10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2014

OR

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

For the transition period from _________ to __________

Commission file number: 333-169821

American Realty Capital Daily Net Asset Value Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland	27-3441614
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
405 Park Ave., 15th Floor, New York, NY	10022
(Address of principal executive offices)	(Zip Code)
(212) 415-6500
(Registrant’s telephone number, including area code)

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

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

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

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

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

On April 30, 2014, the registrant had 1,106,860 shares of retail common stock and 1,180,074 shares of institutional common stock outstanding.

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2014 (Unaudited) and December 31, 2013	2
Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2014 and 2013 (Unaudited)	3
Consolidated Statement of Equity for the Three Months Ended March 31, 2014 (Unaudited)	4
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013 (Unaudited)	5
Notes to Consolidated Financial Statements (Unaudited)	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	31
Item 4. Controls and Procedures	32
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	33
Item 1A. Risk Factors	33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3. Defaults Upon Senior Securities	34
Item 4. Mine Safety Disclosures	34
Item 5. Other Information	34
Item 6. Exhibits	35
Signatures	36

1

Part I — Financial Information

Item 1. Financial Statements

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

CONSOLIDATED BALANCE SHEETS

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

	March 31, 2014			December 31, 2013
	(Unaudited)
ASSETS
Real estate investments, at cost:
Land	$	2,559		$	2,559
Buildings, fixtures and improvements	26,372			26,372
Acquired intangible lease assets	3,858			3,858
Total real estate investments, at cost	32,789			32,789
Less accumulated depreciation and amortization	(3,251		)	(2,787		)
Total real estate investments, net	29,538			30,002
Cash	984			178
Restricted cash	151			151
Prepaid expenses and other assets	380			410
Deferred financing costs, net	185			201
Total assets	$	31,238		$	30,942
LIABILITIES AND EQUITY
Mortgage notes payable	$	11,246		$	11,246
Note payable	5,000			5,000
Derivatives, at fair value	179			189
Accounts payable and accrued expenses	3,234			3,319
Deferred rent and other liabilities	131			143
Distributions payable	117			113
Total liabilities	19,907			20,010
Temporary equity:
Redeemable common stock	1,100			1,048
Permanent equity:
Stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000 authorized, none issued and outstanding at March 31, 2014 and December 31, 2013	—			—
Common stock, $0.01 par value, 300,000,000 shares authorized, 2,210,515 and 2,103,344 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively	22			21
Additional paid-in capital	14,405			13,616
Accumulated other comprehensive loss	(179		)	(189		)
Accumulated deficit	(4,017		)	(3,564		)
Total stockholders' equity	10,231			9,884
Total liabilities and equity	$	31,238		$	30,942

The accompanying notes are an integral part of these statements.

2

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

(Unaudited)

	Three Months Ended March 31,
	2014			2013
Revenues:
Rental income	$	643		$	541
Operating expense reimbursement	22			19
Total revenues	665			560
Operating expenses:
Property operating	25			21
Acquisition and transaction related	—			57
General and administrative	69			70
Depreciation and amortization	464			393
Total operating expenses	558			541
Operating income	107			19
Other income (expense):
Interest expense	(229		)	(312		)
Net loss	(122		)	(293		)
Other comprehensive income (loss):
Designated derivatives, fair value adjustment	10			24
Comprehensive loss	$	(112	)	$	(269	)
Basic and diluted weighted average shares outstanding	2,121,490			1,011,067
Basic and diluted net loss per share	$	(0.06	)	$	(0.29	)

The accompanying notes are an integral part of these statements.

3

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the Three Months Ended March 31, 2014

(In thousands, except for share data)

(Unaudited)

	Permanent Equity																Temporary Equity
	Common Stock
	Number of Shares		Par Value		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders' Equity			Redeemable Common Stock
Balance, December 31, 2013	2,103,344		$	21	$	13,616		$	(189	)	$	(3,564	)	$	9,884		$	1,048
Issuance of common stock	107,776		1		1,099			—			—			1,100			—
Redeemable common stock	—		—		(52		)	—			—			(52		)	52
Common stock offering costs, commissions and dealer manager fees	—		—		(259		)	—			—			(259		)	—
Common stock issued through distribution reinvestment plan	15,494		—		155			—			—			155			—
Common stock repurchases	(16,099	)	—		(163		)	—			—			(163		)	—
Share-based compensation	—		—		9			—			—			9			—
Distributions declared	—		—		—			—			(331		)	(331		)	—
Net loss	—		—		—			—			(122		)	(122		)	—
Other comprehensive loss	—		—		—			10			—			10			—
Balance, March 31, 2014	2,210,515		$	22	$	14,405		$	(179	)	$	(4,017	)	$	10,231		$	1,100

The accompanying notes are an integral part of this statement.

4

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2014			2013
Cash flows from operating activities:
Net loss	$	(122	)	$	(293	)
Adjustment to reconcile net loss to net cash provided by operating activities:
Depreciation	391			336
Amortization of intangibles	73			57
Amortization of deferred financing costs	16			36
Share-based compensation	9			10
Changes in assets and liabilities:
Prepaid expenses and other assets	32			(35		)
Accounts payable and accrued expenses	81			67
Deferred rent and other liabilities	(12		)	7
Net cash provided by operating activities	468			185
Cash flows from investing activities:
Investment in real estate and other assets	—			(1,074		)
Deposits for real estate acquisitions	—			(7		)
Net cash used in investing activities	—			(1,081		)
Cash flows from financing activities:
Repayments of mortgage notes payable	—			(350		)
Proceeds from issuance of common stock	1,098			2,713
Common stock repurchases	(163		)	—
Payments of offering costs and fees related to stock issuance	(259		)	(317		)
Distributions paid	(172		)	(104		)
Repayment of advances from affiliate	(166		)	(141		)
Net cash provided by financing activities	338			1,801
Net change in cash	806			905
Cash, beginning of period	178			196
Cash, end of period	$	984		$	1,101
Supplemental Disclosures
Cash paid for interest	$	214		$	181
Cash paid for income taxes	$	4		$	3
Non-cash Investing and Financing Activities:
Common stock issued through distribution reinvestment plan	$	155		$	38

The accompanying notes are an integral part of these statements.

5

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

Note 1 — Organization

American Realty Capital Daily Net Asset Value Trust, Inc. (the “Company”), incorporated on September 10, 2010, is a Maryland corporation that intends to qualify as a real estate investment trust for U.S. federal income tax purposes for the taxable year ending December 31, 2013. On August 15, 2011, the Company commenced its initial public offering (“IPO”) on a “reasonable best efforts” basis of up to a maximum of approximately $1.5 billion of common stock, par value $0.01 per share, consisting of up to 101.0 million retail shares to be sold to the public through broker dealers and up to 55.6 million institutional shares to be sold through registered investment advisors and broker dealers that are managing wrap or fees-based accounts, pursuant to a registration statement on Form S-11 (File No. 333-169821) (the “Registration Statement”) filed with the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended.  The Registration Statement also covers up to 25.0 million shares of common stock pursuant to a distribution reinvestment plan (the “DRIP”) under which common stockholders may elect to have their distributions reinvested in additional shares of common stock. The per share purchase price for the Company's common stock varies daily and is based on the Company's net asset value (“NAV”) per share.

As of March 31, 2014, the Company had 2.2 million shares of common stock outstanding, including unvested restricted shares and shares issued under the DRIP and had received total gross proceeds, net of repurchases, from the IPO of $21.8 million, including shares issued under the DRIP. As of March 31, 2014, the aggregate value of all issuances and subscriptions of common stock outstanding was $22.0 million, which represents the aggregate number of shares of each class of common stock outstanding, excluding unvested restricted stock, multiplied by the respective NAV per share for each class.

The Company was formed to primarily acquire freestanding, single-tenant bank branches, convenience stores, and office, industrial and retail properties net leased to investment grade and other creditworthy tenants. The Company may also originate or acquire first mortgage loans secured by real estate. The Company purchased its first properties and commenced active operations in January 2012. As of March 31, 2014, the Company owned 13 properties with an aggregate purchase price of $32.8 million, comprising 0.2 million rentable square feet, which were 100% leased.

Substantially all of the Company's business is conducted through American Realty Capital Operating Partnership II, L.P. (the “OP”), a Delaware limited partnership. The Company is the sole general partner and holds substantially all of the units of limited partner interests in the OP (“OP units”). The Special Limited Partner holds 222 units of limited partner interest in the OP, which represents a nominal percentage of the aggregate OP ownership. A holder of OP units has the right to convert OP units for the cash value of a corresponding number of shares of common stock or, at the option of the OP, a corresponding number of the Company's common stock, in accordance with the limited partnership agreement of the OP. The remaining rights of the holders of OP units are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP’s assets.

The Company has no employees. The Company has retained American Realty Capital Advisors II, LLC (the “Advisor”) to manage its affairs on a day-to-day basis. American Realty Capital Properties II, LLC (the “Property Manager”) serves as the Company's property manager. Realty Capital Securities, LLC (the “Dealer Manager”) serves as the dealer manager of the IPO. The Advisor and Property Manager are indirect wholly owned entities of, and the Dealer Manager is under common ownership with, the Company's sponsor, AR Capital, LLC (the “Sponsor”). These related parties receive compensation and fees for services related to the IPO and the investment and management of the Company's assets. These entities have received and will receive fees during the offering, acquisition, operational and liquidation stages.

Note 2 — Summary of Significant Accounting Policies

The accompanying consolidated financial statements of the Company included herein were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three months endedMarch 31, 2014 are not necessarily indicative of the results for the entire year or any subsequent interim period.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of, and for the year ended December 31, 2013, which are included in the Company's Annual Report on Form 10-K filed with the SEC on March 14, 2014. There have been no significant changes to the Company's significant accounting policies during the three months endedMarch 31, 2014 other than the updates described below.

6

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

Recently Issued Accounting Pronouncements

In February 2013, the FASB issued new accounting guidance clarifying the accounting and disclosure requirements for obligations resulting from joint and several liability arrangements for which the total amount under the arrangement is fixed at the reporting date. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2013. The adoption of this guidance did not have a material impact on its consolidated financial position, results of operations or cash flows.

In April 2014, the FASB amended the requirements for reporting discontinued operations. Under the revised guidance, in addition to other disclosure requirements, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component or group of components meets the criteria to be classified as held for sale, disposed of by sale or other than by sale. The Company has adopted the provisions of this guidance effective January 1, 2014 and has applied the provisions prospectively. The adoption of this guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

Note 3 — Real Estate Investments

There were no assets acquired or liabilities assumed during the three months endedMarch 31, 2014. The following table presents the allocation of the assets acquired and liabilities assumed during the three months endedMarch 31, 2013:

	Three Months Ended
(Dollar amounts in thousands)	March 31, 2013
Real estate investments, at cost:
Land	$	137
Buildings, fixtures and improvements	775
Total tangible assets	912
Acquired intangibles:
In-place leases	162
Total assets acquired	1,074
Cash paid for acquired real estate investments	$	1,074
Number of properties purchased	1

The following table presents future minimum base rental cash payments due to the Company subsequent to March 31, 2014.  These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes among other items.

(In thousands)	Future Minimum Base Rent Payments
April 1, 2014 - December 31, 2014	$	1,884
2015	2,513
2016	2,515
2017	2,564
2018	2,570
Thereafter	18,765
	$	30,811

7

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

The following table lists the tenants of the Company whose annualized rental income on a straight-line basis represented greater than 10% of total annualized rental income on a straight-line basis for all portfolio properties.

	March 31,
Tenant	2014	2013
FedEx	64.6%	67.8%
Dollar General	13.1%	10.2%
Family Dollar	*	15.0%

_____________________

* The tenant's annualized rental income on a straight-line basis was not greater than 10% of total annualized rental income on a straight-line basis for all portfolio properties as of the period specified.

The termination, delinquency or non-renewal of leases by one or more of the above tenants may have a material adverse effect on revenues. No other tenant represents more than 10% of annualized rental income for the periods presented.

The following table lists the states where the Company has concentrations of properties where annualized rental income on a straight-line basis represented greater than 10% of consolidated annualized rental income.

	March 31,
State	2014	2013
New York	59.0%	67.8%

Note 4 — Mortgage Notes Payable

The Company has two mortgage notes payable, which expire in 2017. The mortgage notes payable consist of the following:

(Dollar amounts in thousands)	Encumbered Properties	Outstanding Loan Amount		Weighted Average Effective Interest Rate (1)(2)		Weighted Average Maturity (2)
March 31, 2014	5	$	11,246	4.12	%	2.96
December 31, 2013	5	$	11,246	4.12	%	3.21

_____________________

(1) Interest rates are fixed rates or fixed through the use of derivative instruments used for interest rate hedging purposes.

(2) Calculated on a weighted average basis for all mortgages outstanding at March 31, 2014 and December 31, 2013, respectively.

The following table summarizes the scheduled aggregate principal payments subsequent to March 31, 2014:

(In thousands)	Future Principal Payments
April 1, 2014 - December 31, 2014	$	—
2015	—
2016	—
2017	11,246
2018	—
Thereafter	—
	$	11,246

The Company's sources of recourse financing generally include financial covenants, including restrictions on corporate guarantees, the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) as well as the maintenance of minimum net worth. As of March 31, 2014, the Company was in compliance with the covenants under the loan agreements.

8

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

Note 5 — Note Payable

In March 2012, the Company entered into an unsecured $5.0 million note payable with an entity affiliated with a principal stockholder. The note payable bears interest at a fixed rate of 8.0% per annum and was scheduled to mature on March 20, 2013. The note payable had two options for 1-year extensions, which have both been exercised. The note is due to mature in March 2015. The note payable requires monthly interest payments with the principal balance due at maturity. The note payable may be repaid at any time, in whole or in part. The Company is also required to pay an exit fee equal to 1.0% of the original loan amount upon any payment of principal on the loan. The exit fee was accrued as interest expense over the first one-year term of the note payable.

Note 6 — Fair Value of Financial Instruments

The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. This alternative approach also reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The guidance defines three levels of inputs that may be used to measure fair value:

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

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

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

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of March 31, 2014, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

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

9

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

The following table presents information about the Company’s liabilities (including derivatives that are presented net) measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those instruments fall.

(In thousands)	Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
March 31, 2014
Interest rate swap	$	—	$	179	$	—	$	179
December 31, 2013
Interest rate swap	$	—	$	189	$	—	$	189

A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the three months endedMarch 31, 2014 or 2013.

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, other receivables, due to affiliates, accounts payable and distributions payable approximates their carrying value on the consolidated balance sheets due to their short-term nature. The fair values of the Company’s remaining financial instruments that are not reported at fair value on the consolidated balance sheets are reported below.

		Carrying Amount at		Fair Value at		Carrying Amount at		Fair Value at
(In thousands)	Level	March 31, 2014		March 31, 2014		December 31, 2013		December 31, 2013
Mortgage notes payable	3	$	11,246	$	11,246	$	11,246	$	11,246
Note payable	3	$	5,000	$	5,000	$	5,000	$	5,000

The fair value of the mortgage notes and note payable are estimated using a discounted cash flow analysis based on the Advisor's experience with similar types of borrowing arrangements.

Note 7 —Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

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

Cash Flow Hedges of Interest Rate Risk

The Company's objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and collars as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate collars designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above the cap strike rate on the contract and payments of variable-rate amounts if interest rates fall below the floor strike rate on the contract.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2014, such derivatives were used to hedge the variable cash flows associated with variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.

10

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company's variable-rate debt. During the next twelve months, the Company estimates that an additional $0.1 million will be reclassified from other comprehensive income as an increase to interest expense.

The Company had the following outstanding interest rate derivative that was designated as a cash flow hedge of interest rate risk (dollar amounts in thousands).

Interest Rate Derivative	Number of Instruments	Notional Amount
Interest rate swap as of March 31, 2014	1	$	9,716
Interest rate swap as of December 31, 2013	1	$	9,716

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the balance sheets:

(In thousands)	Balance Sheet Location	March 31, 2014		December 31, 2013
Derivatives designated as hedging instruments:
Interest rate swap	Derivatives, at fair value	$	179	$	189

Derivatives in Cash Flow Hedging Relationships

The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges.

	Three Months Ended March 31,
(In thousands)	2014			2013
Amount of loss recognized in accumulated other comprehensive loss from interest rate derivatives (effective portion)	$	(22	)	$	(8	)
Amount of loss reclassified from accumulated other comprehensive income into income as interest expense (effective portion)	$	(32	)	$	(32	)
Amount of gain (loss) recognized in income on derivative instruments (ineffective portion and amount excluded from effectiveness testing)	$	—		$	—

The Company had no derivative assets. The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company's derivative liabilities:

	Offsetting of Derivative Liabilities
(In thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amount
March 31, 2014	$	179	$	—	$	179	$	—	$	—	$	179
December 31, 2013	$	189	$	—	$	189	$	—	$	—	$	189

Credit-Risk-Related Contingent Features

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

As of March 31, 2014, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $0.2 million. As of March 31, 2014, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of $0.2 million at March 31, 2014.

11

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

Reclassifications out of Accumulated Other Comprehensive Income (“AOCI”)

The following table details reclassification adjustments out of AOCI and the corresponding effect on net income:

AOCI Component (in thousands)	Amount Reclassified from AOCI				Affected Line Items in the Consolidated Statements of Operations and Comprehensive Loss
	Three Months Ended March 31,
	2014		2013
Designated derivatives, fair value adjustment	$	32	$	32	Interest expense

Note 8 — Common Stock

The following table details the Company's shares of common stock outstanding, excluding shares of unvested restricted stock, and NAV per share:

	March 31, 2014				December 31, 2013
Class of common stock	Number		NAV per share		Number		NAV per share
Retail	1,075,659		$	10.13	1,061,931		$	10.11
Institutional	1,118,656		$	9.94	1,025,213		$	9.94
Total	2,194,315	(1)			2,087,144	(1)

_____________________

(1) Excluding 16,200, respectively, at March 31, 2014 and December 31, 2013 of unvested restricted shares of common stock issued to independent directors under the restricted share plan.

On September 15, 2011, the Company's board of directors authorized and the Company declared, a distribution, which is calculated based on stockholders of record each day during the applicable period at a rate of $0.0017260274 per day or $0.63 per annum. The Company's distributions are payable by the 5th day following each month end to stockholders of record at the close of business each day during the prior month. Distribution payments are dependent on the availability of funds. The board of directors may reduce the amount of distributions paid or suspend distribution payments at any time, and therefore, distribution payments are not assured.

The following table summarizes the number of shares repurchased under the Company's Share Repurchase Program cumulatively through March 31, 2014:

	Number of Requests	Number of Shares	Average Price per Share
Cumulative repurchases as of December 31, 2013	3	44,672	$	9.63
Three months ended March 31, 2014	2	16,099	10.11
Cumulative repurchase requests as of March 31, 2014	5	60,771	$	9.75

Note 9 — Commitments and Contingencies

Litigation

In the ordinary course of business, the Company may become subject to litigation or claims. There are no material legal proceedings pending or known to be contemplated against the Company.

Environmental Matters

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

12

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

Note 10 — Related Party Transactions and Arrangements

As of March 31, 2014 and December 31, 2013, the Sponsor and an entity controlled by the Sponsor owned 244,444 shares of retail common stock. The Advisor and its affiliates may incur and pay costs and fees on behalf of the Company. All offering costs incurred by the Company or its affiliated entities on behalf of the Company are reflected in the accompanying balance sheets. As of March 31, 2014 and December 31, 2013, the Company had $1.0 million and $1.2 million, respectively, payable to affiliated entities, primarily related to funding the payment of third party professional fees and offering costs, net of a receivable related to general and administrative expenses absorbed by the Advisor.

Fees Paid in Connection with the IPO

The Dealer Manager receives fees and compensation in connection with the sale of the Company’s common stock. The Dealer Manager receives a selling commission of up to 7.0% of the per share purchase price of retail shares before reallowance of commissions earned by participating broker-dealers. In addition, the Dealer Manager receives up to 3.0% of the gross proceeds from the sale of retail shares, before reallowance to participating broker-dealers, as a dealer-manager fee. The Dealer Manager may reallow its dealer-manager fee to such participating broker-dealers. A participating broker dealer may elect to receive a fee equal to 7.5% of the gross proceeds from the sale of retail shares (not including selling commissions and dealer manager fees) by participating broker dealers, with 2.5% thereof paid at the time of such sale and 1.0% thereof paid on each anniversary of the closing of such sale up to and including the fifth anniversary of the closing of such sale. If this option is elected, the dealer manager fee will be reduced to 2.5% of gross proceeds (not including selling commissions and dealer manager fees).

For the institutional shares, the Dealer Manager receives an asset-based platform fee, which is a deferred distribution fee that compensates the Dealer Manager and participating broker-dealers for services in connection with the distribution of the institutional shares, that is payable monthly in arrears and is deducted from the daily NAV on the institutional shares in an amount equal to (a) the number of shares of our common stock outstanding each day during such month, excluding shares issued under the DRIP, multiplied by (b) 1/365th of 0.70% of the NAV on the institutional shares during such day. The Dealer Manager may re-allow a portion of this fee to participating broker dealers.

The Advisor and its affiliates will receive compensation and reimbursement for services relating to the IPO. All offering costs incurred by the Company or its affiliates on behalf of the Company are charged to additional paid-in capital on the accompanying balance sheets. The Company is responsible for offering and related costs from the ongoing offering, excluding commissions and dealer manager fees, up to a maximum of 1.5% of gross proceeds received from its ongoing offering of common stock, measured at the end of the offering. Offering costs in excess of the 1.5% cap as of the end of the offering are the Advisor's responsibility. As of March 31, 2014, offering and related costs exceeded 1.5% of gross proceeds received from the IPO by $5.3 million. The Advisor has elected to cap cumulative offering costs incurred by the Company, net of unpaid amounts, to 15% of gross common stock proceeds during the offering period. As of March 31, 2014, cumulative offering costs were $6.3 million. Cumulative offering costs net of unpaid amounts were less than the 15% threshold as of March 31, 2014.

No selling commission, dealer manager fees and offering costs incurred from the Advisor and Dealer Manager have been forgiven. The table below reflects the selling commissions, dealer manager fees and offering costs incurred from the Advisor and Dealer Manager for the three months endedMarch 31, 2014 and 2013, as well as the related payables as of March 31, 2014 and December 31, 2013:

	Three Months Ended March 31,				Payable as of
(In thousands)	2014		2013		March 31, 2014		December 31, 2013
Selling commissions and dealer manager fees	$	37	$	73	$	6	$	6
Other organization and offering costs	105		190		1,893		1,793
Total offering costs	$	142	$	263	$	1,899	$	1,799

13

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

Fees Paid in Connection With the Operations of the Company

The Advisor receives an acquisition fee of 1.0% of the contract purchase price of each acquired property and 1.0% of the amount advanced for a loan or other investment. The Advisor is also paid for services provided for which it incurs investment-related expenses ("insourced expenses"). Such insourced expenses will initially be fixed at, and may not exceed, 0.5% of the contract purchase price of each acquired property and 0.5% of the amount advanced for a loan or other investment. Additionally, the Company pays third party acquisition expenses. Once the proceeds from the IPO have been fully invested, the aggregate amount of acquisition fees shall not exceed 1.5% of the contract purchase price and the amount advanced for a loan or other investment for all the assets acquired. In no event will the total of all acquisition fees and acquisition expenses with respect to a particular investment exceed 4.5% of the contract purchase price or 4.5% of the amount advanced for a loan or other investment. Acquisition fees are recorded in acquisition and transaction related in the consolidated statement of operations.

The Company pays the Advisor a monthly asset management fee equal to one twelfth of 1.0% of the monthly average of our daily NAV, payable on the first business day of each month for the respective month. Such fee will be payable, at the discretion of our board of directors, in cash, common stock or restricted stock grants or any combination thereof. This fee will be allocated between the retail shares and institutional shares based on the relative NAV of each class. The amount of any asset management fee will be reduced to the extent that funds from operations, as adjusted, during the six months ending on the last day of the calendar quarter immediately preceding the date that such asset management fee is payable, is less than distributions declared with respect to such six month period. Asset management fees, if accrued, are recorded in operating fees to affiliates in the consolidated statement of operations.

For services in overseeing property management and leasing services provided by any person or entity that is not an affiliate of the Property Manager, we will pay the Property Manager an oversight fee equal to 1.0% of the gross revenues of the property managed. Oversight fees, if accrued, are recorded in operating fees to affiliates in the consolidated statement of operations. No such services have been provided by any person or entity that is not an affiliate of the Property Manager during the three months endedMarch 31, 2014 and 2013. There have been no oversight fees incurred during the three months endedMarch 31, 2014 and 2013.

The following table reflects related party fees incurred and forgiven.

	Three Months Ended March 31,								Payable as of
(In thousands)	2014				2013				March 31, 2014		December 31, 2013
	Incurred		Forgiven		Incurred		Forgiven
One-time fees:
Acquisition fees and related cost reimbursements	$	—	$	—	$	24	$	—	$	—	$	—
Other expense reimbursements	—		—		—		—		—		—
Ongoing fees:
Asset management fees (1)	53		53		25		25		—		—
Transfer agent fees	65		—		—		—		17		53
Total related party operation fees and reimbursements	$	118	$	53	$	49	$	25	$	17	$	53

_____________________________

(1) These cash fees have been waived. The Company’s board of directors may elect, subject to the Advisor’s approval, on a prospective basis, to pay asset management fees in the form of performance-based restricted shares.

The Company will reimburse the Advisor’s costs of providing administrative services, subject to the limitation that the Company will not reimburse the Advisor for any amount by which the Company's 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 or (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. Additionally, the Company will reimburse the Advisor for personnel costs in connection with other services during the operational stage, in addition to paying an asset management fee; however, the Company will not reimburse the Advisor for personnel costs in connection with services for which the Advisor receives acquisition fees or real estate commissions. There were no reimbursements incurred from the Advisor for providing services during the three months endedMarch 31, 2014 and 2013, respectively.

14

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

The Company will pay the Advisor an annual subordinated performance fee calculated on the basis of the Company's total return to stockholders, payable annually in arrears, such that for any year in which the Company's total return on stockholders’ capital exceeds 6% per annum, the Advisor will be entitled to 15% of the excess total return but not to exceed 10% of the aggregate total return for such year (which will take into account distributions and realized appreciation). This fee will be payable only upon the sale of assets, distributions or other event which results in our return on stockholders’ capital exceeding 6% per annum. There were no such fees incurred from the Advisor for providing services during the three months endedMarch 31, 2014 or 2013.

In order to improve operating cash flows and the ability to pay distributions from operating cash flows, the Advisor may waive certain fees, including asset management and property management fees. Because the Advisor may waive certain fees, cash flow from operations that would have been paid to the Advisor may be available to pay distributions to stockholders.  The fees that may be forgiven are not deferrals and accordingly, will not be paid to the Advisor in cash. In certain instances, to improve the Company’s working capital, the Advisor may elect to absorb a portion of the Company’s general and administrative costs or property operating expenses.

The Advisor elected to absorb $0.2 million and $0.1 million of general and administrative expenses during the three months endedMarch 31, 2014 and 2013, respectively. These costs are presented net in the accompanying consolidated statements of operations and comprehensive loss.

As the Company’s real estate portfolio matures, the Company expects cash flows from operations (reported in accordance with GAAP) to cover a more significant portion of distributions and over time to cover the entire distribution. As the cash flows from operations become more significant, the Advisor may discontinue its practice of forgiving fees and may charge the full fee owed to it in accordance with the Company’s agreements with the Advisor.

Fees Paid in Connection with the Liquidation or Listing of the Company’s Real Estate Assets

 The Company will pay a brokerage commission on the sale of property, not to exceed the lesser of 2% of the contract sale price of the property 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 the 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 each case, payable to the Advisor if the Advisor or its affiliates, as determined by a majority of the independent directors, provided a substantial amount of services in connection with the sale. There were no such amounts incurred during the three months endedMarch 31, 2014 or 2013.

If the Company is not simultaneously listed on an exchange, the Company will pay a subordinated participation in the net sales proceeds of the sale of real estate assets of 15% of remaining net sale proceeds after return of capital contributions to investors, plus payment to investors of an annual 6% cumulative, pre-tax non-compounded return on the capital contributed by investors.  The Company cannot assure that it will provide this 6% return but the Advisor will not be entitled to the subordinated participation in net sale proceeds unless the Company’s investors have received a 6% cumulative non-compounded return on their capital contributions. There were no such amounts incurred during the three months endedMarch 31, 2014 or 2013.

If the Company is listed on an exchange, the Company will pay a subordinated incentive listing distribution of 15%, payable in the form of a promissory note, of the amount by which the market value of the Company's issued and outstanding common stock, as adjusted, plus distributions exceeds the aggregate capital contributed by investors plus an amount equal to a 6% cumulative, pre-tax non-compounded annual return to investors.  The Company cannot assure that it will provide this 6% return but the Advisor will not be entitled to the subordinated incentive listing fee unless investors have received a 6% cumulative, pre-tax non-compounded return on their capital contributions. There were no such fees incurred during the three months endedMarch 31, 2014 or 2013. Neither the Advisor nor any of its affiliates can earn both the subordination participation in the net proceeds and the subordinated listing distribution.

Upon termination or non-renewal of the advisory agreement, the Advisor will receive distributions from the OP payable in the form of a promissory note. In addition, the Advisor may elect to defer its right to receive a subordinated distribution upon termination until either a listing on a national securities exchange or other liquidity event occurs.

15

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

Note 11 — Economic Dependency

Under various agreements, the Company has engaged or will engage the Advisor, its affiliates and entities under common ownership with the Advisor to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, the sale and maintenance of shares of the Company’s common stock available for issue, transfer agency services as well as other administrative responsibilities for the Company, including accounting services, transaction management services and investor relations.

As a result of these relationships, the Company is dependent upon the Advisor and its affiliates. If these companies are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.

Note 12 — Share-Based Compensation

Stock Option Plan

The Company has a stock option plan (the “Plan”) which authorizes the grant of nonqualified stock options to the Company’s independent directors, officers, advisors, consultants and other personnel, subject to the absolute discretion of the board of directors and the applicable limitations of the Plan. A total of 0.5 million shares have been authorized and reserved for issuance under the Plan. As of March 31, 2014 and December 31, 2013, no stock options were issued under the Plan.

Restricted Share Plan

The Company has an employee and director incentive restricted share plan (the “RSP”), which provides for the automatic grant of 3,000 restricted shares of common stock to each of the independent directors, without any further action by the Company’s board of directors or the stockholders, on the date of initial election to the board of directors and on the date of each annual stockholder’s meeting. Restricted stock issued to independent directors will vest over a five-year period following the date of grant in increments of 20% per annum. The RSP provides the Company with the ability to grant awards of restricted shares to the Company’s directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, certain consultants to the Company and the Advisor and its affiliates or to entities that provide services to the Company. The fair market value of any shares of restricted stock granted under the RSP, together with the total amount of acquisition fees, acquisition expense reimbursements, asset management fees, disposition fees and subordinated distributions payable to the Advisor, shall not exceed (a) 6% of all properties' aggregate gross contract purchase price, (b) as determined annually, the greater, in the aggregate, of 2% of average invested assets and 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, (c) disposition fees, if any, of up to 3% of the contract sales price of all properties that the Company sells and (d) 15% of remaining net sales proceeds after return of capital contributions plus payment to investors of a 6% cumulative, pre-tax, non-compounded return on the capital contributed by investors. Additionally, the total number of shares of common stock granted under the RSP shall not exceed 5.0% of the Company’s authorized shares of common stock pursuant to the IPO and in any event will not exceed 7.5 million shares (as such number may be adjusted for stock splits, stock dividends, combinations and similar events).

16

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

Restricted share awards entitle the recipient to receive shares of common stock from the Company 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 the Company. 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 distributions prior to the time that the restrictions on the restricted shares have lapsed. Any distributions payable in shares of common stock shall be subject to the same restrictions as the underlying restricted shares. 

The following table displays restricted share award activity during the three months endedMarch 31, 2014:

Restricted Share Awards	Number of Restricted Common Shares	Weighted-Average Issue Price
December 31, 2013	20,400	$	9.71
Granted	—	—
Vested	—	—
Forfeited	—	—
March 31, 2014	20,400	$	9.71

Unvested Restricted Shares	Number of Restricted Common Shares	Weighted-Average Issue Price
December 31, 2013	16,200	$	9.77
Granted	—	—
Vested	—	—
Forfeited	—	—
March 31, 2014	16,200	$	9.77

The fair value of the shares is expensed over the vesting period of five years. Adjusted for the timing of board members' resignations and admissions, compensation expense related to restricted stock was approximately $9,000 and $10,000 for the three months ended March 31, 2014 and 2013, respectively.

Other Share-Based Compensation

The Company may issue common stock in lieu of cash to pay fees earned by the Company's directors. There are no restrictions on such shares of common stock issued since these payments in lieu of cash relate to fees earned for services performed. There were no such shares of common stock issued in lieu of cash during the three months endedMarch 31, 2014, and 2013.

Note 13 — Net Loss Per Share

 The following is a summary of the basic and diluted net loss per share computation:

	Three Months Ended March 31,
	2014			2013
Net loss (in thousands)	$	(122	)	$	(293	)
Basic and diluted weighted average shares of common stock outstanding	2,121,490			1,011,067
Basic and diluted net loss per share	$	(0.06	)	$	(0.29	)

As of March 31, 2014 and 2013, the Company had approximately 16,200 shares and 19,800 shares, respectively, of unvested restricted stock outstanding that were excluded from the calculation of diluted loss per share attributable to stockholders as the effect would have been antidilutive.

17

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

Note 14  — Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that there have not been any events that have occurred that would require adjustments to disclosures in the consolidated financial statements except for the following transactions:

Sales of Stock

As of April 30, 2014, the Company had 2.3 million shares of common stock outstanding. Total gross proceeds, net of repurchases, from these issuances were $22.6 million, including shares issued under the DRIP. As of April 30, 2014, the aggregate value of all share issuances was $22.8 million based on a per share value equal to the sum of the NAV for each class of common stock, divided by the number of shares of that class outstanding.

Total capital raised to date, net of repurchases, including shares issued under the DRIP, is as follows:

Source of Capital (In thousands)	Inception to March 31, 2014		April 1, 2014 to April 30, 2014		Total
Common stock	$	21,795	$	765	$	22,560

18

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

The following discussion and analysis should be read in conjunction with the accompanying financial statements of American Realty Capital Daily Net Asset Value Trust, Inc. and the notes thereto. As used herein, the terms the “Company,” “we,” “our” and “us” refer to American Realty Capital Daily Net Asset Value Trust, Inc., a Maryland corporation, including, as required by context, American Realty Capital Operating Partnership II, L.P., a Delaware limited partnership, which we refer to as the “OP,” and to its subsidiaries. The Company is externally managed by American Realty Capital Advisors II, LLC (our “Advisor”), a Delaware limited liability company.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of the Company and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

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

• All of our executive officers are also officers, managers and/or holders of a direct or indirect controlling interest in our Advisor, our dealer manager, Realty Capital Securities, LLC (the “Dealer Manager”) and other entities affiliated with American Realty Capital. As a result, our executive officers, our Advisor and its affiliates face conflicts of interest, including significant conflicts created by our Advisor’s compensation arrangements with us and other investors advised by American Realty Capital affiliates and conflicts in allocating time among these investors and us. These conflicts could result in unanticipated actions.

• Because investment opportunities that are suitable for us may also be suitable for other American Realty Capital advised programs or investors, our Advisor and its affiliates face conflicts of interest relating to the purchase of properties and other investments and such conflicts may not be resolved in our favor, meaning that we could invest in less attractive assets, which could reduce the investment return to our stockholders.

• The purchase price and redemption price for our shares are based on net asset value (“NAV”) rather than a public trading market. Our published NAV may not accurately reflect the value of our assets. 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 and our Advisor are unable to find suitable investments, then we may not be able to achieve our investment objectives or pay distributions.

• We only owned 13 properties as of March 31, 2014, which exposes us to risks due to a lack of tenant and geographic diversity.

• If we raise substantially less than the maximum offering in our initial public offering of common stock (our "IPO"), we may not be able to invest in a diversified portfolio of real estate assets and the value of an investment in us may vary more widely with the performance of specific assets.

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

• We are obligated to pay substantial fees to our Advisor and its affiliates.

• We depend on tenants for our revenue and, accordingly, our revenue is dependent upon the success and economic viability of our tenants.

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

• Our organizational documents permit us to pay distributions from unlimited amounts of any source. Until substantially all the proceeds from our IPO are invested, we may use proceeds from our IPO and financings to fund distributions until we have sufficient cash flow. There are no established limits on the amounts of net proceeds and borrowings that we may use to fund such distribution payments.

• Any of these distributions may reduce the amount of capital we ultimately invest in properties and other permitted investments and negatively impact the value of our stockholders' investment.

• We may not generate cash flows sufficient to pay our distributions to stockholders, as such, we may be forced to borrow at higher rates or depend on our Advisor to waive reimbursement of certain expenses and fees to fund our operations.

19

• We are subject to risks associated with the significant dislocations and liquidity disruptions that have recently occurred in the credit markets of the United States.

• We may fail to qualify, or continue to qualify, to be treated as a real estate investment trust (“REIT”) for U.S. federal income tax purposes, which would result in higher taxes, may adversely affect operations and would reduce our NAV and cash available for distributions.

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

Overview

We were incorporated on September 10, 2010 as a Maryland corporation that intends to qualify as a REIT for the taxable year ended December 31, 2013. On August 15, 2011, we commenced our IPO on a “reasonable best efforts” basis of up to a maximum of approximately $1.5 billion of common stock, par value $0.01 per share, consisting of up to 101.0 million retail shares to be sold to the public through broker dealers and up to 55.6 million institutional shares to be sold through registered investment advisors and broker dealers that are managing wrap or fees-based accounts, pursuant to a registration statement on Form S-11 (File No. 333-169821) (the “Registration Statement”) filed with the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended.  The Registration Statement also covers up to 25.0 million shares of common stock pursuant to a distribution reinvestment plan (the “DRIP”) under which common stockholders may elect to have their distributions reinvested in additional shares of common stock. The per share purchase price for the Company's common stock varies daily and is based on the Company's NAV per share.

As of March 31, 2014, we had 2.2 million shares of stock outstanding, including unvested restricted shares and shares issued under the DRIP and had received total gross proceeds, net of repurchases, from the IPO, including shares issued under the DRIP of $21.8 million. As of March 31, 2014, the aggregate value of all issuances and subscriptions of common stock outstanding was $22.0 million, which represents the aggregate number of shares of each class of common stock outstanding, excluding unvested restricted stock, multiplied by the respective NAV per share for each class.

We were formed to primarily acquire freestanding, single-tenant bank branches, convenience stores, and office, industrial and retail properties net leased to investment grade and other creditworthy tenants. We may also originate or acquire first mortgage loans secured by real estate. We purchased our first properties and commenced active operations in January 2012. As of March 31, 2014, we owned 13 properties with an aggregate purchase price of $32.8 million, comprising 202,416 rentable square feet, which were 100% leased. As of March 31, 2014, rental revenues derived from investment grade tenants, as rated by a major rating agency, represented 97.7% of annualized rental income on a straight-line basis.

Substantially all of our business is conducted through the OP. We are the sole general partner and hold substantially all of the units of limited partner interests in the OP (“OP units”). The Special Limited Partner holds 222 OP units, which represent a nominal percentage of the aggregate ownership of the OP. A holder of OP units has the right to convert OP units for the cash value of a corresponding number of shares of our common stock or, at the option of the OP, a corresponding number of shares of our common stock, as allowed by the limited partnership agreement of the OP. The remaining rights of the holders of OP units are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP’s assets.

We have no paid employees. We have retained the Advisor to manage our affairs on a day-to-day basis. American Realty Capital Properties II, LLC (the “Property Manager”) serves as our property manager. Our Dealer Manager serves as the dealer manager of the IPO. The Advisor and Property Manager are indirect wholly owned entities of, and the Dealer Manager is under common ownership with, our sponsor, AR Capital, LLC (the “Sponsor”). These related parties receive compensation and fees for services related to the IPO and the investment and management of our assets. These entities receive fees during the offering, acquisition, operational and liquidation stages.

Significant Accounting Estimates and Critical Accounting Policies

Set forth below is a summary of the significant accounting estimates and critical accounting policies that management believes are important to the preparation of our financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by our management. As a result, these estimates are subject to a degree of uncertainty. These significant accounting estimates and critical accounting policies include:

20

Offering and Related Costs

Offering and related costs include all expenses incurred in connection with our IPO. Offering costs (other than selling commissions and the dealer manager fees) include costs that may be paid by the Advisor, the Dealer Manager or their affiliates on our behalf. These costs include but are not limited to: (i) legal, accounting, printing, mailing, and filing fees; (ii) escrow service related fees; (iii) reimbursement of the Dealer Manager for amounts it may pay to reimburse the bona fide diligence expenses of broker-dealers; and, (iv) reimbursement to the Advisor for a portion of the costs of its employees and other costs in connection with preparing supplemental sales materials and related offering activities. We are obligated to reimburse the Advisor or its affiliates, as applicable, for organization and offering costs paid by them on our behalf, provided that the Advisor is obligated to reimburse us to the extent organization and offering costs (excluding selling commissions and the dealer manager fee) incurred by us in our offering exceed 1.5% of gross offering proceeds in the IPO. As a result, these costs are only our liability to the extent aggregate selling commissions, the dealer manager fee and other organization and offering costs do not exceed 11.5% of the gross proceeds determined at the end of the IPO.

Revenue Recognition

Our revenues, which are derived primarily from rental income, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. Since many of our leases provide for rental increases at specified intervals, straight-line basis accounting requires us to record a receivable, and include in revenues, unbilled rent receivables that we will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. We defer the revenue related to lease payments received from tenants in advance of their due dates.

We continually review receivables related to rent and unbilled rent receivables and determine collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is in doubt, we record an increase in our allowance for uncollectible accounts or record a direct write-off of the receivable in our consolidated statements of operations.

Investments in Real Estate

Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life of the asset. Costs of repairs and maintenance are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings, 15 years for land improvements, five years for fixtures and improvements and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.

We are required to make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in real estate. These assessments have a direct impact on our net income because if we were to shorten the expected useful lives of our investments in real estate, we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis. We are required to present the operations related to properties that have been sold or properties that are intended to be sold as discontinued operations in the statement of operations at fair value for all periods presented to the extent the disposal of a component represents a strategic shift that has or will have a major effect on the Company's operations and financial results. Properties that are intended to be sold are to be designated as “held for sale” on the balance sheet.

Long-lived assets are carried at cost and evaluated for impairment when events or changes in circumstances indicate such an evaluation is warranted or when they are designated as held for sale. Valuation of real estate is considered a “critical accounting estimate” because the evaluation of impairment and the determination of fair values involve a number of management assumptions relating to future economic events that could materially affect the determination of the ultimate value, and therefore, the carrying amounts of our real estate. Additionally, decisions regarding when a property should be classified as held for sale are also highly subjective and require significant management judgment.

Events or changes in circumstances that could cause an evaluation for impairment include the following:

• a significant decrease in the market price of a long-lived asset;

• a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition;

• a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, including an adverse action or assessment by a regulator;

• an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset; and

• a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset.

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We review our portfolio on an ongoing basis to evaluate the existence of any of the aforementioned events or changes in circumstances that would require us to test for recoverability. In general, our review of recoverability is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value expected, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. We are required to make subjective assessments as to whether there are impairments in the values of our investments in real estate. These assessments have a direct impact on our net income because recording an impairment loss results in an immediate negative adjustment to net income.

Purchase Price Allocation

We allocate the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values. Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. We utilize various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Amounts allocated to land, land improvements, buildings and fixtures are based on cost segregation studies performed by independent third-parties or on our analysis of comparable properties in our portfolio. Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates, the value of in-place leases, and the value of customer relationships, as applicable.

The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered by us in our analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period, which typically ranges from six to 12 months. We also estimate costs to execute similar leases including leasing commissions, legal and other related expenses.

Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease intangibles are amortized as a decrease to rental income over the remaining term of the lease.  The capitalized below-market lease values are amortized as an increase to rental income over the remaining term and any fixed rate renewal periods provided within the respective leases. In determining the amortization period for below-market lease intangibles, we initially will consider, and periodically evaluate on a quarterly basis, the likelihood that a lessee will execute the renewal option.  The likelihood that a lessee will execute the renewal option is determined by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.

The aggregate value of intangible assets related to customer relationships is measured based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with the tenant. Characteristics considered by us in determining these values include the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors.

The value of in-place leases is amortized to expense over the initial term of the respective leases, which range primarily from eight to 15 years. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.

In making estimates of fair values for purposes of allocating purchase price, we utilize a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. We also consider information obtained about each property as a result of our pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.

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Derivative Instruments

We may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with our borrowings. The principal objective of such agreements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions.

We record all derivatives on the balance sheet at fair value.  The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that is attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge.  We may enter into derivative contracts that are intended to economically hedge certain risk, even though hedge accounting does not apply or we elect not to apply hedge accounting.

Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements are described in Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements.

Results of Operations

Our portfolio of real estate investment properties is comprised of the following 13 properties, which were all 100% leased as of March 31, 2014 (dollar amounts in thousands):

Portfolio Property	Acquisition Date	Number of Properties	Square Feet	Remaining Lease Term (1)	Annualized Rental Income on a Straight-Line Basis (2)		Base Purchase Price (3)		Annualized Rental Income (2) per Square Foot
Family Dollar	Jan. 2012	2	16,000	7.7	$	138	$	1,453	$	8.63
Dollar General	Jan. 2012	1	9,013	12.7	83		975		9.21
Family Dollar II	Jan. 2012	1	8,320	7.3	90		991		10.82
FedEx	Mar. 2012	1	111,865	12.8	1,518		19,740		13.57
Circle K	May 2012	1	3,050	10.1	157		2,045		51.48
Dollar General II	Oct. 2012	1	9,002	13.5	90		1,170		10.00
Dollar General III	Dec. 2012	1	9,014	13.7	81		1,060		8.99
Dollar General IV	Mar. 2013	1	9,026	14.1	83		1,074		9.20
O'Reilly Auto	Jul. 2013	1	6,800	12.8	75		972		11.03
Advance Auto	Sep. 2013	1	7,000	9.8	53		715		7.57
Davita Dialysis	Oct. 2013	1	5,934	9.9	59		609		9.94
FedEx II	Dec. 2013	1	7,392	9.6	144		1,985		19.48
		13	202,416	12.2	$	2,571	$	32,789	$	12.70

_____________________

(1) Remaining lease term in years as of March 31, 2014, calculated on a weighted-average basis.

(2) Annualized rental income on a straight-line basis is rental income on a straight-line basis as of March 31, 2014, which includes the effect of tenant concessions such as free rent, as applicable.

(3) Contract purchase price, excluding acquisition related costs.

Comparison of the Three Months Ended March 31, 2014 to Three Months Ended March 31, 2013

Rental Income

Rental income increased $0.1 million to $0.6 million for the three months ended March 31, 2014 compared to $0.5 million for the three months ended March 31, 2013. The increase in rental income was driven by our acquisition of four properties subsequent to March 31, 2013 for an aggregate purchase price of approximately $4.3 million. Same store cash rent on the eight properties held for the full period in both of the three months ended March 31, 2014 and 2013 remained consistent at $0.5 million, respectively. The annualized rental income per square foot of the properties at March 31, 2013 and 2014 was $12.70 with a weighted average remaining lease term of 12.2 years as of March 31, 2014.

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Operating Expense Reimbursements

Operating expense reimbursements increased to $22,000 for the three months ended March 31, 2014 compared to $19,000 for the three months ended March 31, 2013. Operating expense reimbursements represent reimbursements for taxes, property maintenance and other charges contractually due from the tenants per their respective leases. The increase in operating expense reimbursements was driven by our acquisition of four properties since March 31, 2013 and offset by a decrease in same store operating expense reimbursements of $4,000 from $19,000 for the three months ended March 31, 2013 to $15,000 for the three months ended March 31, 2014.

Property Operating Expenses

Property expenses increased to $25,000 for the three months ended March 31, 2014 compared to $21,000 for the three months ended March 31, 2013. These costs relate to expenses associated with maintaining certain properties, including real estate taxes, insurance and repairs and maintenance expenses. The increase in property expenses is mainly due to our acquisition of four properties subsequent to March 31, 2013. Same store property operating expenses decreased $3,000 to $18,000 for the three months ended March 31, 2014.

Acquisition and Transaction Related Costs

There were no acquisition and transaction related costs for the three months ended March 31, 2014 compared to $0.1 million for the three months ended March 31, 2013. Acquisition and transaction related costs represent the costs related to the acquisition of properties. Acquisition and transaction related costs mainly consisted of legal costs, deed transfer costs and other costs related to real estate purchase transactions. Certain acquisition and transaction related costs are based on a percentage of the base purchase price of acquired real estate investment; as such, the decrease in acquisition and transaction related costs was primarily a result of no real estate investment purchases during the three months ended March 31, 2014 compared to one acquisition during the three months ended March 31, 2013.

General and Administrative Expenses

General and administrative expenses decreased by approximately $1,000 to $69,000 for the three months ended March 31, 2014 compared to $70,000 for the three months ended March 31, 2013. General and administrative expenses primarily included insurance, board of directors fees, taxes and the amortization of restricted stock. The Advisor elected to absorb approximately $0.2 million and $0.1 million of general and administrative expenses during the three months ended March 31, 2014 and 2013, respectively.

Depreciation and Amortization Expense

Depreciation and amortization expense increased by approximately $0.1 million to $0.5 million for the three months ended March 31, 2014 compared to $0.4 million for the three months ended March 31, 2013. The increase in depreciation and amortization expense was driven by our acquisition of four properties since March 31, 2013 for an aggregate purchase price of $4.3 million. Same store depreciation and amortization expense remained consistent at $0.4 million for the three months ended March 31, 2014 and 2013, respectively.

Interest Expense

Interest expense decreased $0.1 million to $0.2 million for the three months ended March 31, 2014 from $0.3 million for the three months ended March 31, 2013. Interest expense primarily related to mortgage notes payable of $11.2 million with a weighted average effective interest rate of 4.12% and a $5.0 million note payable, which bore interest at 8.0%. Interest expense decreased due to a repayment of $4.9 million of mortgage notes payable from the amount outstanding at March 31, 2013.

Cash Flows for the Three Months EndedMarch 31, 2014

During the three months endedMarch 31, 2014, net cash provided by operating activities was $0.5 million. The level of cash flows used in or provided by operating activities is affected by the volume of acquisition activity, timing of interest payments and the amount of borrowings outstanding during the period, as well as the receipt of scheduled rent payments. Cash inflows were attributable to net income adjusted for non-cash items of $0.4 million in the aggregate (net loss of $0.1 million adjusted for depreciation and amortization of tangible and intangible real estate assets, amortization of deferred financing costs and share-based compensation of $0.5 million). Cash flows provided by operating activities during the three months endedMarch 31, 2014 included an increase of $0.1 million in accounts payable and accrued expenses.

There was no net cash used in investing activities during the three months endedMarch 31, 2014 since there were no real estate acquisitions.

Net cash provided by financing activities of $0.3 million during the three months endedMarch 31, 2014 related to proceeds from the issuance of common stock of $1.1 million. The inflow was partially offset by payments related to offering costs of $0.3 million, $0.2 million in payments to affiliates, $0.2 million in common stock repurchases and $0.2 million in distributions to stockholders.

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Cash Flows for the Three Months EndedMarch 31, 2013

During the three months endedMarch 31, 2013, net cash provided by operating activities was $0.2 million. The level of cash flows used in or provided by operating activities is affected by the volume of acquisition activity, timing of interest payments and the amount of borrowings outstanding during the period, as well as the receipt of scheduled rent payments. Cash flows provided by operating activities during the three months endedMarch 31, 2013 include $0.1 million of acquisition and transaction related costs. Cash outflows include a net loss adjusted for non-cash items of $0.1 million in the aggregate (net loss of $0.3 million adjusted for depreciation and amortization of tangible and intangible real estate assets, amortization of deferred financing costs and share-based compensation of approximately $0.4 million) an increase in prepaid expenses of $35,000 as well as an increase of approximately $0.1 million in accounts payable and accrued expenses.

Net cash used in investing activities of $1.1 million during the three months endedMarch 31, 2013 related to the acquisition of one property with an aggregate purchase price of $1.1 million.

Net cash provided by financing activities of $1.8 million during the three months endedMarch 31, 2013 related to net proceeds from the issuance of common stock of $2.7 million. The inflow was partially offset by repayments of mortgage notes payable of $0.4 million, payments related to offering costs of $0.3 million, $0.1 million in funding to affiliates and $0.1 million in distributions to stockholders.

Liquidity and Capital Resources

Our principal demands for funds will continue to be for property acquisitions, either directly or through investment interests, for the payment of operating expenses, distributions to our stockholders and non-controlling interest holders, if any, and for the payment of principal and interest on our outstanding indebtedness. Generally, capital needs for property acquisitions will be met through net proceeds received from the sale of common stock through our ongoing offering. We may also, from time to time, enter into other agreements with third parties, whereby third parties will make equity investments in specific properties or groups of properties that we acquire. Expenditures other than property acquisitions are expected to be met from a combination of the proceeds from the sale of common stock and cash flows from operations.

We intend to maintain the following percentage of the overall value of our portfolio in liquid assets that can be liquidated more readily than properties: (1) 15% of our NAV up to $500 million, (2) 10% of our NAV between $500 million and $1 billion, and (3) 5% of our NAV in excess of $1 billion. However, our stockholders should not expect that we will maintain liquid assets at or above these levels. To the extent that we maintain borrowing capacity under a line of credit, such available amount will be included in calculating our liquid assets. Our Advisor will consider various factors in determining the amount of liquid assets we should maintain, including but not limited to our receipt of proceeds from sales of additional shares, our cash flow from operations, available borrowing capacity under a line of credit, if any, our receipt of proceeds from any asset sale, and the use of cash to fund redemptions. The board will review the amount and sources of liquid assets on a quarterly basis.

We expect to meet our future short-term operating liquidity requirements through a combination of net cash provided by our current property operations and the operations of properties to be acquired in the future, and proceeds from the sale of common stock. Management expects that in the future, as our portfolio matures, our properties will generate sufficient cash flow to cover operating expenses and the payment of our monthly distribution. Other potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from private offerings and undistributed funds from operations.

We expect to use debt financing as a source of capital. Under our charter, the maximum amount of our total indebtedness shall not exceed 300% of our total “net assets” (as defined by the North American Securities Administrators Association Statement of Policy Regarding Real Estate Investment Trusts (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 the 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 up to 50% of the aggregate fair market value of our assets (calculated after the close of our offering and once we have invested substantially all the proceeds of our 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 the 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. As of March 31, 2014, our secured debt leverage ratio (secured mortgage notes payable divided by the base purchase price of acquired real estate investments) was approximately 34.3%.

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We expect to continue to raise capital through the sale of our common stock and to utilize the net proceeds from the sale of our common stock and proceeds from secured financings to complete future property acquisitions. As of March 31, 2014, we had 2.2 million shares of common stock outstanding, including unvested restricted shares and shares issued under the DRIP, and had received total gross proceeds, net of repurchases, including shares issued under the DRIP of $21.8 million.

Our board of directors has adopted a Share Repurchase Program (“SRP”) that enables our stockholders to sell their shares to us under limited circumstances. At the time a stockholder requests a repurchase, we may, subject to certain conditions, repurchase the shares presented for repurchase for cash to the extent we have sufficient funds available to fund such repurchase.

The following table summarizes the number of shares repurchased under the SRP cumulatively through March 31, 2014:

	Number of Requests	Number of Shares	Average Price per Share
Cumulative repurchases as of December 31, 2013	3	44,672	$	9.63
Three months ended March 31, 2014	2	16,099	10.11
Cumulative repurchase requests as of March 31, 2014	5	60,771	$	9.75

As of March 31, 2014, since inception, we have repurchased a total of 60,771 shares of common stock at an average NAV of $9.75 per share for a total repurchase price of $0.6 million.

As of March 31, 2014, we had cash of approximately $1.0 million. We expect cash flows from operations and the sale of common stock to be used primarily to invest in additional real estate, pay debt service, pay operating expenses and pay stockholder distributions.

Acquisitions

Our Advisor evaluates potential acquisitions of real estate and real estate related assets and engages in negotiations with sellers and borrowers on our behalf.  Investors should be aware that even after a purchase contract containing specific terms is executed, the property will not be purchased until the successful completion of due diligence and negotiation of final binding agreements. During this period, we may decide to temporarily invest any unused proceeds from common stock offerings in certain investments that could yield lower returns than the properties. These lower returns may affect our ability to make distributions.

Funds from Operations and Modified Funds from Operations

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

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (the “White Paper”). The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property and asset impairment writedowns, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Additionally, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions, which can change over time. An asset will only be evaluated for impairment if certain impairment indicators exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated undiscounted future cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges.

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Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization and impairments, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO and modified funds from operations (“MFFO”), as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. We are using the proceeds raised in our offering to, among other things, acquire properties. We intend to begin the process of achieving a liquidity event (i.e., listing of our common stock on a national exchange, a merger or sale or another similar transaction) within three to five years of the completion of the offering. Thus, unless we raise, or recycle, a significant amount of capital after we complete our offering, we will not be continuing to purchase assets at the same rate as during our offering. Due to the above factors and other unique features of publicly registered, non-listed REITs, the Investment Program Association (“IPA”), an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered non-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP and may not be a useful measure of the impact of long-term operating performance on value if we do not continue to purchase a significant amount of new assets after we complete our offering. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is stabilized. By providing MFFO, we believe it is presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our IPO has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our IPO and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the “Practice Guideline”) issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. While we are responsible for managing interest rate, hedge and foreign exchange risk, we do retain an outside consultant to review all our hedging agreements. In as much as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude such gains and losses in calculating MFFO, as such gains and losses are not reflective of ongoing operations.

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Our MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, we exclude acquisition related expenses, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income. These expenses are paid in cash by us, and therefore such funds will not be available to distribute to investors. All paid and accrued acquisition fees and expenses negatively impact our operating performance during the period in which properties are acquired and will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. Therefore, MFFO may not be an accurate indicator of our operating performance, especially during periods in which properties are being acquired. MFFO that excludes such costs and expenses would only be comparable to that of non-listed REITs that have completed their acquisition activities and have similar operating characteristics as us. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives as items which are unrealized and may not ultimately be realized. We view both gains and losses from dispositions of assets and fair value adjustments of derivatives as items which are not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our business plan to generate operational income and cash flows in order to make distributions to investors. Acquisition fees and expenses will not be reimbursed by our Advisor if there are no further proceeds from the sale of shares in our offering, and therefore such fees and expenses will need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties or from ancillary cash flows.

Our management uses MFFO and the adjustments used to calculate it in order to evaluate our performance against other non-listed REITs with similar acquisition periods and targeted exit strategies. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to non-listed REITs, such as their limited and defined acquisition period. By excluding expensed acquisition costs, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same way. Accordingly, comparisons with other REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. FFO and MFFO are not useful measures in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO or MFFO.

None of the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO.

28

The below table reflects the items deducted or added to net income (loss) in our calculation of FFO and MFFO for the periods presented. Items are presented net of non-controlling interest portions where applicable.

	Three Months Ended March 31,
(In thousands)	2014			2013
Net loss (in accordance with GAAP)	$	(122	)	$	(293	)
Depreciation and amortization	464			393
FFO	342			100
Acquisition fees and expenses (1)	—			57
Straight-line rent (2)	(15		)	(11		)
MFFO	$	327		$	146

_________________

(1) In evaluating investments in real estate, management differentiates the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for non-listed REITs that have completed their acquisition activity and have other similar operating characteristics. By excluding expensed acquisition costs, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our Advisor or third parties. Acquisition fees and expenses under GAAP are considered operating expenses and as expenses included in the determination of net income and income from continuing operations, both of which are performance measures under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property.

(2) Under GAAP, rental receipts are allocated to periods using various methodologies. This may result in income recognition that is significantly different than underlying contract terms. By adjusting for these items (to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), management believes MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments, providing insight on the contractual cash flows of such lease terms and debt investments, and aligns results with management’s analysis of operating performance.

Distributions

On September 15, 2011, our board of directors authorized and we declared, a distribution, which is calculated based on stockholders of record each day during the applicable period at a rate of $0.0017260274 per day or $0.63 annually per share of common stock. Our distributions are payable by the fifth day following each month end to stockholders of record at the close of business each day during the prior month.

The amount of distributions payable to our stockholders is determined by our board of directors and is dependent on a number of factors, including funds available for distribution, financial condition, capital expenditure requirements, as applicable, requirements of Maryland law and annual distribution requirements needed to qualify and maintain our status as a REIT under the Internal Revenue Code (the “Code”). Our board of directors may reduce the amount of distributions paid or suspend distribution payments at any time and therefore distribution payments are not assured.

29

The following table shows the sources for the payment of distributions to common stockholders for the periods presented:

	Three Months Ended
	March 31, 2014					March 31, 2013
	Dividends			Percentage of Distributions					Percentage of Distributions
Distributions:
Distributions paid in cash	$	170				$	104
Distributions reinvested	155					38
Total distributions	$	325				$	142
Source of distribution coverage:
Common stock issued under the DRIP	$	155		47.7	%	$	38		26.8	%
Cash flows provided by operations (1)	170			52.3	%	104			73.2	%
Total sources of distribution coverage	$	325		100.0	%	$	142		100.0	%
Cash flows provided by operations (GAAP basis) (1)	$	468				$	185
Net loss (in accordance with GAAP)	$	(122	)			$	(293	)

___________________

(1) Cash flows provided by operations for the three months endedMarch 31, 2013 includes acquisition and transaction related expenses of approximately $57,000.

The following table compares cumulative distributions paid to cumulative net loss (in accordance with GAAP) for the period from September 10, 2010 (date of inception) through March 31, 2014:

	For the Period from September 10, 2010 (date of inception) to
(Amounts in thousands)	March 31, 2014
Distributions paid to:
Common stockholders in cash	$	1,027
Common stockholders pursuant to DRIP	527
Total distributions paid	$	1,554
Reconciliation of net loss:
Revenues	$	4,674
Acquisition and transaction related	(850		)
Depreciation and amortization	(3,251		)
Operating expenses	(584		)
Other non-operating expenses	(2,334		)
Net loss (in accordance with GAAP) (1)	$	(2,345	)

_____________________

(1) Net loss as defined by GAAP includes the non-cash impact of depreciation and amortization expense as well as costs incurred relating to acquisitions and related transactions.

Loan Obligations

The payment terms of our loan obligations require principal and interest amounts payable monthly with all unpaid principal and interest due at maturity. Our loan agreements stipulate that we comply with specific covenants, including the maintenance of certain financial ratios. As of March 31, 2014, we were in compliance with the debt covenants under our loan agreements.

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Our Advisor may, with approval from our independent board of directors, seek to borrow short-term capital that, combined with secured mortgage financing, exceeds our targeted leverage ratio. Such short-term borrowings may be obtained from third parties on a case-by-case basis as acquisition opportunities present themselves simultaneous with our capital raising efforts. We view the use of short-term borrowings as an efficient and accretive means of acquiring real estate in advance of raising equity capital. Accordingly, we can take advantage of buying opportunities as we expand our fund raising activities. As additional equity capital is obtained, these short-term borrowings will be repaid.

Contractual Obligations

The following is a summary of our contractual obligations as of March 31, 2014:

			April 1, 2014 - December 31, 2014
(Amounts in thousands)	Total				2015-2016		2017-2018		Thereafter
Principal payments due on mortgage notes payable	$	11,246	$	—	$	—	$	11,246	$	—
Interest payments due on mortgage notes payable	1,410		349		929		132		—
Principal payments due on notes payable	5,000		—		5,000		—		—
Interest payments due on notes payable	400		300		100		—		—
	$	18,056	$	649	$	6,029	$	11,378	$	—

Election as a REIT

We intend to elect to be taxed as a REIT under Sections 856 through 860 of the Code, effective for our taxable year ended December 31, 2013. We believe that, commencing with such taxable year, we will be organized and operate in such a manner as to qualify for taxation as a REIT under the Code. We intend to continue to operate in such a manner to qualify for taxation as a REIT, but no assurance can be given that we will operate in a manner so as to qualify or remain qualified as a REIT. If we qualify for taxation as a REIT, we generally will not be subject to federal corporate income tax to the extent we distribute all of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP) to our stockholders and comply with various other requirements applicable to REITs. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and federal income and excise taxes on our undistributed income.

Inflation

We may be adversely impacted by inflation on any leases that do not contain indexed escalation provisions. In addition, we may be required to pay costs for maintenance and operation of properties, which may adversely impact our results of operations due to potential increases in costs and operating expenses resulting from inflation.

Related-Party Transactions and Agreements

We have entered into agreements with affiliates of our Sponsor, whereby we have paid or may in the future pay certain fees or reimbursements to our Advisor, its affiliates and entities under common ownership with our Advisor in connection with acquisition and financing activities, sales and maintenance of common stock under our IPO, transfer agency services, asset and property management services and reimbursement of operating and offering related costs. See  Note 10 — Related Party Transactions and Arrangements to our financial statements included in this report for a discussion of the various related party transactions, agreements and fees.

Off-Balance Sheet Arrangements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our long-term debt, which consists of secured financings and unsecured notes payable, bears interest at fixed rates. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We would not hold or issue these derivative contracts for trading or speculative purposes. We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.

31

As of March 31, 2014, our debt included fixed-rate secured mortgage financings or secured mortgage financing with rates fixed through the use of derivative instruments and a note payable, with a carrying value and fair value of $16.2 million. Changes in market interest rates on our fixed-rate debt impact the fair value of the notes, but it has no impact on interest incurred or cash flow. For instance, if interest rates rise 100 basis points and our fixed rate debt balance remains constant, we expect the fair value of our obligation to decrease, the same way the price of a bond declines as interest rates rise. The sensitivity analysis related to our fixed–rate debt assumes an immediate 100 basis point move in interest rates from their March 31, 2014 levels, with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the fair value of our fixed-rate debt by approximately $0.1 million. A 100 basis point decrease in market interest rates would result in an increase in the fair value of our fixed-rate debt by approximately $0.1 million. 

These amounts were determined by considering the impact of hypothetical interest rates changes on our borrowing costs and assuming no other changes in our capital structure. As the information presented above includes only those exposures that existed as of March 31, 2014, it does not consider exposures or positions arising after that date. The information represented herein has limited predictive value. Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.

Item 4. Controls and Procedures.

In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that the disclosure controls and procedures are effective.

No change occurred in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during three months endedMarch 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

As of the end of the period covered by this Quarterly Report on Form 10-Q, we are not a party to, and none of our properties are subject to, any material pending legal proceedings.

Item 1A. Risk Factors.

Our potential risks and uncertainties are presented in the section entitled "Risk Factors," contained in the prospectus as supplemented and included in our Registration Statement (File No. 333-169821), as amended (the "Registration Statement"). There have been no material changes from the risk factors set forth in our Registration Statement, except for the items described below:

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

Our cash flows provided by operations was approximately $0.5 million for the three months endedMarch 31, 2014. During the three months endedMarch 31, 2014, we paid distributions of approximately $0.3 million, of which approximately $0.2 million, or 52.3%, was funded from cash flows from operations and $0.2 million, or 47.7%, was funded from proceeds from common stock issued pursuant to the DRIP. Additionally, we may in the future pay distributions from sources other than from our cash flows from operations.

Until we acquire additional properties or other real estate-related investments, we may not generate sufficient cash flows from operations to pay distributions. If we are unable to acquire additional properties or other real estate-related investments, these conditions may result in a lower return on your investment than you expect. If we have not generated sufficient cash flows from our operations and other sources, such as from borrowings, the sale of additional securities, advances from our Advisor, or our Advisor's deferral, suspension or waiver of its fees and expense reimbursements, in order to fund distributions, we may use the proceeds from our IPO. Moreover, our board of directors may change our distribution policy, in its sole discretion, at any time. Distributions made from offering proceeds are a return of capital to stockholders, from which we will have already paid offering expenses in connection with our IPO. We have not established any limit on the amount of proceeds from our IPO 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 our IPO, we will have less funds available for acquiring properties or other real estate-related investments. As a result, the return you realize on your investment may be reduced. 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 or the proceeds of our IPO 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 or securities convertible or exercisable into shares of our common stock to third party investors. Payment of distributions from the mentioned sources could restrict our ability to generate sufficient cash flows 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.

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

We did not sell any equity securities that were not registered under the Securities Act of 1933 during the three months endedMarch 31, 2014.

On August 15, 2011, we commenced our IPO on a “reasonable best efforts” basis of up to a maximum of approximately $1.5 billion of common stock, consisting of up to 101.0 million retail shares to be sold to the public through broker dealers and up to 55.6 million institutional shares to be sold through registered investment advisors and broker dealers that are managing wrap or fees-based accounts, pursuant to the Registration Statement on Form S-11 (File No. 333-169821) filed with the SEC under the Securities Act of 1933, as amended. The Registration Statement also covers up to 25.0 million shares of common stock pursuant the DRIP under which common stock holders may elect to have their distributions reinvested in additional shares of common stock. As of March 31, 2014, we have sold 2,210,515 shares of our common stock, including unvested restricted shares and shares issued pursuant to the DRIP, and received total gross proceeds, net of repurchases, from the IPO of $21.8 million, including shares issued under the DRIP.

33

The following table reflects the offering costs associated with the issuance of common stock:

	Three Months Ended
(Amounts in thousands)	March 31, 2014
Selling commissions and dealer manager fees	$	37
Other organization and offering costs	105
Total offering costs	$	142

The Dealer Manager reallowed the selling commissions and a portion of the dealer manager fees to participating broker-dealers. The following table details the selling commissions incurred and reallowed related to the sale of common shares:

	Three Months Ended
(Amounts in thousands)	March 31, 2014
Total commissions incurred from the Dealer Manager	$	37
Less:
Commissions to participating brokers	(13		)
Reallowance to participating broker dealers	(3		)
Net to the Dealer Manager	$	21

We are responsible for offering and related costs from the ongoing offering, excluding commissions and dealer manager fees, up to a maximum of 1.5% of gross proceeds received from its ongoing offering of common stock, measured at the end of the offering. Offering costs in excess of the 1.5% cap as of the end of the offering are the Advisor's responsibility. As of March 31, 2014, offering and related costs exceeded 1.5% of gross proceeds received from the IPO by $5.3 million. The Advisor has elected to cap cumulative offering costs incurred by us, net of unpaid amounts, to 15% of gross common stock proceeds during the offering period. As of March 31, 2014, cumulative offering costs were $6.3 million. Cumulative offering costs net of unpaid amounts were less than the 15% threshold as of March 31, 2014.

We have used, and expect to continue using, substantially all of the net proceeds from our IPO to primarily acquire a diversified portfolio of income producing real estate properties, focusing primarily on acquiring freestanding, single-tenant bank branches, convenience stores, office, industrial and retail properties net leased to investment grade and other creditworthy tenants. We may also originate or acquire first mortgage loans secured by real estate. As of March 31, 2014, we have used the net proceeds from our IPO and debt financing to purchase 13 properties with an aggregate purchase price of $32.8 million.

Share Repurchase Program

Our board of directors has adopted a Share Repurchase Program (“SRP”) that enables our stockholders to sell their shares to us under limited circumstances. At the time a stockholder requests a repurchase, we may, subject to certain conditions, repurchase the shares presented for repurchase for cash to the extent we have sufficient funds available to fund such repurchase.

The following table summarizes the number of shares repurchased under the SRP cumulatively through March 31, 2014:

	Number of Requests	Number of Shares	Average Price per Share
Cumulative repurchases as of December 31, 2013	3	44,672	$	9.63
Three months ended March 31, 2014	2	16,099	10.11
Cumulative repurchase requests as of March 31, 2014	5	60,771	$	9.75

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item5. Other Information.

None.

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Item6. Exhibits.

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

35

SIGNATURES

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

AMERICAN REALTY CAPITAL DAILY NET ASSET VALUE TRUST, INC.
By:	/s/ Nicholas S. Schorsch
	Nicholas S. Schorsch
	Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)
By:	/s/ Nicholas Radesca
	Nicholas Radesca
	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Date: May 14, 2014

EXHIBITS INDEX

The following exhibits are included, in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 (and are numbered in accordance with Item 601 of Regulation S-K).

Exhibit No.	Description
31.1 *	Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 *	Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32 *	Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 *	XBRL (eXtensible Business Reporting Language). The following materials from American Realty Capital Daily Net Asset Value Trust, Inc.'s Quarterly Report on Form 10-Q for the three months ended March 31, 2014, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Loss, (iii) the Consolidated Statement of Changes in Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements. As provided in Rule 406T of Regulation S-T, this information in furnished and not filed for purpose of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934

_____________________

*    Filed herewith.

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER

THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Nicholas S. Schorsch, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of American Realty Capital Daily Net Asset Value Trust, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated this 14th day of May 2014	/s/ Nicholas S. Schorsch
	Nicholas S. Schorsch
	Chief Executive Officer and Chairman of the Board of Directors
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER

THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Nicholas Radesca, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of American Realty Capital Daily Net Asset Value Trust, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated this 14th day of May 2014	/s/ Nicholas Radesca
	Nicholas Radesca
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

EX-32

Exhibit 32

SECTION 1350 CERTIFICATIONS

This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of Section 18 of the Securities Act of 1934, as amended.

The undersigned, who are the Chief Executive Officer and Chief Financial Officer of American Realty Capital Daily Net Asset Value Trust, Inc. (the “Company”), each hereby certify as follows:

The Quarterly Report on Form 10-Q of the Company, which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in this quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated this 14th day of May 2014

/s/ Nicholas S. Schorsch

Nicholas S. Schorsch

Chief Executive Officer and Chairman of the Board of Directors

(Principal Executive Officer)

/s/ Nicholas Radesca

Nicholas Radesca

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

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Fair Value of Financial Instruments (Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivatives, at fair value	$ 179	$ 189
Interest rate swap | Fair Value, Measurements, Recurring | Quoted Prices in Active Markets Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivatives, at fair value	0	0
Interest rate swap | Fair Value, Measurements, Recurring | Significant Other Observable Inputs Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivatives, at fair value	179	189
Interest rate swap | Fair Value, Measurements, Recurring | Significant Unobservable Inputs Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivatives, at fair value	0	0
Interest rate swap | Fair Value, Measurements, Recurring | Total
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivatives, at fair value	$ 179	$ 189

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Share-Based Compensation (Share Activity) (Details) (USD $)			3 Months Ended			3 Months Ended
	Mar. 31, 2014 Restricted Stock	Dec. 31, 2013 Restricted Stock	Mar. 31, 2014 Restricted Stock	Mar. 31, 2014 Restricted Common Stock	Dec. 31, 2013 Restricted Common Stock	Mar. 31, 2014 Restricted Unvested Common Stock [Member]	Mar. 31, 2014 Equity Plan Restricted Unvested Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding [Roll Forward]
Beginning Balance (in shares)	16,200	19,800	16,200	20,400	20,400
Granted (in shares)			0				0
Vested (in shares)			0				0
Forfeited (in shares)			0				0
Ending Balance (in shares)	16,200	19,800		20,400	20,400
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Beginning Balance (in dollars per share)			$ 9.77			$ 9.71
Granted (in dollars per share)			$ 0.00			$ 0.00
Vested (in dollars per share)			$ 0.00			$ 0.00
Forfeited (in dollars per share)			$ 0.00			$ 0.00
Ending Balance (in dollars per share)			$ 9.77			$ 9.71

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Common Stock - Narrative (Details) (USD $)	3 Months Ended
	Mar. 31, 2014
Stockholders' Equity Note [Abstract]
Dividends declared per day (in dollars per share)	$ 0.0017260274
Dividends declared (in dollars per share)	$ 0.63

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Net Loss Per Share (Schedule of Earnings Per Share, Basic and Diluted) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014 Restricted Stock	Dec. 31, 2013 Restricted Stock	Mar. 31, 2014 Restricted Stock	Dec. 31, 2013 Restricted Stock
Earnings Per Share, Basic and Diluted, by Common Class, Including Two Class Method [Line Items]
Net loss	$ (122)	$ (293)
Basic and diluted weighted average common shares outstanding (in shares)	2,121,490	1,011,067
Basic and diluted net loss per share (in dollars per share)	$ (0.06)	$ (0.29)
Unvested to directors (in shares)			16,200	19,800	16,200	16,200

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Derivatives and Hedging Activities (Reclassifications out of Accumulated Other Comprehensive Income (“AOCI”)) (Details) (Interest Expense, Interest rate swap, Cash Flow Hedging, USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Interest Expense | Interest rate swap | Cash Flow Hedging
Derivative [Line Items]
Amount of loss reclassified from accumulated other comprehensive income into income as interest expense (effective portion)	$ 32	$ 32

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Real Estate Investments (Schedule of Future Minimum Rental Payments for Operating Leases) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014
Real Estate [Abstract]
April 1, 2014 - December 31, 2014	$ 1,884
2015	2,513
2016	2,515
2017	2,564
2018	2,570
Thereafter	18,765
Total	$ 30,811

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Derivatives and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Interest Rate Derivatives

The Company had the following outstanding interest rate derivative that was designated as a cash flow hedge of interest rate risk (dollar amounts in thousands).

Interest Rate Derivative	Number of Instruments	Notional Amount
Interest rate swap as of March 31, 2014	1	$	9,716
Interest rate swap as of December 31, 2013	1	$	9,716

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the balance sheets:

(In thousands)	Balance Sheet Location	March 31, 2014		December 31, 2013
Derivatives designated as hedging instruments:
Interest rate swap	Derivatives, at fair value	$	179	$	189

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges.

	Three Months Ended March 31,
(In thousands)	2014			2013
Amount of loss recognized in accumulated other comprehensive loss from interest rate derivatives (effective portion)	$	(22	)	$	(8	)
Amount of loss reclassified from accumulated other comprehensive income into income as interest expense (effective portion)	$	(32	)	$	(32	)
Amount of gain (loss) recognized in income on derivative instruments (ineffective portion and amount excluded from effectiveness testing)	$	—		$	—

Offsetting Liabilities

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company's derivative liabilities:

	Offsetting of Derivative Liabilities
(In thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amount
March 31, 2014	$	179	$	—	$	179	$	—	$	—	$	179
December 31, 2013	$	189	$	—	$	189	$	—	$	—	$	189

Schedule of Accumulated Other Comprehensive Income (Loss)

The following table details reclassification adjustments out of AOCI and the corresponding effect on net income:

AOCI Component (in thousands)	Amount Reclassified from AOCI				Affected Line Items in the Consolidated Statements of Operations and Comprehensive Loss
	Three Months Ended March 31,
	2014		2013
Designated derivatives, fair value adjustment	$	32	$	32	Interest expense

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Related Party Transactions and Arrangements (Related Party Notes) (Details) (USD $)						3 Months Ended					3 Months Ended
	Mar. 31, 2014 Sponsor and Entity Wholly Owned by Sponsor AR Capital, LLC	Dec. 31, 2013 Sponsor and Entity Wholly Owned by Sponsor AR Capital, LLC	Mar. 31, 2014 Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Acquisition fees and related cost reimbursements	Dec. 31, 2013 Acquisition fees and related cost reimbursements	Mar. 31, 2014 Absorbed General and Administrative Expenses Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2013 Absorbed General and Administrative Expenses Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Net Asset Value of Institutional Shares Dealer Manager Realty Capital Securities, LLC	Mar. 31, 2014 Contract Purchase Price Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Advance on Loan or Other Investment Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Monthly Average Daily Net Asset Value Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Pre-tax Non-compounded Return on Capital Contribution Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Pre-tax Non-compounded Return on Capital Contribution Annual Targeted Investor Return Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Excess of Adjusted Market Value of Real Estate Assets Plus Distributions Over Aggregate Contributed Investor Capital Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Net Sale Proceeds, after Return of Capital Contributions and Annual Targeted Investor Return Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Maximum	Mar. 31, 2014 Maximum Gross Proceeds, Retail Shares Dealer Manager Realty Capital Securities, LLC	Mar. 31, 2014 Maximum Contract Purchase Price Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Maximum Advance on Loan or Other Investment Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Maximum Contract Purchase Price, All Assets Acquired Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Maximum Gross Revenue, Managed Properties Property Manager American Realty Capital Properties II, LLC	Mar. 31, 2014 Maximum Pre-tax Non-compounded Return on Capital Contribution Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Maximum Contract Sales Price Brokerage Commission Fees Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Maximum Contract Sales Price Selling commissions and dealer manager fees Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Option One Maximum Gross Proceeds, Retail Shares Dealer Manager Realty Capital Securities, LLC	Mar. 31, 2014 Option One Maximum Gross Proceeds, Retail Shares Participating Broker-Dealer	Mar. 31, 2014 Option Two Gross Proceeds, Retail Shares Dealer Manager Realty Capital Securities, LLC	Mar. 31, 2014 Greater Of Maximum Average Invested Assets Advisor American Realty Capital Advisors II, LLC	Mar. 31, 2014 Greater Of Maximum Net Income, Excluding Additions to Non-cash Reserves and Gains on Sales of Assets Advisor American Realty Capital Advisors II, LLC
Operating partnership units held	244,444	244,444
Due to Affiliate				$ 1,000,000	$ 1,200,000
Dealer selling commission																	7.00%										2.50%
Gross proceeds from sale																									3.00%
Brokerage fees earned																										7.50%
Brokerage fees earned by related party																										2.50%
Brokerage fees earned periodic payment																										1.00%
Percentage of gross proceeds																1.50%
Aggregate costs born by related party			5,300,000
Aggregate offering costs																15.00%
Cumulative offering costs			(6,300,000)
Acquisition fees earned by related party									1.00%
Financing advance fees earned by related party, percentage of benchmark										1.00%
Financing advance fees earned by related party									0.50%
Acquisition and financing coordination fees																		4.50%		1.50%
Acquisition fees and acquisition related expenses																			4.50%
Oversight fees earned by related party																					1.00%
Operating expenses as a percentage of benchmark																												2.00%	25.00%
Cumulative capital investment return													6.00%
Subordinated performance fee earned												15.00%										10.00%
Related party amount						$ 200,000	$ 100,000
Real estate commission earned by related party																							2.00%	6.00%
Subordinated participation fee earned by related party															15.00%
Subordinated incentive listing distribution														15.00%
Asset-based platform fees earned by related party								0.00%
Monthly advisory fees earned by related party											0.08%

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Derivatives and Hedging Activities (Schedule of Interest Rate Derivatives) (Details) (Designated as Hedging Instrument, Swap, Cash Flow Hedging, USD $) In Thousands, unless otherwise specified	Mar. 31, 2014 derivative	Dec. 31, 2013 derivative
Designated as Hedging Instrument | Swap | Cash Flow Hedging
Derivative [Line Items]
Number of Instruments	1	1
Notional Amount	$ 9,716	$ 9,716

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Mortgages Notes Payable (Schedule Of Aggregate Principal Payments Of Mortgages) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Debt Instrument [Line Items]
Total	$ 11,246	$ 11,246
Mortgages Note Payable [Member]
Debt Instrument [Line Items]
April 1, 2014 - December 31, 2014	0
2015	0
2016	0
2017	11,246
2018	0
Thereafter	0
Total	$ 11,246	$ 11,246

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Related Party Transactions and Arrangements (Schedule of Amount Contractually Due and Forgiven in Connection With Operation Related Services) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				3 Months Ended								3 Months Ended												3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014 Acquisition fees and related cost reimbursements	Dec. 31, 2013 Acquisition fees and related cost reimbursements	Mar. 31, 2014 Incurred Total related party operation fees and reimbursements	Mar. 31, 2013 Incurred Total related party operation fees and reimbursements	Mar. 31, 2014 Forgiven Total related party operation fees and reimbursements	Mar. 31, 2013 Forgiven Total related party operation fees and reimbursements	Mar. 31, 2014 Payable	Dec. 31, 2013 Payable	Mar. 31, 2014 Payable Total related party operation fees and reimbursements	Dec. 31, 2013 Payable Total related party operation fees and reimbursements	Mar. 31, 2014 One-time fees: Incurred Acquisition fees and related cost reimbursements	Mar. 31, 2013 One-time fees: Incurred Acquisition fees and related cost reimbursements	Mar. 31, 2014 One-time fees: Incurred Other expense reimbursements	Mar. 31, 2013 One-time fees: Incurred Other expense reimbursements	Mar. 31, 2014 One-time fees: Forgiven Acquisition fees and related cost reimbursements	Mar. 31, 2013 One-time fees: Forgiven Acquisition fees and related cost reimbursements	Mar. 31, 2014 One-time fees: Forgiven Other expense reimbursements	Mar. 31, 2013 One-time fees: Forgiven Other expense reimbursements	Mar. 31, 2014 One-time fees: Payable Acquisition fees and related cost reimbursements	Dec. 31, 2013 One-time fees: Payable Acquisition fees and related cost reimbursements	Mar. 31, 2014 One-time fees: Payable Other expense reimbursements	Dec. 31, 2013 One-time fees: Payable Other expense reimbursements	Mar. 31, 2014 Ongoing fees: Incurred Asset management fees		Mar. 31, 2013 Ongoing fees: Incurred Asset management fees		Mar. 31, 2014 Ongoing fees: Incurred Transfer agent fees	Mar. 31, 2013 Ongoing fees: Incurred Transfer agent fees	Mar. 31, 2014 Ongoing fees: Forgiven Asset management fees		Mar. 31, 2013 Ongoing fees: Forgiven Asset management fees		Mar. 31, 2014 Ongoing fees: Forgiven Transfer agent fees	Mar. 31, 2013 Ongoing fees: Forgiven Transfer agent fees	Mar. 31, 2014 Ongoing fees: Payable Asset management fees		Dec. 31, 2013 Ongoing fees: Payable Asset management fees		Mar. 31, 2014 Ongoing fees: Payable Transfer agent fees	Dec. 31, 2013 Ongoing fees: Payable Transfer agent fees
Related Party Transaction [Line Items]
Related party expenses	$ 142	$ 263			$ 118	$ 49	$ 53	$ 25					$ 0	$ 24	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0					$ 53	[1]	$ 25	[1]	$ 65	$ 0	$ 53	[1]	$ 25	[1]	$ 0	$ 0
Due to Affiliate			$ 1,000	$ 1,200					$ 1,899	$ 1,799	$ 17	$ 53									$ 0	$ 0	$ 0	$ 0													$ 0	[1]	$ 0	[1]	$ 17	$ 53

[1] These cash fees have been waived. The Company’s board of directors may elect, subject to the Advisor’s approval, on a prospective basis, to pay asset management fees in the form of performance-based restricted shares.

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Common Stock (Schedule of Stock by Class) (Details) (USD $)	Mar. 31, 2014		Dec. 31, 2013
Class of Stock [Line Items]
Number (in shares)	2,194,315	[1]	2,087,144	[1]
Restricted Stock
Class of Stock [Line Items]
Unvested to directors (in shares)	16,200		19,800
Retail
Class of Stock [Line Items]
Number (in shares)	1,075,659		1,061,931
NAV per share (in dollars per share)	$ 10.13		$ 10.11
Institutional
Class of Stock [Line Items]
Number (in shares)	1,118,656		1,025,213
NAV per share (in dollars per share)	$ 9.94		$ 9.94
Restricted Stock | Restricted Stock
Class of Stock [Line Items]
Unvested to directors (in shares)	16,200		16,200

[1] These cash fees have been waived. The Company’s board of directors may elect, subject to the Advisor’s approval, on a prospective basis, to pay asset management fees in the form of performance-based restricted shares.

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Real Estate Investments

3 Months Ended

Mar. 31, 2014

Real Estate [Abstract]

Real Estate Investments

Real Estate Investments

There were no assets acquired or liabilities assumed during the three months endedMarch 31, 2014. The following table presents the allocation of the assets acquired and liabilities assumed during the three months endedMarch 31, 2013:

	Three Months Ended
(Dollar amounts in thousands)	March 31, 2013
Real estate investments, at cost:
Land	$	137
Buildings, fixtures and improvements	775
Total tangible assets	912
Acquired intangibles:
In-place leases	162
Total assets acquired	1,074
Cash paid for acquired real estate investments	$	1,074
Number of properties purchased	1

The following table presents future minimum base rental cash payments due to the Company subsequent to March 31, 2014.  These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes among other items.

(In thousands)	Future Minimum Base Rent Payments
April 1, 2014 - December 31, 2014	$	1,884
2015	2,513
2016	2,515
2017	2,564
2018	2,570
Thereafter	18,765
	$	30,811

The following table lists the tenants of the Company whose annualized rental income on a straight-line basis represented greater than 10% of total annualized rental income on a straight-line basis for all portfolio properties.

	March 31,
Tenant	2014	2013
FedEx	64.6%	67.8%
Dollar General	13.1%	10.2%
Family Dollar	*	15.0%

_____________________

* The tenant's annualized rental income on a straight-line basis was not greater than 10% of total annualized rental income on a straight-line basis for all portfolio properties as of the period specified.

The termination, delinquency or non-renewal of leases by one or more of the above tenants may have a material adverse effect on revenues. No other tenant represents more than 10% of annualized rental income for the periods presented.

The following table lists the states where the Company has concentrations of properties where annualized rental income on a straight-line basis represented greater than 10% of consolidated annualized rental income.

	March 31,
State	2014	2013
New York	59.0%	67.8%

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Derivatives and Hedging Activities (Schedule of Derivative Instruments in Statement of Financial Position, Fair Value) (Details) (Swap, Derivatives at Fair Value, USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Designated as Hedging Instrument
Derivatives, Fair Value [Line Items]
Interest rate swap	$ 179	$ 189
Not Designated as Hedging Instrument
Derivatives, Fair Value [Line Items]
Interest rate swap	$ 200

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Net Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

 The following is a summary of the basic and diluted net loss per share computation:

	Three Months Ended March 31,
	2014			2013
Net loss (in thousands)	$	(122	)	$	(293	)
Basic and diluted weighted average shares of common stock outstanding	2,121,490			1,011,067
Basic and diluted net loss per share	$	(0.06	)	$	(0.29	)

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Share Based Compensation (Tables)

3 Months Ended

Mar. 31, 2014

Share-based Compensation [Abstract]

Schedule of Share-based Compensation, Activity

The following table displays restricted share award activity during the three months endedMarch 31, 2014:

Restricted Share Awards	Number of Restricted Common Shares	Weighted-Average Issue Price
December 31, 2013	20,400	$	9.71
Granted	—	—
Vested	—	—
Forfeited	—	—
March 31, 2014	20,400	$	9.71

Unvested Restricted Shares	Number of Restricted Common Shares	Weighted-Average Issue Price
December 31, 2013	16,200	$	9.77
Granted	—	—
Vested	—	—
Forfeited	—	—
March 31, 2014	16,200	$	9.77

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Subsequent Events (Common Stock) (Details) (USD $)	43 Months Ended		1 Months Ended	44 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Apr. 30, 2014 Subsequent Event [Member]	Apr. 30, 2014 Subsequent Event [Member]
Subsequent Event [Line Items]
Common stock, shares outstanding	2,210,515	2,103,344	2,300,000	2,300,000
Common stock issuance, gross proceeds, net of repurchases				$ 22,600,000
Stock outstanding	22,000,000		22,800,000	22,800,000
Proceeds from issuance of common stock	$ 21,795,000		$ 765,000	$ 22,560,000

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Derivatives and Hedging Activities (Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Derivative Instruments, Gain (Loss) [Line Items]
Amount of loss recognized in accumulated other comprehensive loss from interest rate derivatives (effective portion)	$ 10	$ 24
Interest rate swap | Cash Flow Hedging
Derivative Instruments, Gain (Loss) [Line Items]
Amount of loss recognized in accumulated other comprehensive loss from interest rate derivatives (effective portion)	(22)	(8)
Amount of gain (loss) recognized in income on derivative instruments (ineffective portion and amount excluded from effectiveness testing)	0	0
Interest rate swap | Interest Expense | Cash Flow Hedging
Derivative Instruments, Gain (Loss) [Line Items]
Amount of loss reclassified from accumulated other comprehensive income into income as interest expense (effective portion)	$ (32)	$ (32)

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Subsequent Events (Tables)

3 Months Ended

Mar. 31, 2014

Subsequent Events [Abstract]

Schedule of Common Stock Offerings

Total capital raised to date, net of repurchases, including shares issued under the DRIP, is as follows:

Source of Capital (In thousands)	Inception to March 31, 2014		April 1, 2014 to April 30, 2014		Total
Common stock	$	21,795	$	765	$	22,560

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Organization (Details) (USD $)	3 Months Ended		43 Months Ended
	Mar. 31, 2014 Rate sqft	Mar. 31, 2013	Mar. 31, 2014 Rate sqft	Dec. 31, 2013	Mar. 31, 2014 Total Portfolio, As of Document End Date property	Aug. 15, 2011 Retail	Aug. 15, 2011 Common Stock	Aug. 15, 2011 Distribution Reinvestment Plan	Aug. 15, 2011 Institutional	Mar. 31, 2014 Approved OP Units
Operations [Line Items]
Shares available for issuance under initial public offering, shares	300,000,000		300,000,000	300,000,000		101,000,000	1,500,000,000		55,600,000
Common stock, par value (in dollars per share)	$ 0.01		$ 0.01	$ 0.01				$ 0.01
Stock available for issuance (in shares)							25,000,000
Common stock, shares outstanding	2,210,515		2,210,515	2,103,344
Proceeds from issuance of common stock			$ 21,795,000
Proceeds from issuance of common stock	1,098,000	2,713,000
Stock outstanding	22,000,000		22,000,000
Number of properties					13
Aggregate purchase price	$ 32,800,000		$ 32,800,000
Area of property	200,000		200,000
Real estate property percent leased on weighted average basis	100.00%		100.00%
Special partner units (in shares)										222

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

The accompanying consolidated financial statements of the Company included herein were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three months endedMarch 31, 2014 are not necessarily indicative of the results for the entire year or any subsequent interim period.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of, and for the year ended December 31, 2013, which are included in the Company's Annual Report on Form 10-K filed with the SEC on March 14, 2014. There have been no significant changes to the Company's significant accounting policies during the three months endedMarch 31, 2014 other than the updates described below.

Recently Issued Accounting Pronouncements

In February 2013, the FASB issued new accounting guidance clarifying the accounting and disclosure requirements for obligations resulting from joint and several liability arrangements for which the total amount under the arrangement is fixed at the reporting date. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2013. The adoption of this guidance did not have a material impact on its consolidated financial position, results of operations or cash flows.

In April 2014, the FASB amended the requirements for reporting discontinued operations. Under the revised guidance, in addition to other disclosure requirements, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component or group of components meets the criteria to be classified as held for sale, disposed of by sale or other than by sale. The Company has adopted the provisions of this guidance effective January 1, 2014 and has applied the provisions prospectively. The adoption of this guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

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Real Estate Investments (Schedule of Assets and Liabilities Assumed ) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013 property
Real estate investments, at cost:
Land	$ 137
Buildings, fixtures and improvements	775
Total tangible assets	912
In-place leases	162
Total assets acquired	1,074
Cash paid for acquired real estate investments	$ 1,074
Number of properties purchased	1

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Fair Value of Financial Instruments (Fair Value, by Balance Sheet Grouping) (Details) (Significant Unobservable Inputs Level 3, USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Mortgage notes payable | Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt, fair value	$ 11,246	$ 11,246
Mortgage notes payable | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt, fair value	11,246	11,246
Note payable | Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt, fair value	5,000	5,000
Note payable | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt, fair value	$ 5,000	$ 5,000

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Share-Based Compensation (Schedule of Share-based Compensation, Activity) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock issued during period (in shares)	0	0
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	5 years
Stock Option Plan | Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized, in shares	500,000
Stock issued during period (in shares)	0	0
Restricted Share Plan | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized, in shares	7,500,000
Shares with automatic grant (in shares)	3,000
Periodic vesting percentage	20.00%
Maximum authorized amount as a percentage of shares authorized	5.00%
Contract Purchase Price | Maximum | Restricted Share Plan | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of restricted share grants	6.00%
Disposition Fees | Maximum | Restricted Share Plan | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of restricted share grants	3.00%
Average Invested Assets | Maximum | Restricted Share Plan | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of restricted share grants	2.00%
Net Income, Excluding Additions to Non-cash Reserves and Gains on Sales of Assets | Maximum | Restricted Share Plan | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of restricted share grants	25.00%
Net Sale Proceeds, after Return of Capital Contributions and Annual Targeted Investor Return | Maximum | Restricted Share Plan | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of restricted share grants	15.00%
Pre-tax Non-compounded Return on Capital Contribution | Maximum | Restricted Share Plan | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of restricted share grants	6.00%
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation	$ 9	$ 10

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
ASSETS
Land	$ 2,559	$ 2,559
Buildings, fixtures and improvements	26,372	26,372
Acquired intangible lease assets	3,858	3,858
Total real estate investments, at cost	32,789	32,789
Less accumulated depreciation and amortization	(3,251)	(2,787)
Total real estate investments, net	29,538	30,002
Cash	984	178
Restricted cash	151	151
Prepaid expenses and other assets	380	410
Deferred financing costs, net	185	201
Total assets	31,238	30,942
LIABILITIES AND EQUITY
Mortgage notes payable	11,246	11,246
Note payable	5,000	5,000
Derivatives, at fair value	179	189
Accounts payable and accrued expenses	3,234	3,319
Deferred rent and other liabilities	131	143
Distributions payable	117	113
Total liabilities	19,907	20,010
Redeemable common stock	1,100	1,048
Preferred stock, $0.01 par value, 50,000,000 authorized, none issued and outstanding at March 31, 2014 and December 31, 2013	0	0
Common stock, $0.01 par value, 300,000,000 shares authorized, 2,210,515 and 2,103,344 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively	22	21
Additional paid-in capital	14,405	13,616
Accumulated other comprehensive loss	(179)	(189)
Accumulated deficit	(4,017)	(3,564)
Total stockholders' equity	10,231	9,884
Total liabilities and equity	$ 31,238	$ 30,942

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Derivatives and Hedging Activities (Offsetting Derivatives) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Derivative [Line Items]
Gross Amounts of Recognized Liabilities	$ 179	$ 189
Gross Amounts Offset in the Consolidated Balance Sheet	0	0
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet	179	189
Financial Instruments	0	0
Cash Collateral Received	0	0
Net Amount	$ 179	$ 189

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities:
Net loss	$ (122)	$ (293)
Adjustment to reconcile net loss to net cash provided by operating activities:
Depreciation	391	336
Amortization of intangibles	73	57
Amortization of deferred financing costs	16	36
Share-based compensation	9	10
Changes in assets and liabilities:
Prepaid expenses and other assets	32	(35)
Accounts payable and accrued expenses	81	67
Deferred rent and other liabilities	(12)	7
Net cash provided by operating activities	468	185
Cash flows from investing activities:
Investment in real estate and other assets	0	(1,074)
Deposits for real estate acquisitions	0	(7)
Net cash used in investing activities	0	(1,081)
Cash flows from financing activities:
Repayments of mortgage notes payable	0	(350)
Proceeds from issuance of common stock	1,098	2,713
Common stock repurchases	(163)	0
Payments of offering costs and fees related to stock issuance	(259)	(317)
Distributions paid	(172)	(104)
Repayment of advances from affiliate	(166)	(141)
Net cash provided by financing activities	338	1,801
Net change in cash	806	905
Cash, beginning of period	178	196
Cash, end of period	984	1,101
Supplemental Discolsures:
Cash paid for interest	214	181
Cash paid for income taxes	4	3
Non-cash Investing and Financing Activities:
Common stock issued through distribution reinvestment plan	$ 155	$ 38

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Real Estate Investments (Schedule of Revenue from External Customers and Long-Lived Assets) (Details) (New York)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
New York
Revenues from External Customers and Long-Lived Assets [Line Items]
Concentration percentage	59.00%	67.80%