recorded income of $1.6 million and impairments and losses of $12.3 million associated with these ventures.
With respect to these investments, we are not in a position to exercise sole decision-making authority regarding the property, or the joint venture. Consequently, our joint venture investments may involve risks not otherwise present with other methods of investing in real estate. For example, our venture partner may have economic or business interests or goals which are or which become inconsistent with our business interests or goals or may take action contrary to our instructions or requests or contrary to our policies or objectives. We have experienced these events from time to time with our current or former venture partners, which in some cases has resulted in litigation. An adverse outcome in any lawsuit could have a material effect on our results of operations and forward condition. In addition, any litigation increases our expenses and prevents our officers and directors from focusing their time and effort on other aspects of our business. Our relationships with our venture partners are contractual in nature. These agreements may restrict our ability to sell our interest when we desire or on advantageous terms and, on the other hand, may be terminated or dissolved under the terms of the agreements and, in each event, we may not continue to own or operate the interests or assets underlying the relationship or may need to purchase these interests or assets at an above-market price to continue ownership.
Credit market disruptions and certain economic trends may increase the likelihood of a commercial developer defaulting on its obligations with respect to our development projects, including projects where we have notes receivable, or becoming bankrupt or insolvent.
We have invested in, and may continue to invest in, projects that are in various stages of pre-development and development. Investing in properties in pre-development or under development, and in lodging facilities in particular, which typically must be renovated or otherwise improved on a regular basis, including renovations and improvements required by existing franchise agreements, subjects us to uncertainties such as the ability to achieve desired zoning for development, environmental concerns of governmental entities or community groups, ability to control construction costs or to build in conformity with plans, specifications and timetables. In many cases, developers may not have adequate capital to address downturns in the market. Further, the developers of the projects in which we have invested are exposed to risks not only with respect to our projects, but also other projects in which they are involved. A default by a developer in respect to one of our development project investments, or the bankruptcy, insolvency or other failure of a developer for one of these projects, may require that we determine whether we want to assume the senior loan, fund monies beyond what we are contractually obligated to fund, take over development of the project, find another developer for the project, or sell our interest in the project. Developer failures could give tenants the right to terminate pre-construction leases, delay efforts to complete or sell the development project and could ultimately preclude us from realizing our anticipated returns. These events could cause a decrease in the value of our development assets and compel us to seek additional sources of funding, which may or may not be available, in order to hold and complete the development project.
Generally, under bankruptcy law and the bankruptcy guarantees we have required of certain of our joint venture development partners, we may seek recourse from the developer-guarantor to complete our development project with a substitute developer partner. However, in the event of a bankruptcy by the developer-guarantor, we cannot provide assurance that the developer or its trustee will satisfy its obligations. The bankruptcy of any developer or the failure of the developer to satisfy its obligations would likely cause us to have to complete the development or find a replacement developer, which could result in delays and increased costs. We cannot provide assurance that we would be able to complete the development on terms as favorable as when we first entered into the project. If we are not able to, or elect not to, the development costs ordinarily would be charged against income for the then-current period if we determine our costs are not recoverable.
Sale leaseback transactions may be recharacterized in a manner unfavorable to us.
From time to time we have entered into a sale leaseback transaction where we purchase a property and then lease the property to the seller. These transactions could, however, be characterized as a financing instead of a sale in the case of the seller's bankruptcy. In this case, we would not be treated as the owner of the property but rather as a creditor with no interest in the property itself. The seller may have the ability in a bankruptcy proceeding to restructure the financing by imposing new terms and conditions. The transaction also may be recharacterized as a joint venture. In this case, we would be treated as a joint venturer with liability, under some circumstances, for debts incurred by the seller relating to the property.
Our investments in equity and debt securities have materially impacted, and may in the future materially impact, our results.
As of December 31, 2012, we owned investment in real estate related equity and debt securities with an aggregate market value of $327.7 million. For the year ended December 31, 2012, we realized gains on sale of securities of $4.3 million, impairments of $1.9 million, and gross unrealized losses of $2.0 million. Real estate related equity securities are always unsecured and subordinated to other obligations of the issuer. Investments in real estate-related equity securities are subject to numerous risks including: (1)

11


limited liquidity in the secondary trading market in the case of unlisted or thinly traded securities; (2) substantial market price volatility resulting from, among other things, changes in prevailing interest rates in the overall market or related to a specific issuer, as well as changing investor perceptions of the market as a whole, REIT or real estate securities in particular or the specific issuer in question; (3) subordination to the liabilities of the issuer; (4) the possibility that earnings of the issuer may be insufficient to meet its debt service obligations or to pay distributions; and (5) with respect to investments in real estate-related preferred equity securities, the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates that could cause the issuer to redeem the securities. In addition, investments in real estate-related securities involve special risks relating to the particular issuer of the securities, including the financial condition and business outlook of the issuer. Issuers of real estate-related securities generally invest in real estate or real estate-related assets and are subject to the inherent risks associated with real estate-related investments discussed herein. In fact, many of the entities that we have invested in have reduced the dividends paid on their securities. The stock prices for some of these entities have declined since our initial purchase, and in certain cases we have sold these investments at a loss.
Any mortgage loans that we originate or purchase are subject to the risks of delinquency and foreclosure.
We may originate and purchase mortgage loans. Mortgage loans are subject to risks of delinquency and foreclosure, and risks of loss. The ability of a borrower to repay a loan secured by an income-producing property depends primarily upon the successful operation of the property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower's ability to repay the loan may be impaired. A property's net operating income can be affected by the any of the potential issues associated with real estate-related investments as discussed herein. We bear the risks of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage loan. In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to that borrower will be deemed to be collateralized only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law. Foreclosure of a mortgage loan can be an expensive and lengthy process that could have a substantial negative effect on our anticipated return on the foreclosed mortgage loan. We may also be forced to foreclose on certain properties, be unable to sell these properties and be forced to incur substantial expenses to improve operations at the property.
We may make a mortgage loan to affiliates of, or entities sponsored by, our sponsor.
If we have excess working capital, we may, from time to time, and subject to the conditions in our articles, make a mortgage loan to affiliates of, or entities sponsored by, our sponsor. These loan arrangements will not be negotiated at arm's length and may contain terms and conditions that are not in our best interest and would not otherwise be applicable if we entered into arrangements with a third-party borrower not affiliated with these entities.
An increase in real estate taxes may decrease our income from properties.
From time to time, the amount we pay for property taxes increases as either property values increase or assessment rates are adjusted. Increases in a property's value or in the assessment rate result in an increase in the real estate taxes due on that property. If we are unable to pass the increase in taxes through to our tenants, our net operating income for the property will decrease.
Uninsured losses or premiums for insurance coverage may adversely affect a stockholder's returns.
We attempt to adequately insure all of our properties against casualty losses. There are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders sometimes require commercial property owners to purchase specific coverage against terrorism as a condition for providing mortgage loans. These policies may not be available at a reasonable cost, if at all, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. If we incur any casualty losses not fully covered by insurance, the value of our assets will be reduced by the amount of the uninsured loss. In addition, other than any reserves we may establish, we have no designated source of funding to repair or reconstruct any uninsured damaged property.

12



Terrorist attacks and other acts of violence or war may affect the markets in which we operate our operations and our profitability.
We own estate assets located in areas that are susceptible to attack. These attacks may directly impact the value of our assets through damage, destruction, loss or increased security costs. Although we may obtain terrorism insurance, we may not be able to obtain sufficient coverage to fund any losses we may incur. Risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Further, certain losses resulting from these types of events are uninsurable or not insurable at reasonable costs.
More generally, any terrorist attack, other act of violence or war, including armed conflicts, could result in increased volatility in or damage to, the United States and worldwide financial markets and economy. Any terrorist incident may, for example, deter people from traveling, which could affect the ability of our hotels to generate operating income and therefore our ability to pay distributions. Additionally, increased economic volatility could adversely affect our tenants' ability to pay rent on their leases or our ability to borrow money or issue capital stock at acceptable prices.
The cost of complying with environmental and other governmental laws and regulations may adversely affect us.
All real property and the operations conducted on real property are subject to federal, state and local laws and regulations (including those of foreign jurisdictions) relating to environmental protection and human health and safety. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, and the remediation of contamination associated with disposals. We also are required to comply with various local, state and federal fire, health, life-safety and similar regulations. Some of these laws and regulations may impose joint and several liabilities on tenants or owners for the costs of investigating or remediating contaminated properties. These laws and regulations often impose liability whether or not the owner knew of, or was responsible for, the presence of the hazardous or toxic substances. The cost of removing or remediating could be substantial. In addition, the presence of these substances, or the failure to properly remediate these substances, may adversely affect our ability to sell or rent a property or to use the property as collateral for borrowing.

Environmental laws and regulations also may impose restrictions on the manner in which properties may be used or businesses may be operated, and these restrictions may require substantial expenditures by us. Environmental laws and regulations provide for sanctions in the event of noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Third parties may seek recovery from owners of real properties for personal injury or property damage associated with exposure to released hazardous substances. Compliance with new or more stringent laws or regulations or stricter interpretations of existing laws may require material expenditures by us. For example, various federal, regional and state laws and regulations have been implemented or are under consideration to mitigate the effects of climate change caused by greenhouse gas emissions. Among other things, “green” building codes may seek to reduce emissions through the imposition of standards for design, construction materials, water and energy usage and efficiency, and waste management. We are not aware of any such existing requirements that we believe will have a material impact on our current operations. However, future requirements could increase the costs of maintaining or improving our existing properties or developing new properties.
Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem.
The presence of mold at any of our properties could require us to undertake a costly program to remediate, contain or remove the mold. Mold growth may occur when moisture accumulates in buildings or on building materials. Some molds may produce airborne toxins or irritants. Concern about indoor exposure to mold has been increasing because exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions. The presence of mold could expose us to liability from our tenants, their employees and others if property damage or health concerns arise.
We may incur significant costs to comply with the Americans With Disabilities Act.
Our properties generally are subject to the Americans With Disabilities Act of 1990, as amended. Under this act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. The act's requirements could require us to

13


remove access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages.
Risks Associated with Debt Financing
Borrowings may reduce the funds available for distribution and increase the risk of loss since defaults may cause us to lose the properties securing the loans.
We have acquired, and may continue to acquire, real estate assets by using either existing financing or borrowing new monies. Our articles permit us to borrow up to 300% of our net assets. In addition, we may obtain loans secured by some or all of our properties or other assets to fund additional acquisitions or operations including to satisfy the requirement that we distribute at least 90% of our annual “REIT taxable income” (subject to certain adjustments) to our stockholders, or as is otherwise necessary or advisable to assure that we qualify as a REIT for federal income tax purposes. Payments required on any amounts we borrow reduce the funds available for, among other things, distributions to our stockholders because cash otherwise available for distribution is required to pay principal and interest associated with amounts we borrow.
Defaults on loans secured by a property we own may result in us losing the property or properties securing the loan that is in default as a result of foreclosure actions initiated by a lender. For tax purposes, a foreclosure would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the property. If the outstanding balance of the debt exceeds our tax basis in the property, we would recognize taxable gain on the foreclosure but would not receive any cash proceeds. We also may fully or partially guarantee any monies that subsidiaries borrow to purchase or operate real estate assets. In these cases, we will be responsible to the lender for repaying the loans if the subsidiary is unable to do so. If any mortgage contains cross-collateralization or cross-default provisions, more than one property may be affected by a default.
Lenders may restrict certain aspects of our operations, which could, among other things, limit our ability to make distributions.
The terms and conditions contained in any of our loan documents may require us to maintain cash reserves; limit the aggregate amount we may borrow on a secured and unsecured basis; require us to satisfy restrictive financial covenants; prevent us from entering into certain business transactions, such as a merger, sale of assets or other business combination; restrict our leasing operations; or require us to obtain consent from the lender to complete transactions or make investments that are ordinarily approved only by our board of directors. In addition, secured lenders typically restrict our ability to discontinue insurance coverage on a mortgaged property even though we may believe that the insurance premiums paid to insure against certain losses, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, are greater than the potential risk of loss
Interest-only indebtedness may increase our risk of default.
We have obtained, and continue to incur interest related to, interest-only mortgage indebtedness. During the interest only period, the amount of each scheduled payment is less than that of a traditional amortizing mortgage loan. The principal balance of the mortgage loan is not reduced (except in the case of prepayments) because there are no scheduled monthly payments of principal during this period. After the interest-only period, we are required either to make scheduled payments of amortized principal and interest or to make a lump-sum or “balloon” payment at maturity. These required principal or balloon payments increase the amount of our scheduled payments and may increase our risk of default under the related mortgage loan if we are unable to fund the lump-sum or balloon amount.
Increases in interest rates could increase the amount of our debt payments.
As of December 31, 2012, approximately $1.3 billion of our total indebtedness bore interest at variable rates. Increases in interest rates on variable rate debt that has not otherwise been hedged through the use of swap agreements reduce the funds available for other needs, including distribution to our stockholders. As fixed rate debt matures, we may not be able to borrow at rates equal to or lower than the rates on the expiring debt. In addition, if rising interest rates cause us to need additional capital to repay indebtedness, we may be forced to sell one or more of our properties or investments in real estate at times which may not permit us to realize the return on the investments we would have otherwise realized.
To hedge against interest rate fluctuations, we use derivative financial instruments, which may be costly and ineffective.
From time to time, we use derivative financial instruments to hedge exposures to changes in interest rates on certain loans secured by our assets. Our derivative instruments currently consist of interest rate swap contracts but may, in the future, include, interest

14


rate cap or floor contracts, futures or forward contracts, options or repurchase agreements. Our actual hedging decisions are determined in light of the facts and circumstances existing at the time of the hedge. There is no assurance that our hedging strategy will achieve our objectives. We may be subject to costs, such as transaction fees or breakage costs, if we terminate these arrangements.
To the extent that we use derivative financial instruments to hedge against interest rate fluctuations, we are exposed to credit risk, basis risk and legal enforceability risks. In this context, credit risk is the failure of the counterparty to perform under the terms of the derivative contract. Basis risk occurs when the index upon which the contract is based is more or less variable than the index upon which the hedged asset or liability is based, thereby making the hedge less effective. Finally, legal enforceability risks encompass general contractual risks including the risk that the counterparty will breach the terms of, or fail to perform its obligations under, the derivative contract. A counterparty could fail, shut down, file for bankruptcy or be unable to pay out contracts. The business failure of a hedging counterparty with whom we enter into a hedging transaction will most likely result in a default. Default by a party with whom we enter into a hedging transaction may result in the loss of unrealized profits and force us to cover our resale commitments, if any, at the then current market price. Although generally we will seek to reserve the right to terminate our hedging positions, it may not always be possible to dispose of or close out a hedging position without the consent of the hedging counterparty, and we may not be able to enter into an offsetting contract to cover our risk. We cannot provide assurance that a liquid secondary market will exist for hedging instruments purchased or sold, and we may be required to maintain a position until exercise or expiration, which could result in losses.
Further, the REIT provisions of the Code may limit our ability to hedge the risks inherent to our operations. We may be unable to manage these risks effectively.
We may be contractually obligated to purchase property even if we are unable to secure financing for the acquisition.
We typically finance a portion of the purchase price for each property that we acquire. However, to ensure that our offers are as competitive as possible, we generally do not enter into contracts to purchase property that include financing contingencies. Thus, we may be contractually obligated to purchase a property even if we are unable to secure financing for the acquisition. In this event, we may choose to close on the property by using cash on hand, which would result in less cash available for other purposes including funding operating costs or paying distributions to our stockholders. Alternatively, we may choose not to close on the acquisition of the property and default on the purchase contract. If we default on any purchase contract, we could lose our earnest money and become subject to liquidated or other contractual damages and remedies.
Risks Related to Our Common Stock
Since Inland American shares are not currently traded on a national stock exchange, there is no established public market for our shares and you may not be able to sell your shares.
There is no established public market for our shares and no assurance that one may develop. Our charter does not require our directors to seek stockholder approval to liquidate our assets by a specified date, nor does our charter require our directors to list our shares for trading on a national exchange by a specified date. There is no assurance the board will pursue a listing or other liquidity event. In addition, even if our board decides to seek a listing of our shares of common stock, there is no assurance that we will satisfy the listing requirements or that our shares will be approved for listing. If and when a listing occurs there is no guarantee you will be able to sell your common shares at a price equal to your initial investment value.
Our stockholders may not be able to sell some or all of their shares under our share repurchases program.
Our share repurchase program contains numerous restrictions that limit our stockholders' ability to sell their shares, including those relating to the number of shares of our common stock that we can repurchase at any given time and limiting the funds we will use to repurchase shares pursuant to the program. Under the program, we may repurchase shares of our common stock, on a quarterly basis only, from the beneficiary of a stockholder that has died or from stockholders that have a “qualifying disability” or are confined to a “long-term care facility” (together, referred to herein as “hardship repurchases”). Our program does not permit us to accept shares for repurchase for any other reason, further, we are authorized to repurchase shares at a price per share equal to 100% of the most recently disclosed estimated per share value of our common stock, which currently is equal to $6.93 per share. Our obligation to repurchase any shares under the program is further conditioned upon our having sufficient funds available to complete the repurchase. For 2013, our board has reserved $10.0 million per calendar quarter for the purpose of funding repurchases associated with death and $15.0 million per calendar quarter for the purpose of funding hardship repurchases. If the funds reserved for either category of repurchase under the program are insufficient to repurchase all of the shares for which repurchase requests have been received for a particular quarter, or if the number of shares accepted for repurchase would cause us to exceed the 5.0% limit set forth therein, we will repurchase the shares in the following order: (1) for death repurchases, we will repurchase shares

15


in chronological order, based upon the beneficial owner's date of death; and (2) for hardship repurchases, we will repurchase shares on a pro rata basis, up to, but not in excess of, the limits described herein; provided, that in the event that the repurchase would result in a stockholder owning less than 150 shares, we will repurchase all of that stockholder's shares. Further, we have no obligation to repurchase shares if the repurchase would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.
Since the repurchase price is equal to our estimated per share value of our common stock, a stockholder may receive less than the amount of their investment in the shares. Moreover, our directors have the discretion to suspend or terminate the program upon 30 days' notice. Therefore, our stockholders may not have the opportunity to make a repurchase request prior to a potential termination of the share repurchase program and our stockholders may not be able to sell any of their shares of common stock back to us. As a result of these restrictions and circumstances, the ability of our stockholders to sell their shares should they require liquidity is significantly restricted.
The estimated value of our common stock is based on a number of assumptions and estimates that may not be accurate or complete and is also subject to a number of limitations.
On December 19, 2012, we announced an estimated value of our common stock equal to $6.93 per share. As with any methodology used to estimate value, the methodology employed by our business manager and reviewed by Real Globe Advisors, LLC was based upon a number of estimates and assumptions that may not be accurate or complete. Further, different parties using different assumptions and estimates could derive a different estimated value per share, which could be significantly different from our estimated value per share. The estimated value per share may not represent current market values or fair values as determined in accordance with U.S. generally accepted accounting principles (or “GAAP”). Real properties are currently carried at their amortized cost basis in the Company's financial statements. The estimated value of our real estate assets used in our analysis does not necessarily represent the value we would receive or accept if the assets were marketed for sale. The market for commercial real estate can fluctuate and values are expected to change in the future. Further, acquisitions and dispositions of properties will have an effect on the value of our estimated price per share, which is not reflected in the current estimated price. Moreover, the estimated per share value of the Company's common stock does not reflect a liquidity discount for the fact that the shares are not currently traded on a national securities exchange, a discount for the non-assumability or prepayment obligations associated with certain of the Company's loans and other costs that may be incurred, including any costs of sale of its assets. Accordingly, with respect to the estimated value per share, we can give no assurance that:
•
a stockholder would be able to resell his or her shares at this estimated value;
•
a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of our liabilities or a sale of the Company;
•
our shares would trade at a price equal to or greater than the estimated value per share if we listed them on a national securities exchange; or
•
the methodology used to estimate our value per share would be acceptable to FINRA or that the estimated value per share will satisfy the applicable annual valuation requirements under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the Internal Revenue Code of 1986, as amended (the “Code”) with respect to employee benefit plans subject to ERISA and other retirement plans or accounts subject to Section 4975 of the Code.

There is no assurance that we will be able to continue paying cash distributions or that distributions will increase over time.
We pay regular monthly cash distributions to our stockholders. However, there are many factors that can affect the availability and timing of cash distributions such as our ability to earn positive yields on our real estate assets, the yields on securities of other entities in which we invest, our operating expense levels, as well as many other variables. Our long-term portfolio strategy may also affect our ability to pay our cash distributions if we are not able to reinvest the capital we receive from our properties dispositions, in a reasonable amount of time, into assets that generate cash flow yields similar to or greater than the properties sold. There is no assurance that we will be able to continue paying distributions at the current level or that the amount of distributions will increase, or not decrease, over time. Even if we are able to continue paying distributions, the actual amount and timing of distributions is determined by our board of directors in its discretion and typically depends on the amount of funds available for distribution, which depends on items such as current and projected cash requirements and tax considerations. As a result, our distribution rate and payment frequency may vary from time to time.

16


Funding distributions from sources other than cash flow from operating activities may negatively impact our ability to sustain or pay future distributions and will result in us having less cash available for other uses, such as property purchases.
If our cash flow from operating activities is not sufficient to fully fund the payment of distributions, the level of our distributions may not be sustainable and some or all of our distributions will be paid from other sources. In addition, from time to time, our business manager has determined, in its sole discretion, to either forgo or defer a portion of the business management fee, which has had the effect of increasing cash flow from operations for the relevant period because we have not had to use that cash to pay any fee or reimbursement which was foregone or deferred during the relevant period. For the year ended December 31, 2012, we paid our business manager a net business management fee of $39.9 million, or approximately 0.35% of our average invested assets on an annual basis, as well as an investment advisory fee of approximately $1.8 million, both of which together are less than the 1% fee that the business manager could have requested under the express terms of the business manager agreement. Our business manager did not forgo or defer any portion of its fee for the year ended December 31, 2012. There is no assurance that, in the future, our business manager will forgo or defer any portion of its business management fee. Further, we would need to use cash at some point in the future to pay any fee or reimbursement that is deferred. We also may use cash from financing activities, components of which may include borrowings (including borrowings secured by our assets), as well as proceeds from the sales of our properties, to fund distributions. To the extent distributions are paid from these sources or gains on sales of assets, we will have less money available for other uses, such as cash needed to refinance existing indebtedness or for the purchase of new assets.
Risks Related to Conflicts of Interest
There are conflicts of interest between us and affiliates of our sponsor that may affect our acquisition of properties and financial performance.
During the ten years ended December 31, 2012 our sponsor and Inland Private Capital Corporation (“IPCC”) sponsored, in the aggregate, three other REITs and 107 real estate exchange private placement limited partnerships and limited liability companies. Two of the REITs, Inland Diversified Real Estate Trust, Inc. and Inland Real Estate Income Trust, Inc., are managed by affiliates of our business manager. Inland Real Estate Corporation (or IRC) and Retail Properties of America, Inc., (or RPAI) are self-managed, but our sponsor and its affiliates continue to hold a significant investment in these entities. We may be seeking to buy real estate assets at the same time as certain of these other programs. Further, certain programs sponsored by our sponsor or IPCC own and manage the type of properties that we own, and in the same geographical areas in which we own them. Therefore, our properties may compete for tenants with other properties owned and managed by these other programs. Persons performing services for our property managers may face conflicts of interest when evaluating tenant leasing opportunities for our properties and other properties owned and managed by these programs, and these conflicts of interest may have an adverse impact on our ability to attract and retain tenants.

Our sponsor may face a conflict of interest in allocating personnel and resources between its affiliates, our business manager and our property managers.
We rely, to a great extent, on persons performing services for our business manager and property managers and their affiliates to manage our day-to-day operations. Some of these persons also provide services to one or more investment programs previously sponsored by our sponsor. Some of these persons also have ownership interests in these affiliates. These individuals face competing demands for their time and service and may have conflicts in allocating their time between our business and assets and the business and assets of our sponsor, its affiliates and the other programs formed and organized by our sponsor. In addition, if another investment program sponsored by our sponsor decides to internalize its management functions, it may do so by hiring and retaining certain of the persons currently performing services for our business manager and property managers, and if it did so, would likely not allow these persons to perform services for us.
We do not have arm's-length agreements with our business manager, our property managers or any other affiliates of our sponsor.
None of the agreements and arrangements with our business manager, our property managers or any other affiliates of our sponsor was negotiated at arm's-length. These agreements may contain terms and conditions that are not in our best interest and would not otherwise be applicable if we entered into arm's length agreements with third parties.

17


Our business manager and its affiliates face conflicts of interest caused by their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders.
We pay significant fees to our business manager, property managers and other affiliates of our sponsor for services provided to us. Most significantly, our business manager receives fees based on the aggregate book value, including acquired intangibles, of our invested assets. Further, our property managers receive fees based on the gross income from properties under management. Other parties related to, or affiliated with, our business manager or property managers may also receive fees or cost reimbursements from us. These compensation arrangements may cause these entities to take or not take certain actions. For example, these arrangements may provide an incentive for our business manager to borrow more money than prudent to increase the amount we can invest or defer the sale of properties and distribution of proceeds to stockholders to increase management fees. Ultimately, the interests of these parties in receiving fees may conflict with the interest of our stockholders in earning income on their investment in our common stock.
While we have developed our own internal acquisition staff, we utilize entities affiliated with our sponsor to identify real estate assets.
We continue to utilize Inland Real Estate Acquisitions, Inc. (“IREA”) and other affiliates of our sponsor to identify investment opportunities for us. Other public or private programs sponsored by our sponsor or IPCC also rely on these entities to identify potential investments. These entities have, in some cases, rights of first refusal or other pre-emptive rights to the properties that IREA identifies. Our right to acquire properties identified by IREA is subject to the exercise of any prior rights vested in these entities. We may not, therefore, be presented with opportunities to acquire properties that we otherwise would be interested in acquiring.
Risks Related to Our Organization and Structure

Stockholders have limited control over changes in our policies and operations.
Our board of directors determines our major policies, including our investment policies and strategies, and policies regarding financing, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise certain of these and other policies without a vote of the stockholders.
Stockholders' interest in us will be diluted if we issue additional shares.
Stockholders do not have preemptive rights to any shares issued by us in the future. Our articles authorize us to issue up to 1.5 billion shares of capital stock, of which 1.46 billion shares are designated as common stock and 40 million are designated as preferred stock. Future issuances of common stock, including issuances through our distribution reinvestment plan (“DRP”), reduce the percentage of our shares owned by our current stockholders who do not participate in future stock issuances. Stockholders are generally not entitled to vote on whether or not we issue additional shares. In addition, depending on the terms and pricing of an additional offering of our shares and the value of our properties, our stockholders may experience dilution in the book value and value of their shares. Further, our board could authorize the issuance of stock with terms and conditions that could subordinate the rights of the holders of our current common stock or have the effect of delaying, deferring or preventing a change in control in us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for our stockholders.
Stockholders' returns may be reduced if we are required to register as an investment company under the Investment Company Act.
We are not registered, and do not intend to register our company or any of our subsidiaries, as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). If we or any of our subsidiaries become obligated to register as an investment company, the registered entity would have to comply with regulation under the Investment Company Act with respect to capital structure (including the registered entity's ability to use borrowings), management, operations, transactions with affiliated persons (as defined in the Investment Company Act) and portfolio composition, including disclosure requirements and restrictions with respect to diversification and industry concentration, and other matters. Compliance with the Investment Company Act would limit our ability to make certain investments and require us to significantly restructure our operations and business plan. The costs we would incur and the limitations that would be imposed on us as a result of such compliance and restructuring would negatively affect the value of our common stock, our ability to make distributions and the sustainability of our business and investment strategies.

18


We believe that neither we nor any subsidiaries we own fall within the definition of an investment company under Section 3(a)(1) of the Investment Company Act because we primarily engage in the business of investing in real property, through our wholly or majority owned subsidiaries, each of which has at least 60% of their assets in real property. The company conducts its operations, directly and through wholly or majority-owned subsidiaries, so that none of the company and its subsidiaries is registered or will be required to register as an investment company under the Investment Company Act. Section 3(a)(1) of the Investment Company Act, in relevant part, defines an investment company as (i) any issuer that is, or holds itself out as being, engaged primarily in the business of investing, reinvesting or trading in securities., or (ii) any issuer that is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns, or proposes to acquire, “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of government securities and cash items) on an unconsolidated basis, which we refer to as the “40% test.” The term “investment securities” generally includes all securities except government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exemption from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act. We and our subsidiaries are primarily engaged in the business of investing in real property and, as such, fall outside of the definition of an investment company under Section 3(a)(1)(A) of the Investment Company Act. We also conduct our operations and the operations of our subsidiaries so that each complies with the 40% test.
Accordingly, we believe that neither we nor any of our wholly and majority-owned subsidiaries are considered investment companies under either Section 3(a)(1)(A) or Section 3(a)(1)(C) of the Investment Company Act. If we or any of our wholly or majority-owned subsidiaries would ever inadvertently fall within one of the definitions of “investment company,” we intend to rely on the exemption provided by Section 3(c)(5)(C) of the Investment Company Act. To rely upon Section 3(c)(5)(C) of the Investment Company Act as it has been interpreted by the SEC staff, an entity would have to invest at least 55% of its total assets in “mortgage and other liens on and interests in real estate,” which we refer to as “qualifying real estate investments” and maintain an additional 25% of its total assets in qualifying real estate investments or other real estate-related assets. The remaining 20% of the entity's assets can consist of miscellaneous assets. These criteria may limit what we buy, sell and hold.
We classify our assets for purposes of Section 3(c)(5)(C) based in large measure upon no-action letters issued by the SEC staff and other interpretive guidance provided by the SEC and its staff. The no-action positions are based on factual situations that may be substantially different from the factual situations we may face, and a number of these no-action positions were issued more than twenty years ago. Pursuant to this guidance, and depending on the characteristics of the specific investments, certain mortgage-backed securities, other mortgage-related instruments, joint venture investments and the equity securities of other entities may not constitute qualifying real estate assets, and therefore, we may limit our investments in these types of assets. The SEC or its staff may not concur with the way we classify our assets. Future revisions to the Investment Company Act or further guidance from the SEC or its staff may cause us to no longer be in compliance with the exemption from the definition of an “investment company” provided by Section 3(c)(5)(C) and may force us to re-evaluate our portfolio and our investment strategy. For example, on August 31, 2011 the SEC issued a concept release and request for comments regarding the Section 3(c)(5)(C) exemption (Release No. IC-29778) in which it contemplated the possibility of issuing new rules or providing new interpretations of the exemption that might, among other things, define the phrase “liens on and other interests in real estate” or consider sources of income in determining a company's “primary business.” To the extent that the SEC or its staff provides more specific or different guidance, we may be required to adjust our strategy accordingly. Any additional guidance from the SEC or its staff could provide additional flexibility to us, or it could further inhibit our ability to pursue the strategies we have chosen.
A change in the value of any of our assets could cause us to fall within the definition of “investment company” and negatively affect our ability to be free from registration and regulation under the Investment Company Act. To avoid being required to register the company or any of its subsidiaries as an investment company under the Investment Company Act, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. Sales may be required during adverse market conditions, and we could be forced to accept a price below that which we would otherwise consider acceptable. In addition, we may have to acquire additional income or loss generating assets that we might not otherwise have acquired or may have to forgo opportunities to acquire interests in companies that we would otherwise want to acquire and would be important to our investment strategy. Any such selling, acquiring or holding of assets driven by Investment Company Act considerations could negatively affect the value of our common stock, our ability to make distributions and the sustainability of our business and investment strategies.
If we or our subsidiaries were required to register as an investment company but failed to do so, we or the applicable subsidiary would be prohibited from engaging in our or its business, and criminal and civil actions could be brought against us or the applicable subsidiary. In addition, our contracts would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of us and liquidate our business.

19


Maryland law and our organizational documents limit a stockholder's right to bring claims against our officers and directors.
Subject to the limitations set forth in our articles, a director will not have any liability for monetary damages under Maryland law so long as he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interest, and with the care that an ordinary prudent person in a like position would use under similar circumstances. In addition, our articles, in the case of our directors, officers, employees and agents, and the business management agreement and the property management agreements, in the case of our business manager and property managers, respectively, require us to indemnify these persons for actions taken by them in good faith and without negligence or misconduct, or, in the case of our independent directors, actions taken in good faith without gross negligence or willful misconduct. As a result, we and our stockholders may have more limited rights against these persons than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by these persons in some cases.
Our board of directors may, in the future, adopt certain measures under Maryland law without stockholder approval that may have the effect of making it less likely that stockholders would receive a “control premium” for their shares.
Corporations organized under Maryland law are permitted to protect themselves from unsolicited proposals or offers to acquire the company. Although we are not subject to these provisions, our stockholders could approve an amendment to our articles eliminating this restriction. If we do become subject to these provisions, our board of directors would have the power under Maryland law to, among other things, amend our articles without stockholder approval to:
•
stagger our board of directors into three classes;
•
require a two-thirds vote of stockholders to remove directors;
•
empower only remaining directors to fill any vacancies on the board;
•
provide that only the board can fix the size of the board;
•
provide that all vacancies on the board, regardless of how the vacancy was created, may be filled only by the affirmative vote of a majority of the remaining directors in office; and
•
require that special stockholders meetings be called only by holders of a majority of the voting shares entitled to be cast at the meeting.

These provisions may discourage an extraordinary transaction, such as a merger, tender offer or sale of all or substantially all of our assets, all of which might provide a premium price for a stockholder's shares.
Further, under the Maryland Business Combination Act, we may not engage in any merger or other business combination with an “interested stockholder” or any affiliate of that interested stockholder for a period of five years after the most recent purchase of stock by the interested stockholder. After the five-year period ends, any merger or other business combination with the interested stockholder must be recommended by our board of directors and approved by the affirmative vote of at least:
•
80% of all votes entitled to be cast by holders of outstanding shares of our voting stock; and
•
two-thirds of all of the votes entitled to be cast by holders of outstanding shares of our voting stock other than those shares owned or held by the interested stockholder unless, among other things, our stockholders receive a minimum payment for their common stock equal to the highest price paid by the interested stockholder for its common stock.

Our articles exempt any business combination involving us and The Inland Group or any affiliate of The Inland Group, including our business manager and property managers, from the provisions of this law.
Our articles place limits on the amount of common stock that any person may own without the prior approval of our board of directors.
To qualify as a REIT, no more than 50% of the outstanding shares of our common stock may be beneficially owned, directly or indirectly, by five or fewer individuals at any time during the last half of each taxable year. Our articles prohibit any persons or groups from owning more than 9.8% of our common stock without the prior approval of our board of directors. These provisions may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction such as a merger, tender offer or sale of all or substantially all of our assets that might involve a premium price for holders of our common stock. Further, any person or group attempting to purchase shares exceeding these limits could be compelled to sell the additional shares and, as a result, to forfeit the benefits of owning the additional shares.

20


Our articles permit our board of directors to issue preferred stock on terms that may subordinate the rights of the holders of our current common stock or discourage a third party from acquiring us.
Our board of directors is permitted, subject to certain restrictions set forth in our articles, to issue up to forty million shares of preferred stock without stockholder approval. Further, subject to certain restrictions set forth in our articles, our board may classify or reclassify any unissued preferred stock and establish the preferences, conversions or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms or conditions of redemption of any preferred stock. Thus, our board of directors could authorize us to issue shares of preferred stock with terms and conditions that could subordinate the rights of the holders of our common stock or have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction such as a merger, tender offer or sale of all or substantially all of our assets, that might provide a premium price for holders of our common stock.
Maryland law limits, in some cases, the ability of a third party to vote shares acquired in a “control share acquisition.”
Under the Maryland Control Share Acquisition Act, persons or entities owning “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights with respect to those shares except to the extent approved by a vote of two-thirds of the corporation's disinterested stockholders. Shares of stock owned by the acquirer or by officers or directors who are employees of the corporation, are not considered disinterested for these purposes. “Control shares” are shares of stock that, taken together with all other shares of stock the acquirer previously acquired, would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power:
•
one-tenth or more but less than one-third of all voting power;
•
one-third or more but less than a majority of all voting power; or
•
a majority or more of all voting power.

Control shares do not include shares of stock the acquiring person is entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition of control shares, subject to certain exceptions. The Control Share Acquisition Act does not apply to (1) shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (2) acquisitions approved or exempted by our articles or bylaws. Our articles exempt transactions between us and The Inland Group and its affiliates, including our business manager and property managers, from the limits imposed by the Control Share Acquisition Act. This statute could have the effect of discouraging offers from third parties to acquire us and increase the difficulty of successfully completing this type of offer by anyone other than The Inland Group and its affiliates.

Federal Income Tax Risks
If we fail to qualify as a REIT, we will have less cash to distribute to our stockholders.
Our qualification as a REIT depends on our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets as well as other tests imposed by the Internal Revenue Code of 1986, as amended (the “Code”). We cannot assure you that our actual operations for any one taxable year will satisfy these requirements. Further, new legislation, regulations, administrative interpretations or court decisions could significantly affect our ability to qualify as a REIT and/or the federal income tax consequences of our qualification as a REIT. If we were to fail to qualify as a REIT and did not qualify for certain statutory relief provisions:
•
we would not be allowed to deduct distributions paid to stockholders when computing our taxable income;
•
we would be subject to federal, state and local income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates;
•
we would be disqualified from being taxed as a REIT for the four taxable years following the year during which we failed to qualify, unless we qualify for certain statutory relief provisions;
•
we would have less cash to pay distributions to stockholders; and
•
we may be required to borrow additional funds or sell some of our assets in order to pay the corporate tax obligations we may incur as a result of being disqualified.

In addition, if we were to fail to qualify as a REIT, all distributions to stockholders that we did pay would be subject to tax as regular corporate dividends to the extent of our current and accumulated earnings and profits. This means that our U.S. stockholders who are taxed at individual rates would be taxed on our dividends at long-term capital gains rates of up to 20% and that our corporate stockholders generally would be entitled to the dividends received deduction with respect to such dividends, subject, in each case, to applicable limitations under the Code.

21


We are seeking closing agreements with the Internal Revenue Service (the “IRS”) granting us relief for potential failures to satisfy certain REIT qualification requirements, and we may have to pay a significant penalty even if the IRS grants our requests.
A REIT is subject to a number of organizational and operational requirements, including a requirement that it currently distributes at least 90% of its REIT taxable income (subject to certain adjustments) to its stockholders (the “90% Distribution Test”). We have identified certain distribution and stockholder reimbursement practices that may have caused certain dividends paid by the consolidated Inland American REIT and MB REIT (Florida), Inc. (“MB REIT”) to be treated as preferential dividends, which cannot be used to satisfy the 90% Distribution Requirement. We have also identified the ownership of certain assets by the Inland American REIT and MB REIT that may have violated a REIT qualification requirement that prohibits a REIT from owning "securities" of any one issuer in excess of 5% of the REIT's total assets at the end of any calendar quarter (the "5% Securities Test"). In order to provide greater certainty with respect to the qualification of the Inland American REIT and MB REIT as REITs for federal income tax purposes, management concluded that it was in our best interest and the best interest of our stockholders to request closing agreements from the Internal Revenue Service ("IRS") for both the Inland American REIT and MB REIT with respect to such matters. Accordingly, on October 31, 2012, MB REIT filed a request for a closing agreement with the IRS. Additionally, we filed a separate request for a closing agreement on behalf of the Inland American REIT on March 7, 2013.
We identified certain aspects of the calculation of certain dividends on MB REIT's preferred stock and also aspects of the operation of certain "set aside" provisions with respect to accrued but unpaid dividends on certain classes of MB REIT's preferred stock that may have caused certain dividends to be treated as preferential dividends. In the case of the Inland American REIT, management identified certain aspects of the operation of the dividend reinvestment plan and distribution procedures and also certain reimbursements of stockholder expenses that may have caused certain dividends to be treated as preferential dividends. If these practices resulted in preferential dividends, the Inland American REIT and MB REIT would not have satisfied the 90% Distribution Requirement and thus may not have qualified as REITs, which would result in substantial corporate tax liability for the years in which the Inland American REIT or MB REIT failed to qualify as REITs.
In addition, the Inland American REIT and MB REIT made certain overnight investments in bank commercial paper. While the Code does not provide a specific definition of “cash item”, we believe that overnight commercial paper should be treated as a “cash item”, which is not treated as a “security” for purposes of the 5% Securities Test. If treated as a "security", the bank commercial paper would appear to have represented more than 5% of the respective REIT's total assets at the end of certain calendar quarters. In the event this commercial paper is treated as a "security", we anticipate that we would be required to pay corporate income tax on the income earned with respect to the portion of the commercial paper that violated the 5% Securities Test.
We can provide no assurance that the IRS will accept the Inland American REIT's or MB REIT's closing agreement requests. Even if the IRS accepts those requests, the Inland American and MB REIT may be required to pay a penalty which could be significant.
To maintain REIT status, we may be forced to borrow funds or dispose of assets during unfavorable market conditions to make distributions to our stockholders, which could increase our operating costs and decrease the value of an investment in our company.
To qualify as a REIT, we must distribute 90% of our REIT taxable income (which is determined without regard to the dividends-paid deduction or net capital gain) to our stockholders each year. At times, we may not have sufficient funds to satisfy these distribution requirements and may need to borrow funds or dispose of assets to make these distributions and maintain our REIT status and avoid the payment of income and excise taxes. Our inability to satisfy the distribution requirements with operating cash flow could result from (1) differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes; (2) the effect of non-deductible capital expenditures; (3) the creation of reserves; or (4) required debt amortization payments. We may need to borrow funds at times when market conditions are unfavorable. Further, if we are unable to borrow funds when needed for this purpose, we would have to find alternative sources of funding or risk losing our status as a REIT.
Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.
Even if we qualify for taxation as a REIT, we may be subject to certain federal, state and local taxes on our income and assets. For example:
•
We will be subject to tax on any undistributed income. We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year plus amounts retained for which federal income tax was paid are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.


22


•
If we have net income from the sale of foreclosure property that we hold primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, we must pay a tax on that income at the highest corporate income tax rate.
•
If we sell a property, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, our gain would be subject to the 100% “prohibited transactions” tax.
•
Our taxable REIT subsidiaries are subject to regular corporate federal, state and local taxes.
•
We will be subject to a 100% penalty tax on transactions with a taxable REIT subsidiary that are not conducted on an arm's-length basis.

Any of these taxes would decrease cash available for distributions to our stockholders.
The prohibited transactions tax may limit our ability to dispose of our properties.
A REIT's net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of business. We may be subject to the prohibited transactions tax equal to 100% of net gain upon a disposition of a property. As part of our plan to refine our portfolio, we have selectively disposed of certain of our properties in the past and intend to make additional dispositions in the future. Although a safe harbor to the characterization of the sale of property by a REIT as a prohibited transaction is available, not all of our past dispositions have qualified for that safe harbor and some or all of our future dispositions may not qualify for that safe harbor. We believe that our past dispositions will not be treated as prohibited transactions, and we intend to avoid disposing of property that may be characterized as held primarily for sale to customers in the ordinary course of business. Consequently, we may choose not to engage in certain sales of our properties or may conduct such sales through a taxable REIT subsidiary, which would be subject to federal, state and local income taxation.
We may fail to qualify as a REIT if the IRS successfully challenges the valuation of our common stock used for purposes of our DRP.
In order to satisfy the 90% Distribution Requirement, the dividends we pay must not be “preferential.” A dividend determined to be preferential will not qualify for the dividends paid deduction. To avoid paying preferential dividends, we must treat every stockholder of a class of stock with respect to which we make a distribution the same as every other stockholder of that class, and we must not treat any class of stock other than according to its dividend rights as a class. For example, if certain stockholders receive a distribution that is more or less than the distributions received by other stockholders of the same class, the distribution will be preferential. If any part of a distribution is preferential, none of that distribution will be applied towards satisfying the 90% Distribution Requirement.
Stockholders participating in our DRP receive distributions in the form of shares of our common stock rather than in cash. Currently, the purchase price per share under our DRP is equal to 100% of the “market price” of a share of our common stock. Because our common stock is not yet listed for trading, for these purposes, “market price” means the fair market value of a share of our common stock, as estimated by us. In the past, our DRP has offered participants the opportunity to acquire newly-issued shares of our common stock at a discount to the “market price.” Pursuant to an IRS ruling, the prohibition on preferential dividends does not prohibit a REIT from offering shares under a distribution reinvestment plan at discounts of up to 5% of fair market value, but a discount in excess of 5% of the fair market value of the shares would be considered a preferential dividend. Any discount we have offered in the past was intended to fall within the safe harbor for such discounts set forth in the ruling published by the IRS. However, the fair market value of our common stock has not been susceptible to a definitive determination. If the purchase price under our DRP is deemed to have been at more than a 5% discount at any time, we would be treated as having paid one or more preferential dividends. Similarly, we would be treated as having paid one or more preferential dividends if the IRS successfully asserted that the value of the common stock distributions paid to stockholders participating in our DRP exceeded on a per-share basis the cash distribution paid to our other stockholders, which could occur if the IRS successfully asserted that the fair market value of our common stock exceeded the “market value” used for purposes of calculating the distributions under our DRP. If we are determined to have paid preferential dividends as a result of our DRP, we would likely fail to qualify as a REIT.
Complying with the REIT requirements may force us to liquidate otherwise attractive investments.
To maintain qualification as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets, including shares of stock in other REITs, certain mortgage loans and mortgage-backed securities. The remainder of our investment in securities (other than governmental securities, qualified real estate assets and securities of taxable REIT subsidiaries) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities, qualified real estate assets and securities

23


of taxable REIT subsidiaries) can consist of the securities of any one issuer, and no more than 25% of the value of our total securities can be represented by securities of one or more taxable REIT subsidiaries. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within thirty days after the end of the calendar quarter to avoid losing our REIT status and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments in order to maintain our REIT status.
If our leases are not respected as true leases for federal income tax purposes, we would fail to qualify as a REIT.
To qualify as a REIT, we must satisfy two gross income tests, pursuant to which specified percentages of our gross income must be passive income such as rent. For the rent we receive under our lease to be treated as qualifying income for purposes of the gross income tests, the leases must be respected as true leases for federal income tax purposes and must not be treated as service contracts, joint ventures or some other type of arrangement. There are no controlling Treasury regulations, published rulings or judicial decisions involving leases with terms substantially the same as our hotel leases that discuss whether such leases constitute true leases for federal income tax purposes. We believe that all of our leases, including our hotel leases, will be respected as true leases for federal income tax purposes. There can be no assurance, however, that the IRS will agree with this characterization. If a significant portion of our leases were not respected as true leases for federal income tax purposes, we would not be able to satisfy either of the two gross income tests and each would likely lose its REIT status.
If MB REIT failed to qualify as a REIT, we would likely fail to qualify as a REIT.
We own 100% of the common stock of MB REIT, which owns a significant portion of our properties and has elected to be taxed as a REIT for federal income tax purposes. MB REIT is subject to the various REIT qualification requirements and other limitations that apply to us. We believe that MB REIT has operated and will continue to operate in a manner to permit it to qualify for taxation as a REIT for federal income tax purposes. However, if MB REIT were to fail to qualify as a REIT, then (1) MB REIT would become subject to regular corporation income tax and (2) our ownership of shares MB REIT would cease to be a qualifying real estate asset for purposes of the 75% asset test applicable to REITs and would become subject to the 5% asset test, the 10% vote test, and the 10% value test generally applicable to our ownership in corporations other than REITs, qualified REIT subsidiaries and taxable REIT subsidiaries. If MB REIT were to fail to qualify as a REIT, we would not satisfy the 5% asset test, the 10% value test, or the 10% vote test, in which event we would fail to qualify as a REIT unless we qualified for certain statutory relief provisions.
If our hotel managers do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT.
Rent paid by a lessee that is a “related party tenant” of ours will not be qualifying income for purposes of the two gross income tests applicable to REITs. We lease our hotels to our certain of our taxable REIT subsidiaries. A taxable REIT subsidiary will not be treated as a “related party tenant,” and will not be treated as directly operating a lodging facility, which is prohibited, to the extent that hotels that our taxable REIT subsidiaries lease are managed by an “eligible independent contractor.”
We believe that the rent paid by our taxable REIT subsidiaries that lease our hotels is qualifying income for purposes of the REIT gross income tests and that our taxable REIT subsidiaries qualify to be treated as “taxable REIT subsidiaries” for federal income tax purposes, but there can be no assurance that the IRS will not challenge this treatment or that a court would not sustain such a challenge. If the IRS successfully challenged this treatment, we would likely fail to satisfy the asset tests applicable to REITs and a significant portion of our income would fail to qualify for the gross income tests. If we failed to satisfy either the asset or gross income tests, we would likely lose our REIT qualification for federal income tax purposes, unless we qualified for certain statutory relief provisions.
If our hotel managers do not qualify as “eligible independent contractors,” we may fail to qualify as a REIT. Each of the hotel management companies that enters into a management contract with our taxable REIT subsidiaries that lease our hotels must qualify as an “eligible independent contractor” under the REIT rules in order for the rent paid to us by taxable REIT subsidiaries to be qualifying income for gross income tests. Among other requirements, in order to qualify as an eligible independent contractor, (1) a manager must be actively engaged in the trade or business of operating hotels for third parties at the time the manger enters into a management contract with a taxable REIT subsidiary lessee and (2) the manager must not own more than 35% of our outstanding shares (by value) and no person or group of persons can own more than 35% of our outstanding shares and the ownership interests of the manager. Although we believe that all of our hotel managers qualify as eligible independent contractors, no complete assurance can be provided that the IRS will not successfully challenge that position.
Complying with REIT requirements may limit our ability to hedge effectively.
The REIT provisions of the Code may limit our ability to hedge the risks inherent to our operations. Under current law, any income that we generate from derivatives or other transactions intended to hedge our interest rate risk with respect to borrowings made

24


to acquire or carry real estate assets generally will not constitute gross income for purposes of the two gross income tests applicable to REITs, so long as we clearly identify any such transactions as hedges for tax purposes before the close of the day on which they are acquired or entered into and we satisfy other identification requirements. In addition, any income from other hedging transactions would generally not constitute gross income for purposes of both the gross income tests. Accordingly, we may have to limit the use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur.
Legislative or regulatory action could adversely affect you.
Changes to the tax laws are likely to occur, and these changes may adversely affect the taxation of our stockholders. Any such changes could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets. Future legislation might result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be taxed, for federal income tax purposes, as a corporation. As a result, our charter provides our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a corporation, without the vote of our stockholders. Our board of directors has fiduciary duties to us and our stockholders and could only cause changes in our tax treatment if it determines in good faith that such changes are in the best interest of our stockholders. You are urged to consult with your own tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our stock.
The taxation of dividends may adversely affect the value of our stock.
The maximum tax rate applicable to “qualified dividend income” payable to U.S. stockholders that are taxed at individual rates is 20%. Dividends payable by REITs, however, are generally not eligible for the reduced rates on qualified dividend income. The more favorable rates applicable to regular corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our stock.

Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We own interests in retail, lodging, office, industrial, and multi-family properties. As of December 31, 2012, we, directly or indirectly, including through joint ventures in which we have a controlling interest, owned an interest in 706 properties, excluding our lodging and development properties, located in 38 states and the District of Columbia. In addition, we, through our wholly-owned subsidiaries, Inland American Winston Hotels, Inc., Inland American Orchard Hotels, Inc., Inland American Urban Hotels, Inc., and Inland American Lodging Corporation, own 88 lodging properties in 27 states and the District of Columbia. (Dollar amounts stated in thousands, except for revenue per available room, average daily rate and average rent per square foot).
General
The following table sets forth information regarding the ten largest individual tenants in descending order based on annualized rent paid in 2012 but excluding our lodging, multi-family, and development properties. Annualized rent is computed as revenue for the last month of the period multiplied by twelve months. Average rent per square foot is computed as annualized rent divided by the total occupied square footage at the end of the period. Annualized rent includes rent abatements, lease inducements and straight-line rent GAAP adjustments. Physical occupancy is defined as the percentage of total gross leasable area actually used or occupied by a tenant. Economic occupancy is defined as the percentage of total gross leasable area for which a tenant is obligated to pay rent under the terms of its lease agreement, regardless of the actual use or occupation by that tenant of the area being leased.
 

25

Tenant Name
Type
 
2012
Annualized Rental
Income ($)
 
% of Total
Income
 
Square
Footage
 
% of Total
Square
Footage
SunTrust Banks, Inc.
Retail / Office
 
55,085

 
10.19
%
 
2,234,163

 
5.21
%
AT&T, Inc.
Office
 
44,327

 
8.20
%
 
3,404,451

 
7.93
%
Sanofi-Aventis
Office
 
18,034

 
3.34
%
 
736,572

 
1.72
%
United Healthcare Services
Office
 
17,532

 
3.24
%
 
1,210,670

 
2.82
%
C&S Wholesalers
Industrial
 
15,998

 
2.96
%
 
3,031,295

 
7.06
%
Atlas Cold Storage
Industrial
 
14,342

 
2.65
%
 
1,896,815

 
4.42
%
Stop N Shop
Retail
 
10,604

 
1.96
%
 
601,652

 
1.40
%
The Geo Group, Inc.
Industrial
 
9,850

 
1.82
%
 
301,029

 
0.70
%
Best Buy
Retail
 
9,033

 
1.67
%
 
641,839

 
1.50
%
Ross Dress for Less
Retail
 
8,717

 
1.61
%
 
831,741

 
1.94
%
The following sections set forth certain summary information about the character of the properties that we owned at December 31, 2012. Certain of the Company’s properties are encumbered by mortgages, totaling $5,894,443. Additional detail about the properties can be found on Schedule III – Real Estate and Accumulated Depreciation.
Retail Segment
As of December 31, 2012, our retail segment consisted of 585 properties. Our retail segment is centered on 150 multi-tenant properties with an average of approximately 135,000 square feet of total space, located in stable communities, primarily in the southwest and southeast regions of the country. Our retail tenants are largely necessity-based retailers such as grocery and pharmacy, as well as moderate-fashion shoes and clothing retailers, and services such as banking. We own the following types of retail centers:

•
The majority of our single tenant retail properties are bank branches operated by SunTrust Banks, Inc. The bank branches typically offer a wide range of face-to-face or automated banking services to their customers and are often located on corners or out parcels. Typically, these tenants pay rents with contractual increases over time and bear virtually all expenses associated with operating the facility.
•
Community or neighborhood centers are generally open air and designed for tenants that offer a larger array of apparel and other soft goods. Typically, these centers contain anchor stores and other national retail tenants. Our neighborhood shopping centers are generally in-line strip centers with a grocery store anchor, a drugstore, and other small retailers. Tenants of these centers typically offer necessity-based products.
•
Power centers consist of several anchors, such as department stores, off-price stores, warehouse clubs or stores that offer a large selection of merchandise. Typically, the number of specialty tenants is limited.
We have not experienced bankruptcies or receivable write-offs in our retail portfolio that have materially impacted our result of operations. Our multi-tenant retail business is not highly dependent on specific retailers or specific retail industries, which we believe shields the portfolio from significant revenue variances over time.
The following table reflects the types of properties within our retail segment as of December 31, 2012.
 
Retail Properties
Number of
Properties
 
Total Gross
Leasable
Area (Sq.Ft.)
 
% of
Economic
Occupancy
as of
December 31,
2012
 
Total # of
Financially
Active Leases
as of
December 31,
2012
 
Sum of
Annualized
Rent ($)
 
Average Rent
PSF ($)
Bank Branch
435

 
2,351,816

 
99
%
 
434

 
58,045

 
24.98

Community & Neighborhood Center
101

 
9,762,429

 
92
%
 
1,311

 
129,034

 
14.22

Power Center
49

 
10,150,058

 
92
%
 
1,006

 
122,453

 
13.17

 
585

 
22,264,303

 
93
%
 
2,751

 
309,532

 
14.95



26


The following table represents lease expirations for the retail segment:
 
Lease Expiration Year
Number of Expiring Leases
 
GLA of Expiring Leases (Sq. Ft.)
 
Annualized Rent of Expiring Leases ($000)
 
Percent of Total GLA
 
Percent of Total Annualized Rent
 
Expiring Rent/ Square Foot ($)
2013
416

 
1,290,146

 
20,563

 
6.2
%
 
6.6
%
 
15.94

2014
327

 
2,083,316

 
29,716

 
10.1
%
 
9.6
%
 
14.26

2015
359

 
2,385,015

 
29,927

 
11.5
%
 
9.7
%
 
12.55

2016
320

 
1,932,328

 
27,408

 
9.3
%
 
8.8
%
 
14.18

2017
625

 
3,225,891

 
67,818

 
15.6
%
 
21.9
%
 
21.02

2018
289

 
2,214,786

 
38,989

 
10.7
%
 
12.6
%
 
17.60

2019
87

 
1,439,213

 
17,490

 
7.0
%
 
5.6
%
 
12.15

2020
64

 
996,004

 
13,782

 
4.8
%
 
4.4
%
 
13.84

2021
64

 
681,484

 
9,955

 
3.3
%
 
3.2
%
 
14.61

2022
61

 
865,229

 
12,107

 
4.2
%
 
3.9
%
 
13.99

Thereafter
139

 
3,584,419

 
42,499

 
17.3
%
 
13.7
%
 
11.86


2,751

 
20,697,831

 
310,254

 
100
%
 
100
%
 
14.99

We have staggered our lease expirations so that we can manage lease rollover. The percentage of leases expiring each year over the next ten years, as a percentage of annualized rent, averages approximately 9%. In 2017 and 2018, the percentage of leases expiring is higher than average. Of the leases expiring in 2017 and 2018, 52% and 44%, respectively, relate to our large portfolio of bank branches. We believe this is a manageable percentage of lease rollover.
Lodging Segment
Lodging facilities have characteristics different from those found in office, retail, industrial, and multi-family properties. Revenue, operating expenses, and net income of lodging properties are directly tied to the daily hotel sales operation whereas these other asset classes generate revenue from medium to long-term lease contracts. We believe lodging facilities have the benefit of capturing increased revenue opportunities on a daily or weekly basis but are also subject to immediate decreases in lodging revenue as a result of declines in daily rental rates and/or daily occupancy when demand is reduced. Due to seasonality, we expect our lodging revenues to be greater during the second and third quarters with lower revenues in the first and fourth quarters.
We follow two practices common for REITs that own lodging properties: 1) association with national franchise organizations and 2) management of the properties by third-party hotel managers. We have aligned our portfolio with what we believe are the top franchise enterprises in the lodging industry: Marriott, Hilton, Intercontinental, Hyatt, Wyndham, Fairmont and Starwood Hotels. By entering into franchise agreements with these organizations, we believe our lodging operations benefit from enhanced advertising, marketing, and sales programs through the franchisor (in this case, the organization) while the franchisee (in this case, us) pays only a fraction of the overall cost for these programs. We believe effective TV, radio, print, on-line, and other forms of advertisement are necessary to draw customers to our lodging facilities, thus, creating higher occupancy and rental rates, and increased revenue. Additionally, by using the franchise system we are also able to benefit from the frequent traveler rewards programs or “point awards” systems of the franchisor which we believe further bolsters occupancy and overall daily rental rates.

The majority of our lodging facilities and these franchise enterprises are classified in the “upscale” or “upper-upscale” lodging categories. The classifications are defined by Smith Travel Research, an independent provider of lodging industry statistical data. The classification of a property is based on lodging industry standards, which take into consideration many factors such as guest facilities and amenities, level of service and quality of accommodations.





27


The following table reflects the types of properties within our lodging segment as of December 31, 2012.

Lodging Properties
Number
of
Properties
 
Number of
Rooms
 
Average
Occupancy for
the Year ended
December 31,
2012
 
Average Revenue Per
Available Room for
the Year ended
December 31, 2012 ($)
 
Average Daily
Rate for the
Year 2012 ($)
Luxury
1

 
545

 
61
%
 
94

 
153

Upper-Upscale
18

 
5,968

 
70
%
 
102

 
145

Upscale
62

 
8,888

 
75
%
 
93

 
125

Upper-Midscale
7

 
944

 
73
%
 
86

 
119

 
88

 
16,345

 
73
%
 
95

 
132

Office Segment
Our investments in office properties largely represent assets leased to and occupied by either a diverse group of tenants or to a single tenant that fully occupies the leased space. Examples of our multi-tenant properties include Dulles Executive Plaza and Worldgate Plaza, both located in metropolitan Washington D.C., with space leased to high-technology companies and federal government contractors. Examples of our single tenant properties include three buildings leased and occupied by AT&T and located in three distinct US office markets—Chicago, Illinois, St. Louis, Missouri, and Cleveland, Ohio. In addition, our single tenant office portfolio includes bank offices leased on a net basis to SunTrust Banks, Inc., with locations in the east and southeast regions of the country.
The following table reflects the types of properties within our office segment as of December 31, 2012.

Office Properties
Number
of
Properties
 
Total Gross
Leasable Area
(Sq. Ft.)
 
% of Economic
Occupancy as of
December 31, 2012
 
Total # of
Financially
Active Leases as
of December 31, 2012
 
Sum of
Annualized
Rent ($)
 
Average Rent
PSF ($)
Single-Tenant
31

 
7,416,539

 
95
%
 
30

 
98,023

 
13.22

Multi-Tenant
11

 
2,809,961

 
88
%
 
235

 
48,234

 
17.17

 
42

 
10,226,500

 
93
%
 
265

 
146,257

 
14.30


























28



The following table represents lease expirations for the office segment:

Lease Expiration Year
Number of
Expiring Leases
 
GLA of Expiring
Leases (Sq. Ft.)
 
Annualized
Rent of Expiring
Leases ($)
 
Percent of
Total GLA
 
Percent of Total Annualized Rent
 
Expiring
Rent/Square
Foot ($)
2013
39

 
603,670

 
9,010

 
6.4
%
 
6.1
%
 
14.93

2014
47

 
165,344

 
2,513

 
1.7
%
 
1.7
%
 
15.20

2015
46

 
400,062

 
7,261

 
4.2
%
 
4.9
%
 
18.15

2016
37

 
2,563,098

 
39,216

 
27.0
%
 
26.7
%
 
15.30

2017
25

 
1,858,187

 
23,430

 
19.6
%
 
16.0
%
 
12.61

2018
23

 
519,760

 
11,082

 
5.5
%
 
7.5
%
 
21.32

2019
10

 
753,210

 
9,894

 
7.9
%
 
6.7
%
 
13.14

2020
5

 
425,102

 
3,971

 
4.5
%
 
2.7
%
 
9.34

2021
12

 
1,310,978

 
19,343

 
13.8
%
 
13.2
%
 
14.75

2022
6

 
100,669

 
2,178

 
1.1
%
 
1.5
%
 
21.63

Thereafter
15

 
786,817

 
18,964

 
8.3
%
 
12.9
%
 
24.10


265

 
9,486,897

 
146,861

 
100
%
 
100
%
 
15.48

The percentage of leases expiring each year over the next ten years, as a percentage of annualized rent, averages approximately 9%. In 2016 and 2017, 61% and 69%, respectively, of the lease expirations relate to two properties leased by AT&T. In 2016, the lease expires for a property with approximately 1.7 million square feet, occupied by AT&T in Hoffman Estates, Illinois, which is in the greater metro Chicago market. In 2017, the lease expires for a property with approximately 1.5 million square feet, occupied by AT&T in St. Louis, Missouri. We believe this is a manageable percentage of lease rollover.
Industrial Segment
Our industrial segment is comprised of four types of properties: distribution centers, specialty distribution centers, charter schools, and correctional facilities. Our distribution centers are warehouses or other specialized buildings which stock products to be distributed to retailers, wholesalers or directly to consumers. Some properties are located in what we believe are active and sought-after industrial markets, such as the O’Hare airport market of Chicago, Illinois. The specialty distribution centers consist of refrigeration or air conditioned buildings which supply grocery stores in various locations across the country. The charter schools and correctional facilities consist of ten properties under long-term triple net leases.
The following table reflects the types of properties within our industrial segment as of December 31, 2012.
 
Industrial Properties
Number
of
Properties
 
Total Gross
Leasable Area
(Sq. Ft.)
 
% of Economic
Occupancy as of
December 31,
2012
 
Total # of
Financially
Active Leases as of
December 31,
2012
 
Sum of
Annualized
Rent ($)
 
Average Rent
PSF ($)
Distribution Center
32

 
10,385,577

 
96
%
 
35

 
48,914

 
4.71

Specialty Distribution Center
11

 
1,896,815

 
100
%
 
11

 
14,342

 
7.56

Charter Schools
8

 
321,710

 
100
%
 
8

 
6,940

 
21.57

Correctional Facilities
2

 
457,345

 
100
%
 
2

 
11,995

 
26.23

 
53

 
13,061,447

 
97
%
 
56

 
82,191

 
6.48







29

The following table represents lease expirations for the industrial segment:
 
Lease Expiration Year
Number of
Expiring Leases
 
GLA of Expiring
Leases (Sq. Ft.)
 
Annualized
Rent of Expiring
Leases ($)
 
Percent of
Total GLA
 
Percent of Total
Annualized Rent
 
Expiring
Rent/Square
Foot ($)
2013
5

 
747,458

 
4,651

 
5.9
%
 
5.7
%
 
6.22

2014
4

 
454,423

 
2,563

 
3.6
%
 
3.1
%
 
5.64

2015
4

 
885,506

 
3,749

 
7.0
%
 
4.6
%
 
4.23

2016
4

 
1,367,801

 
4,877

 
10.8
%
 
6.0
%
 
3.57

2017
4

 
888,749

 
5,162

 
7.0
%
 
6.3
%
 
5.81

2018
1

 
175,052

 
646

 
1.4
%
 
0.8
%
 
3.69

2019
1

 
43,500

 
130

 
0.3
%
 
0.2
%
 
2.99

2020
1

 
301,029

 
9,850

 
2.4
%
 
12.1
%
 
32.72

2021
4

 
1,049,486

 
5,849

 
8.3
%
 
7.2
%
 
5.57

2022
8

 
2,402,681

 
15,253

 
19.0
%
 
18.7
%
 
6.35

Thereafter
20

 
4,361,306

 
28,972

 
34.4
%
 
35.5
%
 
6.64


56

 
12,676,991

 
81,701

 
100
%
 
100
%
 
6.44

The percentage of leases expiring each year over the next ten years, as a percentage of annualized rent, averages approximately 7%. We believe this is a manageable percentage of lease rollover.

Multi-family Segment
Our multi-family portfolio consists of conventional apartments and student housing. Our conventional apartment properties are upscale with resident amenities such as business centers, fitness centers, swimming pools, landscaped grounds and clubhouse facilities. The apartment buildings are typically three-story walk-up buildings offering one, two and three bedroom apartments and are leased on per unit basis.
Our student housing portfolio consists of residential and mixed-use communities close to university campuses and in urban infill locations. The student housing properties are high-end properties with amenities such as fitness centers, swimming pools, multimedia lounges, and sports courts. Most of the properties are marketed under the "University House" brand. We are increasing the size of our student housing portfolio through acquisitions and developments. In 2012, we acquired two properties and placed-in-service two properties. The properties are leased on a per bed basis rather than per unit.
The following table reflects the types of properties within our multi-family segment as of December 31, 2012.
 
Multi-family Properties
Number
of
Properties
 
Total Units / Beds
 
% of Economic
Occupancy as of
December 31,
2012
 
Total #
of Units/
Beds
Occupied
 
Rent
per
Unit/
Bed ($)
Conventional (units)
17
 
5,311
 
90%
 
4,776
 
$992
Student Housing (beds)
9
 
5,212
 
94%
 
4,887
 
$680
 
26
 

 
 
 

 
 
Item 3. Legal Proceedings

As previously disclosed, the SEC is conducting a non-public, formal, fact-finding investigation to determine whether there have been violations of certain provisions of the federal securities laws regarding our business manager fees, property management fees, transactions with our affiliates, timing and amount of distributions paid to our investors, determination of property impairments, and any decision regarding whether we might become a self-administered REIT. We have not been accused of any wrongdoing by the SEC. We also have been informed by the SEC that the existence of this investigation does not mean that the SEC has concluded that anyone has broken the law or that the SEC has a negative opinion of any person, entity, or security. We have been cooperating fully with the SEC.

We cannot reasonably estimate the timing of the investigation, nor can we predict whether or not the investigation might have a
material adverse effect on our business.


30


Inland American Business Manager & Advisor, Inc. has offered to reduce its business management fee in an aggregate amount necessary to reimburse the Company for any costs, fees, fines or assessments, if any, which may result from the SEC investigation, other than legal fees incurred by the Company, or fees and costs otherwise covered by insurance. The business manager also offered to waive its reimbursement of legal fees or costs that the business manager incurs in connection with the SEC investigation. On May 4, 2012, Inland American Business Manager & Advisor, Inc. forwarded a letter to the Company that memorializes this arrangement.

A copy of Inland American Business Manager & Advisor, Inc.’s letter to the Company regarding these items was filed on May 7, 2012 with our Quarterly Report on Form 10-Q as of March 31, 2012 and is filed herewith as Exhibit 10.10.

We have also received two related demands by stockholders to conduct investigations regarding claims that the officers, the board of directors, the business manager, and the affiliates of the business manager (the "Inland American Parties")breached their fiduciary duties to us in connection with the matters that we disclosed are subject to the SEC investigation. The first demand claims that the Inland American Parties (i) falsely reported the value of our common stock until September 2010; (ii) caused us to purchase shares of our common stock from stockholders at prices in excess of their value; and (iii) disguised returns of capital paid to stockholders as REIT income resulting in the payment of fees to the business manager for which it was not entitled. The three stockholders in that demand contend that legal proceedings should seek recovery of damages in an unspecified amount allegedly sustained by us. The second demand by another shareholder makes similar claims and further alleges that the Inland American Parties (i) caused us to engage in transactions that unduly favored related parties, (ii) falsely disclosed the timing and amount of distributions, and (iii) falsely disclosed whether we might become a self-administered REIT. There has been no lawsuit filed, however, with regard to these matters.

The full Board of Directors has responded by authorizing the independent directors to investigate the claims contained in the demand letters, as well as any other matters the independent directors see fit to investigate, including matters related to the SEC investigation.  Pursuant to this authority, the independent directors have formed a special litigation committee that is comprised solely of independent directors to review and evaluate the matters referred by the full Board to the independent directors, and to recommend to the full Board any further action as is appropriate.  The special litigation committee intends to investigate these claims with the assistance of independent legal counsel and will make a recommendation to the Board of Directors after the committee has completed its investigation. 

Item 4. Mine Safety Disclosures
Not applicable.


PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information

We published an estimated per share value of our common stock to assist broker dealers that sold our common stock in our initial and follow-on “best efforts” offerings to comply with the rules published by the Financial Industry Regulatory Authority (“FINRA”).  On December 19, 2012, we announced an estimated value of our common stock equal to $6.93 per share.

To estimate our per share value, our Business Manager relied this year solely on the net asset valuation method. Our Business Manager began its analysis by estimating the value of the Company's real properties using a discounted cash flow of projected net operating income less capital expenditures for each property, for the ten-year period ending December 31, 2022.  In this analysis, the Business Manager used a range of discount rates and exit capitalization rates for similar property types and that the Business Manager believed fell within ranges that would be used by similar investors to value the Company's real properties.  The Business Manager then applied a sensitivity analysis to create a range of values and recommended a share value number within that range, based upon a variety of facts and assumptions related to, among other things, the nature of our operations, the markets in which our properties are located, and the general economic conditions in the United States. External factors relied upon by our Business Manager to recommend a share price above the mid-point of the net asset valuation range included trends showing declines in capitalization rates in retail and industrial segments, as well as the overall improving economic conditions relative to real estate.  Our Business Manager tempered its share price calculation, however, based on uncertainties in the overall economy, including the fiscal cliff and current debt crisis.

31


 
To arrive at the total asset value, the Business Manager added the value of other assets and investments, such as cash, marketable securities, joint ventures and land held for developments, to the value of the real properties described above. From total asset value, the Business Manager then subtracted the total fair value of the Company's debt.  This value was then divided by the number of shares outstanding as of December 1, 2012 to arrive at a per share estimated value.

The Business Manager believes that the net asset value method used to estimate the per share value of our common stock and our assets and liabilities is the most commonly used valuation methodology for a non-listed REIT.  The value of our real estate assets reflects an overall decline from original purchase price plus post-acquisition capital investments of 14%.  We believe that the assumptions used to estimate value are within the ranges used by sellers of similar properties including joint venture and development assets.   The estimated value may not, however, represent current market values or fair values as determined in accordance with U.S. generally accepted accounting principles (or “GAAP”).  Real properties are currently carried at their amortized cost basis in the Company's financial statements.  The estimated value of our real estate assets did not necessarily represent the value we would receive or accept if the assets were marketed for sale.  The market for commercial real estate can fluctuate and values are expected to change in the future.  Further, the estimated per share value of the Company's common stock does not reflect a liquidity discount for the fact that the shares are not currently traded on a national securities exchange, a discount for the non-assumability or prepayment obligations associated with certain of the Company's loans and other costs that may be incurred, including any costs of sale of its assets.

As with any methodology used to estimate value, the methodology employed by our Business Manager was based upon a number of estimates and assumptions that may not be accurate or complete.  Further, different parties using different assumptions and estimates could derive a different estimated value per share, which could be significantly different from our estimated value per share.  The estimated per share value established by us represents neither the fair value according to GAAP of our assets less liabilities, nor the amount that our shares would trade at on a national securities exchange or the amount a stockholder would obtain if he or she tried to sell his or her shares or if we liquidated our assets and distributed the proceeds after paying all of our expenses and liabilities.  Accordingly, with respect to the estimated value per share, we can give no assurance that:

•
a stockholder would be able to resell his or her shares at this estimated value;

•
a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of our liabilities or a sale of the Company;
 
•
our shares would trade at a price equal to or greater than the estimated value per share if we listed them on a national securities exchange; or

•
the methodology used to estimate our value per share would be acceptable to FINRA or that the estimated value per share will satisfy the applicable annual valuation requirements under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the Internal Revenue Code of 1986, as amended (the “Code”) with respect to employee benefit plans subject to ERISA and other retirement plans or accounts subject to Section 4975 of the Code.
 
The estimated value per share was accepted by our board on December 18, 2012 and reflects the fact that the estimate was calculated at a moment in time.  The value of our shares will likely change over time and will be influenced by changes to the value of our individual assets as well as changes and developments in the real estate and capital markets.  We currently expect to update our estimated value per share no later than December 31, 2013.  Nevertheless, stockholders should not rely on the estimated value per share in making a decision to buy or sell shares of our common stock.
Share Repurchase Program
Our board of directors adopted a share repurchase program, which became effective August 31, 2005 and was suspended as of March 30, 2009. Our board later adopted an Amended and Restated Share Repurchase Program, which was effective from April 11, 2011 through January 31, 2012. Our board subsequently adopted a Second Amended and Restated Share Repurchase Program, which became effective as of February 1, 2012 (the “Second Amended Program”).
Under the Second Amended Program, we may repurchase shares of our common stock, on a quarterly basis, from the beneficiary of a stockholder that has died or from stockholders that have a “qualifying disability” or are confined to a “long-term care facility” (together, referred to herein as “hardship repurchases”). We are authorized to repurchase shares at a price per share equal to 100% of the most recently disclosed estimated per share value of our common stock, which currently is equal to

32


$6.93 per share. Our obligation to repurchase any shares under the Second Amended Program is conditioned upon our having sufficient funds available to complete the repurchase. Our board has initially reserved $10.0 million per calendar quarter for the purpose of funding repurchases associated with death and $15.0 million per calendar quarter for the purpose of funding hardship repurchases. In addition, notwithstanding anything to the contrary, at no time during any consecutive twelve month period may the aggregate number of shares repurchased under the Second Amended Program exceed 5.0% of the aggregate number of issued and outstanding shares of our common stock at the beginning of the twelve month period. For any calendar quarter, if the number of shares accepted for repurchase would cause us to exceed the 5.0% limit, repurchases for death will take priority over any hardship repurchases, in each case in accordance with the procedures, and subject to the funding limits, described in the Second Amended Program and summarized herein.
If, on the other hand, the funds reserved for either category of repurchase under the Second Amended Program are insufficient to repurchase all of the shares for which repurchase requests have been received for a particular quarter, or if the number of shares accepted for repurchase would cause us to exceed the 5.0% limit, we will repurchase the shares in the following order:

•
for death repurchases, we will repurchase shares in chronological order, based upon the beneficial owner’s date of death; and
•
for hardship repurchases, we will repurchase shares on a pro rata basis, up to, but not in excess of, the limits described herein; provided, that in the event that the repurchase would result in a stockholder owning less than 150 shares, we will repurchase all of that stockholder’s shares.
The Second Amended Program will immediately terminate if our shares are approved for listing on any national securities exchange. We may amend or modify any provision of the Second Amended Program, or reject any request for repurchase, at any time at our board’s sole discretion.
The table below outlines the shares of common stock we repurchased pursuant to the Second Amended Program during the three months ended December 31, 2012:
 
As of month ended,
Total Number of Share Requests (2)
Total Number of
Shares Repurchased (2)
 
Average
Price Paid
per Share
 
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
 
Maximum
Number of Shares
That May Yet be
Purchased Under the
Plans or Programs
October 2012 (3)
—

1,380,980

 
$
7.22

 
1,380,980

 
(1
)
November 2012
—

—

 
N/A

 
—

 
(1
)
December 2012 (4)
1,334,524

—

 
N/A

 
—

 
(1
)
 
(1)
A description of the Second Amended Program, including the date that the program was amended, the dollar amount approved, the expiration date and the maximum number of shares that may be purchased thereunder is included in the narrative preceding this table.
(2)
Beginning in April 2012, shares were repurchased in the subsequent quarter that share requests were received.
(3)
There were 1,380,980 share requests outstanding as of the month ended September 30, 2012, which were repurchased in October 2013 at a price of $7.22 per share.
(4)
All share requests outstanding as of the month ended December 31, 2012 were repurchased in January 2013 at a price of $6.93 per share.
Stockholders
As of March 1, 2013, we had 185,430 stockholders of record.
Distributions
We have been paying monthly cash distributions since October 2005. During the years ended December 31, 2012 and 2011, we declared cash distributions, which are paid monthly in arrears to stockholders, totaling $440.0 million and $429.6 million, respectively, in each case equal to $0.50 per share on an annualized basis. During the years ended December 31, 2012 and 2011, we paid cash distributions of $439.2 million and $428.7 million, respectively. For Federal income tax purposes for the years ended December 31, 2012 and 2011, 87% and 62% of the distributions paid constituted a return of capital in the applicable year.


33


We intend to continue paying regular monthly cash distributions to our stockholders. However, there are many factors that can affect the amount and timing of cash distributions to stockholders. There is no assurance that we will be able to continue paying distributions at the current level or that the amount of distributions will increase, or not decrease further, over time. Even if we are able to continue paying distributions, the actual amount and timing of distributions is determined by our board of directors in its discretion and typically depends on the amount of funds available for distribution, which depends on items such as current and projected cash requirements and tax considerations. As a result, our distribution rate and payment frequency may vary from time to time.

Notification Regarding Payments of Distributions
Shareholders should be aware that the method by which a shareholder has chosen to receive his or her distributions affects the timing of the shareholder's receipt of those distributions. Specifically, under our transfer agent's payment processing procedures, distributions are paid in the following manner:

(1) those shareholders who have chosen to receive their distributions via ACH wire transfers receive their distributions on the distribution payment date (as determined by our Board of Directors);

(2) those shareholders who have chosen to receive their distributions by paper check are typically mailed those checks on the distribution payment date, but sometimes paper checks are mailed on the day following the distribution payment date; and

(3) for those shareholders holding shares through a broker or other nominee, the distributions payments are wired, or paper checks are mailed, to the broker or other nominee on the day following the distribution payment date.

All shareholders who hold shares directly in record name may change at any time the method through which they receive their distributions from our transfer agent, and those shareholders will not have to pay any fees to us or our transfer agent to make such a change. Also, all shareholders are eligible to participate at no cost in our DRP. Accordingly, each shareholder may select the timing of receipt of distributions from our transfer agent by selecting the method above that corresponds to the desired timing for receipt of the distributions. Because all shareholders may elect to have their distributions sent via ACH wire on the distribution payment date or credited on the distribution payment date to their DRP, we will treat all of our shareholders, regardless of the method by which they have chosen to receive their distributions, as having constructively received their distributions from us on the distribution payment date for federal income tax purposes.

Shareholders who hold shares directly in record name and who would like to change their distribution payment method should complete a “Change of Distribution Election Form.” Also, shareholders who would like to participate in our DRP should complete the “Change of Distribution Election Form.” The form is available on our website under “Investor Relations-Forms.”

We note that the payment method for shareholders who hold shares through a broker or nominee is determined by the broker or nominee. Similarly, the payment method for shareholders who hold shares in a tax-deferred account, such as an IRA, is generally determined by the custodian for the account. Shareholders that currently hold shares through a broker or other nominee and would like to receive distributions via ACH wire or paper check should contact their broker or other nominee regarding their processes for transferring shares to record name ownership. Similarly, shareholders who hold shares in a tax deferred account may need to hold shares outside of their tax-deferred accounts to change the method through which they receive their distributions. Shareholders who hold shares through a tax-deferred account and who would like to change the method through which they receive their distributions should contact their custodians regarding the transfer process and should consult their tax advisor regarding the consequences of transferring shares outside of a tax-deferred account.







34


Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information regarding our equity compensation plans as of December 31, 2012.
Equity Compensation Plan Information
Plan category
Number of securities to
be issued upon
exercise of outstanding
options,
warrants and rights (a)
 
Weighted-average
exercise price of
outstanding options,
warrants
and rights
 
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
shares reflected in
column (a))
Equity compensation plans approved by security holders:
 
 
 
 
 
Independent Director Stock Option Plan
29,000

 
$
8.87

 
46,000

Equity compensation plans not approved by security holders
—

 
$
—

 
—

Total:
29,000

 
$
8.87

 
46,000

We have adopted an Independent Director Stock Option Plan, as amended, which, subject to certain conditions, provides for the grant to each independent director of an option to purchase 3,000 shares following their becoming a director and for the grant of additional options to purchase 500 shares on the date of each annual stockholder’s meeting. The options for the initial 3,000 shares are exercisable as follows: 1,000 shares on the date of grant and 1,000 shares on each of the first and second anniversaries of the date of grant. All other options are exercisable on the second anniversary of the date of grant. The exercise price for all options is equal to the fair value of our shares, as defined in the plan, on the date of each grant.

Recent Sales of Unregistered Securities
None.
Item 6. Selected Financial Data
The following table shows our consolidated selected financial data relating to our consolidated historical financial condition and results of operations. Such selected data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes appearing elsewhere in this report (dollar amounts are stated in thousands, except per share amounts).
 

35


 
As of and for the year ended December 31,
 
2012
 
2011
 
2010
 
2009
 
2008
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Total assets
$
10,759,884

 
$
10,919,190

 
$
11,391,502

 
$
11,328,211

 
$
11,136,866

Mortgages, notes and margins payable, net
$
6,006,146

 
$
5,902,712

 
$
5,532,057

 
$
5,085,899

 
$
4,437,997

Operating Data:
 
 
 
 
 
 
 
 
 
Total income
$
1,437,395

 
$
1,227,873

 
$
1,094,696

 
$
1,058,574

 
$
965,274

Total interest and dividend income
$
23,386

 
$
22,860

 
$
33,068

 
$
55,161

 
$
77,997

Net loss attributable to Company
$
(69,338
)
 
$
(316,253
)
 
$
(176,431
)
 
$
(397,960
)
 
$
(365,178
)
Net loss per common share, basic and diluted
$
(0.08
)
 
$
(0.37
)
 
$
(0.21
)
 
$
(0.49
)
 
$
(0.54
)
Common Stock Distributions:
 
 
 
 
 
 
 
 
 
Distributions declared to common stockholders
$
440,031

 
$
429,599

 
$
417,885

 
$
405,337

 
$
418,694

Distributions per weighted average common share
$
0.50

 
$
0.50

 
$
0.50

 
$
0.51

 
$
0.62

Funds from Operations:
 
 
 
 
 
 
 
 
 
Funds from operations (a)
$
476,714

 
$
443,459

 
$
321,828

 
$
142,601

 
$
140,064

Cash Flow Data:
 
 
 
 
 
 
 
 
 
Cash flows provided by operating activities
$
456,221

 
$
397,949

 
$
356,660

 
$
369,031

 
$
384,365

Cash flows used in investing activities
$
(118,162
)
 
$
(286,896
)
 
$
(380,685
)
 
$
(563,163
)
 
$
(2,484,825
)
Cash flows provided by (used in) financing activities
$
(335,443
)
 
$
(160,597
)
 
$
(208,759
)
 
$
(250,602
)
 
$
2,636,325

Other Information:
 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding, basic and diluted
879,685,949

 
858,637,707

 
835,131,057

 
811,400,035

 
675,320,438

 
(a)
We consider “Funds from Operations, or “FFO” a widely accepted and appropriate measure of performance for a REIT. FFO provides a supplemental measure to compare our performance and operations to other REITs. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts or NAREIT, an industry trade group, has promulgated a standard known as FFO, which it believes reflects the operating performance of a REIT. As defined by NAREIT, FFO means net income computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization and impairment charges on depreciable property and after adjustments for unconsolidated partnerships and joint ventures in which we hold an interest. In calculating FFO, impairment charges of depreciable real estate assets are added back even though the impairment charge may represent a permanent decline in value due to decreased operating performance of the applicable property. Further, because gains and losses from sales of property are excluded from FFO, it is consistent and appropriate that impairments, which are often early recognition of losses on prospective sales of property, also be excluded. If evidence exists that a loss reflected in the investment of an unconsolidated entity is due to the write-down of depreciable real estate assets, these impairment charges are added back to FFO. The methodology is consistent with the concept of excluding impairment charges of depreciable assets or early recognition of losses on sale of depreciable real estate assets held by the Company.

FFO is neither intended to be an alternative to “net income” nor to “cash flows from operating activities” as determined by GAAP as a measure of our capacity to pay distributions. We believe that FFO is a better measure of our properties’ operating performance because FFO excludes non-cash items from GAAP net income. FFO is calculated as follows (in thousands):
 

36


 
 
Year ended December 31,
 
 
2012
 
2011
 
2010
Funds from Operations:
 
 
 
 
 
 
Net loss attributable to Company
$
(69,338
)
 
$
(316,253
)
 
$
(176,431
)
Add:
Depreciation and amortization related to investment properties
438,755

 
439,077

 
443,100

 
Depreciation and amortization related to investment in unconsolidated entities
48,840

 
63,645

 
43,845

 
Provision for asset impairment
77,348

 
28,967

 
—

 
Provision for asset impairment included in discontinued operations
5,968

 
134,673

 
47,529

 
Impairment of investment in unconsolidated entities
9,365

 
113,621

 
11,239

 
Impairment reflected in equity in earnings of unconsolidated entities
470

 
16,739

 
10,710

 
Gain on sale of property reflected in net income attributed to noncontrolling interest
5,439

 
—

 
—

 
Loss from sales of investment in unconsolidated entities
2,957

 
—

 
—

Less:
Gains from property sales and transfer of assets
40,691

 
16,510

 
55,412

 
Gains from property sales reflected in equity in earnings of unconsolidated entities
2,399

 
11,141

 
242

 
Gains from sales of investment in unconsolidated entities
—

 
7,545

 
—

 
Noncontrolling interest share of depreciation and amortization related to investment properties
—

 
1,814

 
2,510

 
Funds from operations
$
476,714

 
$
443,459

 
$
321,828

Below is additional information related to certain items that significantly impact the comparability of our Funds from Operations and Net Loss or significant non-cash items from the periods presented (in thousands):
 
 
Year ended December 31,
 
2012
 
2011
 
2010
Gain on conversion of note receivable to equity interest
$
—

 
$
(17,150
)
 
$
—

Payment from note receivable previously impaired
$
—

 
$
(2,422
)
 
$
—

Impairment of notes receivable
$
—

 
$
—

 
$
111,896

Impairment on securities
$
1,899

 
$
24,356

 
$
1,856

(Gain) loss on consolidation of an investment
$
—

 
$
—

 
$
(433
)
Straight-line rental income
$
(11,010
)
 
$
(13,841
)
 
$
(17,705
)
Amortization of above/below market leases
$
(2,271
)
 
$
(1,326
)
 
$
(433
)
Amortization of mark to market debt discounts
$
6,488

 
$
7,973

 
$
6,203

Gain on extinguishment of debt
$
(9,478
)
 
$
(10,848
)
 
$
(19,227
)
Gain on extinguishment of debt reflected in equity in earnings of unconsolidated entities
$
(2,176
)
 
$
—

 
$
—

Acquisition Costs
$
1,644

 
$
1,680

 
$
1,805



37




Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-K constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical, including statements regarding management’s intentions, beliefs, expectations, representations, plans or predictions of the future and are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “will,” “should” and “could.” Similarly, statements that describe or contain information related to matters such as management’s intent, belief or expectation with respect to the Company’s financial performance, investment strategy and portfolio, cash flows, growth prospects, legal proceedings, amount and timing of anticipated future cash distributions, and other matters are forward-looking statements. These forward-looking statements are not historical facts but are the intent, belief or current expectations of the Company’s management based on their knowledge and understanding of the business and industry, the economy and other future conditions. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors listed and described under “Risk Factors” in this Annual Report on Form 10-K . These factors include, but are not limited to: market and economic volatility experienced by the U.S. economy or real estate industry as a whole, and the local economic conditions in the markets in which the Company’s properties are located; the Company’s ability to refinance maturing debt or to obtain new financing on attractive terms; the availability of cash flow from operating activities to fund distributions; future increases in interest rates; and actions or failures by the Company’s joint venture partners, including development partners. The Company intends that such forward-looking statements be subject to the safe harbors created by Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.
The following discussion and analysis relates to the years ended December 31, 2012, 2011 and 2010 and as of December 31, 2012 and 2011. You should read the following discussion and analysis along with our consolidated financial statements and the related notes included in this report.
Overview
We continue to maintain a sustainable distribution rate funded by our operations. In 2012, we began disposing of assets we determined less strategic and reinvesting the capital in real estate assets that we believe will produce attractive current yields and long-term risk-adjusted returns to our stockholders. For our existing portfolio, our property managers for our non-lodging properties actively seek to lease space at favorable rates, control expenses, and maintain strong tenant relationships. We oversee the management of our lodging facilities through active engagement with our third party managers and franchisors to maximize occupancy and daily rates as well as control expenses.
On a consolidated basis, essentially all of our revenues and cash flows from operations for the year ended December 31, 2012 were generated by collecting rental payments from our tenants, room revenues from lodging properties, distributions from unconsolidated entities and dividend income earned from investments in marketable securities. Our largest cash expense relates to the operation of our properties as well as the interest expense on our mortgages. Our property operating expenses include, but are not limited to, real estate taxes, regular repair and maintenance, management fees, utilities and insurance (some of which are recoverable). Our lodging operating expenses include, but are not limited to, rooms, food and beverage, utility, administrative and marketing, payroll, franchise and management fees and repairs and maintenance expenses.
In 2012, we saw total net operating income increase from $678.5 million to $756.4 million for the year ended December 31, 2011 to 2012. The increase of $77.9 million or 11.5% was due to same store net operating income increase of approximately 3.0% or $19.7 million, significantly resulting from our increased lodging and multi-family operating performance. The remainder of the increase is a result of a full year of operations of the retail and lodging properties acquired in late 2011 and the property performance for the lodging properties acquired in early 2012.

In evaluating our financial condition and operating performance, management focuses on the following financial and non-financial indicators, discussed in further detail herein:
•
Cash flow from operations as determined in accordance with U.S. generally accepted accounting principles (“GAAP”).
•
Funds from Operations (“FFO”), a supplemental non-GAAP measure to net income determined in accordance with GAAP.

38

•
Economic and physical occupancy and rental rates.
•
Leasing activity and lease rollover.
•
Managing operating expenses.
•
Average daily room rate, revenue per available room, and average occupancy to measure our lodging properties.
•
Debt maturities and leverage ratios.
•
Liquidity levels.
During 2013, we will continue to execute on our strategy of disposing less strategic assets and deploying the capital into segments we believe have opportunity for higher performance, which are multi-tenant retail, lodging, and student housing. While we believe we will continue to see overall same store operating performance increases in 2013, we could see an increase in disposition activity in 2013. This disposition activity could cause us to experience dilution in our operating performance during the period we dispose of properties and prior to our reinvestment in other properties or used to repurchase our shares as the proceeds from disposition will be held in cash pending reinvestment.
We expect to see increased same store operating performance in our lodging and multi-family segments in 2013. The lodging industry is expected to have positive growth for 2013 and the rental growth is projected to continue for the multi-family properties in 2013. Our retail, office and industrial portfolios are expected to maintain high occupancy and have limited lease rollover in the next three years. We believe the retail and industrial segments same store income will be consistent with 2012 results. We do expect to see lower income in the office segment compared to 2012 results. We believe that our debt maturities over the next five years are manageable and although we believe interest rates will rise in the future, we anticipate low interest rates to continue in 2013. We believe we will be maintain our cash distribution in 2013 and anticipate distributions to be funded by cash flow from operations as well as distributions from unconsolidated entities and gains on sales of properties.

Results of Operations
General
Consolidated Results of Operations
This section describes and compares our results of operations for the years ended December 31, 2012, 2011 and 2010. We generate most of our net operating income from property operations. In order to evaluate our overall portfolio, management analyzes the operating performance of all properties from period to period and properties we have owned and operated for the same period during each year. Investment properties owned for the entire years ended December 31, 2012 and 2011 and December 31, 2011 and 2010, respectively, are referred to herein as “same store” properties. Unless otherwise noted, all dollar amounts are stated in thousands (except per share amounts, per square foot amounts, revenue per available room and average daily rate).

Comparison of the years ended December 31, 2012, 2011 and 2010

 
Year ended
December 31, 2012
 
Year ended
December 31, 2011
 
Year ended
December 31, 2010
Net loss attributable to Company
(69,338
)
 
(316,253
)
 
(176,431
)
Net loss, per common share, basic and diluted
(0.08
)
 
(0.37
)
 
(0.21
)
Our net loss decreased from the years ended December 31, 2011 to 2012 primarily due to a decrease in one-time impairment charges to unconsolidated entities and to various properties for the year ended December 31, 2012 compared to 2011. Additionally, operating income increased from same store growth as our lodging and multi-family operating performance increased and from a full year of operations for retail and lodging properties acquired in late 2011 and early 2012.
Our net loss increased from the years ended December 31, 2010 to 2011 primarily due to an increase in one-time impairment charges to unconsolidated entities and to various properties for the year ended December 31, 2011 compared to 2010. This was offset by an increase in operating income for the year ended December 31, 2011 due to a full year of operations for properties acquired in 2011 and 2010, as well as one-time impairment charges to notes receivables for the year ended December 31, 2010.
A detailed discussion of our financial performance is outlined below.


39

Operating Income and Expenses:

 
Year ended
December 31, 2012
 
Year ended
December 31, 2011
 
Year ended
December 31, 2010
 
2012 Increase
(decrease) from
2011
 
2011 Increase
(decrease) from
2010
Income:
 
 
 
 
 
 
 
 
 
Rental income
$
622,954

 
$
594,946

 
$
560,350

 
$
28,008

 
$
34,596

Tenant recovery income
98,770

 
90,213

 
85,263

 
8,557

 
4,950

Other property income
15,244

 
16,462

 
14,544

 
(1,218
)
 
1,918

Lodging income
700,427

 
526,252

 
434,539

 
174,175

 
91,713

Operating Expenses:
 
 
 
 
 
 

 

Lodging operating expenses
454,417

 
335,372

 
275,398

 
119,045

 
59,974

Property operating expenses
128,096

 
127,676

 
119,005

 
420

 
8,671

Real estate taxes
98,495

 
86,292

 
80,370

 
12,203

 
5,922

Provision for asset impairment
77,348

 
28,967

 
—

 
48,381

 
28,967

General and administrative expenses
36,814

 
31,032

 
36,665

 
5,782

 
(5,633
)
Business management fee
39,892

 
40,000

 
36,000

 
(108
)
 
4,000

Property Income and Operating Expenses
Rental income for non-lodging properties consists of basic monthly rent, straight-line rent adjustments, amortization of acquired above and below market leases, other property, and percentage rental income recorded pursuant to tenant leases. Tenant recovery income consists of reimbursements for real estate taxes, common area maintenance costs, management fees, and insurance costs. Tenant recovery income generally fluctuates correspondingly with property operating expenses and real estate taxes. Other property income for non-lodging properties consists of lease termination fees and other miscellaneous property income. Property operating expenses for non-lodging properties consist of regular repair and maintenance, management fees, utilities and insurance (some of which are recoverable from the tenant).
•
There was a modest increase in property revenues in the year ended December 31, 2012 compared to 2011. The increase was a result of the full year of operations for the seven properties added in 2011. Same store consolidated property revenues amounted to $692,777 in 2012 and $684,011 in 2011, which resulted in a 1.3% increase. Comparatively, same store operating expenses were $206,801 in 2012 and $205,279 in 2011, an increase of 1.4%.
•
The increase in property revenues in the year ended December 31, 2011 compared to 2010 was again due to a full year of operations for properties acquired in 2011 and 2010. Same store consolidated property revenues amounted to $590,186 in 2011 compared to $590,259 in 2010, which was less than a 1% change. In correlation, same store property operating expenses amounted to $177,419 in 2011 compared to $179,940 in 2010, which was a 1% change.

Lodging Income and Operating Expenses
Our lodging properties generate revenue through sales of rooms and associated food and beverage services. Lodging operating expenses include the room maintenance, food and beverage, utilities, administrative and marketing, payroll, franchise and management fees, and repairs and maintenance expenses.
•
The $174,175 increase in lodging operating income for the year ended December 31, 2012 compared to 2011 was a result of the addition of hotels acquired in 2012 as well as an increase in our same store properties' performance. We acquired five hotels in the first quarter of 2012 and were able to obtain nine months of operating performance. This accounted for approximately $148,305 of the increase. The remaining $25,870 of the increase was due to improved same store revenues. The addition of upper upscale properties to our portfolio resulted in higher operating costs. The increase in lodging expenses of $119,045 (35%) for 2012 was directly correlated to the percentage increase in revenues (33%).
•
Lodging income increased in the year ended December 31, 2011 primarily due to a full year of operations reflected in 2011 for hotels acquired in 2010 in addition to 2011 acquisition of three hotels. In general, the economy was better in 2011 than in prior years which contributed to the increase in hotel performance. As expected, lodging operating expense increased correspondingly to lodging income.



40

Provision for Asset Impairment
•
For the year ended December 31, 2012, we identified certain properties which may have a reduction in the expected holding period and reviewed the probability of these assets’ dispositions. As a result, we recorded a provision for asset impairment of $77,348 for continuing operations and $5,968 for discontinued operations, to reduce the book value of certain investment properties to their fair values.
•
For the years ended December 31, 2011 and 2010, we identified certain properties which may have a reduction in the expected holding period and reviewed the probability of these assets’ dispositions. As a result, we recorded a provision for asset impairment of $28,967 and $0 in continuing operations, respectively, to reduce the book value of certain investment properties to their new fair values. We disposed of many of the properties impaired in 2011 and 2010 by December 31, 2012. The related impairment charges of $134,673 and $47,529, respectively, are reflected in discontinued operations.
General Administrative Expenses and Business Management Fee
After our stockholders have received a non-cumulative, non-compounded return of 5% per annum on their “invested capital,” we pay our business manager an annual business management fee of up to 1% of the “average invested assets,” payable quarterly in an amount equal to 0.25% of the average invested assets as of the last day of the immediately preceding quarter. Once we have satisfied the minimum return on invested capital, the amount of the actual fee paid to the business manager is requested by the business manager and approved by the board of directors up to the amount permitted by the agreement.
•
We incurred a business management fee of $39,892, $40,000 and $36,000, which is equal to 0.35%, 0.35%, and 0.32% of average invested assets for the years ended December 31, 2012, 2011 and 2010, respectively.
•
The increase in general and administrative expenses for the year ended December 31, 2012 compared to 2011 was primarily a result of an increase in legal costs and an increase in salary expense as a result of a shift in personnel from our property managers to our business manager. For the year ended December 31, 2011, the decrease in general and administrative expenses was primarily a result of a reduction in legal and consulting costs compared to 2010, specifically due to the Lauth settlement and restructure and foreclosure of the Stan Thomas note.

Non-Operating Income and Expenses:

 
Year ended
December 31, 2012
 
Year ended
December 31, 2011
 
Year ended
December 31, 2010
 
2012 Increase
(decrease) from
2011
 
2011 Increase
(decrease) from
2010
Non-operating income and expenses:
 
 
 
 
 
 
 
 
 
Other income
$
2,710

 
$
19,145

 
$
3,095

 
$
(16,435
)
 
$
16,050

Interest expense
(306,047
)
 
(295,447
)
 
(271,360
)
 
10,600

 
24,087

Equity in income (loss) of unconsolidated entities
1,998

 
(12,802
)
 
(18,684
)
 
14,800

 
5,882

Gain, (loss) and (impairment) of investment in unconsolidated entities, net
(12,322
)
 
(106,023
)
 
(11,239
)
 
(93,701
)
 
(94,784
)
Realized gain, (loss) and (impairment) on securities, net
4,319

 
(16,219
)
 
21,073

 
20,538

 
(37,292
)
Income (loss) from discontinued operations, net
51,981

 
(95,012
)
 
27,041

 
146,993

 
(122,053
)
Other Income
•
The significant decrease in other income for the year ended December 31, 2012 was primarily due to the gain recognized on the conversion of a note receivable to equity of $17,150 in an unconsolidated entity for the year ended December 31, 2011.
Interest Expense
•
The increase in interest expense for the year ended December 31, 2012 compared to 2011 was primarily due to the principal amount of mortgage debt financings during 2012 which increased from $5,812,595 to $5,894,443. The increase in interest expense in 2011 over 2010 is a result of the increase in the principal amount of mortgage debt from $5,508,668 to $5,812,595 as well as a $6,362 amortization of a mark to market mortgage discount as a result of two property loans totaling $43,236 being in default, from 2010. Our weighted average interest rate on outstanding debt was 5.1%, 5.2%, and 5.1% per annum for the years ended December 31, 2012, 2011 and 2010, respectively.



41

Equity in Income (Loss) of Unconsolidated Entities
•
For the year ended December 31, 2012, the equity in income of unconsolidated entities in 2012 was largely a result of a $4,575 gain from our share of property sales and debt extinguishment in two unconsolidated entities offset by an impairment charge recognized by one unconsolidated entity of which our portion was $470.
•
For the year ended December 31, 2011, the equity in loss of unconsolidated entities was largely a result of impairment charges recognized by two unconsolidated entities of which our portion was a $16,739, offset by a $11,141 gain from our share of property sales in two unconsolidated entities.
•
For the year ended December 31, 2010, the equity in loss of unconsolidated entities reflects impairments recognized by one unconsolidated entity of which our portion was $10,710.
Gain, (Loss) and (Impairment) of Investment in Unconsolidated Entities, net
•
For the year ended December 31, 2012, we recorded an impairment of $9,365 on our investment in unconsolidated entities related to the Net Lease Strategic Assets Fund LP joint venture, DR Stephens joint venture, and a lodging joint venture. Additionally, we recorded losses on the sales of 100% of our equity in the Net Lease Strategic Assets Fund LP joint venture of $1,556 and a lodging joint venture of $1,401.
•
For the year ended December 31, 2011, we recorded an impairment of $113,621 on our investment in unconsolidated entities related to the Net Lease Strategic Assets Fund LP joint venture. The impairment was offset by a $7,545 gain on our investment in unconsolidated entities due to the sale of 100% of our equity in the NRF Healthcare LLC joint venture.
•
For the year ended December 31, 2010, we recorded an impairment of $11,239 on our investment in unconsolidated entities related to a retail development center and two lodging developments.
Realized Gain, (Loss) and (Impairment) on Securities, net
•
For the year ended December 31, 2012, there was a $1,899 impairment charge for equity securities offset by a $6,218 net realized gain.
•
For the year ended December 31, 2011, the loss was primarily due to a $24,356 impairment charge on equity securities, which was offset by an $8,137 realized gain.
•
For the year ended December 31, 2010, the loss was primarily due to a $1,857 impairment charge on equity securities, which was offset by an $22,930 realized gain.
Discontinued Operations
•
For the year ended December 31, 2012 we recorded income of $51,981 from discontinued operations, which primarily included a gain on sale of properties of $38,516, a gain on extinguishment of debt of $9,478, a gain on transfer of assets of $2,175, and provision for asset impairment of $5,968.
•
For the year ended December 31, 2011, we recorded loss of $95,012 from discontinued operations, which primarily included a gain on sale of properties of $11,964, a gain on extinguishment of debt of $10,848, a gain on transfer of assets of $4,546, and provision for asset impairment of $134,673.
•
For the year ended December 31, 2010, we recorded income of $27,041 from discontinued operations, which primarily included a gain on sale of properties of $55,412, a gain on extinguishment of debt of $19,227, and a provision for asset impairment of $47,529.

Segment Reporting
An analysis of results of operations by segment is below. In order to evaluate our overall portfolio, management analyzes the operating performance of all properties from period to period and properties we have owned and operated for the same period during each year. A total of 765 and 728 of our investment properties satisfied the criteria of being owned for the entire years ended December 31, 2012 and 2011 and December 31, 2011 and 2010, respectively, and are referred to herein as “same store” properties. This same store analysis allows management to monitor the operations of our existing properties for comparable periods to determine the effects of our new acquisitions on net income. The tables contained throughout summarize certain key operating performance measures for the years ended December 31, 2012, 2011 and 2010. The rental rates reflected in retail, office, industrial, and multi-family are inclusive of rent abatements, lease inducements and straight-line rent GAAP adjustments, but exclusive of tenant improvements and lease commissions. For the year ended December 31, 2012, these costs associated with leasing space were not material. Physical occupancy is defined as the percentage of total gross leasable area actually used or occupied by a tenant. Economic occupancy is defined as the percentage of total gross leasable area for which a

42

tenant is obligated to pay rent under the terms of its lease agreement, regardless of the actual use or occupation by that tenant of the area being leased.

Retail Segment
The composition of our retail segment has changed from 2010 to 2012 as we, over the three year period, acquired thirty-two multi-tenant retail properties. The non-same store net operating income increased from $7,898 to $24,181 for the year ended December 31, 2011 compared to 2012. This was a result of the full operations of properties acquired in the second half of 2011. Additionally, we disposed of 146 properties, including 142 retail bank branches. The net operating income associated with these properties is reflected in discontinued operations on the consolidated statement of operations and other comprehensive income. We anticipate continuing to divest in the remaining bank branches, which are mainly SunTrust Banks, Inc.

Our retail segment net operating income on a same store basis grew slightly for the year ended December 31, 2012 compared to the year ended December 31, 2011 up 1.5%, or $254,082 from $250,385, respectively. This was a result of the strong same store economic occupancy percentage of 93% and 94% for 2012 and 2011, respectively and comparable lease rates year to year. Also, in 2012, same store property operating expenses decreased $1,751 or 3.0%, which was due to decreased property management fees and snow removal costs. Tenant recovery income increased on a same store basis by $2,637 or 4.5% because of increased real estate taxes, which are fully recoverable. We expect our same store net operating income to have a slight increase in the coming year.
 
 
Total Retail Properties
 
As of December 31,
 
2012
 
2011
 
2010
Retail Properties
 
 
 
 
 
Physical occupancy
92
%
 
93
%
 
93
%
Economic occupancy
93
%
 
94
%
 
94
%
Rent per square foot
$
14.95

 
$
14.77

 
$
14.81

Investment in properties, undepreciated
$
4,134,874

 
$
4,234,336

 
$
3,926,395


Comparison of Years Ended December 31, 2012 and 2011
The table below represents operating information for the retail segment and for the same store retail segment consisting of properties acquired prior to January 1, 2011. The properties in the same store portfolio were owned for the entire years ended December 31, 2012 and 2011.
 

43

Retail
For the year ended
December 31, 2012
 
For the year ended
December 31, 2011
 
Same Store
Portfolio
Change
Favorable/
(Unfavorable)
 
Total  Company
Change
Favorable/
(Unfavorable)
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Amount
 
%
 
Amount
 
%
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental Income
$
274,976

 
$
27,347

 
$
302,323

 
$
273,119

 
$
11,330

 
$
284,449

 
$
1,857

 
0.7
 %
 
$
17,874

 
6.3
 %
Straight Line Income
5,392

 
441

 
5,833

 
7,108

 
(174
)
 
6,934

 
(1,716
)
 
(24.1
)%
 
(1,101
)
 
(15.9
)%
Tenant Recovery Income
61,648

 
6,963

 
68,611

 
59,011

 
4,022

 
63,033

 
2,637

 
4.5
 %
 
5,578

 
8.8
 %
Other Property Income
5,088

 
127

 
5,215

 
5,124

 
90

 
5,214

 
(36
)
 
(0.7
)%
 
1

 
—
 %
Total Revenues
$
347,104

 
$
34,878

 
$
381,982

 
$
344,362

 
$
15,268

 
$
359,630

 
$
2,742

 
0.8
 %
 
$
22,352

 
6.2
 %
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses
$
56,301

 
$
6,659

 
$
62,960

 
$
58,052

 
$
3,899

 
$
61,951

 
$
1,751

 
3.0
 %
 
$
(1,009
)
 
(1.6
)%
Real estate taxes
36,721

 
4,038

 
40,759

 
35,925

 
3,471

 
39,396

 
(796
)
 
(2.2
)%
 
(1,363
)
 
(3.5
)%
Total operating expenses
$
93,022

 
$
10,697

 
$
103,719

 
$
93,977

 
$
7,370

 
$
101,347

 
$
955

 
1.0
 %
 
$
(2,372
)
 
(2.3
)%
Net operating income
$
254,082


$
24,181

 
$
278,263

 
$
250,385

 
$
7,898

 
$
258,283

 
$
3,697

 
1.5
 %
 
$
19,980

 
7.7
 %
Average occupancy for the period
93
%
 
N/A

 
93
%
 
94
%
 
N/A

 
94
%
 
 
 
 
 
 
 
 
Number of Properties
573

 
12

 
585

 
573

 
8

 
581

 
 
 
 
 
 
 
 


Comparison of Years Ended December 31, 2011 and December 31, 2010
The table below represents operating information for the retail segment and for the same store retail segment consisting of properties acquired prior to January 1, 2010. The properties in the same store portfolio were owned for the entire years ended December 31, 2011 and 2010.
 
Retail
For the year ended
December 31, 2011
 
For the year ended
December 31, 2010
 
Same  Store
Portfolio
Change
Favorable/
(Unfavorable)
 
Total Company
Change  Favorable/
(Unfavorable)
  
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Amount
 
%
 
Amount
 
%
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
222,922

 
$
61,527

 
$
284,449

 
$
219,855

 
$
39,848

 
$
259,703

 
$
3,067

 
1.4
 %
 
$
24,746

 
9.5
 %
Straight Line Income
6,534

 
400

 
6,934

 
8,963

 
(283
)
 
8,680

 
(2,429
)
 
(27.1
)%
 
(1,746
)
 
(20.1
)%
Tenant recovery incomes
45,810

 
17,223

 
63,033

 
46,854

 
10,582

 
57,436

 
(1,044
)
 
(2.2
)%
 
5,597

 
9.7
 %
Other property income
4,180

 
1,034

 
5,214

 
3,728

 
1,036

 
4,764

 
452

 
12.1
 %
 
450

 
9.4
 %
Total revenues
$
279,446

 
$
80,184

 
$
359,630

 
$
279,400

 
$
51,183

 
$
330,583

 
$
46

 
—
 %
 
$
29,047

 
8.8
 %
Expenses:

 

 

 

 

 

 

 

 

 

Property operating expenses
$
46,080

 
$
15,871

 
$
61,951

 
$
44,417

 
$
10,381

 
$
54,798

 
$
(1,663
)
 
(3.7
)%
 
$
(7,153
)
 
(13.1
)%
Real estate taxes
28,038

 
11,358

 
39,396

 
28,307

 
5,781

 
34,088

 
269

 
1.0
 %
 
(5,308
)
 
(15.6
)%
Total operating expenses
$
74,118

 
$
27,229

 
$
101,347

 
$
72,724

 
$
16,162

 
$
88,886

 
$
(1,394
)
 
(1.9
)%
 
$
(12,461
)
 
(14.0
)%
Net operating income
$
205,328

 
$
52,955

 
$
258,283

 
$
206,676

 
$
35,021

 
$
241,697

 
$
(1,348
)
 
(0.7
)%
 
$
16,586

 
6.9
 %
Average occupancy for the period
94
%
 
N/A

 
94
%
 
94
%
 
N/A

 
94
%
 
 
 
 
 
 
 
 
Number of Properties
553

 
28

 
581

 
553

 
20

 
573

 
 
 
 
 
 
 
 

44

Lodging Segment
During 2012, we continued to execute our lodging portfolio strategy, to move out of certain midscale lodging assets and into more urban, full service properties by acquiring seven upper upscale lodging assets and disposing of thirteen midscale lodging assets. Refining the assets in our lodging portfolio coupled by the significant improvement in the lodging industry has driven the increase in our operating performance for this sector. Our total net operating income for lodging has increased from $136,959 to $167,318 to $214,910, for the years ended December 31, 2010, 2011 and 2012 respectively. In addition, revenue per available room ("RevPAR") grew 5.5% from $90 as of December 31, 2011 to $95 as of December 31, 2012 because the average daily rate ("ADR") grew 5.6% from $125 to $132 as well as occupancy increased from 72% to 73% for the same period.
Significant growth of RevPAR has occurred in the lodging industry since 2010. RevPAR represents the product of the average daily room rate charged and the average daily occupancy achieved but excludes other revenue generated by a hotel property, such as food and beverage, parking, telephone and other guest service revenues. The lodging industry has seen a recovery in business travelers and leisure transient and our operating managers have been able to push rates which has improved the performance of our lodging segment. On a same store basis, net operating income increased 6.7% for the years ended December 31, 2011 to December 31, 2012, from $158,817 to $169,532. The same store properties for the years ended December 31, 2010 and December 31, 2011 also had an increase in net operating income of 11.0%, from $130,662 to $145,044.
We are optimistic our lodging portfolio will continue its strong performance in 2013 with increases in RevPAR and ADR. We believe business and leisure travel is forecasted to remain strong in 2013 with leisure demand continuing to be active, but price sensitive and group travel demand to be flat although at a healthy level. We also expect supply growth to remain below historical levels for the next couple of years, which will also help support the fundamentals for the lodging segment. We believe our revenue per available room will increase consistent with industry expectations.
 
Total Lodging Properties
 
For the year ended December 31,
 
2012
 
2011
 
2010
Lodging Properties
 
 
 
 
 
Revenue per available room
$
95

 
$
90

 
$
84

Average daily rate
$
132

 
$
125

 
$
119

Occupancy
73
%
 
72
%
 
70
%
Investment in properties, undepreciated, as of December 31
$
3,296,270

 
$
2,711,281

 
$
2,506,029

Comparison of Years Ended December 31, 2012 and 2011
The table below represents operating information for the lodging segment and for the same store portfolio for properties acquired prior to January 1, 2011. The properties in the same store portfolio were owned for the entire years ended December 31, 2012 and 2011.
 

45

Lodging
For the year ended
December 31, 2012
 
For the year ended
December 31, 2011
 
Same Store
Portfolio
Change  Favorable/
(Unfavorable)
 
Total  Company
Change
Favorable/
(Unfavorable)
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Amount
 
%
 
Amount
 
%
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lodging operating income
$
517,438

 
$
182,989

 
$
700,427

 
$
491,568

 
$
34,684

 
$
526,252

 
$
25,870

 
5.3
 %
 
$
174,175

 
33.1
 %
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lodging operating expenses
$
323,528

 
$
130,889

 
$
454,417

 
$
310,076

 
$
25,295

 
$
335,371

 
$
(13,452
)
 
(4.3
)%
 
$
(119,046
)
 
(35.5
)%
Real estate taxes
24,378

 
6,722

 
31,100

 
22,675

 
888

 
23,563

 
(1,703
)
 
(7.5
)%
 
(7,537
)
 
(32.0
)%
Total operating expenses
$
347,906

 
$
137,611


$
485,517

 
$
332,751

 
$
26,183

 
$
358,934

 
$
(15,155
)
 
(4.6
)%
 
$
(126,583
)
 
(35.3
)%
Net operating income
$
169,532

 
$
45,378

 
$
214,910

 
$
158,817

 
$
8,501

 
$
167,318

 
$
10,715

 
6.7
 %
 
$
47,592

 
28.4
 %
Average occupancy for the period
73
%
 
N/A

 
73
%
 
72
%
 
N/A

 
72
%
 
 
 
 
 
 
 
 
Number of Properties
78

 
10

 
88

 
78

 
3

 
81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Room Rev Par
$
94

 
n/a

 
$
95

 
$
90

 
n/a

 
$
90

 
 
 
 
 
 
 
 
Average Daily Rate
$
128

 
n/a

 
$
132

 
$
124

 
n/a

 
$
125

 
 
 
 
 
 
 
 
Comparison of Years Ended December 31, 2011 and December 31, 2010
The table below represents operating information for the lodging segment and for the same store portfolio of properties acquired prior to January 1, 2010. The properties in the same store portfolio were owned for the entire years ended December 31, 2011 and December 31, 2010.
 
Lodging
For the year ended
December 31, 2011
 
For the year ended
December 31, 2010
 
Same Store
Portfolio
Change
Favorable/
(Unfavorable)
 
Total
Company
Change
Favorable/
(Unfavorable)
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Amount
 
%
 
Amount
 
%
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lodging operating income
$
447,324

 
$
78,928

 
$
526,252

 
$
413,492

 
$
21,047

 
$
434,539

 
$
33,832

 
8.2
 %
 
$
91,713

 
21.1
 %
Expenses:

 

 

 

 

 

 

 

 

 

Lodging operating expenses
$
281,972

 
$
53,399

 
$
335,371

 
$
261,529

 
$
13,869

 
$
275,398

 
$
(20,443
)
 
(7.8
)%
 
$
(59,973
)
 
(21.8
)%
Real estate taxes
20,308

 
3,255

 
23,563

 
21,301

 
881

 
22,182

 
993

 
4.7
 %
 
(1,381
)
 
(6.2
)%
Total operating expenses
$
302,280

 
$
56,654

 
$
358,934

 
$
282,830

 
$
14,750

 
$
297,580

 
$
(19,450
)
 
(6.9
)%
 
$
(61,354
)
 
(17.1
)%
Net operating income
$
145,044

 
$
22,274

 
$
167,318

 
$
130,662

 
$
6,297

 
$
136,959

 
$
14,382

 
11.0
 %
 
$
30,359

 
22.2
 %
Average occupancy for the period
73
%
 
N/A

 
72
%
 
71
%
 
N/A

 
70
%
 
 
 
 
 
 
 
 
Number of Properties
73

 
8

 
81

 
73

 
5

 
78

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Room Rev Par
$
90

 
N/A

 
$
90

 
$
84

 
N/A

 
$
84

 
 
 
 
 
 
 
 
Average Daily Rate
$
123

 
N/A

 
$
125

 
$
119

 
N/A

 
$
119

 
 
 
 
 
 
 
 



Office Segment
We had no acquisitions in our office portfolio in 2012, 2011 and 2010 and minimal dispositions during the same period. Our office segment net operating income totaled $133,701 for the year ended December 31, 2010 to $132,050 for the year ended December 31, 2011 and to $132,229 for the year ended December 31, 2012. The stability of net operating income was a result

46

of consistent occupancy and rental rates over the periods. We had slight decreases in straight-line rents due to contractual rent changes as well as decreased termination income reflected in other property income when comparing the three periods. The increase in real estate taxes was offset by an increase in tenant recovery income as generally the tenants are responsible for reimbursement of real estate tax and lower property operating expenses due to decreased management fees and lower snow removal costs.
We see market rates continuing to decrease from the current rates as office tenants continue to downsize not only their workforce, but also the space they provide for their employees. The lease expirations reflected in 2016 and 2017 substantially consist of two properties, AT&T in Hoffman Estates, Illinois, which is located in the greater metro Chicago market and AT&T in St. Louis, Missouri. These leases represent 61% of the 2016 lease expirations or approximately 1.7 million square feet and 69% of the 2017 lease expirations or approximately 1.5 million square feet, respectively. In 2013, we expect our same store net operating income to be slightly down to flat.
 
 
Total Office Properties
 
As of December 31,
 
2012
 
2011
 
2010
Office Properties
 
 
 
 
 
Physical occupancy
92
%
 
92
%
 
94
%
Economic occupancy
93
%
 
92
%
 
94
%
Rent per square foot
$
15.42

 
$
15.13

 
$
15.09

Investment in properties, undepreciated
$
1,924,468

 
$
1,925,736

 
$
1,929,763

Comparison of Years Ended December 31, 2012 and 2011
The table below represents operating information for the office segment and for the same store portfolio consisting of properties acquired prior to January 1, 2011. The properties in the same store portfolio were owned for the years ended December 31, 2012 and 2011.
 
Office
For the year ended
December 31, 2012
 
For the year ended
December 31, 2011
 
Same Store
Portfolio
Change Favorable/
(Unfavorable)
 
Total
Company
Change
Favorable/
(Unfavorable)
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Amount
 
%
 
Amount
 
%
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
143,019

 
$
—

 
$
143,019

 
$
143,112

 
$
—

 
$
143,112

 
$
(93
)
 
(0.1
)%
 
$
(93
)
 
(0.1
)%
Straight line rental income
3,883

 
—

 
3,883

 
4,147

 
—

 
4,147

 
(264
)
 
(6.4
)%
 
(264
)
 
(6.4
)%
Tenant recovery incomes
26,292

 
—

 
26,292

 
25,300

 
—

 
25,300

 
992

 
3.9
 %
 
992

 
3.9
 %
Other property income
3,089

 
—

 
3,089

 
3,885

 
—

 
3,885

 
(796
)
 
(20.5
)%
 
(796
)
 
(20.5
)%
Total revenues
$
176,283

 
$
—

 
$
176,283

 
$
176,444

 
$
—

 
$
176,444

 
$
(161
)
 
(0.1
)%
 
$
(161
)
 
(0.1
)%
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses
$
29,963

 
$
—

 
$
29,963

 
$
31,052

 
$
—

 
$
31,052

 
$
1,089

 
3.5
 %
 
$
1,089

 
3.5
 %
Real estate taxes
14,091

 
—

 
14,091

 
13,342

 
—

 
13,342

 
(749
)
 
(5.6
)%
 
(749
)
 
(5.6
)%
Total operating expenses
$
44,054

 
$
—

 
$
44,054

 
$
44,394

 
$
—

 
$
44,394

 
$
340

 
0.8
 %
 
$
340

 
0.8
 %
Net operating income
$
132,229

 
$
—

 
$
132,229

 
$
132,050

 
$
—

 
$
132,050

 
$
179

 
0.1
 %
 
$
179

 
0.1
 %
Average occupancy for the period
93
%
 
N/A

 
93
%
 
93
%
 
N/A

 
92
%
 
 
 
 
 
 
 
 
Number of Properties
42

 
—

 
42

 
42

 
—

 
42

 
 
 
 
 
 
 
 




47

Comparison of Years Ended December 31, 2011 and December 31, 2010
The table below represents operating information for the office segment and for the same store portfolio consisting of properties acquired prior to January 1, 2010. The properties in the same store portfolio were owned for the years ended December 31, 2011 and December 31, 2010.
 
Office
For the year ended
December 31, 2011
 
For the year ended
December 31, 2010
 
Same Store
Portfolio
Change
Favorable/
(Unfavorable)
 
Total Company
Change
Favorable/
(Unfavorable)
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Amount
 
%
 
Amount
 
%
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
139,165

 
$
3,947

 
$
143,112

 
$
140,922

 
$
981

 
$
141,903

 
$
(1,757
)
 
(1.2
)%
 
$
1,209

 
0.9
 %
Straight line rental income
4,594

 
(447
)
 
4,147

 
6,131

 
(376
)
 
5,755

 
(1,537
)
 
(25.1
)%
 
(1,608
)
 
(27.9
)%
Tenant recovery incomes
24,199

 
1,101

 
25,300

 
26,195

 
224

 
26,419

 
(1,996
)
 
(7.6
)%
 
(1,119
)
 
(4.2
)%
Other property income
3,857

 
28

 
3,885

 
4,229

 
(2
)
 
4,227

 
(372
)
 
(8.8
)%
 
(342
)
 
(8.1
)%
Total revenues
$
171,815

 
$
4,629

 
$
176,444

 
$
177,477

 
$
827

 
$
178,304

 
$
(5,662
)
 
(3.2
)%
 
$
(1,860
)
 
(1.0
)%
Expenses:

 

 

 

 

 

 

 

 

 

Property operating expenses
$
29,958

 
$
1,094

 
$
31,052

 
$
31,008

 
$
(115
)
 
$
30,893

 
$
1,050

 
3.4
 %
 
$
(159
)
 
(0.5
)%
Real estate taxes
12,474

 
868

 
13,342

 
13,512

 
198

 
13,710

 
1,038

 
7.7
 %
 
368

 
2.8
 %
Total operating expenses
$
42,432

 
$
1,962

 
$
44,394

 
$
44,520

 
$
83

 
$
44,603

 
$
2,088

 
4.7
 %
 
$
209

 
0.5
 %
Net operating income
$
129,383

 
$
2,667

 
$
132,050

 
$
132,957

 
$
744

 
$
133,701

 
$
(3,574
)
 
(2.7
)%
 
$
(1,651
)
 
(1.2
)%
Average occupancy for the period
93
%
 
N/A

 
92
%
 
94
%
 
N/A

 
94
%
 
 
 
 
 
 
 
 
Number of Properties
39

 
3

 
42

 
39

 
3

 
42

 
 
 
 
 
 
 
 
Industrial Segment
During 2012, our industrial holdings continued to experience high economic occupancy and consistent rental rates. These factors are reflected in the same store net operating income increase of 1.5% for the year ended December 31, 2011 to December 31, 2012, which was a result of scheduled rent increases as well as a reduction of property management fees. Total segment real estate taxes increased from December 31, 2011 of $1,171 compared to $2,940 for the same period in 2012. In late 2011, a real estate tax expense cap expired at one of our properties which have net leases and tenants are directly responsible for operating expenses and reimburse us for real estate taxes. This is reflected in the tenant recovery income which increased to $3,370 from $1,414 for the year ended December 31, 2012 and 2011.
In early 2010, we acquired charter schools and correctional facilities consisting of nine properties under long-term triple net leases. Additionally in 2011, we placed in service one charter school. These acquisitions contributed to total segment net operating income for December 31, 2011 exceeding the prior year by $3,362 or 4.5%.
Rental rates are expected to remain consistent in 2013 for our specialty distribution centers as well as our charter schools and correctional facilities and slightly increase for our distribution centers. In 2013, we expect our same store net operating income to be flat to slightly up.
 
 
Total Industrial Properties
 
As of December 31,
 
2012
 
2011
 
2010
Industrial Properties
 
 
 
 
 
Physical occupancy
96
%
 
97
%
 
94
%
Economic occupancy
97
%
 
98
%
 
95
%
Rent per square foot
$
6.48

 
$
6.23

 
$
6.31

Investment in properties, undepreciated
$
971,935

 
$
979,579

 
$
944,871


48


Comparison of Years Ended December 31, 2012 and 2011
The table below represents operating information for the industrial segment and for the same store portfolio consisting of properties acquired prior to January 1, 2011. The properties in the same store portfolio were owned for the years ended December 31, 2012 and 2011.
 
Industrial
For the year ended December 31,
2012
 
For the year ended December 31,
2011
 
Same Store
Portfolio
Change
Favorable/
(Unfavorable)
 
Total Company
Change
Favorable/
(Unfavorable)
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Amount
 
%
 
Amount
 
%
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
77,642

 
$
3,224

 
$
80,866

 
$
75,784

 
$
1,139

 
$
76,923

 
$
1,858

 
2.5
 %
 
$
3,943

 
5.1
 %
Straight line rental income
2,231

 
(16
)
 
2,215

 
3,816

 
40

 
3,856

 
(1,585
)
 
(41.5
)%
 
(1,641
)
 
(42.6
)%
Tenant recovery incomes
2,609

 
761

 
3,370

 
1,253

 
161

 
1,414

 
1,356

 
108.2
 %
 
1,956

 
138.3
 %
Other property income
290

 
66

 
356

 
118

 
1,002

 
1,120

 
172

 
145.8
 %
 
(764
)
 
(68.2
)%
Total revenues
$
82,772

 
$
4,035

 
$
86,807

 
$
80,971

 
$
2,342

 
$
83,313

 
$
1,801

 
2.2
 %
 
$
3,494

 
4.2
 %
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses
$
3,107

 
$
589

 
$
3,696

 
$
3,976

 
$
268

 
$
4,244

 
$
869

 
21.9
 %
 
$
548

 
12.9
 %
Real estate taxes
2,571

 
369

 
2,940

 
1,007

 
164

 
1,171

 
(1,564
)
 
(155.3
)%
 
(1,769
)
 
(151.1
)%
Total operating expenses
$
5,678

 
$
958

 
$
6,636

 
$
4,983

 
$
432

 
$
5,415

 
$
(695
)
 
(13.9
)%
 
$
(1,221
)
 
(22.5
)%
Net operating income
$
77,094

 
$
3,077

 
$
80,171

 
$
75,988

 
$
1,910

 
$
77,898

 
$
1,106

 
1.5
 %
 
$
2,273

 
2.9
 %
Average occupancy for the period
97
%
 
N/A

 
97
%
 
98
%
 
N/A

 
98
%
 
 
 
 
 
 
 
 
Number of Properties
50

 
3

 
53

 
50

 
3

 
53

 
 
 
 
 
 
 
 

Comparison of Years Ended December 31, 2011 and December 31, 2010
The table below represents operating information for the industrial segment and for the same store portfolio consisting of properties acquired prior to January 1, 2010. The properties in the same store portfolio were owned for the years ended December 31, 2011 and December 31, 2010.
 

49

Industrial
For the year ended December 31,
2011
 
For the year ended December 31,
2010
 
Same Store
Portfolio
Change
Favorable/
(Unfavorable)
 
Total Company
Change
Favorable/
(Unfavorable)
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Amount
 
%
 
Amount
 
%
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
59,169

 
$
17,754

 
$
76,923

 
$
60,522

 
$
14,969

 
$
75,491

 
$
(1,353
)
 
(2.2
)%
 
$
1,432

 
1.9
 %
Straight line rental income
3,998

 
(142
)
 
3,856

 
2,496

 
443

 
2,939

 
1,502

 
60.2
 %
 
917

 
31.2
 %
Tenant recovery incomes
1,253

 
161

 
1,414

 
1,037

 
—

 
1,037

 
216

 
20.8
 %
 
377

 
36.4
 %
Other property income
70

 
1,050

 
1,120

 
69

 
41

 
110

 
1

 
1.4
 %
 
1,010

 
918.2
 %
Total revenues
$
64,490

 
$
18,823

 
$
83,313

 
$
64,124

 
$
15,453

 
$
79,577

 
$
366

 
0.6
 %
 
$
3,736

 
4.7
 %
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses
$
3,403

 
$
841

 
$
4,244

 
$
3,523

 
$
324

 
$
3,847

 
$
120

 
3.4
 %
 
$
(397
)
 
(9.4
)%
Real estate taxes
1,007

 
164

 
1,171

 
1,123

 
71

 
1,194

 
116

 
10.3
 %
 
23

 
2.0
 %
Total operating expenses
$
4,410

 
$
1,005

 
$
5,415

 
$
4,646

 
$
395

 
$
5,041

 
$
236

 
5.1
 %
 
$
(374
)
 
(6.9
)%
Net operating income
$
60,080

 
$
17,818

 
$
77,898

 
$
59,478

 
$
15,058

 
$
74,536

 
$
602

 
1.0
 %
 
$
3,362

 
4.5
 %
Average occupancy for the period
98
%
 
N/A

 
98
%
 
98
%
 
N/A

 
95
%
 
 
 
 
 
 
 
 
Number of Properties
43

 
10

 
53

 
43

 
9

 
52

 
 
 
 
 
 
 
 

Multi-family Segment
Our multi-family portfolio continues to perform well with net operating income increasing $7,830 or 18.2% on a total segment basis for the year ended December 31, 2012 compared to the year ended December 31, 2011 and $9,954 or 30.1% for the year ended December 31, 2011 compared to the year ended December 31, 2010. The increases were a result of high occupancy which provided the ability to increase rental rates and decrease the concessions, specifically in 2011 and 2012. On a same store basis, net operating income increased $3,965 or 9.2% for the year ended December 31, 2012 compared to the year ended December 31, 2011 and $5,775 or 17.8% for the year ended December 31, 2011 compared to the year ended December 31, 2010. We believe these increases were a result of the single family housing market downturn and limited availability of credit for new or existing homeowners, which drove demand to multi-family apartments across the nation.
Our multi-family segment consists of conventional apartments and student housing. During 2010, 2011 and 2012, for conventional apartments we acquired 1,072 units and disposed of 3,068 units and for student housing we acquired and placed in service 2,566 student housing beds. During 2013, we anticipate placing one additional student housing property in service and one additional conventional multi-family property in service. During 2014, we anticipate placing another student housing property in service. We expect to see rental rates in the student housing and conventional multi-family continue to rise in 2013 and occupancy to remain consistent with 2012. In 2013, we expect our same store net operating income to be up over 2012 results.

 
Total Multi-family Properties
 
As of December 31,
 
2012
 
2011
 
2010
Multi-family Properties
 
 
 
 
 
Economic occupancy
92
%
 
92
%
 
92
%
End of month scheduled rent per multi-family unit per month
$
992

 
$
953

 
$
925

End of month scheduled rent per student housing bed per month
$
680

 
$
668

 
$
655

Investment in properties, undepreciated
$
892,043

 
$
737,767

 
$
705,711



50

Comparison of Years Ended December 31, 2012 and 2011
The table below represents operating information for the multi-family segment and for the same store portfolio consisting of properties acquired prior to January 1, 2011. The properties in the same store portfolio were owned for the years ended December 31, 2012 and 2011.

Multi-family
For the year ended December 31,
2012
 
For the year ended December 31,
2011
 
Same Store
Portfolio
Change
Favorable/
(Unfavorable)
 
Total
Company
Change
Favorable/
(Unfavorable)
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Amount
 
%
 
Amount
 
%
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
79,641

 
$
4,939

 
$
84,580

 
$
75,300

 
$
—

 
$
75,300

 
$
4,341

 
5.8
 %
 
$
9,280

 
12.3
 %
Straight line rental income
246

 
(11
)
 
235

 
225

 
—

 
225

 
21

 
9.3
 %
 
10

 
4.4
 %
Tenant recovery incomes
497

 
—

 
497

 
466

 
—

 
466

 
31

 
6.7
 %
 
31

 
6.7
 %
Other property income
6,234

 
350

 
6,584

 
6,243

 
—

 
6,243

 
(9
)
 
(0.1
)%
 
341

 
5.5
 %
Total revenues
$
86,618

 
$
5,278

 
$
91,896

 
$
82,234

 
$
—

 
$
82,234

 
$
4,384

 
5.3
 %
 
$
9,662

 
11.7
 %
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses
$
30,496

 
$
981

 
$
31,477

 
$
30,430

 
$
—

 
$
30,430

 
$
(66
)
 
(0.22
)%
 
$
(1,047
)
 
(3.4
)%
Real estate taxes
9,173

 
432

 
9,605

 
8,820

 
—

 
8,820

 
(353
)
 
(4.0
)%
 
(785
)
 
(8.9
)%
Total operating expenses
$
39,669

 
$
1,413

 
$
41,082

 
$
39,250

 
$
—

 
$
39,250

 
$
(419
)
 
(1.1
)%
 
$
(1,832
)
 
(4.7
)%
Net operating income
$
46,949

 
$
3,865

 
$
50,814

 
$
42,984

 
$
—

 
$
42,984

 
$
3,965

 
9.2
 %
 
$
7,830

 
18.2
 %
Average occupancy for the period
93
%
 
N/A

 
94
%
 
93
%
 
N/A

 
93
%
 
 
 
 
 
 
 
 
Number of Properties
22

 
4

 
26

 
22

 
—

 
22

 
 
 
 
 
 
 
 

Comparison of Years Ended December 31, 2011 and December 31, 2010
The table below represents operating information for the multi-family segment and for the same store portfolio consisting of properties acquired prior to January 1, 2010. The properties in the same store portfolio were owned for the years ended December 31, 2011 and December 31, 2010.
 

51

Multi-family
For the year ended December 31,
2011
 
For the year ended December 31,
2010
 
Same Store
Portfolio
Change  Favorable/
(Unfavorable)
 
Total  Company
Change
Favorable/
(Unfavorable)
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Same
Store
Portfolio
 
Non-Same
Store
 
Total
Company
 
Amount
 
%
 
Amount
 
%
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
68,252

 
$
7,048

 
$
75,300

 
$
63,413

 
$
2,263

 
$
65,676

 
$
4,839

 
7.6
 %
 
$
9,624

 
14.7
 %
Straight line rental income
145

 
80

 
225

 
232

 
(29
)
 
203

 
(87
)
 
(37.5
)%
 
22

 
10.8
 %
Tenant recovery incomes
446

 
20

 
466

 
360

 
11

 
371

 
86

 
23.9
 %
 
95

 
25.6
 %
Other property income
5,592

 
651

 
6,243

 
5,253

 
190

 
5,443

 
339

 
6.5
 %
 
800

 
14.7
 %
Total revenues
74,435

 
7,799

 
82,234

 
69,258

 
2,435

 
71,693

 
5,177

 
7.5
 %
 
10,541

 
14.7
 %
Expenses:

 

 

 

 

 

 

 

 

 

Property operating expenses
$
28,899

 
$
1,531

 
$
30,430

 
$
28,813

 
$
584

 
$
29,397

 
$
(86
)
 
(0.3
)%
 
$
(1,033
)
 
(3.4
)%
Real estate taxes
7,252

 
1,568

 
8,820

 
7,936

 
1,330

 
9,266

 
684

 
8.6
 %
 
446

 
5.1
 %
Total operating expenses
$
36,151

 
$
3,099

 
$
39,250

 
$
36,749

 
$
1,914

 
$
38,663

 
$
598

 
1.6
 %
 
$
(587
)
 
(1.5
)%
Net operating income
$
38,284

 
$
4,700

 
$
42,984

 
$
32,509

 
$
521

 
$
33,030

 
$
5,775

 
17.8
 %
 
$
9,954

 
30.1
 %
Average occupancy for the period
93
%
 
N/A

 
94
%
 
92
%
 
N/A

 
92
%
 
 
 
 
 
 
 
 
Number of Properties
20

 
2

 
22

 
20

 
2

 
22

 
 
 
 
 
 
 
 
Developments
We have development projects that are in various stages of pre-development and development which are funded by borrowings secured by the properties and our equity. Specifically identifiable direct development and construction costs are capitalized, including, where applicable, salaries and related costs, real estate taxes and interest incurred in developing the property. These developments encompass the retail and multi-family segments.
The properties under development and all amounts set forth below are as of December 31, 2012. (Dollar amounts stated in thousands.)
 
Name
Location
(City, State)
Property Type
Square
Feet
Total Costs
Incurred to
Date ($) (a)
Total
Estimated
Costs ($)
(b)
Remaining
Costs to be
Funded by
Inland
American ($)
(c)
Note
Payable as
of
December 31,
2012 ($)
Estimated
Placed in
Service Date
(d) (e)
Woodbridge
Wylie, TX
Retail
519,745
44,932

69,019

—

18,515

(f)
Cityville/Cityplace
Dallas, TX
Multi-family
356 units
53,840

62,169

—

24,070

Q2 2013 (e)
UH at Fullerton
Fullerton, CA
Student Housing
1,198 beds
113,327

128,501

—

60,570

 Q3 2013 (e)
UH at Charlotte
Charlotte, NC
Student Housing
670 beds
3,465

43,230

15,307

—

Q3 2014
 
(a)
The Total Costs Incurred to Date represent total costs incurred for the development, including any costs allocated to parcels placed in service, but excluding capitalized interest.
(b)
The Total Estimated Costs represent 100% of the development’s estimated costs, including the acquisition cost of the land and building, if any, and excluding capitalized interest. The Total Estimated Costs are subject to change upon, or prior to, the completion of the development and include amounts required to lease the property.
(c)
We anticipate funding remaining development, to the extent any, through construction financing secured by the properties and equity contributions.
(d)
The Estimated Placed in Service Date represents the date the certificate of occupancy is currently anticipated to be obtained. Subsequent to obtaining the certificate of occupancy, each property will go through a lease-up period.
(e)
Leasing activities related to multi-family and student housing properties do not begin until six to nine months prior to the placed in service date.
(f)
Woodbridge is a retail shopping center and development is planned to be completed in phases. As the construction and lease-up of individual phases are completed, the respective phase will be placed in service resulting in a range of estimated placed in service dates through 2016. Of the costs incurred to date, $30,292 relates to phases that have been placed in service as of December 31, 2012.


52

As part of our restructure and foreclosure of the Stan Thomas note, we began overseeing as the secured lender certain roadway and utility infrastructure projects that will provide access to the 240 acre Sacramento Railyards property. The Railyards property is located immediately adjacent to, and to the north of, Sacramento’s central business district. The infrastructure projects were planned, approved and funded prior to the foreclosure of the Stan Thomas note. The Railyards property is the subject of a collaborative planning and infrastructure funding effort of various federal, state and local municipalities, and its development is scheduled to be completed in phases during the years 2013-2030. We are currently engaged in efforts both to either sell parcels within the Railyards or to sell the entire property to a master developer. The current book value, excluding capitalized interest, of the Railyards property is $113,832 as of December 31, 2012.
Critical Accounting Policies and Estimates
General
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. This section discusses those critical accounting policies and estimates. These judgments often result from the need to make estimates about the effect of matters that are inherently uncertain. GAAP requires information in financial statements about accounting principles, methods used and disclosures pertaining to significant estimates. This discussion addresses our judgment pertaining to trends, events or uncertainties known which were taken into consideration upon the application of those policies.
Acquisitions
We allocate the purchase price of each acquired business between tangible and intangible assets at full fair value at the date of the transaction. Such tangible and intangible assets include land, building and improvements, acquired above market and below market leases, in-place lease value, customer relationships (if any), and any assumed financing that is determined to be above or below market terms. Any additional amounts are allocated to goodwill as required, based on the remaining purchase price in excess of the fair value of the tangible and intangible assets acquired and liabilities assumed. The allocation of the purchase price is an area that requires judgment and significant estimates.
We expense acquisition costs of all transactions as incurred. All costs related to finding, analyzing and negotiating a transaction are expensed as incurred as a general and administrative expense, whether or not the acquisition is completed. These expenses would include acquisition fees, if any, paid to an affiliate of our business manager.
Impairment
We assess the carrying values of the respective long-lived assets, whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable, such as a reduction in the expected holding period of the asset. If it is determined that the carrying value is not recoverable because the undiscounted cash flows do not exceed carrying value, we are required to record an impairment loss to the extent that the carrying value exceeds fair value. The valuation and possible subsequent impairment of investment properties is a significant estimate that can and does change based on our continuous process of analyzing each property and reviewing assumptions about uncertain inherent factors, as well as the economic condition of the property at a particular point in time.
We also evaluate our equity method investments for impairment indicators. The valuation analysis considers the investment positions in relation to the underlying business and activities of our investment and identifies potential declines in fair value. An impairment loss should be recognized if a decline in value of the investment has occurred that is considered to be other than temporary, without ability to recover or sustain operations that would support the value of the investment.

Cost Capitalization and Depreciation Policies
Our policy is to review all expenses paid and capitalize any items which are deemed to be an upgrade or a tenant improvement. These costs are capitalized and included in the investment properties classification as an addition to buildings and improvements.
Buildings and improvements are depreciated on a straight-line basis based upon estimated useful lives of 30 years for buildings and improvements, and 5-15 years for site improvements and furniture, fixtures and equipment. Tenant improvements are depreciated on a straight-line basis over the life of the related lease as a component of depreciation and amortization expense. The portion of the purchase price allocated to acquired above market costs and acquired below market costs is amortized on a straight-line basis over the life of the related lease as an adjustment to net rental income. Acquired in-place lease costs, customer relationship value and other leasing costs are amortized on a straight-line basis over the life of the related lease as a component of amortization expense.

53

Cost capitalization and the estimate of useful lives requires our judgment and includes significant estimates that can and do change based on our process which periodically analyzes each property and on our assumptions about uncertain inherent factors.
Dispositions
The Company accounts for dispositions in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-20, Real Estate Sales. The Company recognizes gain in full when real estate is sold, provided (a) the profit is determinable, that is, the collectability of the sales price is reasonably assured or the amount that will not be collectible can be estimated, and (b) the earnings process is virtually complete, that is, the seller is not obliged to perform significant activities after the sale to earn the profit. The Company records the transaction as discontinued operations for all periods presented in accordance with FASB ASC 205-20, Presentation of Financial Statements - Discontinued Operations.
Investment in Marketable Securities
We classify our investment in securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities in which we have the ability and intent to hold the security until maturity. All securities not included in trading or held-to-maturity are classified as available-for-sale. Investment in securities at December 31, 2012 and 2011 consists of common and preferred stock investments and investments in real estate related bonds that are all classified as available-for-sale securities and are recorded at fair value. Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and reported as a separate component of other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific identification basis. A decline in the market value of any available-for-sale security below cost that is deemed to be other than temporary, results in a reduction in the carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. When a security is impaired, management considers whether we have the ability and intent to hold the investment for a time sufficient to allow for any anticipated recovery in market value and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to period end and forecasted performance of the investee.
Revenue Recognition
We commence revenue recognition on our leases based on a number of factors. In most cases, revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset. Generally, this occurs on the lease commencement date. The determination of who is the owner, for accounting purposes, of the tenant improvements determines the nature of the leased asset and when revenue recognition under a lease begins. If we are the owner, for accounting purposes, of the tenant improvements, then the leased asset is the finished space and revenue recognition begins when the lessee takes possession of the finished space, typically when the improvements are substantially complete. If we conclude we are not the owner, for accounting purposes, of the tenant improvements (the lessee is the owner), then the leased asset is the unimproved space and any tenant improvement allowances funded under the lease are treated as lease incentives which reduces revenue recognized over the term of the lease. In these circumstances, we begin revenue recognition when the lessee takes possession of the unimproved space for the lessee to construct their own improvements. We consider a number of different factors to evaluate whether it or the lessee is the owner of the tenant improvements for accounting purposes. These factors include:
•
whether the lease stipulates how and on what a tenant improvement allowance may be spent;
•
whether the tenant or landlord retains legal title to the improvements;
•
the uniqueness of the improvements;
•
the expected economic life of the tenant improvements relative to the length of the lease; and
•
who constructs or directs the construction of the improvements.
The determination of who owns the tenant improvements, for accounting purposes, is subject to significant judgment. In making that determination, we consider all of the above factors. No one factor, however, necessarily establishes its determination.
We recognize rental income on a straight-line basis over the term of each lease. The difference between rental income earned on a straight-line basis and the cash rent due under the provisions of the lease agreements is recorded as deferred rent receivable and is included as a component of accounts and rents receivable in the accompanying consolidated balance sheets.

54

Due to the impact of the straight-line basis, rental income generally is greater than the cash collected in the early years and decreases in the later years of a lease. We periodically review the collectability of outstanding receivables. Allowances are taken for those balances that we deem to be uncollectible, including any amounts relating to straight-line rent receivables.
Reimbursements from tenants for recoverable real estate tax and operating expenses are accrued as revenue in the period the applicable expenses are incurred. We make certain assumptions and judgments in estimating the reimbursements at the end of each reporting period. We do not expect the actual results to significantly differ from the estimated reimbursement.
We will recognize lease termination income if there is a signed termination letter agreement, all of the conditions of the agreement have been met, collectability is reasonably assured and the tenant is no longer occupying the property. Upon early lease termination, we will provide for losses related to unrecovered intangibles and other assets.
We recognize lodging operating revenue on an accrual basis consistent with operations.
Consolidation
We evaluate our investments in limited liability companies and partnerships to determine whether such entities may be a variable interest entity (“VIE”). If the entity is a VIE, the determination of whether we are the primary beneficiary must be made. We will consolidate a VIE if we are deemed to be the primary beneficiary, as defined in FASB ASC 810, Consolidation. The equity method of accounting is applied to entities in which we are not the primary beneficiary as defined FASB ASC 810, or the entity is not a VIE and we do not have effective control, but can exercise influence over the entity with respect to its operations and major decisions.

Income Taxes
We operate in a manner intended to enable each entity to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. Under those sections, a REIT that distributes at least 90% of its “REIT taxable income” determined without regard to the deduction for dividends paid and by excluding any net capital gain to its stockholders each year and that meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its stockholders. If we fail to distribute the required amount of income to our stockholders, or fail to meet the various REIT requirements, without the benefit of certain relief provisions, we may fail to qualify as a REIT and substantial adverse tax consequences may result. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income, property, or net worth, and to federal income and excise taxes on our undistributed taxable income. In addition, taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to federal, state and local income taxes.
Liquidity and Capital Resources
As of December 31, 2012, we had $220.8 million of cash and cash equivalents. We continually evaluate the economic and credit environment and its impact on our business. Maintaining significant capital reserves has become a priority. We believe we are appropriately positioned to have significant cash to utilize in executing our strategy.
Short Term Liquidity and Capital Resources
On a short term basis, our principal demands for funds are to pay our corporate and operating expenses, as well as property capital expenditures, make distributions to our stockholders, and pay/make interest and principal payments on our current indebtedness. Our capital expenditures mainly consist of improvements to hotels, in which a portion is reserved for in restricted escrows. We are negotiating refinancing the remaining 2013 debt at terms that will most likely be at lower rates. We expect to meet our short term liquidity requirements from cash flow from operations, proceeds from our dividend reinvestment plan and distributions from our joint venture investments.
Long Term Liquidity and Capital Resources
On a long term basis, our objectives are to maximize revenue generated by our existing properties, to further enhance the value of our segments that produce attractive current yield and long-term risk-adjusted returns to our stockholders and to generate sustainable and predictable cash flow from our operations to distribute to our stockholders. We believe the increased performance of our lodging and multi-family segments as well as the repositioning of our retail and lodging properties will increase our operating cash flows.
Our principal demands for funds have been and will continue to be:
•
to pay our expenses and the operating expenses of our properties;

55

•
to make distributions to our stockholders;
•
to service or pay-down our debt;
•
to fund capital expenditures;
•
to invest in properties;
•
to fund joint ventures and development investments; and
•
to fund our share repurchase program.
Generally, our cash needs have been and will be funded from:
•
income earned on our investment properties;
•
interest income on investments and dividend and gain on sale income earned on our investment in marketable securities;
•
distributions from our joint venture investments;
•
proceeds from sales of properties;
•
proceeds from borrowings on properties; and
•
issuance of shares under our distribution reinvestment plan.
Distributions
We declared cash distributions to our stockholders per weighted average number of shares outstanding during the period from January 1, 2012 to December 31, 2012 totaling $440.0 million or $.50 per share, including amounts reinvested through the dividend reinvestment plan. During the year ended December 31, 2012, we paid cash distributions of $439.2 million. These cash distributions were paid with $456.2 million from our cash flow from operations, $31.7 million provided by distributions from unconsolidated entities, as well as $40.7 million from gain on sales of properties.

We continue to provide cash distributions to our stockholders from cash generated by our operations. The following chart summarizes the sources of our cash used to pay distributions. Our primary source of cash is cash flow provided by operating activities from our investments as presented in our cash flow statement. We also include distributions from unconsolidated entities to the extent that the underlying real estate operations in these entities generate these cash flows. Gain on sales of properties relate to net profits from the sale of certain properties. Our presentation is not intended to be an alternative to our consolidated statements of cash flow and does not present all the sources and uses of our cash.
The following table presents a historical view of our distribution coverage.
 
 
2012
 
2011
 
2010
 
2009
 
2008
Cash flow provided by operations
$
456,221

 
397,949

 
356,660

 
369,031

 
384,365

Distributions from unconsolidated entities
$
31,710

 
33,954

 
31,737

 
32,081

 
41,704

Gain on sales of properties (1)
$
40,691

 
6,141

 
55,412

 
—

 
—

Distributions declared
$
(440,031
)
 
(429,599
)
 
(417,885
)
 
(405,337
)
 
(418,694
)
Excess (deficiency)
$
88,591

 
8,445

 
25,924

 
(4,225
)
 
7,375

 
(1)
Excludes gains reflected on impaired values.

Cash flow from operations for the year ended December 31, 2012 included an increase in the accrued interest expense payable of $22,100 as compared to the year ended December 31, 2011. This was a result of a one-time change in timing of debt service payments from 2011 to 2012.

The following table presents a historical summary of distributions declared, distributions paid and distributions reinvested.
 
2012
 
2011
 
2010
 
2009
 
2008
Distributions declared
$
440,031

 
429,599

 
417,885

 
405,337

 
418,694

Distributions paid
$
439,188

 
428,650

 
416,935

 
411,797

 
405,925

Distributions reinvested
$
191,785

 
199,591

 
207,296

 
231,306

 
242,113


56

Acquisitions and Dispositions of Real Estate Investments
We acquired thirteen and ten properties during the years ended December 31, 2012 and 2011, respectively, which were funded with available cash, disposition proceeds, mortgage indebtedness, and the proceeds from the distribution reinvestment plan. We invested net cash of approximately $447.9 million and $446.1 million for these acquisitions. For the year ended December 31, 2012, we sold approximately 143 bank branches (142 retail branches and one office branch), four retail properties, 13 lodging properties, two industrial properties, and four multi-family properties, generating net sales proceeds of $522.6 million. Comparatively for the year ended December 31, 2011 we sold 14 retail, six lodging, four office, one industrial, and one multi-family properties, generating net sales proceeds of $246.3 million.
Stock Offering
We have completed two public offerings of our common stock on a best efforts basis as well as offerings of common stock under our distribution reinvestment plan, or “DRP.” Under the DRP, as amended, the purchase price per share is equal to 100% of the “market price” of a share of the Company’s common stock until the shares become listed for trading. For reinvestments made after September 21, 2010 until December 29, 2011, the DRP purchase price was equal to $8.03 per share. After December 29, 2011 until December 19, 2012, the DRP purchase price was equal to $7.22 per share. After December 19, 2012 and until a new estimated value per share has been established, the DRP purchase price is $6.93 per share. We are permitted to offer shares pursuant to the DRP under the existing registration statement until the earlier of March 16, 2015 or the date we sell all $803.0 million worth of shares in the offering. At that time we would consider filing a new registration statement to permit the continued issuance of DRP shares. As of December 31, 2012, we had raised a total of approximately $8.8 billion of gross offering proceeds as a result of all of our offerings (inclusive of distribution reinvestments and net of redemptions).
During the year ended December 31, 2012, we sold a total of 26,571,399 shares and generated $191.8 million in gross offering proceeds under the DRP, as compared to 24,855,275 shares and $200.0 million during the year ended December 31, 2011. Our average distribution reinvestment plan participation was 44% for the year ended December 31, 2012, compared to 47% for the year ended December 31, 2011.
Share Repurchase Program
Our board adopted an Amended and Restated Share Repurchase Program, which was effective from April 11, 2011 through January 31, 2012 (the “First Amended Program”). Our board subsequently adopted a Second Amended and Restated Share Repurchase Program, which became effective as of February 1, 2012 (the “Second Amended Program”).
Under the Second Amended Program, we may repurchase shares of our common stock, on a quarterly basis, from the beneficiary of a stockholder that has died or from stockholders that have a “qualifying disability” or are confined to a “long-term care facility” (together, referred to herein as “hardship repurchases”). We are authorized to repurchase shares at a price per share equal to 100% of the most recently disclosed estimated per share value of our common stock, which currently is equal to $6.93 per share. Our obligation to repurchase any shares under the Second Amended Program is conditioned upon our having sufficient funds available to complete the repurchase. Our board has initially reserved $10.0 million per calendar quarter for the purpose of funding repurchases associated with death and $15.0 million per calendar quarter for the purpose of funding hardship repurchases. If the funds reserved for either category of repurchase under the Second Amended Program are insufficient to repurchase all of the shares for which repurchase requests have been received for a particular quarter, or if the number of shares accepted for repurchase would cause us to exceed the 5.0% limit set forth therein, we will repurchase the shares in the following order: (1) for death repurchases, we will repurchase shares in chronological order, based upon the beneficial owner’s date of death; and (2) for hardship repurchases, we will repurchase shares on a pro rata basis, up to, but not in excess of, the limits described herein; provided, that in the event that the repurchase would result in a stockholder owning less than 150 shares, we will repurchase all of that stockholder’s shares.
For the year ended December 31, 2012, we received requests for the repurchase of 7,668,711 shares of our common stock. Of these requests, we repurchased 6,334,187 shares of common stock for $45.7 million for the year ended December 31, 2012. In January 2013, we repurchased 1,334,524 shares of common stock for $9.2 million. There were no additional requests outstanding. The price per share for shares repurchased during the year ended December 31, 2012 was $7.22. The price per share for shares repurchased in January 2013 was $6.93. All repurchases were funded from proceeds from our distribution reinvestment plan. The table below summarizes the share repurchases.
 
Total number of share repurchase requests
 
Total number of shares repurchased
 
Price per share at date of redemption
 
Total value of shares repurchased
 (in thousands)
For the year ended December 31, 2012
7,668,711

 
6,334,187

 
$7.22
 
$45,732
January 2013
—

 
1,334,524

 
$6.93
 
$9,248

57


Borrowings
The table below presents, on a consolidated basis, the principal amount, weighted average interest rates and maturity date (by year) on our mortgage debt as of December 31, 2012 (dollar amounts are stated in thousands).
 
 
2013
 
2014
 
2015
 
2016
 
2017
 
Thereafter
 
Total
Maturing debt :
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate debt (mortgage loans)
$
469,193

 
246,851

 
422,472

 
730,600

 
1,129,891

 
1,604,274

 
4,603,281

Variable rate debt (mortgage loans)
$
413,714

 
422,123

 
261,856

 
52,397

 
100,422

 
40,650

 
1,291,162

Weighted average interest rate on debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate debt (mortgage loans)
5.90
%
 
5.50
%
 
5.59
%
 
5.58
%
 
5.74
%
 
5.63
%
 
5.67
%
Variable rate debt (mortgage loans)
2.95
%
 
3.08
%
 
3.12
%
 
3.13
%
 
3.67
%
 
3.47
%
 
3.11
%
The debt maturity excludes mortgage discounts associated with debt assumed at acquisition of which a discount of $27.4 million, net of accumulated amortization, is outstanding as of December 31, 2012. Of the total outstanding debt, approximately $691.5 million is recourse to us.
As of December 31, 2012, we had approximately $883 million and $669 million in mortgage debt maturing in 2013 and 2014, respectively. We are negotiating refinancing the remaining 2013 debt maturities at terms that will most likely be at lower rates. We currently anticipate that we will be able to repay or refinance all of our debt on a timely basis, and believe we have adequate sources of funds to meet our short term cash needs. However, there can be no assurance that we can obtain such refinancing on satisfactory terms. Continued volatility in the capital markets could expose us to the risk of not being able to borrow on terms and conditions acceptable to us for future acquisitions or refinancings.
Mortgage loans outstanding as of December 31, 2012 and 2011 were $5.9 billion and $5.8 billion, respectively, and had a weighted average interest rate of 5.1% and 5.2% per annum, respectively. For the years ended December 31, 2012 and 2011, we borrowed, net of paydowns, $18.3 million and $58.8 million, respectively, secured by our portfolio of marketable securities. For the years ended December 31, 2012 and 2011, we borrowed approximately $709.3 million and $1.2 billion, respectively, secured by mortgages on our properties and assumed $232.0 million and $0, respectively, of debt at acquisition.
Summary of Cash Flows
 
 
Year ended December 31,
 
2012
 
2011
 
2010
 
(In thousands)
Cash provided by operating activities
$
456,221

 
$
397,949

 
$
356,660

Cash used in investing activities
(118,162
)
 
(286,896
)
 
(380,685
)
Cash used in financing activities
(335,443
)
 
(160,597
)
 
(208,759
)
Increase (decrease) in cash and cash equivalents
2,616


(49,544
)
 
(232,784
)
Cash and cash equivalents, at beginning of year
218,163

 
267,707

 
500,491

Cash and cash equivalents, at end of year
$
220,779

 
$
218,163


$
267,707

Cash provided by operating activities was $456, $398 and $357 million for the years ended December 31, 2012, 2011 and 2010, respectively, and was generated primarily from operating income from property operations, and interest and dividends. The increase in operating cash flows from the years ended December 31, 2010 to December 31, 2011 to December 31, 2012 was primarily due to the improved performance of the lodging and multi-family segments as well as a 2012 increase in the accrued interest expense payable of $22,100. This was a result of a one-time change in timing of debt service payments from 2011 to 2012.

58

Cash used in investing activities was $118, $287 and $381 million for years ended December 31, 2012, 2011 and 2010, respectively. The decrease in cash used in investing activities from the years ended December 31, 2011 to December 31, 2012 was primarily due to the proceeds from the sale of our investment properties in 2012. The decrease in cash used in investing activities from the years ended December 31, 2010 to December 31, 2011 was primarily due to the proceeds from the sale of unconsolidated entities in 2011.
Cash used in financing activities was $335, $161 and $209 million for the years ended December 31, 2012, 2011 and 2010, respectively. The increase in cash used in financing activities from the years ended December 31, 2011 to December 31, 2012 was primarily due to a decrease in proceeds from our mortgage debt of $470 million in 2012, offset by the redemption of noncontrolling interest of $294 million in 2011. The decrease in cash used in financing activities from the years ended December 31, 2010 to December 31, 2011 was primarily due to the increase in proceeds from our mortgage debt of $747 million, offset by the increase in our payoffs of mortgage debt of $374 million and by the redemption of noncontrolling interest of $294 million.
We consider all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements with a maturity of three months or less, at the date of purchase, to be cash equivalents. We maintain our cash and cash equivalents at financial institutions. The combined account balances at one or more institutions periodically exceed the Federal Depository Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage.
Off Balance Sheet Arrangements
Contractual Obligations
The table below presents, on a consolidated basis, obligations and commitments to make future payments under debt obligations (including interest), lease agreements, and margin accounts on our marketable securities portfolio as of December 31, 2012 (dollar amounts are stated in thousands).
 
 
Payments due by period
 
Total
 
Less than
1 year
 
1-3 years
 
3-5 years
 
More than
5 years
Long-Term Debt Obligations
$
7,533,793

 
1,156,473

 
2,797,593

 
2,096,386

 
1,483,341

Ground Lease Payments
$
36,706

 
833

 
2,424

 
2,424

 
31,025

Margins Payable
$
139,142

 
139,142

 
—

 
—

 
—


Of the total long-term debt obligations, approximately $691.5 million is recourse to the Company.
We have acquired several properties subject to the obligation to pay the seller additional monies depending on the future leasing and occupancy of the property. These earnout payments are based on a predetermined formula. Each earnout agreement has a time limit regarding the obligation to pay any additional monies. If at the end of the time period, certain space has not been leased and occupied, we will not have any further obligation. Assuming all the conditions are satisfied, as of December 31, 2012, we would be obligated to pay as much as $6.4 million in the future as vacant space covered by these earnout agreements is occupied and becomes rent producing. The information in the above table does not reflect these contractual obligations.

Unconsolidated Real Estate Joint Ventures
Unconsolidated joint ventures are those where we have substantial influence over but do not control the entity. We account for our interest in these ventures using the equity method of accounting. For additional discussion of our investments in joint ventures. Please refer to Note 5 in our consolidated financial statements in Item 8 of this Annual Report on Form 10-K, which is incorporated by reference into this Item 7. Our ownership percentage and related investment in each joint venture is summarized in the following table. (Dollar amounts stated in thousands.)
 

59

Joint Venture
Ownership %
 
Investment at
December 31, 2012
Cobalt Industrial REIT II
36
%
 
102,599

D.R. Stephens Institutional Fund, LLC
90
%
 
34,541

Brixmor/IA JV, LLC
(a)

 
90,315

Other Unconsolidated Joint Ventures
Various

 
26,344

 
 
 
$
253,799

 
(a)
We have preferred membership interest and are entitled to a 11% preferred dividend in Brixmor/IA JV, LLC (formerly Centro/IA JV LLC).

Subsequent Events

Subsequent to December 31, 2012, we purchased one retail property, two lodging properties, and one student housing property for a gross acquisition price of $119,900.



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are subject to market risk associated with changes in interest rates both in terms of variable-rate debt and the price of new fixed-rate debt upon maturity of existing debt and for acquisitions. We are also subject to market risk associated with our marketable securities investments.
Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. If market rates of interest on all of the floating rate debt as of December 31, 2012 permanently increased by 1%, the increase in interest expense on the floating rate debt would decrease future earnings and cash flows by approximately $12.9 million. If market rates of interest on all of the floating rate debt as of December 31, 2012 permanently decreased by 1%, the decrease in interest expense on the floating rate debt would increase future earnings and cash flows by approximately $12.9 million.
With regard to our variable rate financing, we assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. We maintain risk management control systems to monitor interest rate cash flow risk attributable to both of our outstanding or forecasted debt obligations as well as our potential offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on our future cash flows.
We monitor interest rate risk using a variety of techniques, including periodically evaluating fixed interest rate quotes on all variable rate debt and the costs associated with converting the debt to fixed rate debt. Also, existing fixed and variable rate loans that are scheduled to mature in the next year or two are evaluated for possible early refinancing and or extension due to consideration given to current interest rates. Refer to our Borrowings table in Item 7 of this Annual Report on Form 10-K for mortgage debt principal amounts and weighted average interest rates by year and expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes.
We use derivative financial instruments to hedge exposures to changes in interest rates on loans secured by our properties. To the extent we do, we are exposed to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, it does not possess credit risk. It is our policy to enter into these transactions with the same party providing the financing. In the alternative, we seek to minimize the credit risk in derivative instruments by entering into transactions with what we believe are high-quality counterparties. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. The market risk associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
We have entered into nine interest rate swap agreements that have converted $176.4 million or 9% of our variable rate mortgage loans from variable to fixed rates. As of December 31, 2012, the pay rates ranged from 0.79% to 3.32% with maturity dates from January 2, 2013 to September 29, 2014. The interest rate swaps have a notional amount of $176.4 million and fair

60


value at $0.9 million and $2.3 million as of December 31, 2012 and 2011, respectively. Please refer to Note 11 in our consolidated financial statements in Item 8 of this Annual Report on Form 10-K, which is incorporated by reference into this Item 7.
We have, and may in the future enter into, derivative positions that do not qualify for hedge accounting treatment. The gains or losses resulting from marking-to-market, these derivatives at the end of each reporting period are recognized as an increase or decrease in “interest expense” on our consolidated statements of income. In addition, we are, and may in the future be, subject to additional expense based on the notional amount of the derivative positions and a specified spread over LIBOR.

Equity Price Risk
We are exposed to equity price risk as a result of our investments in marketable equity securities. Equity price risk is based on volatility of equity prices and the values of corresponding equity indices.
Other than temporary impairments on our investments in marketable securities were $1.9, $24.4 and $1.9 million for the years ended December 31, 2012, 2011 and 2010, respectively. We believe that our investments will continue to generate dividend income and we could continue to recognize gains on sale. However, due to general economic and credit market uncertainties it is difficult to project where the REIT market and our portfolio will perform in 2013.
Although it is difficult to project what factors may affect the prices of equity sectors and how much the effect might be, the table below illustrates the impact of a 10% increase and a 10% decrease in the price of the equities held by us would have on the value of the total assets and the book value of the Company as of December 31, 2012 (dollar amounts stated in thousands).
 
 
Cost
 
Fair Value
 
Hypothetical 10%
Decrease in
Market Value
 
Hypothetical 10%
Increase in
Market Value
Equity securities
$
222,126

 
304,811

 
274,330

 
335,292



61
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)
Index

Item 8. Consolidated Financial Statements and Supplementary Data
 
Schedules not filed:
All schedules other than the ones listed in the Index have been omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.

62


Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Inland American Real Estate Trust, Inc.:

We have audited the accompanying consolidated balance sheets of Inland American Real Estate Trust, Inc. (the Company) as of December 31, 2012 and 2011, and the related consolidated statements of operations and other comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2012. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule III. These consolidated financial statements and financial statement schedule III are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule III based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Inland American Real Estate Trust, Inc. as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule III, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/S/ KPMG LLP
Chicago, Illinois
March 12, 2013

63
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Consolidated Balance Sheets
(Dollar amounts in thousands, except share amounts)
 

December 31,
2012
 
December 31,
2011
Assets

 

Assets:

 

Investment properties:

 

Land
$
1,882,715

 
$
1,938,637

Building and other improvements
8,679,105

 
8,465,602

Construction in progress
337,384

 
323,842

Total
10,899,204

 
10,728,081

Less accumulated depreciation
(1,581,524
)
 
(1,301,899
)
Net investment properties
9,317,680

 
9,426,182

Cash and cash equivalents
220,779

 
218,163

Restricted cash and escrows
104,027

 
98,444

Investment in marketable securities
327,655

 
289,365

Investment in unconsolidated entities
253,799

 
316,711

Accounts and rents receivable (net of allowance of $10,348 and $9,488)
121,773

 
114,615

Intangible assets, net
298,828

 
326,332

Deferred costs and other assets
115,343

 
129,378

Total assets
$
10,759,884

 
$
10,919,190

Liabilities and Equity

 

Liabilities:

 

Mortgages, notes and margins payable, net
$
6,006,146

 
$
5,902,712

Accounts payable and accrued expenses
142,835

 
105,153

Distributions payable
37,059

 
36,216

Intangible liabilities, net
80,769

 
83,203

Other liabilities
150,325

 
128,592

Total liabilities
6,417,134

 
6,255,876

Commitments and contingencies


 


Stockholders’ equity:

 

Preferred stock, $.001 par value, 40,000,000 shares authorized, none outstanding
—

 
—

Common stock, $.001 par value, 1,460,000,000 shares authorized, 889,424,572 and 869,187,360 shares issued and outstanding
889

 
869

Additional paid in capital
7,921,913

 
7,775,880

Accumulated distributions in excess of net loss
(3,664,591
)
 
(3,155,222
)
Accumulated other comprehensive income
84,414

 
41,948

Total Company stockholders’ equity
4,342,625

 
4,663,475

Noncontrolling interests
125

 
(161
)
Total equity
4,342,750

 
4,663,314

Total liabilities and equity
$
10,759,884

 
$
10,919,190

See accompanying notes to the consolidated financial statements.

64
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Consolidated Statements of Operations and Other Comprehensive Income
(Dollar amounts in thousands, except per share amounts)

Year ended
December 31, 2012
 
Year ended
December 31, 2011
 
Year ended
December 31, 2010
Income:

 

 

Rental income
$
622,954

 
$
594,946

 
$
560,350

Tenant recovery income
98,770

 
90,213

 
85,263

Other property income
15,244

 
16,462

 
14,544

Lodging income
700,427

 
526,252

 
434,539

Total income
1,437,395

 
1,227,873

 
1,094,696

Expenses:

 

 

General and administrative expenses
36,814

 
31,032

 
36,665

Property operating expenses
128,096

 
127,676

 
119,005

Lodging operating expenses
454,417

 
335,372

 
275,398

Real estate taxes
98,495

 
86,292

 
80,370

Depreciation and amortization
424,236

 
407,968

 
390,166

Business management fee
39,892

 
40,000

 
36,000

Provision for asset impairment
77,348

 
28,967

 
—

Provision for notes receivable impairment
—

 
—

 
111,896

Total expenses
1,259,298

 
1,057,307

 
1,049,500

Operating income
$
178,097

 
$
170,566

 
$
45,196

Interest and dividend income
23,386

 
22,860

 
33,068

Other income
2,710

 
19,145

 
3,095

Interest expense
(306,047
)
 
(295,447
)
 
(271,360
)
Equity in income (loss) of unconsolidated entities
1,998

 
(12,802
)
 
(18,684
)
Gain, (loss) and (impairment) of investment in unconsolidated entities, net
(12,322
)
 
(106,023
)
 
(11,239
)
Realized gain, (loss) and (impairment) on securities, net
4,319

 
(16,219
)
 
21,073

Loss before income taxes
$
(107,859
)
 
$
(217,920
)
 
$
(198,851
)
Income tax benefit (expense)
(7,771
)
 
3,387

 
4,518

Net loss from continuing operations
$
(115,630
)
 
$
(214,533
)
 
$
(194,333
)
Income (loss) from discontinued operations, net
$
51,981

 
$
(95,012
)
 
$
27,041

Net loss
$
(63,649
)
 
$
(309,545
)
 
$
(167,292
)
Less: Net income attributable to noncontrolling interests
(5,689
)
 
(6,708
)
 
(9,139
)
Net loss attributable to Company
$
(69,338
)
 
$
(316,253
)
 
$
(176,431
)
Net loss, per common share, from continuing operations, basic and diluted
(0.14
)
 
(0.26
)
 
(0.24
)
Net income (loss), per common share, from discontinued operations, basic and diluted
0.06

 
(0.11
)
 
0.03

Net loss, per common share, basic and diluted
(0.08
)
 
(0.37
)
 
(0.21
)
Weighted average number of common shares outstanding, basic and diluted
$
879,685,949

 
$
858,637,707

 
$
835,131,057

Other comprehensive income (loss):


 


 


Unrealized gain (loss) on investment securities
$
45,372

 
$
(24,950
)
 
$
40,491

Reversal of unrealized (gain) loss to realized gain (loss) on investment securities
$
(4,319
)
 
$
16,219

 
$
(21,073
)
Unrealized gain on derivatives
$
1,413

 
$
1,249

 
$
300

Comprehensive loss attributable to the Company
(26,872
)
 
(323,735
)
 
(156,713
)

See accompanying notes to the consolidated financial statements.

65
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)




66
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)



Consolidated Statements of Changes in Equity
(Dollar amounts in thousands)
For the years ended December 31, 2012, 2011 and 2010
 

Number of
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Distributions
in excess of
Net Loss
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interests
 
Total
 
Noncontrolling
Redeemable
Interests
Balance at January 1, 2010
823,619,190

 
824

 
7,397,831

 
(1,815,054
)
 
29,712

 
18,869

 
5,632,182

 
264,132

Net income (loss)
—

 
—

 
—

 
(176,431
)
 
—

 
(106
)
 
(176,537
)
 
9,245

Unrealized gain on investment securities
—

 
—

 
—

 
—

 
40,491

 
—

 
40,491

 
—

Reversal of unrealized gain to realized gain on investment securities
—

 
—

 
—

 
—

 
(21,073
)
 
—

 
(21,073
)
 
—

Unrealized gain on derivatives
—

 
—

 
—

 
—

 
300

 
—

 
300

 
—

Distributions declared
—

 
—

 
—

 
(417,885
)
 
—

 
(2,237
)
 
(420,122
)
 
(9,245
)
Contributions from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
855

 
855

 
—

Proceeds from distribution reinvestment program
22,787,584

 
22

 
207,274

 
—

 
—

 
—

 
207,296

 
—

Balance at December 31, 2010
846,406,774

 
846

 
7,605,105

 
(2,409,370
)
 
49,430

 
17,381

 
5,263,392

 
264,132


See accompanying notes to the consolidated financial statements.

67
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)



Consolidated Statements of Changes in Equity
(continued)
(Dollar amounts in thousands)
For the years ended December 31, 2012, 2011 and 2010
 
 
Number of
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Distributions
in excess of
Net Loss
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interests
 
Total
 
Noncontrolling
Redeemable
Interests
Balance at January 1, 2011
846,406,774

 
846

 
7,605,105

 
(2,409,370
)
 
49,430

 
17,381

 
5,263,392

 
264,132

Net income (loss)
—

 
—

 
—

 
(316,253
)
 
—

 
(1,183
)
 
(317,436
)
 
7,891

Unrealized loss on investment securities
—

 
—

 
—

 
—

 
(24,950
)
 
—

 
(24,950
)
 
—

Reversal of unrealized loss to realized loss on investment securities
—

 
—

 
—

 
—

 
16,219

 
—

 
16,219

 
—

Unrealized gain on derivatives
—

 
—

 
—

 
—

 
1,249

 
—

 
1,249

 
—

Distributions declared
—

 
—

 
—

 
(429,599
)
 
—

 
(660
)
 
(430,259
)
 
(7,891
)
Adjustment to redemption value for noncontrolling interest
—

 
—

 
(13,793
)
 
—

 
—

 
(15,555
)
 
(29,348
)
 
29,348

Contributions from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
651

 
651

 
—

Redemption of noncontrolling interests
—

 
—

 
—

 
—

 
—

 
(795
)
 
(795
)
 
(293,480
)
Proceeds from distribution reinvestment program
24,855,275

 
25

 
199,566

 
—

 
—

 
—

 
199,591

 
—

Share repurchase program
(2,074,689
)
 
(2
)
 
(14,998
)
 
—

 
—

 
—

 
(15,000
)
 
—

Balance at December 31, 2011
869,187,360

 
869

 
7,775,880

 
(3,155,222
)
 
41,948

 
(161
)
 
4,663,314

 
—


See accompanying notes to the consolidated financial statements.

68
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)



Consolidated Statements of Changes in Equity
(continued)
(Dollar amounts in thousands)
For the years ended December 31, 2012, 2011 and 2010
 
 
Number of
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Distributions
in excess of
Net Loss
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interests
 
Total
Balance at January 1, 2012
869,187,360

 
$
869

 
$
7,775,880

 
$
(3,155,222
)
 
$
41,948

 
$
(161
)
 
$
4,663,314

Net income (loss)
—

 
—

 
—

 
(69,338
)
 
—

 
5,689

 
(63,649
)
Unrealized loss on investment securities
—

 
—

 
—

 
—

 
45,372

 
—

 
45,372

Reversal of unrealized loss to realized loss on investment securities
—

 
—

 
—

 
—

 
(4,319
)
 
—

 
(4,319
)
Unrealized gain on derivatives
—

 
—

 
—

 
—

 
1,413

 
—

 
1,413

Contributions/(distributions) declared, net
—

 
—

 
—

 
(440,031
)
 
—

 
(3,806
)
 
(443,837
)
Disposal of noncontrolling interest
—

 
—

 
—

 
—

 
—

 
(1,597
)
 
(1,597
)
Proceeds from distribution reinvestment program
26,571,399

 
26

 
191,759

 
—

 
—

 
—

 
191,785

Share repurchase program
(6,334,187
)
 
(6
)
 
(45,726
)
 
—

 
—

 
—

 
(45,732
)
Balance at December 31, 2012
889,424,572

 
$
889

 
$
7,921,913

 
$
(3,664,591
)
 
$
84,414

 
$
125

 
$
4,342,750

    
See accompanying notes to the consolidated financial statements.


69
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
 

Year ended
December 31, 2012
 
Year ended
December 31, 2011
 
Year ended
December 31, 2010
Cash flows from operating activities:

 

 

Net loss
$
(63,649
)
 
$
(309,545
)
 
$
(167,292
)
Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

Depreciation and amortization
438,755

 
439,759

 
443,787

Amortization of above and below market leases, net
(2,271
)
 
(1,326
)
 
(433
)
Amortization of debt premiums, discounts, and financing costs
16,107

 
20,430

 
18,424

Straight-line rental income
(11,010
)
 
(13,841
)
 
(17,705
)
Gain on extinguishment of debt
(9,478
)
 
(10,848
)
 
(19,227
)
Gain on sale of property, net
(40,691
)
 
(16,510
)
 
(55,412
)
(Gain) loss on consolidated investment
—

 
—

 
(433
)
Provision for asset impairment
83,316

 
163,641

 
47,529

Impairment of notes receivable
—

 
—

 
111,896

Equity in (income) loss of unconsolidated of entities
(1,998
)
 
12,802

 
18,684

Distributions from unconsolidated entities
7,171

 
9,849

 
3,887

(Gain), loss and impairment of investment in unconsolidated entities, net
12,322

 
106,023

 
11,239

Realized (gain) loss on investments in securities
(6,218
)
 
(8,137
)
 
(22,929
)
Impairment of investments in securities
1,899

 
24,356

 
1,856

Other non-cash adjustments
2,019

 
(18,649
)
 
(278
)
Changes in assets and liabilities:

 

 

Accounts and rents receivable
(603
)
 
(855
)
 
(3,612
)
Deferred costs and other assets
(3,005
)
 
(12,138
)
 
580

Accounts payable and accrued expenses
33,205

 
7,492

 
(6,958
)
Other liabilities
350

 
5,446

 
(6,943
)
Net cash flows provided by operating activities
456,221

 
397,949

 
356,660

Cash flows from investing activities:

 

 

Purchase of investment properties
(447,909
)
 
(446,096
)
 
(365,427
)
Acquired in-place and market-lease intangibles, net
(15,838
)
 
(18,231
)
 
(74,841
)
Acquired goodwill
(23,735
)
 
—

 
—

Capital expenditures and tenant improvements
(89,578
)
 
(71,157
)
 
(109,827
)
Investment in development projects
(109,441
)
 
(74,850
)
 
(56,894
)
Sale of investment properties
522,583

 
246,317

 
301,189

Purchase of investment securities
(23,015
)
 
(79,147
)
 
(86,986
)
Sale of investment securities
30,095

 
33,558

 
75,812

Investment in unconsolidated entities
—

 
(409
)
 
(60,043
)
Proceeds from the sale of and return of capital from unconsolidated entities
13,706

 
100,408

 
—

Distributions from unconsolidated entities
31,710

 
33,954

 
31,737

Payment of leasing fees and franchise fees
(11,341
)
 
(9,772
)
 
(8,211
)
Purchase of note receivable
—

 
—

 
(34,253
)
Payments from notes receivable
26

 
18,443

 
26,141

Restricted escrows
(4,735
)
 
(6,567
)
 
(23,179
)
Other assets
9,310

 
(13,347
)
 
4,097

Net cash flows used in investing activities
(118,162
)
 
(286,896
)
 
(380,685
)
See accompanying notes to the consolidated financial statements.



70
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Consolidated Statements of Cash Flows
(continued)
(Dollar amounts in thousands)
 
 
Year ended
December 31, 2012
 
Year ended
December 31, 2011
 
Year ended
December 31, 2010
Cash flows from financing activities:
 
 
 
 
 
Proceeds from the distribution reinvestment program
191,785

 
199,591

 
207,296

Shares repurchased
(45,732
)
 
(15,000
)
 
—

Distributions paid
(439,188
)
 
(428,650
)
 
(416,935
)
Proceeds from mortgage debt and notes payable
709,280

 
1,179,594

 
432,873

Payoffs of mortgage debt
(722,233
)
 
(804,204
)
 
(429,737
)
Principal payments of mortgage debt
(34,735
)
 
(36,036
)
 
(16,812
)
Proceeds from margin securities debt, net
18,284

 
58,756

 
33,800

Payment of loan fees and deposits
(7,501
)
 
(12,473
)
 
(8,617
)
Distributions paid to noncontrolling interests
(3,806
)
 
(660
)
 
(2,237
)
Distributions paid to noncontrolling redeemable interests
—

 
(7,891
)
 
(9,245
)
Contributions from noncontrolling interests
—

 
651

 
855

Redemption of noncontrolling interests
—

 
(294,275
)
 
—

Disposal of noncontrolling interests
(1,597
)
 
—

 
—

Net cash flows used in financing activities
(335,443
)
 
(160,597
)
 
(208,759
)
Net increase (decrease) in cash and cash equivalents
2,616

 
(49,544
)
 
(232,784
)
Cash and cash equivalents, at beginning of year
218,163

 
267,707

 
500,491

Cash and cash equivalents, at end of year
$
220,779

 
$
218,163

 
$
267,707


See accompanying notes to the consolidated financial statements.

71
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)



Consolidated Statements of Cash Flows
(continued)
(Dollar amounts in thousands)
 
 
Year ended December 31, 2012
 
Year ended December 31, 2011
 
Year ended December 31, 2010
Supplemental disclosure of cash flow information:
 
 
 
 
 
Purchase of investment properties
$
(672,125
)
 
$
(448,169
)
 
$
(779,986
)
Tenant and real estate tax liabilities assumed at acquisition
492

 
2,073

 
4,753

Assumption of mortgage debt at acquisition
232,017

 
—

 
457,685

Non-cash discount on assumption of mortgage debt at acquisition
(3,311
)
 
—

 
(47,879
)
Assumption of lender held escrows
(4,982
)
 
—

 
—

 
$
(447,909
)
 
$
(446,096
)
 
$
(365,427
)
Cash paid for interest, net of capitalized interest of $10,487, $10,851, and $4,302 for 2012, 2011 and 2010
$
309,478

 
$
296,065

 
$
293,301

Supplemental schedule of non-cash investing and financing activities:
 
 
 
 
 
Consolidation of Lauth assets
$
—

 
$
—

 
$
38,365

Assumption of mortgage debt at consolidation of Lauth
$
—

 
$
—

 
$
(37,890
)
Liabilities assumed at consolidation of Lauth
$
—

 
$
—

 
$
(1,345
)
Property surrendered in exchange for extinguishment of debt
$
28,655

 
$
35,524

 
$
10,492

Property acquired through exchange of notes receivable
$
—

 
$
20,000

 
$
142,827

Conversion of note receivable to equity interest
$
—

 
$
17,150

 
$
121,320

Redemption value adjustment for noncontrolling redeemable interest
$
—

 
$
29,348

 
$
—

Property acquired through transfer of equity interest
$
—

 
$
8,500

 
$
—

Mortgage assumed by buyer upon disposal of property
$
60,659

 
$
—

 
$
—


See accompanying notes to the consolidated financial statements.


72
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)

December 31, 2012, 2011 and 2010


(1) Organization
Inland American Real Estate Trust, Inc. (the “Company”) was formed on October 4, 2004 (inception) to acquire and manage a diversified portfolio of commercial real estate, primarily retail properties and multi-family (both conventional and student housing), office, industrial and lodging properties, located in the United States and Canada. The Business Management Agreement (the “Agreement”) provides for Inland American Business Manager & Advisor, Inc. (the “Business Manager”), an affiliate of the Company’s sponsor, to be the business manager to the Company. On August 31, 2005, the Company commenced an initial public offering (the “Initial Offering”) of up to 500,000,000 shares of common stock (“Shares”) at $10.00 each and the issuance of 40,000,000 shares at $9.50 per share available to be distributed pursuant to the Company’s distribution reinvestment plan. On August 1, 2007, the Company commenced a second public offering (the “Second Offering”) of up to 500,000,000 shares of common stock at $10.00 per share and up to 40,000,000 shares at $9.50 per share available to be distributed through the Company’s distribution reinvestment plan. Effective April 6, 2009, the Company elected to terminate the Second Offering. On March 31, 2009, the Company filed a registration statement to register 50,000,000 shares to be issued under the distribution reinvestment plan or “DRP.” Under the DRP, as amended, the purchase price per share is equal to 100% of the “market price” of a share of the Company’s common stock until the shares become listed for trading.
The accompanying consolidated financial statements include the accounts of the Company, as well as all wholly owned subsidiaries and consolidated joint venture investments. Wholly owned subsidiaries generally consist of limited liability companies (LLCs) and limited partnerships (LPs). The effects of all significant intercompany transactions have been eliminated.
Each property is owned by a separate legal entity which maintains its own books and financial records and each entity's assets are not available to satisfy the liabilities of other affiliated entities, except as otherwise disclosed in Mortgages, Notes and Margins Payable Note 10.
At December 31, 2012, the Company owned a portfolio of 794 commercial real estate properties compared to 964 properties at December 31, 2011. The breakdown by segment is as follows:
 
Segment
 
Property Count
 
Square Ft/Rooms/Units/Beds
(unaudited)
Retail
 
585
 
22,264,303
 
square feet
Lodging
 
88
 
16,345
 
rooms
Office
 
42
 
10,226,500
 
square feet
Industrial
 
53
 
13,061,447
 
square feet
Multi-family
 
26
 
5,311

/
5,212

units/beds
(2) Summary of Significant Accounting Policies
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
 
Revenue Recognition
The Company commences revenue recognition on its leases based on a number of factors. In most cases, revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset. Generally, this occurs on the lease commencement date. The determination of who is the owner, for accounting purposes, of the tenant improvements determines the nature of the leased asset and when revenue recognition under a lease begins. If the Company is the owner, for accounting purposes, of the tenant improvements, then the leased asset is the finished space and revenue recognition begins when the lessee takes possession of the finished space, typically when the improvements are substantially complete. If the Company concludes it is not the owner, for accounting purposes, of the tenant improvements (the lessee is the owner), then the

73
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)

December 31, 2012, 2011 and 2010

leased asset is the unimproved space and any tenant improvement allowances funded under the lease are treated as lease incentives which reduces revenue recognized over the term of the lease. In these circumstances, the Company begins revenue recognition when the lessee takes possession of the unimproved space for the lessee to construct their own improvements. The Company considers a number of different factors to evaluate whether it or the lessee is the owner of the tenant improvements for accounting purposes. These factors include:
•
whether the lease stipulates how and on what a tenant improvement allowance may be spent;
•
whether the tenant or landlord retains legal title to the improvements;
•
the uniqueness of the improvements;
•
the expected economic life of the tenant improvements relative to the length of the lease; and
•
who constructs or directs the construction of the improvements.
The determination of who owns the tenant improvements, for accounting purposes, is subject to significant judgment. In making that determination, the Company considers all of the above factors. No one factor, however, necessarily establishes its determination.
Rental income is recognized on a straight-line basis over the term of each lease. The difference between rental income earned on a straight-line basis and the cash rent due under the provisions of the lease agreements is recorded as deferred rent receivable and is included as a component of accounts and rents receivable in the accompanying consolidated balance sheets.
Revenue for lodging facilities is recognized when the services are provided. Additionally, the Company collects sales, use, occupancy and similar taxes at its lodging facilities which it presents on a net basis (excluded from revenues) on the consolidated statements of operations and other comprehensive income.
The Company records lease termination income if there is a signed termination agreement, all of the conditions of the agreement have been met, the tenant is no longer occupying the property and amounts due are considered collectible.
The Company defers recognition of contingent rental income (i.e. percentage/excess rent) until the specified target that triggers the contingent rental income is achieved.
Consolidation
The Company evaluates its investments in limited liability companies and partnerships to determine whether such entities may be a variable interest entity (“VIE”). If the entity is a VIE, the determination of whether the Company is the primary beneficiary must be made. The primary beneficiary determination is based on a qualitative assessment as to whether the entity has (i) power to direct significant activities of the VIE and (ii) an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. The Company will consolidate a VIE if it is deemed to be the primary beneficiary, as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation. The equity method of accounting is applied to entities in which the Company is not the primary beneficiary as defined in FASB ASC 810, or the entity is not a VIE and the Company does not have effective control, but can exercise influence over the entity with respect to its operations and major decisions.
Reclassifications
Certain reclassifications have been made to the 2011 and 2010 consolidated financial statements to conform to the 2012 presentations. The reclasses primarily represent reclassifications of revenue and expenses to discontinued operations as a result of the sales of investment properties in 2012.
Capitalization and Depreciation
Real estate is reflected at cost less accumulated depreciation. Ordinary repairs and maintenance are expensed as incurred.

74
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)

December 31, 2012, 2011 and 2010

Depreciation expense is computed using the straight line method. Building and other improvements are depreciated based upon estimated useful lives of 30 years for building and improvements and 5-15 years for furniture, fixtures and equipment and site improvements.
Tenant improvements are amortized on a straight line basis over the life of the related lease as a component of depreciation and amortization expense.
Leasing fees are amortized on a straight-line basis over the life of the related lease as a component of depreciation and amortization expense.
Loan fees are amortized on a straight-line basis, which approximates the effective interest method, over the life of the related loan as a component of interest expense.
Direct and indirect costs that are clearly related to the construction and improvements of investment properties are capitalized. Costs incurred for property taxes and insurance are capitalized during periods in which activities necessary to get the property ready for its intended use are in progress. Interest costs are also capitalized during such periods. Additionally, the Company treats investments accounted for by the equity method as assets qualifying for interest capitalization provided (1) the investee has activities in progress necessary to commence its planned principal operations and (2) the investee’s activities include the use of such funds to acquire qualifying assets.
Investment Properties Held for Sale
In determining whether to classify an investment property as held for sale, the Company considers whether: (i) management has committed to a plan to sell the investment property; (ii) the investment property is available for immediate sale, in its present condition; (iii) the Company has initiated a program to locate a buyer; (iv) the Company believes that the sale of the investment property is probable; (v) the Company has received a significant non-refundable deposit for the purchase of the property; (vi) the Company is actively marketing the investment property for sale at a price that is reasonable in relation to its fair value; and (vii) actions required for the Company to complete the plan indicate that it is unlikely that any significant changes will be made to the plan.
If all of the above criteria are met, the Company classifies the investment property as held for sale. On the day that these criteria are met, the Company suspends depreciation on the investment properties held for sale, including depreciation for tenant improvements and additions, as well as on the amortization of acquired in-place leases. The investment properties and liabilities associated with those investment properties that are held for sale are classified separately on the consolidated balance sheets for the most recent reporting period and recorded at the lesser of the carrying value or fair value less costs to sell. Additionally, the operations for the periods presented are classified on the consolidated statements of operations and other comprehensive income as discontinued operations for all periods presented. As of December 31, 2012 and 2011, no investment properties were classified as held for sale.
Disposition of Real Estate
The Company accounts for dispositions in accordance with FASB ASC 360-20, Real Estate Sales. The Company recognizes gain in full when real estate is sold, provided (a) the profit is determinable, that is, the collectability of the sales price is reasonably assured or the amount that will not be collectible can be estimated, and (b) the earnings process is virtually complete, that is, the seller is not obliged to perform significant activities after the sale to earn the profit. The Company records the transaction as discontinued operations for all periods presented in accordance with FASB ASC 205-20, Presentation of Financial Statements - Discontinued Operations.
Impairment
The Company assesses the carrying values of the respective long-lived assets, whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable, such as a reduction in the expected holding period of the asset. If it is determined that the carrying value is not recoverable because the undiscounted cash flows do not exceed carrying value, the Company is required to record an impairment loss to the extent that the carrying value exceeds fair value. The valuation and possible subsequent impairment of investment properties is a significant estimate that can and does

75
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)

December 31, 2012, 2011 and 2010

change based on our continuous process of analyzing each property and reviewing assumptions about uncertain inherent factors, as well as the economic condition of the property at a particular point in time.
The use of projected future cash flows and related holding period is based on assumptions that are consistent with the estimates of future expectations and the strategic plan the Company uses to manage its underlying business. However assumptions and estimates about future cash flows and capitalization rates are complex and subjective. Changes in economic and operating conditions and the Company’s ultimate investment intent that occur subsequent to the impairment analyses could impact these assumptions and result in future impairment charges of the real estate properties.
On a periodic basis, management assesses whether there are any indicators that the carrying value of the Company’s investments in unconsolidated entities may be other than temporarily impaired. To the extent impairment has occurred, the loss is measured as the excess of the carrying value of the investment over the fair value of the investment. The fair value of the underlying investment includes a review of expected cash flows to be received from the investee.
Derivative Instruments
In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company limits these risks by following established risk management policies and procedures including the use of derivatives to hedge interest rate risk on debt instruments.
The Company has a policy of only entering into contracts with established financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, the Company has not sustained a material loss from those instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives.
 
The Company recognizes all derivatives in the balance sheet at fair value. Additionally, the fair value adjustments will affect either equity or net income depending on whether the derivative instruments qualify as a hedge for accounting purposes and, if so, the nature of the hedging activity. When the terms of an underlying transaction are modified, or when the underlying transaction is terminated or completed, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income each period until the instrument matures. Any derivative instrument used for risk management that does not meet the criteria for hedge accounting is marked-to-market each period in the income statement. The Company does not use derivatives for trading or speculative purposes.
Marketable Securities
The Company classifies its investment in securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities in which the Company has the ability and intent to hold the security until maturity. All securities not included in trading or held-to-maturity are classified as available-for-sale. Investment in securities at December 31, 2012 and 2011 consists of common and preferred stock investments and investments in real estate related bonds that are all classified as available-for-sale securities and are recorded at fair value. Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and reported as a separate component of other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific identification basis. A decline in the market value of any available-for-sale security below cost that is deemed to be other than temporary, results in a reduction in the carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. When a security is impaired, the Company considers whether it has the ability and intent to hold the investment for a time sufficient to allow for any anticipated recovery in market value and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to period end and forecasted performance of the investee.
Acquisition of Real Estate
The Company allocates the purchase price of each acquired business (as defined in the accounting guidance related to business combinations) between tangible and intangible assets at full fair value at the date of the transaction. Such tangible and

76
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)

December 31, 2012, 2011 and 2010

intangible assets include land, building and improvements, acquired above market and below market leases, in-place lease value, customer relationships (if any), and any assumed financing that is determined to be above or below market terms. Any additional amounts are allocated to goodwill as required, based on the remaining purchase price in excess of the fair value of the tangible and intangible assets acquired and liabilities assumed. The allocation of the purchase price is an area that requires judgment and significant estimates.
The Company uses the information contained in the independent appraisal obtained at acquisition as the primary basis for the allocation to land and building and improvements. The Company determines whether any financing assumed is above or below market based upon comparison to similar financing terms for similar investment properties. The Company allocates a portion of the purchase price to the estimated acquired in-place lease costs based on estimated lease execution costs for similar leases as well as lost rent payments during assumed lease up period when calculating as if vacant fair values. The Company also evaluates each acquired lease based upon current market rates at the acquisition date and considers various factors including geographical location, size and location of leased space within the investment property, tenant profile, and the credit risk of the tenant in determining whether the acquired lease is above or below market lease costs. After an acquired lease is determined to be above or below market, the Company allocates a portion of the purchase price to such above or below acquired lease costs based upon the present value of the difference between the contractual lease rate and the estimated market rate. For below market leases with fixed rate renewals, renewal periods are included in the calculation of below market in-place lease values. The determination of the discount rate used in the present value calculation is based upon the “risk free rate” and current interest rates. This discount rate is a significant factor in determining the market valuation which requires judgment of subjective factors such as market knowledge, economics, demographics, location, visibility, age and physical condition of the property.
The Company expenses acquisition costs of all transactions as incurred. All costs related to finding, analyzing and negotiating a transaction are expensed as incurred as a general and administrative expense, whether or not the acquisition is completed. These expenses would include acquisition fees, if any, paid to an affiliate of the business manager.
Cash and Cash Equivalents
The Company considers all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements purchased with a maturity of three months or less, at the date of purchase, to be cash equivalents. The Company maintains its cash and cash equivalents at financial institutions. The combined account balances at one or more institutions periodically exceed the Federal Depository Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company believes that the risk is not significant, as the Company does not anticipate the financial institutions’ non-performance.
Restricted Cash and Escrows
Restricted escrows primarily consist of cash held in escrow comprised of lenders’ restricted escrows of $36,278 and $35,728, post acquisition escrows of $12,435 and $16,052, and lodging furniture, fixtures and equipment reserves of $50,041and $40,570 as of December 31, 2012 and 2011, respectively. As of December 31, 2012 and 2011, the restricted cash balance was $5,273 and $6,094, respectively.
Goodwill
The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed was recorded as goodwill. Goodwill has been recognized and allocated to specific properties in our lodging segment since each individual hotel property is an operating segment and considered a reporting unit. The Company tests goodwill for impairment annually or more frequently if events or changes in circumstances indicate impairment.
The Company tested goodwill for impairment by first comparing the estimated fair value of each property with goodwill to the carrying value of the property’s assets, including goodwill. The fair value is based on estimated future cash flow projections that utilize discount and capitalization rates, which are generally unobservable in the market place (Level 3 inputs), but approximate the inputs the Company believes would be utilized by market participants in assessing fair value. The estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/

77
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)

December 31, 2012, 2011 and 2010

economic conditions. If the carrying amount of the property’s assets, including goodwill, exceeds its estimated fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. In this second step, if the implied fair value of goodwill is less than the carrying amount of goodwill, an impairment charge is recorded in an amount equal to that excess.
Beginning with fiscal year 2012, in accordance with FASB ASC 350, Intangibles - Goodwill and Other, the Company tested goodwill for impairment by making a qualitative assessment of whether it is more likely than not the reporting unit's fair value is less than its carrying amount before application of the two-step goodwill impairment test. The two-step goodwill test was not performed for those assets where it was concluded that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount. For those reporting units where this was not the case, the two step procedure detailed above was followed in order to determine goodwill impairment. The Company tested goodwill for impairment as of December 31, 2012, 2011 and 2010 resulting in no impairment recorded as of December 31, 2012, 2011 and 2010.
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
(3) Acquired Properties
The Company records identifiable assets, liabilities, and goodwill acquired in a business combination at fair value. During the years ended December 31, 2012, 2011 and 2010, the Company incurred $1,644, $1,680 and $1,805, respectively, of acquisition and transaction costs that were recorded in general and administrative expenses on the consolidated statements of operations and other comprehensive income.
The Company acquired 13 properties for the year ended December 31, 2012 and 10 properties for the year ended December 31, 2011, for a gross acquisition price of $726,550 and $449,300, respectively. The table below reflects acquisition activity for the year ended December 31, 2012.
 
Segment
Property
Date
Gross Acquisition Price
(in 000's)
Square Feet / Rooms
(unaudited)
Lodging
Marriott-San Francisco Airport
3/23/2012
$
108,000

685

rooms
Lodging
Hilton St. Louis Downtown
3/23/2012
22,600

195

rooms
Lodging
Renaissance Arboretum - Austin, TX
3/23/2012
103,000

492

rooms
Lodging
Renaissance Waverly - Atlanta, GA
3/23/2012
97,000

521

rooms
Lodging
Marriott Griffin Gate Resort & Spa
3/23/2012
62,500

409

rooms
Retail
Tomball Town Center Outparcel
3/30/2012
3,000

6,541

square feet
Retail
Tulsa Hills Expansion
4/20/2012
10,600

74,406

square feet
Lodging
Bohemian Hotel Savannah Riverfront
8/9/2012
51,200

75

rooms
Multi Family
University House Retreat, Raleigh
12/7/2012
40,600

554

beds
Multi Family
University House Retreat, Tallahassee
12/7/2012
54,000

710

beds
Retail
Rockwell Plaza
12/21/2012
31,000

254,690

square feet
Retail
Stone Ridge Market
12/27/2012
62,250

218,389

square feet
Lodging
Grand Bohemian Hotel Orlando
12/27/2012
80,800

247

rooms
Total


$
726,550

 
 

78
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010

On July 31, 2012, the Company placed in service two multi-family properties, University House at Central Florida (995 beds) and Arizona State University Polytechnic Student Housing (307 beds) for $65,300 and $12,000, respectively.
For properties acquired as of December 31, 2012, the Company recorded revenue of $119,436 and property net income of $19,207, not including related expensed acquisition costs in 2012. For properties acquired as of December 31, 2011, the Company recorded revenue of $46,512 and property net income of $9,074, not including related expensed acquisition costs in 2011.
 
(4) Discontinued Operations
The Company sold 166 properties for the year ended December 31, 2012 and 26 properties for the year ended December 31, 2011 for a gross disposition price of $603,500 and $242,300, respectively. The table below reflects disposition activity for the year ended December 31, 2012.
 
Segment
Property
Date
Gross Disposition
Price
Sq Ft/Units/Rooms
(unaudited)
Retail
Citizen Bank Branches – 30 Properties
Various Q2
27,400
81,451

square feet
Industrial
Union Venture
5/17/2012
49,600
970,168

square feet
Retail
Lakewood Shopping Center I & II
6/21/2012
31,500
236,679

square feet
Lodging
Hilton GI - Akron
7/31/2012
15,500
121

rooms
Retail
Plaza at Eagle's Landing
8/2/2012
5,300
33,265

square feet
Retail
Canfield Plaza
8/31/2012
8,800
100,958

square feet
Industrial
Southwide Industrial Center #8
9/1/2012
300
10,185

square feet
Lodging
Lodging Portfolio - 12 Properties
9/13/2012
116,000
1,643

rooms
Multi-family
Waterford Place at Shadow Creek
9/27/2012
25,600
296

units
Multi-family
Villas at Shadow Creek - Waterford Place II Villas
9/27/2012
27,000
264

units
Multi-family
Fannin Street Apartments
9/28/2012
72,500
678

units
Retail
Citizen Bank Branches – 34 Properties
Various Q3
52,900
155,211

square feet
Retail
Citizen Bank Branches – 72 Properties
Various Q4
106,000
347,417

square feet
Multi-family
Landings at Clear Lake
11/15/2012
35,000
364

units
Various
Sun Trust Bank Branches -7 Properties
Various Q4
30,100
45,738

square feet
Total


$603,500

 
The Company has presented separately as discontinued operations in all periods the results of operations for all disposed assets in consolidated operations. The Company sold 166 assets and surrendered one lodging property and 19 industrial properties (cross-collateralized by one loan) to the lender for the year ended December 31, 2012 and sold 26 assets and surrendered three properties to the lender for the year ended December 31, 2011. All properties surrendered for the years ended December 31, 2012 and 2011 were in satisfaction of non-recourse debt. The components of the Company’s discontinued operations are presented below and include the results of operations for the respective periods that the Company owned such assets or was involved with the operations of such ventures during the years ended December 31, 2012, 2011 and 2010.
 









79
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010


Year ended
December 31, 2012
 
Year ended
December 31, 2011
 
Year ended
December 31, 2010
Revenues
$
70,279

 
$
135,700

 
$
168,807

Expenses
48,054

 
101,562

 
139,116

Provision for asset impairment
5,968

 
134,673

 
47,529

Operating loss from discontinued operations
16,257

 
(100,535
)
 
(17,838
)
Other Loss
(14,445
)
 
(21,835
)
 
(29,760
)
Gain on sale of properties, net
38,516

 
11,964

 
55,412

Gain on extinguishment of debt
9,478

 
10,848

 
19,227

Gain on transfer of assets
$
2,175

 
$
4,546

 
$
—

Income (loss) from discontinued operations, net
$
51,981

 
$
(95,012
)
 
$
27,041


For the years ended December 31, 2012, 2011 and 2010, the Company had proceeds from the sale of investment properties of $545,132, $246,317, and $301,189, respectively.
(5) Investment in Partially Owned Entities
Consolidated Entities
On October 11, 2005, the Company entered into a joint venture with Minto (Delaware), LLC, or Minto Delaware who owned all of the outstanding equity of Minto Builders (Florida), Inc. (“MB REIT”) prior to October 11, 2005. Pursuant to the terms of the purchase agreement, the Company purchased 920,000 shares of common stock of MB REIT at a price of $1,276 per share for a total investment of approximately $1,172,000 in MB REIT. MB REIT was not considered a VIE as defined in FASB ASC 810, Consolidation, however the Company had a controlling financial interest in MB REIT, had the direct ability to make major decisions for MB REIT through its voting interests, and held key management positions in MB REIT. Therefore this entity was consolidated by the Company and the outside ownership interests were reflected as noncontrolling redeemable interests in the accompanying consolidated financial statements. On October 4, 2011, the Company bought out the common and preferred stock of the consolidated MB REIT joint venture for $293,480. No gain or loss was recorded due to this transaction because there was no change in control.
 
The Company has ownership interests of 67% in various limited liability companies which own nine shopping centers. These entities are considered VIEs as defined in FASB ASC 810, and the Company is considered the primary beneficiary of each of these entities. Therefore, these entities are consolidated by the Company. The entities' agreements contain put/call provisions which grant the right to the outside owners and the Company to require these entities to redeem the ownership interests of the outside owners during future periods. Because the outside ownership interests are subject to a put/call arrangement requiring settlement for a fixed amount, these entities are treated as 100% owned subsidiaries by the Company with the amount of $47,762 as of December 31, 2012 and 2011 due to the outside owners reflected as a financing and included within other liabilities in the accompanying consolidated financial statements. Interest expense is recorded on these liabilities in an amount generally equal to the preferred return due to the outside owners as provided in the entities agreements.
For these VIEs where the Company is the primary beneficiary, the following are the liabilities of the consolidated VIEs, which are not recourse to the Company, and the assets that can be used only to settle those obligations.
 
 
December 31, 2012
December 31, 2011
Net investment properties
$
113,476

$
117,235

Other assets
8,687

9,167

Total assets
$
122,163

$
126,402

Mortgages, notes and margins payable
$
(84,291
)
$
(84,823
)
Other liabilities
(49,648
)
(49,073
)
Total liabilities
$
(133,939
)
$
(133,896
)
Net assets
$
(11,776
)
$
(7,494
)

80
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010

Unconsolidated Entities
The entities listed below are owned by the Company and other unaffiliated parties in joint ventures. Net income, distributions and capital transactions for these properties are allocated to the Company and its joint venture partners in accordance with the respective partnership agreements. These entities are not consolidated by the Company and the equity method of accounting is used to account for these investments. Under the equity method of accounting, the net equity investment of the Company and the Company’s share of net income or loss from the unconsolidated entity are reflected in the consolidated balance sheets and the consolidated statements of operations and other comprehensive income.
 
Entity
Description
Ownership %
 
Investment at
December 31, 2012
 
Investment at
December 31, 2011
Net Lease Strategic Asset Fund L.P.
Diversified portfolio of net lease assets
85%(a)
 
$
—

 
$
26,508

Cobalt Industrial REIT II
Industrial portfolio
36%(b)
 
102,599

 
113,623

D.R. Stephens Institutional Fund, LLC
Industrial and R&D assets
90%(c)
 
34,541

 
36,218

Brixmor/IA JV, LLC
Retail Shopping Centers
(d)
 
90,315

 
103,567

Other Unconsolidated Entities (e)
Various Real Estate investments
Various
 
26,344

 
36,795

 
 
 
 
$
253,799

 
$
316,711

 
(a)
On August 10, 2007, the Company entered into a joint venture with The Lexington Master Limited Partnership (“LMLP”) and LMLP GP LLC (“LMLP GP”), for the purpose of directly or indirectly acquiring, financing, holding for investment, operating, and leasing real estate assets as acquired by the joint venture. The Company’s initial capital contribution was approximately $127,500 and LMLP’s initial contribution was approximately $22,500. On September 5, 2012, the Company entered into a definitive agreement and sold the Company's interest in Net Lease Strategic Asset Fund L.P. to LMLP. The Company received its final distribution of $9,438 and recorded a loss of $1,556 on the sale of the investment. For the years ended December 31, 2012 and 2011, the Company recorded an impairment of $4,200 and $113,621, respectively, on this investment.
(b)
On June 29, 2007, the Company entered into a joint venture, Cobalt Industrial REIT II (“Cobalt”), to invest $149,000 in shares of common beneficial interest. The investment gives the Company the right to a preferred dividend equal to 9% per annum. The Company analyzed the venture and determined that it was not a VIE. The Company also considered its participating rights under the joint venture agreement and determined that such participating rights also require the agreement of Cobalt, which equates to shared decision making ability, and therefore do not give the Company control over the venture. As such, the Company has significant influence but does not control Cobalt. Therefore, the Company does not consolidate this entity, rather the Company accounts for its investment in the entity under the equity method of accounting.
(c)
On April 23, 2007, the Company entered into a joint venture, D.R. Stephens Institutional Fund, LLC, between the Company and Stephens Ventures III, LLC (“Stephens Member”) for the purpose of acquiring entities engaged in the acquisition, ownership, and development of real property. The Company’s initial capital contribution was limited to approximately $90,000 and the Stephens Member’s initial contribution was limited to approximately $10,000. Stephens & Stephens LLC (“Stephens”), an affiliate of the Stephens Member, is the managing member of D.R. Stephens Institutional Fund, LLC. The Company analyzed the venture and determined that it was not a VIE. The Company also considered its participating rights under the joint venture agreement and determined that such participating rights also require the agreement of Stephens Member, which equates to shared decision making ability, and therefore do not give the Company control over the venture. As such, the Company has significant influence but does not control D.R. Stephens Institutional Fund, LLC. Therefore, the Company does not consolidate this entity, rather the Company accounts for its investment in the entity under the equity method of accounting. As of December 31,

81
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010

2012, the Company determined that the investment may have a reduction in the expected holding period. Therefore, for the year ended December 31, 2012, the Company recorded an impairment of $2,700 on this investment.
(d)
On December 6, 2010, the Company entered into a Joint Venture with Brixmor Residual Holding LLC (“Brixmor”) (formerly Centro NP Residual Holding LLC), resulting in the creation of Brixmor/IA JV, LLC (formerly Centro/IA JV, LLC). The joint venture structure provides the Company with an equity stake of $121,534, a preferred capital position and preferred return of 11%. The Company analyzed the venture and determined that it was not a VIE. The Company also considered its participating rights under the joint venture agreement and determined that such participating rights also require the agreement of Brixmor, which equates to shared decision making ability, and therefore do not give the Company control over the venture. As such, the Company has significant influence but does not control Brixmor/IA JV, LLC. Therefore, the Company does not consolidate this entity, rather the Company accounts for its investment in the entity under the equity method of accounting.
(e)
On July 7, 2011, a foreclosure sale was held on a hotel property which previously secured one of the Company’s notes receivable. The note had been in default and fully impaired since 2009. A trust, on behalf of the lender group, was the successful bidder at the foreclosure sale and thereby, the Company obtained an equity interest in the trust which is the 100% owner of the hotel property. The Company’s interest is not consolidated and the equity method is used to account for the investment. The Company recorded its equity interest at fair value and recognized a gain of $17,150 in 2011 on the conversion of the note reflected in other income on the consolidated statement of operations and other comprehensive income. As of December 31, 2012, the Company recorded an impairment of $2,465 on one lodging joint venture and a loss of $1,401 on the sale of another lodging joint venture.
 
In total, the Company recorded an impairment of $9,365, $113,621 and $11,239 related to three, one and two of its unconsolidated entities for the years ended December 31, 2012, 2011 and 2010, respectively.
Combined Financial Information
The following table presents the combined financial information for the Company’s investment in unconsolidated entities.
 

Balance as of December 31, 2012
 
Balance as of December 31, 2011
Balance Sheets:

 

Assets:

 

Real estate assets, net of accumulated depreciation
$
1,437,268

 
$
1,949,035

Other assets
222,096

 
485,887

Total Assets
$
1,659,364

 
$
2,434,922

Liabilities and Equity:

 

Mortgage debt
$
1,062,086

 
$
1,402,462

Other liabilities
89,573

 
94,361

Equity
507,705

 
938,099

Total Liabilities and Equity
$
1,659,364

 
$
2,434,922

Company’s share of equity
$
252,994

 
$
307,684

Net excess of cost of investments over the net book value of underlying net assets (net of accumulated depreciation of $1,714 and $1,372, respectively)
805

 
9,027

Carrying value of investments in unconsolidated entities
$
253,799

 
$
316,711

 

82
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010


For the years ended
 
December 31,
2012
 
December 31,
2011
 
December 31,
2010
Statements of Operations:

 

 

Revenues
$
202,155

 
$
283,913

 
$
287,694

Expenses:

 

 

Interest expense and loan cost amortization
$
63,233

 
$
91,965

 
$
90,857

Depreciation and amortization
83,324

 
111,699

 
99,254

Operating expenses, ground rent and general and administrative expenses
76,149

 
159,539

 
100,954

Impairments
553

 
21,017

 
14,019

Total expenses
$
223,259

 
$
384,220

 
$
305,084

Net loss before gain on sale of real estate
$
(21,104
)
 
$
(100,319
)
 
$
(17,390
)
Gain on sale of real estate
9,484

 
9,219

 
553

Net loss
$
(11,620
)
 
$
(91,100
)
 
$
(16,837
)
Company’s share of:

 

 

Net loss, net of excess basis depreciation of $342, $5 and $84
$
1,998

 
$
(12,802
)
 
$
(18,684
)
The unconsolidated entities had total third party debt of $1,062,086 at December 31, 2012 that matures as follows:
 
2013
$
143,157

2014
75,458

2015
58,950

2016
4,100

2017
165,100

Thereafter
615,321

 
$
1,062,086

The debt maturities of the unconsolidated entities are not recourse to the Company and the Company has no obligation to fund such debt maturities. It is anticipated that the joint ventures will be able to repay or refinance all of their debt on a timely basis.



















83
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010

(6) Transactions with Related Parties
The following table summarizes the Company’s related party transactions for the years ended December 31, 2012, 2011 and 2010.
 
 
For the years ended
 
Unpaid amount as of
 
December 31,
2012
 
December 31,
2011
 
December 31,
2010
 
December 31,
2012
 
December 31,
2011
General and administrative:

 

 

 

 

General and administrative reimbursement (a)
$
12,189

 
$
9,404

 
$
8,205

 
$
4,017

 
$
2,734

Loan servicing (b)
147

 
586

 
586

 
—

 
—

Investment advisor fee (c)
1,768

 
1,564

 
1,447

 
150

 
135

Total general and administrative to related parties
$
14,104

 
$
11,554

 
$
10,238

 
$
4,167

 
$
2,869

Property management fees (d)
$
27,615

 
$
31,437

 
$
30,828

 
$
75

 
$
(178
)
Business manager fee (e)
$
39,892

 
$
40,000

 
$
36,000

 
$
9,910

 
$
10,000

Loan placement fees (f)
$
1,241

 
$
1,260

 
$
845

 
$
—

 
$
—

 
(a)
The Business Manager and its related parties are entitled to reimbursement for general and administrative expenses of the Business Manager and its related parties relating to the Company’s administration. Unpaid amounts as of December 31, 2012 and 2011 are included in accounts payable and accrued expenses on the consolidated balance sheets.

(b)
A related party of the Business Manager provided loan servicing to the Company.

(c)
The Company pays a related party of the Business Manager to purchase and monitor its investment in marketable securities.

(d)
The property managers, entities owned principally by individuals who were related parties of the Business Manager, are entitled to receive property management fees up to a certain percentage of gross operating income (as defined). For the six months ending June 30, 2012, the property managers, entities owned principally by individuals who were related parties of the Business Manager, are entitled to receive property management fees up to 4.5% of gross operating income (as defined), for management and leasing services; however, (1) for triple-net lease properties, the property managers were entitled to monthly fees equal to 2.9% of the gross income generated by the applicable property each month and (2) for bank branches, the property managers were entitled to monthly fees equal to 2.5% of the gross income generated by the applicable property each month in operating companies purchased by the Company. The property managers were entitled to receive an oversight fee of 1% of gross operating income (as defined). These rates became effective January 1, 2012 when the Company entered into an extension agreement with the property managers which extended the term through June 30, 2012.

On July 1, 2012, the Company entered into new master agreements with its property managers and extended the term until December 31, 2013 which will automatically be renewed until June 30, 2015 unless either party to the agreement provides written notice of cancellation before June 30, 2013. Under the new master agreements, the Company will pay the property managers monthly management fees by property type, updated as follows: (i) for any bank branch facility (office or retail), 2.50% of the gross income generated by the property; (ii) for any multi-tenant industrial property, 4.00% of the gross income generated by the property; (iii) for any multi-family property, 3.75% of the gross income generated by the property; (iv) for any multi-tenant office property, 3.75% of the gross income generated by the property; (v) for any multi-tenant retail property, 4.50% of the gross income generated by the property; (vi) for any single-tenant industrial property, 2.25% of the gross income generated by the property; (vii) for any single-tenant office property, 2.90% of the gross income generated by the property; and (viii) for any single-tenant retail property, 2.90% of the gross income generated by the property.

84
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010


In addition to these fees, the property managers receive reimbursements of payroll costs for property level employees. The Company reimbursed the property managers and other affiliates $14,049, $15,752 and $14,626 for the year ended December 31, 2012, 2011 and 2010, respectively. Unpaid amounts as of December 31, 2012 and 2011 are included in other liabilities on the consolidated balance sheets.

(e)
After the Company’s stockholders have received a non-cumulative, non-compounded return of 5% per annum on their “invested capital,” the Company pays its Business Manager an annual business management fee of up to 1% of the “average invested assets,” payable quarterly in an amount equal to 0.25% of the average invested assets as of the last day of the immediately preceding quarter. For the years ended December 31, 2012, 2011 and 2010, average invested assets were $11,470,745, $11,515,550 and $11,411,953. The Company incurred a business management fee of $39,892, $40,000, and $36,000, which is equal to 0.35%, 0.35%, and 0.32% of average invested assets for the years ended December 31, 2012, 2011 and 2010, respectively. Pursuant to the letter agreement dated May 4, 2012, the business management fee shall be reduced in each particular quarter for investigation costs exclusive of legal fees incurred in conjunction with the SEC matter. During the year ended December 31, 2012, the Company incurred $108 of investigation costs, resulting in a business management fee expense of $39,892 for the year ended December 31, 2012. In addition, effective July 30, 2012, the Company extended the agreement with the Business Manager through July 30, 2013. The terms of the Business Manager Agreement remains unchanged.

(f)
The Company pays a related party of the Business Manager 0.2% of the principal amount of each loan placed for the Company. Such costs are capitalized as loan fees and amortized over the respective loan term.
As of December 31, 2012 and 2011, the Company had deposited $375 and $373, respectively, in Inland Bank and Trust, a subsidiary of Inland Bancorp, Inc., an affiliate of The Inland Real Estate Group, Inc.
The Company is party to an agreement with an LLC formed as an insurance association captive (the “Captive”), which is wholly-owned by the Company and two related parties, Inland Real Estate Corporation (“IRC”) and Inland Diversified Real Estate Trust, Inc., and a third party, Retail Properties of America ("RPAI"). The Company paid insurance premiums of $12,217, $9,627 and $10,096 for the years ended December 31, 2012, 2011 and 2010, respectively.
As of December 31, 2012 and 2011, the Company held 889,820 and 889,820 shares of IRC valued at $7,540 and $6,848, respectively.
(7) Investment in Marketable Securities
Investment in marketable securities of $327,655 and $289,365 at December 31, 2012 and 2011, respectively, consists of primarily preferred and common stock investments in other REITs and certain real estate related bonds which are classified as available-for-sale securities and recorded at fair value. The cost basis net of impairments of available-for-sale securities was $242,370 and $245,131 at December 31, 2012 and 2011, respectively.
Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and reported as a separate component of comprehensive income until realized. The Company has net accumulated other comprehensive income of $85,285, $44,234 and $52,965, which includes gross unrealized losses of $2,014, $9,990 and $5,433 as of December 31, 2012, 2011 and 2010, respectively. Gross unrealized losses on investments have a related fair value of $14,576 as of December 31, 2012.
The Company’s policy for assessing recoverability of its available-for-sale securities is to record a charge against net earnings when the Company determines that a decline in the fair value of a security drops below the cost basis and believes that decline to be other-than-temporary. Factors in the assessment of other-than-temporary impairment include determining whether (1) the Company has the ability and intent to hold the security until it recovers, and (2) the length of time and degree to which the security’s price has declined. During the year ended December 31, 2012, the Company recorded impairment of $1,899 compared to an impairment of $24,356 and $1,856 for the years ended December 31, 2011 and 2010 for other-than-temporary declines on certain available-for-sale securities, which is included as a component of realized gain (loss) and (impairment) on securities, net on the consolidated statements of operations and other comprehensive income.

85
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010

Dividend income is recognized when earned. During the years ended December 31, 2012, 2011 and 2010, dividend income of $20,757, $18,586 and $18,386 was recognized and is included in interest and dividend income on the consolidated statements of operations and other comprehensive income.
(8) Leases
Operating Leases
Minimum lease payments to be received under operating leases, excluding multi-family and lodging properties and assuming no expiring leases are renewed, are as follows:
 
 
Minimum Lease
Payments
2013
$
525,951

2014
488,259

2015
457,727

2016
408,825

2017
343,120

2018
234,662

2019
204,455

2020
176,264

2021
152,872

2022
113,723

Thereafter
484,061

Total
$
3,589,919

The remaining lease terms range from one year to thirty-eight years. The majority of the revenue from the Company’s properties consists of rents received under long-term operating leases. Some leases provide for the payment of fixed base rent paid monthly in advance, and for the reimbursement by tenants to the Company for the tenant’s pro rata share of certain operating expenses including real estate taxes, special assessments, insurance, utilities, common area maintenance, management fees, and certain building repairs paid by the landlord and recoverable under the terms of the lease. Under these leases, the landlord pays all expenses and is reimbursed by the tenant for the tenant’s pro rata share of recoverable expenses paid. Certain other tenants are subject to net leases which provide that the tenant is responsible for fixed base rent as well as all costs and expenses associated with occupancy. Under net leases where all expenses are paid directly by the tenant rather than the landlord, such expenses are not included in the consolidated statements of operations and other comprehensive income. Under leases where all expenses are paid by the landlord, subject to reimbursement by the tenant, the expenses are included within property operating expenses and reimbursements are included in tenant recovery income on the consolidated statements of operations and other comprehensive income.
 














86
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010

(9) Intangible Assets and Goodwill
The following table summarizes the Company’s identified intangible assets, intangible liabilities and goodwill as of December 31, 2012 and 2011.
 

Balance as of
December 31, 2012
 
Balance as of
December 31, 2011
Intangible assets:

 

Acquired in-place lease
$
573,711

 
$
601,959

Acquired above market lease
41,276

 
37,624

Acquired below market ground lease
10,536

 
8,825

Advance bookings
8,410

 
5,924

Accumulated amortization
(366,301
)
 
(335,761
)
Net intangible assets
267,632

 
318,571

Goodwill, net
31,196

 
7,761

Total intangible assets, net
$
298,828

 
$
326,332

Intangible liabilities:

 

Acquired below market lease
$
101,430

 
$
99,187

Acquired above market ground lease
5,839

 
5,840

Accumulated amortization
(26,500
)
 
(21,824
)
Net intangible liabilities
$
80,769

 
$
83,203

The portion of the purchase price allocated to acquired above market lease costs and acquired below market lease costs are amortized on a straight line basis over the life of the related lease, including the respective renewal period for below market lease costs with fixed rate renewals, as an adjustment to rental income. Amortization pertaining to the above market lease costs was applied as a reduction to rental income. Amortization pertaining to the below market lease costs was applied as an increase to rental income. The portion of the purchase price allocated to acquired in-place lease intangibles is amortized on a straight line basis over the life of the related lease.
The following table summarized the amortization related to acquired above and below market lease costs and acquired in-place lease intangibles for the years ended December 31, 2012, 2011 and 2010.
 
 
For the years ended
 
December 31,
2012
 
December 31,
2011
 
December 31,
2010
Amortization of:

 

 

Acquired above market lease costs
$
(4,507
)
 
$
(5,076
)
 
$
(5,797
)
Acquired below market lease costs
$
6,771

 
$
6,767

 
$
6,218

Net rental income increase
$
2,264

 
$
1,691

 
$
421

Acquired in-place lease intangibles
$
56,645

 
$
63,157

 
$
71,148


 






87
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010

The following table presents the amortization during the next five years and thereafter related to intangible assets and liabilities at December 31, 2012.
 

2013
 
2014
 
2015
 
2016
 
2017
 
Thereafter
 
Total
Amortization of:

 

 

 

 

 

 

Acquired above market lease costs
$
(4,082
)
 
(3,648
)
 
(3,188
)
 
(2,949
)
 
(2,481
)
 
(6,290
)
 
$
(22,638
)
Acquired below market lease costs
$
5,716

 
5,313

 
5,109

 
4,941

 
4,777

 
50,017

 
$
75,873

Net rental income increase
$
1,634

 
1,665

 
1,921

 
1,992

 
2,296

 
43,727

 
$
53,235

Acquired in-place lease intangibles
$
51,083

 
37,832

 
32,964

 
29,836

 
23,723

 
58,663

 
$
234,101

Advance bookings
$
1,730

 
1,694

 
557

 
—

 
—

 
—

 
$
3,981

Acquired below market ground lease
$
(206
)
 
(206
)
 
(206
)
 
(206
)
 
(206
)
 
(5,882
)
 
$
(6,912
)
Acquired above market ground lease
$
140

 
140

 
140

 
140

 
140

 
4,196

 
$
4,896

(10) Mortgages, Notes and Margins Payable
During the years ended December 31, 2012 and 2011, the following debt transactions occurred:
 
Balance at December 31, 2010
$
5,532,057

New financings
1,252,057

Paydown of debt
(781,606
)
Extinguishment of debt
(102,983
)
Amortization of discount/premium
3,187

Balance at December 31, 2011
$
5,902,712

New financings
867,651

Paydown of debt
(409,067
)
Assumed financings, net of discount
228,706

Extinguishment of debt
(590,344
)
Amortization of discount/premium
6,488

Balance at December 31, 2012
$
6,006,146

Mortgage loans outstanding as of December 31, 2012 and 2011 were $5,894,443 and $5,812,595 and had a weighted average interest rate of 5.1% and 5.2% per annum, respectively. Mortgage premium and discount, net was a discount of $27,439 and $30,741 as of December 31, 2012 and 2011. As of December 31, 2012, scheduled maturities for the Company’s outstanding mortgage indebtedness had various due dates through December 2047.
 

88
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010


As of
December 31, 2012
 
Weighted average
interest rate
2013
$
882,907

 
4.52
%
2014
$
668,974

 
3.97
%
2015
$
684,328

 
4.64
%
2016
$
782,997

 
5.42
%
2017
$
1,230,313

 
5.57
%
Thereafter
$
1,644,924

 
5.57
%

The Company is negotiating refinancing debt maturing in 2013 with various lenders at terms that will allow us to pay lower interest rates. It is anticipated that the Company will be able to repay, refinance or extend the maturities and the Company believes it has adequate sources of funds to meet short term cash needs related to these refinancings. Of the total outstanding debt, approximately $691,469 is recourse to the Company.
Some of the mortgage loans require compliance with certain covenants, such as debt service ratios, investment restrictions and distribution limitations. As of December 31, 2012, the Company was in compliance with all mortgage loan requirements except five loans with a carrying value of $72,414; none of which are cross collateralized with any other mortgage loans or recourse to the Company. The stated maturities of the mortgage loans in default are reflected as follows: $12,100 in 2011, $17,078 in 2012, and $43,236 in 2017.
The Company has purchased a portion of its securities through margin accounts. As of December 31, 2012 and 2011, the Company recorded a payable of $139,142 and $120,858, respectively, for securities purchased on margin. At December 31, 2012 and 2011, the interest rate on the margin loans was 0.560% and 0.621%, respectively. Interest expense in the amount of $756, $473 and $419 was recognized in interest expense on the consolidated statements of operations and other comprehensive income for the years ended December 31, 2012, 2011 and 2010, respectively.
(11) Derivatives
As of December 31, 2012, in connection with certain mortgages payable that have variable interest rates, the Company has entered into interest rate swap agreements, with a notional value of $176,394. The Company’s interest rate swaps 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 interest rate swaps were considered highly effective as of December 31, 2012. The change in the fair value of the Company’s swaps as reflected in other comprehensive income was $1,413, $1,249, and $300 for the years ended December 31, 2012, 2011 and 2010, respectively.
 
The following table summarizes interest rate swap contracts outstanding as of December 31, 2012 and 2011:
 
Date Entered
Effective Date
 
End Date
 
Pay
Fixed
Rate
 
Receive Floating
Rate Index
 
Notional
Amount
 
Fair Value
as of
December 31,
2012
 
Fair Value
as of
December 31,
2011
March 28, 2008
March 28, 2008
 
March 27, 2013
 
3.32%
 
1 month LIBOR
 
33,062

 
(243
)
 
(1,156
)
January 16, 2009
January 13, 2009
 
January 13, 2012
 
1.62%
 
1 month LIBOR
 
 N/A

 
—

 
(10
)
August 19, 2010
August 31, 2010
 
March 27, 2012
 
0.63%
 
1 month LIBOR
 
 N/A

 
—

 
(22
)
October 15, 2010
November 1, 2010
 
April 23, 2013
 
0.94%
 
1 month LIBOR
 
29,727

 
(68
)
 
(181
)
January 7, 2011
January 7, 2011
 
January 2, 2013
 
0.91%
 
1 month LIBOR
 
26,090

 
(1
)
 
(121
)
January 7, 2011
January 7, 2011
 
January 2, 2013
 
0.91%
 
1 month LIBOR
 
22,696

 
—

 
(105
)
April 28, 2011
May 3, 2011
 
September 30, 2012
 
1.575%
 
1 month LIBOR
 
N/A

 
—

 
(481
)
September 1, 2011
September 29, 2012
 
September 29, 2014
 
0.79%
 
1 month LIBOR
 
56,501

 
(507
)
 
(130
)
October 14, 2011
October 14, 2011
 
October 22, 2013
 
1.04%
 
1 month LIBOR
 
8,318

 
(52
)
 
(78
)


 

 

 

 
$
176,394

 
$
(871
)
 
$
(2,284
)

89
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010

Risk Management Objective of Using Derivatives
The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its debt funding and through the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to add stability to interest expense and to manage its exposure to interest rate movements.
Cash Flow Hedges of Interest Rate Risk
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.
Derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The derivative instruments were reported at their fair value of $871 and $2,284 in other liabilities at December 31, 2012 and 2011, respectively. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the next 12 months, the Company estimates that $683 of loss will be reclassified into earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.
 
The tables below present the effect of the Company’s derivative financial instruments on the consolidated statements of operations and other comprehensive income for the years ended December 31, 2012, 2011 and 2010:
 
Derivatives in ASC
815 Cash Flow
Hedging
Relationships
 
Amount of Gain or
(Loss) Recognized in
OCI on Derivative
(Effective Portion) For
the years ended
December 31,
Location of
Gain or
(Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
 
Amount of Gain or (Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)
For the years ended
December 31,
Location of
Gain or
(Loss)
Recognized
in Income
on
Derivative
(Ineffective
Portion and
Amount
Excluded
from
Effectiveness
Testing)
 
Amount of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion
and Amount
Excluded from
Effectiveness
Testing) For the
years ended
December 31,
2012
 
2011
 
2010
2012
 
2011
 
2010
2012
 
2011
 
2010
Interest Rate Products
 
$
1,413

 
$
1,249

 
$
300

Interest
expense
 
$
(2,329
)
 
$
(4,012
)
 
$
(4,508
)
Interest
expense
 
$
—

 
$
(84
)
 
$
473


(12) Fair Value Measurements
In accordance with FASB ASC 820, Fair Value Measurement and Disclosures, the Company defines fair value based on the price that would be received upon sale of an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below:
•
Level 1 - Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
•
Level 2 - Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The Company has estimated the fair value of its financial and non-financial instruments using available market information and valuation methodologies the Company believes to be appropriate for these purposes. Considerable judgment and a high degree

90
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010

of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of amounts that would be realized upon disposition.
 
For assets and liabilities measured at fair value on a recurring basis, quantitative disclosure of the fair value for each major category of assets and liabilities is presented below:
 
 
Fair Value Measurements at December 31, 2012
 
Using Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
 
Using Significant
Other Observable
Inputs
(Level 2)
 
Using Significant
Other Unobservable
Inputs
(Level 3)
Description

 

 

Available-for-sale real estate equity securities
$
304,811

 
$
—

 
$
—

Real estate related bonds
—

 
22,844

 
—

Total assets
$
304,811

 
$
22,844

 
$
—

Derivative interest rate instruments
$
—

 
$
(871
)
 
$
—

Total liabilities
$
—

 
$
(871
)
 
$
—

 
 
Fair Value Measurements at December 31, 2011
 
Using Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
 
Using Significant
Other Observable
Inputs
(Level 2)
 
Using Significant
Other Unobservable
Inputs
(Level 3)
Description

 

 

Available-for-sale real estate equity securities
$
274,274

 
$
—

 
$
—

Real estate related bonds
—

 
15,091

 
—

Total assets
$
274,274

 
$
15,091

 
$
—

Derivative interest rate instruments
$
—

 
$
(2,284
)
 
$
—

Total liabilities
$
—

 
$
(2,284
)
 
$
—

Level 1
At December 31, 2012 and 2011, the fair value of the available for sale real estate equity securities have been estimated based upon quoted market prices for the same or similar issues when current quoted market prices are available. Unrealized gains or losses on investment are reflected in unrealized gain (loss) on investment securities in other comprehensive income on the consolidated statements of operations and other comprehensive income.
Level 2
To calculate the fair value of the real estate related bonds and the derivative interest rate instruments, the Company primarily uses quoted prices for similar securities and contracts. For the real estate related bonds, the Company reviews price histories for similar market transactions. For the derivative interest rate instruments, the Company uses inputs based on data that is observed in the forward yield curve which is widely observable in the marketplace.  The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements which utilizes Level 3 inputs, such as estimates of current credit spreads. However, as of December 31, 2012 and 2011, the Company has assessed that the credit valuation adjustments are not significant to the overall valuation of its 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.


91
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010

Level 3
Non-Recurring Measurements
The following table summarizes activity for the Company’s assets measured at fair value on a non-recurring basis. The Company recognized certain non-cash gains and impairment charges to reflect the investments at their fair values for the years ended December 31, 2012 and 2011. The asset groups that were reflected at fair value through this evaluation are:
 
 
As of December 31, 2012
 
As of December 31, 2011
 
Fair Value
Measurements Using
Significant
Unobservable Inputs
(Level 3)
 
Total
Gain
(Impairment
Losses), net
 
Fair Value
Measurements
Using Significant
Unobservable Inputs
(Level 3)
 
Total
Gain
(Impairment
Losses), net
Investment properties
$
146,085

 
$
(77,348
)
 
$
76,346

 
$
(28,967
)
Investment in unconsolidated entities
36,469

 
(5,165
)
 
43,658

 
(96,471
)
Total
$
182,554

 
$
(82,513
)
 
$
120,004

 
$
(125,438
)
 
The Company’s estimated fair value relating to the investment properties’ impairment analysis was based on a comparison of letters of intent or purchase contracts, broker opinions of value and discounted cash flow models, which includes contractual inflows and outflows over a specific holding period. The cash flows consist of unobservable inputs such as contractual revenues and forecasted revenues and expenses. These unobservable inputs are based on market conditions and the Company’s expected growth rates. Capitalization rates ranging from 7.00% to 10.00% and discount rates ranging from 8.00% to 11.50% were utilized in the model and are based upon observable rates that the Company believes to be within a reasonable range of current market rates.

For the year ended December 31, 2012, the Company identified certain properties which may have a reduction in the expected holding period, and the Company reviewed the probability of the disposition of these properties. For the years ended, December 31, 2012, 2011 and 2010, the Company recorded an impairment of investment properties of $77,348, $28,967 and $0, respectively. Certain properties have been disposed and were impaired prior to disposition and the related impairment charge of $5,968, $134,673 and $47,529 was included in discontinued operations for the years ended December 31, 2012, 2011 and 2010, respectively.

For the year ended December 31, 2012, the Company identified certain investments in unconsolidated entities that may be other than temporarily impaired. The Company's estimated fair value relating to the investment in unconsolidated entities' impairment analysis was based on letters of intent or purchase contracts, broker opinions of value, expected future cash distributions and the fair value of the Company's interest in the underlying assets of the investment using a net asset value model. The net asset value model utilizes an income capitalization analysis and consists of unobservable inputs such as forecasted net operating income and capitalization rates based on market conditions.  Capitalization rates ranging from 6.50% to 8.25% were utilized in the model and are based upon observable rates that the Company believes to be within a reasonable range of current market rates.

For the year ended December 31, 2011, the Company recognized an investment in unconsolidated entities equal to its equity investment in a trust which owns 100% of a hotel property. The investment was a result of a conversion of a note receivable to an equity interest in which the Company recognized a gain of $17,150 for the year ended December 31, 2011. The fair value of hotel property was estimated based on analysis of appraisals, broker opinions of value, and discounted cash flow models, which includes contractual inflows and outflows over a specific holding period. The cash flows consist of unobservable inputs such as contractual revenues and forecasted revenues and expenses. These unobservable inputs are based on market conditions and expected growth rates. Capitalization rates and discount rates are utilized in the model and are based upon observable rates that the Company believes to be within a reasonable range of current market rates.

For the years ended, December 31, 2012, 2011 and 2010, the Company recorded an impairment of investments in unconsolidated entities of $9,365, $113,621, and $11,239, respectively.

92
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010

For the year ended December 31, 2010, the Company determined that it is probable that it will not be able to collect all amounts due under the contractual terms of the note receivables. When the Company assesses the potential impairment of notes receivables, an evaluation of the fair value of the collateral is performed through a review of third party appraisals and discounted cash flow models. The Company's discounted cash flow models include contractual inflows and outflows over a specific holding period and utilize unobservable inputs based on market conditions and the Company's expected growth rates. The Company believes the capitalization rates and discount rates utilized in the models are based upon observable rates that are within a reasonable range of current market rates.
For the years ended December 31, 2012, 2011 and 2010, the Company recorded an impairment of notes receivables of $0, $0 and $111,896, respectively.

Financial Instruments not Measured at Fair Value
The table below represents the fair value of financial instruments presented at carrying values in our consolidated financial statements as of December 31, 2012 and December 31, 2011.
 
 
December 31, 2012
 
December 31, 2011
 
Carrying Value
 
Estimated Fair Value
 
Carrying Value
 
Estimated Fair Value
Mortgage and notes payable
$
5,894,443

 
$
5,790,201

 
$
5,812,595

 
$
5,524,022

Margins payable
$
139,142

 
$
139,142

 
$
120,858

 
$
120,858

The Company estimates the fair value of its debt instruments using a weighted average effective interest rate of 5.1% per annum. The assumptions reflect the terms currently available on similar borrowing terms to borrowers with credit profiles similar to the Company's. The Company has determined that its debt instrument valuations are classified in Level 2 of the fair value hierarchy.

(13) Income Taxes
The Company is qualified and has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended, for federal income tax purposes commencing with the tax year ending December 31, 2005. Since the Company qualifies for taxation as a REIT, the Company generally will not be subject to federal income tax on taxable income that is distributed to stockholders. A REIT is subject to a number of organizational and operational requirements, including a requirement that it currently distributes at least 90% of its REIT taxable income (subject to certain adjustments) to its stockholders. If the Company fails to qualify as a REIT in any taxable year, without the benefit of certain relief provisions, the Company will be subject to federal and state income tax on its taxable income at regular corporate tax rates. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income, property or net worth and federal income and excise taxes on its undistributed income.
The Company has elected to treat certain of its consolidated subsidiaries, and may in the future elect to treat newly formed subsidiaries, as taxable REIT subsidiaries pursuant to the Internal Revenue Code. Taxable REIT subsidiaries may participate in non-real estate related activities and/or perform non-customary services for tenants and are subject to federal and state income tax at regular corporate tax rates. The Company’s hotels are leased to certain of the Company’s taxable REIT subsidiaries. Lease revenue from these taxable REIT subsidiaries and its wholly-owned subsidiaries is eliminated in consolidation.
The components of income tax expense for the years ended December 31:
 

93
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010

 
2012
 
2011
 
2010
 
Federal
 
State
 
Total
 
Federal
 
State
 
Total
 
Federal
 
State
 
Total
Current
$
267

 
$
2,603

 
$
2,870

 
$
110

 
$
588

 
$
698

 
$
1,502

 
$
1,466

 
$
2,968

Deferred
4,412

 
489

 
4,901

 
(3,837
)
 
(248
)
 
(4,085
)
 
(6,698
)
 
(788
)
 
(7,486
)
Total income expense (benefit)
$
4,679

 
$
3,092

 
$
7,771

 
$
(3,727
)
 
$
340

 
$
(3,387
)
 
$
(5,196
)
 
$
678

 
$
(4,518
)
 

Deferred tax assets and liabilities are included within deferred costs and other assets and other liabilities in the consolidated balance sheets, respectively. The components of the deferred tax assets and liabilities at December 31, 2012 and 2011 were as follows:


2012
 
2011
Net operating loss
$
11,618

 
$
16,084

Deferred income
2,657

 
1,536

Basis difference on development property
31,916

 
31,916

Lease acquisition costs
—

 
314

Depreciation expense
879

 
753

Miscellaneous
(190
)
 
118

Total deferred tax assets
46,880

 
50,721

Less: Valuation allowance
(39,360
)
 
(38,300
)
Net deferred tax assets
$
7,520

 
$
12,421

Deferred tax liabilities
$
—

 
$
—

Federal net operating loss carryforwards amounting to $11,618 begin to expire in 2023, if not utilized by then.
Deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence, including future reversal of existing taxable temporary differences, future projected taxable income, and tax-planning strategies. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company has considered various factors, including future reversals of existing taxable temporary differences, projected future taxable income and tax-planning strategies in making this assessment.
Based upon tax-planning strategies and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowance of $39,360 at December 31, 2012. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.
Uncertain Tax Positions
The Company had no unrecognized tax benefits as of or during the three year period ended December 31, 2012. The Company expects no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2012. The Company has no material interest or penalties relating to income taxes recognized in the consolidated statements of operations and other comprehensive income for the years ended December 31, 2012, 2011 and 2010 or in the consolidated balance sheets as of December 31, 2012 and 2011. As of December 31, 2012, the Company’s 2011, 2010, and 2009 tax years remain subject to examination by U.S. and various state tax jurisdictions.


94
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010

Distributions
For federal income tax purposes, distributions may consist of ordinary income, qualifying dividends, return of capital, capital gains or a combination thereof. Distributions to the extent of the Company’s current and accumulated earnings and profits for federal income tax purposes are taxable to the recipient as ordinary income. Distributions in excess of these earnings and profits will constitute a non-taxable return of capital rather than a dividend and will reduce the recipient’s basis in the shares.
A summary of the average taxable nature of the Company’s common distributions paid for each of the years in the three year period ended December 31, 2012 is as follows: 

2012
 
2011
 
2010
Ordinary income
$
0.07

 
$
0.19

 
$
0.17

Return of capital
0.43

 
0.31

 
0.33

Total distributions per share
$
0.50

 
$
0.50

 
$
0.50


IRS Closing Agreement

The Company has identified certain distribution and shareholder reimbursement practices that may have caused certain dividends to be treated as preferential dividends, which cannot be used to satisfy the 90% Distribution Requirement. The Company has also identified the ownership of certain assets that may have violated a REIT qualification requirement that prohibits a REIT from owning "securities" of any one issuer in excess of 5% of the REIT's total assets at the end of any calendar quarter (the "5% Securities Test"). In order to provide greater certainty with respect to the Company's qualification as a REIT for federal income tax purposes, management concluded that it was in the best interest of the Company and its stockholders to request closing agreements from the Internal Revenue Service ("IRS") for both the Company and MB REIT with respect to such matters. Accordingly, on October 31, 2012, MB REIT filed a request for a closing agreement with the IRS. Additionally, the Company filed a separate request for a closing agreement on its own behalf on March 7, 2013.

The Company identified certain aspects of the calculation of certain dividends on MB REIT's preferred stock and also aspects of the operation of certain "set aside" provisions with respect to accrued but unpaid dividends on certain classes of MB REIT's preferred stock that may have caused certain dividends to be treated as preferential dividends. In the case of the Company, management identified certain aspects of the operation of the Company's dividend reinvestment plan and distribution procedures and also certain reimbursements of shareholder expenses that may have caused certain dividends to be treated as preferential dividends. If these practices resulted in preferential dividends, the Company and MB REIT would not have satisfied the 90% Distribution Requirement and thus may not have qualified as REITs, which would result in substantial corporate tax liability for the years in which the Company or MB REIT failed to qualify as a REIT.

In addition, the Company and MB REIT made certain overnight investments in bank commercial paper. While the Internal Revenue Code does not provide a specific definition of “cash item”, the Company believes that overnight commercial paper should be treated as a “cash item”, which is not treated as a “security” for purposes of the 5% Securities Test. If treated as a "security", the bank commercial paper would appear to have represented more than 5% of the Company's and MB REIT's total assets at the end of certain calendar quarters. In the event this commercial paper is treated as a "security", the Company anticipates that it would be required to pay corporate income tax on the income earned with respect to the portion of the commercial paper that violated the 5% Securities Test.

The Company can provide no assurance that the IRS will accept the Company's or MB REIT's closing agreement requests. Even if the IRS accepts those requests, the Company and MB REIT may be required to pay a penalty. The Company cannot predict whether such a penalty would be imposed or, if so, the amount of the penalty. The Company believes that (i) the IRS will enter into closing agreements with the Company and MB REIT and (ii) the Business Manager may be liable, in whole or in part, for any penalty imposed in connection with those closing agreements. As noted above, the Company can provide no assurance that the IRS will enter into closing agreements with the Company and MB REIT or that the Company and MB REIT will not be liable for any penalty imposed in connection with those closing agreements. Management believes based on the currently available information, that such penalty, if any, will not have a material adverse effect on the financial statements of the Company.

95
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010



(14) Segment Reporting
The Company has five business segments: Retail, Lodging, Office, Industrial and Multi-family. The Company evaluates segment performance primarily based on net operating income. Net operating income of the segments primarily exclude interest expense, depreciation and amortization, general and administrative expenses, net income of noncontrolling interest and other investment income from corporate investments. The non-segmented assets primarily include the Company’s cash and cash equivalents, investment in marketable securities, construction in progress, investment in unconsolidated entities and notes receivable.
Prior to October 1, 2010, the Company considered the net operating income of the assets of LIP Holdings, LLC, its 100% owned subsidiary (LIP-H), which consisted of eight operating office and retail properties, a segment. Due to the settlement and consolidation of the remaining Lauth assets and the disposition of four of eight LIP-H assets, the Company no longer evaluates the net operating income of these assets as a segment. For the year ended December 31, 2011, the assets of the LIP-H segment were classified into the appropriate segment as identified above. The Company has restated the prior years’ comparatives to conform with current year presentation.
For the year ended December 31, 2012, approximately 10% of the Company’s rental revenue (related to the retail, office, and industrial segments) was generated by over 400 retail banking properties leased to SunTrust Banks, Inc. Also, as of December 31, 2012, approximately 8% of the Company’s rental revenue (related to the retail, office, and industrial segments) was generated by three properties leased to AT&T, Inc. As a result of the concentration of revenue generated from these properties, if SunTrust or AT&T were to cease paying rent or fulfilling its other monetary obligations, the Company could have significantly reduced rental revenues or higher expenses until the defaults were cured or the properties were leased to a new tenant or tenants.

96
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010


 
The following table summarizes net operating income by segment as of and for the year ended December 31, 2012.
 
 
Total
 
Retail
 
Lodging
 
Office
 
Industrial
 
Multi-
Family
Rental income
$
610,788

 
$
302,323

 
$
—

 
$
143,019

 
$
80,866

 
$
84,580

Straight line income
12,166

 
5,833

 
—

 
3,883

 
2,215

 
235

Tenant recovery income
98,770

 
68,611

 
—

 
26,292

 
3,370

 
497

Other property income
15,244

 
5,215

 
—

 
3,089

 
356

 
6,584

Lodging income
700,427

 
—

 
700,427

 
—

 
—

 
—

Total income
$
1,437,395

 
$
381,982

 
$
700,427

 
$
176,283

 
$
86,807

 
$
91,896

Operating expenses
$
681,008

 
$
103,719

 
$
485,517

 
$
44,054

 
$
6,636

 
$
41,082

Net operating income
$
756,387

 
$
278,263

 
$
214,910

 
$
132,229

 
$
80,171

 
$
50,814

Non allocated expenses (a)
$
(500,942
)
 
 
 
 
 
 
 
 
 
 
Other income and expenses (b)
$
(283,403
)
 
 
 
 
 
 
 
 
 
 
Loss from unconsolidated entities (c)
$
(10,324
)
 
 
 
 
 
 
 
 
 
 
Provision for asset impairment
$
(77,348
)
 
 
 
 
 
 
 
 
 
 
Net loss from continuing operations
$
(115,630
)
 
 
 
 
 
 
 
 
 
 
Income from discontinued operations, net
$
51,981

 
 
 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interests
$
(5,689
)
 
 
 
 
 
 
 
 
 
 
Net loss attributable to Company
$
(69,338
)
 
 
 
 
 
 
 
 
 
 
Balance Sheet Data:

 
 
 
 
 
 
 
 
 
 
Real estate assets, net (d)
$
9,279,123

 
$
3,542,440

 
$
2,684,575

 
$
1,482,555

 
$
799,503

 
$
770,050

Non-segmented assets (e)
1,480,761

 
 
 
 
 
 
 
 
 
 
Total Assets
$
10,759,884

 
 
 
 
 
 
 
 
 
 
Capital expenditures
$
88,637

 
$
16,334

 
$
60,381

 
$
6,891

 
$
2,826

 
$
2,205

 
(a)
Non allocated expenses consist of general and administrative expenses, business manager management fee and depreciation and amortization.
(b)
Other income and expenses consist of interest and dividend income, interest expense, other income and expenses, realized gain, (loss) and (impairment) on securities, net, and income tax expense.
(c)
Loss from unconsolidated entities consists of equity (losses) in earnings of unconsolidated entities as well as gain, (loss) and (impairment) of investment in unconsolidated entities.
(d)
Real estate assets includes intangible assets, net of amortization.
(e)
Construction in progress is included as non-segmented assets.


97
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010


The following table summarizes net operating income by segment as of and for the year ended December 31, 2011.
 
 
Total
 
Retail
 
Lodging
 
Office
 
Industrial
 
Multi-
Family
Rental income
$
579,784

 
$
284,449

 
$
—

 
$
143,112

 
$
76,923

 
$
75,300

Straight line income
15,162

 
6,934

 
—

 
4,147

 
3,856

 
225

Tenant recovery income
90,213

 
63,033

 
—

 
25,300

 
1,414

 
466

Other property income
16,462

 
5,214

 
—

 
3,885

 
1,120

 
6,243

Lodging income
526,252

 
—

 
526,252

 
—

 
—

 
—

Total income
$
1,227,873

 
$
359,630

 
$
526,252

 
$
176,444

 
$
83,313

 
$
82,234

Operating expenses
$
549,340

 
$
101,347

 
$
358,934

 
$
44,394

 
$
5,415

 
$
39,250

Net operating income
$
678,533

 
$
258,283

 
$
167,318

 
$
132,050

 
$
77,898

 
$
42,984

Non allocated expenses (a)
$
(479,000
)
 
 
 
 
 
 
 
 
 
 
Other income and expenses (b)
$
(266,274
)
 
 
 
 
 
 
 
 
 
 
Loss from unconsolidated entities (c)
$
(118,825
)
 
 
 
 
 
 
 
 
 
 
Provision for asset impairment
$
(28,967
)
 
 
 
 
 
 
 
 
 
 
Net loss from continuing operations
$
(214,533
)
 
 
 
 
 
 
 
 
 
 
Loss from discontinued operations, net
$
(95,012
)
 
 
 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interests
$
(6,708
)
 
 
 
 
 
 
 
 
 
 
Net loss attributable to Company
$
(316,253
)
 
 
 
 
 
 
 
 
 
 
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
 
Real estate assets, net (d)
$
9,429,500

 
$
3,803,062

 
$
2,386,432

 
$
1,568,153

 
$
910,227

 
$
761,626

Non-segmented assets (e)
1,489,690

 
 
 
 
 
 
 
 
 
 
Total Assets
$
10,919,190

 
 
 
 
 
 
 
 
 
 
Capital expenditures
$
83,405

 
$
18,642

 
$
53,453

 
$
5,427

 
$
4,168

 
$
1,715

 
(a)
Non allocated expenses consist of general and administrative expenses, business manager management fee and depreciation and amortization.
(b)
Other income and expenses consist of interest and dividend income, interest expense, other income, realized gain, (loss) and (impairment) on securities, net, and income tax benefit.
(c)
Loss from unconsolidated entities consists of equity losses in earnings of unconsolidated entities as well as gain, (loss) and (impairment) of investment in unconsolidated entities.
(d)
Real estate assets includes intangible assets, net of amortization.
(e)
Construction in progress is included as non-segmented assets.



98
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010


The following table summarizes net operating income by segment as of and for the year ended December 31, 2010.
 
 
Total
 
Retail
 
Lodging
 
Office
 
Industrial
 
Multi-
Family
Rental income
$
542,773

 
$
259,703

 
$
—

 
$
141,903

 
$
75,491

 
$
65,676

Straight line income
17,577

 
8,680

 
—

 
5,755

 
2,939

 
203

Tenant recovery income
85,263

 
57,436

 
—

 
26,419

 
1,037

 
371

Other property income
14,544

 
4,764

 
—

 
4,227

 
110

 
5,443

Lodging income
434,539

 
—

 
434,539

 
—

 
—

 
—

Total income
$
1,094,696

 
$
330,583

 
$
434,539

 
$
178,304

 
$
79,577

 
$
71,693

Operating expenses
$
474,773

 
$
88,886

 
$
297,580

 
$
44,603

 
$
5,041

 
$
38,663

Net operating income
$
619,923

 
$
241,697

 
$
136,959

 
$
133,701

 
$
74,536

 
$
33,030

Non allocated expenses (a)
$
(462,831
)
 
 
 
 
 
 
 
 
 
 
Other income and expenses (b)
$
(209,606
)
 
 
 
 
 
 
 
 
 
 
Loss from unconsolidated entities (c)
$
(29,923
)
 
 
 
 
 
 
 
 
 
 
Provision for asset impairment (d)
$
(111,896
)
 
 
 
 
 
 
 
 
 
 
Net loss from continuing operations
$
(194,333
)
 
 
 
 
 
 
 
 
 
 
Income from discontinued operations, net
$
27,041

 
 
 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interests
$
(9,139
)
 
 
 
 
 
 
 
 
 
 
Net loss attributable to Company
$
(176,431
)
 
 
 
 
 
 
 
 
 
 
 
(a)
Non allocated expenses consist of general and administrative expenses, business manager management fee and depreciation and amortization.
(b)
Other income and expenses consist of interest and dividend income, interest expense, other income and expenses, realized gain, (loss) and (impairment) on securities, net, and income tax benefit.
(c)
Loss from unconsolidated entities consists of equity (losses) in earnings of unconsolidated entities as well as gain, (loss) and (impairment) of investment in unconsolidated entities.
(d)
Provision for asset impairment consists of provision for asset impairment, provision for goodwill impairment, and provision for notes receivable impairment.





99
      
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except for per share amounts)

December 31, 2012, 2011 and 2010


(15) Earnings (loss) per Share
Basic earnings (loss) per share (“EPS”) are computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period (the “common shares”). Diluted EPS is computed by dividing net income (loss) by the common shares plus potential common shares issuable upon exercising options or other contracts. There are an immaterial amount of potentially dilutive common shares.
The basic and diluted weighted average number of common shares outstanding was 879,685,949, 858,637,707 and 835,131,057 for the years ended December 31, 2012, 2011 and 2010.
(16) Commitments and Contingencies
Certain leases and operating agreements within the lodging segment require the Company to reserve funds relating to replacements and renewals of the hotels' furniture, fixtures and equipment. As of December 31, 2012 the Company has funded $50,041 in reserves for future improvements. This amount is included in restricted cash and escrows on the consolidated balance sheet as of December 31, 2012.
The Company has learned that the SEC is conducting a non-public, formal, fact-finding investigation to determine whether there have been violations of certain provisions of the federal securities laws regarding the business management fees, property management fees, transactions with affiliates, timing and amount of distributions paid to investors, determination of property impairments, and any decision regarding whether the Company might become a self-administered REIT. The Company has not been accused of any wrongdoing by the SEC. The Company also has been informed by the SEC that the existence of this investigation does not mean that the SEC has concluded that anyone has broken the law or that the SEC has a negative opinion of any person, entity, or security. The Company has been cooperating fully with the SEC.
The Company cannot reasonably estimate the timing of the investigation, nor can the Company predict whether or not the investigation might have a material adverse effect on the business.
Inland American Business Manager & Advisor, Inc. has offered to reduce the business management fee in an aggregate amount necessary to reimburse the Company for any costs, fees, fines or assessments, if any, which may result from the SEC investigation, other than legal fees incurred by the Company, or fees and costs otherwise covered by insurance. The business manager also offered to waive its reimbursement of legal fees or costs that the business manager incurs in connection with the SEC investigation. On May 4, 2012, Inland American Business Manager & Advisor, Inc. forwarded a letter to the Company that memorializes this arrangement.

The Company have also received two related demands by stockholders to conduct investigations regarding claims that the officers, the board of directors, the business manager, and the affiliates of the business manager (the "Inland American Parties") breached their fiduciary duties to the Company in connection with the matters that the Company disclosed are subject to the Investigation. The first demand claims that the Inland American Parties (i) falsely reported the value of our common stock until September 2010; (ii) caused us to purchase shares of our common stock from stockholders at prices in excess of their value; and (iii) disguised returns of capital paid to stockholders as REIT income resulting in the payment of fees to the business manager for which it was not entitled. The three stockholders in that demand contend that legal proceedings should seek recovery of damages in an unspecified amount allegedly sustained by us. The second demand by another shareholder makes similar claims and further alleges that the Inland American Parties (i) caused us to engage in transactions that unduly favored related parties, (ii) falsely disclosed the timing and amount of distributions, and (iii) falsely disclosed whether the Company might become a self-administered REIT. There has been no lawsuit filed, however, with regard to these matters.

The full Board of Directors has responded by authorizing the independent directors to investigate the claims contained in the demand letters, as well as any other matters the independent directors see fit to investigate, including matters related to the SEC investigation.  Pursuant to this authority, the independent directors have formed a special litigation committee that is comprised solely of independent directors to review and evaluate the matters referred by the full Board to the independent directors, and to recommend to the full Board any further action as is appropriate.  The special litigation committee intends to investigate these claims with the assistance of independent legal counsel and will make a recommendation to the Board of Directors after the committee has completed its investigation. 

100
INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)

December 31, 2012, 2011 and 2010

The Company has also filed a number of eviction actions against tenants and is involved in a number of tenant bankruptcies. The tenants in some of the eviction cases may file counterclaims against the Company in an attempt to gain leverage against the Company in connection with the eviction. In the opinion of the Company, none of these counterclaims is likely to result in any material losses to the Company.

The Company is subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material adverse effect on the financial statements of the Company.


(17) Subsequent Events

Subsequent to December 31, 2012, the Company purchased one retail property, two lodging properties, and one student housing property for a gross acquisition price of $119,900.


(18) Quarterly Supplemental Financial Information (unaudited)
The following represents the results of operations, for each quarterly period, during 2012 and 2011.
 
 
2012
 
Dec. 31
 
Sept. 30
 
June 30
 
March 31
Total income
$
370,758

 
$
368,639

 
$
378,834

 
$
319,164

Net loss
(2,731
)
 
(12,917
)
 
(17,791
)
 
(30,210
)
Net loss attributable to Company
(3,569
)
 
(17,576
)
 
(17,910
)
 
(30,283
)
Net loss, per common share, basic and diluted (1)
(0.01
)
 
(0.02
)
 
(0.02
)
 
(0.03
)
Weighted average number of common shares outstanding, basic and diluted (1)
886,849,317

 
881,717,879

 
877,188,933

 
872,886,566

 
2011
 
Dec. 31
 
Sept. 30
 
June 30
 
March 31
Total income
$
305,208

 
$
313,418

 
$
314,966

 
$
294,281

Net loss
(182,076
)
 
(48,952
)
 
(26,114
)
 
(52,403
)
Net loss attributable to Company
(182,188
)
 
(51,677
)
 
(27,761
)
 
(54,627
)
Net loss, per common share, basic and diluted (1)
(0.22
)
 
(0.06
)
 
(0.03
)
 
(0.06
)
Weighted average number of common shares outstanding, basic and diluted (1)
867,028,126

 
861,505,671

 
855,953,324

 
849,843,349

 
(1)
Quarterly income per common share amounts may not total to the annual amounts due to rounding and the changes in the number of weighted common shares outstanding

101

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements 
(D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
Retail
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14th STREET MARKET
Plano, TX
7,712

 
3,500

 
9,241

 
—

 
264

 
3,500

 
9,505

 
13,005

 
1,866

 
2007
24 HOUR FITNESS -THE WOODLANDS
Woodlands, TX
3,500

 
1,540

 
11,287

 
—

 
—

 
1,540

 
11,287

 
12,827

 
2,864

 
2005
95th and CICERO
Oak Lawn, IL
8,949

 
4,500

 
9,910

 
—

 
49

 
4,500

 
9,959

 
14,459

 
1,522

 
2008
ALCOA EXCHANGE
Bryant, AR
12,200

 
4,900

 
15,577

 
—

 
90

 
4,900

 
15,668

 
20,568

 
2,621

 
2008
ALCOA EXCHANGE II
Benton, AR
—

 
1,300

 
5,511

 
—

 
—

 
1,300

 
5,511

 
6,811

 
797

 
2009
ANDERSON CENTRAL Anderson, SC
13,653

 
2,800

 
9,961

 
—

 
382

 
2,800

 
10,343

 
13,143

 
1,034

 
2010
ANTOINE TOWN CENTER
Houston, TX
5,490

 
1,645

 
7,343

 
—

 
188

 
1,645

 
7,531

 
9,176

 
1,890

 
2005
ATASCOCITA SHOPPING CENTER
Humble, TX
—

 
1,550

 
7,994

 
(398
)
 
(2,866
)
 
1,152

 
5,129

 
6,281

 
292

 
2005
BARTOW MARKETPLACE
Atlanta, GA
23,298

 
5,600

 
20,154

 
—

 
50

 
5,600

 
20,204

 
25,804

 
2,038

 
2010
BAY COLONY
League City, TX
22,255

 
3,190

 
30,828

 
—

 
5,452

 
3,190

 
36,280

 
39,470

 
8,533

 
2005
BAY COLONY II
League City, TX
27,470

 
4,500

 
32,514

 
—

 
4,478

 
4,500

 
36,992

 
41,492

 
1,584

 
2011
BEAR CREEK VILLAGE CENTER
Wildomar, CA
14,361

 
3,523

 
12,384

 
—

 
(72
)
 
3,523

 
12,313

 
15,836

 
1,698

 
2009





102

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements 
(D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
BELLERIVE PLAZA
Nicholasville, KY
6,092

 
2,400

 
7,749

 
—

 
76

 
2,400

 
7,825

 
10,225

 
1,601

 
2007
BENT TREE PLAZA
Raleigh, NC
6,433

 
1,983

 
7,093

 
—

 
(120
)
 
1,983

 
6,972

 
8,955

 
1,044

 
2009
BI-LO—GREENVILLE
Greenville, SC
4,286

 
1,400

 
5,503

 
—

 
—

 
1,400

 
5,503

 
6,903

 
1,268

 
2006
BLACKHAWK TOWN CENTER
Houston, TX
12,125

 
1,645

 
19,982

 
—

 
1

 
1,645

 
19,984

 
21,629

 
5,009

 
2005
BOYNTON COMMONS
Miami, FL
27,854

 
11,400

 
17,315

 
—

 
146

 
11,400

 
17,461

 
28,861

 
1,777

 
2010
BRANDON CENTRE SOUTH
Brandon, FL
16,133

 
5,720

 
19,500

 
—

 
810

 
5,720

 
20,310

 
26,030

 
4,050

 
2007
BROOKS CORNER
San Antonio, TX
13,970

 
10,600

 
13,648

 
—

 
2,781

 
10,600

 
16,429

 
27,029

 
3,831

 
2006
BUCKHEAD CROSSING
Atlanta, GA
33,215

 
7,565

 
27,104

 
—

 
(1,210
)
 
7,565

 
25,894

 
33,459

 
3,576

 
2009
BUCKHORN PLAZA
Bloomsburg, PA
9,025

 
1,651

 
11,770

 
—

 
772

 
1,651

 
12,542

 
14,193

 
2,870

 
2006
CAMPUS MARKETPLACE
San Marcos, CA
18,792

 
6,723

 
27,462

 
—

 
(160
)
 
6,723

 
27,302

 
34,024

 
3,674

 
2009






103

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements 
(D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
CENTERPLACE OF GREELEY
Greeley, CO
15,518

 
3,904

 
14,715

 
—

 
(51
)
 
3,904

 
14,664

 
18,568

 
2,093

 
2009
CHESAPEAKE COMMONS
Chesapeake, VA
—

 
2,669

 
10,839

 
—

 
59

 
2,669

 
10,897

 
13,566

 
2,287

 
2007
CHEYENNE MEADOWS
Colorado Springs, CO
6,415

 
2,023

 
6,991

 
—

 
(149
)
 
2,023

 
6,842

 
8,865

 
987

 
2009
CHILI’S—HUNTING BAYOU
Jacinto City, TX
—

 
400

 
—

 
—

 
—

 
400

 
—

 
400

 
—

 
2005
CINEMARK—JACINTO CITY
Jacinto City, TX
—

 
1,160

 
10,540

 
(164
)
 
(3,668
)
 
996

 
6,872

 
7,868

 
422

 
2005
CITIZENS (CFG) DELAWARE
Lewes, DE
—

 
525

 
353

 
—

 
(4
)
 
525

 
349

 
874

 
71

 
2007
CITIZENS (CFG) ILLINOIS
Villa Park, IL
—

 
575

 
379

 
(118
)
 
(156
)
 
457

 
223

 
681

 
—

 
2007
CITIZENS (CFG) ILLINOIS
Westchester, IL
—

 
725

 
582

 
—

 
(1
)
 
725

 
580

 
1,305

 
119

 
2007
CITIZENS (CFG) ILLINOIS
Chicago Heights, IL
—

 
290

 
904

 
—

 
(2
)
 
290

 
902

 
1,192

 
185

 
2007
CITIZENS (CFG) MELLON BANK BLD
Georgetown, DE
—

 
725

 
2,255

 
—

 
311

 
725

 
2,567

 
3,292

 
499

 
2007






104

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements 
(D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
CITIZENS (CFG) NEW HAMPSHIRE
Manchester, NH
—

 
9,620

 
15,633

 
—

 
—

 
9,620

 
15,633

 
25,253

 
3,197

 
2007
CITIZENS (CFG) NEW HAMPSHIRE
Hinsdale, NH
—

 
172

 
281

 
(32
)
 
(110
)
 
140

 
171

 
310

 
—

 
2007
CITIZENS (CFG) NEW JERSEY
Haddon Heights, NJ
—

 
500

 
466

 
—

 
—

 
500

 
466

 
966

 
95

 
2007
CITIZENS (CFG) NEW YORK
Plattsburgh, NY
—

 
70

 
1,342

 
(46
)
 
(1,126
)
 
24

 
216

 
240

 
6

 
2007
CITIZENS (CFG) PENNSYLVANIA
Camp Hill, PA
—

 
1,150

 
1,420

 
(508
)
 
(917
)
 
642

 
502

 
1,144

 
—

 
2007
CITIZENS (CFG) PENNSYLVANIA
Charlerol, PA
—

 
40

 
1,555

 
—

 
—

 
40

 
1,555

 
1,595

 
318

 
2007
CITIZENS (CFG) PENNSYLVANIA
Dallastown, PA
—

 
150

 
962

 
(113
)
 
(816
)
 
37

 
146

 
183

 
1

 
2007
CITIZENS (CFG) PENNSYLVANIA
Glenside, PA
—

 
385

 
1,727

 
—

 
—

 
385

 
1,727

 
2,112

 
353

 
2007
CITIZENS (CFG) PENNSYLVANIA
Reading, PA
—

165

165

 
2,265

 
—

 
—

 
165

 
2,265

 
2,430

 
463

 
2007
CITIZENS (CFG) PENNSYLVANIA
York, PA
—

 
400

 
3,016

 
(276
)
 
(2,513
)
 
124

 
503

 
627

 
—

 
2007







105

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements 
(D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
CITIZENS (CFG) PENNSYLVANIA
Altoona, PA
—

 
100

 
573

 
(18
)
 
(218
)
 
82

 
354

 
437

 
—

 
2007
CITIZENS (CFG) PENNSYLVANIA
Cranberry, PA
—

 
100

 
483

 
(18
)
 
(185
)
 
82

 
298

 
380

 
—

 
2007
CITIZENS (CFG) RHODE ISLAND
Providence, RI
—

 
1,278

 
3,817

 
—

 
(7
)
 
1,278

 
3,810

 
5,088

 
780

 
2007
CITIZENS (CFG) RHODE ISLAND
Warwick, RI
—

 
2,254

 
15,856

 
—

 
(30
)
 
2,254

 
15,826

 
18,080

 
3,238

 
2007





106

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
CITIZENS (CFG) MASSACHUSETTS
Springfield, MA
—

 
310

 
856

 
—

 
(1
)
 
310

 
855

 
1,165

 
175

 
2007
CITIZENS (CFG) MASSACHUSETTS
Springfield, MA
—

 
300

 
243

 
(60
)
 
(98
)
 
240

 
144

 
385

 
—

 
2007
CITY CROSSING
Warner Robins, GA
17,418

 
4,200

 
5,679

 
—

 
16

 
4,200

 
5,695

 
9,895

 
667

 
2010
COWETA CROSSING
Newnan, GA
—

 
1,143

 
4,590

 
—

 
(349
)
 
1,143

 
4,240

 
5,383

 
625

 
2009
CROSS TIMBERS COURT
Flower Mound, TX
8,193

 
3,300

 
9,939

 
—

 
147

 
3,300

 
10,086

 
13,386

 
2,026

 
2007
CROSSROADS AT CHESAPEAKE SQUARE
Chesapeake, VA
—

 
3,970

 
13,732

 
—

 
1,115

 
3,970

 
14,847

 
18,817

 
3,122

 
2007
CUSTER CREEK VILLAGE
Richardson, TX
10,149

 
4,750

 
12,245

 
—

 
89

 
4,750

 
12,333

 
17,083

 
2,474

 
2007
CYFAIR TOWN CENTER
Cypress, TX
9,095

 
1,800

 
13,093

 
—

 
53

 
1,800

 
13,146

 
14,946

 
2,944

 
2006
CYFAIR TOWN CENTER II
Houston, TX
32,955

 
11,300

 
39,840

 
—

 
2,922

 
11,300

 
42,762

 
54,062

 
1,859

 
2011
CYPRESS TOWN CENTER
Houston, TX
—

 
1,850

 
11,630

 
(805
)
 
(7,314
)
 
1,045

 
4,315

 
5,360

 
216

 
2005






107

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
DONELSON PLAZA
Nashville, TN
2,315

 
1,000

 
3,147

 
—

 
—

 
1,000

 
3,147

 
4,147

 
663

 
2007
DOTHAN PAVILION
Dothan, AL
37,165

 
8,200

 
38,759

 
—

 
950

 
8,200

 
39,710

 
47,910

 
5,611

 
2009
EAST GATE
Aiken, SC
6,800

 
2,000

 
10,305

 
—

 
194

 
2,000

 
10,498

 
12,498

 
2,165

 
2007
ELDRIDGE TOWN CENTER
Houston, TX
9,000

 
3,200

 
16,663

 
—

 
305

 
3,200

 
16,968

 
20,168

 
4,467

 
2005
FABYAN RANDALL PLAZA
Batavia, IL
13,405

 
2,400

 
22,198

 
—

 
(4
)
 
2,400

 
22,194

 
24,594

 
5,060

 
2006
FAIRVIEW MARKET
Simpsonville, SC
2,477

 
1,140

 
5,241

 
—

 
(179
)
 
1,140

 
5,062

 
6,201

 
676

 
2009
FLOWER MOUND CROSSING
Flower Mound, TX
8,342

 
4,500

 
9,049

 
—

 
389

 
4,500

 
9,438

 
13,938

 
1,944

 
2007
FOREST PLAZA
Fond du Lac, WI
1,959

 
3,400

 
14,550

 
—

 
553

 
3,400

 
15,103

 
18,503

 
2,905

 
2007
FURY’S FERRY
Augusta, GA
6,381

 
1,600

 
9,783

 
—

 
507

 
1,600

 
10,290

 
11,890

 
2,121

 
2007
GARDEN VILLAGE
San Pedro, CA
11,977

 
3,188

 
16,522

 
—

 
(217
)
 
3,188

 
16,305

 
19,493

 
2,219

 
2009






108

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
GATEWAY MARKET CENTER
Tampa, FL
23,173

 
13,600

 
4,992

 
—

 
321

 
13,600

 
5,313

 
18,913

 
675

 
2010
GATEWAY PLAZA
Jacksonville, NC
10,098

 
4,700

 
6,769

 
—

 
(175
)
 
4,700

 
6,594

 
11,294

 
728

 
2010
GLENDALE HEIGHTS I, II, III
Glendale Heights, IL
4,705

 
2,220

 
6,399

 
—

 
172

 
2,220

 
6,571

 
8,791

 
1,518

 
2006
GRAFTON COMMONS SHOPPING CENTER
Grafton, WI
18,299

 
7,200

 
26,984

 
—

 
117

 
7,200

 
27,101

 
34,301

 
3,006

 
2009
GRAVOIS DILLON PLAZA
High Ridge, MO
12,630

 
7,300

 
—

 
—

 
16,122

 
7,300

 
16,122

 
23,422

 
3,322

 
2007
HERITAGE CROSSING
Wilson, NC
16,800

 
4,400

 
22,921

 
—

 
1,252

 
4,400

 
24,173

 
28,573

 
2,401

 
2010
HERITAGE HEIGHTS
Grapevine, TX
10,719

 
4,600

 
13,502

 
—

 
282

 
4,600

 
13,784

 
18,384

 
2,720

 
2007
HERITAGE PLAZA—CHICAGO
Carol Stream, IL
10,481

 
5,297

 
8,831

 
—

 
(423
)
 
5,297

 
8,408

 
13,705

 
1,224

 
2009
HIGHLAND PLAZA
Katy, TX
—

 
2,450

 
15,642

 
(520
)
 
(6,207
)
 
1,930

 
9,435

 
11,365

 
601

 
2005
HIRAM PAVILION
Hiram, GA
37,609

 
4,600

 
16,832

 
—

 
1,198

 
4,600

 
18,030

 
22,630

 
1,898

 
2010






109

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
HUNTER’S GLEN CROSSING
Plano, TX
9,790

 
4,800

 
11,719

 
—

 
593

 
4,800

 
12,312

 
17,112

 
2,391

 
2007
HUNTING BAYOU
Jacinto City, TX
—

 
2,400

 
16,265

 
—

 
793

 
2,400

 
17,058

 
19,458

 
4,381

 
2006
IA ORLANDO SAND
Orlando, FL
—

 
19,388

 
—

 
—

 
—

 
19,388

 
—

 
19,388

 
—

 
2011
INTECH RETAIL
Indianapolis, IN
2,688

 
819

 
2,038

 
—

 
121

 
819

 
2,159

 
2,978

 
329

 
2009
JAMES CENTER
Tacoma, WA
12,734

 
4,497

 
16,219

 
—

 
(119
)
 
4,497

 
16,100

 
20,597

 
2,398

 
2009
JOSEY OAKS CROSSING
Carrollton, TX
9,346

 
2,620

 
13,989

 
—

 
238

 
2,620

 
14,227

 
16,847

 
2,885

 
2007
LA FITNESS AT ELDRIDGE LAKES
Houston, TX
5,000

 
500

 
8,398

 
—

 
—

 
500

 
8,398

 
8,898

 
369

 
2011
LAKEPORT COMMONS
Sioux City, IA
22,950

 
7,800

 
39,984

 
—

 
3,037

 
7,800

 
43,021

 
50,821

 
7,802

 
2007
LEGACY CROSSING
Marion, OH
10,890

 
4,280

 
13,896

 
—

 
296

 
4,280

 
14,191

 
18,471

 
2,944

 
2007
LEXINGTON ROAD
Athens, GA
5,454

 
1,980

 
7,105

 
—

 
—

 
1,980

 
7,105

 
9,085

 
1,606

 
2006





110

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
LINCOLN MALL
Lincoln, RI
33,835

 
11,000

 
50,395

 
—

 
4,064

 
11,000

 
54,459

 
65,459

 
12,232

 
2006
LINCOLN VILLAGE
Chicago, IL
22,035

 
13,600

 
25,053

 
—

 
780

 
13,600

 
25,833

 
39,433

 
5,728

 
2006
LOGAN'S ROADHOUSE
Orlando, FL
—

 
—

 
1,881

 
—

 
—

 
—

 
1,881

 
1,881

 
187

 
2010
LORD SALISBURY CENTER
Salisbury, MD
12,600

 
11,000

 
9,567

 
—

 
46

 
11,000

 
9,613

 
20,613

 
1,927

 
2007
MARKET AT MORSE / HAMILTON
Columbus, OH
—

 
4,490

 
8,734

 
(907
)
 
(3,504
)
 
3,583

 
5,230

 
8,814

 
102

 
2007
MARKET AT WESTLAKE
Westlake Hills, TX
4,803

 
1,200

 
6,274

 
—

 
79

 
1,200

 
6,353

 
7,553

 
1,316

 
2007
MCKINNEY TOWN CENTER
McKinney, TX
21,412

 
16,297

 
22,562

 
—

 
460

 
16,297

 
23,022

 
39,319

 
2,214

 
2007
MERCHANTS CROSSING
Englewood, FL
11,112

 
3,404

 
11,281

 
—

 
(1,152
)
 
3,404

 
10,129

 
13,533

 
1,569

 
2009
MIDDLEBURG CROSSING
Middleburg, FL
5,247

 
2,760

 
7,145

 
—

 
450

 
2,760

 
7,595

 
10,355

 
1,429

 
2007
MONADNOCK MARKETPLACE
Keene, NH
26,785

 
7,000

 
39,008

 
—

 
307

 
7,000

 
39,314

 
46,314

 
9,604

 
2006






111

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
NEW FOREST CROSSING II
Houston, TX
—

 
1,490

 
3,922

 
(253
)
 
(999
)
 
1,237

 
2,923

 
4,160

 
175

 
2006
NEWTOWN ROAD
Virginia Beach, VA
968

 
574

 
877

 
—

 
(877
)
 
574

 
—

 
574

 
—

 
2006
NORTHWEST MARKETPLACE
Houston, TX
19,965

 
2,910

 
30,340

 
—

 
57

 
2,910

 
30,397

 
33,307

 
5,967

 
2007
NTB ELDRIDGE
Houston, TX
500

 
960

 
—

 
—

 
—

 
960

 
—

 
960

 
—

 
2005
PALAZZO DEL LAGO
Orlando, FL
—

 
8,938

 
—

 
—

 
—

 
8,938

 
—

 
8,938

 
—

 
2010
PALM HARBOR SHOPPING CENTER
Palm Coast, FL
12,100

 
2,836

 
10,927

 
—

 
(572
)
 
2,836

 
10,355

 
13,192

 
1,459

 
2009
PARADISE PLACE
West Palm Beach, FL
10,149

 
3,975

 
5,912

 
—

 
19

 
3,975

 
5,931

 
9,906

 
600

 
2010
PARADISE SHOPS OF LARGO
Largo, FL
6,545

 
4,640

 
7,483

 
—

 
(7
)
 
4,640

 
7,476

 
12,116

 
1,977

 
2005
PARK WEST PLAZA
Grapevine, TX
7,532

 
4,250

 
8,186

 
—

 
28

 
4,250

 
8,214

 
12,464

 
1,723

 
2007
PARKWAY CENTRE NORTH
Grove City, OH
13,892

 
4,680

 
16,046

 
—

 
1,821

 
4,680

 
17,867

 
22,547

 
3,771

 
2007






112

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
PARKWAY CENTRE NORTH
OUTLOT B
Grove City, OH
2,198

 
900

 
2,590

 
—

 
4

 
900

 
2,595

 
3,495

 
549

 
2007
PAVILION AT LAQUINTA
LaQuinta, CA
24,200

 
15,200

 
20,947

 
—

 
24

 
15,200

 
20,972

 
36,172

 
2,842

 
2009
PAVILIONS AT HARTMAN HERITAGE
Independence, MO
23,450

 
9,700

 
28,849

 
—

 
4,815

 
9,700

 
33,664

 
43,364

 
6,291

 
2007
PEACHLAND PROMENADE
Port Charlotte, FL
3,233

 
1,742

 
6,502

 
—

 
(58
)
 
1,742

 
6,444

 
8,186

 
954

 
2009
PENN PARK
Oklahoma City, OK
31,000

 
6,260

 
29,424

 
—

 
1,799

 
6,260

 
31,223

 
37,483

 
5,902

 
2007
PIONEER PLAZA
Mesquite, TX
2,250

 
373

 
3,099

 
—

 
12

 
373

 
3,112

 
3,484

 
657

 
2007
PLEASANT HILL SQUARE
Duluth, GA
30,459

 
7,950

 
22,651

 
(3,399
)
 
(11,772
)
 
4,551

 
10,879

 
15,430

 
94

 
2010
POPLIN PLACE
Monroe, NC
22,554

 
6,100

 
27,790

 
—

 
436

 
6,100

 
28,226

 
34,326

 
4,394

 
2008
PRESTONWOOD SHOPPING CENTER
Dallas, TX
26,600

 
25,400

 
17,193

 
—

 
251

 
25,400

 
17,444

 
42,844

 
1,672

 
2010
PROMENADE FULTONDALE
Fultondale, AL
16,870

 
5,540

 
22,414

 
—

 
159

 
5,540

 
22,573

 
28,113

 
3,115

 
2009






113

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
RALEIGH HILLSBOROUGH
Raleigh, NC
—

 
2,605

 
—

 
—

 
—

 
2,605

 
—

 
2,605

 
—

 
2007
RIVERSTONE SHOPPING CENTER
Missouri City, TX
21,000

 
12,000

 
26,395

 
—

 
232

 
12,000

 
26,626

 
38,626

 
5,366

 
2007
RIVERVIEW VILLAGE
Arlington, TX
10,121

 
6,000

 
9,649

 
—

 
107

 
6,000

 
9,756

 
15,756

 
1,956

 
2007
ROCKWELL PLAZA
Oklahoma City, OK
16,250

 
3,800

 
26,296

 
—

 
—

 
3,800

 
26,296

 
30,096

 
—

 
2012
ROSE CREEK
Woodstock, GA
4,339

 
1,443

 
5,630

 
—

 
(99
)
 
1,443

 
5,531

 
6,974

 
820

 
2009
ROSEWOOD SHOPPING CENTER
Columbia, SC
3,444

 
1,138

 
3,946

 
—

 
(81
)
 
1,138

 
3,865

 
5,003

 
583

 
2009
SALTGRASS RESTAURANT-HUNTING BAYOU
Jacinto City, TX
—

 
540

 
—

 
—

 
—

 
540

 
—

 
540

 
—

 
2005
SARASOTA PAVILION
Sarasota, FL
40,425

 
12,000

 
25,823

 
—

 
222

 
12,000

 
26,045

 
38,045

 
2,662

 
2010
SCOFIELD CROSSING
Austin, TX
8,435

 
8,100

 
4,992

 
—

 
28

 
8,100

 
5,020

 
13,120

 
1,062

 
2007
SHALLOTTE COMMONS
Shallotte, NC
6,078

 
1,650

 
9,028

 
(606
)
 
(4,771
)
 
1,044

 
4,257

 
5,300

 
—

 
2007






114

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SHERMAN PLAZA
Evanston, IL
30,275

 
9,655

 
30,982

 
—

 
8,517

 
9,655

 
39,499

 
49,154

 
8,043

 
2006
SHERMAN TOWN CENTER
Sherman, TX
33,858

 
4,850

 
49,273

 
—

 
157

 
4,850

 
49,430

 
54,280

 
10,960

 
2006
SHERMAN TOWN CENTER II
Sherman, TX
10,000

 
3,000

 
14,805

 
—

 
(36
)
 
3,000

 
14,769

 
17,769

 
1,093

 
2010
SHILOH SQUARE
Garland, TX
3,238

 
1,025

 
3,946

 
—

 
1

 
1,025

 
3,947

 
4,972

 
794

 
2007
SIEGEN PLAZA
East Baton Rouge, LA
16,600

 
9,340

 
20,251

 
—

 
273

 
9,340

 
20,524

 
29,864

 
3,372

 
2008
SILVERLAKE
Erlanger, KY
5,487

 
2,031

 
6,975

 
—

 
(103
)
 
2,031

 
6,872

 
8,903

 
993

 
2009
SONIC AT ANTOINE TOWN CENTER
Houston, TX
360

 
649

 
—

 
—

 
—

 
649

 
—

 
649

 
—

 
2011
SOUTHGATE VILLAGE
Pelham, AL
5,039

 
1,789

 
6,266

 
—

 
(81
)
 
1,789

 
6,185

 
7,974

 
733

 
2009
SPARKS CROSSING
Sparks, NV
—

 
10,330

 
23,238

 
—

 
75

 
10,330

 
23,313

 
33,643

 
1,526

 
2011
SPRING TOWN CENTER
Spring, TX
—

 
3,150

 
12,433

 
—

 
121

 
3,150

 
12,554

 
15,704

 
2,985

 
2006






115

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SPRING TOWN CENTER III
Spring, TX
—

 
1,320

 
3,070

 
—

 
2,008

 
1,320

 
5,078

 
6,398

 
897

 
2007
STABLES TOWN CENTER I and II
Spring, TX
13,750

 
4,650

 
19,006

 
—

 
2,369

 
4,650

 
21,376

 
26,026

 
5,111

 
2005
STATE STREET MARKET
Rockford, IL
10,348

 
3,950

 
14,184

 
—

 
1,771

 
3,950

 
15,955

 
19,905

 
3,497

 
2006
STONE CREEK
San Marcos, TX
9,939

 
—

 
—

 
—

 
9,723

 
—

 
9,723

 
9,723

 
301

 
 
STONECREST MARKETPLACE
Lithonia, GA
34,516

 
6,150

 
23,321

 
—

 
377

 
6,150

 
23,698

 
29,848

 
2,398

 
2010
STONE RIDGE MARKET
San Antonio, TX
28,125

 
13,400

 
43,812

 
—

 
—

 
13,400

 
43,812

 
57,212

 
—

 
2012
STOP & SHOP—SICKLERVILLE
Sicklerville, NJ
8,535

 
2,200

 
11,559

 
—

 
—

 
2,200

 
11,559

 
13,759

 
2,663

 
2006
STOP N SHOP—BRISTOL
Bristol, RI
8,204

 
1,700

 
11,830

 
—

 
—

 
1,700

 
11,830

 
13,530

 
2,726

 
2006
STOP N SHOP—CUMBERLAND
Cumberland, RI
11,531

 
2,400

 
16,196

 
—

 
—

 
2,400

 
16,196

 
18,596

 
3,731

 
2006
STOP N SHOP - FRAMINGHAM
Framingham, MA
9,115

 
6,500

 
8,517

 
—

 
—

 
6,500

 
8,517

 
15,017

 
1,962

 
2006






116

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
STOP N SHOP—HYDE PARK
Hyde Park, NY
8,100

 
2,000

 
12,274

 
—

 
—

 
2,000

 
12,274

 
14,274

 
2,999

 
2006
STOP N SHOP—MALDEN
Malden, MA
12,496

 
6,700

 
13,828

 
—

 
—

 
6,700

 
13,828

 
20,528

 
3,186

 
2006
STOP N SHOP—SOUTHINGTON
Southington, CT
11,145

 
4,000

 
13,938

 
—

 
—

 
4,000

 
13,938

 
17,938

 
3,211

 
2006
STOP N SHOP—SWAMPSCOTT
Swampscott, MA
10,879

 
4,200

 
13,613

 
—

 
—

 
4,200

 
13,613

 
17,813

 
3,136

 
2006
STREETS OF CRANBERRY
Cranberry Township, PA
19,834

 
4,300

 
20,215

 
—

 
8,268

 
4,300

 
28,484

 
32,784

 
5,123

 
2007
STREETS OF INDIAN LAKES
Hendersonville, TN
37,500

 
8,825

 
48,679

 
—

 
6,314

 
8,825

 
54,993

 
63,818

 
7,945

 
2008
SUNCREEK VILLAGE
Plano, TX
2,683

 
900

 
3,155

 
—

 
26

 
900

 
3,181

 
4,081

 
677

 
2007
SUNTRUST BANK I AL
Muscle Shoals, AL
966

 
675

 
1,018

 
—

 
(1
)
 
675

 
1,017

 
1,692

 
190

 
2007
SUNTRUST BANK I AL
Killen, AL
426

 
633

 
449

 
—

 
—

 
633

 
449

 
1,082

 
84

 
2007
SUNTRUST BANK I DC
Brightwood, DC
—

 
500

 
2,082

 
—

 
(1
)
 
500

 
2,081

 
2,581

 
388

 
2007
SUNTRUST BANK I FL
Panama City, FL
839

 
1,200

 
603

 
—

 
—

 
1,200

 
603

 
1,803

 
112

 
2007




117

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I FL
Orlando, FL
—

 
1,400

 
786

 
—

 
—

 
1,400

 
786

 
2,186

 
147

 
2007
SUNTRUST BANK I FL
Apopka, FL
—

 
1,276

 
620

 
—

 
—

 
1,276

 
620

 
1,896

 
115

 
2007
SUNTRUST BANK I FL
Bayonet Point, FL
819

 
1,285

 
584

 
—

 
—

 
1,285

 
584

 
1,869

 
109

 
2007
SUNTRUST BANK I FL
West Palm Beach, FL
—

 
800

 
879

 
—

 
—

 
800

 
879

 
1,679

 
164

 
2007
SUNTRUST BANK I FL
Daytona Beach, FL
940

 
600

 
681

 
—

 
—

 
600

 
681

 
1,281

 
127

 
2007
SUNTRUST BANK I FL
Sarasota, FL
737

 
900

 
534

 
—

 
—

 
900

 
534

 
1,434

 
100

 
2007
SUNTRUST BANK I FL
Dade City, FL
—

 
759

 
425

 
—

 
—

 
759

 
425

 
1,184

 
79

 
2007
SUNTRUST BANK I FL
Pensacola, FL
499

 
725

 
359

 
—

 
—

 
725

 
359

 
1,084

 
67

 
2007
SUNTRUST BANK I FL
New Smyrna Beach, FL
—

 
1,100

 
1,142

 
—

 
—

 
1,100

 
1,142

 
2,242

 
213

 
2007
SUNTRUST BANK I FL
Clearwater, FL
1,308

 
1,700

 
933

 
—

 
—

 
1,700

 
933

 
2,633

 
174

 
2007
SUNTRUST BANK I FL
Daytona Beach, FL
829

 
1,218

 
601

 
—

 
—

 
1,218

 
601

 
1,819

 
112

 
2007
SUNTRUST BANK I FL
Deltona, FL
812

 
950

 
579

 
—

 
—

 
950

 
579

 
1,529

 
108

 
2007




118

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I FL
Boca Raton, FL
1,172

 
1,900

 
849

 
—

 
—

 
1,900

 
849

 
2,749

 
158

 
2007
SUNTRUST BANK I FL
Clearwater, FL
1,124

 
900

 
802

 
—

 
—

 
900

 
801

 
1,701

 
149

 
2007
SUNTRUST BANK I FL
Ocala, FL
804

 
1,476

 
574

 
—

 
—

 
1,476

 
574

 
2,049

 
107

 
2007
SUNTRUST BANK I FL
Palm Coast, FL
748

 
1,100

 
534

 
—

 
—

 
1,100

 
534

 
1,634

 
99

 
2007
SUNTRUST BANK I FL
Tampa, FL
—

 
650

 
348

 
—

 
—

 
650

 
348

 
998

 
65

 
2007
SUNTRUST BANK I FL
Fort Meade, FL
982

 
1,400

 
712

 
—

 
—

 
1,400

 
712

 
2,112

 
133

 
2007
SUNTRUST BANK I FL
Fruitland Park, FL
446

 
575

 
321

 
—

 
—

 
575

 
321

 
896

 
60

 
2007
SUNTRUST BANK I FL
Ocala, FL
703

 
953

 
509

 
—

 
—

 
953

 
509

 
1,462

 
95

 
2007
SUNTRUST BANK I FL
Ormond Beach, FL
1,063

 
950

 
771

 
—

 
—

 
950

 
771

 
1,721

 
144

 
2007
SUNTRUST BANK I FL
Gainesville, FL
740

 
1,100

 
537

 
—

 
—

 
1,100

 
537

 
1,637

 
100

 
2007
SUNTRUST BANK I FL
Lakeland, FL
509

 
625

 
366

 
—

 
—

 
625

 
366

 
991

 
68

 
2007
SUNTRUST BANK I FL
Hobe Sound, FL
884

 
950

 
641

 
—

 
—

 
950

 
641

 
1,591

 
119

 
2007




119

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I FL
Mulberry, FL
433

 
600

 
314

 
—

 
—

 
600

 
314

 
914

 
58

 
2007
SUNTRUST BANK I FL
Indian Harbour Beach, FL
764

 
1,060

 
553

 
—

 
—

 
1,060

 
553

 
1,613

 
103

 
2007
SUNTRUST BANK I FL
Inverness, FL
986

 
500

 
715

 
—

 
—

 
500

 
715

 
1,215

 
133

 
2007
SUNTRUST BANK I FL
Lake Mary, FL
1,993

 
2,100

 
1,422

 
—

 
—

 
2,100

 
1,422

 
3,522

 
265

 
2007
SUNTRUST BANK I FL
Melbourne, FL
906

 
910

 
656

 
—

 
—

 
910

 
656

 
1,566

 
122

 
2007
SUNTRUST BANK I FL
St. Petersburg, FL
724

 
1,000

 
525

 
—

 
—

 
1,000

 
524

 
1,524

 
98

 
2007
SUNTRUST BANK I FL
Lutz, FL
653

 
1,100

 
474

 
—

 
—

 
1,100

 
473

 
1,573

 
88

 
2007
SUNTRUST BANK I FL
Marianna, FL
1,179

 
275

 
841

 
—

 
—

 
275

 
841

 
1,116

 
157

 
2007
SUNTRUST BANK I FL
Gainesville, FL
469

 
730

 
340

 
—

 
—

 
730

 
340

 
1,070

 
63

 
2007
SUNTRUST BANK I FL
Vero Beach, FL
1,361

 
900

 
979

 
—

 
—

 
900

 
979

 
1,879

 
183

 
2007
SUNTRUST BANK I FL
Mount Dora, FL
1,065

 
500

 
772

 
—

 
—

 
500

 
772

 
1,272

 
144

 
2007
SUNTRUST BANK I FL
Sarasota, FL
1,172

 
1,800

 
850

 
—

 
—

 
1,800

 
850

 
2,650

 
158

 
2007




120

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I FL
New Smyrna Beach, FL
556

 
300

 
403

 
—

 
—

 
300

 
403

 
703

 
75

 
2007
SUNTRUST BANK I FL
Lakeland, FL
972

 
1,700

 
705

 
—

 
—

 
1,700

 
705

 
2,405

 
131

 
2007
SUNTRUST BANK I FL
North Palm Beach, FL
—

 
1,300

 
585

 
—

 
—

 
1,300

 
585

 
1,885

 
109

 
2007
SUNTRUST BANK I FL
Port St. Lucie, FL
761

 
900

 
552

 
—

 
—

 
900

 
551

 
1,451

 
103

 
2007
SUNTRUST BANK I FL
Clearwater, FL
—

 
1,100

 
410

 
—

 
—

 
1,100

 
410

 
1,510

 
76

 
2007
SUNTRUST BANK I FL
Okeechobee, FL
861

 
1,200

 
620

 
—

 
—

 
1,200

 
620

 
1,820

 
115

 
2007
SUNTRUST BANK I FL
Ormond Beach, FL
1,186

 
650

 
859

 
—

 
—

 
650

 
859

 
1,509

 
160

 
2007
SUNTRUST BANK I FL
Osprey, FL
999

 
1,100

 
719

 
—

 
—

 
1,100

 
719

 
1,819

 
134

 
2007
SUNTRUST BANK I FL
Panama City Beach, FL
—

 
601

 
303

 
—

 
—

 
601

 
303

 
903

 
56

 
2007
SUNTRUST BANK I FL
New Port Richey, FL
634

 
975

 
459

 
—

 
—

 
975

 
459

 
1,434

 
86

 
2007
SUNTRUST BANK I FL
Pembroke Pines, FL
993

 
1,750

 
708

 
—

 
—

 
1,750

 
708

 
2,458

 
132

 
2007
SUNTRUST BANK I FL
Orlando, FL
992

 
1,023

 
719

 
—

 
—

 
1,023

 
719

 
1,742

 
134

 
2007




121

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I FL
Pompano Beach, FL
1,237

 
1,800

 
896

 
—

 
—

 
1,800

 
896

 
2,696

 
167

 
2007
SUNTRUST BANK I FL
Jacksonville, FL
647

 
1,030

 
469

 
—

 
—

 
1,030

 
469

 
1,499

 
87

 
2007
SUNTRUST BANK I FL
Brooksville, FL
—

 
298

 
155

 
—

 
—

 
298

 
155

 
453

 
29

 
2007
SUNTRUST BANK I FL
Miami, FL
1,938

 
2,803

 
1,394

 
—

 
—

 
2,803

 
1,394

 
4,197

 
260

 
2007
SUNTRUST BANK I FL
Rockledge, FL
796

 
490

 
577

 
—

 
—

 
490

 
577

 
1,067

 
107

 
2007
SUNTRUST BANK I FL
Tampa, FL
561

 
812

 
406

 
—

 
—

 
812

 
406

 
1,218

 
76

 
2007
SUNTRUST BANK I FL
Seminole, FL
1,586

 
1,565

 
1,141

 
—

 
—

 
1,565

 
1,141

 
2,706

 
213

 
2007
SUNTRUST BANK I FL
Orlando, FL
985

 
1,430

 
714

 
—

 
—

 
1,430

 
713

 
2,143

 
133

 
2007
SUNTRUST BANK I FL
Jacksonville, FL
594

 
861

 
431

 
—

 
—

 
861

 
430

 
1,291

 
80

 
2007
SUNTRUST BANK I FL
Ocala, FL
1,071

 
1,500

 
764

 
—

 
—

 
1,500

 
764

 
2,264

 
142

 
2007
SUNTRUST BANK I FL
Orlando, FL
—

 
2,200

 
1,142

 
—

 
—

 
2,200

 
1,142

 
3,342

 
213

 
2007
SUNTRUST BANK I FL
Brooksville, FL
462

 
600

 
335

 
—

 
—

 
600

 
335

 
935

 
62

 
2007




122

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I FL
Spring Hill, FL
1,067

 
600

 
761

 
—

 
—

 
600

 
761

 
1,361

 
142

 
2007
SUNTRUST BANK I FL
St. Augustine, FL
1,062

 
1,000

 
758

 
—

 
—

 
1,000

 
758

 
1,758

 
141

 
2007
SUNTRUST BANK I FL
Port St. Lucie, FL
951

 
1,050

 
689

 
—

 
—

 
1,050

 
689

 
1,739

 
128

 
2007
SUNTRUST BANK I FL
Vero Beach, FL
609

 
850

 
441

 
—

 
—

 
850

 
441

 
1,291

 
82

 
2007
SUNTRUST BANK I FL
Gulf Breeze, FL
795

 
1,150

 
576

 
—

 
—

 
1,150

 
576

 
1,726

 
107

 
2007
SUNTRUST BANK I FL
Casselberry, FL
1,259

 
2,400

 
913

 
—

 
—

 
2,400

 
912

 
3,312

 
170

 
2007
SUNTRUST BANK I FL
Winter Park, FL
1,494

 
2,700

 
1,075

 
—

 
—

 
2,700

 
1,074

 
3,774

 
200

 
2007
SUNTRUST BANK I FL
Fort Pierce, FL
—

 
1,500

 
690

 
—

 
—

 
1,500

 
690

 
2,190

 
129

 
2007
SUNTRUST BANK I FL
Plant City, FL
633

 
600

 
456

 
—

 
—

 
600

 
456

 
1,056

 
85

 
2007
SUNTRUST BANK I FL
St. Petersburg, FL
913

 
1,540

 
662

 
—

 
—

 
1,540

 
662

 
2,202

 
123

 
2007
SUNTRUST BANK I FL
Ormond Beach, FL
911

 
580

 
661

 
—

 
—

 
580

 
660

 
1,240

 
123

 
2007
SUNTRUST BANK I FL
West St. Cloud, FL
1,085

 
1,840

 
786

 
(26
)
 
—

 
1,814

 
786

 
2,600

 
147

 
2007




123

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I FL
Tamarac, FL
899

 
1,450

 
652

 
—

 
—

 
1,450

 
652

 
2,102

 
121

 
2007
SUNTRUST BANK I GA
Brunswick, GA
676

 
1,050

 
584

 
—

 
—

 
1,050

 
584

 
1,634

 
109

 
2007
SUNTRUST BANK I GA
Kennesaw, GA
1,114

 
2,100

 
955

 
—

 
—

 
2,100

 
955

 
3,055

 
178

 
2007
SUNTRUST BANK I GA
Columbus, GA
1,003

 
675

 
852

 
—

 
—

 
675

 
852

 
1,527

 
159

 
2007
SUNTRUST BANK I GA
Atlanta, GA
3,857

 
7,184

 
3,329

 
—

 
—

 
7,184

 
3,330

 
10,514

 
621

 
2007
SUNTRUST BANK I GA
Chamblee, GA
890

 
1,375

 
756

 
—

 
—

 
1,375

 
756

 
2,131

 
141

 
2007
SUNTRUST BANK I GA
Conyers, GA
912

 
525

 
787

 
—

 
—

 
525

 
787

 
1,312

 
147

 
2007
SUNTRUST BANK I GA
Atlanta, GA
1,414

 
1,750

 
1,211

 
—

 
—

 
1,750

 
1,212

 
2,962

 
226

 
2007
SUNTRUST BANK I GA
Savannah, GA
560

 
300

 
483

 
—

 
—

 
300

 
483

 
783

 
90

 
2007
SUNTRUST BANK I GA
Dunwoody, GA
—

 
1,325

 
1,190

 
—

 
—

 
1,325

 
1,190

 
2,515

 
222

 
2007
SUNTRUST BANK I GA
Douglasville, GA
720

 
800

 
617

 
—

 
—

 
800

 
617

 
1,417

 
115

 
2007







124

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I GA
Albany, GA
293

 
325

 
253

 
—

 
—

 
325

 
253

 
578

 
47

 
2007
SUNTRUST BANK I GA
Athens, GA
540

 
865

 
466

 
—

 
—

 
865

 
466

 
1,330

 
87

 
2007
SUNTRUST BANK I GA
Macon, GA
472

 
250

 
408

 
—

 
—

 
250

 
408

 
658

 
76

 
2007
SUNTRUST BANK I GA
Atlanta, GA
—

 
500

 
652

 
—

 
—

 
500

 
653

 
1,153

 
122

 
2007
SUNTRUST BANK I GA
Duluth, GA
1,366

 
1,275

 
1,171

 
—

 
—

 
1,275

 
1,171

 
2,446

 
218

 
2007
SUNTRUST BANK I GA
Thomson, GA
—

 
360

 
565

 
—

 
—

 
360

 
565

 
925

 
105

 
2007
SUNTRUST BANK I GA
Madison, GA
723

 
90

 
614

 
—

 
—

 
90

 
614

 
704

 
114

 
2007
SUNTRUST BANK I GA
Savannah, GA
—

 
325

 
674

 
—

 
—

 
325

 
674

 
999

 
126

 
2007
SUNTRUST BANK I GA
Marietta, GA
1,298

 
2,025

 
1,120

 
—

 
—

 
2,025

 
1,120

 
3,145

 
209

 
2007
SUNTRUST BANK I GA
Marietta, GA
1,149

 
1,200

 
992

 
—

 
—

 
1,200

 
992

 
2,192

 
185

 
2007
SUNTRUST BANK I GA
Cartersville, GA
1,322

 
1,000

 
1,141

 
—

 
—

 
1,000

 
1,141

 
2,141

 
213

 
2007
SUNTRUST BANK I GA
Atlanta, GA
2,617

 
4,539

 
2,259

 
—

 
—

 
4,539

 
2,259

 
6,798

 
421

 
2007




125

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I GA
Lithonia, GA
539

 
300

 
465

 
—

 
—

 
300

 
465

 
765

 
87

 
2007
SUNTRUST BANK I GA
Peachtree City, GA
1,197

 
1,500

 
1,034

 
—

 
—

 
1,500

 
1,034

 
2,534

 
193

 
2007
SUNTRUST BANK I GA
Stone Mountain, GA
797

 
575

 
688

 
—

 
—

 
575

 
688

 
1,263

 
128

 
2007
SUNTRUST BANK I GA
Atlanta, GA
1,832

 
1,600

 
1,581

 
—

 
—

 
1,600

 
1,582

 
3,182

 
295

 
2007
SUNTRUST BANK I GA
Waycross, GA
—

 
175

 
658

 
—

 
—

 
175

 
658

 
833

 
123

 
2007
SUNTRUST BANK I GA
Union City, GA
402

 
475

 
347

 
—

 
—

 
475

 
347

 
822

 
65

 
2007
SUNTRUST BANK I GA
Savannah, GA
535

 
650

 
462

 
—

 
—

 
650

 
462

 
1,112

 
86

 
2007
SUNTRUST BANK I GA
Morrow, GA
1,017

 
525

 
878

 
—

 
—

 
525

 
878

 
1,403

 
164

 
2007
SUNTRUST BANK I GA
Norcross, GA
462

 
575

 
396

 
—

 
—

 
575

 
396

 
971

 
74

 
2007
SUNTRUST BANK I GA
Stockbridge, GA
699

 
869

 
603

 
—

 
—

 
869

 
603

 
1,472

 
112

 
2007
SUNTRUST BANK I GA
Stone Mountain, GA
529

 
250

 
449

 
—

 
—

 
250

 
449

 
699

 
84

 
2007
SUNTRUST BANK I GA
Sylvester, GA
450

 
575

 
388

 
—

 
—

 
575

 
388

 
963

 
72

 
2007




126

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I GA
Evans, GA
1,233

 
1,100

 
1,065

 
—

 
—

 
1,100

 
1,065

 
2,165

 
198

 
2007
SUNTRUST BANK I GA
Thomson, GA
340

 
200

 
294

 
—

 
—

 
200

 
294

 
494

 
55

 
2007
SUNTRUST BANK I MD
Landover, MD
—

 
800

 
1,174

 
—

 
—

 
800

 
1,173

 
1,973

 
219

 
2007
SUNTRUST BANK I MD
Avondale, MD
1,015

 
600

 
1,414

 
—

 
(1
)
 
600

 
1,413

 
2,013

 
263

 
2007
SUNTRUST BANK I MD
Cambridge, MD
1,050

 
800

 
1,462

 
—

 
(1
)
 
800

 
1,461

 
2,261

 
272

 
2007
SUNTRUST BANK I MD
Cockeysville, MD
1,139

 
800

 
1,575

 
—

 
(1
)
 
800

 
1,574

 
2,374

 
293

 
2007
SUNTRUST BANK I MD
Glen Burnie, MD
1,600

 
700

 
2,229

 
—

 
(1
)
 
700

 
2,228

 
2,928

 
415

 
2007
SUNTRUST BANK I MD
Annapolis, MD
1,776

 
100

 
2,473

 
—

 
(1
)
 
100

 
2,473

 
2,573

 
461

 
2007
SUNTRUST BANK I MD
Prince Frederick, MD
1,267

 
1,100

 
1,737

 
—

 
(1
)
 
1,100

 
1,737

 
2,837

 
324

 
2007
SUNTRUST BANK I NC
Greensboro, NC
608

 
600

 
844

 
—

 
—

 
600

 
844

 
1,444

 
157

 
2007
SUNTRUST BANK I NC
Greensboro, NC
510

 
550

 
719

 
—

 
—

 
550

 
719

 
1,269

 
134

 
2007





127

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I NC
Apex, NC
640

 
190

 
896

 
—

 
—

 
190

 
896

 
1,086

 
167

 
2007
SUNTRUST BANK I NC
Arden, NC
341

 
450

 
477

 
—

 
—

 
450

 
477

 
927

 
89

 
2007
SUNTRUST BANK I NC
Asheboro, NC
490

 
400

 
690

 
—

 
—

 
400

 
690

 
1,090

 
129

 
2007
SUNTRUST BANK I NC
Bessemer City, NC
428

 
75

 
604

 
—

 
—

 
75

 
604

 
679

 
113

 
2007
SUNTRUST BANK I NC
Durham, NC
315

 
500

 
444

 
—

 
—

 
500

 
444

 
944

 
83

 
2007
SUNTRUST BANK I NC
Charlotte, NC
506

 
550

 
701

 
—

 
—

 
550

 
702

 
1,252

 
131

 
2007
SUNTRUST BANK I NC
Charlotte, NC
632

 
200

 
891

 
—

 
—

 
200

 
891

 
1,091

 
166

 
2007
SUNTRUST BANK I NC
Greensboro, NC
654

 
425

 
915

 
—

 
—

 
425

 
915

 
1,340

 
170

 
2007
SUNTRUST BANK I NC
Creedmoor, NC
369

 
320

 
512

 
—

 
—

 
320

 
512

 
832

 
95

 
2007
SUNTRUST BANK I NC
Durham, NC
565

 
280

 
796

 
—

 
—

 
280

 
797

 
1,077

 
148

 
2007
SUNTRUST BANK I NC
Dunn, NC
583

 
400

 
821

 
—

 
—

 
400

 
822

 
1,222

 
153

 
2007
SUNTRUST BANK I NC
Harrisburg, NC
276

 
550

 
389

 
—

 
—

 
550

 
389

 
939

 
73

 
2007




128

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I NC
Hendersonville, NC
659

 
450

 
929

 
—

 
—

 
450

 
929

 
1,379

 
173

 
2007
SUNTRUST BANK I NC
Cary, NC
—

 
230

 
708

 
—

 
—

 
230

 
709

 
939

 
132

 
2007
SUNTRUST BANK I NC
Mebane, NC
734

 
300

 
1,034

 
—

 
—

 
300

 
1,035

 
1,335

 
193

 
2007
SUNTRUST BANK I NC
Lenoir, NC
1,689

 
175

 
2,380

 
—

 
1

 
175

 
2,381

 
2,556

 
444

 
2007
SUNTRUST BANK I NC
Roxboro, NC
539

 
130

 
747

 
—

 
—

 
130

 
748

 
878

 
139

 
2007
SUNTRUST BANK I NC
Winston-Salem, NC
438

 
300

 
617

 
—

 
—

 
300

 
617

 
917

 
115

 
2007
SUNTRUST BANK I NC
Oxford, NC
826

 
280

 
1,164

 
—

 
—

 
280

 
1,165

 
1,445

 
217

 
2007
SUNTRUST BANK I NC
Pittsboro, NC
294

 
25

 
408

 
—

 
—

 
25

 
408

 
433

 
76

 
2007
SUNTRUST BANK I NC
Charlotte, NC
753

 
500

 
1,061

 
—

 
—

 
500

 
1,061

 
1,561

 
198

 
2007
SUNTRUST BANK I NC
Greensboro, NC
401

 
500

 
561

 
—

 
—

 
500

 
561

 
1,061

 
104

 
2007
SUNTRUST BANK I NC
Stanley, NC
291

 
350

 
410

 
—

 
—

 
350

 
410

 
760

 
76

 
2007
SUNTRUST BANK I NC
Salisbury, NC
273

 
275

 
382

 
—

 
—

 
275

 
382

 
657

 
71

 
2007



129

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I NC
Stokesdale, NC
—

 
250

 
477

 
—

 
—

 
250

 
477

 
727

 
89

 
2007
SUNTRUST BANK I NC
Sylva, NC
317

 
600

 
446

 
—

 
—

 
600

 
446

 
1,046

 
83

 
2007
SUNTRUST BANK I NC
Lexington, NC
168

 
150

 
237

 
—

 
—

 
150

 
237

 
387

 
44

 
2007
SUNTRUST BANK I NC
Walnut Cove, NC
478

 
140

 
674

 
—

 
—

 
140

 
674

 
814

 
126

 
2007
SUNTRUST BANK I NC
Waynesville, NC
—

 
200

 
632

 
—

 
—

 
200

 
632

 
832

 
118

 
2007
SUNTRUST BANK I NC
Concord, NC
—

 
550

 
757

 
—

 
—

 
550

 
757

 
1,307

 
141

 
2007
SUNTRUST BANK I NC
Yadkinville, NC
668

 
250

 
941

 
—

 
—

 
250

 
941

 
1,191

 
175

 
2007
SUNTRUST BANK I NC
Rural Hall, NC
252

 
275

 
356

 
—

 
—

 
275

 
356

 
631

 
66

 
2007
SUNTRUST BANK I NC
Summerfield, NC
—

 
450

 
479

 
—

 
—

 
450

 
479

 
929

 
89

 
2007
SUNTRUST BANK I SC
Greenville, SC
836

 
260

 
1,255

 
—

 
(1
)
 
260

 
1,254

 
1,514

 
234

 
2007
SUNTRUST BANK I SC
Fountain Inn, SC
—

 
36

 
904

 
—

 
(1
)
 
36

 
903

 
939

 
168

 
2007
SUNTRUST BANK I SC
Liberty, SC
513

 
80

 
758

 
—

 
—

 
80

 
758

 
838

 
141

 
2007



130

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I SC
Mauldin, SC
590

 
350

 
878

 
—

 
(1
)
 
350

 
878

 
1,228

 
164

 
2007
SUNTRUST BANK I SC
Greenville, SC
543

 
160

 
816

 
—

 
—

 
160

 
815

 
975

 
152

 
2007
SUNTRUST BANK I SC
Greenville, SC
411

 
360

 
618

 
—

 
—

 
360

 
617

 
977

 
115

 
2007
SUNTRUST BANK I SC
Greenville, SC
794

 
800

 
1,192

 
—

 
(1
)
 
800

 
1,192

 
1,992

 
222

 
2007
SUNTRUST BANK I TN
Kingsport, TN
343

 
240

 
319

 
—

 
—

 
240

 
319

 
559

 
59

 
2007
SUNTRUST BANK I TN
Morristown, TN
251

 
370

 
234

 
—

 
—

 
370

 
233

 
603

 
44

 
2007
SUNTRUST BANK I TN
Brentwood, TN
1,112

 
1,110

 
1,036

 
—

 
(1
)
 
1,110

 
1,035

 
2,145

 
193

 
2007
SUNTRUST BANK I TN
Brentwood, TN
1,001

 
1,100

 
932

 
—

 
(1
)
 
1,100

 
931

 
2,031

 
174

 
2007
SUNTRUST BANK I TN
Nashville, TN
1,104

 
1,450

 
1,028

 
—

 
(1
)
 
1,450

 
1,027

 
2,477

 
191

 
2007
SUNTRUST BANK I TN
Nashville, TN
—

 
675

 
350

 
—

 
—

 
675

 
350

 
1,025

 
65

 
2007
SUNTRUST BANK I TN
East Ridge, TN
433

 
250

 
400

 
—

 
—

 
250

 
400

 
650

 
75

 
2007
SUNTRUST BANK I TN
Nashville, TN
952

 
735

 
872

 
—

 
(1
)
 
735

 
872

 
1,607

 
162

 
2007




131

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I TN
Chattanooga, TN
—

 
370

 
409

 
—

 
—

 
370

 
408

 
778

 
76

 
2007
SUNTRUST BANK I TN
Lebanon, TN
925

 
675

 
848

 
—

 
(1
)
 
675

 
847

 
1,522

 
158

 
2007
SUNTRUST BANK I TN
Chattanooga, TN
677

 
425

 
630

 
—

 
(1
)
 
425

 
630

 
1,055

 
117

 
2007
SUNTRUST BANK I TN
Chattanooga, TN
531

 
185

 
491

 
—

 
—

 
185

 
491

 
676

 
91

 
2007
SUNTRUST BANK I TN
Loudon, TN
411

 
410

 
383

 
—

 
—

 
410

 
383

 
793

 
71

 
2007
SUNTRUST BANK I TN
Nashville, TN
726

 
1,400

 
671

 
—

 
(1
)
 
1,400

 
671

 
2,071

 
125

 
2007
SUNTRUST BANK I TN
Soddy Daisy, TN
423

 
150

 
394

 
—

 
—

 
150

 
393

 
543

 
73

 
2007
SUNTRUST BANK I TN
Oak Ridge, TN
—

 
660

 
725

 
—

 
(1
)
 
660

 
725

 
1,385

 
135

 
2007
SUNTRUST BANK I TN
Savannah, TN
—

 
335

 
645

 
—

 
(1
)
 
335

 
644

 
979

 
120

 
2007
SUNTRUST BANK I TN
Signal Mountain, TN
403

 
550

 
375

 
—

 
—

 
550

 
375

 
925

 
70

 
2007
SUNTRUST BANK I TN
Smyrna, TN
636

 
870

 
593

 
—

 
(1
)
 
870

 
592

 
1,462

 
110

 
2007
SUNTRUST BANK I TN
Murfreesboro, TN
570

 
1,000

 
530

 
—

 
(1
)
 
1,000

 
530

 
1,530

 
99

 
2007




132

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I TN
Murfreesboro, TN
285

 
391

 
265

 
—

 
—

 
391

 
265

 
657

 
49

 
2007
SUNTRUST BANK I TN
Johnson City, TN
184

 
180

 
168

 
—

 
—

 
180

 
168

 
348

 
31

 
2007
SUNTRUST BANK I TN
Chattanooga, TN
298

 
453

 
278

 
—

 
—

 
453

 
278

 
730

 
52

 
2007
SUNTRUST BANK I TN
Nashville, TN
488

 
620

 
454

 
—

 
—

 
620

 
454

 
1,074

 
85

 
2007
SUNTRUST BANK I VA
Accomac, VA
232

 
30

 
260

 
—

 
—

 
30

 
260

 
290

 
49

 
2007
SUNTRUST BANK I VA
Richmond, VA
273

 
300

 
306

 
—

 
—

 
300

 
306

 
606

 
57

 
2007
SUNTRUST BANK I VA
Fairfax, VA
1,471

 
1,000

 
1,647

 
—

 
—

 
1,000

 
1,647

 
2,647

 
307

 
2007
SUNTRUST BANK I VA
Fredericksburg, VA
911

 
1,000

 
1,012

 
—

 
—

 
1,000

 
1,012

 
2,012

 
189

 
2007
SUNTRUST BANK I VA
Richmond, VA
261

 
500

 
292

 
—

 
—

 
500

 
292

 
792

 
54

 
2007
SUNTRUST BANK I VA
Collinsville, VA
349

 
140

 
384

 
—

 
—

 
140

 
384

 
524

 
72

 
2007
SUNTRUST BANK I VA
Doswell, VA
—

 
150

 
346

 
—

 
—

 
150

 
346

 
496

 
64

 
2007
SUNTRUST BANK I VA
Lynchburg, VA
889

 
380

 
988

 
—

 
—

 
380

 
987

 
1,367

 
184

 
2007




133

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)

Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I VA
Stafford, VA
1,323

 
2,200

 
1,482

 
—

 
—

 
2,200

 
1,482

 
3,682

 
276

 
2007
SUNTRUST BANK I VA
Gloucester, VA
1,036

 
760

 
1,142

 
—

 
—

 
760

 
1,142

 
1,902

 
213

 
2007
SUNTRUST BANK I VA
Chesapeake, VA
653

 
450

 
726

 
—

 
—

 
450

 
725

 
1,175

 
135

 
2007
SUNTRUST BANK I VA
Lexington, VA
204

 
310

 
228

 
—

 
—

 
310

 
228

 
538

 
42

 
2007
SUNTRUST BANK I VA
Radford, VA
165

 
90

 
185

 
—

 
—

 
90

 
185

 
275

 
34

 
2007
SUNTRUST BANK I VA
Williamsburg, VA
489

 
530

 
547

 
—

 
—

 
530

 
547

 
1,077

 
102

 
2007
SUNTRUST BANK I VA
Salem, VA
—

 
860

 
479

 
—

 
—

 
860

 
479

 
1,339

 
89

 
2007
SUNTRUST BANK I VA
Roanoke, VA
1,212

 
1,170

 
1,357

 
—

 
—

 
1,170

 
1,357

 
2,527

 
253

 
2007
SUNTRUST BANK I VA
New Market, VA
—

 
150

 
634

 
—

 
—

 
150

 
634

 
784

 
118

 
2007
SUNTRUST BANK I VA
Onancock, VA
892

 
200

 
999

 
—

 
—

 
200

 
999

 
1,199

 
186

 
2007
SUNTRUST BANK I VA
Painter, VA
157

 
120

 
176

 
—

 
—

 
120

 
176

 
296

 
33

 
2007
SUNTRUST BANK I VA
Stuart, VA
840

 
260

 
926

 
—

 
—

 
260

 
926

 
1,186

 
172

 
2007


134

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST BANK I VA
Roanoke, VA
445

 
450

 
498

 
—

 
—

 
450

 
498

 
948

 
93

 
2007
SUNTRUST BANK I VA
Vinton, VA
—

 
399

 
243

 
—

 
—

 
399

 
243

 
642

 
45

 
2007
SUNTRUST II FLORIDA
Miami, FL
1,550

 
1,533

 
893

 
—

 
3

 
1,533

 
896

 
2,429

 
164

 
2007
SUNTRUST II FLORIDA
Destin, FL
1,408

 
1,392

 
811

 
—

 
2

 
1,392

 
813

 
2,206

 
149

 
2007
SUNTRUST II FLORIDA
Dunedin, FL
—

 
1,463

 
852

 
—

 
2

 
1,463

 
855

 
2,318

 
157

 
2007
SUNTRUST II FLORIDA
Palm Harbor FL
1,094

 
1,082

 
630

 
—

 
2

 
1,082

 
632

 
1,715

 
116

 
2007
SUNTRUST II FLORIDA
Tallahassee, FL
1,694

 
1,675

 
976

 
—

 
3

 
1,675

 
979

 
2,654

 
179

 
2007
SUNTRUST II FLORIDA
Orlando, FL
1,235

 
1,221

 
711

 
—

 
2

 
1,221

 
713

 
1,935

 
131

 
2007
SUNTRUST II FLORIDA
Melbourne, FL
1,140

 
1,127

 
656

 
—

 
2

 
1,127

 
658

 
1,785

 
121

 
2007
SUNTRUST II FLORIDA
Coral Springs, FL
1,333

 
1,319

 
768

 
—

 
2

 
1,319

 
770

 
2,089

 
141

 
2007
SUNTRUST II FLORIDA
Lakeland, FL
1,049

 
1,038

 
604

 
—

 
2

 
1,038

 
606

 
1,644

 
111

 
2007




135

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)



Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST II FLORIDA
Palm Coast, FL
—

 
1,221

 
711

 
—

 
2

 
1,221

 
713

 
1,935

 
131

 
2007
SUNTRUST II FLORIDA
Plant City, FL
—

 
1,527

 
890

 
—

 
3

 
1,527

 
892

 
2,420

 
163

 
2007
SUNTRUST II FLORIDA
South Daytona, FL
1,037

 
1,026

 
598

 
—

 
2

 
1,026

 
599

 
1,625

 
110

 
2007
SUNTRUST II FLORIDA
Pensacola, FL
993

 
982

 
572

 
—

 
2

 
982

 
574

 
1,556

 
105

 
2007
SUNTRUST II FLORIDA
West Palm Beach, FL
—

 
1,240

 
722

 
—

 
2

 
1,240

 
724

 
1,965

 
133

 
2007
SUNTRUST II FLORIDA
Lake Wells, FL
—

 
815

 
475

 
—

 
1

 
815

 
476

 
1,292

 
87

 
2007
SUNTRUST II FLORIDA
Dunnellon, FL
—

 
339

 
198

 
—

 
1

 
339

 
198

 
537

 
36

 
2007
SUNTRUST II FLORIDA
Kissimmee, FL
—

 
1,180

 
687

 
—

 
2

 
1,180

 
689

 
1,869

 
126

 
2007
SUNTRUST II FLORIDA
Port Orange, FL
—

 
1,131

 
659

 
—

 
2

 
1,131

 
660

 
1,791

 
121

 
2007
SUNTRUST II FLORIDA
North Port, FL
—

 
1,119

 
652

 
—

 
2

 
1,119

 
654

 
1,772

 
120

 
2007





136

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST II FLORIDA
Hudson, FL
—

 
1,095

 
638

 
—

 
2

 
1,095

 
640

 
1,735

 
117

 
2007
SUNTRUST II FLORIDA
Port Orange, FL
—

 
1,030

 
600

 
—

 
2

 
1,030

 
602

 
1,632

 
110

 
2007
SUNTRUST II GEORGIA
Atlanta, GA
1,487

 
1,399

 
1,057

 
58

 
6

 
1,458

 
1,063

 
2,521

 
195

 
2007
SUNTRUST II GEORGIA
Bowden, GA
—

 
900

 
680

 
37

 
4

 
938

 
684

 
1,622

 
125

 
2007
SUNTRUST II GEORGIA
St. Simons Island, GA
—

 
1,124

 
849

 
47

 
5

 
1,171

 
854

 
2,025

 
156

 
2007
SUNTRUST II GEORGIA
Dunwoody, GA
—

 
1,734

 
1,310

 
72

 
7

 
1,806

 
1,317

 
3,123

 
241

 
2007
SUNTRUST II GEORGIA
Atlanta, GA
1,086

 
1,022

 
772

 
42

 
4

 
1,064

 
776

 
1,841

 
142

 
2007
SUNTRUST II GEORGIA
Jessup, GA
—

 
1,010

 
763

 
42

 
4

 
1,052

 
767

 
1,820

 
141

 
2007
SUNTRUST II GEORGIA
Brunswick, GA
168

 
159

 
120

 
7

 
1

 
165

 
120

 
286

 
22

 
2007
SUNTRUST II GEORGIA
Roswell, GA
1,347

 
1,268

 
958

 
53

 
5

 
1,320

 
963

 
2,283

 
176

 
2007






137

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST II GEORGIA
Augusta, GA
—

 
607

 
459

 
25

 
2

 
632

 
461

 
1,094

 
84

 
2007
SUNTRUST II MARYLAND
Annapolis, MD
2,949

 
1,747

 
2,890

 
—

 
2

 
1,747

 
2,892

 
4,639

 
530

 
2007
SUNTRUST II MARYLAND
Frederick, MD
1,218

 
721

 
1,193

 
—

 
1

 
721

 
1,194

 
1,915

 
219

 
2007
SUNTRUST II MARYLAND
Waldorf, MD
—

 
1,269

 
2,099

 
—

 
1

 
1,269

 
2,100

 
3,369

 
385

 
2007
SUNTRUST II MARYLAND
Ellicott City, MD
—

 
962

 
1,591

 
—

 
1

 
962

 
1,592

 
2,554

 
292

 
2007
SUNTRUST II NORTH CAROLINA
Belmont, NC
—

 
453

 
1,038

 
—

 
1

 
453

 
1,039

 
1,492

 
190

 
2007
SUNTRUST II NORTH CAROLINA
Carrboro, NC
630

 
301

 
690

 
—

 
1

 
301

 
691

 
992

 
127

 
2007
SUNTRUST II NORTH CAROLINA
Monroe, NC
1,257

 
601

 
1,375

 
—

 
2

 
601

 
1,377

 
1,978

 
252

 
2007
SUNTRUST II NORTH CAROLINA
Lexington, NC
787

 
376

 
861

 
—

 
1

 
376

 
862

 
1,238

 
158

 
2007








138

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST II NORTH CAROLINA
Burlington, NC
610

 
292

 
668

 
—

 
1

 
292

 
669

 
961

 
123

 
2007
SUNTRUST II NORTH CAROLINA
Mocksville, NC
—

 
1,155

 
2,645

 
—

 
3

 
1,155

 
2,648

 
3,803

 
485

 
2007
SUNTRUST II NORTH CAROLINA
Durham, NC
1,310

 
627

 
1,434

 
—

 
2

 
627

 
1,436

 
2,063

 
263

 
2007
SUNTRUST II NORTH CAROLINA
Oakboro, NC
555

 
265

 
607

 
—

 
1

 
265

 
608

 
873

 
111

 
2007
SUNTRUST II NORTH CAROLINA
Concord, NC
869

 
416

 
951

 
—

 
1

 
416

 
953

 
1,368

 
175

 
2007
SUNTRUST II NORTH CAROLINA
Raleigh, NC
—

 
386

 
883

 
—

 
1

 
386

 
884

 
1,270

 
162

 
2007
SUNTRUST II NORTH CAROLINA
Greensboro, NC
—

 
338

 
773

 
—

 
1

 
338

 
774

 
1,111

 
142

 
2007
SUNTRUST II NORTH CAROLINA
Pittsboro, NC
222

 
106

 
243

 
—

 
—

 
106

 
243

 
349

 
45

 
2007








139

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST II NORTH CAROLINA
Yadkinville, NC
351

 
168

 
385

 
—

 
—

 
168

 
385

 
553

 
71

 
2007
SUNTRUST II NORTH CAROLINA
Matthews, NC
—

 
226

 
517

 
—

 
1

 
226

 
517

 
743

 
95

 
2007
SUNTRUST II NORTH CAROLINA
Burlington, NC
—

 
183

 
419

 
—

 
1

 
183

 
420

 
603

 
77

 
2007
SUNTRUST II NORTH CAROLINA
Zebulon, NC
706

 
338

 
773

 
—

 
1

 
338

 
774

 
1,111

 
142

 
2007
SUNTRUST II SOUTH CAROLINA
Belton, SC
647

 
220

 
798

 
—

 
—

 
220

 
798

 
1,018

 
146

 
2007
SUNTRUST II SOUTH CAROLINA
Anderson, SC
—

 
343

 
1,243

 
—

 
1

 
343

 
1,244

 
1,587

 
228

 
2007
SUNTRUST II SOUTH CAROLINA
Travelers Rest, SC
918

 
312

 
1,132

 
—

 
1

 
312

 
1,132

 
1,444

 
208

 
2007
SUNTRUST II TENNESSEE
Nashville, TN
1,780

 
1,190

 
1,619

 
—

 
3

 
1,190

 
1,623

 
2,812

 
297

 
2007











140

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST II TENNESSEE
Lavergne, TN
—

 
156

 
213

 
—

 
—

 
156

 
213

 
369

 
39

 
2007
SUNTRUST II TENNESSEE
Nashville, TN
757

 
506

 
689

 
—

 
1

 
506

 
690

 
1,196

 
126

 
2007
SUNTRUST II TENNESSEE
Nashville, TN
538

 
360

 
489

 
—

 
1

 
360

 
490

 
850

 
90

 
2007
SUNTRUST II TENNESSEE
Chatanooga, TN
—

 
622

 
847

 
—

 
2

 
622

 
848

 
1,470

 
155

 
2007
SUNTRUST II TENNESSEE
Madison, TN
—

 
587

 
798

 
—

 
2

 
587

 
800

 
1,387

 
147

 
2007
SUNTRUST II VIRGINIA
Richmond, VA
1,383

 
759

 
1,423

 
—

 
(1
)
 
759

 
1,422

 
2,181

 
261

 
2007
SUNTRUST II VIRGINIA
Richmond, VA
—

 
235

 
441

 
—

 
—

 
235

 
441

 
676

 
81

 
2007
SUNTRUST II VIRGINIA
Norfolk, VA
672

 
369

 
692

 
—

 
—

 
369

 
692

 
1,061

 
127

 
2007
SUNTRUST II VIRGINIA
Lynchburg, VA
—

 
242

 
454

 
—

 
—

 
242

 
453

 
695

 
83

 
2007
SUNTRUST II VIRGINIA
Cheriton, VA
—

 
203

 
382

 
—

 
—

 
203

 
381

 
585

 
70

 
2007
SUNTRUST II VIRGINIA
Rocky Mount, VA
1,117

 
613

 
1,149

 
—

 
(1
)
 
613

 
1,149

 
1,761

 
211

 
2007
SUNTRUST II VIRGINIA
Petersburg, VA
253

 
139

 
260

 
—

 
—

 
139

 
260

 
399

 
48

 
2007



141

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST III DISTRICT OF COLUMBIA
Washington, DC
1,737

 
800

 
1,986

 
—

 
—

 
800

 
1,986

 
2,786

 
346

 
2008
SUNTRUST III FLORIDA
Avon Park, FL
1,091

 
1,199

 
729

 
—

 
—

 
1,199

 
729

 
1,928

 
127

 
2008
SUNTRUST III FLORIDA
Bartow, FL
622

 
622

 
378

 
—

 
—

 
622

 
378

 
1,000

 
66

 
2008
SUNTRUST III FLORIDA
Belleview, FL
560

 
616

 
374

 
—

 
—

 
616

 
374

 
991

 
65

 
2008
SUNTRUST III FLORIDA
Beverly Hills, FL
1,021

 
1,020

 
620

 
—

 
—

 
1,020

 
620

 
1,640

 
108

 
2008
SUNTRUST III FLORIDA
Boca Raton, FL
1,503

 
1,474

 
896

 
—

 
—

 
1,474

 
896

 
2,370

 
156

 
2008
SUNTRUST III FLORIDA
Bradenton, FL
1,009

 
990

 
602

 
—

 
—

 
990

 
602

 
1,592

 
105

 
2008
SUNTRUST III FLORIDA
Cape Coral, FL
1,214

 
1,192

 
724

 
—

 
—

 
1,192

 
724

 
1,916

 
126

 
2008
SUNTRUST III FLORIDA
Clearwater, FL
569

 
559

 
340

 
—

 
—

 
559

 
340

 
898

 
59

 
2008
SUNTRUST III FLORIDA
Crystal River, FL
1,677

 
1,646

 
1,000

 
—

 
—

 
1,646

 
1,000

 
2,645

 
174

 
2008
SUNTRUST III FLORIDA
Daytona Beach Shores, FL
601

 
661

 
402

 
—

 
—

 
661

 
402

 
1,063

 
70

 
2008



142

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST III FLORIDA
Deland, FL
992

 
975

 
592

 
—

 
—

 
975

 
592

 
1,567

 
103

 
2008
SUNTRUST III FLORIDA
Deland, FL
975

 
975

 
592

 
—

 
—

 
975

 
592

 
1,567

 
103

 
2008
SUNTRUST III FLORIDA
Edgewater, FL
1,063

 
1,043

 
634

 
—

 
—

 
1,043

 
634

 
1,677

 
110

 
2008
SUNTRUST III FLORIDA
Flager Beach, FL
941

 
924

 
562

 
—

 
—

 
924

 
562

 
1,486

 
98

 
2008
SUNTRUST III FLORIDA
Fort Myers, FL
690

 
678

 
412

 
—

 
—

 
678

 
412

 
1,090

 
72

 
2008
SUNTRUST III FLORIDA
Fort Myers, FL
1,082

 
1,081

 
657

 
—

 
—

 
1,081

 
657

 
1,738

 
114

 
2008
SUNTRUST III FLORIDA
Greenacres City, FL
1,454

 
1,426

 
867

 
—

 
—

 
1,426

 
867

 
2,293

 
151

 
2008
SUNTRUST III FLORIDA
Gulf Breeze, FL
1,812

 
1,778

 
1,080

 
—

 
—

 
1,778

 
1,080

 
2,859

 
188

 
2008
SUNTRUST III FLORIDA
Haines City, FL
1,107

 
1,106

 
672

 
—

 
—

 
1,106

 
672

 
1,778

 
117

 
2008
SUNTRUST III FLORIDA
Hallandale, FL
2,220

 
2,178

 
1,323

 
—

 
—

 
2,178

 
1,323

 
3,501

 
230

 
2008
SUNTRUST III FLORIDA
Hamosassa, FL
618

 
680

 
413

 
—

 
—

 
680

 
413

 
1,093

 
72

 
2008
SUNTRUST III FLORIDA
Hilaleah, FL
2,154

 
2,115

 
1,285

 
—

 
—

 
2,115

 
1,285

 
3,401

 
224

 
2008



143

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST III FLORIDA
Inverness, FL
525

 
577

 
350

 
—

 
—

 
577

 
350

 
927

 
61

 
2008
SUNTRUST III FLORIDA
Jacksonville, FL
862

 
862

 
524

 
—

 
—

 
862

 
524

 
1,385

 
91

 
2008
SUNTRUST III FLORIDA
Jacksonville, FL
1,101

 
1,080

 
656

 
—

 
—

 
1,080

 
656

 
1,736

 
114

 
2008
SUNTRUST III FLORIDA
Jupiter, FL
1,176

 
1,294

 
786

 
—

 
—

 
1,294

 
786

 
2,080

 
137

 
2008
SUNTRUST III FLORIDA
Lady Lake, FL
1,022

 
1,124

 
683

 
—

 
—

 
1,124

 
683

 
1,806

 
119

 
2008
SUNTRUST III FLORIDA
Lady Lake, FL
1,307

 
1,283

 
779

 
—

 
—

 
1,283

 
779

 
2,062

 
136

 
2008
SUNTRUST III FLORIDA
Lake Placid, FL
1,053

 
1,052

 
639

 
—

 
—

 
1,052

 
639

 
1,692

 
111

 
2008
SUNTRUST III FLORIDA
Lakeland, FL
809

 
795

 
483

 
—

 
—

 
795

 
483

 
1,278

 
84

 
2008
SUNTRUST III FLORIDA
Largo, FL
719

 
706

 
429

 
—

 
—

 
706

 
429

 
1,135

 
75

 
2008
SUNTRUST III FLORIDA
Lynn Haven, FL
879

 
863

 
525

 
—

 
—

 
863

 
525

 
1,388

 
91

 
2008
SUNTRUST III FLORIDA
Melbourne, FL
890

 
874

 
531

 
—

 
—

 
874

 
531

 
1,405

 
92

 
2008
SUNTRUST III FLORIDA
Miami, FL
1,634

 
1,633

 
992

 
—

 
—

 
1,633

 
992

 
2,624

 
173

 
2008



144

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST III FLORIDA
Miami Beach, FL
957

 
956

 
581

 
—

 
—

 
956

 
581

 
1,538

 
101

 
2008
SUNTRUST III FLORIDA
New Port Richey, FL
936

 
935

 
568

 
—

 
—

 
935

 
568

 
1,503

 
99

 
2008
SUNTRUST III FLORIDA
Orlando, FL
1,499

 
1,498

 
910

 
—

 
—

 
1,498

 
910

 
2,408

 
158

 
2008
SUNTRUST III FLORIDA
Orlando, FL
1,278

 
1,405

 
854

 
—

 
—

 
1,405

 
854

 
2,259

 
149

 
2008
SUNTRUST III FLORIDA
Palm Harbor, FL
583

 
572

 
348

 
—

 
—

 
572

 
348

 
920

 
61

 
2008
SUNTRUST III FLORIDA
Palm Harbor, FL
1,378

 
1,352

 
821

 
—

 
—

 
1,352

 
821

 
2,173

 
143

 
2008
SUNTRUST III FLORIDA
Port St. Lucie, FL
945

 
928

 
564

 
—

 
—

 
928

 
564

 
1,492

 
98

 
2008
SUNTRUST III FLORIDA
Punta Gorda, FL
1,696

 
1,695

 
1,030

 
—

 
—

 
1,695

 
1,030

 
2,724

 
179

 
2008
SUNTRUST III FLORIDA
Roseland, FL
993

 
974

 
592

 
—

 
—

 
974

 
592

 
1,567

 
103

 
2008
SUNTRUST III FLORIDA
Sebring, FL
802

 
787

 
478

 
—

 
—

 
787

 
478

 
1,265

 
83

 
2008
SUNTRUST III FLORIDA
Seminole, FL
757

 
743

 
452

 
—

 
—

 
743

 
452

 
1,195

 
79

 
2008
SUNTRUST III FLORIDA
Spring Hill, FL
835

 
820

 
498

 
—

 
—

 
820

 
498

 
1,319

 
87

 
2008


145

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST III FLORIDA
Spring Hill, FL
1,237

 
1,360

 
827

 
—

 
—

 
1,360

 
827

 
2,187

 
144

 
2008
SUNTRUST III FLORIDA
Spring Hill, FL
1,210

 
1,330

 
808

 
—

 
—

 
1,330

 
808

 
2,138

 
141

 
2008
SUNTRUST III FLORIDA
St. Petersburg, FL
953

 
936

 
569

 
—

 
—

 
936

 
569

 
1,505

 
99

 
2008
SUNTRUST III FLORIDA
Stuart, FL
1,733

 
1,906

 
1,158

 
—

 
—

 
1,906

 
1,158

 
3,063

 
202

 
2008
SUNTRUST III FLORIDA
Sun City Center, FL
2,014

 
2,013

 
1,223

 
—

 
—

 
2,013

 
1,223

 
3,236

 
213

 
2008
SUNTRUST III FLORIDA
Tamarac, FL
1,547

 
1,518

 
922

 
—

 
—

 
1,518

 
922

 
2,440

 
161

 
2008
SUNTRUST III FLORIDA
Valrico, FL
605

 
605

 
367

 
—

 
—

 
605

 
367

 
972

 
64

 
2008
SUNTRUST III FLORIDA
Wildwood, FL
760

 
760

 
462

 
—

 
—

 
760

 
462

 
1,221

 
80

 
2008
SUNTRUST III FLORIDA
Zephyhills, FL
817

 
802

 
488

 
—

 
—

 
802

 
488

 
1,290

 
85

 
2008
SUNTRUST III FLORIDA
Zephyhills, FL
1,742

 
1,916

 
1,164

 
—

 
—

 
1,916

 
1,164

 
3,080

 
203

 
2008
SUNTRUST III GEORGIA
Albany, GA
659

 
564

 
482

 
—

 
—

 
564

 
482

 
1,046

 
84

 
2008
SUNTRUST III GEORGIA
Alpharetta, GA
1,917

 
1,642

 
1,404

 
—

 
—

 
1,642

 
1,404

 
3,046

 
244

 
2008



146

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST III GEORGIA
Alpharetta, GA
1,440

 
1,233

 
1,054

 
—

 
—

 
1,233

 
1,054

 
2,287

 
183

 
2008
SUNTRUST III GEORGIA
Athens, GA
1,117

 
1,061

 
907

 
—

 
—

 
1,061

 
907

 
1,968

 
158

 
2008
SUNTRUST III GEORGIA
Atlanta, GA
2,300

 
2,005

 
1,714

 
—

 
—

 
2,005

 
1,714

 
3,719

 
298

 
2008
SUNTRUST III GEORGIA
Atlanta, GA
498

 
427

 
365

 
—

 
—

 
427

 
365

 
791

 
63

 
2008
SUNTRUST III GEORGIA
Augusta, GA
935

 
888

 
759

 
—

 
—

 
888

 
759

 
1,647

 
132

 
2008
SUNTRUST III GEORGIA
Augusta, GA
455

 
432

 
370

 
—

 
—

 
432

 
370

 
802

 
64

 
2008
SUNTRUST III GEORGIA
Augusta, GA
680

 
582

 
498

 
—

 
—

 
582

 
498

 
1,080

 
87

 
2008
SUNTRUST III GEORGIA
Baxley, GA
1,055

 
904

 
772

 
—

 
—

 
904

 
772

 
1,676

 
134

 
2008
SUNTRUST III GEORGIA
Columbus, GA
610

 
523

 
447

 
—

 
—

 
523

 
447

 
970

 
78

 
2008
SUNTRUST III GEORGIA
Conyers, GA
531

 
454

 
389

 
—

 
—

 
454

 
389

 
843

 
68

 
2008
SUNTRUST III GEORGIA
Douglas, GA
706

 
615

 
526

 
—

 
—

 
615

 
526

 
1,141

 
92

 
2008
SUNTRUST III GEORGIA
Duluth, GA
1,182

 
1,122

 
959

 
—

 
—

 
1,122

 
959

 
2,081

 
167

 
2008



147

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST III GEORGIA
Jonesboro, GA
937

 
802

 
686

 
—

 
—

 
802

 
686

 
1,488

 
119

 
2008
SUNTRUST III GEORGIA
Lawrenceville, GA
1,828

 
1,593

 
1,362

 
—

 
—

 
1,593

 
1,362

 
2,955

 
237

 
2008
SUNTRUST III GEORGIA
Marietta, GA
851

 
728

 
622

 
—

 
—

 
728

 
622

 
1,351

 
108

 
2008
SUNTRUST III GEORGIA
Norcross, GA
735

 
641

 
548

 
—

 
—

 
641

 
548

 
1,189

 
95

 
2008
SUNTRUST III GEORGIA
Tucker, GA
891

 
777

 
664

 
—

 
—

 
777

 
664

 
1,441

 
116

 
2008
SUNTRUST III GEORGIA
Warner Robins, GA
1,435

 
1,251

 
1,069

 
—

 
—

 
1,251

 
1,069

 
2,320

 
186

 
2008
SUNTRUST III GEORGIA
Woodstock, GA
1,225

 
1,050

 
897

 
—

 
—

 
1,050

 
897

 
1,947

 
156

 
2008
SUNTRUST III GEORGIA
Macon, GA
388

 
332

 
284

 
—

 
—

 
332

 
284

 
615

 
49

 
2008
SUNTRUST III MARYLAND
Bladensburg, MD
1,040

 
563

 
1,427

 
—

 
—

 
563

 
1,427

 
1,989

 
248

 
2008
SUNTRUST III MARYLAND
Chestertown, MD
822

 
368

 
933

 
—

 
—

 
368

 
933

 
1,301

 
162

 
2008
SUNTRUST III MARYLAND
Upper Marlboro, MD
1,717

 
770

 
1,952

 
—

 
—

 
770

 
1,952

 
2,721

 
340

 
2008





148

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST III NORTH CAROLINA
Black Mountain, NC
972

 
617

 
953

 
—

 
—

 
617

 
953

 
1,570

 
166

 
2008
SUNTRUST III NORTH CAROLINA
Butner, NC
430

 
273

 
422

 
—

 
—

 
273

 
422

 
695

 
74

 
2008
SUNTRUST III NORTH CAROLINA
Cary, NC
758

 
546

 
843

 
—

 
—

 
546

 
843

 
1,389

 
147

 
2008
SUNTRUST III NORTH CAROLINA
Chapel Hill, NC
480

 
346

 
534

 
—

 
—

 
346

 
534

 
880

 
93

 
2008
SUNTRUST III NORTH CAROLINA
Denton, NC
834

 
600

 
928

 
—

 
—

 
600

 
928

 
1,528

 
162

 
2008
SUNTRUST III NORTH CAROLINA
Erwin, NC
514

 
320

 
495

 
—

 
—

 
320

 
495

 
815

 
86

 
2008
SUNTRUST III NORTH CAROLINA
Greensboro, NC
616

 
384

 
594

 
—

 
—

 
384

 
594

 
978

 
103

 
2008
SUNTRUST III NORTH CAROLINA
Hudson, NC
491

 
312

 
482

 
—

 
—

 
312

 
482

 
794

 
84

 
2008












149

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST III NORTH CAROLINA
Huntersville, NC
524

 
333

 
514

 
(157
)
 
—

 
176

 
514

 
690

 
89

 
2008
SUNTRUST III NORTH CAROLINA
Kannapolis, NC
1,100

 
792

 
1,224

 
—

 
—

 
792

 
1,224

 
2,016

 
213

 
2008
SUNTRUST III NORTH CAROLINA
Kernersville, NC
565

 
407

 
628

 
—

 
—

 
407

 
628

 
1,035

 
109

 
2008
SUNTRUST III NORTH CAROLINA
Marshville, NC
358

 
224

 
345

 
—

 
—

 
224

 
345

 
569

 
60

 
2008
SUNTRUST III NORTH CAROLINA
Mocksville, NC
610

 
439

 
678

 
—

 
—

 
439

 
678

 
1,118

 
118

 
2008
SUNTRUST III NORTH CAROLINA
Monroe, NC
536

 
335

 
517

 
—

 
—

 
335

 
517

 
852

 
90

 
2008
SUNTRUST III NORTH CAROLINA
Monroe, NC
633

 
395

 
610

 
—

 
—

 
395

 
610

 
1,004

 
106

 
2008
SUNTRUST III NORTH CAROLINA
Norwood, NC
557

 
354

 
546

 
—

 
—

 
354

 
546

 
900

 
95

 
2008






150

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST III NORTH CAROLINA
Raleigh, NC
1,272

 
916

 
1,415

 
—

 
—

 
916

 
1,415

 
2,332

 
246

 
2008
SUNTRUST III NORTH CAROLINA
Roxboro, NC
845

 
608

 
940

 
—

 
—

 
608

 
940

 
1,548

 
164

 
2008
SUNTRUST III NORTH CAROLINA
Spencer, NC
538

 
342

 
528

 
—

 
—

 
342

 
528

 
869

 
92

 
2008
SUNTRUST III NORTH CAROLINA
Wake Forest, NC
1,347

 
841

 
1,299

 
—

 
—

 
841

 
1,299

 
2,139

 
226

 
2008
SUNTRUST III NORTH CAROLINA
Youngsville, NC
232

 
167

 
259

 
—

 
—

 
167

 
259

 
426

 
45

 
2008
SUNTRUST III SOUTH CAROLINA
Anderson, SC
791

 
422

 
836

 
—

 
—

 
422

 
836

 
1,258

 
145

 
2008
SUNTRUST III SOUTH CAROLINA
Spartanburg, SC
520

 
278

 
550

 
—

 
—

 
278

 
550

 
828

 
96

 
2008
SUNTRUST III TENNESSEE
Chattanooga, TN
574

 
597

 
343

 
—

 
—

 
597

 
343

 
940

 
60

 
2008






151

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST III TENNESSEE
Chattanooga, TN
680

 
783

 
449

 
—

 
—

 
783

 
449

 
1,232

 
78

 
2008
SUNTRUST III TENNESSEE
Chattanooga, TN
464

 
533

 
306

 
—

 
—

 
533

 
306

 
839

 
53

 
2008
SUNTRUST III TENNESSEE
Chattanooga, TN
701

 
716

 
411

 
—

 
—

 
716

 
411

 
1,127

 
72

 
2008
SUNTRUST III TENNESSEE
Cleveland, TN
339

 
353

 
203

 
—

 
—

 
353

 
203

 
556

 
35

 
2008
SUNTRUST III TENNESSEE
Johnson City, TN
112

 
115

 
66

 
—

 
—

 
115

 
66

 
180

 
11

 
2008
SUNTRUST III TENNESSEE
Jonesborough, TN
232

 
237

 
136

 
—

 
—

 
237

 
136

 
373

 
24

 
2008
SUNTRUST III TENNESSEE
Lake City, TN
564

 
576

 
330

 
—

 
—

 
576

 
330

 
907

 
58

 
2008
SUNTRUST III TENNESSEE
Lawrenceburg, TN
303

 
310

 
178

 
—

 
—

 
310

 
178

 
488

 
31

 
2008
SUNTRUST III TENNESSEE
Murfreesboro, TN
581

 
593

 
340

 
—

 
—

 
593

 
340

 
934

 
59

 
2008
SUNTRUST III TENNESSEE
Nashville, TN
846

 
973

 
558

 
—

 
—

 
973

 
558

 
1,531

 
97

 
2008
SUNTRUST III TENNESSEE
Nashville, TN
752

 
768

 
441

 
—

 
—

 
768

 
441

 
1,209

 
77

 
2008
SUNTRUST III TENNESSEE
Nashville, TN
714

 
730

 
419

 
—

 
—

 
730

 
419

 
1,148

 
73

 
2008


152

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST III VIRGINIA
Alexandria, VA
1,778

 
1,518

 
1,370

 
—

 
—

 
1,518

 
1,370

 
2,888

 
238

 
2008
SUNTRUST III VIRGINIA
Arlington, VA
1,573

 
1,319

 
1,190

 
—

 
—

 
1,319

 
1,190

 
2,508

 
207

 
2008
SUNTRUST III VIRGINIA
Beaverdam, VA
293

 
273

 
246

 
—

 
—

 
273

 
246

 
520

 
43

 
2008
SUNTRUST III VIRGINIA
Franklin, VA
546

 
458

 
413

 
—

 
—

 
458

 
413

 
871

 
72

 
2008
SUNTRUST III VIRGINIA
Gloucester, VA
732

 
614

 
554

 
—

 
—

 
614

 
554

 
1,169

 
96

 
2008
SUNTRUST III VIRGINIA
Harrisonburg, VA
439

 
368

 
332

 
—

 
—

 
368

 
332

 
701

 
58

 
2008
SUNTRUST III VIRGINIA
Lightfoot, VA
392

 
335

 
302

 
—

 
—

 
335

 
302

 
637

 
53

 
2008
SUNTRUST III VIRGINIA
Madison Heights, VA
369

 
310

 
280

 
—

 
—

 
310

 
280

 
590

 
49

 
2008
SUNTRUST III VIRGINIA
Manassas, VA
1,853

 
1,727

 
1,558

 
—

 
—

 
1,727

 
1,558

 
3,285

 
271

 
2008
SUNTRUST III VIRGINIA
Mechanicsville, VA
514

 
479

 
433

 
—

 
—

 
479

 
433

 
912

 
75

 
2008
SUNTRUST III VIRGINIA
Nassawadox, VA
273

 
254

 
229

 
—

 
—

 
254

 
229

 
484

 
40

 
2008
SUNTRUST III VIRGINIA
Radford, VA
362

 
309

 
279

 
—

 
—

 
309

 
279

 
589

 
49

 
2008


153

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST III VIRGINIA
Richmond, VA
1,414

 
1,186

 
1,070

 
—

 
—

 
1,186

 
1,070

 
2,257

 
186

 
2008
SUNTRUST III VIRGINIA
Richmond, VA
309

 
259

 
234

 
—

 
—

 
259

 
234

 
493

 
41

 
2008
SUNTRUST III VIRGINIA
Richmond, VA
901

 
755

 
681

 
—

 
—

 
755

 
681

 
1,437

 
119

 
2008
SUNTRUST III VIRGINIA
Richmond, VA
597

 
501

 
452

 
—

 
—

 
501

 
452

 
952

 
79

 
2008
SUNTRUST III VIRGINIA
Roanoke, VA
404

 
339

 
306

 
—

 
—

 
339

 
306

 
646

 
53

 
2008
SUNTRUST III VIRGINIA
Roanoke, VA
160

 
149

 
135

 
—

 
—

 
149

 
135

 
284

 
23

 
2008
SUNTRUST III VIRGINIA
South Boston, VA
839

 
716

 
646

 
—

 
—

 
716

 
646

 
1,362

 
112

 
2008
SUNTRUST III VIRGINIA
Spotsylvania, VA
1,330

 
1,136

 
1,025

 
—

 
—

 
1,136

 
1,025

 
2,160

 
178

 
2008
SUNTRUST III VIRGINIA
Virginia Beach, VA
654

 
558

 
504

 
—

 
—

 
558

 
504

 
1,062

 
88

 
2008
SYCAMORE COMMONS
Matthews, NC
48,382

 
12,500

 
31,265

 
—

 
475

 
12,500

 
31,740

 
44,240

 
3,548

 
2010
THE CENTER AT HUGH HOWELL
Tucker, GA
7,722

 
2,250

 
11,091

 
—

 
686

 
2,250

 
11,777

 
14,027

 
2,459

 
2007




154

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
THE HIGHLANDS
Flower Mound, TX
9,745

 
5,500

 
9,589

 
—

 
105

 
5,500

 
9,694

 
15,194

 
1,959

 
2006
THE MARKET AT HILLIARD
Hilliard, OH
11,205

 
4,432

 
13,308

 
—

 
3,220

 
4,432

 
16,528

 
20,960

 
3,604

 
2005
THOMAS CROSSROADS
Newnan, GA
5,624

 
1,622

 
8,322

 
—

 
183

 
1,622

 
8,505

 
10,127

 
1,235

 
2009
TOMBALL TOWN CENTER
Tomball, TX
9,595

 
1,938

 
14,233

 
360

 
6,025

 
2,298

 
20,258

 
22,555

 
4,185

 
2005
TRIANGLE CENTER
Longview, WA
21,932

 
12,770

 
24,556

 
—

 
1,722

 
12,770

 
26,278

 
39,048

 
6,400

 
2005
TULSA HILLS SHOPPING CENTER
Tulsa, OK
37,727

 
8,000

 
42,272

 
4,770

 
5,201

 
12,770

 
47,473

 
60,243

 
4,305

 
2010
UNIVERSAL PLAZA
Lauderhill, FL
9,887

 
2,900

 
4,950

 
—

 
27

 
2,900

 
4,977

 
7,877

 
504

 
2010
UNIVERSITY OAKS SHOPPING CENTER
Round Rock, TX
27,000

 
7,250

 
25,326

 
—

 
5,823

 
7,250

 
31,149

 
38,399

 
2,819

 
2010
VENTURE POINT
Duluth, GA
25,818

 
10,400

 
12,887

 
(273
)
 
(5,947
)
 
10,127

 
6,940

 
17,067

 
—

 
2010
VICTORY LAKES TOWN CENTER
League City, TX
30,825

 
8,750

 
44,894

 
—

 
5,425

 
8,750

 
50,319

 
59,069

 
2,166

 
2011







155

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
WARDS CROSSING
Lynchburg, VA
12,904

 
2,400

 
11,417

 
—

 
3

 
2,400

 
11,420

 
13,820

 
1,221

 
2010
WASHINGTON PARK PLAZA
Homewood, IL
30,600

 
6,500

 
33,912

 
—

 
(297
)
 
6,500

 
33,615

 
40,115

 
6,473

 
2005
WHITE OAK CROSSING
Garner, NC
52,000

 
19,000

 
70,275

 
—

 
6

 
19,000

 
70,281

 
89,281

 
3,473

 
2011
WILLIS TOWN CENTER
Willis, TX
—

 
1,550

 
1,820

 
—

 
654

 
1,550

 
2,474

 
4,024

 
555

 
2005
WINCHESTER TOWN CENTER
Houston, TX
—

 
495

 
3,966

 
—

 
48

 
495

 
4,014

 
4,509

 
1,038

 
2005
WINDERMERE VILLAGE
Houston, TX
4,000

 
1,220

 
6,331

 
—

 
836

 
1,220

 
7,168

 
8,388

 
1,813

 
2005
WOODBRIDGE
Wylie, TX
18,186

 
—

 
—

 
—

 
24,176

 
—

 
24,176

 
24,176

 
1,929

 
 
WOODLAKE CROSSING
San Antonio, TX
15,575

 
3,420

 
14,153

 
—

 
3,424

 
3,420

 
17,577

 
20,997

 
1,793

 
2009
Office
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11500 MARKET STREET
Jacinto City, TX
—

 
140

 
346

 
(35
)
 
(159
)
 
105

 
187

 
292

 
12

 
2005
AMERICAN EXPRESS—GREENSBORO
Greensboro, NC
26,068

 
8,850

 
39,527

 
—

 
5

 
8,850

 
39,532

 
48,382

 
5,116

 
2009




156

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
AMERICAN EXPRESS—SALT LAKE CITY
Salt Lake City, UT
22,676

 
9,000

 
45,415

 
—

 
—

 
9,000

 
45,415

 
54,415

 
5,793

 
2009
SBC CENTER
Hoffman Estates, IL
173,878

 
35,800

 
287,424

 
—

 
757

 
35,800

 
288,181

 
323,981

 
72,166

 
2007
AT&T—ST LOUIS
St Louis, MO
112,695

 
8,000

 
170,169

 
—

 
109

 
8,000

 
170,278

 
178,278

 
35,742

 
2007
AT&T CLEVELAND
Cleveland, OH
29,061

 
870

 
40,033

 
—

 
137

 
870

 
40,170

 
41,040

 
8,200

 
2005
BRIDGESIDE POINT OFFICE BLDG
Pittsburg, PA
16,632

 
1,525

 
28,609

 
—

 
—

 
1,525

 
28,609

 
30,134

 
7,092

 
2006
COMMONS DRIVE
Aurora, IL
3,663

 
1,600

 
5,746

 
—

 
2,798

 
1,600

 
8,544

 
10,144

 
1,622

 
2007
CRYSTAL LAKE MEDICAL
Crystal Lake, IL
—

 
2,343

 
5,972

 
—

 
465

 
2,343

 
6,437

 
8,780

 
600

 
2010
DAKOTA RIDGE MEDICAL
Littleton, CO
—

 
1,873

 
5,406

 
—

 
—

 
1,873

 
5,407

 
7,280

 
711

 
2010
DENVER HIGHLANDS
Highlands Ranch, CO
9,788

 
1,700

 
11,839

 
—

 
—

 
1,700

 
11,839

 
13,539

 
2,568

 
2006
DULLES EXECUTIVE PLAZA
Herndon, VA
68,750

 
15,500

 
96,083

 
—

 
3,140

 
15,500

 
99,223

 
114,723

 
24,158

 
2006
HOUSTON LAKES
Houston, TX
8,988

 
3,000

 
12,950

 
—

 
642

 
3,000

 
13,592

 
16,592

 
2,926

 
2006





157

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
IDS CENTER
Minneapolis, MN
147,999

 
24,900

 
202,016

 
—

 
22,313

 
24,900

 
224,329

 
249,229

 
50,381

 
2007
KINROSS LAKES
Richfield, OH
10,065

 
825

 
14,639

 
(468
)
 
(11,368
)
 
357

 
3,271

 
3,628

 
—

 
2005
MCP ONE
Indianapolis, IN
—

 
451

 
2,861

 
—

 
1,349

 
451

 
4,210

 
4,660

 
563

 
2009
MCP TWO
Indianapolis, IN
12,150

 
1,990

 
9,820

 
—

 
77

 
1,990

 
9,897

 
11,887

 
2,170

 
2009
MCP THREE
Indianapolis, IN
11,400

 
2,251

 
7,178

 
—

 
505

 
2,251

 
7,683

 
9,933

 
932

 
2010
MIDLOTHIAN MEDICAL
Midlothian, VA
8,297

 
—

 
9,041

 
—

 
113

 
—

 
9,153

 
9,153

 
1,456

 
2009
REGIONAL ROAD
Greensboro, NC
8,679

 
950

 
10,501

 
—

 
122

 
950

 
10,623

 
11,573

 
2,389

 
2006
SANOFI AVENTIS
Bridgewater, NJ
190,000

 
16,900

 
192,987

 
—

 
2,621

 
16,900

 
195,608

 
212,508

 
26,899

 
2009
SANTEE—CIVIC CENTER
Santee, CA
12,023

 
—

 
17,838

 
—

 
422

 
—

 
18,260

 
18,260

 
3,917

 
2005
SUNTRUST OFFICE I FL
Bushnell, FL
578

 
315

 
363

 
—

 
(1
)
 
315

 
363

 
678

 
68

 
2007
SUNTRUST OFFICE I FL
Melbourne, FL
1,046

 
1,260

 
662

 
—

 
(1
)
 
1,260

 
661

 
1,921

 
123

 
2007






158

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST OFFICE I GA
Douglas, GA
495

 
275

 
675

 
—

 
—

 
275

 
675

 
950

 
126

 
2007
SUNTRUST OFFICE I MD
Bethesda, MD
2,651

 
650

 
4,617

 
—

 
(2
)
 
650

 
4,614

 
5,264

 
860

 
2007
SUNTRUST OFFICE I NC
Winston-Salem, NC
—

 
400

 
1,471

 
—

 
(1
)
 
400

 
1,470

 
1,870

 
274

 
2007
SUNTRUST OFFICE I NC
Raleigh, NC
1,098

 
500

 
1,700

 
—

 
(1
)
 
500

 
1,699

 
2,199

 
317

 
2007
SUNTRUST OFFICE I VA
Richmond, VA
3,826

 
1,360

 
6,272

 
—

 
(3
)
 
1,360

 
6,269

 
7,629

 
1,168

 
2007
SUNTRUST II OFFICE GEORGIA
Atlanta, GA
—

 
2,625

 
4,355

 
—

 
(3
)
 
2,625

 
4,352

 
6,977

 
798

 
2008
SUNTRUST III OFFICE FLORIDA
Gainesville, FL
1,350

 
1,667

 
457

 
—

 
—

 
1,667

 
457

 
2,124

 
80

 
2008
SUNTRUST III OFFICE FLORIDA
Holy Hill, FL
754

 
1,058

 
290

 
—

 
—

 
1,058

 
290

 
1,348

 
51

 
2008
SUNTRUST III OFFICE GEORGIA
Brunswick, GA
1,313

 
676

 
1,703

 
—

 
—

 
676

 
1,703

 
2,379

 
297

 
2008







159

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
SUNTRUST III OFFICE GEORGIA
Gainesville, GA
1,782

 
799

 
2,016

 
—

 
—

 
799

 
2,016

 
2,815

 
351

 
2008
UNITED HEALTH—CYPRESS
Cypress, CA
22,000

 
10,000

 
30,547

 
—

 
2

 
10,000

 
30,549

 
40,549

 
4,480

 
2008
UNITED HEALTH—FREDERICK
Frederick, MD
17,173

 
5,100

 
26,303

 
—

 
2

 
5,100

 
26,305

 
31,405

 
3,683

 
2008
UNITED HEALTH—GREEN BAY
Green Bay, WI
27,870

 
4,250

 
45,725

 
—

 
23

 
4,250

 
45,748

 
49,998

 
6,404

 
2008
UNITED HEALTH—INDIANAPOLIS
Indianapolis, IN
16,545

 
3,500

 
24,248

 
—

 
2

 
3,500

 
24,250

 
27,750

 
3,395

 
2008
UNITED HEALTH—ONALASKA
Onalaska, WI
4,149

 
4,090

 
2,794

 
—

 
2

 
4,090

 
2,796

 
6,886

 
410

 
2008
UNITED HEALTH—WAUWATOSA
Wauwatosa, WI
10,050

 
1,800

 
14,930

 
—

 
2

 
1,800

 
14,932

 
16,732

 
2,090

 
2006
WASHINGTON MUTUAL—ARLINGTON
Arlington, TX
20,115

 
4,870

 
30,915

 
—

 
5

 
4,870

 
30,920

 
35,790

 
6,990

 
2007












160

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
WORLDGATE PLAZA
Herndon, VA
59,950

 
14,000

 
79,048

 
—

 
3,762

 
14,000

 
82,809

 
96,809

 
16,995

 
2007
Apartment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14th STREET—UAB
Birmingham, AL
11,770

 
4,250

 
27,458

 
—

 
—

 
4,250

 
27,458

 
31,708

 
5,586

 
2007
ASU POLYTECHNIC STUDENT HOUSING
Mesa, AZ
6,547

 
—

 
12,122

 
—

 
—

 
—

 
12,122

 
12,122

 
202

 
2012
BLOCK 121
Birmingham, AL
15,465

 
3,360

 
32,087

 
(150
)
 
2,444

 
3,210

 
34,531

 
37,741

 
2,759

 
2010
BRAZOS RANCH APARTMENTS
Rosenberg, TX
15,246

 
4,000

 
22,246

 
—

 
18

 
4,000

 
22,264

 
26,264

 
3,373

 
2009
ENCINO CANYON APARTMENTS
San Antonio, TX
12,000

 
1,700

 
16,443

 
—

 
—

 
1,700

 
16,443

 
18,143

 
3,372

 
2007
FIELDS APARTMENT HOMES
Bloomington, IN
18,700

 
1,850

 
29,783

 
—

 
26

 
1,850

 
29,809

 
31,659

 
6,438

 
2007
GROGANS LANDING APARTMENTS
The Woodlands, TX
9,705

 
4,380

 
10,533

 
—

 
1,930

 
4,380

 
12,463

 
16,843

 
1,994

 
2009







161

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012 
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
LEGACY AT ART QUARTER
Oklahoma City, OK
28,948

 
1,290

 
35,031

 
—

 
199

 
1,290

 
35,229

 
36,519

 
5,524

 
2008
LEGACY CORNER
Midwest City, OK
14,630

 
1,600

 
23,765

 
—

 
9

 
1,600

 
23,774

 
25,374

 
3,740

 
2008
LEGACY CROSSING
Oklahoma City, OK
24,400

 
1,110

 
29,297

 
—

 
120

 
1,110

 
29,417

 
30,527

 
4,573

 
2008
LEGACY WOODS
Edmond, OK
21,190

 
2,500

 
31,505

 
—

 
36

 
2,500

 
31,541

 
34,041

 
4,965

 
2007
NANTUCKET APARTMENTS
Loveland, OH
26,251

 
2,170

 
30,388

 
—

 
182

 
2,170

 
30,570

 
32,740

 
2,776

 
2010
OAK PARK
Dallas, TX
27,193

 
9,738

 
39,958

 
(14
)
 
(924
)
 
9,724

 
39,033

 
48,757

 
737

 
2009
OAK PARK II
Dallas, TX
2,255

 
8,499

 
—

 
(4,056
)
 
—

 
4,443

 
—

 
4,443

 
—

 
2011
OAK PARK TRS
Dallas, TX
3,893

 
19,030

 
—

 
(9,072
)
 
—

 
9,957

 
—

 
9,957

 
—

 
2011
PARKSIDE APARTMENTS
The Woodlands, TX
18,000

 
5,500

 
15,623

 
—

 
50

 
5,500

 
15,673

 
21,173

 
1,990

 
2009
SEVEN PALMS APARTMENTS
Webster, TX
18,750

 
3,550

 
24,348

 
—

 
176

 
3,550

 
24,524

 
28,074

 
4,954

 
2006
SOUTHGATE APARTMENTS
Louisville, KY
10,725

 
1,730

 
16,356

 
—

 
20

 
1,730

 
16,376

 
18,106

 
4,091

 
2007
STERLING RIDGE ESTATES
The Woodlands, TX
14,324

 
4,140

 
20,550

 
—

 
(8
)
 
4,140

 
20,542

 
24,682

 
2,707

 
2009



162

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
THE RADIAN (PENN)
Radian, PA
57,353

 
—

 
79,997

 
—

 
11,943

 
—

 
91,939

 
91,939

 
14,548

 
2007
UNIV HOUSE AT CENTRAL FL
Orlando, FL
44,224

 
13,319

 
51,478

 
—

 
—

 
13,319

 
51,478

 
64,797

 
868

 
2012
UNIV HOUSE AT GAINESVILLE
Gainesville, FL
15,827

 
6,561

 
36,879

 
—

 
902

 
6,561

 
37,781

 
44,342

 
6,690

 
2007
UNIV HOUSE AT HUNTSVILLE
Huntsville, TX
13,325

 
1,351

 
26,308

 
—

 
1,250

 
1,351

 
27,559

 
28,909

 
5,456

 
2007
UNIV HOUSE AT LAFAYETTE
Lafayette, AL
9,306

 
—

 
16,357

 
—

 
1,742

 
—

 
18,099

 
18,099

 
3,547

 
2007
UNIV HOUSE AT THE RETREAT RALEIGH
Raleigh, NC
24,360

 
2,200

 
36,364

 
—

 
—

 
2,200

 
36,364

 
38,564

 
—

 
2012
UNIV HOUSE AT THE RETREAT TALLAHASSEE
Tallahassee, FL
32,227

 
4,075

 
48,636

 
—

 
—

 
4,075

 
48,636

 
52,711

 
—

 
2012
VILLAGES AT KITTY HAWK
Universal City, TX
11,550

 
2,070

 
17,397

 
—

 
94

 
2,070

 
17,490

 
19,560

 
3,727

 
2007
WOODRIDGE APARTMENTS The Woodlands, TX
12,721

 
3,680

 
11,235

 
—

 
37

 
3,680

 
11,272

 
14,952

 
1,405

 
2009
Industrial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11500 MELROSE AVE -294 TOLLWAY
Franklin Park, IL
4,561

 
2,500

 
5,071

 
—

 
—

 
2,500

 
5,071

 
7,571

 
1,007

 
2006



163

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
1800 BRUNING
Itasca, IL
10,156

 
10,000

 
7,971

 
—

 
85

 
10,000

 
8,056

 
18,056

 
1,791

 
2006
500 HARTLAND
Hartland, WI
5,860

 
1,200

 
7,459

 
—

 
150

 
1,200

 
7,609

 
8,809

 
1,694

 
2006
55th STREET
Kenosha, WI
7,351

 
1,600

 
11,115

 
—

 
—

 
1,600

 
11,115

 
12,715

 
2,513

 
2007


164

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
ANHEUSER BUSCH
Devens, MA
7,546

 
2,200

 
13,598

 
—

 
—

 
2,200

 
13,598

 
15,798

 
2,538

 
2007
ATLAS—BELVIDERE
Belvidere, IL
11,329

 
1,600

 
15,521

 
—

 
—

 
1,600

 
15,521

 
17,121

 
2,858

 
2007
ATLAS—CARTERSVILLE
Cartersville, GA
8,273

 
900

 
13,112

 
—

 
(39
)
 
900

 
13,073

 
13,973

 
2,403

 
2007
ATLAS—DOUGLAS
Douglas, GA
3,432

 
75

 
6,681

 
—

 
—

 
75

 
6,681

 
6,756

 
1,228

 
2007
ATLAS—GAFFNEY
Gaffney, SC
3,350

 
950

 
5,114

 
—

 
—

 
950

 
5,114

 
6,064

 
940

 
2007
ATLAS—GAINESVILLE
Gainesville, GA
7,731

 
550

 
12,783

 
—

 
—

 
550

 
12,783

 
13,333

 
2,349

 
2007
ATLAS—PENDERGRASS
Pendergrass, GA
14,919

 
1,250

 
24,259

 
—

 
—

 
1,250

 
24,259

 
25,509

 
4,457

 
2007










165

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
ATLAS—PIEDMONT
Piedmont, SC
13,563

 
400

 
23,113

 
—

 
7

 
400

 
23,120

 
23,520

 
4,248

 
2007
ATLAS—ST PAUL
St. Paul, MN
8,226

 
3,890

 
10,093

 
—

 
—

 
3,890

 
10,093

 
13,983

 
1,855

 
2007
ATLAS-BROOKLYN PARK
Brooklyn Park, MN
7,407

 
2,640

 
8,934

 
—

 
—

 
2,640

 
8,934

 
11,574

 
1,642

 
2007
ATLAS-NEW ULM
New Ulm, MN
6,015

 
900

 
9,359

 
—

 
—

 
900

 
9,359

 
10,259

 
1,723

 
2007
ATLAS-ZUMBROTA
Zumbrota, MN
10,242

 
1,300

 
16,437

 
—

 
—

 
1,300

 
16,437

 
17,737

 
3,020

 
2006
BAYMEADOW—GLEN BURNIE
Glen Burnie, MD
13,824

 
1,225

 
23,407

 
—

 
24

 
1,225

 
23,431

 
24,656

 
4,988

 
2006
C&S—ABERDEEN
Aberdeen, MD
22,720

 
4,650

 
33,276

 
(10
)
 
13

 
4,640

 
33,289

 
37,929

 
6,990

 
2006
C&S—BIRMINGHAM
Birmingham, AL
25,032

 
3,400

 
40,373

 
—

 
—

 
3,400

 
40,373

 
43,773

 
6,358

 
2008
C&S—NORTH HATFIELD
Hatfield, MA
20,280

 
4,800

 
30,103

 
—

 
14

 
4,800

 
30,117

 
34,917

 
6,324

 
2006
C&S—SOUTH HATFIELD
Hatfield, MA
10,000

 
2,500

 
15,251

 
—

 
11

 
2,500

 
15,262

 
17,762

 
3,205

 
2006
C&S—WESTFIELD
Westfield, MA
29,500

 
3,850

 
45,906

 
—

 
13

 
3,850

 
45,919

 
49,769

 
9,643

 
2006
CLARION
Clarion, IA
3,172

 
87

 
4,790

 
—

 
90

 
87

 
4,880

 
4,967

 
1,033

 
2007



166

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
COLOMA
Coloma, MI
10,017

 
410

 
17,110

 
—

 
772

 
410

 
17,882

 
18,292

 
3,317

 
2006
DEER PARK SEACO
Deer Park, TX
2,965

 
240

 
5,271

 
—

 
—

 
240

 
5,271

 
5,511

 
1,192

 
2007
DORAL—WAUKESHA
Waukesha, WI
1,364

 
240

 
2,013

 
—

 
76

 
240

 
2,089

 
2,329

 
456

 
2006
HASKELL-ROLLING PLAINS FACILITY
Haskell, TX
—

 
45

 
19,733

 
—

 
—

 
45

 
19,733

 
19,778

 
3,601

 
2008
HOME DEPOT—LAKE PARK
Valdosta, GA
15,469

 
1,350

 
24,770

 
—

 
4

 
1,350

 
24,774

 
26,124

 
3,468

 
2008
HOME DEPOT—MACALLA
MaCalla, AL
17,094

 
2,800

 
26,067

 
—

 
4

 
2,800

 
26,071

 
28,871

 
3,655

 
2008











167

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
HUDSON CORRECTIONAL FACILITY
Hudson, CO
—

 
1,382

 
—

 
—

 
93,137

 
1,382

 
93,137

 
94,520

 
12,713

 
2009
IMAGINE AVONDALE
Avondale, AZ
—

 
1,195

 
5,731

 
—

 
—

 
1,195

 
5,731

 
6,926

 
621

 
2010
IMAGINE COOLIDGE
Coolidge, AZ
—

 
2,260

 
3,895

 
(1,490
)
 
1,017

 
770

 
4,913

 
5,683

 
483

 
2010
IMAGINE COOLIDGE
II Coolidge, AZ
—

 
1,490

 
4,857

 
—

 
1,025

 
1,490

 
5,882

 
7,372

 
229

 
2011
IMAGINE DISCOVERY
Baltimore, MD
—

 
590

 
7,117

 
—

 
—

 
590

 
7,117

 
7,707

 
769

 
2010
IMAGINE FIRESTONE
Firestone, CO
—

 
680

 
6,439

 
—

 
—

 
680

 
6,439

 
7,119

 
697

 
2010
IMAGINE HOPE LAMOND
Washington, DC
—

 
775

 
9,706

 
—

 
—

 
775

 
9,706

 
10,481

 
1,047

 
2010
IMAGINE INDIGO RANCH
Colorado Springs, CO
—

 
1,150

 
7,304

 
—

 
—

 
1,150

 
7,304

 
8,454

 
790

 
2010
IMAGINE TOWN CENTER
Palm Coast, FL
—

 
1,175

 
7,309

 
—

 
2,606

 
1,175

 
9,915

 
11,090

 
879

 
2010
INDUSTRIAL DRIVE
Horican, WI
3,709

 
200

 
6,812

 
—

 
—

 
200

 
6,812

 
7,012

 
1,470

 
2007
KATO/MILMONT
Fremont, CA
—

 
2,340

 
5,460

 
—

 
3

 
2,340

 
5,463

 
7,803

 
182

 
2011




168

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
KINSTON
Kinston, NC
8,930

 
460

 
14,837

 
—

 
250

 
460

 
15,087

 
15,547

 
2,899

 
2006
KIRK ROAD
St. Charles, IL
7,863

 
2,200

 
11,413

 
—

 
42

 
2,200

 
11,455

 
13,655

 
2,588

 
2007
LIBERTYVILLE ASSOCIATES
Libertyville, IL
14,807

 
3,600

 
20,563

 
—

 
9

 
3,600

 
20,571

 
24,171

 
4,258

 
2005
MOUNT ZION ROAD
Lebanon, IN
24,632

 
2,570

 
41,667

 
—

 
—

 
2,570

 
41,667

 
44,237

 
8,627

 
2007
NORTH POINTE ONE
Hanahan, SC
—

 
1,963

 
14,588

 
—

 
587

 
1,963

 
15,175

 
17,138

 
1,563

 
2011
NORTH POINTE PARK
Hanahan, SC
—

 
2,350

 
—

 
—

 
—

 
2,350

 
—

 
2,350

 
—

 
2011
OTTAWA
Ottawa, IL
1,768

 
200

 
2,905

 
—

 
—

 
200

 
2,905

 
3,105

 
639

 
2007
SCHNEIDER ELECTRIC
Loves Park, IL
11,000

 
2,150

 
14,720

 
(581
)
 
(6,935
)
 
1,569

 
7,785

 
9,353

 
—

 
2007









169

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
THERMO PROCESS SYSTEMS
Sugar Land, TX
7,071

 
1,202

 
11,995

 
—

 
—

 
1,202

 
11,995

 
13,197

 
3,041

 
2007
TRI-STATE HOLDINGS I
Wood Dale, IL
4,665

 
4,700

 
3,973

 
—

 
—

 
4,700

 
3,973

 
8,673

 
862

 
2007
TRI-STATE HOLDINGS II
Houston, TX
6,372

 
1,630

 
11,252

 
—

 
—

 
1,630

 
11,252

 
12,882

 
2,330

 
2007
TRI-STATE HOLDINGS III
Mosinee, WI
4,334

 
650

 
8,083

 
—

 
—

 
650

 
8,083

 
8,733

 
1,674

 
2007
UPS E-LOGISTICS
Elizabethtown, KY
9,246

 
950

 
18,453

 
—

 
—

 
950

 
18,453

 
19,403

 
3,444

 
2006














170

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
WESTPORT—MECHANICSBURG
Mechanicsburg, PA
4,029

 
1,300

 
6,185

 
—

 
486

 
1,300

 
6,671

 
7,971

 
1,464

 
2006
Hotel
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ALOFT CHAPEL HILL
Chapel Hill, NC
—

 
6,484

 
16,478

 
45

 
(45
)
 
6,529

 
16,434

 
22,963

 
2,299

 
2010
BOHEMIAN HOTEL SAVANNA
Savanna, GA
27,480

 
2,300

 
24,240

 
—

 
—

 
2,300

 
24,240

 
26,540

 
529

 
2012
COURTYARD BY MARRIOTT QUORUM
Addison, TX
18,860

 
4,000

 
26,141

 
—

 
2,104

 
4,000

 
28,245

 
32,245

 
6,955

 
2007
COURTYARD BY MARRIOTT
Ann Arbor, MI
11,846

 
4,989

 
18,988

 
—

 
4,175

 
4,989

 
23,163

 
28,153

 
6,361

 
2007
COURTYARD BY MARRIOTT DUNN LORING-FAIRFAX
Vienna, VA
30,810

 
12,100

 
40,242

 
—

 
3,050

 
12,100

 
43,292

 
55,392

 
12,077

 
2007
COURTYARD—DOWNTOWN AT UAB
Birmingham, AL
14,000

 
—

 
20,810

 
1,553

 
1,931

 
1,553

 
22,741

 
24,294

 
6,968

 
2008
COURTYARD—FORT MEADE AT NBP
Annapolis Junction, MD
14,400

 
1,611

 
22,622

 
—

 
2,021

 
1,611

 
24,643

 
26,254

 
6,798

 
2008
COURTYARD BY MARRIOTT -WEST LANDS END
Fort Worth, TX
7,550

 
1,500

 
13,416

 
—

 
1,080

 
1,500

 
14,495

 
15,995

 
3,962

 
2007







171

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
COURTYARD—FT WORTH
Fort Worth, TX
13,792

 
774

 
45,820

 
—

 
4,098

 
774

 
49,918

 
50,693

 
13,682

 
2008
COURTYARD BY MARRIOTT
Harlingen, TX
6,790

 
1,600

 
13,247

 
—

 
3,347

 
1,600

 
16,594

 
18,194

 
4,870

 
2007
COURTYARD BY MARRIOTT—NORTHWEST
Houston, TX
7,038

 
1,428

 
15,085

 
—

 
1,539

 
1,428

 
16,623

 
18,051

 
4,625

 
2007
COURTYARD BY MARRIOTT—WESTCHASE
Houston, TX
16,680

 
4,400

 
22,626

 
—

 
3,138

 
4,400

 
25,764

 
30,164

 
6,499

 
2007
COURTYARD BY MARRIOTT WEST UNIVERSITY
Houston, TX
10,980

 
2,200

 
16,408

 
—

 
1,777

 
2,200

 
18,185

 
20,385

 
4,739

 
2007
COURTYARD BY MARRIOTT—COUNTRY CLUB PLAZA
Kansas City, MO
12,740

 
3,426

 
16,349

 
—

 
862

 
3,426

 
17,211

 
20,637

 
4,449

 
2007
COURTYARD BY MARRIOTT
Lebanon, NJ
10,320

 
3,200

 
19,009

 
—

 
2,414

 
3,200

 
21,422

 
24,622

 
5,921

 
2007
COURTYARD—NEWARK ELIZABETH
Elizabeth, NJ
8,983

 
—

 
35,177

 
—

 
2,796

 
—

 
37,973

 
37,973

 
11,266

 
2008








172

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
COURTYARD—PITTSBURGH DOWNTOWN
Pittsburgh, PA
24,461

 
2,700

 
33,086

 
—

 
2,001

 
2,700

 
35,087

 
37,787

 
4,098

 
2010
COURTYARD—PITTSBURGH WEST HOME
Pittsburgh, PA
8,024

 
1,500

 
14,364

 
—

 
523

 
1,500

 
14,886

 
16,386

 
1,752

 
2010
COURTYARD—RICHMOND
Richmond, VA
11,800

 
2,173

 
—

 
—

 
19,640

 
2,173

 
19,640

 
21,813

 
5,658

 
2007
COURTYARD BY MARRIOTT—ROANOKE AIRPORT
Roanoke, VA
14,196

 
3,311

 
22,242

 
—

 
2,439

 
3,311

 
24,682

 
27,992

 
6,196

 
2007
COURTYARD BY MARRIOTT SEATTLE—FEDERAL WAY
Federal Way, WA
22,830

 
7,700

 
27,167

 
—

 
1,717

 
7,700

 
28,883

 
36,583

 
6,867

 
2007
COURTYARD BY MARRIOTT—WILLIAM CENTER
Tucson, AZ
16,030

 
4,000

 
20,942

 
—

 
3,261

 
4,000

 
24,202

 
28,202

 
6,655

 
2007
COURTYARD BY MARRIOTT
Wilmington, NC
—

 
2,397

 
18,560

 
—

 
3,483

 
2,397

 
22,043

 
24,440

 
5,747

 
2007









173

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
COURTYARD—WEST PALM AIRPORT
Palm Coast, FL
5,731

 
1,900

 
8,703

 
—

 
977

 
1,900

 
9,680

 
11,580

 
1,198

 
2010
DOUBLETREE—ATLANTA GALLERIA
Alpharetta, GA
6,116

 
1,082

 
20,397

 
—

 
1,983

 
1,082

 
22,380

 
23,462

 
6,839

 
2008
DOUBLETREE—WASHINGTON DC
Washington, DC
26,398

 
25,857

 
56,964

 
—

 
3,186

 
25,857

 
60,149

 
86,006

 
15,499

 
2008
EMBASSY SUITES—BALTIMORE
Hunt Valley, MD
12,661

 
2,429

 
38,927

 
—

 
4,765

 
2,429

 
43,693

 
46,122

 
13,454

 
2008
FAIRFIELD INN
Ann Arbor, MI
—

 
1,981

 
6,353

 
—

 
605

 
1,981

 
6,958

 
8,939

 
2,254

 
2007
FAIRMONT—DALLAS
Dallas, TX
42,324

 
8,700

 
60,634

 
—

 
5,813

 
8,700

 
66,447

 
75,147

 
5,198

 
2011
HAMPTON INN SUITES—DENVER
Colorado Springs, CO
14,000

 
6,144

 
26,472

 
—

 
2,076

 
6,144

 
28,548

 
34,692

 
8,055

 
2008












174

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
HAMPTON INN BALTIMORE-INNER HARBOR
Baltimore, MD
13,700

 
1,700

 
21,067

 
—

 
1,262

 
1,700

 
22,329

 
24,029

 
5,221

 
2007
HAMPTON INN SUITES DULUTH-GWINNETT
Duluth, GA
9,287

 
488

 
12,991

 
(90
)
 
(3,804
)
 
398

 
9,187

 
9,584

 
342

 
2007
HAMPTON INN WHITE PLAINS-TARRYTOWN
Elmsford, NY
15,157

 
3,200

 
26,160

 
—

 
5,668

 
3,200

 
31,828

 
35,028

 
7,673

 
2007
HAMPTON INN
Jacksonville, NC
—

 
2,753

 
3,782

 
(1,586
)
 
(1,913
)
 
1,167

 
1,869

 
3,036

 
17

 
2007
HGI—BOSTON BURLINGTON
Burlington, MA
5,871

 
4,095

 
25,556

 
—

 
4,021

 
4,095

 
29,576

 
33,671

 
7,922

 
2008
HGI—COLORADO SPRINGS
Colorado Springs, CO
—

 
1,400

 
17,522

 
—

 
2,445

 
1,400

 
19,967

 
21,367

 
5,254

 
2008















175

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
HGI—WASHINGTON DC
Washington, DC
58,381

 
18,800

 
64,359

 
—

 
4,973

 
18,800

 
69,332

 
88,132

 
19,201

 
2008
HILTON GARDEN INN TAMPA YBOR
Tampa, FL
9,460

 
2,400

 
16,159

 
—

 
2,068

 
2,400

 
18,227

 
20,627

 
4,437

 
2007
HILTON GARDEN INN ALBANY AIRPORT
Albany, NY
12,050

 
1,645

 
20,263

 
—

 
4,742

 
1,645

 
25,005

 
26,650

 
6,493

 
2007
HILTON GARDEN INN
Evanston, IL
19,309

 
2,920

 
27,995

 
—

 
3,319

 
2,920

 
31,314

 
34,234

 
7,223

 
2007
HILTON GARDEN INN RALEIGH -DURHAM
Raleigh, NC
7,719

 
2,754

 
26,050

 
—

 
4,598

 
2,754

 
30,648

 
33,402

 
7,516

 
2007
HILTON GARDEN INN
Westbury, NY
21,680

 
8,900

 
25,156

 
—

 
4,051

 
8,900

 
29,207

 
38,107

 
7,325

 
2007
HILTON GARDEN INN
Wilmington, NC
5,200

 
6,354

 
10,328

 
—

 
319

 
6,354

 
10,647

 
17,001

 
3,700

 
2007










176

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
HILTON GARDEN INN HARTFORD NORTH
Windsor, CT
10,062

 
5,606

 
13,892

 
—

 
4,897

 
5,606

 
18,790

 
24,395

 
4,720

 
2007
HILTON GARDEN INN PHOENIX
Phoenix, AZ
—

 
5,114

 
57,105

 
—

 
868

 
5,114

 
57,973

 
63,087

 
14,996

 
2008
HILTON - ST LOUIS DOWNTOWN
St Louis, MO
14,690

 
780

 
22,031

 
—

 
—

 
780

 
22,031

 
22,811

 
822

 
2012
HILTON—UNIVERSITY OF FLORIDA
Gainesville, FL
27,775

 
—

 
50,407

 
—

 
5,746

 
—

 
56,153

 
56,153

 
15,679

 
2007
HOLIDAY INN HARMON MEADOW SECAUCUS
Secaucus, NJ
—

 
—

 
23,291

 
1

 
9,704

 
1

 
32,995

 
32,996

 
8,791

 
2007
HOMEWOOD—HOUSTON GALLERIA
Houston, TX
14,840

 
1,655

 
30,587

 
—

 
563

 
1,655

 
31,149

 
32,804

 
10,157

 
2008
HOMEWOOD SUITES
Albuquerque, NM
10,160

 
2,400

 
18,071

 
—

 
2,849

 
2,400

 
20,920

 
23,320

 
6,361

 
2007
HOMEWOOD SUITES
Baton Rouge, LA
12,930

 
4,300

 
15,629

 
—

 
2,778

 
4,300

 
18,407

 
22,707

 
5,506

 
2007
HOMEWOOD SUITES
Cary, NC
12,351

 
1,478

 
19,404

 
—

 
6,422

 
1,478

 
25,826

 
27,305

 
7,404

 
2007






177

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
HOMEWOOD SUITES
Durham, NC
7,703

 
2,403

 
10,441

 
(709
)
 
(4,095
)
 
1,694

 
6,346

 
8,040

 
234

 
2007
HOMEWOOD SUITES
Princeton, NJ
14,300

 
3,203

 
21,300

 
—

 
1,888

 
3,203

 
23,187

 
26,390

 
6,591

 
2007
HOMEWOOD SUITES CLEVELAND SOLON
Solon, OH
5,490

 
1,900

 
10,757

 
—

 
1,721

 
1,900

 
12,479

 
14,379

 
3,825

 
2007
HOMEWOOD SUITES COLORADO SPRINGS NORTH
Colorado Springs, CO
7,830

 
2,900

 
14,011

 
—

 
2,715

 
2,900

 
16,726

 
19,626

 
5,533

 
2007
HYATT REGENCY—OC
Orange County, CA
65,000

 
18,688

 
93,384

 
—

 
25,844

 
18,688

 
119,228

 
137,916

 
27,280

 
2008












178

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
HYATT—BOSTON/MEDFORD
Medford, MA
14,660

 
2,766

 
29,141

 
—

 
368

 
2,766

 
29,509

 
32,275

 
9,451

 
2008
GRAND BOHEMIAN HOTEL ORLANDO
Orlando, FL
52,017

 
7,739

 
75,510

 
—

 
—

 
7,739

 
75,510

 
83,249

 
—

 
2012
MARRIOTT—ATL CENTURY CENTER
Atlanta, GA
9,628

 
—

 
36,571

 
—

 
3,257

 
—

 
39,828

 
39,828

 
14,279

 
2008
MARRIOTT—CHICAGO—MED DIST UIC
Chicago, IL
8,527

 
8,831

 
17,911

 
—

 
5,190

 
8,831

 
23,101

 
31,933

 
7,481

 
2008
MARRIOTT—CHARLESTON
Charleston, SC
17,328

 
—

 
26,647

 
—

 
7,037

 
—

 
33,685

 
33,685

 
3,825

 
2008
MARRIOTT—DALLAS
Dallas, TX
32,411

 
6,300

 
45,158

 
—

 
15,406

 
6,300

 
60,564

 
66,864

 
7,753

 
2010
MARRIOTT - GRIFFIN GATE RESORT
Lexington, KY
36,250

 
8,638

 
54,960

 
—

 
—

 
8,638

 
54,960

 
63,598

 
1,952

 
2012
MARRIOTT—NAPA VALLEY
Napa Valley, CA
39,820

 
14,800

 
57,223

 
—

 
1,381

 
14,800

 
58,604

 
73,404

 
3,558

 
2011
MARRIOT - SAN FRANCISCO AIRPORT
San Francisco, CA
55,000

 
36,700

 
72,370

 
—

 
—

 
36,700

 
72,370

 
109,070

 
2,634

 
2012
MARRIOTT—WOODLANDS WATERWAY
Woodlands, TX
76,634

 
5,500

 
98,886

 
—

 
25,046

 
5,500

 
123,932

 
129,432

 
29,479

 
2007
MARRIOTT—WEST DES MOINES
Des Moines, IA
10,628

 
3,410

 
15,416

 
—

 
4,924

 
3,410

 
20,340

 
23,750

 
2,368

 
2010
QUALITY SUITES Charleston, SC
10,029

 
1,331

 
13,709

 
—

 
13,617

 
1,331

 
27,326

 
28,657

 
5,117

 
2007



179

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
RENAISSANCE - ATLANTA WAVERLY
Atlanta, GA
97,000

 
6,834

 
90,792

 
—

 
—

 
6,834

 
90,792

 
97,626

 
2,879

 
2012
RENAISSANCE - AUSTIN
Austin, TX
83,000

 
10,656

 
97,960

 
—

 
—

 
10,656

 
97,960

 
108,616

 
2,857

 
2012
RESIDENCE INN—BALTIMORE
Baltimore, MD
40,040

 
—

 
55,410

 
—

 
3,902

 
—

 
59,312

 
59,312

 
16,525

 
2008
RESIDENCE INN
Brownsville, TX
6,900

 
1,700

 
12,629

 
—

 
1,120

 
1,700

 
13,749

 
15,449

 
3,599

 
2007
RESIDENCE INN—CAMBRIDGE
Cambridge, MA
31,606

 
10,346

 
72,735

 
—

 
1,105

 
10,346

 
73,840

 
84,185

 
19,276

 
2008
RESIDENCE INN SOUTH BRUNSWICK-CRANBURY
Cranbury, NJ
10,000

 
5,100

 
15,368

 
—

 
2,630

 
5,100

 
17,998

 
23,098

 
5,099

 
2007
RESIDENCE INN CYPRESS—LOS ALAMITS
Cypress, CA
20,650

 
9,200

 
25,079

 
—

 
3,359

 
9,200

 
28,439

 
37,639

 
8,120

 
2007
RESIDENCE INN DFW AIRPORT NORTH
Dallas-Fort Worth, TX
9,560

 
2,800

 
14,782

 
—

 
899

 
2,800

 
15,681

 
18,481

 
4,003

 
2007
RESIDENCE INN PARK CENTRAL
Dallas , TX
8,970

 
2,600

 
17,322

 
—

 
2,866

 
2,600

 
20,188

 
22,788

 
6,018

 
2007


180

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
RESIDENCE INN SOMERSET-FRANKLIN
Franklin , NJ
9,890

 
3,100

 
14,322

 
—

 
2,323

 
3,100

 
16,644

 
19,744

 
4,669

 
2007
RESIDENCE INN
Hauppauge, NY
10,810

 
5,300

 
14,632

 
—

 
2,404

 
5,300

 
17,037

 
22,337

 
4,787

 
2007
RESIDENCE INN WESTCHASE
Westchase, TX
12,550

 
4,300

 
16,969

 
—

 
3,020

 
4,300

 
19,989

 
24,289

 
4,664

 
2007
RESIDENCE INN WEST UNIVERSITY
Houston, TX
13,100

 
3,800

 
18,834

 
—

 
985

 
3,800

 
19,819

 
23,619

 
5,093

 
2007
RESIDENCE INN NASHVILLE AIRPORT
Nashville, TN
12,120

 
3,500

 
14,147

 
—

 
2,647

 
3,500

 
16,794

 
20,294

 
4,219

 
2007
RESIDENCE INN—POUGHKEEPSIE
Poughkeepsie, NY
11,693

 
1,003

 
24,590

 
—

 
2,263

 
1,003

 
26,853

 
27,855

 
7,595

 
2008
RESIDENCE INN ROANOKE AIRPORT
Roanoke, VA
5,800

 
500

 
9,499

 
—

 
267

 
500

 
9,766

 
10,266

 
2,897

 
2007
RESIDENCE INN WILLIAMS CENTRE
Tucson, AZ
12,770

 
3,700

 
17,601

 
—

 
2,256

 
3,700

 
19,858

 
23,558

 
4,923

 
2007











181

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III
Real Estate and Accumulated Depreciation
(Dollar amounts in thousands)
December 31, 2012
 
 
 
Initial Cost (A)
 
 
 
 
 
Gross amount at which carried at end of period
 
Encumbrance
 
Land
 
Buildings and
Improvements
 
Adjustments
to Land
Basis
(C)
 
Adjustments
to Basis (C)
 
Land and
Improvements
 
Buildings and
Improvements
 (D)
 
Total (D,E)
 
Accumulated
Depreciation 
(D,F)
 
Date of
Completion of
Construction or
Acquisition
RESIDENCE INN—NEWARK ELIZABETH
Elizabeth, NJ
10,321

 
—

 
41,096

 
—

 
2,267

 
—

 
43,363

 
43,363

 
13,198

 
2008
SPRINGHILL SUITES
Danbury, CT
9,130

 
3,200

 
14,833

 
—

 
1,600

 
3,200

 
16,434

 
19,634

 
3,906

 
2007
Balance
5,809,803

 
1,902,559

 
8,142,837

 
(19,845
)
 
536,267

 
1,882,715

 
8,679,105

 
10,561,820

 
1,581,524

 
 


182

INLAND AMERICAN REAL ESTATE TRUST, INC.
(A Maryland Corporation)


Schedule III (continued)
Real Estate and Accumulated Depreciation
December 31, 2012
(Dollar amounts in thousands)
Notes:
(A)
The initial cost to the Company represents the original purchase price of the property, including amounts incurred subsequent to acquisition which were contemplated at the time the property was acquired.
(B)
The aggregate cost of real estate owned at December 31, 2012 for Federal income tax purposes was approximately $11,241,545 (unaudited).
(C)
Cost capitalized subsequent to acquisition includes payments under master lease agreements as well as additional tangible costs associated with investment properties, including any earnout of tenant space.
(D)
Reconciliation of real estate owned:
 
2012
 
2011
 
2010
Balance at January 1,
$
10,404,239

 
10,295,107

 
9,551,426

Acquisitions and capital improvements
762,939

 
433,410

 
1,058,837

Intangible assets
20,618

 
4,550

 
(73,901
)
Intangible liabilities
2,242

 
6,846

 
10,916

Sales
(628,218
)
 
(335,674
)
 
(252,171
)
Balance at December 31,
$
10,561,820

 
10,404,239

 
10,295,107

 
(E)
Reconciliation of accumulated depreciation:
Balance at January 1,
$
1,301,899

 
1,038,829

 
717,547

Depreciation expense
279,625

 
263,070

 
321,282

Balance at December 31,
$
1,581,524

 
1,301,899

 
1,038,829

 
(F)
Depreciation is computed based upon the following estimated lives:
Buildings and improvements
30 years
Tenant improvements
Life of the lease
Furniture, fixtures & equipment
5
-
15 years



183


Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
As required by Rule 13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our principal executive officer and our principal financial officer evaluated as of December 31, 2012, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and Rule 15d-15(e). Based on that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures, as of December 31, 2012, were effective for the purpose of ensuring that information required to be disclosed by us in this report is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including the principal executive officer and our principal financial officer as appropriate to allow timely decisions regarding required disclosures.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our management, including our principal executive officer and principal financial officer, evaluated as of December 31, 2012, the effectiveness of our internal control over financial reporting based on the framework in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation, our management has concluded that we maintained effective internal control over financial reporting as of December 31, 2012.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to permanent deferral of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the fourth quarter of 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.

Part III
Item 10. Directors, Executive Officers and Corporate Governance.
The following biographies set forth each director's principal occupation and business, as well as the specific experience, qualifications, attributes and skills that led to the conclusion by the board that he or she should serve as a director of the Company. All ages are stated as of January 1, 2013. As used herein, “Inland” refers to some or all of the entities that are a part of The Inland Real Estate Group of Companies, Inc., which is comprised of a group of independent legal entities, some of which share ownership or have been sponsored and managed by Inland Real Estate Investment Corporation (“IREIC”) or its subsidiaries.
Robert D. Parks, 69. Chairman of the board and director since October 2004. Mr. Parks has over forty years of experience in the commercial real estate industry, having been a principal of the Inland organization since May 1968. Mr. Parks is currently chairman of IREIC, a position he has held since November 1984. He has also served as a director of Inland Investment Advisors, Inc. since June 1995, and served as a director of Inland Securities Corporation from August 1984 until June 2009. He served as a director of Inland Real Estate Corporation from 1994 through June 2008, and served as chairman of the board from May 1994 to May 2004 and president and chief executive officer from 1994 to April 2008. He also served as a director and chairman of the board of Inland Retail Real Estate Trust, Inc. from its inception in September 1998 to March 2006, and as chief executive officer until December 2004, and as the chairman of the board and a director of Retail Properties of America, Inc. (formerly, Inland Western Retail Real Estate Trust, Inc.) from its inception in March 2003 to October 2010. Mr. Parks also has served as the chairman of the board and a director of Inland Diversified Real Estate Trust, Inc. since its inception in June 2008. Mr. Parks is responsible for the ongoing administration of existing investment programs, corporate budgeting and administration for IREIC. He oversees and coordinates the marketing of all investments and investor relations.

184

He received his bachelor degree from Northeastern Illinois University in Chicago, and his master's degree from the University of Chicago and later taught in Chicago's public schools. He is a member of the National Association of Real Estate Investment Trusts, or “NAREIT.”
With over forty years of experience in the commercial real estate industry, our board believes that Mr. Parks has the depth of experience to implement and oversee our business strategy. As the current or past chairman of the board of each of the other real estate investment trusts, or “REITs,” sponsored by IREIC, including as the past chairman of a New York Stock Exchange-listed REIT, our board believes Mr. Parks has an understanding of the requirements of serving on a public company board and the leadership experience necessary to serve as our chairman.
J. Michael Borden, 76. Independent director since October 2004. Mr. Borden is president and chief executive officer of Rock Valley Trucking Co., Inc., Total Quality Plastics, Inc., Rock Valley Leasing, Inc., Hufcor Inc. and Airwall, Inc. Mr. Borden also served as the president and chief executive officer of Freedom Plastics, Inc. through February 2009, at which time it filed a voluntary petition for a court-supervised liquidation of all of its assets in the Circuit Court of Rock County, Wisconsin. Mr. Borden also is the chief executive officer of Hufcor Asia Pacific in China and Hong Kong, Marashumi Corp. in Malaysia, Hufcor Australia Group, and F. P. Investments a Real Estate Investment Company. He currently serves on the board of directors of Dowco, Inc., M&I Bank, Competitive Wisconsin, St. Anthony of Padua Charitable Trust and Great Lakes Packaging, is a trustee of The Nature Conservancy and is a regent of the Milwaukee School of Engineering. Mr. Borden previously served as chairman of the board of the Wisconsin Workforce Development Board and as a member of the SBA Advisory Council and the Federal Reserve Bank Advisory Council. He was named Wisconsin entrepreneur of the year in 1998. Mr. Borden received a bachelor degree in accounting and finance from Marquette University, Milwaukee, Wisconsin. He also attended a master of business administration program in finance at Marquette University.
Over the past twenty-five years, Mr. Borden's various businesses have routinely entered into real estate transactions in the ordinary course of business, allowing him to develop experience in acquiring, leasing, developing and redeveloping real estate assets. Our board believes that this experience qualifies him to serve as a director on our board.
Thomas F. Glavin, 52. Independent director since October 2007. Mr. Glavin is the owner of Thomas F. Glavin & Associates, Inc., a certified public accounting firm that he started in 1988. In that capacity, Mr. Glavin specializes in providing accounting and tax services to closely held companies. Mr. Glavin began his career at Vavrus & Associates, a real estate firm, located in Joliet, Illinois, that owned and managed apartment buildings and health clubs. At Vavrus & Associates, Mr. Glavin was an internal auditor responsible for reviewing and implementing internal controls. In 1984, Mr. Glavin began working in the tax department of Touche Ross & Co., where he specialized in international taxation. In addition to his accounting experience, Mr. Glavin also has been involved in the real estate business for the past seventeen years. Since 1997, Mr. Glavin has been a partner in Gateway Homes, which has zoned, developed and manages a 440 unit manufactured home park in Frankfort, Illinois. Mr. Glavin received his bachelor degree in accounting from Michigan State University in East Lansing, Michigan and a master of science in taxation from DePaul University in Chicago, Illinois. Mr. Glavin is a member of the Illinois CPA Society and the American Institute of Certified Public Accountants.
As a result of his financial experience, including over twenty-eight years in the accounting profession, our board believes that Mr. Glavin is able to provide valuable insight and advice with respect to our financial risk exposures, our financial reporting process and our system of internal controls. Mr. Glavin, who currently serves as the chairman of the audit committee of our board, qualifies as an “audit committee financial expert” as defined by the SEC.
Brenda G. Gujral, 70.  Director since October 2004. Ms. Gujral has served as our president from October 2004 to September 2012. Ms. Gujral is a director of IREIC and has served as its president since February 2012 (and served in that capacity from July 1987 through June 1992 and again from January 1998 through January 2011). In addition, Ms. Gujral served as the chief executive officer of IREIC from January 2008 to February 2012. Ms. Gujral was appointed president of Inland Securities Corporation in January 2013; she previously served as the president and chief operating officer of Inland Securities Corporation from January 1997 to June 2009, and has been a director of Inland Securities Corporation since January 1997. Ms. Gujral has served as a director of Inland Investment Advisors, Inc., an investment advisor, since January 2001, and has served as a director (March 2003 to May 2012) and chief executive officer (June 2005 to November 2007) of Retail Properties of America, Inc. (formerly, Inland Western Retail Real Estate Trust, Inc.) and as president (from June 2008 to May 2009) of Inland Diversified Real Estate Trust, Inc. and as a director and chairman of the board (August 2011 to June 2012) of Inland Real Estate Income Trust, Inc. (formerly, Inland Monthly Income Trust, Inc.). Ms. Gujral also has been the chairman of the board (since May 2001) and the president (since May 2012) of Inland Private Capital Corporation (formerly, Inland Real Estate Exchange Corporation) and a director of Inland Opportunity Business Manager & Advisor, Inc. since April 2009. Ms. Gujral was a director of Inland Retail Real Estate Trust, Inc. from its inception in September 1998 until it was acquired in February 2007.
Ms. Gujral has overall responsibility for the operations of IREIC, including investor relations, regulatory compliance and filings, review of asset management activities and broker-dealer marketing and communication. Ms. Gujral works with internal and outside legal counsel in structuring IREIC's investment programs and in connection with preparing offering documents and

185

registering the related securities with the SEC and state securities commissions. Our board believes that this experience, coupled with her leadership of IREIC, qualify Ms. Gujral to serve as a member of our board.
Ms. Gujral has been with the Inland organization for thirty-five years, becoming an officer in 1982. Prior to joining the Inland organization, she worked for the Land Use Planning Commission of the State of Oregon, establishing an office in Portland, to implement land use legislation for Oregon. Ms. Gujral graduated from California State University, in Fresno. She holds Series 7, 22, 39 and 63 certifications from FINRA, and is a member of NAREIT, the Investment Program Association and the Real Estate Investment Securities Association. Additionally, Ms. Gujral serves on the board of directors of the Disability Rights Center of the Virgin Islands, an organization that focuses on advancing the legal rights of people with disabilities in the U.S. Virgin Islands.
Thomas F. Meagher, 82. Independent director since October 2004. Mr. Meagher currently serves on the board of directors of DuPage Airport Authority and the TWA Plan Oversight Committee. He also is a former member of the board of trustees of Edward Lowe Foundation, The Private Bank Corp. and the Chicago Chamber of Commerce. Mr. Meagher has previously served on the board of directors of UNR Industries, Rohn Towers, Greyhound Lines Inc., Festival Airlines, Lakeside Bank and Trans World Airlines, where he served as chairman of the board for two years and participated in the sale of the company to American Airlines.
Mr. Meagher began his business career in 1958 when he was selected by American Airlines for its management training program. He subsequently joined Continental Air Transport of Chicago as Executive Vice-President in 1964. In 1970, Mr. Meagher was appointed the first president and chief executive officer of the Chicago Convention and Tourism Bureau, returning to Continental Air Transport as president and chief executive officer in 1972. In 1980, Mr. Meagher purchased Howell Tractor and Equipment Company, a large heavy construction equipment dealership, and sold the company in April 2005.
Mr. Meagher received his bachelor degree from St. Mary's University of Minnesota. Upon graduation, he entered the U.S. Marine Corps Officer Candidate Program, serving with the 2nd Marine Air Wing and achieving the rank of Captain. Mr. Meagher also attended graduate business school at the University of Chicago.
Because of Mr. Meagher's service on the board of directors of a variety of public and private entities, our board believes that he is qualified to serve on our board.
Paula Saban, 59. Independent director since October 2004. Ms. Saban has worked in the financial services and banking industry for over twenty-five years. She began her career in 1978 with Continental Bank, which later merged into Bank of America. From 1978 to 1990, Ms. Saban held various consultative sales roles in treasury management and in traditional lending areas. She also managed client service teams and developed numerous client satisfaction programs. In 1990, Ms. Saban began designing and implementing various financial solutions for clients with Bank of America's Private Bank and Banc of America Investment Services, Inc. Her clients included top management of publicly-held companies and entrepreneurs. In addition to managing a diverse client portfolio, she was responsible for client management and overall client satisfaction. She retired from Bank of America in 2006 as a senior vice president/private client manager. In 1994, Ms. Saban and her husband started a construction products company, Newport Distribution, Inc., of which she is secretary and treasurer, and a principal stockholder.
Ms. Saban received her bachelor degree from MacMurray College, Jacksonville, Illinois, and her master of business administration from DePaul University, Chicago, Illinois. She holds Series 7 and 63 certifications from FINRA. She is a former president of the Fairview Elementary School PTA and a former trustee of both the Goodman Theatre and Urban Gateways. She served as Legislative Chair of Illinois PTA District 37 and as liaison to the No Child Left Behind Task Force of School District 54. She is currently a board member of a Hands On Suburban Chicago which is a not-for-profit organization that matches community and corporate volunteers of all ages and skills with opportunities to connect and serve.
In her roles with Newport Distribution, Ms. Saban has insight into the development and construction industry. Our board believes that these experiences and this insight make her qualified to serve on our board.
William J. Wierzbicki, 66. Independent director since October 2005. Mr. Wierzbicki is a registered Professional Planner in the Province of Ontario, Canada, and is a member of both the Canadian Institute of Planners and the Ontario Professional Planners Institute. Mr. Wierzbicki is the sole proprietor of “Planning Advisory Services,” a land-use planning consulting service providing consultation and advice to various local governments, developers and individuals. Through Planning Advisory Services, Mr. Wierzbicki is the planner for the Municipalities of Huron Shores and Price Township as well as the Town of Chapleau. Mr. Wierzbicki previously served as the Coordinator of Current Planning with the City of Sault Ste. Marie, Ontario. In that capacity, his expertise was in the review of residential, commercial and industrial development proposals. Mr. Wierzbicki led the program to develop a new Comprehensive Zoning By-Law for the City of Sault Ste. Marie. Mr. Wierzbicki was the leader of the team that developed the Sault Ste. Marie's Industrial Development Strategy. More recently he has completed a Community Development Plan for Batchwana First Nation's Rankin site and an Official Plan for the

186

Township of Prince. Mr. Wierzbicki received an architectural technologist diploma from the Sault Ste. Marie Technical and Vocational School in Ontario, Canada, and attended Sault College and Algoma University.
Our board believes that Mr. Wierzbicki's experience and knowledge of commercial real estate industry, including with real estate development, qualifies him to serve on our board. In addition, if we determine to acquire any real estate assets in Canada in the future, Mr. Wierzbicki's expertise in the Canadian real estate market will be useful to our board.
Executive Officers
In addition to Mr. Parks, whose biography is set forth above, the following individuals serve as our executive officers. All ages are stated as of January 1, 2013.
Thomas P. McGuinness, 57. President since September 2012. Mr. McGuinness joined Inland Property Management, Inc. in 1982, and has served as its president since 1991. Mr. McGuinness also has served as president (since 1990) and chairman (since 2001) of Mid-America Management Corporation. From August 2005 through December 2011, Mr. McGuinness served as the president of Inland American HOLDCO LLC (“HOLDCO”), the sole member of each of our property managers, Inland American Retail Management LLC, Inland American Office Management LLC, Inland American Industrial Management LLC and Inland American Apartment Management LLC, and as the chairman, a director and the chief executive officer of the four members of HOLDCO, which are controlled by The Inland Group, Inc. (collectively, the “Parent Companies”). Mr. McGuinness, has served as the president of our business manager since January 2012.
Mr. McGuinness previously served as the president of the Chicagoland Apartment Association and as the regional vice president of the National Apartment Association. He also served on the board of directors of the Apartment Building Owners and Managers Association, and was a trustee with the Service Employees’ Local No. 1 Health and Welfare Fund and its Pension Fund. He holds CLS and CSM accreditations from the International Council of Shopping Centers (“ICSC”). Mr. McGuinness is the husband of JoAnn M. McGuinness. Ms. McGuinness is currently a director of the Inland Group and president of Inland Real Estate Income Trust, Inc., and its business manager.
Roberta S. Matlin, 68. Vice president - administration since October 2004. Ms. Matlin joined IREIC in November 1984 as director of investor administration and currently serves as a director and senior vice president of IREIC, in the latter capacity directing its day-to-day internal operations. Ms. Matlin also has been a director of Inland Private Capital Corporation (f/k/a Inland Real Estate Exchange Corporation) since May 2001, the vice president of Inland Institutional Capital Partners Corporation since May 2006 and a director since August 2012, and a director of Pan American Bank since December 2007. She also has served as a director and president of Inland Investment Advisors, Inc. since June 1995 and Intervest Southern Real Estate Corporation since July 1995 and a director and vice president of Inland Securities Corporation since July 1995. Ms. Matlin has served as the vice president of Inland Monthly Income Trust, Inc. and its business manager since August 2011. She has served as vice president of Inland Diversified Real Estate Trust, Inc. since September 2008, and the vice president of its business manager since May 2009; she also served as the president of Inland Diversified's business manager from June 2008 to May 2009. Ms. Matlin served as vice president of administration of Retail Properties of America, Inc. (formerly, Inland Western Retail Real Estate Trust, Inc.) from 2003 until 2007, vice president of administration of Inland Retail Real Estate Trust, Inc. from September 1998 until December 2004, vice president of administration of Inland Real Estate Corporation from March 1995 until June 2000 and trustee and executive vice president of Inland Mutual Fund Trust from October 2001 until May 2004. Ms. Matlin also has served as the president of Inland Opportunity Business Manager & Advisor, Inc. since April 2009. Prior to joining Inland, Ms. Matlin worked for the Chicago Region of the Social Security Administration of the United States Department of Health and Human Services. Ms. Matlin received her bachelor degree from the University of Illinois in Champaign. She holds Series 7, 22, 24, 39, 63 and 65 certifications from FINRA. Ms. Matlin is a member of NAREIT, the Investment Program Association and the Real Estate Investment Securities Association.
Jack Potts, 43. Treasurer and principal financial officer, and the chief financial officer of our business manager, since February 2012. Mr. Potts previously served as our principal accounting officer and the chief accounting officer of our business manager, from September 2007 to January 2012. Mr. Potts also has served as the treasurer of Inland Real Estate Income Trust, Inc., and the treasurer of its business manager from February 2012 through July 2012. Prior to joining the Inland organization, from February 1998 to April 2007, Mr. Potts held various accounting and financial reporting positions with Equity Office Properties Trust, Inc., a then-publicly traded owner and manager of office properties. Mr. Potts previously worked in the field of public accounting and was a manager in the real estate division for Ernst and Young LLP. He received a bachelor degree in accounting from Michigan State University in East Lansing. Mr. Potts is a certified public accountant.
Anna Fitzgerald, 37. Principal accounting officer and chief accounting officer of our business manager since February 2012. Ms. Fitzgerald joined our business manager in January 2011 as the vice president of accounting. Prior to joining the Inland organization, she had worked as a consultant to the Company, from March 2008 to December 2010. Ms. Fitzgerald was previously employed by Equity Office Properties Trust, Inc. from October 1999 to February 2008, where she held various

187

positions in accounting, financial reporting and treasury. She received a bachelor degree in accounting and finance from Drake University in Des Moines, Iowa. Ms. Fitzgerald is a certified public accountant.
Scott W. Wilton, 51. Secretary since October 2004. Mr. Wilton joined The Inland Group, Inc. in January 1995. He is assistant vice president of The Inland Real Estate Group, Inc. and assistant counsel with The Inland Real Estate Group law department. Mr. Wilton previously served as secretary of Retail Properties of America, Inc. (formerly, Inland Western Retail Real Estate Trust, Inc.) from March 2003 to November 2005, as secretary of Inland Private Capital Corporation from May 2001 to August 2009 and as secretary of Inland Retail Real Estate Trust, Inc. and Inland Retail Real Estate Advisory Services, Inc. from September 1998 to December 2004. Mr. Wilton is involved in all aspects of The Inland Group, Inc.'s business, including real estate acquisitions and financing, securities law and corporate governance matters, leasing and tenant matters and litigation management. He received bachelor degrees in economics and history from the University of Illinois, Champaign, in 1982 and his law degree from Loyola University, Chicago, Illinois, in 1985. Prior to joining The Inland Group, Inc. Mr. Wilton worked for the Chicago law firm of Williams, Rutstein, Goldfarb, Sibrava and Midura, Ltd., specializing in real estate, corporate transactions and litigation.
Audit Committee
Our board has formed an audit committee comprised of four independent directors, Messrs. Borden, Glavin, Meagher and Ms. Saban. The board has determined that Mr. Glavin, the chairman of the committee, qualifies as an “audit committee financial expert,” as defined by the SEC, and that each member of the committee is independent in accordance with the standards set forth in the committee's charter. The audit committee assists the board in fulfilling its oversight responsibility relating to: (1) the integrity of our financial statements; (2) our compliance with legal and regulatory requirements; (3) the qualifications and independence of the independent registered public accounting firm; (4) the adequacy of our internal controls; and (5) the performance of our independent registered public accounting firm. The audit committee has adopted a written charter, which is available on our website at www.inland-american.com under the “Corporate Governance” tab.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires each director, officer and individual beneficially owning more than 10% of our common stock to file initial statements of beneficial ownership (Form 3) and statements of changes in beneficial ownership (Forms 4 and 5) of our common stock with the SEC. Officers, directors and greater than 10% beneficial owners are required by SEC rules to furnish us with copies of all such forms they file. Based solely on a review of the copies of such forms furnished to us during and with respect to the fiscal year ended December 31, 2012, or written representations that no additional forms were required, we believe that all of our officers and directors and persons that beneficially own more than 10% of the outstanding shares of our common stock complied with these filing requirements in 2012.
Code of Ethics
We have adopted a code of ethics applicable to our directors, officers and employees, which is available on our website free of charge at http://www.inlandamerican.com. We will provide the code of ethics free of charge upon request to our customer relations group.
Item 11. Executive Compensation
Compensation of Executive Officers
All of our executive officers are officers and employees, respectively, of one or more of the affiliates of our business manager and are compensated by those entities, in part, for services rendered to us. We do not separately compensate our executive officers, nor do we reimburse either our business manager or our property managers for any compensation paid to their employees who also serve as our executive officers, other than through the general fees we pay to them under the business management agreement or the property management agreements. For the purposes of reimbursement, our corporate secretary is not considered an “executive officer.” As a result, we do not have, and our board of directors has not considered, a compensation policy or program for our executive officers and has not included in this Form 10-K a “Compensation Discussion and Analysis” or a report from our board of directors with respect to executive compensation. The fees we pay to the business manager and property managers under the business management agreement or the property management agreements are described in more detail in Item 13 of this Form 10-K.
If we decide to pay our named executive officers in the future, the board of directors will review all forms of compensation and approve all stock option grants, warrants, stock appreciation rights and other current or deferred compensation payable to the executive officers with respect to the current or future value of our shares.

188

Independent Director Compensation
We pay each of our independent directors an annual fee of $30,000, plus $1,000 for each meeting of the board attended in person and $500 for each meeting of the board attended by telephone. We also pay the chairperson of the audit committee an annual fee of $10,000, and pay each member of the audit committee $1,000 for each meeting of the audit committee attended in person and $500 for each meeting of the audit committee attended by telephone. We pay the chairperson of every other committee, including any special committee, an annual fee of $5,000, and pay each member of such committee $1,000 for each meeting of the committee attended in person and $500 for each meeting of the committee attended by telephone. We reimburse all of our directors for any out-of-pocket expenses incurred by them in attending meetings. In addition, on the date of each annual meeting of stockholders, we grant to each independent director then in office options to purchase 500 shares of our common stock under our independent director stock option plan.
We do not compensate any director that also is an employee of our Company, our business manager or its affiliates.
The following table further summarizes compensation earned by the independent directors for the year ended December 31, 2012.
 
 
 
 
 
 
Fees Earned in Cash ($) 
 
Option Awards* ($) (1) 
 
Total ($) 
 
J. Michael Borden
56,000

3,610

59,610

Thomas F. Glavin
70,000

3,610

73,610

Thomas F. Meagher
56,000

3,610

59,610

Paula Saban
59,000

3,610

62,610

William J. Wierzbicki
50,000

3,610

53,610

* Each director receives 500 shares at each annual stockholder meeting, with an exercise price equal to the market value of our shares at the time of issuance.
(1) With the exception of Mr. Glavin, each independent director had options to purchase 6,000 shares of our common stock outstanding at December 31, 2012. Mr. Glavin had options to purchase 5,000 shares of our common stock outstanding at December 31, 2012. All options have been granted pursuant to our independent director stock option plan.
Stock Option Grants
Under our independent director stock option plan, we have authorized and reserved a total of 75,000 shares of our common stock for issuance. The number and type of shares that could be issued under the plan may be adjusted if we are the surviving entity after a reorganization or merger or if we split our stock, are consolidated or are recapitalized. If this occurs, the exercise price of the options will be correspondingly adjusted.
The independent director stock option plan generally provides for the grant of non-qualified stock options to purchase 3,000 shares to each independent director upon his or her appointment subject to satisfying the conditions set forth in the plan. The plan also provides for subsequent grants of options to purchase 500 shares on the date of each annual stockholder's meeting to each independent director then in office. The exercise price for all options is equal to the fair market value of our shares, as defined in the plan, on the date of each grant. However, options may not be granted at any time when the grant, along with the grants to be made at the same time to other independent directors, would exceed 9.8% in value of our issued and outstanding shares of stock or 9.8% in value or number of shares, whichever is more restrictive, of our issued and outstanding shares of common stock.
One-third of the options granted following an individual initially becoming an independent director are exercisable beginning on the date of their grant, one-third become exercisable on the first anniversary of the date of their grant and the remaining one-third become exercisable on the second anniversary of the date of their grant. All other options granted under the independent director stock option plan become fully exercisable on the second anniversary of their date of grant.
Options granted under the independent director stock option plan are exercisable until the first to occur of: the tenth anniversary of the date of grant; the removal for cause of the person as an independent director; or three months following the date the person ceases to be an independent director for any other reason except death or disability.

189

All options generally are exercisable in the case of death or disability for a period of one year after death or the disabling event, provided that the death or disabling event occurs while the person is an independent director. However, if the option is exercised within the first six months after it becomes exercisable, any shares issued pursuant to such exercise may not be sold until the six month anniversary of the date of the grant of the option. Notwithstanding any other provisions of the independent director stock option plan to the contrary, no option issued pursuant thereto may be exercised if exercise would jeopardize our status as a REIT under the Internal Revenue Code of 1986, as amended.
No option may be sold, pledged, assigned or transferred by an independent director in any manner otherwise than by will or by the laws of descent or distribution.
 Upon our dissolution, liquidation, reorganization, merger or consolidation as a result of which we are not the surviving corporation, or upon sale of all or substantially all of our assets, the independent director stock option plan will terminate, and any outstanding unexercised options will terminate and be forfeited. However, holders of options may exercise any options that are otherwise exercisable immediately prior to the dissolution, liquidation, consolidation or merger. Additionally, our board may provide for other alternatives in the case of a dissolution, liquidation, consolidation or merger.
Compensation Committee Interlocks and Insider Participation
None of our current or former officers or employees, or the current or former officers or employees of our subsidiaries, participated in any deliberations of our board of directors concerning executive officer compensation during the year ended December 31, 2012. In addition, during the year ended December 31, 2012, none of our executive officers served as a director or a member of the compensation committee of any entity that has one or more executive officers serving as a member of our board of directors.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Equity Compensation Plan Information
The following table provides information regarding our equity compensation plans as of December 31, 2012.
 
Plan category
Number of 
securities to be issued upon 
exercise
of outstanding 
options, warrants and rights
 
Weighted-average exercise price of 
outstanding
options, warrants and rights
Number of 
securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders:
 
 
 
Independent Director Stock Option Plan
29,000

$
8.87

46,000

Equity compensation plans not approved by security holders
—

—

—

 
 
 

 
Total:
29,000

$
8.87

46,000

 
 
 
 
We have adopted an Independent Director Stock Option Plan which, subject to certain conditions, provides for the grant to each independent director of an option to purchase 3,000 shares following their becoming a director and for the grant of additional options to purchase 500 shares on the date of each annual stockholder's meeting. The options for the initial 3,000 shares are exercisable as follows: 1,000 shares on the date of grant and 1,000 shares on each of the first and second anniversaries of the date of grant. All other options are exercisable on the second anniversary of the date of grant.
 
Stock Owned by Certain Beneficial Owners and Management
Based on a review of filings with the SEC, the following table shows the amount of common stock beneficially owned (unless otherwise indicated) by (1) persons that are known to beneficially own more than 5% of the outstanding shares of our common stock ; (2) our directors; (3) our executive officers; and (4) our directors and executive officers as a group. All information is as of February 19, 2013.

190

 
Name and Address of Beneficial Owner (1)
Amount and Nature
of Beneficial Ownership (2)
 
Percent
of Class 
J. Michael Borden, Independent Director
156,099

(3)
*

Thomas F. Glavin, Independent Director
27,207

(4)
*

Brenda G. Gujral, Director
9,280

(5)
*

Thomas F. Meagher, Independent Director
20,280

(6)
*

Robert D. Parks, Director and Chairman of the Board
451,920

(7)
*

Paula Saban, Independent Director
5,500

(8)
*

William J. Wierzbicki, Independent Director
6,934

(9)
*

Thomas P. McGuinness, President
—

 
—

Roberta S. Matlin, Vice President-Administration
3,126

(10)
*

Jack Potts, Treasurer and Principal Financial Officer
—

 
—

Anna Fitzgerald, Principal Accounting Officer
—

 
—

Scott W. Wilton, Secretary
4,028

(11)
*

 
 

 
 

All Directors and Officers as a group (twelve persons)
684,374

 
*

 
 
 
 
 *Less than 1%
(1)
The business address of each person listed in the table is c/o Inland American Real Estate Trust, Inc., 2901 Butterfield Road, Oak Brook, Illinois 60523.
(2)
All fractional ownership amounts have been rounded to the nearest whole number.
(3)
Mr. Borden has sole voting and dispositive power over 144,405 shares, including 58,357 shares owned by St. Anthony Padua Charitable Trust, for which Mr. Borden is the trustee, and Mr. Borden and his wife share voting and dispositive power over 6,194 shares. Mr. Borden's shares include vested options exercisable into 5,500 shares of common stock.
(4)
Mr. Glavin and his wife share voting and dispositive power over 22,707 shares. Mr. Glavin's shares include vested options exercisable into 4,500 shares of common stock.
(5)
Ms. Gujral has sole voting and dispositive power over 3,336 shares. Ms. Gujral and her husband share voting and dispositive power over 5,944 shares.
(6)
Mr. Meagher has sole voting and dispositive power over all of the shares that he owns. Mr. Meagher's shares include vested options exercisable into 5,500 shares of common stock.
(7)
Mr. Parks has sole voting and dispositive power over all 451,920 shares.
(8)
Ms. Saban has sole voting and dispositive power over all of the shares that she owns. Ms. Saban's ownership is comprised of vested options exercisable into 5,500 shares of common stock.
(9)
Mr. Wierzbicki and his wife share voting and dispositive power over 1,434 shares. Mr. Wierzbicki's shares include vested options exercisable into 5,500 shares of common stock.
(10)
Ms. Matlin has sole voting and dispositive power over all of the shares that she owns.
(11)
Mr. Wilton and his mother share voting and dispositive power over all 3,351 shares, and Mr. Wilton and his spouse share voting and dispositive power over 677 shares owned by Mr. Wilton's spouse through her individual IRA.
 

Item 13. Certain Relationships and Related Transactions, and Director Independence.
Director Independence
Our business is managed under the direction and oversight of our board. The members of our board are J. Michael Borden, Thomas F. Glavin, Brenda G. Gujral, Thomas F. Meagher, Robert D. Parks, Paula Saban and William J. Wierzbicki. As required by our charter, a majority of our directors must be “independent.” As defined by our charter, an “independent director” is a person who: (1) is not directly or indirectly associated, and has not been directly or indirectly associated within the two years prior to becoming an independent director, with the Company, IREIC or our business manager whether by ownership of, ownership interest in, employment by, any material business or professional relationship with or as an officer or director of the Company, IREIC, our business manager or any of their affiliates; (2) does not serve as a director for another REIT originated by IREIC or advised by our business manager or any of its affiliates; and (3) performs no other services for the Company, except as director.

191

Although our shares are not listed for trading on any national securities exchange and therefore our board of directors is not subject to the independence requirements of the New York Stock Exchange (“NYSE”) or any other national securities exchange, our board has evaluated whether our directors are “independent” as defined by the NYSE. The NYSE standards provide that to qualify as an independent director, in addition to satisfying certain bright-line criteria, the board of directors must affirmatively determine that a director has no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company).
Consistent with these considerations, after a review of all relevant transactions or relationships between each director, or any of his or her family members, and the Company, our management and our independent registered public accounting firm, the board has determined that Messrs. Borden, Glavin, Meagher and Wierzbicki and Ms. Saban qualify as independent directors.
Related Party Transactions
We pay our business manager, an affiliate of our sponsor, IREIC, and its affiliates various fees and compensation. The following is a summary of the fees and compensation we paid to our business manager and its affiliates during the year ended December 31, 2012.
After our stockholders have received a non-cumulative, non-compounded return of 5.0% per annum on their “invested capital,” we pay our business manager an annual business management fee of up to 1% of the “average invested assets,” payable quarterly in an amount equal to 0.25% of the average invested assets as of the last day of the immediately preceding quarter. For these purposes, “average invested assets” means, for any period, the average of the aggregate book value of our assets, including lease intangibles, invested, directly or indirectly, in financial instruments, debt and equity securities and equity interests in and loans secured by real estate assets, including amounts invested in REITs and other real estate operating companies, before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of these values at the end of each month during the period. We pay this fee for services provided or arranged by our business manager, such as managing our day-to-day business operations, arranging for the ancillary services provided by other affiliates and overseeing these services, administering our bookkeeping and accounting functions, consulting with our board, overseeing our real estate assets and providing other services as our board deems appropriate. Pursuant to the letter agreement dated May 4, 2012, the business management fee shall be reduced in each particular quarter for investigation costs exclusive of legal fees incurred in conjunction with the SEC matter. During the year ended December 31, 2012, the Company incurred $108 thousand of investigation costs, resulting in a business management fee expense of $39,892, or approximately 0.35% of our “average invested assets” on an annual basis, for the year ended December 31, 2012. In addition, effective July 30, 2012, the Company extended the agreement with the Business Manager through July 30, 2013. The terms of the Business Manager Agreement remains unchanged.
We pay Inland Investment Advisors, Inc., another affiliate of our business manager, an annual fee, paid on a monthly basis, totaling 1% of the first $1 to $5 million of marketable securities under management, 0.85% of marketable securities from $5 to $10 million, 0.75% of marketable securities from $10 to $25 million, 0.65% of marketable securities from $25 to $50 million, 0.60% of marketable securities from $50 to $100 million and 0.50% of marketable securities above $100 million. Notwithstanding the above, the total annual fees paid to Inland Investment Advisors plus the annual business management fee paid to our business manager may not exceed the amounts we may pay as the annual business management fee. For the year ended December 31, 2012, we paid fees to Inland Investment Advisors in an amount equal to approximately $1.8 million.
We also reimburse our business manager and its affiliates for all expenses that it, or any affiliate, pays or incurs on our behalf, including the salaries and benefits of persons employed by the business manager or its affiliates and performing services for us, except for the salaries and benefits of persons who also serve as one of the executive officers or as an executive officer of the business manager. For the purposes of reimbursement, our corporate secretary is not considered an “executive officer”. For the year ended December 31, 2012, we incurred approximately $12.2 million of these costs. In addition, for any year in which we qualify as a REIT, our business manager must reimburse us for the amounts, if any, by which the total operating expenses paid during the previous year exceed the greater of 2% of the average invested assets for that year or 25% of net income for that year, subject to certain adjustments. Our total operating expenses did not exceed these limits during the year ended December 31, 2012.
Additionally, we pay the business manager a fee for services performed in connection with acquiring a controlling interest in a REIT or other real estate operating company. Acquisition fees, however, are not paid for acquisitions solely of a fee interest in property. The amount of the acquisition fee is equal to 2.5% of the aggregate purchase price paid to acquire the controlling interest. We did not pay any acquisition fees for the year ended December 31, 2012.

We pay our property managers, entities owned principally by individuals who are affiliated with our sponsor, a monthly fee up to a certain percentage of gross operating income (as defined). For the six months ending June 30, 2012, the property managers were entitled to receive property management fees up to 4.5% of gross operating income (as defined), for management and leasing services; however, (1) for triple-net lease properties, the property managers were entitled to monthly fees equal to 2.9%

192

of the gross income generated by the applicable property each month and (2) for bank branches, the property managers were entitled to monthly fees equal to 2.5% of the gross income generated by the applicable property each month in operating companies purchased by the Company. The property managers were entitled to receive an oversight fee of 1% of gross operating income (as defined). These rates became effective January 1, 2012 when we entered into an extension agreement with the property managers which extended the term through June 30, 2012.

On July 1, 2012, we entered into new master agreements with its property managers and extended the term until December 31, 2013 which will automatically be renewed until June 30, 2015 unless either party to the agreement provides written notice of cancellation before June 30, 2013. Under the new master agreements, we paid the property managers monthly management fees by property type, updated as follows: (i) for any bank branch facility (office or retail), 2.50% of the gross income generated by the property; (ii) for any multi-tenant industrial property, 4.00% of the gross income generated by the property; (iii) for any multi-family property, 3.75% of the gross income generated by the property; (iv) for any multi-tenant office property, 3.75% of the gross income generated by the property; (v) for any multi-tenant retail property, 4.50% of the gross income generated by the property; (vi) for any single-tenant industrial property, 2.25% of the gross income generated by the property; (vii) for any single-tenant office property, 2.90% of the gross income generated by the property; and (viii) for any single-tenant retail property, 2.90% of the gross income generated by the property.

We also pay our property managers, based on the type of property managed, a monthly oversight fee of up to 1% of the gross income from each property managed directly by entities other than our property managers, their affiliates or agents. We do not pay any oversight fees with respect to our lodging properties. Further, as is customary in the industry, we reimburse each property manager, its affiliates and agents for property-level expenses that it or they pay, such as salaries and benefit expenses for on-site employees and other miscellaneous expenses. We paid our property managers management fees of approximately $27.6 million for the year ended December 31, 2012. We did not pay any oversight fees for the year ended December 31, 2012. We also reimbursed the property managers approximately $14.0 million related to property level payroll costs.
We pay a related party of the business manager 0.2% of the principal amount of each loan placed on our behalf. Such costs are capitalized as loan fees and amortized over the respective loan term. We paid $1.2 million for the year ended December 31, 2012. During the first half of 2012, we paid a related party to provide loan servicing. We paid $0.1 million for the year ended December 31, 2012.
As of December 31, 2012, we had deposited $0.4 million in Inland Bank and Trust, a subsidiary of Inland Bancorp, Inc., an affiliate of The Inland Real Estate Group, Inc., which is owned by The Inland Group, Inc.
 
We are party to an agreement with a limited liability company formed as an insurance association captive , which is wholly-owned by us and and two related parties, Inland Real Estate Corporation (“IRC”) and Inland Diversified Real Estate Trust, Inc., and a third party, Retail Properties of America ("RPAI"). We paid insurance premiums of $12.2 million for the year ended December 31, 2012.
We held 889,820 shares of IRC valued $7.5 million as of December 31, 2012.
Policies and Procedures with Respect to Related Party Transactions
Our charter contains provisions setting forth our ability to engage in certain related party transactions. Our board reviews all of these transactions and, as a general rule, any related party transactions must be approved by a majority of the directors, including a majority of the independent directors not otherwise interested in the transaction. All transactions described under the caption “Related Party Transactions” are subject to board approval, including a majority of the independent directors not otherwise interested in the transaction. In determining whether to approve or authorize a particular related party transaction, these directors will consider whether the transaction between us and the related party is fair and reasonable to us and has terms and conditions no less favorable to us than those available from unaffiliated third parties. We believe that our general policies and procedures regarding related party transactions also are evidenced by the disclosures in this Form 10-K and our prior proxy statements under the caption “Certain Relationships and Related Transactions.” We may in the future adopt more specific written policies and procedures regarding related party transactions.

Item 14. Principal Accounting Fees and Services.
Fees to Independent Registered Public Accounting Firm
The following table presents fees for professional services rendered by our independent registered public accounting firm, KPMG LLC (“KPMG”), for the audit of our annual financial statements for the years ended December 31, 2012 and 2011, together with fees for audit-related services and tax services rendered by KPMG for the years ended December 31, 2012 and 2011, respectively.

193

 
 
Year ended December 31,  
 
2012
2011
Audit fees (1)
$
1,638,845

$
1,283,000

Audit-related fees
—

—

Tax fees (2)
514,774

567,760

All other fees
—

—

 
 
 
TOTAL
$
2,153,619

$
1,850,760

 
 
 
(1)
Audit fees consist principally of fees paid for the audit of our annual consolidated financial statements and review of our consolidated financial statements included in our quarterly reports.
(2)
Tax fees are comprised of tax compliance fees.

Approval of Services and Fees
Our audit committee has reviewed and approved all of the fees charged by KPMG for the years ended December 31, 2012 and 2011, and actively monitors the relationship between audit and non-audit services provided by KPMG. The audit committee concluded that all services rendered by KPMG during the years ended December 31, 2012 and 2011, respectively, were consistent with maintaining KPMG's independence. Accordingly, the audit committee has approved all of the services provided by KPMG. As a matter of policy, the Company will not engage its primary independent registered public accounting firm for non-audit services other than “audit-related services,” as defined by the SEC, certain tax services and other permissible non-audit services as specifically approved by the chairperson of the audit committee and presented to the full committee at its next regular meeting. The policy also includes limits on hiring partners of, and other professionals employed by, KPMG to ensure that the SEC's auditor independence rules are satisfied.
Under the policy, the audit committee must pre-approve any engagements to render services provided by the Company's independent registered public accounting firm and the fees charged for these services including an annual review of audit fees, audit-related fees, tax fees and other fees with specific dollar value limits for each category of service. During the year, the audit committee will periodically monitor the levels of fees charged by KPMG and compare these fees to the amounts previously approved. The audit committee also will consider on a case-by-case basis and, if appropriate, approve specific engagements that are not otherwise pre-approved. Any proposed engagement that does not fit within the definition of a pre-approved service may be presented to the chairperson of the audit committee for approval.



Part IV

Item 15. Exhibits and Financial Statement Schedules
(a)
List of documents filed:

(b)
Financial Statements:
 
 
Report of Independent Registered Public Account Firm
 
 
The consolidated financial statements of the Company are set forth in the report in Item 8.
(2)
Financial Statement Schedules:
 
 
Financial statement schedule for the year ended December 31, 2012 is submitted herewith.
 
 
Real Estate and Accumulated Depreciation (Schedule III)
(3)
Exhibits:
 
 
The list of exhibits filed as part of this Annual Report is set forth on the Exhibit Index attached hereto.

194


(b)
Exhibits:
 
 
The exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto.
(c)
Financial Statement Schedules
All schedules other than those indicated in the index have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.


195

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INLAND AMERICAN REAL ESTATE TRUST, INC.
 
 
 
/s/ Thomas P. McGuinness
By:
 
Thomas P. McGuinness
 
 
President
Date:
 
March 12, 2013
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
  
 
Signature
  
Title
 
Date
 
 
 
 
By:
 
/s/ Robert D. Parks
  
Director and chairman of the board
 
March 12, 2013
Name:
 
Robert D. Parks
  
 
 
 
 
 
 
 
By:
 
/s/ Thomas P. McGuinness
  
President (principal executive officer)
 
March 12, 2013
Name:
 
Thomas P. McGuinness
  
 
 
 
 
 
 
 
By:
 
/s/ Jack Potts
  
Treasurer and principal financial officer
 
March 12, 2013
Name:
 
Jack Potts
  
 
 
 
 
 
 
 
By:
 
/s/ Anna N. Fitzgerald
  
Principal accounting officer
 
March 12, 2013
Name:
 
Anna N. Fitzgerald
  
 
 
 
 
 
 
 
By:
 
/s/ J. Michael Borden
  
Director
 
March 12, 2013
Name:
 
J. Michael Borden
  
 
 
 
 
 
 
 
By:
 
/s/ Thomas F. Meagher
  
Director
 
March 12, 2013
Name:
 
Thomas F. Meagher
  
 
 
 
 
 
 
 
By:
 
/s/ Paula Saban
  
Director
 
March 12, 2013
Name:
 
Paula Saban
  
 
 
 
 
 
 
 
By:
 
/s/ William J. Wierzbicki
  
Director
 
March 12, 2013
Name:
 
William J. Wierzbicki
  
 
 
 
 
 
 
 
By:
 
/s/ Thomas F. Glavin
  
Director
 
March 12, 2013
Name:
 
Thomas F. Glavin
  
 
 
 
 
 
 
 
 
 
 
By:
 
/s/ Brenda G. Gujral
  
Director
 
March 12, 2013
Name:
 
Brenda G. Gujral
  
 
 
 

196


EXHIBIT INDEX

 
 
 
EXHIBIT
NO.
  
DESCRIPTION
 
 
3.1
  
Sixth Articles of Amendment and Restatement of Inland American Real Estate Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on August 26, 2010)
 
 
3.2
  
Amended and Restated Bylaws of Inland American Real Estate Trust, Inc., effective as of April 1, 2008 (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on April 1, 2008), as amended by the Amendment to the Amended and Restated Bylaws of Inland American Real Estate Trust, Inc., effective as of January 20, 2009 (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on January 23, 2009)
 
 
4.1
  
Second Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on September 23, 2010)
 
 
4.2
  
Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to Exhibit 4.4 to the Registrant’s Amendment No. 1 to Form S-11 Registration Statement, as filed by the Registrant with the SEC on July 31, 2007 (file number 333-139504))
 
 
10.1
  
First Amended and Restated Business Management Agreement, dated as of July 30, 2007, by and between Inland American Real Estate Trust, Inc. and Inland American Business Manager & Advisor, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on August 3, 2009)
 
 
10.2.1
  
Master Management Agreement, dated as of July 1, 2012, by and between Inland American Real Estate Trust, Inc. and Inland American Apartment Management LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on July 6, 2012)
 
 
10.2.2
  
Master Management Agreement, dated as of July 1, 2012, by and between Inland American Real Estate Trust, Inc. and Inland American Industrial Management LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on July 6, 2012)
 
 
10.2.3
  
Master Management Agreement, dated as of July 1, 2012, by and between Inland American Real Estate Trust, Inc. and Inland American Office Management LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on July 6, 2012)

197

EXHIBIT
NO.
  
DESCRIPTION
 
 
10.2.4
  
Master Management Agreement, dated as of July 1, 2012, by and between Inland American Real Estate Trust, Inc. and Inland American Retail Management LLC (incorporated by reference to Exhibit 10.4 to the Registrant's Form 8-K, as filed by the Registrant with the SEC on July 6, 2012)

 
 
10.2.5
  
Master Management Agreement and Property Management Agreement Extension Agreement, dated as of December 29, 2011, by and between Inland American Real Estate Trust, Inc. and Inland American Apartment Management LLC, Inland American Industrial Management LLC, Inland American Office Management LLC and Inland American Retail Management LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on December 29, 2011)
 
 
10.3
  
First Amended and Restated Property Acquisition Agreement, dated as of July 30, 2007, by and between Inland American Real Estate Trust, Inc. and Inland American Real Estate Acquisitions, Inc. (incorporated by reference to Exhibit 10.3.1 to the Registrant’s Amendment No. 1 to Form S-11 Registration Statement, as filed by the Registrant with the SEC on July 31, 2007 (file number 333-139504))
 
 
10.4
  
Form of Indemnification Agreement (previously filed and incorporated by reference to Exhibit 10.5 to the Registrant’s Amendment No. 4 to Form S-11 Registration Statement, as filed by the Registrant with the SEC on August 18, 2005 (file number 333-122743))
 
 
10.5
  
Indemnity Agreement, dated as of June 9, 2008, by Inland American Real Estate Trust, Inc. in favor of and for the benefit of Inland Real Estate Acquisitions, Inc. (incorporated by reference to Exhibit 10.177 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on June 13, 2008)
 
 
10.6
  
Amended and Restated Independent Director Stock Option Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on July 26, 2010)
 
 
10.7
  
Articles of Association of Oak Real Estate Association by and among Inland Real Estate Corporation, Inland Real Estate Trust, Inc., Inland Western Retail Real Estate Trust, Inc. and Inland American Real Estate Trust, Inc., dated September 29, 2006 (incorporated by reference to Exhibit 10.139 to the Registrant’s Quarterly Report on Form 10-Q, as filed by the Registrant with the SEC on November 7, 2006)
 
 
10.8
  
Operating Agreement of Oak Property and Casualty L.L.C. by and among Inland Real Estate Corporation, Inland Retail Real Estate Trust, Inc., Inland Western Retail Real Estate Trust, Inc. and Inland American Real Estate Trust, Inc, dated September 29, 2006 (incorporated by reference to Exhibit 10.140 to the Registrant’s Quarterly Report on Form 10-Q, as filed by the Registrant with the SEC on November 7, 2006)
 
 
10.9
  
Oak Property and Casualty L.L.C. Membership Participation Agreement by and among Inland Real Estate Corporation, Inland Retail Real Estate Trust, Inc., Inland Western Retail Real Estate Trust, Inc., Inland American Real Estate Trust, Inc., and Oak Property and Casualty L.L.C. dated September 29, 2006 (incorporated by reference to Exhibit 10.141 to the Registrant’s Quarterly Report on Form 10-Q, as filed by the Registrant with the SEC on November 7, 2006)
 
 
10.10
 
Letter Agreement, dated May 4, 2012, from Inland American Business Manager & Advisor, Inc. to Inland American Real Estate Trust, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q, as filed by the Registrant with the SEC on May 7, 2012)
 
 
 
14.1
 
Code of Ethics
 
 
 
21.1
  
Subsidiaries of the Registrant*
 
 
23.1
  
Consent of KPMG LLP*

198

EXHIBIT
NO.
  
DESCRIPTION
 
 
31.1
  
Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
 
 
31.2
  
Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
 
 
32.1
  
Certification by Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
 
 
32.2
  
Certification by Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
 
 
99.1
  
Non-Retaliation Policy (incorporated by reference to Exhibit 99.1 to the Registrant’s Form S-11 Registration Statement, as filed by the Registrant with the SEC on February 11, 2005 (file number 333-122743))
 
 
99.2
  
Responsibilities of the Compliance Officer of the Company (incorporated by reference to Exhibit 99.2 to the Registrant’s Form S-11 Registration Statement, as filed by the Registrant with the SEC on February 11, 2005 (file number 333-122743))
 
 
99.3
  
First Amended and Restated Articles of Incorporation of Minto Builders (Florida), Inc. (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on October 17, 2005)
 
 
99.4
  
Articles of Amendment to the First Amended and Restated Articles of Incorporation of Minto Builders (Florida), Inc. with Respect to 3.5% Series A Cumulative Redeemable Preferred Stock (incorporated by reference to Exhibit 99.2 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on October 17, 2005)
 
 
99.5
  
Second Amended and Restated Articles of Incorporation of Minto Builders (Florida), Inc. (incorporated by reference to Exhibit 99.3 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on October 17, 2005)
 
 
99.6
  
Articles of Amendment to the Second Amended and Restated Articles of Incorporation of Minto Builders (Florida), Inc. with Respect to Convertible Special Voting Stock (incorporated by reference to Exhibit 99.4 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on October 17, 2005)
 
 
99.7
  
Articles of Amendment to the Second Amended and Restated Articles of Incorporation of Minto Builders (Florida), Inc. with Respect to 125 Shares of 12.5% Series B Cumulative Non-Voting Preferred Stock (incorporated by reference to Exhibit 99.5 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on October 17, 2005)
 
 
99.8
  
Amended and Restated Share Repurchase Program, effective April 11, 2011 (incorporated by reference to Exhibit 99.3 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on March 11, 2011), as amended by the First Amendment to the Amended and Restated Share Repurchase Program of Inland American Real Estate Trust, Inc., effective August 12, 2011 (incorporated by reference to Exhibit 99.2 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on July 12, 2011),
 
 
99.9
  
Second Amended and Restated Share Repurchase Program, effective February 1, 2012 (incorporated by reference to Exhibit 99.2 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on December 29, 2011)
 
 
101
  
The following financial information from our Annual Report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission on March 8, 2012, is formatted in Extensible Business Reporting Language (“XBRL”): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Other Comprehensive Income, (iii) Consolidated Statements of Equity, (iv) Consolidated Statements of Cash Flows (v) Notes to Consolidated Financial Statements (tagged as blocks of text).**
*
Filed as part of this Annual Report on Form 10-K.
**
The XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

199