10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________

FORM 10-Q

_________________________________

(Mark One)

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

For the quarterly period ended June 30, 2016

OR

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

For the transition period from              to             

Commission file number 000-54376

 _________________________________

STRATEGIC REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)

_________________________________

Maryland	90-0413866
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
400 South El Camino Real, Suite 1100 San Mateo, California, 94402	(650) 343-9300
(Address of Principal Executive Offices; Zip Code)	(Registrant’s Telephone Number, Including Area Code)

_________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x

As of August 8, 2016, there were 11,008,668 shares of the Registrant’s common stock issued and outstanding.

STRATEGIC REALTY TRUST, INC.

INDEX

		Page
PART I — FINANCIAL INFORMATION		3
Item 1.	Unaudited Condensed Consolidated Financial Statements	4
	Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015	4
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2015	5
	Condensed Consolidated Statement of Equity for the six months ended June 30, 2016	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	31
Signatures		32

2 

PART I

FINANCIAL INFORMATION

The accompanying unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2016, have been prepared by Strategic Realty Trust, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2015, as filed with the SEC on March 30, 2016 (the “2015 Annual Report on Form 10-K”). The condensed consolidated financial statements herein should also be read in conjunction with the Notes to Condensed Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q. The results of operations for the three and six months ended June 30, 2016, are not necessarily indicative of the operating results expected for the full year. The information furnished in the Company’s accompanying unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of operations, equity, and cash flows reflects all adjustments that are, in management’s opinion, necessary for a fair presentation of the aforementioned financial statements. Such adjustments are of a normal recurring nature.

3 

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except shares and per share amounts)

(unaudited)

	June 30, 2016			December 31, 2015
ASSETS
Investments in real estate
Land	$	17,715		$	15,981
Building and improvements		60,237			56,158
Tenant improvements		3,593			3,676
		81,545			75,815
Accumulated depreciation		(11,250	)		(10,068	)
Investments in real estate, net		70,295			65,747
Properties under development and development costs
Land		25,851			—
Buildings		609			—
Development costs		2,012			—
Properties under development and development costs		28,472			—
Cash and cash equivalents		3,265			8,793
Restricted cash		5,869			2,693
Prepaid expenses and other assets, net		1,015			731
Tenant receivables, net		1,218			1,664
Investments in unconsolidated joint ventures		6,469			6,902
Lease intangibles, net		4,265			4,290
Assets held for sale		—			9,769
Deferred financing costs, net		439			579
TOTAL ASSETS	$	121,307		$	101,168
LIABILITIES AND EQUITY
LIABILITIES
Notes payable, net	$	63,071		$	34,052
Accounts payable and accrued expenses		1,119			1,486
Amounts due to affiliates		75			49
Other liabilities		1,502			1,479
Liabilities related to assets held for sale		—			6,909
Below market lease intangibles, net		3,601			3,303
Deferred gain on sale of properties to unconsolidated joint venture		1,227			1,225
TOTAL LIABILITIES		70,595			48,503
Commitments and contingencies (Note 13)
EQUITY
Stockholders' equity
Preferred stock, $0.01 par value; 50,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.01 par value; 400,000,000 shares authorized; 11,008,668 and 11,037,948 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively		111			111
Additional paid-in capital		96,480			96,684
Accumulated deficit		(47,758	)		(46,124	)
Total stockholders' equity		48,833			50,671
Non-controlling interests		1,879			1,994
TOTAL EQUITY		50,712			52,665
TOTAL LIABILITIES AND EQUITY	$	121,307		$	101,168

See accompanying notes to condensed consolidated financial statements.

4 

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except shares and per share amounts)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Revenue:
Rental and reimbursements	$	2,482		$	3,921		$	5,190		$	8,725
Expense:
Operating and maintenance		893			1,370			1,838			3,147
General and administrative		586			760			1,068			1,525
Depreciation and amortization		851			1,162			1,721			3,030
Transaction expense		276			—			280			—
Interest expense		510			1,354			1,110			3,048
		3,116			4,646			6,017			10,750
Operating loss		(634	)		(725	)		(827	)		(2,025	)
Other income (loss):
Equity in income of unconsolidated joint ventures		276			239			302			110
Gain on disposal of real estate		605			99			614			4,882
Gain (loss) on extinguishment of debt		(965	)		33			(966	)		(200	)
Income (loss) before income taxes		(718	)		(354	)		(877	)		2,767
Income taxes		(228	)		(80	)		(134	)		(79	)
Net income (loss)		(946	)		(434	)		(1,011	)		2,688
Net income (loss) attributable to non-controlling interests		(35	)		(15	)		(37	)		246
Net income (loss) attributable to common stockholders	$	(911	)	$	(419	)	$	(974	)	$	2,442
Earnings (loss) per common share - basic and diluted	$	(0.08	)	$	(0.04	)	$	(0.09	)	$	0.22
Weighted average shares outstanding used to calculate earnings (loss) per common share - basic and diluted		11,008,017			10,967,917			11,022,603			10,968,769

See accompanying notes to condensed consolidated financial statements.

5 

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(in thousands, except shares)

(unaudited)

												Total
	Number of					Additional			Accumulated			Stockholders'			Non-controlling			Total
	Shares			Par Value		Paid-in Capital			Deficit			Equity			Interests			Equity
BALANCE — December 31, 2015		11,037,948		$	111	$	96,684		$	(46,124	)	$	50,671		$	1,994		$	52,665
Conversion of OP units to common shares		9,588			—		52			—			52			(52	)		—
Redemption of common shares		(38,868	)		—		(256	)		—			(256	)		—			(256	)
Quarterly distributions		—			—		—			(660	)		(660	)		(26	)		(686	)
Net loss		—			—		—			(974	)		(974	)		(37	)		(1,011	)
BALANCE — June 30, 2016		11,008,668		$	111	$	96,480		$	(47,758	)	$	48,833		$	1,879		$	50,712

See accompanying notes to condensed consolidated financial statements.

6 

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months Ended June 30,
	2016			2015
Cash flows from operating activities:
Net income (loss)	$	(1,011	)	$	2,688
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net gain on disposal of real estate		(614	)		(4,882	)
Loss on extinguishment of debt		966			200
Equity in (income) loss of unconsolidated joint ventures		(302	)		(110	)
Straight-line rent		(42	)		(51	)
Amortization of deferred costs and notes payable premium/discount		510			287
Depreciation and amortization		1,721			3,030
Amortization of above and below-market leases		(92	)		(75	)
Bad debt expense		24			25
Interest income on note receivable		—			(152	)
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(284	)		(167	)
Tenant receivables		465			261
Accounts payable and accrued expenses		(367	)		(700	)
Amounts due to affiliates		26			72
Other liabilities		7			273
Net change in restricted cash for operational expenditures		(163	)		(872	)
Net cash provided by (used in) operating activities		844			(173	)
Cash flows from investing activities:
Net proceeds from the sale of real estate		8,737			53,058
Acquisition of real estate		(5,630	)		—
Investment in properties under development and costs of development		(28,472	)		—
Improvements, capital expenditures, and leasing costs		(203	)		(587	)
Investments in unconsolidated joint ventures		—			(4,555	)
Issuance of note receivable		—			(7,000	)
Distributions from unconsolidated joint ventures		735			—
Net change in restricted cash from investments in consolidated variable interest entities		(3,458	)		—
Net change in restricted cash for capital expenditures		445			693
Net cash provided by (used in) investing activities		(27,846	)		41,609
Cash flows from financing activities:
Redemption of member interests		—			(2,102	)
Redemption of common shares		(256	)		(554	)
Quartertly distributions		(686	)		(1,426	)
Proceeds from notes payable		32,700			—
Repayment of notes payable		(8,680	)		(36,984	)
Payment of penalties associated with early repayment of notes payable		(839	)		—
Payment of loan fees and financing costs		(765	)		—
Net cash provided by (used in) financing activities		21,474			(41,066	)
Net increase (decrease) in cash and cash equivalents		(5,528	)		370
Cash and cash equivalents – beginning of period		8,793			3,211
Cash and cash equivalents – end of period	$	3,265		$	3,581
Supplemental disclosure of non-cash investing and financing activities:
Distributions declared but not paid	$	—		$	680
Cash paid for interest, net of amounts capitalized		717			3,619

See accompanying notes to condensed consolidated financial statements.

7 

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. ORGANIZATION AND BUSINESS

Strategic Realty Trust, Inc. (the “Company”) was formed on September 18, 2008, as a Maryland corporation. Effective August 22, 2013, the Company changed its name from TNP Strategic Retail Trust, Inc. to Strategic Realty Trust, Inc. The Company believes it qualifies as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and has elected REIT status beginning with the taxable year ended December 31, 2009, the year in which the Company began material operations.

Since the Company’s inception, its business has been managed by an external advisor. The Company has no direct employees and all management and administrative personnel responsible for conducting the Company’s business are employed by its advisor. Currently, the Company is externally managed and advised by SRT Advisor, LLC, a Delaware limited liability company (the “Advisor”) pursuant to an advisory agreement with the Advisor (the “Advisory Agreement”) initially executed on August 10, 2013, and subsequently renewed in August 2014, August 2015 and August 2016. The current term of the Advisory Agreement terminates on August 10, 2017. The Advisor is an affiliate of Glenborough, LLC (together with its affiliates, “Glenborough”), a privately held full-service real estate investment and management company focused on the acquisition, management and leasing of commercial properties.

Substantially all of the Company’s business is conducted through Strategic Realty Operating Partnership, L.P. (the “OP”). During the Company’s initial public offering (“Offering”), as the Company accepted subscriptions for shares of its common stock, it transferred substantially all of the net proceeds of the initial public offering to the OP as a capital contribution. The Company is the sole general partner of the OP. As of June 30, 2016 and December 31, 2015, the Company owned 96.3% and 96.2%, respectively, of the limited partnership interest in the OP.

The Company’s principal demand for funds has been for the acquisition of real estate assets, the payment of operating expenses, interest on outstanding indebtedness, the payment of distributions to stockholders, and investments in unconsolidated joint ventures as well as development of properties. Substantially all of the proceeds of the completed Offering have been used to fund investments in real properties and other real estate-related assets, for payment of operating expenses, for payment of interest, for payment of various fees and expenses, such as acquisition fees and management fees, and for payment of distributions to stockholders. The Company’s available capital resources, cash and cash equivalents on hand and sources of liquidity are currently limited. The Company expects its future cash needs will be funded using cash from operations, future asset sales, debt financing and the proceeds to the Company from any sale of equity that it may conduct in the future.

The Company invests in and manages a portfolio of income-producing retail properties, located in the United States, real estate-owning entities and real estate-related assets, including the investment in or origination of mortgage, mezzanine, bridge and other loans related to commercial real estate. The Company has invested directly, and indirectly through joint ventures, in a portfolio of income-producing retail properties located throughout the United States, with a focus on grocery anchored multi-tenant retail centers, including neighborhood, community and lifestyle shopping centers, multi-tenant shopping centers and free standing single-tenant retail properties. During the first quarter of 2016, the Company invested, through joint ventures, in two significant retail projects under development.

As of June 30, 2016, in addition to the development projects, the Company’s portfolio of properties was comprised of 10 properties with approximately 694,000 rentable square feet of retail space located in 6 states. As of June 30, 2016, the rentable space at the Company’s retail properties was 89% leased.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements as contained within the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the Securities and Exchange Commission (“the SEC”), including the instructions to Form 10-Q and Regulation S-X.

The unaudited condensed consolidated financial statements include the accounts of the Company, the OP, their direct and indirect owned subsidiaries, and the accounts of joint ventures that are determined to be variable interest entities for which the Company is the primary beneficiary. All significant intercompany balances and transactions are eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows have been included.

The Company evaluates the need to consolidate joint ventures and variable interest entities based on standards set forth in ASC Topic 810, Consolidation (“ASC 810”). In determining whether the Company has a controlling interest in a joint venture or a variable interest entity and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the partners/members, as well as whether the entity is a variable interest entity for which the Company is the primary beneficiary. As of June 30, 2016, the Company held ownership interests in two unconsolidated joint ventures. Refer to Note 4, “Investments in Unconsolidated Joint Ventures” for additional information. As of June 30, 2016, the Company held variable interests in two variable interest entities and consolidated those entities. Refer to Note 5, “Variable Interest Entities” for additional information.

8 

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Properties Under Development

The initial cost of properties under development includes the acquisition cost of the property, direct development costs and borrowing costs directly attributable to the development. Borrowing costs associated with direct expenditures on properties under development are capitalized. The amount of capitalized borrowing costs is determined by reference to borrowings specific to the project, where relevant. Borrowing costs are capitalized from the commencement of the development until the date of practical completion where the property is substantially ready for its intended use. Capitalization of borrowing costs is suspended if there are prolonged periods when development activity is interrupted. Practical completion is when the property is capable of operating in the manner intended by management.

Interest on projects is based on interest rates in place during the development period, and is capitalized until the project is ready for its intended use. The amount of interest capitalized during the six months ended June 30, 2016, was approximately $1.2 million.

Reclassifications

Certain prior period amounts have been reclassified to conform with current period’s presentation. The reclassifications had no effect on the Company’s financial condition, results of operations, or cash flows.

As of June 30, 2016, in respect to the Company’s adoption of Accounting Standards Update (“ASU”) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), the Company classified deferred financing costs, net of accumulated amortization, as a contra-liability to notes payable on the condensed consolidated balance sheet. ASU 2015-03 requires retrospective application, wherein the balance sheet of each period presented should be adjusted to reflect the effects of the new guidance. Accordingly, for comparative purposes herein, the Company reclassified the December 31, 2015 balance of $0.3 million of deferred financing costs, net of accumulated amortization, as a contra-liability to notes payable in the condensed consolidated balance sheet, and $0.1 million of deferred financing costs, net of accumulated amortization, as a contra-liability to liabilities held for sale on the condensed consolidated balance sheet.

Assets sold or held for sale and related liabilities have been reclassified on the condensed consolidated balance sheets.

Newly Adopted Accounting Pronouncements

The Company adopted ASU 2015-03 on a retrospective basis, effective with the quarter ended March 31, 2016. The amendments in ASU 2015-03 require debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. ASU 2015-03 is limited to the presentation of debt issuance costs and does not affect the recognition and measurement of debt issuance costs. The adoption of ASU 2015-03 would change the presentation of debt issuance costs as the Company presents debt issuance costs as deferred financing costs, net on the accompanying condensed consolidated balance sheets. ASU 2015-03 does not address how debt issuance costs related to line-of-credit arrangements should be presented on the balance sheet or amortized. Given this absence of authoritative guidance within ASU 2015-03, the FASB issued ASU 2015-15, Interest – Imputation of Interest (Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting, which clarifies that the SEC Staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. Effective January 2016, the Company presents deferred financing costs, net, as a contra-liability in periods when there is an associated debt liability on the balance sheet, rather than as a deferred asset. If no associated debt liability is recorded on the balance sheet, deferred financing costs will be presented as a deferred asset. The adoption of ASU 2015-03 did not have a material impact on the Company’s condensed consolidated financial statements.

The Company adopted ASU 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustment (“ASU 2015-16”) effective with the quarter ended March 31, 2016. The amendments in ASU 2015-16 require an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Further, the acquirer is required to record, in the financial statements for the same period, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Entities must also present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current period earnings by the line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This guidance should be applied prospectively and early adoption is permitted. The adoption of ASU 2015-16 had no impact on the Company’s condensed consolidated financial statements.

9 

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Recent Accounting Pronouncements

The FASB issued the following Accounting Standards Updates (“ASUs”) which could have potential impact to the Company’s consolidated financial statements:

In June 2016, the FASB issued ASU no. 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”). ASU 2016-13 requires a financial asset, measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with adoption permitted for fiscal years beginning after December 15, 2018. Adjustments resulting from adopting ASU 2016-13 shall be applied through a cumulative-effect adjustment to retained earnings. The Company is currently evaluating the impact of the guidance on its condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which effectively defers the adoption of ASU 2014-09 to fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2016. Companies may apply either a full retrospective or a modified retrospective approach to adopt this guidance. In 2016, the FASB issued ASU No. 2016-08, ASU No. 2016-09 and ASU No. 2016-12, which provide interpretive clarifications on the new guidance in Topic 606. The Company is currently evaluating the transition methods and the impact of the guidance on its condensed consolidated financial statements.

3. REAL ESTATE INVESTMENTS

Acquisition of Properties

On June 14, 2016, the Company, through an indirect subsidiary, purchased a 100% ownership interest in two retail properties located in San Francisco, California (the “San Francisco Properties”) from each of Octavia Gateway Holdings, LLC and Grove Street Hayes Valley, LLC, each a Delaware limited liability company and each a subsidiary of DDG Partners LLC. The sellers were not affiliated with the Company or the Advisor. The San Francisco Properties encompass four retail condominiums with an aggregate of 5,640 square feet of retail space. The aggregate purchase price of the San Francisco Properties was approximately $5.6 million subject to customary closing costs and proration adjustments. The Company funded the purchase price using borrowings under the Amended and Restated Credit Facility (“KeyBank credit facility”). Refer to Note 8. “Notes Payable, Net” for details.

In conjunction with the acquisition of the San Francisco Properties, on May 4, 2016, the Company, through an indirect subsidiary, entered into a purchase agreement to acquire a retail property from Hayes Street Hayes Valley LLC, a Delaware limited liability company and a subsidiary of DDG Partners LLC. The seller was not affiliated with the Company or its external advisor. The purchase of this retail property is expected to close later in 2016.

The following table summarizes the estimated fair values of the acquired tangible and intangible assets and assumed liabilities as of the acquisition date (amounts in thousands):

Property	Buildings and Improvements		Land		Lease Intangibles		Below-Market Lease Liabilities			Estimated Fair Value of Net Assets Acquired
8 Octavia	$	1,969	$	734	$	143	$	(106	)	$	2,740
400 Grove		2,111		1,000		110		(331	)		2,890
	$	4,080	$	1,734	$	253	$	(437	)	$	5,630

The initial accounting for the business combinations is incomplete with respect to the values assigned to tangible and intangible assets acquired and liabilities assumed as the Company did not have sufficient time to finalize these respective valuations and, accordingly, amounts are subject to change within the purchase price allocation period. The Company expects to finalize the allocation of purchase consideration as soon as practicable and no later than one year from the acquisition date.

Lease intangibles and below-market lease liabilities generally relate to commercial leases. As of June 30, 2016, the remaining weighted-average amortization period of lease intangibles and below-market lease liabilities was 14.0 years and 14.2 years, respectively.

For the three and six months ended June 30, 2016, the Company incurred $0.2 million of acquisition-related costs in connection with the acquisition of the San Francisco Properties. These costs are included in transaction expenses in the condensed consolidated statements of operations.

2016 Sale of Properties

On April 4, 2016, the Company consummated the disposition of Bloomingdale Hills, located in Riverside, Florida, for a sales price of approximately $9.2 million in cash, a portion of which was used to pay off the related $5.3 million mortgage loan and $3 million of which was used to pay down the line of credit under its KeyBank credit facility. The sale of the property did not represent a strategic shift that will have a major effect on the Company’s operations and financial results and its results of operations were not reported as discontinued operations on the Company’s condensed consolidated financial statements. The disposition of Bloomingdale Hills resulted in a gain of $0.6 million, which was included on the Company’s condensed consolidated statement of operations. The Company’s condensed consolidated statements of operations include net operating income of approximately $25,000 for the three months ended June 30, 2016, and a net operating loss of $73,000 for the six months ended June 30, 2016, relating to the results of operations of Bloomingdale Hills. Results of operations of Bloomingdale Hills for the three and six months ended June 30, 2015, were not material.

10 

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

2015 Sale of Properties

On March 11, 2015, the Company sold the following three properties for the aggregate gross sales price of $53.6 million (amounts in thousands):

Property	Location	Acquisition Date	Gross Sales Price		Original Purchase Price (1)
Osceola Village	Kissimmee, Florida	10/11/2011	$	22,000	$	21,800	(2)
Constitution Trail	Normal, Illinois	10/21/2011		23,100		18,000
Aurora Commons	Aurora, Ohio	3/20/2012		8,500		7,000
Total			$	53,600	$	46,800

(1) The original purchase price amounts do not include acquisition fees.

(2) The original purchase price for Osceola Village included an additional pad which was sold for approximately $0.9 million prior to this transaction.

The sale of the three properties did not represent a strategic shift that will have a major effect on the Company’s operations and financial results and, as a result, was not included in discontinued operations for the six months ended June 30, 2015. The Company’s condensed consolidated statements of operations include net operating losses of approximately $16,000 and $0.3 million, respectively, for the three and six months ended June 30, 2015, relating to the results of operations for the three sold properties.

The sale of Osceola Village, Constitution Trail and Aurora Commons (the “SGO Properties”) was completed in connection with the formation of the SGO Joint Venture. The three properties were sold to the SGO Joint Venture, and the closing of the sale was conditioned on the Company receiving a 19% membership interest in the SGO Joint Venture. In exchange for this 19% membership interest, the Company contributed $4.5 million to the SGO Joint Venture, which amount was credited against the Company’s proceeds from the sale of the three properties to the SGO Joint Venture. Of the net sales proceeds from the sale of the aforementioned properties, $36.4 million was used by the Company to retire the debt associated with the sold properties. Since the sale of the SGO Properties does not represent a strategic shift that will have a major effect on the Company’s operations and financial results, their results of operations were not reported as discontinued operations on the Company’s financial statements.

4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

On September 30, 2015, the Company, through wholly-owned subsidiaries, formed a joint venture (the “SGO MN Joint Venture”) with MN Retail Grand Avenue Partners, LLC, a subsidiary of Oaktree Real Estate Opportunities Fund V.I. L.P. (“Oaktree”) and GLB SGO MN, LLC, a wholly-owned subsidiary of Glenborough Property Partners, LLC (“GPP”). GPP is an affiliate of the Advisor and the Company’s property manager. On March 11, 2015, the Company, through a wholly-owned subsidiary, formed a joint venture (the “SGO Joint Venture”) with Grocery Retail Grand Avenue Partners, LLC, a subsidiary of Oaktree, and GLB SGO, LLC, a wholly-owned subsidiary of GPP. These joint ventures own property types similar to properties that are directly owned by the Company.

The following table summarizes the Company’s investments in unconsolidated joint ventures as of June 30, 2016, and December 31, 2015 (amounts in thousands):

		Ownership Interest						Investment
Joint Venture	Date of Investment	June 30, 2016			December 31, 2015			June 30, 2016		December 31, 2015
SGO Retail Acquisitions Venture, LLC	3/11/2015		19	%		19	%	$	3,852	$	4,098
SGO MN Retail Acquisitions Venture, LLC	9/30/2015		10	%		10	%		2,617		2,804
Total								$	6,469	$	6,902

The Company’s off-balance sheet arrangements consist primarily of investments in the joint ventures as set forth in the table above. The joint ventures typically fund their cash needs through secured debt financings obtained by and in the name of the joint venture entity. The joint ventures’ debts are secured by a first mortgage, are without recourse to the joint venture members, and do not represent a liability of the members other than carve-out guarantees for certain matters such as environmental conditions, misuse of funds and material misrepresentations. As of June 30, 2016, the Company has provided carve-out guarantees in connection with the two aforementioned unconsolidated joint ventures; in connection with those carve-out guarantees, the Company has certain rights of recovery from the joint venture members.

5. VARIABLE INTEREST ENTITIES

The Company has variable interests in, and is the primary beneficiary of, variable interest entities (“VIEs”) through its investments in (i) a joint venture with the Gelson’s Joint Venture and the Wilshire Joint Venture (both as defined below). The Company has consolidated the accounts of these variable interest entities. For further information, refer to Note 2. “Summary of Significant Accounting Policies,” under “Principles of Consolidation and Basis of Presentation.”

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STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Gelson’s Joint Venture

On January 7, 2016, the Company, through wholly-owned subsidiaries, entered into the Limited Liability Company Agreement of Sunset & Gardner Investors, LLC (the “Gelson’s Joint Venture Agreement”) to form a joint venture (the” Gelson’s Joint Venture”) with Sunset & Gardner LA, LLC (“S&G LA” and together with the Company the “Gelson’s Members”), a subsidiary of Cadence Capital Investments, LLC (“Cadence”). Cadence is a real estate development and investment firm focused on commercial properties. They offer high-quality, market-driven developments, and have expertise in market planning and site selection build-to-suit and small center developments, redevelopment and repositioning of existing properties.

The Gelson’s Joint Venture Agreement provides for the ownership and operation of certain real property by the Gelson’s Joint Venture, in which the Company owns a 100% capital interest and a 50% profits interest. In exchange for ownership in the Gelson’s Joint Venture, the Company has agreed to contribute cash in an amount up to $7 million in initial capital contributions and $0.7 million in subsequent capital contributions to the Gelson’s Joint Venture. S&G LA contributed its rights to acquire the real property, its interest under a 20 year lease with Gelson’s Markets (the “Gelson’s Lease”) and agreed to provide certain management and development services.

On January 28, 2016, the Gelson’s Joint Venture used the capital contributions of the Company, together with the proceeds of a loan from Buchanan Mortgage Holdings, LLC in the amount of $10.7 million, to purchase property located at the corner of Sunset Boulevard and Gardner in Hollywood, California for a build to suit grocery store for Gelson’s Markets (the “Gelson’s Property”) from a third party seller, for a total purchase price of approximately $13.0 million. The Gelson’s Joint Venture intends to proceed with obtaining all required governmental approvals and entitlements to replace the existing improvements on the property with a build-to-suit grocery store for Gelson’s Markets with an expected size of approximately 38,000 square feet. Gelson’s Markets was founded in 1951 and is recognized as one of the nation’s premier supermarket chains. Gelson’s Markets currently has 24 locations throughout Southern California.

Pursuant to the Gelson’s Joint Venture Agreement, S&G LA will manage and conduct the day-to-day operations and affairs of the Gelson’s Joint Venture, subject to certain major decisions set forth in the Gelson’s Joint Venture Agreement that require the consent of all the Gelson’s Members. Income, losses and distributions will generally be allocated based on the Gelson’s Members’ respective capital and profits interests. Additionally, in certain circumstances described in the Gelson’s Joint Venture Agreement, the Company may be required to make additional capital contributions to the Joint Venture, in proportion to the Gelson’s Members’ respective ownership interests. Until the Company has received back its capital contribution and specified preferred returns, all distributions go to the Company; thereafter, the Gelson’s Joint Venture will distribute the profits 50% to the Company and 50% to S&G LA.

3032 Wilshire Joint Venture

On December 21, 2015, the Company, through wholly-owned subsidiaries, entered into the Limited Liability Company Agreement of 3032 Wilshire Investors, LLC (the “Wilshire Joint Venture Agreement”) to form a joint venture (the “Wilshire Joint Venture”) with 3032 Wilshire SM, LLC, a subsidiary of Cadence (together with the Company, the “Wilshire Members”).

On December 14, 2015 and January 5, 2016, the Company paid deposits in the amounts of $0.5 million and $0.1 million, respectively, toward the acquisition of certain property located at 3032 Wilshire Boulevard and 1210 Berkeley Street in Santa Monica, California (the “Wilshire Property”). The Wilshire Joint Venture intends to redevelop, reposition and re-lease the Wilshire Property. On March 7, 2016, the Company contributed $5.7 million to the Wilshire Joint Venture. The Wilshire Joint Venture Agreement provides for the ownership and operation of certain real property by the Wilshire Joint Venture, in which the Company owns a 100% capital interest and a 50% profits interest.

On March 8, 2016, the Wilshire Joint Venture used the deposits and capital contribution of the Company, together with the proceeds of a loan from Buchanan Mortgage Holdings, LLC in the amount of $8.5 million, to acquire the Wilshire Property from a third party seller, for a total purchase price of $13.5 million. The Wilshire Joint Venture intends to reposition and re-lease the existing improvements on the property.

Pursuant to the Wilshire Joint Venture Agreement, 3032 Wilshire SM will manage and conduct the day-to-day operations and affairs of the Wilshire Joint Venture, subject to certain major decisions set forth in the Wilshire Joint Venture Agreement that require the consent of all the Wilshire Members. Income, losses and distributions will generally be allocated based on the Wilshire Members’ respective capital and profits interests. Additionally, in certain circumstances described in the Wilshire Joint Venture Agreement, the Company may be required to make additional capital contributions to the Wilshire Joint Venture, in proportion to the Wilshire Members’ respective ownership interests. Until the Company has received back its capital contribution and specified preferred returns, all distributions go to the Company; thereafter, the Wilshire Joint Venture will distribute the profits 50% to the Company and 50% to 3032 Wilshire SM.

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STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following reflects the assets and liabilities of the Gelson’s Joint Venture and the Wilshire Joint Venture, which were consolidated by the Company, as of June 30, 2016 (amounts in thousands):

	June 30, 2016
ASSETS
Properties under development and development costs:
Land	$	25,851
Building		609
Development costs		2,012
Properties under development and development costs		28,472
Restricted cash		2,867
Cash and cash equivalents		340
Prepaid expenses and other assets, net		22
Tenant receivables, net		25
TOTAL ASSETS (1)	$	31,726
LIABILITIES
Notes payable, net (2)	$	18,748
Accounts payable and accrued expenses		360
Amounts due to affiliates		283
Other liabilities		40
TOTAL LIABILITIES	$	19,431

(1) The assets of the Gelson’s Joint Venture and Wilshire Joint Venture can be used only to settle obligations of the respective consolidated joint ventures.

(2) Includes reclassification of $0.5 million of deferred financing costs, net, as a contra-liability. The creditors of the consolidated joint ventures do not have recourse to the general credit of the Company. The notes payable of the consolidated joint ventures are not guaranteed by the Company.

6. FUTURE MINIMUM RENTAL INCOME

Operating Leases

The Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of June 30, 2016, the leases at the Company’s properties have remaining terms (excluding options to extend) of up to 20 years with a weighted-average remaining term (excluding options to extend) of 5 years. The leases may have provisions to extend the lease agreements, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit and/or a letter of credit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying condensed consolidated balance sheets and totaled approximately $0.2 million as of June 30, 2016 and December 31, 2015, respectively.

As of June 30, 2016, the future minimum rental income from the Company’s properties under non-cancelable operating leases, excluding properties held for sale, was as follows (amounts in thousands):

Remainder of 2016	$	3,711
2017		7,036
2018		6,074
2019		5,471
2020		4,543
Thereafter		11,815
Total	$	38,650

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STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

7. LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES

As of June 30, 2016 and December 31, 2015, the Company’s acquired lease intangibles and below-market lease liabilities were as follows (amounts in thousands):

	Lease Intangibles						Below-Market Lease Liabilities
	June 30, 2016			December 31, 2015			June 30, 2016			December 31, 2015
Cost	$	8,191		$	8,089		$	(4,783	)	$	(4,463	)
Accumulated amortization		(3,926	)		(3,799	)		1,182			1,160
Total	$	4,265		$	4,290		$	(3,601	)	$	(3,303	)

The Company’s amortization of lease intangibles and below-market lease liabilities for the three and six months ended June 30, 2016 and 2015, were as follows (amounts in thousands):

	Lease Intangibles						Below-Market Lease Liabilities
	Three Months Ended June 30,						Three Months Ended June 30,
	2016			2015			2016		2015
Amortization	$	(235	)	$	(357	)	$	67	$	95

	Lease Intangibles						Below-Market Lease Liabilities
	Six Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016		2015
Amortization	$	(486	)	$	(950	)	$	139	$	212

8. NOTES PAYABLE, NET

As of June 30, 2016 and December 31, 2015, the Company’s notes payable, consisted of the following (amounts in thousands):

	Principal Balance						Interest Rates At
	June 30, 2016			December 31, 2015			June 30, 2016
KeyBank credit facility (1)	$	10,500		$	—			2.95	%
Secured term loans		24,492			24,701			5.10	%
Mortgage loans		9,614			9,690			5.63	%
Mortgage loans secured by properties under development (2)		19,200			—			9.5% - 10.0	%
Deferred financing costs, net (3)		(735	)		(339	)		n/a
	$	63,071		$	34,052

(1) The KeyBank credit facility is a revolving credit facility with an initial maximum aggregate commitment of $30.0 million (the “Facility Amount”). Subject to certain terms and conditions contained in the loan documents, the Company may request that the Facility Amount be increased to a maximum of $60.0 million. The KeyBank credit facility matures on August 4, 2017. Each loan made pursuant to the Key Bank credit facility will be either a LIBOR rate loan or a base rate loan, at the election of the Company, plus an applicable margin, as defined. Monthly payments are interest only with the entire principal balance and all outstanding interest due at maturity. The Company will pay KeyBank an unused commitment fee, quarterly in arrears, which will accrue at 0.30% per annum, if the usage under the KeyBank credit facility is greater than 50% of the Facility Amount. The Company is providing a guaranty of all of its obligations under the KeyBank credit facility and all other loan documents in connection with the KeyBank credit facility. As of June 30, 2016, the KeyBank credit facility was secured by Pinehurst Square, Topaz Marketplace, 8 Octavia and 400 Grove. For information regarding recent draws under the Key Bank credit facility, see “– Recent Financing Transactions - KeyBank Credit Facility.”

(2) Comprised of $10.7 million and $8.5 million associated with the Company’s investment in the Gelson’s Joint Venture and the Wilshire Joint Venture, respectively.

(3) Reclassification of deferred financing costs, net of accumulated depreciation, as a contra-liability in accordance with ASU 2015-03.

During the three and six months ended June 30, 2016, the Company incurred and expensed approximately $0.5 million and approximately $1.1 million, respectively, of interest costs, which included the amortization and write-off of deferred financing costs of approximately $0.1 million and approximately $0.2 million, respectively. During the three and six months ended June 30, 2015, the Company incurred and expensed approximately $1.4 million and approximately $3.0 million, respectively, of interest costs, which included the amortization and write-off of deferred financing costs of approximately $0.1 million and approximately $0.3 million, respectively. Also during the three and six months ended June 30, 2016, the Company incurred and capitalized approximately $0.9 million and approximately $1.2 million, respectively, of interest expense related to the variable interest entities, which included the amortization of deferred financing costs of approximately $0.2 million and approximately $0.3 million, respectively.

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STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

As of June 30, 2016 and December 31, 2015, interest expense payable was approximately $0.3 million and approximately $0.2 million, respectively, including an amount related to the variable interest entities of approximately $0.2 million as of June 30, 2016.

The following is a schedule of future principal payments for all of the Company’s notes payable outstanding as of June 30, 2016 (amounts in thousands):

Remainder of 2016	$	293
2017		39,685
2018		473
2019		23,355
Total (1)	$	63,806

(1) Total future principal payments reflect actual amounts due to creditors, and excludes reclassification of $0.7 million deferred financing costs, net.

Recent Financing Transactions

KeyBank Credit Facility

On March 7, 2016, the Company drew $6.0 million under the Key Bank credit facility and used the proceeds to invest in the Wilshire Joint Venture (as defined in Note 5. “Variable Interest Entities” to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q).

On June 9, 2016, the Company drew $7.5 million under the Key Bank credit facility and used the majority of the proceeds to acquire 8 Octavia and 400 Grove from Octavia Gateway Holdings, LLC and Grove Street Hayes Valley, LLC, respectively. Refer to Note 3 “Real Estate Investments” for additional information.

Mortgage Loans Secured by Properties Under Development

In connection with the Company’s investment in the Wilshire Joint Venture and the acquisition of the Wilshire Property (as defined in Note 5. “Variable Interest Entities” to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q), the Company has consolidated borrowings of $8.5 million (the “Wilshire Loan”) from Buchanan Mortgage Holdings, LLC (as the lender) and 3032 Wilshire Investors, LLC (as the borrower). The Wilshire Loan bears interest at a rate of 10.0% per annum, payable monthly, commencing on April 1, 2016. The loan matures on March 7, 2017, with an option for an additional six-month period, subject to certain conditions as stated in the loan agreement. The loan is secured by, among other things, a lien on the Wilshire development project and other collateral as defined in the loan agreement.

In connection with the Company’s investment in the Gelson’s Joint Venture (as defined in Note 5. “Variable Interest Entities” to be condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q) and the acquisition of the Gelson’s Property (defined in Note 5. “Variable Interest Entities” to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q), the Company has consolidated borrowings of $10.7 million (the “Gelson’s Loan”) from Buchanan Mortgage Holdings, LLC (as the lender) and Sunset and Gardner Investors, LLC (as the borrower). The Gelson’s Loan bears interest at a rate of 9.5% per annum, payable monthly, commencing on April 1, 2016. The loan matures on January 27, 2017, with an option to extend for an additional six-month period, subject to certain conditions as stated in the loan agreement. The loan is secured by, among other things, a lien on the Gelson’s development project and other joint venture collateral as defined in the loan agreement.

9. FAIR VALUE DISCLOSURES

Certain financial assets and liabilities are measured at fair value on a recurring basis. The Company determines fair value using the following hierarchy:

· Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

· Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

15 

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

· Level 3 - prices or valuation techniques where little or no market data is available for inputs that are significant to the fair value measurement.

The Company believes the total carrying values reflected on its condensed consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses, and amounts due to affiliates reasonably approximate their fair values due to their short-term nature.

The fair value of the Company’s notes payable is estimated using a present value technique based on contractual cash flows and management’s observations of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. The Company significantly reduces the amount of judgment and subjectivity in its fair value determination through the use of cash flow inputs that are based on contractual obligations. Discount rates are determined by observing interest rates published by independent market participants for comparable instruments. The Company classifies these inputs as Level 2 inputs.

The following table provides the carrying values and fair values of the Company’s notes payable related to continuing operations as of June 30, 2016 and December 31, 2015 (amounts in thousands):

	Carrying Value (1)				Fair Value (2)
	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
Notes Payable	$	63,071	$	34,052	$	64,317	$	34,760

(1) The carrying value of the Company’s notes payable represents the outstanding principal as of June 30, 2016, and December 31, 2015. The carrying values and fair values of the notes payable include the reclassification of deferred financing costs, net, of approximately $0.7 million and approximately $0.3 million, as a contra-liability, as of June 30, 2016 and December 31, 2015, respectively.

(2) The estimated fair value of the notes payable is based upon the indicative market prices of the Company’s notes payable based on prevailing market interest rates.

10. EQUITY

Share Redemption Program

On April 1, 2015, the Company’s board of directors approved the reinstatement of the share redemption program (which had been suspended since January 15, 2013) and adopted an Amended and Restated Share Redemption Program (the “Amended and Restated SRP”). Under the Amended and Restated SRP, only shares submitted for repurchase in connection with the death or “qualifying disability” (as defined in the Amended and Restated SRP) of a stockholder are eligible for repurchase by the Company. The number of shares to be redeemed is limited to the lesser of (i) a total of $2.0 million for redemptions sought upon a stockholder’s death and a total of $1.0 million for redemptions sought upon a stockholder’s qualifying disability, and (ii) 5% of the number of shares of the Company’s common stock outstanding during the prior calendar year. Share repurchases pursuant to the share redemption program are made at the sole discretion of the Company. The Company reserves the right to reject any redemption request for any reason or no reason or to amend or terminate the share redemption program at any time subject to the notice requirements in the Amended and Restated SRP.

The redemption price for shares that are redeemed is 100% of the Company’s most recent estimated net asset value per share as of the applicable redemption date. A redemption request must be made within one year after the stockholder’s death or disability, unless such death or disability occurred between January 15, 2013 and April 1, 2015, when the share redemption program was suspended. Redemption requests due to the death or disability of a Company stockholder that occurred during such time period, must be submitted within one year after the adoption of the Amended and Restated SRP.

The Amended and Restated SRP provides that any request to redeem less than $5,000 worth of shares will be treated as a request to redeem all of the stockholder’s shares. If the Company cannot honor all redemption requests received in a given quarter, all requests, including death and disability redemptions, will be honored on a pro rata basis. If the Company does not completely satisfy a redemption request in one quarter, it will treat the unsatisfied portion as a request for redemption in the next quarter when funds are available for redemption, unless the request is withdrawn. The Company may increase or decrease the amount of funding available for redemptions under the Amended and Restated SRP on ten business days’ notice to stockholders. Shares submitted for redemption during any quarter will be redeemed on the penultimate business day of such quarter. The record date for quarterly distributions has historically been and is expected to continue to be the last business day of each quarter; therefore, shares that are redeemed during any quarter are expected to be redeemed prior to the record date and thus would not be eligible to receive the distribution declared for such quarter.

The other material terms of the Amended and Restated SRP are consistent with the terms of the share redemption program that was in effect immediately prior to January 15, 2013.

16 

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

On August 7, 2015, the board of directors approved the amendment and restatement of the Amended and Restated SRP (the “Second Amended and Restated SRP” and, together with the Amended and Restated SRP, the “SRP”). Under the Second Amended and Restated SRP, the redemption date with respect to third quarter 2015 redemptions was November 10, 2015 or the next practicable date as the Chief Executive Officer determined so that redemptions with respect to the third quarter of 2015 were delayed until after the payment date for the Special Distribution. With this revision, stockholders who were to have 100% of their shares redeemed were not left holding a small number of shares from the Special Distribution after the date of the redemption of their shares. The other material terms of the Second Amended and Restated SRP are consistent with the terms of the Amended and Restated SRP.  

During the three and six months ended June 30, 2016, the Company redeemed 8,147 shares and 38,868 shares of common stock, respectively, for $54,000 and for approximately $0.3 million under the SRP. During the three and six months ended June 30, 2015, the Company redeemed 77,916 shares of common stock for approximately $0.6 million. Cumulatively, through June 30, 2016, the Company has redeemed 404,771 shares sold in its initial public offering for $3.3 million.

Quarterly Distributions

In order to qualify as a REIT, the Company is required to distribute at least 90% of its annual REIT taxable income, subject to certain adjustments, to its stockholders. Some or all of the Company’s distributions have been paid, and in the future may continue to be paid from sources other than cash flows from operations.

Under the terms of the Key Bank credit facility, the Company may pay distributions to its investors so long as the total amount paid does not exceed 100% of the cumulative Adjusted Funds From Operations provided, however, that the Company is not restricted from making any distributions necessary in order to maintain its status as a REIT. The Company’s board of directors evaluates the Company’s ability to make quarterly distributions based on the Company’s operational cash needs.

The following tables set forth the quarterly distributions declared to the Company’s common stockholders and Common Unit holders for the six months ended June 30, 2016, and the year ended December 31, 2015. Distributions to its common stockholders and common unit holders for the three months ended June 30, 2016 were declared subsequent to June 30, 2016, as described in Note 14. “Subsequent Events” (amounts in thousands, except per share amounts):

	Distribution Record Date	Distribution Payable Date	Distribution Per Share of Common Stock / Common Unit		Total Common Stockholders Distribution		Total Common Unit Holders Distribution		Total Distribution
First Quarter 2016	3/31/2016	4/29/2016	$	0.06	$	660	$	26	$	686

	Distribution Record Date	Distribution Payable Date	Distribution Per Share of Common Stock / Common Unit		Total Common Stockholders Distribution		Total Common Unit Holders Distribution		Total Distribution
First Quarter 2015	3/31/2015	4/30/2015	$	0.06	$	658	$	26	$	684
Second Quarter 2015	6/30/2015	7/30/2015		0.06		654		26		680
Third Quarter 2015	9/30/2015	10/31/2015		0.06		654		26		680
Fourth Quarter 2015	12/31/2015	1/30/2016		0.06		661		25		686
Total					$	2,627	$	103	$	2,730

11. EARNINGS PER SHARE

Earnings per share (“EPS”) is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted EPS is computed after adjusting the basic EPS computation for the effect of potentially dilutive securities outstanding during the period. The effect of non-vested shares, if dilutive, is computed using the treasury stock method. The Company applies the two-class method for determining EPS as its outstanding shares of non-vested restricted stock are considered participating securities as dividend payments are not forfeited even if the underlying award does not vest. There is no unvested stock as of June 30, 2016. The Company’s excess of distributions over earnings related to participating securities are shown as a reduction in income (loss) attributable to common stockholders in the Company’s computation of EPS.

17 

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table sets forth the computation of the Company’s basic and diluted earnings (loss) per share for the three and six months ended June 30, 2016 and 2015 (amounts in thousands, except shares and per share amounts):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2016			2015			2016			2015
Numerator - basic and diluted
Net income (loss)	$	(946	)	$	(434	)	$	(1,011	)	$	2,688
Net income (loss) attributable to non-controlling interests		(35	)		(15	)		(37	)		246
Net income (loss) attributable to common shares	$	(911	)	$	(419	)	$	(974	)	$	2,442
Denominator - basic and diluted
Basic weighted average common shares		11,008,017			10,967,917			11,022,603			10,968,769
Effect of dilutive securities		—			—			—			—
Common Units (1)		—			—			—			—
Diluted weighted average common shares		11,008,017			10,967,917			11,022,603			10,968,769
Earnings (loss) per common share - basic and diluted
Net earnings (loss) attributable to common shares	$	(0.08	)	$	(0.04	)	$	(0.09	)	$	0.22

(1) The effect of 422,308 convertible Common Units pursuant to the redemption rights outlined in the Company’s registration statement on Form S-11 have not been included as they would not be dilutive.

12. RELATED PARTY TRANSACTIONS

On August 7, 2013, the Company entered into the Advisory Agreement with the Advisor. On August 10, 2016, the Advisory Agreement with the Advisor was renewed for an additional twelve months, beginning on August 10, 2016. The Advisor manages the Company’s business as the Company’s external advisor pursuant to the Advisory Agreement. Pursuant to the Advisory Agreement, the Company will pay the Advisor specified fees for services related to the investment of funds in real estate and real estate-related investments, management of the Company’s investments and for other services.

On July 9, 2013, SRT Manager, an affiliate of the Advisor, acquired an initial 12% membership interest in SRT Holdings, the Company’s wholly-owned subsidiary. Following the Constitution Transaction on August 4, 2014 (refer to Note 8. “Notes Payable, Net”), SRT Manager’s membership interests in SRT Holdings decreased to 8.33%. In March 2015, SRT Holdings paid SRT Manager $2.1 million in full redemption of SRT Manager’s 8.33% membership interest in SRT Holdings.

On March 11, 2015, the Company, through a wholly-owned subsidiary, entered into the Limited Liability Company Agreement of SGO Retail Acquisitions Venture, LLC to form the SGO Joint Venture. On September 30, 2015, the Company, through wholly-owned subsidiaries, entered into the Limited Liability Company Agreement of SGO MN Retail Acquisitions Venture, LLC to form the SGO MN Joint Venture. For additional information regarding the SGO Joint Venture and the SGO MN Joint Venture, refer to Note 4. “Investments in Unconsolidated Joint Ventures.”

Summary of Related Party Fees

Summarized separately below are the Advisor related party costs incurred and payable by the Company for the periods presented (amounts in thousands):

Advisor Fees

	Incurred								Payable as of
	Three Months Ended June 30,				Six Months Ended June 30,				June 30,		December 31,
Expensed	2016		2015		2016		2015		2016		2015
Acquisition fees	$	56	$	—	$	58	$	—	$	—	$	—
Asset management fees		230		210		447		530		71		19
Reimbursement of operating expenses		48		—		98		—		4		27
Property management fees		97		150		221		351		—		3
Disposition fees		115		—		115		525		—		—
Guaranty fees (1)		—		—		—		1		—		—
Total	$	546	$	360	$	939	$	1,407	$	75	$	49
Capitalized
Acquisition fees	$	—	$	—	$	273	$	—	$	—	$	—
Leasing fees		92		39		103		66		—		—
Legal leasing fees		21		18		33		56		—		—
Construction management fees		—		10		1		15		—		—
Financing fees		—		—		—		32		—		—
Total	$	113	$	67	$	410	$	169	$	—	$	—

(1) Guaranty fees were paid by the Company to its prior advisor, TNP Strategic Retail Advisor, LLC.

18 

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Acquisition Fee

Under the Advisory Agreement, the Advisor is entitled to receive an acquisition fee equal to 1% of (1) the cost of each investment acquired directly by the Company or (2) the Company’s allocable cost of an investment acquired pursuant to a joint venture, in each case including purchase price, acquisition expenses and any debt attributable to such investments. An acquisition fee is capitalized by the Company when the related transaction does not qualify as a business combination; otherwise an acquisition fee is expensed.

Origination Fee

Under the Advisory Agreement, the Advisor is entitled to receive an origination fee equal to 1% of the amount funded by the Company to acquire or originate real estate-related loans, including any acquisition expenses related to such investment and any debt used to fund the acquisition or origination of the real estate-related loans. The Company will not pay an origination fee to the Advisor with respect to any transaction pursuant to which it is required to pay the Advisor an acquisition fee.

Financing Coordination Fee

Under the Advisory Agreement, the Advisor is entitled to receive a financing coordination fee equal to 1% of the amount made available and/or outstanding under any (1) financing obtained or assumed, directly or indirectly, by the Company or the OP and used to acquire or originate investments; or (2) the refinancing of any financing obtained or assumed, directly or indirectly, by the Company or the OP.

Asset Management Fee

Under the Advisory Agreement, the Advisor is entitled to receive an asset management fee equal to a monthly fee of one-twelfth (1/12th) of 0.6% of the higher of (1) aggregate cost on a GAAP basis (before non-cash reserves and depreciation) of all investments the Company owns, including any debt attributable to such investments; or (2) the fair market value of the Company’s investments (before non-cash reserves and depreciation) if the board of directors has authorized the estimate of a fair market value of the Company’s investments; provided, however, that the asset management fee will not be less than $250,000 in the aggregate during any one calendar year.

Reimbursement of Operating Expenses

The Company reimburses the Advisor for all expenses paid or incurred by the Advisor in connection with the services provided to the Company, subject to the limitation that the Company will not reimburse the Advisor for any amount by which the Company’s total operating expenses (including the asset management fee described below) at the end of the four preceding fiscal quarters exceeded the greater of (1) 2% of its average invested assets (as defined in the Company’s Articles of Amendment and Restatement (the “Charter”)); or (2) 25% of its net income (as defined in the Charter) determined without reduction for any additions to depreciation, bad debts or other similar non-cash expenses and excluding any gain from the sale of the Company’s assets for that period (the “2%/25% Guideline”). The Advisor is required to reimburse the Company quarterly for any amounts by which total operating expenses exceed the 2%/25% Guideline in the previous expense year that the independent directors do not approve. The Company will not reimburse the Advisor for any of its personnel costs or other overhead costs except for customary reimbursements for personnel costs under property management agreements entered into between the OP and the Advisor or its affiliates. Notwithstanding the above, the Company may reimburse the Advisor for expenses in excess of the 2%/25% Guideline if a majority of the independent directors determine that such excess expenses are justified based on unusual and non-recurring factors.

For the three and six months ended June 30, 2016 and 2015, the Company’s total operating expenses (as defined in the Charter) did not exceed the 2%/25% Guideline.

Property Management Fee

Under the property management agreements between the Company and Glenborough, Glenborough is entitled to receive property management fees calculated at a maximum of up to 4% of the properties’ gross revenue. The property management agreements with Glenborough have been renewed for an additional twelve months, beginning on August 10, 2016.

Disposition Fee

Under the Advisory Agreement, if the Advisor or its affiliates provide a substantial amount of services, as determined by the Company’s independent directors, in connection with the sale of a real property, the Advisor or its affiliates may be paid disposition fees up to 50% of a customary and competitive real estate commission, but not to exceed 3% of the contract sales price of each property sold.

Guaranty Fees

In connection with certain acquisition financings, the Company’s former chairman and former co-chief executive officer and/or Thompson National Properties, LLC had executed certain guaranty agreements to the respective lenders. As consideration for such guaranty, the Company entered into a reimbursement and fee agreement to provide for an upfront payment and an annual guaranty fee payment for the duration of the guarantee period. In March 2015, the Company retired the outstanding notes payable related to Osceola Village resulting in the expiration of the remaining guaranty agreement.

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STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Leasing Fee

Under the property management agreements, Glenborough is entitled to receive a separate fee for the leases of new tenants, and for expansions, extensions and renewals of existing tenants in an amount not to exceed the fee customarily charged by similarly situated parties rendering similar services in the same geographic area for similar properties.

Legal Leasing Fee

Under the property management agreements, Glenborough is entitled to receive a market-based legal leasing fee for the negotiation and production of new leases, renewals, and amendments.

Construction Management Fee

In connection with the construction or repair in or about a property, the property manager is responsible for coordinating and facilitating the planning and the performance of all construction and is entitled to receive a fee equal to 5% of the hard costs for the project in question.

Related-Party Fees Paid by the Unconsolidated Joint Ventures

The unconsolidated joint ventures are party to certain agreements with Glenborough for services related to the investment of funds and management of the joint ventures’ investments, as well as the day-to-day management, operation and maintenance of the properties owned by the joint ventures. The joint ventures pay fees to Glenborough for these services. The SGO Joint Venture and the SGO MN Joint Venture recognized related-party fees and reimbursements of $0.1 million and $0.3 million, respectively for the three months ended June 30, 2016, and approximately $0.3 million and $0.5 million, respectively, for the six months ended June 30, 2016. The related-party amounts consist of property management, asset management, leasing commission, legal leasing, construction management fees and salary reimbursements.

13. COMMITMENTS AND CONTINGENCIES

Economic Dependency

The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase, and disposition of real estate and real estate-related investments, management of the daily operations of the Company’s real estate and real estate-related investment portfolio, and other general and administrative responsibilities. In the event that the Advisor is unable to provide such services to the Company, the Company will be required to obtain such services from other sources.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its consolidated financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

14. SUBSEQUENT EVENTS

Second Quarter Distribution

On July 6, 2016, the Company declared a second quarter distribution in the amount of $0.06 per share/unit to common stockholders and holders of common units of record as of July 7, 2016, totaling approximately $0.7 million. The distribution was paid on July 29, 2016.

Acquisitions

On July 25, 2016, the Company drew $4.7 million under the KeyBank credit facility to fund the acquisition of a retail property located in San Francisco, California (the “Fulton Street Shops”). The acquisition of the Fulton Street Shops closed on July 27, 2016. The seller is not affiliated with the Company or the Advisor. The Fulton Street Shops is comprised of five high-quality street retail condominiums with an aggregate of 3,759 square feet of retail space. The aggregate purchase price of the Fulton Street Shops was approximately $4.6 million subject to customary closing costs and proration adjustments. The Company is in the process of concluding on its accounting for this acquisition, but anticipates that the purchase price of this acquisition will be allocated to land, building and other identifiable intangible assets and liabilities, and that the fair value of the acquired net assets will approximate the fair value of the consideration transferred.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements, the notes thereto and the other unaudited financial data included in this Quarterly Report on Form 10-Q and in our audited consolidated financial statements and the notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission, or SEC, on March 30, 2016, which we refer to herein as our “2015 Annual Report on Form 10-K.” As used herein, the terms “we,” “our,” “us,” and “Company” refer to Strategic Realty Trust, Inc., formerly TNP Strategic Retail Trust, Inc., and, as required by context, Strategic Realty Operating Partnership, L.P., formerly TNP Strategic Retail Operating Partnership, L.P., a Delaware limited partnership, which we refer to as our “operating partnership” or “OP”, and to their respective subsidiaries. References to “shares” and “our common stock” refer to the shares of our common stock.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs, which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. The following are some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

· Our executive officers and certain other key real estate professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor. As a result, they face conflicts of interest, including conflicts created by our advisor’s compensation arrangements with us and conflicts in allocating time among us and other programs and business activities.

· Our initial public offering has terminated and we are uncertain of our sources for funding our future capital needs. If we cannot obtain debt or equity financing on acceptable terms, our ability to continue to acquire real properties or other real estate-related assets, fund or expand our operations and pay distributions to our stockholders will be adversely affected.

· We depend on tenants for our revenue and, accordingly, our revenue is dependent upon the success and economic viability of our tenants. Revenues from our properties could decrease due to a reduction in tenants (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of tenant leases and non-renewal of existing tenant leases) and/or lower rental rates, making it more difficult for us to meet our financial obligations, including debt service and our ability to pay distributions to our stockholders.

· Our current and future investments in real estate and other real estate-related investments may be affected by unfavorable real estate market and general economic conditions, which could decrease the value of those assets and reduce the investment return to our stockholders. Revenues from our properties could decrease. Such events would make it more difficult for us to meet our debt service obligations and limit our ability to pay distributions to our stockholders.

· Certain of our debt obligations have variable interest rates with interest and related payments that vary with the movement of LIBOR or other indices. Increases in these indices could increase the amount of our debt payments and limit our ability to pay distributions to our stockholders.

All forward-looking statements should be read in light of the risks identified in Part I, Item 1A of our 2015 Annual Report on Form 10-K. Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed upon on any forward-looking statements included herein. All forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements made after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward looking statements included in this Quarterly Report on Form 10-Q, and the risks described in Part I, Item 1A of our 2015 Annual Report on Form 10-K, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report on Form 10-Q will be achieved.

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Overview

We are a Maryland corporation that was formed on September 18, 2008 to invest in and manage a portfolio of income-producing retail properties, located in the United States, real estate-owning entities and real estate-related assets, including the investment in or origination of mortgage, mezzanine, bridge and other loans related to commercial real estate. During the first quarter of 2016, we also invested, through joint ventures, in two significant retail projects under development. We have elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes, commencing with the taxable year ended December 31, 2009, and we intend to operate in such a manner. We own substantially all of our assets and conduct our operations through our operating partnership, of which we are the sole general partner. We also own a majority of the outstanding limited partner interests in the operating partnership.

Since our inception, our business has been managed by an external advisor. We no longer have direct employees and all management and administrative personnel responsible for conducting our business are employed by our advisor. Currently we are externally managed and advised by SRT Advisor, LLC, a Delaware limited liability company (the “Advisor”) pursuant to an advisory agreement with the Advisor (the “Advisory Agreement”) initially executed on August 10, 2013, and subsequently renewed in August 2014, August 2015 and August 2016. The current term of the Advisory Agreement terminates on August 10, 2017. The Advisor is an affiliate of Glenborough, LLC (together with its affiliates, “Glenborough”), a privately held full-service real estate investment and management company focused on the acquisition, management and leasing of commercial properties.

Property Portfolio

As of June 30, 2016, our property portfolio included 10 retail properties, which we refer to as “our properties” or “our portfolio,” comprising an aggregate of 693,648 square feet of single- and multi-tenant, commercial retail space located in 6 states. We purchased our properties for an aggregate purchase price of approximately $93.3 million. As of June 30, 2016 and December 31, 2015, there was approximately $34.1 million and approximately $39.8 million of indebtedness on our properties, respectively. As of June 30, 2016 and December 31, 2015, approximately 89% and 90% of our portfolio was leased (based on rentable square footage), respectively, with weighted-average remaining lease terms of approximately 5 years as of both period ends.

(dollars in thousands)		Rentable Square		Percent			Effective Rent (3)		Anchor	Date	Original Purchase
Property Name	Location	Feet (1)		Leased (2)			(Sq. Foot)		Tenant	Acquired	Price (4)		Debt (5)
Real Estate Investments
Pinehurst Square	Bismarck, ND		114,102		96	%	$	14.39	TJ Maxx	5/26/11	$	15,000	$	—
Cochran Bypass	Chester, SC		45,817		100	%		5.11	Bi-Lo	7/14/11		2,585		1,499
Topaz Marketplace	Hesperia, CA		50,699		62	%		24.33	n/a	9/23/11		13,500		—
Morningside Marketplace	Fontana, CA		76,923		96	%		15.46	Ralphs	1/9/12		18,050		8,556
Woodland West Marketplace	Arlington, TX		175,258		70	%		9.54	Randall's	2/3/12		13,950		9,614
Ensenada Square	Arlington, TX		62,628		100	%		7.33	Kroger	2/27/12		5,025		2,967
Shops at Turkey Creek	Knoxville, TN		16,324		100	%		27.33	n/a	3/12/12		4,300		2,685
Florissant Marketplace	Florissant, MO		146,257		100	%		9.83	Schnuck's	5/16/12		15,250		8,784
400 Grove Street	San Francisco, CA		2,000		100	%		60.00	n/a	6/14/16		2,890		—
8 Octavia Street	San Francisco, CA		3,640		100	%		26.15	n/a	6/14/16		2,740		—
			693,648								$	93,290	$	34,105

(1) Square feet include improvements made on ground leases at the property.

(2) Percentage is based on leased rentable square feet of each property as of June 30, 2016.

(3) Effective rent per square foot is calculated by dividing the annualized June 2016 contractual base rent by the total square feet occupied at the property. The contractual base rent does not include other items such as tenant concessions (e.g., free rent), percentage rent, and expense recoveries.

(4) The purchase price for Pinehurst Square and Shops at Turkey Creek includes the issuance of common units in our operating partnership to the sellers.

(5) Debt represents the outstanding balance as of June 30, 2016, and excludes reclassification of approximately $0.3 million deferred financing costs, net, as a contra-liability. For more information on our financing, refer to Note 8. “Notes Payable, Net” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. As of June 30, 2016, the KeyBank credit facility principal balance of $10.5 million was secured by Pinehurst Square, Topaz Marketplace, 8 Octavia and 400 Grove. For information regarding recent draws under the Key Bank credit facility, see “– Recent Financing Transactions - KeyBank Credit Facility.”

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Properties Under Development

As of June 30, 2016, we had 2 properties under development. The properties are identified in the following table (amounts in thousands):

		Estimated
	Estimated	Expected
Properties Under Development	Completion Date	Square Feet		Debt (1)
3032 Wilshire and 1210 Berkeley Street, Santa Monica, California	November, 2017		9,400	$	8,500
Sunset Boulevard and Gardner, Hollywood, California	March, 2018		38,000		10,700
Total			47,400	$	19,200

(1) Debt excludes reclassification of approximately $0.5 million deferred financing costs, net, as a contra-liability.

Results of Operations

Comparison of the three and six months ended June 30, 2016, versus the three and six months ended June 30, 2015

The following table provides summary information about our results of operations for the three and six months ended June 30, 2016 and 2015 (amounts in thousands):

	Three Months Ended June 30,
	2016			2015			$ Change			% Change
Rental revenue and reimbursements	$	2,482		$	3,921		$	(1,439	)		(36.7	%)
Operating and maintenance expenses		893			1,370			(477	)		(34.8	%)
General and administrative expenses		586			760			(174	)		(22.9	%)
Depreciation and amortization expenses		851			1,162			(311	)		(26.8	%)
Transaction expense		276			—			276			100.0	%
Interest expense		510			1,354			(844	)		(62.3	%)
Operating loss		(634	)		(725	)		91			(12.6	%)
Other income (loss), net		(84	)		371			(455	)		(122.6	%)
Income taxes		(228	)		(80	)		(148	)		185.0	%
Net loss	$	(946	)	$	(434	)	$	(512	)		118.0	%

	Six Months Ended June 30,
	2016			2015			$ Change			% Change
Rental revenue and reimbursements	$	5,190		$	8,725		$	(3,535	)		(40.5	%)
Operating and maintenance expenses		1,838			3,147			(1,309	)		(41.6	%)
General and administrative expenses		1,068			1,525			(457	)		(30.0	%)
Depreciation and amortization expenses		1,721			3,030			(1,309	)		(43.2	%)
Transaction expense		280			—			280			100.0	%
Interest expense		1,110			3,048			(1,938	)		(63.6	%)
Operating loss		(827	)		(2,025	)		1,198			(59.2	%)
Other income (loss), net		(50	)		4,792			(4,842	)		(101.0	%)
Income taxes		(134	)		(79	)		(55	)		69.6	%
Net income (loss)	$	(1,011	)	$	2,688		$	(3,699	)		(137.6	%)

Our results of operations for the three and six months ended June 30, 2016, are not necessarily indicative of those expected in future periods.

Revenue

The decrease in revenue during the three months ended June 30, 2016 compared to the same period in 2015, was primarily due to the sale of Northgate Plaza, Moreno Marketplace and Summit Point in October 2015 and Bloomingdale Hills in April 2016.

The decrease in revenue during the six months ended June 30, 2016, compared to the same period in 2015, was primarily due to the sale of Aurora Commons, Constitution Trail, and Osceola Village in March 2015, Northgate Plaza, Moreno Marketplace and Summit Point in October 2015 and Bloomingdale Hills in April 2016. The sale of the three properties in March 2015 was completed in connection with the formation of the SGO Joint Venture (as described in Note 4. “Investments in Unconsolidated Joint Ventures” to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q).

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Operating and maintenance expenses

The decrease in operating and maintenance expenses during the three months ended June 30, 2016, compared to the same period in 2015, was primarily due to the sale of Northgate Plaza, Moreno Marketplace and Summit Point in October 2015 and Bloomingdale Hills in April 2016.

The decrease in operating and maintenance expenses during the six months ended June 30, 2016, compared to the same period in 2015, was primarily attributed to the sale of Aurora Commons, Constitution Trail, and Osceola Village in March 2015, the sales of Northgate Plaza, Moreno Marketplace and Summit Point in October 2015 and the sale of Bloomingdale Hills in April 2016.

General and administrative expenses

The decrease in general and administrative expenses during the three months ended June 30, 2016, compared to the same period in 2015 was primarily due to lower legal expenses of approximately $0.2 million with the resolution of the class action lawsuit in 2015.

The decrease in general and administrative expenses during the six months ended June 30, 2016, compared to the same period in 2015 was primarily due to a decrease in legal expenses of $0.3 million with the resolution of the class action lawsuit in 2015 as well as lower asset management fees in 2016 due to the sale of Aurora Commons, Constitution Trail, and Osceola Village in March 2015, the sales of Northgate Plaza, Moreno Marketplace and Summit Point in October 2015, and the sale of Bloomingdale Hills in April 2016.

Depreciation and amortization expenses

The decrease in depreciation and amortization expenses during the three months ended June 30, 2016, compared to the same period in 2015 was attributed to the sales of Northgate Plaza, Moreno Marketplace and Summit Point in October 2015 and the sale of Bloomingdale Hills in April 2016.

The decrease in depreciation and amortization expenses during the six months ended June 30, 2016, compared to the same period in 2015 was attributed to the sales of Aurora Commons, Constitution Trail, and Osceola Village in March 2015, the sales of Northgate Plaza, Moreno Marketplace and Summit Point in October 2015 and the sale of Bloomingdale Hills in April 2016.

Transaction expense

The increase in transaction expenses during the three months ended June 30, 2016, compared to the same period in 2015 is primarily due to our acquisition fees for our investments in 400 Grove and 8 Octavia. Refer to Note 3. “Real Estate Investments” to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

The increase in transaction expenses during the six months ended June 30, 2016, compared to the same period in 2015 is primarily due to acquisition fees for our investments in 400 Grove and 8 Octavia. Refer to Note 3. “Real Estate Investments” to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Interest expense

The decrease in interest expense during the three months ended June 30, 2016, compared to the same period in 2015 was primarily due to loan pay-offs using the proceeds from the sales of the sales of Northgate Plaza, Moreno Marketplace and Summit Point in October 2015, and the sale of Bloomingdale Hills in April 2016.

The decrease in interest expense during the six months ended June 30, 2016, compared to the same period in 2015 was primarily due to loan pay-offs using the proceeds from the sales of Aurora Commons, Constitution Trail, and Osceola Village in March 2015, the sales of Northgate Plaza, Moreno Marketplace and Summit Point in October 2015, and the sale of Bloomingdale Hills in April 2016.

Other income (loss), net

Other loss, net for the three months ended June 30, 2016, primarily consisted of approximately $1.0 million related to prepayment penalties on extinguishment of debt as well as the write-off of unamortized loan fees related to the sale of Bloomingdale Hills in April 2016. This was partially offset by the gain on sale of Bloomingdale Hills of approximately $0.6 million as well as the equity in income resulting from our investment in unconsolidated joint ventures. Other income, net for the three months ended June 30, 2015, primarily consisted of the equity in income resulting from our investment in unconsolidated joint ventures.

Other loss, net for the six months ended June 30, 2016, primarily consisted of approximately $1.0 million related to prepayment penalties on extinguishment of debt as well as the write-off of unamortized loan fees related to the sale of Bloomingdale Hills in April 2016. This was partially offset by the gain on sale of Bloomingdale Hills of approximately $0.6 million, as well as the equity in income resulting from our investment in unconsolidated joint ventures of approximately $0.3 million. Other income, net for the six months ended June 30, 2015, primarily consisted of the net gain and the write-off of unamortized loan fees recorded on the sale of Aurora Commons, Constitution Trail, and Osceola Village in March 2015, as well as the equity in income resulting from our investment in unconsolidated joint ventures.

24 

Income taxes

We have elected to treat one of our subsidiaries as a taxable REIT subsidiary (“TRS”). In general, a TRS may engage in any real estate business and certain non-real estate businesses, subject to certain limitations under the Internal Revenue Code. A TRS is subject to federal and state income taxes. For the six months ended June 30, 2016, income tax provision primarily includes income taxes on our share of the gain from the sale of certain SGO MN Joint Venture properties. This is partially offset by the reversal of an over accrual of estimated alternative minimum state/federal taxes, which was accrued and included in expenses as of December 31, 2015. The over accrual was determined as a result of finalizing in 2016 the calculation of taxes owed for 2015.

Liquidity and Capital Resources

Since our inception, our principal demand for funds has been for the acquisition of real estate, the payment of operating expenses and interest on our outstanding indebtedness, the payment of distributions to our stockholders and investments in unconsolidated joint ventures and development properties. On February 7, 2013, we ceased offering shares of our common stock in our primary offering and under our distribution reinvestment plan. As a result of the termination of our initial public offering, offering proceeds from the sale of our securities are not currently available to fund our cash needs. We have used and expect to continue to use debt financing, net sales proceeds and cash flow from operations to fund our cash needs.

During the six months ended June 30, 2016, we utilized the net proceeds from the fourth quarter 2015 disposition of our properties (remaining after paydown of debt) to invest in the Gelson’s Joint Venture and the Wilshire Joint Venture.

As of June 30, 2016, our cash and cash equivalents were approximately $3.3 million and our restricted cash (funds held by the lenders for property taxes, insurance, tenant improvements, leasing commissions, capital expenditures, rollover reserves and other financing needs) was approximately $5.9 million. For properties with such lender reserves, we may draw upon such reserves to fund the specific needs for which the funds were established.

Our aggregate borrowings, secured and unsecured, are reviewed by our board of directors at least quarterly. Under our Articles of Amendment and Restatement, as amended, which we refer to as our “charter,” we are prohibited from borrowing in excess of 300% of the value of our net assets. Net assets for purposes of this calculation is defined to be our total assets (other than intangibles), valued at cost prior to deducting depreciation, reserves for bad debts and other non-cash reserves, less total liabilities. The preceding calculation is generally expected to approximate 75% of the aggregate cost of our assets before non-cash reserves and depreciation. However, we may temporarily borrow in excess of these amounts if such excess is approved by a majority of the independent directors and disclosed to stockholders in our next quarterly report, along with an explanation for such excess. As of June 30, 2016 and December 31, 2015, our borrowings were approximately 124.0% and 65.3%, respectively, of the carrying value of our net assets. 

The following table summarizes, for the periods indicated, selected items in our Condensed Consolidated Statements of Cash Flows (amounts in thousands):

	Six Months Ended June 30,
	2016			2015			$ Change
Net cash provided by (used in):
Operating activities	$	844		$	(173	)	$	1,017
Investing activities		(27,846	)		41,609			(69,455	)
Financing activities		21,474			(41,066	)		62,540
Net increase (decrease) in cash and cash equivalents	$	(5,528	)	$	370

Cash Flows from Operating Activities

The increase in cash flows from operating activities was primarily due to larger net deposits to restricted cash in 2015 as compared to 2016.

Cash Flows from Investing Activities

The change in cash flows from investing activities was primarily due to our investments in the Wilshire and Gelson’s Joint Ventures during the first quarter of 2016, consisting of land and building under development and development costs, of approximately $28.5 million, as well as our acquisition of 400 Grove and 8 Octavia during the three months ended June 30, 2016, which consisted of land and buildings, totaling $5.6 million. Additionally, cash flows from investing activities during the six months ended June 30, 2015 consisted of proceeds of $53.1 million, before the pay down of debt, from the sale of Aurora Commons, Constitution Trail and Osceola Village.

Cash Flows from Financing Activities

The change in cash flows from financing activities was primarily due to loan proceeds during the six months ended June 30, 2016, of approximately $32.7 million in connection with our investments in the Wilshire and Gelson’s Joint Ventures and an additional draw under our Amended and Restated Credit Facility (“Key Bank credit facility”), compared to the pay down of debt in the amount of $37.0 million during the six months ended June 30, 2015 resulting from the sales of Aurora Commons, Constitution Trail and Osceola Village.

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Short-term Liquidity and Capital Resources

Our principal short-term demand for funds is for the payment of operating expenses, the payment of principal and interest on our outstanding indebtedness, and distributions. To date, our cash needs for operations have been covered from cash provided by property operations, the sales of properties and the sale of shares of our common stock. Due to the termination of our initial public offering on February 7, 2013, we may fund our short-term operating cash needs from operations, from the sales of properties and from debt.

Long-term Liquidity and Capital Resources

On a long-term basis, our principal demand for funds will be for real estate and real estate-related investments and the payment of acquisition-related expenses, operating expenses, distributions to stockholders, future redemptions of shares and interest and principal payments on current and future indebtedness. Generally, we intend to meet cash needs for items other than acquisitions and acquisition-related expenses from our cash flow from operations, debt and sales of properties. Until the termination of our initial public offering on February 7, 2013, our cash needs for acquisitions were satisfied from the net proceeds of the public offering and from debt financings. On a long-term basis, we expect that substantially all cash generated from operations will be used to pay distributions to our stockholders after satisfying our operating expenses including interest and principal payments. We may consider future public offerings or private placements of equity. Refer to Note 8. “Notes Payable, Net” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on the maturity dates and terms of our outstanding indebtedness.

Recent Financing Transactions

KeyBank Credit Facility

On March 7, 2016, we drew $6.0 million under the Key Bank credit facility and used the proceeds to invest in the Wilshire Joint Venture.

On June 9, 2016, we drew approximately $7.5 million under the Key Bank credit facility, the majority of which was used to fund the purchase of the San Francisco properties. Refer to Note 3. “Real Estate Investments” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

Mortgage Loans Secured by Properties Under Development

In connection with our investment in the Gelson’s Joint Venture and the acquisition of the Gelson’s Property, we have consolidated borrowings of $10.7 million (the “Gelson’s Loan”) from Buchanan Mortgage Holdings, LLC (as the lender) and Sunset and Gardner Investors, LLC (as the borrower). The Gelson’s Loan bears interest at a rate of 9.5% per annum, payable monthly commencing on April 1, 2016. The loan matures on January 27, 2017, with an option to extend for an additional six-month period, subject to certain conditions as stated in the loan agreement. The loan is secured by, among other things, a lien on the Gelson’s development project and other collateral as defined in the loan agreement.

In connection with our investment in the Wilshire Joint Venture and the acquisition of the Wilshire Property, we have consolidated borrowings of $8.5 million (the “Wilshire Loan”) from Buchanan Mortgage Holdings, LLC (as the lender) and 3032 Wilshire Investors, LLC (as the borrower). The Wilshire Loan bears interest at a rate of 10.0% per annum, payable monthly commencing on April 1, 2016. The loan matures on March 7, 2017, with an option for an additional six-month period, subject to certain conditions as stated in the loan agreement. The loan is secured by, among other things, a lien on the Wilshire development project and other collateral as defined in the loan agreement.

Interim Financial Information

The financial information as of and for the period ended June 30, 2016, included in this Quarterly Report on Form 10-Q is unaudited, but includes all adjustments (consisting of normal recurring adjustments) that, in the opinion of management, are necessary for a fair presentation of our financial position and operating results for the three and six months ended June 30, 2016. These interim unaudited condensed consolidated financial statements do not include all disclosures required by GAAP for complete consolidated financial statements. Interim results of operations are not necessarily indicative of the results to be expected for the full year; and such results may be less favorable. Our accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our 2015 Annual Report on Form 10-K.

Guidelines on Total Operating Expenses

We reimburse our Advisor for some expenses paid or incurred by our Advisor in connection with the services provided to us, except that we will not reimburse our Advisor for any amount by which our total operating expenses at the end of the four preceding fiscal quarters exceed the greater of (1) 2% of our average invested assets, as defined in our charter; and (2) 25% of our net income, as defined in our charter, or the “2%/25% Guidelines” unless a majority of our independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. For the three and six months ended June 30, 2016, our total operating expenses did not exceed the 2%/25% Guidelines.

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Inflation

The majority of our leases at our properties contain inflation protection provisions applicable to reimbursement billings for common area maintenance charges, real estate tax and insurance reimbursements on a per square foot basis, or in some cases, annual reimbursement of operating expenses above a certain per square foot allowance. We expect to include similar provisions in our future tenant leases designed to protect us from the impact of inflation. Due to the generally long-term nature of these leases, annual rent increases, as well as rents received from acquired leases, may not be sufficient to cover inflation and rent may be below market rates.

REIT Compliance

To qualify as a REIT for tax purposes, we are required to annually distribute at least 90% of our REIT taxable income, subject to certain adjustments, to our stockholders. We must also meet certain asset and income tests, as well as other requirements.  If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which our REIT qualification is lost unless the IRS grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders. In 2015, we made a special distribution to stockholders to preserve our REIT status based on underreporting of federal taxable income in 2011 (the “Special Distribution”).

Quarterly Distributions

As set forth above, in order to qualify as a REIT, we are required to distribute at least 90% of our annual REIT taxable income, subject to certain adjustments, to our stockholders.

Under the terms of the Key Bank credit facility, we may pay distributions to our stockholders so long as the total amount paid does not exceed certain thresholds specified in the Key Bank credit facility provided, however, that we are not restricted from making any distributions necessary in order to maintain our status as a REIT. Our board of directors will continue to evaluate the amount of future quarterly distributions based on our operational cash needs.

Some or all of our distributions have been paid, and in the future may continue to be paid from sources other than cash flows from operations.

The following tables set forth the quarterly distributions declared to our common stockholders and common unit holders for the six months ended June 30, 2016, and the year ended December 31, 2015. Distributions to our common stockholders and common unit holders for the three months ended June 30, 2016 were declared subsequent to June 30, 2016 (amounts in thousands, except per share amounts).

	Distribution Record Date	Distribution Payable Date	Distribution Per Share of Common Stock / Common Unit		Total Common Stockholders Distribution		Total Common Unit Holders Distribution		Total Distribution
First Quarter 2016	3/31/2016	4/29/2016	$	0.06	$	660	$	26	$	686

	Distribution Record Date	Distribution Payable Date	Distribution Per Share of Common Stock / Common Unit		Total Common Stockholders Distribution		Total Common Unit Holders Distribution		Total Distribution
First Quarter 2015	3/31/2015	4/30/2015	$	0.06	$	658	$	26	$	684
Second Quarter 2015	6/30/2015	7/30/2015		0.06		654		26		680
Third Quarter 2015	9/30/2015	10/31/2015		0.06		654		26		680
Fourth Quarter 2015	12/31/2015	1/30/2016		0.06		661		25		686
Total					$	2,627	$	103	$	2,730

Funds From Operations

Funds from operations (“FFO”) is a supplemental non-GAAP financial measure of a real estate company’s operating performance. The National Association of Real Estate Investment Trusts, or “NAREIT”, an industry trade group, has promulgated this supplemental performance measure and defines FFO as net income, computed in accordance with GAAP, plus real estate related depreciation and amortization and excluding extraordinary items and gains and losses on the sale of real estate, and after adjustments for unconsolidated joint ventures (adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO.) It is important to note that not only is FFO not equivalent to our net income or loss as determined under GAAP, it also does not represent cash flows from operating activities in accordance with GAAP.  FFO should not be considered an alternative to net income as an indication of our performance, nor is FFO necessarily indicative of cash flow as a measure of liquidity or our ability to fund cash needs, including the payment of distributions.

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We consider FFO to be a meaningful, additional measure of operating performance and one that is an appropriate supplemental disclosure for an equity REIT due to its widespread acceptance and use within the REIT and analyst communities. Comparison of our presentation of FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs.

Our calculation of FFO attributable to common shares and Common Units and the reconciliation of net income (loss) to FFO is as follows (amounts in thousands, except shares and per share amounts):

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
FFO	2016			2015			2016			2015
Net income (loss) (1)	$	(946	)	$	(434	)	$	(1,011	)	$	2,688
Adjustments (2):
Net income related to membership interest		—			(150	)		—			(243	)
Gain (loss) on disposal of assets		(605	)		84			(614	)		(4,601	)
Adjustment to reflect FFO of unconsolidated joint ventures		(28	)		125			176			143
Depreciation of real estate		638			819			1,282			2,164
Amortization of in-place leases and other intangibles		213			316			439			820
FFO attributable to common shares and Common Units	$	(728	)	$	760		$	272		$	971
FFO per share/Common Unit	$	(0.06	)	$	0.07		$	0.02		$	0.09
Weighted average common shares/units outstanding		11,438,859			11,399,813			11,477,703			11,400,665

(1) Our Common Units have the right to convert a unit into common stock for a one-to-one conversion. Therefore, we are including the related non-controlling interest income/loss attributable to Common Units in the computation of FFO and including the Common Units together with weighted average shares outstanding for the computation of FFO per share and Common Unit.

(2) Where applicable, adjustments exclude amounts attributable to membership interest.

Related Party Transactions and Agreements

We are currently party to the Advisory Agreement, pursuant to which the Advisor manages our business in exchange for specified fees paid for services related to the investment of funds in real estate and real estate-related investments, management of our investments and for other services. Refer to Note 12. “Related Party Transactions” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of the Advisory Agreement and other related party transactions, agreements and fees.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements consist primarily of our investments in joint ventures and are described in Note 4. “Investments in Unconsolidated Joint Ventures” in the notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q. Our joint ventures typically fund their cash needs through secured debt financings obtained by and in the name of the joint venture entity. The joint ventures’ debts are secured by a first mortgage, are without recourse to the joint venture partners, and do not represent a liability of the partners other than carve-out guarantees for certain matters such as environmental conditions, misuse of funds and material misrepresentations. As of June 30, 2016, we have provided carve-out guarantees in connection with our two unconsolidated joint ventures; in connection with those carve-out guarantees we have certain rights of recovery from our joint venture partners.

Critical Accounting Policies

Our condensed consolidated interim financial statements have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our 2015 Annual Report on Form 10-K.

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Subsequent Events

Second Quarter Distributions

On July 6, 2016, we declared a second quarter distribution in the amount of $0.06 per share/unit to common stockholders and holders of common units of record as of July 7, 2016, totaling approximately $0.7 million. The distribution was paid on July 29, 2016.

Acquisitions

On July 25, 2016, we drew $4.7 million under the KeyBank credit facility to fund the acquisition of a retail property located in San Francisco, California (the “Fulton Street Shops”). The acquisition of the Fulton Street Shops closed on July 27, 2016. The seller is not affiliated with us or the Advisor. The Fulton Street Shops is comprised of five high-quality street retail condominiums with an aggregate of 3,759 square feet of retail space. The aggregate purchase price of the Fulton Street Shops was approximately $4.6 million subject to customary closing costs and proration adjustments.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Omitted as permitted under rules applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this report, management, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon, and as of the date of, the evaluation, our chief executive officer and chief financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Omitted as permitted under rules applicable to smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the period covered by this Quarterly Report on Form 10-Q, we did not issue any equity securities that were not registered under the Securities Act of 1933, as amended.

Share Redemption Program

On April 1, 2015, our board of directors approved the reinstatement of the share redemption program (which had been suspended since January 15, 2013) and adopted an Amended and Restated Share Redemption Program (the “Amended and Restated SRP”). Under the Amended and Restated SRP, only shares submitted for repurchase in connection with the death or “qualifying disability” (as defined in the Amended and Restated SRP) of a stockholder are eligible for repurchase by us. The number of shares to be redeemed is limited to the lesser of (i) a total of $2.0 million for redemptions sought upon a stockholder’s death and a total of $1.0 million for redemptions sought upon a stockholder’s qualifying disability, and (ii) 5% of the weighted average of the number of shares of our common stock outstanding during the prior calendar year. Share repurchases pursuant to the share redemption program are made at our sole discretion. We reserve the right to reject any redemption request for any reason or no reason or to amend or terminate the share redemption program at any time subject to the notice requirements in the Amended and Restated SRP.

The redemption price for shares that are redeemed is 100% of our most recent estimated net asset value per share as of the applicable redemption date. A redemption request must be made within one year after the stockholder’s death or disability, unless such death or disability occurred between January 15, 2013 and April 1, 2015, when the share redemption program was suspended. Redemption requests due to the death or disability of a Company stockholder, that occurred during such time period, must be submitted within one year after the adoption of the Amended and Restated SRP.

The Amended and Restated SRP provides that any request to redeem less than $5,000 worth of shares will be treated as a request to redeem all of the stockholder’s shares. If we cannot honor all redemption requests received in a given quarter, all requests, including death and disability redemptions, will be honored on a pro rata basis. If we do not completely satisfy a redemption request in one quarter, we will treat the unsatisfied portion as a request for redemption in the next quarter when funds are available for redemption, unless the request is withdrawn. We may increase or decrease the amount of funding available for redemptions under the Amended and Restated SRP on ten business days’ notice to stockholders. Shares submitted for redemption during any quarter will be redeemed on the penultimate business day of such quarter. The record date for quarterly distributions has historically been and is expected to continue to be the last business day of each quarter; therefore, shares that are redeemed during any quarter are expected to be redeemed prior to the record date and thus would not be eligible to receive the distribution declared for such quarter.

The other material terms of the Amended and Restated SRP are consistent with the terms of the share redemption program that was in effect immediately prior to January 15, 2013.

On August 7, 2015, our board of directors approved the amendment and restatement of the Amended and Restated SRP (the “Second Amended and Restated SRP” and, together with the Amended and Restated SRP, the “SRP”). Under the Second Amended and Restated SRP, the redemption date with respect to third quarter 2015 redemptions was November 10, 2015 or the next practicable date as our Chief Executive Officer determined so that redemptions with respect to the third quarter of 2015 were delayed until after the payment date for the Special Distribution. With this revision, stockholders who were to have 100% of their shares redeemed were not left holding a small number of shares from the Special Distribution after the date of the redemption of their shares. The other material terms of the Second Amended and Restated SRP are consistent with the terms of the Amended and Restated SRP.

30 

During the six months ended June 30, 2016, we redeemed shares as follows:

Period	Total Number of Shares Redeemed (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program		Approximate Dollar Value of Shares That May Yet be Redeemed Under the Program (2)
January 2016		—	$	—		—	$	1,617,866
February 2016		—		—		—		1,617,866
March 2016		30,721		6.56		30,721		1,416,420
April 2016		—		—		—		1,416,420
May 2016		—		—		—		1,416,420
June 2016		8,147		6.55		8,147		1,363,049
Total		38,868				38,868

(1) All of our purchases of equity securities during the six months ended June 30, 2016, were made pursuant to the SRP.

(2) We currently limit the dollar value and number of shares that may yet be repurchased under the SRP as described above.

Cumulatively, through June 30, 2016, we have redeemed 404,771 shares of common stock sold in our initial public offering for approximately $3.3 million.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

As of the three months ended June 30, 2016, all items required to be disclosed under Form 8-K were reported under Form 8-K.

ITEM 6. EXHIBITS

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

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on August 12, 2016.

Strategic Realty Trust, Inc.
By:	/s/ Andrew Batinovich
	Andrew Batinovich
	Chief Executive Officer, Corporate Secretary and Director (Principal Executive Officer)
By:	/s/ Terri Garnick
	Terri Garnick
	Chief Financial Officer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the six months ended June 30, 2016 (and are numbered in accordance with Item 601 of Regulation S-K).

			Incorporated by Reference
Exhibit No.	Description	Filed Herewith	Form/File No.	Filing Date
3.1.1	Articles of Amendment and Restatement of TNP Strategic Retail Trust, Inc.		S-11/ No. 333-154975	7/10/2009
3.1.2	Articles of Amendment, dated August 22, 2013		8-K	8/26/2013
3.1.3	Articles Supplementary, dated November 1, 2013		8-K	11/4/2013
3.1.4	Articles Supplementary, dated January 22, 2014		8-K	1/28/2014
3.2	Third Amended and Restated Bylaws of Strategic Realty Trust, Inc.		8-K	1/28/2014
10.1	Agreement of Purchase and Sale and Joint Escrow Instructions between Octavia Gateway Holdings, LLC and SRT SF Retail, I, LLC, dated May 4, 2016	X
10.2	First Amendment to Agreement of Purchase and Sale and Joint Escrow Instructions between Octavia Gateway Holdings, LLC and SRT SF Retail I, LLC, dated May 25, 2016	X
10.3	Agreement of Purchase and Sale and Joint Escrow Instructions between Grove Street Hayes Valley LLC and SRT SF Retail, I, LLC, dated May 4, 2016	X
10.4	First Amendment to Agreement of Purchase and Sale and Joint Escrow Instructions between Grove Street Hayes Valley LLC and SRT SF Retail, I, LLC, dated May 25, 2016	X
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
99.1	Strategic Realty Trust, Inc. Amended and Restated Share Redemption Program Adopted April 1, 2015		8-K	4/9/2015
101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema Document	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	X

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EX-10.1

Exhibit 10.1

AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS

THIS AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS (this “Agreement”) is made and entered into as of the 4th day of May, 2016 (the “Effective Date”), by and between Octavia Gateway Holdings, LLC, a Delaware limited liability company (“Seller”), and SRT SF Retail I, LLC, a Delaware limited liability company (“Buyer”).

RECITALS

A.           Seller owns certain improved real property commonly known as 8 Octavia Boulevard, Units 102, 307 and 308, San Francisco, California, in the City and County of San Francisco, State of California, which is more particularly described on Exhibit “A” attached hereto (excluding any improvements owned by any tenant pursuant to its Lease) (the “Real Property”), together with all of Seller’s right, title and interest, if any, in and to (i) all leases of space in said Real Property and any guaranties of such leases (collectively, the “Leases”), (ii) all of the Binding Contracts, if any, that have been approved by Buyer pursuant to Paragraph 14, (iii) all intangible personal property, to the extent assignable and related exclusively to the Real Property, including but not limited to, any such (A) warranties, guaranties and indemnities, (B) governmental licenses, permits, or similar rights, (C) plans, drawings, specifications, surveys, engineering reports, other technical descriptions and any names by which the improvements on the Real Property may be known or identified, including its street address; but excluding any contracts other than the Leases and, to the extent approved by Buyer pursuant to Paragraph 14, the Binding Contracts (with the exception of such excluded property, the property described in this subparagraph (iii) is collectively referred to as the “Intangible Property”), and (iv) any tangible personal property owned by Seller and located in the Real Property excluding any such property which is owned by any tenant or integrated with the property manager’s operation of other properties (the “Personal Property”) are hereinafter collectively referred to as the “Property”.

B.           Concurrently herewith, (i) Grove Street Hayes Valley LLC, a Delaware limited liability company (“Grove Seller”) and Buyer have entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions, dated as of even date herewith (the “Grove Purchase Agreement”), and (ii) Hayes Street Hayes Valley LLC, a Delaware limited liability company (“Hayes Seller”, and together with Grove Seller, “Other Sellers”) and Buyer have entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions, dated as of even date herewith (the “Hayes Purchase Agreement”, and together with the Grove Purchase Agreement, the “Other Purchase Agreements”).

C.           Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, the Property on and subject to the terms and conditions of this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows:

1.          Purchase and Sale. Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller, the Property upon the terms and conditions set forth in this Agreement.

2.          Purchase Price. The Purchase Price (“Purchase Price”) for the Property shall be Two Million Seven Hundred Forty Thousand and 00/100 Dollars ($2,740,000.00). The Purchase Price shall be payable as follows:

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(a)          Deposit. Prior to 5:00 P.M. (Pacific Time) on the second (2nd) Business Day after the Effective Date (the “Initial Deposit Deadline”), Buyer shall deliver or cause to be delivered to First American Title Insurance Company, at 101 Mission Street, Suite 1600, San Francisco, CA 94105, attention: Heather Kucala (“Escrow Holder”), cash or other immediately available funds in the amount of Seventy Thousand and 00/100 Dollars ($70,000.00) (the “Initial Deposit”). In the event that the Initial Deposit is not timely funded on or before the Initial Deposit Deadline for any reason, then this Agreement shall be automatically null and void and of no further force and effect (and Buyer shall have no rights, and Seller shall have no obligations, under this Agreement of any kind or nature). Prior to 5:00 P.M. (Pacific Time) on the second (2nd) Business Day following the Contingency Date, Buyer shall deliver or cause to be delivered to Escrow Holder cash or other immediately available funds in the amount of Seventy Thousand and 00/100 Dollars ($70,000.00) (the “Additional Deposit”). The Initial Deposit and, if and when deposited with Escrow Holder, the Additional Deposit, are collectively referred to herein as the “Deposit”. The Deposit shall be invested in an interest earning account designated by Buyer, subject to Seller’s reasonable approval, and any interest earned thereon shall be a part of the Deposit for all purposes under this Agreement. At the Close of Escrow, the Deposit, and any interest accruing thereon, shall be applied and credited toward payment of the Purchase Price.

(b)          Cash Balance. On or before 11:00 A.M. (Pacific Time) on the Closing Date, Buyer shall deposit into Escrow cash or other immediately available funds in the amount of the balance of the Purchase Price, as adjusted by Buyer’s share of expenses and prorations.

(c)          Independent Consideration. Contemporaneously with the execution and delivery of this Agreement, Buyer has paid to Seller as further consideration for this Agreement, in cash, the sum of $100.00 (the "Independent Consideration"), in addition to the Deposit and the Purchase Price and independent of any other consideration provided hereunder, which Independent Consideration is fully earned by Seller and is non-refundable under all circumstances.

3. Escrow.

(a)          Opening of Escrow. Buyer and Seller shall promptly evidence the opening of Escrow by delivering a fully executed copy of this Agreement to Escrow Holder.

(b)          Close of Escrow. The Close of Escrow shall occur, if at all, on the Closing Date. The “Closing Date” means the date that is twenty (20) days after the Contingency Date, provided that such date is a Business Day which is followed by a Business Day, otherwise the Closing Date shall be the next soonest date that is a Business Day which is followed by a Business Day. Buyer and Seller hereby authorize their respective attorneys to execute and deliver to Escrow Holder any additional or supplementary instructions as may be necessary or convenient to implement the terms of this Agreement and close the transactions contemplated hereby, provided such instructions are consistent with and merely supplement this Agreement and shall not in any way modify, amend or supersede this Agreement. Such supplementary instructions, together with the escrow instructions set forth in this Agreement, as they may be amended from time to time by the parties, shall collectively be referred to as the “Escrow Instructions”. The Escrow Instructions may be amended and supplemented by such standard terms and provisions as the Escrow Holder may request the parties hereto to execute, provided that any such standard terms and provisions do not materially increase Seller’s or Buyer’s obligations hereunder or materially decrease Seller’s or Buyer’s rights hereunder. The parties hereto and Escrow Holder acknowledge and agree that in the event of a conflict between any provision of such standard terms and provisions supplied by the Escrow Holder and the Escrow Instructions, the Escrow Instructions shall prevail.

4. Buyer’s Investigations.

(a)          Access to and Delivery of Materials. Buyer hereby acknowledges that prior to the Effective Date, Seller has delivered to Buyer or made available for Buyer’s review the documents listed on Exhibit “B” attached hereto (collectively, “Seller’s Documents”). Seller shall also make available to Buyer, promptly following Buyer’s written request, any other documents in Seller’s possession, other than Excluded Documents, which are reasonably requested by Buyer with respect to the Property. As used herein, “Excluded Documents” shall mean any documents involving either Seller’s financing or refinancing of the Property, any purchase and sale agreements and correspondence pertaining to Seller’s acquisition of the Property, any documents pertaining to the potential acquisition of the Property by any past or prospective purchasers, any third party purchase inquiries and correspondence, appraisals of the Property, attorney-client privileged documents, internal budgets or financial projections, and any other internal documents. Except as may otherwise be expressly set forth in Paragraph 12 below, all third party reports are delivered to Buyer without representation or warranty by or recourse against, Seller or any third party preparing such report or any of their respective direct or indirect partners, managers, members, employees, officers, directors, agents, subsidiaries or affiliates, and its or their respective successors and assigns (and Buyer hereby releases the same from and against any obligation or liability in connection therewith). On termination of this Agreement for any reason, Buyer shall promptly destroy all Seller’s Documents and other information, of whatever nature and in whatever form, with respect to the Property, heretofore or hereafter delivered by Seller or obtained by Buyer and/or created by or on behalf of Buyer in reliance upon such information, without any copies being retained by Buyer. In any such event, and as a covenant which shall survive the termination of this Agreement, all such information, as well as the terms of this Agreement, shall be treated by Buyer as confidential and none of it shall be disclosed by Buyer to any other party thereafter for any purpose or in any context, except as provided in Paragraph 20 below.

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(b)          Due Diligence.

(i)          General. On or before the date which is twenty (20) days after the Effective Date (the “Contingency Date”), Buyer shall have completed any and all due diligence activities which Buyer may choose to conduct or commission, including without limitation, a review of: Seller’s Documents, any other documents made available to Buyer, the condition of title to the Real Property as disclosed by the PTR, the condition of the improvements located on the Real Property and all operating systems relating thereto, the presence of Hazardous Materials, if any, the status of Binding Contracts and the Leases, compliance with Governmental Regulations, the development potential (or lack thereof) of the Real Property, and any and all other matters of similar or dissimilar nature relating in any way to the Property or Buyer’s purchase of the Property (collectively, the “Due Diligence”).

(ii)         Estoppels. In connection with such Due Diligence, Seller shall work diligently to have (A) the tenants under the Leases execute an estoppel certificate for the benefit of Seller, Buyer and Buyer’s lender in the form attached hereto as Exhibit “C” and (B) 8 Octavia Boulevard Owners’ Association (the “Association”) execute an estoppel certificate for the benefit of Seller, Buyer and Buyer’s lender in the form attached hereto as Exhibit “M”, in each case with such terms as have been previously approved by Buyer (i.e., Buyer shall review and approve each such completed estoppel certificate prior to the date that it is distributed to the tenant or the Association, as applicable, for review and execution by such tenant or the Association, as applicable), provided that Seller shall not be in breach of this sentence in the event that, despite its diligent efforts, it fails to obtain such executed estoppel certificates from the tenants and/or the Association. Buyer shall so approve each such estoppel certificate (which approval shall not be unreasonably withheld), or provide its comments thereto, within two (2) Business Days following its receipt of the same otherwise Buyer shall be deemed to have approved the same. Seller shall promptly deliver to Buyer all executed estoppel certificates received by Seller. Seller makes no representation as to the number of estoppel certificates, if any, that will be returned to Buyer. In the event executed estoppel certificates are not received on or before the date that is two (2) Business Days prior to the Closing Date from all tenants of the Real Property and the Association, dated no earlier than thirty (30) days prior to the Closing Date, and without material adverse factual disclosure compared to the form of estoppel distributed to such tenant or the Association, as applicable, for its review and execution pursuant to the terms hereof (collectively, the “Required Estoppels”), then Buyer shall have the right to terminate this Agreement and upon any such termination receive a refund of its Deposit; provided, however, that any objection by Buyer to any executed estoppel certificate must be raised by Buyer within two (2) Business Days following its receipt of the same otherwise such estoppel certificate shall be deemed to satisfy the requirements of this Paragraph. Notwithstanding anything contained herein to the contrary, in no event shall any fact or issue disclosed in any tenant’s Lease or made on Exhibit “J” attached hereto, constitute a material adverse factual disclosure or otherwise be objected to by Buyer.

(iii)        Contracts. Notwithstanding anything contained herein to the contrary, Seller shall terminate all of its listing agreements and property management agreements, to the extent relating to the Property, at its expense as of the Close of Escrow (provided that this obligation to terminate listing agreements and property management agreements shall only apply to those agreements entered into by Seller to the extent the same apply to the Real Property, and shall in no event apply to any listing agreements or property management agreements entered into by the Association).

(iv)        Third Party Communications. Notwithstanding anything to the contrary contained herein, Buyer shall not (i) communicate with any tenants under the Leases with respect to the Property without affording Seller a reasonable opportunity to have a representative of Seller participate in any conversations with such tenants or (ii) contact any governmental authority having jurisdiction over the Property with respect to the Property, other than in connection with Buyer’s due diligence evaluation of the Property to verify zoning and/or compliance matters, without obtaining the prior written consent of Seller and without affording Seller a reasonable opportunity to have a representative of Seller participate in any conversations with such governmental authority.

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(c)          Buyer’s Right to Terminate. Buyer may at Buyer’s election and discretion terminate this Agreement, for any reason or no reason, at any time prior to 5:00 P.M. (Pacific Time) on the Contingency Date by delivering written notice thereof to Seller and Escrow Holder, and upon such termination, Paragraph 5(c) shall apply. If Buyer elects not to terminate this Agreement in accordance with the foregoing sentence, Buyer shall deliver to Seller and Escrow Holder, prior to 5:00 P.M. (Pacific Time) on the Contingency Date, written notice of Buyer’s intent to proceed with the acquisition of the Property under the terms of this Agreement (the “Approval Notice”), and the Deposit shall thereupon become non-refundable to Buyer except as otherwise expressly provided in this Agreement. In the event that Buyer fails to timely deliver the Approval Notice pursuant to the terms of this Paragraph 4(c), then Buyer shall be deemed to have terminated this Agreement pursuant to this Paragraph 4(c) and Paragraph 5(c) shall apply.

(d)          Access by Buyer. Subject to the rights of tenants and the requirements of Paragraph 4(e), at Buyer’s sole cost and expense, Buyer and Buyer’s agents and representatives shall have the right, upon no less than one (1) Business Day’s prior notice to Seller, to enter upon the Real Property at all reasonable times in order to conduct such inspections, tests or studies as Buyer may deem appropriate (including, without limitation, for the preparation of an ALTA/NSPS Land Title Survey of the Real Property), excluding invasive investigations of the land or improvements thereon; except that any such entry shall be coordinated with Seller and Seller’s property manager or other agent of Seller in control of the Property, and shall be conducted in such a manner as to not materially interfere with the on-going operation of the Property. Any damage caused to the Property in connection with any inspection, test, or study shall be promptly and fully repaired by Buyer and the Property returned to its prior condition, all at Buyer’s cost, which obligation shall survive any termination of this Agreement. In no event shall Buyer, prior to the Close of Escrow, indicate in any way that Buyer owns or holds any other rights of any nature in the Property or any portion thereof, or that Buyer is in any manner acting on behalf of Seller. Buyer shall keep the Property free and clear of any mechanic’s liens or materialmen’s liens arising out of any of Buyer’s activities or those of its agents and representatives, which obligation shall survive any termination of this Agreement. Not less than two (2) Business Days prior to any work being conducted on the Real Property by or for the benefit of Buyer, which work could be the basis for the filing of a mechanic’s lien claim against the Real Property if such work were not duly paid for, Buyer shall obtain Seller’s written consent and shall allow Seller to post such notices of non-responsibility with respect thereto as Seller may deem appropriate. Further, except for the mere discovery of existing conditions on or affecting the Property or to the extent arising from the active negligence or willful misconduct of Seller, Buyer hereby agrees to indemnify, defend and hold Seller harmless from and against any and all loss, cost, liability or expense arising out of the acts or omissions of Buyer and/or its agents or representatives in connection with any such entry, inspection, test, study or other activity, including without limitation all legal expenses reasonably incurred by Seller in connection therewith. The indemnity provided herein shall survive the Close of Escrow and any termination of this Agreement and shall not be limited by the insurance required to be maintained under Paragraph 4(e).

(e)          Insurance. Prior to Buyer entering upon the Real Property, or any other person or entity entering upon the Real Property pursuant to Buyer’s rights under Paragraph 4(d) (each a “Consultant”), Buyer shall, and shall cause each and every such Consultant, to furnish Seller with a certificate of insurance evidencing that Seller has been added as an additional insured under an insurance policy maintained by Buyer or such Consultant, as applicable, and all premiums due on the policy have been paid. Each such insurance policy shall be from an insurer licensed in the State of California with a rating by A.M. Best of A- or higher, and provide coverage against any claim for personal liability or property damage caused by Buyer or such Consultant, as applicable, and its respective agents or representatives, with a combined single limit liability of not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate.

5. Conditions to the Close of Escrow.

(a)          Conditions Precedent to Buyer’s Obligations. The Close of Escrow and Buyer’s obligations with respect to the consummation of the transactions contemplated by this Agreement are subject to the timely satisfaction or waiver by Buyer of the following conditions:

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(i)          Representations, Warranties and Covenants of Seller. Seller shall have duly performed in all material respects all material covenants to be performed by Seller hereunder, and all of Seller’s representations and warranties set forth in Paragraph 12 shall be true and correct as of the Effective Date and the Closing Date (except to the extent that Paragraph 12 expressly provides that such representations and warranties are made as of the Effective Date) in all material respects.

(ii)         Delivery of Documents. Seller shall have delivered all of the duly executed documents required to be delivered by Seller pursuant to Paragraph 6(a).

(iii)        Title Insurance. As of the Close of Escrow, First American Title Insurance Company (the “Title Company”) shall have issued or shall have unconditionally committed to issue an ALTA extended coverage owner’s policy of title insurance showing title to the Real Property vested in Buyer subject only to the Permitted Exceptions, with a liability amount equal to the Purchase Price, which includes an endorsement providing affirmative mechanics’ and materialmen’s lien coverage against liens for services, labor or material arising out of the work described in Paragraph 5(a)(iii)(z) below, which endorsement shall be in a form reasonably acceptable to Buyer and Buyer’s lender (the “Title Policy”). Buyer has obtained from the Title Company that certain preliminary title report with respect to the Property, dated as of March 31, 2016, and issued under order no. NCS-787084-2-SF (the “PTR”), containing such exceptions as the Title Company would specify in the Title Policy and copies of all documents of record identified as exceptions in such PTR. On or before the date that is five (5) days prior to the Contingency Date (or within five (5) days after Buyer’s receipt of any supplemental preliminary title report that is delivered to Buyer later than the date that is five (5) days prior to the Contingency Date), Buyer shall have the right to give written notice to Seller disapproving any items identified as exceptions in such PTR (or supplemental preliminary title report), and identifying the items and/or exceptions disapproved (a “Title Disapproval”). Notwithstanding anything contained herein to the contrary, Buyer shall have no right to deliver a Title Disapproval with respect to any exception contained in any such supplemental preliminary title report which (1) was also contained in the original PTR or (2) would constitute a Permitted Exception regardless of whether or not included in any such report. Any exceptions in the PTR or any supplemental preliminary title report not timely disapproved by Buyer with a Title Disapproval shall be deemed to have been approved by Buyer, other than those items Seller is obligated to remove in the last sentence of this Paragraph. Upon Buyer’s delivery of a Title Disapproval, Seller may elect, in its sole discretion, to remove (or otherwise modify or cure in a manner reasonably satisfactory to Buyer) said disapproved item or items at or prior to the Close of Escrow, by delivering written notice of such election to Buyer not later than three (3) days following the date Seller receives a Title Disapproval. If Seller does not notify Buyer in writing that Seller will eliminate (or otherwise cure to Buyer’s reasonable satisfaction) such disapproved exceptions or matters within such three (3) day period, Seller shall be deemed to have elected not to remove (or otherwise cure) such exception and Buyer shall have five (5) days following the date Seller received the Title Disapproval to terminate this Agreement in accordance with Paragraph 5(c). If Buyer fails to so terminate this Agreement, Buyer shall be deemed to have withdrawn its disapproval and approved such exception, other than those items Seller is obligated to remove in the last sentence of this Paragraph. The term “Permitted Exceptions” shall mean: the specific exceptions listed in the PTR and any supplemental preliminary title report approved or deemed approved by Buyer or which Seller has agreed to cure in a manner reasonably acceptable to Buyer; applicable zoning and building ordinances and land use regulations; such state of facts as would be disclosed by a survey or physical inspection of the Property; the lien of taxes and assessments not yet delinquent; any standard form exclusions from coverage set forth in the jacket of the Title Policy; any exceptions caused by Buyer, its agents, representatives or employees; any liens arising from or related to Lease Inducement Costs for which Buyer is liable pursuant to Paragraph 9(f); and the rights of the tenants under the Leases, as tenants only. It shall not be a condition to the Close of Escrow if Buyer elects to obtain any endorsements (other than the mechanic’s lien endorsement contemplated above), requests reinsurance or coinsurance, or otherwise elects to obtain any different or additional coverage in excess of that provided by the Title Policy, and in no event shall the Close of Escrow be delayed by reason of having to obtain a survey or to fulfill any other necessary title requirement, so long as the Title Company is in position to issue the Title Policy as of the Closing Date. Notwithstanding the foregoing provisions of this Paragraph 5(a)(iii) to the contrary, subject to the terms and conditions of this Agreement, (y) Seller does agree to deliver title to the Real Property at the Close of Escrow free and clear of liens of any deeds of trust and/or mortgages created by, under or through Seller or any Affiliate of Seller, which liens Seller shall cause to be released at or prior to the Close of Escrow (with Seller having the right to apply the Purchase Price or a portion thereof for such purpose), and (z) Seller agrees to use commercially reasonable efforts to remove or cause to be insured over by the Title Company, in a manner reasonably acceptable to Buyer, any mechanics’ or materialmen’s liens on or attaching to the Real Property relating to or arising out of any work of improvement contracted for by or on behalf of Seller or any Affiliate of Seller. If reasonably requested by the Title Company in connection with the issuance of affirmative mechanic’s and materialmen’s lien coverage to Buyer and/or Buyer’s lender, Seller shall provide the Title Company with a mechanics lien indemnity, in form reasonably acceptable to the Title Company and Seller, with respect to any work of improvement performed on or benefitting the Real Property (and/or the project of which the Real Property is a part) which was contracted for by or on behalf of Seller or any Affiliate of Seller.

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(iv)        No Material Defaults Under Other Purchase Agreements. No material breach or material default by any of the Other Sellers shall exist under any of the Other Purchase Agreements.

(v)         Estoppel Certificates. Buyer shall have received the Required Estoppels pursuant to Paragraph 4(b)(ii).

(b)          Conditions Precedent to Seller’s Obligations. The Close of Escrow and Seller’s obligations with respect to the consummation of the transactions contemplated by this Agreement are subject to the timely satisfaction or waiver by Seller of the following conditions:

(i)          Representations, Warranties and Covenants of Buyer. Buyer shall have duly performed in all material respects each and every material covenant of Buyer hereunder, and all of Buyer’s representations and warranties set forth in this Agreement shall be true and correct as of the Effective Date and the Closing Date (except to the extent that Paragraph 13 expressly provides that such representations and warranties are made as of the Effective Date) in all material respects.

(ii)         Delivery of Documents and Purchase Price. Buyer shall have timely delivered the Purchase Price pursuant to the provisions of Paragraph 2, and shall have delivered all of the duly executed documents required to be delivered by Buyer pursuant to Paragraph 6(b).

(iii)        No Material Defaults Under Other Purchase Agreements. No material breach or material default by Buyer shall exist under any of the Other Purchase Agreements.

(c)          Effect of Termination. In the event any condition set forth in this Paragraph 5 is not timely satisfied, unless waived by the applicable party, Buyer or Seller, as applicable, shall have the right to terminate this Agreement and if this Agreement is so terminated or is terminated by either party pursuant to any other provision of this Agreement giving that party the right to do so, then:

(i)          Termination of Agreement. This Agreement, the Escrow, and the rights and obligations of Buyer and Seller shall terminate, except as otherwise expressly provided herein;

(ii)         Return of Deposit. Except as otherwise provided herein (including, without limitation, as provided in Paragraph 18(b)), the Deposit, and any interest accruing thereon, shall be promptly returned to Buyer and any documents and monies deposited by the parties which are then held by Escrow Holder shall be returned to the party depositing same; and

(iii)        Cancellation Fees and Expenses. Any cancellation charges required to be paid to Escrow Holder and the Title Company shall be borne equally by Buyer and Seller (unless one party is in breach or default hereunder in which case the defaulting party shall pay the cancellation charges), and all other charges shall be borne by the party incurring same.

(d)          Close of Escrow. It is contemplated that the transaction shall be closed by means of the concurrent delivery of the documents of title, the commitment to deliver the Title Policy and the payment of the Purchase Price. Notwithstanding the foregoing, there shall be no requirement that Seller and Buyer physically meet for the Close of Escrow, and all documents to be delivered at the Close of Escrow shall be delivered to the Escrow Holder unless the parties hereto mutually agree otherwise. Seller and Buyer agree to use reasonable efforts to complete all requirements for the Close of Escrow prior to the Closing Date. Seller and Buyer also agree that disbursement of the Purchase Price, as adjusted by the prorations, shall not be conditioned upon the recording of the Deed, but rather, upon the satisfaction or waiver of all conditions precedent to the Close of Escrow and the irrevocable agreement by the Title Company to issue the Title Policy without reservation for any “gap” between Close of Escrow and the recordation of the Deed. The date upon which such satisfaction or waiver and such irrevocable agreement occurs shall be the “Close of Escrow”.

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6. Deliveries to Escrow Holder.

(a)          Seller’s Deliveries. Seller hereby covenants and agrees to deliver or cause to be delivered to Escrow Holder at least one (1) Business Day prior to the Closing Date the following instruments and documents:

(i)          Deed. A grant deed (“Deed”), duly executed and acknowledged in recordable form by Seller, conveying Seller’s interest in the Real Property to Buyer. The Deed shall be in the form attached hereto as Exhibit “D”.

(ii)         Bill of Sale. A bill of sale (“Bill of Sale”) duly executed by Seller, conveying to Buyer, without warranty, all of Seller’s right, title and interest in and to the Personal Property. The Bill of Sale shall be in the form of Exhibit “E” attached hereto.

(iii)        General Assignment. An assignment and assumption (“General Assignment”), duly executed by Seller, assigning to Buyer, without warranty, all of Seller’s right, title and interest in and to any and all Intangible Property, Leases and any Binding Contracts, all to the extent transferable by Seller. The General Assignment shall be in the form of Exhibit “F” attached hereto.

(iv)        Non-Foreign Certifications. A certificate duly executed by Seller, in the form of Exhibit “G” attached hereto, and a California Form 593-C executed by Seller.

(v)         Proof of Authority. Such proof of Seller’s authority and authorization to enter into this Agreement and the transactions contemplated hereby, and such proof of the power and authority of the individual(s) executing and/or delivering any instruments, documents or certificates on behalf of Seller to act for and bind Seller as may be reasonably required by Title Company.

(vi)        Notice to Tenants. Notices to all lessees under the Leases for the Property, if any, in the form of Exhibit “H” attached hereto, duly executed by Seller. Buyer shall promptly provide to Seller all necessary information regarding the Buyer required to complete the tenant notices, if any.

(vii)       Owner’s Affidavit and Gap Indemnity. An owner’s affidavit in the form of Exhibit “I” attached hereto and a gap indemnity in a form reasonably acceptable to Seller and the Title Company, each duly executed by Seller.

(b)          Buyer’s Deliveries. Buyer hereby covenants and agrees to deliver or cause to be delivered to Escrow Holder at least one (1) Business Day prior to the Closing Date the following instruments and documents:

(i)          General Assignment. A counterpart of the General Assignment, duly executed by Buyer.

(ii)         Proof of Authority. Such proof of Buyer’s authority and authorization to enter into this Agreement and the transactions contemplated hereby, and such proof of the power and authority of the individual(s) executing and/or delivering any instruments, documents or certificates on behalf of Buyer to act for and bind Buyer as reasonably may be required by Title Company.

7.          Deliveries Upon Close of Escrow. Promptly following the Close of Escrow, outside of the escrow with Escrow Holder, Seller shall deliver to Buyer:

(a)          Documents. Any originals of the Leases and any Binding Contracts in Seller’s possession.

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(b)          Personal Property. Subject to the terms of the Leases and any Binding Contracts, possession of the Personal Property, including without limitation all keys and access codes to the improvements on the Real Property in Seller’s possession.

8.          Costs and Expenses. Buyer shall pay the title premium for the Title Policy, including the standard coverage portion and all title premiums associated with any ALTA extended coverage requested by Buyer and any title endorsements requested by Buyer. Buyer shall pay the cost of any survey commissioned by Buyer in connection with obtaining extended title coverage. Buyer shall pay all other due diligence expenses incurred by Buyer. Buyer shall pay all of Escrow Holder’s charges. Seller shall pay the City and County of San Francisco transfer tax and recording charges with respect to the Deed. Buyer and Seller shall each bear their own legal and professional fees and expenses and any other costs incurred by such party.

9. Prorations.

(a)          General. Subject to the following provisions of this Paragraph 9, rentals, revenues, and other income, if any, from the Property, and real property taxes and operating expenses affecting the Property, which are customarily prorated by buyers and sellers of real property located in the City and County of San Francisco, shall be prorated on an accrual basis as of midnight on the day preceding the Close of Escrow. For purposes of calculating prorations, Buyer shall be deemed to be in title to the Property, and therefore entitled to the income and responsible for the expenses, for the entire day upon which the Close of Escrow occurs.

(b)          Rent.

(i)          Rents. With the sole exception of Percentage Rents, which shall be prorated in accordance with the terms of Paragraph 9(b)(ii) below, all rents, license fees and other income and payments received from tenants under any and all Leases (collectively, “Rents”) shall be apportioned on the basis of the period for which the same is payable and if, as and when collected, as follows: Buyer shall apply all Rents received after the Close of Escrow in the following order of priority: (x) first, to payment of the current Rents then due for the month in which the Close of Escrow occurs, which amount shall be apportioned between Buyer and Seller as set forth in Paragraph 9(a) (with Seller’s portion thereof to be delivered to Seller); (y) second, to Rents applicable to the period of time after the Close of Escrow, which amount shall be retained by Buyer; and (z) thereafter, to Rents applicable to the period of time prior to the Close of Escrow but not collected by Seller as of the Close of Escrow (collectively, “Uncollected Rents”), which amount shall be delivered to Seller. Buyer shall use reasonable efforts (which shall not include any obligation to file suit or take enforcement action under the Lease), to collect Uncollected Rents. Seller shall have no right to pursue the collection of Uncollected Rents. Any Rents received by Buyer shall be applied as provided above, and Buyer shall remit to Seller any such sums received by Buyer to which Seller is entitled within five (5) Business Days after receipt thereof. Buyer shall bill the tenants under the Leases for any Uncollected Rents and use its commercially reasonable efforts to collect the same.

(ii)         Percentage Rents. Percentage rent or overage rent (collectively, “Percentage Rents”) under the Leases shall be prorated between Buyer and Seller on a lease by lease basis with Seller entitled to the portion of total Percentage Rent paid under each Lease for the “Lease Year” in which the Close of Escrow occurs (the “Subject Lease Year”) which is in the same ratio to total Percentage Rent paid with respect to such Subject Lease Year under the subject Lease as the ratio of (i) the number of days of said Subject Lease Year which Seller was the landlord under the subject Lease to (ii) the total number of days in said Subject Lease Year. Buyer shall be entitled to the balance of Percentage Rent paid under each Lease with respect to the Subject Lease Year. As used herein, the term “Lease Year” means the twelve (12) month period as to which annual Percentage Rent is owed under each Lease. The foregoing proration shall be made as follows on a lease by lease basis: (i) subject to the balance of this Paragraph 9(b)(ii), Seller shall retain all Percentage Rent payments received by it on and prior to the Close of Escrow and Buyer shall retain all Percentage Rent payments received by it after the Close of Escrow; (ii) as promptly as possible after the date of the Close of Escrow, Seller shall deliver to Buyer a statement of all Percentage Rent collected by Seller with respect to the Subject Lease Year, if any, on a lease by lease basis along with a copy of the Percentage Rent invoices and sales reports which support such collections, (iii) for each Lease, not later than forty-five (45) days after the date the last Percentage Rent payment with respect to the Subject Lease Year is due, Buyer shall deliver to Seller a statement of all Percentage Rent owed, collected or deemed collectable by Buyer, along with a copy of the annual reconciliation of Percentage Rent owed for the Subject Lease Year and the related sales information backup; and, (iv) for each Lease, within fifteen (15) days after the date the statement and reconciliation described in clause (iii) above is delivered to Seller, Buyer shall pay to Seller or Seller shall pay to Buyer, whichever is applicable, the positive difference, if any, between (a) the total Percentage Rental collected by such party with respect to such Lease for the Subject Lease Year and (b) the product of (y) the average daily Percentage Rental received with respect to such Lease for the Subject Lease Year after taking into account the annual reconciliation and (z) the actual number of days such party was the owner of the Property during the Subject Lease Year. If Percentage Rent is thereafter collected by Buyer from delinquent tenants, Buyer shall promptly pay to Seller a portion thereof which is equal to the ratio of (i) the number of days of the Subject Lease Year in which Seller was the landlord, to (ii) the total number of days in the Subject Lease Year.

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(c)          Reimbursable Tenant Expenses. Prior to the Close of Escrow, the parties shall reasonably estimate the Reimbursable Tenant Expenses due to Seller for expenses actually incurred by Seller during the portion of the calendar year preceding the date upon which the Close of Escrow occurs (“Seller’s Estimated Reimbursable Tenant Expenses”). If, prior to the Close of Escrow, Seller has collected more payments for estimated Reimbursable Tenant Expenses for the year in which the Close of Escrow occurs from tenants of the Real Property than Seller’s Estimated Reimbursable Tenant Expenses, then, Buyer shall receive a credit at the Close of Escrow in the amount of such excess. However, if, prior to the Closing Date, Seller has collected less payments for Reimbursable Tenant Expenses for the year in which the Close of Escrow occurs than Seller’s Estimated Reimbursable Tenant Expenses, then, Buyer shall use its reasonable efforts to collect the same from the tenants on and subject to the terms of their respective Leases (which shall not include any obligation to file suit or take enforcement action under the Lease) and, as and when the amount of such underpayment is received from the tenants and payable to Seller pursuant to the terms of Paragraph 9(b)(i), such amount shall be paid to Seller in reimbursement for such underpayment. Seller shall have no right to collect any such amounts from the tenants under the Leases. As used herein, the term “Reimbursable Tenant Expenses” shall mean payments required to be paid by tenants under Leases for such tenant’s share of ad valorem taxes, insurance, common area maintenance and/or other operating expenses of the Property.

(d)          Taxes and Assessments. All non-delinquent real estate taxes, personal property taxes and current installments of assessments affecting the Property which are payable by Seller shall be prorated as of the Close of Escrow based on the actual current tax bill, or if such tax bill is not available, the latest available tax information for the tax year in which the Closing occurs (“Current Tax Year”) (with Seller and Buyer each being responsible for a pro rata share of such taxes and assessments based upon the number of days in the Current Tax Year occurring before the Closing Date, in the case of Seller, and on and after the Closing Date, in the case of Buyer); provided, however, Seller shall not be liable for any supplemental or escape taxes or assessments arising from the transfer of the Property pursuant to this Agreement or any other events triggering reassessment occurring on or after the Close of Escrow. All delinquent taxes and assessments, if any, affecting the Property which are payable by Seller shall be paid at the Close of Escrow from funds accruing to Seller. Any refunds of real estate taxes and assessments attributable to the period prior to the Close of Escrow shall, subject to the rights of tenants, be paid to Seller upon receipt, whether such receipt occurs before or after the Close of Escrow.

(e)          Operating Expenses. All utility service charges for electricity, heat and air conditioning service and other utilities, charges for elevator maintenance and common area maintenance, taxes (other than real estate taxes and income taxes) such as rental taxes, expenses and obligations under any Binding Contracts, and other expenses affecting the Property which are payable by Seller and any other costs incurred in the ordinary course of business or the management and operation of the Property, which are customarily prorated by buyers and sellers of real property located in the City and County of San Francisco, shall be prorated on an accrual basis. Seller shall pay all such expenses that accrue prior to the Close of Escrow and Buyer shall pay all such expenses accruing on the Close of Escrow and thereafter. To the extent possible, Seller and Buyer shall obtain billings and meter readings as of the Close of Escrow to aid in such prorations. To the greatest extent possible, utility service charges shall be prorated based upon the actual charges accrued before and after the Close of Escrow, rather than upon an average daily charge.

(f)          Leasing Expenses. Seller agrees to pay or discharge at or prior to the Close of Escrow, or to provide a credit to Buyer upon the Close of Escrow for, all brokerage commissions, tenant improvement allowances and free or abated rent (collectively, “Lease Inducement Costs”) that are payable with respect to Leases in force as of or prior to the Close of Escrow; provided, however, that Seller shall have no obligation to pay, as of the Close of Escrow Buyer shall be deemed to have assumed the obligation to pay, and from and after the Close of Escrow Buyer shall indemnify, defend and hold Seller harmless from and against, (i) any and all Lease Inducement Costs payable with respect to any option to renew or option to expand that has not been exercised as of or prior to the Close of Escrow, and (ii) any and all Lease Inducement Costs incurred with respect to Leases and renewals, extensions, amendments and terminations thereof executed subsequent to the Close of Escrow. Buyer shall indemnify, defend and hold Seller harmless from and against any and all Lease Inducement Costs as to which Seller provides Buyer a credit upon the Close of Escrow.

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(g)          Security Deposits. At the Close of Escrow, Seller shall, at Seller’s option, either deliver to Buyer any security deposits held by Seller pursuant to any and all Leases or credit to the account of Buyer the amount of such security deposits (to the extent such security deposits have not been applied against delinquent rentals or otherwise as provided in the Leases). If any security deposits shall be held by Seller in the form of letters of credit, Seller shall, upon the Close of Escrow, assign such letters of credit to Buyer.

(h)          Method of Proration. Seller shall prepare and deliver to Buyer a schedule of the prorations set forth herein at least three (3) Business Days prior to the Closing Date, which schedule shall be subject to the reasonable approval of Buyer. Such prorations shall be paid by Buyer to Seller (if the prorations result in a net credit to the Seller) or by Seller to Buyer (if the prorations result in a net credit to the Buyer) by increasing or reducing the cash to be paid by Buyer at the Close of Escrow. A copy of the schedule of prorations as agreed upon by Buyer and Seller shall be delivered to Escrow Holder prior to the Close of Escrow. Ninety (90) days after the Close of Escrow, Seller and Buyer shall agree to any reprorations based on additional information learned about the prorations after the Close of Escrow, which reproration shall be final.

(i)          Survival. The provisions of this Paragraph 9 shall survive the Close of Escrow.

10.         Disbursements and Other Actions by Escrow Holder. Upon the Close of Escrow, Escrow Holder shall promptly undertake all of the following in the manner hereinbelow indicated:

(a)          Funds. Disburse all funds deposited with Escrow Holder by Buyer in payment of the Purchase Price as follows:

(i)          Deduct all items chargeable to the account of Seller pursuant to Paragraph 8.

(ii)         If, as the result of the prorations and credits pursuant to Paragraph 9, amounts are to be charged to the account of Seller, deduct the total amount of such charges.

(iii)        Disburse the remaining balance of the funds to Seller promptly upon the Close of Escrow in accordance with Seller’s wire transfer instructions.

(b)          Recording. Cause the Deed, and any other documents which the parties hereto may mutually direct to be recorded, to be recorded in the Official Records of San Francisco County and obtain conformed copies thereof for distribution to Buyer and Seller.

(c)          Title Policy. Direct the Title Company to issue the Title Policy to Buyer, without reservation for any “gap” between Close of Escrow and the recordation of the Deed.

(d)          Disbursement of Documents to Buyer. Disburse to Buyer fully executed originals of the Bill of Sale, the General Assignment, and any other documents (or copies thereof) deposited into Escrow by Seller pursuant hereto.

(e)          Disbursement of Documents to Seller. Disburse to Seller a fully executed original of the General Assignment, and any other documents (or copies thereof) deposited into Escrow by Buyer pursuant hereto.

11.         AS-IS Sale and Purchase; Release. Buyer acknowledges that the provisions of this Paragraph 11 have been required by Seller as a material inducement to enter into the contemplated transactions, and the intent and effect of such provisions have been explained to Buyer by Buyer’s counsel and have been understood and agreed to by Buyer.

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(a)          Buyer’s Acknowledgment. As a material inducement to Seller to enter into this Agreement and to convey the Property to Buyer, Buyer hereby acknowledges and agrees as follows:

(i)          AS IS. Buyer is purchasing the Property in its existing condition, “AS-IS, WHERE-IS, WITH ALL FAULTS”, and will, by the Contingency Date, have made or have waived all inspections and investigations of the Property and its vicinity which Buyer believes are necessary to protect its own interest in, and its contemplated use of, the Property.

(ii)         No Representations. Other than the express representations and warranties of Seller contained in Paragraph 12, neither Seller, its members or managers, nor any person or entity acting by or on behalf of Seller, or any member, manager, partner, shareholder, officer, director, trustor, trustee, beneficiary, employee, agent, affiliate, successor or assign of any of the foregoing has made any representation, warranty, inducement, promise, agreement, assurance or statement, oral or written, of any kind to Buyer upon which Buyer is relying, or in connection with which Buyer has made or will make any decisions concerning the Property or its vicinity including, without limitation, its use, condition, value, compliance with Governmental Regulations, status of any Binding Contracts and Leases, amounts of money owed to or owed by Seller, disputes with third parties, existence or absence of Hazardous Materials, the status of the construction of tenant improvements, whether completed or in progress, or the permissibility, feasibility, or convertibility of all or any portion of the Property for any particular use or purpose, including without limitation its present or future prospects for sale, lease, development, occupancy or suitability as security for financing. As used herein, the term “Governmental Regulations” means any laws, ordinances, rules, requirements, resolutions, policy statements and regulations (including, without limitation, those relating to land use, subdivision, zoning, Hazardous Materials, occupational health and safety, handicapped access, water, earthquake hazard reduction, and building and fire codes) of any governmental or quasi-governmental body or agency claiming jurisdiction over the Property. As used herein, the term “Hazardous Materials” means any hazardous or toxic substance, material or waste which is now or hereafter the subject of Governmental Regulations, including without limitation any material or substance which is (A) defined as a “hazardous waste,” “extremely hazardous waste” or “restricted hazardous waste” under Section 25115, 25117 or 25122.7, or listed pursuant to Section 25140, or the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (B) defined as a “hazardous substance” under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (C) defined as a “hazardous material,” “hazardous substance,” or “hazardous waste” under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (D) petroleum and other hydrocarbons, (E) asbestos, (F) listed under Article 9 or defined as hazardous or extremely hazardous pursuant to Article 11 of Title 22 of California Administrative Code, Division 4, Chapter 20, (G) designated as a “hazardous substance” pursuant to Section 311 of the Federal Water Pollution Control Act 33 U.S.C. § 1251 et. seq., (33 U.S.C. § 1321) or as listed pursuant to § 307 of the Federal Water Pollution Control Act (33 U.S.C. § 1317), (H) defined as a “hazardous waste” pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. (42 U.S.C. § 9601), (I) defined as a “hazardous substance” pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq., or (J) associated with the so-called “sick building syndrome.”

(iii)        No Implied Warranties. SELLER HEREBY DISCLAIMS ALL WARRANTIES IMPLIED BY LAW ARISING OUT OF OR WITH RESPECT TO THE EXECUTION OF THIS AGREEMENT, ANY ASPECT OR ELEMENT OF THE PROPERTY, OR THE PERFORMANCE OF SELLER’S OBLIGATIONS HEREUNDER INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE.

(iv)        Information Supplied by Seller. Buyer specifically acknowledges and agrees that, except as may otherwise be expressly provided in Paragraph 12, Seller has made, is making, and shall make, no representation or warranty of any nature concerning the accuracy or completeness of Seller’s Documents, or the authenticity, source, accuracy or completeness of any information contained in such Seller’s Documents or any other documents previously or hereafter furnished by or on behalf of Seller to Buyer, including without limitation any Binding Contracts, the Leases, and various studies, inspections, reports and exhibits and correspondence relating thereto. Buyer further acknowledges that Seller has not reviewed and is under no obligation to review any files in Seller’s possession or which may be available to Seller. As to certain of the materials made available to Buyer in Seller’s Documents, Buyer specifically acknowledges that they have been prepared by third parties with whom Buyer has no privity and Buyer acknowledges and agrees that no warranty or representation, express or implied, has been made, nor shall any be deemed to have been made, to Buyer with respect thereto, either by Seller or by any third parties that prepared the same. Buyer waives any claim of any nature against anyone should any information, conclusion, projection, or other statement of any nature contained in any of such materials prove not to be true or accurate for any reason.

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(v)         Negotiated Purchase Price. Buyer represents and warrants to Seller that Buyer is specifically familiar with the Property and that Buyer has inspected and examined, or will have had the opportunity to inspect and examine, all aspects of the Property and its current condition that Buyer believes to be relevant to its decision to purchase the Property. Buyer further acknowledges and agrees that the Purchase Price negotiated by Seller and Buyer reflects the known and unknown risks and liabilities assumed by Buyer under the Agreement, Seller’s unwillingness to conduct any investigation or due diligence with respect to the Property on behalf of Buyer, and Seller’s desire to receive an absolutely net, fixed amount as consideration for the sale of the Property regardless of any facts known or discovered before or following the Close of Escrow which might result in a diminution in value of the Property.

(vi)        Buyer’s Investigation of Property. Prior to the Contingency Date, Buyer will have had the opportunity to investigate all physical and economic aspects of the Property and to make all inspections and investigations of the Property which Buyer deems necessary or desirable to protect its interests in acquiring the Property, including, without limitation, review of the Leases (and the rights of the tenants thereunder), building permits, certificates of occupancy, environmental audits and assessments, toxic reports, surveys, investigation of land use and development rights, development restrictions and conditions that are or may be imposed by governmental agencies, agreements with associations affecting or concerning the Property, the condition of title, soils and geological reports, engineering and structural tests, insurance contracts, contracts for work in progress, marketing studies, cost-to-complete studies, governmental agreements and approvals, architectural plans and site plans, and that all matters concerning the Property have been or shall be independently verified by Buyer prior to the Contingency Date, and that, except for the express representations and warranties of Seller set forth in this Agreement, Buyer shall purchase the Property on Buyer’s own knowledge of the Property and Buyer’s prior investigation and examination of the Property (or Buyer’s election not to do so). Notwithstanding anything to the contrary herein, Buyer and Seller acknowledge that any written disclosures made by Seller prior to the Close of Escrow shall constitute notice to Buyer of the matter disclosed, and Seller shall have no further liability thereafter if Buyer thereafter consummates the transaction contemplated hereby. Buyer agrees that it shall make an independent investigation of the matters set forth in any such disclosures as well as all other matters relating to the Property and shall not rely on any specific information or any other materials provided by Seller, except for the express representations and warranties of Seller set forth in Paragraph 12.

(vii)       Natural Hazard Disclosure Statement. Seller has made a property disclosure report (the “Disclosure Report”) available to Buyer prior to the Effective Date. The Disclosure Report fully and completely discharges Seller from its disclosure obligations, if any, which may be required under the Natural Hazard Disclosure Act, California Government Code Sections 8589.3, 8589.4, and 51183.5, California Public Resources Code Sections 2621.9, 2694, and 4136, and California Civil Code Sections 1102.6 and 1103.2, and any successor law, and, for the purposes of this Agreement, the provisions of Civil Code Section 1102.4 regarding the non-liability of Seller for errors and/or omissions not within its personal knowledge shall be deemed to apply and the preparer of the Disclosure Report shall be deemed to be an expert, dealing with matters within the scope of its expertise with respect to the examination and Disclosure Report. Nothing set forth in the Disclosure Report shall (A) require Seller to remediate any matter referred to in the Disclosure Report or (B) create any liability by Seller to Buyer therefor and Seller shall in no event be required to expend funds to remediate any matters disclosed in the Disclosure Report. Notwithstanding Buyer’s receipt and review of the Disclosure Report, Buyer hereby knowingly, voluntarily and intentionally waives its right to disclosure by Seller of natural hazards found in Natural Hazard Disclosure Act, California Government Code Sections 8589.3, 8589.4, and 51183.5, California Public Resources Code Sections 2621.9, 2694, and 4136, and California Civil Code Sections 1102.6 and 1103.2, and any similar or successor law. Buyer represents and warrants that it has obtained the Disclosure Report from an expert satisfying the requirements of California Civil Code Section 1103.4, and has waived any objection to such Disclosure Report. Buyer acknowledges and agrees that the matters set forth in the Disclosure Report may change on or prior to the Close of Escrow and that Seller has no obligation to update, modify, or supplement the Disclosure Report. Following the Close of Escrow, Buyer shall be solely responsible for preparing and delivering its own disclosure report to any subsequent prospective buyers of the Property.

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(b)          Release. In consideration of the foregoing, Buyer hereby releases Seller and its direct and indirect members, managers, partners, officers, directors, shareholders, trustors, trustees, beneficiaries, agents, affiliates, employees and successors and assigns from and against any and all complaints, claims, charges, claims for relief, demands, suits, actions and causes of action, whether in law or in equity, which Buyer asserts or could assert at common law or under any statute, rule, regulation, order or law, whether federal, state or local, on any ground whatsoever, whether or not known, suspected, liquidated, contingent or matured, with respect to any event, matter, claim, occurrence, damages or injury (collectively, “Claims”), to the extent arising out of or in connection with the Property. Buyer agrees that there is a risk that subsequent to the execution of this Agreement, Buyer will suffer losses, damages or injuries which are unknown and unanticipated at the time this Agreement is signed. Buyer hereby assumes such risk and agrees that the release contained in this Paragraph 11(b) SHALL APPLY TO ALL UNKNOWN OR UNANTICIPATED CLAIMS, AS WELL AS THOSE KNOWN AND ANTICIPATED, AND BUYER DOES HEREBY WAIVE ANY AND ALL RIGHTS UNDER CALIFORNIA CIVIL CODE SEC. 1542, WHICH SECTION HAS BEEN DULY EXPLAINED AND READS AS FOLLOWS:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

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Buyer’s Initials

The foregoing release shall be effective as of the Effective Date and shall be deemed to be remade and reaffirmed as of the Contingency Date and as of the Close of Escrow. Notwithstanding anything stated to the contrary in this Agreement, the foregoing release shall not extend to (and shall expressly exclude) claims arising from (i) Seller’s intentional fraud, (ii) Seller’s breach of its express representations, warranties, covenants and obligations (including indemnity obligations) under this Agreement and the documents executed by Seller upon the Close of Escrow or (iii) any third party breach of contract claims (with respect to contracts to which Seller is a party, but only to the extent of any obligations and liabilities thereunder that were not expressly assumed by Buyer) or third party tort claims brought against Buyer for personal injury, wrongful death or personal property damage, in each case arising out of events occurring during Seller’s ownership of the Property (provided that, in no event will Seller be required to repair or remediate, or pay for the repair or remediation of, physical or environmental conditions on the Property after Close of Escrow). The provisions of this Paragraph 11 shall survive the Close of Escrow.

12.         Seller’s Representations and Warranties. Subject to those matters described in Exhibit "J" attached hereto (the “Disclosure Items"), as to which Seller makes no representations or warranties of any kind and for which Seller shall have no liability or obligation to Buyer of any kind whatsoever, Seller hereby makes the following representations and warranties to Buyer (all of which, to the extent applicable, are qualified by the Disclosure Items):

(a)          Status. Seller is a limited liability company duly organized or formed, validly existing and in good standing under the laws of the State of Delaware and is qualified to transact business in the State of California.

(b)          Due Authority. The execution and delivery of this Agreement and the performance of Seller's obligations hereunder have been or will be duly authorized by all necessary action on the part of Seller, and this Agreement constitutes the legal, valid and binding obligation of Seller, subject to equitable principles and principles governing creditors' rights generally.

(c)          OFAC Compliance. Neither Seller, nor, to Seller’s actual knowledge, any person or entity who owns an interest in Seller, is a person or entity with whom Buyer is restricted from doing business under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, H.R. 3162, Public Law 107-56 (commonly known as the “USA Patriot Act” or Executive Order Number 13224 on Terrorism Financing, effective September 24, 2001 and regulations promulgated pursuant thereto (collectively, “Anti Terrorism Laws”), including without limitation any persons named on the U.S. Department of the Treasury’s Office of Foreign Asset Control (“OFAC”) Specially Designated Nationals and Blocked Persons List.

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(d)          Bankruptcy. Seller has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by Seller’s creditors against it, (iii) suffered the appointment of a receiver to take possession of all, or substantially all, of Seller’s assets, which remains pending, or (iv) suffered the attachment or other judicial seizure of all, or substantially all, of Seller’s assets, which remains pending.

(e)          Leases. The Leases in effect as of the Effective Date are identified on Exhibit “K” attached hereto. Seller has provided Buyer with true, correct and complete copies of the Leases, including all amendments thereto. As of the Effective Date, Seller has not received any written notice from any tenant of any uncured default by Seller, as lessor under the Leases. Except as may be disclosed in any estoppel certificate delivered to Buyer pursuant to this Agreement, to Seller’s actual knowledge, as of the Effective Date, there are no uncured material defaults under the Leases.

(f)          Litigation and Condemnation. To Seller’s actual knowledge, (i) there is no litigation pending or threatened against Seller with respect to the Property and (ii) as of the Effective Date, no condemnation or eminent domain proceedings are pending or contemplated against the Property.

(g)          Notices. To Seller’s actual knowledge, Seller has received no written notice from any governmental entity that the Property, or the operation or use of the same, does not comply with any law (including any environmental law), ordinance or regulation in any material respect, which failure of compliance has not been cured.

(h)          Seller Not a Foreign Person. Seller is not a "foreign person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended.

Seller’s representations and warranties set forth in this Paragraph 12 shall survive the Close of Escrow for a period of six (6) months subject to the limitations of Paragraph 18(a).

Anything herein to the contrary notwithstanding, but subject to Seller’s obligation to reimburse Buyer for its reasonable out-of-pocket expenses in accordance to the terms and conditions of Paragraph 18(a), if Buyer becomes aware of any information prior to the Close of Escrow which renders any of the above representations and warranties of Seller inaccurate or incomplete, such representations and warranties shall be deemed modified to reflect the disclosure of such information (except for purposes of Paragraph 5(a)(i)). Whenever the phrase “to Seller’s actual knowledge” is used in this Agreement, such phrase shall mean and refer to the present actual knowledge, without taking into account any constructive or imputed knowledge, of Craig Hamburg, the individual within Seller’s organization with the most knowledge of the matters contained herein, without any duty of inquiry or investigation. Buyer acknowledges that the individual named above is named solely for the purpose of defining and narrowing the scope of Seller's knowledge and not for the purpose of imposing any liability on or creating any duties running from such individual to Buyer. Buyer covenants that it will bring no action of any kind against such individual arising out of these representations and warranties.

13.         Buyer’s Representations and Warranties. Buyer hereby makes the following representations and warranties to Seller:

(a)          Status. Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and is, or will be as of the Closing Date, qualified to transact business in the State of California.

(b)          Due Authority. The execution and delivery of this Agreement and the performance of Buyer’s obligations hereunder have been or will be duly authorized by all necessary action on the part of Buyer, and this Agreement constitutes the legal, valid and binding obligation of Buyer, subject to equitable principles and principles governing creditors' rights generally.

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(c)          OFAC Compliance. Neither Buyer, nor any person or entity who owns an interest in Buyer (excluding interests held in publicly traded entities), is a person or entity with whom Seller is restricted from doing business under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, H.R. 3162, Public Law 107-56 (commonly known as the “USA Patriot Act” or Executive Order Number 13224 on Terrorism Financing, effective September 24, 2001 and regulations promulgated pursuant thereto (collectively, “Anti Terrorism Laws”), including without limitation any persons named on the U.S. Department of the Treasury’s Office of Foreign Asset Control (“OFAC”) Specially Designated Nationals and Blocked Persons List.

(d)          Bankruptcy. Buyer has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by Buyer’s creditors against it, (iii) suffered the appointment of a receiver to take possession of all, or substantially all, of Buyer’s assets, which remains pending, or (iv) suffered the attachment or other judicial seizure of all, or substantially all, of Buyer’s assets, which remains pending.

(e)          Principal. Buyer has executed this Agreement as a principal on its own behalf and not as an agent of undisclosed third parties.

The provisions of this Paragraph 13 shall survive the Close of Escrow.

Whenever the phrase “to Buyer’s actual knowledge” is used in this Agreement, such phrase shall mean and refer to the present actual knowledge, without taking into account any constructive or imputed knowledge, of Alan Shapiro, without any duty of inquiry or investigation. Seller acknowledges that the individual named above is named solely for the purpose of defining and narrowing the scope of Buyer's knowledge and not for the purpose of imposing any liability on or creating any duties running from such individual to Seller. Seller covenants that it will bring no action of any kind against such individual arising out of these representations and warranties.

14.         Seller Covenants. Following the execution of this Agreement and through the Close of Escrow, subject to the occurrence of any casualty or condemnation, Seller covenants to own, operate and maintain its interests in the items comprising the Property in substantially the same manner as presently owned, operated and maintained. In addition, Seller agrees not to enter into any new Lease or contract (but only to the extent that Buyer is required to assume such contract upon the Close of Escrow or such contract will encumber the Real Property from and after the Close of Escrow (each, a “Binding Contract”)) or materially amend or terminate any existing Lease or Binding Contract (except to the extent required to do so under the terms of such existing Lease or Binding Contract or in connection with the enforcement of such Lease or Binding Contract), without obtaining the prior written consent of Buyer, provided that Buyer’s consent shall not be unreasonably withheld or conditioned. In the event that Buyer fails to grant such consent (or notify Seller of its decision to withhold such consent) within three (3) Business Days following its receipt of such request, Buyer shall be deemed to have granted such consent.

15. Casualty and Condemnation.

(a)          Casualty. If prior to Close of Escrow the Real Property is damaged by fire or other casualty, Seller shall (i) reasonably estimate the cost to repair, (ii) gather all information then available, which is reasonably necessary to determine whether the damage is Material Damage and (iii) provide Buyer with written notice of the repair cost estimate and the Material Damage determination (the “Casualty Notice”) as soon as reasonably possible after the occurrence of the casualty.

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(i)          Material. In the event of any Material Damage to or destruction of the Real Property or any portion thereof prior to Close of Escrow, Buyer may, at its option, terminate this Agreement by delivering written notice to Seller on or before the expiration of ten (10) Business Days after the date Seller delivers the Casualty Notice to Buyer (and if necessary, the Closing Date shall be extended to give the parties the full ten (10) Business Day period to make such election and to obtain full information regarding any applicable insurance policies). Upon any such termination, the Escrow shall be canceled, this Agreement shall be terminated and become null and void, all parties hereto shall be released from further performance of this Agreement (with the exception of those provisions or paragraphs which recite that they survive termination of this Agreement), and Escrow Holder shall return to Buyer all or any portion of the Deposit deposited with Escrow Holder and shall return to each party any and all documents which such party had deposited with it. If Buyer does not so terminate this Agreement within said ten (10) Business Day period, then the parties shall proceed under this Agreement and close on schedule (subject to extension of the Closing Date as provided above), and as of Close of Escrow Seller shall assign to Buyer, without representation or warranty by or recourse against Seller, all of Seller’s rights (if any) in and to any resulting insurance proceeds (and Buyer shall receive a credit at the Close of Escrow in an amount equal to any applicable deductible under any applicable Seller property insurance policy) (excluding any rent loss insurance applicable to any period prior to the Closing Date) due Seller (or previously paid to Seller) as a result of such damage or destruction (less any portion thereof expended by Seller in connection with repairs to the Property) and, as between Seller and Buyer, Buyer shall assume full responsibility for all needed repairs. For purposes of this Agreement, “Material Damage” and “Materially Damaged” mean damage which (A) will cost in excess of an amount equal to $50,000 to repair or (B) permits termination of any Lease by the tenant thereunder or (C) permits the tenant under any Lease to abate its rent under such Lease for a period of six (6) months or longer after the Close of Escrow.

(ii)         Not Material. If the Real Property is not Materially Damaged, then Buyer shall not have the right to terminate this Agreement, and Seller shall assign to Buyer, without representation or warranty by or recourse against Seller, all of Seller’s rights (if any) in and to any resulting insurance proceeds (and Buyer shall receive a credit at the Close of Escrow in an amount equal to any applicable deductible under any applicable Seller property insurance policy) (excluding any rent loss insurance applicable to any period prior to the Closing Date) due Seller (or previously paid to Seller) as a result of such damage or destruction (less any portion thereof expended by Seller in connection with repairs to the Property) and, as between Seller and Buyer, Buyer shall assume full responsibility for all needed repairs.

(b)          Condemnation. If, at any time prior to the Close of Escrow, legal proceedings under power of eminent domain are commenced with respect to all or any portion of the Real Property, then by delivery to Seller of written notice of election within ten (10) Business Days after receipt of written notice of such pending condemnation, Buyer may elect to either (i) terminate this Agreement, or (ii) elect to continue this Agreement in full force and effect, in which event, as of the Close of Escrow, Seller shall assign to Buyer, without representation or warranty by or recourse against Seller, all of Seller’s rights in and to any resulting proceeds and/or claims due Seller (or previously paid to Seller) on account of such condemnation proceedings, and Buyer shall take title to the Property subject to such condemnation proceedings. If Buyer fails to deliver written notice to Seller of Buyer’s election within the time period specified in this Paragraph, Buyer shall be deemed to have elected alternative (ii) above. If Buyer properly delivers written notice to Seller within the time period specified in this Paragraph electing alternative (i) above, the Escrow shall be canceled, this Agreement shall be terminated and become null and void, all parties hereto shall be released from further performance of this Agreement (with the exception of those provisions or paragraphs which recite that they survive termination of this Agreement), and Escrow Holder shall return to Buyer all or any portion of the Deposit deposited with Escrow Holder and shall return to each party any and all documents which such party had deposited with it.

16.         Notices. All notices, requests and demands to be made hereunder to the parties hereto shall be in writing and shall be deemed received upon (i) delivery of email on a Business Day between the hours of 9:00 a.m. and 5:00 p.m. the recipient’s time (otherwise, the next following Business Day) (provided that such email contains in all uppercase letters the words “OFFICIAL NOTICE” in the subject line and generates no server-generated response that such delivery was ineffective or delayed), provided that such notice is also simultaneously delivered by one of the methods set forth in clauses (ii) through (v), inclusive; (ii) personal delivery; (iii) confirmed telecopy delivery on a Business Day between the hours of 9:00 a.m. and 5:00 p.m. the recipient’s time (otherwise, the next following Business Day); (iv) one (1) Business Day after being deposited with Federal Express, DHL Worldwide Express or another reliable overnight courier service prior to the specified delivery deadline for next day service, specifying an address to which such courier makes overnight deliveries; or (v) three (3) Business Days after being deposited in the United States mail, registered or certified mail, postage prepaid, return receipt required, addressed to the applicable party at the addresses set forth below:

To Seller:	Octavia Gateway Holdings, LLC
	c/o DDG Partners LLC
	60 Hudson Street, 18th Floor
	New York, New York 10013
	Attention:  William M. Kluczkowski
	Email: wmk@ddgpartners.com
	Telephone:  (212) 612-3248
	Facsimile: (212) 612-3260

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and:	Octavia Gateway Holdings, LLC
	c/o DM Development
	448 Linden Street
	San Francisco, California  94102
	Attention:  Mark MacDonald
	Email: mark.macdonald@dm-dev.com
	Telephone:  (415) 692-5062
	Facsimile: (415) 693-4454
with a copy to:	Cox, Castle & Nicholson LLP
	50 California Street, Suite 3200
	San Francisco, California 94111
	Attention:  Kevin J. Crabtree
	Email: kcrabtree@coxcastle.com
	Telephone:  (415) 262-5155
	Facsimile:  (415) 262-5199
To Buyer:	SRT SF Retail I, LLC
	c/o Glenborough LLC
	400 South El Camino, 11th Floor
	San Mateo, CA 94402-1708
	Attention:  Alan Shapiro
	Email: alan.shapiro@glenborough.com
	Telephone:  (650) 343-9300
	Facsimile:   (650) 343-9690
with a copy to:	SRT SF Retail I, LLC
	c/o Glenborough LLC
	400 South El Camino, 11th Floor
	San Mateo, CA 94402-1708
	Attention:  G. Lee Burns, Jr.
	Email: chip.burns@glenborough.com
	Telephone:  (650) 343-9300
	Facsimile:   (650) 343-9690
To Escrow Holder:	First American Title Insurance Company
	National Commercial Services
	101 Mission Street, Suite 1600
	San Francisco, California 94105
	Attention:  Heather Kucala
	Email:  hkucala@firstam.com
	Telephone:  (415) 837-2295
	Facsimile:  (714) 481-2576
	Escrow No. NCS-787084

Notice of change of address shall be given by written notice in the manner detailed in this Paragraph 16. Notice given by counsel for a party shall be deemed to be notice given by such party and shall be effective when delivered to the other party as provided above, or when delivered to counsel for the other party, with a copy to the other party identified above.

17.         Commissions. If the Close of Escrow occurs, Seller shall pay a broker’s commission directly to, Retail West Inc. (“Broker”) pursuant to a separate agreement with Broker. In the event of any claims for additional advisor’s, brokers’ or finders’ fees or commissions in connection with the negotiation, execution or consummation of this Agreement, then as a covenant which shall survive the termination of this Agreement or the Close of Escrow, Buyer shall indemnify, save harmless and defend Seller from and against such claims if they shall be based upon any statement or representation or agreement by Buyer, and Seller shall indemnify, save harmless and defend Buyer if such claims shall be based upon any statement, representation or agreement made by Seller.

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18. Legal and Equitable Enforcement of this Agreement.

(a)          Default by Seller. IN THE EVENT THE CLOSE OF ESCROW DOES NOT OCCUR BY REASON OF ANY DEFAULT BY SELLER (OR ANY DEFAULT BY EITHER OF THE OTHER SELLERS UNDER THE OTHER PURCHASE AGREEMENTS), BUYER SHALL BE ENTITLED, AS ITS SOLE AND EXCLUSIVE REMEDY (BUT WITHOUT LIMITING THE AVAILABLE REMEDIES OF BUYER UNDER THE OTHER PURCHASE AGREEMENTS), TO EITHER (1) TERMINATE THIS AGREEMENT AND RECEIVE A REFUND OF THE DEPOSIT AND SELLER SHALL REIMBURSE BUYER FOR ITS REASONABLE OUT-OF-POCKET EXPENSES INCURRED IN CONNECTION WITH THIS AGREEMENT IN AN AMOUNT NOT TO EXCEED THIRTY THOUSAND DOLLARS ($30,000), OR (2) BRING AN ACTION FOR SPECIFIC PERFORMANCE. IF BUYER FAILS TO BRING AN ACTION FOR SPECIFIC PERFORMANCE WITHIN THIRTY (30) DAYS FOLLOWING THE CLOSING DATE, BUYER SHALL BE DEEMED TO HAVE ELECTED TO TERMINATE THIS AGREEMENT AND RECEIVE A REFUND OF THE DEPOSIT AND SUCH OUT-OF-POCKET EXPENSE REIMBURSEMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR IN ANY EXHIBITS ATTACHED HERETO OR IN ANY DOCUMENTS EXECUTED OR TO BE EXECUTED IN CONNECTION HEREWITH (COLLECTIVELY, INCLUDING THIS AGREEMENT, SAID EXHIBITS AND ALL SUCH DOCUMENTS, THE “PURCHASE DOCUMENTS”), IT IS EXPRESSLY UNDERSTOOD AND AGREED BY AND BETWEEN THE PARTIES HERETO THAT: (I) SELLER SHALL HAVE NO LIABILITY FOR, BUYER AND ITS SUCCESSORS AND ASSIGNS SHALL BE DEEMED TO HAVE WAIVED AND RELEASED SELLER FROM AND AGAINST ANY AND ALL CLAIMS ARISING FROM, AND BUYER AND ITS SUCCESSORS AND ASSIGNS SHALL OTHERWISE HAVE NO RECOURSE AGAINST SELLER WITH RESPECT TO, ANY BREACH OR ALLEGED BREACH BY OR ON THE PART OF SELLER OF ANY REPRESENTATION, WARRANTY, COVENANT, UNDERTAKING, INDEMNITY OR AGREEMENT CONTAINED IN ANY OF THE PURCHASE DOCUMENTS (COLLECTIVELY, “SELLER’S UNDERTAKINGS”) OCCURRING PRIOR TO THE CLOSE OF ESCROW (PROVIDED THAT BUYER HAD ACTUAL KNOWLEDGE OF SUCH BREACH OR ALLEGED BREACH PRIOR TO THE CLOSE OF ESCROW BUT NEVERTHELESS ELECTED TO PROCEED WITH THE CLOSE OF ESCROW), (II) SELLER SHALL HAVE NO LIABILITY FOR, BUYER AND ITS SUCCESSORS AND ASSIGNS SHALL BE DEEMED TO HAVE WAIVED AND RELEASED SELLER FROM AND AGAINST ANY AND ALL CLAIMS ARISING FROM, AND BUYER AND ITS SUCCESSORS AND ASSIGNS SHALL OTHERWISE HAVE NO RECOURSE AGAINST SELLER WITH RESPECT TO, ANY BREACH OR ALLEGED BREACH BY OR ON THE PART OF SELLER OF ANY OF SELLER’S UNDERTAKINGS OCCURRING (A) AFTER THE CLOSE OF ESCROW OR (B) PROVIDED THAT BUYER DID NOT HAVE KNOWLEDGE OF SUCH BREACH OR ALLEGED BREACH PRIOR TO THE CLOSE OF ESCROW, PRIOR TO THE CLOSE OF ESCROW (COLLECTIVELY, “BUYER’S POST-CLOSING CLAIMS”), UNLESS BUYER HAS DELIVERED TO SELLER WRITTEN NOTICE THAT BUYER IS SEEKING RECOURSE WITH RESPECT THERETO (THE “RECOURSE NOTICE”) AFTER THE CLOSE OF ESCROW BUT ON OR BEFORE THE DATE THAT IS SIX (6) MONTHS FOLLOWING THE CLOSE OF ESCROW AND BUYER HAS FILED SUIT WITH RESPECT THERETO WITHIN THIRTY (30) DAYS AFTER BUYER’S DELIVERY OF THE RECOURSE NOTICE, (III) THE RECOURSE OF BUYER AND ITS SUCCESSORS OR ASSIGNS AGAINST SELLER WITH RESPECT TO BUYER’S POST-CLOSING CLAIMS SHALL BE LIMITED TO AN AMOUNT NOT TO EXCEED ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000) IN THE AGGREGATE (PLUS ANY AWARD FOR BROKER’S COMMISSIONS AS DESCRIBED IN PARAGRAPH 17 OR PROFESSIONAL FEES AS DESCRIBED IN PARAGRAPH 21(e)), PROVIDED HOWEVER, BUYER SHALL HAVE NO RIGHT TO FILE SUIT FOR RECOURSE WITH RESPECT TO BUYER’S POST-CLOSING CLAIMS UNLESS AND UNTIL THE AGGREGATE AMOUNT OF SUCH RECOURSE EXCEEDS twenty thousand DOLLARS ($20,000); PROVIDED FURTHER, THAT IN THE EVENT ANY JUDGMENT AGAINST SELLER FOR RECOURSE WITH RESPECT TO BUYER’S POST-CLOSING CLAIMS (EXCLUSIVE OF ANY AWARD FOR PROFESSIONAL FEES AS DESCRIBED IN PARAGRAPH 21(e)) IS FOR AN AMOUNT LESS THAN TWENTY thousand DOLLARS ($20,000), THEN SELLER SHALL BE DEEMED TO BE THE PREVAILING PARTY (INCLUDING WITHOUT LIMITATION FOR THE PURPOSES OF PARAGRAPH 21(e)) AND SELLER SHALL HAVE NO LIABILITY THEREFOR; (IV) NO PERSONAL LIABILITY OR PERSONAL RESPONSIBILITY OF ANY SORT WITH RESPECT TO ANY OF SELLER’S UNDERTAKINGS OR ANY BREACH OR ALLEGED BREACH THEREOF IS ASSUMED BY, OR SHALL AT ANY TIME BE ASSERTED OR ENFORCEABLE AGAINST, SELLER EXCEPT AS EXPRESSLY PROVIDED IN SUBPARAGRAPHS (II) AND (III) ABOVE, AND (V) NO PERSONAL LIABILITY OR PERSONAL RESPONSIBILITY OF ANY SORT WITH RESPECT TO ANY OF SELLER’S UNDERTAKINGS OR ANY BREACH OR ALLEGED BREACH THEREOF, IS ASSUMED BY, OR SHALL AT ANY TIME BE ASSERTED OR ENFORCEABLE AGAINST ANY OF SELLER’S DIRECT OR INDIRECT MEMBERS, MANAGERS, PARTNERS, SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, TRUSTORS, BENEFICIARIES, TRUSTEES OR REPRESENTATIVES. NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL SELLER BE LIABLE TO BUYER FOR ANY PUNITIVE, SPECULATIVE OR CONSEQUENTIAL DAMAGES.

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(b)          Default by Buyer. IN THE EVENT THE CLOSE OF ESCROW DOES NOT OCCUR BY REASON OF ANY DEFAULT BY BUYER (OR ANY DEFAULT BY BUYER UNDER THE OTHER PURCHASE AGREEMENTS), BUYER AND SELLER AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES WHICH SELLER MAY SUFFER. THEREFORE BUYER AND SELLER DO HEREBY AGREE THAT A REASONABLE ESTIMATE OF THE TOTAL NET DETRIMENT THAT SELLER WOULD SUFFER IN THE EVENT OF SUCH A DEFAULT BY BUYER IS AND SHALL BE, AS SELLER’S SOLE AND EXCLUSIVE REMEDY (WHETHER AT LAW OR IN EQUITY) FOR SUCH BREACH, AN AMOUNT EQUAL TO THE DEPOSIT, AND ANY INTEREST ACCRUING THEREON. SAID AMOUNT SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES FOR SUCH A BREACH OF THIS AGREEMENT BY BUYER, ALL OTHER CLAIMS TO DAMAGES OR OTHER REMEDIES WITH RESPECT TO SUCH A BREACH BY BUYER BEING HEREIN EXPRESSLY WAIVED BY SELLER. UPON SUCH A DEFAULT BY BUYER, THIS AGREEMENT SHALL BE TERMINATED AND, EXCEPT FOR THOSE PROVISIONS WHICH EXPRESSLY SURVIVE TERMINATION OF THIS AGREEMENT, NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREUNDER, EACH TO THE OTHER EXCEPT FOR THE RIGHT OF SELLER TO COLLECT SUCH LIQUIDATED DAMAGES FROM BUYER AND ESCROW HOLDER. NOTWITHSTANDING ANYTHING IN THIS PARAGRAPH 18(b) TO THE CONTRARY, IN THE EVENT OF A TERMINATION OF THIS AGREEMENT, SELLER SHALL HAVE ALL REMEDIES AVAILABLE AT LAW OR IN EQUITY IN THE EVENT BUYER OR ANY PARTY RELATED TO OR AFFILIATED WITH BUYER IS ASSERTING ANY CLAIMS OR RIGHT TO THE PROPERTY THAT WOULD OTHERWISE DELAY OR PREVENT SELLER FROM HAVING CLEAR, INDEFEASIBLE AND MARKETABLE TITLE TO THE PROPERTY. IF CLOSE OF ESCROW IS CONSUMMATED, SELLER SHALL HAVE ALL REMEDIES AVAILABLE AT LAW OR IN EQUITY IN THE EVENT BUYER FAILS TO PERFORM ANY OBLIGATION OF BUYER UNDER THIS AGREEMENT. NOTWITHSTANDING ANYTHING IN THIS PARAGRAPH 18(b) TO THE CONTRARY, THE FOREGOING SHALL IN NO EVENT LIMIT BUYER’S OBLIGATIONS UNDER PARAGRAPHS 4(d), 17, 20, 21(e) and 21(m) AND/OR SELLER’S RIGHTS AND REMEDIES IN CONNECTION THEREWITH.

(c)          Survival. THE PROVISIONS OF THIS PARAGRAPH 18 SHALL SURVIVE THE CLOSE OF ESCROW AND ANY TERMINATION OF THIS AGREEMENT.

Buyer’s Initials Seller’s Initials

19.         Assignment. Prior to the Close of Escrow, Buyer shall not directly or indirectly assign, transfer or convey its rights and obligations under this Agreement or in the Property without the prior written consent of Seller (in its sole and absolute discretion), and any purported assignment, transfer or conveyance without such consent of Seller shall be null and void. Any approved assignee shall succeed to all of Buyer’s rights and remedies hereunder. Notwithstanding the foregoing, Buyer shall have the right to assign all of its right, title and interest in and to this Agreement (partial assignments shall not be permitted) to any Affiliate of Buyer; provided that (1) such assignment includes an assumption by the assignee of all of Buyer’s obligations under this Agreement, including a remaking of all of Buyer’s representations and warranties in this Agreement in favor of Seller, and is otherwise in form reasonably approved by Seller, and (2) Buyer delivers notice of such assignment, together with a copy of such fully executed assignment, and an affidavit, or such proofs as are reasonably required by Seller to establish that any purported assignment of this Agreement complies with the provisions hereof, to Seller not later than seven (7) Business Days prior to the Closing Date. Notwithstanding the foregoing, no such assignment shall relieve Buyer from its liability under this Agreement.

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20.         Confidentiality. Buyer agrees that it shall keep confidential the information contained in the materials delivered or provided for inspection by Seller pursuant to the terms of this Agreement or otherwise obtained by Buyer in the conduct of its Due Diligence, that it shall use such information only to evaluate the acquisition of the Property from Seller and not in a manner which has an adverse effect on Seller, and that it shall not disclose such information to any third parties (except as may be required by applicable law), except that Buyer shall have the right to provide such information to its lenders, consultants, attorneys and prospective investors in connection with Buyer’s acquisition of the Property (provided that Buyer shall instruct the aforesaid parties to maintain the confidentiality of such information). If the transaction contemplated by this Agreement is not consummated for any reason, Buyer promptly shall destroy, and instruct its representatives, consultants, attorneys, lenders, and prospective investors to destroy, all Seller’s Documents and all other copies and originals of information and materials previously provided for inspection by Seller to Buyer. The provisions of this Paragraph 20 shall survive any termination of this Agreement.

21. Miscellaneous.

(a)          Governing Law. The parties hereto acknowledge that this Agreement has been negotiated and entered into in California. The parties hereto expressly agree that this Agreement shall be governed by, interpreted under, and construed and enforced in accordance with the laws of the State of California.

(b)          Partial Invalidity. If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each such term and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law.

(c)          Waivers. No waiver of any breach of any covenant or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof, or of any other covenant or provision herein contained. No extension of time for performance of any obligation or act shall be deemed an extension of the time for performance of any other obligation or act.

(d)          Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the permitted successors and assigns of the parties hereto.

(e)          Professional Fees. In the event of the bringing of any action or suit by a party hereto against another party hereunder by reason of any breach of any of the covenants, agreements or provisions on the part of the other party arising out of this Agreement, then in that event the prevailing party shall be entitled to have and recover of and from the other party all reasonable out-of-pocket costs and expenses of the action or suit, including reasonable out-of-pocket attorneys’ fees, accounting and engineering fees, and any other professional fees resulting therefrom.

(f)          Entire Agreement. This Agreement (including all Exhibits attached hereto) is the final expression of, and contains the entire agreement between, the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto. This Agreement may not be modified, changed, supplemented or terminated, nor may any obligations hereunder be waived, except by written instrument signed by the party to be charged or by its agent duly authorized in writing or as otherwise expressly permitted herein. The parties do not intend to confer any benefit hereunder on any person, firm or corporation other than the parties hereto.

(g)          Time of Essence. Seller and Buyer hereby acknowledge and agree that time is strictly of the essence with respect to each and every term, condition, obligation and provision hereof and that failure to timely perform any of the material terms, obligations or provisions hereof (including, without limitation, the obligation to timely fund the Initial Deposit on or before the Initial Deposit Deadline pursuant to Paragraph 2(a), the obligation to timely fund the Additional Deposit pursuant to Paragraph 2(a) and the obligation to timely fund the balance of the Purchase Price (as adjusted by Buyer’s share of expenses and prorations) pursuant to Paragraph 2(b)) by either party shall constitute a material breach of and a non-curable (but waivable) default under this Agreement by the party so failing to perform.

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(h)          Construction. Headings at the beginning of each paragraph and subparagraph are solely for the convenience of the parties and are not a part of the Agreement. Whenever required by the context of this Agreement, the singular shall include the plural and the masculine shall include the feminine and vice versa. This Agreement shall not be construed as if it had been prepared by one of the parties, but rather as if both parties had prepared the same. Unless otherwise indicated, all references to paragraphs and subparagraphs are to this Agreement. In the event the date on which Buyer or Seller is required to take any action under the terms of this Agreement is not a Business Day, the action shall be taken on the next succeeding Business Day. For purposes of this Agreement, the term “Business Day” shall mean any day other than Saturday, Sunday or any day upon which banks in the State of California are required or permitted to be closed. For purposes of this Agreement, “Person” shall mean any natural person, corporation, general or limited partnership, limited liability company, association, joint venture, trust, estate, Governmental Authority or other legal entity, in each case whether in its own or a representative capacity. For purposes of this Agreement, “Affiliate” means, with respect to the Person in question, any other Person that, directly or indirectly, controls, is controlled by or is under common control with, such Person. For the purposes of this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the Person in question, whether by the ownership of voting securities, contract or otherwise.

(i)          Authority. The individuals signing below represent and warrant that they have the requisite authority to bind the entities on whose behalf they are signing.

(j)          Severability. The invalidity or unenforceability of any one or more of the provisions of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement.

(k)          Further Assurances. The parties hereto agree to execute, acknowledge and deliver any and all additional papers, documents and other assurances and shall perform any and all acts and things reasonably necessary in connection with the performance of the obligations hereunder to carry out the interest of the parties hereto.

(l)          Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

(m)          No Recordation or Lis Pendens.

(i)          THE PARTIES HERETO AGREE THAT NEITHER THIS AGREEMENT NOR ANY MEMORANDUM OR NOTICE HEREOF SHALL BE RECORDED, AND, EXCEPT AS OTHERWISE PROVIDED IN PARAGRAPH 21(m)(ii), BUYER AGREES NOT TO FILE ANY LIS PENDENS OR OTHER INSTRUMENT AGAINST THE PROPERTY IN CONNECTION HEREWITH. IN FURTHERANCE OF THE FOREGOING, BUYER (I) ACKNOWLEDGES THAT THE FILING OF A LIS PENDENS OR OTHER EVIDENCE OF BUYER’S RIGHTS OR THE EXISTENCE OF THIS AGREEMENT AGAINST THE PROPERTY, COULD CAUSE SIGNIFICANT MONETARY AND OTHER DAMAGES TO SELLER AND (II) HEREBY INDEMNIFIES SELLER FROM AND AGAINST ANY AND ALL LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES AND COSTS INCURRED IN THE ENFORCEMENT OF THE FOREGOING INDEMNIFICATION OBLIGATION) ARISING OUT OF THE BREACH BY BUYER OF ANY OF BUYER’S OBLIGATIONS UNDER THIS PARAGRAPH 21(m).

(ii)         NOTWITHSTANDING THE PROVISIONS OF PARAGRAPH 21(m)(i) ABOVE, BUYER SHALL HAVE THE RIGHT TO FILE A LIS PENDENS AGAINST THE PROPERTY SOLELY UNDER CIRCUMSTANCES UNDER WHICH BUYER IS IN GOOD FAITH SEEKING SPECIFIC PERFORMANCE OF SELLER’S OBLIGATIONS HEREUNDER, PROVIDED (A) BUYER FILES SUCH CLAIM WITHIN THIRTY (30) DAYS AFTER THE EARLIER OF (X) THE DATE ON WHICH SELLER PURPORTS TO TERMINATE THIS AGREEMENT OR BUYER ALLEGES THAT SELLER HAS DEFAULTED HEREUNDER OR (Y) THE CLOSING DATE AND (B) IF IT IS ULTIMATELY DETERMINED BY A COURT ORDER THAT BUYER WAS NOT ENTITLED TO SPECIFIC PERFORMANCE UNDER THIS AGREEMENT OTHER THAN AS A RESULT OF ANY WRONGFUL ACT BY SELLER MAKING SPECIFIC PERFORMANCE IMPRACTICABLE OR IMPOSSIBLE, BUYER SHALL, AND HEREBY DOES, INDEMNIFY AND HOLD HARMLESS SELLER FROM AND AGAINST ANY AND ALL LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES AND COSTS INCURRED IN THE ENFORCEMENT OF THE FOREGOING INDEMNIFICATION OBLIGATION) ARISING OUT OF THE FILING OF SUCH LIS PENDENS BY BUYER (INCLUDING, WITHOUT LIMITATION, CONSEQUENTIAL DAMAGES INCURRED BY SELLER AS A RESULT THEREOF).

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(iii)        THE PROVISIONS OF THIS PARAGRAPH 21(m) SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.

______________	_____________
BUYER’S INITIALS	SELLER’S INITIALS

(n)          THE SUBMISSION OF THIS AGREEMENT FOR EXAMINATION IS NOT INTENDED TO NOR SHALL IT CONSTITUTE AN OFFER TO SELL, OR A RESERVATION OF, OR OPTION OR PROPOSAL OF ANY KIND FOR THE PURCHASE OF THE PROPERTY. IN NO EVENT SHALL ANY DRAFT OF THIS AGREEMENT CREATE ANY OBLIGATION OR LIABILITY, IT BEING UNDERSTOOD THAT THIS AGREEMENT SHALL BE EFFECTIVE AND BINDING ONLY WHEN A COUNTERPART HEREOF HAS BEEN EXECUTED AND DELIVERED BY EACH PARTY HERETO TO ESCROW HOLDER.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year hereinabove written.

Seller:
OCTAVIA GATEWAY HOLDINGS, LLC,
a Delaware limited liability company
By:	DM Development Partners, LLC,
	a California limited liability company, Its Manager

By:

Name:

Title:

By:	DDG California LLC,
	a Delaware limited liability company, Its Manager
	By:	DDG Partners LLC,
	a Delaware limited liability company,
	Its Member

By:

Name:

Title:

Buyer:

SRT SF RETAIL I, LLC,

a Delaware limited liability company

By:

Name:

Title:

S-1

ACCEPTANCE BY ESCROW HOLDER

First American Title Insurance Company acknowledges that it has received a fully executed copy of the foregoing Agreement of Purchase and Sale and Joint Escrow Instructions (the “Agreement”) and agrees to act as Escrow Holder under the Agreement and to be bound by and strictly perform the terms thereof as such terms apply to Escrow Holder.

Dated: May ___, 2016

first american Title Insurance Company

By:

Name:

Title:

S-2

EXHIBIT “A”

LEGAL DESCRIPTION

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY AND COUNTY OF SAN FRANCISCO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:

A CONDOMINIUM COMPRISED OF

TRACT A:

PARCEL ONE:

CONDOMINIUM UNIT 102 (LOT NO. 53) OF PARCEL A OF FINAL MAP 7511, FILED MAY 29, 2014 IN BOOK 123 OF CONDOMINIUM MAPS, PAGES 188, 189 AND 190 OFFICIAL RECORDS OF SAN FRANCISCO COUNTY RECORDS ("OFFICIAL RECORDS"), AS SUCH UNIT IS SHOWN ON THE CONDOMINIUM PLAN ("PLAN"), ATTACHED AS AN EXHIBIT TO THE DECLARATION OF RESTRICTIONS AND CONDOMINIUM PLAN FOR 8 OCTAVIA BOULEVARD ("DECLARATION"), RECORDED JULY 25, 2014, SERIES NO. 2014-J914505 OFFICIAL RECORDS, ALONG WITH ANY AMENDMENTS AND/OR ANNEXATIONS RECORDED PURSUANT THERETO.

PARCEL TWO:

AN UNDIVIDED 4.2669% INTEREST AS TENANT IN COMMON IN AND TO THE COMMON AREA LYING WITHIN SAID PARCEL A OF FINAL MAP 7511, AS SHOWN ON THE PLAN AND DEFINED IN THE DECLARATION, EXCEPTING THEREFROM THE FOLLOWING:

A. ALL CONDOMINIUM UNITS SHOWN ON THE PLAN AND DESCRIBED IN THE DECLARATION.

PARCEL THREE:

NON-EXCLUSIVE EASEMENTS FOR USE, ENJOYMENT, INGRESS, EGRESS AND SUPPORT IN AND TO THE COMMON AREA, AS SHOWN ON THE PLAN AND DESCRIBED IN THE DECLARATION, FOR THE BENEFIT OF PARCEL ONE HEREINABOVE.

PARCEL FOUR:

EXCLUSIVE USE EASEMENTS, AS SHOWN ON THE PLAN AND DESCRIBED IN THE

DECLARATION, APPURTENANT TO PARCEL ONE HEREINABOVE FOR THE POSSESSION, USE AND ENJOYMENT OF:

A.           PARKING P- N/A

B.           HANDICAP PARKING HCP- N/A

C.           BIKE STALL B- N/A

D.           ROOF EQUIPMENT AREA E-102

TRACT B:

PARCEL ONE:

CONDOMINIUM UNIT 307 (LOT NO. 54) OF PARCEL A OF FINAL MAP 7511, FILED MAY 29, 2014 IN BOOK 123 OF CONDOMINIUM MAPS, PAGES 188, 189 AND 190 OFFICIAL RECORDS OF SAN FRANCISCO COUNTY RECORDS ("OFFICIAL RECORDS"), AS SUCH UNIT IS SHOWN ON THE CONDOMINIUM PLAN ("PLAN"), ATTACHED AS AN EXHIBIT TO THE DECLARATION OF RESTRICTIONS AND CONDOMINIUM PLAN FOR 8 OCTAVIA BOULEVARD ("DECLARATION"), RECORDED JULY 25, 2014, SERIES NO. 2014-J914505 OFFICIAL RECORDS, ALONG WITH ANY AMENDMENTS AND/OR ANNEXATIONS RECORDED PURSUANT THERETO.

A-1

PARCEL TWO:

AN UNDIVIDED 1.5325% INTEREST AS TENANT IN COMMON IN AND TO THE COMMON AREA LYING WITHIN SAID PARCEL A OF FINAL MAP 7511, AS SHOWN ON THE PLAN AND DEFINED IN THE DECLARATION, EXCEPTING THEREFROM THE FOLLOWING:

A. ALL CONDOMINIUM UNITS SHOWN ON THE PLAN AND DESCRIBED IN THE DECLARATION.

PARCEL THREE:

NON-EXCLUSIVE EASEMENTS FOR USE, ENJOYMENT, INGRESS, EGRESS AND SUPPORT IN AND TO THE COMMON AREA, AS SHOWN ON THE PLAN AND DESCRIBED IN THE DECLARATION, FOR THE BENEFIT OF PARCEL ONE HEREINABOVE.

PARCEL FOUR:

EXCLUSIVE USE EASEMENTS, AS SHOWN ON THE PLAN AND DESCRIBED IN THE DECLARATION, APPURTENANT TO PARCEL ONE HEREINABOVE FOR THE POSSESSION, USE AND ENJOYMENT OF:

A.           PARKING P- N/A

B.           HANDICAP PARKING HCP- N/A

C.           BIKE STALL B- N/A

TRACT C:

PARCEL ONE:

CONDOMINIUM UNIT 308 (LOT NO. 55) OF PARCEL A OF FINAL MAP 7511, FILED MAY 29, 2014 IN BOOK 123 OF CONDOMINIUM MAPS, PAGES 188, 189 AND 190 OFFICIAL RECORDS OF SAN FRANCISCO COUNTY RECORDS ("OFFICIAL RECORDS"), AS SUCH UNIT IS SHOWN ON THE CONDOMINIUM PLAN ("PLAN"), ATTACHED AS AN EXHIBIT TO THE DECLARATION OF RESTRICTIONS AND CONDOMINIUM PLAN FOR 8 OCTAVIA BOULEVARD ("DECLARATION"), RECORDED JULY 25, 2014, SERIES NO. 2014-J914505 OFFICIAL RECORDS, ALONG WITH ANY AMENDMENTS AND/OR ANNEXATIONS RECORDED PURSUANT THERETO.

PARCEL TWO:

AN UNDIVIDED 3.2689% INTEREST AS TENANT IN COMMON IN AND TO THE COMMON AREA LYING WITHIN SAID PARCEL A OF FINAL MAP 7511, AS SHOWN ON THE PLAN AND DEFINED IN THE DECLARATION, EXCEPTING THEREFROM THE FOLLOWING:

A. ALL CONDOMINIUM UNITS SHOWN ON THE PLAN AND DESCRIBED IN THE DECLARATION.

PARCEL THREE:

NON-EXCLUSIVE EASEMENTS FOR USE, ENJOYMENT, INGRESS, EGRESS AND SUPPORT IN AND TO THE COMMON AREA, AS SHOWN ON THE PLAN AND DESCRIBED IN THE DECLARATION, FOR THE BENEFIT OF PARCEL ONE HEREINABOVE.

PARCEL FOUR:

EXCLUSIVE USE EASEMENTS, AS SHOWN ON THE PLAN AND DESCRIBED IN THE DECLARATION, APPURTENANT TO PARCEL ONE HEREINABOVE FOR THE POSSESSION, USE AND ENJOYMENT OF:

A-2

A.           PARKING P- N/A

B.           HANDICAP PARKING HCP- N/A

C.           BIKE STALL B- N/A

D.           DECK D-308

Assessor's:	Lot 053; Block 0855 (Affects: Tract A)
	Lot 054; Block 0855 (Affects: Tract B) and
	Lot 055; Block 0855 (Affects: Tract C)

A-3

EXHIBIT “B”

LIST OF SELLER’S DOCUMENTS

8 Octavia ALTA Owner's Policy

Boba Lease - Executed

Final Certificate of Occupancy 02.24.15

Geotechnical Report

HOA Budget 05.30.14

Phase I Environmental Site Assessment

ACC Phase II Report

CC&R's 2014 - J914505

DDG Property Management Agreement 2014 - 2015

Executed First Source Agreement

Go Sake Restaurant Lease

Go Sake Retail Lease

OGW Final Construction Drawings 03.31.13

Preliminary Title Report Suite 102

Preliminary Title Report Suite 307

Preliminary Title Report Suite 308

Recorded NSR - Conditions of Approval

FATCO Title Insurance Commitment / PTR (hyperlinked) – effective date March 31, 2016

HOA Insurance Certificates

Tenant Insurance Certificates

Recent Property Tax Bills

Tenant Contact List

HOA Actuals (prior years)

HOA Budget (2016)

Warranties

HOA Reserve Study (if any)

Tenant Financials

B-1

EXHIBIT “C”

FORM OF ESTOPPEL CERTIFICATE

To:

Dated:

Re:        Lease Pertaining to _________________________ (the “Property”)

Ladies and Gentlemen:

The above addressee (“Buyer”) has entered into an agreement to acquire the Property. The undersigned, as tenant (“Tenant”) acknowledges the right of Buyer to rely upon the statements and representations of the undersigned contained in this certificate, and further acknowledges that Buyer will be acquiring the Property in material reliance on this certificate. Given the foregoing, Tenant hereby certifies and represents to Buyer and its lender, Keybank National Association (and its and their successors and assigns), and Landlord (and its successors and assigns) with respect to the above-described Lease, as follows (if any blanks do not apply, simply state “None”):

1. Tenant is the lessee under that certain lease (the “Lease”) pertaining to the Property which is dated [_____________], and includes the following amendments: [Describe Lease and amendments]

2. The name of the current landlord (“Landlord”) is: ___________________________________.

3. The Lease is for the following portion of the Property (the “Premises”): That certain space identified as [__________] having approximately [___________] of rentable square feet.

4. The initial term of the Lease commenced on [_________] and shall expire on [__________], unless sooner terminated in accordance with the terms of the Lease. Tenant has no option to renew or extend the term of the Lease, except as follows (if none, so state): [_________].

5. The Lease, as it may have been modified or amended, contains the entire agreement of Landlord and Tenant with respect to the Premises, and is in full force and effect.

6. As of the date hereof, Tenant is occupying the Premises and is paying rent on a current basis under the Lease.

(a) The minimum monthly or base rent currently being paid by Tenant for the Premises pursuant to the terms of the Lease is [________] per month and has been paid through , 2016.

(b) Percentage rent (“Percentage Rent”), if any, due under the Lease has been paid through [________] and the amount of Percentage Rent for [________] was [________].

(c) Common area maintenance, taxes, insurance and other charges (the “Reimbursables”) due under the Lease, currently in the amount of $__________ per month, have been paid through [________].

7. Tenant has accepted possession of the Premises, and all construction to be performed by Landlord for the Premises under the Lease has been completed in accordance with the terms of the Lease and within the time periods set forth in the Lease. Landlord has paid in full any required contribution towards work to be performed by Tenant under the Lease, except as follows (if none, so state): __________________________________________________.

8. The Premises shall be expanded by the addition of the following space on the dates hereinafter indicated (if none, so state): _________________________________________________________________________ .

C-1

9. No default or event that with the passage of time or notice would constitute a default on the part of Tenant exists under the Lease in the performance of the terms, covenants and conditions of the Lease required to be performed on the part of the Tenant.

10. No default or event that with the passage of time or notice would constitute a default on the part of Landlord exists under the Lease in the performance of the terms, covenants and conditions of the Lease required to be performed on the part of Landlord.

11. Tenant has no option or right to purchase all or any part of the Property.

12. Tenant has not assigned, sublet, transferred, hypothecated or otherwise disposed of its interest in the Lease and/or the Premises, or any part thereof.

13. Neither the Lease nor any obligations of Tenant thereunder have been guaranteed by any person or entity, except as follows (if none, so state): _____________________________________________________________ .

14. Tenant has received no notice that, and has no knowledge that, hazardous substances are being generated, used, handled, stored or disposed of by Tenant on the Premises or on the Property in violation of any applicable laws, rules or regulations or the terms of the Lease.

15. No rentals are accrued and unpaid under the Lease, except for Percentage Rent, if any, or Reimbursables, if any, which are not yet due and payable.

16. No prepayments of rentals due under the Lease have been made for more than one month in advance. No security or similar deposit has been made under the Lease, except for the sum of [________] which has been deposited by Tenant with Landlord pursuant to the terms of the Lease.

17. Tenant has no defense, setoff, claim or counterclaim as to its obligations under the Lease, and to date has not asserted any rights of setoff, claim or counterclaim against Landlord.

18. Tenant has not received notice of any assignment, hypothecation, mortgage or pledge of Landlord’s interest in the Lease or the rents or other amounts payable thereunder, except as follows (if none, so state): _________________________________________________________________________________ .

19. The undersigned is authorized to execute this Tenant Estoppel on behalf of Tenant.

Dated: , 2016

Very truly yours,

TENANT:

[___________________________________]

[___________________________________]

By:

Name:

Its:

C-2

GUARANTOR CERTIFICATION

The undersigned (“Guarantor”) certifies to Buyer, its lender and their successors and assigns that he/she/it is guarantor of the Lease described in the attached Estoppel Certificate pursuant to a Guaranty dated _________________, 20__ (the “Guaranty”). The Guarantor certifies that the Guaranty remains in full force and effect, and that guarantor has no offsets or defenses or counterclaims with respect thereto. Guarantor further certifies that, to its knowledge, each statement of Tenant set forth in the attached Estoppel Certificate is true, correct and complete. Guarantor acknowledges that Landlord, Buyer and its lender are relying upon the accuracy of the statements in this Guarantor Certification.

Signed by Guarantor on:	GUARANTOR:
_________________, 2016	[___________________________________]
	[___________________________________]
	By:
	Name:
	Its:

C-3

EXHIBIT “D”

RECORDING REQUESTED BY

AND WHEN RECORDING MAIL TO:

(Above Space for Recorder’s Use Only)

GRANT DEED

The Undersigned Grantor(s) Declare(s): DOCUMENTARY TRANSFER TAX is $____________, computed on full value of the property conveyed; City and County of San Francisco, State of California;

FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, _____________________, a ______________________ (“Grantor”), hereby GRANTS to ________________, a _________ __________________, the following described real property (the “Property”) located in the City and County of San Francisco, State of California: See Exhibit “A” attached hereto.

SUBJECT TO:

1.          Taxes and assessments.

2.          All other covenants, conditions, restrictions, reservations, rights, rights of way, easements, encumbrances, liens and title matters whether or not of record or visible from an inspection of the Property and all matters which an accurate survey of the Property would disclose.

D-1

IN WITNESS WHEREOF, Grantor has caused this Grant Deed to be executed as of the ___ day of ____________, 2016.

GRANTOR:

____________________________,

a _____________________

By:

Name:

Title:

D-2

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

STATE OF CALIFORNIA	)
	)      ss:
COUNTY OF	)

On ______________, 2016 before me, _____________________________________________

(insert name and title of the officer),

personally appeared ____________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature:

[Seal]

D-3

EXHIBIT “A” to Grant deed

LEGAL DESCRIPTION

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY AND COUNTY OF San Francisco, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

D-4

EXHIBIT “E”

BILL OF SALE

THIS BILL OF SALE is made this ______ day of _____________, 2016 by ________________, a ___________________ (“Seller”), to ________________, a ___________________ (“Buyer”).

RECITALS :

A. Seller and Buyer are parties to that certain Agreement of Purchase and Sale and Joint Escrow Instructions dated as of _____________, 2016 (the “Purchase Agreement”) for the purchase and sale of certain real property more particularly described therein (the “Real Property”). Each capitalized term not defined herein shall have the respective meaning given to that term in the Purchase Agreement.

B.           The Purchase Agreement provides, in part, that Seller shall transfer to Buyer all of Seller’s right, title and interest, if any, in and to any tangible personal property owned by Seller and located on the Real Property, excluding any such property which is owned by any tenant or integrated with the property manager’s operation of other properties (“Personal Property”).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller does hereby absolutely and unconditionally give, grant, bargain, sell, transfer, set over, assign, convey, release, confirm and deliver (collectively, “Transfer”) to Buyer, and Buyer accepts, all of Seller’s right, title and interest, if any, in and to the Personal Property.

1.          SELLER’S RIGHT, TITLE AND INTEREST IN AND TO THE PERSONAL PROPERTY, IF ANY, IS BEING TRANSFERRED ON AN “AS IS” BASIS, WITHOUT ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, OF ANY KIND WHATSOEVER BY SELLER. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER ACKNOWLEDGES THAT SELLER EXPRESSLY DISCLAIMS AND NEGATES, AS TO ALL PROPERTY TRANSFERRED HEREBY: (A) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY: (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE; AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR MATERIALS.

2.          This Bill of Sale shall be binding upon and inure to the benefit of the respective successors, assigns, personal representatives, heirs and legatees of Buyer and Seller.

3.          If any party hereto brings any action or suit against the other party hereto by reason of any breach of any covenant, agreement or provision on the part of the other party set forth in this Bill of Sale, the prevailing party shall be entitled to recover from the other party all reasonable out-of-pocket costs and expenses of the action or suit, including reasonable out-of-pocket attorneys’ fees, charges and costs, in addition to any other relief to which it may be entitled.

4.          This Bill of Sale may be executed in counterparts, each of which shall be an original, and all of which, together, shall constitute one and the same instrument.

E-1

IN WITNESS WHEREOF, Seller has executed and delivered this Bill of Sale as of the day and year first above written.

SELLER:

____________________________,

a __________________________

By:

Name:

Title:

E-2

EXHIBIT “F”

GENERAL ASSIGNMENT

THIS GENERAL ASSIGNMENT (“Assignment”) is made this _____ day of ______________, 2016, by and between ___________________________, a __________________________ (“Assignor”), and _________________, a _____________________ (“Assignee”).

WITNESSETH:

WHEREAS, Assignor and Assignee are parties to that certain Agreement of Purchase and Sale and Joint Escrow Instructions (the “Agreement”) dated as of ______________, 2016, respecting the sale of certain “Property” (as described in the Agreement). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Agreement.

WHEREAS, under the Agreement, Assignor is obligated to assign to Assignee, to the extent transferable by Assignor, all of Assignor’s right, title and interest, if any, in and to all Intangible Property, those Leases listed on Exhibit “A” attached hereto (the “Leases”), and those Contracts listed on Exhibit “B” attached hereto (the “Contracts”).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, except as otherwise provided in Paragraph 9 of the Agreement, Assignor hereby assigns, sells, transfers, sets over and delivers unto Assignee, to the extent transferable by Assignor, all of Assignor’s estate, right, title and interest in and to the Intangible Property, the Leases and the Contracts, and Assignee hereby accepts such assignment.

By acceptance of this Assignment, Assignee hereby assumes the performance of all of the terms, covenants and conditions imposed upon Assignor under the Leases and Contracts to the extent of those obligations first arising or accruing on or after the date of this Assignment.

In the event any party hereto institutes any action or proceeding against the other party with regard to this Assignment, the prevailing party in such action shall be entitled to recover, in addition to the cost of the suit, its reasonable out-of-pocket attorneys’ fees.

This Assignment shall be binding upon and inure to the benefit of the successors, assignees, personal representatives, heirs and legatees of all the respective parties hereto.

This Assignment may be executed in any number of counterparts, each of which shall be an original, and all of which, together, shall constitute one and the same instrument.

The parties hereto agree to execute, acknowledge and deliver any and all additional papers, documents and other assurances and shall perform any and all acts and things reasonably necessary in connection with the performance of the obligations hereunder to carry out the interest of the parties hereto.

F-1

IN WITNESS WHEREOF, Assignor and Assignee have executed and delivered this Assignment as of the day and year first above written.

ASSIGNOR:

______________________________,

a ___________________________

By:

Name:

Title:

ASSIGNEE:

_________________________________,

a _______________________________

By:

Name:

Title:

F-2

EXHIBIT “A” TO GENERAL ASSIGNMENT

F-3

EXHIBIT “B” TO GENERAL ASSIGNMENT

F-4

EXHIBIT “G”

TRANSFEROR’S CERTIFICATION OF NON-FOREIGN STATUS

Section 1445 of the Internal Revenue Code provides that a transferee of a United States real property interest must withhold tax if the transferor is a foreign person. For U.S. tax purposes (including Section 1445), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity. To inform _________________, a __________________________ (“Transferee”), that withholding of tax is not required upon the disposition of a United States real property interest by ________________, a ____________________ (“Transferor”), Transferor hereby certifies the following:

1.          The Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Code and the Income Tax Regulations promulgated thereunder);

2.          The Transferor is not a disregarded entity as defined in Section 1.1445-2(b)(2)(iii) of the Income Tax Regulations issued under the Internal Revenue Code;

3.          The Transferor’s U.S. employer identification number is __________; and

4.          The Transferor’s office address is ______________________________.

The Transferor understands that this Certification may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Under penalty of perjury I declare that I have examined this Certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of the Transferor.

Date:  _______________, 2016
	TRANSFEROR:
	___________________________,
	a ________________________
	By:
	Name:
	Title:

G-1

EXHIBIT “H”

FORM OF TENANT NOTICE LETTER

___________________________, 2016

Re: Your lease (the “Lease”) of space in the building located at [______________________], in the City and County of San Francisco, State of California (the “Building”)

Ladies and Gentlemen:

You are hereby notified that ________________________, a __________________ (the “Owner”), as owner of the Building and the current owner of the landlord’s interest under the Lease, has sold the Building to _________________ (“Buyer”) as of the date of this letter set forth above, and in connection with such sale the Owner has assigned and transferred its interest in the Lease and the security deposits held by it thereunder to Buyer, and Buyer has assumed and agreed to perform all of the landlord’s obligations under the Lease (including any obligations set forth in the Lease to repay or account for such security deposits) from and after such date. Accordingly, (a) all of your obligations under the Lease from and after the date of this letter (including your obligations to pay rent and fulfill your insurance requirements) shall be performable to and for the benefit of Buyer, its successors and assigns and (b) all of the obligations of the landlord under the Lease (including any obligations to repay or account for any such security deposits thereunder) from and after the date of this letter shall be the binding obligations of Buyer and its successors and assigns.

The address of Buyer for purposes of payments or rentals under the Lease is:

Facsimile No.

Telephone No.

All inquiries regarding your Lease and the leased premises should be made to ______________ at the following address:

Facsimile No.

Telephone No.

H-1

Very truly yours,

OWNER:

_______________________,

a _______________________

By:

Name:

Title:

H-2

EXHIBIT “I”

Owner’s Affidavit

San Francisco County, California

Order/File No. _________________________

That certain real property described on Exhibit “A” attached hereto (the “Real Property”)

OWNER’S DECLARATION

The undersigned (hereafter “Owner”) does hereby state that the following facts and statements are true and correct to its actual knowledge:

1.          That the person executing this Declaration is fully authorized and qualified to make this Declaration on Owner’s behalf;

2.          That during the period of ninety (90) days immediately preceding the date of this declaration no work has been done and no materials have been furnished in connection with the erection, repair, protection or removal of any building or other structure on the Real Property or in connection with the improvement of the Real Property, except ________________________________________________.

3.          That the Real Property is currently in use as a retail condominium; and that the following are all of the persons or entities having leases or other occupancy rights affecting the Real Property: See Exhibit “B” attached hereto.

4.          That there are no outstanding options or rights of first refusal to purchase the Real Property.

5.          Seller is not a wholesaler or retailer of perishable agricultural commodities, produce, poultry, poultry products, livestock or meat products, and has no direct or indirect relationship (other than the relationship of landlord to tenant) to the following tenants currently occupying portions of the Property: [ADD RESTAURANTS, GROCERS, FOOD/PERISHABLE VENDORS].

This declaration is made with the intention that First American Title Insurance Company (the “Company”) and its policy issuing agents will rely upon it in issuing their title insurance policies and endorsements. Owner agrees to indemnify the Company against loss or damage (including attorneys’ fees, expenses, and costs) incurred by the Company as a result of any statement made herein by Owner, as qualified by Owner’s actual knowledge, being untrue.

I-1

Owner declares under penalty of perjury that the foregoing is true and correct to its actual knowledge.

Dated this ____ day of __________, 2016.

OWNER:

______________________________,

a __________________________

By:

Name:

Title:

I-2

EXHIBIT “A” to Owner’s Affidavit

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY AND COUNTY OF SAN FRANCISCO, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

I-3

EXHIBIT “B” to Owner’s Affidavit

I-4

EXHIBIT “J”

LIST OF SELLER DISCLOSURES

See attached.

J-1

EXHIBIT “K”

LIST OF LEASES

Lease dated May 1, 2015 with Go Sake Ventures II, LLC

Lease dated May 28, 2015 with Go Sake Ventures III, LLC

Lease dated July 8, 2015 with Boba Guys, Inc.

K-1

EXHIBIT “L”

Intentionally deleted

L-1

EXHIBIT “M”

FORM OF CC&R ESTOPPEL CERTIFICATE

[SUBJECT TO REVISION FOLLOWING REVIEW OF CC&Rs]

To:

Dated:

Re:       Declaration of Covenants and Restrictions of the ______________ Association dated as of _______________, recorded in the Official Records of San Francisco County, California (the “Official Records”) on _____________ as Instrument No. ____________ (the “Original CC&Rs”), as amended or assigned by (a) that certain ___________________ of the _____________ Association dated as of _______________, recorded in the Official Records on __________ as Instrument No. __________, and (b) that certain Assignment of ___________ dated _____________, recorded in the Official Records on _______________ as Instrument No. ____________ (as amended and assigned, the “CC&Rs”)

Ladies and Gentlemen:

The undersigned (the “Association”) has the full right, power and authority to execute and deliver this estoppel certificate. Terms not otherwise defined herein shall have the meaning given thereto in the CC&Rs. The property more particularly described in Exhibit A attached hereto (the “Property”) is currently owned by __________________ (“Owner”) and is subject to the CC&Rs and is part of the planned unit development of which the Property is a part (the “CID”). The undersigned understands that the above addressee (“Buyer”) intends to acquire the Property and will be relying on this estoppel certificate in doing so. Accordingly, as of the date hereof, the undersigned, in accordance with Section ________ of the Original CC&Rs, hereby certifies and represents to Buyer, and its lender, Keybank National Association (and its and their successors and assigns), and Owner (and its successors and assigns), as follows:

1.          The CC&Rs are valid, enforceable, and in full force and effect and have not been modified, supplemented, amended, terminated or superseded except as expressly set forth above.

2.          True, correct and complete copies of the [Association Documents] [TO BE DEFINED] are attached hereto as Exhibit B. The Association Documents are in full force and effect and have not been modified, supplemented, amended, terminated or superseded except as expressly set forth above.

3.          There are no use agreements, maintenance agreements or other agreements regarding use rights and maintenance obligations between the Association and the original Declarant under the CC&Rs (or any successor thereto) that is currently in force affecting the Property, other than the following:_______________________________________________________________________.

4.          To the Association’s actual knowledge, there are no defaults existing under the CC&Rs as the same apply to the Property.

5.          As of the date hereof, the aggregate amount of the fees, assessments, maintenance expenses, and other charges which are or could become a lien or encumbrance on or against the Property or an obligation of Owner is $________ and such fees, maintenance expenses and other charges have been paid through ________________, 2016.

6.          Association is presently entitled to no offsets, credit, or claims against assessments owed under the CC&Rs with respect to the Property.

7.          There are no liens being asserted or capable of being asserted against the Property by the undersigned under the CC&Rs.

M-1

8.          The CID is a mixed use residential and commercial project governed jointly under the CC&R’s by the Association.

9.          No tenant or owner within the CID has asserted or alleged any claim related to any defect in the construction or condition of any part of the common area of the CID or any improvements comprising part of the CID.

10.         All insurance required under the CC&R’s is in full force and effect. The owner of the Property is an additional insured under such insurance to the extent of its interest in the Property.

11.         There is no pending or to the knowledge of the Association, threatened litigation, arbitration or other dispute resolution proceeding involving the CID or under the CC&R’s, except as follows: __________________________________________________.

12.         No special assessments or levies under the CC&R’s have been adopted by the Association and to the Association’s knowledge no such special assessment or levy is contemplated.

13.         Attached hereto as Exhibit C are: (i) a true and correct copy of the [HOA Budget] for calendar year 2016, (ii) a true and correct copy of the [HOA 2015 Income and Expense Statement], and (iii) a true and correct copy of [Reserve Study].

Each individual executing this estoppel certificate represents and warrants that such individual has been duly and validly authorized to do so. This estoppel certificate shall be binding on the undersigned and its successors and assigns and shall inure to the benefit of Buyer, and its lender, Keybank National Association (and its and their successors and assigns), and Owner (and its successors and assigns).

a _______________________

By:

Name:

Title:

M-2

EXHIBIT A

LEGAL DESCRIPTION

M-3

EXHIBIT B

COPIES OF ASSOCIATION DOCUMENTS

M-4

EXHIBIT C

COPIES OF ASSOCIATION FINANCIAL DOCUMENTS

M-5

AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS

by and between

OCTAVIA GATEWAY HOLDINGS, LLC, as Seller,

and

SRT SF Retail I, LLC, as Buyer

Table of Contents

		Page
1.	Purchase and Sale	1
2.	Purchase Price	1
3.	Escrow	2
4.	Buyer’s Investigations	2
5.	Conditions to the Close of Escrow	4
6.	Deliveries to Escrow Holder	7
7.	Deliveries Upon Close of Escrow	7
8.	Costs and Expenses	8
9.	Prorations	8
10.	Disbursements and Other Actions by Escrow Holder	10
11.	AS-IS Sale and Purchase; Release	10
12.	Seller’s Representations and Warranties	13
13.	Buyer’s Representations and Warranties	14
14.	Seller Covenants	15
15.	Casualty and Condemnation	15
16.	Notices	16
17.	Commissions	17
18.	Legal and Equitable Enforcement of this Agreement	18
19.	Assignment	19
20.	Confidentiality	20
21.	Miscellaneous	20

 -i-

Glossary

Additional Deposit	2
Affiliate	21
Agreement	1
Approval Notice	4
Association	3
Bill of Sale	7
Business Day	21
Buyer	1
BUYER’S POST-CLOSING CLAIMS	18
Claims	13
Close of Escrow	7
Closing Date	2
Consultant	4
Contingency Date	3
Current Tax Year	9
Deed	7
Deposit	2
Disclosure Items	13
Disclosure Report	12
Due Diligence	3
Effective Date	1
Escrow Holder	1
Escrow Instructions	2
Excluded Documents	2
General Assignment	7
Governmental Regulations	11
Hazardous Materials	11
Independent Consideration	2
Initial Deposit	1
Initial Deposit Deadline	1
Intangible Property	1
Lease Inducement Costs	9
Lease Year	8
Leases	1
Material Damage	16
Materially Damaged	16
Percentage Rents	8
Permitted Exceptions	5
Person	21
Personal Property	1
Property	1
PTR	5
PURCHASE DOCUMENTS	18
Purchase Price	1
Real Property	1
RECOURSE NOTICE	18
Reimbursable Tenant Expenses	9
Rents	8
Required Estoppels	3
Seller	1
Seller’s Documents	2
Seller’s Estimated Reimbursable Tenant Expenses	9
SELLER’S UNDERTAKINGS	18
Subject Lease Year	8
Title Company	5
Title Disapproval	5
Title Policy	5
Uncollected Rents	8

 -i-

EX-10.2

Exhibit 10.2 

FIRST AMENDMENT TO

AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS

(8 OCTAVIA BOULEVARD, UNITS 102, 307 AND 308, SAN FRANCISCO, CA)

THIS FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS (this “Amendment”), dated as of May 25, 2016, is made by and between OCTAVIA GATEWAY HOLDINGS, LLC, a Delaware limited liability company (“Seller”) and SRT SF RETAIL I, LLC, a Delaware limited liability company (“Buyer”).

A. Seller and Buyer are parties to that certain Agreement of Purchase and Sale and Joint Escrow Instructions dated as of May 4, 2016 (the “Purchase Agreement”).

B. Seller and Buyer desire to amend certain provisions of the Purchase Agreement as set forth herein.

NOW THEREFORE, in consideration of the premises, their mutual covenants and promises set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows:

1. Defined Terms. Capitalized terms used in this Amendment but not defined herein shall have the meanings set forth in the Purchase Agreement.

2. Form of Tenant Estoppel. Exhibit C [Form of Estoppel Certificate] to the Purchase Agreement is hereby superseded and replaced in its entirety by the forms of estoppel certificate attached hereto as Exhibits A-1 (Unit 102), A-2 (Unit 307) and A-3 (Unit 308). Buyer hereby approves the completed forms of estoppel certificate attached hereto as Exhibits A-1 (Unit 102), A-2 (Unit 307) and A-3 (Unit 308).

3. Approval Notice. This Amendment constitutes Buyer’s Approval Notice under Section 4(c) of the Purchase Agreement and shall be deemed properly delivered and accepted upon its execution and delivery by Seller and Buyer. Buyer has no further right to terminate the Purchase Agreement pursuant to Section 4(c) of the Purchase Agreement, and the Deposit is non-refundable to Buyer except as otherwise expressly provided in the Purchase Agreement.

4. Ratification and Affirmation of Contract. Seller and Buyer hereby ratify and affirm the Purchase Agreement in its entirety, except as expressly amended herein. The provisions of this Amendment shall control in the event of any conflicts with the provisions of the Purchase Agreement.

5. Execution of Amendment. This Amendment may be executed in counterparts, each of which shall be part of one and the same instrument, which counterparts will be transmitted to each party to the Purchase Agreement by email transmission of signature pages. This Amendment shall not be effective or binding upon either party until and unless Seller and Buyer have each delivered a signed signature page to this Amendment to the other party.

[SIGNATURES ON FOLLOWING PAGE]

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions – 8 Octavia

Page 1 of 2

IN WITNESS WHEREOF, Seller and Buyer have executed this Amendment as of the date first set forth above.

Seller:
OCTAVIA GATEWAY HOLDINGS, LLC,
a Delaware limited liability company
By:	DM Development Partners, LLC,
	a California limited liability company, Its Manager
	By:
	Name:
	Title:
By:	DDG California LLC,
	a Delaware limited liability company, Its Manager
	By:	DDG Partners LLC,
		a Delaware limited liability company,
		Its Member

By:

Name:

Title:

Buyer:

SRT SF RETAIL I, LLC,

a Delaware limited liability company

By:

Name:

Title:

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions – 8 Octavia

Page S-1

EXHIBIT A-1

FORM OF ESTOPPEL CERTIFICATE – UNIT 102

To:	SRT SF Retail I, LLC
	c/o Glenborough LLC
	400 South El Camino, 11th Floor
	San Mateo, CA 94402-1708

Dated:

Re: Lease Pertaining to 8 Octavia Boulevard, Unit 102, San Francisco, CA (the “Property”)

Ladies and Gentlemen:

The above addressee (“Buyer”) has entered into an agreement to acquire the Property. The undersigned, as tenant (“Tenant”), acknowledges the right of Buyer to rely upon the statements and representations of the undersigned contained in this certificate, and further acknowledges that Buyer will be acquiring the Property in material reliance on this certificate. Given the foregoing, Tenant hereby certifies and represents to Buyer and its lender, Keybank National Association (and its and their successors and assigns), and Landlord (and its successors and assigns) with respect to the above-described Lease, as follows (if any blanks do not apply, simply state “None”):

1. Tenant is the lessee under that certain lease (the “Lease”) pertaining to the Property which is dated May 1, 2015, and includes the following amendments:     None                                        .

2. The name of the current landlord (“Landlord”) is: Octavia Gateway Holdings, LLC.

3. The Lease is for the following portion of the Property (the “Premises”): That certain space identified as Unit 102 having approximately 1,930 square feet of usable interior ground floor space.

4. Delivery of the Premises, as that phrase is defined in the Lease, by the Landlord to the Tenant, occurred on or before: October 1, 2015.

5. Tenant has not had its Opening Day, as that phrase is defined in the Lease.

6. The Rent Commencement Date, as that phrase is defined in the Lease, occurred on: February 1, 2016.

7. The initial term of the Lease commenced on February 1, 2016 and shall expire on February 1, 2031, unless sooner terminated in accordance with the terms of the Lease. Tenant has no option to renew or extend the term of the Lease, except as follows (if none, so state): One (1) option to extend the term of the lease by five (5) years, on the terms and conditions set forth in the Lease.

8. The Lease, as it may have been modified or amended, contains the entire agreement of Landlord and Tenant with respect to the Premises, and is in full force and effect.

9. As of the date hereof, Tenant is occupying the Premises and is paying rent on a current basis under the Lease.

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions – 8 Octavia

Exhibit A-1 – Form of Estoppel Certificate – Go Sake Ventures II

Page 1 of 3

(a) The minimum monthly or base rent currently being paid by Tenant for the Premises pursuant to the terms of the Lease is $3,860 per month and has been paid through                                                                                         , 2016.

(b) There is currently no percentage rent due under the Lease.

(c) Operating Expenses, Expenses, common area maintenance, taxes, insurance and other charges (the “Reimbursables”) due under the Lease, currently in the amount of $1,994.16 per month, have been paid through ________________.

10. Tenant has accepted possession of the Premises, and all construction to be performed by Landlord for the Premises under the Lease is “substantially complete” (as that phrase is defined in the Lease) and has been completed by Landlord and approved by Tenant in accordance with the terms of the Lease and within the time periods set forth in the Lease. Landlord has paid in full any required contribution towards work to be performed by Tenant under the Lease, except as follows (if none, so state): $50,180.00 remaining due from Landlord contribution towards Tenant Improvements.

11. The Premises shall be expanded by the addition of the following space on the dates hereinafter indicated (if none, so state):    None                                                                .

12. No default or event that with the passage of time or notice would constitute a default on the part of Tenant exists under the Lease in the performance of the terms, covenants and conditions of the Lease required to be performed on the part of the Tenant.

13. No default or event that with the passage of time or notice would constitute a default on the part of Landlord exists under the Lease in the performance of the terms, covenants and conditions of the Lease required to be performed on the part of Landlord.

14. Tenant has no option or right to purchase all or any part of the Property.

15. Tenant has not assigned, sublet, transferred, hypothecated or otherwise disposed of its interest in the Lease and/or the Premises, or any part thereof.

16. Neither the Lease nor any obligations of Tenant thereunder have been guaranteed by any person or entity, except as follows (if none, so state):    None                                                 .

17. Tenant has received no notice that, and has no knowledge that, hazardous substances are being generated, used, handled, stored or disposed of by Tenant on the Premises or on the Property in violation of any applicable laws, rules or regulations or the terms of the Lease.

18. No rentals are accrued and unpaid under the Lease, except for Percentage Rent, if any, or Reimbursables, if any, which are not yet due and payable.

19. No prepayments of rentals due under the Lease have been made for more than one month in advance. No security or similar deposit has been made under the Lease.

20. Tenant has no defense, setoff, claim or counterclaim as to its obligations under the Lease, and to date has not asserted any rights of setoff, claim or counterclaim against Landlord.

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions – 8 Octavia

Exhibit A-1 – Form of Estoppel Certificate – Go Sake Ventures II

Page 2 of 3

21. Tenant has not received notice of any assignment, hypothecation, mortgage or pledge of Landlord’s interest in the Lease or the rents or other amounts payable thereunder, except as follows (if none, so state): None.

22. The undersigned is authorized to execute this Tenant Estoppel on behalf of Tenant.

Dated: , 2016.

Very truly yours,

TENANT:

Go Sake Ventures II, LLC,

a Delaware limited liability company

By:

Name:

Its:

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions – 8 Octavia

Exhibit A-1 – Form of Estoppel Certificate – Go Sake Ventures II

Page 3 of 3

EXHIBIT A-2

FORM OF ESTOPPEL CERTIFICATE – UNIT 307

To:	SRT SF Retail I, LLC
	c/o Glenborough LLC
	400 South El Camino, 11th Floor
	San Mateo, CA 94402-1708

Dated:

Re: Lease Pertaining to 8 Octavia Boulevard, Unit 307, San Francisco, CA (the “Property”)

Ladies and Gentlemen:

The above addressee (“Buyer”) has entered into an agreement to acquire the Property. The undersigned, as tenant (“Tenant”), acknowledges the right of Buyer to rely upon the statements and representations of the undersigned contained in this certificate, and further acknowledges that Buyer will be acquiring the Property in material reliance on this certificate. Given the foregoing, Tenant hereby certifies and represents to Buyer and its lender, Keybank National Association (and its and their successors and assigns), and Landlord (and its successors and assigns) with respect to the above-described Lease, as follows (if any blanks do not apply, simply state “None”):

1. Tenant is the lessee under that certain lease (the “Lease”) pertaining to the Property which is dated May 28, 2015, and includes the following amendments:      None                                 .

2. The name of the current landlord (“Landlord”) is: Octavia Gateway Holdings, LLC.

3. The Lease is for the following portion of the Property (the “Premises”): That certain space identified as Unit 307 having approximately 730 square feet of usable interior ground floor space.

4. Delivery of the Premises, as that phrase is defined in the Lease, by the Landlord to the Tenant, occurred on or before: October 1, 2015.

5. Tenant has not had its Opening Day, as that phrase is defined in the Lease.

6. The Rent Commencement Date, as that phrase is defined in the Lease, occurred on: February 1, 2016.

7. The initial term of the Lease commenced on February 1, 2016 and shall expire on February 1, 2031, unless sooner terminated in accordance with the terms of the Lease. Tenant has no option to renew or extend the term of the Lease, except as follows (if none, so state): One (1) option to extend the term of the lease by five (5) years, on the terms and conditions set forth in the Lease.

8. The Lease, as it may have been modified or amended, contains the entire agreement of Landlord and Tenant with respect to the Premises, and is in full force and effect.

9. As of the date hereof, Tenant is occupying the Premises and is paying rent on a current basis under the Lease.

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions – 8 Octavia

Exhibit A-2 – Form of Estoppel Certificate – Go Sake Ventures III

Page 1 of 3

(d) The minimum monthly or base rent currently being paid by Tenant for the Premises pursuant to the terms of the Lease is $1,460 per month and has been paid through                                                                                         , 2016.

(e) Operating Expenses, Expenses, common area maintenance, taxes, insurance and other charges (the “Reimbursables”) due under the Lease, currently in the amount of $464.72 per month, have been paid through ________________.

10. Tenant has accepted possession of the Premises, and all construction to be performed by Landlord for the Premises under the Lease is “substantially complete” (as that phrase is defined in the Lease) and has been completed by Landlord and approved by Tenant in accordance with the terms of the Lease and within the time periods set forth in the Lease. Landlord has paid in full any required contribution towards work to be performed by Tenant under the Lease, except as follows (if none, so state): $21,900.00 remaining due from Landlord contribution towards Tenant Improvements.

11. The Premises shall be expanded by the addition of the following space on the dates hereinafter indicated (if none, so state):       None                                           .

12. No default or event that with the passage of time or notice would constitute a default on the part of Tenant exists under the Lease in the performance of the terms, covenants and conditions of the Lease required to be performed on the part of the Tenant.

13. No default or event that with the passage of time or notice would constitute a default on the part of Landlord exists under the Lease in the performance of the terms, covenants and conditions of the Lease required to be performed on the part of Landlord.

14. Tenant has no option or right to purchase all or any part of the Property.

15. Tenant has not assigned, sublet, transferred, hypothecated or otherwise disposed of its interest in the Lease and/or the Premises, or any part thereof.

16. Neither the Lease nor any obligations of Tenant thereunder have been guaranteed by any person or entity, except as follows (if none, so state):     None                                          .

17. Tenant has received no notice that, and has no knowledge that, hazardous substances are being generated, used, handled, stored or disposed of by Tenant on the Premises or on the Property in violation of any applicable laws, rules or regulations or the terms of the Lease.

18. No rentals are accrued and unpaid under the Lease, except for Percentage Rent, if any, or Reimbursables, if any, which are not yet due and payable.

19. No prepayments of rentals due under the Lease have been made for more than one month in advance. No security or similar deposit has been made under the Lease.

20. Tenant has no defense, setoff, claim or counterclaim as to its obligations under the Lease, and to date has not asserted any rights of setoff, claim or counterclaim against Landlord.

21. Tenant has not received notice of any assignment, hypothecation, mortgage or pledge of Landlord’s interest in the Lease or the rents or other amounts payable thereunder, except as follows (if none, so state): None.

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions – 8 Octavia

Exhibit A-2 – Form of Estoppel Certificate – Go Sake Ventures III

Page 2 of 3

22. The undersigned is authorized to execute this Tenant Estoppel on behalf of Tenant.

Dated: , 2016.

Very truly yours,

TENANT:

Go Sake Ventures III, LLC,

a ____________ limited liability company

By:

Name:

Its:

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions – 8 Octavia

Exhibit A-2 – Form of Estoppel Certificate – Go Sake Ventures III

Page 3 of 3

EXHIBIT A-3

FORM OF ESTOPPEL CERTIFICATE – UNIT 308

To:	SRT SF Retail I, LLC
	c/o Glenborough LLC
	400 South El Camino, 11th Floor
	San Mateo, CA 94402-1708

Dated:

Re: Lease Pertaining to 8 Octavia Boulevard, Unit 308, San Francisco, CA (the “Property”)

Ladies and Gentlemen:

The above addressee (“Buyer”) has entered into an agreement to acquire the Property. The undersigned, as tenant (“Tenant”), acknowledges the right of Buyer to rely upon the statements and representations of the undersigned contained in this certificate, and further acknowledges that Buyer will be acquiring the Property in material reliance on this certificate. Given the foregoing, Tenant hereby certifies and represents to Buyer and its lender, Keybank National Association (and its and their successors and assigns), and Landlord (and its successors and assigns) with respect to the above-described Lease, as follows (if any blanks do not apply, simply state “None”):

1. Tenant is the lessee under that certain lease (the “Lease”) pertaining to the Property which is dated July__, 2015 [sic], and includes the following amendments:     None                                    .

2. The name of the current landlord (“Landlord”) is: Octavia Gateway Holdings LLC.

3. The Lease is for the following portion of the Property (the “Premises”): That certain space identified as Unit 308 having approximately 980 square feet of usable interior ground floor space.

4. Delivery of the Premises, as that phrase is defined in the Lease, by the Landlord to the Tenant, occurred on or before: October 1, 2015. Tenant received all Approvals, as that term is defined in the Lease, on or before such date.

5. Tenant has not had its Opening Day, as that phrase is defined in the Lease, and the Opening Day is anticipated to occur in June 2016.

6. The Rent Commencement Date, as that phrase is defined in the Lease, has occurred or will occur on: May 27, 2016.

7. The initial term of the Lease commenced on May 27, 2016 and shall expire on May 26, 2026, unless sooner terminated in accordance with the terms of the Lease. Tenant has no option to renew or extend the term of the Lease, except as follows (if none, so state): One (1) option to extend the term of the lease by five (5) years, on the terms and conditions set forth in the Lease.

8. The Lease, as it may have been modified or amended, contains the entire agreement of Landlord and Tenant with respect to the Premises, and is in full force and effect.

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions – 8 Octavia

Exhibit A-3 – Form of Estoppel Certificate – Boba Guys

Page 1 of 3

9. As of the date hereof, Tenant is occupying the Premises and is paying rent on a current basis under the Lease.

(f) The minimum monthly or base rent currently being paid by Tenant for the Premises pursuant to the terms of the Lease is $2,613.34 per month and has been paid through ______________________, 2016.

(g) There is currently no percentage rent due under the Lease.

(h) Operating Expenses, Expenses, common area maintenance, taxes, insurance and other charges (the “Reimbursables”) due under the Lease, currently in the amount of $680.68 per month, have been paid through ________________.

10. Tenant has accepted possession of the Premises, and all construction to be performed by Landlord for the Premises under the Lease is “substantially complete” (as that phrase is defined in the Lease) and has been completed by Landlord and approved by Tenant in accordance with the terms of the Lease and within the time periods set forth in the Lease. Landlord has paid in full any required contribution towards work to be performed by Tenant under the Lease, except as follows (if none, so state): $24,500.00 remaining due from Landlord contribution to Tenant Improvements. Tenant has exhausted all credits against monthly minimum rent to which Tenant was entitled under the Lease, except as follows (if none, so state): $10,000.00 rent credit to cover the cost to replace the sliding glass door in its Premises, contingent upon Tenant providing receipt of costs.

11. The existence of a spiral staircase in the Premises did not prevent Tenant from obtaining final approvals and a certificate of occupancy (or its equivalent) from the applicable governmental authorities. Tenant did not have a right to abatement of one (1) month’s rent as a result of such spiral staircase issues. If Tenant did have a right to such rent abatement, Tenant has fully exhausted such abatement prior to the date of this certificate.

12. The Premises shall be expanded by the addition of the following space on the dates hereinafter indicated (if none, so state):    None                                                   .

13. No default or event that with the passage of time or notice would constitute a default on the part of Tenant exists under the Lease in the performance of the terms, covenants and conditions of the Lease required to be performed on the part of the Tenant.

14. No default or event that with the passage of time or notice would constitute a default on the part of Landlord exists under the Lease in the performance of the terms, covenants and conditions of the Lease required to be performed on the part of Landlord.

15. Tenant has no option or right to purchase all or any part of the Property.

16. Tenant has not assigned, sublet, transferred, hypothecated or otherwise disposed of its interest in the Lease and/or the Premises, or any part thereof.

17. Neither the Lease nor any obligations of Tenant thereunder have been guaranteed by any person or entity, except as follows (if none, so state): None .

18. Tenant has received no notice that, and has no knowledge that, hazardous substances are being generated, used, handled, stored or disposed of by Tenant on the Premises or on the Property in violation of any applicable laws, rules or regulations or the terms of the Lease.

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions – 8 Octavia

Exhibit A-3 – Form of Estoppel Certificate – Boba Guys

Page 2 of 3

19. No rentals are accrued and unpaid under the Lease, except for Percentage Rent, if any, or Reimbursables, if any, which are not yet due and payable.

20. No prepayments of rentals due under the Lease have been made for more than one month in advance. No security or similar deposit has been made under the Lease.

21. Tenant has no defense, setoff, claim or counterclaim as to its obligations under the Lease, and to date has not asserted any rights of setoff, claim or counterclaim against Landlord.

22. Tenant has not received notice of any assignment, hypothecation, mortgage or pledge of Landlord’s interest in the Lease or the rents or other amounts payable thereunder, except as follows (if none, so state): None.

23. The undersigned is authorized to execute this Tenant Estoppel on behalf of Tenant.

Dated: , 2016.

Very truly yours,

TENANT:

Boba Guys Inc.,

a California corporation

By:

Name:

Its:

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions – 8 Octavia

Exhibit A-3 – Form of Estoppel Certificate – Boba Guys

Page 3 of 3

EX-10.3

Exhibit 10.3

AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS

THIS AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS (this “Agreement”) is made and entered into as of the 4th day of May, 2016 (the “Effective Date”), by and between Grove Street Hayes Valley LLC, a Delaware limited liability company (“Seller”), and SRT SF Retail I, LLC, a Delaware limited liability company (“Buyer”).

RECITALS

A.           Seller owns certain improved real property commonly known as 400 Grove Street, Unit C-1, San Francisco, California, in the City and County of San Francisco, State of California, which is more particularly described on Exhibit “A” attached hereto (excluding any improvements owned by any tenant pursuant to its Lease) (the “Real Property”), together with all of Seller’s right, title and interest, if any, in and to (i) all leases of space in said Real Property and any guaranties of such leases (collectively, the “Leases”), (ii) all of the Binding Contracts, if any, that have been approved by Buyer pursuant to Paragraph 14, (iii) all intangible personal property, to the extent assignable and related exclusively to the Real Property, including but not limited to, any such (A) warranties, guaranties and indemnities, (B) governmental licenses, permits, or similar rights, (C) plans, drawings, specifications, surveys, engineering reports, other technical descriptions and any names by which the improvements on the Real Property may be known or identified, including its street address; but excluding any contracts other than the Leases and, to the extent approved by Buyer pursuant to Paragraph 14, the Binding Contracts (with the exception of such excluded property, the property described in this subparagraph (iii) is collectively referred to as the “Intangible Property”), and (iv) any tangible personal property owned by Seller and located in the Real Property excluding any such property which is owned by any tenant or integrated with the property manager’s operation of other properties (the “Personal Property”) are hereinafter collectively referred to as the “Property”.

B.           Concurrently herewith, (i) Octavia Gateway Holdings, LLC, a Delaware limited liability company (“Octavia Seller”) and Buyer have entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions, dated as of even date herewith (the “Octavia Purchase Agreement”), and (ii) Hayes Street Hayes Valley LLC, a Delaware limited liability company (“Hayes Seller”, and together with Octavia Seller, “Other Sellers”) and Buyer have entered into that certain Agreement of Purchase and Sale and Joint Escrow Instructions, dated as of even date herewith (the “Hayes Purchase Agreement”, and together with the Octavia Purchase Agreement, the “Other Purchase Agreements”).

C.           Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, the Property on and subject to the terms and conditions of this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows:

1.          Purchase and Sale. Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller, the Property upon the terms and conditions set forth in this Agreement.

2.          Purchase Price. The Purchase Price (“Purchase Price”) for the Property shall be Two Million Eight Hundred Ninety Thousand and 00/100 Dollars ($2,890,000.00). The Purchase Price shall be payable as follows:

1

(a)          Deposit. Prior to 5:00 P.M. (Pacific Time) on the second (2nd) Business Day after the Effective Date (the “Initial Deposit Deadline”), Buyer shall deliver or cause to be delivered to First American Title Insurance Company, at 101 Mission Street, Suite 1600, San Francisco, CA 94105, attention: Heather Kucala (“Escrow Holder”), cash or other immediately available funds in the amount of Seventy-Five Thousand and 00/100 Dollars ($75,000.00) (the “Initial Deposit”). In the event that the Initial Deposit is not timely funded on or before the Initial Deposit Deadline for any reason, then this Agreement shall be automatically null and void and of no further force and effect (and Buyer shall have no rights, and Seller shall have no obligations, under this Agreement of any kind or nature). Prior to 5:00 P.M. (Pacific Time) on the second (2nd) Business Day following the Contingency Date, Buyer shall deliver or cause to be delivered to Escrow Holder cash or other immediately available funds in the amount of Seventy-Five Thousand and 00/100 Dollars ($75,000.00) (the “Additional Deposit”). The Initial Deposit and, if and when deposited with Escrow Holder, the Additional Deposit, are collectively referred to herein as the “Deposit”. The Deposit shall be invested in an interest earning account designated by Buyer, subject to Seller’s reasonable approval, and any interest earned thereon shall be a part of the Deposit for all purposes under this Agreement. At the Close of Escrow, the Deposit, and any interest accruing thereon, shall be applied and credited toward payment of the Purchase Price.

(b)          Cash Balance. On or before 11:00 A.M. (Pacific Time) on the Closing Date, Buyer shall deposit into Escrow cash or other immediately available funds in the amount of the balance of the Purchase Price, as adjusted by Buyer’s share of expenses and prorations.

(c)          Independent Consideration. Contemporaneously with the execution and delivery of this Agreement, Buyer has paid to Seller as further consideration for this Agreement, in cash, the sum of $100.00 (the "Independent Consideration"), in addition to the Deposit and the Purchase Price and independent of any other consideration provided hereunder, which Independent Consideration is fully earned by Seller and is non-refundable under all circumstances.

3.          Escrow.

(a)          Opening of Escrow. Buyer and Seller shall promptly evidence the opening of Escrow by delivering a fully executed copy of this Agreement to Escrow Holder.

(b)          Close of Escrow. The Close of Escrow shall occur, if at all, on the Closing Date. The “Closing Date” means the date that is twenty (20) days after the Contingency Date, provided that such date is a Business Day which is followed by a Business Day, otherwise the Closing Date shall be the next soonest date that is a Business Day which is followed by a Business Day. Buyer and Seller hereby authorize their respective attorneys to execute and deliver to Escrow Holder any additional or supplementary instructions as may be necessary or convenient to implement the terms of this Agreement and close the transactions contemplated hereby, provided such instructions are consistent with and merely supplement this Agreement and shall not in any way modify, amend or supersede this Agreement. Such supplementary instructions, together with the escrow instructions set forth in this Agreement, as they may be amended from time to time by the parties, shall collectively be referred to as the “Escrow Instructions”. The Escrow Instructions may be amended and supplemented by such standard terms and provisions as the Escrow Holder may request the parties hereto to execute, provided that any such standard terms and provisions do not materially increase Seller’s or Buyer’s obligations hereunder or materially decrease Seller’s or Buyer’s rights hereunder. The parties hereto and Escrow Holder acknowledge and agree that in the event of a conflict between any provision of such standard terms and provisions supplied by the Escrow Holder and the Escrow Instructions, the Escrow Instructions shall prevail.

4.          Buyer’s Investigations.

(a)          Access to and Delivery of Materials. Buyer hereby acknowledges that prior to the Effective Date, Seller has delivered to Buyer or made available for Buyer’s review the documents listed on Exhibit “B” attached hereto (collectively, “Seller’s Documents”). Seller shall also make available to Buyer, promptly following Buyer’s written request, any other documents in Seller’s possession, other than Excluded Documents, which are reasonably requested by Buyer with respect to the Property. As used herein, “Excluded Documents” shall mean any documents involving either Seller’s financing or refinancing of the Property, any purchase and sale agreements and correspondence pertaining to Seller’s acquisition of the Property, any documents pertaining to the potential acquisition of the Property by any past or prospective purchasers, any third party purchase inquiries and correspondence, appraisals of the Property, attorney-client privileged documents, internal budgets or financial projections, and any other internal documents. Except as may otherwise be expressly set forth in Paragraph 12 below, all third party reports are delivered to Buyer without representation or warranty by or recourse against, Seller or any third party preparing such report or any of their respective direct or indirect partners, managers, members, employees, officers, directors, agents, subsidiaries or affiliates, and its or their respective successors and assigns (and Buyer hereby releases the same from and against any obligation or liability in connection therewith). On termination of this Agreement for any reason, Buyer shall promptly destroy all Seller’s Documents and other information, of whatever nature and in whatever form, with respect to the Property, heretofore or hereafter delivered by Seller or obtained by Buyer and/or created by or on behalf of Buyer in reliance upon such information, without any copies being retained by Buyer. In any such event, and as a covenant which shall survive the termination of this Agreement, all such information, as well as the terms of this Agreement, shall be treated by Buyer as confidential and none of it shall be disclosed by Buyer to any other party thereafter for any purpose or in any context, except as provided in Paragraph 20 below.

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(b)          Due Diligence.

(i)          General. On or before the date which is twenty (20) days after the Effective Date (the “Contingency Date”), Buyer shall have completed any and all due diligence activities which Buyer may choose to conduct or commission, including without limitation, a review of: Seller’s Documents, any other documents made available to Buyer, the condition of title to the Real Property as disclosed by the PTR, the condition of the improvements located on the Real Property and all operating systems relating thereto, the presence of Hazardous Materials, if any, the status of Binding Contracts and the Leases, compliance with Governmental Regulations, the development potential (or lack thereof) of the Real Property, and any and all other matters of similar or dissimilar nature relating in any way to the Property or Buyer’s purchase of the Property (collectively, the “Due Diligence”).

(ii)         Estoppels. In connection with such Due Diligence, Seller shall work diligently to have (A) the tenants under the Leases execute an estoppel certificate for the benefit of Seller, Buyer and Buyer’s lender in the form attached hereto as Exhibit “C” and (B) 400 Grove Street Owners’ Association (the “Association”) execute an estoppel certificate for the benefit of Seller, Buyer and Buyer’s lender in the form attached hereto as Exhibit “M”, in each case with such terms as have been previously approved by Buyer (i.e., Buyer shall review and approve each such completed estoppel certificate prior to the date that it is distributed to the tenant or the Association, as applicable, for review and execution by such tenant or the Association, as applicable), provided that Seller shall not be in breach of this sentence in the event that, despite its diligent efforts, it fails to obtain such executed estoppel certificates from the tenants and/or the Association. Buyer shall so approve each such estoppel certificate (which approval shall not be unreasonably withheld), or provide its comments thereto, within two (2) Business Days following its receipt of the same otherwise Buyer shall be deemed to have approved the same. Seller shall promptly deliver to Buyer all executed estoppel certificates received by Seller. Seller makes no representation as to the number of estoppel certificates, if any, that will be returned to Buyer. In the event executed estoppel certificates are not received on or before the date that is two (2) Business Days prior to the Closing Date from all tenants of the Real Property and the Association, dated no earlier than thirty (30) days prior to the Closing Date, and without material adverse factual disclosure compared to the form of estoppel distributed to such tenant or the Association, as applicable, for its review and execution pursuant to the terms hereof (collectively, the “Required Estoppels”), then Buyer shall have the right to terminate this Agreement and upon any such termination receive a refund of its Deposit; provided, however, that any objection by Buyer to any executed estoppel certificate must be raised by Buyer within two (2) Business Days following its receipt of the same otherwise such estoppel certificate shall be deemed to satisfy the requirements of this Paragraph. Notwithstanding anything contained herein to the contrary, in no event shall any fact or issue disclosed in any tenant’s Lease or made on Exhibit “J” attached hereto, constitute a material adverse factual disclosure or otherwise be objected to by Buyer.

(iii)        Contracts. Notwithstanding anything contained herein to the contrary, Seller shall terminate all of its listing agreements and property management agreements, to the extent relating to the Property, at its expense as of the Close of Escrow (provided that this obligation to terminate listing agreements and property management agreements shall only apply to those agreements entered into by Seller to the extent the same apply to the Real Property, and shall in no event apply to any listing agreements or property management agreements entered into by the Association).

(iv)        Third Party Communications. Notwithstanding anything to the contrary contained herein, Buyer shall not (i) communicate with any tenants under the Leases with respect to the Property without affording Seller a reasonable opportunity to have a representative of Seller participate in any conversations with such tenants or (ii) contact any governmental authority having jurisdiction over the Property with respect to the Property, other than in connection with Buyer’s due diligence evaluation of the Property to verify zoning and/or compliance matters, without obtaining the prior written consent of Seller and without affording Seller a reasonable opportunity to have a representative of Seller participate in any conversations with such governmental authority.

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(c)          Buyer’s Right to Terminate. Buyer may at Buyer’s election and discretion terminate this Agreement, for any reason or no reason, at any time prior to 5:00 P.M. (Pacific Time) on the Contingency Date by delivering written notice thereof to Seller and Escrow Holder, and upon such termination, Paragraph 5(c) shall apply. If Buyer elects not to terminate this Agreement in accordance with the foregoing sentence, Buyer shall deliver to Seller and Escrow Holder, prior to 5:00 P.M. (Pacific Time) on the Contingency Date, written notice of Buyer’s intent to proceed with the acquisition of the Property under the terms of this Agreement (the “Approval Notice”), and the Deposit shall thereupon become non-refundable to Buyer except as otherwise expressly provided in this Agreement. In the event that Buyer fails to timely deliver the Approval Notice pursuant to the terms of this Paragraph 4(c), then Buyer shall be deemed to have terminated this Agreement pursuant to this Paragraph 4(c) and Paragraph 5(c) shall apply.

(d)          Access by Buyer. Subject to the rights of tenants and the requirements of Paragraph 4(e), at Buyer’s sole cost and expense, Buyer and Buyer’s agents and representatives shall have the right, upon no less than one (1) Business Day’s prior notice to Seller, to enter upon the Real Property at all reasonable times in order to conduct such inspections, tests or studies as Buyer may deem appropriate (including, without limitation, for the preparation of an ALTA/NSPS Land Title Survey of the Real Property), excluding invasive investigations of the land or improvements thereon; except that any such entry shall be coordinated with Seller and Seller’s property manager or other agent of Seller in control of the Property, and shall be conducted in such a manner as to not materially interfere with the on-going operation of the Property. Any damage caused to the Property in connection with any inspection, test, or study shall be promptly and fully repaired by Buyer and the Property returned to its prior condition, all at Buyer’s cost, which obligation shall survive any termination of this Agreement. In no event shall Buyer, prior to the Close of Escrow, indicate in any way that Buyer owns or holds any other rights of any nature in the Property or any portion thereof, or that Buyer is in any manner acting on behalf of Seller. Buyer shall keep the Property free and clear of any mechanic’s liens or materialmen’s liens arising out of any of Buyer’s activities or those of its agents and representatives, which obligation shall survive any termination of this Agreement. Not less than two (2) Business Days prior to any work being conducted on the Real Property by or for the benefit of Buyer, which work could be the basis for the filing of a mechanic’s lien claim against the Real Property if such work were not duly paid for, Buyer shall obtain Seller’s written consent and shall allow Seller to post such notices of non-responsibility with respect thereto as Seller may deem appropriate. Further, except for the mere discovery of existing conditions on or affecting the Property or to the extent arising from the active negligence or willful misconduct of Seller, Buyer hereby agrees to indemnify, defend and hold Seller harmless from and against any and all loss, cost, liability or expense arising out of the acts or omissions of Buyer and/or its agents or representatives in connection with any such entry, inspection, test, study or other activity, including without limitation all legal expenses reasonably incurred by Seller in connection therewith. The indemnity provided herein shall survive the Close of Escrow and any termination of this Agreement and shall not be limited by the insurance required to be maintained under Paragraph 4(e).

(e)          Insurance. Prior to Buyer entering upon the Real Property, or any other person or entity entering upon the Real Property pursuant to Buyer’s rights under Paragraph 4(d) (each a “Consultant”), Buyer shall, and shall cause each and every such Consultant, to furnish Seller with a certificate of insurance evidencing that Seller has been added as an additional insured under an insurance policy maintained by Buyer or such Consultant, as applicable, and all premiums due on the policy have been paid. Each such insurance policy shall be from an insurer licensed in the State of California with a rating by A.M. Best of A- or higher, and provide coverage against any claim for personal liability or property damage caused by Buyer or such Consultant, as applicable, and its respective agents or representatives, with a combined single limit liability of not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate.

5.          Conditions to the Close of Escrow.

(a)          Conditions Precedent to Buyer’s Obligations. The Close of Escrow and Buyer’s obligations with respect to the consummation of the transactions contemplated by this Agreement are subject to the timely satisfaction or waiver by Buyer of the following conditions:

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(i)          Representations, Warranties and Covenants of Seller. Seller shall have duly performed in all material respects all material covenants to be performed by Seller hereunder, and all of Seller’s representations and warranties set forth in Paragraph 12 shall be true and correct as of the Effective Date and the Closing Date (except to the extent that Paragraph 12 expressly provides that such representations and warranties are made as of the Effective Date) in all material respects.

(ii)         Delivery of Documents. Seller shall have delivered all of the duly executed documents required to be delivered by Seller pursuant to Paragraph 6(a).

(iii)        Title Insurance. As of the Close of Escrow, First American Title Insurance Company (the “Title Company”) shall have issued or shall have unconditionally committed to issue an ALTA extended coverage owner’s policy of title insurance showing title to the Real Property vested in Buyer subject only to the Permitted Exceptions, with a liability amount equal to the Purchase Price, which includes an endorsement providing affirmative mechanics’ and materialmen’s lien coverage against liens for services, labor or material arising out of the work described in Paragraph 5(a)(iii)(z) below, which endorsement shall be in a form reasonably acceptable to Buyer and Buyer’s lender (the “Title Policy”). Buyer has obtained from the Title Company that certain preliminary title report with respect to the Property, dated as of March 17, 2016, and issued under order no. NCS-787084-5-SF (the “PTR”), containing such exceptions as the Title Company would specify in the Title Policy and copies of all documents of record identified as exceptions in such PTR. On or before the date that is five (5) days prior to the Contingency Date (or within five (5) days after Buyer’s receipt of any supplemental preliminary title report that is delivered to Buyer later than the date that is five (5) days prior to the Contingency Date), Buyer shall have the right to give written notice to Seller disapproving any items identified as exceptions in such PTR (or supplemental preliminary title report), and identifying the items and/or exceptions disapproved (a “Title Disapproval”). Notwithstanding anything contained herein to the contrary, Buyer shall have no right to deliver a Title Disapproval with respect to any exception contained in any such supplemental preliminary title report which (1) was also contained in the original PTR or (2) would constitute a Permitted Exception regardless of whether or not included in any such report. Any exceptions in the PTR or any supplemental preliminary title report not timely disapproved by Buyer with a Title Disapproval shall be deemed to have been approved by Buyer, other than those items Seller is obligated to remove in the last sentence of this Paragraph. Upon Buyer’s delivery of a Title Disapproval, Seller may elect, in its sole discretion, to remove (or otherwise modify or cure in a manner reasonably satisfactory to Buyer) said disapproved item or items at or prior to the Close of Escrow, by delivering written notice of such election to Buyer not later than three (3) days following the date Seller receives a Title Disapproval. If Seller does not notify Buyer in writing that Seller will eliminate (or otherwise cure to Buyer’s reasonable satisfaction) such disapproved exceptions or matters within such three (3) day period, Seller shall be deemed to have elected not to remove (or otherwise cure) such exception and Buyer shall have five (5) days following the date Seller received the Title Disapproval to terminate this Agreement in accordance with Paragraph 5(c). If Buyer fails to so terminate this Agreement, Buyer shall be deemed to have withdrawn its disapproval and approved such exception, other than those items Seller is obligated to remove in the last sentence of this Paragraph. The term “Permitted Exceptions” shall mean: the specific exceptions listed in the PTR and any supplemental preliminary title report approved or deemed approved by Buyer or which Seller has agreed to cure in a manner reasonably acceptable to Buyer; applicable zoning and building ordinances and land use regulations; such state of facts as would be disclosed by a survey or physical inspection of the Property; the lien of taxes and assessments not yet delinquent; any standard form exclusions from coverage set forth in the jacket of the Title Policy; any exceptions caused by Buyer, its agents, representatives or employees; any liens arising from or related to Lease Inducement Costs for which Buyer is liable pursuant to Paragraph 9(f); and the rights of the tenants under the Leases, as tenants only. It shall not be a condition to the Close of Escrow if Buyer elects to obtain any endorsements (other than the mechanic’s lien endorsement contemplated above), requests reinsurance or coinsurance, or otherwise elects to obtain any different or additional coverage in excess of that provided by the Title Policy, and in no event shall the Close of Escrow be delayed by reason of having to obtain a survey or to fulfill any other necessary title requirement, so long as the Title Company is in position to issue the Title Policy as of the Closing Date. Notwithstanding the foregoing provisions of this Paragraph 5(a)(iii) to the contrary, subject to the terms and conditions of this Agreement, (y) Seller does agree to deliver title to the Real Property at the Close of Escrow free and clear of liens of any deeds of trust and/or mortgages created by, under or through Seller or any Affiliate of Seller, which liens Seller shall cause to be released at or prior to the Close of Escrow (with Seller having the right to apply the Purchase Price or a portion thereof for such purpose), and (z) Seller agrees to use commercially reasonable efforts to remove or cause to be insured over by the Title Company, in a manner reasonably acceptable to Buyer, any mechanics’ or materialmen’s liens on or attaching to the Real Property relating to or arising out of any work of improvement contracted for by or on behalf of Seller or any Affiliate of Seller. If reasonably requested by the Title Company in connection with the issuance of affirmative mechanic’s and materialmen’s lien coverage to Buyer and/or Buyer’s lender, Seller shall provide the Title Company with a mechanics lien indemnity, in form reasonably acceptable to the Title Company and Seller, with respect to any work of improvement performed on or benefitting the Real Property (and/or the project of which the Real Property is a part) which was contracted for by or on behalf of Seller or any Affiliate of Seller.

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(iv)        No Material Defaults Under Other Purchase Agreements. No material breach or material default by any of the Other Sellers shall exist under any of the Other Purchase Agreements.

(v)         Estoppel Certificates. Buyer shall have received the Required Estoppels pursuant to Paragraph 4(b)(ii).

(b)          Conditions Precedent to Seller’s Obligations. The Close of Escrow and Seller’s obligations with respect to the consummation of the transactions contemplated by this Agreement are subject to the timely satisfaction or waiver by Seller of the following conditions:

(i)          Representations, Warranties and Covenants of Buyer. Buyer shall have duly performed in all material respects each and every material covenant of Buyer hereunder, and all of Buyer’s representations and warranties set forth in this Agreement shall be true and correct as of the Effective Date and the Closing Date (except to the extent that Paragraph 13 expressly provides that such representations and warranties are made as of the Effective Date) in all material respects.

(ii)         Delivery of Documents and Purchase Price. Buyer shall have timely delivered the Purchase Price pursuant to the provisions of Paragraph 2, and shall have delivered all of the duly executed documents required to be delivered by Buyer pursuant to Paragraph 6(b).

(iii)        No Material Defaults Under Other Purchase Agreements. No material breach or material default by Buyer shall exist under any of the Other Purchase Agreements.

(c)          Effect of Termination. In the event any condition set forth in this Paragraph 5 is not timely satisfied, unless waived by the applicable party, Buyer or Seller, as applicable, shall have the right to terminate this Agreement and if this Agreement is so terminated or is terminated by either party pursuant to any other provision of this Agreement giving that party the right to do so, then:

(i)          Termination of Agreement. This Agreement, the Escrow, and the rights and obligations of Buyer and Seller shall terminate, except as otherwise expressly provided herein;

(ii)         Return of Deposit. Except as otherwise provided herein (including, without limitation, as provided in Paragraph 18(b)), the Deposit, and any interest accruing thereon, shall be promptly returned to Buyer and any documents and monies deposited by the parties which are then held by Escrow Holder shall be returned to the party depositing same; and

(iii)        Cancellation Fees and Expenses. Any cancellation charges required to be paid to Escrow Holder and the Title Company shall be borne equally by Buyer and Seller (unless one party is in breach or default hereunder in which case the defaulting party shall pay the cancellation charges), and all other charges shall be borne by the party incurring same.

(d)          Close of Escrow. It is contemplated that the transaction shall be closed by means of the concurrent delivery of the documents of title, the commitment to deliver the Title Policy and the payment of the Purchase Price. Notwithstanding the foregoing, there shall be no requirement that Seller and Buyer physically meet for the Close of Escrow, and all documents to be delivered at the Close of Escrow shall be delivered to the Escrow Holder unless the parties hereto mutually agree otherwise. Seller and Buyer agree to use reasonable efforts to complete all requirements for the Close of Escrow prior to the Closing Date. Seller and Buyer also agree that disbursement of the Purchase Price, as adjusted by the prorations, shall not be conditioned upon the recording of the Deed, but rather, upon the satisfaction or waiver of all conditions precedent to the Close of Escrow and the irrevocable agreement by the Title Company to issue the Title Policy without reservation for any “gap” between Close of Escrow and the recordation of the Deed. The date upon which such satisfaction or waiver and such irrevocable agreement occurs shall be the “Close of Escrow”.

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6.          Deliveries to Escrow Holder.

(a)          Seller’s Deliveries. Seller hereby covenants and agrees to deliver or cause to be delivered to Escrow Holder at least one (1) Business Day prior to the Closing Date the following instruments and documents:

(i)          Deed. A grant deed (“Deed”), duly executed and acknowledged in recordable form by Seller, conveying Seller’s interest in the Real Property to Buyer. The Deed shall be in the form attached hereto as Exhibit “D”.

(ii)         Bill of Sale. A bill of sale (“Bill of Sale”) duly executed by Seller, conveying to Buyer, without warranty, all of Seller’s right, title and interest in and to the Personal Property. The Bill of Sale shall be in the form of Exhibit “E” attached hereto.

(iii)        General Assignment. An assignment and assumption (“General Assignment”), duly executed by Seller, assigning to Buyer, without warranty, all of Seller’s right, title and interest in and to any and all Intangible Property, Leases and any Binding Contracts, all to the extent transferable by Seller. The General Assignment shall be in the form of Exhibit “F” attached hereto.

(iv)        Non-Foreign Certifications. A certificate duly executed by Seller, in the form of Exhibit “G” attached hereto, and a California Form 593-C executed by Seller.

(v)         Proof of Authority. Such proof of Seller’s authority and authorization to enter into this Agreement and the transactions contemplated hereby, and such proof of the power and authority of the individual(s) executing and/or delivering any instruments, documents or certificates on behalf of Seller to act for and bind Seller as may be reasonably required by Title Company.

(vi)        Notice to Tenants. Notices to all lessees under the Leases for the Property, if any, in the form of Exhibit “H” attached hereto, duly executed by Seller. Buyer shall promptly provide to Seller all necessary information regarding the Buyer required to complete the tenant notices, if any.

(vii)       Owner’s Affidavit and Gap Indemnity. An owner’s affidavit in the form of Exhibit “I” attached hereto and a gap indemnity in a form reasonably acceptable to Seller and the Title Company, each duly executed by Seller.

(b)          Buyer’s Deliveries. Buyer hereby covenants and agrees to deliver or cause to be delivered to Escrow Holder at least one (1) Business Day prior to the Closing Date the following instruments and documents:

(i)          General Assignment. A counterpart of the General Assignment, duly executed by Buyer.

(ii)         Proof of Authority. Such proof of Buyer’s authority and authorization to enter into this Agreement and the transactions contemplated hereby, and such proof of the power and authority of the individual(s) executing and/or delivering any instruments, documents or certificates on behalf of Buyer to act for and bind Buyer as reasonably may be required by Title Company.

7.          Deliveries Upon Close of Escrow. Promptly following the Close of Escrow, outside of the escrow with Escrow Holder, Seller shall deliver to Buyer:

(a)          Documents. Any originals of the Leases and any Binding Contracts in Seller’s possession.

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(b)          Personal Property. Subject to the terms of the Leases and any Binding Contracts, possession of the Personal Property, including without limitation all keys and access codes to the improvements on the Real Property in Seller’s possession.

8.          Costs and Expenses. Buyer shall pay the title premium for the Title Policy, including the standard coverage portion and all title premiums associated with any ALTA extended coverage requested by Buyer and any title endorsements requested by Buyer. Buyer shall pay the cost of any survey commissioned by Buyer in connection with obtaining extended title coverage. Buyer shall pay all other due diligence expenses incurred by Buyer. Buyer shall pay all of Escrow Holder’s charges. Seller shall pay the City and County of San Francisco transfer tax and recording charges with respect to the Deed. Buyer and Seller shall each bear their own legal and professional fees and expenses and any other costs incurred by such party.

9.          Prorations.

(a)          General. Subject to the following provisions of this Paragraph 9, rentals, revenues, and other income, if any, from the Property, and real property taxes and operating expenses affecting the Property, which are customarily prorated by buyers and sellers of real property located in the City and County of San Francisco, shall be prorated on an accrual basis as of midnight on the day preceding the Close of Escrow. For purposes of calculating prorations, Buyer shall be deemed to be in title to the Property, and therefore entitled to the income and responsible for the expenses, for the entire day upon which the Close of Escrow occurs.

(b)          Rent.

(i)          Rents. With the sole exception of Percentage Rents, which shall be prorated in accordance with the terms of Paragraph 9(b)(ii) below, all rents, license fees and other income and payments received from tenants under any and all Leases (collectively, “Rents”) shall be apportioned on the basis of the period for which the same is payable and if, as and when collected, as follows: Buyer shall apply all Rents received after the Close of Escrow in the following order of priority: (x) first, to payment of the current Rents then due for the month in which the Close of Escrow occurs, which amount shall be apportioned between Buyer and Seller as set forth in Paragraph 9(a) (with Seller’s portion thereof to be delivered to Seller); (y) second, to Rents applicable to the period of time after the Close of Escrow, which amount shall be retained by Buyer; and (z) thereafter, to Rents applicable to the period of time prior to the Close of Escrow but not collected by Seller as of the Close of Escrow (collectively, “Uncollected Rents”), which amount shall be delivered to Seller. Buyer shall use reasonable efforts (which shall not include any obligation to file suit or take enforcement action under the Lease), to collect Uncollected Rents. Seller shall have no right to pursue the collection of Uncollected Rents. Any Rents received by Buyer shall be applied as provided above, and Buyer shall remit to Seller any such sums received by Buyer to which Seller is entitled within five (5) Business Days after receipt thereof. Buyer shall bill the tenants under the Leases for any Uncollected Rents and use its commercially reasonable efforts to collect the same.

(ii)         Percentage Rents. Percentage rent or overage rent (collectively, “Percentage Rents”) under the Leases shall be prorated between Buyer and Seller on a lease by lease basis with Seller entitled to the portion of total Percentage Rent paid under each Lease for the “Lease Year” in which the Close of Escrow occurs (the “Subject Lease Year”) which is in the same ratio to total Percentage Rent paid with respect to such Subject Lease Year under the subject Lease as the ratio of (i) the number of days of said Subject Lease Year which Seller was the landlord under the subject Lease to (ii) the total number of days in said Subject Lease Year. Buyer shall be entitled to the balance of Percentage Rent paid under each Lease with respect to the Subject Lease Year. As used herein, the term “Lease Year” means the twelve (12) month period as to which annual Percentage Rent is owed under each Lease. The foregoing proration shall be made as follows on a lease by lease basis: (i) subject to the balance of this Paragraph 9(b)(ii), Seller shall retain all Percentage Rent payments received by it on and prior to the Close of Escrow and Buyer shall retain all Percentage Rent payments received by it after the Close of Escrow; (ii) as promptly as possible after the date of the Close of Escrow, Seller shall deliver to Buyer a statement of all Percentage Rent collected by Seller with respect to the Subject Lease Year, if any, on a lease by lease basis along with a copy of the Percentage Rent invoices and sales reports which support such collections, (iii) for each Lease, not later than forty-five (45) days after the date the last Percentage Rent payment with respect to the Subject Lease Year is due, Buyer shall deliver to Seller a statement of all Percentage Rent owed, collected or deemed collectable by Buyer, along with a copy of the annual reconciliation of Percentage Rent owed for the Subject Lease Year and the related sales information backup; and, (iv) for each Lease, within fifteen (15) days after the date the statement and reconciliation described in clause (iii) above is delivered to Seller, Buyer shall pay to Seller or Seller shall pay to Buyer, whichever is applicable, the positive difference, if any, between (a) the total Percentage Rental collected by such party with respect to such Lease for the Subject Lease Year and (b) the product of (y) the average daily Percentage Rental received with respect to such Lease for the Subject Lease Year after taking into account the annual reconciliation and (z) the actual number of days such party was the owner of the Property during the Subject Lease Year. If Percentage Rent is thereafter collected by Buyer from delinquent tenants, Buyer shall promptly pay to Seller a portion thereof which is equal to the ratio of (i) the number of days of the Subject Lease Year in which Seller was the landlord, to (ii) the total number of days in the Subject Lease Year.

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(c)          Reimbursable Tenant Expenses. Prior to the Close of Escrow, the parties shall reasonably estimate the Reimbursable Tenant Expenses due to Seller for expenses actually incurred by Seller during the portion of the calendar year preceding the date upon which the Close of Escrow occurs (“Seller’s Estimated Reimbursable Tenant Expenses”). If, prior to the Close of Escrow, Seller has collected more payments for estimated Reimbursable Tenant Expenses for the year in which the Close of Escrow occurs from tenants of the Real Property than Seller’s Estimated Reimbursable Tenant Expenses, then, Buyer shall receive a credit at the Close of Escrow in the amount of such excess. However, if, prior to the Closing Date, Seller has collected less payments for Reimbursable Tenant Expenses for the year in which the Close of Escrow occurs than Seller’s Estimated Reimbursable Tenant Expenses, then, Buyer shall use its reasonable efforts to collect the same from the tenants on and subject to the terms of their respective Leases (which shall not include any obligation to file suit or take enforcement action under the Lease) and, as and when the amount of such underpayment is received from the tenants and payable to Seller pursuant to the terms of Paragraph 9(b)(i), such amount shall be paid to Seller in reimbursement for such underpayment. Seller shall have no right to collect any such amounts from the tenants under the Leases. As used herein, the term “Reimbursable Tenant Expenses” shall mean payments required to be paid by tenants under Leases for such tenant’s share of ad valorem taxes, insurance, common area maintenance and/or other operating expenses of the Property.

(d)          Taxes and Assessments. All non-delinquent real estate taxes, personal property taxes and current installments of assessments affecting the Property which are payable by Seller shall be prorated as of the Close of Escrow based on the actual current tax bill, or if such tax bill is not available, the latest available tax information for the tax year in which the Closing occurs (“Current Tax Year”) (with Seller and Buyer each being responsible for a pro rata share of such taxes and assessments based upon the number of days in the Current Tax Year occurring before the Closing Date, in the case of Seller, and on and after the Closing Date, in the case of Buyer); provided, however, Seller shall not be liable for any supplemental or escape taxes or assessments arising from the transfer of the Property pursuant to this Agreement or any other events triggering reassessment occurring on or after the Close of Escrow. All delinquent taxes and assessments, if any, affecting the Property which are payable by Seller shall be paid at the Close of Escrow from funds accruing to Seller. Any refunds of real estate taxes and assessments attributable to the period prior to the Close of Escrow shall, subject to the rights of tenants, be paid to Seller upon receipt, whether such receipt occurs before or after the Close of Escrow.

(e)          Operating Expenses. All utility service charges for electricity, heat and air conditioning service and other utilities, charges for elevator maintenance and common area maintenance, taxes (other than real estate taxes and income taxes) such as rental taxes, expenses and obligations under any Binding Contracts, and other expenses affecting the Property which are payable by Seller and any other costs incurred in the ordinary course of business or the management and operation of the Property, which are customarily prorated by buyers and sellers of real property located in the City and County of San Francisco, shall be prorated on an accrual basis. Seller shall pay all such expenses that accrue prior to the Close of Escrow and Buyer shall pay all such expenses accruing on the Close of Escrow and thereafter. To the extent possible, Seller and Buyer shall obtain billings and meter readings as of the Close of Escrow to aid in such prorations. To the greatest extent possible, utility service charges shall be prorated based upon the actual charges accrued before and after the Close of Escrow, rather than upon an average daily charge.

(f)          Leasing Expenses. Seller agrees to pay or discharge at or prior to the Close of Escrow, or to provide a credit to Buyer upon the Close of Escrow for, all brokerage commissions, tenant improvement allowances and free or abated rent (collectively, “Lease Inducement Costs”) that are payable with respect to Leases in force as of or prior to the Close of Escrow; provided, however, that Seller shall have no obligation to pay, as of the Close of Escrow Buyer shall be deemed to have assumed the obligation to pay, and from and after the Close of Escrow Buyer shall indemnify, defend and hold Seller harmless from and against, (i) any and all Lease Inducement Costs payable with respect to any option to renew or option to expand that has not been exercised as of or prior to the Close of Escrow, and (ii) any and all Lease Inducement Costs incurred with respect to Leases and renewals, extensions, amendments and terminations thereof executed subsequent to the Close of Escrow. Buyer shall indemnify, defend and hold Seller harmless from and against any and all Lease Inducement Costs as to which Seller provides Buyer a credit upon the Close of Escrow.

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(g)          Security Deposits. At the Close of Escrow, Seller shall, at Seller’s option, either deliver to Buyer any security deposits held by Seller pursuant to any and all Leases or credit to the account of Buyer the amount of such security deposits (to the extent such security deposits have not been applied against delinquent rentals or otherwise as provided in the Leases). If any security deposits shall be held by Seller in the form of letters of credit, Seller shall, upon the Close of Escrow, assign such letters of credit to Buyer.

(h)          Method of Proration. Seller shall prepare and deliver to Buyer a schedule of the prorations set forth herein at least three (3) Business Days prior to the Closing Date, which schedule shall be subject to the reasonable approval of Buyer. Such prorations shall be paid by Buyer to Seller (if the prorations result in a net credit to the Seller) or by Seller to Buyer (if the prorations result in a net credit to the Buyer) by increasing or reducing the cash to be paid by Buyer at the Close of Escrow. A copy of the schedule of prorations as agreed upon by Buyer and Seller shall be delivered to Escrow Holder prior to the Close of Escrow. Ninety (90) days after the Close of Escrow, Seller and Buyer shall agree to any reprorations based on additional information learned about the prorations after the Close of Escrow, which reproration shall be final.

(i)          Survival. The provisions of this Paragraph 9 shall survive the Close of Escrow.

10.         Disbursements and Other Actions by Escrow Holder. Upon the Close of Escrow, Escrow Holder shall promptly undertake all of the following in the manner hereinbelow indicated:

(a)          Funds. Disburse all funds deposited with Escrow Holder by Buyer in payment of the Purchase Price as follows:

(i)          Deduct all items chargeable to the account of Seller pursuant to Paragraph 8.

(ii)         If, as the result of the prorations and credits pursuant to Paragraph 9, amounts are to be charged to the account of Seller, deduct the total amount of such charges.

(iii)        Disburse the remaining balance of the funds to Seller promptly upon the Close of Escrow in accordance with Seller’s wire transfer instructions.

(b)          Recording. Cause the Deed, and any other documents which the parties hereto may mutually direct to be recorded, to be recorded in the Official Records of San Francisco County and obtain conformed copies thereof for distribution to Buyer and Seller.

(c)          Title Policy. Direct the Title Company to issue the Title Policy to Buyer, without reservation for any “gap” between Close of Escrow and the recordation of the Deed.

(d)          Disbursement of Documents to Buyer. Disburse to Buyer fully executed originals of the Bill of Sale, the General Assignment, and any other documents (or copies thereof) deposited into Escrow by Seller pursuant hereto.

(e)          Disbursement of Documents to Seller. Disburse to Seller a fully executed original of the General Assignment, and any other documents (or copies thereof) deposited into Escrow by Buyer pursuant hereto.

11.         AS-IS Sale and Purchase; Release. Buyer acknowledges that the provisions of this Paragraph 11 have been required by Seller as a material inducement to enter into the contemplated transactions, and the intent and effect of such provisions have been explained to Buyer by Buyer’s counsel and have been understood and agreed to by Buyer.

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(a)          Buyer’s Acknowledgment. As a material inducement to Seller to enter into this Agreement and to convey the Property to Buyer, Buyer hereby acknowledges and agrees as follows:

(i)          AS IS. Buyer is purchasing the Property in its existing condition, “AS-IS, WHERE-IS, WITH ALL FAULTS”, and will, by the Contingency Date, have made or have waived all inspections and investigations of the Property and its vicinity which Buyer believes are necessary to protect its own interest in, and its contemplated use of, the Property.

(ii)         No Representations. Other than the express representations and warranties of Seller contained in Paragraph 12, neither Seller, its members or managers, nor any person or entity acting by or on behalf of Seller, or any member, manager, partner, shareholder, officer, director, trustor, trustee, beneficiary, employee, agent, affiliate, successor or assign of any of the foregoing has made any representation, warranty, inducement, promise, agreement, assurance or statement, oral or written, of any kind to Buyer upon which Buyer is relying, or in connection with which Buyer has made or will make any decisions concerning the Property or its vicinity including, without limitation, its use, condition, value, compliance with Governmental Regulations, status of any Binding Contracts and Leases, amounts of money owed to or owed by Seller, disputes with third parties, existence or absence of Hazardous Materials, the status of the construction of tenant improvements, whether completed or in progress, or the permissibility, feasibility, or convertibility of all or any portion of the Property for any particular use or purpose, including without limitation its present or future prospects for sale, lease, development, occupancy or suitability as security for financing. As used herein, the term “Governmental Regulations” means any laws, ordinances, rules, requirements, resolutions, policy statements and regulations (including, without limitation, those relating to land use, subdivision, zoning, Hazardous Materials, occupational health and safety, handicapped access, water, earthquake hazard reduction, and building and fire codes) of any governmental or quasi-governmental body or agency claiming jurisdiction over the Property. As used herein, the term “Hazardous Materials” means any hazardous or toxic substance, material or waste which is now or hereafter the subject of Governmental Regulations, including without limitation any material or substance which is (A) defined as a “hazardous waste,” “extremely hazardous waste” or “restricted hazardous waste” under Section 25115, 25117 or 25122.7, or listed pursuant to Section 25140, or the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (B) defined as a “hazardous substance” under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (C) defined as a “hazardous material,” “hazardous substance,” or “hazardous waste” under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (D) petroleum and other hydrocarbons, (E) asbestos, (F) listed under Article 9 or defined as hazardous or extremely hazardous pursuant to Article 11 of Title 22 of California Administrative Code, Division 4, Chapter 20, (G) designated as a “hazardous substance” pursuant to Section 311 of the Federal Water Pollution Control Act 33 U.S.C. § 1251 et. seq., (33 U.S.C. § 1321) or as listed pursuant to § 307 of the Federal Water Pollution Control Act (33 U.S.C. § 1317), (H) defined as a “hazardous waste” pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. (42 U.S.C. § 9601), (I) defined as a “hazardous substance” pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq., or (J) associated with the so-called “sick building syndrome.”

(iii)        No Implied Warranties. SELLER HEREBY DISCLAIMS ALL WARRANTIES IMPLIED BY LAW ARISING OUT OF OR WITH RESPECT TO THE EXECUTION OF THIS AGREEMENT, ANY ASPECT OR ELEMENT OF THE PROPERTY, OR THE PERFORMANCE OF SELLER’S OBLIGATIONS HEREUNDER INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE.

(iv)        Information Supplied by Seller. Buyer specifically acknowledges and agrees that, except as may otherwise be expressly provided in Paragraph 12, Seller has made, is making, and shall make, no representation or warranty of any nature concerning the accuracy or completeness of Seller’s Documents, or the authenticity, source, accuracy or completeness of any information contained in such Seller’s Documents or any other documents previously or hereafter furnished by or on behalf of Seller to Buyer, including without limitation any Binding Contracts, the Leases, and various studies, inspections, reports and exhibits and correspondence relating thereto. Buyer further acknowledges that Seller has not reviewed and is under no obligation to review any files in Seller’s possession or which may be available to Seller. As to certain of the materials made available to Buyer in Seller’s Documents, Buyer specifically acknowledges that they have been prepared by third parties with whom Buyer has no privity and Buyer acknowledges and agrees that no warranty or representation, express or implied, has been made, nor shall any be deemed to have been made, to Buyer with respect thereto, either by Seller or by any third parties that prepared the same. Buyer waives any claim of any nature against anyone should any information, conclusion, projection, or other statement of any nature contained in any of such materials prove not to be true or accurate for any reason.

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(v)         Negotiated Purchase Price. Buyer represents and warrants to Seller that Buyer is specifically familiar with the Property and that Buyer has inspected and examined, or will have had the opportunity to inspect and examine, all aspects of the Property and its current condition that Buyer believes to be relevant to its decision to purchase the Property. Buyer further acknowledges and agrees that the Purchase Price negotiated by Seller and Buyer reflects the known and unknown risks and liabilities assumed by Buyer under the Agreement, Seller’s unwillingness to conduct any investigation or due diligence with respect to the Property on behalf of Buyer, and Seller’s desire to receive an absolutely net, fixed amount as consideration for the sale of the Property regardless of any facts known or discovered before or following the Close of Escrow which might result in a diminution in value of the Property.

(vi)        Buyer’s Investigation of Property. Prior to the Contingency Date, Buyer will have had the opportunity to investigate all physical and economic aspects of the Property and to make all inspections and investigations of the Property which Buyer deems necessary or desirable to protect its interests in acquiring the Property, including, without limitation, review of the Leases (and the rights of the tenants thereunder), building permits, certificates of occupancy, environmental audits and assessments, toxic reports, surveys, investigation of land use and development rights, development restrictions and conditions that are or may be imposed by governmental agencies, agreements with associations affecting or concerning the Property, the condition of title, soils and geological reports, engineering and structural tests, insurance contracts, contracts for work in progress, marketing studies, cost-to-complete studies, governmental agreements and approvals, architectural plans and site plans, and that all matters concerning the Property have been or shall be independently verified by Buyer prior to the Contingency Date, and that, except for the express representations and warranties of Seller set forth in this Agreement, Buyer shall purchase the Property on Buyer’s own knowledge of the Property and Buyer’s prior investigation and examination of the Property (or Buyer’s election not to do so). Notwithstanding anything to the contrary herein, Buyer and Seller acknowledge that any written disclosures made by Seller prior to the Close of Escrow shall constitute notice to Buyer of the matter disclosed, and Seller shall have no further liability thereafter if Buyer thereafter consummates the transaction contemplated hereby. Buyer agrees that it shall make an independent investigation of the matters set forth in any such disclosures as well as all other matters relating to the Property and shall not rely on any specific information or any other materials provided by Seller, except for the express representations and warranties of Seller set forth in Paragraph 12.

(vii)       Natural Hazard Disclosure Statement. Seller has made a property disclosure report (the “Disclosure Report”) available to Buyer prior to the Effective Date. The Disclosure Report fully and completely discharges Seller from its disclosure obligations, if any, which may be required under the Natural Hazard Disclosure Act, California Government Code Sections 8589.3, 8589.4, and 51183.5, California Public Resources Code Sections 2621.9, 2694, and 4136, and California Civil Code Sections 1102.6 and 1103.2, and any successor law, and, for the purposes of this Agreement, the provisions of Civil Code Section 1102.4 regarding the non-liability of Seller for errors and/or omissions not within its personal knowledge shall be deemed to apply and the preparer of the Disclosure Report shall be deemed to be an expert, dealing with matters within the scope of its expertise with respect to the examination and Disclosure Report. Nothing set forth in the Disclosure Report shall (A) require Seller to remediate any matter referred to in the Disclosure Report or (B) create any liability by Seller to Buyer therefor and Seller shall in no event be required to expend funds to remediate any matters disclosed in the Disclosure Report. Notwithstanding Buyer’s receipt and review of the Disclosure Report, Buyer hereby knowingly, voluntarily and intentionally waives its right to disclosure by Seller of natural hazards found in Natural Hazard Disclosure Act, California Government Code Sections 8589.3, 8589.4, and 51183.5, California Public Resources Code Sections 2621.9, 2694, and 4136, and California Civil Code Sections 1102.6 and 1103.2, and any similar or successor law. Buyer represents and warrants that it has obtained the Disclosure Report from an expert satisfying the requirements of California Civil Code Section 1103.4, and has waived any objection to such Disclosure Report. Buyer acknowledges and agrees that the matters set forth in the Disclosure Report may change on or prior to the Close of Escrow and that Seller has no obligation to update, modify, or supplement the Disclosure Report. Following the Close of Escrow, Buyer shall be solely responsible for preparing and delivering its own disclosure report to any subsequent prospective buyers of the Property.

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(b)          Release. In consideration of the foregoing, Buyer hereby releases Seller and its direct and indirect members, managers, partners, officers, directors, shareholders, trustors, trustees, beneficiaries, agents, affiliates, employees and successors and assigns from and against any and all complaints, claims, charges, claims for relief, demands, suits, actions and causes of action, whether in law or in equity, which Buyer asserts or could assert at common law or under any statute, rule, regulation, order or law, whether federal, state or local, on any ground whatsoever, whether or not known, suspected, liquidated, contingent or matured, with respect to any event, matter, claim, occurrence, damages or injury (collectively, “Claims”), to the extent arising out of or in connection with the Property. Buyer agrees that there is a risk that subsequent to the execution of this Agreement, Buyer will suffer losses, damages or injuries which are unknown and unanticipated at the time this Agreement is signed. Buyer hereby assumes such risk and agrees that the release contained in this Paragraph 11(b) SHALL APPLY TO ALL UNKNOWN OR UNANTICIPATED CLAIMS, AS WELL AS THOSE KNOWN AND ANTICIPATED, AND BUYER DOES HEREBY WAIVE ANY AND ALL RIGHTS UNDER CALIFORNIA CIVIL CODE SEC. 1542, WHICH SECTION HAS BEEN DULY EXPLAINED AND READS AS FOLLOWS:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

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Buyer’s Initials

The foregoing release shall be effective as of the Effective Date and shall be deemed to be remade and reaffirmed as of the Contingency Date and as of the Close of Escrow. Notwithstanding anything stated to the contrary in this Agreement, the foregoing release shall not extend to (and shall expressly exclude) claims arising from (i) Seller’s intentional fraud, (ii) Seller’s breach of its express representations, warranties, covenants and obligations (including indemnity obligations) under this Agreement and the documents executed by Seller upon the Close of Escrow or (iii) any third party breach of contract claims (with respect to contracts to which Seller is a party, but only to the extent of any obligations and liabilities thereunder that were not expressly assumed by Buyer) or third party tort claims brought against Buyer for personal injury, wrongful death or personal property damage, in each case arising out of events occurring during Seller’s ownership of the Property (provided that, in no event will Seller be required to repair or remediate, or pay for the repair or remediation of, physical or environmental conditions on the Property after Close of Escrow). The provisions of this Paragraph 11 shall survive the Close of Escrow.

12.         Seller’s Representations and Warranties. Subject to those matters described in Exhibit "J" attached hereto (the “Disclosure Items"), as to which Seller makes no representations or warranties of any kind and for which Seller shall have no liability or obligation to Buyer of any kind whatsoever, Seller hereby makes the following representations and warranties to Buyer (all of which, to the extent applicable, are qualified by the Disclosure Items):

(a)          Status. Seller is a limited liability company duly organized or formed, validly existing and in good standing under the laws of the State of Delaware and is qualified to transact business in the State of California.

(b)          Due Authority. The execution and delivery of this Agreement and the performance of Seller's obligations hereunder have been or will be duly authorized by all necessary action on the part of Seller, and this Agreement constitutes the legal, valid and binding obligation of Seller, subject to equitable principles and principles governing creditors' rights generally.

(c)          OFAC Compliance. Neither Seller, nor, to Seller’s actual knowledge, any person or entity who owns an interest in Seller, is a person or entity with whom Buyer is restricted from doing business under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, H.R. 3162, Public Law 107-56 (commonly known as the “USA Patriot Act” or Executive Order Number 13224 on Terrorism Financing, effective September 24, 2001 and regulations promulgated pursuant thereto (collectively, “Anti Terrorism Laws”), including without limitation any persons named on the U.S. Department of the Treasury’s Office of Foreign Asset Control (“OFAC”) Specially Designated Nationals and Blocked Persons List.

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(d)          Bankruptcy. Seller has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by Seller’s creditors against it, (iii) suffered the appointment of a receiver to take possession of all, or substantially all, of Seller’s assets, which remains pending, or (iv) suffered the attachment or other judicial seizure of all, or substantially all, of Seller’s assets, which remains pending.

(e)          Leases. The Leases in effect as of the Effective Date are identified on Exhibit “K” attached hereto. Seller has provided Buyer with true, correct and complete copies of the Leases, including all amendments thereto. As of the Effective Date, Seller has not received any written notice from any tenant of any uncured default by Seller, as lessor under the Leases. Except as may be disclosed in any estoppel certificate delivered to Buyer pursuant to this Agreement, to Seller’s actual knowledge, as of the Effective Date, there are no uncured material defaults under the Leases.

(f)          Litigation and Condemnation. To Seller’s actual knowledge, (i) there is no litigation pending or threatened against Seller with respect to the Property and (ii) as of the Effective Date, no condemnation or eminent domain proceedings are pending or contemplated against the Property.

(g)          Notices. To Seller’s actual knowledge, Seller has received no written notice from any governmental entity that the Property, or the operation or use of the same, does not comply with any law (including any environmental law), ordinance or regulation in any material respect, which failure of compliance has not been cured.

(h)          Seller Not a Foreign Person. Seller is not a "foreign person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended.

Seller’s representations and warranties set forth in this Paragraph 12 shall survive the Close of Escrow for a period of six (6) months subject to the limitations of Paragraph 18(a).

Anything herein to the contrary notwithstanding, but subject to Seller’s obligation to reimburse Buyer for its reasonable out-of-pocket expenses in accordance to the terms and conditions of Paragraph 18(a), if Buyer becomes aware of any information prior to the Close of Escrow which renders any of the above representations and warranties of Seller inaccurate or incomplete, such representations and warranties shall be deemed modified to reflect the disclosure of such information (except for purposes of Paragraph 5(a)(i)). Whenever the phrase “to Seller’s actual knowledge” is used in this Agreement, such phrase shall mean and refer to the present actual knowledge, without taking into account any constructive or imputed knowledge, of Craig Hamburg, the individual within Seller’s organization with the most knowledge of the matters contained herein, without any duty of inquiry or investigation. Buyer acknowledges that the individual named above is named solely for the purpose of defining and narrowing the scope of Seller's knowledge and not for the purpose of imposing any liability on or creating any duties running from such individual to Buyer. Buyer covenants that it will bring no action of any kind against such individual arising out of these representations and warranties.

13.         Buyer’s Representations and Warranties. Buyer hereby makes the following representations and warranties to Seller:

(a)          Status. Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and is, or will be as of the Closing Date, qualified to transact business in the State of California.

(b)          Due Authority. The execution and delivery of this Agreement and the performance of Buyer’s obligations hereunder have been or will be duly authorized by all necessary action on the part of Buyer, and this Agreement constitutes the legal, valid and binding obligation of Buyer, subject to equitable principles and principles governing creditors' rights generally.

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(c)          OFAC Compliance. Neither Buyer, nor any person or entity who owns an interest in Buyer (excluding interests held in publicly traded entities), is a person or entity with whom Seller is restricted from doing business under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, H.R. 3162, Public Law 107-56 (commonly known as the “USA Patriot Act” or Executive Order Number 13224 on Terrorism Financing, effective September 24, 2001 and regulations promulgated pursuant thereto (collectively, “Anti Terrorism Laws”), including without limitation any persons named on the U.S. Department of the Treasury’s Office of Foreign Asset Control (“OFAC”) Specially Designated Nationals and Blocked Persons List.

(d)          Bankruptcy. Buyer has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by Buyer’s creditors against it, (iii) suffered the appointment of a receiver to take possession of all, or substantially all, of Buyer’s assets, which remains pending, or (iv) suffered the attachment or other judicial seizure of all, or substantially all, of Buyer’s assets, which remains pending.

(e)          Principal. Buyer has executed this Agreement as a principal on its own behalf and not as an agent of undisclosed third parties.

The provisions of this Paragraph 13 shall survive the Close of Escrow.

Whenever the phrase “to Buyer’s actual knowledge” is used in this Agreement, such phrase shall mean and refer to the present actual knowledge, without taking into account any constructive or imputed knowledge, of Alan Shapiro, without any duty of inquiry or investigation. Seller acknowledges that the individual named above is named solely for the purpose of defining and narrowing the scope of Buyer's knowledge and not for the purpose of imposing any liability on or creating any duties running from such individual to Seller. Seller covenants that it will bring no action of any kind against such individual arising out of these representations and warranties.

14.         Seller Covenants. Following the execution of this Agreement and through the Close of Escrow, subject to the occurrence of any casualty or condemnation, Seller covenants to own, operate and maintain its interests in the items comprising the Property in substantially the same manner as presently owned, operated and maintained. In addition, Seller agrees not to enter into any new Lease or contract (but only to the extent that Buyer is required to assume such contract upon the Close of Escrow or such contract will encumber the Real Property from and after the Close of Escrow (each, a “Binding Contract”)) or materially amend or terminate any existing Lease or Binding Contract (except to the extent required to do so under the terms of such existing Lease or Binding Contract or in connection with the enforcement of such Lease or Binding Contract), without obtaining the prior written consent of Buyer, provided that Buyer’s consent shall not be unreasonably withheld or conditioned. In the event that Buyer fails to grant such consent (or notify Seller of its decision to withhold such consent) within three (3) Business Days following its receipt of such request, Buyer shall be deemed to have granted such consent.

15.         Casualty and Condemnation.

(a)          Casualty. If prior to Close of Escrow the Real Property is damaged by fire or other casualty, Seller shall (i) reasonably estimate the cost to repair, (ii) gather all information then available, which is reasonably necessary to determine whether the damage is Material Damage and (iii) provide Buyer with written notice of the repair cost estimate and the Material Damage determination (the “Casualty Notice”) as soon as reasonably possible after the occurrence of the casualty.

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(i)          Material. In the event of any Material Damage to or destruction of the Real Property or any portion thereof prior to Close of Escrow, Buyer may, at its option, terminate this Agreement by delivering written notice to Seller on or before the expiration of ten (10) Business Days after the date Seller delivers the Casualty Notice to Buyer (and if necessary, the Closing Date shall be extended to give the parties the full ten (10) Business Day period to make such election and to obtain full information regarding any applicable insurance policies). Upon any such termination, the Escrow shall be canceled, this Agreement shall be terminated and become null and void, all parties hereto shall be released from further performance of this Agreement (with the exception of those provisions or paragraphs which recite that they survive termination of this Agreement), and Escrow Holder shall return to Buyer all or any portion of the Deposit deposited with Escrow Holder and shall return to each party any and all documents which such party had deposited with it. If Buyer does not so terminate this Agreement within said ten (10) Business Day period, then the parties shall proceed under this Agreement and close on schedule (subject to extension of the Closing Date as provided above), and as of Close of Escrow Seller shall assign to Buyer, without representation or warranty by or recourse against Seller, all of Seller’s rights (if any) in and to any resulting insurance proceeds (and Buyer shall receive a credit at the Close of Escrow in an amount equal to any applicable deductible under any applicable Seller property insurance policy) (excluding any rent loss insurance applicable to any period prior to the Closing Date) due Seller (or previously paid to Seller) as a result of such damage or destruction (less any portion thereof expended by Seller in connection with repairs to the Property) and, as between Seller and Buyer, Buyer shall assume full responsibility for all needed repairs. For purposes of this Agreement, “Material Damage” and “Materially Damaged” mean damage which (A) will cost in excess of an amount equal to $50,000 to repair or (B) permits termination of any Lease by the tenant thereunder or (C) permits the tenant under any Lease to abate its rent under such Lease for a period of six (6) months or longer after the Close of Escrow.

(ii)         Not Material. If the Real Property is not Materially Damaged, then Buyer shall not have the right to terminate this Agreement, and Seller shall assign to Buyer, without representation or warranty by or recourse against Seller, all of Seller’s rights (if any) in and to any resulting insurance proceeds (and Buyer shall receive a credit at the Close of Escrow in an amount equal to any applicable deductible under any applicable Seller property insurance policy) (excluding any rent loss insurance applicable to any period prior to the Closing Date) due Seller (or previously paid to Seller) as a result of such damage or destruction (less any portion thereof expended by Seller in connection with repairs to the Property) and, as between Seller and Buyer, Buyer shall assume full responsibility for all needed repairs.

(b)          Condemnation. If, at any time prior to the Close of Escrow, legal proceedings under power of eminent domain are commenced with respect to all or any portion of the Real Property, then by delivery to Seller of written notice of election within ten (10) Business Days after receipt of written notice of such pending condemnation, Buyer may elect to either (i) terminate this Agreement, or (ii) elect to continue this Agreement in full force and effect, in which event, as of the Close of Escrow, Seller shall assign to Buyer, without representation or warranty by or recourse against Seller, all of Seller’s rights in and to any resulting proceeds and/or claims due Seller (or previously paid to Seller) on account of such condemnation proceedings, and Buyer shall take title to the Property subject to such condemnation proceedings. If Buyer fails to deliver written notice to Seller of Buyer’s election within the time period specified in this Paragraph, Buyer shall be deemed to have elected alternative (ii) above. If Buyer properly delivers written notice to Seller within the time period specified in this Paragraph electing alternative (i) above, the Escrow shall be canceled, this Agreement shall be terminated and become null and void, all parties hereto shall be released from further performance of this Agreement (with the exception of those provisions or paragraphs which recite that they survive termination of this Agreement), and Escrow Holder shall return to Buyer all or any portion of the Deposit deposited with Escrow Holder and shall return to each party any and all documents which such party had deposited with it.

16.         Notices. All notices, requests and demands to be made hereunder to the parties hereto shall be in writing and shall be deemed received upon (i) delivery of email on a Business Day between the hours of 9:00 a.m. and 5:00 p.m. the recipient’s time (otherwise, the next following Business Day) (provided that such email contains in all uppercase letters the words “OFFICIAL NOTICE” in the subject line and generates no server-generated response that such delivery was ineffective or delayed), provided that such notice is also simultaneously delivered by one of the methods set forth in clauses (ii) through (v), inclusive; (ii) personal delivery; (iii) confirmed telecopy delivery on a Business Day between the hours of 9:00 a.m. and 5:00 p.m. the recipient’s time (otherwise, the next following Business Day); (iv) one (1) Business Day after being deposited with Federal Express, DHL Worldwide Express or another reliable overnight courier service prior to the specified delivery deadline for next day service, specifying an address to which such courier makes overnight deliveries; or (v) three (3) Business Days after being deposited in the United States mail, registered or certified mail, postage prepaid, return receipt required, addressed to the applicable party at the addresses set forth below:

To Seller:	GROVE STREET HAYES VALLEY LLC
	c/o DDG Partners LLC
	60 Hudson Street, 18th Floor
	New York, New York 10013
	Attention:  William M. Kluczkowski
	Email: wmk@ddgpartners.com

Telephone:  (212) 612-3248

Facsimile: (212) 612-3260

16

and:	GROVE STREET HAYES VALLEY LLC
	c/o DM Development
	448 Linden Street
	San Francisco, California  94102
	Attention:  Mark MacDonald
	Email: mark.macdonald@dm-dev.com
	Telephone:  (415) 692-5062
	Facsimile: (415) 693-4454
with a copy to:	Cox, Castle & Nicholson LLP
	50 California Street, Suite 3200
	San Francisco, California 94111
	Attention:  Kevin J. Crabtree
	Email: kcrabtree@coxcastle.com
	Telephone:  (415) 262-5155
	Facsimile:  (415) 262-5199
To Buyer:	SRT SF Retail I, LLC
	c/o Glenborough LLC
	400 South El Camino, 11th Floor
	San Mateo, CA 94402-1708
	Attention:  Alan Shapiro
	Email: alan.shapiro@glenborough.com
	Telephone:  (650) 343-9300
	Facsimile:  (650) 343-9690
with a copy to:	SRT SF Retail I, LLC
	c/o Glenborough LLC
	400 South El Camino, 11th Floor
	San Mateo, CA 94402-1708
	Attention:  G. Lee Burns, Jr.
	Email: chip.burns@glenborough.com
	Telephone:  (650) 343-9300
	Facsimile:  (650) 343-9690
To Escrow Holder:	First American Title Insurance Company
	National Commercial Services
	101 Mission Street, Suite 1600
	San Francisco, California 94105
	Attention:  Heather Kucala
	Email:  hkucala@firstam.com
	Telephone:  (415) 837-2295
	Facsimile:  (714) 481-2576
	Escrow No. NCS-787084

Notice of change of address shall be given by written notice in the manner detailed in this Paragraph 16. Notice given by counsel for a party shall be deemed to be notice given by such party and shall be effective when delivered to the other party as provided above, or when delivered to counsel for the other party, with a copy to the other party identified above.

17.         Commissions. If the Close of Escrow occurs, Seller shall pay a broker’s commission directly to, Retail West Inc. (“Broker”) pursuant to a separate agreement with Broker. In the event of any claims for additional advisor’s, brokers’ or finders’ fees or commissions in connection with the negotiation, execution or consummation of this Agreement, then as a covenant which shall survive the termination of this Agreement or the Close of Escrow, Buyer shall indemnify, save harmless and defend Seller from and against such claims if they shall be based upon any statement or representation or agreement by Buyer, and Seller shall indemnify, save harmless and defend Buyer if such claims shall be based upon any statement, representation or agreement made by Seller.

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18.         Legal and Equitable Enforcement of this Agreement.

(a)          Default by Seller. IN THE EVENT THE CLOSE OF ESCROW DOES NOT OCCUR BY REASON OF ANY DEFAULT BY SELLER (OR ANY DEFAULT BY EITHER OF THE OTHER SELLERS UNDER THE OTHER PURCHASE AGREEMENTS), BUYER SHALL BE ENTITLED, AS ITS SOLE AND EXCLUSIVE REMEDY (BUT WITHOUT LIMITING THE AVAILABLE REMEDIES OF BUYER UNDER THE OTHER PURCHASE AGREEMENTS), TO EITHER (1) TERMINATE THIS AGREEMENT AND RECEIVE A REFUND OF THE DEPOSIT AND SELLER SHALL REIMBURSE BUYER FOR ITS REASONABLE OUT-OF-POCKET EXPENSES INCURRED IN CONNECTION WITH THIS AGREEMENT IN AN AMOUNT NOT TO EXCEED THIRTY THOUSAND DOLLARS ($30,000), OR (2) BRING AN ACTION FOR SPECIFIC PERFORMANCE. IF BUYER FAILS TO BRING AN ACTION FOR SPECIFIC PERFORMANCE WITHIN THIRTY (30) DAYS FOLLOWING THE CLOSING DATE, BUYER SHALL BE DEEMED TO HAVE ELECTED TO TERMINATE THIS AGREEMENT AND RECEIVE A REFUND OF THE DEPOSIT AND SUCH OUT-OF-POCKET EXPENSE REIMBURSEMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR IN ANY EXHIBITS ATTACHED HERETO OR IN ANY DOCUMENTS EXECUTED OR TO BE EXECUTED IN CONNECTION HEREWITH (COLLECTIVELY, INCLUDING THIS AGREEMENT, SAID EXHIBITS AND ALL SUCH DOCUMENTS, THE “PURCHASE DOCUMENTS”), IT IS EXPRESSLY UNDERSTOOD AND AGREED BY AND BETWEEN THE PARTIES HERETO THAT: (I) SELLER SHALL HAVE NO LIABILITY FOR, BUYER AND ITS SUCCESSORS AND ASSIGNS SHALL BE DEEMED TO HAVE WAIVED AND RELEASED SELLER FROM AND AGAINST ANY AND ALL CLAIMS ARISING FROM, AND BUYER AND ITS SUCCESSORS AND ASSIGNS SHALL OTHERWISE HAVE NO RECOURSE AGAINST SELLER WITH RESPECT TO, ANY BREACH OR ALLEGED BREACH BY OR ON THE PART OF SELLER OF ANY REPRESENTATION, WARRANTY, COVENANT, UNDERTAKING, INDEMNITY OR AGREEMENT CONTAINED IN ANY OF THE PURCHASE DOCUMENTS (COLLECTIVELY, “SELLER’S UNDERTAKINGS”) OCCURRING PRIOR TO THE CLOSE OF ESCROW (PROVIDED THAT BUYER HAD ACTUAL KNOWLEDGE OF SUCH BREACH OR ALLEGED BREACH PRIOR TO THE CLOSE OF ESCROW BUT NEVERTHELESS ELECTED TO PROCEED WITH THE CLOSE OF ESCROW), (II) SELLER SHALL HAVE NO LIABILITY FOR, BUYER AND ITS SUCCESSORS AND ASSIGNS SHALL BE DEEMED TO HAVE WAIVED AND RELEASED SELLER FROM AND AGAINST ANY AND ALL CLAIMS ARISING FROM, AND BUYER AND ITS SUCCESSORS AND ASSIGNS SHALL OTHERWISE HAVE NO RECOURSE AGAINST SELLER WITH RESPECT TO, ANY BREACH OR ALLEGED BREACH BY OR ON THE PART OF SELLER OF ANY OF SELLER’S UNDERTAKINGS OCCURRING (A) AFTER THE CLOSE OF ESCROW OR (B) PROVIDED THAT BUYER DID NOT HAVE KNOWLEDGE OF SUCH BREACH OR ALLEGED BREACH PRIOR TO THE CLOSE OF ESCROW, PRIOR TO THE CLOSE OF ESCROW (COLLECTIVELY, “BUYER’S POST-CLOSING CLAIMS”), UNLESS BUYER HAS DELIVERED TO SELLER WRITTEN NOTICE THAT BUYER IS SEEKING RECOURSE WITH RESPECT THERETO (THE “RECOURSE NOTICE”) AFTER THE CLOSE OF ESCROW BUT ON OR BEFORE THE DATE THAT IS SIX (6) MONTHS FOLLOWING THE CLOSE OF ESCROW AND BUYER HAS FILED SUIT WITH RESPECT THERETO WITHIN THIRTY (30) DAYS AFTER BUYER’S DELIVERY OF THE RECOURSE NOTICE, (III) THE RECOURSE OF BUYER AND ITS SUCCESSORS OR ASSIGNS AGAINST SELLER WITH RESPECT TO BUYER’S POST-CLOSING CLAIMS SHALL BE LIMITED TO AN AMOUNT NOT TO EXCEED ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000) IN THE AGGREGATE (PLUS ANY AWARD FOR BROKER’S COMMISSIONS AS DESCRIBED IN PARAGRAPH 17 OR PROFESSIONAL FEES AS DESCRIBED IN PARAGRAPH 21(e)), PROVIDED HOWEVER, BUYER SHALL HAVE NO RIGHT TO FILE SUIT FOR RECOURSE WITH RESPECT TO BUYER’S POST-CLOSING CLAIMS UNLESS AND UNTIL THE AGGREGATE AMOUNT OF SUCH RECOURSE EXCEEDS twenty thousand DOLLARS ($20,000); PROVIDED FURTHER, THAT IN THE EVENT ANY JUDGMENT AGAINST SELLER FOR RECOURSE WITH RESPECT TO BUYER’S POST-CLOSING CLAIMS (EXCLUSIVE OF ANY AWARD FOR PROFESSIONAL FEES AS DESCRIBED IN PARAGRAPH 21(e)) IS FOR AN AMOUNT LESS THAN TWENTY thousand DOLLARS ($20,000), THEN SELLER SHALL BE DEEMED TO BE THE PREVAILING PARTY (INCLUDING WITHOUT LIMITATION FOR THE PURPOSES OF PARAGRAPH 21(e)) AND SELLER SHALL HAVE NO LIABILITY THEREFOR; (IV) NO PERSONAL LIABILITY OR PERSONAL RESPONSIBILITY OF ANY SORT WITH RESPECT TO ANY OF SELLER’S UNDERTAKINGS OR ANY BREACH OR ALLEGED BREACH THEREOF IS ASSUMED BY, OR SHALL AT ANY TIME BE ASSERTED OR ENFORCEABLE AGAINST, SELLER EXCEPT AS EXPRESSLY PROVIDED IN SUBPARAGRAPHS (II) AND (III) ABOVE, AND (V) NO PERSONAL LIABILITY OR PERSONAL RESPONSIBILITY OF ANY SORT WITH RESPECT TO ANY OF SELLER’S UNDERTAKINGS OR ANY BREACH OR ALLEGED BREACH THEREOF, IS ASSUMED BY, OR SHALL AT ANY TIME BE ASSERTED OR ENFORCEABLE AGAINST ANY OF SELLER’S DIRECT OR INDIRECT MEMBERS, MANAGERS, PARTNERS, SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, TRUSTORS, BENEFICIARIES, TRUSTEES OR REPRESENTATIVES. NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL SELLER BE LIABLE TO BUYER FOR ANY PUNITIVE, SPECULATIVE OR CONSEQUENTIAL DAMAGES.

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(b)          Default by Buyer. IN THE EVENT THE CLOSE OF ESCROW DOES NOT OCCUR BY REASON OF ANY DEFAULT BY BUYER (OR ANY DEFAULT BY BUYER UNDER THE OTHER PURCHASE AGREEMENTS), BUYER AND SELLER AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES WHICH SELLER MAY SUFFER. THEREFORE BUYER AND SELLER DO HEREBY AGREE THAT A REASONABLE ESTIMATE OF THE TOTAL NET DETRIMENT THAT SELLER WOULD SUFFER IN THE EVENT OF SUCH A DEFAULT BY BUYER IS AND SHALL BE, AS SELLER’S SOLE AND EXCLUSIVE REMEDY (WHETHER AT LAW OR IN EQUITY) FOR SUCH BREACH, AN AMOUNT EQUAL TO THE DEPOSIT, AND ANY INTEREST ACCRUING THEREON. SAID AMOUNT SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES FOR SUCH A BREACH OF THIS AGREEMENT BY BUYER, ALL OTHER CLAIMS TO DAMAGES OR OTHER REMEDIES WITH RESPECT TO SUCH A BREACH BY BUYER BEING HEREIN EXPRESSLY WAIVED BY SELLER. UPON SUCH A DEFAULT BY BUYER, THIS AGREEMENT SHALL BE TERMINATED AND, EXCEPT FOR THOSE PROVISIONS WHICH EXPRESSLY SURVIVE TERMINATION OF THIS AGREEMENT, NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREUNDER, EACH TO THE OTHER EXCEPT FOR THE RIGHT OF SELLER TO COLLECT SUCH LIQUIDATED DAMAGES FROM BUYER AND ESCROW HOLDER. NOTWITHSTANDING ANYTHING IN THIS PARAGRAPH 18(b) TO THE CONTRARY, IN THE EVENT OF A TERMINATION OF THIS AGREEMENT, SELLER SHALL HAVE ALL REMEDIES AVAILABLE AT LAW OR IN EQUITY IN THE EVENT BUYER OR ANY PARTY RELATED TO OR AFFILIATED WITH BUYER IS ASSERTING ANY CLAIMS OR RIGHT TO THE PROPERTY THAT WOULD OTHERWISE DELAY OR PREVENT SELLER FROM HAVING CLEAR, INDEFEASIBLE AND MARKETABLE TITLE TO THE PROPERTY. IF CLOSE OF ESCROW IS CONSUMMATED, SELLER SHALL HAVE ALL REMEDIES AVAILABLE AT LAW OR IN EQUITY IN THE EVENT BUYER FAILS TO PERFORM ANY OBLIGATION OF BUYER UNDER THIS AGREEMENT. NOTWITHSTANDING ANYTHING IN THIS PARAGRAPH 18(b) TO THE CONTRARY, THE FOREGOING SHALL IN NO EVENT LIMIT BUYER’S OBLIGATIONS UNDER PARAGRAPHS 4(d), 17, 20, 21(e) and 21(m) AND/OR SELLER’S RIGHTS AND REMEDIES IN CONNECTION THEREWITH.

(c)          Survival. THE PROVISIONS OF THIS PARAGRAPH 18 SHALL SURVIVE THE CLOSE OF ESCROW AND ANY TERMINATION OF THIS AGREEMENT.

____________	____________
Buyer’s Initials	Seller’s Initials

19.         Assignment. Prior to the Close of Escrow, Buyer shall not directly or indirectly assign, transfer or convey its rights and obligations under this Agreement or in the Property without the prior written consent of Seller (in its sole and absolute discretion), and any purported assignment, transfer or conveyance without such consent of Seller shall be null and void. Any approved assignee shall succeed to all of Buyer’s rights and remedies hereunder. Notwithstanding the foregoing, Buyer shall have the right to assign all of its right, title and interest in and to this Agreement (partial assignments shall not be permitted) to any Affiliate of Buyer; provided that (1) such assignment includes an assumption by the assignee of all of Buyer’s obligations under this Agreement, including a remaking of all of Buyer’s representations and warranties in this Agreement in favor of Seller, and is otherwise in form reasonably approved by Seller, and (2) Buyer delivers notice of such assignment, together with a copy of such fully executed assignment, and an affidavit, or such proofs as are reasonably required by Seller to establish that any purported assignment of this Agreement complies with the provisions hereof, to Seller not later than seven (7) Business Days prior to the Closing Date. Notwithstanding the foregoing, no such assignment shall relieve Buyer from its liability under this Agreement.

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20.         Confidentiality. Buyer agrees that it shall keep confidential the information contained in the materials delivered or provided for inspection by Seller pursuant to the terms of this Agreement or otherwise obtained by Buyer in the conduct of its Due Diligence, that it shall use such information only to evaluate the acquisition of the Property from Seller and not in a manner which has an adverse effect on Seller, and that it shall not disclose such information to any third parties (except as may be required by applicable law), except that Buyer shall have the right to provide such information to its lenders, consultants, attorneys and prospective investors in connection with Buyer’s acquisition of the Property (provided that Buyer shall instruct the aforesaid parties to maintain the confidentiality of such information). If the transaction contemplated by this Agreement is not consummated for any reason, Buyer promptly shall destroy, and instruct its representatives, consultants, attorneys, lenders, and prospective investors to destroy, all Seller’s Documents and all other copies and originals of information and materials previously provided for inspection by Seller to Buyer. The provisions of this Paragraph 20 shall survive any termination of this Agreement.

21.         Miscellaneous.

(a)          Governing Law. The parties hereto acknowledge that this Agreement has been negotiated and entered into in California. The parties hereto expressly agree that this Agreement shall be governed by, interpreted under, and construed and enforced in accordance with the laws of the State of California.

(b)          Partial Invalidity. If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each such term and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law.

(c)          Waivers. No waiver of any breach of any covenant or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof, or of any other covenant or provision herein contained. No extension of time for performance of any obligation or act shall be deemed an extension of the time for performance of any other obligation or act.

(d)          Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the permitted successors and assigns of the parties hereto.

(e)          Professional Fees. In the event of the bringing of any action or suit by a party hereto against another party hereunder by reason of any breach of any of the covenants, agreements or provisions on the part of the other party arising out of this Agreement, then in that event the prevailing party shall be entitled to have and recover of and from the other party all reasonable out-of-pocket costs and expenses of the action or suit, including reasonable out-of-pocket attorneys’ fees, accounting and engineering fees, and any other professional fees resulting therefrom.

(f)          Entire Agreement. This Agreement (including all Exhibits attached hereto) is the final expression of, and contains the entire agreement between, the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto. This Agreement may not be modified, changed, supplemented or terminated, nor may any obligations hereunder be waived, except by written instrument signed by the party to be charged or by its agent duly authorized in writing or as otherwise expressly permitted herein. The parties do not intend to confer any benefit hereunder on any person, firm or corporation other than the parties hereto.

(g)          Time of Essence. Seller and Buyer hereby acknowledge and agree that time is strictly of the essence with respect to each and every term, condition, obligation and provision hereof and that failure to timely perform any of the material terms, obligations or provisions hereof (including, without limitation, the obligation to timely fund the Initial Deposit on or before the Initial Deposit Deadline pursuant to Paragraph 2(a), the obligation to timely fund the Additional Deposit pursuant to Paragraph 2(a) and the obligation to timely fund the balance of the Purchase Price (as adjusted by Buyer’s share of expenses and prorations) pursuant to Paragraph 2(b)) by either party shall constitute a material breach of and a non-curable (but waivable) default under this Agreement by the party so failing to perform.

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(h)          Construction. Headings at the beginning of each paragraph and subparagraph are solely for the convenience of the parties and are not a part of the Agreement. Whenever required by the context of this Agreement, the singular shall include the plural and the masculine shall include the feminine and vice versa. This Agreement shall not be construed as if it had been prepared by one of the parties, but rather as if both parties had prepared the same. Unless otherwise indicated, all references to paragraphs and subparagraphs are to this Agreement. In the event the date on which Buyer or Seller is required to take any action under the terms of this Agreement is not a Business Day, the action shall be taken on the next succeeding Business Day. For purposes of this Agreement, the term “Business Day” shall mean any day other than Saturday, Sunday or any day upon which banks in the State of California are required or permitted to be closed. For purposes of this Agreement, “Person” shall mean any natural person, corporation, general or limited partnership, limited liability company, association, joint venture, trust, estate, Governmental Authority or other legal entity, in each case whether in its own or a representative capacity. For purposes of this Agreement, “Affiliate” means, with respect to the Person in question, any other Person that, directly or indirectly, controls, is controlled by or is under common control with, such Person. For the purposes of this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the Person in question, whether by the ownership of voting securities, contract or otherwise.

(i)          Authority. The individuals signing below represent and warrant that they have the requisite authority to bind the entities on whose behalf they are signing.

(j)          Severability. The invalidity or unenforceability of any one or more of the provisions of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement.

(k)          Further Assurances. The parties hereto agree to execute, acknowledge and deliver any and all additional papers, documents and other assurances and shall perform any and all acts and things reasonably necessary in connection with the performance of the obligations hereunder to carry out the interest of the parties hereto.

(l)          Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

(m)          No Recordation or Lis Pendens.

(i)          THE PARTIES HERETO AGREE THAT NEITHER THIS AGREEMENT NOR ANY MEMORANDUM OR NOTICE HEREOF SHALL BE RECORDED, AND, EXCEPT AS OTHERWISE PROVIDED IN PARAGRAPH 21(m)(ii), BUYER AGREES NOT TO FILE ANY LIS PENDENS OR OTHER INSTRUMENT AGAINST THE PROPERTY IN CONNECTION HEREWITH. IN FURTHERANCE OF THE FOREGOING, BUYER (I) ACKNOWLEDGES THAT THE FILING OF A LIS PENDENS OR OTHER EVIDENCE OF BUYER’S RIGHTS OR THE EXISTENCE OF THIS AGREEMENT AGAINST THE PROPERTY, COULD CAUSE SIGNIFICANT MONETARY AND OTHER DAMAGES TO SELLER AND (II) HEREBY INDEMNIFIES SELLER FROM AND AGAINST ANY AND ALL LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES AND COSTS INCURRED IN THE ENFORCEMENT OF THE FOREGOING INDEMNIFICATION OBLIGATION) ARISING OUT OF THE BREACH BY BUYER OF ANY OF BUYER’S OBLIGATIONS UNDER THIS PARAGRAPH 21(m).

(ii)         NOTWITHSTANDING THE PROVISIONS OF PARAGRAPH 21(m)(i) ABOVE, BUYER SHALL HAVE THE RIGHT TO FILE A LIS PENDENS AGAINST THE PROPERTY SOLELY UNDER CIRCUMSTANCES UNDER WHICH BUYER IS IN GOOD FAITH SEEKING SPECIFIC PERFORMANCE OF SELLER’S OBLIGATIONS HEREUNDER, PROVIDED (A) BUYER FILES SUCH CLAIM WITHIN THIRTY (30) DAYS AFTER THE EARLIER OF (X) THE DATE ON WHICH SELLER PURPORTS TO TERMINATE THIS AGREEMENT OR BUYER ALLEGES THAT SELLER HAS DEFAULTED HEREUNDER OR (Y) THE CLOSING DATE AND (B) IF IT IS ULTIMATELY DETERMINED BY A COURT ORDER THAT BUYER WAS NOT ENTITLED TO SPECIFIC PERFORMANCE UNDER THIS AGREEMENT OTHER THAN AS A RESULT OF ANY WRONGFUL ACT BY SELLER MAKING SPECIFIC PERFORMANCE IMPRACTICABLE OR IMPOSSIBLE, BUYER SHALL, AND HEREBY DOES, INDEMNIFY AND HOLD HARMLESS SELLER FROM AND AGAINST ANY AND ALL LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES AND COSTS INCURRED IN THE ENFORCEMENT OF THE FOREGOING INDEMNIFICATION OBLIGATION) ARISING OUT OF THE FILING OF SUCH LIS PENDENS BY BUYER (INCLUDING, WITHOUT LIMITATION, CONSEQUENTIAL DAMAGES INCURRED BY SELLER AS A RESULT THEREOF).

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(iii)        THE PROVISIONS OF THIS PARAGRAPH 21(m) SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.

_____________	_____________
BUYER’S INITIALS	SELLER’S INITIALS

(n)          THE SUBMISSION OF THIS AGREEMENT FOR EXAMINATION IS NOT INTENDED TO NOR SHALL IT CONSTITUTE AN OFFER TO SELL, OR A RESERVATION OF, OR OPTION OR PROPOSAL OF ANY KIND FOR THE PURCHASE OF THE PROPERTY. IN NO EVENT SHALL ANY DRAFT OF THIS AGREEMENT CREATE ANY OBLIGATION OR LIABILITY, IT BEING UNDERSTOOD THAT THIS AGREEMENT SHALL BE EFFECTIVE AND BINDING ONLY WHEN A COUNTERPART HEREOF HAS BEEN EXECUTED AND DELIVERED BY EACH PARTY HERETO TO ESCROW HOLDER.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year hereinabove written.

SELLER:
GROVE STREET HAYES VALLEY LLC,
a Delaware limited liability company
By:	DM Development Partners, LLC,
	a California limited liability company, Its Manager
	By:
	Name:
	Title:

By:	DDG California LLC,
	a Delaware limited liability company, Its Manager
	By:	DDG Partners LLC,
		a Delaware limited liability company,
		Its Member
		By:
		Name:
		Title:

BUYER:

SRT SF RETAIL I, LLC,

a Delaware limited liability company

By:

Name:

Title:

S-1

ACCEPTANCE BY ESCROW HOLDER

First American Title Insurance Company acknowledges that it has received a fully executed copy of the foregoing Agreement of Purchase and Sale and Joint Escrow Instructions (the “Agreement”) and agrees to act as Escrow Holder under the Agreement and to be bound by and strictly perform the terms thereof as such terms apply to Escrow Holder.

Dated: May ___, 2016

first american Title Insurance Company

By:

Name:

Title:

S-2

EXHIBIT “A”

LEGAL DESCRIPTION

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY AND COUNTY OF SAN FRANCISCO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:

A CONDOMINIUM COMPRISED OF

PARCEL ONE:

CONDOMINIUM UNIT C-1 (LOT NO. 104) OF PARCEL A OF FINAL MAP 7986, FILED JANUARY 7, 2015 IN BOOK 126 OF CONDOMINIUM MAPS, PAGES 85, 86 AND 87, OFFICIAL RECORDS OF SAN FRANCISCO COUNTY RECORDS (“OFFICIAL RECORDS”), AS SUCH UNIT IS SHOWN ON THE CONDOMINIUM PLAN (“PLAN”), ATTACHED AS AN EXHIBIT TO THE DECLARATION OF RESTRICTIONS AND CONDOMINIUM PLAN FOR 400 GROVE STREET (“DECLARATION”), RECORDED MARCH 18, 2015, SERIES NO. 2015-K034558, OFFICIAL RECORDS, AND ANY AMENDMENTS AND/OR ANNEXATIONS RECORDED PURSUANT THERETO.

PARCEL TWO:

AN UNDIVIDED 6.719% INTEREST AS TENANT IN COMMON IN AND TO THE COMMON AREA LYING WITHIN SAID PARCEL A OF FINAL MAP 7986, AS SHOWN ON THE PLAN AND DEFINED IN THE DECLARATION, EXCEPTING THEREFROM THE FOLLOWING:

A. ALL CONDOMINIUM UNITS SHOWN ON THE PLAN AND DESCRIBED IN THE DECLARATION.

PARCEL THREE:

NON-EXCLUSIVE EASEMENTS FOR USE, ENJOYMENT, INGRESS, EGRESS AND SUPPORT IN AND TO THE COMMON AREA, AS SHOWN ON THE PLAN AND DESCRIBED IN THE DECLARATION, FOR THE BENEFIT OF PARCEL ONE HEREINABOVE.

PARCEL FOUR:

EXCLUSIVE USE EASEMENTS, AS SHOWN ON THE PLAN AND DESCRIBED IN THE DECLARATION, APPURTENANT TO PARCEL ONE HEREINABOVE FOR THE POSSESSION, USE AND ENJOYMENT OF:

A. EXCLUSIVE USE FOR COMMERCIAL MECHANICAL SPACE E-C

Assessor's Lot 103; Block 0793 (portion)

A-1

EXHIBIT “B”

LIST OF SELLER’S DOCUMENTS

400 Grove 100% CD Arch Plan Set

ALTA Survey

Executed First Source Agreement

Recorded NSR - Conditions of Approval

CC&R's 2015-K034558

Final Map

Geotechnical Report

Little Gem Executed Lease

Phase II Report

TCO Renewal 1.28.16

Phase I Environmental Site Assessment

HOA Budget - Final

Recorded NSR - Variance

Preliminary Title Report Suite C-1

DDG Property Management Agreement 2015 - 2016

TCO 10.01.15

FATCO Title Insurance Commitment / PTR (hyperlinked) – effective date March 17, 2016

HOA Insurance Certificates

Tenant Insurance Certificates

Recent Property Tax Bills

Tenant Contact List

HOA Actuals (prior years)

HOA Budget (2016)

Warranties

HOA Reserve Study (if any)

Tenant Financials

B-1

EXHIBIT “C”

FORM OF ESTOPPEL CERTIFICATE

To:

Dated:

Re: Lease Pertaining to _________________________ (the “Property”)

Ladies and Gentlemen:

The above addressee (“Buyer”) has entered into an agreement to acquire the Property. The undersigned, as tenant (“Tenant”) acknowledges the right of Buyer to rely upon the statements and representations of the undersigned contained in this certificate, and further acknowledges that Buyer will be acquiring the Property in material reliance on this certificate. Given the foregoing, Tenant hereby certifies and represents to Buyer and its lender, Keybank National Association (and its and their successors and assigns), and Landlord (and its successors and assigns) with respect to the above-described Lease, as follows (if any blanks do not apply, simply state “None”):

1. Tenant is the lessee under that certain lease (the “Lease”) pertaining to the Property which is dated [_____________], and includes the following amendments: [Describe Lease and amendments]

2. The name of the current landlord (“Landlord”) is: ___________________________________.

3. The Lease is for the following portion of the Property (the “Premises”): That certain space identified as [__________] having approximately [___________] of rentable square feet.

4. The initial term of the Lease commenced on [_________] and shall expire on [__________], unless sooner terminated in accordance with the terms of the Lease. Tenant has no option to renew or extend the term of the Lease, except as follows (if none, so state): [_________].

5. The Lease, as it may have been modified or amended, contains the entire agreement of Landlord and Tenant with respect to the Premises, and is in full force and effect.

6. As of the date hereof, Tenant is occupying the Premises and is paying rent on a current basis under the Lease.

(a) The minimum monthly or base rent currently being paid by Tenant for the Premises pursuant to the terms of the Lease is [________] per month and has been paid through _____, 2016.

(b) Percentage rent (“Percentage Rent”), if any, due under the Lease has been paid through [________] and the amount of Percentage Rent for [________] was [________].

(c) Common area maintenance, taxes, insurance and other charges (the “Reimbursables”) due under the Lease, currently in the amount of $__________ per month, have been paid through [________].

7. Tenant has accepted possession of the Premises, and all construction to be performed by Landlord for the Premises under the Lease has been completed in accordance with the terms of the Lease and within the time periods set forth in the Lease. Landlord has paid in full any required contribution towards work to be performed by Tenant under the Lease, except as follows (if none, so state): __________________________________________________________________________.

8. The Premises shall be expanded by the addition of the following space on the dates hereinafter indicated (if none, so state): ____________________________________________________________________________.

C-1

9. No default or event that with the passage of time or notice would constitute a default on the part of Tenant exists under the Lease in the performance of the terms, covenants and conditions of the Lease required to be performed on the part of the Tenant.

10. No default or event that with the passage of time or notice would constitute a default on the part of Landlord exists under the Lease in the performance of the terms, covenants and conditions of the Lease required to be performed on the part of Landlord.

11. Tenant has no option or right to purchase all or any part of the Property.

12. Tenant has not assigned, sublet, transferred, hypothecated or otherwise disposed of its interest in the Lease and/or the Premises, or any part thereof.

13. Neither the Lease nor any obligations of Tenant thereunder have been guaranteed by any person or entity, except as follows (if none, so state): _____________________________________________________________.

14. Tenant has received no notice that, and has no knowledge that, hazardous substances are being generated, used, handled, stored or disposed of by Tenant on the Premises or on the Property in violation of any applicable laws, rules or regulations or the terms of the Lease.

15. No rentals are accrued and unpaid under the Lease, except for Percentage Rent, if any, or Reimbursables, if any, which are not yet due and payable.

16. No prepayments of rentals due under the Lease have been made for more than one month in advance. No security or similar deposit has been made under the Lease, except for the sum of [________] which has been deposited by Tenant with Landlord pursuant to the terms of the Lease.

17. Tenant has no defense, setoff, claim or counterclaim as to its obligations under the Lease, and to date has not asserted any rights of setoff, claim or counterclaim against Landlord.

18. Tenant has not received notice of any assignment, hypothecation, mortgage or pledge of Landlord’s interest in the Lease or the rents or other amounts payable thereunder, except as follows (if none, so state): _______________________________________________________________________________.

19. The undersigned is authorized to execute this Tenant Estoppel on behalf of Tenant.

Dated: ___________________, 2016

Very truly yours,

TENANT:

[___________________________________]

[___________________________________]

By:

Name:

Its:

C-2

GUARANTOR CERTIFICATION

The undersigned (“Guarantor”) certifies to Buyer, its lender and their successors and assigns that he/she/it is guarantor of the Lease described in the attached Estoppel Certificate pursuant to a Guaranty dated____________, 20__ (the “Guaranty”). The Guarantor certifies that the Guaranty remains in full force and effect, and that guarantor has no offsets or defenses or counterclaims with respect thereto. Guarantor further certifies that, to its knowledge, each statement of Tenant set forth in the attached Estoppel Certificate is true, correct and complete. Guarantor acknowledges that Landlord, Buyer and its lender are relying upon the accuracy of the statements in this Guarantor Certification.

Signed by Guarantor on:	GUARANTOR:
_______________, 2016	[___________________________________]
	[___________________________________]
	By:
	Name:
	Its:

C-3

EXHIBIT “D”

RECORDING REQUESTED BY

AND WHEN RECORDING MAIL TO:

(Above Space for Recorder’s Use Only)

GRANT DEED

The Undersigned Grantor(s) Declare(s): DOCUMENTARY TRANSFER TAX is $____________, computed on full value of the property conveyed; City and County of San Francisco, State of California;

FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, _____________________, a ______________________ (“Grantor”), hereby GRANTS to ________________, a _________ __________________, the following described real property (the “Property”) located in the City and County of San Francisco, State of California: See Exhibit “A” attached hereto.

SUBJECT TO:

1.          Taxes and assessments.

2.          All other covenants, conditions, restrictions, reservations, rights, rights of way, easements, encumbrances, liens and title matters whether or not of record or visible from an inspection of the Property and all matters which an accurate survey of the Property would disclose.

D-1

IN WITNESS WHEREOF, Grantor has caused this Grant Deed to be executed as of the ___ day of ____________, 2016.

GRANTOR:

_____________________________,

a _____________________

By:

Name:

Title:

D-2

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

STATE OF CALIFORNIA	)
	)	ss:
county of	)

On ______________, 2016 before me, _____________________________________________
	(insert name and title of the officer),

personally appeared                                                                                 , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature:

[Seal]

D-3

EXHIBIT “A” to Grant deed

LEGAL DESCRIPTION

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY AND COUNTY OF San Francisco, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

D-4

EXHIBIT “E”

BILL OF SALE

THIS BILL OF SALE is made this ______ day of _____________, 2016 by ________________, a ___________________ (“Seller”), to ________________, a ___________________ (“Buyer”).

RECITALS :

A.            Seller and Buyer are parties to that certain Agreement of Purchase and Sale and Joint Escrow Instructions dated as of _____________, 2016 (the “Purchase Agreement”) for the purchase and sale of certain real property more particularly described therein (the “Real Property”). Each capitalized term not defined herein shall have the respective meaning given to that term in the Purchase Agreement.

B.           The Purchase Agreement provides, in part, that Seller shall transfer to Buyer all of Seller’s right, title and interest, if any, in and to any tangible personal property owned by Seller and located on the Real Property, excluding any such property which is owned by any tenant or integrated with the property manager’s operation of other properties (“Personal Property”).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller does hereby absolutely and unconditionally give, grant, bargain, sell, transfer, set over, assign, convey, release, confirm and deliver (collectively, “Transfer”) to Buyer, and Buyer accepts, all of Seller’s right, title and interest, if any, in and to the Personal Property.

1.          SELLER’S RIGHT, TITLE AND INTEREST IN AND TO THE PERSONAL PROPERTY, IF ANY, IS BEING TRANSFERRED ON AN “AS IS” BASIS, WITHOUT ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, OF ANY KIND WHATSOEVER BY SELLER. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER ACKNOWLEDGES THAT SELLER EXPRESSLY DISCLAIMS AND NEGATES, AS TO ALL PROPERTY TRANSFERRED HEREBY: (A) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY: (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE; AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR MATERIALS.

2.          This Bill of Sale shall be binding upon and inure to the benefit of the respective successors, assigns, personal representatives, heirs and legatees of Buyer and Seller.

3.          If any party hereto brings any action or suit against the other party hereto by reason of any breach of any covenant, agreement or provision on the part of the other party set forth in this Bill of Sale, the prevailing party shall be entitled to recover from the other party all reasonable out-of-pocket costs and expenses of the action or suit, including reasonable out-of-pocket attorneys’ fees, charges and costs, in addition to any other relief to which it may be entitled.

4.          This Bill of Sale may be executed in counterparts, each of which shall be an original, and all of which, together, shall constitute one and the same instrument.

E-1

IN WITNESS WHEREOF, Seller has executed and delivered this Bill of Sale as of the day and year first above written.

Seller:

____________________________,

a __________________________

By:

Name:

Title:

E-2

EXHIBIT “F”

GENERAL ASSIGNMENT

THIS GENERAL ASSIGNMENT (“Assignment”) is made this _____ day of ______________, 2016, by and between ___________________________, a __________________________ (“Assignor”), and _________________, a _____________________ (“Assignee”).

WITNESSETH:

WHEREAS, Assignor and Assignee are parties to that certain Agreement of Purchase and Sale and Joint Escrow Instructions (the “Agreement”) dated as of ______________, 2016, respecting the sale of certain “Property” (as described in the Agreement). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Agreement.

WHEREAS, under the Agreement, Assignor is obligated to assign to Assignee, to the extent transferable by Assignor, all of Assignor’s right, title and interest, if any, in and to all Intangible Property, those Leases listed on Exhibit “A” attached hereto (the “Leases”), and those Contracts listed on Exhibit “B” attached hereto (the “Contracts”).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, except as otherwise provided in Paragraph 9 of the Agreement, Assignor hereby assigns, sells, transfers, sets over and delivers unto Assignee, to the extent transferable by Assignor, all of Assignor’s estate, right, title and interest in and to the Intangible Property, the Leases and the Contracts, and Assignee hereby accepts such assignment.

By acceptance of this Assignment, Assignee hereby assumes the performance of all of the terms, covenants and conditions imposed upon Assignor under the Leases and Contracts to the extent of those obligations first arising or accruing on or after the date of this Assignment.

In the event any party hereto institutes any action or proceeding against the other party with regard to this Assignment, the prevailing party in such action shall be entitled to recover, in addition to the cost of the suit, its reasonable out-of-pocket attorneys’ fees.

This Assignment shall be binding upon and inure to the benefit of the successors, assignees, personal representatives, heirs and legatees of all the respective parties hereto.

This Assignment may be executed in any number of counterparts, each of which shall be an original, and all of which, together, shall constitute one and the same instrument.

The parties hereto agree to execute, acknowledge and deliver any and all additional papers, documents and other assurances and shall perform any and all acts and things reasonably necessary in connection with the performance of the obligations hereunder to carry out the interest of the parties hereto.

F-1

IN WITNESS WHEREOF, Assignor and Assignee have executed and delivered this Assignment as of the day and year first above written.

Assignor:

______________________________,

a ___________________________

By:

Name:

Title:

Assignee:

_________________________________,

a _______________________________

By:

Name:

Title:

F-2

EXHIBIT “A” TO GENERAL ASSIGNMENT

F-3

EXHIBIT “B” TO GENERAL ASSIGNMENT

F-4

EXHIBIT “G”

TRANSFEROR’S CERTIFICATION OF NON-FOREIGN STATUS

Section 1445 of the Internal Revenue Code provides that a transferee of a United States real property interest must withhold tax if the transferor is a foreign person. For U.S. tax purposes (including Section 1445), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity. To inform _________________, a __________________________ (“Transferee”), that withholding of tax is not required upon the disposition of a United States real property interest by ________________, a ____________________ (“Transferor”), Transferor hereby certifies the following:

1.          The Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Code and the Income Tax Regulations promulgated thereunder);

2.          The Transferor is not a disregarded entity as defined in Section 1.1445-2(b)(2)(iii) of the Income Tax Regulations issued under the Internal Revenue Code;

3.          The Transferor’s U.S. employer identification number is __________; and

4.          The Transferor’s office address is ______________________________.

The Transferor understands that this Certification may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Under penalty of perjury I declare that I have examined this Certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of the Transferor.

Date: _______________, 2016

TRANSFEROR:

___________________________,

a ________________________

By:

Name:

Title:

G-1

EXHIBIT “H”

FORM OF TENANT NOTICE LETTER

___________________________, 2016

Re: Your lease (the “Lease”) of space in the building located at [______________________], in the City and County of San Francisco, State of California (the “Building”)

Ladies and Gentlemen:

You are hereby notified that ________________________, a __________________ (the “Owner”), as owner of the Building and the current owner of the landlord’s interest under the Lease, has sold the Building to _________________ (“Buyer”) as of the date of this letter set forth above, and in connection with such sale the Owner has assigned and transferred its interest in the Lease and the security deposits held by it thereunder to Buyer, and Buyer has assumed and agreed to perform all of the landlord’s obligations under the Lease (including any obligations set forth in the Lease to repay or account for such security deposits) from and after such date. Accordingly, (a) all of your obligations under the Lease from and after the date of this letter (including your obligations to pay rent and fulfill your insurance requirements) shall be performable to and for the benefit of Buyer, its successors and assigns and (b) all of the obligations of the landlord under the Lease (including any obligations to repay or account for any such security deposits thereunder) from and after the date of this letter shall be the binding obligations of Buyer and its successors and assigns.

The address of Buyer for purposes of payments or rentals under the Lease is:

Facsimile No.

Telephone No.

All inquiries regarding your Lease and the leased premises should be made to ______________ at the following address:

Facsimile No.

Telephone No.

H-1

Very truly yours,

Owner:

_______________________,

a _______________________

By:

Name:

Title:

H-2

EXHIBIT “I”

Owner’s Affidavit

San Francisco County, California

Order/File No. _________________________

That certain real property described on Exhibit “A” attached hereto (the “Real Property”)

OWNER’S DECLARATION

The undersigned (hereafter “Owner”) does hereby state that the following facts and statements are true and correct to its actual knowledge:

1.          That the person executing this Declaration is fully authorized and qualified to make this Declaration on Owner’s behalf;

2.          That during the period of ninety (90) days immediately preceding the date of this declaration no work has been done and no materials have been furnished in connection with the erection, repair, protection or removal of any building or other structure on the Real Property or in connection with the improvement of the Real Property, except ________________________________________________.

3.          That the Real Property is currently in use as a retail condominium; and that the following are all of the persons or entities having leases or other occupancy rights affecting the Real Property: See Exhibit “B” attached hereto.

4.          That there are no outstanding options or rights of first refusal to purchase the Real Property.

5.          Seller is not a wholesaler or retailer of perishable agricultural commodities, produce, poultry, poultry products, livestock or meat products, and has no direct or indirect relationship (other than the relationship of landlord to tenant) to the following tenants currently occupying portions of the Property: [ADD RESTAURANTS, GROCERS, FOOD/PERISHABLE VENDORS].

This declaration is made with the intention that First American Title Insurance Company (the “Company”) and its policy issuing agents will rely upon it in issuing their title insurance policies and endorsements. Owner agrees to indemnify the Company against loss or damage (including attorneys’ fees, expenses, and costs) incurred by the Company as a result of any statement made herein by Owner, as qualified by Owner’s actual knowledge, being untrue.

I-1

Owner declares under penalty of perjury that the foregoing is true and correct to its actual knowledge.

Dated this ____ day of __________, 2016.

Owner:

______________________________,

a __________________________

By:

Name:

Title:

I-2

EXHIBIT “A” to Owner’s Affidavit

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY AND COUNTY OF SAN FRANCISCO, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

I-3

EXHIBIT “B” to Owner’s Affidavit

I-4

EXHIBIT “J”

LIST OF SELLER DISCLOSURES

See attached.

J-1

EXHIBIT “K”

LIST OF LEASES

Lease dated March 30, 2015 with F2 Founders, LLC

K-1

EXHIBIT “L”

Intentionally deleted

L-1

EXHIBIT “M”

FORM OF CC&R ESTOPPEL CERTIFICATE

[SUBJECT TO REVISION FOLLOWING REVIEW OF CC&Rs]

To:

Dated:

Re: Declaration of Covenants and Restrictions of the ______________ Association dated as of _______________, recorded in the Official Records of San Francisco County, California (the “Official Records”) on _____________ as Instrument No. ____________ (the “Original CC&Rs”), as amended or assigned by (a) that certain ___________________ of the _____________ Association dated as of _______________, recorded in the Official Records on __________ as Instrument No. __________, and (b) that certain Assignment of ___________ dated _____________, recorded in the Official Records on _______________ as Instrument No. ____________ (as amended and assigned, the “CC&Rs”)

Ladies and Gentlemen:

The undersigned (the “Association”) has the full right, power and authority to execute and deliver this estoppel certificate. Terms not otherwise defined herein shall have the meaning given thereto in the CC&Rs. The property more particularly described in Exhibit A attached hereto (the “Property”) is currently owned by __________________ (“Owner”) and is subject to the CC&Rs and is part of the planned unit development of which the Property is a part (the “CID”). The undersigned understands that the above addressee (“Buyer”) intends to acquire the Property and will be relying on this estoppel certificate in doing so. Accordingly, as of the date hereof, the undersigned, in accordance with Section ________ of the Original CC&Rs, hereby certifies and represents to Buyer, and its lender, Keybank National Association (and its and their successors and assigns), and Owner (and its successors and assigns), as follows:

1.          The CC&Rs are valid, enforceable, and in full force and effect and have not been modified, supplemented, amended, terminated or superseded except as expressly set forth above.

2.          True, correct and complete copies of the [Association Documents] [TO BE DEFINED] are attached hereto as Exhibit B. The Association Documents are in full force and effect and have not been modified, supplemented, amended, terminated or superseded except as expressly set forth above.

3.          There are no use agreements, maintenance agreements or other agreements regarding use rights and maintenance obligations between the Association and the original Declarant under the CC&Rs (or any successor thereto) that is currently in force affecting the Property, other than the following:_______________________________________________________________________.

4.          To the Association’s actual knowledge, there are no defaults existing under the CC&Rs as the same apply to the Property.

5.          As of the date hereof, the aggregate amount of the fees, assessments, maintenance expenses, and other charges which are or could become a lien or encumbrance on or against the Property or an obligation of Owner is $________ and such fees, maintenance expenses and other charges have been paid through ________________, 2016.

6.          Association is presently entitled to no offsets, credit, or claims against assessments owed under the CC&Rs with respect to the Property.

7.          There are no liens being asserted or capable of being asserted against the Property by the undersigned under the CC&Rs.

M-1

8.          The CID is a mixed use residential and commercial project governed jointly under the CC&R’s by the Association.

9.          No tenant or owner within the CID has asserted or alleged any claim related to any defect in the construction or condition of any part of the common area of the CID or any improvements comprising part of the CID.

10.         All insurance required under the CC&R’s is in full force and effect. The owner of the Property is an additional insured under such insurance to the extent of its interest in the Property.

11.         There is no pending or to the knowledge of the Association, threatened litigation, arbitration or other dispute resolution proceeding involving the CID or under the CC&R’s, except as follows: __________________________________________________.

12.         No special assessments or levies under the CC&R’s have been adopted by the Association and to the Association’s knowledge no such special assessment or levy is contemplated.

13.         Attached hereto as Exhibit C are: (i) a true and correct copy of the [HOA Budget] for calendar year 2016, (ii) a true and correct copy of the [HOA 2015 Income and Expense Statement], and (iii) a true and correct copy of [Reserve Study].

Each individual executing this estoppel certificate represents and warrants that such individual has been duly and validly authorized to do so. This estoppel certificate shall be binding on the undersigned and its successors and assigns and shall inure to the benefit of Buyer, and its lender, Keybank National Association (and its and their successors and assigns), and Owner (and its successors and assigns).

_______________________

a _______________________

By:  

Name:  

Title:

M-2

EXHIBIT A

LEGAL DESCRIPTION

M-3

EXHIBIT B

COPIES OF ASSOCIATION DOCUMENTS

M-4

EXHIBIT C

COPIES OF ASSOCIATION FINANCIAL DOCUMENTS

M-5

AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS

by and between

Grove Street Hayes Valley LLC, as Seller,

and

SRT SF Retail I, LLC, as Buyer

Table of Contents

		Page
1.	Purchase and Sale	1
2.	Purchase Price	1
3.	Escrow	2
4.	Buyer’s Investigations	2
5.	Conditions to the Close of Escrow	4
6.	Deliveries to Escrow Holder	7
7.	Deliveries Upon Close of Escrow	7
8.	Costs and Expenses	8
9.	Prorations	8
10.	Disbursements and Other Actions by Escrow Holder	10
11.	AS-IS Sale and Purchase; Release	10
12.	Seller’s Representations and Warranties	13
13.	Buyer’s Representations and Warranties	14
14.	Seller Covenants	15
15.	Casualty and Condemnation	15
16.	Notices	16
17.	Commissions	17
18.	Legal and Equitable Enforcement of this Agreement	18
19.	Assignment	19
20.	Confidentiality	20
21.	Miscellaneous	20

-i-

Glossary

Additional Deposit	2
Affiliate	21
Agreement	1
Approval Notice	4
Association	3
Bill of Sale	7
Business Day	21
Buyer	1
BUYER’S POST-CLOSING CLAIMS	18
Claims	13
Close of Escrow	7
Closing Date	2
Consultant	4
Contingency Date	3
Current Tax Year	9
Deed	7
Deposit	2
Disclosure Items	13
Disclosure Report	12
Due Diligence	3
Effective Date	1
Escrow Holder	1
Escrow Instructions	2
Excluded Documents	2
General Assignment	7
Governmental Regulations	11
Hazardous Materials	11
Independent Consideration	2
Initial Deposit	1
Initial Deposit Deadline	1
Intangible Property	1
Lease Inducement Costs	9
Lease Year	8
Leases	1
Material Damage	16
Materially Damaged	16
Percentage Rents	8
Permitted Exceptions	5
Person	21
Personal Property	1
Property	1
PTR	5
PURCHASE DOCUMENTS	18
Purchase Price	1
Real Property	1
RECOURSE NOTICE	18
Reimbursable Tenant Expenses	9
Rents	8
Required Estoppels	3
Seller	1
Seller’s Documents	2
Seller’s Estimated Reimbursable Tenant Expenses	9
SELLER’S UNDERTAKINGS	18
Subject Lease Year	8
Title Company	5
Title Disapproval	5
Title Policy	5
Uncollected Rents	8

-i-

EX-10.4

Exhibit 10.4

FIRST AMENDMENT TO

AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS

(400 GROVE STREET, UNIT C-1, SAN FRANCISCO, CA)

THIS FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS (this “Amendment”), dated as of May 25, 2016, is made by and between GROVE STREET HAYES VALLEY LLC, a Delaware limited liability company (“Seller”) and SRT SF RETAIL I, LLC, a Delaware limited liability company (“Buyer”).

A. Seller and Buyer are parties to that certain Agreement of Purchase and Sale and Joint Escrow Instructions dated as of May 4, 2016 (the “Purchase Agreement”).

B. Seller and Buyer desire to amend certain provisions of the Purchase Agreement as set forth herein.

NOW THEREFORE, in consideration of the premises, their mutual covenants and promises set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows:

1. Defined Terms. Capitalized terms used in this Amendment but not defined herein shall have the meanings set forth in the Purchase Agreement.

2. Form of Tenant Estoppel. Exhibit C [Form of Estoppel Certificate] to the Purchase Agreement is hereby superseded and replaced in its entirety by the form of estoppel certificate attached hereto as Exhibit A. Buyer hereby approves the completed form of estoppel certificate attached hereto as Exhibit A.

3. Approval Notice. This Amendment constitutes Buyer’s Approval Notice under Section 4(c) of the Purchase Agreement and shall be deemed properly delivered and accepted upon its execution and delivery by Seller and Buyer. Buyer has no further right to terminate the Purchase Agreement pursuant to Section 4(c) of the Purchase Agreement, and the Deposit is non-refundable to Buyer except as otherwise expressly provided in the Purchase Agreement.

4. Ratification and Affirmation of Contract. Seller and Buyer hereby ratify and affirm the Purchase Agreement in its entirety, except as expressly amended herein. The provisions of this Amendment shall control in the event of any conflicts with the provisions of the Purchase Agreement.

5. Execution of Amendment. This Amendment may be executed in counterparts, each of which shall be part of one and the same instrument, which counterparts will be transmitted to each party to the Purchase Agreement by email transmission of signature pages. This Amendment shall not be effective or binding upon either party until and unless Seller and Buyer have each delivered a signed signature page to this Amendment to the other party.

[SIGNATURES ON FOLLOWING PAGE]

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions – 400 Grove

Page 1 of 2

IN WITNESS WHEREOF, Seller and Buyer have executed this Amendment as of the date first set forth above.

Seller:
grove street hayes valley LLC,
a Delaware limited liability company
By:	DM Development Partners, LLC,
	a California limited liability company, Its Manager
	By:
	Name:
	Title:

By:	DDG California LLC,
	a Delaware limited liability company, Its Manager
	By:	DDG Partners LLC,
		a Delaware limited liability company,
		Its Member
		By:
		Name:
		Title:

Buyer:

SRT SF RETAIL I, LLC,

a Delaware limited liability company

By:

Name:

Title:

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions – 400 Grove

S-1

EXHIBIT A

FORM OF ESTOPPEL CERTIFICATE

To:	SRT SF Retail I, LLC
	c/o Glenborough LLC
	400 South El Camino, 11th Floor
	San Mateo, CA 94402-1708

Dated:

Re: Lease Pertaining to 400 Grove St., Unit C-1, San Francisco, CA (the “Property”)

Ladies and Gentlemen:

The above addressee (“Buyer”) has entered into an agreement to acquire the Property. The undersigned, as tenant (“Tenant”), acknowledges the right of Buyer to rely upon the statements and representations of the undersigned contained in this certificate, and further acknowledges that Buyer will be acquiring the Property in material reliance on this certificate. Given the foregoing, Tenant hereby certifies and represents to Buyer and its lender, Keybank National Association (and its and their successors and assigns), and Landlord (and its successors and assigns) with respect to the above-described Lease, as follows (if any blanks do not apply, simply state “None”):

1. Tenant is the lessee under that certain lease (the “Lease”) pertaining to the Property which is dated March 30, 2015, and includes the following amendments: None.

2. The name of the current landlord (“Landlord”) is: Grove Street Hayes Valley LLC.

3. The Lease is for the following portion of the Property (the “Premises”): That certain space identified as Unit C-1. The Premises consist of 2,000 square feet of usable interior ground floor space.

4. Delivery of the Premises, as that phrase is defined in the Lease, by the Landlord to the Tenant, occurred on or before: August 10, 2015.

5. Tenant has had its Opening Day, as that phrase is defined in the Lease, and the Opening Day occurred on December 17, 2015.

6. The Rent Commencement Date, as that phrase is defined in the Lease, occurred on: December 17, 2015.

7. The initial term of the Lease commenced on December 17, 2015 and shall expire on February 1, 2031, unless sooner terminated in accordance with the terms of the Lease. Tenant has no option to renew or extend the term of the Lease, except as follows (if none, so state): One (1) option to extend the term of the lease by ten (10) years, on the terms and conditions set forth in the Lease.

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions

Exhibit A – Form of Estoppel Certificate – 400 Grove

Page 1 of 3

8. The Lease, as it may have been modified or amended, contains the entire agreement of Landlord and Tenant with respect to the Premises, and is in full force and effect.

9. As of the date hereof, Tenant is occupying the Premises and is paying rent on a current basis under the Lease.

(a) The minimum monthly or base rent currently being paid by Tenant for the Premises pursuant to the terms of the Lease is $10,000 per month and has been paid through May 31, 2016.

(b) There is currently no percentage rent due under the Lease.

(c) Operating Expenses, Expenses, common area maintenance, taxes, insurance and other charges (the “Reimbursables”) due under the Lease, currently in the amount of $730.07 per month, have been paid through ________________.

10. Tenant has accepted possession of the Premises, and all construction to be performed by Landlord for the Premises under the Lease is “substantially complete” (as that phrase is defined in the Lease) and has been completed by Landlord and approved by Tenant in accordance with the terms of the Lease and within the time periods set forth in the Lease. Landlord has paid in full any required contribution towards work to be performed by Tenant under the Lease, except as follows (if none, so state): None. Tenant has exhausted all credits against monthly minimum rent to which Tenant was entitled under the Lease, except as follows (if none, so state): None.

11. To the extent Exhibit C of the Lease requires Landlord to provide or attempt to provide Tenant with the use of the following space, such space has been provided prior to the date of this certificate, and is satisfactory and acceptable to Tenant, or Landlord has fully satisfied its obligation to attempt to provide such space: (i) a basement or roof storage area for Tenant’s compressor racks and water heater; and (ii) an adequate area for exterior wash down and the temporary storage of garbage and recycling with concrete pad and sewer drain.

12. The Premises shall be expanded by the addition of the following space on the dates hereinafter indicated (if none, so state):    None                                                  .

13. No default or event that with the passage of time or notice would constitute a default on the part of Tenant exists under the Lease in the performance of the terms, covenants and conditions of the Lease required to be performed on the part of the Tenant.

14. No default or event that with the passage of time or notice would constitute a default on the part of Landlord exists under the Lease in the performance of the terms, covenants and conditions of the Lease required to be performed on the part of Landlord.

15. Tenant has no option or right to purchase all or any part of the Property.

16. Tenant has not assigned, sublet, transferred, hypothecated or otherwise disposed of its interest in the Lease and/or the Premises, or any part thereof.

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions

Exhibit A – Form of Estoppel Certificate – 400 Grove

Page 2 of 3

17. Neither the Lease nor any obligations of Tenant thereunder have been guaranteed by any person or entity, except as follows (if none, so state):     None                          .

18. Tenant has received no notice that, and has no knowledge that, hazardous substances are being generated, used, handled, stored or disposed of by Tenant on the Premises or on the Property in violation of any applicable laws, rules or regulations or the terms of the Lease.

19. No rentals are accrued and unpaid under the Lease, except for Percentage Rent, if any, or Reimbursables, if any, which are not yet due and payable.

20. No prepayments of rentals due under the Lease have been made for more than one month in advance. No security or similar deposit has been made under the Lease.

21. Tenant has no defense, setoff, claim or counterclaim as to its obligations under the Lease, and to date has not asserted any rights of setoff, claim or counterclaim against Landlord.

22. Tenant has not received notice of any assignment, hypothecation, mortgage or pledge of Landlord’s interest in the Lease or the rents or other amounts payable thereunder, except as follows (if none, so state): None.

23. The undersigned is authorized to execute this Tenant Estoppel on behalf of Tenant.

Dated:  , 2016.

Very truly yours,

TENANT:

F2 Founders, LLC,

a California limited liability company, dba Little Gem

By:

Name:

Its:

First Amendment to Agreement of Purchase and Sale

and Joint Escrow Instructions

Exhibit A – Form of Estoppel Certificate – 400 Grove

Page 3 of 3

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew Batinovich, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Strategic Realty Trust, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2016

/s/ Andrew Batinovich

Andrew Batinovich

Chief Executive Officer, Corporate Secretary and Director

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Terri Garnick, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Strategic Realty Trust, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2016

/s/ Terri Garnick

Terri Garnick

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THESARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the Quarterly Report on Form 10-Q of Strategic Realty Trust, Inc. (the “Company”) for the period ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chief Executive Officer of the Company, certifies, to his knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 12, 2016

/s/ Andrew Batinovich

Andrew Batinovich

Chief Executive Officer, Corporate Secretary and Director

(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the Quarterly Report on Form 10-Q of Strategic Realty Trust, Inc. (the “Company”) for the period ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chief Financial Officer of the Company, certifies, to her knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 12, 2016

/s/ Terri Garnick

Terri Garnick

Chief Financial Officer

(Principal Financial and Accounting Officer)

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 08, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Entity Registrant Name	Strategic Realty Trust, Inc.
Entity Central Index Key	0001446371
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		11,008,668

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Investments in real estate
Land	$ 17,715	$ 15,981
Building and improvements	60,237	56,158
Tenant improvements	3,593	3,676
Investments in real estate, net	81,545	75,815
Accumulated depreciation	(11,250)	(10,068)
Investments in real estate, net	70,295	65,747
Properties under development and development costs
Land	25,851	0
Buildings	609	0
Development costs	2,012	0
Properties under development and development costs	28,472	0
Cash and cash equivalents	3,265	8,793
Restricted cash	5,869	2,693
Prepaid expenses and other assets, net	1,015	731
Tenant receivables, net	1,218	1,664
Investments in unconsolidated joint ventures	6,469	6,902
Lease intangibles, net	4,265	4,290
Assets held for sale	0	9,769
Deferred financing costs, net	439	579
TOTAL ASSETS	121,307	101,168
LIABILITIES
Notes payable, net	63,071	34,052
Accounts payable and accrued expenses	1,119	1,486
Amounts due to affiliates	75	49
Other liabilities	1,502	1,479
Liabilities related to assets held for sale	0	6,909
Below market lease intangibles, net	3,601	3,303
Deferred gain on sale of properties to unconsolidated joint venture	1,227	1,225
TOTAL LIABILITIES	70,595	48,503
Commitments and contingencies (Note 13)
Stockholders' equity
Preferred stock, $0.01 par value; 50,000 shares authorized, none issued and outstanding	0	0
Common stock, $0.01 par value; 400,000,000 shares authorized; 11,008,668 and 11,037,948 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively	111	111
Additional paid-in capital	96,480	96,684
Accumulated deficit	(47,758)	(46,124)
Total stockholders' equity	48,833	50,671
Non-controlling interests	1,879	1,994
TOTAL EQUITY	50,712	52,665
TOTAL LIABILITIES AND EQUITY	$ 121,307	$ 101,168

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2016	Dec. 31, 2015
Preferred stock par value (in dollars per share)	$ 0.01	$ 0.01
preferred stock, shares authorized	50,000	50,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	400,000,000	400,000,000
Common stock, shares issued	11,008,668	11,037,948
Common stock, shares outstanding	11,008,668	11,037,948

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue:
Rental and reimbursements	$ 2,482	$ 3,921	$ 5,190	$ 8,725
Expense:
Operating and maintenance	893	1,370	1,838	3,147
General and administrative	586	760	1,068	1,525
Depreciation and amortization	851	1,162	1,721	3,030
Transaction expense	276	0	280	0
Interest expense	510	1,354	1,110	3,048
Total expense	3,116	4,646	6,017	10,750
Operating loss	(634)	(725)	(827)	(2,025)
Other income (loss):
Equity in income of unconsolidated joint ventures	276	239	302	110
Gain on disposal of real estate	605	99	614	4,882
Gain (loss) on extinguishment of debt	(965)	33	(966)	(200)
Income (loss) before income taxes	(718)	(354)	(877)	2,767
Income taxes	(228)	(80)	(134)	(79)
Net income (loss)	(946)	(434)	(1,011)	2,688
Net income (loss) attributable to non-controlling interests	(35)	(15)	(37)	246
Net income (loss) attributable to common stockholders	$ (911)	$ (419)	$ (974)	$ 2,442
Earnings (loss) per common share - basic and diluted (in dollars per share)	$ (0.08)	$ (0.04)	$ (0.09)	$ 0.22
Weighted average shares outstanding used to calculate earnings (loss) per common share - basic and diluted (in shares)	11,008,017	10,967,917	11,022,603	10,968,769

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CONDENSED CONSOLIDATED STATEMENT OF EQUITY - 6 months ended Jun. 30, 2016 - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Total Stockholders' Equity	Non-controlling Interests
BALANCE at Dec. 31, 2015	$ 52,665	$ 111	$ 96,684	$ (46,124)	$ 50,671	$ 1,994
BALANCE (in shares) at Dec. 31, 2015		11,037,948
Conversion of OP units to common shares	0	$ 0	52	0	52	(52)
Conversion of OP units to common shares (in shares)		9,588
Redemption of common shares	(256)	$ 0	(256)	0	(256)	0
Redemption of common shares (in shares)		(38,868)
Quarterly distributions	(686)	$ 0	0	(660)	(660)	(26)
Net loss	(1,011)	0	0	(974)	(974)	(37)
BALANCE at Jun. 30, 2016	$ 50,712	$ 111	$ 96,480	$ (47,758)	$ 48,833	$ 1,879
BALANCE (in shares) at Jun. 30, 2016		11,008,668

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities:
Net income (loss)	$ (1,011)	$ 2,688
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net gain on disposal of real estate	(614)	(4,882)
Loss on extinguishment of debt	(966)	(200)
Equity in income of unconsolidated joint ventures	(302)	(110)
Straight-line rent	(42)	(51)
Amortization of deferred costs and notes payable premium/discount	510	287
Depreciation and amortization	1,721	3,030
Amortization of above and below-market leases	(92)	(75)
Bad debt expense	24	25
Interest income on note receivable	0	(152)
Changes in operating assets and liabilities:
Prepaid expenses and other assets	(284)	(167)
Tenant receivables	465	261
Accounts payable and accrued expenses	(367)	(700)
Amounts due to affiliates	26	72
Other liabilities	7	273
Net change in restricted cash for operational expenditures	(163)	(872)
Net cash provided by (used in) operating activities	844	(173)
Cash flows from investing activities:
Net proceeds from the sale of real estate	8,737	53,058
Acquisition of real estate	(5,630)	0
Investment in properties under development and costs of development	(28,472)	0
Improvements, capital expenditures, and leasing costs	(203)	(587)
Investments in unconsolidated joint ventures	0	(4,555)
Issuance of note receivable	0	(7,000)
Distributions from unconsolidated joint ventures	735	0
Net change in restricted cash from investments in consolidated variable interest entities	(3,458)	0
Net change in restricted cash for capital expenditures	445	693
Net cash provided by (used in) investing activities	(27,846)	41,609
Cash flows from financing activities:
Redemption of member interests	0	(2,102)
Redemption of common shares	(256)	(554)
Quartertly distributions	(686)	(1,426)
Proceeds from notes payable	32,700	0
Repayment of notes payable	(8,680)	(36,984)
Payment of penalties associated with early repayment of notes payable	(839)	0
Payment of loan fees and financing costs	(765)	0
Net cash provided by (used in) financing activities	21,474	(41,066)
Net increase (decrease) in cash and cash equivalents	(5,528)	370
Cash and cash equivalents - beginning of period	8,793	3,211
Cash and cash equivalents - end of period	3,265	3,581
Supplemental disclosure of non-cash investing and financing activities:
Distributions declared but not paid	0	680
Cash paid for interest, net of amounts capitalized	$ 717	$ 3,619

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ORGANIZATION AND BUSINESS

6 Months Ended

Jun. 30, 2016

Organization and Business [Abstract]

ORGANIZATION AND BUSINESS

1. ORGANIZATION AND BUSINESS

Strategic Realty Trust, Inc. (the “Company”) was formed on September 18, 2008, as a Maryland corporation. Effective August 22, 2013, the Company changed its name from TNP Strategic Retail Trust, Inc. to Strategic Realty Trust, Inc. The Company believes it qualifies as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and has elected REIT status beginning with the taxable year ended December 31, 2009, the year in which the Company began material operations.

Since the Company’s inception, its business has been managed by an external advisor. The Company has no direct employees and all management and administrative personnel responsible for conducting the Company’s business are employed by its advisor. Currently, the Company is externally managed and advised by SRT Advisor, LLC, a Delaware limited liability company (the “Advisor”) pursuant to an advisory agreement with the Advisor (the “Advisory Agreement”) initially executed on August 10, 2013, and subsequently renewed in August 2014, August 2015 and August 2016. The current term of the Advisory Agreement terminates on August 10, 2017. The Advisor is an affiliate of Glenborough, LLC (together with its affiliates, “Glenborough”), a privately held full-service real estate investment and management company focused on the acquisition, management and leasing of commercial properties.

Substantially all of the Company’s business is conducted through Strategic Realty Operating Partnership, L.P. (the “OP”). During the Company’s initial public offering (“Offering”), as the Company accepted subscriptions for shares of its common stock, it transferred substantially all of the net proceeds of the initial public offering to the OP as a capital contribution. The Company is the sole general partner of the OP. As of June 30, 2016 and December 31, 2015, the Company owned 96.3% and 96.2%, respectively, of the limited partnership interest in the OP.

The Company’s principal demand for funds has been for the acquisition of real estate assets, the payment of operating expenses, interest on outstanding indebtedness, the payment of distributions to stockholders, and investments in unconsolidated joint ventures as well as development of properties. Substantially all of the proceeds of the completed Offering have been used to fund investments in real properties and other real estate-related assets, for payment of operating expenses, for payment of interest, for payment of various fees and expenses, such as acquisition fees and management fees, and for payment of distributions to stockholders. The Company’s available capital resources, cash and cash equivalents on hand and sources of liquidity are currently limited. The Company expects its future cash needs will be funded using cash from operations, future asset sales, debt financing and the proceeds to the Company from any sale of equity that it may conduct in the future.

The Company invests in and manages a portfolio of income-producing retail properties, located in the United States, real estate-owning entities and real estate-related assets, including the investment in or origination of mortgage, mezzanine, bridge and other loans related to commercial real estate. The Company has invested directly, and indirectly through joint ventures, in a portfolio of income-producing retail properties located throughout the United States, with a focus on grocery anchored multi-tenant retail centers, including neighborhood, community and lifestyle shopping centers, multi-tenant shopping centers and free standing single-tenant retail properties. During the first quarter of 2016, the Company invested, through joint ventures, in two significant retail projects under development.

As of June 30, 2016, in addition to the development projects, the Company’s portfolio of properties was comprised of 10 properties with approximately 694,000 rentable square feet of retail space located in 6 states. As of June 30, 2016, the rentable space at the Company’s retail properties was 89% leased.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2016

Summary Of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements as contained within the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the Securities and Exchange Commission (“the SEC”), including the instructions to Form 10-Q and Regulation S-X.

The unaudited condensed consolidated financial statements include the accounts of the Company, the OP, their direct and indirect owned subsidiaries, and the accounts of joint ventures that are determined to be variable interest entities for which the Company is the primary beneficiary. All significant intercompany balances and transactions are eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows have been included.

The Company evaluates the need to consolidate joint ventures and variable interest entities based on standards set forth in ASC Topic 810, Consolidation (“ASC 810”). In determining whether the Company has a controlling interest in a joint venture or a variable interest entity and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the partners/members, as well as whether the entity is a variable interest entity for which the Company is the primary beneficiary. As of June 30, 2016, the Company held ownership interests in two unconsolidated joint ventures. Refer to Note 4, “Investments in Unconsolidated Joint Ventures” for additional information. As of June 30, 2016, the Company held variable interests in two variable interest entities and consolidated those entities. Refer to Note 5, “Variable Interest Entities” for additional information.

Properties Under Development

The initial cost of properties under development includes the acquisition cost of the property, direct development costs and borrowing costs directly attributable to the development. Borrowing costs associated with direct expenditures on properties under development are capitalized. The amount of capitalized borrowing costs is determined by reference to borrowings specific to the project, where relevant. Borrowing costs are capitalized from the commencement of the development until the date of practical completion where the property is substantially ready for its intended use. Capitalization of borrowing costs is suspended if there are prolonged periods when development activity is interrupted. Practical completion is when the property is capable of operating in the manner intended by management.

Interest on projects is based on interest rates in place during the development period, and is capitalized until the project is ready for its intended use. The amount of interest capitalized during the six months ended June 30, 2016, was approximately $1.2 million.

Reclassifications

Certain prior period amounts have been reclassified to conform with current period’s presentation. The reclassifications had no effect on the Company’s financial condition, results of operations, or cash flows.

 

As of June 30, 2016, in respect to the Company’s adoption of Accounting Standards Update (“ASU”) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), the Company classified deferred financing costs, net of accumulated amortization, as a contra-liability to notes payable on the condensed consolidated balance sheet. ASU 2015-03 requires retrospective application, wherein the balance sheet of each period presented should be adjusted to reflect the effects of the new guidance. Accordingly, for comparative purposes herein, the Company reclassified the December 31, 2015 balance of $0.3 million of deferred financing costs, net of accumulated amortization, as a contra-liability to notes payable in the condensed consolidated balance sheet, and $0.1 million of deferred financing costs, net of accumulated amortization, as a contra-liability to liabilities held for sale on the condensed consolidated balance sheet.

Assets sold or held for sale and related liabilities have been reclassified on the condensed consolidated balance sheets.

Newly Adopted Accounting Pronouncements

The Company adopted ASU 2015-03 on a retrospective basis, effective with the quarter ended March 31, 2016. The amendments in ASU 2015-03 require debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. ASU 2015-03 is limited to the presentation of debt issuance costs and does not affect the recognition and measurement of debt issuance costs. The adoption of ASU 2015-03 would change the presentation of debt issuance costs as the Company presents debt issuance costs as deferred financing costs, net on the accompanying condensed consolidated balance sheets. ASU 2015-03 does not address how debt issuance costs related to line-of-credit arrangements should be presented on the balance sheet or amortized. Given this absence of authoritative guidance within ASU 2015-03, the FASB issued ASU 2015-15, Interest – Imputation of Interest (Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting, which clarifies that the SEC Staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. Effective January 2016, the Company presents deferred financing costs, net, as a contra-liability in periods when there is an associated debt liability on the balance sheet, rather than as a deferred asset. If no associated debt liability is recorded on the balance sheet, deferred financing costs will be presented as a deferred asset. The adoption of ASU 2015-03 did not have a material impact on the Company’s condensed consolidated financial statements.

The Company adopted ASU 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustment (“ASU 2015-16”) effective with the quarter ended March 31, 2016. The amendments in ASU 2015-16 require an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Further, the acquirer is required to record, in the financial statements for the same period, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Entities must also present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current period earnings by the line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This guidance should be applied prospectively and early adoption is permitted. The adoption of ASU 2015-16 had no impact on the Company’s condensed consolidated financial statements.

Recent Accounting Pronouncements

The FASB issued the following Accounting Standards Updates (“ASUs”) which could have potential impact to the Company’s consolidated financial statements:

In June 2016, the FASB issued ASU no. 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”). ASU 2016-13 requires a financial asset, measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with adoption permitted for fiscal years beginning after December 15, 2018. Adjustments resulting from adopting ASU 2016-13 shall be applied through a cumulative-effect adjustment to retained earnings. The Company is currently evaluating the impact of the guidance on its condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which effectively defers the adoption of ASU 2014-09 to fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2016. Companies may apply either a full retrospective or a modified retrospective approach to adopt this guidance. In 2016, the FASB issued ASU No. 2016-08, ASU No. 2016-09 and ASU No. 2016-12, which provide interpretive clarifications on the new guidance in Topic 606. The Company is currently evaluating the transition methods and the impact of the guidance on its condensed consolidated financial statements.

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REAL ESTATE INVESTMENTS

6 Months Ended

Jun. 30, 2016

Real Estate Investments, Net [Abstract]

REAL ESTATE INVESTMENTS

3. REAL ESTATE INVESTMENTS

Acquisition of Properties

On June 14, 2016, the Company, through an indirect subsidiary, purchased a 100% ownership interest in two retail properties located in San Francisco, California (the “San Francisco Properties”) from each of Octavia Gateway Holdings, LLC and Grove Street Hayes Valley, LLC, each a Delaware limited liability company and each a subsidiary of DDG Partners LLC. The sellers were not affiliated with the Company or the Advisor. The San Francisco Properties encompass four retail condominiums with an aggregate of 5,640 square feet of retail space. The aggregate purchase price of the San Francisco Properties was approximately $5.6 million subject to customary closing costs and proration adjustments. The Company funded the purchase price using borrowings under the Amended and Restated Credit Facility (“KeyBank credit facility”). Refer to Note 8. “Notes Payable, Net” for details.

In conjunction with the acquisition of the San Francisco Properties, on May 4, 2016, the Company, through an indirect subsidiary, entered into a purchase agreement to acquire a retail property from Hayes Street Hayes Valley LLC, a Delaware limited liability company and a subsidiary of DDG Partners LLC. The seller was not affiliated with the Company or its external advisor. The purchase of this retail property is expected to close later in 2016.

 

The following table summarizes the estimated fair values of the acquired tangible and intangible assets and assumed liabilities as of the acquisition date (amounts in thousands):

 

Property	Buildings and  Improvements		Land		Lease Intangibles		Below-Market  Lease Liabilities		Estimated Fair Value of Net Assets Acquired
8 Octavia	$	1,969	$	734	$	143	$	(106)	$	2,740
400 Grove		2,111		1,000		110		(331)		2,890
	$	4,080	$	1,734	$	253	$	(437)	$	5,630

The initial accounting for the business combinations is incomplete with respect to the values assigned to tangible and intangible assets acquired and liabilities assumed as the Company did not have sufficient time to finalize these respective valuations and, accordingly, amounts are subject to change within the purchase price allocation period. The Company expects to finalize the allocation of purchase consideration as soon as practicable and no later than one year from the acquisition date.

Lease intangibles and below-market lease liabilities generally relate to commercial leases. As of June 30, 2016, the remaining weighted-average amortization period of lease intangibles and below-market lease liabilities was 14.0 years and 14.2 years, respectively.

For the three and six months ended June 30, 2016, the Company incurred $0.2 million of acquisition-related costs in connection with the acquisition of the San Francisco Properties. These costs are included in transaction expenses in the condensed consolidated statements of operations.

2016 Sale of Properties

On April 4, 2016, the Company consummated the disposition of Bloomingdale Hills, located in Riverside, Florida, for a sales price of approximately $9.2 million in cash, a portion of which was used to pay off the related $5.3 million mortgage loan and $3 million of which was used to pay down the line of credit under its KeyBank credit facility. The sale of the property did not represent a strategic shift that will have a major effect on the Company’s operations and financial results and its results of operations were not reported as discontinued operations on the Company’s condensed consolidated financial statements. The disposition of Bloomingdale Hills resulted in a gain of $0.6 million, which was included on the Company’s condensed consolidated statement of operations. The Company’s condensed consolidated statements of operations include net operating income of approximately $25,000 for the three months ended June 30, 2016, and a net operating loss of $73,000 for the six months ended June 30, 2016, relating to the results of operations of Bloomingdale Hills. Results of operations of Bloomingdale Hills for the three and six months ended June 30, 2015, were not material.

 

2015 Sale of Properties

On March 11, 2015, the Company sold the following three properties for the aggregate gross sales price of $53.6 million (amounts in thousands):

 

Property	Location	Acquisition Date	Gross Sales Price		Original Purchase Price  (1)
Osceola Village	Kissimmee, Florida	10/11/2011	$	22,000	$	21,800	(2)
Constitution Trail	Normal, Illinois	10/21/2011		23,100		18,000
Aurora Commons	Aurora, Ohio	3/20/2012		8,500		7,000
Total			$	53,600	$	46,800

(1) The original purchase price amounts do not include acquisition fees.

(2) The original purchase price for Osceola Village included an additional pad which was sold for approximately $0.9 million prior to this transaction.

The sale of the three properties did not represent a strategic shift that will have a major effect on the Company’s operations and financial results and, as a result, was not included in discontinued operations for the six months ended June 30, 2015. The Company’s condensed consolidated statements of operations include net operating losses of approximately $16,000 and $0.3 million, respectively, for the three and six months ended June 30, 2015, relating to the results of operations for the three sold properties.

The sale of Osceola Village, Constitution Trail and Aurora Commons (the “SGO Properties”) was completed in connection with the formation of the SGO Joint Venture. The three properties were sold to the SGO Joint Venture, and the closing of the sale was conditioned on the Company receiving a 19% membership interest in the SGO Joint Venture. In exchange for this 19% membership interest, the Company contributed $4.5 million to the SGO Joint Venture, which amount was credited against the Company’s proceeds from the sale of the three properties to the SGO Joint Venture. Of the net sales proceeds from the sale of the aforementioned properties, $36.4 million was used by the Company to retire the debt associated with the sold properties. Since the sale of the SGO Properties does not represent a strategic shift that will have a major effect on the Company’s operations and financial results, their results of operations were not reported as discontinued operations on the Company’s financial statements.

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INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

6 Months Ended

Jun. 30, 2016

Equity Method Investments and Joint Ventures [Abstract]

INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

On September 30, 2015, the Company, through wholly-owned subsidiaries, formed a joint venture (the “SGO MN Joint Venture”) with MN Retail Grand Avenue Partners, LLC, a subsidiary of Oaktree Real Estate Opportunities Fund V.I. L.P. (“Oaktree”) and GLB SGO MN, LLC, a wholly-owned subsidiary of Glenborough Property Partners, LLC (“GPP”). GPP is an affiliate of the Advisor and the Company’s property manager. On March 11, 2015, the Company, through a wholly-owned subsidiary, formed a joint venture (the “SGO Joint Venture”) with Grocery Retail Grand Avenue Partners, LLC, a subsidiary of Oaktree, and GLB SGO, LLC, a wholly-owned subsidiary of GPP. These joint ventures own property types similar to properties that are directly owned by the Company.

The following table summarizes the Company’s investments in unconsolidated joint ventures as of June 30, 2016, and December 31, 2015 (amounts in thousands):

		Ownership Interest						Investment
Joint Venture	Date of Investment	June 30, 2016			December 31, 2015			June 30, 2016		December 31, 2015
SGO Retail Acquisitions Venture, LLC	3/11/2015		19	%		19	%	$	3,852	$	4,098
SGO MN Retail Acquisitions Venture, LLC	9/30/2015		10	%		10	%		2,617		2,804
Total								$	6,469	$	6,902

The Company’s off-balance sheet arrangements consist primarily of investments in the joint ventures as set forth in the table above. The joint ventures typically fund their cash needs through secured debt financings obtained by and in the name of the joint venture entity. The joint ventures’ debts are secured by a first mortgage, are without recourse to the joint venture members, and do not represent a liability of the members other than carve-out guarantees for certain matters such as environmental conditions, misuse of funds and material misrepresentations. As of June 30, 2016, the Company has provided carve-out guarantees in connection with the two aforementioned unconsolidated joint ventures; in connection with those carve-out guarantees, the Company has certain rights of recovery from the joint venture members.

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VARIABLE INTEREST ENTITIES

6 Months Ended

Jun. 30, 2016

Organization and Business [Abstract]

VARIABLE INTEREST ENTITIES

5. VARIABLE INTEREST ENTITIES

The Company has variable interests in, and is the primary beneficiary of, variable interest entities (“VIEs”) through its investments in (i) a joint venture with the Gelson’s Joint Venture and the Wilshire Joint Venture (both as defined below). The Company has consolidated the accounts of these variable interest entities. For further information, refer to Note 2. “Summary of Significant Accounting Policies,” under “Principles of Consolidation and Basis of Presentation.”

Gelson’s Joint Venture

On January 7, 2016, the Company, through wholly-owned subsidiaries, entered into the Limited Liability Company Agreement of Sunset & Gardner Investors, LLC (the “Gelson’s Joint Venture Agreement”) to form a joint venture (the” Gelson’s Joint Venture”) with Sunset & Gardner LA, LLC (“S&G LA” and together with the Company the “Gelson’s Members”), a subsidiary of Cadence Capital Investments, LLC (“Cadence”). Cadence is a real estate development and investment firm focused on commercial properties. They offer high-quality, market-driven developments, and have expertise in market planning and site selection build-to-suit and small center developments, redevelopment and repositioning of existing properties.

The Gelson’s Joint Venture Agreement provides for the ownership and operation of certain real property by the Gelson’s Joint Venture, in which the Company owns a 100% capital interest and a 50% profits interest. In exchange for ownership in the Gelson’s Joint Venture, the Company has agreed to contribute cash in an amount up to $7 million in initial capital contributions and $0.7 million in subsequent capital contributions to the Gelson’s Joint Venture. S&G LA contributed its rights to acquire the real property, its interest under a 20 year lease with Gelson’s Markets (the “Gelson’s Lease”) and agreed to provide certain management and development services.

On January 28, 2016, the Gelson’s Joint Venture used the capital contributions of the Company, together with the proceeds of a loan from Buchanan Mortgage Holdings, LLC in the amount of $10.7 million, to purchase property located at the corner of Sunset Boulevard and Gardner in Hollywood, California for a build to suit grocery store for Gelson’s Markets (the “Gelson’s Property”) from a third party seller, for a total purchase price of approximately $13.0 million. The Gelson’s Joint Venture intends to proceed with obtaining all required governmental approvals and entitlements to replace the existing improvements on the property with a build-to-suit grocery store for Gelson’s Markets with an expected size of approximately 38,000 square feet. Gelson’s Markets was founded in 1951 and is recognized as one of the nation’s premier supermarket chains. Gelson’s Markets currently has 24 locations throughout Southern California.

 

Pursuant to the Gelson’s Joint Venture Agreement, S&G LA will manage and conduct the day-to-day operations and affairs of the Gelson’s Joint Venture, subject to certain major decisions set forth in the Gelson’s Joint Venture Agreement that require the consent of all the Gelson’s Members. Income, losses and distributions will generally be allocated based on the Gelson’s Members’ respective capital and profits interests. Additionally, in certain circumstances described in the Gelson’s Joint Venture Agreement, the Company may be required to make additional capital contributions to the Joint Venture, in proportion to the Gelson’s Members’ respective ownership interests. Until the Company has received back its capital contribution and specified preferred returns, all distributions go to the Company; thereafter, the Gelson’s Joint Venture will distribute the profits 50% to the Company and 50% to S&G LA.

3032 Wilshire Joint Venture

On December 21, 2015, the Company, through wholly-owned subsidiaries, entered into the Limited Liability Company Agreement of 3032 Wilshire Investors, LLC (the “Wilshire Joint Venture Agreement”) to form a joint venture (the “Wilshire Joint Venture”) with 3032 Wilshire SM, LLC, a subsidiary of Cadence (together with the Company, the “Wilshire Members”).

On December 14, 2015 and January 5, 2016, the Company paid deposits in the amounts of $0.5 million and $0.1 million, respectively, toward the acquisition of certain property located at 3032 Wilshire Boulevard and 1210 Berkeley Street in Santa Monica, California (the “Wilshire Property”). The Wilshire Joint Venture intends to redevelop, reposition and re-lease the Wilshire Property. On March 7, 2016, the Company contributed $5.7 million to the Wilshire Joint Venture. The Wilshire Joint Venture Agreement provides for the ownership and operation of certain real property by the Wilshire Joint Venture, in which the Company owns a 100% capital interest and a 50% profits interest.

On March 8, 2016, the Wilshire Joint Venture used the deposits and capital contribution of the Company, together with the proceeds of a loan from Buchanan Mortgage Holdings, LLC in the amount of $8.5 million, to acquire the Wilshire Property from a third party seller, for a total purchase price of $13.5 million. The Wilshire Joint Venture intends to reposition and re-lease the existing improvements on the property.

 

Pursuant to the Wilshire Joint Venture Agreement, 3032 Wilshire SM will manage and conduct the day-to-day operations and affairs of the Wilshire Joint Venture, subject to certain major decisions set forth in the Wilshire Joint Venture Agreement that require the consent of all the Wilshire Members. Income, losses and distributions will generally be allocated based on the Wilshire Members’ respective capital and profits interests. Additionally, in certain circumstances described in the Wilshire Joint Venture Agreement, the Company may be required to make additional capital contributions to the Wilshire Joint Venture, in proportion to the Wilshire Members’ respective ownership interests. Until the Company has received back its capital contribution and specified preferred returns, all distributions go to the Company; thereafter, the Wilshire Joint Venture will distribute the profits 50% to the Company and 50% to 3032 Wilshire SM.

 

The following reflects the assets and liabilities of the Gelson’s Joint Venture and the Wilshire Joint Venture, which were consolidated by the Company, as of June 30, 2016 (amounts in thousands):

	June 30, 2016
ASSETS
Properties under development and development costs:
Land	$	25,851
Building		609
Development costs		2,012
Properties under development and development costs		28,472
Restricted cash		2,867
Cash and cash equivalents		340
Prepaid expenses and other assets, net		22
Tenant receivables, net		25
TOTAL ASSETS (1)	$	31,726
LIABILITIES
Notes payable, net (2)	$	18,748
Accounts payable and accrued expenses		360
Amounts due to affiliates		283
Other liabilities		40
TOTAL LIABILITIES	$	19,431

(1) The assets of the Gelson’s Joint Venture and Wilshire Joint Venture can be used only to settle obligations of the respective consolidated joint ventures.

(2) Includes reclassification of $0.5 million of deferred financing costs, net, as a contra-liability. The creditors of the consolidated joint ventures do not have recourse to the general credit of the Company. The notes payable of the consolidated joint ventures are not guaranteed by the Company.

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FUTURE MINIMUM RENTAL INCOME

6 Months Ended

Jun. 30, 2016

Minimum Rents [Abstract]

FUTURE MINIMUM RENTAL INCOME

6. FUTURE MINIMUM RENTAL INCOME

Operating Leases

The Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of June 30, 2016, the leases at the Company’s properties have remaining terms (excluding options to extend) of up to 20 years with a weighted-average remaining term (excluding options to extend) of 5 years. The leases may have provisions to extend the lease agreements, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit and/or a letter of credit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying condensed consolidated balance sheets and totaled approximately $0.2 million as of June 30, 2016 and December 31, 2015, respectively.

 

As of June 30, 2016, the future minimum rental income from the Company’s properties under non-cancelable operating leases, excluding properties held for sale, was as follows (amounts in thousands):

Remainder of 2016	$	3,711
2017		7,036
2018		6,074
2019		5,471
2020		4,543
Thereafter		11,815
Total	$	38,650

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LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES

6 Months Ended

Jun. 30, 2016

Intangibles [Abstract]

ACQUIRED LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES

7. LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES

As of June 30, 2016 and December 31, 2015, the Company’s acquired lease intangibles and below-market lease liabilities were as follows (amounts in thousands):

	Lease Intangibles				Below-Market Lease Liabilities
	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
Cost	$	8,191	$	8,089	$	(4,783)	$	(4,463)
Accumulated amortization		(3,926)		(3,799)		1,182		1,160
Total	$	4,265	$	4,290	$	(3,601)	$	(3,303)

The Company’s amortization of lease intangibles and below-market lease liabilities for the three and six months ended June 30, 2016 and 2015, were as follows (amounts in thousands):

	Lease Intangibles				Below-Market Lease Liabilities
	Three Months Ended June 30,				Three Months Ended June 30,
	2016		2015		2016		2015
Amortization	$	(235)	$	(357)	$	67	$	95

	Lease Intangibles				Below-Market Lease Liabilities
	Six Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Amortization	$	(486)	$	(950)	$	139	$	212

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NOTES PAYABLE, NET

6 Months Ended

Jun. 30, 2016

Debt [Abstract]

NOTES PAYABLE

8. NOTES PAYABLE, NET

As of June 30, 2016 and December 31, 2015, the Company’s notes payable, consisted of the following (amounts in thousands):

	Principal Balance				Interest Rates At
	June 30, 2016		December 31, 2015		June 30, 2016
KeyBank credit facility (1)	$	10,500	$	—		2.95	%
Secured term loans		24,492		24,701		5.10	%
Mortgage loans		9,614		9,690		5.63	%
Mortgage loans secured by properties under development (2)		19,200		—		9.5% - 10.0	%
Deferred financing costs, net (3)		(735)		(339)		n/a
	$	63,071	$	34,052

(1) The KeyBank credit facility is a revolving credit facility with an initial maximum aggregate commitment of $30.0 million (the “Facility Amount”). Subject to certain terms and conditions contained in the loan documents, the Company may request that the Facility Amount be increased to a maximum of $60.0 million. The KeyBank credit facility matures on August 4, 2017. Each loan made pursuant to the Key Bank credit facility will be either a LIBOR rate loan or a base rate loan, at the election of the Company, plus an applicable margin, as defined. Monthly payments are interest only with the entire principal balance and all outstanding interest due at maturity. The Company will pay KeyBank an unused commitment fee, quarterly in arrears, which will accrue at 0.30% per annum, if the usage under the KeyBank credit facility is greater than 50% of the Facility Amount. The Company is providing a guaranty of all of its obligations under the KeyBank credit facility and all other loan documents in connection with the KeyBank credit facility. As of June 30, 2016, the KeyBank credit facility was secured by Pinehurst Square, Topaz Marketplace, 8 Octavia and 400 Grove. For information regarding recent draws under the Key Bank credit facility, see “– Recent Financing Transactions - KeyBank Credit Facility.”

(2) Comprised of $10.7 million and $8.5 million associated with the Company’s investment in the Gelson’s Joint Venture and the Wilshire Joint Venture, respectively.

(3) Reclassification of deferred financing costs, net of accumulated depreciation, as a contra-liability in accordance with ASU 2015-03.

During the three and six months ended June 30, 2016, the Company incurred and expensed approximately $0.5 million and approximately $1.1 million, respectively, of interest costs, which included the amortization and write-off of deferred financing costs of approximately $0.1 million and approximately $0.2 million, respectively. During the three and six months ended June 30, 2015, the Company incurred and expensed approximately $1.4 million and approximately $3.0 million, respectively, of interest costs, which included the amortization and write-off of deferred financing costs of approximately $0.1 million and approximately $0.3 million, respectively. Also during the three and six months ended June 30, 2016, the Company incurred and capitalized approximately $0.9 million and approximately $1.2 million, respectively, of interest expense related to the variable interest entities, which included the amortization of deferred financing costs of approximately $0.2 million and approximately $0.3 million, respectively.

As of June 30, 2016 and December 31, 2015, interest expense payable was approximately $0.3 million and approximately $0.2 million, respectively, including an amount related to the variable interest entities of approximately $0.2 million as of June 30, 2016.

 

The following is a schedule of future principal payments for all of the Company’s notes payable outstanding as of June 30, 2016 (amounts in thousands):

Remainder of 2016	$	293
2017		39,685
2018		473
2019		23,355
Total (1)	$	63,806

(1) Total future principal payments reflect actual amounts due to creditors, and excludes reclassification of $0.7 million deferred financing costs, net.

Recent Financing Transactions

KeyBank Credit Facility

On March 7, 2016, the Company drew $6.0 million under the Key Bank credit facility and used the proceeds to invest in the Wilshire Joint Venture (as defined in Note 5. “Variable Interest Entities” to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q).

 

On June 9, 2016, the Company drew $7.5 million under the Key Bank credit facility and used the majority of the proceeds to acquire 8 Octavia and 400 Grove from Octavia Gateway Holdings, LLC and Grove Street Hayes Valley, LLC, respectively. Refer to Note 3 “Real Estate Investments” for additional information.

Mortgage Loans Secured by Properties Under Development

In connection with the Company’s investment in the Wilshire Joint Venture and the acquisition of the Wilshire Property (as defined in Note 5. “Variable Interest Entities” to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q), the Company has consolidated borrowings of $8.5 million (the “Wilshire Loan”) from Buchanan Mortgage Holdings, LLC (as the lender) and 3032 Wilshire Investors, LLC (as the borrower). The Wilshire Loan bears interest at a rate of 10.0% per annum, payable monthly, commencing on April 1, 2016. The loan matures on March 7, 2017, with an option for an additional six-month period, subject to certain conditions as stated in the loan agreement. The loan is secured by, among other things, a lien on the Wilshire development project and other collateral as defined in the loan agreement.

In connection with the Company’s investment in the Gelson’s Joint Venture (as defined in Note 5. “Variable Interest Entities” to be condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q) and the acquisition of the Gelson’s Property (defined in Note 5. “Variable Interest Entities” to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q), the Company has consolidated borrowings of $10.7 million (the “Gelson’s Loan”) from Buchanan Mortgage Holdings, LLC (as the lender) and Sunset and Gardner Investors, LLC (as the borrower). The Gelson’s Loan bears interest at a rate of 9.5% per annum, payable monthly, commencing on April 1, 2016. The loan matures on January 27, 2017, with an option to extend for an additional six-month period, subject to certain conditions as stated in the loan agreement. The loan is secured by, among other things, a lien on the Gelson’s development project and other joint venture collateral as defined in the loan agreement.

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FAIR VALUE DISCLOSURES

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

FAIR VALUE DISCLOSURES

9. FAIR VALUE DISCLOSURES

Certain financial assets and liabilities are measured at fair value on a recurring basis. The Company determines fair value using the following hierarchy:

· Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

· Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

· Level 3 - prices or valuation techniques where little or no market data is available for inputs that are significant to the fair value measurement.

The Company believes the total carrying values reflected on its condensed consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses, and amounts due to affiliates reasonably approximate their fair values due to their short-term nature.

The fair value of the Company’s notes payable is estimated using a present value technique based on contractual cash flows and management’s observations of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. The Company significantly reduces the amount of judgment and subjectivity in its fair value determination through the use of cash flow inputs that are based on contractual obligations. Discount rates are determined by observing interest rates published by independent market participants for comparable instruments. The Company classifies these inputs as Level 2 inputs.

The following table provides the carrying values and fair values of the Company’s notes payable related to continuing operations as of June 30, 2016 and December 31, 2015 (amounts in thousands):

	Carrying Value  (1)				Fair Value  (2)
	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
Notes Payable	$	63,071	$	34,052	$	64,317	$	34,760

(1) The carrying value of the Company’s notes payable represents the outstanding principal as of June 30, 2016, and December 31, 2015. The carrying values and fair values of the notes payable include the reclassification of deferred financing costs, net, of approximately $0.7 million and approximately $0.3 million, as a contra-liability, as of June 30, 2016 and December 31, 2015, respectively.

(2) The estimated fair value of the notes payable is based upon the indicative market prices of the Company’s notes payable based on prevailing market interest rates.

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EQUITY

6 Months Ended

Jun. 30, 2016

Stockholders' Equity Note [Abstract]

EQUITY

10. EQUITY

Share Redemption Program

On April 1, 2015, the Company’s board of directors approved the reinstatement of the share redemption program (which had been suspended since January 15, 2013) and adopted an Amended and Restated Share Redemption Program (the “Amended and Restated SRP”). Under the Amended and Restated SRP, only shares submitted for repurchase in connection with the death or “qualifying disability” (as defined in the Amended and Restated SRP) of a stockholder are eligible for repurchase by the Company. The number of shares to be redeemed is limited to the lesser of (i) a total of $2.0 million for redemptions sought upon a stockholder’s death and a total of $1.0 million for redemptions sought upon a stockholder’s qualifying disability, and (ii)  5% of the number of shares of the Company’s common stock outstanding during the prior calendar year. Share repurchases pursuant to the share redemption program are made at the sole discretion of the Company. The Company reserves the right to reject any redemption request for any reason or no reason or to amend or terminate the share redemption program at any time subject to the notice requirements in the Amended and Restated SRP.

The redemption price for shares that are redeemed is 100% of the Company’s most recent estimated net asset value per share as of the applicable redemption date. A redemption request must be made within one year after the stockholder’s death or disability, unless such death or disability occurred between January 15, 2013 and April 1, 2015, when the share redemption program was suspended. Redemption requests due to the death or disability of a Company stockholder that occurred during such time period, must be submitted within one year after the adoption of the Amended and Restated SRP.

The Amended and Restated SRP provides that any request to redeem less than $5,000 worth of shares will be treated as a request to redeem all of the stockholder’s shares. If the Company cannot honor all redemption requests received in a given quarter, all requests, including death and disability redemptions, will be honored on a pro rata basis. If the Company does not completely satisfy a redemption request in one quarter, it will treat the unsatisfied portion as a request for redemption in the next quarter when funds are available for redemption, unless the request is withdrawn. The Company may increase or decrease the amount of funding available for redemptions under the Amended and Restated SRP on ten business days’ notice to stockholders. Shares submitted for redemption during any quarter will be redeemed on the penultimate business day of such quarter. The record date for quarterly distributions has historically been and is expected to continue to be the last business day of each quarter; therefore, shares that are redeemed during any quarter are expected to be redeemed prior to the record date and thus would not be eligible to receive the distribution declared for such quarter.

The other material terms of the Amended and Restated SRP are consistent with the terms of the share redemption program that was in effect immediately prior to January 15, 2013.

On August 7, 2015, the board of directors approved the amendment and restatement of the Amended and Restated SRP (the “Second Amended and Restated SRP” and, together with the Amended and Restated SRP, the “SRP”). Under the Second Amended and Restated SRP, the redemption date with respect to third quarter 2015 redemptions was November 10, 2015 or the next practicable date as the Chief Executive Officer determined so that redemptions with respect to the third quarter of 2015 were delayed until after the payment date for the Special Distribution. With this revision, stockholders who were to have 100% of their shares redeemed were not left holding a small number of shares from the Special Distribution after the date of the redemption of their shares. The other material terms of the Second Amended and Restated SRP are consistent with the terms of the Amended and Restated SRP.  

 

During the three and six months ended June 30, 2016, the Company redeemed 8,147 shares and 38,868 shares of common stock, respectively, for $54,000 and for approximately $0.3 million under the SRP. During the three and six months ended June 30, 2015, the Company redeemed 77,916 shares of common stock for approximately $0.6 million. Cumulatively, through June 30, 2016, the Company has redeemed 404,771 shares sold in its initial public offering for $3.3 million.

Quarterly Distributions

In order to qualify as a REIT, the Company is required to distribute at least 90% of its annual REIT taxable income, subject to certain adjustments, to its stockholders. Some or all of the Company’s distributions have been paid, and in the future may continue to be paid from sources other than cash flows from operations.

Under the terms of the Key Bank credit facility, the Company may pay distributions to its investors so long as the total amount paid does not exceed 100% of the cumulative Adjusted Funds From Operations provided, however, that the Company is not restricted from making any distributions necessary in order to maintain its status as a REIT. The Company’s board of directors evaluates the Company’s ability to make quarterly distributions based on the Company’s operational cash needs.

The following tables set forth the quarterly distributions declared to the Company’s common stockholders and Common Unit holders for the six months ended June 30, 2016, and the year ended December 31, 2015. Distributions to its common stockholders and common unit holders for the three months ended June 30, 2016 were declared subsequent to June 30, 2016, as described in Note 14. “Subsequent Events” (amounts in thousands, except per share amounts):

		Distribution	Distribution Per Share of Common		Total Common		Total Common
	Distribution Record	Payable	Stock /		Stockholders		Unit Holders		Total
	Date	Date	Common Unit		Distribution		Distribution		Distribution
First Quarter 2016	3/31/2016	4/29/2016	$	0.06	$	660	$	26	$	686

		Distribution	Distribution Per Share of Common		Total Common		Total Common
	Distribution Record	Payable	Stock /		Stockholders		Unit Holders		Total
	Date	Date	Common Unit		Distribution		Distribution		Distribution
First Quarter 2015	3/31/2015	4/30/2015	$	0.06	$	658	$	26	$	684
Second Quarter 2015	6/30/2015	7/30/2015		0.06		654		26		680
Third Quarter 2015	9/30/2015	10/31/2015		0.06		654		26		680
Fourth Quarter 2015	12/31/2015	1/30/2016		0.06		661		25		686
Total					$	2,627	$	103	$	2,730

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

EARNINGS PER SHARE

11. EARNINGS PER SHARE

Earnings per share (“EPS”) is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted EPS is computed after adjusting the basic EPS computation for the effect of potentially dilutive securities outstanding during the period. The effect of non-vested shares, if dilutive, is computed using the treasury stock method. The Company applies the two-class method for determining EPS as its outstanding shares of non-vested restricted stock are considered participating securities as dividend payments are not forfeited even if the underlying award does not vest. There is no unvested stock as of June 30, 2016. The Company’s excess of distributions over earnings related to participating securities are shown as a reduction in income (loss) attributable to common stockholders in the Company’s computation of EPS.

The following table sets forth the computation of the Company’s basic and diluted earnings (loss) per share for the three and six months ended June 30, 2016 and 2015 (amounts in thousands, except shares and per share amounts):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2016		2015		2016		2015
Numerator - basic and diluted
Net income (loss)	$	(946)	$	(434)	$	(1,011)	$	2,688
Net income (loss) attributable to non-controlling interests		(35)		(15)		(37)		246
Net income (loss) attributable to common shares	$	(911)	$	(419)	$	(974)	$	2,442
Denominator - basic and diluted
Basic weighted average common shares		11,008,017		10,967,917		11,022,603		10,968,769
Effect of dilutive securities		—		—		—		—
Common Units (1)		—		—		—		—
Diluted weighted average common shares		11,008,017		10,967,917		11,022,603		10,968,769
Earnings (loss) per common share - basic and diluted
Net earnings (loss) attributable to common shares	$	(0.08)	$	(0.04)	$	(0.09)	$	0.22

(1) The effect of 422,308 convertible Common Units pursuant to the redemption rights outlined in the Company’s registration statement on Form S-11 have not been included as they would not be dilutive.

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RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2016

Related Party Transaction, Due from (to) Related Party [Abstract]

RELATED PARTY TRANSACTIONS

12. RELATED PARTY TRANSACTIONS

On August 7, 2013, the Company entered into the Advisory Agreement with the Advisor. On August 10, 2016, the Advisory Agreement with the Advisor was renewed for an additional twelve months, beginning on August 10, 2016. The Advisor manages the Company’s business as the Company’s external advisor pursuant to the Advisory Agreement. Pursuant to the Advisory Agreement, the Company will pay the Advisor specified fees for services related to the investment of funds in real estate and real estate-related investments, management of the Company’s investments and for other services.

On July 9, 2013, SRT Manager, an affiliate of the Advisor, acquired an initial 12% membership interest in SRT Holdings, the Company’s wholly-owned subsidiary. Following the Constitution Transaction on August 4, 2014 (refer to Note 8. “Notes Payable, Net”), SRT Manager’s membership interests in SRT Holdings decreased to 8.33%. In March 2015, SRT Holdings paid SRT Manager $2.1 million in full redemption of SRT Manager’s 8.33% membership interest in SRT Holdings.

 

On March 11, 2015, the Company, through a wholly-owned subsidiary, entered into the Limited Liability Company Agreement of SGO Retail Acquisitions Venture, LLC to form the SGO Joint Venture. On September 30, 2015, the Company, through wholly-owned subsidiaries, entered into the Limited Liability Company Agreement of SGO MN Retail Acquisitions Venture, LLC to form the SGO MN Joint Venture. For additional information regarding the SGO Joint Venture and the SGO MN Joint Venture, refer to Note 4. “Investments in Unconsolidated Joint Ventures.”

Summary of Related Party Fees

Summarized separately below are the Advisor related party costs incurred and payable by the Company for the periods presented (amounts in thousands):

Advisor Fees

	Incurred								Payable as of
	Three Months Ended June 30,				Six Months Ended June 30,				June 30,		December 31,
Expensed	2016		2015		2016		2015		2016		2015
Acquisition fees	$	56	$	—	$	58	$	—	$	—	$	—
Asset management fees		230		210		447		530		71		19
Reimbursement of operating expenses		48		—		98		—		4		27
Property management fees		97		150		221		351		—		3
Disposition fees		115		—		115		525		—		—
Guaranty fees (1)		—		—		—		1		—		—
Total	$	546	$	360	$	939	$	1,407	$	75	$	49
Capitalized
Acquisition fees	$	—	$	—	$	273	$	—	$	—	$	—
Leasing fees		92		39		103		66		—		—
Legal leasing fees		21		18		33		56		—		—
Construction management fees		—		10		1		15		—		—
Financing fees		—		—		—		32		—		—
Total	$	113	$	67	$	410	$	169	$	—	$	—

(1) Guaranty fees were paid by the Company to its prior advisor, TNP Strategic Retail Advisor, LLC.

Acquisition Fee

Under the Advisory Agreement, the Advisor is entitled to receive an acquisition fee equal to 1% of (1) the cost of each investment acquired directly by the Company or (2) the Company’s allocable cost of an investment acquired pursuant to a joint venture, in each case including purchase price, acquisition expenses and any debt attributable to such investments. An acquisition fee is capitalized by the Company when the related transaction does not qualify as a business combination; otherwise an acquisition fee is expensed.

Origination Fee

Under the Advisory Agreement, the Advisor is entitled to receive an origination fee equal to 1% of the amount funded by the Company to acquire or originate real estate-related loans, including any acquisition expenses related to such investment and any debt used to fund the acquisition or origination of the real estate-related loans. The Company will not pay an origination fee to the Advisor with respect to any transaction pursuant to which it is required to pay the Advisor an acquisition fee.

Financing Coordination Fee

Under the Advisory Agreement, the Advisor is entitled to receive a financing coordination fee equal to 1% of the amount made available and/or outstanding under any (1) financing obtained or assumed, directly or indirectly, by the Company or the OP and used to acquire or originate investments; or (2) the refinancing of any financing obtained or assumed, directly or indirectly, by the Company or the OP.

Asset Management Fee

Under the Advisory Agreement, the Advisor is entitled to receive an asset management fee equal to a monthly fee of one-twelfth (1/12th) of 0.6% of the higher of (1) aggregate cost on a GAAP basis (before non-cash reserves and depreciation) of all investments the Company owns, including any debt attributable to such investments; or (2) the fair market value of the Company’s investments (before non-cash reserves and depreciation) if the board of directors has authorized the estimate of a fair market value of the Company’s investments; provided, however, that the asset management fee will not be less than $250,000 in the aggregate during any one calendar year.

 

Reimbursement of Operating Expenses

The Company reimburses the Advisor for all expenses paid or incurred by the Advisor in connection with the services provided to the Company, subject to the limitation that the Company will not reimburse the Advisor for any amount by which the Company’s total operating expenses (including the asset management fee described below) at the end of the four preceding fiscal quarters exceeded the greater of (1) 2% of its average invested assets (as defined in the Company’s Articles of Amendment and Restatement (the “Charter”)); or (2) 25% of its net income (as defined in the Charter) determined without reduction for any additions to depreciation, bad debts or other similar non-cash expenses and excluding any gain from the sale of the Company’s assets for that period (the “2%/25% Guideline”). The Advisor is required to reimburse the Company quarterly for any amounts by which total operating expenses exceed the 2%/25% Guideline in the previous expense year that the independent directors do not approve. The Company will not reimburse the Advisor for any of its personnel costs or other overhead costs except for customary reimbursements for personnel costs under property management agreements entered into between the OP and the Advisor or its affiliates. Notwithstanding the above, the Company may reimburse the Advisor for expenses in excess of the 2%/25% Guideline if a majority of the independent directors determine that such excess expenses are justified based on unusual and non-recurring factors.

For the three and six months ended June 30, 2016 and 2015, the Company’s total operating expenses (as defined in the Charter) did not exceed the 2%/25% Guideline.

Property Management Fee

Under the property management agreements between the Company and Glenborough, Glenborough is entitled to receive property management fees calculated at a maximum of up to 4% of the properties’ gross revenue. The property management agreements with Glenborough have been renewed for an additional twelve months, beginning on August 10, 2016.

Disposition Fee

Under the Advisory Agreement, if the Advisor or its affiliates provide a substantial amount of services, as determined by the Company’s independent directors, in connection with the sale of a real property, the Advisor or its affiliates may be paid disposition fees up to 50% of a customary and competitive real estate commission, but not to exceed 3% of the contract sales price of each property sold.

Guaranty Fees

In connection with certain acquisition financings, the Company’s former chairman and former co-chief executive officer and/or Thompson National Properties, LLC had executed certain guaranty agreements to the respective lenders. As consideration for such guaranty, the Company entered into a reimbursement and fee agreement to provide for an upfront payment and an annual guaranty fee payment for the duration of the guarantee period. In March 2015, the Company retired the outstanding notes payable related to Osceola Village resulting in the expiration of the remaining guaranty agreement.

Leasing Fee

Under the property management agreements, Glenborough is entitled to receive a separate fee for the leases of new tenants, and for expansions, extensions and renewals of existing tenants in an amount not to exceed the fee customarily charged by similarly situated parties rendering similar services in the same geographic area for similar properties.

Legal Leasing Fee

Under the property management agreements, Glenborough is entitled to receive a market-based legal leasing fee for the negotiation and production of new leases, renewals, and amendments.

Construction Management Fee

In connection with the construction or repair in or about a property, the property manager is responsible for coordinating and facilitating the planning and the performance of all construction and is entitled to receive a fee equal to 5% of the hard costs for the project in question.

Related-Party Fees Paid by the Unconsolidated Joint Ventures

The unconsolidated joint ventures are party to certain agreements with Glenborough for services related to the investment of funds and management of the joint ventures’ investments, as well as the day-to-day management, operation and maintenance of the properties owned by the joint ventures. The joint ventures pay fees to Glenborough for these services. The SGO Joint Venture and the SGO MN Joint Venture recognized related-party fees and reimbursements of $0.1 million and $0.3 million, respectively for the three months ended June 30, 2016, and approximately $0.3 million and $0.5 million, respectively, for the six months ended June 30, 2016. The related-party amounts consist of property management, asset management, leasing commission, legal leasing, construction management fees and salary reimbursements.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

13. COMMITMENTS AND CONTINGENCIES

Economic Dependency

The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase, and disposition of real estate and real estate-related investments, management of the daily operations of the Company’s real estate and real estate-related investment portfolio, and other general and administrative responsibilities. In the event that the Advisor is unable to provide such services to the Company, the Company will be required to obtain such services from other sources.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its consolidated financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2016

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

14. SUBSEQUENT EVENTS

Second Quarter Distribution

On July 6, 2016, the Company declared a second quarter distribution in the amount of $0.06 per share/unit to common stockholders and holders of common units of record as of July 7, 2016, totaling approximately $0.7 million. The distribution was paid on July 29, 2016.

Acquisitions

On July 25, 2016, the Company drew $4.7 million under the KeyBank credit facility to fund the acquisition of a retail property located in San Francisco, California (the “Fulton Street Shops”). The acquisition of the Fulton Street Shops closed on July 27, 2016. The seller is not affiliated with the Company or the Advisor. The Fulton Street Shops is comprised of five high-quality street retail condominiums with an aggregate of 3,759 square feet of retail space. The aggregate purchase price of the Fulton Street Shops was approximately $4.6 million subject to customary closing costs and proration adjustments. The Company is in the process of concluding on its accounting for this acquisition, but anticipates that the purchase price of this acquisition will be allocated to land, building and other identifiable intangible assets and liabilities, and that the fair value of the acquired net assets will approximate the fair value of the consideration transferred.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2016

Summary Of Significant Accounting Policies [Abstract]

Principles of Consolidation and Basis of Presentation

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements as contained within the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the Securities and Exchange Commission (“the SEC”), including the instructions to Form 10-Q and Regulation S-X.

The unaudited condensed consolidated financial statements include the accounts of the Company, the OP, their direct and indirect owned subsidiaries, and the accounts of joint ventures that are determined to be variable interest entities for which the Company is the primary beneficiary. All significant intercompany balances and transactions are eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows have been included.

The Company evaluates the need to consolidate joint ventures and variable interest entities based on standards set forth in ASC Topic 810, Consolidation (“ASC 810”). In determining whether the Company has a controlling interest in a joint venture or a variable interest entity and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the partners/members, as well as whether the entity is a variable interest entity for which the Company is the primary beneficiary. As of June 30, 2016, the Company held ownership interests in two unconsolidated joint ventures. Refer to Note 4, “Investments in Unconsolidated Joint Ventures” for additional information. As of June 30, 2016, the Company held variable interests in two variable interest entities and consolidated those entities. Refer to Note 5, “Variable Interest Entities” for additional information.

Properties Under Development

Properties Under Development

The initial cost of properties under development includes the acquisition cost of the property, direct development costs and borrowing costs directly attributable to the development. Borrowing costs associated with direct expenditures on properties under development are capitalized. The amount of capitalized borrowing costs is determined by reference to borrowings specific to the project, where relevant. Borrowing costs are capitalized from the commencement of the development until the date of practical completion where the property is substantially ready for its intended use. Capitalization of borrowing costs is suspended if there are prolonged periods when development activity is interrupted. Practical completion is when the property is capable of operating in the manner intended by management.

Interest on projects is based on interest rates in place during the development period, and is capitalized until the project is ready for its intended use. The amount of interest capitalized during the six months ended June 30, 2016, was approximately $1.2 million.

Reclassification

Reclassifications

Certain prior period amounts have been reclassified to conform with current period’s presentation. The reclassifications had no effect on the Company’s financial condition, results of operations, or cash flows.

 

As of June 30, 2016, in respect to the Company’s adoption of Accounting Standards Update (“ASU”) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), the Company classified deferred financing costs, net of accumulated amortization, as a contra-liability to notes payable on the condensed consolidated balance sheet. ASU 2015-03 requires retrospective application, wherein the balance sheet of each period presented should be adjusted to reflect the effects of the new guidance. Accordingly, for comparative purposes herein, the Company reclassified the December 31, 2015 balance of $0.3 million of deferred financing costs, net of accumulated amortization, as a contra-liability to notes payable in the condensed consolidated balance sheet, and $0.1 million of deferred financing costs, net of accumulated amortization, as a contra-liability to liabilities held for sale on the condensed consolidated balance sheet.

Assets sold or held for sale and related liabilities have been reclassified on the condensed consolidated balance sheets.

Recent Accounting Pronouncements

Newly Adopted Accounting Pronouncements

The Company adopted ASU 2015-03 on a retrospective basis, effective with the quarter ended March 31, 2016. The amendments in ASU 2015-03 require debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. ASU 2015-03 is limited to the presentation of debt issuance costs and does not affect the recognition and measurement of debt issuance costs. The adoption of ASU 2015-03 would change the presentation of debt issuance costs as the Company presents debt issuance costs as deferred financing costs, net on the accompanying condensed consolidated balance sheets. ASU 2015-03 does not address how debt issuance costs related to line-of-credit arrangements should be presented on the balance sheet or amortized. Given this absence of authoritative guidance within ASU 2015-03, the FASB issued ASU 2015-15, Interest – Imputation of Interest (Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting, which clarifies that the SEC Staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. Effective January 2016, the Company presents deferred financing costs, net, as a contra-liability in periods when there is an associated debt liability on the balance sheet, rather than as a deferred asset. If no associated debt liability is recorded on the balance sheet, deferred financing costs will be presented as a deferred asset. The adoption of ASU 2015-03 did not have a material impact on the Company’s condensed consolidated financial statements.

The Company adopted ASU 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustment (“ASU 2015-16”) effective with the quarter ended March 31, 2016. The amendments in ASU 2015-16 require an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Further, the acquirer is required to record, in the financial statements for the same period, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Entities must also present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current period earnings by the line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This guidance should be applied prospectively and early adoption is permitted. The adoption of ASU 2015-16 had no impact on the Company’s condensed consolidated financial statements.

Recent Accounting Pronouncements

The FASB issued the following Accounting Standards Updates (“ASUs”) which could have potential impact to the Company’s consolidated financial statements:

In June 2016, the FASB issued ASU no. 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”). ASU 2016-13 requires a financial asset, measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with adoption permitted for fiscal years beginning after December 15, 2018. Adjustments resulting from adopting ASU 2016-13 shall be applied through a cumulative-effect adjustment to retained earnings. The Company is currently evaluating the impact of the guidance on its condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which effectively defers the adoption of ASU 2014-09 to fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2016. Companies may apply either a full retrospective or a modified retrospective approach to adopt this guidance. In 2016, the FASB issued ASU No. 2016-08, ASU No. 2016-09 and ASU No. 2016-12, which provide interpretive clarifications on the new guidance in Topic 606. The Company is currently evaluating the transition methods and the impact of the guidance on its condensed consolidated financial statements.

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REAL ESTATE INVESTMENTS (Tables)

6 Months Ended

Jun. 30, 2016

Real Estate Investments, Net [Abstract]

Schedule of Real Estate Properties

The following table summarizes the estimated fair values of the acquired tangible and intangible assets and assumed liabilities as of the acquisition date (amounts in thousands):

 

Property	Buildings and  Improvements		Land		Lease Intangibles		Below-Market  Lease Liabilities		Estimated Fair Value of Net Assets Acquired
8 Octavia	$	1,969	$	734	$	143	$	(106)	$	2,740
400 Grove		2,111		1,000		110		(331)		2,890
	$	4,080	$	1,734	$	253	$	(437)	$	5,630

Real Estate Properties Sales Price

On March 11, 2015, the Company sold the following three properties for the aggregate gross sales price of $53.6 million (amounts in thousands):

 

Property	Location	Acquisition Date	Gross Sales Price		Original Purchase Price  (1)
Osceola Village	Kissimmee, Florida	10/11/2011	$	22,000	$	21,800	(2)
Constitution Trail	Normal, Illinois	10/21/2011		23,100		18,000
Aurora Commons	Aurora, Ohio	3/20/2012		8,500		7,000
Total			$	53,600	$	46,800

(1) The original purchase price amounts do not include acquisition fees.

(2) The original purchase price for Osceola Village included an additional pad which was sold for approximately $0.9 million prior to this transaction.

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INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES (Tables)

6 Months Ended

Jun. 30, 2016

Equity Method Investments and Joint Ventures [Abstract]

Schedule of Investment in Unconsolidated Joint Ventures

The following table summarizes the Company’s investments in unconsolidated joint ventures as of June 30, 2016, and December 31, 2015 (amounts in thousands):

		Ownership Interest						Investment
Joint Venture	Date of Investment	June 30, 2016			December 31, 2015			June 30, 2016		December 31, 2015
SGO Retail Acquisitions Venture, LLC	3/11/2015		19	%		19	%	$	3,852	$	4,098
SGO MN Retail Acquisitions Venture, LLC	9/30/2015		10	%		10	%		2,617		2,804
Total								$	6,469	$	6,902

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VARIABLE INTEREST ENTITIES (Tables)

6 Months Ended

Jun. 30, 2016

Organization and Business [Abstract]

Schedule of Variable Interest Entities

The following reflects the assets and liabilities of the Gelson’s Joint Venture and the Wilshire Joint Venture, which were consolidated by the Company, as of June 30, 2016 (amounts in thousands):

	June 30, 2016
ASSETS
Properties under development and development costs:
Land	$	25,851
Building		609
Development costs		2,012
Properties under development and development costs		28,472
Restricted cash		2,867
Cash and cash equivalents		340
Prepaid expenses and other assets, net		22
Tenant receivables, net		25
TOTAL ASSETS (1)	$	31,726
LIABILITIES
Notes payable, net (2)	$	18,748
Accounts payable and accrued expenses		360
Amounts due to affiliates		283
Other liabilities		40
TOTAL LIABILITIES	$	19,431

(1) The assets of the Gelson’s Joint Venture and Wilshire Joint Venture can be used only to settle obligations of the respective consolidated joint ventures.

(2) Includes reclassification of $0.5 million of deferred financing costs, net, as a contra-liability. The creditors of the consolidated joint ventures do not have recourse to the general credit of the Company. The notes payable of the consolidated joint ventures are not guaranteed by the Company.

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FUTURE MINIMUM RENTAL INCOME (Tables)

6 Months Ended

Jun. 30, 2016

Minimum Rents [Abstract]

Schedule of Future Minimum Rental Receivable For Operating Leases

As of June 30, 2016, the future minimum rental income from the Company’s properties under non-cancelable operating leases, excluding properties held for sale, was as follows (amounts in thousands):

Remainder of 2016	$	3,711
2017		7,036
2018		6,074
2019		5,471
2020		4,543
Thereafter		11,815
Total	$	38,650

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LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2016

Finite-Lived Intangible Assets, Net [Abstract]

Acquired Lease Intangibles and Below Market Lease Liabilities

As of June 30, 2016 and December 31, 2015, the Company’s acquired lease intangibles and below-market lease liabilities were as follows (amounts in thousands):

	Lease Intangibles				Below-Market Lease Liabilities
	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
Cost	$	8,191	$	8,089	$	(4,783)	$	(4,463)
Accumulated amortization		(3,926)		(3,799)		1,182		1,160
Total	$	4,265	$	4,290	$	(3,601)	$	(3,303)

Increases Decreases In Net Income As Result Of Amortization Of Acquired Lease Intangibles

The Company’s amortization of lease intangibles and below-market lease liabilities for the three and six months ended June 30, 2016 and 2015, were as follows (amounts in thousands):

	Lease Intangibles				Below-Market Lease Liabilities
	Three Months Ended June 30,				Three Months Ended June 30,
	2016		2015		2016		2015
Amortization	$	(235)	$	(357)	$	67	$	95

	Lease Intangibles				Below-Market Lease Liabilities
	Six Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Amortization	$	(486)	$	(950)	$	139	$	212

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NOTES PAYABLE, NET (Tables)

6 Months Ended

Jun. 30, 2016

Debt [Abstract]

Schedule Of Notes Payable

As of June 30, 2016 and December 31, 2015, the Company’s notes payable, consisted of the following (amounts in thousands):

	Principal Balance				Interest Rates At
	June 30, 2016		December 31, 2015		June 30, 2016
KeyBank credit facility (1)	$	10,500	$	—		2.95	%
Secured term loans		24,492		24,701		5.10	%
Mortgage loans		9,614		9,690		5.63	%
Mortgage loans secured by properties under development (2)		19,200		—		9.5% - 10.0	%
Deferred financing costs, net (3)		(735)		(339)		n/a
	$	63,071	$	34,052

(1) The KeyBank credit facility is a revolving credit facility with an initial maximum aggregate commitment of $30.0 million (the “Facility Amount”). Subject to certain terms and conditions contained in the loan documents, the Company may request that the Facility Amount be increased to a maximum of $60.0 million. The KeyBank credit facility matures on August 4, 2017. Each loan made pursuant to the Key Bank credit facility will be either a LIBOR rate loan or a base rate loan, at the election of the Company, plus an applicable margin, as defined. Monthly payments are interest only with the entire principal balance and all outstanding interest due at maturity. The Company will pay KeyBank an unused commitment fee, quarterly in arrears, which will accrue at 0.30% per annum, if the usage under the KeyBank credit facility is greater than 50% of the Facility Amount. The Company is providing a guaranty of all of its obligations under the KeyBank credit facility and all other loan documents in connection with the KeyBank credit facility. As of June 30, 2016, the KeyBank credit facility was secured by Pinehurst Square, Topaz Marketplace, 8 Octavia and 400 Grove. For information regarding recent draws under the Key Bank credit facility, see “– Recent Financing Transactions - KeyBank Credit Facility.”

(2) Comprised of $10.7 million and $8.5 million associated with the Company’s investment in the Gelson’s Joint Venture and the Wilshire Joint Venture, respectively.

(3) Reclassification of deferred financing costs, net of accumulated depreciation, as a contra-liability in accordance with ASU 2015-03.

Schedule of maturities for notes payable outstanding

The following is a schedule of future principal payments for all of the Company’s notes payable outstanding as of June 30, 2016 (amounts in thousands):

Remainder of 2016	$	293
2017		39,685
2018		473
2019		23,355
Total (1)	$	63,806

(1) Total future principal payments reflect actual amounts due to creditors, and excludes reclassification of $0.7 million deferred financing costs, net.

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FAIR VALUE DISCLOSURES (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Notes Payable

The following table provides the carrying values and fair values of the Company’s notes payable related to continuing operations as of June 30, 2016 and December 31, 2015 (amounts in thousands):

	Carrying Value  (1)				Fair Value  (2)
	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
Notes Payable	$	63,071	$	34,052	$	64,317	$	34,760

(1) The carrying value of the Company’s notes payable represents the outstanding principal as of June 30, 2016, and December 31, 2015. The carrying values and fair values of the notes payable include the reclassification of deferred financing costs, net, of approximately $0.7 million and approximately $0.3 million, as a contra-liability, as of June 30, 2016 and December 31, 2015, respectively.

(2) The estimated fair value of the notes payable is based upon the indicative market prices of the Company’s notes payable based on prevailing market interest rates.

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EQUITY (Tables)

6 Months Ended

Jun. 30, 2016

Stockholders' Equity Note [Abstract]

Distributions declared and paid

The following tables set forth the quarterly distributions declared to the Company’s common stockholders and Common Unit holders for the six months ended June 30, 2016, and the year ended December 31, 2015. Distributions to its common stockholders and common unit holders for the three months ended June 30, 2016 were declared subsequent to June 30, 2016, as described in Note 14. “Subsequent Events” (amounts in thousands, except per share amounts):

		Distribution	Distribution Per Share of Common		Total Common		Total Common
	Distribution Record	Payable	Stock /		Stockholders		Unit Holders		Total
	Date	Date	Common Unit		Distribution		Distribution		Distribution
First Quarter 2016	3/31/2016	4/29/2016	$	0.06	$	660	$	26	$	686

		Distribution	Distribution Per Share of Common		Total Common		Total Common
	Distribution Record	Payable	Stock /		Stockholders		Unit Holders		Total
	Date	Date	Common Unit		Distribution		Distribution		Distribution
First Quarter 2015	3/31/2015	4/30/2015	$	0.06	$	658	$	26	$	684
Second Quarter 2015	6/30/2015	7/30/2015		0.06		654		26		680
Third Quarter 2015	9/30/2015	10/31/2015		0.06		654		26		680
Fourth Quarter 2015	12/31/2015	1/30/2016		0.06		661		25		686
Total					$	2,627	$	103	$	2,730

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EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Company's basic and diluted (loss)earnings per share

The following table sets forth the computation of the Company’s basic and diluted earnings (loss) per share for the three and six months ended June 30, 2016 and 2015 (amounts in thousands, except shares and per share amounts):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2016		2015		2016		2015
Numerator - basic and diluted
Net income (loss)	$	(946)	$	(434)	$	(1,011)	$	2,688
Net income (loss) attributable to non-controlling interests		(35)		(15)		(37)		246
Net income (loss) attributable to common shares	$	(911)	$	(419)	$	(974)	$	2,442
Denominator - basic and diluted
Basic weighted average common shares		11,008,017		10,967,917		11,022,603		10,968,769
Effect of dilutive securities		—		—		—		—
Common Units (1)		—		—		—		—
Diluted weighted average common shares		11,008,017		10,967,917		11,022,603		10,968,769
Earnings (loss) per common share - basic and diluted
Net earnings (loss) attributable to common shares	$	(0.08)	$	(0.04)	$	(0.09)	$	0.22

(1) The effect of 422,308 convertible Common Units pursuant to the redemption rights outlined in the Company’s registration statement on Form S-11 have not been included as they would not be dilutive.

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RELATED PARTY TRANSACTIONS (Tables)

6 Months Ended

Jun. 30, 2016

Related Party Transaction, Due from (to) Related Party [Abstract]

Summarized below are the related-party transactions

Summarized separately below are the Advisor related party costs incurred and payable by the Company for the periods presented (amounts in thousands):

Advisor Fees

	Incurred								Payable as of
	Three Months Ended June 30,				Six Months Ended June 30,				June 30,		December 31,
Expensed	2016		2015		2016		2015		2016		2015
Acquisition fees	$	56	$	—	$	58	$	—	$	—	$	—
Asset management fees		230		210		447		530		71		19
Reimbursement of operating expenses		48		—		98		—		4		27
Property management fees		97		150		221		351		—		3
Disposition fees		115		—		115		525		—		—
Guaranty fees (1)		—		—		—		1		—		—
Total	$	546	$	360	$	939	$	1,407	$	75	$	49
Capitalized
Acquisition fees	$	—	$	—	$	273	$	—	$	—	$	—
Leasing fees		92		39		103		66		—		—
Legal leasing fees		21		18		33		56		—		—
Construction management fees		—		10		1		15		—		—
Financing fees		—		—		—		32		—		—
Total	$	113	$	67	$	410	$	169	$	—	$	—

(1) Guaranty fees were paid by the Company to its prior advisor, TNP Strategic Retail Advisor, LLC.

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ORGANIZATION AND BUSINESS (Details Textual)	6 Months Ended	12 Months Ended
	Jun. 30, 2016 ft²	Dec. 31, 2015
Organization and Business (Additional Textual) [Abstract]
Number of Real Estate Properties	10
Net Rentable Area	694,000
Number of States in which Entity Operates	6
Delaware Limited Liability Company [Member]
Organization and Business (Additional Textual) [Abstract]
Partnership Interest Ownership Percentage	96.30%	96.20%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Textual) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016	Dec. 31, 2015
Summary of Significant Accounting Policies (Textual) [Abstract]
Interest Costs Capitalized	$ 0.9	$ 1.2
Reclassification From Deferred Financing Cost To Notes Payable [Member] | Accounting Standard Update 2015-03 [Member]
Summary of Significant Accounting Policies (Textual) [Abstract]
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets	$ 0.7	$ 0.7	$ 0.3
Reclassification From Deferred Financing Cost To Liabilities Held For Sale [Member] | Accounting Standard Update 2015-03 [Member]
Summary of Significant Accounting Policies (Textual) [Abstract]
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets			$ 0.1

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REAL ESTATE INVESTMENTS (Details) $ in Thousands	Jun. 30, 2016 USD ($)
Leases, Acquired-in-Place [Member]
Real Estate Investments, Net	$ 253
Leases, Acquired-in-Place, Market Adjustment [Member]
Real Estate Investments, Net	(437)
Building Improvements [Member]
Real Estate Investments, Net	4,080
Land [Member]
Real Estate Investments, Net	1,734
Estimated Fair Value of Net Assets Acquired [Member]
Real Estate Investments, Net	5,630
Octavia Gateway Holdings, LLC [Member] | Leases, Acquired-in-Place [Member]
Real Estate Investments, Net	143
Octavia Gateway Holdings, LLC [Member] | Leases, Acquired-in-Place, Market Adjustment [Member]
Real Estate Investments, Net	(106)
Octavia Gateway Holdings, LLC [Member] | Building Improvements [Member]
Real Estate Investments, Net	1,969
Octavia Gateway Holdings, LLC [Member] | Land [Member]
Real Estate Investments, Net	734
Octavia Gateway Holdings, LLC [Member] | Estimated Fair Value of Net Assets Acquired [Member]
Real Estate Investments, Net	2,740
Grove Street Hayes Valley, LLC [Member] | Leases, Acquired-in-Place [Member]
Real Estate Investments, Net	110
Grove Street Hayes Valley, LLC [Member] | Leases, Acquired-in-Place, Market Adjustment [Member]
Real Estate Investments, Net	(331)
Grove Street Hayes Valley, LLC [Member] | Building Improvements [Member]
Real Estate Investments, Net	2,111
Grove Street Hayes Valley, LLC [Member] | Land [Member]
Real Estate Investments, Net	1,000
Grove Street Hayes Valley, LLC [Member] | Estimated Fair Value of Net Assets Acquired [Member]
Real Estate Investments, Net	$ 2,890

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REAL ESTATE INVESTMENTS (Details 1) $ in Thousands	1 Months Ended
	Mar. 11, 2015 USD ($)
Gross Sales Price	$ 53,600
Original Purchase Price	46,800	[1]
Osceola Village Kissimmee, Florida [Member]
Gross Sales Price	22,000
Original Purchase Price	21,800	[1],[2]
Constitution Trail Normal, Illinois [Member]
Gross Sales Price	23,100
Original Purchase Price	18,000	[1]
Aurora Commons Aurora, Ohio [Member]
Gross Sales Price	8,500
Original Purchase Price	$ 7,000	[1]

[1] The original purchase price amounts do not include acquisition fees.

[2] The original purchase price for Osceola Village included an additional pad which was sold for approximately $0.9 million prior to this transaction.

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REAL ESTATE INVESTMENTS (Details Textual)			1 Months Ended	3 Months Ended		6 Months Ended
	Jun. 14, 2016 USD ($) ft²	Apr. 04, 2016 USD ($)	Mar. 11, 2015 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)
Payments to Acquire Interest in Joint Venture						$ 0	$ 4,555,000
Sales of Real Estate			$ 53,600,000
Payments to Acquire Real Estate	$ 5,600,000					5,630,000	0
Operating Income (Loss)				$ (634,000)	$ (725,000)	(827,000)	(2,025,000)
Proceeds from Sale of Other Real Estate						8,737,000	53,058,000
Area of Real Estate Property | ft²	5,640
Business Acquisition, Transaction Costs				200,000		200,000
Gains (Losses) on Sales of Investment Real Estate				605,000	99,000	$ 614,000	4,882,000
Leases, Acquired-in-Place [Member]
Finite-Lived Intangible Asset, Useful Life						14 years
Leases, Acquired-in-Place, Market Adjustment [Member]
Finite-Lived Intangible Asset, Useful Life						14 years 2 months 12 days
Bloomingdale Hills [Member]
Sales of Real Estate		$ 9,200,000
Operating Income (Loss)				$ 25,000		$ 73,000
Repayments of Debt		5,300,000
Repayments of Lines of Credit		3,000,000
Gains (Losses) on Sales of Investment Real Estate		$ 600,000
SGO Joint Venture [Member]
Payments to Acquire Interest in Joint Venture			4,500,000
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners				19.00%		19.00%
Repayments of Debt						$ 36,400,000
Osceola Village Kissimmee, Florida [Member]
Sales of Real Estate			22,000,000
Proceeds from Sale of Other Real Estate						$ 900,000
2015 Sale of Properties [Member]
Sales of Real Estate			$ 53,600,000
Operating Income (Loss)					$ 16,000		$ 300,000

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INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Schedule of Equity Method Investments [Line Items]
Equity Method Investments	$ 6,469	$ 6,902
SGO Retail Acquisitions Venture, LLC [Member]
Schedule of Equity Method Investments [Line Items]
Equity Method Investment, Ownership Percentage	19.00%	19.00%
Equity Method Investments	$ 3,852	$ 4,098
SGO MN Retail Acquisitions Venture, LLC [Member]
Schedule of Equity Method Investments [Line Items]
Equity Method Investment, Ownership Percentage	10.00%	10.00%
Equity Method Investments	$ 2,617	$ 2,804

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VARIABLE INTEREST ENTITIES (Details) - USD ($) $ in Thousands		Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015	Dec. 31, 2014
Properties under development and development costs:
Building		$ 609	$ 0
Properties under development and development costs		28,472	0
Restricted cash		5,869	2,693
Cash and cash equivalents		3,265	8,793	$ 3,581	$ 3,211
Tenant receivables, net		1,218	1,664
TOTAL ASSETS		121,307	101,168
LIABILITIES
Notes payable, net		63,071	34,052
Accounts payable and accrued expenses		1,119	1,486
Amounts due to affiliates		75	49
Other liabilities		1,502	1,479
TOTAL LIABILITIES		70,595	$ 48,503
Variable Interest Entity, Primary Beneficiary [Member]
Properties under development and development costs:
Land		25,851
Building		609
Development costs		2,012
Properties under development and development costs		28,472
Restricted cash		2,867
Cash and cash equivalents		340
Prepaid expenses and other assets, net		22
Tenant receivables, net		25
TOTAL ASSETS	[1]	31,726
LIABILITIES
Notes payable, net	[2]	18,748
Accounts payable and accrued expenses		360
Amounts due to affiliates		283
Other liabilities		40
TOTAL LIABILITIES		$ 19,431

[1] The assets of the Gelson’s Joint Venture and Wilshire Joint Venture can be used only to settle obligations of the respective consolidated joint ventures.

[2] Includes reclassification of $0.5 million of deferred financing costs, net, as a contra-liability. The creditors of the consolidated joint ventures do not have recourse to the general credit of the Company. The notes payable of the consolidated joint ventures are not guaranteed by the Company.

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VARIABLE INTEREST ENTITIES (Details Textual) $ in Thousands						1 Months Ended	6 Months Ended
	Jun. 14, 2016 USD ($)	Mar. 08, 2016 USD ($)	Mar. 07, 2016 USD ($)	Jan. 05, 2016 USD ($)	Dec. 14, 2015 USD ($)	Jan. 28, 2016 USD ($) ft²	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)
Payments to Acquire Interest in Joint Venture							$ 0	$ 4,555
Payments to Acquire Real Estate	$ 5,600						5,630	$ 0
Deferred Costs							$ 500
Gelson’s Development Joint Venture [Member]
Capital Interest Percentage in Joint Venture							100.00%
Profit Interest Percentage in Joint Venture							50.00%
Area of Land | ft²						38,000
Profit sharing ratio of joint Venture							50.00%
Lease Expiration Term							20 years
Gelson’s Development Joint Venture [Member] | Initial Contribution [Member]
Payments to Acquire Interest in Joint Venture							$ 7,000
Gelson’s Development Joint Venture [Member] | Subsequent Contributuion [Member]
Payments to Acquire Interest in Joint Venture							$ 700
Gelson’s Development Joint Venture [Member] | Buchanan Mortgage Holdings [Member]
Proceeds from Loan Originations						$ 10,700
Payments to Acquire Real Estate						$ 13,000
Wilshire Joint Venture 3032 [Member]
Capital Interest Percentage in Joint Venture			100.00%
Profit Interest Percentage in Joint Venture			50.00%
Payments to Acquire Interest in Joint Venture			$ 5,700
Proceeds from Loan Originations		$ 8,500
Payments to Acquire Real Estate		$ 13,500
Payments for Other Deposits				$ 100	$ 500
Wilshire Joint Venture [Member]
Profit sharing ratio of joint Venture							50.00%
3032 Wilshire SM [Member]
Profit sharing ratio of joint Venture							50.00%
Sunset Gardner LA, LLC [Member]
Profit sharing ratio of joint Venture							50.00%

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FUTURE MINIMUM RENTAL INCOME (Details) $ in Thousands	Jun. 30, 2016 USD ($)
Operating Leases, Future Minimum Payments Receivable [Abstract]
Remainder of 2016	$ 3,711
2017	7,036
2018	6,074
2019	5,471
2020	4,543
Thereafter	11,815
Total	$ 38,650

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FUTURE MINIMUM RENTAL INCOME (Details Textual) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Security Deposit	$ 0.2	$ 0.2
Operating Leases Remaining Term	20 years
Operating Leases Weighted Average Remaining Term	5 years

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LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets, Net [Abstract]
Lease Intangibles, Cost	$ 8,191	$ 8,089
Lease Intangibles, Accumulated amortization	(3,926)	(3,799)
Lease Intangibles	4,265	4,290
Below - Market Lease Liabilities, Cost	(4,783)	(4,463)
Below - Market Lease Liabilities, Accumulated amortization	1,182	1,160
Below - Market Lease Liabilities	$ (3,601)	$ (3,303)

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LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES (Details 1) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Amortization of lease intangibles and below-market lease liabilities
Lease Intangibles, Amortization	$ (235)	$ (357)	$ (486)	$ (950)
Below - Market Lease Liabilities, Amortization	$ 67	$ 95	$ 139	$ 212

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NOTES PAYABLE, NET (Details) - USD ($) $ in Thousands		Jun. 30, 2016	Dec. 31, 2015
Notes Payable
Principal Balance		$ 63,071	$ 34,052
Deferred Finance Costs, Net	[1]	(735)	(339)
Key Bank credit facility [Member]
Notes Payable
Principal Balance	[2]	$ 10,500	0
Interest Rate	[2]	2.95%
Secured term loans [Member]
Notes Payable
Principal Balance		$ 24,492	24,701
Interest Rate		5.10%
Mortgage loans [Member]
Notes Payable
Principal Balance		$ 9,614	9,690
Interest Rate		5.63%
Mortgage Loans Secured By Properties Under Development [Member]
Notes Payable
Principal Balance	[3]	$ 19,200	$ 0
Mortgage Loans Secured By Properties Under Development [Member] | Minimum [Member]
Notes Payable
Interest Rate	[3]	9.50%
Mortgage Loans Secured By Properties Under Development [Member] | Maximum [Member]
Notes Payable
Interest Rate	[3]	10.00%

[1] Reclassification of deferred financing costs, net of accumulated depreciation, as a contra-liability in accordance with ASU 2015-03.

[2] The KeyBank credit facility is a revolving credit facility with an initial maximum aggregate commitment of $30.0 million (the “Facility Amount”). Subject to certain terms and conditions contained in the loan documents, the Company may request that the Facility Amount be increased to a maximum of $60.0 million. The KeyBank credit facility matures on August 4, 2017. Each loan made pursuant to the Key Bank credit facility will be either a LIBOR rate loan or a base rate loan, at the election of the Company, plus an applicable margin, as defined. Monthly payments are interest only with the entire principal balance and all outstanding interest due at maturity. The Company will pay KeyBank an unused commitment fee, quarterly in arrears, which will accrue at 0.30% per annum, if the usage under the KeyBank credit facility is greater than 50% of the Facility Amount. The Company is providing a guaranty of all of its obligations under the KeyBank credit facility and all other loan documents in connection with the KeyBank credit facility. As of June 30, 2016, the KeyBank credit facility was secured by Pinehurst Square, Topaz Marketplace, 8 Octavia and 400 Grove. For information regarding recent draws under the Key Bank credit facility, see “– Recent Financing Transactions - KeyBank Credit Facility.”

[3] Comprised of $10.7 million and $8.5 million associated with the Company’s investment in the Gelson’s Joint Venture and the Wilshire Joint Venture, respectively.

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NOTES PAYABLE, NET (Details 1) $ in Thousands	Jun. 30, 2016 USD ($)
Schedule of maturities for notes payable outstanding
Remainder of 2016	$ 293
2017	39,685
2018	473
2019	23,355
Total	$ 63,806	[1]

[1] Total future principal payments reflect actual amounts due to creditors, and excludes reclassification of $0.7 million deferred financing costs, net.

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NOTES PAYABLE, NET (Details Textual) - USD ($) $ in Millions			3 Months Ended		6 Months Ended
	Jun. 09, 2016	Mar. 07, 2016	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Notes Payable
Interest expense payable			$ 0.3		$ 0.3		$ 0.2
Line of Credit Facility, Maximum Borrowing Capacity			60.0		$ 60.0
Line of Credit Facility, Commitment Fee Description					The Company will pay KeyBank an unused commitment fee, quarterly in arrears, which will accrue at 0.30% per annum if the usage under the KeyBank credit facility is greater than 50% of the Facility Amount.
Interest Costs Capitalized			0.9		$ 1.2
Interest Expense, Debt			0.5	$ 1.4	1.1	$ 3.0
Amortization of Financing Costs			0.1	$ 0.1	0.2	$ 0.3
Reclassification From Deferred Financing Cost To Notes Payable [Member] | Accounting Standard Update 2015-03 [Member]
Notes Payable
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets			0.7		0.7		$ 0.3
Variable Interest Entity, Primary Beneficiary [Member]
Notes Payable
Interest expense payable			0.2		0.2
Amortization of Financing Costs			$ 0.2		$ 0.3
Wilshire Joint Venture 3032 [Member]
Notes Payable
Proceeds from Loan Originations		$ 6.0
Eight Octavia and Four Hundred Grove [Member]
Notes Payable
Proceeds from Loan Originations	$ 7.5
Wilshire Loan [Member] | Buchanan Mortgage Holdings, LLC [Member]
Notes Payable
Interest Rate			10.00%		10.00%
Proceeds from Loan Originations					$ 8.5
Debt Instrument, Maturity Date					Mar. 07, 2017
Gelson’s Loan [Member] | Buchanan Mortgage Holdings, LLC [Member]
Notes Payable
Interest Rate			9.50%		9.50%
Proceeds from Loan Originations					$ 10.7
Debt Instrument, Maturity Date					Jan. 27, 2017
Revolving Credit Facility [Member]
Notes Payable
Line of Credit Facility, Maximum Borrowing Capacity			$ 30.0		$ 30.0

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FAIR VALUE DISCLOSURES (Details) - USD ($)		Jun. 30, 2016	Dec. 31, 2015
Notes Payable
Notes Payable, Carrying Value	[1]	$ 63,071	$ 34,052
Notes Payable, Fair Value	[2]	$ 64,317	$ 34,760

[1] The carrying value of the Company’s notes payable represents the outstanding principal as of June 30, 2016, and December 31, 2015. The carrying values and fair values of the notes payable include the reclassification of deferred financing costs, net, of approximately $0.7 million and approximately $0.3 million, as a contra-liability, as of June 30, 2016 and December 31, 2015, respectively.

[2] The estimated fair value of the notes payable is based upon the indicative market prices of the Company’s notes payable based on prevailing market interest rates.

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FAIR VALUE DISCLOSURES (Details Textual) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Reclassification From Deferred Financing Cost To Notes Payable [Member] | Accounting Standard Update 2015-03 [Member]
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets	$ 0.7	$ 0.3

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EQUITY (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended					12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2015
Company's common stockholders and non-controlling Common Unit holders
Distribution Record Date	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015
Distribution Payable Date	Apr. 29, 2016	Jan. 30, 2016	Oct. 31, 2015	Jul. 30, 2015	Apr. 30, 2015
Distribution Per Common Stock /Common Unit	$ 0.06	$ 0.06	$ 0.06	$ 0.06	$ 0.06
Total Common Stockholders Distribution	$ 660	$ 661	$ 654	$ 654	$ 658	$ 2,627
Total Common Unit Holders Distribution	26	25	26	26	26	103
Total Distribution	$ 686	$ 686	$ 680	$ 680	$ 684	$ 2,730

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EQUITY (Details Textual) - USD ($)	1 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016	Jun. 30, 2016	Jun. 30, 2015	Aug. 07, 2015
Stockholders' Equity Note [Abstract]
Subsidiary of Limited Liability Company or Limited Partnership, Ownership Interest			100.00%
Stock Redeemed or Called During Period, Value			$ 256,000
Redemption Price for Shares Percentage			100.00%
Amended and Restated Share Redemption, Redemption Amount Minimum Limit	$ 5,000	$ 5,000	$ 5,000
Common Stock Outstanding Percentage			5.00%
Minimum Percentage of Taxable Income Distributed to Shareholders			90.00%
Special Distribution [Member]
Stockholders' Equity Note [Abstract]
Share Redemption Program, Redemption Percentage					100.00%
Death of a shareholder [Member]
Stockholders' Equity Note [Abstract]
Stock Redeemed or Called During Period, Value			$ 2,000,000
Disability of a shareholder [Member]
Stockholders' Equity Note [Abstract]
Stock Redeemed or Called During Period, Value			$ 1,000,000
Common Stock [Member]
Stockholders' Equity Note [Abstract]
Stock Redeemed or Called During Period, Shares			38,868
Stock Redeemed or Called During Period, Value			$ 0
Common Stock [Member] | Share Redemption Program [Member]
Stockholders' Equity Note [Abstract]
Stock Redeemed or Called During Period, Shares	404,771	8,147	38,868	77,916
Stock Redeemed or Called During Period, Value	$ 3,300,000	$ 54,000	$ 300,000	$ 600,000

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Numerator - basic and diluted
Net income (loss)		$ (946)	$ (434)	$ (1,011)	$ 2,688
Net income (loss) attributable to non-controlling interests		(35)	(15)	(37)	246
Net income (loss) attributable to common stockholders		$ (911)	$ (419)	$ (974)	$ 2,442
Denominator - basic and diluted
Basic weighted average common shares		11,008,017	10,967,917	11,022,603	10,968,769
Effect of dilutive securities Common Units	[1]	0	0	0	0
Diluted weighted average common shares		11,008,017	10,967,917	11,022,603	10,968,769
Earnings (loss) per common share - basic and diluted
Net earnings (loss) attributable to common shares		$ (0.08)	$ (0.04)	$ (0.09)	$ 0.22

[1] The effect of 422,308 convertible Common Units pursuant to the redemption rights outlined in the Company’s registration statement on Form S-11 have not been included as they would not be dilutive.

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EARNINGS PER SHARE (Details Textual)	6 Months Ended
	Jun. 30, 2016 shares
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Antidiluted Convertible Common Units of Redemption	422,308

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RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Expensed Acquisition Fees [Member]
Summarized below are the related-party transactions
Related-party costs, Incurred		$ 56	$ 0	$ 58	$ 0
Related-party costs, Payable		0		0		$ 0
Expensed Asset management Fees [Member]
Summarized below are the related-party transactions
Related-party costs, Incurred		230	210	447	530
Related-party costs, Payable		71		71		19
Expensed Reimbursement Of Operating Expenses [Member]
Summarized below are the related-party transactions
Related-party costs, Incurred		48	0	98	0
Related-party costs, Payable		4		4		27
Expensed Property Management Fees [Member]
Summarized below are the related-party transactions
Related-party costs, Incurred		97	150	221	351
Related-party costs, Payable		0		0		3
Expensed Disposition Fees [Member]
Summarized below are the related-party transactions
Related-party costs, Incurred		115	0	115	525
Related-party costs, Payable		0		0		0
Expensed Guaranty Fees [Member]
Summarized below are the related-party transactions
Related-party costs, Incurred	[1]	0	0	0	1
Related-party costs, Payable	[1]	0		0		0
Capitalized Acquisition Fees [Member]
Summarized below are the related-party transactions
Related-party costs, Incurred		0	0	273	0
Related-party costs, Payable		0		0		0
Capitalized Leasing Fees [Member]
Summarized below are the related-party transactions
Related-party costs, Incurred		92	39	103	66
Related-party costs, Payable		0		0		0
Capitalized Legal Leasing Fees [Member]
Summarized below are the related-party transactions
Related-party costs, Incurred		21	18	33	56
Related-party costs, Payable		0		0		0
Capitalized Construction Management Fees [Member]
Summarized below are the related-party transactions
Related-party costs, Incurred		0	10	1	15
Related-party costs, Payable		0		0		0
Financing Fees, Expensed [Member]
Summarized below are the related-party transactions
Related-party costs, Incurred		0	0	0	32
Related-party costs, Payable		0		0		0
Expensed [Member] | Advisor Fees [Member]
Summarized below are the related-party transactions
Related-party costs, Incurred		546	360	939	1,407
Related-party costs, Payable		75		75		49
Capitalized [Member] | Advisor Fees [Member]
Summarized below are the related-party transactions
Related-party costs, Incurred		113	$ 67	410	$ 169
Related-party costs, Payable		$ 0		$ 0		$ 0

[1] Guaranty fees were paid by the Company to its prior advisor, TNP Strategic Retail Advisor, LLC.

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RELATED PARTY TRANSACTIONS (Details Textual) - USD ($)		1 Months Ended	3 Months Ended		6 Months Ended
		Mar. 31, 2015	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Aug. 04, 2014	Jul. 09, 2013
Related Party Transactions [Abstract]
Property Management Fee, Percent Fee					4.00%
Market-based property management fee of gross revenues					5.00%
Company pays Advisor an acquisition fee for cost of investments acquired					1.00%
Company pays Advisor of the amount funded by the Company to acquire or originate real estate-related loans					1.00%
Advisor or its affiliates also will be paid disposition fees of a customary and competitive real estate commission					50.00%
Advisor or its affiliates also will be paid disposition fees of a customary and competitive real estate commission, not to exceed					3.00%
Reimbursement Of Operating Expenses Description					The Company reimburses the Advisor for all expenses paid or incurred by the Advisor in connection with the services provided to the Company, subject to the limitation that the Company will not reimburse the Advisor for any amount by which the Company’s total operating expenses (including the asset management fee described below) at the end of the four preceding fiscal quarters exceeded the greater of (1) 2% of its average invested assets (as defined in the Company’s Articles of Amendment and Restatement (the “Charter”)); or (2) 25% of its net income (as defined in the Charter) determined without reduction for any additions to depreciation, bad debts or other similar non-cash expenses and excluding any gain from the sale of the Company’s assets for that period (the “2%/25% Guideline”). The Advisor is required to reimburse the Company quarterly for any amounts by which total operating expenses exceed the 2%/25% Guideline in the previous expense year that the independent directors do not approve. The Company will not reimburse the Advisor for any of its personnel costs or other overhead costs except for customary reimbursements for personnel costs under property management agreements entered into between the OP and the Advisor or its affiliates. Notwithstanding the above, the Company may reimburse the Advisor for expenses in excess of the 2%/25% Guideline if a majority of the independent directors determine that such excess expenses are justified based on unusual and non-recurring factors.
SGO Joint Venture [Member]
Related Party Transactions [Abstract]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners			19.00%		19.00%
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]
Related Party Transaction, Expenses from Transactions with Related Party			$ 100,000	$ 300,000	$ 300,000	$ 500,000
SRT Manager [Member]
Related Party Transactions [Abstract]
Operating Partnership Interest		8.33%					8.33%
Full Redemption Amount Paid	[1]	$ 2,100,000
Asset management fees [Member]
Related Party Transactions [Abstract]
Related-party costs, Incurred					$ 250,000
Company pays Advisor a monthly asset management fee on all real estate investments					0.60%
Financing coordination fees [Member]
Related Party Transactions [Abstract]
Payment of financial Coordination fees			1.00%		1.00%
Mortgage Notes [Member]
Related Party Transactions [Abstract]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners								12.00%

[1] Guaranty fees were paid by the Company to its prior advisor, TNP Strategic Retail Advisor, LLC.

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SUBSEQUENT EVENTS (Details Textual) $ / shares in Units, $ in Thousands		1 Months Ended		3 Months Ended					12 Months Ended
	Jul. 06, 2016 USD ($) $ / shares	Jul. 27, 2016 USD ($) ft²	Jul. 25, 2016 USD ($)	Mar. 31, 2016 USD ($) $ / shares	Dec. 31, 2015 USD ($) $ / shares	Sep. 30, 2015 USD ($) $ / shares	Jun. 30, 2015 USD ($) $ / shares	Mar. 31, 2015 USD ($) $ / shares	Dec. 31, 2015 USD ($)
Subsequent Event [Line Items]
Dividend Distribution To Common Stockholders And Unit Holders				$ 686	$ 686	$ 680	$ 680	$ 684	$ 2,730
Common Stock, Dividends, Per Share, Declared | $ / shares				$ 0.06	$ 0.06	$ 0.06	$ 0.06	$ 0.06
Subsequent Event [Member]
Subsequent Event [Line Items]
Dividend Distribution To Common Stockholders And Unit Holders	$ 700
Common Stock, Dividends, Per Share, Declared | $ / shares	$ 0.06
Subsequent Event [Member] | Fulton Street Shops [Member]
Subsequent Event [Line Items]
Area of Land | ft²		3,759
Business Combination, Consideration Transferred		$ 4,600
Subsequent Event [Member] | Key Bank [Member]
Subsequent Event [Line Items]
Proceeds from Secured Lines of Credit			$ 4,700