S-11 1 v175022_s11.htm

As filed with the Securities and Exchange Commission on March 23, 2010

Registration No. 333-           

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

FORM S-11

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



 

CARTER VALIDUS MISSION CRITICAL REIT, INC.

(Exact Name of Registrant as Specified in Its Governing Instruments)

4211 West Boy Scout Blvd.
Suite 500
Tampa, Florida 33607
(813) 287-0101

(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant’s Principal Executive Offices)



 

John E. Carter
Carter Validus Mission Critical REIT, Inc.
4211 West Boy Scout Blvd.
Suite 500
Tampa, Florida 33607
(813) 287-0101

(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)



 

With a Copy to:

 
Lisa Drummond
Carter Validus Mission Critical REIT, Inc.
4211 West Boy Scout Blvd.
Suite 500
Tampa, Florida 33607
Tel: (813) 287-0101
Fax: (813) 287-0397
  Lauren B. Prevost, Esq.
Heath D. Linsky, Esq.
Morris, Manning & Martin, LLP
3343 Peachtree Road, NE
Suite 1600
Atlanta, Georgia 30326
Tel: (404) 233-7000
Fax: (404) 365-9532


 

Approximate Date of Commencement of Proposed Sale to the Public: As soon as practicable after the effective date of this Registration Statement.

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

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

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

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

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

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

     
Large Accelerated Filer o   Accelerated Filer o   Non-Accelerated Filer x
(Do not check if a smaller
reporting company)
  Smaller Reporting Company o

CALCULATION OF REGISTRATION FEE

       
Title of Each Class of Securities to Be Registered   Amount to Be
Registered
  Proposed
Maximum
Offering
Price per Share
  Proposed
Maximum
Aggregate
Offering Price
  Amount of
Registration Fee(1)
Common Stock, $0.01 par value per share     150,000,000     $ 10.00     $ 1,500,000,000     $ 106,950.00  
Common Stock, $0.01 par value per share     25,000,000 (1)    $ 9.50 (1)    $ 237,500,000     $ 16,933.75  

(1) Calculated in accordance with Rule 457.
(2) Represents shares to be issued pursuant to the distribution reinvestment plan. The offering price per share issuable pursuant to the distribution reinvestment plan is estimated for purposes of calculating the registration fee at $9.50 per share. We reserve the right to reallocate the shares of common stock we are offering between the primary offering and the distribution reinvestment plan.


 

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

 

 


 
 

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

 
PRELIMINARY PROSPECTUS DATED MARCH 23, 2010   SUBJECT TO COMPLETION

CARTER VALIDUS MISSION CRITICAL REIT, INC.

200,000 Shares of Common Stock — Minimum Offering
175,000,000 Shares of Common Stock — Maximum Offering

Carter Validus Mission Critical REIT, Inc. is a Maryland corporation incorporated on December 16, 2009 that intends to invest primarily in quality income-producing commercial real estate in the medical, data center and educational sectors, net leased to investment grade and other creditworthy tenants, as well as making other real estate investments that relate to such property types. We intend to elect to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes commencing with our taxable year ending December 31, 2010, or the first year in which we commence material operations.

We are offering up to 150,000,000 shares of our common stock in our primary offering at a price of $10.00 per share on a “best efforts” basis through SC Distributors, LLC, our dealer manager. “Best efforts” means that our dealer manager is not obligated to purchase any specific number or dollar amount of shares. We also are offering up to 25,000,000 shares of our common stock pursuant to our distribution reinvestment plan at $9.50 per share. We reserve the right to reallocate the shares of common stock we are offering between the primary offering and our distribution reinvestment plan.

Investing in our common stock involves a high degree of risk. You should purchase these securities only if you can afford a complete loss of your investment. See the section entitled “Risk Factors” beginning on page 31 of this prospectus for a discussion of the risks which should be considered in connection with your investment in our common stock, including:

We are a “blind pool” offering because we do not currently own any properties, we have not identified any properties to acquire with the offering proceeds and we have no operating history or established financing sources.
Our investment policies permit us to invest in any type of commercial real estate, but we expect to focus primarily on commercial properties in the medical, data center and educational sectors, preferably with long-term net leases to investment grade and other creditworthy tenants.
We are depending on our advisor to select investments and conduct our operations. Adverse changes in the financial condition of our advisor or our relationship with our advisor could adversely affect us.
No public market currently exists for our shares of common stock, nor may a public market ever develop and our shares are illiquid.
There are substantial conflicts among the interests of our investors, our interests and the interests of our advisor, sponsor, dealer manager and our respective affiliates regarding compensation, investment opportunities and management resources.
We expect to maintain a target level of leverage of 50% of the aggregate fair market value of our properties (calculated after the close of this offering and once we have invested substantially all the proceeds of this offering).
As long as we maintain our status as a REIT for U.S. federal income tax purposes, we will be subject to numerous limitations under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, including that five or fewer individuals, as specifically defined for this purpose, generally are prohibited from beneficially owning more than 50% of our outstanding shares (based on value) during the last half of each taxable year.
Our investment objectives and strategies may be changed without stockholder consent.
We are obligated to pay substantial fees to our advisor, which may result in our advisor recommending riskier investments.
We may incur substantial debt, which could hinder our ability to pay distributions to our stockholders or could decrease the value of your investment if income on, or the value of, the property securing the debt falls.
Although our distribution policy is not to use the proceeds of this offering to make distributions, our organizational documents permit us to pay distributions from any source. Until substantially all the proceeds from this offering are invested, we may use proceeds from this offering and financings to fund distributions until we have sufficient cash flow from operations. Subject to certain limited exceptions, there is no limit to the amount of distributions that we may pay from offering proceeds.
We are not yet a REIT and may be unable to qualify as a REIT.

None of the Securities and Exchange Commission, or the SEC, the Attorney General of the State of New York and any other state securities regulator has approved or disapproved of our common stock, determined if this prospectus is truthful or complete or passed on or endorsed the merits of this offering. Any representation to the contrary is a criminal offense. The use of projections or forecasts in this offering is prohibited. Any representation to the contrary and any predictions, written or oral, as to the amount or certainty of any future benefit or tax consequence that may flow from an investment in our common stock is not permitted.

SC Distributors, LLC, which has applied for membership with, and prior to the commencement of this offering will become a member firm of, the Financial Industry Regulatory Authority, or FINRA, will serve as our dealer manager and will offer our shares of common stock on a best efforts basis. This offering will end no later than     , 2012, which is two years from the effective date of this offering, unless we elect to extend it to a date no later than     , 2013. We will deposit subscription payments in an escrow account held by the escrow agent,     , in trust for each subscriber’s benefit, pending release to us. A minimum of 200,000 shares of common stock at a price of $10.00 per share must be sold within one year following this offering or we will terminate this offering and promptly return your subscription payments with your pro rata share of the interest earned on such funds in accordance with the provisions of the escrow agreement. Subscription payments held in escrow will be placed in short-term, highly liquid, interest-bearing investments prior to our investments in real estate and real estate-related assets. If we do not raise the minimum amount of the offering and refund your subscription payments as a result, our sponsor will pay any escrow fees and no amounts will be deducted from the escrow funds. If we do raise the minimum amount of the offering and break escrow, any interest earned on proceeds in the escrow account up to such point will be distributed ratably to subscribers.

       
  Price to Public   Sales Commissions   Dealer Manager Fee   Proceeds to Us
Before Expenses(1)(2)
Primary Offering Per Share   $ 10.00     $ .70     $ .275     $ 9.025  
Total Minimum   $ 2,000,000.00     $ 140,000.00     $ 55,000.00     $ 1,805,000.00  
Total Maximum   $ 1,500,000,000.00     $ 105,000,000.00     $ 41,250,000.00     $ 1,353,750,000.00  
Distribution Reinvestment Plan Offering Per Share(1)   $ 9.50     $     $     $ 9.50  
Total Maximum   $ 237,500,000.00     $     $     $ 237,500,000.00  

(1) We reserve the right to reallocate shares of common stock being offered between the primary offering and our distribution reinvestment plan.
(2) Proceeds are calculated before reimbursing our advisor for organization and offering expenses.

Prospectus, dated     , 2010


 
 

TABLE OF CONTENTS

CARTER VALIDUS MISSION CRITICAL REIT, INC.

TABLE OF CONTENTS

 
  Page
Investor Suitability Standards     1  
Restrictions Imposed by the USA PATRIOT Act and Related Acts     3  
Cautionary Note Regarding Forward-Looking Statements     3  
Questions and Answers About This Offering     4  
Prospectus Summary     13  
Risk Factors     31  
Estimated Use of Proceeds     66  
Market Overview     68  
Management     74  
Management Compensation     94  
Principal Stockholders     101  
Conflicts of Interest     102  
Investment Objectives, Strategy and Policies     108  
Competition     123  
Selected Financial Data     124  
Management’s Discussion and Analysis of Financial Condition and Results of Operations     125  
Prior Performance Summary     128  
Certain Material U.S. Federal Income Tax Considerations     133  
Investment by Tax-Exempt Entities and ERISA Considerations     149  
Description of Securities     155  
Distribution Reinvestment Plan     163  
Share Repurchase Program     166  
Summary of Our Organizational Documents     168  
Summary of Our Operating Partnership Agreement     178  
Plan of Distribution     185  
How to Subscribe     193  
Sales Literature     194  
Reports to Stockholders     194  
Litigation     196  
Privacy Policy Notice     196  
Legal Matters     196  
Experts     196  
Electronic Delivery of Documents     196  
Where You Can Find Additional Information     197  
Index to the Financial Statements of Carter Validus Mission Critical REIT, Inc.     F-1  
Report of Independent Registered Public Accounting Firm     F-2  
Appendix A: Prior Performance Tables     A-1  
Appendix B: Distribution Reinvestment Plan     B-1  
Appendix C: Subscription Agreement     C-1  
Appendix D: Transfer on Death Designation     D-1  
Appendix E: Letter of Direction     E-1  
Appendix F: Notice of Revocation     F-1  
Appendix G: Privacy Policy Notice     G-1  

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INVESTOR SUITABILITY STANDARDS

An investment in our common stock involves significant risk and is suitable only for persons who have adequate financial means, desire a relatively long-term investment and who will not need immediate liquidity from their investment. Persons who meet this standard and seek to diversify their personal portfolios with a finite-life, real estate-based investment, which among its benefits hedges against inflation and the volatility of the stock market, seek to receive current income, seek to preserve capital, wish to obtain the benefits of potential long-term capital appreciation, and are able to hold their investment for a time period consistent with our liquidity plans, are most likely to benefit from an investment in our company. On the other hand, we caution persons who require immediate liquidity or guaranteed income, or who seek a short-term investment, not to consider an investment in our common stock as meeting these needs. Notwithstanding these investor suitability standards, potential investors should note that investing in shares of our common stock involves a high degree of risk and should consider all the information contained in this prospectus, including the “Risk Factors” section contained herein, in determining whether an investment in our common stock is appropriate.

In order to purchase shares in this offering, you must:

meet the applicable financial suitability standards as described below; and
purchase at least the minimum number of shares as described below.

The minimum purchase is 200 shares ($2,000), except in New York where the minimum purchase is 250 shares ($2,500). After you have purchased the minimum purchase amount, any additional purchase must be in increments of $500 or made pursuant to our distribution reinvestment plan, which may be in lesser amounts. You may not transfer fewer shares than the minimum purchase requirement. In addition, you may not transfer, fractionalize or subdivide your shares so as to retain less than the number of shares required for the minimum purchase. In order to satisfy the minimum purchase requirements for individual retirement accounts, or IRAs, unless otherwise prohibited by state law, a husband and wife may jointly contribute funds from their separate IRAs, provided that each such contribution is made in increments of $100. You should note that an investment in shares of our common stock will not, in itself, create a retirement plan and that, in order to create a retirement plan, you must comply with all applicable provisions of the Internal Revenue Code.

We have established suitability standards for initial stockholders and subsequent purchasers of shares from our stockholders. These suitability standards require that a purchaser of shares satisfy the requirements set forth below. Certain states have established suitability requirements that are more stringent than the standards that we have established. Shares will be sold to investors in these states only if they meet the state-specific suitability standards set forth below. In each case, these suitability standards exclude from the calculation of net worth the value of the investor’s home, home furnishings and automobiles. For purpose of these suitability standards “liquid net worth” is defined as that portion of net worth (total assets minus total liabilities) that is comprised of cash, cash equivalents and readily marketable securities.

General Standards for all Investors.  Investors must have either (a) a net worth of at least $250,000 or (b) an annual gross income of at least $70,000 and a minimum net worth of at least $70,000.

Kansas.  In addition to the general suitability standards described above, it is recommended that investors should invest no more than 10% of their liquid net worth in our shares and securities of other REITs.

Pennsylvania.  Because the minimum closing amount is less than $175,000,000, you are cautioned to carefully evaluate the program’s ability to fully accomplish its stated objectives and inquire as to the current dollar volume of the program subscriptions. We will not release any proceeds received from Pennsylvania investors from escrow until we have an aggregate of $86,875,000 in subscriptions.

In the case of sales to fiduciary accounts (such as an IRA, Keogh Plan or pension or profit-sharing plan), these minimum suitability standards must be satisfied by the beneficiary, the fiduciary account, or by the donor or grantor who directly or indirectly supplies the funds to purchase our common stock if the donor or the grantor is the fiduciary. Prospective investors with investment discretion over the assets of an IRA, employee benefit plan or other retirement plan or arrangement that is covered by the Employee Retirement Income

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Security Act of 1974, as amended, or ERISA, or Section 4975 of the Internal Revenue Code should carefully review the information in the section of this prospectus entitled “Investment by Tax-Exempt Entities and ERISA Considerations.” Any such prospective investors are required to consult their own legal and tax advisors on these matters.

In the case of gifts to minors, the minimum suitability standards must be met by the custodian of the account or by the donor.

In order to ensure adherence to the suitability standards described above, requisite criteria must be met, as set forth in the subscription agreement in the form attached hereto as Appendix C. In addition, our sponsor, our dealer manager and any soliciting dealers, as our agents, must make every reasonable effort to determine that the purchase of our shares is a suitable and appropriate investment for an investor. In making this determination, our sponsor, our dealer manager and the soliciting dealers will rely on relevant information provided by the investor in the investor’s subscription agreement, including information regarding the investor’s age, investment objectives, investment experience, income, net worth, financial situation, and other investments, and any other pertinent information. Executed subscription agreements will be maintained in our records for at least six years.

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RESTRICTIONS IMPOSED BY THE USA PATRIOT ACT AND RELATED ACTS

In accordance with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended, or the USA PATRIOT Act, the shares of common stock offered hereby may not be offered, sold, transferred or delivered, directly or indirectly, to any “unacceptable investor,” which means anyone who is:

a “designated national,” “specially designated national,” “specially designated terrorist,” “specially designated global terrorist,” “foreign terrorist organization,” or “blocked person” within the definitions set forth in the Foreign Assets Control Regulations of the U.S. Treasury Department;
acting on behalf of, or an entity owned or controlled by, any government against whom the U.S. maintains economic sanctions or embargoes under the Regulations of the U.S. Treasury Department;
within the scope of Executive Order 13224 — Blocking Property and Prohibiting Transactions with Persons who Commit, Threaten to Commit, or Support Terrorism, effective September 24, 2001;
subject to additional restrictions imposed by the following statutes or regulations, and executive orders issued thereunder: the Trading with the Enemy Act, the Iraq Sanctions Act, the National Emergencies Act, the Antiterrorism and Effective Death Penalty Act of 1996, the International Emergency Economic Powers Act, the United Nations Participation Act, the International Security and Development Cooperation Act, the Nuclear Proliferation Prevention Act of 1994, the Foreign Narcotics Kingpin Designation Act, the Iran and Libya Sanctions Act of 1996, the Cuban Democracy Act, the Cuban Liberty and Democratic Solidarity Act and the Foreign Operations, Export Financing and Related Programs Appropriation Act or any other law of similar import as to any non-U.S. country, as each such act or law has been or may be amended, adjusted, modified or reviewed from time to time; or
designated or blocked, associated or involved in terrorism, or subject to restrictions under laws, regulations, or executive orders as may apply in the future similar to those set forth above.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements that reflect our expectations and projections about our future results, performance, prospects and opportunities. We have attempted to identify these forward-looking statements by using words such as “may,” “will,” “expects,” “anticipates,” “believes,” “intends,” “should,” “estimates,” “could” or similar expressions. These forward-looking statements are based on information currently available to us and are subject to a number of known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among other things, those discussed under the heading “Risk Factors” below. We do not undertake publicly to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required to satisfy our obligations under federal securities law.

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QUESTIONS AND ANSWERS ABOUT THIS OFFERING

Below we have provided some of the more frequently asked questions and answers relating to an offering of this type. See the section entitled “Prospectus Summary” and the remainder of this prospectus for more detailed information about this offering.

Q: What is Carter Validus Mission Critical REIT, Inc.?

A: Carter Validus Mission Critical REIT, Inc. is a newly organized Maryland corporation that intends to qualify as a real estate investment trust beginning in the taxable year ending December 31, 2010, or the first year in which we commence material operations. We expect to use substantially all the net proceeds of this offering to acquire quality income-producing commercial real estate with a focus on medical facilities, data centers and educational facilities. In the current market environment, we believe it is possible to buy quality commercial real estate properties at a discount to replacement cost and with significant potential for appreciation. If attractive investment opportunities arise, we also may purchase other types of commercial real estate. We do not intend to invest in assets located outside of the United States.

Q: What are your investment objectives?

A: Our investment objectives are to:

acquire quality commercial real estate properties with a focus on the medical, data center and educational sectors, which provide current cash flow from operations;
pay regular cash distributions to stockholders;
preserve, protect and return capital contributions to stockholders;
realize appreciated growth in the value of our investments upon the sale of such investments; and
be prudent, patient and deliberate with respect to the purchase and sale of our investments considering current and future real estate markets.

Our real estate team is led by seasoned professionals who have institutional experience investing through various real estate cycles. The seven senior executives of our advisor have over 149 years of combined real estate experience and have acquired over $3.5 billion of real estate and real estate-related assets. We believe a number of factors differentiate us from other non-traded REITs, including our property type focus, our lack of legacy issues, our opportunistic buy and sell strategy and our institutional management team.

Q: What is a REIT?

A: In general, a REIT is a company that:

combines the capital of many investors to acquire a large-scale diversified real estate portfolio under professional management;
allows individual investors to invest in a diversified real estate portfolio managed by a professional management team;
pays distributions to investors of at least 90% of its taxable income (excluding net capital gain) each year; and
avoids the “double taxation” treatment of income that generally results from investments in a corporation because a REIT generally is not subject to U.S. federal corporate income tax and excise tax on its net income distributed to stockholders, provided certain tax requirements are satisfied.

Q: What is an UPREIT?

A: UPREIT stands for “Umbrella Partnership Real Estate Investment Trust.” An UPREIT is a REIT that holds substantially all its properties through a partnership in which the REIT (directly or indirectly) holds an interest as a general partner and/or a limited partner, approximately equal to the value of capital raised by the REIT through sales of its capital stock. Using an UPREIT structure may give us an advantage in acquiring properties from persons who may not otherwise sell their properties because of certain unfavorable U.S.

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federal income tax consequences. Generally, a sale of property directly to a REIT is a taxable sale to the selling property owner. In an UPREIT structure, a seller of a property who desires to defer taxable gain on the sale of its property may in some cases transfer the property to the UPREIT in exchange for limited partnership units in the partnership and defer taxation of gain until the seller later exchanges its limited partnership units on a one-for-one basis for REIT shares or for cash pursuant to the terms of the limited partnership agreement.

Q: What is the experience of your officers and directors in real estate?

A: John E. Carter is our Chief Executive Officer and Chairman of the board of directors. He also is Chief Executive Officer, Chief Investment Officer and a member of the Investment Management Committee of Carter/Validus Advisors, LLC and Executive Vice President of Carter Real Estate Management Services, LLC. Mr. Carter has more than 28 years of real estate experience in all aspects of leasing, asset management, acquisitions, finance, investment and corporate advisory services. Mr. Carter is Executive Vice President and a principal of Carter & Associates, L.L.C., or Carter & Associates, one of the principals of our sponsor. Mr. Carter has served in such capacities since he sold his company, Newport Partners LLC, to Carter & Associates in January 2000. Mr. Carter founded Newport Partners in November 1989 and grew the company into a full service real estate firm with 63 associates throughout Florida. At Carter & Associates, Mr. Carter plays a key role in establishing and maintaining some of Carter & Associates’ most significant institutional client relationships. From December 2003 until December 31, 2009, Mr. Carter completed in excess of $3.5 billion of real estate property acquisitions and financings representing 18.5 million square feet of real estate. In September 2005, Mr. Carter was responsible for facilitating one of Carter & Associates’ largest transactions, a $1 billion acquisition and financing of a class “A” office portfolio consisting of 23 buildings in six states. Prior to November 1989, Mr. Carter worked for two years at Trammel Crow Company. In the early 1980s, he spent five years at Citicorp where he focused primarily on tax shelter, Industrial Revenue Bonds (IRBs) and other real estate financing transactions. He also is a founding board member of Gulfshore Bank, a community bank located in Tampa, Florida. Mr. Carter obtained a Bachelor’s degree in Economics with a minor in Mathematics from St. Lawrence University in Canton, New York in 1982 and a Masters in Business Administration from Harvard University in Cambridge, Massachusetts in 1989.

Michael Seton is our Chief Financial Officer. He also is Chief Financial Officer of Carter/Validus Advisors, LLC. Mr. Seton has more than 15 years of real estate and real estate finance experience. Mr. Seton is an Executive Vice President of Carter & Associates and head of its Capital Markets group based in New York, New York. He is involved in all aspects of equity raising and debt financing for Carter & Associates’ activities. For the past 15 years, Mr. Seton has been an active player in capital markets in the real estate industry. From 1997 until joining Carter & Associates in September 2009, Mr. Seton worked for Eurohypo AG (including its predecessor organizations) in New York, New York. At Eurohypo AG, Mr. Seton was a Managing Director and Division Head in the Originations Group, leading a team of 12 professionals in the origination, structuring, documentation, closing and distribution of real estate financings for private developers and owners, REITs, and real estate operating companies (REOCs). Real estate finance transactions in which Mr. Seton was involved included both on and off-balance sheet executions, including senior debt and mezzanine financings. Mr. Seton has been directly involved in over $25.0 billion in financings for real estate clients, including high profile transactions such as the recapitalization of the Chrysler Building and the General Motors Building, both of which are located in New York, New York, Merchandise Mart in Chicago, Illinois, construction financing for 15 Central Park West in New York, New York, several Ritz-Carlton hotels throughout the United States, and many office developments in major U.S. cities. While at Eurohypo AG, Mr. Seton’s clients included some of the most respected names in the real estate industry, including Tishman Speyer Properties, Millennium Partners, Vornado Realty Trust, Carter & Associates, Boston Properties, and Goldman Sachs. Mr. Seton obtained a Bachelor of Science in Economics from Vanderbilt University in Nashville, Tennessee in 1994.

Lisa Drummond is our Chief Operating Officer and Secretary. She also is Chief Operating Officer and Secretary of Carter/Validus Advisors, LLC. Mrs. Drummond has more than 20 years of real estate experience involving real estate accounting, asset management, property management and financial analysis. Mrs. Drummond joined Carter & Associates in January 2000 as a Vice President in its Transaction Services Group, as part of the merger of Newport Partners LLC and Carter & Associates. In such capacity, Mrs. Drummond’s responsibility and focus is on all aspects of asset management, financial analysis, and

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acquisition and financing, including overseeing the due diligence work and support for acquisition and disposition transactions. From December 2003 to December 2009, Mrs. Drummond was actively involved in the acquisition and financing process of over $3.5 billion in real estate transactions. Prior to the merger with Carter & Associates, Mrs. Drummond was with Newport Partners LLC since July 1996, serving as its Controller. Prior to joining Newport Partners LLC in July 1996, Mrs. Drummond worked with JPI Multifamily for two years and Anterra Realty Corporation for five years, both of which are located in Dallas, Texas. Mrs. Drummond obtained a Bachelor’s degree in Accountancy from the University of Missouri in Columbia, Missouri in 1985.

Sheri Rose is our Treasurer. She also is Treasurer of Carter/Validus Advisors, LLC. Ms. Rose has more than 23 years of real estate experience. Since joining Carter & Associates in June 1987, Ms. Rose has held a number of accounting positions within the company. In September 2005, she was promoted to Vice President of Carter & Associates. In October 2005, Ms. Rose was promoted to Senior Vice President of Carter & Associates and continues to hold this position. In such position, she oversees all reporting functions to Carter & Associates’ members and managers, as well as the treasury, banking, payroll and regulatory functions of the company. In addition, Ms. Rose is in charge of the accounting department, which was consolidated within Carter & Associates into a single department in January 2006. She also is responsible for all reporting and financial activities for asset management, development, property management, and financial services performed for Carter & Associates’ clients and their investments. Ms. Rose obtained a Bachelor in Business Administration in Accounting from Saint Ambrose University in Davenport, Iowa in 1987.

Robert M. Winslow is our Executive Vice President. He also is a member of the Investment Management Committee of Carter/Validus Advisors, LLC. He has more than 36 years of real estate experience in the Southeastern United States, specializing in Florida. Over the past 24 years, Mr. Winslow has packaged and managed more than 50 commercial investments in hotels, offices and shopping centers with a value exceeding $300 million. He currently serves as President and Chief Executive Office of Global Building and Consulting Corporation, a multi-service residential and commercial investment company specializing in performance- oriented management of real estate assets, and has served in such capacities since 1996. At Global Building and Consulting Corporation, Mr. Winslow has developed condominium, single family and commercial properties. From 1987 to 1989, Mr. Winslow structured a joint venture with Prentiss Properties to serve as the Florida Development Manager for proposed office projects for tenants including, among others, Loral Federal Systems and AT&T. In July 1980, Mr. Winslow founded Global Properties, a full service real estate brokerage firm with a unique international theme that grew to over 120 sales associates, and served as the President of its General Partner until Global Properties was sold to a private investment group under a multi-year payout from 1984 to 1985. Global Properties was the first firm with whom Merrill Lynch signed a non-binding Letter of Intent to purchase a property when it entered the Orlando market. Prior to founding Global Properties in 1980, Mr. Winslow was Vice President of Real Estate for Winter Park Land Company, where he managed a $35 million real estate portfolio, supervising the development, brokerage and maintenance operations, as well as reversing two unprofitable divisions into successful ventures and creating a compatible new construction strategy. Mr. Winslow obtained a Bachelor of Arts in Business Administration from Rollins College in Winter Park, Florida in 1971 and a Masters in Business Administration in International Finance from the Roy E. Crummer Graduate School of Business at Rollins College in Winter Park, Florida in 1973.

Mario Garcia, Jr. is one of our directors. He also is a member of the Investment Management Committee of Carter/Validus Advisors, LLC. Mr. Garcia has more than 13 years of real estate experience. Mr. Garcia is the President and Chief Executive Officer of Electrostim Medical Services, Inc., a company that he founded in June 1995, and has served in such capacities since its inception. Mr. Garcia also founded Validus Group Partners Ltd. in 2004, which develops and manages real estate in Florida, and has served as its Chief Executive Officer since its inception. Validus Group Partners Ltd. is one of the principals of our sponsor. As the Chief Executive Officer of Validus Group Partners Ltd., Mr. Garcia manages over $25 million in real estate assets in the retail, office and industrial property sectors, as well as in raw land. In addition, Mr. Garcia is one of the founding board members and is Chairman of the Board of Directors of Gulfshore Bank, a local community bank in Tampa, Florida focusing on small to medium size companies. He is also an active participant on the Finance Committee, and is the Chairman, of the National Hispanic Scientist of the Year Committee. He is also a member of Vistage (formerly TEC), a national networking group and leadership

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organization consisting of Chief Executive Officers. Mr. Garcia and his companies also support News in Education, Adopt-A-School Program, The Kids’ Wish Network, The Special Olympics, Florida Institute of Community Studies, Junior Achievement, and Cattle Baron’s Ball, a charity event sponsored by the American Cancer Society.

Please also see the section entitled “Management” in this prospectus.

Q: Who is, and what is the role of, your advisor?

A: Our advisor is Carter/Validus Advisors, LLC. Carter/Validus Advisors, LLC is responsible for managing our day-to-day operations and our assets. Carter/Validus Advisors, LLC also will make recommendations for all of our investment decisions, which will be subject to the approval of our board of directors, subject to certain exceptions as discussed further in the section entitled “Summary of Our Organizational Documents” in this prospectus.

Q: What is the role of your board of directors?

A: We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders as fiduciaries. Our board of directors is comprised of five members, three of whom are independent of our advisor and its affiliates. A majority of our independent directors will be responsible for reviewing the performance of our advisor and approving certain other matters as set forth in our charter. Our directors are elected annually by our stockholders.

Q: How will the payment of fees and expenses affect my invested capital?

A: We will pay sales commissions and dealer manager fees in connection with this offering. In addition, we will reimburse our advisor for our organization and offering expenses not to exceed, together with the dealer manager fees and selling commissions, 15% of the gross proceeds of our offering. We estimate such organization and offering expenses will be approximately 1.25% of the gross offering proceeds raised if we sell the maximum number of shares in our primary offering. If we do not raise the minimum amount of the offering, we will not reimburse our advisor for our organization and offering expenses. We will also pay our advisor acquisition fees for substantial services provided in the acquisition of investments. The payment of fees and expenses will reduce the funds available to us for investment in real estate and real estate-related assets.

Q: Do you currently have any shares outstanding?

A: Yes. We have sold 20,000 shares of our common stock to Carter/Validus REIT Investment Management, LLC for an aggregate purchase price of $200,000 and intend to contribute the proceeds from that sale to Carter/Validus Operating Partnership, LP, our operating partnership, for which we intend to acquire 20,000 general partnership units of the operating partnership.

Q: Do you currently own any real estate?

A: We do not currently own any properties or other real estate investments and have not identified any specific assets to acquire. Because we have not yet identified any specific assets to acquire, we are considered a blind pool. Because we do not and have not owned any properties or real estate investments, you do not need to be concerned about possible “legacy issues” related to assets acquired before the commencement of this offering. As specific investments become probable, we will supplement this prospectus to provide information regarding the probable investment to the extent it is material to an investment decision with respect to our common stock. We also will describe material changes to our portfolio, including the closing of property acquisitions, by means of a supplement to this prospectus.

Q: How do you plan to structure the ownership and operation of your assets?

A: We plan to own substantially all our assets and conduct our operations through an operating partnership named Carter/Validus Operating Partnership, LP. We are the sole general partner of Carter/Validus Operating Partnership, LP. This structure is commonly referred to as an “umbrella partnership REIT,” or “UPREIT,” structure. We refer to Carter/Validus Operating Partnership, LP as the “operating partnership” and to partnership interests and special partnership interests in the operating partnership as “OP Units” and “Special

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OP Units,” respectively. We use an UPREIT structure primarily because it may give us an advantage in acquiring desired properties from persons who may not otherwise sell their properties because of unfavorable tax consequences that may be avoided by transferring their properties to an UPREIT.

Q: What are your exit strategies?

A: We intend to begin the process of achieving a Liquidity Event not later than three to five years after the termination of this primary offering; however, we may seek to achieve a Liquidity Event prior to three years after the termination of this primary offering if our board of directors determines that an opportune time is at hand. A “Liquidity Event,” as the term is used in this prospectus, could include a sale of all or substantially all our assets, a sale or merger of our company, a listing of our common stock on a national securities exchange (provided we meet the then applicable listing requirements), or other similar transaction. We currently intend to achieve a Liquidity Event by selling our assets; however, we may achieve a Liquidity Event through a sale or merger of our company, a listing of our common stock on a national securities exchange, or other similar transaction if our board of directors determines that such a transaction is in the best interests of our stockholders.

If we do not begin the process of achieving a Liquidity Event by the fifth anniversary of the completion or termination of this offering, our charter will require that a majority of the board of directors and a majority of the independent directors must adopt a resolution either (i) seeking stockholder approval of an extension or amendment of this deadline or (ii) seeking stockholder approval of the liquidation of the corporation. If we sought and did not obtain stockholder approval of an extension or amendment to the deadline, we would then be required to seek stockholder approval of our liquidation. If we sought and did not obtain stockholder approval of our liquidation, our charter would not require us to achieve a Liquidity Event or liquidate and we could continue to operate as before. In such event, there will be no public market for shares of our common stock and you may be required to hold the shares indefinitely. See “Description of Securities — Meetings and Special Voting Requirements” in this prospectus for a more detailed discussion on this requirement.

Q: If I buy shares in this offering, how may I sell them later?

A: At the time you purchase the shares, they will not be listed for trading on any national securities exchange or over-the-counter market. Until our shares are listed, if ever, you may not sell your shares unless the buyer meets the applicable suitability and minimum purchase standards and the sale does not violate state securities laws. In addition, our charter will prohibit the ownership by one person of more than 9.8% in value of the aggregate of our outstanding shares of stock and more than 9.8% (in value or number of shares, whichever is more restrictive) of any class or series of the outstanding shares of our stock, unless exempted by our board of directors. Until our shares are listed, if ever, you will have difficulty selling your shares and even if you are able to sell your shares, you likely will have to sell them at a substantial discount.

In order to provide stockholders with the benefit of some interim liquidity, our board of directors will adopt a share repurchase program that enables our stockholders to sell their shares back to us after you have held them for at least one year, subject to the significant conditions and limitations in our share repurchase program. The terms of our share repurchase program are more flexible in cases involving the death of a stockholder.

Repurchases of shares of our common stock, when requested, are at our sole discretion and generally will be made monthly. We will limit the number of shares repurchased during any calendar year to 5% of the number of shares of common stock outstanding on December 31st of the previous calendar year. In addition, we only are authorized to repurchase shares using the proceeds received from our distribution reinvestment plan and will limit the amount we spend to repurchase shares in a given month to the amount of proceeds we received from our distribution reinvestment plan in that same month. Due to these limitations, we cannot guarantee that we will be able to accommodate all repurchase requests.

Unless the shares of our common stock are being repurchased in connection with a stockholder’s death or qualifying disability, the purchase price for shares repurchased under our share repurchase program will be as set forth below until we establish an estimated value of our shares. We currently do not anticipate obtaining appraisals for our investments (other than investments in transaction with affiliates) and, accordingly, the estimated value of our investments should not be viewed as an accurate reflection of the fair market value of

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our investments nor will they represent the amount of net proceeds that would result from an immediate sale of our assets. We expect to begin establishing an estimated value of our shares based on the value of our real estate and real estate-related investments beginning 18 months after the close of this offering. We will retain persons independent of us and our advisor to prepare the estimated value of our shares. Prior to establishing the estimated value of our shares, the price per share that we will pay to repurchase shares of our common stock will be as follows (in each case, as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to our common stock):

for stockholders who have continuously held their shares of our common stock for at least one year, the price will be 92.5% of the amount paid for each such share;
for stockholders who have continuously held their shares of our common stock for at least two years, the price will be 95.0% of the amount paid for each such share;
for stockholders who have continuously held their shares of our common stock for at least three years, the price will be 97.5% of the amount paid for each such share; and
for stockholders who have held their shares of our common stock for at least four years, the price will be 100.0% of the amount paid for each such share.

The share repurchase program immediately will terminate if our shares are listed on any national securities exchange. In addition, our board of directors may suspend (in whole or in part) the share repurchase program at any time and from time to time upon notice to our stockholders and amend or terminate the share repurchase program at any time upon 30 days’ prior written notice to our stockholders. Further, our board of directors reserves the right, in its sole discretion, to reject any requests for repurchases. For additional information on our share repurchase program refer to the section entitled “Share Repurchase Program” elsewhere in this prospectus.

Q: In what types of real property will you invest?

A: We intend to focus generally on acquiring quality income-producing commercial real estate in the medical, data center and educational sectors. In particular, we intend to focus on buying quality commercial real estate at a discount to replacement cost and with appreciation potential. If attractive investment opportunities arise, we also may purchase other types of commercial real estate. We do not expect to acquire assets located outside of the United States.

Q: Will you invest in anything other than real property?

A: Yes. In addition to real property, we may invest in other real estate-related investments that meet our overall investment strategy and return criteria. Other real estate investments may include equity or debt interests, including securities or joint venture interests, in other real estate entities. We also may originate or acquire real estate debt. We expect our debt originations and acquisitions to be focused on first mortgages, but they may include bridge loans, mezzanine loans and securitized debt. We expect that the aggregate amount of our investments, if any, in publicly traded real estate equity or debt securities, including commercial mortgage-backed securities (CMBS), and debt originations and acquisitions to be no more than 10% of the aggregate fair market value of our assets as of the close of our offering period and thereafter.

Q: Do you expect to enter into joint ventures?

A: Yes. We expect that some of our investments may be done in joint ventures or other co-ownership arrangements when we determine it is advantageous to do so. Some possible reasons for entering into a joint venture or other co-ownership arrangement would be to acquire assets we could not otherwise acquire, to reduce our capital commitment to a particular asset or to benefit from certain expertise that a partner might have.

Q: Will distributions to me be taxable as ordinary income?

A: Yes and no. Distributions that you receive (not designated as capital gain dividends), including distributions reinvested pursuant to our distribution reinvestment plan, will be taxed as ordinary income to the extent they are paid from our earnings and profits (as determined for U.S. federal income tax purposes). However,

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distributions that we designate as capital gain dividends generally will be taxable as long-term capital gain to the extent they do not exceed our actual net capital gain for the taxable year. Some portion of your distributions may not be subject to tax in the year in which they are received because depreciation expense reduces the amount of taxable income, but does not reduce cash available for distribution. The portion of your distribution which is not designated as a capital gain dividend and is in excess of our current and accumulated earnings and profits is considered a return of capital for U.S. federal income tax purposes and will reduce the adjusted tax basis of your investment, but not below zero, deferring such portion of your tax until your investment is sold or our company is liquidated, at which time you will be taxed at capital gains rates. To the extent such portion of your distribution exceeds the adjusted basis of your investment, such excess will be treated as capital gain. Please note that each investor’s tax considerations are different, therefore, you should consult with your own tax advisor and financial planners prior to making an investment in our shares. You also should review the section of this prospectus entitled “Certain Material U.S. Federal Income Tax Considerations.”

Q: When should I expect to receive distributions?

A: To maintain our qualification as a REIT, we generally are required to make aggregate annual distributions to our stockholders of at least 90% of our annual REIT taxable income, excluding net capital gain (which does not equal net income, as calculated in accordance with generally accepted accounting principles in the United States of America, or GAAP).

We intend to pay distributions on a regular basis beginning no later than the first calendar month after the calendar month in which we make our first real estate investment. Once we commence paying distributions, we expect to pay distributions monthly and continue paying distributions monthly unless our results of operations, our general financial condition, general economic conditions or other factors make it imprudent to do so. The timing and amount of distributions will be determined by our board, in its sole discretion, may vary from time to time, and will be influenced in part by its intention to comply with REIT requirements of the Internal Revenue Code.

We have not established any limit on the amount of proceeds from this offering that may be used to fund distributions, except that, in accordance with our organizational documents and Maryland law, we may not make distributions that would: (1) cause us to be unable to pay our debts as they become due in the usual course of business; (2) cause our total assets to be less than the sum of our total liabilities plus senior liquidation preferences, if any; or (3) jeopardize our ability to qualify as a REIT.

Q: Will you offer stockholders an opportunity to re-invest their distributions?

A: Yes, pursuant to our distribution reinvestment plan, stockholders may elect to have the distributions they receive from us reinvested, in whole or in part, in additional shares of our common stock. The purchase price per share under our distribution reinvestment plan will be the higher of 95% of the fair market value per share as determined by our board of directors and $9.50 per share.

Q: What kind of offering is this?

A: Through our dealer manager, SC Distributors, LLC, we are offering a minimum of 200,000 shares of our common stock and a maximum of 150,000,000 shares of our common stock to the public in our primary offering on a “best efforts” basis at $10.00 per share. “Best efforts” means that our dealer manager is not obligated to purchase any specific number or dollar amount of shares. We also are offering up to an additional 25,000,000 shares of our common stock to be issued pursuant to our distribution reinvestment plan at $9.50 per share to stockholders who elect to participate in such plan as described in this prospectus. We reserve the right to reallocate shares of common stock being offered between the primary offering and the distribution reinvestment plan.

Q: How does a “best efforts” offering work?

A: When shares are offered to the public on a “best efforts” basis, the brokers participating in the offering are only required to use their reasonable best efforts to sell the shares and have no firm commitment or obligation to purchase any of the shares. Therefore, we may not sell all the shares that we are offering.

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Q: How long will this offering last?

A: We expect to sell up to 150,000,000 shares of our common stock in our primary offering. This primary offering will end no later than     , 2012, which is two years from the effective date of this offering, unless we elect to extend it to a date no later than     , 2013. We also expect to sell up to an additional 25,000,000 shares of our common stock pursuant to our distribution reinvestment plan. We may amend, suspend or terminate the distribution reinvestment plan at our discretion at any time upon ten days’ prior written notice to our stockholders. Additionally, we will be required to discontinue sales of shares under the distribution reinvestment plan on the earlier to occur of (a)     , 2012, which is two years from the effective date of this offering, and (b) the date we sell all the shares registered for sale under the distribution reinvestment plan, unless we elect to extend it to a date no later than     , 2013.

Q: What will you do with the proceeds from your primary offering?

A: If we sell all the shares offered in our primary offering, we expect to use approximately 86.6% of the gross proceeds to make real estate investments. We will use the remaining approximately 13.4% of the gross proceeds to pay selling commissions, dealer manager fees, organization and offering expenses, a fee to our advisor for services in connection with the selection and acquisition of properties and for working capital reserves.

Q: What will you do with the money raised in this offering before you invest the proceeds in real estate?

A: Until we invest the net proceeds of this offering in real estate, we will invest in short-term, highly liquid, interest-bearing investments, such as money market mutual funds, certificates of deposit, commercial paper, interest-bearing government securities and other short-term investments. We also may use a portion of the proceeds to fund distributions. We may not be able to invest the proceeds in real estate promptly and such short-term investments will not earn as high of a return as we expect to earn on our real estate investments.

Q: Who can buy shares?

A: Generally, you may buy shares pursuant to this prospectus, provided that you have either (a) a net worth of at least $70,000 and a gross annual income of at least $70,000, or (b) a net worth of at least $250,000. For this purpose, net worth does not include your home, home furnishings and automobiles. Residents of certain states may have a different standard. You should read carefully the more detailed description under the section entitled “Investor Suitability Standards” immediately following the cover page of this prospectus.

Q: Who should buy shares?

A: An investment in our shares may be appropriate for you if you meet the minimum suitability standards mentioned above, seek to diversify your personal portfolio with a finite-life, real estate-based investment, which among its benefits hedges against inflation and the volatility of the stock market, seek to receive current income, seek to preserve capital, wish to obtain the benefits of potential long-term capital appreciation and are able to hold your investment for a time period consistent with our liquidity plans. Persons who require immediate liquidity or guaranteed income, or who seek a short-term investment, are not appropriate investors for us, as our shares will not meet those needs.

Q: May I make an investment through my IRA, SEP or other tax-deferred account?

A: Yes. You may make an investment through your individual retirement account, or an IRA, a simplified employee pension, or a SEP, plan or other tax-deferred account. In making these investment decisions, you should consider, at a minimum, (a) whether the investment is in accordance with the documents and instruments governing your IRA, plan or other account, (b) whether the investment satisfies the fiduciary requirements associated with your IRA, plan or other account, (c) whether the investment will generate unrelated business taxable income, or UBTI, to your IRA, plan or other account, (d) whether there is sufficient liquidity for such investment under your IRA, plan or other account, (e) the need to value the assets of your IRA, plan or other account annually or more frequently, and (f) whether the investment would constitute a prohibited transaction under applicable law. You should read carefully the more detailed description under the section entitled “Investment by Tax-Exempt Entites and ERISA Considerations” of this prospectus.

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Q: Is there any minimum investment required?

A: Yes. Generally, you must invest at least $2,000. Investors who already own our shares can make additional purchases for less than the minimum investment. You should read carefully the more detailed description of the minimum investment requirements appearing under the section entitled “Investor Suitability Standards” immediately following the cover page of this prospectus.

Q: What type of reports on my investment will I receive?

A: We will provide you with periodic updates on the performance of your investment with us, including:

following our commencement of distributions to stockholders, four quarterly or 12 monthly distribution reports;
three quarterly financial reports;
an annual report;
an annual U.S. Internal Revenue Service, or IRS, Form 1099, if applicable; and
supplements to the prospectus during the offering period, via mailings or website access.

Q: When will I get my detailed tax information?

A: If applicable, your IRS Form 1099 (or such successor form), which includes tax information, will be placed in the mail by January 31 of each year.

Q: How do I subscribe for shares?

A: If you choose to purchase shares in this offering and you are not already a stockholder, you will need to complete and sign a subscription agreement, like the one contained in this prospectus as Appendix C, for a specific number of shares and pay for the shares at the time you subscribe.

Q: Who is the transfer agent?

A: The name and address of our transfer agent is as follows:



To ensure that any account changes are made promptly and accurately, all changes (including your address, ownership type and distribution mailing address) should be directed to the transfer agent.

Q: Who can help answer my questions?

A: If you have more questions about the offering or if you would like additional copies of this prospectus, you should contact your registered representative or contact:

SC Distributors, LLC



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PROSPECTUS SUMMARY

This prospectus summary highlights material information contained elsewhere in this prospectus. Because it is a summary, it may not contain all the information that is important to you. To understand this offering fully, you should read the entire prospectus carefully, including the “Risk Factors” section and the financial statements, before making a decision to invest in our common stock. Except where the context suggests otherwise, the terms “the company,” “we,” “us” and “our” refer to Carter Validus Mission Critical REIT, Inc., a Maryland corporation. We refer to: Carter/Validus Advisors, LLC, a Delaware limited liability company, as our advisor; Carter/Validus Operating Partnership, LP, a Delaware limited partnership, as our operating partnership; SC Distributors, LLC, a Delaware limited liability company, as our dealer manager; Carter Real Estate Management Services, LLC, a Delaware limited liability company, as our property manager; and Carter/Validus REIT Investment Management, LLC, a Delaware limited liability company, as our sponsor.

Carter Validus Mission Critical REIT, Inc.

Carter Validus Mission Critical REIT, Inc. is a Maryland corporation incorporated on December 16, 2009 that intends to qualify as a REIT for U.S. federal income tax purposes beginning with the taxable year ending December 31, 2010, or the first year in which we commence material operations. Among other requirements, REITs are required to distribute at least 90% of their annual ordinary net taxable income.

We expect to use the net proceeds from this offering primarily to acquire quality income-producing commercial real estate with a focus on medical facilities, data centers and educational facilities, preferably with long-term net leases to investment grade and other creditworthy tenants. In the current market environment we believe it is possible to buy quality commercial real estate at a discount to replacement cost and with potential for substantial appreciation. If attractive investment opportunities arise, we also may purchase other types of commercial real estate. Other real estate investments may include equity or debt interests, including securities, in other real estate entities. We also may originate or invest in real estate debt. We expect our real estate debt originations and investments to be focused on first mortgage loans, but they also may include real estate-related bridge loans, mezzanine loans and securitized debt. We do not intend to invest in assets located outside of the United States.

Assuming the maximum amount of the primary offering is raised, we currently estimate that we will invest, directly or indirectly, approximately 30% of our total asset value in medical facilities, approximately 30% of our total asset value in data centers, approximately 30% of our total asset value in educational facilities and not more than 10% of our assets in real estate-related debt and securities. We expect the size of individual properties that we purchase to vary significantly, but we expect most of the properties we acquire are likely to have a purchase price between $10 million and $50 million. See the section entitled “Investment Objectives, Strategy and Policies — Investment Limitations” in this prospectus for a more detailed discussion of the limitations of the assets we may acquire.

Our executive offices are located at 4211 West Boy Scout Blvd., Suite 500, Tampa, Florida 33607. Our telephone number is (813) 287-0101, our fax number is (813) 287-0397 and the e-mail address of our investor relations department is         . Additional information about us and our affiliates may be obtained at www.carterusa.com, but the contents of that site are not incorporated by reference in or otherwise a part of this prospectus.

Our Investment Objectives

Our investment objectives are to:

acquire quality commercial real estate properties with a focus on the medical, data center and educational sectors, which provide current cash flow from operations;
pay regular cash distributions to stockholders;
preserve, protect and return capital contributions to stockholders;
realize appreciated growth in the value of our investments upon the sale of such investments; and

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be prudent, patient and deliberate with respect to the purchase and sale of our investments considering current and future real estate markets.

Our real estate team is led by seasoned professionals who have institutional experience investing through various real estate cycles. The seven senior executives of our advisor have over 149 years of combined real estate experience and have acquired over $3.5 billion of real estate and real estate-related assets. We believe a number of factors differentiate us from other non-traded REITs, including our property type focus, our lack of legacy issues, our opportunistic buy and sell strategy, and our institutional management team.

Our Dealer Manager

SC Distributors, LLC, a Delaware limited liability company formed in March 2009, will serve as our dealer manager for this offering. Our dealer manager has applied for membership as a member firm of the Financial Industry Regulatory Authority, or FINRA. It is not yet registered as a member firm nor is it registered as a broker dealer in any state. Until our dealer manager becomes a FINRA member and is properly registered in the states where it is required to be registered, it may not engage in the conduct of a securities business, including participating in this offering or serving as our dealer manager. Our dealer manager is located at             .

Our Sponsor

Carter/Validus REIT Investment Management, LLC, a Delaware limited liability company, which is directly or indirectly controlled by John Carter and Mario Garcia, Jr., controls our advisor and is our sponsor. Carter/Validus REIT Investment Management, LLC owns 100% of the interests in Carter/Validus Holding Company, LLC, a Delaware limited liability company, which wholly owns our advisor and our dealer manager.

Our Board

We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders as fiduciaries. Currently, we have five directors, John Carter, Mario Garcia, Jr., James Ziegelbauer, Randall Greene and Ronald Rayevich. Each of the latter three directors is independent of our advisor, Carter/Validus Advisors, LLC. Each of our directors was selected by our executive officers because of his qualifications and significant experience in the real estate business. Each of our executive officers and Messrs. Carter and Garcia are affiliated with our advisor. Our charter will require that a majority of our directors be independent of us, our sponsor, our advisor and all of our or their affiliates, and will provide that our independent directors will be responsible for reviewing the performance of our advisor and must approve certain other matters as set forth in our charter. See the section entitled “Conflicts of Interest — Certain Conflict Resolution Procedures” in this prospectus. Our directors will be elected annually by our stockholders. Although we have executive officers who manage our operations, we do not have any paid employees.

Our Advisor

Carter/Validus Advisors, LLC, a Delaware limited liability company formed on December 29, 2009, is our external advisor and is responsible for managing our affairs on a day-to-day basis. Our advisor’s responsibilities include identifying potential investments, evaluating potential investments, making investments, asset management, asset dispositions, financial reporting, regulatory compliance, investor relations and other administrative functions on our behalf. Our advisor is an affiliate of Carter & Associates and may contract with other affiliates of Carter & Associates or other third parties to perform or assist with these functions.

Carter/Validus Advisors, LLC also is the special limited partner of our operating partnership. Through the sponsor’s ownership and control of Carter/Validus Advisors, LLC, the sponsor may be entitled to certain fees in connection with our liquidation or listing on a national stock exchange. The payment of these fees to Carter/Validus Advisors, LLC is related to our successful performance and is paid indirectly to the sponsor through this entity for tax reasons that are advantageous to the sponsor and that have no impact on us.

The “subordinated participation in net sale proceeds,” also known as the “promote,” is a success-based performance fee. The fee is calculated as 15% of the remaining net sale proceeds after the investors have

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received a return of net capital contributions and an 8% annual cumulative, pre-tax, non-compounded return on their capital contributions. If our net sale proceeds do not result in such an annual cumulative, pre-tax, non-compounded return greater than 8%, then Carter/Validus Advisors, LLC would not earn this performance fee. If we list our common stock on a national securities exchange, Carter/Validus Advisors, LLC will be entitled to a fee equal to 15% of the amount, if any, by which (a) the market value of our outstanding common stock plus distributions paid by us prior to listing, exceeds (b) the aggregate remaining capital contributed by investors plus an amount equal to an 8% annual cumulative, pre-tax, non-compounded return to investors on their aggregate capital contributed.

Our Operating Partnership

We expect to own substantially all our real estate properties through our operating partnership, Carter/Validus Operating Partnership, LP, a Delaware limited partnership formed on December 29, 2009. We may, however, own properties directly, through subsidiaries of Carter/Validus Operating Partnership, LP or through other entities. We are the sole general partner of Carter/Validus Operating Partnership, LP, and Carter/Validus Advisors, LLC is the initial limited partner of Carter/Validus Operating Partnership, LP. Our ownership of properties in Carter/Validus Operating Partnership, LP is referred to as an “UPREIT.” This UPREIT structure may enable sellers of properties to transfer their properties to Carter/Validus Operating Partnership, LP in exchange for limited partnership units of Carter/Validus Operating Partnership, LP and defer potential gain recognition for U.S. federal income tax purposes with respect to such transfers of properties. The holders of units in Carter/Validus Operating Partnership, LP may have their units exchanged for the cash value of a corresponding number of shares of our common stock or, at our option, a corresponding number of shares of our common stock. At present, we have no plans to acquire any specific properties in exchange for units of Carter/Validus Operating Partnership, LP.

Our Property Manager

Our property manager is Carter Real Estate Management Services, LLC, a Delaware limited liability company formed on December 29, 2009. Our property manager will provide services to us in connection with the rental, leasing, operation and management of our properties. Our property manager is located at 171 17th Street NW, Suite 1200, Atlanta, Georgia 30363 and its telephone number is (404) 888-3000.

Carter/Validus Holding Company, LLC

Carter/Validus Holding Company, LLC, a Delaware limited liability company formed on December 29, 2009 is wholly owned by our sponsor. Carter/Validus Holding Company, LLC is a holding company that owns 100% of the outstanding limited liability company interests in our advisor and our dealer manager. Except for the foregoing ownership interests, Carter/Validus Holding Company, LLC has no operations nor any equity interest in any other entity.

Our REIT Status

If we qualify as a REIT, we generally will not be subject to U.S. federal income tax on income that we distribute currently to our stockholders. Under the Internal Revenue Code, a REIT is subject to numerous organizational and operational requirements, including a requirement that it generally distribute at least 90% of its annual REIT taxable income (excluding net capital gain) to its stockholders. If we fail to qualify for taxation as a REIT in any year, and the statutory relief provisions of the Internal Revenue Code do not apply, our income will be taxed at regular corporate rates, and we may be precluded from qualifying for treatment as a REIT for the four-year period following our failure to qualify. Even if we qualify as a REIT, we may still be subject to state and local taxes on our income and property, U.S. federal income and excise taxes on our undistributed income and other U.S. taxes.

Terms of the Offering

We are offering an aggregate of up to 150,000,000 shares of common stock in our primary offering on a best efforts basis at $10.00 per share. Discounts are available for certain categories of purchasers as described in the “Plan of Distribution” section of this prospectus. We also are offering up to an additional 25,000,000 shares of common stock under our distribution reinvestment plan at $9.50 per share, subject to certain limitations, as described in the “Distribution Reinvestment Plan” section of this prospectus. We will offer

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shares of common stock in our primary offering until the earlier of         , 2012, which is two years from the effective date of this offering, or the date we sell 150,000,000 shares, unless we elect to extend it to a date no later than         , 2013. We may amend, suspend or terminate the distribution reinvestment plan at our discretion at any time upon ten days’ prior written notice to our stockholders. Additionally, we will be required to discontinue sales of shares under the distribution reinvestment plan on the earlier to occur of (a)     , 2012, which is two years from the effective date of this offering, and (b) the date we sell all the shares registered for sale under the distribution reinvestment plan, unless we elect to extend it to a date no later than     , 2013. We may sell shares under the distribution reinvestment plan beyond such time, however, primary offering until we have sold 25,000,000 shares through the reinvestment of distributions, but only if there is an effective registration statement with respect to the shares. We reserve the right to reallocate the shares of common stock we are offering between the primary offering and our distribution reinvestment plan. This offering must be registered in every state in which we offer or sell shares. Generally, such registrations are for a period of one year. Thus, we may have to stop selling shares in any state in which our registration is not renewed or otherwise extended annually. We may terminate this offering at any time prior to the stated termination date.

All subscription payments will be placed in an account held by the escrow agent,       , in trust for subscribers’ benefit. Other than subscription payments from Pennsylvania residents, all subscription payments will be released to us from the escrow account only if we have sold a minimum of 200,000 shares to the public by         , 2011, which is one year from the effective date of this offering. Our directors, officers, advisor and their respective affiliates may purchase for investment shares of our common stock in this offering and such purchases will not count toward meeting this minimum threshold. Subscription payments received from Pennsylvania residents will be held in the escrow account until we have an aggregate of $86,875,000 in subscriptions (including sales made to residents of other states). Funds in escrow will be invested in short-term investments that mature on or before         , 2011, which is one year from the effective date of this offering, or that can be readily sold or otherwise disposed of for cash by such date without any dissipation of the offering proceeds invested.

Estimated Use of Proceeds of This Offering

Depending primarily on the number of shares we sell in this offering, the amounts listed in the table below represent our current estimates concerning the use of the offering proceeds and assume no shares available under our distribution reinvestment plan are sold. Since these are estimates, they may not accurately reflect the actual receipt or application of the offering proceeds. The first scenario assumes we sell the minimum number of 200,000 shares of common stock in this offering and the second scenario assumes that we sell the maximum number of 150,000,000 shares in this offering, with both scenarios contemplating a price of $10.00 per share. We estimate that for each share sold in this offering, approximately 86.8% will be available for the purchase of real estate and real estate-related investments in both the first scenario and second scenario. We will use the remainder of the offering proceeds to pay the costs of the offering, including selling commissions and the dealer manager fee, to pay a fee to our advisor for its services in connection with the selection and acquisition of properties and for working capital reserves. We will not pay selling commissions or a dealer manager fee on shares sold under our distribution reinvestment plan. The table does not give effect to special sales or volume discounts which could reduce selling commissions and many of the figures represent management’s best estimate because they cannot be precisely calculated at this time.

       
  Minimum Offering
(Not Including Distribution
Reinvestment Plan)
  Maximum Offering
(Not Including Distribution
Reinvestment Plan)
     Amount   Percent   Amount   Percent
Gross offering proceeds   $ 2,000,000       100.0 %    $ 1,500,000,000       100.0 % 
Less offering expenses:
                                   
Selling commissions and dealer manager fee   $ 195,000       9.75 %    $ 146,250,000       9.75 % 
Organization and offering expenses   $ 25,000       1.25 %    $ 18,750,000       1.25 % 
Amount available for investment   $ 1,780,000       89.0 %    $ 1,335,000,000       89.0 % 
Acquisition:
                                   
Acquisition and advisory fees   $ 34,698       1.95 %    $ 26,023,392       1.95%  

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  Minimum Offering
(Not Including Distribution
Reinvestment Plan)
  Maximum Offering
(Not Including Distribution
Reinvestment Plan)
     Amount   Percent   Amount   Percent
Acquisition expenses   $ 8,625       0.49 %    $ 6,505,848       0.49 % 
Working capital reserve   $ 1,735       0.1 %    $ 1,301,170       0.1 % 
Amount invested in properties   $ 1,734,892       86.8 %    $ 1,301,169,591       86.8 % 

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Prior Offerings

For a summary of the prior offerings of our sponsor and its principals see the section entitled “Prior Performance Summary” in this prospectus.

Distribution Policy

To maintain our qualification as a REIT, we generally are required to make aggregate annual distributions to our stockholders of at least 90% of our annual REIT taxable income, excluding net capital gain (which does not equal net income, as calculated in accordance with GAAP). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.

We intend to accrue and pay distributions on a regular basis beginning no later than the first calendar month after the calendar month in which we make our first real estate investment. Once we commence paying distributions we expect to pay distributions monthly and continue paying distributions monthly unless our results of operations, our general financial conditions, general economic conditions, applicable provisions of Maryland law or other factors make it imprudent to do so. The timing and amount of distributions will be determined by our board of directors, in its discretion, and may vary from time to time. The board’s discretion will be influenced in substantial part by its obligation to cause us to comply with REIT requirements of the Internal Revenue Code.

We generally do not intend to fund distributions from offering proceeds. However, if we do not have enough cash to make distributions, we may borrow, use proceeds from this offering, issue additional securities or sell assets in order to fund distributions. Until we are generating operating cash flow sufficient to make distributions to our stockholders, we intend to pay all or a substantial portion of our distributions from the proceeds of this offering or from borrowings, including possible borrowings from our advisor or its affiliates, in anticipation of future cash flow, which may reduce the amount of capital we ultimately invest in properties or other permitted investments, and negatively impact the value of your investment. We have not established any limit on the amount of proceeds from this offering that may be used to fund distributions, except that, in accordance with our organizational documents and Maryland law, we may not make distributions that would: (1) cause us to be unable to pay our debts as they become due in the usual course of business; (2) cause our total assets to be less than the sum of our total liabilities plus senior liquidation preferences, if any; or (3) jeopardize our ability to qualify as a REIT. Distributions made from offering proceeds are effectively a return of capital to stockholders from which we will have paid organization and offering expenses in connection with this offering.

Leverage Policy

Prior to the commencement of this offering, our charter will provide that the maximum amount of our total indebtedness shall not exceed 300% of our total “net assets” (as defined by the Statement of Policy Regarding Real Estate Investment Trusts revised and adopted by the North American Securities Administrators Association on May 7, 2007, or the NASAA REIT Guidelines) as of the date of any borrowing, which is generally expected to be approximately 75% of the cost of our investments; however, we may exceed that limit if approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report following such borrowing along with justification for exceeding such limit. This charter limitation, however, does not apply to individual real estate assets or investments.

In addition, it is currently our intention to limit our aggregate borrowings to 50% of the aggregate fair market value of our assets (calculated after the close of this offering and once we have invested substantially all the proceeds of this offering), unless borrowing a greater amount is approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report following such borrowing along with justification for borrowing such a greater amount. This limitation, however, will not apply to individual real estate assets or investments. At the date of acquisition of each asset, we anticipate that the cost of investment for such asset will be substantially similar to its fair market value, which will enable us to satisfy our requirements under the NASAA REIT Guidelines. However, subsequent events, including changes in the fair market value of our assets, could result in our exceeding these limits. See the section entitled “Investment Objectives, Strategy and Polices — Financing Strategies and Policies” in this prospectus for a more detailed discussion of our borrowing policies.

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Exit Strategy — Liquidity Event

It is our intention to begin the process of achieving a Liquidity Event not later than three to five years after the termination of this primary offering; however, we may seek to achieve a Liquidity Event prior to three years after the termination of this primary offering if our board of directors determines that an opportune time is at hand. A “Liquidity Event” could include a sale of all or substantially all our assets, a sale or merger of our company, a listing of our common stock on a national securities exchange (provided we meet the then applicable listing requirements), or other similar transaction. We currently intend to achieve a Liquidity Event by selling our assets; however, we may achieve a Liquidity Event through a sale or merger of our company, a listing of our common stock on a national securities exchange, or other similar transaction if our board of directors determines that such a transaction is in the best interests of our stockholders.

If we do not begin the process of achieving a Liquidity Event by the fifth anniversary of the completion or termination of this offering, our charter will require that a majority of the board of directors and a majority of the independent directors must adopt a resolution either (i) seeking stockholder approval of an extension or amendment of this deadline or (ii) seeking stockholder approval of the liquidation of the corporation. If we sought and did not obtain stockholder approval of an extension or amendment to the deadline, we would then be required to seek stockholder approval of our liquidation. If we sought and did not obtain stockholder approval of our liquidation, our charter would not require us to achieve a Liquidity Event or liquidate and we could continue to operate as before. In such event, there will be no public market for shares of our common stock and you may be required to hold the shares indefinitely. See “Description of Securities — Meetings and Special Voting Requirements” in this prospectus for a more detailed discussion on this requirement.

Market conditions and other factors could cause us to delay our Liquidity Event beyond the fifth anniversary of the termination of this primary offering. Even after we decide to pursue a Liquidity Event, we are under no obligation to conclude our Liquidity Event within a set time frame because the timing of our Liquidity Event will depend on real estate market conditions, financial market conditions, U.S. federal income tax consequences to stockholders, and other conditions that may prevail in the future. We also cannot assure you that we will be able to achieve a Liquidity Event.

Conflicts of Interest

Carter/Validus Advisors, LLC, as our advisor, will experience conflicts of interest in connection with the management of our business affairs, including the following:

The management personnel of Carter/Validus Advisors, LLC, each of whom may in the future make investment decisions for other programs sponsored by our sponsor and its affiliates and direct investments, must determine which investment opportunities to recommend to us or another program sponsored by our sponsor and its affiliates or joint venture, and must determine how to allocate resources among us and any other future programs sponsored by our sponsor and its affiliates;
Carter/Validus Advisors, LLC may structure the terms of joint ventures between us and other programs sponsored by our sponsor and its affiliates;
We have retained Carter Real Estate Management Services, LLC, an affiliate of Carter/Validus Advisors, LLC, to manage and lease some or all our properties;
Carter/Validus Advisors, LLC and its affiliates will have to allocate their time between us and other real estate programs and activities in which they may be involved in the future; and
Carter/Validus Advisors, LLC and its affiliates will receive fees in connection with transactions involving the purchase, financing, management and sale of our properties, and, because our advisor and its affiliates do not maintain a significant equity interest in us and are entitled to receive substantial minimum compensation regardless of performance, our advisor’s interests are not wholly aligned with those of our stockholders.

Our officers and two of our directors also will face these conflicts because of their affiliation with Carter/Validus Advisors, LLC. These conflicts of interest could result in decisions that are not in our best interests. See the section entitled “Conflicts of Interest” in this prospectus for a detailed discussion of the various conflicts of interest relating to your investment, as well as the procedures that we have established to mitigate a number of these potential conflicts.

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The following chart shows the ownership structure of the various entities that are affiliated with us and our advisor.

ORGANIZATIONAL STRUCTURE

[GRAPHIC MISSING]

1. Sponsor owns 200,000 shares of common stock (less than .01% assuming maximum offering)
2. The Advisor and Dealer Manager are owned through wholly-owned holding companies that are not shown on this Organizational Structure

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Compensation to Our Advisor and its Affiliates

Our advisor, Carter/Validus Advisors, LLC, and its affiliates will receive compensation and reimbursement for services relating to this offering and the investment and management of our assets. The most significant items of compensation and reimbursement are included in the table below. In the sole discretion of our advisor, the advisor may elect to have certain fees and commissions paid, in whole or in part, in cash or OP Units. For a more detailed discussion of compensation, see the table included in the “Management Compensation” section of this prospectus, including the footnotes thereto. The selling commissions and dealer manager fee may vary for different categories of purchasers. See the section entitled “Plan of Distribution” in this prospectus. No effect is given to any shares sold through our distribution reinvestment plan.

   
Type of Compensation   Determination of Amount   Estimated Amount for
Minimum Offering
(200,000 shares)/
Maximum Offering
(175,000,000 shares)
Offering Stage
Selling Commission   We will pay to SC Distributors, LLC 7% of gross proceeds of our primary offering; we will not pay any selling commissions on sales of shares under our distribution reinvestment plan; SC Distributors, LLC may reallow all or a portion of its selling commissions to participating broker-dealers.   $140,000 / $105,000,000
Dealer Manager Fee   We will pay to SC Distributors, LLC 2.75% of gross proceeds of our primary offering; we will not pay a dealer manager fee with respect to sales under our distribution reinvestment plan; SC Distributors, LLC may reallow all or a portion of its dealer manager fees to participating broker-dealers.   $55,000 / $41,250,000
Organization and Offering Expenses   We will reimburse Carter/Validus Advisors, LLC up to 1.25% of the gross offering proceeds for organization and offering expenses (other than selling commissions and dealer manger fees). If we do not raise the minimum amount of the offering, we will not reimburse Carter/Validus Advisors, LLC for organization and offering expenses.   $25,000 / $18,750,000

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Type of Compensation   Determination of Amount   Estimated Amount for
Minimum Offering
(200,000 shares)/
Maximum Offering
(175,000,000 shares)
Operational Stage
Acquisition Fees   We will pay to Carter/Validus Advisors, LLC 2.0% of the contract purchase price of each property acquired (including our pro rata share of debt attributable to such property) and 2.0% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment). For purposes of this prospectus, “contract purchase price” means the amount actually paid or allocated in respect of the purchase, development, construction or improvement of a property or the amount actually paid or allocated in respect of the purchase of loans or other real estate-related assets, in each case exclusive of acquisition fees and acquisition expenses, but in each case including any indebtedness assumed or incurred in respect of such investment.   $35,740 / $26,805,000 (or $71,480 / $53,610,000, assuming that we incur our expected leverage set forth in our investment guidelines; or $107,220 / $80,415,000, assuming the maximum leverage permitted by our charter.)
Acquisition Expenses   Reimbursement of acquisition expenses incurred in the process of acquiring properties or other real estate-related investments (including expenses relating to potential investments that we do not close), such as legal fees and expenses, costs of real estate due diligence, travel and communications expenses, accounting fees and expenses and other closing costs. We expect these expenses will be approximately 0.5% of the purchase price of each property or real estate-related investment.   $8,935 / $6,701,250 (or $17,870 / $13,402,500, assuming that we incur our expected leverage set forth in our investment guidelines.)
Asset Management Fees   We will pay Carter/Validus Advisors, LLC a fee equal to 0.75% of the cost of our assets (cost will include the purchase price, acquisition expenses, capital expenditures and other customarily capitalized costs, but exclude acquisition fees). This fee will be payable quarterly in arrears, based on assets held by us on the last day of such quarter.   Not determinable at this time. Because the fee is based on a fixed percentage of aggregate asset value, there is no maximum dollar amount of this fee.

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Type of Compensation   Determination of Amount   Estimated Amount for
Minimum Offering
(200,000 shares)/
Maximum Offering
(175,000,000 shares)
Property Management and Leasing Fees   In connection with the rental, leasing, operation and management of our properties, we will pay our advisor and its affiliates aggregate fees equal to: (a) with respect to single tenant properties, 3.0% of gross revenues from the properties managed; and (b) with respect to multi-tenant properties, 4.0% of gross revenues from the properties managed. We also will reimburse the property manager and its affiliates for property-level expenses that any of them pay or incur on our behalf, including salaries, bonuses and benefits of persons employed by the property manager and its affiliates except for the salaries, bonuses and benefits of persons who also serve as one of our executive officers or as an executive officer of the property manager or its affiliates. The property manager and its affiliates may subcontract the performance of their duties to third parties and pay all or a portion of the property management fee to the third parties with whom they contract for these services. If we contract directly with third parties for such services, we will pay them customary market fees and will pay Carter Real Estate Management Services, LLC an oversight fee equal to 1.0% of the gross revenues of the property managed. In no event will we pay our property manager, our advisor or any affiliate both a property management fee and an oversight fee with respect to any particular property.   Not determinable at this time. Because the fee is based on a fixed percentage of gross revenue and/or market rates, there is no maximum dollar amount of this fee.
     We also may pay Carter Real Estate Management Services, LLC a separate fee for the one-time initial rent-up or leasing-up of newly constructed properties in an amount not to exceed the fee customarily charged in arm’s length transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of brokers and agents in such area.
Construction Management Fee   For acting as general contractor and/or construction manager to supervise or coordinate projects or to provide major repairs or rehabilitation on our properties, we may pay Carter Real Estate Management Services, LLC up to 5.0% of the cost of the projects, repairs and/or rehabilitation, as applicable.   Not determinable at this time. Because the fee is based on a fixed percentage of certain costs, there is no maximum dollar amount of this fee.

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Type of Compensation   Determination of Amount   Estimated Amount for
Minimum Offering
(200,000 shares)/
Maximum Offering
(175,000,000 shares)
Operating Expenses   We will reimburse our advisor’s costs of providing administrative services, subject to the limitation that we will not reimburse our advisor for any amount by which our operating expenses (including the asset management fee) at the end of the four preceding fiscal quarters exceeds the greater of (a) 2% of average invested assets and (b) 25% of net income other than any additions to reserves for depreciation, bad debt or other similar non-cash reserves and excluding any gain from the sale of assets for that period. For these purposes, “average invested assets” means, for any period, the average of the aggregate book value of our assets (including lease intangibles) invested, directly or indirectly, in financial instruments, debt and equity securities and equity interests in and loans secured by real estate assets (including amounts invested in REITs and other real estate operating companies) before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of these values at the end of each month during the period. Additionally, we will not reimburse our advisor for personnel costs in connection with services for which the advisor receives acquisition fees or real estate commissions.   Not determinable at this time.

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Type of Compensation   Determination of Amount   Estimated Amount for
Minimum Offering
(200,000 shares)/
Maximum Offering
(175,000,000 shares)
Liquidation/Listing Stage
Real Estate Commissions   For substantial assistance in connection with the sale of properties, we will pay Carter/Validus Advisors, LLC a real estate commission paid on the sale of a property, up to the lesser of 1.5% of the contract sales price and one-half of the total brokerage commission paid if a third party broker is also involved; provided, however, that in no event may the real estate commissions paid to our advisor, its affiliates and unaffiliated third parties exceed the lesser of 6% of the contract sales price and a reasonable, customary and competitive real estate commission in light of the size, type and location of the property. Substantial assistance in connection with the sale of an asset includes the advisor’s preparation of an investment package for an asset (including an investment analysis, an asset description and other due diligence information) or such other substantial services performed by the advisor in connection with a sale.   Not determinable at this time. Because the commission is based on a fixed percentage of the contract price for a sold property, there is no maximum dollar amount of these commissions.
Subordinated Participation in Net Sale Proceeds (payable only if we are not listed on an exchange)   Our advisor will receive 15% of the remaining net sale proceeds after return of capital contributions plus payment to investors of an 8% annual cumulative, pre-tax, non-compounded return on the capital contributed by investors. We cannot assure you that we will provide this 8% return, which we have disclosed solely as a measure for our advisor’s and its affiliates’ performance compensation.   Not determinable at this time. There is no maximum amount of these payments.
Subordinated Incentive Listing Fee (payable only if we are listed on an exchange, which we have no intention to do at this time)   Our advisor will receive 15% of the amount by which the sum of our adjusted market value plus distributions exceeds the sum of the aggregate capital contributed by investors plus an amount equal to an 8% annual cumulative, pre-tax, non-compounded return to investors. We cannot assure you that we will provide this 8% return, which we have disclosed solely as a measure for our advisor’s and its affiliates’ performance compensation.   Not determinable at this time. There is no maximum amount of this fee.
Subordinated Termination Fee   Upon termination or non-renewal of the advisory agreement, our advisor shall be entitled to a subordinated termination fee. In addition, our advisor may elect to defer its right to receive a subordinated termination fee until either a listing on a national securities exchange or other Liquidity Event occurs.   Not determinable at this time. There is no maximum amount of this fee.

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Distribution Reinvestment Plan

Pursuant to our distribution reinvestment plan, you may elect to have the distributions you receive from us reinvested, in whole or in part, in additional shares of our common stock. The purchase price per share under our distribution reinvestment plan will be the greater of 95% of the fair market value per share as determined by our board of directors and $9.50 per share. No selling commissions or dealer manager fees will be paid on shares sold under our distribution reinvestment plan.

If you participate in the distribution reinvestment plan, you will not receive the cash from your distributions, other than any special distributions that are designated by our board of directors. As a result, you may have a tax liability with respect to your share of our taxable income, but you will not receive cash distributions to pay such liability. We may amend, suspend or terminate the distribution reinvestment plan at our discretion at any time upon ten days’ prior written notice to you. Additionally, we will be required to discontinue sales of shares under the distribution reinvestment plan on the earlier of         , 2012, which is two years from the effective date of this offering, and the date we sell all the shares registered for sale under the distribution reinvestment plan, unless we elect to extend it to a date no later than         , 2013. We reserve the right to reallocate the shares of our common stock we are offering between the primary offering and the distribution reinvestment plan.

Share Repurchase Program

Our common stock is currently not listed on a national securities exchange and we will not seek to list our stock unless and until such time as our independent directors believe that the listing of our stock would be in the best interest of our stockholders. In order to provide stockholders with the benefit of some interim liquidity, our board of directors has adopted a share repurchase program that enables our stockholders to sell their shares back to us after you have held them for at least one year, subject to the significant conditions and limitations in our share repurchase program. The terms of our share repurchase program are more flexible in cases involving the death of a stockholder.

Repurchases of shares of our common stock, when requested, are at our sole discretion and generally will be made monthly. We will limit the number of shares repurchased during any calendar year to 5% of the number of shares of common stock outstanding on December 31st of the previous calendar year. In addition, we are only authorized to repurchase shares using the proceeds received from our distribution reinvestment plan and will limit the amount we spend to repurchase shares in a given month to the amount of proceeds we received from our distribution reinvestment plan in that same month. Due to these limitations, we cannot guarantee that we will be able to accommodate all repurchase requests.

Unless the shares of our common stock are being repurchased in connection with a stockholder’s death or qualifying disability, the purchase price for shares repurchased under our share repurchase program will be as set forth below until we establish an estimated value of our shares. We do not currently anticipate obtaining appraisals for our investments (other than investments in transaction with affiliates) and, accordingly, the estimated value of our investments should not be viewed as an accurate reflection of the fair market value of our investments nor will they represent the amount of net proceeds that would result from an immediate sale of our assets. We expect to begin establishing an estimated value of our shares based on the value of our real estate and real estate-related investments beginning 18 months after the close of this offering. We will retain persons independent of us and our advisor to prepare the estimated value of our shares. Prior to establishing the estimated value of our shares, the price per share that we will pay to repurchase shares of our common stock will be as follows (in each case, as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to our common stock):

for stockholders who have continuously held their shares of our common stock for at least one year, the price will be 92.5% of the amount paid for each such share;
for stockholders who have continuously held their shares of our common stock for at least two years, the price will be 95.0% of the amount paid for each such share;
for stockholders who have continuously held their shares of our common stock for at least three years, the price will be 97.5% of the amount paid for each such share; and

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for stockholders who have held their shares of our common stock for at least four years, the price will be 100.0% of the amount paid for each such share.

The share repurchase program immediately will terminate if our shares are listed on any national securities exchange. In addition, our board of directors may suspend (in whole or in part) the share repurchase program at any time and from time to time upon notice to our stockholders and amend or terminate the share repurchase program at any time upon 30 days’ prior written notice to our stockholders. Further, our board of directors reserves the right, in its sole discretion, to reject any requests for repurchases. For additional information on our share repurchase program refer to the section entitled “Share Repurchase Program” elsewhere in this prospectus.

Investment Company Act of 1940 Considerations

We intend to conduct our operations so that the company and each of its subsidiaries are exempt from registration as an investment company under the Investment Company Act of 1940, or the Investment Company Act. Under Section 3(a)(1)(A) of the Investment Company Act, a company is an “investment company” if it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities. Under Section 3(a)(1)(C) of the Investment Company Act, a company is deemed to be an “investment company” if it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of its total assets on an unconsolidated basis, which we refer to as the “40% test.” “Investment securities” excludes U.S. Government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.

We intend to acquire real estate and real estate-related assets directly, for example, by acquiring fee interests in real property, or by purchasing interests, including controlling interests, in REITs or other “real estate operating companies,” such as real estate management companies and real estate development companies, that own real property. We also may acquire real estate assets through investments in joint venture entities, including joint venture entities in which we may not own a controlling interest. We anticipate that our assets generally will be held in wholly and majority-owned subsidiaries of the company, each formed to hold a particular asset.

We intend to conduct our operations so that the company and most, if not all, of its wholly owned and majority-owned subsidiaries will comply with the 40% test. We will continuously monitor our holdings on an ongoing basis to determine the compliance of the company and each wholly owned and majority-owned subsidiary with this test. We expect that most, if not all, of the company’s wholly owned and majority-owned subsidiaries will not be relying on exemptions under either Section 3(c)(1) or 3(c)(7) of the Investment Company Act. Consequently, interests in these subsidiaries (which are expected to constitute most, if not all, of our assets) generally will not constitute “investment securities.” Accordingly, we believe that the company and most, if not all, of its wholly owned and majority-owned subsidiaries will not be considered investment companies under Section 3(a)(1)(C) of the Investment Company Act.

In addition, we believe that neither the company nor any of its wholly or majority-owned subsidiaries will be considered investment companies under Section 3(a)(1)(A) of the Investment Company Act because they will not engage primarily or hold themselves out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, the company and its subsidiaries will be primarily engaged in non-investment company businesses related to real estate. Consequently, the company and its subsidiaries expect to be able to conduct their respective operations such that none of them will be required to register as an investment company under the Investment Company Act.

The determination of whether an entity is a majority-owned subsidiary of our company is made by us. The Investment Company Act defines a majority-owned subsidiary of a person as a company 50% or more of the outstanding voting securities of which are owned by such person, or by another company which is a majority-owned subsidiary of such person. The Investment Company Act further defines voting securities as any security presently entitling the owner or holder thereof to vote for the election of directors of a company. We treat companies in which we own at least a majority of the outstanding voting securities as

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majority-owned subsidiaries for purposes of the 40% test. We have not requested that the SEC staff approve our treatment of any entity as a majority-owned subsidiary and the SEC staff has not done so. If the SEC staff were to disagree with our treatment of one or more companies as majority-owned subsidiaries, we would need to adjust our strategy and our assets in order to continue to comply with the 40% test. Any such adjustment in our strategy could have a material adverse effect on us.

We intend to conduct our operations so that neither we nor any of our wholly or majority-owned subsidiaries fall within the definition of “investment company” under the Investment Company Act. In the event that the company or any of its wholly or majority-owned subsidiaries inadvertently falls within one of the definitions of “investment company,” we intend to rely on the exclusion provided by Section 3(c)(5)(C) of the Investment Company Act, which is available for entities primarily engaged in the business of “purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” In addition to prohibiting the issuance of certain types of securities, this exclusion generally requires that at least 55% of an entity’s assets must be comprised of mortgages and other liens on and interests in real estate, also known as “qualifying assets,” and at least 80% of the entity’s assets must be comprised of qualifying assets and a broader category of assets that we refer to as “real estate-related assets” under the Investment Company Act. Additionally, no more than 20% of the entity’s assets may be comprised of miscellaneous assets.

Qualification for exemption from the definition of “investment company” under the Investment Company Act will limit our ability to make certain investments. For example, these restrictions may limit the ability of the company and its subsidiaries to invest directly in mortgage-backed securities that represent less than the entire ownership in a pool of mortgage loans, debt and equity tranches of securitizations and certain asset-backed securities and real estate companies or in assets not related to real estate. Although we intend to monitor our portfolio, there can be no assurance that we will be able to maintain this exemption from registration for our company or each of our subsidiaries.

To the extent that the SEC staff provides more specific guidance regarding any of the matters bearing upon the definition of investment company and the exceptions to that definition, we may be required to adjust our investment strategy accordingly. Additional guidance from the SEC staff could provide additional flexibility to us, or it could further inhibit our ability to pursue the investment strategy we have chosen.

Description of Shares

Uncertificated Shares

Our board of directors has authorized the issuance of shares of our stock without certificates. Instead, your investment will be recorded on our books only. Our transfer agent maintains a stock ledger that contains the name and address of each stockholder and the number of shares that the stockholder holds. With respect to uncertificated stock, we will continue to treat the stockholder registered on our stock ledger as the owner of the shares until the record owner and the new owner delivers a properly executed stock transfer form to us, along with a fee to cover reasonable transfer costs, in an amount determined by our board of directors. We will provide the required stock transfer form to you upon request.

Stockholder Meetings

We will hold annual meetings of our stockholders for the purpose of electing our directors and conducting other business matters that may be presented at such meetings. We also may call special meetings of stockholders from time to time. You are entitled to one vote for each share of common stock you own at any of these meetings.

Restriction on Share Ownership and Transfer

Our charter will contain restrictions on ownership and transfer of the shares that, among other restrictions, prevent any one person from owning more than 9.8% in value of the aggregate of our outstanding shares of stock and more than 9.8% (in value or in number of shares, whichever is more restrictive) of any class or series of the outstanding shares of our stock, unless exempted by our board of directors. Our charter also will limit your ability to transfer your shares to prospective stockholders unless (a) they meet the minimum suitability standards regarding income or net worth, which are described in the “Investor Suitability Standards” section immediately following the cover page of this prospectus, and (b) the transfer complies with

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minimum purchase requirements, which are described in the sections entitled “Investor Suitability Standards” and “Plan of Distribution.” For a more complete description of the shares, including this and other restrictions on the ownership and transfer of our shares, please see the section entitled “Description of Securities” in this prospectus.

ERISA Considerations

Prospective investors with investment discretion over the assets of an individual retirement account, employee benefit plan or other retirement plan or arrangement that is covered by ERISA or Section 4975 of the Internal Revenue Code should carefully review the information in the section of this prospectus entitled “Investment by Tax-Exempt Entities and ERISA Considerations.” Any such prospective investors are required to consult their own legal and tax advisors on these matters.

Summary Risk Factors

Investing in our common stock involves a high degree of risk. If we are unable to effectively manage the impact of these risks, we may not meet our investment objectives, and therefore, you should purchase these securities only if you can afford a complete loss of your investment. See the section entitled “Risk Factors” in this prospectus for a discussion of the risks which should be considered in connection with your investment in our common stock. Some of the more significant risks relating to this offering and an investment in our shares include:

We have no operating history or established financing sources;
Since this is initially a blind pool offering, you may not have the opportunity to evaluate our investments before you make your purchase of our common stock, thus making your investment more speculative;
We do not currently own any properties and we have not identified any properties to acquire with the offering proceeds;
No public market currently exists, or may ever exist, for shares of our common stock and our shares are, and may continue to be, illiquid;
If we, through our advisor, are unable to find suitable investments, then we may not be able to achieve our investment objectives or pay distributions;
Properties that we acquire may be adversely affected by the current economic downturn;
If we are unable to raise substantial funds, we will be limited in the number and type of investments we may make and the value of your investment in us will fluctuate with the performance of the specific properties we acquire;
If only the minimum number of shares is sold in this offering, our ability to diversify our investments will be limited;
We may be unable to pay or maintain cash distributions or increase distributions over time;
We may borrow to make distributions to our stockholders if we are unable to make distributions with our cash flows from our operations. Such distributions could reduce the cash available to us and could constitute a return of capital to stockholders;
Our share repurchase program is subject to numerous restrictions, may be cancelled at any time and should not be relied upon as a means of liquidity;
There are numerous conflicts of interest between the interests of investors and our interests or the interests of our advisor, our sponsor, and their respective affiliates;
Our advisor is compensated based on an incentive fee structure, which may result in our advisor recommending riskier or more speculative investments;
Our investment objectives and strategies may be changed without stockholder consent;

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We are obligated to pay substantial fees to our advisor and its affiliates, including fees payable upon the sale of properties;
There are significant risks associated with maintaining as high level of leverage as permitted under our charter (which permits leverage of up to 300% of our total “net assets” (as defined by the NASAA REIT Guidelines) as of the date of any borrowing, which is generally expected to be approximately 75% of the cost of our investments);
There are limitations on ownership and transferability of our shares;
We are subject to risks associated with the significant dislocations and liquidity disruptions currently occurring in the U.S. credit markets;
We may fail to qualify or continue to qualify to be treated as a REIT;
Our dealer manager has not conducted an independent review of this prospectus; and
We may be deemed to be an investment company under the Investment Company Act and thus subject to regulation under the Investment Company Act.

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RISK FACTORS

An investment in our common stock involves various risks and uncertainties. You should carefully consider the following risk factors in conjunction with the other information contained in this prospectus before purchasing our common stock. The risks discussed in this prospectus can adversely affect our business, operating results, prospects and financial condition. These risks could cause the value of our common stock to decline and could cause you to lose all or part of your investment. The risks and uncertainties described below represent those risks and uncertainties that we believe are material to our business, operating results, prospects and financial condition as of the date of this prospectus. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may harm our business.

Risks Related to an Investment in Carter Validus Mission Critical REIT, Inc.

We have no prior operating history or established financing sources, and the prior performance of real estate investment programs sponsored by affiliates of our advisor may not be an indication of our future results.

We have no operating history and you should not rely upon the past performance of other real estate investment programs sponsored by affiliates of our advisor to predict our future results. We were incorporated on December 16, 2009. As of the date of this prospectus, we have not made any investments in real estate or otherwise and do not own any properties or have any operations or independent financing. Although Messrs. Carter, Garcia, Peterson and Winslow and other members of our advisor’s management have significant experience in the acquisition, finance, management and development of commercial real estate, the prior performance of real estate investment programs sponsored by Messrs. Carter, Garcia, Peterson and Winslow and other affiliates of our advisor may not be indicative of our future results.

Moreover, neither we nor our advisor have any established financing sources. Presently, both we and our advisor are funded by capital contributions from Carter/Validus REIT Investment Management, LLC, a company which is directly or indirectly controlled by Messrs. Carter and Garcia. If our capital resources, or those of our advisor, are insufficient to support our operations, we will not be successful.

You should consider our prospects in light of the risks, uncertainties and difficulties frequently encountered by companies that are, like us, in their early stage of development. To be successful in this market, we must, among other things:

identify and acquire investments that further our investment strategies;
increase awareness of the Carter Validus Mission Critical REIT, Inc. name within the investment products market;
expand and maintain our network of licensed securities brokers and other agents;
attract, integrate, motivate and retain qualified personnel to manage our day-to-day operations;
respond to competition for our targeted real estate properties and other investments as well as for potential investors; and
continue to build and expand our operations structure to support our business.

We cannot guarantee that we will succeed in achieving these goals, and our failure to do so could cause you to lose all or a portion of your investment.

Because this is a blind pool offering, you will not have the opportunity to evaluate our investments before we make them, which makes an investment in us more speculative.

We have not yet acquired or identified any investments that we may make, and we do not currently own any properties. Additionally, we will not provide you with information to evaluate our investments prior to our acquisition of properties. We will seek to invest substantially all the offering proceeds available for investment, after the payment of fees and expenses, in the acquisition of properties in the medical, data center and educational sectors. We also may, in the discretion of our advisor, invest in other types of real estate or in entities that invest in real estate. In addition, our advisor may make or invest in mortgage, bridge or

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mezzanine loans or participations therein on our behalf if our board of directors determines, due to the state of the real estate market or in order to diversify our investment portfolio or otherwise, that such investments are advantageous to us. For a more detailed discussion of our investment policies, see the section entitled “Investment Objectives, Strategy and Policies — Acquisition and Investment Policies” in this prospectus.

There is no public trading market for our shares and there may never be one; therefore, it may be difficult for you to sell your shares.

There currently is no public market for our shares and there may never be one. If you are able to find a buyer for your shares, you may not sell your shares unless the buyer meets applicable suitability and minimum purchase standards and the sale does not violate state securities laws. Our charter also will prohibit the ownership of more than 9.8% in value of the aggregate of our outstanding shares of stock or more than 9.8% (in value or number of shares, whichever is more restrictive) of any class or series of the outstanding shares of our stock by any one person, unless exempted by our board of directors, which may inhibit large investors from desiring to purchase your shares. Moreover, our share repurchase program includes numerous restrictions that would limit your ability to sell your shares to us. Our board of directors may reject any request for repurchase of shares, suspend (in whole or in part) the share repurchase program at any time and from time to time upon notice to our stockholders and amend or terminate our share repurchase program at any time upon 30 days’ notice to our stockholders. Therefore, it may be difficult for you to sell your shares promptly or at all. If you are able to sell your shares, you likely will have to sell them at a substantial discount to the price you paid for the shares. It also is likely that your shares would not be accepted as the primary collateral for a loan. You should purchase the shares only as a long-term investment because of the illiquid nature of the shares. See the sections entitled “Investor Suitability Standards,” “Description of Securities — Restrictions on Ownership and Transfer” and “Share Repurchase Program” elsewhere in this prospectus for a more complete discussion on the restrictions on your ability to transfer your shares.

If we, through Carter/Validus Advisors, LLC, are unable to find suitable investments, then we may not be able to achieve our investment objectives or pay distributions.

Our ability to achieve our investment objectives and to pay distributions is dependent upon the performance of Carter/Validus Advisors, LLC, our advisor, in selecting and acquiring our investments, selecting tenants for our properties and securing independent financing arrangements. We currently do not own any properties or have any operations, financing or investments. Except for investors who purchase shares in this offering after such time as this prospectus is supplemented to describe one or more identified investments, you will have no opportunity to evaluate the terms of transactions or other economic or financial data concerning our investments. You must rely entirely on the management ability of Carter/Validus Advisors, LLC and the oversight of our board of directors. We cannot be sure that Carter/Validus Advisors, LLC will be successful in obtaining suitable investments on financially attractive terms or that, if it makes investments on our behalf, our objectives will be achieved. If we, through Carter/Validus Advisors, LLC, are unable to find suitable investments, we will hold the proceeds of this offering in an interest-bearing account, invest the proceeds in short-term, investment-grade investments or, if our board of directors determines it is in the best interests of our stockholders, liquidate. In such an event, our ability to pay distributions to our stockholders would be adversely affected.

We may suffer from delays in locating suitable investments, which could adversely affect our ability to make distributions and the value of your investment.

We could suffer from delays in locating suitable investments, particularly as a result of our reliance on our advisor at times when management of our advisor is simultaneously seeking to locate suitable investments for other affiliated programs. Delays we encounter in the selection, acquisition and, if we develop properties, development of income-producing properties, likely would adversely affect our ability to make distributions and the value of your overall returns. In such event, we may pay all or a substantial portion of our distributions from the proceeds of this offering or from borrowings in anticipation of future cash flow, which may constitute a return of your capital. Distributions from the proceeds of this offering or from borrowings also could reduce the amount of capital we ultimately invest in properties. This, in turn, would reduce the value of your investment. In particular, where we acquire properties prior to the start of construction or during

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the early stages of construction, it typically will take at least several months to complete construction and rent available space. Therefore, you could suffer delays in the receipt of cash distributions attributable to those particular properties. If Carter/Validus Advisors, LLC is unable to obtain suitable investments, we will hold the proceeds of this offering in an interest-bearing account or invest the proceeds in short-term, investment-grade investments. If we cannot invest proceeds from this offering within a reasonable amount of time, or if our board of directors determines it is in the best interests of our stockholders, we will return the uninvested proceeds to investors.

Our dealer manager has no experience in public offerings, which may affect the amount of funds it raises in this offering.

Our dealer manager, SC Distributors, LLC, was formed in March 2009 and has not conducted any public offering such as this, nor does it have any established relationships with registered broker-dealers, registered investment advisors or bank trust departments, which increases the risk that we will not achieve the minimum offering. This lack of experience may affect the way in which our dealer manager conducts this offering. Until we achieve the minimum offering, your investment in us will be held in escrow and be invested in accordance with the terms of the escrow agreement. If we do not achieve the minimum offering, the return on your investment in us may be less than the return you would have achieved if you had invested your money in other investments.

Our properties are expected to be in located in the continental United States and will be affected by the current economic downturn, as well as economic cycles and risks inherent to that area.

We expect to use substantially all the net proceeds of this offering to acquire quality income-producing commercial real estate located in the continental United States. Real estate markets are subject to economic downturns, as they have been in the past, and we cannot predict how economic conditions will impact this market in both the short and long term. Declines in the economy or a decline in the real estate market in the continental United States could hurt our financial performance and the value of our properties. The factors affecting economic conditions in the continental United States include:

financial performance and productivity of the publishing, advertising, financial, technology, retail, insurance and real estate industries;
business layoffs or downsizing;
industry slowdowns;
relocations of businesses;
changing demographics;
increased telecommuting and use of alternative work places;
infrastructure quality;
any oversupply of, or reduced demand for, real estate;
concessions or reduced rental rates under new leases for properties where tenants defaulted; and
increased insurance premiums.

As of the date of this prospectus, the capital and credit markets have been experiencing extreme volatility and disruption for approximately two years. A protracted economic downturn could have a negative impact on our portfolio. If real property or other real estate-related asset values continue to decline after we acquire them, we may have a difficult time making new acquisitions or generating returns on your investment. If the current debt market environment persists, we may modify our investment strategy in order to optimize our portfolio performance. Our options would include limiting or eliminating the use of debt and focusing on those investments that do not require the use of leverage to meet our portfolio goals.

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It is impossible for us to assess with certainty the future effects of the current adverse trends in the economic and investment climates of the United States, or the local real estate markets in this area. If the current economic downturn persists or if there is any further local, national or global worsening of the current economic downturn, our businesses and future profitability will be adversely affected.

Our sponsor has only invested $200,000 in us through the purchase of 20,000 shares of our common stock at $10.00 per share. Therefore, if we are successful in raising enough proceeds to be able to reimburse our sponsor for our significant organization and offering expenses, our sponsor will have little exposure to loss in value of our shares. Without this exposure, our investors may be at a greater risk of loss because our sponsor may have less to lose from a decrease in the value of our shares as does a sponsor that makes more significant equity investments in its company.

Distributions paid from sources other than our cash flow from operations will result in us having fewer funds available for the acquisition of properties and other real estate-related investments, which may adversely affect our ability to fund future distributions with cash flow from operations and may adversely affect your overall return.

As mentioned above, we may pay distributions from sources other than from our cash flow from operations. Until we acquire properties or other real estate-related investments, we will not generate sufficient cash flow from operations to pay distributions. We do not intend to fund distributions from offering proceeds; however, if we have not generated sufficient cash flow from our operations and other sources, such as from borrowings, sale of additional securities, advances from our advisor, our advisor’s deferral, suspension and/or waiver of its fees and expense reimbursements, to fund distributions, we may use the offering proceeds. Funding distributions from borrowings could restrict the amount we can borrow for investments, which may affect our profitability. Funding distributions with the sale of assets may affect our ability to generate cash flows. Funding distributions from the sale of additional securities could dilute your interest in us if we sell shares of our common stock to third party investors. Furthermore, we have not established any limit on the amount of proceeds from this offering that may be used to fund distributions, except that, in accordance with our organizational documents and Maryland law, we may not make distributions that would: (1) cause us to be unable to pay our debts as they become due in the usual course of business; (2) cause our total assets to be less than the sum of our total liabilities plus senior liquidation preferences, if any; or (3) jeopardize our ability to qualify as a REIT. If we fund distributions from the proceeds of this offering, we will have less funds available for acquiring properties or real estate-related investments. Our inability to acquire properties or real estate-related investments may have a negative effect on our ability to generate sufficient cash flow from operations to pay distributions. As a result, the return you realize on your investment may be reduced and investors who invest in us before we commence significant real estate operations or generate significant cash flow may realize a lower rate of return than later investors. Payment of distributions from any of the mentioned sources could restrict our ability to generate sufficient cash flow from operations, affect our profitability and/or affect the distributions payable to you upon a Liquidity Event, any or all of which may have an adverse effect on your investment.

If we are unable to raise substantial funds, we will be limited in the number and type of investments we may make and the value of your investment in us will fluctuate with the performance of the specific properties we acquire.

This offering is being made on a best efforts basis, whereby the brokers participating in the offering are only required to use their reasonable best efforts to sell our shares and have no firm commitment or obligation to purchase any of the shares. As a result, the amount of proceeds we raise in this offering may be substantially less than the amount we would need to achieve a broadly diversified property portfolio. We may be unable to raise even the minimum offering amount. If we are unable to raise substantially more than the minimum offering amount, we will make fewer investments resulting in less diversification in terms of the number of investments owned, the geographic regions in which our investments are located and the types of investments that we make. In such event, the likelihood of our profitability being affected by the performance of any one of our investments will increase. For example, if we only sell 200,000 shares, we may be able to make only one investment. If we only are able to make one investment, we would not achieve any asset diversification. Additionally, subject to our investment policies, we are not limited in the number or size of

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our investments or the percentage of net proceeds we may dedicate to a single investment. Your investment in our shares will be subject to greater risk to the extent that we lack a diversified portfolio of investments. In addition, our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, and our financial condition and ability to pay distributions could be adversely affected.

If our advisor loses or is unable to obtain key personnel, our ability to implement our investment strategies could be delayed or hindered, which could adversely affect our ability to make distributions and the value of your investment.

Our success depends to a significant degree upon the contributions of certain of our executive officers and other key personnel of our advisor, including Messrs. Carter, Garcia, Peterson and Winslow, each of whom would be difficult to replace. Our advisor does not have an employment agreement with any of these key personnel and we cannot guarantee that all, or any particular one, will remain affiliated with us and/or our advisor. If any of our key personnel were to cease their affiliation with our advisor, our operating results could suffer. Further, we do not intend to separately maintain key person life insurance on Messrs. Carter, Garcia, Peterson and Winslow or any other person. We believe that our future success depends, in large part, upon our advisor’s ability to hire and retain highly skilled managerial, operational and marketing personnel. Competition for such personnel is intense, and we cannot assure you that our advisor will be successful in attracting and retaining such skilled personnel. If our advisor loses or is unable to obtain the services of key personnel, our ability to implement our investment strategies could be delayed or hindered, and the value of your investment may decline.

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

Maryland law provides that a director has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the corporation’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. In addition, subject to certain limitations set forth therein or under Maryland law, our charter will provide that no director or officer will be liable to us or our stockholders for monetary damages and requires us to indemnify our directors, officers and advisor and our advisor’s affiliates and permits us to indemnify our employees and agents. However, as required by the NASAA REIT Guidelines, our charter will provide that we may not indemnify a director, our advisor or an affiliate of our advisor for any loss or liability suffered by any of them, or hold harmless such indemnitee for any loss or liability suffered by us, unless (1) the indemnitee determined, in good faith, that the course of conduct that caused the loss or liability was in our best interests, (2) the indemnitee was acting on behalf of or performing services for us, (3) the liability or loss was not the result of (A) negligence or misconduct, in the case of a director (other than an independent director), the advisor or an affiliate of the advisor, or (B) gross negligence or willful misconduct, in the case of an independent director, and (4) the indemnification or agreement to hold harmless is recoverable only out of our net assets and not from our stockholders. Although our charter will not allow us to indemnify or hold harmless an indemnitee to a greater extent than permitted under Maryland law and the NASAA REIT Guidelines, we and our stockholders may have more limited rights against our directors, officers, employees and agents, and our advisor and its affiliates, than might otherwise exist under common law, which could reduce your and our recovery against them. In addition, we may be obligated to fund the defense costs incurred by our directors, officers, employees and agents or our advisor and its affiliates in some cases, which would decrease the cash otherwise available for distribution to you. See the section captioned “Management — Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents” elsewhere herein.

Risks Related to Conflicts of Interest

We will be subject to conflicts of interest arising out of our relationships with our advisor and its affiliates, including the material conflicts discussed below. The “Conflicts of Interest” section of this prospectus provides a more detailed discussion of the conflicts of interest between us and our advisor and its affiliates, and our policies to reduce or eliminate certain potential conflicts.

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Carter/Validus Advisors, LLC will face conflicts of interest relating to the purchase and leasing of properties, and such conflicts may not be resolved in our favor, which could adversely affect our investment opportunities.

Affiliates of our advisor have sponsored and may sponsor one or more other real estate investment programs in the future. We may buy properties at the same time as one or more of the other programs sponsored by affiliates of our advisor and managed by officers and key personnel of our advisor. There is a risk that Carter/Validus Advisors, LLC will choose a property that provides lower returns to us than a property purchased by another program sponsored by affiliates of our advisor. We cannot be sure that officers and key personnel acting on behalf of Carter/Validus Advisors, LLC and on behalf of managers of other programs sponsored by affiliates of our advisor will act in our best interests when deciding whether to allocate any particular property to us. In addition, we may acquire properties in geographic areas where other programs sponsored by affiliates of our advisor own properties. Also, we may acquire properties from, or sell properties to, other programs sponsored by affiliates of our advisor. If one of the other programs sponsored by affiliates of our advisor attracts a tenant that we are competing for, we could suffer a loss of revenue due to delays in locating another suitable tenant. You will not have the opportunity to evaluate the manner in which these conflicts of interest are resolved before or after making your investment. Similar conflicts of interest may apply if our advisor determines to make or purchase mortgage, bridge or mezzanine loans or participations therein on our behalf, since other programs sponsored by affiliates of our advisor may be competing with us for these investments.

Carter/Validus Advisors, LLC faces conflicts of interest relating to joint ventures, which could result in a disproportionate benefit to the other venture partners at our expense.

We may enter into joint ventures with other programs sponsored by affiliates of our advisor for the acquisition, development or improvement of properties. Carter/Validus Advisors, LLC may have conflicts of interest in determining which program sponsored by affiliates of our advisor should enter into any particular joint venture agreement. The co-venturer may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. In addition, Carter/Validus Advisors, LLC may face a conflict in structuring the terms of the relationship between our interests and the interest of the affiliated co-venturer managing the joint venture. Since Carter/Validus Advisors, LLC and its affiliates will control both the affiliated co-venturer and, to a certain extent, us, agreements and transactions between the co-venturers with respect to any such joint venture will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers, which may result in the co-venturer receiving benefits greater than the benefits that we receive. In addition, we may assume liabilities related to the joint venture that exceed the percentage of our investment in the joint venture.

Carter/Validus Advisors, LLC and its officers and employees and certain of our key personnel face competing demands relating to their time, and this may cause our operating results to suffer.

Carter/Validus Advisors, LLC and its officers and employees and certain of our key personnel and their respective affiliates are key personnel, general partners and sponsors of other real estate programs having investment objectives and legal and financial obligations similar to ours and may have other business interests as well. Because these persons have competing demands on their time and resources, they may have conflicts of interest in allocating their time between our business and these other activities. During times of intense activity in other programs and ventures, they may devote less time and fewer resources to our business than is necessary or appropriate. If this occurs, the returns on our investments may suffer.

Our officers and directors face conflicts of interest related to the positions they hold with affiliated entities, which could hinder our ability to successfully implement our business strategy and generate returns to you.

Certain of our executive officers and directors, including John Carter, who also serves as the chairman of our board of directors, Mario Garcia, Jr., Robert Winslow, Sheri Rose and Lisa Drummond, also are officers and/or directors of our advisor, our property manager, our dealer manager and other affiliated entities. As a result, these individuals owe fiduciary duties to these other entities and their stockholders and limited partners, which fiduciary duties may conflict with the duties that they owe to us and our stockholders. Their loyalties to these other entities could result in actions or inactions that are detrimental to our business, which could harm

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the implementation of our business strategy and our investment and leasing opportunities. Conflicts with our business and interests are most likely to arise from involvement in activities related to (a) allocation of new investments and management time and services between us and the other entities, (b) our purchase of properties from, or sale of properties, to affiliated entities, (c) the timing and terms of the investment in or sale of an asset, (d) development of our properties by affiliates, (e) investments with affiliates of our advisor, (f) compensation to our advisor, and (g) our relationship with our dealer manager and property manager. If we do not successfully implement our business strategy, we may be unable to generate cash needed to make distributions to you and to maintain or increase the value of our assets.

Carter/Validus Advisors, LLC faces conflicts of interest relating to the performance fee structure under our advisory agreement, which could result in actions that are not necessarily in the long-term best interests of our stockholders.

Under our advisory agreement, Carter/Validus Advisors, LLC or its affiliates will be entitled to fees that are structured in a manner intended to provide incentives to our advisor to perform in our best interests and in the best interests of our stockholders. However, because our advisor does not maintain a significant equity interest in us and is entitled to receive substantial minimum compensation regardless of performance, our advisor’s interests are not wholly aligned with those of our stockholders. In that regard, our advisor could be motivated to recommend riskier or more speculative investments in order for us to generate the specified levels of performance or sales proceeds that would entitle our advisor to fees. In addition, our advisor’s or its affiliates’ entitlement to fees upon the sale of our assets and to participate in sale proceeds could result in our advisor recommending sales of our investments at the earliest possible time at which sales of investments would produce the level of return that would entitle the advisor to compensation relating to such sales, even if continued ownership of those investments might be in our best long-term interest. Our advisory agreement will require us to pay a performance-based termination fee to our advisor or its affiliates if we terminate the advisory agreement prior to the listing of our shares for trading on an exchange or, absent such listing, in respect of its participation in net sales proceeds. To avoid paying this fee, our independent directors may decide against terminating the advisory agreement prior to our listing of our shares or disposition of our investments even if, but for the termination fee, termination of the advisory agreement would be in our best interest. In addition, the requirement to pay the fee to the advisor or its affiliates at termination could cause us to make different investment or disposition decisions than we would otherwise make, in order to satisfy our obligation to pay the fee to the terminated advisor. Moreover, our advisor will have the right to terminate the advisory agreement upon a change of control of our company and thereby trigger the payment of the performance fee, which could have the effect of delaying, deferring or preventing the change of control. For a more detailed discussion of the fees payable to our advisor and its affiliates in respect of this offering, see the section entitled “Management Compensation” in this prospectus.

There is no separate counsel for us and our affiliates, which could result in conflicts of interest.

Morris, Manning & Martin, LLP acts as legal counsel to us and also represents our advisor and some of its affiliates. There is a possibility in the future that the interests of the various parties may become adverse and, under the Code of Professional Responsibility of the legal profession, Morris, Manning & Martin, LLP may be precluded from representing any one or all such parties. If any situation arises in which our interests appear to be in conflict with those of our advisor or its affiliates, additional counsel may be retained by one or more of the parties to assure that their interests are adequately protected. Moreover, should a conflict of interest not be readily apparent, Morris, Manning & Martin, LLP may inadvertently act in derogation of the interest of the parties, which could affect our ability to meet our investment objectives.

Risks Related to This Offering and Our Corporate Structure

The limit on the number of shares a person may own may discourage a takeover that could otherwise result in a premium price to our stockholders.

Our charter, with certain exceptions, will authorize our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. In this connection, among other things, unless exempted by our board of directors, no person may own more than 9.8% in value of the aggregate of our outstanding

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shares of stock or more than 9.8% (in value or number, whichever is more restrictive) of any class or series of the outstanding shares of our stock. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all our assets) that might provide a premium price for holders of our common stock. See the section entitled “Description of Securities — Restriction on Ownership and Transfer” in this prospectus.

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

Our charter permits our board of directors to issue up to 350,000,000 shares of stock. In addition, our board of directors, without any action by our stockholders, may amend our charter from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series of stock that we have authority to issue. Our board of directors may classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption of any such stock. Thus, our board of directors could authorize the issuance of preferred stock with terms and conditions that could have a priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all our assets) that might provide a premium price for holders of our common stock. See the section entitled “Description of Securities — Preferred Stock” in this prospectus.

Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired and may limit your ability to exit the investment.

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

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

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

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

80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and
two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares. The business combination statute permits various exemptions from its provisions, including business combinations that are exempted by the

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board of directors prior to the time that the interested stockholder becomes an interested stockholder. Our board of directors has exempted from the business combination statute any business combination involving Carter/Validus Advisors, LLC or any of its affiliates. Consequently, the five-year prohibition and the super-majority vote requirements will not apply to business combinations between us and Carter/Validus Advisors, LLC or any of its affiliates. As a result, Carter/Validus Advisors, LLC and any of its affiliates may be able to enter into business combinations with us that may not be in the best interest of our stockholders, without compliance with the super-majority vote requirements and the other provisions of the statute. The business combination statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. For a more detailed discussion of the Maryland laws governing us and the ownership of our shares of common stock, see the section of this prospectus captioned “Description of Securities — Business Combinations.”

Maryland law limits the ability of a third-party to buy a large stake in us and exercise voting power in electing directors.

The Maryland Control Share Acquisition Act provides that “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights except to the extent approved by stockholders by a vote of two-thirds of the votes entitled to be cast on the matter. Shares of stock owned by the acquirer, by officers or by employees who are directors of the corporation are excluded from shares entitled to vote on the matter. “Control shares” are voting shares of stock which, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer can exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer, directly or indirectly, to exercise or direct the exercise of voting power of shares of stock in electing directors within specified ranges of voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition of issued and outstanding control shares. The control share acquisition statute does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction, or (b) to acquisitions approved or exempted by the charter or bylaws of the corporation. Our bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions of our stock by any person. There can be no assurance that this provision will not be amended or eliminated at any time in the future. For a more detailed discussion on the Maryland laws governing control share acquisitions, see the section of this prospectus captioned “Description of Securities — Control Share Acquisitions.”

Your investment return may be reduced if we are required to register as an investment company under the Investment Company Act.

The company is not registered, and does not intend to register itself or any of its subsidiaries, as an investment company under the Investment Company Act of 1940, or the Investment Company Act. If we become obligated to register the company or any of its subsidiaries as an investment company, the registered entity would have to comply with a variety of substantive requirements under the Investment Company Act imposing, among other things:

limitations on capital structure;
restrictions on specified investments;
prohibitions on transactions with affiliates; and
compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly change our operations.

The company intends to conduct its operations directly and through wholly or majority-owned subsidiaries, so that the company and each of its subsidiaries do not fall within the definition of an “investment company” under the Investment Company Act. Under Section 3(a)(1)(A) of the Investment Company Act, a company is deemed to be an “investment company” if it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities. Under Section 3(a)(1)(C) of the Investment Company Act, a company is deemed to be an “investment company” if it is engaged, or proposes to engage, in the business of investing, reinvesting,

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owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of its total assets on an unconsolidated basis, which we refer to as the “40% test.”

The company intends to conduct its operations so that the company and most, if not all, of its wholly and majority-owned subsidiaries will comply with the 40% test. We will continuously monitor our holdings on an ongoing basis to determine the compliance of the company and each wholly and majority-owned subsidiary with this test. We expect that most, if not all, of the company’s wholly owned and majority-owned subsidiaries will not be relying on exemptions under either Section 3(c)(1) or 3(c)(7) of the Investment Company Act. Consequently, interests in these subsidiaries (which are expected to constitute most, if not all, of our assets) generally will not constitute “investment securities.” Accordingly, we believe that the company and most, if not all, of its wholly and majority-owned subsidiaries will not be considered investment companies under Section 3(a)(1)(C) of the Investment Company Act.

Since we will be primarily engaged in the business of acquiring real estate, we believe that the company and most, if not all, of its wholly and majority-owned subsidiaries will not be considered investment companies under either Section 3(a)(1)(A) of the Investment Company Act. If the company or any of its wholly or majority-owned subsidiaries would ever inadvertently fall within one of the definitions of “investment company,” we intend to rely on the exception provided by Section 3(c)(5)(C) of the Investment Company Act.

Under Section 3(c)(5)(C), the SEC staff generally requires the company to maintain at least 55% of its assets directly in qualifying assets and at least 80% of the entity’s assets in qualifying assets and in a broader category of real estate-related assets to qualify for this exception. Mortgage-related securities may or may not constitute such qualifying assets, depending on the characteristics of the mortgage-related securities, including the rights that we have with respect to the underlying loans. The company’s ownership of mortgage-related securities, therefore, is limited by provisions of the Investment Company Act and SEC staff interpretations. See the section entitled “Business and Policies — Investment Company Act of 1940” in this prospectus.

The method we use to classify our assets for purposes of the Investment Company Act will be based in large measure upon no-action positions taken by the SEC staff in the past. These no-action positions were issued in accordance with factual situations that may be substantially different from the factual situations we may face, and a number of these no-action positions were issued more than ten years ago. Accordingly, no assurance can be given that the SEC staff will concur with our classification of our assets. In addition, the SEC staff may, in the future, issue further guidance that may require us to re-classify our assets for purposes of qualifying for an exclusion from regulation under the Investment Company Act. If we are required to re-classify our assets, we may no longer be in compliance with the exclusion from the definition of an “investment company” provided by Section 3(c)(5)(C) of the Investment Company Act.

A change in the value of any of our assets could cause us or one or more of our wholly or majority-owned subsidiaries to fall within the definition of “investment company” and negatively affect our ability to maintain our exemption from regulation under the Investment Company Act. To avoid being required to register the company or any of its subsidiaries as an investment company under the Investment Company Act, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may have to acquire additional income- or loss-generating assets that we might not otherwise have acquired or may have to forgo opportunities to acquire interests in companies that we would otherwise want to acquire and would be important to our investment strategy.

If we were required to register the company as an investment company but failed to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of us and liquidate our business.

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You are bound by the majority vote on matters on which you are entitled to vote, and therefore, your vote on a particular matter may be superseded by the vote of others.

You may vote on certain matters at any annual or special meeting of stockholders, including the election of directors. However, you will be bound by the majority vote on matters requiring approval of a majority of the stockholders even if you do not vote with the majority on any such matter.

If you do not agree with the decisions of our board of directors, you only have limited control over changes in our policies and operations and may not be able to change such policies and operations.

Our board of directors determines our major policies, including our policies regarding investments, financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders except to the extent that such policies are set forth in our charter. Under the Maryland General Corporation Law and our charter, our stockholders have a right to vote only on the following:

the election or removal of directors;
any amendment of our charter (including a change in our investment objectives), except that our board of directors may amend our charter without stockholder approval to (a) increase or decrease the aggregate number of our shares or the number of shares of any class or series that we have the authority to issue, (b) effect certain reverse stock splits, and (c) change our name or the name or other designation or the par value of any class or series of our stock and the aggregate par value of our stock;
our liquidation or dissolution;
certain reorganizations of our company, as provided in our charter; and
certain mergers, consolidations or sales or other dispositions of all or substantially all our assets, as provided in our charter.

All other matters are subject to the discretion of our board of directors.

Our board of directors may change our investment policies without stockholder approval, which could alter the nature of your investments.

Our charter will require that our independent directors review our investment policies at least annually to determine that the policies we are following are in the best interest of the stockholders. These policies may change over time. The methods of implementing our investment policies also may vary, as new real estate development trends emerge and new investment techniques are developed. Except to the extent that policies and investment limitations are included in our charter, our investment policies, the methods for their implementation, and our other objectives, policies and procedures may be altered by our board of directors without the approval of our stockholders. As a result, the nature of your investment could change without your consent.

Our authorized but unissued shares of common and preferred stock may prevent a change in our control.

Our charter authorizes us to issue additional authorized but unissued shares of common or preferred stock. In addition, our board of directors may, without stockholder approval, amend our charter to increase the aggregate number of shares of our common stock or the number of shares of stock of any class or series that we have authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the preferences, rights and other terms of the classified or reclassified shares. As a result, our board of directors may establish a series of shares of common or preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for shares of our common stock or otherwise be in the best interest of our stockholders.

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Because of our holding company structure, we depend on our operating subsidiary and its subsidiaries for cash flow and we will be structurally subordinated in right of payment to the obligations of such operating subsidiary and its subsidiaries.

We are a holding company with no business operations of our own. Our only significant asset is and will be the general partnership interests of our operating partnership. We conduct, and intend to conduct, all of our business operations through our operating partnership. Accordingly, our only source of cash to pay our obligations is distributions from our operating partnership and its subsidiaries of their net earnings and cash flows. We cannot assure you that our operating partnership or its subsidiaries will be able to, or be permitted to, make distributions to us that will enable us to make distributions to our stockholders from cash flows from operations. Each of our operating partnership’s subsidiaries is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from such entities. In addition, because we are a holding company, your claims as stockholders will be structurally subordinated to all existing and future liabilities and obligations of our operating partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our operating partnership and its subsidiaries will be able to satisfy your claims as stockholders only after all of our and our operating partnership’s and its subsidiaries’ liabilities and obligations have been paid in full.

We will not calculate the net asset value per share for our shares until 18 months after completion of our last offering; therefore, you will not be able to determine the net asset value of your shares on an on-going basis during this offering and for a substantial period of time thereafter.

We do not intend to calculate the net asset value per share for our shares until 18 months after the completion of our last offering. Beginning 18 months after the completion of the last offering of our shares (excluding offerings under our distribution reinvestment plan), our board of directors will determine the value of our properties and our other assets based on such information as our board determines appropriate, which may or may not include independent valuations of our properties or of our enterprise as a whole. We will disclose this net asset value to stockholders in our filings with the SEC. Therefore, you will not be able to determine the net asset value of your shares on an on-going basis during this offering. See the section entitled “Investment by Tax-Exempt Entities and ERISA Considerations — Annual or More Frequent Valuation Requirement” in this prospectus.

You are limited in your ability to sell your shares pursuant to our share repurchase program and may have to hold your shares for an indefinite period of time.

Our board of directors may reject any request for repurchase of shares, suspend (in whole or in part) the share repurchase program at any time and from time to time upon notice to our stockholders and amend or terminate our share repurchase program at any time upon 30 days’ notice to our stockholders. In addition, the share repurchase program includes numerous restrictions that would limit your ability to sell your shares. Generally, you must have held your shares for at least one year in order to participate in our share repurchase program. Subject to funds being available, the purchase price for shares repurchased under our share repurchase program will be as set forth below until we establish an estimated value of our shares. We do not currently anticipate obtaining appraisals for our investments (other than investments in transactions with affiliates) and, accordingly, the estimated value of our investments should not be viewed as an accurate reflection of the fair market value of our investments nor will they represent the amount of net proceeds that would result from an immediate sale of our assets. We expect to begin establishing an estimated value of our shares based on the value of our real estate and real estate-related investments beginning 18 months after the close of this offering. We will retain persons independent of us and our advisor to prepare the estimated value of our shares. Prior to establishing the estimated value of our shares, the price per share that we will pay to repurchase shares of our common stock will be as follows: (a) for stockholders who have continuously held their shares of our common stock for at least one year, the price will be 92.5% of the amount paid for each such share, (b) for stockholders who have continuously held their shares of our common stock for at least two years, the price will be 95.0% of the amount paid for each such share, (c) for stockholders who have continuously held their shares of our common stock for at least three years, the price will be 97.5% of the amount paid for each such share, and (d) for stockholders who have held their shares of our common stock for at least four years, the price will be 100.0% of the amount paid for each such share (in each case, as

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adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to our common stock). These limits might prevent us from accommodating all repurchase requests made in any year. See the section entitled “Share Repurchase Program” in this prospectus for more information about the share repurchase program. These restrictions severely limit your ability to sell your shares should you require liquidity, and limit your ability to recover the value you invested or the fair market value of your shares. As a result, you should not rely on our share repurchase program to provide you with liquidity.

We established the offering price on an arbitrary basis; as a result, the actual value of your investment may be substantially less than what you pay.

Our board of directors has arbitrarily determined the selling price of the shares, and such price bears no relationship to our book or asset values, or to any other established criteria for valuing issued or outstanding shares. Because the offering price is not based upon any independent valuation, the offering price is not indicative of the proceeds that you would receive upon liquidation.

Because the dealer manager will be one of our affiliates, you will not have the benefit of an independent review of the prospectus or the company customarily performed in underwritten offerings.

The dealer manager, SC Distributors, LLC, will be one of our affiliates and will not make an independent review of the company or the offering. Accordingly, you will have to rely on your own broker-dealer to make an independent review of the terms of this offering. If your broker-dealer does not conduct such a review, you will not have the benefit of an independent review of the terms of this offering. Further, the due diligence investigation of us by the dealer manager cannot be considered to be an independent review and, therefore, may not be as meaningful as a review conducted by an unaffiliated broker-dealer or investment banker. In addition, we do not, and do not expect to, have research analysts reviewing our performance or our securities on an ongoing basis. Therefore, you will not have an independent review of our performance and the value of our common stock relative to publicly traded companies.

Your interest in us will be diluted if we issue additional shares.

Existing stockholders and potential investors in this offering do not have preemptive rights to any shares issued by us in the future. Our charter currently has authorized 350,000,000 shares of stock, of which 300,000,000 shares are designated as common stock and 50,000,000 are designated as preferred stock. Subject to any limitations set forth under Maryland law, our board of directors may increase or decrease the aggregate number of authorized shares of stock, increase or decrease the number of shares of any class or series of stock designated, or reclassify any unissued shares without the necessity of obtaining stockholder approval. All such shares may be issued in the discretion of our board of directors. Existing stockholders and investors purchasing shares in this offering likely will suffer dilution of their equity investment in us, if we: (a) sell shares in this offering or sell additional shares in the future, including those issued pursuant to our distribution reinvestment plan; (b) sell securities that are convertible into shares of our common stock; (c) issue shares of our common stock in a private offering of securities to institutional investors; (d) issue restricted share awards to our directors; (e) issue shares to our advisor or its successors or assigns, in payment of an outstanding fee obligation as set forth under our advisory agreement; or (f) issue shares of our common stock to sellers of properties acquired by us in connection with an exchange of limited partnership interests of Carter/Validus Operating Partnership, LP. In addition, the partnership agreement for Carter/Validus Operating Partnership, LP contains provisions that would allow, under certain circumstances, other entities, including other programs affiliated with our advisor and its affiliates, to merge into or cause the exchange or conversion of their interest for interests of Carter/Validus Operating Partnership, LP. Because the limited partnership interests of Carter/Validus Operating Partnership, LP may, in the discretion of our board of directors, be exchanged for shares of our common stock, any merger, exchange or conversion between Carter/Validus Operating Partnership, LP and another entity ultimately could result in the issuance of a substantial number of shares of our common stock, thereby diluting the percentage ownership interest of other stockholders. Because of these and other reasons described in this “Risk Factors” section, you should not expect to be able to own a significant percentage of our shares.

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If we internalize our management functions, the percentage of our outstanding common stock owned by our other stockholders could be reduced, and we could incur other significant costs associated with being self-administered.

In the future, our board of directors may consider internalizing the functions performed for us by our advisor. The method by which we could internalize these functions could take many forms, including without limitation, acquiring our advisor. There is no assurance that internalizing our management functions will be beneficial to us and our stockholders. An acquisition of our advisor’s assets could result in dilution of your interests as a stockholder and could reduce earnings per share and funds from operation per share. Additionally, we may not realize the perceived benefits, we may not be able to properly integrate a new staff of managers and employees or we may not be able to effectively replicate the services provided previously by our advisor, property manager or their affiliates. Internalization transactions involving the acquisition of advisors or property managers affiliated with entity sponsors have also, in some cases, been the subject of litigation. Even if these claims are without merit, we could be forced to spend significant amounts of money defending claims, which would reduce the amount of funds available for us to invest in properties or other investments and to pay distributions. All of these factors could have a material adverse effect on our results of operations, financial condition and ability to pay distributions. See the section of this prospectus titled “Management — The Advisor” for more information about the potential internalization of our management functions.

Payment of fees to Carter/Validus Advisors, LLC and its affiliates reduces cash available for investment and distribution.

Carter/Validus Advisors, LLC and its affiliates will perform services for us in connection with the offer and sale of the shares, the selection and acquisition of our investments, the management and leasing of our properties, the servicing of our mortgage, bridge or mezzanine loans, if any, and the administration of our other investments. Carter/Validus Advisors, LLC and its affiliates are paid substantial fees for these services, which reduces the amount of cash available for investment in properties or distribution to stockholders. Such fees and reimbursements include, but are not limited to: (i) an asset management fee equal to 0.75% of the cost of our assets; (ii) reimbursement of up to 1.25% of gross offering proceeds for organization and offering expenses; (iii) acquisition fees equal to 2.0% of the contract purchase price of each property or asset that we acquire (including our pro rata share of debt attributable to such property) and 2.0% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment), along with reimbursement of acquisition expenses; (iv) reimbursement for expenses actually incurred (including personnel costs) related to selecting, evaluating and acquiring assets on our behalf; (v) property management and leasing fees equal to: (A) with respect to single tenant properties, 3.0% of gross revenues from properties managed; and (B) with respect to multi-tenant properties, 4.0% of gross revenues from properties managed; (vi) a real estate commission paid on the sale of property, up to the lesser of 1.5% and one-half of the total brokerage commission paid if a third party broker is also involved; (vii) a subordinated participation in net sale proceeds equal to 15% of the remaining net sale proceeds after return of capital contributions plus payment to investors of an 8% annual cumulative, pre-tax, non-compounded return on the capital contributed by investors; and (viii) a subordinated termination fee, in each case subject to the conditions set forth in the advisory agreement. For a more detailed discussion of the fees payable to such entities in respect of this offering, see the section entitled “Management Compensation” in this prospectus.

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

There are many factors that can affect the availability and timing of cash distributions to stockholders. Distributions will be based principally on cash available from our operations. The amount of cash available for distributions is affected by many factors, such as our ability to buy properties as offering proceeds become available, rental income from such properties and our operating expense levels, as well as many other variables. Actual cash available for distributions may vary substantially from estimates. With no prior operating history, we cannot assure you that we will be able to pay or maintain our current level of distributions or that distributions will increase over time. We cannot give any assurance that rents from the properties will increase, that the securities we buy will increase in value or provide constant or increased distributions over time, or that future acquisitions of real properties, mortgage, bridge or mezzanine loans or

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any investments in securities will increase our cash available for distributions to stockholders. Our actual results may differ significantly from the assumptions used by our board of directors in establishing the distribution rate to stockholders. We may not have sufficient cash from operations to make a distribution required to qualify for or maintain our REIT status. We may increase borrowing or use proceeds from this offering to make distributions, each of which could be deemed to be a return of your capital. We may make distributions from the proceeds of this offering or from borrowings in anticipation of future cash flow. Any such distributions will constitute a return of capital and may reduce the amount of capital we ultimately invest in properties and negatively impact the value of your investment. For a description of the factors that can affect the availability and timing of cash distributions to stockholders, see the section of this prospectus captioned “Description of Securities — Distribution Policy and Distributions.”

General Risks Related to Investments in Real Estate

Our operating results will be affected by economic and regulatory changes that have an adverse impact on the real estate market in general, and we cannot assure you that we will be profitable or that we will realize growth in the value of our real estate properties.

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

changes in general economic or local conditions;
changes in supply of or demand for similar or competing properties in an area;
changes in interest rates and availability of permanent mortgage funds that may render the sale of a property difficult or unattractive;
changes in tax, real estate, environmental and zoning laws; and
periods of high interest rates and tight money supply.

These and other reasons may prevent us from being profitable or from realizing growth or maintaining the value of our real estate properties.

If a tenant declares bankruptcy, we may be unable to collect balances due under relevant leases.

Any of our tenants, or any guarantor of a tenant’s lease obligations, could be subject to a bankruptcy proceeding pursuant to Title 11 of the bankruptcy laws of the United States. Such a bankruptcy filing would bar all efforts by us to collect pre-bankruptcy debts from these entities or their properties, unless we receive an enabling order from the bankruptcy court. Post-bankruptcy debts would be paid currently. If a lease is assumed, all pre-bankruptcy balances owing under it must be paid in full. If a lease is rejected by a tenant in bankruptcy, we would have a general unsecured claim for damages. If a lease is rejected, it is unlikely we would receive any payments from the tenant because our claim is capped at the rent reserved under the lease, without acceleration, for the greater of one year or 15% of the remaining term of the lease, but not greater than three years, plus rent already due but unpaid. This claim could be paid only if funds were available, and then only in the same percentage as that realized on other unsecured claims.

A tenant or lease guarantor bankruptcy could delay efforts to collect past due balances under the relevant leases, and could ultimately preclude full collection of these sums. Such an event could cause a decrease or cessation of rental payments that would mean a reduction in our cash flow and the amount available for distributions to you. In the event of a bankruptcy, we cannot assure you that the tenant or its trustee will assume our lease. If a given lease, or guaranty of a lease, is not assumed, our cash flow and the amounts available for distributions to you may be adversely affected.

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

We may enter into sale-leaseback transactions, whereby we would purchase a property and then lease the same property back to the person from whom we purchased it. In the event of the bankruptcy of a tenant, a transaction structured as a sale-leaseback may be re-characterized as either a financing or a joint venture, either of which outcomes could adversely affect our business. If the sale-leaseback were re-characterized as a financing, we might not be considered the owner of the property, and as a result would have the status of a creditor in relation to the tenant. In that event, we would no longer have the right to sell or encumber our ownership interest in the property. Instead, we would have a claim against the tenant for the amounts owed under the lease, with the claim arguably secured by the property. The tenant/debtor might have the ability to propose a plan restructuring the term, interest rate and amortization schedule of its outstanding balance. If confirmed by the bankruptcy court, we could be bound by the new terms, and prevented from foreclosing our lien on the property. If the sale-leaseback were re-characterized as a joint venture, our lessee and we could be treated as co-venturers with regard to the property. As a result, we could be held liable, under some circumstances, for debts incurred by the lessee relating to the property. Either of these outcomes could adversely affect our cash flow and the amount available for distributions to you.

Properties that have vacancies for a significant period of time could be difficult to sell, which could diminish the return on your investment.

A property may incur vacancies either by the continued default of tenants under their leases or the expiration of tenant leases. If vacancies continue for a long period of time, we may suffer reduced revenues, resulting in less cash to be distributed to stockholders. In addition, because properties’ market values depend principally upon the value of the properties’ leases, the resale value of properties with prolonged vacancies could suffer, which could further reduce your return.

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

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

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

When tenants do not renew their leases or otherwise vacate their space, it is usual that, in order to attract replacement tenants, we will be required to expend substantial funds for tenant improvements and tenant refurbishments to the vacated space. In addition, although we expect that our leases with tenants will require tenants to pay routine property maintenance costs, we will likely be responsible for any major structural repairs, such as repairs to the foundation, exterior walls and rooftops. We will use substantially all of this offering’s gross proceeds to buy real estate and pay various fees and expenses. Accordingly, if we need additional capital in the future to improve or maintain our properties or for any other reason, we will have to obtain financing from other sources, such as cash flow from operations, borrowings, property sales or future equity offerings. These sources of funding may not be available on attractive terms or at all. If we cannot procure additional funding for capital improvements, our investments may generate lower cash flows or decline in value, or both.

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Our inability to sell a property when we desire to do so could adversely impact our ability to pay cash distributions to you.

The real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond our control. We cannot predict whether we will be able to sell any property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of a property.

We may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot assure you that we will have funds available to correct such defects or to make such improvements. Moreover, in acquiring a property, we may agree to restrictions that prohibit the sale of that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property. These provisions would restrict our ability to sell a property.

We may not be able to sell our properties at a price equal to, or greater than, the price for which we purchased such property, which may lead to a decrease in the value of our assets.

Many of our leases will not contain rental increases over time. Therefore, the value of the property to a potential purchaser may not increase over time, which may restrict our ability to sell a property, or if we are able to sell such property, may lead to a sale price less than the price that we paid to purchase the property.

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

Lock-out provisions could materially restrict us from selling or otherwise disposing of or refinancing properties. These provisions would affect our ability to turn our investments into cash and thus affect cash available for distributions to you. Lock out provisions may prohibit us from reducing the outstanding indebtedness with respect to any properties, refinancing such indebtedness on a non-recourse basis at maturity, or increasing the amount of indebtedness with respect to such properties. Lock-out provisions could impair our ability to take other actions during the lock-out period that could be in the best interests of our stockholders and, therefore, may have an adverse impact on the value of the shares, relative to the value that would result if the lock-out provisions did not exist. In particular, lock-out provisions could preclude us from participating in major transactions that could result in a disposition of our assets or a change in control even though that disposition or change in control might be in the best interests of our stockholders.

Rising expenses could reduce cash flow and funds available for future acquisitions.

Any properties that we buy in the future will be subject to operating risks common to real estate in general, any or all of which may negatively affect us. If any property is not fully occupied or if rents are being paid in an amount that is insufficient to cover operating expenses, we could be required to expend funds with respect to that property for operating expenses. The properties will be subject to increases in tax rates, utility costs, operating expenses, insurance costs, repairs and maintenance and administrative expenses. While we expect that many of our properties will be leased on a triple-net-lease basis or will require the tenants to pay all or a portion of such expenses, renewals of leases or future leases may not be negotiated on that basis, in which event we may have to pay those costs. If we are unable to lease properties on a triple-net-lease basis or on a basis requiring the tenants to pay all or some of such expenses, or if tenants fail to pay required tax, utility and other impositions, we could be required to pay those costs, which could adversely affect funds available for future acquisitions or cash available for distributions.

If we suffer losses that are not covered by insurance or that are in excess of insurance coverage, we could lose invested capital and anticipated profits.

We will carry comprehensive general liability coverage and umbrella liability coverage on all our properties with limits of liability which we deem adequate to insure against liability claims and provide for the costs of defense. Similarly, we are insured against the risk of direct physical damage in amounts we estimate to be adequate to reimburse us on a replacement cost basis for costs incurred to repair or rebuild each property, including loss of rental income during the rehabilitation period. Material losses may occur in

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excess of insurance proceeds with respect to any property, as insurance may not be sufficient to fund the losses. However, there are types of losses, generally of a catastrophic nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, which are either uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Insurance risks associated with potential terrorism acts could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders in some cases have begun to insist that commercial property owners purchase specific coverage against terrorism as a condition for providing mortgage loans. It is uncertain whether such insurance policies will be available, or available at reasonable cost, which could inhibit our ability to finance or refinance our potential properties. In these instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate, or any, coverage for such losses. The Terrorism Risk Insurance Act of 2002 is designed for a sharing of terrorism losses between insurance companies and the federal government, and extends the federal terrorism insurance backstop through 2014. We cannot be certain how this act will impact us or what additional cost to us, if any, could result. If such an event damaged or destroyed one or more of our properties, we could lose both our invested capital and anticipated profits from such property.

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

Some local real property tax assessors may seek to reassess some of our properties as a result of our acquisition of the property. From time to time our property taxes may increase as property values or assessment rates change or for other reasons deemed relevant by the assessors. An increase in the assessed valuation of a property for real estate tax purposes will result in an increase in the related real estate taxes on that property. Although some tenant leases may permit us to pass through such tax increases to the tenants for payment, there is no assurance that renewal leases or future leases will be negotiated on the same basis. Increases not passed through to tenants will adversely affect our income, cash available for distributions, and the amount of distributions to you.

CC&Rs may restrict our ability to operate a property.

Some of our properties may be contiguous to other parcels of real property, comprising part of the same commercial center. In connection with such properties, there are significant covenants, conditions and restrictions, known as “CC&Rs,” restricting the operation of such properties and any improvements on such properties, and related to granting easements on such properties. Moreover, the operation and management of the contiguous properties may impact such properties. Compliance with CC&Rs may adversely affect our operating costs and reduce the amount of funds that we have available to pay distributions.

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

While we do not currently intend to do so, we may use proceeds from this offering to acquire and develop properties upon which we will construct improvements. We will be subject to uncertainties associated with re-zoning for development, environmental concerns of governmental entities and/or community groups, and our builder’s ability to build in conformity with plans, specifications, budgeted costs, and timetables. If a builder fails to perform, we may resort to legal action to rescind the purchase or the construction contract or to compel performance. A builder’s performance also may be affected or delayed by conditions beyond the builder’s control. Delays in completion of construction could also give tenants the right to terminate preconstruction leases. We may incur additional risks when we make periodic progress payments or other advances to builders before they complete construction. These and other such factors can result in increased costs of a project or loss of our investment. In addition, we will be subject to normal lease-up risks relating to newly constructed projects. We also must rely on rental income and expense projections and estimates of the fair market value of property upon completion of construction when agreeing upon a price at the time we acquire the property. If our projections are inaccurate, we may pay too much for a property, and our return on our investment could suffer.

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While we do not currently intend to do so, we may invest in unimproved real property, subject to the limitations on investments in unimproved real property contained in our charter. For purposes of this paragraph, “unimproved real property” is real property which has not been acquired for the purpose of producing rental or other operating income, has no development or construction in process and on which no construction or development is planned in good faith to commence within one year. Returns from development of unimproved properties are also subject to risks associated with re-zoning the land for development and environmental concerns of governmental entities and/or community groups. Although we intend to limit any investment in unimproved property to property we intend to develop, your investment nevertheless is subject to the risks associated with investments in unimproved real property.

Competition with third parties in acquiring properties and other investments may reduce our profitability and the return on your investment.

We compete with many other entities engaged in real estate investment activities, including individuals, corporations, bank and insurance company investment accounts, other REITs, real estate limited partnerships, and other entities engaged in real estate investment activities, many of which have greater resources than we do. Larger REITs may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable investments may increase. Any such increase would result in increased demand for these assets and therefore increased prices paid for them. If we pay higher prices for properties and other investments, our profitability will be reduced and you may experience a lower return on your investment.

Our properties face competition that may affect tenants’ willingness to pay the amount of rent requested by us and the amount of rent paid to us may affect the cash available for distributions and the amount of distributions.

There will be numerous other properties within the market area of each of our properties that will compete with us for tenants. The number of competitive properties could have a material effect on our ability to rent space at our properties and the amount of rents charged. We could be adversely affected if additional competitive properties are built in locations competitive with our properties, causing increased competition for customer traffic and creditworthy tenants. This could result in decreased cash flow from tenants and may require us to make capital improvements to properties that we would not have otherwise made, thus affecting cash available for distributions and the amount available for distributions to you.

Delays in acquisitions of properties may have an adverse effect on your investment.

There may be a substantial period of time before the proceeds of this offering are invested. Delays we encounter in the selection, acquisition and/or development of properties could adversely affect your returns. Where properties are acquired prior to the start of construction or during the early stages of construction, it will typically take several months to complete construction and rent available space. Therefore, you could suffer delays in the payment of cash distributions attributable to those particular properties.

Costs of complying with governmental laws and regulations, including those relating to environmental matters, may adversely affect our income and the cash available for any distributions.

All real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, and the remediation of contamination associated with disposals. Environmental laws and regulations may impose joint and several liability on tenants, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. This liability could be substantial. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such property as collateral for future borrowings.

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

State and federal laws in this area are constantly evolving, and we intend to monitor these laws and take commercially reasonable steps to protect ourselves from the impact of these laws, including obtaining environmental assessments of most properties that we acquire; however, we will not obtain an independent third-party environmental assessment for every property we acquire. In addition, any such assessment that we do obtain may not reveal all environmental liabilities or that a prior owner of a property did not create a material environmental condition not known to us. The cost of defending against claims of liability, of compliance with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims would materially adversely affect our business, assets or results of operations and, consequently, amounts available for distribution to you. See the section entitled “Investment Objectives, Strategy and Policies — Acquisition and Investment Policies — Investing in Real Property” in this prospectus.

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

If we decide to sell any of our properties, we intend to use our best efforts to sell them for cash. However, in some instances we may sell our properties by providing financing to purchasers. When we provide financing to purchasers, we will bear the risk that the purchaser may default, which could negatively impact our cash distributions to stockholders. Even in the absence of a purchaser default, the distribution of the proceeds of sales to our stockholders, or their reinvestment in other assets, will be delayed until the promissory notes or other property we may accept upon the sale are actually paid, sold, refinanced or otherwise disposed of. In some cases, we may receive initial down payments in cash and other property in the year of sale in an amount less than the selling price, and subsequent payments will be spread over a number of years. If any purchaser defaults under a financing arrangement with us, it could negatively impact our ability to pay cash distributions to our stockholders.

Our recovery of an investment in a mortgage, bridge or mezzanine loan that has defaulted may be limited.

There is no guarantee that the mortgage, loan or deed of trust securing an investment will, following a default, permit us to recover the original investment and interest that would have been received absent a default. The security provided by a mortgage, deed of trust or loan is directly related to the difference between the amount owed and the appraised market value of the property. Although we intend to rely on a current real estate appraisal when we make the investment, the value of the property is affected by factors outside our control, including general fluctuations in the real estate market, rezoning, neighborhood changes, highway relocations and failure by the borrower to maintain the property. In addition, we may incur the costs of litigation in our efforts to enforce our rights under defaulted loans.

Our costs associated with complying with the Americans with Disabilities Act may affect cash available for distributions.

Our properties will be subject to the Americans with Disabilities Act of 1990, or the Disabilities Act. Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services, including restaurants and retail stores, be made accessible and available to people with disabilities. The Disabilities Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties, or, in some cases, an award of damages. We will

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attempt to acquire properties that comply with the Disabilities Act or place the burden on the seller or other third party, such as a tenant, to ensure compliance with the Disabilities Act. However, we cannot assure you that we will be able to acquire properties or allocate responsibilities in this manner. If we cannot, our funds used for Disabilities Act compliance may affect cash available for distributions and the amount of distributions to you.

Economic conditions may adversely affect our income and we could be subject to risks associated with acquiring discounted real estate assets.

U.S. and international markets are currently experiencing increased levels of volatility due to a combination of many factors, including decreasing values of home prices, limited access to credit markets, higher fuel prices, less consumer spending and fears of a national and global recession. The effects of the current market dislocation may persist as financial institutions continue to take the necessary steps to restructure their business and capital structures. As a result, this economic downturn has reduced demand for space and removed support for rents and property values. Since we cannot predict when the real estate markets will recover, the value of our properties may decline if current market conditions persist or worsen.

In addition, we will be subject to the risks generally incident to the ownership of discounted real estate assets. Such assets may be purchased at a discount from historical cost due to, among other things, substantial deferred maintenance, abandonment, undesirable locations or markets, or poorly structured financing of the real estate or debt instruments underlying the assets, which has since lowered their value. Further, the continuing instability in the financial markets has limited the availability of lines of credit and the degree to which people and entities have access to cash to pay rents or debt service on the underlying assets. Such illiquidity has the effect of increasing vacancies, increasing bankruptcies and weakening interest rates commercial entities can charge consumers, which can all decrease the value of already discounted real estate assets. Should conditions worsen, the continued inability of the underlying real estate assets to produce income may weaken our return on our investments, which, in turn, may weaken your return on investment.

Further, irrespective of the instability the financial markets may have on the return produced by discounted real estate assets, the evolving efforts to correct the instability make the valuation of such assets highly unpredictable. Though we intend to purchase real estate assets at a discount from historical cost, the fluctuation in market conditions makes judging the future performance of such assets difficult. There is a risk that we may not purchase real estate assets at absolute discounted rates and that such assets may continue to decline in value.

Risks Associated with Investments in the Medical Property Sector

Our real estate investments may be concentrated in medical facilities, making us more vulnerable economically than if our investments were diversified.

As a REIT, we will invest primarily in real estate. Within the real estate industry, we may focus on the acquisition and ownership of medical facilities. We are subject to risks inherent in concentrating investments in real estate. These risks resulting from a lack of diversification become even greater as a result of our business strategy to invest to a substantial degree in medical facilities. A downturn in the commercial real estate industry generally could significantly adversely affect the value of our properties. A downturn in the healthcare industry could negatively affect our lessees’ ability to make lease payments to us and our ability to make distributions to our stockholders. These adverse effects could be more pronounced than if we diversified our investments outside of real estate or if our portfolio did not include a concentration in medical facilities.

Certain of our properties may not have efficient alternative uses, so the loss of a tenant may cause us not to be able to find a replacement or cause us to spend considerable capital to adapt the property to an alternative use.

Some of the properties we will seek to acquire are specialized medical facilities. If we or our tenants terminate the leases for these properties or our tenants lose their regulatory authority to operate such properties, we may not be able to locate suitable replacement tenants to lease the properties for their specialized uses. Alternatively, we may be required to spend substantial amounts to adapt the properties to

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other uses. Any loss of revenues or additional capital expenditures required as a result may have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Our medical facilities and tenants may be unable to compete successfully.

The medical facilities we will acquire may face competition from nearby hospitals and other medical facilities that provide comparable services. Some of those competing facilities are owned by governmental agencies and supported by tax revenues, and others are owned by nonprofit corporations and may be supported to a large extent by endowments and charitable contributions. These types of support are not available to our properties. Similarly, our tenants face competition from other medical practices in nearby hospitals and other medical facilities. Our tenants’ failure to compete successfully with these other practices could adversely affect their ability to make rental payments, which could adversely affect our rental revenues. Further, from time to time and for reasons beyond our control, referral sources, including physicians and managed care organizations, may change their lists of hospitals or physicians to which they refer patients. This could adversely affect our tenants’ ability to make rental payments, which could adversely affect our rental revenues. Any reduction in rental revenues resulting from the inability of our medical facilities and our tenants to compete successfully may have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Reductions in reimbursement from third party payors, including Medicare and Medicaid, could adversely affect the profitability of our tenants and hinder their ability to make rent payments to us.

Sources of revenue for our tenants may include the federal Medicare program, state Medicaid programs, private insurance carriers and health maintenance organizations, among others. Efforts by such payors to reduce healthcare costs have intensified in recent years and will likely continue, which may result in reductions or slower growth in reimbursement for certain services provided by some of our tenants. In addition, the failure of any of our tenants to comply with various laws and regulations could jeopardize their ability to continue participating in Medicare, Medicaid and other government sponsored payment programs. The healthcare industry continues to face various challenges, including increased government and private payor pressure on healthcare providers to control or reduce costs. It is possible that our tenants will continue to experience a shift in payor mix away from fee-for-service payors, resulting in an increase in the percentage of revenues attributable to managed care payors, and general industry trends that include pressures to control healthcare costs. Pressures to control healthcare costs and a shift away from traditional health insurance reimbursement to managed care plans have resulted in an increase in the number of patients whose healthcare coverage is provided under managed care plans, such as health maintenance organizations and preferred provider organizations. These changes could have a material adverse effect on the financial condition of some or all of our tenants in our medical facilities. The financial impact on our tenants could restrict their ability to make rent payments to us, which would have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We face increasing competition for the acquisition of medical facilities, which may impede our ability to make future acquisitions or may increase the cost of these acquisitions.

We compete with many other entities engaged in real estate investment activities for acquisitions of medical facilities, including national, regional and local operators, acquirers and developers of medical facilities. The competition for medical facilities may significantly increase the price we must pay for medical facilities or other assets we seek to acquire and our competitors may succeed in acquiring those properties or assets themselves. In addition, our potential acquisition targets may find our competitors to be more attractive because they may have greater resources, may be willing to pay more for the properties or may have a more compatible operating philosophy. In particular, larger healthcare real estate REITs may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable investment properties may increase. This competition will result in increased demand for these assets and therefore increased prices paid for them. Because of an increased interest in single-property acquisitions among tax-motivated individual purchasers, we may pay higher prices if we purchase single properties in comparison

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with portfolio acquisitions. If we pay higher prices for medical facilities, our business, financial condition and results of operations and our ability to make distributions to our stockholders may be materially and adversely affected.

The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of our tenants to make rent payments to us.

The healthcare industry is heavily regulated by federal, state and local governmental bodies. The tenants in our medical facilities generally will be subject to laws and regulations covering, among other things, licensure, certification for participation in government programs, and relationships with physicians and other referral sources. Changes in these laws and regulations could negatively affect the ability of our tenants to make lease payments to us and our ability to make distributions to our stockholders. Many of our medical facilities and their tenants may require a license or certificate of need, or CON, to operate. Failure to obtain a license or CON, or loss of a required license or CON, would prevent a facility from operating in the manner intended by the tenant. These events could materially adversely affect our tenants’ ability to make rent payments to us. State and local laws also may regulate expansion, including the addition of new beds or services or acquisition of medical equipment, and the construction of medical facilities, by requiring a CON or other similar approval. State CON laws are not uniform throughout the United States and are subject to change. We cannot predict the impact of state CON laws on our development of facilities or the operations of our tenants. In addition, state CON laws often materially impact the ability of competitors to enter into the marketplace of our facilities. The repeal of CON laws could allow competitors to freely operate in previously closed markets. This could negatively affect our tenants’ abilities to make current payments to us. In limited circumstances, loss of state licensure or certification or closure of a facility could ultimately result in loss of authority to operate the facility and require new CON authorization to re-institute operations. As a result, a portion of the value of the facility may be reduced, which would adversely impact our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Tenants of our medical facilities will be subject to fraud and abuse laws, the violation of which by a tenant may jeopardize the tenant’s ability to make rent payments to us.

There are various federal and state laws prohibiting fraudulent and abusive business practices by healthcare providers who participate in, receive payments from or are in a position to make referrals in connection with government-sponsored healthcare programs, including the Medicare and Medicaid programs. Our lease arrangements with certain tenants may also be subject to these fraud and abuse laws. These laws include the Federal Anti-Kickback Statute, which prohibits, among other things, the offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, the referral of any item or service reimbursed by Medicare or Medicaid; the Federal Physician Self-Referral Prohibition, which, subject to specific exceptions, restricts physicians from making referrals for specifically designated health services for which payment may be made under Medicare or Medicaid programs to an entity with which the physician, or an immediate family member, has a financial relationship; the False Claims Act, which prohibits any person from knowingly presenting false or fraudulent claims for payment to the federal government, including claims paid by the Medicare and Medicaid programs; and the Civil Monetary Penalties Law, which authorizes the U.S. Department of Health and Human Services to impose monetary penalties for certain fraudulent acts. Each of these laws includes criminal and/or civil penalties for violations that range from punitive sanctions, damage assessments, penalties, imprisonment, denial of Medicare and Medicaid payments and/or exclusion from the Medicare and Medicaid programs. Certain laws, such as the False Claims Act, allow for individuals to bring whistleblower actions on behalf of the government for violations thereof. Additionally, states in which the facilities are located may have similar fraud and abuse laws. Investigation by a federal or state governmental body for violation of fraud and abuse laws or imposition of any of these penalties upon one of our tenants could jeopardize that tenant’s ability to operate or to make rent payments, which may have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

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Adverse trends in healthcare provider operations may negatively affect our lease revenues and our ability to make distributions to our stockholders.

The healthcare industry is currently experiencing changes in the demand for and methods of delivering healthcare services; changes in third party reimbursement policies; significant unused capacity in certain areas, which has created substantial competition for patients among healthcare providers in those areas; continuing pressure by private and governmental payors to reduce payments to providers of services; and increased scrutiny of billing, referral and other practices by federal and state authorities. These factors may adversely affect the economic performance of some or all of our tenants and, in turn, our lease revenues and our ability to make distributions to our stockholders.

Tenants of our medical facilities may be subject to significant legal actions that could subject them to increased operating costs and substantial uninsured liabilities, which may affect their ability to pay their rent payments to us.

As is typical in the healthcare industry, certain types of tenants of our medical facilities may often become subject to claims that their services have resulted in patient injury or other adverse effects. Many of these tenants may have experienced an increasing trend in the frequency and severity of professional liability and general liability insurance claims and litigation asserted against them. The insurance coverage maintained by these tenants may not cover all claims made against them nor continue to be available at a reasonable cost, if at all. In some states, insurance coverage for the risk of punitive damages arising from professional liability and general liability claims and/or litigation may not, in certain cases, be available to these tenants due to state law prohibitions or limitations of availability. As a result, these types of tenants of our medical facilities operating in these states may be liable for punitive damage awards that are either not covered or are in excess of their insurance policy limits. We also believe that there has been, and will continue to be, an increase in governmental investigations of certain healthcare providers, particularly in the area of Medicare/Medicaid false claims, as well as an increase in enforcement actions resulting from these investigations. Insurance is not available to cover such losses. Any adverse determination in a legal proceeding or governmental investigation, whether currently asserted or arising in the future, could have a material adverse effect on a tenant’s financial condition. If a tenant is unable to obtain or maintain insurance coverage, if judgments are obtained in excess of the insurance coverage, if a tenant is required to pay uninsured punitive damages, or if a tenant is subject to an uninsurable government enforcement action, the tenant could be exposed to substantial additional liabilities, which may affect the tenant’s ability to pay rent, which in turn could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Risks Associated with Investments in the Data Center Property Sector

Our data center properties will depend upon the technology industry and the demand for technology-related real estate.

A portion of our portfolio of properties will consist of technology-related real estate. A decline in the technology industry or a decrease in the adoption of data center space for corporate enterprises could lead to a decrease in the demand for technology-related real estate, which may have a greater adverse effect on our business and financial condition than if we owned a portfolio with a more diversified tenant base. We are susceptible to adverse developments in the corporate and institutional data center and broader technology industries (such as business layoffs or downsizing, industry slowdowns, relocations of businesses, costs of complying with government regulations or increased regulation and other factors) and the technology-related real estate market (such as oversupply of or reduced demand for space). In addition, the rapid development of new technologies or the adoption of new industry standards could render many of our tenants’ current products and services obsolete or unmarketable and contribute to a downturn in their businesses, thereby increasing the likelihood that they default under their leases, become insolvent or file for bankruptcy.

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Our data center properties may not be suitable for lease to certain data center, technology or office tenants without significant expenditures or renovations.

Because many of our technology-related properties will contain extensive tenant improvements installed at our tenants’ expense, they may be better suited for a specific corporate enterprise data center user or technology industry tenant and could require modification in order for us to re-lease vacant space to another corporate enterprise data center user or technology industry tenant. For the same reason, our properties also may not be suitable for lease to traditional office tenants without significant expenditures or renovations.

Our tenants may choose to develop new data centers or expand their existing data centers, which could result in the loss of one or more key tenants or reduce demand for our newly developed data centers.

Although our tenants generally will enter into long-term leases with us and make considerable investments in housing their servers in our facilities, we cannot assure you that our larger tenants will not choose to develop new data centers or expand any existing data centers of their own. In the event that any of our key tenants were to do so, it could result in a loss of business to us or put pressure on our pricing. If we lose a tenant, there is no guarantee that we would be able to replace that tenant at a competitive rate or at all.

Our data center infrastructure may become obsolete and we may not be able to upgrade our power and cooling systems cost-effectively or at all.

The markets for data centers, as well as the industries in which data center tenants operate, are characterized by rapidly changing technology, evolving industry standards, frequent new service introductions, shifting distribution channels and changing tenant demands. The data center infrastructure in some of the data centers that we will acquire may become obsolete due to the development of new systems to deliver power to or eliminate heat from the servers we will house. Additionally, the data center infrastructure in some of the data centers that we will cure could become obsolete as a result of the development of new server technology that does not require the levels of critical load and heat removal that such facilities may be designed to provide and could, possibly, be run less expensively on a different platform. In addition, the power and cooling systems in data centers are difficult and expensive to upgrade. Accordingly, we may not be able to efficiently upgrade or change these systems in some of the data centers that we will acquire to meet new demands without incurring significant costs that we may not be able to pass on to our tenants. The obsolescence of the power and cooling systems in such data centers could have a material negative impact on our business.

Risks Associated with Investments in the Educational Property Sector

The education industry is heavily regulated, and failure of our educational facility tenants to comply with extensive regulations could adversely affect the profitability of our tenants and hinder their ability to make rent payments to us.

Some of our educational facility tenants may derive a substantial portion of their revenues from federal student financial aid programs pursuant to Title IV of the Higher Education Act of 1965, as amended, or “Title IV programs.” Our tenants’ participation in Title IV programs is subject to certification and oversight by the U.S. Department of Education and is further conditioned upon approvals granted by other agencies. Such certification is also a precondition to the ability of our tenants’ students to participate in Title IV programs. Our tenants also must comply with the requirements of any loan guarantee agencies that guarantee certain federal student loans made to our tenants’ students, the requirements of such state financial aid programs as may be available to our tenants’ students and the requirements of specialized accrediting agencies which oversee educational quality in particular program areas. As a result, our tenants are subject to extensive regulation and review by these agencies which cover virtually all phases of their operations. These regulations also affect our tenants’ ability to add new educational programs, substantially change existing programs or change their corporate or ownership structure. The agencies that regulate our tenants’ operations periodically revise their requirements and modify their interpretations of existing requirements. If any of our tenants were to violate or fail to meet any of these legal and regulatory requirements, they could suffer monetary liabilities or assessments, limitations on operating activities, loss of accreditation, limitations on their ability to offer new programs, termination of or limitations on the their ability to grant degrees and certificates, or limitations

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on or suspension or termination of their eligibility to participate in federal student financial aid programs. A significant portion of our tenants’ students may rely on federal student financial aid funds to finance their education. Such tenants are required to seek recertifications of their schools from the U.S. Department of Education periodically in order to participate in Title IV programs. If the U.S. Department of Education were to decide not to renew or to withdraw our tenants’ certification to participate in Title IV programs at any time, our tenants’ students no longer would be able to receive Title IV program funds. These factors may adversely affect the economic performance of some of our tenants, and in turn, our lease revenues and our ability to make distributions to our stockholders.

Loss of or reductions in financial aid programs and other methods of financing for our tenants’ students could negatively impact our tenants’ revenues and hinder their ability to make rent payments to us.

Many students of our educational facility tenants may rely on financial aid and loans to fund all or a portion of their tuition and the cost of living. The education finance industry has been experiencing and may continue to experience problems that have resulted in fewer overall financing options for students. Factors that could impact the general availability of loans to our tenants’ students include:

changes in overall economic conditions or overall uncertainty or disruption in capital markets, in either case, causing lenders to cease making student loans, limit the volume or types of loans made or impose more stringent eligibility or underwriting standards;
the financial condition and continued financial viability of student loan providers, including Sallie Mae;
changes in applicable laws or regulations could have the effect of reducing the availability of education financing, including as a result of any lenders choosing to provide fewer loans or to stop providing loans altogether in light of increased regulation, or which could increase the costs of student loans; or
determinations by lenders to reduce the number of loans, or to cease making loans altogether, to students attending or planning to attend certain types of schools, particularly for-profit institutions.

The consumer credit markets in the United States have recently suffered from increases in default rates and foreclosures on mortgages, which in some cases have called into question the continued financial viability of certain student loan providers and has resulted in fewer providers of student loans. Providers of federally guaranteed student loans and alternative or private student loans have also experienced recent increases in default rates. Adverse market conditions for consumer and federally guaranteed student loans have resulted in providers of private loans reducing the attractiveness and/or decreasing the availability of private loans to post-secondary students, including students with low credit scores who would not otherwise be eligible for credit-based private loans. Prospective students may find that these increased financing costs make borrowing prohibitively expensive and abandon or delay enrollment in post-secondary education programs. Further, some of our educational facility tenants may be for-profit post secondary institutions. Recently several states have substantially decreased or eliminated the amount of grants available to students who attend for-profit post secondary institutions.

The inability of our tenants’ students to finance their education could have a material adverse effect on some of our tenants’ revenues due to enrollment losses at their schools, which may affect their ability to pay rent to us, and in turn, adversely affect our lease revenues and our ability to make distributions to our stockholders.

A protracted economic slowdown and rising unemployment could harm our tenants’ operations if their students are unable to obtain employment upon completion of their programs, are unable to repay student loans or elect not to pursue postsecondary education.

Many students pursue post-secondary education to be more competitive in the job market. However, the recent economic recession has adversely affected job markets and a protracted economic slowdown could further increase unemployment and diminish job prospects and placement rates. Further diminished job prospects and placement rates and heightened financial worries could affect the willingness of students to incur loans to pay for post-secondary education and to pursue post-secondary education in general. The recent

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weakness in the job markets could also affect the prospects for long-term job growth, and there can be no assurance that the growth projected by the U.S. Bureau of Labor Statistics will materialize. As a result, our tenants’ enrollment and operating performance could suffer, which may affect the tenant’s ability to pay rent to us, and, in turn, adversely affect our lease revenues and our ability to make distributions to our stockholders.

Our results of operations will be subject to the following risks inherent in the student housing industry: annual leasing cycle, concentrated lease-up period, seasonal cash flows and increased risk of student defaults during the summer months of a 12-month lease.

Some of our educational facilities may be student housing properties. We will generally lease our student housing properties under 12-month leases, but we may also lease such properties for terms of nine months or less. As a result, we may experience significantly reduced cash flows during the summer months at properties leased for terms shorter than 12 months. In addition, students leasing under 12-month leases may be more likely to default in their rental payments during the summer months. Although we will typically require a student’s parents to guarantee the student’s lease, we may have to spend considerable effort and expense in pursuing payment upon a defaulted lease, and our efforts may not be successful. Furthermore, all of our student housing properties will need to be entirely re-leased each year, exposing us to increased leasing risk. In addition, we will be subject to increased leasing risk on properties that we acquire that we have not previously managed due to our lack of experience leasing those properties and unfamiliarity with their leasing cycles. Student housing communities are typically leased during a limited leasing season that begins in February and ends in August of each year. We are therefore highly dependent on the effectiveness of our marketing and leasing efforts and personnel during this season.

We will face significant competition from university-owned student housing and from other private student housing communities located within close proximity to universities.

Many students prefer on-campus housing to off-campus housing because of the closer physical proximity to campus and integration of on-campus facilities into the academic community. Universities can generally avoid real estate taxes and borrow funds at lower interest rates, while we and other private-sector operators pay full real estate tax rates and have higher borrowing costs. Consequently, universities often can offer more convenient and/or less expensive student housing than we can, which can adversely affect the occupancy and rental rates on our student housing properties. We will also compete with other national and regional owner-operators of off-campus student housing in a number of markets as well as with smaller local owner-operators. There may also be purpose-built student housing properties that compete directly with us located near or in the same general vicinity as some of our student housing communities. Such competing student housing communities may be newer than our student housing communities, located closer to campus, charge less rent, possess more attractive amenities, or offer more services, shorter lease terms or more flexible leases. The construction of competing properties or decreases in the general levels of rents for housing in competing properties could adversely affect our rental income. We believe that a number of other large national companies may be potential entrants in the student housing business. In some cases, these potential competitors possess substantially greater financial and marketing resources than we do. The entry of one or more of these companies could increase competition for student tenants and for the acquisition, development and management of other student housing communities.

We will rely on our relationships with universities, and changes in university personnel and/or policies could adversely affect our operating results.

In some cases, we will rely on our relationships with universities for referrals of prospective tenants or for mailing lists of prospective tenants and their parents. The failure to maintain good relationships with personnel at these universities could therefore have a material adverse effect on us. If universities refuse to make their lists of prospective student-tenants and their parents available to us or increase the costs of these lists, the increased costs or failure to obtain such lists could also have a material adverse effect on us. We may be adversely affected by a change in university admission policies. For example, if a university reduces the number of student admissions, the demand for our properties may be reduced and our occupancy rates may decline. In addition, universities may institute a policy that a certain class of students, such as freshmen, must live in a university-owned facility, which would also reduce the demand for our properties. While we may engage in marketing efforts to compensate for such policy changes, we may not be able to effect such marketing efforts prior to the commencement of the annual lease-up period or at all.

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Risks Associated with Debt Financing and Investments

We may incur mortgage indebtedness and other borrowings, which may increase our business risks.

We expect that in most instances, we will acquire real properties by using either existing financing or borrowing new funds. In addition, we may incur mortgage debt and pledge all or some of our real properties as security for that debt to obtain funds to acquire additional real properties. We may borrow if we need funds to satisfy the REIT tax qualification requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders. We also may borrow if we otherwise deem it necessary or advisable to assure that we qualify, or maintain our qualification, as a REIT.

Our advisor believes that utilizing borrowing is consistent with our investment objective of maximizing the return to investors. There is no limitation on the amount we may borrow against any single improved property. Prior to the commencement of this offering, our charter will provide that our borrowings may not exceed 300% of our total “net assets” (as defined by the NASAA REIT Guidelines) as of the date of any borrowing, which is generally expected to be approximately 75% of the cost of our investments; however, we may exceed that limit if approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report following such borrowing along with justification for exceeding such limit. This charter limitation, however, does not apply to individual real estate assets or investments. In addition, it is our intention to limit our borrowings of 50% of the aggregate fair market value of our assets (calculated after the close of this offering and once we have invested substantially all the proceeds of this offering), unless excess borrowing is approved by a majority of the independent directors and disclosed to stockholders in our next quarterly report following such borrowing along with justification for such excess borrowing. This limitation, however, will not apply to individual real estate assets or investments. At the date of acquisition of each asset, we anticipate that that the cost of investment for such asset will be substantially similar to its fair market value, which will enable us to satisfy our requirements under the NASAA REIT Guidelines. However, subsequent events, including changes in the fair market value of our assets, could result in our exceeding these limits. We expect that during the period of this offering we will seek independent director approval of borrowings in excess of these limitations since we will then be in the process of raising our equity capital to acquire our portfolio. As a result, we expect that our debt levels will be higher until we have invested most of our capital.

If there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage debt on a property, then the amount available for distributions to stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the value of your investment. For U.S. federal income tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds. In such event, we may be unable to pay the amount of distributions required in order to maintain our REIT status. We may give full or partial guarantees to lenders of mortgage debt to the entities that own our properties. When we provide a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgages contain cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties. If any of our properties are foreclosed upon due to a default, our ability to pay cash distributions to our stockholders will be adversely affected which could result in our losing our REIT status and would result in a decrease in the value of your investment.

The current state of debt markets could have a material adverse impact on our earnings and financial condition.

The domestic and international commercial real estate debt markets are currently experiencing volatility as a result of certain factors including the tightening of underwriting standards by lenders and credit rating agencies. This is resulting in lenders increasing the cost for debt financing. Should the overall cost of borrowings increase, either by increases in the index rates or by increases in lender spreads, we will need to factor such increases into the economics of future acquisitions. This may result in future acquisitions

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generating lower overall economic returns and potentially reducing future cash flow available for distribution. If these disruptions in the debt markets persist, our ability to borrow monies to finance the purchase of, or other activities related to, real estate assets will be negatively impacted. If we are unable to borrow monies on terms and conditions that we find acceptable, we likely will have to reduce the number of properties we can purchase, and the return on the properties we do purchase may be lower. In addition, we may find it difficult, costly or impossible to refinance indebtedness which is maturing.

In addition, the state of the debt markets could have an impact on the overall amount of capital investing in real estate, which may result in price or value decreases of real estate assets. Although this may benefit us for future acquisitions, it could negatively impact the current value of our existing assets.

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

If we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the loans come due, or of being unable to refinance on favorable terms. If interest rates are higher when the properties are refinanced, we may not be able to finance the properties and our income could be reduced. If any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to you and may hinder our ability to raise more capital by issuing more stock or by borrowing more money.

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

In connection with providing us financing, a lender could impose restrictions on us that affect our distribution, investment and operating policies and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property, discontinue insurance coverage or replace Carter/Validus Advisors, LLC as our advisor. These or other limitations may adversely affect our flexibility and our ability to achieve our investment and operating objectives. Additionally, such restrictions could make it difficult for us to satisfy the requirements necessary to maintain our qualification as a REIT for U.S. federal income tax purposes.

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

We expect that we will incur indebtedness in the future. To the extent that we incur variable rate debt, increases in interest rates would increase our interest costs, which could reduce our cash flows and our ability to pay distributions to you. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments in properties at times that may not permit realization of the maximum return on such investments.

We may invest in collateralized mortgage-backed securities, which may increase our exposure to credit and interest rate risk.

We may invest in collateralized mortgage-backed securities (CMBS), which may increase our exposure to credit and interest rate risk. We have not adopted, and do not expect to adopt, any formal policies or procedures designed to manage risks associated with our investments in CMBS. In this context, credit risk is the risk that borrowers will default on the mortgages underlying the CMBS. We intend to manage this risk by investing in CMBS guaranteed by U.S. government agencies, such as the Government National Mortgage Association (GNMA), or U.S. government sponsored enterprises, such as the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC). Interest rate risk occurs as prevailing market interest rates change relative to the current yield on the CMBS. For example, when interest rates fall, borrowers are more likely to prepay their existing mortgages to take advantage of the lower cost of financing. As prepayments occur, principal is returned to the holders of the CMBS sooner than expected, thereby lowering the effective yield on the investment. On the other hand, when interest rates rise, borrowers are more likely to maintain their existing mortgages. As a result, prepayments decrease, thereby extending the average maturity of the mortgages underlying the CMBS. We intend to manage interest rate risk by

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purchasing CMBS offered in tranches, or with sinking fund features, that are designed to match our investment objectives. If we are unable to manage these risks effectively, our results of operations, financial condition and ability to pay distributions to you will be adversely affected.

Any real estate debt security that we originate or purchase is subject to the risks of delinquency and foreclosure.

We may originate and purchase real estate debt securities, which are subject to risks of delinquency and foreclosure and risks of loss. Typically, we will not have recourse to the personal assets of our borrowers. The ability of a borrower to repay a real estate debt security secured by an income-producing property depends primarily upon the successful operation of the property, rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower’s ability to repay the real estate debt security may be impaired. A property’s net operating income can be affected by, among other things:

increased costs, added costs imposed by franchisors for improvements or operating changes required, from time to time, under the franchise agreements;
property management decisions;
property location and condition;
competition from comparable types of properties;
changes in specific industry segments;
declines in regional or local real estate values, or occupancy rates; and
increases in interest rates, real estate tax rates and other operating expenses.

We bear the risks of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the real estate debt security, which could have a material adverse effect on our cash flow from operations and limit amounts available for distribution to you. In the event of the bankruptcy of a real estate debt security borrower, the real estate debt security to that borrower will be deemed to be collateralized only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the real estate debt security will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law. Foreclosure of a real estate debt security can be an expensive and lengthy process that could have a substantial negative effect on our anticipated return on the foreclosed real estate debt security. We also may be forced to foreclose on certain properties, be unable to sell these properties and be forced to incur substantial expenses to improve operations at the property.

U.S. Federal Income Tax Risks

Failure to qualify as a REIT would adversely affect our operations and our ability to make distributions.

We intend to elect to be taxed as a REIT beginning with the taxable year ending December 31, 2010, or the first year in which we commence material operations. In order for us to qualify as a REIT, we must satisfy certain requirements set forth in the Internal Revenue Code and Treasury Regulations and various factual matters and circumstances that are not entirely within our control. We intend to structure our activities in a manner designed to satisfy all of these requirements. However, if certain of our operations were to be recharacterized by the IRS, such recharacterization could jeopardize our ability to satisfy all of the requirements for qualification as a REIT. Morris, Manning & Martin, LLP, our tax counsel, has rendered its opinion that we will qualify as a REIT, based upon our representations as to the manner in which we are and will be owned, invest in assets and operate, among other things. However, our qualification as a REIT will depend upon our ability to meet, through investments, actual operating results, distributions and satisfaction of the various tests imposed by the Internal Revenue Code. Morris, Manning & Martin, LLP will not review these operating results or compliance with the qualification standards on an ongoing basis. This means that we may fail to satisfy the REIT requirements in the future. Also, this opinion represents Morris, Manning & Martin, LLP’s legal judgment based on the law in effect as of the date of this prospectus. Morris, Manning &

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Martin, LLP’s opinion is not binding on the IRS or the courts and we will not apply for a ruling from the IRS regarding our status as a REIT. Future legislative, judicial or administrative changes to the U.S. federal income tax laws could be applied retroactively, which could result in our disqualification as a REIT.

If we fail to qualify as a REIT for any taxable year, we will be subject to U.S. federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends paid deduction, and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax.

To qualify as a REIT, we must meet annual distribution requirements, which may result in us distributing amounts that may otherwise be used for our operations.

To obtain the favorable tax treatment afforded to REITs under the Internal Revenue Code, we generally will be required each year to distribute to our stockholders at least 90% of our REIT taxable income (excluding net capital gain), determined without regard to the deduction for distributions paid. We will be subject to U.S. federal income tax on our undistributed taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (i) 85% of our ordinary income, (ii) 95% of our capital gain net income and (iii) 100% of our undistributed income from prior years. These requirements could cause us to distribute amounts that otherwise would be spent on investments in real estate assets and it is possible that we might be required to borrow funds, possibly at unfavorable rates, or sell assets to fund these distributions. Although we intend to make distributions sufficient to meet the annual distribution requirements and to avoid U.S. federal income and excise taxes on our earnings, it is possible that we might not always be able to do so. See the section entitled “Certain Material U.S. Federal Income Tax Considerations” in this prospectus.

You may have current tax liability on distributions you elect to reinvest in our common stock but would not receive cash from such distributions to pay such tax liability.

If you participate in our distribution reinvestment plan, you will be deemed to have received, and for U.S. federal income tax purposes will be taxed on, the amount reinvested in common stock to the extent the amount reinvested was not a tax-free return of capital. As a result, unless you are a tax-exempt entity, you may have to use funds from other sources to pay your tax liability on the value of the common stock received.

There is a risk that you may receive shares of our common stock as dividends and thereby have a current tax liability without receiving the cash to pay such tax liability.

We have the ability to declare a large portion of a dividend for the purpose of fulfilling our REIT distribution requirements in shares of our common stock instead of in cash. As long as a portion of such dividend is paid in cash (which portion could potentially be as low as 10%) and certain requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, a stockholder would be taxed on 100% of the dividend in the same manner as a cash dividend, even though most of the dividend was paid in shares of our common stock. Stockholders who receive a disproportionate amount of cash in the dividend under the election procedures may experience greater dilution than other stockholders if we elect to distribute our common stock as a dividend.

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

Our ability to dispose of property during the first few years following acquisition is restricted to a substantial extent as a result of our REIT status. Under applicable provisions of the Internal Revenue Code regarding prohibited transactions by REITs, we will be subject to a 100% tax on any gain recognized on the sale or other disposition of any property (other than foreclosure property) that we own, directly or through any subsidiary entity, including our operating partnership, but generally excluding our taxable REIT subsidiaries,

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that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of trade or business. Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property. We intend to avoid the 100% prohibited transaction tax by (i) conducting activities that may otherwise be considered prohibited transactions through a taxable REIT subsidiary (but such subsidiaries will incur income taxes), (ii) conducting our operations in such a manner so that no sale or other disposition of an asset we own, directly or through any subsidiary other than a taxable REIT subsidiary, will be treated as a prohibited transaction or (iii) structuring certain dispositions of our properties to comply with certain safe harbors available under the Internal Revenue Code for properties held for at least two years. However, despite our present intention, no assurance can be given that any particular property we own, directly or through any subsidiary entity, including our operating partnership, but generally excluding our taxable REIT subsidiaries, will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business.

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

Even if we qualify and maintain our status as a REIT, we may be subject to U.S. federal, state and local income taxes. For example, net income from the sale of properties that are “dealer” properties sold by a REIT (a “prohibited transaction” under the Internal Revenue Code) will be subject to a 100% tax. We may not be able to make sufficient distributions to avoid excise taxes applicable to REITs. We also may decide to retain net capital gain we earn from the sale or other disposition of our property and pay income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability. Further, a 100% excise tax would be imposed on certain transactions between us and any potential taxable REIT subsidiaries that are not conducted on an arm’s-length basis. We also may be subject to state and local taxes on our income or property, either directly or at the level of Carter/Validus Operating Partnership, LP or at the level of the other companies through which we indirectly own our assets. Any taxes we pay will reduce our cash available for distribution to you.

The use of taxable REIT subsidiaries, which may be required for REIT qualification purposes, would increase our overall tax liability and thereby reduce our cash available for distribution to you.

Some of our assets (e.g., qualified health care properties) may need to be owned by, or operations may need to be conducted through, one or more taxable REIT subsidiaries. Any of our taxable REIT subsidiaries would be subject to U.S. federal, state and local income tax on its taxable income. The after-tax net income of our taxable REIT subsidiaries would be available for distribution to us. Further, we would incur a 100% excise tax on transactions with our taxable REIT subsidiaries that are not conducted on an arm’s-length basis. For example, to the extent that the rent paid by one of our taxable REIT subsidiaries exceeds an arm’s length rental amount, such amount would be potentially subject to a 100% excise tax. While we intend that all transactions between us and our taxable REIT subsidiaries would be conducted on an arm’s length basis, and therefore, any amounts paid by our taxable REIT subsidiaries to us would not be subject to the excise tax, no assurance can be given that no excise tax would arise from such transactions.

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

To qualify as a REIT, we must ensure that we meet the REIT gross income tests annually and that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets, including certain mortgage loans and certain kinds of mortgage-related securities. The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our total securities can be represented by securities of one or more taxable REIT subsidiaries. If we fail to comply with

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these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio or not make otherwise attractive investments in order to maintain our qualification as a REIT. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

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

We may purchase properties and lease them back to the sellers of such properties. While we will use our best efforts to structure any such sale-leaseback transaction such that the lease will be characterized as a “true lease,” thereby allowing us to be treated as the owner of the property for U.S. federal income tax purposes, the IRS could challenge such characterization. In the event that any such sale-leaseback is challenged and recharacterized as a financing transaction or loan for U.S. federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed. If a sale-leaseback transaction were so recharacterized, we might fail to satisfy the REIT qualification asset tests or income tests and, consequently, lose our REIT status effective with the year of recharacterization. Alternatively, the amount of our REIT taxable income could be recalculated, which also might cause us to fail to meet the annual distribution requirement for a taxable year.

Legislative or regulatory action could adversely affect the returns to our investors.

In recent years, numerous legislative, judicial and administrative changes have been made in the provisions of U.S. federal income tax laws applicable to investments similar to an investment in shares of our common stock. Additional changes to the tax laws are likely to continue to occur, and we cannot assure you that any such changes will not adversely affect the taxation of a stockholder. Any such changes could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets. You are urged to consult with your own tax adviser with respect to the impact of recent legislation on your investment in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares. You also should note that our counsel’s tax opinion was based upon existing law, applicable as of the date of its opinion, all of which will be subject to change, either prospectively or retroactively.

Although REITs continue to receive substantially better tax treatment than entities taxed as corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be taxed for U.S. federal income tax purposes as a corporation. As a result, our charter will provide our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a corporation, without the vote of our stockholders. Our board of directors has fiduciary duties to us and our stockholders and could only cause such changes in our tax treatment if it determines in good faith that such changes are in the best interest of our stockholders.

If the operating partnership fails to maintain its status as a partnership, its income may be subject to taxation.

We intend to maintain the status of the operating partnership as a partnership for U.S. federal income tax purposes. However, if the IRS were to successfully challenge the status of the operating partnership as a partnership for such purposes, it would be taxable as a corporation. In such event, this would reduce the amount of distributions that the operating partnership could make to us. This would also result in our losing REIT status, and becoming subject to a corporate level tax on our own income. This would substantially reduce our cash available to pay distributions and the yield on your investment. In addition, if any of the partnerships or limited liability companies through which the operating partnership owns its properties, in whole or in part, loses its characterization as a partnership for U.S. federal income tax purposes, it would be subject to taxation as a corporation, thereby reducing distributions to the operating partnership. Such a recharacterization of an underlying property owner could also threaten our ability to maintain REIT status.

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Distributions to foreign investors may be treated as an ordinary income distribution to the extent that it is made out of current or accumulated earnings and profits.

In general, foreign investors will be subject to regular U.S. federal income tax with respect to their investment in our stock if the income derived therefrom is “effectively connected” with the foreign investor’s conduct of a trade or business in the United States. A distribution to a foreign investor that is not attributable to gain realized by us from the sale or exchange of a “U.S. real property interest” within the meaning of the Foreign Investment in Real Property Tax Act of 1980, as amended, or FIRPTA, and that we do not designate as a capital gain dividend, will be treated as an ordinary income distribution to the extent that it is made out of current or accumulated earnings and profits (as determined for U.S. federal income tax purposes). Generally, any ordinary income distribution will be subject to a U.S. federal income tax equal to 30% of the gross amount of the distribution, unless this tax is reduced by the provisions of an applicable treaty. See the section entitled “Certain Material U.S. Federal Income Tax Considerations — Taxation of Non-U.S. Stockholders” in this prospectus.

Foreign purchasers of our common stock may be subject to FIRPTA tax upon the sale of their shares or upon the payment of a capital gain dividend.

A foreign person disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to the FIRPTA tax on the gain recognized on the disposition. Such FIRPTA tax does not apply, however, to the disposition of stock in a REIT if the REIT is “domestically controlled.” A REIT is “domestically controlled” if less than 50% of the REIT’s stock, by value, has been owned directly or indirectly by persons who are not qualifying U.S. persons during a continuous five-year period ending on the date of disposition or, if shorter, during the entire period of the REIT’s existence. We cannot assure you that we will qualify as a “domestically controlled” REIT. If we were to fail to so qualify, gain realized by foreign investors on a sale of our shares would be subject to FIRPTA tax, unless our shares were traded on an established securities market and the foreign investor did not at any time during a specified testing period directly or indirectly own more than 5% of the value of our outstanding common stock. See the section entitled “Certain Material U.S. Federal Income Tax Considerations — Special Tax Considerations for Non-U.S. Stockholders — Sale of our Shares by a Non-U.S. Stockholder” in this prospectus.

A foreign investor also may be subject to FIRPTA tax upon the payment of any capital gain dividend by us, which dividend is attributable to gain from sales or exchanges of U.S. real property interests. See the section entitled “Certain Material U.S. Federal Income Tax Considerations — Taxation of Non-U.S. Stockholders” in this prospectus. We encourage you to consult your own tax advisor to determine the tax consequences applicable to you if you are a foreign investor.

In order to avoid triggering additional taxes and/or penalties, if you intend to invest in our shares through pension or profit-sharing trusts or IRAs, you should consider additional factors.

Our management has attempted to structure us in such a manner that we will be an attractive investment vehicle for pension, profit-sharing, 401(k), Keogh and other qualified retirement plans and IRAs. However, in considering an investment in our shares, those involved with making such an investment decision should consider applicable provisions of the Internal Revenue Code and ERISA. While each of the ERISA and Internal Revenue Code issues discussed below may not apply to all such plans and IRAs, individuals involved with making investment decisions with respect to such plans and IRAs should carefully review the items described below, and determine their applicability to their situation. Any such prospective investors are required to consult their own legal and tax advisors on these matters.

In general, individuals making investment decisions with respect to such plans and IRAs should, at a minimum, consider:

whether the investment is in accordance with the documents and instruments governing such plan or IRA;
whether the investment satisfies the prudence and diversification and other fiduciary requirements of ERISA, if applicable;

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whether the investment will result in UBTI to the plan or IRA (see the section entitled “Certain Material U.S. Federal Income Tax Considerations — Federal Income Taxation of Stockholders — Taxation of Tax-Exempt Stockholders” in this prospectus);
whether there is sufficient liquidity for the plan or IRA, considering the minimum and other distribution requirements under the Internal Revenue Code and the liquidity needs of such plan or IRA, after taking this investment into account;
the need to value the assets of the plan or IRA annually or more frequently; and
whether the investment would constitute or give rise to a prohibited transaction under ERISA or the Internal Revenue Code, if applicable.

For a more complete discussion of the foregoing risks and other issues associated with an investment in shares by such plans or IRAs, please see the section entitled “Investment by Tax-Exempt Entities and ERISA Considerations” in this prospectus.

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ESTIMATED USE OF PROCEEDS

Depending primarily on the number of shares we sell in this offering, the amounts listed in the table below represent our current estimates concerning the use of the offering proceeds and assume no shares available under our distribution reinvestment plan are sold. Since these are estimates, they may not accurately reflect the actual receipt or application of the offering proceeds. The first scenario assumes we sell the minimum number of 200,000 shares of common stock in this offering and the second scenario assumes that we sell the maximum number of 150,000,000 shares in this offering, with both scenarios contemplating a price of $10.00 per share. We estimate that for each share sold in this offering, approximately 86.8% will be available for the purchase of real estate and real estate-related investments in both the first scenario and second scenario. We will use the remainder of the offering proceeds to pay the costs of the offering, including selling commissions and the dealer manager fee, to pay a fee to our advisor for its services in connection with the selection and acquisition of properties and for working capital reserves. We will not pay selling commissions or a dealer manager fee on shares sold under our distribution reinvestment plan.

Assuming the maximum amount of the primary offering is raised, we currently estimate that we will invest, directly or indirectly, approximately 30% of our assets in medical facilities, approximately 30% of our assets in data centers, approximately 30% of our assets in educational facilities and not more than 10% of our assets in real estate-related debt and securities. We expect the size of individual properties that we purchase to vary significantly, but we expect most of the properties we acquire are likely to have a purchase price between $10 million and $50 million. However, there is no assurance that upon the completion of this offering we will not allocate the proceeds from this offering in a different manner among our target assets. Our decisions will depend on prevailing market conditions and may change over time in response to opportunities available in light of different interest rates and economic and credit environments. Until we invest the net proceeds of this offering in real estate, we may invest in short-term, highly liquid or other authorized investments, such as money market mutual funds, certificates of deposit, commercial paper, interest-bearing government securities and other short-term investments. Such short-term investments will not earn as high of a return as we expect to earn on our real estate investments. See the section entitled “Investment Objectives, Strategy and Policies — Investment Limitations” in this prospectus for a more detailed discussion of the limitations of the assets we may acquire.

If we encounter delays in the selection, acquisition or development of income-producing properties, we may pay all or a substantial portion of our distributions from the proceeds of this offering or from borrowings in anticipation of future cash flow. We have not established any limit on the amount of proceeds from this offering that may be used to fund distributions, except that, in accordance with our organizational documents and Maryland law, we may not make distributions that would: (1) cause us to be unable to pay our debts as they become due in the usual course of business; (2) cause our total assets to be less than the sum of our total liabilities plus senior liquidation preferences, if any; or (3) jeopardize our ability to qualify as a REIT.

The table does not give effect to special sales or volume discounts which could reduce selling commissions and many of the figures represent management’s best estimate because they cannot be precisely calculated at this time.

       
  Minimum Offering
(Not Including Distribution
Reinvestment Plan)
  Maximum Offering
(Not Including Distribution
Reinvestment Plan)
     Amount   Percent   Amount   Percent
Gross offering proceeds   $ 2,000,000       100.0 %    $ 1,500,000,000       100.0 % 
Less offering expenses:
                                   
Selling commissions and dealer manager fee(1)   $ 195,000       9.75 %    $ 146,250,000       9.75 % 
Organization and offering expenses(2)   $ 25,000       1.25     $ 18,750,000       1.25 % 
Amount available for investment(3)   $ 1,780,000       89.0 %    $ 1,335,000,000       89.0 % 
Acquisition:
                                   
Acquisition and advisory fees(4)   $ 34,698       1.95 %    $ 26,023,392       1.95 % 
Acquisition expenses(5)   $ 8,625       0.49 %    $ 6,505,848       0.49 % 
Working capital reserve(6)   $ 1,735       0.1 %    $ 1,301,170       0.1 % 
Amount invested in properties(7)   $ 1,734,892       86.8 %    $ 1,301,169,591       86.8 % 

(1) Includes selling commissions equal to 7% of aggregate gross offering proceeds and a dealer manager fee equal to 2.75% of aggregate gross offering proceeds, both of which are payable to the dealer manager, our

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affiliate. We will not pay any selling commissions or a dealer manager fee on sales of shares under our distribution reinvestment plan. SC Distributors, LLC, our dealer manager, in its sole discretion, may reallow all or a portion of its selling commissions in the aggregate amount of up to 7% of aggregate gross offering proceeds to unaffiliated broker-dealers participating in this offering attributable to the amount of shares sold by them. In addition, our dealer manager may reallow all or a portion of its dealer manager fee to participating dealers in the aggregate amount of up to 2.75% of gross offering proceeds to be paid to such participating dealers as marketing fees, based upon such factors as the volume of sales of such participating dealers, the level of marketing support provided by such participating dealers and the assistance of such participating dealers in marketing the offering, or to reimburse representatives of such participating dealers for the costs and expenses of attending our educational conferences and seminars. The amount of selling commissions may often be reduced under certain circumstances for volume discounts. See the section entitled “Plan of Distribution” in this prospectus for a description of such provisions.
(2) Organization and offering expenses include all expenses (other than selling commissions and the dealer manager fee) to be paid by us in connection with the offering, including our legal, accounting, printing, mailing and filing fees, charge of our escrow holder, due diligence expense reimbursements to participating broker-dealers included in a detailed and itemized invoice and amounts to reimburse Carter/Validus Advisors, LLC for its portion of the salaries of the employees of its affiliates who provide services to our advisor and other costs in connection with administrative oversight of the offering and marketing process and preparing supplemental sales materials, holding educational conferences and attending retail seminars conducted by broker-dealers. Our advisor will be responsible for the payment of all such organization and offering expenses to the extent such expenses exceed 1.25% of the aggregate gross proceeds of this offering over the life of the offering. We also will pay a $35.00 fee per subscription agreement to our advisor for reviewing and processing subscription agreements. If we do not raise the minimum amount of the offering, we will not reimburse our advisor for our organization and offering expenses.
(3) Until required in connection with the acquisition of properties or other investments, substantially all of the net proceeds of the offering and, thereafter, any working capital reserves we may have, may be invested in short-term, highly-liquid investments, including government obligations, bank certificates of deposit, short-term debt obligations and interest-bearing accounts.
(4) Acquisition and advisory fees are defined generally as fees and commissions paid by any party to any person in connection with identifying, reviewing, evaluating, investing in and purchasing of properties. Acquisition and advisory fees exclude acquisition expenses and any construction fee paid to a person who is not our affiliate in connection with construction of a project after our acquisition of a property. We will pay to our advisor acquisition and advisory fees up to a maximum amount of 2.0% of the contract purchase price of each property acquired (including our pro rata share of debt attributable to such property) and up to 2.0% of the amount advanced for a loan or other real estate-related investment (including our pro rata share of debt attributable to such investment). Assuming that we incur our targeted leverage up to 50% of the combined market value of all of our assets, as set forth in our investment guidelines, the minimum and the maximum acquisition fees would be $69,396 and $52,046,784, respectively.
(5) Acquisition expenses include, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, accounting fees and expenses, title insurance premiums and expenses and other miscellaneous expenses relating to the selection, evaluation and acquisition of real estate properties, including closing costs and non-refundable option payments, whether or not the property is acquired. For purposes of this table, we have assumed expenses of 0.5% of the purchase price of each property (including our pro rata share of debt attributable to such property) and 0.5% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment); however, expenses on a particular acquisition may be higher. Acquisition fees and expenses for any particular property will not exceed 6% of the contract purchase price of each property (including our pro rata share of debt attributable to such property) or 6% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment).
(6) Working capital reserves will be maintained at the property level and are typically utilized for extraordinary expenses that are not covered by revenue generation of the property, such as tenant improvements, leasing commissions and major capital expenditures. Alternatively, a lender party may require its own formula for escrow of working capital reserves.
(7) Includes amounts anticipated to be invested in properties net of fees and expenses. Subject to certain limitations, this amount may be used to fund distributions.

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MARKET OVERVIEW

Over the last 50-plus years, Carter & Associates, one of the principals of our sponsor, has grown to become the largest privately held full service commercial real estate company in the Southeastern U.S. Carter & Associates currently owns, manages or leases approximately 25 million square feet of space in 15 states across the U.S. Carter & Associates has successfully and responsibly navigated five decades of real estate cycles, and we believe that Carter & Associates’ deep longstanding relationships and lack of legacy issues places us in a unique position to take advantage of the current and impending real estate investment opportunities.

Medical Industry and Property Sector

We believe that the medical property sector is uniquely poised to enter an expansion phase based on an aging population, fundamental changes to the healthcare system and medical innovation, despite the downturn in the conventional real estate markets.

Demographics

In a period of unprecedented uncertainty, there is one incontrovertible trend persisting in the United States: as a population, we are getting older. The aging population currently is creating, and we believe will continue to create, an even larger demand for health service providers.

According to the U.S. Census Bureau (2010), the U.S. population age 65 and over is expected to double in size over the next 25 years. By 2030, almost one out of five Americans will be 65 years or older. Population growth in the 55-plus age cohort alone will necessitate an additional 25 million square feet of medical office building space by the end of 2013, above and beyond normal absorption trends.
Additionally, according to the U.S. Census Bureau (2010), the fastest growing age group in the country consists of those individuals age 85 or over. With such a tremendous increase in the aging population, we believe that medical office space in all U.S. markets will be in demand for much of the foreseeable future.

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Healthcare Reform

As the healthcare industry continues to evolve as a result of recent healthcare reform legislation and increased government spending, we believe that new medical facilities and supporting office properties will be developed and existing facilities will need to be repositioned to conform to new standards and redefined user groups and to accommodate the increase in demand created by more insured Americans.

As the number of insured individuals increases due to healthcare reform, the demand for healthcare services is expected to increase significantly. It is estimated that if 50% of the approximately 46 million currently uninsured individuals gained coverage, the added demand would require nearly 45 million square feet of medical office space beyond what is needed to satisfy normal demand trends.
As further evidence, healthcare remains the strongest sector of the economy, adding 222,000 workers in 2009, representing a 1.4% increase over the prior year, compared to decreasing employment rates in almost every other sector in 2009.

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According to Marcus and Millichap — National Medical Office Research Report, 2010 Outlook, individuals in the 45 – 64 year old age group account for the greatest number of insured individuals and the largest group of healthcare users. Notwithstanding any change resulting from healthcare reform, we believe that the population growth in this group will support the need for more medical space.

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Medical Innovation

According to Marcus and Millichap — The Outlook: Healthcare Reform, A winning prognosis for medical office investments (2009), technology, innovation and research and development will play crucial roles in healthcare reform, providing yet another potential demand driver for medical space. The medical landscape is changing rapidly as new treatments, drugs and devices become available. We believe that such change will result in increased spending on research, including investments in studies in the comparative effectiveness of drugs and treatment, thereby generating demand for research and development facilities and traditional medical office space.

According to Government Technology.com (2010), the $787 billion American Recovery and Reinvestment Act of 2009, or the ARRA, has allocated approximately $19 billion to facilitate the development of electronic medical records. Additionally, according to the National Institute of Health (2009), the ARRA also contains $10 billion for medical research to the National Institute of Health to be distributed in the form of grants to top researchers around the country for, among other purposes, studies comparing the effectiveness of certain drugs and treatments. As a result, we believe that the ARRA will increase the demand for research and development facilities and traditional medical office space.

Recent Performance

Despite the recent economic recession, medical properties have performed favorably, and demand is set to accelerate over the next several years as the trends discussed above are realized. Unlike other asset types, medical properties continue to garner investors’ demands by exhibiting considerable resistance to the economic downturn. According to Marcus and Millichap — The Outlook: Healthcare Reform, A winning prognosis for medical office investments (2009), medical property vacancy is currently 11.6%, up only 100 basis points from one year ago; by comparison, traditional office vacancy is currently 15.2%, a 240 basis point increase over the same time period. Further, many medical space users prefer locating on multiservice medical campuses, which we believe could offer a rare opportunity for medical office development in the coming years.

Acquisition Strategy

Carter & Associates has more than 50 years of experience as one of the nation’s top full-service commercial and institutional real estate firms. Carter & Associates has significant expertise in developing and financing healthcare related real estate projects. Carter & Associates provides hospitals and health systems clients with a full spectrum of real estate facility financing and development services, as well as industry expertise in operations, strategic, facility and capital planning, program management, facility ownership and development, leasing and property management. The Carter & Associates team has led approximately $6 billion of healthcare facility planning and development projects across 36 states. Carter & Associates has a track record of long-term client relationships, which often span several decades. Our acquisition strategy will focus on the sourcing of acquisitions, investments and developments through existing relationships of Carter & Associates with healthcare system, company and medical office users, as well as through traditional channels.

Technology Industry and Data Center Property Sector

Data centers are the cornerstone of an emerging communication services industry and the technology real estate class. Demand for quality built “scalable” data centers is at a high level due to favorable market trends.

A data center is a structure utilized by a company to house and operate its computer operations, including hardware, software applications, communications and all support mechanicals (MEP) necessary to the company’s operation. These specialized facilities typically house technical equipment, such as servers, routers and switches in secure, highly improved and resilient environments that run 24 hours a day, 365 days a year. Data centers are utilized by major corporations in all types of industries.

Power has become the primary resource required when operating data centers, having eclipsed square footage in importance. In this market space, revenue is directly related to available power and real estate square footage provided to a data center. As a result, higher power-density customer equipment will be hosted and priced at a higher rate.

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The market for data center services has changed dramatically in the last five years. After the “dot.com era” collapsed and the huge investments made for “Y2K” had been completed, demand for data center services decreased considerably. As a result, many companies put off making any capital investments in data centers until there was a demonstrated need for upgrades. This lack of activity caused a pent-up demand for modern data centers in late 2005 when enterprises experienced increased heating/cooling requirements, space shortages in their own facilities and older third-party data centers did not have the infrastructure to support modern technologies.

The T5/Carter Data Center Industry Overview (2007) projects an even greater increase in the need for mission critical data centers resulting from the following recent favorable trends in the marketplace:

As technology has advanced and internet use has increased exponentially, data centers developed as recently as ten years ago are virtually obsolete. While processor size has sharply decreased, overall processing capacity requirements have exploded. As a result, the supply of data center space is deeply constrained.
The constant per bite of data stored or processed is power. Current data center designs contemplate changes in space needs, but more importantly, also include future power demand metrics in their capacity specifications.
Changes in healthcare technology and data center needs also are expected to drive a need for space proximate to medical facilities.
Due to security concerns, many companies and government entities prefer, and often require, a single tenant configuration for their data center needs.

Acquisition Strategy

T5 Partners, LLC and Carter Development Services, L.L.C, a subsidiary of Carter & Associates, formed an alliance on February 29, 2009, which we refer to as T5/Carter, which enables T5/Carter to scale project management services as projects dictate. Since 1995, Carter Development Services has provided specialized site selection, brokerage services, project management and delivery for some of the world’s largest corporations. T5 Partners’ alliance with Carter Development Services offers T5 Partners a strong platform and provides deep project management resources required to execute large and complex projects, thus strengthening T5 Partners’ proven expertise in mission critical real estate.

T5/Carter is responsible for delivering more than 10 million square feet of space for over 100 contact and data center projects and is widely recognized as one of the nation’s foremost experts in the mission critical real estate industry. T5/Carter provides data center clients with a full range of real estate services and specific industry expertise, including site selection services, acquisition, disposition, real estate brokerage, capital sourcing, leasing, development and project management. Our acquisition strategy will focus on the sourcing of acquisitions, investments and developments through existing relationships of T5/Carter with data center users, as well as through traditional channels.

Educational Industry and Property Sector

In these difficult economic times, we believe that educational properties are likely to stand out as strong performers in 2010 and beyond due to the following:

Total enrollment in degree-granting institutions increased from 17.8 million students in 2006 to 18.2 million students in the fall of 2007, and according to U.S. Department of Education, Projections of Education Statistics 2018 (September 2009) is projected to rise to 20.6 million students by the fall of 2018. Enrollment is expected to increase in both public and private degree-granting institutions.

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According to the U.S. Department of Education, over the past 15 years student enrollment at U.S. colleges and universities has increased by 3.3 million students. The next 11 years are projected to see 2.3 million additional students, as well as enrollment of younger students increasing at a faster rate. California enrollments remained the highest in the nation from 2000 to 2008, with Texas, New York, Florida and Illinois following in rank.

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There is a growing population of college age students. Persons born between 1977 and 1994, known as the “echo boomers,” represent a population of approximately 75 million people, or approximately 25% of the total U.S. population.

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The share of 18- to 24-year-olds attending college in the U.S. hit an all-time high in October 2008 driven by a recession-era surge in enrollments at community colleges.
Just under 11.5 million students, or 39.6% of all young adults ages 18 to 24, were enrolled in either a two- or four-year college in October 2008. According to Pew Research Center (October 2009), the number and the percentage of young adults ages 18 to 24 who were enrolled in either a two- or four-year college were at their highest levels ever in 2009.

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College enrollments are expected to grow to at least 19.5 million students by 2015, marking a 27% increase over the enrollment recorded in 2000.
Dorm capacity at public four-year colleges in the top 15 states accommodates on average only 24% of the student population.

The demand for secondary educational facilities continues to outpace supply due to increased college enrollment at a time when existing facilities are becoming more obsolete and traditional funding sources are declining. In addition to classrooms, labs and other campus buildings, many universities are already faced with a significant deficit of student housing. We believe there is a current and growing market for investment opportunities in educational facilities as universities search for equity funding needed to maintain their facilities and meet their growing enrollment.

Acquisition Strategy

Carter & Associates’ higher education practice group has managed approximately $2 billion in new projects and capital improvements through 65 separate projects on 25 campuses. The experience of the team at Carter & Associates ranges from multi-facility capital improvement programs in excess of $100 million to single building and dorm renovations and restorations. Since the group’s inception over 15 years ago, Carter & Associates has maintained a strong reputation by completing every one of its projects on time and with financial savings returned to its clients. Our acquisition strategy will focus on the sourcing of acquisitions, investments and developments through existing relationships of Carter & Associates with institutions and client referrals, as well as through traditional channels.

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MANAGEMENT

General

We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders as fiduciaries. The board is responsible for the overall management and control of our affairs. The board has retained Carter/Validus Advisors, LLC to manage our day-to-day affairs and the acquisition and disposition of our investments, subject to the board’s supervision. As described in greater detail under the section entitled “— The Advisor” below, our advisor will be responsible for making investment decisions subject, in most cases, to the approval of our board of directors.

Our charter will be reviewed and ratified by at least a majority of our board of directors, including the independent directors. This ratification by our board of directors is required by the NASAA REIT Guidelines.

Prior to the commencement of our offering, our charter will provide that, in order to be considered an independent director, the director may not, on the date of determination or for two years prior to the date of determination, other than in his or her capacity as a director: (i) own any interest in the sponsor, the advisor or their affiliates, other than us; (ii) be or have been employed by the advisor, the sponsor or their affiliates, or by us or our affiliates, on the date of determination or for two years prior to the date of determination; (iii) serve as an officer of the sponsor, the advisor or any of their affiliates; (iv) perform services for us, other than as a member of our board of directors; (v) serve as a director or trustee, including as a member of our board of directors, of more than three REITs organized or controlled by the sponsor or advised by the advisor; or (vi) maintain a “material” business or professional relationship with the sponsor, the advisor or any of their affiliates. A business or professional relationship qualifies as “material” if the aggregate gross revenue derived by the director from the sponsor, the advisor and their affiliates exceeds 5% of either the director’s annual gross revenue during either of the last two years or the director’s net worth on a fair market value basis. In addition, an independent director may not maintain, or have maintained, any of the foregoing prohibited associations either directly or indirectly. An indirect association includes circumstances in which a spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in-law or brother- or sister-in-law of the director is or has been associated with the sponsor, the advisor, any of their affiliates or us.

Our charter and bylaws will provide that the number of our directors may be established by a majority of the entire board of directors but may not be fewer than three nor more than ten, each of whom (other than a director elected to fill the unexpired term of another director) is elected by our stockholders and serves a term of one year and until his or her successor is duly elected and qualifies. The directors may be reelected for an unlimited number of successive one-year terms. We have a total of five directors, including three independent directors. Each of our directors was selected by our executive officers because of his qualifications and significant experience in the real estate business. Prior to the commencement of this offering, our charter will provide that a majority of the directors must be independent directors except for a period of up to 60 days after the death, resignation or removal of an independent director. There are no family relationships among any of our directors or officers, or officers of our advisor. Each director must have at least three years of relevant experience demonstrating the knowledge and experience required to successfully acquire and manage the type of assets being acquired by us. Currently, each of our directors has substantially in excess of three years of relevant real estate experience. At least one of the independent directors must have at least three years of relevant real estate experience and at least one of our independent directors must be a financial expert with at least three years of relevant financial experience.

During the discussion of a proposed transaction, independent directors may offer ideas for ways in which transactions may be structured to offer the greatest value to us, and our management will take these suggestions into consideration when structuring transactions. Each director will serve until the next annual meeting of stockholders or until his or her successor is duly elected and qualifies. Although the number of directors may be increased or decreased, a decrease will not have the effect of shortening the term of any incumbent director.

Any director may resign at any time and may be removed with or without cause by the stockholders upon the affirmative vote of at least a majority of all the votes entitled to be cast at a meeting properly called for the purpose of the proposed removal. The notice of the meeting will indicate that the purpose, or one of the purposes, of the meeting is to determine if the director shall be removed. Neither our advisor, any member

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of our board of directors nor any of their affiliates may vote or consent on matters submitted to the stockholders regarding the removal of our advisor or any director or any of their affiliates or any transaction between us and any of them after we accept any subscriptions for the purchase of shares in this offering. In determining the requisite percentage in interest required to approve such a matter after we accept any subscriptions for the purchase of shares in this offering, any shares owned by such persons will not be included.

Any vacancy created by an increase in the number of directors or the death, resignation, removal, adjudicated incompetence or other incapacity of a director may be filled only by a vote of a majority of the remaining directors. Independent directors shall nominate replacements for vacancies in the independent director positions. If at any time there are no directors in office, successor directors shall be elected by the stockholders. Each director will be bound by the charter and the bylaws.

The directors are not required to devote all of their time to our business and are only required to devote the time to our affairs as their duties require. The directors will meet quarterly or more frequently, if necessary. Our directors are not required to devote a substantial portion of their time to discharge their duties as our directors. Consequently, in the exercise of their responsibilities, the directors heavily rely on our advisor. Our directors have a fiduciary duty to our stockholders to supervise the relationship between us and our advisor. The board is empowered to fix the compensation of all officers that it selects and approve the payment of compensation to directors for services rendered to us in any other capacity.

Our board of directors has established policies on investments and borrowing, the general terms of which are set forth in this prospectus. The directors may establish further policies on investments and borrowings and monitor our administrative procedures, investment operations and performance to ensure that the policies are fulfilled and are in the best interest of our stockholders.

In general, a majority of the independent directors must approve matters relating to minimum capital, duties of our directors, the advisory agreement, liability and indemnification of our directors, advisor and affiliates, advisor and affiliate fees, compensation and expenses, investment policies, leverage and borrowing policies, meetings of stockholders, stockholders’ election of directors, and our distribution reinvestment plan.

The independent directors are responsible for reviewing our fees and expenses on at least an annual basis and with sufficient frequency to determine that the expenses incurred are reasonable in light of our investment performance, our net assets, our net income and the fees and expenses of other comparable unaffiliated REITs. Each determination and the basis therefor shall be set forth in the minutes of the meetings of our board of directors. In addition, a majority of the directors, including a majority of the independent directors, who are not otherwise interested in the transaction must determine that any transaction with Carter/Validus Advisors, LLC or its affiliates is fair and reasonable to us. The independent directors also are responsible for reviewing the performance of Carter/Validus Advisors, LLC and determining that the compensation to be paid to Carter/Validus Advisors, LLC is reasonable in relation to the nature and quality of services to be performed and our investment performance and that the provisions of the advisory agreement are being carried out. This evaluation will be based on the following factors as well as any other factors deemed relevant by the independent directors:

the amount of the fees paid to Carter/Validus Advisors, LLC or its affiliates in relation to the size, composition and performance of our investments;
the success of Carter/Validus Advisors, LLC in generating appropriate investment opportunities;
rates charged to other REITs, especially REITs of similar structure, and other investors by advisors performing similar services;
additional revenues realized by Carter/Validus Advisors, LLC and its affiliates through their relationship with us, whether we pay them or they are paid by others with whom we do business;
the quality and extent of service and advice furnished by Carter/Validus Advisors, LLC and the performance of our investment portfolio;
the performance of our investment portfolio; and
the quality of our portfolio relative to the investments generated by Carter/Validus Advisors, LLC.

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Neither our advisor nor any of its affiliates, nor any director of our advisor or its affiliates, may vote or consent to the voting of shares of our common stock they now own or hereafter acquire on matters submitted to the stockholders regarding either (1) the removal of such director or Carter/Validus Advisors, LLC as our advisor, or (2) any transaction between us and Carter/Validus Advisors, LLC, such director or any of their respective affiliates. In determining the requisite percentage in interest of shares necessary to approve a matter on which a director, our advisor or any of their respective affiliates may not vote or consent, any shares owned by such director, our advisor or any of their respective affiliates will not be included.

Committees of the Board of Directors

Our entire board of directors considers all major decisions concerning our business, including property acquisitions. However, our charter and bylaws will provide that our board may establish such committees as the board believes appropriate. The board will appoint the members of the committee in the board’s discretion. Our charter and bylaws will require that a majority of the members of each committee of our board is to be comprised of independent directors.

Audit Committee

Our board of directors will establish an audit committee, which will consist of our three independent directors. The audit committee, by approval of at least a majority of the members, selects the independent registered public accounting firm to audit our annual financial statements, reviews with the independent registered public accounting firm the plans and results of the audit engagement, approves the audit and non-audit services provided by the independent registered public accounting firm, reviews the independence of the independent registered public accounting firm, considers the range of audit and non-audit fees charged by the independent registered public accounting firm and reviews the adequacy of our internal accounting controls. James Ziegelbauer, one of our independent directors, will qualify as an audit committee financial expert. Our board of directors has adopted a charter for the audit committee that sets forth its specific functions and responsibilities.

Executive Officers and Directors

We have provided below certain information about our executive officers and directors.

   
Name   Age   Position(s)
John Carter   49   Chairman of the Board and Chief Executive Officer
Michael Seton   37   Chief Financial Officer
Sheri Rose   45   Treasurer
Robert Winslow   60   Executive Vice President
Lisa Drummond   46   Chief Operating Officer and Secretary
Mario Garcia, Jr.   39   Director
James Ziegelbauer   56   Independent Director
Randall Greene   60   Independent Director
Ronald Rayevich   67   Independent Director

John E. Carter is our Chief Executive Officer and Chairman of the board of directors. He also is Chief Executive Officer, Chief Investment Officer and member of the Investment Management Committee of Carter/Validus Advisors, LLC and Executive Vice President of Carter Real Estate Management Services, LLC. Mr. Carter has more than 28 years of real estate experience in all aspects of leasing, asset management, acquisitions, finance, investment and corporate advisory services. Mr. Carter is Executive Vice President and a principal of Carter & Associates, L.L.C., or Carter & Associates, one of the principals of our sponsor. Mr. Carter has served in such capacities since he sold his company, Newport Partners LLC, to Carter & Associates in January 2000. Mr. Carter founded Newport Partners in November 1989 and grew the company into a full service real estate firm with 63 associates throughout Florida. At Carter & Associates, Mr. Carter plays a key role in establishing and maintaining some of Carter & Associates’ most significant institutional client relationships. From December 2003 until December 31, 2009, Mr. Carter has completed in excess of $3.5 billion of real estate property acquisitions and financings representing 18.5 million square feet of real estate. In September 2005, Mr. Carter was responsible for facilitating one of Carter & Associates’ largest

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transactions, a $1 billion acquisition and financing of a class “A” office portfolio consisting of 23 buildings in six states. Prior to November 1989, Mr. Carter worked for two years at Trammel Crow Company. In the early 1980s, he spent five years at Citicorp where he focused primarily on tax shelter, Industrial Revenue Bonds (IRBs) and other real estate financing transactions. He also is a founding board member of Gulfshore Bank, a community bank located in Tampa, Florida. Mr. Carter obtained a Bachelor’s degree in Economics with a minor in Mathematics from St. Lawrence University in Canton, New York in 1982 and a Masters in Business Administration from Harvard University in Cambridge, Massachusetts in 1989. We believe that Mr. Carter’s experience at Carter/Validus Advisors, LLC and Carter Real Estate Management Services, LLC and his significant real estate acquisition experience make him well qualified to serve as our Chairman of the Board and Chief Executive Officer.

Michael Seton is our Chief Financial Officer. He also is Chief Financial Officer of Carter/Validus Advisors, LLC. Mr. Seton has more than 15 years of real estate and real estate finance experience. Mr. Seton is an Executive Vice President of Carter & Associates and head of its Capital Markets group based in New York, New York. He is involved in all aspects of equity raising and debt financing for Carter & Associates’ activities. For the past 15 years, Mr. Seton has been an active player in capital markets in the real estate industry. From 1997 until joining Carter & Associates in September 2009, Mr. Seton worked for Eurohypo AG (including its predecessor organizations) in New York, New York. At Eurohypo AG, Mr. Seton was a Managing Director and Division Head in the Originations Group, leading a team of 12 professionals in the origination, structuring, documentation, closing and distribution of real estate financings for private developers and owners, REITs, and real estate operating companies (REOCs). Real estate finance transactions in which Mr. Seton was involved included both on and off-balance sheet executions, including senior debt and mezzanine financings. Mr. Seton has been directly involved in over $25.0 billion in financings for real estate clients, including high profile transactions such as the recapitalization of the Chrysler Building and the General Motors Building, both of which are located in New York, New York, Merchandise Mart in Chicago, Illinois, construction financing for 15 Central Park West in New York, New York, several Ritz-Carlton hotels throughout the United States, and many office developments in major U.S. cities. While at Eurohypo AG, Mr. Seton’s clients included some of the most respected names in the real estate industry, including Tishman Speyer Properties, Millennium Partners, Vornado Realty Trust, Carter & Associates, Boston Properties, and Goldman Sachs. Mr. Seton obtained a Bachelor of Science in Economics from Vanderbilt University in Nashville, Tennessee in 1994.

Lisa Drummond is our Chief Operating Officer and Secretary. She also is Chief Operating Officer and Secretary of Carter/Validus Advisors, LLC. Mrs. Drummond has more than 20 years of real estate experience involving real estate accounting, asset management, property management and financial analysis. Mrs. Drummond joined Carter & Associates in January 2000 as a Vice President in its Transaction Services Group, as part of the merger of Newport Partners LLC and Carter & Associates. In such capacity, Mrs. Drummond’s responsibility and focus is on all aspects of asset management, financial analysis, and acquisition and financing, including overseeing the due diligence work and support for acquisition and disposition transactions. From December 2003 to December 2009, Mrs. Drummond has been actively involved in the acquisition and financing process of over $3.5 billion in real estate transactions. Prior to the merger with Carter & Associates, Mrs. Drummond was with Newport Partners LLC since July 1996, serving as its Controller. Prior to joining Newport Partners LLC in July 1996, Mrs. Drummond worked with JPI Multifamily for two years and Anterra Realty Corporation for five years, both of which are located in Dallas, Texas. Mrs. Drummond obtained a Bachelor’s degree in Accountancy from the University of Missouri in Columbia, Missouri in 1985.

Sheri Rose is our Treasurer. She also is Treasurer of Carter/Validus Advisors, LLC. Ms. Rose has more than 23 years of real estate experience. Since joining Carter & Associates in June 1987, Ms. Rose has held a number of accounting positions within the company. In September 2005, she was promoted to Vice President of Carter & Associates. In October 2005, Ms. Rose was promoted to Senior Vice President of Carter & Associates and continues to hold this position. In such position, she oversees all reporting functions to Carter & Associates’ members and managers, as well as the treasury, banking, payroll and regulatory functions of the company. In addition, Ms. Rose is in charge of the accounting department, which was consolidated within Carter & Associates into a single department in January 2006. She also is responsible for all reporting and

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financial activities for asset management, development, property management, and financial services performed for Carter & Associates’ clients and their investments. Ms. Rose obtained a Bachelor in Business Administration in Accounting from Saint Ambrose University in Davenport, Iowa in 1987.

Robert M. Winslow is our Executive Vice President. He also is a member of the Investment Management Committee of Carter/Validus Advisors, LLC. He has more than 36 years of real estate experience in the Southeastern United States, specializing in Florida. Over the past 24 years, Mr. Winslow has packaged and managed more than 50 commercial investments in hotels, offices and shopping centers with a value exceeding $300 million. He currently serves as President and Chief Executive Office of Global Building and Consulting Corporation, a multi-service residential and commercial investment company specializing in performance-oriented management of real estate assets, and has served in such capacities since 1996. At Global Building and Consulting Corporation, Mr. Winslow has developed condominium, single family and commercial properties. From 1987 to 1989, Mr. Winslow structured a joint venture with Prentiss Properties to serve as the Florida Development Manager for proposed office projects for tenants including, among others, Loral Federal Systems and AT&T. In July 1980, Mr. Winslow founded Global Properties, a full service real estate brokerage firm with a unique international theme that grew to over 120 sales associates, and served as the President of its General Partner until Global Properties was sold to a private investment group under a multi-year payout from 1984 to 1985. Global Properties was the first firm with whom Merrill Lynch signed a non-binding Letter of Intent to purchase a property when it entered the Orlando market. Prior to founding Global Properties in 1980, Mr. Winslow was Vice President of Real Estate for Winter Park Land Company, where he managed a $35 million real estate portfolio, supervising the development, brokerage and maintenance operations, as well as reversing two unprofitable divisions into successful ventures and creating a compatible new construction strategy. Mr. Winslow obtained a Bachelor of Arts in Business Administration from Rollins College in Winter Park, Florida in 1971 and a Masters in Business Administration in International Finance from the Roy E. Crummer Graduate School of Business at Rollins College in Winter Park, Florida in 1973.

Mario Garcia, Jr. is one of our directors. He also is a member of the Investment Management Committee of Carter/Validus Advisors, LLC. Mr. Garcia has more than 13 years of real estate experience. Mr. Garcia is the President and Chief Executive Officer of Electrostim Medical Services, Inc., a company that he founded in June 1995, and has served in such capacities since its inception. Mr. Garcia also founded Validus Group Partners Ltd. in 2004, which develops and manages real estate in Florida, and has served as its Chief Executive Officer since its inception. Validus Group Partners Ltd. is one of the principals of our sponsor. As the Chief Executive Officer of Validus Group Partners Ltd., Mr. Garcia manages over $25 million in real estate assets in the retail, office and industrial property sectors, as well as in raw land. In addition, Mr. Garcia is one of the founding board members and is Chairman of the Board of Directors of Gulfshore Bank, a local community bank in Tampa, Florida focusing on small to medium size companies. He is also an active participant on the Finance Committee, and is the Chairman, of the National Hispanic Scientist of the Year Committee. He is also a member of Vistage (formerly TEC), a national networking group and leadership organization consisting of Chief Executive Officers. Mr. Garcia and his companies also support News in Education, Adopt-A-School Program, The Kids’ Wish Network, The Special Olympics, Florida Institute of Community Studies, Junior Achievement, and Cattle Baron’s Ball, a charity event sponsored by the American Cancer Society. We believe that Mr. Garcia’s experience at Carter/Validus Advisors, LLC, Electrostim Medical Services, Inc., Validus Group Partners, Ltd., and Gulfshore Bank make him well qualified to serve as a member of our Board of Directors.

James Ziegelbauer is one of our independent directors. He began his career in public accounting in March 1977 with Arthur Andersen & Company’s Atlanta office, moving to Price Waterhouse in 1985. Mr. Ziegelbauer was a tax partner at Price Waterhouse and its successor firm, PricewaterhouseCoopers, LLP, from 1988 through the spring of 2001. He was the Partner-in-Charge of the Price Waterhouse Atlanta Tax Department for 5 years during that period. After a brief partnership with the local Atlanta firm of Harshman Phillips & Company, LLC, he founded JRZ, LLC. in June of 2002 and has headed that firm to the present. Mr. Ziegelbauer has been a certified public accountant since 1980, and is a long standing member of the American Institute of Certified Public Accountants and the Georgia Society of Certified Public Accountants. His area of expertise throughout the last 24 years has been almost exclusively with high net worth individuals

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and all aspects of real estate, including both domestic and international investors and developers in land, office, retail, and residential development. JRZ, LLC.’s mission is to focus solely on clients involved in the real estate industry. Mr. Ziegelbauer obtained a Bachelor’s degree in both Accounting and Finance from Marquette University in Milwaukee, Wisconsin in 1975 and a Masters in Business Administration from the University of Chicago in 1977. We believe that Mr. Ziegelbauer’s experience in accounting and his Accounting and Finance Degree and Masters Degree make him well qualified to serve as a member of our Board of Directors.

Randall Greene is one of our independent directors. He has approximately 20 years of experience in real estate management, mortgage banking, construction and property development. Mr. Greene served as Vice President of Charter Mortgage Co., and as President of its subsidiary, St. John’s Management Company, from 1975 to 1977, in which he managed more than 3500 multifamily units and 300,000 square feet of commercial and retail space throughout Florida. He also was President and Chief Executive Officer of Coastal Corporation of Florida (Nasdaq: CLFL), a community developer in Florida, from 1976 to 1986, in which he supervised the development of more than 2000 acres of residential and commercial properties, the construction of more than 500 homes and a number of commercial and retail developments. From 1992 to 1995, Mr. Greene was a consultant for Eastbrokers, in which he consulted on, among other purchases, the acquisition of one of the largest dairy plants in the world, located in Krakow, Poland. Mr. Greene currently serves as the Managing Partner for Greene Capital Partners, LLC, an investment and advisory firm, and has been in this position since 1999, as well as President and a Director of ITR Capital Management, LLC, an investment management firm, positions he has held since September 2009. Mr. Greene has been the Florida Chapter Chairman of the Young Presidents’ Organization since 1995, and a member of the World Presidents’ Organization, Tampa Young President’s Organization Forum II, Association for Corporate Growth, Financial Planning Association and the British American Business Council. Since November 2004, Mr. Greene has been an executive coach for 30 Tampa-area CEOs through Vistage Florida. He also has been honored as an Outstanding Young Man of America, as an Alumnus of the Year by Phi Kappa Tau Fraternity and with the Florida Blue Key. Mr. Greene is a Certified Financial Planner and a Registered Investment Advisor. Mr. Green obtained a Bachelor’s degree, with distinction, from Eckerd College in St. Petersburg, Florida in 1986 and a Masters in Business Administration from The Wharton School, University of Pennsylvania in Philadelphia, Pennsylvania in 1988. We believe that Mr. Greene’s experience at Charter Mortgage Co., St. John’s Management Company, Coastal Corporation of Florida, Eastbrokers, Green Capital Partners, LLC, and ITR Capital Management, LLC make him well qualified to serve as a member of our Board of Directors.

Ronald Rayevich is one of our independent directors. He has been active in residential and commercial real estate and investment management since 1965. Mr. Rayevich spent the bulk of his career with Prudential Insurance Company (now Prudential Financial) from 1965 to 1979 and from 1985 to 1994, last serving as President and Chief Operating Officer of The Prudential Realty Group with responsibility for the management of the insurance company’s then $6.5 billion commercial real estate portfolio. Between 1979 and 1982, he served as Vice President for Investments at Columbia University and from 1982 to 1985 he was Managing Director at Prudential-Bache Securities in the Investment Banking Division. Following early retirement in 1994, he formed Raymar Associates, Inc. in 1995 and continues to remain active as a real estate consultant serving clients throughout the United States. Mr. Rayevich served as a director for Stiles Corporation, a Ft. Lauderdale, Florida based real estate developer and contractor from August 2006 to November 2008. He also currently is serving as an independent director for special purpose entities of Carlyle Realty, L.P., a Washington, DC based real estate investment arm of The Carlyle Group, and has been in this position since 1996, and as a director and advisor to Advance Realty Group and Advance Realty Development, Bedminster, NJ based real estate investment and development companies with properties in New Jersey, Maryland, and Virginia, and has been in this position since 1995. Mr. Rayevich remains an active member of the Urban Land Institute and NAIOP: the Commercial Real Estate Development Association, where he currently serves as a member of the Board of the NAIOP Research Foundation. In 1997, he served as National Chairman (then called President) of NAIOP and was founder of its National Forums and a founding director and Governor of its research foundation. Mr. Rayevich obtained a Bachelor of Arts in History from The Citadel in Charleston, South Carolina in 1964 and a Masters in Business Administration in Finance from Florida State University in Tallahassee, Florida in 1971. We believe that Mr. Rayevich’s experience at Prudential Insurance Company, The Prudential Realty Group, Columbia University, Prudential-Bache Securities, Raymar Associates, Inc.,

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Stiles Corporation, Carlyle Realty, L.P., Advance Realty Group and Advance Realty Development make him well qualified to serve as a member of our Board of Directors.

Compensation of Directors

We pay to each of our independent directors a retainer of $30,000 per year, plus $2,000 for each board or board committee meeting the director attends in person ($2,500 for attendance by the chairperson of the audit committee at each meeting of the audit committee) and $250 for each meeting the director attends by telephone. If there is a meeting of the board and one or more committees in a single day, the fees will be limited to $2,500 per day ($3,000 for the chairperson of the audit committee if there is a meeting of such committee). All directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. If a director also is an employee of Carter/Validus Advisors, LLC or its affiliates, we do not pay compensation for services rendered as a director.

Restricted Share Plan

Our board of directors will adopt an employee and director incentive restricted share plan to:

furnish incentives to individuals chosen to receive restricted shares because they are considered capable of improving our operations and increasing profits;
encourage selected persons to accept or continue employment with our advisor and its affiliates; and
increase the interest of our employees, officers and directors in our welfare through their participation in the growth in the value of our common stock.

Our restricted share plan will provide for the automatic grant of 3,000 restricted shares of common stock to each of our independent directors, without any further action by our board of directors or the stockholders, on the date of each annual stockholders’ meeting. Restricted stock issued to independent directors will vest over a four-year period following the first anniversary of the date of grant in increments of 25% per annum.

Our employee and director incentive restricted share plan provides us with the ability to grant awards of restricted shares to our directors, officers and employees (if we ever have employees), employees of our advisor and its affiliates, employees of entities that provide services to us, directors of the advisor or of entities that provide services to us, certain of our consultants and certain consultants to the advisor and its affiliates or to entities that provide services to us. We will authorize and reserve 150,000 shares of our common stock for issuance under the employee and director incentive restricted share plan outstanding shares on a fully diluted basis at any time.

Restricted share awards entitle the recipient to common stock from us under terms that provide for vesting over a specified period of time or upon attainment of pre-established performance objectives. Such awards would typically be forfeited with respect to the unvested shares upon the termination of the recipient’s employment or other relationship with us. Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares may receive cash dividends prior to the time that the restrictions on the restricted shares have lapsed. Any dividends payable in common stock shall be subject to the same restrictions as the underlying restricted shares.

Compliance with the American Jobs Creation Act

As part of our strategy for compensating our independent directors, we intend to issue restricted share awards under our employee and director incentive restricted share plan, which is described above. This method of compensating individuals may possibly be considered to be a “nonqualified deferred compensation plan” under Section 409A of the Internal Revenue Code.

Under Section 409A, “nonqualified deferred compensation plans” must meet certain requirements regarding the timing of distributions or payments and the timing of agreements or elections to defer payments, and must also prohibit any possibility of acceleration of distributions or payments, as well as certain other requirements. The guidance under Section 409A of the Internal Revenue Code provides that there is no deferral of compensation merely because the value of property (received in connection with the performance of services) is not includible in income by reason of the property being substantially nonvested (as defined in

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Section 83 of the Internal Revenue Code). Accordingly, it is intended that the restricted share awards will not be considered “nonqualified deferred compensation.”

If Section 409A applies to any of the awards issued under either plan described above, or if Section 409A applies to any other arrangement or agreement that we may make, and if such award, arrangement or agreement does not meet the timing and other requirements of Section 409A, then (i) all amounts deferred for all taxable years under the award, arrangement or agreement would be currently includible in the gross income of the recipient of such award or of such deferred amount to the extent not subject to a substantial risk of forfeiture and not previously included in the gross income of the recipient, (ii) interest at the underpayment rate plus 1% would be imposed on the underpayments that would have occurred had the compensation been includible in income when first deferred (or, if later, when not subject to a substantial risk of forfeiture) would be imposed upon the recipient and (iii) a 20% additional tax would be imposed on the recipient with respect to the amounts required to be included in the recipient’s income. Furthermore, if the affected individual is our employee, we would be required to withhold U.S. federal income taxes on the amount deferred but includible in income due to Section 409A, although there may be no funds currently being paid to the individual from which we could withhold such taxes. We would also be required to report on an appropriate form (W-2 or 1099) amounts which are deferred, whether or not they meet the requirements of Section 409A, and if we fail to do so, penalties could apply.

We do not intend to issue any award, or enter into any agreement or arrangement that would be considered a “nonqualified deferred compensation plan” under Section 409A, unless such award, agreement or arrangement complies with the timing and other requirements of Section 409A. It is our current belief, based upon the statute, the regulations issued under Section 409A and legislative history, that the restricted share awards we currently intend to grant will not be subject to taxation under Section 409A because such restricted share awards will not be considered a “nonqualified deferred compensation plan.” Nonetheless, there can be no assurances that any restricted share awards that we grant will not be affected by Section 409A, or that any such restricted share awards will not be subject to income taxation under Section 409A.

Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents

We are permitted to limit the liability of our directors and officers to us and our stockholders for monetary damages and to indemnify and advance expenses to our directors, officers and other agents, only to the extent permitted by Maryland law and the NASAA REIT Guidelines.

Maryland law permits us to include in our charter a provision limiting the liability of our directors and officers to our stockholders and us for money damages, except for liability resulting from (i) actual receipt of an improper benefit or profit in money, property or services or (ii) active and deliberate dishonesty established by a final judgment and that is material to the cause of action.

The Maryland General Corporation Law requires us (unless our charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful in the defense of any proceeding to which he or she is made a party by reason of his or her service in that capacity. The Maryland General Corporation Law allows directors and officers to be indemnified against judgments, penalties, fines, settlements and reasonable expenses actually incurred in a proceeding unless the following can be established:

an act or omission of the director or officer was material to the cause of action adjudicated in the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty;
the director or officer actually received an improper personal benefit in money, property or services; or
with respect to any criminal proceeding, the director or officer had reasonable cause to believe his or her act or omission was unlawful.

A court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct or was adjudged liable on the basis that personal benefit was improperly received. However, indemnification for an adverse judgment in a suit by the corporation or in its right, or for a judgment of liability on the basis that personal benefit was improperly received, is limited to expenses. The Maryland General Corporation Law

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permits a corporation to advance reasonable expenses to a director or officer upon receipt of a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification and a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed if it is ultimately determined that the standard of conduct was not met.

Subject to the limitations of Maryland law and to any additional limitations contained therein, our charter will limit directors’ and officers’ liability to us and our stockholders for monetary damages, requires us to indemnify and pay or reimburse reasonable expenses in advance of final disposition of a proceeding to our directors, our officers, Carter/Validus Advisors, LLC or any of its affiliates and permits us to provide such indemnification and advance of expenses to our employees and agents. This provision does not reduce the exposure of directors and officers to liability under federal or state securities laws, nor does it limit the stockholders’ ability to obtain injunctive relief or other equitable remedies for a violation of a director’s or an officer’s duties to us, although the equitable remedies may not be an effective remedy in some circumstances.

However, as set forth in the NASAA REIT Guidelines, our charter will further limit our ability to indemnify our directors, Carter/Validus Advisors, LLC and its affiliates for losses or liability suffered by them and to hold them harmless for losses or liability suffered by us by requiring that the following additional conditions are met:

the person seeking indemnification has determined, in good faith, that the course of conduct which caused the loss or liability was in our best interests;
the person seeking indemnification was acting on our behalf or performing services for us; and
the liability or loss was not the result of negligence or misconduct on the part of the person seeking indemnification, except that if the person seeking indemnification is or was an independent director, the liability or loss was not the result of gross negligence or willful misconduct.

In any such case, the indemnification or agreement to indemnify is recoverable only out of our net assets and not from the assets of our stockholders.

In addition, we will not indemnify any director, our advisor or any of its affiliates for losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities laws unless one or more of the following conditions are met:

there has been a successful adjudication on the merits of each count involving alleged material securities law violations as to the particular person seeking indemnification;
the claims have been dismissed with prejudice on the merits by a court of competent jurisdiction; or
a court of competent jurisdiction approves a settlement of the claims against the indemnitee and finds that indemnification of the settlement and related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and the published position of any state securities regulatory authority of a jurisdiction in which our securities were offered or sold as to indemnification for securities law violations.

We have agreed to indemnify and hold harmless Carter/Validus Advisors, LLC and its affiliates performing services for us from specific claims and liabilities arising out of the performance of their obligations under the advisory agreement. As a result, our stockholders and we may be entitled to a more limited right of action than they and we would otherwise have if these indemnification rights were not included in the advisory agreement.

The general effect to investors of any arrangement under which we agree to insure or indemnify any persons against liability is a potential reduction in distributions resulting from our payment of premiums associated with insurance or indemnification payments in excess of amounts covered by insurance. In addition, indemnification could reduce the legal remedies available to our stockholders and us against the officers and directors.

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Finally, our charter will provide that we may pay or reimburse reasonable legal expenses and other costs incurred by a director, our advisor or any of its affiliates in advance of final disposition of a proceeding only if all of the following conditions are satisfied:

the legal action relates to acts or omissions relating to the performance of duties or services for us or on our behalf by the person seeking indemnification;
the legal action is initiated by a third party who is not a stockholder or the legal action is initiated by a stockholder acting in his or her capacity as such and a court of competent jurisdiction specifically approves advancement;
the person seeking indemnification provides us with a written affirmation of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification; and
the person seeking indemnification undertakes in writing to repay us the advanced funds, together with interest at the applicable legal rate of interest, if the person seeking indemnification is found not to have complied with the requisite standard of conduct.

The Advisor

Our advisor is Carter/Validus Advisors, LLC. Our officers and one of our directors also are officers, key personnel and/or members of Carter/Validus Advisors, LLC. Carter/Validus Advisors, LLC has contractual responsibility to us and our stockholders pursuant to the advisory agreement. Carter/Validus Advisors, LLC is indirectly majority-owned and controlled by Messrs. Carter and Garcia.

The officers and key personnel of our advisor are as follows:

   
Name   Age   Position(s)
John Carter   49   Chief Executive Officer, Chief Investment Officer and Member of Investment Management Committee
Michael Seton   37   Chief Financial Officer
Sheri Rose   45   Treasurer
Lisa Drummond   46   Chief Operating Officer and Secretary
Patrick Miller   46   Executive Vice President
Mario Garcia, Jr.   39   Member of Investment Management Committee
Bob Peterson   58   Member of Investment Management Committee
Robert Winslow   60   Member of Investment Management Committee

The backgrounds of John Carter, Michael Seton, Sheri Rose, Lisa Drummond, Mario Garcia, Jr. and Robert Winslow are described in the “Management — Executive Officers and Directors” section of this prospectus.

Patrick Miller is Executive Vice President of Carter/Validus Advisors, LLC. He has been the president of SC Distributors, LLC since its formation in March 2009. He is co-founder and Managing Director of Strategic Capital Companies, LLC, a distribution and advisory business focused on marketing alternative investment products via professional financial intermediaries formed in June 2009. Mr. Miller is responsible for overall strategy and new business development at Strategic Capital Companies. In addition, Mr. Miller serves on the Board of Trustees for the Investment Program Association. Prior to founding Strategic Capital Companies, he served as President of KBS Capital Markets Group, LLC since the company’s inception in October 2005. During his tenure, KBS raised approximately $1.7 billion in investment capital for KBS REIT 1 and successfully launched KBS REIT 2, which is currently raising equity capital through a network of independent broker-dealers. From 2002 until joining KBS Capital Markets Group in October 2005, Mr. Miller served as President and Chief Executive Officer of FinancialCampus, an online education and training company serving the financial services industry. He was responsible for facilitating the successful acquisition of the company by the Thomson Corporation in 2004. Mr. Miller also served as Chief Executive Oficer of Equitable Distributors Inc., the wholesale distribution subsidiary of AXA Financial until 2001. Mr. Miller was elected Chief Executive Officer in 2000 after having joined Equitable Distributors at its inception in 1996 as President of the Wirehouse Division. Mr. Miller obtained a Bachelor of Arts from the University of California at Los Angeles in Los Angeles, California in 1985.

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Bob Peterson is a member of the Investment Management Committee of Carter/Validus Advisors, LLC. He also is the Chief Executive Officer and Chairman of the Board of Directors of Carter Real Estate Management Services, LLC. Mr. Peterson has more than 35 years of real estate experience. Mr. Peterson joined Carter & Associates in May 2001 as a partner and Executive Vice President. In October 2002, he was promoted and assumed the role of Chairman of the Board of Directors and Chief Executive Officer of Carter & Associates, and has served in such capacities since. From October 1996 until joining Carter & Associates in May 2001, Mr. Peterson was Managing Director of CarrAmerica Realty Company (NYSE:CRE) and President of CarrAmerica Development Inc. He also served on CarrAmerica Realty Company’s investment and operating committees. Prior to joining CarrAmerica Realty Company and CarrAmerica Development Inc. in October 1996, Mr. Peterson served as Chief Executive Officer of Peterson Properties, a full-service commercial real estate company, which he founded in 1979 and subsequently sold to CarrAmerica Realty Company in October 1996. Peterson Properties developed over 30 office and industrial projects totaling approximately four million square feet, and handled more than $1 billion in investment transactions over a 17-year period ending in 1996. Mr. Peterson obtained a Bachelor of Science from the University of North Carolina in Chapel Hill, North Carolina in 1974.

Investment Management Committee

Carter/Validus Advisors, LLC has established an Investment Management Committee, which consists of Messrs. Carter, Garcia, Winslow and Peterson. The Investment Management Committee’s primary function is to find, evaluate, present and recommend to the advisor’s executive officers and to our board of directors, as applicable, investment opportunities. None of the members of the Investment Management Committee are members of Carter/Validus Advisors, LLC.

Affiliates of our advisor have sponsored and may sponsor one or more other real estate investment programs in the future. We may buy properties at the same time as one or more of the other programs sponsored by affiliates of our advisor and/or managed by officers and key personnel of our advisor. As a result, they owe duties to each of these entities, their members and limited partners and investors, which duties may from time to time conflict with the fiduciary duties that they owe to us and our stockholders. However, to the extent that our advisor or its affiliates take actions that are more favorable to other entities than to us, these actions could have a negative impact on our financial performance and, consequently, on distributions to you and the value of our stock. In addition, our directors and officers and certain of our stockholders may engage for their own account in business activities of the types conducted or to be conducted by our subsidiaries and us. For a description of some of the risks related to these conflicts of interest, see the section of this prospectus captioned “Risk Factors — Risks Related to Conflicts of Interest.”

The officers and key personnel of Carter/Validus Advisors, LLC may spend a portion of their time on activities unrelated to us. Carter/Validus Advisors, LLC employs personnel who have extensive experience in selecting and managing commercial properties similar to the properties sought to be acquired by us. As of the date of this prospectus, our advisor is the sole limited partner of Carter/Validus Operating Partnership, LP.

Many of the services to be performed by Carter/Validus Advisors, LLC in managing our day-to-day activities are summarized below. This summary is provided to illustrate the material functions that we expect Carter/Validus Advisors, LLC will perform for us as our advisor, and it is not intended to include all of the services that may be provided to us by third parties. Under the terms of the advisory agreement, Carter/Validus Advisors, LLC will undertake to use its commercially reasonable best efforts to present to us investment opportunities consistent with our investment policies and objectives as adopted by our board of directors. In its performance of this undertaking, Carter/Validus Advisors, LLC, either directly or indirectly by engaging an affiliate, shall, among other duties and subject to the authority of our board of directors:

find, evaluate, present and recommend to us investment opportunities consistent with our investment policies and objectives;
serve as our investment and financial advisor and provide research, economic and statistical data in connection with our assets and our investment policies;
provide the daily management and perform and supervise the various administrative functions reasonably necessary for our management and operations;

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investigate, select, and, on our behalf, engage and conduct business with such third parties as the advisor deems necessary to the proper performance of its obligations under the advisory agreement;
consult with our officers and board of directors and assist the board of directors in the formulating and implementing of our financial policies;
structure and negotiate the terms and conditions of our real estate acquisitions, sales or joint ventures;
review and analyze each property’s operating and capital budget;
acquire properties and make investments on our behalf in compliance with our investment objectives and policies;
arrange, structure and negotiate financing and refinancing of properties;
enter into leases of property and service contracts for assets and, to the extent necessary, perform all other operational functions for the maintenance and administration of such assets, including the servicing of mortgages; and
prepare and review on our behalf, with the participation of one designated principal executive officer and principal financial officer, all reports and returns required by the SEC, IRS and other state or federal governmental agencies.

Our advisor may purchase on our account, without the prior approval of the board of directors, properties with a purchase price of less than $15,000,000, so long as the investment in the property would not, if consummated, violate our investment guidelines or any restrictions on indebtedness and the consideration to be paid for such properties does not exceed the fair market value of such properties. Where the purchase price is equal to or greater than $15,000,000, investment decisions will be made by our board of directors upon recommendation of our advisor. If an asset with a purchase price of less than $15,000,000 is acquired by our advisor without the prior approval of the board of directors, the fair market value will be determined by a qualified independent real estate appraiser selected by the independent directors.

Our directors will evaluate the performance of the advisor before entering into or renewing the advisory agreement, and the criteria used in such evaluation will be reflected in the minutes of the meeting of the board of directors. The advisory agreement has an initial term of one year and is renewable for successive one-year terms upon the mutual consent of the parties. It may be terminated without cause or penalty by either party, by mutual consent of the parties or by a majority of the independent directors, as the case may be, upon 60 days’ written notice. If the advisory agreement is terminated, the advisor must cooperate with us and take all reasonable steps requested by our board of directors to assist it in making an orderly transition of the advisory function. In addition, upon termination of the agreement, our advisor will be entitled to a subordinated termination fee, as described below.

We pay Carter/Validus Advisors, LLC an asset management fee equal to 0.75% of the cost our assets (cost will include the purchase price, acquisition expenses, capital expenditures, and other customarily capitalized costs but exclude acquisition fees). This fee will be payable quarterly in arrears, based on assets held by us on the last day of such quarter. In the sole discretion of our advisor, our advisor may elect to have these fees paid, in whole or in part, in cash or OP Units. For the purposes of the payment of these fees, each OP Unit will be valued at the per share offering price of our common stock minus the maximum selling commissions and dealer manager fee allowed in the offering, to account for the fact that no selling commissions or dealer manager fees will be paid in connection with any such issuances (at the offering price, each such OP Unit would be issued at $9.035 per share). Each OP Unit may be exchanged for the cash value of one share of our common stock or, at our option, one share of our common stock.

We will reimburse Carter/Validus Advisors, LLC up to 1.25% of gross offering proceeds for organization and offering expenses. These organization and offering expenses include all expenses (other than selling commissions and the dealer manager fee) to be paid by us in connection with the offering, including our legal, accounting, printing, mailing and filing fees, charges of our escrow holder, due diligence expense reimbursements to participating broker-dealers included in a detailed and itemized invoice and amounts to

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reimburse Carter/Validus Advisors, LLC for its portion of the salaries of the employees of its affiliates who provide services to our advisor and other costs in connection with administrative oversight of the offering and marketing process and preparing supplemental sales materials, holding educational conferences and attending retail seminars conducted by broker-dealers. Our advisor will be responsible for the payment of all such organization and offering expenses to the extent such expenses exceed 1.25% of the aggregate gross proceeds of this offering. If we do not raise the minimum amount of the offering, we will not reimburse our advisor for our organization and offering expenses.

We also pay Carter/Validus Advisors, LLC acquisition fees equal to 2.0% of the contract purchase price of each property or asset that we acquire (including our pro rata share of debt attributable to such property) and 2.0% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment), along with reimbursement of acquisition expenses. In the sole discretion of our advisor, our advisor may elect to have these fees paid, in whole or in part, in cash or OP Units in the same manner as described above. Each OP Unit may be exchanged for the cash value of one share of our common stock or, at our option, one share of our common stock. In addition, if during the period ending two years after the close of the offering, we sell an asset and then reinvest in other assets, we will pay to our advisor 2.0% of the contract purchase price of each property (including our pro rata share of debt attributable to such property) and 2.0% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment); provided, however, that in no event shall the aggregate acquisition fee paid in respect of such sale or reinvestment exceed 6.0% of the contract purchase price of each property (including our pro rata share of debt attributable to such property) or 6.0% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment).

In addition, we will reimburse Carter/Validus Advisors, LLC for expenses actually incurred (including personnel costs) related to selecting, evaluating and acquiring assets on our behalf, regardless of whether we actually acquire the related assets. In addition, we also will pay third parties, or reimburse the advisor or its affiliates, for any investment-related expenses due to third parties, including, but not limited to, legal fees and expenses, travel and communications expenses, costs of appraisals, accounting fees and expenses, third-party brokerage or finders fees, title insurance expenses, survey expenses, property inspection expenses and other closing costs regardless of whether we acquire the related assets. We expect these expenses to be approximately 0.5% of the purchase price of each property (including our pro rata share of debt attributable to such property). In no event will the total of all acquisition fees and acquisition expenses payable with respect to a particular investment exceed 6% of the contract purchase price of each property (including our pro rata share of debt attributable to such property) or 6% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment).

For substantial assistance in connection with the sale of properties, we will pay Carter/Validus Advisors, LLC a real estate commission paid on the sale of property, up to the lesser of 1.5% of the contract sales price and one-half of the total brokerage commission paid if a third party broker is also involved; provided, however, that in no event may the real estate commissions paid to our advisor, its affiliates and unaffiliated third parties exceed the lesser of 6% of the contract sales price and a reasonable, customary and competitive real estate commission in light of the size, type and location of the property. In the sole discretion of our advisor, our advisor may elect to have these fees paid, in whole or in part, in cash or OP Units in the same manner as described above. Each OP Unit may be exchanged for the cash value of one share of our common stock or, at our option, one share of our common stock.

Our advisor will receive a subordinated participation in net sale proceeds equal to 15% of the remaining net sale proceeds after return of capital contributions plus payment to investors of an 8% annual cumulative, pre-tax, non-compounded return on the capital contributed by investors. In addition, our advisor will receive a subordinated incentive listing fee equal to 15% of the amount by which the sum of our adjusted market value plus distributions exceeds the sum of the aggregate capital contributed by investors plus an amount equal to an 8% annual cumulative, pre-tax, non-compounded annual return on the investors’ capital contributed to investors. However, Carter/Validus Advisors, LLC cannot earn both the subordinated participation in net sale proceeds and the subordinated incentive listing fee. In the event that multiple advisors and/or their affiliates participate in the sale of one or more of our properties, the foregoing fees may be distributed to all advisors and their affiliates that participated in the sales, provided that the fees are distributed on a proportional method

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reasonably designed to reflect the value added by each respective advisor or affiliate involved. The subordinated participation in net sale proceeds or the subordinated incentive listing fee, as the case may be, will be paid in the form of a non-interest bearing promissory note that will be repaid from the net sale proceeds of each sale after the date of the termination or listing. At the time of such sale, we may, however, at our discretion, pay all or a portion of such promissory note with shares of our common stock or cash. If shares are used for payment, we do not anticipate that they will be registered under the Securities Act of 1933, as amended, or the Securities Act, and, therefore, will be subject to restrictions on transferability. Any portion of the subordinated participation in net sale proceeds that Carter/Validus Advisors, LLC receives prior to our listing will offset the amount otherwise due pursuant to the subordinated incentive listing fee. In no event will the amount paid to Carter/Validus Advisors, LLC under the promissory note, if any, exceed the amount considered presumptively reasonable by the NASAA REIT Guidelines.

If for any reason our independent directors determine that we should become “self-administered,” including in contemplation of a listing on a national securities exchange, we may, among other methods, acquire the business conducted by our advisor after a good faith negotiation with our advisor. Alternatively, if at any time the shares become listed on a national securities exchange and our independent directors determine that we should not become “self-administered,” we will negotiate in good faith with Carter/Validus Advisors, LLC a fee structure appropriate for an entity with a perpetual life. Our independent directors must approve the new fee structure negotiated with Carter/Validus Advisors, LLC. The market value of our outstanding common stock will be calculated based on the average market value of the shares of common stock issued and outstanding at listing over the 30 trading days beginning 180 days after the shares are first listed or included for quotation. We have the option to pay the subordinated incentive listing fee in the form of stock, cash, a promissory note or any combination thereof. If any previous payments of the subordinated participation in net sale proceeds will offset the amounts due pursuant to the subordinated incentive listing fee, then we will not be required to pay Carter/Validus Advisors, LLC any further subordinated participation in net sale proceeds.

Upon termination of the advisory agreement, our advisor shall be entitled to a subordinated termination fee. The subordinated termination fee, if any, will equal to the sum of (a) 15% of the amount, if any, by which (1) the appraised value of our assets on the termination date, less any indebtedness secured by such assets, plus total distributions paid through the termination date, exceeds (2) the sum of the total amount of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan) and the total amount of cash that, if distributed to them as of the termination date, would have provided them an 8% annual cumulative, pre-tax, non-compounded return on the gross proceeds from the sale of shares of our common stock through the termination date. Our advisor may elect to defer its right to receive a subordinated termination fee until either a listing or other Liquidity Event occurs, including a liquidation, sale of substantially all of our assets or merger in which our stockholders receive in exchange for their shares of our common stock shares of a company that are traded on a national securities exchange.

If our advisor elects to defer its right to receive a subordinated termination fee and there is a listing of the shares of our common stock on a national securities exchange or a merger in which our stockholders receive in exchange for their shares of our common stock shares of a company that are traded on a national securities exchange, then our advisor will be entitled to receive a subordinated termination fee in an amount equal to 15% of the amount, if any, by which the sum of (a) (1) the fair market value of our assets (determined by appraisal as of the listing date or merger date, as applicable) owned as of the termination of the advisory agreement, plus any assets acquired after such termination for which our advisor would have been entitled to receive an acquisition fee (referred to herein as the “included assets”) less any indebtedness secured by the included assets, plus the cumulative distributions made by our operating partnership to us and the limited partners who received partnership units in connection with the acquisition of the included assets, from our inception through the listing date or merger date, as applicable, exceeds (2) the sum of the total amount of capital raised from stockholders and the capital value of partnership units issued in connection with the acquisition of the included assets through the listing date or merger date, as applicable (excluding any capital raised after the completion of this offering) (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan), plus an amount equal to an annual 8% cumulative, non-compounded return on the total amount of capital raised from stockholders and the capital value of such

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partnership units measured for the period from inception through the listing date or merger date, as applicable. If our advisor receives the subordinated incentive listing fee, it would no longer be entitled to receive subordinated distributions of net sales proceeds or the subordinated termination fee. If our advisor receives the subordinated termination fee, it would no longer be entitled to receive subordinated distributions of net sales proceeds or the subordinated incentive listing fee. There are many additional conditions and restrictions on the amount of compensation our advisor and its affiliates may receive.

Carter/Validus Advisors, LLC and its officers, employees and affiliates engage in other business ventures and, as a result, their resources are not dedicated exclusively to our business. However, pursuant to the advisory agreement, Carter/Validus Advisors, LLC is required to devote sufficient resources to our administration to discharge its obligations. Carter/Validus Advisors, LLC currently has no paid employees; however, as of the date of this prospectus, its affiliates had approximately 7 full-time employees, each of whom may dedicate a portion of his or her time providing services to our advisor. Our advisor is responsible for a pro rata portion of each employee’s compensation based upon the approximate percentage of time the employee dedicates to our advisor. Carter/Validus Advisors, LLC may assign the advisory agreement to an affiliate upon approval of a majority of our independent directors. The advisory agreement may be assigned or transferred to a successor advisor; provided that at least a majority of our independent directors determines that any such successor advisor possesses sufficient qualifications to perform the advisory function and to justify the compensation payable to the advisor. Our independent directors will base their determination on the general facts and circumstances that they deem applicable, including the overall experience and specific industry experience of the successor advisor and its management. Other factors that will be considered are the compensation to be paid to the successor advisor and any potential conflicts of interest that may occur.

The fees payable to Carter/Validus Advisors, LLC or its affiliates under the advisory agreement are described in further detail in the section captioned “Management Compensation” below. We also describe in that section our obligation to reimburse Carter/Validus Advisors, LLC for organization and offering expenses, administrative and management services, and payments made by Carter/Validus Advisors, LLC to third parties in connection with potential acquisitions.

Affiliated Companies

Property Manager

Our properties will be managed and leased initially by Carter Real Estate Management Services, LLC, our property manager. Carter Real Estate Management Services, LLC is indirectly wholly owned and controlled by Carter & Associates, LLC. The officers and key personnel of our property manager are as follows:

   
Name   Age   Position(s)
Bob Peterson   58   Chairman of the Board and Chief Executive Officer
John Carter   49   Executive Vice President
Holly Hughes   41   Executive Vice President and Chief Administrative Officer
Rutledge Beacham   64   Vice President — Property and Facility Management
Mike Burson   57   Vice President — Property and Facility Management
Dena Rodrigues   48   Vice President — Property and Facility Management

The background of Mr. Carter is described in the “Management — Executive Officers and Directors” section of this prospectus and the background of Mr. Peterson is described in the “Management — The Advisor” section of this prospectus.

Holly Hughes is Executive Vice President and Chief Administrative Officer of Carter Real Estate Management Services, LLC. She also is Executive Vice President and Chief Administrative Officer of Carter & Associates. Ms. Hughes joined Carter & Associates in 1997. Within Carter & Associates, Ms. Hughes was promoted to Vice President in 2000 and Executive Vice President in 2005, a position she currently holds and in which she is responsible for operations in 11 states, encompassing almost 25 million square feet of commercial real estate and 200 associates. She is a Certified Property Manager and a licensed real estate salesperson in Georgia. Ms. Hughes currently serves on the boards of directors of Sheltering Arms Childcare Centers, Make-A-Wish Foundations of Georgia and Alabama and the YWCA of Greater Atlanta and is an

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honorary board member of the Georgia State University Department of Real Estate. She also currently is affiliated with the Building Owners and Managers Association, Commercial Real Estate Women, CoreNet Global, Institute of Real Estate Management and International Facility Management. Ms. Hughes obtained a Bachelor of Science from Georgia State University in Atlanta, Georgia in 1994 and a Masters in Business Administration from Georgia State University in Atlanta, Georgia in 1997.

Rutledge Beacham is Vice President, Property and Facility Management of Carter Real Estate Management Services, LLC. He joined Carter & Associates in 1978 and currently is its Vice President, Property Management, in which he oversees more than 2.7 million square feet of office, industrial and retail properties. Mr. Beacham has more than 35 years of experience in commercial real estate. He currently is a licensed real estate broker in Georgia, a Real Property Administrator (designated by the Building Owners and Managers Association) and affiliated with the Society of Property Administrators. Mr. Beacham obtained a Bachelor of Science in Accounting from Georgia State University in Atlanta, Georgia in 1968.

Mike Burson is Vice President, Property and Facility Management of Carter Real Estate Management Services, LLC. He joined Carter & Associates in 1992 and currently is its Vice President, Property and Facility Management, in which he leads a 15 million square foot real estate portfolio across multiple markets. Mr. Burson has approximately 30 years of experience in the real estate industry, having served as First Vice President for Resources Property Management Corporation, in which he was responsible for 6 million square feet of commercial real estate in 12 states, and as a Commercial Development Manager for Kaiser Development Company prior to joining Carter & Associates. He is a Certified Property Manager and a licensed real estate agent in Georgia. Mr. Burson currently is affiliated with the Institute of Real Estate Management and was President of its Atlanta Chapter #67 in 2001, as well as with the Building Owners and Managers Association, National Board of Realtors and the Atlanta Board of Realtors. Mr. Burson obtained a Bachelor in Business Administration from the University of Washington in Seattle, Washington in 1975.

Dena Rodrigues is Vice President, Property and Facility Management of Carter Real Estate Management Services, LLC. She joined Carter & Associates in February 2007 and currently is its Vice President, Property and Facility Management. Ms. Rodrigues has more than 20 years of experience in the real estate industry, with an emphasis on portfolio management, lease and contract negotiations and business development. Prior to joining Carter & Associates, she served as Vice President for Jones Lang LaSalle, in which she managed a portfolio of approximately 3 million square feet of commercial office space and worked for CarrAmerica Realty Corporation, in which she lead operations for a 25 building, 3 million square foot office portfolio and leased and renewed more than 1 million square feet of space each year. She also served on the Georgia Real Estate Commission from 2002 until 2006. Ms. Rodrigues is a Certified Property Manager and a licensed real estate salesperson in Georgia. She also currently serves as Chairman of the Cumberland Area Council and on the Board of Directors of the Cobb Chamber of Commerce, and is affiliated with the Institute of Real Estate Management, an organization for which she formerly served as Vice President of its Atlanta Chapter, the Atlanta Board of Commercial Realtors, the Building Owners and Managers Association and Commercial Real Estate Women. Ms. Rodrigues obtained a Bachelor of Science in Business Education from the University of Tennessee in Knoxville, Tennessee in 1983.

Carter Real Estate Management Services, LLC was organized on December 29, 2009 to lease and manage properties that we or our affiliated entities acquire. In accordance with the property management and leasing agreement, we will pay to our advisor and its affiliates aggregate fees equal to: (a) with respect to single tenant properties, 3.0% of gross revenues from the properties managed; and (b) with respect to multi-tenant properties, 4.0% of gross revenues from the properties managed. Notwithstanding the foregoing, our advisor and its affiliates may be entitled to receive higher fees if our property manager demonstrates to the satisfaction of a majority of the directors (including a majority of the independent directors) that a higher competitive fee is justified for the services rendered. We also will reimburse the property manager and its affiliates for property-level expenses that they pay or incur on our behalf, including salaries, bonuses and benefits of persons employed by the property manager and its affiliates except for the salaries, bonuses and benefits of persons who also serve as one of our executive officers or as an executive officer of the property manager or its affiliates. The property manager and its affiliates may subcontract the performance of their duties to third parties and pay all or a portion of the property management fee to the third parties with whom they contract for these services. If we contract directly with third parties for such services we will pay them

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customary market fees and will pay Carter Real Estate Management Services, LLC an oversight fee equal to 1.0% of the gross revenues of the property managed. In no event will we pay our property manager or an affiliate both a property management fee and an oversight fee with respect to any particular property. Carter Real Estate Management Services, LLC derives substantially all of its income from the property management and leasing services it performs for us.

If Carter Real Estate Management Services, LLC assists a tenant with tenant improvements, a separate fee may be charged to, and payable by, us. This fee will not exceed 5.0% of the cost of the tenant improvements. The property manager will only provide these services if it does not cause any of our income from the applicable property to be treated as other than rents from real property for purposes of the applicable REIT requirements described under “Certain Material U.S. Federal Income Tax Considerations.”

The property management and leasing agreement among Carter Real Estate Management Services, LLC, Carter Validus Mission Critical REIT, Inc. and Carter/Validus Advisors, LLC has a one-year term, which may be renewed for an unlimited number of successive one-year terms upon the mutual consent of the parties unless Carter Real Estate Management Services, LLC provides written notice of its intent to terminate at least 30 days prior to the expiration of the initial or renewal term. We also may terminate the agreement upon 30 days’ prior written notice in the event of gross negligence or willful misconduct by the property manager.

Carter Real Estate Management Services, LLC hires, directs and establishes policies for employees who have direct responsibility for the operations of each property we acquire, which may include, but is not limited to, on-site managers and building and maintenance personnel. Certain employees of the property manager may be employed on a part-time basis and also may be employed by our advisor or certain companies affiliated with it.

The property manager also directs the purchase of equipment and supplies, and supervises all maintenance activity, for our properties. The management fees paid to the property manager cover, without additional expense to us, all of the property manager’s general overhead costs. The principal office of the property manager is located at 171 17th Street NW, Suite 1200, Atlanta, Georgia 30363 and its telephone number is (404) 888-3000.

Dealer Manager

SC Distributors, LLC, our dealer manager, was organized in March 2009 for the purpose of participating in and facilitating the distribution of securities in this offering. SC Distributors, LLC has applied for membership as a member firm of FINRA and intends to be registered under the applicable federal and state securities laws and to be qualified to do business as a securities broker-dealer throughout the United States. Until our dealer manager becomes a FINRA member and is properly registered in the states where it is required to be registered, it may not engage in the conduct of a securities business including, but not limited to, participating in this offering or serving as our dealer manager. Patrick J. Miller, the President of our dealer manager, has over 23 years of experience in the financial services business, including extensive experience overseeing national sales and marketing.

SC Distributors, LLC will provide certain wholesaling, sales, promotional and marketing assistance services to us in connection with the distribution of the shares offered pursuant to this prospectus. It also may sell a limited number of shares at the retail level. The compensation we will pay to SC Distributors, LLC in connection with this offering is described in the section of this prospectus captioned “Management Compensation.” See also “Plan of Distribution — Dealer Manager and Compensation We Will Pay for the Sale of Our Shares.”

SC Distributors, LLC will be an affiliate of both our advisor and our property manager. See the section entitled “Conflicts of Interest” in this prospectus.

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The current officers of S C Distributors, LLC are:

   
Name   Age   Position(s)
            

Investment Decisions

The primary responsibility for the investment decisions of Carter/Validus Advisors, LLC and its affiliates, the negotiation for these investments, and the property management and leasing of these investment properties resides with Messrs. Carter, Peterson, Winslow and Seton and Ms. Drummond. Carter/Validus Advisors, LLC seeks to invest in commercial properties on our behalf that satisfy our investment objectives. Except as described below, to the extent we invest in properties, a majority of the directors will approve the consideration paid for such properties based on the fair market value of the properties. Notwithstanding the foregoing, our advisor may purchase on our account, without the prior approval of the board of directors, properties with a purchase price of less than $15,000,000, so long as the investment in the property would not, if consummated, violate our investment guidelines or any restrictions on indebtedness and the consideration to be paid for such properties does not exceed the fair market value of such properties. If a majority of independent directors so determines, if an asset is acquired from our advisor, one or more of our directors, our sponsor or any of its affiliates, or if an asset with a purchase price of less than $15,000,000 is acquired by our advisor without the prior approval of the board of directors, the fair market value will be determined by a qualified independent real estate appraiser selected by the independent directors.

Appraisals are estimates of value and should not be relied on as measures of true worth or realizable value. We will maintain the appraisal in our records for at least five years, and copies of each appraisal will be available for review by stockholders upon their request.

Certain Relationships and Related Transactions

Advisory Agreement.  We will enter into an advisory agreement with Carter/Validus Advisors, LLC, whereby Carter/Validus Advisors, LLC will manage our day-to-day operations. We will pay Carter/Validus Advisors, LLC an asset management fee equal to 0.75% of the cost our assets (cost will include the purchase price, acquisition expenses, capital expenditures, and other customarily capitalized costs but exclude acquisition fees). This fee will be payable quarterly in arrears, based on assets held by us on the last day of such quarter. In the sole discretion of our advisor, our advisor may elect to have these fees paid, in whole or in part, in cash or OP Units. See the section entitled “— The Advisor” in this prospectus. We will reimburse Carter/Validus Advisors, LLC up to 1.25% of gross offering proceeds for organization and offering expenses and for expenses actually incurred (including personnel costs) related to selecting, evaluating and acquiring assets on our behalf regardless of whether we actually acquire the related assets. If we do not raise the minimum amount of the offering, we will not reimburse our advisor for our organization and offering expenses.

We also will pay to Carter/Validus Advisors, LLC acquisition fees equal to 2.0% of the contract purchase price of each property or asset that we acquire (including our pro rata share of debt attributable to such property) and 2.0% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment). In the sole discretion of our advisor, our advisor may elect to have these fees paid, in whole or in part, in cash or OP Units. In addition, if during the period ending two years after the close of the offering, we sell assets and then reinvest in other assets, we will pay to Carter/Validus Advisors, LLC 2.0% of the contract purchase price of each property acquired (including our pro rata share of debt attributable to such property) and 2.0% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment); provided, however, that in no event shall the aggregate acquisition fee paid in respect of such sale or reinvestment exceed 6.0% of the contract purchase price of each property (including our pro rata share of debt attributable to such property) or 6.0% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment). In addition, we will reimburse Carter/Validus Advisors, LLC for expenses actually incurred (including personnel costs) related to selecting, evaluating and acquiring assets on our behalf, regardless of whether we actually acquire the related assets. In addition, we also will pay third parties, or reimburse the advisor or its affiliates, for any investment-related expenses due to third parties, including, but not limited to, legal fees and expenses,

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travel and communications expenses, costs of appraisals, accounting fees and expenses, third-party brokerage or finders fees, title insurance expenses, survey expenses, property inspection expenses and other closing costs regardless of whether we acquire the related assets. We expect these expenses to be approximately 0.5% of the purchase price of each property (including our pro rata share of debt attributable to such property) and 0.5% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment). In no event will the total of all acquisition fees and acquisition expenses payable with respect to a particular investment exceed 6% of the contract purchase price of each property (including our pro rata share of debt attributable to such property) or 6% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment). See the section entitled “— The Advisor” in this prospectus.

For substantial assistance in connection with the sale of properties, we will pay Carter/Validus Advisors, LLC a real estate commission paid on the sale of property, up to the lesser of 1.5% of the contract sales price and one-half of the total brokerage commission paid if a third party broker is also involved; provided, however, that in no event may the real estate commissions paid to our advisor, its affiliates and unaffiliated third parties exceed the lesser of 6% of the contract sales price and a reasonable, customary and competitive real estate commission in light of the size, type and location of the property. In the sole discretion of our advisor, our advisor may elect to have these fees paid, in whole or in part, in cash or OP Units. See the section entitled “— The Advisor” in this prospectus.

Our advisor will receive a subordinated participation in net sale proceeds equal to 15% of the remaining net sale proceeds after return of capital contributions plus payment to investors of an 8% annual cumulative, pre-tax, non-compounded return on the capital contributed by investors. In addition, our advisor will receive a subordinated incentive listing fee equal to 15% of the amount by which the sum of our adjusted market value plus distributions exceeds the sum of the aggregate capital contributed by investors plus an amount equal to an 8% annual cumulative, pre-tax, non-compounded return on the investors’ capital contributed to investors. However, Carter/Validus Advisors, LLC cannot earn both the subordinated participation in net sale proceeds and the subordinated listing fee. The subordinated participation in net sale proceeds or the subordinated listing fee, as the case may be, will be paid in the form of a non-interest bearing promissory note that will be repaid from the net sale proceeds of each sale after the date of the termination or listing. At the time of such sale, we may, however, at our discretion, pay all or a portion of such promissory note with shares of our common stock or cash. See the section entitled “— The Advisor” in this prospectus.

Upon termination of the advisory agreement, our advisor shall be entitled to a subordinated termination fee. In addition, our advisor may elect to defer its right to receive a subordinated termination fee until either a listing on a national securities exchange or other Liquidity Event occurs.

Property Management and Leasing Agreement.  We will enter into a Property Management and Leasing Agreement with Carter Real Estate Management Services, LLC. We will pay to our advisor and its affiliates aggregate fees equal to: (a) with respect to single tenant properties, 3.0% of gross revenues from the properties managed; and (b) with respect to multi-tenant properties, 4.0% of gross revenues from the properties managed. Notwithstanding the foregoing, our advisor and its affiliates may be entitled to receive higher fees if our property manager demonstrates to the satisfaction of a majority of the directors (including a majority of the independent directors) that a higher competitive fee is justified for the services rendered. We also will reimburse the property manager and its affiliates for property-level expenses that they pay or incur on our behalf, including salaries, bonuses and benefits of persons employed by the property manager and its affiliates except for the salaries, bonuses and benefits of persons who also serve as one of our executive officers or as an executive officer of the property manager or its affiliates. The property manager and its affiliates may subcontract the performance of their duties to third parties and pay all or a portion of the property management fee to the third parties with whom they contract for these services. If we contract directly with third parties for such services we will pay them customary market fees and will pay Carter Real Estate Management Services, LLC an oversight fee equal to 1.0% of the gross revenues of the property managed. In no event will we pay our advisor or an affiliate both a property management fee and an oversight fee with respect to any particular property.

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Dealer Manager Agreement.  We will enter into a Dealer Manager Agreement with SC Distributors, LLC Securities, LLC, our dealer manager. We will pay to SC Distributors, LLC a selling commission equal to 7% of the gross offering proceeds from this offering, except that no selling commissions will be paid on shares sold under our distribution reinvestment plan. SC Distributors, LLC may reallow all or a portion of its selling commission to participating broker-dealers. SC Distributors, LLC also will waive the selling commission with respect to shares sold by an investment advisory representative. Additionally, we will pay to SC Distributors, LLC a dealer manager fee equal to 2.75% of the gross offering proceeds sold through broker-dealers. SC Distributors, LLC Securities, LLC may reallow all or a portion of its dealer manager fee to participating broker-dealers. We will not pay a dealer manager fee for shares purchased through our distribution reinvestment plan. For a further description of this agreement, see the sections entitled “— Affiliated Companies — Dealer Manager,” “Management Compensation,” “Plan of Distribution” and “Conflicts of Interest” in this prospectus.

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MANAGEMENT COMPENSATION

We have no paid employees. Carter/Validus Advisors, LLC, our advisor, and its affiliates, manages our day-to-day affairs. The following table summarizes all of the compensation and fees we pay to Carter/Validus Advisors, LLC and its affiliates, including amounts to reimburse their costs in providing services. In the sole discretion of our advisor, the advisor may elect to have certain fees and commissions paid, in whole or in part, in cash or OP Units. The selling commissions may vary for different categories of purchasers. See the section entitled “Plan of Distribution” in this prospectus. No effect is given to any shares sold through our distribution reinvestment plan.

   
Type of Compensation   Determination of Amount   Estimated Amount for
Minimum Offering
(200,000 shares)/
Maximum Offering
(175,000,000 shares)
Offering Stage
Selling Commission   We will pay to SC Distributors, LLC 7% of gross proceeds of our primary offering; we will not pay any selling commissions on sales of shares under our distribution reinvestment plan; SC Distributors, LLC may reallow all or a portion of its selling commissions to participating broker-dealers.   $140,000 / $105,000,000
Dealer Manager Fee   We will pay to SC Distributors, LLC 2.75% of gross proceeds of our primary offering; we will not pay a dealer manager fee with respect to sales under our distribution reinvestment plan; SC Distributors, LLC may reallow all or a portion of its dealer manager fees to participating broker-dealers.   $55,000 / $41,250,000
Organization and Offering Expenses   We will reimburse Carter/Validus Advisors, LLC up to 1.25% of the gross offering proceeds for organization and offering expenses (other than selling commissions and dealer manger fees). If we do not raise the minimum amount of the offering, we will not reimburse Carter/Validus Advisors, LLC for organization and offering expenses.(1)   $25,000 / $18,750,000
Operational Stage
Acquisition Fees   We will pay to Carter/Validus Advisors, LLC 2.0% of the contract purchase price of each property acquired (including our pro rata share of debt attributable to such property) and 2.0% of the amount advanced for a loan or other real estate-related investment (including our pro rata share of debt attributable to such investment). For purposes of this prospectus, “contract purchase price” means the amount actually paid or allocated in respect of the purchase, development, construction or improvement of a property or the amount actually paid or allocated in respect of the purchase of loans or other real-estate related assets, in each case exclusive of   $34,698 / $26,023,392 (or $69,396 / $52,046,784, assuming that we incur our expected leverage set forth in our investment guidelines.)

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Type of Compensation   Determination of Amount   Estimated Amount for
Minimum Offering
(200,000 shares)/
Maximum Offering
(175,000,000 shares)
     acquisition fees and acquisition expenses, but in each case including any indebtedness assumed or incurred in respect of such investment.(2)(3)     
Acquisition Expenses   Reimbursement of acquisition expenses incurred in the process of acquiring properties or other real estate-related investments (including expenses relating to potential investments that we do not close), such as legal fees and expenses, costs of real estate due diligence, travel and communications expenses, accounting fees and expenses and other closing costs. We expect these expenses will be approximately 0.5% of the purchase price of each property or real estate-related investment.   $8,625 / $6,505,848 (or $17,250 / $13,011,696, assuming that we incur our expected leverage set forth in our investment guidelines.)
Asset Management Fees   We will pay Carter/Validus Advisors, LLC a fee equal to 0.75% of the cost of our assets (cost will include the purchase price, acquisition expenses, capital expenditures and other customarily capitalized costs but exclude acquisition fees). This fee will be payable quarterly in arrears, based on assets held by us on the last day of such quarter.(4)   Not determinable at this time. Because the fee is based on a fixed percentage of aggregate asset value, there is no maximum dollar amount of this fee.
Property Management and Leasing Fees   In connection with the rental, leasing, operation and management of our properties, we will pay our advisor and its affiliates aggregate fees equal to: (a) with respect to single tenant properties, 3.0% of gross revenues from the properties managed; and (b) with respect to multi-tenant properties, 4.0% of gross revenues from the properties managed. We also will reimburse the property manager and its affiliates for property-level expenses that any of them pay or incur on our behalf, including salaries, bonuses and benefits of persons employed by the property manager and its affiliates except for the salaries, bonuses and benefits of persons who also serve as one of our executive officers or as an executive officer of the property manager or its affiliates. The property manager and its affiliates may subcontract the performance of their duties to third parties and pay all or a portion of the property management fee to the third parties with whom they contract for these services. If we contract directly with third parties for such services, we will pay them customary market fees and will pay Carter Real Estate Management Services, LLC an oversight fee equal to 1.0% of   Not determinable at this time. Because the fee is based on a fixed percentage of gross revenue and/or

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Type of Compensation   Determination of Amount   Estimated Amount for
Minimum Offering
(200,000 shares)/
Maximum Offering
(175,000,000 shares)
     the gross revenues of the property managed. In no event will we pay our property manager, our advisor or any affiliate both a property management fee and an oversight fee with respect to any particular property.(5)   market rates, there is no maximum dollar amount ofthis fee.
     We may also pay Carter Real Estate Management Services, LLC a separate fee for the one-time initial rent-up or leasing-up of newly constructed properties in an amount not to exceed the fee customarily charged in arm’s length transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of brokers and agents in such area.    
Construction Management Fee   For acting as general contractor and/or construction manager to supervise or coordinate projects or to provide major repairs or rehabilitation on our properties, we may pay Carter Real Estate Management Services, LLC up to 5.0% of the cost of the projects, repairs and/or rehabilitation, as applicable.   Not determinable at this time. Because the fee is based on a fixed percentage of certain costs, there is no maximum dollar amount of this fee.
Operating Expenses   We will reimburse our advisor’s costs of providing administrative services, subject to the limitation that we will not reimburse our advisor for any amount by which our operating expenses (including the asset management fee) at the end of the four preceding fiscal quarters exceeds the greater of (a) 2% of average invested assets and (b) 25% of net income. For these purposes: “average invested assets” means, for any period, the average of the aggregate book value of our assets (including lease intangibles) invested, directly or indirectly, in financial instruments, debt and equity securities and equity interests in and loans secured by real estate assets (including amounts invested in REITs and other real estate operating companies) before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of these values at the end of each month during the period; and “net income” means total revenues less expenses other than additions to reserves for depreciation, bad debts or other similar non-cash reserves, and excluding excludes any gain from the sale of assets for that period. Additionally,   Not determinable at this time.

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Type of Compensation   Determination of Amount   Estimated Amount for
Minimum Offering
(200,000 shares)/
Maximum Offering
(175,000,000 shares)
     we will not reimburse our advisor for personnel costs in connection with services for which the advisor receives acquisition fees or real estate commissions.     
Liquidation/Listing Stage
Real Estate Commissions   For substantial assistance in connection with the sale of properties, we will pay Carter/Validus Advisors, LLC a real estate commission paid on the sale of a property, up to the lesser of 1.5% of the contract sales price and one-half of the total brokerage commission paid if a third party broker is also involved; provided, however, that in no event may the real estate commissions paid to our advisor, its affiliates and unaffiliated third parties exceed the lesser of 6% of the contract sales price and a reasonable, customary and competitive real estate commission in light of the size, type and location of the property.(6)   Not determinable at this time. Because the commission is based on a fixed percentage of the contract price for a sold property, there is no maximum dollar amount of these commissions.
Subordinated Participation in Net Sale Proceeds (payable only if we are not listed on an exchange)(7)(8)   Our advisor will receive 15% of the remaining net sale proceeds after return of capital contributions plus payment to investors of an 8% annual cumulative, pre-tax, non-compounded return on the capital contributed by investors. We cannot assure you that we will provide this 8% return, which we have disclosed solely as a measure for our advisor’s and its affiliates’ performance compensation.   Not determinable at this time. There is no maximum amount of these payments.
Subordinated Incentive Listing Fee (payable only if we are listed on an exchange, which we have no intention to do at this time)(7)(8)   Our advisor will receive 15% of the amount by which the sum of our adjusted market value plus distributions exceeds the sum of the aggregate capital contributed by investors plus an amount equal to an 8% annual cumulative, pre-tax, non-compounded return to investors. We cannot assure you that we will provide this 8% return, which we have disclosed solely as a measure for our advisor’s and its affiliates’ performance compensation.   Not determinable at this time. There is no maximum amount of this fee.
Subordinated Termination Fee   Upon termination or non-renewal of the advisory agreement, our advisor shall be entitled to a subordinated termination fee. In addition, our advisor may elect to defer its right to receive a subordinated termination fee until either a listing on a national securities exchange or other Liquidity Event occurs.(9)   Not determinable at this time. There is no maximum amount of this fee.

(1) These organization and offering expenses include, without limitation, all expenses (other than selling commissions and the dealer manager fee) incurred by and to be paid by us in connection with this offering, including our legal, accounting, printing, mailing and filing fees, charges of our escrow holder

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and transfer agents, due diligence expense reimbursements to participating broker-dealers included in a detailed and itemized invoice, and amounts to reimburse Carter/Validus Advisors, LLC for its portion of the salaries of the employees of its affiliates who provide services to our advisor and other costs in connection with administrative oversight of the offering and marketing process and preparing supplemental sales materials, holding educational conferences and attending retail seminars conducted by broker-dealers. Our advisor will not be reimbursed for the direct payment of such organization and offering expenses that exceed 1.25% of the aggregate gross proceeds of this offering. We also will pay a $35.00 fee per subscription agreement to our advisor for reviewing and processing subscription agreements.
(2) In the sole discretion of our advisor, our advisor may elect to have these fees paid, in whole or in part, in cash or OP Units. For the purposes of the payment of these fees, each OP Unit will be valued at the per share offering price of our common stock minus the maximum selling commissions and dealer manager fee allowed in the offering, to account for the fact that no selling commissions or dealer manager fees will be paid in connection with any such issuances (at the offering price, each such OP Unit would be issued at $9.025 per share). Each OP Unit will be exchangeable for the cash value of one share of our common stock or, at our option, one share of our common stock.
(3) In addition, if during the period ending two years after the close of this offering, we sell an asset and then reinvest the proceeds from such sale in other assets, we will pay to our advisor 2.0% of the contract purchase price of each property acquired with reinvested proceeds (including our pro rata share of debt attributable to such property) and 2.0% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment); provided, however, that in no event shall the aggregate acquisition fee paid in respect of such sale or reinvestment exceed 6.0% of the contract purchase price of each property (including our pro rata share of debt attributable to such property) or 6.0% of the amount advanced for a loan or other investment (including our pro rata share of debt attributable to such investment).
(4) In the sole discretion of our advisor, our advisor may elect to have these fees paid, in whole or in part, in cash or OP Units. See footnote 2 above.
(5) Notwithstanding the foregoing, our advisor and its affiliates may be entitled to receive higher fees if our property manager demonstrates to the satisfaction of a majority of the directors (including a majority of the independent directors) that a higher competitive fee is justified for the services rendered.
(6) In the sole discretion of our advisor, our advisor may elect to have these fees paid, in whole or in part, in cash or OP Units. Substantial assistance in connection with the sale of an asset includes the advisor’s preparation of an investment package for an asset (including an investment analysis, an asset description and other due diligence information) or such other substantial services performed by the advisor in connection with a sale. See footnote 2 above.
(7) Carter/Validus Advisors, LLC cannot earn both the subordinated participation in net sale proceeds and the subordinated incentive listing fee. The subordinated participation in net sale proceeds or the subordinated incentive listing fee, as the case may be, will be paid in the form of a non-interest bearing promissory note that will be repaid from the net sale proceeds of each sale after the date of the termination or listing. At the time of such sale, we may, however, at our discretion, pay all or a portion of such promissory note with shares of our common stock or cash. If shares are used for payment, we do not anticipate that they will be registered under the Securities Act and, therefore, will be subject to restrictions on transferability. Any portion of the subordinated participation in net sale proceeds that Carter/Validus Advisors, LLC receives prior to our listing will offset the amount otherwise due pursuant to the subordinated incentive listing fee. In no event will the amount paid to Carter/Validus Advisors, LLC under the promissory note, if any, exceed the amount considered presumptively reasonable by the NASAA REIT Guidelines.
(8) If for any reason our independent directors determine that we should become “self-administered,” including in contemplation of a listing on a national securities exchange, we may, among other methods, acquire the business conducted by our advisor after a good faith negotiation with our advisor. Alternatively, if at any time the shares become listed on a national securities exchange and our independent directors determine that we should not become “self-administered,” we will negotiate in good faith with Carter/Validus Advisors, LLC a fee structure appropriate for an entity with a perpetual life. Our independent directors must approve the new fee structure negotiated with Carter/Validus Advisors, LLC. The market value of our outstanding common stock will be calculated based on the average market value of the shares of common stock issued and outstanding at listing over the 30 trading days beginning 180 days after the shares are first listed or included for quotation. We have the option to pay the subordinated incentive listing fee in the form of stock, cash, a promissory note or any