UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[Mark One]

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

For the fiscal year ended December 31, 2012

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: 333-164777

Clarion Partners Property Trust Inc.

(Exact Name of Registrant as Specified in Its Charter)

Maryland		27-1242815
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

230 Park Avenue, New York, New York 10169

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (212) 808-3600

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post all such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporate by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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

Large accelerated filer o		Accelerated filer o

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

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

There is no established market for the registrant’s shares of common stock. There was no common stock held by non-affiliates of the registrant as of June 29, 2012, the last business day of the registrants most recently completed second fiscal quarter. As of March 14, 2013, Clarion Partners Property Trust Inc. had 39,064 shares of Class A common stock, $.01 par value, outstanding, 1,252,637 shares of Class W common stock, $.01 par value, outstanding and 125 shares of preferred stock outstanding.

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CLARION PARTNERS PROPERTY TRUST INC.

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Special Note Regarding Forward-Looking Statements		1

PART I
Item 1.	Business	2
Item 1A.	Risk Factors	5
Item 1B.	Unresolved Staff Comments	25
Item 2.	Properties	25
Item 3.	Legal Proceedings	26
Item 4.	Mine Safety Disclosures	26

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
Item 6.	Selected Financial Data	30
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 8.	Financial Statements and Supplementary Data	37
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	37
Item 9A.	Controls and Procedures	37
Item 9B.	Other information	37

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	38
Item 11.	Executive Compensation	38
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	38
Item 13.	Certain Relationships and Related Transactions and Director Independence	38
Item 14.	Principal Accounting Fees and Services	38

PART IV
Item 15.	Exhibits, Financial Statement Schedules	39

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

· the fact that we have no significant operating history;

· our ability to raise capital in our continuous public offering;

· our ability to deploy effectively the proceeds we raise in our offering of common stock;

· the fact that we will depend on tenants for our revenue, and accordingly, our revenue is dependent upon the success and economic viability of our tenants;

· the fact that 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;

· competition for the type of properties we desire to acquire, which may cause our distributions and the long-term returns of our investors to be lower than they otherwise would be;

· changes in economic conditions generally and the real estate market specifically;

· legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts;

· the availability of credit;

· interest rates; and

· changes to generally accepted accounting principles in the United States.

Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed on any forward-looking statements included herein. All forward-looking statements are made as of the date this Annual Report is filed with the Securities and Exchange Commission and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements made herein, whether as a result of new information, future events, changed circumstances or any other reason.

All forward-looking statements included herein should be read in light of the factors identified in the “Risk Factors” section of Item 1A in this Annual Report.

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PART I.

Item 1. Business

Overview

Clarion Partners Property Trust Inc. was formed as a Maryland corporation on November 3, 2009 for the purpose of investing primarily in a diversified portfolio of income-producing real estate properties and other real estate related assets. As used herein, the terms “we,” “our” and “us” refer to Clarion Partners Property Trust Inc. We intend to qualify as a real estate investment trust, or REIT, for federal tax purposes beginning with the taxable year ending December 31, 2012. As of December 31, 2012, we owned one property comprising 18,754 rentable square feet of medical office space. In addition, we own 50% of a joint venture that owns a 315,000 rentable square foot industrial property. As of December 31, 2012, these properties were 100% leased.

We conduct substantially all of our investment activities and own all of our assets through CPT Real Estate LP, our operating partnership, of which we are the sole general partner. The initial limited partner of the operating partnership is CPT OP Partner LLC, our wholly owned subsidiary. We have engaged CPT Advisors LLC, or our advisor, to manage our day-to-day operations and our portfolio of properties and real estate related assets. On November 10, 2009, Clarion Partners, LLC, our sponsor, provided our initial capitalization by purchasing 20,000 shares of our Class A common stock for $200,000 in cash.

On May 16, 2011, or the initial offering date, our registration statement on Form S-11, as amended (File No. 333-164777), for our initial public offering was declared effective by the Securities and Exchange Commission, or SEC. The registration statement covers our initial public offering, which we refer to as our “offering,” of up to $2,250,000,000 of shares of our common stock, consisting of up to $2,000,000,000 of shares in our primary offering and up to $250,000,000 of shares pursuant to our distribution reinvestment plan. We may reallocate the shares offered between our primary offering and our distribution reinvestment plan. We are offering to the public any combination of two classes of shares of our common stock, Class A shares and Class W shares.

Our shares are sold at our net asset value, or NAV, per share for the applicable class of shares, plus, for Class A shares only, applicable selling commissions. Each class of shares will have a different NAV per share because certain fees are charged differently with respect to each class.

On October 17, 2012, Clarion Partners CPPT Coinvestment, LLC, a wholly owned subsidiary of our sponsor purchased 1,020,000 shares of our Class W common stock for $10.00 per share, or $10,200,000 in the aggregate, pursuant to a private placement. On November 1, 2012, following the approval of our board of directors, we broke escrow and received an additional $1,460,713 in public offering proceeds from the sale of shares of our common stock. Going forward, the per share purchase price of our common stock will vary from day-to-day, and on any given business day will be equal to our NAV, divided by the number of shares of our common stock outstanding as of the end of business on such day.

Investment Objectives and Strategy

Our primary investment objectives are:

· to provide stockholders an attractive level of current income;

· to achieve appreciation of our net asset value; and

· to enable stockholders to utilize real estate as an asset class in diversified, long-term investment portfolios.

We intend primarily to acquire properties, including office, industrial, retail, multifamily, hospitality and other real property types. To a lesser extent, we will also seek investments in other types of assets related to the real estate sector such as the common and preferred stock of publicly-traded real estate related companies, preferred equity interests, mortgage loans and other real estate related equity and debt instruments, which we refer to collectively as “real estate related assets.”

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We intend to select investments across property types, geographic regions and metropolitan areas in an attempt to achieve portfolio stability, diversification and favorable risk-adjusted investment returns. We will employ a research-based investment philosophy focused on building a portfolio of properties and real estate related assets that we believe have the potential to outperform market averages.

We believe that the evolving real estate market may present opportunities to purchase high quality properties and other real estate related assets at significant discounts to both the previous market peak levels and asset replacement costs during the period in which we are investing the net proceeds of our offering.

With respect to our investments in properties, we generally expect to invest in properties in large metropolitan areas that are well-leased with a stable tenant base and predictable income. However, we may make investments in properties with other characteristics if we believe that such investments have the potential to enhance portfolio diversification or investment returns.

Our advisor has the authority to execute on our behalf all investment transactions that meet the requirements of the investment guidelines approved by our board of directors. The investment committee of our sponsor will review and approve each potential investment before our advisor may consider the opportunity for our portfolio.

Following our initial ramp-up period (described below), we will seek to invest:

· between 70% and 85% of our net assets in properties;

· between 10% and 25% of our net assets in real estate related assets; and

· between 1% and 15% of our net assets in cash, cash equivalents and other short-term investments.

Notwithstanding the above, the actual percentage of our portfolio that is invested in each investment type may from time to time be outside the target levels provided above due to factors such as a large inflow of capital over a short period of time, a lack of attractive investment opportunities or an increase in anticipated cash requirements or redemption requests. During the period until we have raised substantial proceeds in our offering and acquired a diversified portfolio of our target investments, which we refer to as our “ramp-up period,” we will balance the goal of achieving diversification in our portfolio with the goal of maintaining moderate leverage. Following the end of our ramp-up period, we believe that the size of our portfolio of investments should be sufficient for our advisor to adhere more closely to our investment guidelines, although we cannot predict how long our ramp-up period will last and we cannot provide assurances that we will be able to raise sufficient proceeds in our offering to accomplish this objective. During our ramp-up period, the percentages of our gross assets comprised of various categories of assets may fluctuate as we identify investment opportunities and make investments with a combination of proceeds from our offering and proceeds from borrowings.

Borrowing Policies

We intend to use conservative amounts of financial leverage to provide additional funds to support our investment activities. Our target leverage ratio after we have acquired a substantial portfolio of real estate investments is 35% to 40% of the gross value of our assets. During the period when we are acquiring our portfolio, we may employ greater leverage in order to build a diversified portfolio of assets.

If we obtain a line of credit to fund redemptions of our shares pursuant to our redemption plan and for general corporate purposes, we will consider actual borrowings when determining whether or not we are at our leverage target, but not unused borrowing capacity. If, therefore, we are at our target leverage ratio of 35% to 40% and we borrow additional amounts under a line of credit, or if the value of our portfolio decreases, our leverage could exceed our target leverage ratio. In the event that our leverage ratio exceeds 40%, regardless of the reason, we will thereafter endeavor to manage our leverage back down to our 35% to 40% target.

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Competitive Market Factors Affecting Our Business

The U.S. commercial real estate investment and leasing markets remain competitive. We face competition from various entities for investment opportunities in commercial and office properties, including other REITs, pension funds, insurance companies, investment funds and companies, partnerships and developers. Many of these entities have substantially greater financial resources than we do and may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of a tenant or the geographic location of its investments. Competition from these entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell.

The success of our portfolio of real estate related investments depends, in part, on our ability to acquire and originate investments with spreads over our borrowing cost. In acquiring and originating these investments, we compete with mortgage REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, other lenders, governmental bodies and other entities, many of which have greater financial resources and lower costs of capital available to them than we do. In addition, there are numerous REITs with asset acquisition objectives similar to ours, and others may be organized in the future, which may increase competition for the investments suitable for us. Our competitors may be willing to accept lower returns on their investments and may succeed in buying the assets that we have targeted for acquisition. Although we believe that we are well-positioned to compete effectively in each facet of our business, there is competition in our market sector and there can be no assurance that we will compete effectively or that we will not encounter increased competition in the future that could limit our ability to conduct our business effectively.

Compliance with Federal, State and Local Environmental Law

Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances.

Employees

We have no paid employees. We are externally managed and advised by our advisor, a wholly owned subsidiary of our sponsor. In providing management, acquisition, advisory and administrative services to us, our advisor relies on the personnel of our sponsor.

Financial Information About Industry Segments

Our current business plan consists of owning, managing, operating, leasing, acquiring, developing, investing in, and disposing of properties and real estate related assets. We internally evaluate all of our properties and real estate related assets as one industry segment, and, accordingly, we do not report segment information.

Concentration of Credit Risk

As of December 31, 2012, we had cash on deposit at two financial institutions, one of which had $3.2 million in deposits which is in excess of federally insured levels; however, we have not experienced any losses in this account. We limit significant cash holdings to accounts held by financial institutions with high credit standing and we therefore believe we are not exposed to any significant credit risk on cash deposits.

As of December 31, 2012, 100% of our gross rental revenues were from a medical office building that we own in Connecticut, known as the Darien Property. Stamford Health System, Inc., the sole tenant in the Darien Property is a not-for profit provider of comprehensive healthcare services and has a Fitch credit rating of A.

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In addition, we own a 50% interest in a joint venture. The joint venture owns an industrial property located in Pennsylvania, which has 2 tenants, each occupying 157,500 square feet.

Available information

Access to copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other filings with the SEC, including amendments to such filings, may be obtained free of charge directly from the SEC’s website, http://www.sec.gov. These filings are made available promptly after we file them with, or furnish them to, the SEC. These reports and other filings with the SEC are also accessible from our website, www.clarionpartnerstrust.com.

Item 1A. Risk Factors

The factors described below represent our principal risks. Other factors may exist that we do not consider to be significant based on information that is currently available or that we are not currently able to anticipate. The occurrence of any of the risks discussed below could have a material adverse effect on our business, financial condition, results of operations and our ability to pay distributions to our stockholders.

Risks Related to an Investment in Our Shares

We have no significant operating history and there is no assurance that we will be able to successfully achieve our investment objectives.

We have no significant operating history and may not be able to achieve our investment objectives. We cannot assure stockholders that the past experiences of affiliates of our advisor will be sufficient to allow us to successfully achieve our investment objectives. As a result, an investment in our shares of common stock may entail more risk than the shares of common stock of a REIT with a substantial operating history.

There is no public trading market for shares of our common stock; therefore, stockholders’ ability to dispose of their shares will likely be limited to redemption by us. If stockholders do sell their shares to us, they may receive less than the price they paid.

There is no current public trading market for shares of our common stock, and we do not expect that such a public market will ever develop. Therefore, redemption of shares by us will likely be the only way for stockholders to dispose of their shares. We will redeem shares at a price equal to the NAV per share of the class of shares being redeemed on the date of redemption, and not based on the price at which stockholders initially purchased their shares. Subject to limited exceptions, shares redeemed within 365 days of the date of purchase are subject to a short-term trading discount equal to 2% of the gross proceeds otherwise payable with respect to the redemption, which inures indirectly to the benefit of our remaining stockholders. As a result, stockholders may receive less than the price they paid for their shares when stockholders sell them to us pursuant to our redemption plan.

In addition, we may redeem stockholders’ shares if they fail to maintain a minimum balance of $2,000 in shares, even if the failure to meet the minimum balance is caused solely by a decline in our NAV. Shares redeemed for this reason are subject to the short-term trading discount of 2% if redeemed within 365 days of the date of purchase.

Purchases of common stock by our affiliates in our offering should not influence investment decisions of independent, unaffiliated investors.

Affiliates of our advisor have purchased shares of our common stock, and such purchases were included for purposes of releasing the escrowed purchase order proceeds to us. As of December 31, 2012, our affiliates owned approximately 84% of our common stock. However, there are no written or other binding commitments with respect to the further acquisition of shares by such parties. Any shares purchased by affiliates of ours will be purchased for investment purposes only. However, the investment decisions made by any such affiliates should not influence any investor’s decision to invest in shares of our common stock, and investors should make their own independent investment decision concerning the risks and benefits of an investment in our common stock.

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Our sponsor has no obligation to reimburse us for, or pay on our behalf, our organization, offering and operating expenses.

We entered into an expense support agreement with our sponsor on November 5, 2012. Pursuant to the terms of the expense support agreement, commencing with the partial quarter ending December 31, 2012 our sponsor may reimburse us for, or pay on our behalf, all or a portion of our organization, offering and operating expenses, until such time as we receive $350.0 million in gross offering proceeds from our offering. However, our sponsor has no obligation, under the expense support agreement or otherwise, to make any such reimbursements or payments. If our sponsor determines to discontinue such reimbursements or payments, such discontinuation will reduce our cash available for investment in properties and distributions to our stockholders.

Our payment of organization, offering and operating expenses will negatively affect NAV.

Upon our receipt of $350.0 million in gross proceeds from our offering we will begin to reimburse our sponsor pursuant to the expense support agreement for payments it has made to us or on our behalf for organization, offering and operating expenses. These payments will lower our NAV and may negatively impact the value of your investment.

Our ability to redeem stockholders’ shares may be limited, and our board of directors may modify or suspend our redemption plan at any time.

Under our redemption plan, the total amount of net redemptions during any calendar quarter is limited to shares whose aggregate value is 5% of the combined NAV of both classes of shares, calculated as of the last day of the previous calendar quarter. The vast majority of our assets will consist of properties which generally cannot be readily liquidated without impacting our ability to realize full value upon their disposition. Therefore, we may not always have a sufficient amount of cash to immediately satisfy redemption requests. Should redemption requests, in the business judgment of our board of directors, place an undue burden on our liquidity, adversely affect our investment operations or pose a risk of having a material adverse impact on non-redeeming stockholders, then our board of directors may modify or suspend our redemption plan. Because our board of directors is not required to authorize the recommencement of the redemption plan within any specified period of time, our board may effectively terminate the plan by suspending it indefinitely. As a result of these limitations on our redemption plan, stockholders’ ability to have their shares redeemed by us may be limited and at times no liquidity may be available for their investment.

Our board of directors will not approve each investment selected by our advisor.

Our board of directors has approved investment guidelines that delegate to our advisor the authority to execute (1) acquisitions and dispositions and (2) investments in other real estate related assets, in each case so long as such investments are consistent with the investment guidelines. Our directors review our investment guidelines on an annual basis and our investment portfolio on a quarterly basis or, in each case, as often as they deem appropriate. The prior approval of our board of directors will be required only for the acquisition or disposition of assets that are not in accordance with our investment guidelines. In addition, in conducting periodic reviews, our directors will rely primarily on information provided to them by our advisor. Furthermore, transactions entered into on our behalf by our advisor may be costly, difficult or impossible to unwind when they are subsequently reviewed by our board of directors.

If we pay distributions from sources other than our cash flow from operations, we will have fewer funds available for investments, which may adversely affect our ability to fund future distributions with cash flows from operations and may reduce the overall return.

Our long-term corporate strategy is to fund the payment of regular distributions to our stockholders entirely from cash flow from our operations. However, during the ramp-up period, and from time to time thereafter, we may not generate sufficient cash flow from operations to fully fund distributions to stockholders. Therefore, we may choose to use cash flows from financing activities, which include borrowings (including borrowings secured by our assets), net offering proceeds, or other sources to fund distributions to our stockholders. We may be required to

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continue to fund our regular distributions from a combination of some of these sources if our investments fail to perform as anticipated, if expenses are greater than expected and due to numerous other factors. We have not established a limit on the amount of our distributions that may be paid from any of these sources.

Using certain of these sources may result in a liability to us, which would require a future repayment. The use of these sources for distributions and the ultimate repayment of any liabilities incurred could adversely impact our ability to pay distributions in future periods, decrease our NAV, decrease the amount of cash we have available for operations and new investments and adversely impact the value of stockholders investments.

Valuations and appraisals of our properties and real estate related assets are estimates of fair value and may not necessarily correspond to realizable value.

For the purposes of calculating our NAV after the close of business on each business day, our properties are initially valued at cost which we expect to represent fair value at that time. Thereafter, valuations of properties, which are based in part on appraisals of each of our properties by our independent valuation advisor at least once during every calendar quarter after the respective calendar quarter in which such property was acquired, are performed in accordance with our valuation guidelines. Likewise, our investments in real estate related assets are initially valued at cost, and thereafter are valued quarterly, or in the case of liquid securities, daily, as applicable, at fair value. Within the parameters of our valuation guidelines, the valuation methodologies used to value our properties involve subjective judgments regarding such factors as comparable sales, rental and operating expense data, the capitalization or discount rate, and projections of future rent and expenses based on appropriate analysis. Although our valuation guidelines are designed to determine the accurate and timely fair value of our assets, valuations and appraisals of our properties and real estate related assets are only estimates of fair value. Ultimate realization of the value of an asset depends to a great extent on economic and other conditions beyond our control and the control of our advisor and independent valuation advisor. Further, valuations do not necessarily represent the price at which an asset would sell, since market prices of assets can only be determined by negotiation between a willing buyer and seller. Therefore, the valuations of our properties and our investments in real estate related assets may not correspond to the timely realizable value upon a sale of those assets. There will be no retroactive adjustment in the valuation of such assets, the price of our shares of common stock, the price we paid to redeem shares of our common stock or NAV-based fees we paid to our advisor and dealer manager to the extent such valuations prove to not accurately reflect the true estimate of value and are not a precise measure of realizable value.

Although our advisor is responsible for calculating our NAV, our advisor bases its calculations in part on independent appraisals of our properties, the accuracy of which our advisor does not independently verify.

In calculating our NAV on a daily basis, our advisor includes values of individual properties that were obtained from the independent valuation advisor. Our independent valuation advisor was selected by our advisor and approved by our board of directors, including a majority of our independent directors. Although our advisor is responsible for the accuracy of the daily NAV calculation and our independent valuation advisor provides appraisals pursuant to our valuation guidelines, we do not independently verify the appraised value of our properties. As a result, the appraised value of a particular property may be greater or less than its potential realizable value, which would cause our estimated NAV to be greater or less than the potential realizable NAV.

Our NAV per share may suddenly change if the appraised values of our properties materially change from prior appraisals or the actual operating results for a particular month differ from what we originally budgeted for that month.

We anticipate that the quarterly appraisals of our properties will not be spread evenly throughout the calendar quarter, but instead could be received in groupings during the quarter or a particular month. As such, when these appraisals are reflected in our NAV calculation, there may be a sudden change in our NAV per share for each class of our common stock. In addition, actual operating results for a given month may differ from what we originally budgeted for that month, which may cause a sudden increase or decrease in the NAV per share amounts. We accrue estimated income and expenses on a daily basis based on quarterly budgets. As soon as practicable after the end of each month, we adjust the income and expenses we estimated for that month to reflect the income and expenses actually earned and incurred. We do not retroactively adjust the NAV per share of each class for each day of the previous month. Therefore, because the actual results from operations may be better or worse than what we

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previously budgeted for a particular month, the adjustment to reflect actual operating results may cause the NAV per share for each class of our common stock to increase or decrease, and such increase or decrease will occur on the day the adjustment is made.

The NAV per share that we publish may not necessarily reflect changes in our NAV that are not immediately quantifiable.

From time to time, we may experience events with respect to our investments that may have a material impact on our NAV. For example, an unexpected termination or renewal of a material lease, a material change in vacancies or an unanticipated structural or environmental event at a property may cause the value of a property to change materially. The NAV per share of each class of our common stock as published on any given day may not reflect such extraordinary events to the extent that their financial impact is not immediately quantifiable. As a result, the NAV per share of each class published after the announcement of a material event may differ significantly from our actual NAV per share for such class until such time as the financial impact is quantified and our NAV is appropriately adjusted in accordance with our valuation guidelines. The resulting potential disparity in our NAV may inure to the benefit of redeeming or non-redeeming stockholders, depending on whether our published NAV per share for such class is overstated or understated.

Changes in global economic and capital market conditions, including periods of generally deteriorating real estate industry fundamentals, may significantly affect our results of operations and returns to our stockholders.

We are subject to risks incident to the ownership of real estate and real estate related assets, including changes in global, national, regional or local economic, demographic and real estate market conditions, as well as other factors particular to the locations of our investments. A prolonged recession, such as the one experienced over the past few years, and a prolonged recovery period could adversely impact our investments as a result of, among other items, increased tenant defaults under our leases, lower demand for rentable space, as well as potential oversupply of rentable space, each of which could lead to increased concessions, tenant improvement expenditures or reduced rental rates to maintain occupancies. These conditions could also adversely impact the financial condition of the tenants that occupy our real properties and, as a result, their ability to pay us rents.

In addition, the risks associated with our business tend to be more severe during periods of economic slowdown or recession if these periods are accompanied by deteriorating fundamentals and declining values in the real estate industry. To the extent that the general economic slowdown is further prolonged or becomes more severe or real estate fundamentals deteriorate, it may have a significant and adverse impact on our revenues, results from operations, financial condition, liquidity, overall business prospects and ultimately our ability to make distributions to our stockholders.

Continued uncertainty and volatility in the credit markets could affect our ability to obtain debt financing on reasonable terms, or at all, which could reduce the number of properties we may be able to acquire and the amount of cash distributions we can make to our stockholders.

The U.S. and global credit markets have experienced severe dislocations and liquidity disruptions over the past several years, which have caused volatility in the credit spreads on prospective debt financings and have constrained the availability of debt financing. The uncertainty in the credit markets may adversely impact our ability to access additional debt financing on reasonable terms or at all, which may adversely affect investment returns on future acquisitions or our ability to make acquisitions.

If mortgage debt is unavailable on reasonable terms, we may not be able to finance the initial purchase of properties. In addition, since we incur mortgage debt on properties, we run the risk of being unable to refinance such debt upon maturity, or of being unable to refinance on favorable terms. If interest rates are higher or other financing terms, such as principal amortization, the need for a corporate guaranty, or other terms are not as favorable when we refinance debt or issue new debt, our income could be reduced. To the extent we are unable to refinance debt on reasonable terms, or at appropriate times or at all, we may be required to sell properties on terms that are not advantageous to us, or could result in the foreclosure of such properties. If any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to our stockholders and may hinder our ability to raise more capital by borrowing more money.

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Economic events that may cause our stockholders to request that we redeem their shares may materially adversely affect our cash flow and our ability to achieve our investment objectives.

Economic events affecting the U.S. economy, such as the general negative performance of the investment real estate sector, could cause our stockholders to seek to sell their shares to us pursuant to our redemption plan. Our redemption plan limits the amount of funds we may use for net redemptions during each calendar quarter to 5% of the combined NAV of both classes of shares as of the last day of the previous calendar quarter. Even if we are able to satisfy all resulting redemption requests, our cash flow could be materially adversely affected. In addition, if we determine to sell valuable assets to satisfy redemption requests, our ability to achieve our investment objectives, including, without limitation, diversification of our portfolio by property type and location, moderate financial leverage, conservative operating risk and an attractive level of current income, could be materially adversely affected.

We depend on our advisor, the key personnel of our advisor and our dealer manager, and we may not be able to secure suitable replacements in the event that we fail to retain their services.

Our success is dependent upon our relationships with, and the performance of, our advisor, the key real estate professionals of our advisor and our dealer manager in the marketing and distribution of our offering, the acquisition and management of our investment portfolio, and our corporate operations. Any of these parties may suffer or become distracted by adverse financial or operational problems in connection with their business and activities unrelated to us and over which we have no control. Should any of these parties fail to allocate sufficient resources to perform their responsibilities to us for any reason, we may be unable to achieve our investment objectives or to pay distributions to our stockholders. In the event that, for any reason, our advisory agreement or dealer manager agreement is terminated, or our advisor is unable to retain its key personnel, it may be difficult to secure suitable replacements on acceptable terms, which would adversely impact the value of a stockholder’s investment. Our ability to retain the services of our dealer manager may additionally be adversely affected by the currently ongoing strategic review and reorganization of our dealer manager’s ultimate parent, ING Groep N.V., or ING Groep, as a result of which our dealer manager may be acquired or controlled by a third party.

In the event ING Groep amends the term of our dealer manager agreement in connection with a divestment of our dealer manager, our ability to raise capital may be adversely affected and the fees payable to the new dealer manager may increase.

The term of the dealer manager agreement we entered into with our dealer manager may be amended upon request of the Executive Board of ING Groep, the parent company of our dealer manager, in connection with, and not later than contemporaneously with, any divestment of our dealer manager. The Executive Board of ING Groep could effectively terminate our dealer manager agreement or reduce the length of the period during which our dealer manager is required to perform under the agreement by amending its term, which could adversely affect us and our stockholders. Although our dealer manager is required to use its best efforts to cooperate with us in transferring the management of our offering to another broker dealer we designate, we may have difficulty identifying and engaging a new dealer manager with similar experience and resources. If we do not timely identify and engage a new dealer manager, or if the new dealer manager has less experience or fewer resources than our current dealer manager, our ability to raise capital may be impaired. Even if we timely identify and engage a new dealer manager, we may be unable to negotiate terms, including fees, that are as favorable to us and our stockholders as the terms of our current dealer manager agreement. Further, if we engage an unaffiliated dealer manager, we may incur significant costs associated with reimbursing our dealer manager for the cost of its independent due diligence review of our offering. These events could materially impact our operations and adversely affect our stockholders.

If we are unable to raise substantial funds, we will be limited in the number and type of investments we make, and the value of our shares will fluctuate with the performance of the specific assets we acquire.

Our offering is being made on a ‘‘best efforts’’ basis, meaning that our dealer manager is only required to use its best efforts to sell our shares and has no firm commitment or obligation to purchase any shares. As a result, the amount of proceeds we raise in our offering may be substantially less than the amount we would need to achieve a diversified portfolio of investments. If we are unable to raise substantially more than the minimum offering amount, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments

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that we make. In that case, the likelihood that any single asset’s performance would adversely affect our profitability will increase. Further, we will have certain fixed operating expenses, including expenses of being a public reporting company, regardless of whether we are able to raise substantial funds. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.

The termination or replacement of our advisor could trigger a repayment event under our mortgage loans for some of our properties and the credit agreement governing for any line of credit we obtain.

Lenders for certain of our properties may request provisions in the mortgage loan documentation that would make the termination or replacement of our advisor an event requiring the immediate repayment of the full outstanding balance of the loan. If we elect to obtain a line of credit and are able to do so, the termination or replacement of our advisor could trigger repayment of outstanding amounts under the credit agreement governing our line of credit. If a repayment event occurs with respect to any of our properties, our ability to achieve our investment objectives could be materially adversely affected.

In the event we are able to quickly raise a substantial amount of capital, we may have difficulty investing it in properties.

If we are able to quickly raise capital, we may have difficulty identifying and purchasing suitable properties on attractive terms in order to meet our targeted investment allocation of up to 85% of our assets invested in properties. In addition, we may have capital which cannot be deployed until additional investment opportunities have been allocated to us by our sponsor pursuant to its allocation policy. Therefore, there could be a delay between the time we receive net offering proceeds from the sale of shares of our common stock and the time we invest the net proceeds. This could cause a substantial delay in the time it takes for a stockholder’s investment to realize its full potential return and could adversely affect our ability to pay regular distributions of cash flow from operations to stockholders.

We may change our investment and operational policies without stockholder consent.

Except for changes to the investment objectives and investment restrictions contained in our charter, which require stockholder consent to amend, we may change our investment and operational policies, including our policies with respect to investments, operations, indebtedness, capitalization and distributions, at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier or more highly leveraged than, the types of investments described in this prospectus. A change in our investment strategy may, among other things, increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could materially affect our ability to achieve our investment objectives.

Risks Related to Conflicts of Interest

Our advisor will face a conflict of interest with respect to the allocation of investment opportunities and competition for tenants between us and other real estate programs that it advises.

Our advisor’s officers and key real estate professionals are expected to identify potential investments in properties and other real estate related assets which are consistent with our investment guidelines for our possible acquisition. However, our advisor may not acquire any investment in a property unless our sponsor has reviewed and approved presenting it to us in accordance with its allocation policies. Our sponsor and its affiliates advise other investment programs that invest in properties and real estate related assets in which we may be interested. Our sponsor could face conflicts of interest in determining which programs will have the opportunity to acquire and participate in such investments as they become available. As a result, other investment programs advised by our sponsor may compete with us with respect to certain investments that we may want to acquire.

In addition, we may acquire properties in geographic areas where other investment programs advised by our sponsor own properties. Therefore, our properties may compete for tenants with other properties owned by such

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investment programs. If one of such investment programs attracts a tenant that we are competing for, we could suffer a loss of revenue due to delays locating another suitable tenant.

Our advisor faces a conflict of interest because the fees it receives for services performed are based on our NAV, which is calculated by our advisor.

Our advisor is paid a fee for its services based on our daily NAV, which is calculated by our advisor in accordance with our valuation guidelines. The calculation of our NAV in accordance with our valuation guidelines includes certain subjective judgments of our advisor and our independent valuation advisor, including estimates of fair value of particular assets, and therefore may not correspond to realizable value upon a sale of those assets. Our advisor may benefit by our retention of ownership of our assets at times when our stockholders may be better served by the sale or disposition of our assets in order to avoid a reduction in our NAV. If our NAV is calculated in a way that is not reflective of our actual NAV, then the purchase price of shares of our common stock on a given date may not accurately reflect the value of our portfolio, and stockholders’ shares may be worth less than the purchase price.

Our advisor’s inability to retain the services of key real estate professionals could hurt our performance.

Our success depends to a significant degree upon the contributions of certain key real estate professionals employed by our sponsor acting on behalf of our advisor, each of whom would be difficult to replace. Neither we nor our advisor have employment agreements with these individuals and they may not remain associated with us. If any of these persons were to cease their association with us, our operating results could suffer. Our future success depends, in large part, upon our sponsor’s ability to attract and retain highly skilled managerial, operational and marketing professionals. If our sponsor loses or is unable to obtain the services of highly skilled professionals, our ability to implement our investment strategies could be delayed or hindered.

The key real estate professionals employed by our sponsor that provide services to us are all involved in the management of other funds sponsored by our sponsor and separate accounts established for institutional investors, each of which invest in properties and real estate related assets. As a result of their obligations to other funds and investors and the fact that they engage in and they will continue to engage in other business activities, on behalf of themselves and others, these individuals face conflicts of interest in allocating their time among us and such other funds, investors and activities. These conflicts of interest could cause these individuals to allocate less of their time to us than we may require, which may adversely impact our operations.

Our executive officers, our affiliated directors and the key real estate professionals acting on behalf of our advisor face conflicts of interest related to their positions or interests in affiliates of our advisor, which could hinder our ability to implement our business strategy and to generate returns to our stockholders.

Our executive officers, our affiliated directors and the key real estate professionals acting on behalf of our advisor are also executive officers, directors, managers and key professionals of other entities affiliated with our sponsor. Through entities affiliated with our sponsor, some of these persons also serve as managers and investment advisors to other funds and institutional investors in real estate and real estate related assets. As a result, they owe fiduciary duties to each of these entities and their investors, which fiduciary duties may from time to time conflict with the fiduciary duties that they owe to us and our stockholders. Their loyalties to these other entities and investors could result in action or inaction that is detrimental to our business, which could harm the implementation of our investment strategy.

Payment of fees and expenses to our advisor and our dealer manager reduces the cash available for distribution and increases the risk that stockholders will not be able to recover the amount of their investment in our shares.

Our advisor performs services for us in connection with the selection and acquisition of our investments, the management of our assets and certain administrative services. We pay our advisor advisory fees and expense reimbursements for these services, which reduces the amount of cash available for further investments or distribution to our stockholders. We also pay our dealer manager, dealer manager fees and distribution fees based on our NAV. The fees we pay to our advisor and our dealer manager increase the risk that stockholders may receive a

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lower price when they sell their shares to us pursuant to our redemption plan than the purchase price they initially paid for their shares.

Risks Related to Our Corporate Structure

The limits on the percentage of shares of our common stock that any person may own may discourage a takeover or business combination that could otherwise benefit our stockholders.

Our charter, with certain exceptions, authorizes our board of directors to take such actions as are necessary and desirable to qualify us as a REIT. Unless exempted by our board of directors, no person may own more than 9.8% in value of our outstanding capital stock or more than 9.8% in value or number of shares, whichever is more restrictive, of our outstanding common stock. A person that did not acquire more than 9.8% of our shares may become subject to our charter restrictions if redemptions by other stockholders cause such person’s holdings to exceed 9.8% of our outstanding shares. Our 9.8% ownership limitation may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for our stockholders.

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

Our board of directors may classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms or conditions of redemption of any such stock without stockholder approval. Thus, our board of directors could authorize the issuance of preferred stock with terms and conditions that could have priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might otherwise provide a premium price to holders of our common stock.

Maryland law and our organizational documents limit our rights and the rights of our stockholders to recover claims against our directors and officers, which could reduce stockholders’ and our recovery against them if they cause us to incur losses.

Maryland law provides that a director will not have any liability as a director so long as he or she performs his or her duties in accordance with the applicable standard of conduct. In addition, Maryland law and our charter provide that no director or officer shall be liable to us or our stockholders for monetary damages unless the director or officer (1) actually received an improper benefit or profit in money, property or services or (2) was actively and deliberately dishonest as established by a final judgment. Moreover, our charter generally requires us to indemnify and advance expenses to our directors and officers for losses they may incur by reason of their service in those capacities unless their act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, they actually received an improper personal benefit in money, property or services or, in the case of any criminal proceeding, they had reasonable case to believe the act or omission was unlawful. Further, we have entered into separate indemnification agreements with each of our officers and directors. As a result, stockholders and we may have more limited rights against our directors or officers than might otherwise exist under common law, which could reduce stockholders and our recovery from these persons if they act in a manner that causes us to incur losses. In addition, we are obligated to fund the defense costs incurred by these persons in some cases. However, our charter provides that we may not indemnify our directors, or our advisor and its affiliates, for any liability or loss suffered by them or hold our directors, our advisor and its affiliates harmless for any liability or loss suffered by us, unless they have determined that the course of conduct that caused the loss or liability was in our best interests, they were acting on our behalf or performing services for us, the liability or loss was not the result of negligence or misconduct by our non-independent directors, our advisor and its affiliates, or gross negligence or willful misconduct by our independent directors, and the indemnification or agreement to hold harmless is recoverable only out of our net assets or the proceeds of insurance and not from the stockholders.

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Certain provisions of Maryland law could inhibit transactions or changes of control under circumstances that could otherwise provide stockholders with the opportunity to realize a premium.

Certain provisions of the Maryland General Corporation Law applicable to us prohibit business combinations with: (1) any person who beneficially owns 10% or more of the voting power of our outstanding voting stock, which we refer to as an “interested stockholder;” (2) an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding stock, which we also refer to as an “interested stockholder;” or (3) an affiliate of an interested stockholder.

These prohibitions last for five years after the most recent date on which the interested stockholder became an interested stockholder. Thereafter, any business combination with the interested stockholder or an affiliate of the interested stockholder must be recommended by our board of directors and approved by the affirmative vote of at least 80% of the votes entitled to be cast by holders of our outstanding voting stock, and two-thirds of the votes entitled to be cast by holders of our voting stock other than shares held by the interested stockholder or its affiliate with whom the business combination is to be effected or held by an affiliate or associate of the interested stockholder. These requirements could have the effect of inhibiting a change in control even if a change in control were in our stockholders’ best interest. These provisions of Maryland law do not apply, however, to business combinations that are approved or exempted by our board of directors prior to the time that someone becomes an interested stockholder. Pursuant to the business combination statute, our board of directors has exempted any business combination involving us and any person, provided that such business combination is first approved by a majority of our board of directors, including a majority of our independent directors.

Our UPREIT structure may result in potential conflicts of interest with limited partners in our operating partnership whose interests may not be aligned with those of our stockholders.

Our directors and officers have duties to our corporation and our stockholders under Maryland law in connection with their management of the corporation. At the same time, we, as general partner, have fiduciary duties under Delaware law to our operating partnership and to the limited partners in connection with the management of our operating partnership. Our duties as general partner of our operating partnership and its partners may come into conflict with the duties of our directors and officers to the corporation and our stockholders. Under Delaware law, a general partner of a Delaware limited partnership owes its limited partners the duties of good faith and fair dealing. Other duties, including fiduciary duties, may be modified or eliminated in the partnership’s partnership agreement. The partnership agreement of our operating partnership provides that, for so long as we own a controlling interest in our operating partnership, any conflict that cannot be resolved in a manner not adverse to either our stockholders or the limited partners will be resolved in favor of our stockholders.

Additionally, the partnership agreement expressly limits our liability by providing that we and our officers, directors, agents and employees, will not be liable or accountable to our operating partnership for losses sustained, liabilities incurred or benefits not derived if we or our officers, directors, agents or employees acted in good faith. In addition, our operating partnership is required to indemnify us and our officers, directors, employees, agents and designees to the extent permitted by applicable law from and against any and all claims arising from operations of our operating partnership, unless it is established that: (1) the act or omission was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty; (2) the indemnified party received an improper personal benefit in money, property or services; or (3) in the case of a criminal proceeding, the indemnified person had reasonable cause to believe that the act or omission was unlawful.

The provisions of Delaware law that allow the fiduciary duties of a general partner to be modified by a partnership agreement have not been tested in a court of law, and we have not obtained an opinion of counsel covering the provisions set forth in the partnership agreement that purport to waive or restrict our fiduciary duties.

Stockholders’ investment returns may be reduced if we are deemed to be an investment company under the Investment Company Act.

Neither we nor our operating partnership nor any of the subsidiaries of our operating partnership intend, or expect to be an investment company under the Investment Company Act. Rule 3a-1 under the Investment Company

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Act generally provides that, notwithstanding Section 3(a)(1)(C) of the Investment Company Act, an issuer will not be deemed to be an “investment company” under the Investment Company Act provided that (1) it does not hold itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities, and (2) on an unconsolidated basis except as otherwise provided, no more than 45% of the value of its total assets, consolidated with the assets of any wholly-owned subsidiary, (exclusive of U.S. government securities and cash items) consists of, and no more than 45% of its net income after taxes, consolidated with the net income of any wholly owned subsidiary, (for the last four fiscal quarters combined) is derived from, securities other than U.S. government securities, securities issued by employees’ securities companies, securities issued by certain majority owned subsidiaries of such company and securities issued by certain companies that are controlled primarily by such company. In addition, we believe neither we nor our operating partnership will be considered an investment company under Section 3(a)(1)(A) of the Investment Company Act because neither we nor our operating partnership will engage primarily or hold ourselves out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through our operating partnership’s wholly-owned or majority-owned subsidiaries, we and our operating partnership will be primarily engaged in the non-investment company businesses of these subsidiaries, namely the business of purchasing or otherwise acquiring real property, mortgages and other interests in real estate.

To maintain compliance with this exception from the definition of investment company under the Investment Company Act, we may be unable to sell assets we would otherwise want to sell and may be unable to purchase securities we would otherwise want to purchase.

We believe that we, our operating partnership and the subsidiaries of our operating partnership will satisfy this exclusion. However, if we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:

· limitations on capital structure;

· restrictions on specified investments;

· restrictions or prohibitions on retaining earnings;

· restrictions on leverage or senior securities;

· restrictions on unsecured borrowings;

· requirements that our income be derived from certain types of assets;

· prohibitions on transactions with affiliates; and

· compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.

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

Registration with the SEC as an investment company would be costly, would subject our company to a host of complex regulations, and would divert the attention of management from the conduct of our business. In addition, the purchase of real estate that does not fit our investment guidelines and the purchase or sale of investment securities or other assets to preserve our status as a company not required to register as an investment company could materially adversely affect our NAV, the amount of funds available for investment and our ability to pay distributions to our stockholders.

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General Risks Related to Investments in Real Estate

Our operating results will be affected by economic and regulatory changes that impact the real estate market in general.

We will be subject to risks generally attributable to the ownership of real property, including:

· vacancies or inability to lease space on favorable terms;

· changes in global, national, regional or local economic, demographic or capital market conditions;

· future adverse national real estate trends, including increasing vacancy rates, declining rental rates and general deterioration of market conditions;

· changes in supply of or demand for similar properties in a given market or metropolitan area which could result in rising vacancy rates or decreasing market rental rates;

· increased competition for properties targeted by our investment strategy;

· bankruptcies, financial difficulties or lease defaults by our tenants;

· increases in interest rates and availability of financing; and

· changes in government rules, regulations and fiscal policies, including increases in property taxes, changes in zoning laws, and increasing costs to comply with environmental laws.

All of these factors are beyond our control. Any negative changes in these factors could affect our ability to meet our obligations and make distributions to stockholders.

Adverse economic conditions in the regions and metropolitan markets where our assets are located may adversely affect our ability to lease our properties and our ability to increase lease prices.

In addition to our properties being subject to national economic real estate trends, our properties will also be subject to adverse conditions in the regions and metropolitan areas where our properties are located, which may reduce our ability to lease our properties, restrict our ability to increase lease prices and force us to lower lease prices or offer tenant incentives. As a result, adverse regional or city specific events or trends may impact certain of our properties without impacting our entire portfolio, which could decrease our overall performance.

We may have difficulty selling our properties, which may limit our flexibility and ability to pay distributions.

Because real estate investments are illiquid, it could be difficult for us to promptly sell one or more of our properties on favorable terms. This may limit our ability to change our portfolio promptly in response to adverse changes in the performance of any such property or economic or market trends. In addition, federal tax laws that impose a 100% excise tax on gains from sales of dealer property by a REIT (generally, property held for sale, rather than investment) could limit our ability to sell properties and may affect our ability to sell properties without adversely affecting returns to our stockholders. These restrictions could adversely affect our ability to achieve our investment objectives.

We face risks associated with property acquisitions.

We intend to acquire properties and portfolios of properties, including large portfolios that will increase our size and result in changes to our capital structure. Our acquisition activities and their success are subject to the following risks:

· we may be unable to complete an acquisition after making a non-refundable deposit and incurring certain other acquisition-related costs;

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· we may be unable to obtain financing for acquisitions on commercially reasonable terms or at all;

· acquired properties may fail to perform as expected;

· the actual costs of repositioning or redeveloping acquired properties may be greater than our estimates;

· acquired properties may be located in new markets in which we may face risks associated with a lack of market knowledge or understanding of the local economy, lack of business relationships in the area and unfamiliarity with local governmental and permitting procedures; and

· we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations.

Properties that incur vacancies could be difficult and costly to sell or re-lease.

A property may incur a vacancy either by the continued default of a tenant under its lease or the expiration of one of our leases. In addition, certain of the properties we acquire may have some level of vacancy at the time of closing. Certain other properties may be specifically suited to the particular needs of a tenant and may become vacant after we acquire them. Therefore, we may have difficulty obtaining a new tenant for any vacant space we have in our properties, and substantial expenditures may be necessary to customize the property to fit the needs of a successor tenant or prepare the property for sale. If the vacancy continues for a long period of time, we may suffer reduced revenues resulting in lower cash distributions to stockholders. In addition, the resale value of the property could be diminished because the market value may depend principally upon the value of the property’s leases.

Potential losses or damage to our properties may not be covered by insurance.

We plan to carry comprehensive liability, fire, extended coverage, business interruption and rental loss insurance covering all of the properties in our portfolio under a blanket policy. Our advisor will select policy specifications and insured limits which it believes to be appropriate and adequate given the relative risk of loss, the cost of the coverage and industry practice. Insurance policies on our properties may include some coverage for losses that are generally catastrophic in nature, such as losses due to terrorism, earthquakes and floods, but we cannot assure stockholders that it will be adequate to cover all losses and some of our policies will be insured subject to limitations involving large deductibles or co-payments and policy limits which may not be sufficient to cover losses. If we, or one or more of our tenants, experience a loss which is uninsured or which exceeds policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.

Our properties will face significant competition.

We will face significant competition from owners, operators and developers of properties. Substantially all of our properties will face competition from similar properties in the same market. This competition may affect our ability to attract and retain tenants and may reduce the rents we are able to charge. These competing properties may have vacancy rates higher than our properties, which may result in their owners being willing to lease available space at lower prices than the space in our properties. If one of our properties were to lose an anchor tenant, this could impact the leases of other tenants, who may be able to modify or terminate their leases as a result. Due to such competition, the terms and conditions of any lease that we enter into with our tenants may vary substantially from those we describe in this prospectus.

Our properties may be leased at below-market rates under long-term leases.

We may negotiate longer-term leases, which may allow tenants to renew the lease with pre-defined rate increases. If we do not accurately judge the potential for increases in market rental rates, we may set the rental rates of these long-term leases at levels such that even after contractual rental increases, the resulting rental rates are less than then-current market rental rates. Further, we may be unable to terminate those leases or adjust the rent to then-

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prevailing market rates. As a result, our income and distributions to our stockholders could be lower than if we did not enter into long-term leases.

Our retail tenants will face competition from numerous retail channels.

Retailers leasing our properties will face continued competition from discount or value retailers, factory outlet centers, wholesale clubs, mail order catalogues and operators, television shopping networks and shopping via the Internet. Such competition could adversely affect our tenants and, consequently, our revenues and funds available for distribution.

Our industrial tenants may be adversely affected by a decline in manufacturing activity in the United States.

Fluctuations in manufacturing activity in the United States may adversely affect our industrial tenants and therefore the demand for and profitability of our industrial properties. Trade agreements with foreign countries have given employers the option to utilize less expensive foreign manufacturing workers. Outsourcing manufacturing activities could reduce the demand for U.S. workers, thereby reducing the profitability of our industrial tenants and the demand for and profitability of our industrial properties.

Competition in acquiring properties may reduce our profitability and the return on stockholders’ investments.

We face competition from various entities for investment opportunities in properties, including other REITs, pension funds, insurance companies, investment funds and companies, partnerships, and developers. We may also face competition from real estate programs sponsored by our sponsor. Many third party competitors have substantially greater financial resources than we do and may be able to accept more risk than we can prudently manage. Competition from these entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell. Additionally, disruptions and dislocations in the credit markets have materially impacted the cost and availability of debt to finance real estate acquisitions, which is a key component of our acquisition strategy. This lack of available debt could result in a further reduction of suitable investment opportunities and create a competitive advantage for other entities that have greater financial resources than we do. In addition, as the economy recovers, the number of entities and the amount of funds competing for suitable investments may increase. In addition to third party competitors, other programs sponsored by our sponsor may raise additional capital and seek investment opportunities under our sponsor’s allocation policy. If we acquire properties and other investments at higher prices or by using less-than-ideal capital structures, our returns will be lower and the value of our assets may not appreciate or may decrease significantly below the amount we paid for such assets. If such events occur, stockholders may experience a lower return on their investment.

In the event we obtain options to acquire properties, we may lose the amount paid for such options whether or not the underlying property is purchased.

We may obtain options to acquire certain properties. The amount paid for an option, if any, is normally surrendered if the property is not purchased and may or may not be credited against the purchase price if the property is purchased. Any unreturned option payments will reduce the amount of cash available for further investments or distributions to our stockholders.

Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of co-venturers and disputes between us and our co-venturers.

We have co-invested with an affiliate of our sponsor in the past and may co-invest with other affiliates or third parties in the future through partnerships or other entities, which we collectively refer to as joint ventures, acquiring non-controlling interests in or sharing responsibility for managing the affairs of the joint venture. In such event, we would not be in a position to exercise sole decision-making authority regarding the joint venture. Investments in joint ventures may, under certain circumstances, involve risks not present were a co-venturer not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their required capital contributions. Co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such

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investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the co-venturer would have full control over the joint venture. Disputes between us and co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business. Consequently, actions by or disputes with co-venturers might result in subjecting properties owned by the joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our co-venturers.

We may make investments outside of the United States, which will subject us to unique risks.

Foreign real estate investments involve risks not generally associated with investments in the United States. Foreign real estate investments are subject to foreign currency risk due to potential fluctuations in exchange rates between foreign currencies and the U.S. dollar. Changes in the relation of any such foreign currency to U.S. dollars may adversely affect our cash flow, which in turn could adversely affect our net income and ability to pay distributions. Foreign properties will also face risks in connection with unexpected changes in regulatory requirements, political and economic instability, potential imposition of adverse or confiscatory taxes, possible challenges to the anticipated tax treatment of the structures that allow us to acquire and hold investments, possible currency transfer restrictions, expropriation, the difficulty in enforcing obligations in other countries and the burden of complying with a wide variety of foreign laws. In addition, to qualify as a REIT, we generally will be required to operate any non-U.S. investments in accordance with the rules applicable to U.S. REITs, which may be inconsistent with local practices.

Costs of complying with governmental laws and regulations may reduce our net income and the cash available for distributions to our stockholders.

Real estate and the operations conducted on properties are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. We could be subject to liability in the form of fines or damages for noncompliance with these laws and regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid hazardous materials, the remediation of contaminated property associated with the disposal of solid and hazardous materials and other health and safety-related concerns.

Our properties may be subject to the Americans with Disabilities Act of 1990, as amended, or the ADA. Under the ADA, all places of public accommodation must meet federal requirements related to access and use by persons with disabilities. The ADA’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. Additional or new federal, state and local laws also may require modifications to our properties, or restrict our ability to renovate properties. We will attempt to acquire properties that comply with the ADA and other similar legislation or place the burden on the seller or other third party, such as a tenant, to ensure compliance with such legislation. However, we cannot assure stockholders that we will be able to acquire properties or allocate responsibilities in this manner. If we cannot, or if changes to the ADA mandate further changes to our properties, then our funds used for ADA compliance may reduce cash available for investments and the amount of distributions to stockholders.

We will rely on third party property managers to operate our properties and leasing agents to lease vacancies in our properties.

Our advisor intends to hire third party property managers to manage our properties and leasing agents to lease vacancies in our properties. The third party property managers will have significant decision-making authority with respect to the management of our properties. Our ability to direct and control how our properties are managed on a day-to-day basis may be limited because we will engage third parties to perform this function. Thus, the success of our business may depend in large part on the ability of our third party property managers to manage the day-to-day operations and the ability of our leasing agents to lease vacancies in our properties. Any adversity experienced by our property managers or leasing agents could adversely impact the operation and profitability of our properties.

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General Risks Related to Investments in Real Estate Related Assets

Our investments in real estate related assets will be subject to the risks related to the underlying real estate.

Real estate loans secured by properties are subject to the risks related to underlying real estate. The ability of a borrower to repay a loan secured by a property typically is dependent upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired. Any default on the loan could result in our acquiring ownership of the property, and we would bear a risk of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage loan. In addition, foreclosure of a mortgage loan can be an expensive and lengthy process that could have a substantial negative effect on our anticipated return on the foreclosed loan.

We will not know whether the values of the properties ultimately securing our loans will remain at the levels existing on the dates of origination of those loans. If the values of the underlying properties decline, our risk will increase because of the lower value of the security associated with such loans. In this manner, real estate values could impact the values of our loan investments. Our investments in mortgage-backed securities, collateralized debt obligations and other real estate related investments may be similarly affected by property values.

The mezzanine loans in which we may invest would involve greater risks of loss than senior loans secured by income-producing real properties, which may result in losses to us.

We may invest in mezzanine loans that take the form of subordinated loans secured by second mortgages on the underlying real property or loans secured by a pledge of the ownership interests of either the entity owning the real property or the entity that owns the interest in the entity owning the real property. These types of investments involve a higher degree of risk than first-lien mortgage loans secured by income producing real property because the investment may become unsecured as a result of foreclosure by the senior lender. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt. As a result, we may not recover some or all of our investment. In addition, mezzanine loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the real property and increasing the risk of loss of principal.

The real estate related equity securities in which we may invest are subject to specific risks relating to the particular issuer of the securities and may be subject to the general risks of investing in subordinated real estate securities.

We may invest in common and preferred stock of both publicly traded and private real estate companies, which involves a higher degree of risk than debt securities due to a variety of factors, including that such investments are subordinate to creditors and are not secured by the issuer’s properties. Our investments in real estate related equity securities will involve special risks relating to the particular issuer of the equity securities, including the financial condition and business outlook of the issuer. Issuers of real estate related common equity securities generally invest in real estate or real estate related assets and are subject to the inherent risks associated with real estate discussed in this Annual Report on Form 10-K, including risks relating to rising interest rates.

The value of the real estate related securities that we may invest in may be volatile.

The value of real estate related securities, including those of REITs, fluctuates in response to issuer, political, market and economic developments. In the short term, equity prices can fluctuate dramatically in response to these developments. Different parts of the market and different types of equity securities can react differently to these developments and they can affect a single issuer, multiple issuers within an industry, the economic sector or geographic region, or the market as a whole. The real estate industry is sensitive to economic downturns. The value of securities of companies engaged in real estate activities can be affected by changes in real estate values and rental

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income, property taxes, interest rates and tax and regulatory requirements. In addition, the value of a REIT’s equity securities can depend on the capital structure and amount of cash flow generated by the REIT.

We expect a portion of our securities portfolio to be illiquid, and we may not be able to adjust our portfolio in response to changes in economic and other conditions.

We may purchase real estate related securities in connection with privately negotiated transactions that are not registered under the relevant securities laws, resulting in a prohibition against their transfer, sale, pledge or other disposition except in a transaction that is exempt from the registration requirements of, or is otherwise in accordance with, those laws. As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited. The mezzanine and bridge loans we may purchase will be particularly illiquid investments due to their short life, their unsuitability for securitization and the greater risk of our inability to recover loaned amounts in the event of a borrower’s default.

Interest rate and related risks may cause the value of our real estate related assets to be reduced.

We will be subject to interest rate risk with respect to our investments in fixed income securities such as preferred equity and debt securities, and to a lesser extent dividend paying common stocks. Interest rate risk is the risk that these types of securities will decline in value because of changes in market interest rates. Generally, when market interest rates rise, the fair value of such securities will decline. Our investment in such securities means that our NAV may decline if market interest rates rise.

During periods of rising interest rates, the average life of certain types of securities may be extended because of slower than expected principal payments. This may lock in a below-market interest rate, increase a given security’s duration and reduce the value of the security. This is known as extension risk. During periods of declining interest rates, an issuer may be able to exercise an option to prepay principal earlier than scheduled, which is generally known as “call risk” or “prepayment risk.” If this occurs, we may be forced to reinvest in lower yielding securities. This is known as “reinvestment risk.” Preferred equity and debt securities frequently have call features that allow the issuer to redeem such securities prior to their stated maturity. An issuer may redeem an obligation if the issuer can refinance the debt at a lower cost due to declining interest rates or an improvement in the credit standing of the issuer. These risks may reduce the value of our securities investments.

If we liquidate prior to the maturity of our real estate securities investments, we may be forced to sell those investments on unfavorable terms or at a loss.

Our board of directors may choose to liquidate our assets, including our real estate related assets. If we liquidate those investments prior to their maturity, we may be forced to sell those investments on unfavorable terms or at a loss. For instance, if we are required to liquidate mortgage loans at a time when prevailing interest rates are higher than the interest rates of such mortgage loans, we likely would sell such loans at a discount to their stated principal values.

Risks Associated with Financial Leverage

We will incur mortgage indebtedness and other borrowings, which may increase our business risks, could hinder our ability to make distributions and could decrease the value of a stockholder’s investment.

We intend to finance a portion of the purchase price of properties by borrowing funds. Under our charter, we have a limitation on borrowing which precludes us from borrowing in excess of 300% of the value of our net assets. We may obtain mortgage loans and pledge some or all of our properties as security for these loans to obtain funds to acquire additional properties or for working capital. We may also obtain a line of credit to provide a flexible borrowing source that will allow us to fund redemptions, to pay distributions or to use for other business purposes.

If there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage loans on that property, then the amount of cash available for distributions to stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss of a property since defaults on indebtedness secured by a property

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may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the value of a stockholder’s investment. For tax purposes, a foreclosure on any of our properties will be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the loan secured by the mortgage exceeds our tax basis in the property, we will recognize taxable income on foreclosure, but we would not receive any cash proceeds. We may give full or partial guarantees to lenders of mortgage loans to the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the loan if it is not paid by such entity. If any mortgage contains cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties. If any of our properties are foreclosed upon due to a default, our ability to pay cash distributions to our stockholders will be adversely affected.

If we draw on a line of credit to fund redemptions or for any other reason, our financial leverage ratio could increase beyond our target.

We may seek to obtain a line of credit in an effort to provide for a ready source of liquidity to fund redemptions of shares of our common stock in the event that redemption requests exceed net proceeds from our continuous offering. There can be no assurances that we will be able to obtain a line of credit on financially reasonable terms given the recent volatility in the capital markets. In addition, we may not be able to obtain a line of credit of an appropriate size for our business until such time as we have a substantial portfolio, or at all. If we borrow under a line of credit to fund redemptions of shares of our common stock, our financial leverage will increase and may exceed our target leverage ratio. Our leverage may remain at the higher level until we receive additional net proceeds from our continuous offering or sell some of our assets to repay outstanding indebtedness.

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

Interest we pay on our loan obligations will reduce cash available for distributions. If we obtain variable rate loans, increases in interest rates would increase our interest costs, which would reduce our cash flows and our ability to make distributions to stockholders. In addition, if we need to repay existing loans during periods of rising interest rates, we could be required to liquidate one or more of our investments in properties at times which may not permit realization of the maximum return on such investments.

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

When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to obtain additional loans. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property or discontinue insurance coverage. In addition, loan documents may limit our ability to enter into or terminate certain operating or lease agreements related to the property. These or other limitations may adversely affect our flexibility and our ability to achieve our investment objectives.

If we enter into financing arrangements involving balloon payment obligations, it may adversely affect our ability to make distributions to our stockholders.

Some of our financing arrangements may require us to make a lump-sum or “balloon” payment at maturity. Our ability to make a balloon payment at maturity is uncertain and may depend upon our ability to obtain replacement financing or our ability to sell particular properties. At the time the balloon payment is due, we may or may not be able to refinance the balloon payment on terms as favorable as the original loan or sell the particular property at a price sufficient to make the balloon payment. The effect of a refinancing or sale could affect the rate of return to stockholders and the projected time of disposition of our assets.

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Failure to hedge effectively against interest rate changes may materially adversely affect our ability to achieve our investment objectives.

Subject to any limitations required to qualify as a REIT or as otherwise imposed by other applicable regulations, we may seek to manage our exposure to interest rate volatility by using interest rate hedging arrangements, such as interest rate cap or collar agreements and interest rate swap agreements. These agreements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements and that these arrangements may not be effective in reducing our exposure to interest rate changes. These interest rate hedging arrangements may create additional assets or liabilities from time to time that may be held or liquidated separately from the underlying property or loan for which they were originally established. Hedging may reduce the overall returns on our investments. Failure to hedge effectively against interest rate changes may materially adversely affect our ability to achieve our investment objectives.

Federal Income Tax Risks

Failure to qualify as a REIT would have significant adverse consequences to us.

Alston & Bird LLP has rendered an opinion to us that we have been organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code, or the Code, and that our proposed method of operations will enable us to meet the requirements for qualification and taxation as a REIT commencing with our taxable year ending December 31, 2012, the year in which our escrow period concluded. This opinion is based upon, among other things, our representations as to the manner in which we are and will be owned and the manner in which we will invest in and operate assets. However, our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Code. Alston & Bird LLP will not review our compliance with the REIT qualification standards on an ongoing basis, and we may fail to satisfy the REIT requirements in the future. Also, this opinion represents the legal judgment of Alston & Bird LLP based on the law in effect as of the date of the opinion. The opinion of Alston & Bird LLP is not binding on the Internal Revenue Service, or IRS, or the courts. Future legislative, judicial or administrative changes to the federal income tax laws could be applied retroactively, which could result in our disqualification as a REIT. If the IRS determines that we do not qualify as a REIT or if we qualify as a REIT and subsequently lose our REIT qualification, we will be subject to serious tax consequences that would cause a significant reduction in our cash available for distribution for each of the years involved because:

· we would be subject to federal corporate income taxation on our taxable income, potentially including alternative minimum tax, and could be subject to higher state and local taxes;

· we would not be permitted to take a deduction for dividends paid to stockholders in computing our taxable income; and

· if we had previously qualified as a REIT, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified (unless we are entitled to relief under applicable statutory provisions).

The increased taxes would cause a reduction in our NAV or cash available for distribution to stockholders. In addition, if we do not qualify as a REIT, we will not be required to make distributions to stockholders. As a result of all these factors, our failure to qualify as a REIT also could hinder our ability to raise capital and grow our business.

We may have to borrow funds on a short-term basis during unfavorable market conditions to satisfy our REIT distribution requirements.

To qualify as a REIT, we generally must distribute annually to our stockholders a minimum of 90% of our net taxable income, excluding capital gains. We will be subject to regular corporate income taxes to the extent that we distribute less than 100% of our REIT taxable income each year. Additionally, we will be subject to a 4% nondeductible excise tax on any amount by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from

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previous years. Payments we make to our stockholders under our redemption plan will not be taken into account for purposes of these distribution requirements. If we do not have sufficient cash to make distributions necessary to preserve our REIT status for any year or to avoid taxation, we may be forced to borrow funds or sell assets even if the market conditions at that time are not favorable for these borrowings or sales.

Compliance with REIT requirements may cause us to forego otherwise attractive opportunities, which may hinder or delay our ability to meet our investment objectives and reduce stockholders’ overall returns.

To qualify as a REIT, we are required at all times to satisfy tests relating to, among other things, the sources of our income, the nature and diversification of our assets, the ownership of our stock and the amounts we distribute to our stockholders. We may therefore be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with the REIT requirements may impair our ability to operate solely on the basis of maximizing profits.

Compliance with REIT requirements may force us to liquidate otherwise attractive investments.

To qualify as a REIT, we are required to ensure that at the end of each calendar quarter, at least 75% of our assets consist of cash, cash items, government securities and qualified real estate assets. The remainder of our investments in securities (other than qualified real estate assets and government securities) generally cannot include more than 10% of the voting securities of any one issuer or more than 10% of the value of the outstanding securities of any one issuer. Additionally, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our assets may be represented by securities of one or more taxable REIT subsidiaries. In order to satisfy these requirements, we may be forced to liquidate otherwise attractive investments.

The IRS may deem the gains from sales of our properties to be subject to a 100% prohibited transaction tax.

From time to time, we may be forced to sell assets to fund redemption requests, to satisfy our REIT distribution requirements, to satisfy other REIT requirements or for other purposes. The IRS may deem one or more sales of our properties to be “prohibited transactions.” If the IRS takes the position that we have engaged in a “prohibited transaction” (i.e., we sell a property held by us primarily for sale in the ordinary course of our trade or business), the gain we recognize from such sale would be subject to a 100% tax. The Code sets forth a safe harbor for REITs that wish to sell property without risking the imposition of the 100% tax, however there is no assurance that we will be able to qualify for the safe harbor. We do not intend to hold property for sale in the ordinary course of business, however there is no assurance that our position will not be challenged by the IRS, especially if we make frequent sales or sales of property in which we have short holding periods.

Investments outside the United States may subject us to additional taxes and could present additional complications to our ability to satisfy the REIT qualification requirements.

Non-U.S. investments may subject us to various non-U.S. tax liabilities, including withholding taxes. In addition, operating in functional currencies other than the U.S. dollar and in environments in which real estate transactions are typically structured differently than they are in the United States or are subject to different legal rules may present complications to our ability to structure non-U.S. investments in a manner that enables us to satisfy the REIT qualification requirements.

We may be subject to tax liabilities that reduce our cash flow and our ability to make distributions to stockholders even if we qualify as a REIT for federal income tax purposes.

We may be subject to federal and state taxes on our income or property even if we qualify as a REIT for federal income tax purposes, including those described below.

· In order to qualify as a REIT, we are required to distribute annually at least 90% of our REIT taxable income (determined without regard to the dividends-paid deduction or net capital gain) to our stockholders.

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If we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to corporate income tax on the undistributed income.

· We will be required to pay a 4% nondeductible excise tax on the amount, if any, by which the distributions we make to our stockholders in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from previous years.

· If we have net income from the sale of foreclosure property that we hold primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, we will be required to pay a tax on that income at the highest corporate income tax rate.

· Any gain we recognize on the sale of a property, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, would be subject to the 100% “prohibited transaction” tax.

Our board of directors is authorized to revoke our REIT election without stockholder approval, which may cause adverse consequences to our stockholders.

In the event that we elect to be taxed as a REIT, our charter authorizes our board of directors to revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is not in our best interest to qualify as a REIT. In this event, we would become subject to U.S. federal income tax on our taxable income and we would no longer be required to distribute most of our net income to our stockholders, which may cause a reduction in the total return to our stockholders.

Stockholders may have current tax liability on distributions stockholders elect to reinvest in our common stock.

If stockholders participate in our distribution reinvestment plan, they will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not a tax-free return of capital. Therefore, unless stockholders are a tax-exempt entity, they may be forced to use funds from other sources to pay stockholders’ tax liability on the reinvested dividends.

Generally, ordinary dividends payable by REITs do not qualify for reduced U.S. federal income tax rates.

Currently, the maximum U.S. federal income tax rate for “qualifying dividends” payable by U.S. corporations to individual U.S. stockholders is 20%. However, ordinary dividends payable by REITs are generally not eligible for this reduced rate.

We may be subject to adverse legislative or regulatory tax changes.

At any time, the federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended. We cannot predict when or if any new federal income tax law, regulation or administrative interpretation, or any amendment to any existing federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation.

If certain sale-leaseback transactions are not characterized by the IRS as “true leases,” we may be subject to adverse tax consequences.

We may purchase investments in properties and lease them back to the sellers of these properties. If the IRS does not characterize these leases as “true leases,” we could be subject to certain adverse tax consequences, such as an inability to deduct depreciation expense and cost recovery relating to such property. Under certain circumstances, we could also fail to qualify as a REIT as a result.

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Retirement Plan Risks

If the fiduciary of an employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended, or ERISA, fails to meet the fiduciary and other standards under ERISA, the Code or common law as a result of an investment in our stock, the fiduciary could be subject to criminal and civil penalties.

There are special considerations that apply to investing in our shares on behalf of a trust, pension, profit sharing or 401(k) plans, health or welfare plans, trusts, individual retirement accounts, or IRAs, or Keogh plans. If stockholders are investing the assets of any of the entities identified in the prior sentence in our common stock, stockholders should satisfy themselves that:

· the investment is consistent with the stockholder’s fiduciary obligations under applicable law, including common law, ERISA and the Code;

· the investment is made in accordance with the documents and instruments governing the trust, plan or IRA, including a plan’s investment policy;

· the investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and the Code;

· the investment will not impair the liquidity of the trust, plan or IRA;

· the investment will not produce “unrelated business taxable income” for the plan or IRA;

· our stockholders will be able to value the assets of the plan annually in accordance with ERISA requirements and applicable provisions of the plan or IRA; and

· the investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code. Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA, the Code, or other applicable statutory or common law may result in the imposition of civil (and criminal, if the violation was willful) penalties, and can subject the fiduciary to equitable remedies. In addition, if an investment in our shares constitutes a prohibited transaction under ERISA or the Code, the fiduciary that authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of December 31, 2012, we have the following investments:

Darien Property

The Darien Property, located in Darien, Connecticut, is 100% owned by CPPT Darien LLC, a wholly owned subsidiary of our operating partnership. We acquired the Darien Property on October 31, 2012 for a gross purchase price of $7,200,000 in cash, exclusive of closing costs. The Darien Property is an 18,754 square foot, single-tenant medical office building constructed in 1997 and expanded in 2008. The Darien Property is 100% leased to Stamford Health System, Inc., a not-for-profit provider of comprehensive healthcare services with a Fitch credit rating of A, pursuant to a non-cancelable, triple-net lease, whereby the tenant is responsible for paying the operating expenses of the Darien Property, which expires on November 30, 2023. As of December 31, 2012, the base rent per year was $459,473, or approximately $24.50 per square foot. In 2013 and in 2018, the tenant’s base rent will adjust based on changes in the consumer price index. The lease is subject to one optional renewal period of five years. During the renewal period, the base rent would be the greater of the base rent as of November 30, 2023 or 95% of the fair market value rents for the Darien Property or a substantially similar property located in Darien.

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Lehigh Valley South

CPPT Lehigh LLC, or CPPT Lehigh, a wholly owned subsidiary of our operating partnership, acquired a 50% ownership in Lehigh Valley South and LIT Industrial Limited Partnership, or LIT, a limited partnership indirectly owned by Lion Industrial Trust, a privately held REIT managed by our sponsor, acquired the remaining 50% ownership in Lehigh Valley South, located in Macungie, Pennsylvania. Lehigh Valley South was acquired by the joint venture on October 18, 2012 for a total purchase price of $19,687,500, exclusive of closing costs. CPPT Lehigh paid $9,843,750 in cash for its ownership interest and LIT made a contribution of its 50% interest in the property. Lehigh Valley South is comprised of a 24.7 acre parcel of land with a 315,000 square foot, warehouse/distribution building that features 54 dock doors, two drive-in doors, ample trailer parking and 32 feet of usable height inside the warehouse. Lehigh Valley South was built in 2008 and is currently leased to two tenants, Barry Callebaut U.S.A. LLC, or Barry Callebaut, and Quality Packaging Specialists International, LLC, or QPSI, with an average remaining lease term of approximately eight years. Both leases are triple net leases, whereby the tenants are responsible for paying the operating expenses of Lehigh Valley South, pursuant to which the tenants are responsible for the operating expenses of the property. As of December 31, 2012, Barry Callebaut had a base rent of $4.88 per square foot per year and QPSI had a base rent of $4.40 per square foot per year.

Item 3. Legal Proceedings

We are not a party to any material pending legal proceedings.

Item 4. Mine Safety Disclosures

None.

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PART II

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

Stockholder Information

As of March 14, 2013, 39,064 Class A common shares, 1,252,637 Class W common shares, and 125 shares of preferred stock were issued and outstanding.

Market Information

There is no established public trading market for our shares of common stock and none is expected to develop. We do not intend to list our shares of common stock for trading on an exchange or other trading market. Accordingly, our stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase requirements. In addition, our charter prohibits the ownership of more than 9.8% in value of our outstanding capital stock (which includes common stock and preferred stock we may issue) and more than 9.8% in value or number of shares, whichever is more restrictive, of our outstanding common stock, unless exempted by our board of directors. Consequently, there is the risk that our stockholders may not be able to sell their shares at a time or price acceptable to them.

We have engaged an independent valuation expert which has the expertise in appraising real estate assets, to provide, on a rolling quarterly basis, valuations of each of our real estate assets to be set forth in individual appraisal reports, and to adjust those valuations for events known to the independent valuation expert that it believes are likely to have a material impact on previously provided estimates of the value of the affected commercial real estate assets. In addition, our assets will include real estate related assets, which will be priced daily by third party pricing sources and cash and cash equivalents.

At the end of each trading day, after taking into consideration additional contributions, redemptions, distribution reinvestments, any change in our aggregate NAV (whether an increase or decrease) will be allocated among each class of shares based on each class’s relative percentage of the aggregate NAV. Changes in our daily NAV will reflect factors including, but not limited to, our portfolio income, interest expense, unrealized/realized gains (losses) on assets, and accruals for the advisory fee and dealer manager fee. The portfolio income will be calculated and accrued on the basis of data extracted from (1) the prior month’s actual realized income and expenses for each property and at the fund level, including organization and offering expenses incurred following the escrow period and certain operating expenses, (2) material, unbudgeted nonrecurring income and expense events such as capital expenditures, prepayment penalties, assumption fees, tenant buyouts, lease termination fees and tenant turnover with respect to our properties when our advisor becomes aware of such events and the relevant information is available and (3) material property acquisitions and dispositions occurring during the month. During the ramp-up period, we will not accrue in NAV any operating, organization or offering expenses that are paid or reimbursed, or expected to be paid on reimbursed, by our sponsor until we become obligated to reimburse our sponsor for such amounts. NAV per share for each class is calculated by dividing such class’s NAV at the end of each trading day by the number of shares outstanding for that class on such day. Our NAV is not audited by our independent registered public accounting firm.

Our goal is to provide a reasonable estimate of the market value of our shares. However, the majority of our assets will consist of real estate assets and, as with any real estate valuation protocol, the conclusions reached by our independent valuation expert will be based on a number of judgments, assumptions and opinions about future events that may or may not prove to be correct. The use of different judgments, assumptions or opinions would likely result in different estimates of the value of our real estate investments. In addition, on any given day, our published NAV per share may not fully reflect certain material events, to the extent that the financial impact of such events in our portfolio is not immediately quantifiable. As a result, the daily calculation of our NAV per share may not reflect the precise amount that might be paid for a stockholder’s shares in a market transaction, and any potential disparity in our NAV per share may be in favor of either stockholders who redeem their shares, or stockholders who buy new shares, or existing stockholders.

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Share Redemption Plan

We have adopted a redemption plan whereby on a daily basis stockholders may request the redemption of all or any portion of their shares beginning on the first day of the calendar quarter following the conclusion of the escrow period. The redemption price per share will be equal to our NAV per share of the class of shares being redeemed on the date of redemption.

Under our redemption plan, the total amount of net redemptions during any calendar quarter is limited to shares whose aggregate value (based on the redemption price per share on the day the redemption is effected) is 5% of the combined NAV of both classes of shares, calculated as of the last day of the previous calendar quarter, which means that our net redemptions will be limited to approximately 20% of our total NAV in any 12 month period. We use the term “net redemptions” to mean the excess of our share redemptions (capital outflows) over our share purchases (capital inflows) in our offering. As a result, redemptions will count against the 5% cap during a calendar quarter only to the extent the aggregate value of share redemptions during the quarter exceeds the aggregate value of share purchases in the same quarter. Measuring redemptions on a net basis allows us to provide our stockholders with more liquidity during quarters in which we are experiencing inflows of capital. Thus, on any business day during a calendar quarter, the maximum amount available for redemptions for that quarter will be equal to (1) 5% of the combined NAV of both classes of shares, calculated as of the last day of the previous calendar quarter, plus (2) proceeds from sales of new shares in our offering (including reinvestment of distributions) since the beginning of the current calendar quarter, less (3) redemption proceeds paid since the beginning of the current calendar quarter. The quarterly redemption limitation will be monitored each business day by our transfer agent, which has access to daily updated information on the proceeds from sales of new shares in our offering and the redemption proceeds paid by us. If the quarterly redemption limitation is reached during a given day, we will cease accepting redemption requests for the remainder of the quarter, regardless of additional share purchases by investors in our offering for the remainder of such quarter. The combined NAV of both share classes at December 31, 2012 was $12,429,448 resulting in a first quarter 2013 cap of $621,472.

On the first business day during any quarter in which we have reached that quarter’s volume limitation for redemptions we will publicly disclose such fact through a filing with the SEC and a posting to our website in order to notify stockholders that we will not accept additional redemption requests during such quarter. In such event, unless our board of directors determines to suspend our redemption plan for any of the reasons described below, our redemption plan will automatically and without stockholder notification resume on the first day of the calendar quarter following the quarter in which redemptions were suspended due to reaching such quarter’s volume limitation for redemptions. Even when net redemption requests do not exceed our plan’s quarterly volume limitation, we may not have a sufficient amount of liquid assets to satisfy redemption requests because our assets will consist primarily of properties and types of real estate related assets that cannot be readily liquidated. Under normal circumstances, we intend to maintain an allocation to cash, cash equivalents, securities and other liquid assets of approximately 15% to 20% of our NAV, which we may supplement by borrowing additional funds under a line of credit.

While there is no minimum holding period, shares redeemed within 365 days of the date of purchase will be redeemed at our NAV per share of the class of shares being redeemed on the date of redemption less a short-term trading discount equal to 2% of the gross proceeds otherwise payable with respect to the redemption. We may waive the short-term trading discount (1) with respect to redemptions resulting from death or qualifying disability or (2) in the event that a stockholder’s shares are redeemed because the stockholder has failed to maintain a minimum account balance of $2,000.

Our board of directors has the discretion to suspend or modify the redemption plan if (1) it determines that such action is in the best interests of our stockholders, (2) it determines that it is necessary due to regulatory changes or changes in law or (3) it becomes aware of undisclosed material information that it believes should be publicly disclosed before shares are redeemed. In addition, our board of directors may suspend the offering or the redemption plan, if it determines that the calculation of NAV is materially incorrect or there is a condition that restricts the valuation of a material portion of our assets.

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Distribution Information

We intend to declare and make distributions on a quarterly basis on each class of our common stock. For purposes of calculating our NAV to account for any declared distributions, our advisor will accrue as our liability on the day after the record date (the distribution adjustment date) the amount of the declared distributions. Distributions will be payable only to stockholders of record on the business day immediately preceding the distribution adjustment date.

Distributions will be made on all classes of our common stock at the same time. The per share amount of distributions on Class A shares and Class W shares will likely differ because of different allocations of class-specific expenses.

We are required to make distributions sufficient to satisfy the requirements for qualification as a REIT for federal income tax purposes. Generally, income distributed will not be taxable to us under the Code if we distribute at least 90% of our taxable income each year (computed without regard to the distributions paid deduction and our net capital gain).

Generally, our policy will be to pay distributions from cash flow from operations. However, we may pay distributions from any other source, including, without limitation, the sale of assets, borrowings, the net proceeds from our offering, the issuance of additional securities expense support payments from our sponsor, and the deferral of fees and expense reimbursements by our advisor in its sole discretion. We expect that our cash flow from operations available for distribution will be lower during the early stages of our operations until we have raised significant capital and made substantial investments. Further, because we may receive income at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund expenses, we expect that during the early stages of our operations and from time to time thereafter, we may declare distributions in anticipation of cash flow that we expect to receive during a later period and these distributions would be paid in advance of our actual receipt of these funds. In these instances, we expect to look to third party borrowings and offering proceeds to fund our distributions.

On October 31, 2012, our board of directors authorized and declared cash distributions for the period commencing on November 1, 2012 and ending on December 31, 2012 for each share of the Company’s Class A and Class W common stock outstanding as of December 28, 2012. Both distributions were paid on January 2, 2013. Holders of Class W shares received an amount equal to $0.09167 per share, and holders of Class A shares received an amount equal to $0.09140 per share ($0.09167 per share less an amount calculated at the end of the distribution period equal to the class-specific expenses incurred during the distribution period that are allocable to each Class A share.) Each distribution equates to an annualized yield of 5.5% (before class-specific expenses on the Class A shares) assuming an initial share price of $10.00 as of November 1, 2012.

Use of Proceeds from Sales of Registered Securities and Unregistered Sales of Equity Securities

We were initially capitalized with a $200,000 cash contribution from our sponsor on November 10, 2009 in exchange for 20,000 shares of our Class A common stock. The issuance of our Class A shares to our sponsor was exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof for transactions not involving a public offering.

On May 16, 2011, our Registration Statement on Form S-11 (File No. 333-164777), covering our offering up to $2,250,000,000 of shares of our common stock, consisting of up to $2,000,000,000 of shares in our primary offering and up to $250,000,000 of shares pursuant to our distribution reinvestment plan, was initially declared effective under the Securities Act by the SEC. On October 17, 2012, Clarion Partners CPPT Coinvestment, LLC, a wholly owned subsidiary of our sponsor purchased 1,020,000 shares of our Class W common stock for $10.00 per share, or $10,200,000 in the aggregate, pursuant to a private placement. On November 1, 2012, following the approval of our board of directors to break escrow, we received an additional $1,460,713 in public offering proceeds from the sale of shares of our common stock. As of December 31, 2012, we had 1,236,761 shares of common stock outstanding for total gross proceeds of $12,371,715.

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ING Investments Distributor, LLC, our dealer manager, serves as the dealer manager for our offering and is responsible for the marketing of our shares. As of December 31, 2012, we had incurred dealer manager fees of $1,417 and distribution fees of $41.

As of December 31, 2012, we had invested $7.2 million in gross real estate assets and $5.2 million in a joint venture investment.

Item 6. Selected Financial Data.

The following data should be read in conjunction with our consolidated financial statements and the notes thereto and “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual Report on Form 10-K. The selected financial data presented below was derived from our consolidated financial statements.

	December 31, 2012		December 31, 2011
Balance Sheet Data:
Total assets	$	17,248,136	$	272,073
Total liabilities	$	11,588,092	$	424,615
Total stockholders’ equity	$	5,660,044	$	(152,542	)

	Year Ended December 31, 2012			Year Ended December 31, 2011
Operating Data:
Total revenue	$	110,438		$	—
Operating loss	$	(3,081,226	)	$	(352,542	)
Net loss	$	(2,793,595	)	$	(352,542	)
Cash Flow Data:
Net cash used in operating activities	$	(114,521	)	$	—
Net cash used in investing activities	$	(12,404,117	)	$	—
Net cash provided by financing activities	$	16,026,229		$	—
Per Common Share Data:
Net loss — basic and diluted	$	(10.88	)	$	(17.63	)
Distributions declared(1)	$	.09		$	—
Weighted average shares outstanding — basic and diluted	256,809			20,000

(1) Distributions declared per common share at a rate of 0.09167 for Class W common shares, and distributions declared per common share at a rate of $0.09140 for Class A common shares ($0.09167 per share less an amount calculated at the end of the distribution period equal to the class-specific expenses incurred during the distribution period that are allocable to each Class A share).

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s discussion and analysis of financial condition and results of operations, or MD&A is intended to provide the reader with information that will assist in understanding our financial statements and the reasons for changes in key components of our financial statements from period to period. MD&A also provides the reader with our perspective on our financial position and liquidity, as well as certain other factors that may affect our future results. Our MD&A should be read in conjunction with our accompanying financial statements and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Clarion Partners Property Trust Inc., a Maryland corporation, and, as required by context, CPT Real Estate LP, or our operating partnership, a Delaware limited partnership.

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Overview

Clarion Partners Property Trust Inc. was formed as a Maryland corporation on November 3, 2009 for the purpose of investing primarily in a diversified portfolio of income-producing real estate properties and other real estate related assets. As used herein, the terms “we,” “our” and “us” refer to Clarion Partners Property Trust Inc. We intend to qualify as a real estate investment trust, or REIT, for federal tax purposes beginning with the taxable year ending December 31, 2012. As of December 31, 2012, we owned one property comprising of 18,754 rentable square feet of medical office space, in addition to a 315,000 rentable square foot industrial property, which we own 50% with a related party. As of December 31, 2012, these properties were 100% leased.

We intend to conduct substantially all of our investment activities and own all of our assets through CPT Real Estate LP, our operating partnership, of which we are the sole general partner. The initial limited partner of the operating partnership is CPT OP Partner LLC, our wholly owned subsidiary. We have engaged CPT Advisors LLC, or our advisor, to manage our day-to-day operations and our portfolio of properties and real estate related assets. On November 10, 2009, Clarion Partners, LLC, our sponsor, provided our initial capitalization by purchasing 20,000 shares of our Class A common stock for $200,000 in cash.

On May 16, 2011, or the initial offering date, our registration statement on Form S-11, as amended (File No. 333-164777), for our initial public offering was declared effective by the SEC. The registration statement covers our initial public offering, which we refer to as our “offering,” of up to $2,250,000,000 of shares of our common stock, consisting of up to $2,000,000,000 of shares in our primary offering and up to $250,000,000 of shares pursuant to our distribution reinvestment plan. We may reallocate the shares offered between our primary offering and our distribution reinvestment plan. We are offering to the public any combination of two classes of shares of our common stock, Class A shares and Class W shares.

Shares are to be sold at our net asset value, or NAV, per share for the applicable class of shares, plus, for Class A shares only, applicable selling commissions. Each class of shares will have a different NAV per share because certain fees are charged differently with respect to each class.

On October 17, 2012, Clarion Partners CPPT Coinvestment, LLC, a wholly owned subsidiary of our sponsor purchased 1,020,000 shares of our Class W common stock for $10.00 per share, or $10,200,000 in the aggregate, pursuant to a private placement. On November 1, 2012, following the approval of our board of directors, we broke escrow and received an additional $1,460,713 in public offering proceeds from the sale of shares of our common stock. Going forward, the per share purchase price of our common stock will vary from day-to-day, and on any given business day will be equal to our NAV divided by the number of shares of our common stock outstanding as of the end of business on such day.

Results of Operations

For the year ended December 31, 2012, we incurred a net loss of approximately $2.8 million primarily representing cumulative general and administrative costs incurred from inception consisting primarily of legal, accounting, printing fees and compensation for our independent directors and organizational costs, which as a result of breaking escrow on November 1, 2012, we have now recorded on our consolidated financial statements.

Our advisor and our dealer manager funded our organization and offering expenses incurred on our behalf through the escrow period. In addition, our advisor funded our operating expenses through the escrow period, including, without limitation, director compensation, insurance, and legal, accounting, tax and consulting fees. We have agreed to reimburse our advisor and our dealer manager for these expenses ratably on a monthly basis over the period that begins 12 months after the end of the escrow period and ends 60 months after the end of the escrow period. Our advisor has funded our organizational costs, offering costs and operating expenses through our escrow break totaling approximately $6.4 million. We will reimburse our advisor and our dealer manager for any offering expenses incurred after the end of the escrow period by our advisor and our dealer manager on our behalf as and when incurred.

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thereafter, our sponsor may, in its sole discretion, reimburse us for, or pay on our behalf, all or a portion of our organization, offering and operating expenses. For the partial quarter ending December 31, 2012, our sponsor has agreed to fund a portion of our organization, offering and operating expenses we have incurred for that period. As such, we recognized a receivable from our sponsor of $475,484.

We intend to qualify as a REIT for federal income tax purposes for the year ended December 31, 2012. If we qualify as a REIT for federal income tax purposes, we generally will not be subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year after the taxable year in which we initially elect to be taxed as a REIT, we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is denied. Failing to qualify as a REIT could materially and adversely affect our net income.

Portfolio Information

As of December 31, 2012, we had the following investments:

Darien Property

The Darien Property is 100% owned by CPPT Darien LLC, a wholly owned subsidiary of our operating partnership. We acquired the Darien Property on October 31, 2012 for a gross purchase price of $7,200,000 in cash, exclusive of closing costs. The Darien Property is an 18,754 square foot, single-tenant medical office building constructed in 1997 and expanded in 2008. The Darien property is 100% leased to Stamford Health System, Inc., a not-for-profit provider of comprehensive healthcare services with a Fitch credit rating of A, pursuant to a non-cancelable, triple-net lease that expires on November 30, 2023. As of December 31, 2012, the base rent per year was $459,473, or approximately $24.50 per square foot. In 2013 and in 2018, the tenant’s base rent will adjust based on changes in the consumer price index. The lease is subject to one optional renewal period of five years. During the renewal period, the base rent would be the greater of the base rent as of November 30, 2023 or 95% of the fair market value rents for the Darien Property or a substantially similar property located in Darien.

Lehigh Valley South

CPPT Lehigh LLC, or CPPT Lehigh, a wholly owned subsidiary of our operating partnership, acquired a 50% ownership in Lehigh Valley South and LIT Industrial Limited Partnership, or LIT, a limited partnership indirectly owned by Lion Industrial Trust, a privately held REIT managed by our sponsor, acquired the remaining 50% ownership in Lehigh Valley South. Lehigh Valley South was acquired on October 18, 2012 for a total purchase price of $19,687,500, exclusive of closing costs. CPPT Lehigh paid $9,843,750 in cash for its ownership interest and LIT made a contribution of its 50% interest in the property. Lehigh Valley South is comprised of a 24.7 acre parcel of land with a 315,000 square foot, warehouse/distribution building that features 54 dock doors, two drive-in doors, ample trailer parking and 32 feet of usable height inside the warehouse. Lehigh Valley South was built in 2008 and is currently leased to two tenants, Barry Callebaut U.S.A. LLC, or Barry Callebaut, and Quality Packaging Specialists International, LLC, or QPSI, with an average remaining lease term of approximately eight years. Both leases are triple net leases pursuant to which the tenants are responsible for the operating expenses of the property. As of December 31, 2012, Barry Callebaut had a base rent of $4.88 per square foot per year and QPSI had a base rent of $4.40 per square foot per year.

Liquidity and Capital Resources

Our primary needs for liquidity and capital resources are to fund our investments, to make distributions to our stockholders, to redeem shares of our common stock pursuant to our redemption plan, to pay our offering and operating fees and expenses and to pay interest on any indebtedness we may incur. We anticipate our offering and operating fees and expenses will include, among other things, the advisory fee that we will pay to our advisor, the dealer manager fee and distribution fee we will pay to our dealer manager, legal and audit expenses, federal and state filing fees, printing expenses, transfer agent fees, insurance, marketing and distribution expenses and fees related to appraising and managing our properties.

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On November 5, 2012, we entered into an expense support agreement with our sponsor whereby our sponsor, in its sole discretion, will reimburse us for, or pay on our behalf of, all or a portion of our total operating expenses, and any additional organization and offering expenses we may incur. Our sponsor has agreed to fund a portion of our organization, offering and operating expenses we have incurred for the partial period ending December 31, 2012. From and after the quarter in which we raise $350.0 million in cumulative gross offering proceeds, we are required to reimburse our sponsor for these costs in the amount of $250,000 per quarter.

Our advisor will incur certain of these expenses and fees, for which we will reimburse our advisor, subject to certain limitations. We will reimburse our advisor for out-of-pocket expenses in connection with providing services to us, including our allocable share of our advisor’s overhead, such as rent, utilities and personnel costs for employees whose primary job function relates to our business provided, that our advisor does not currently intend to seek reimbursement for any portion of the compensation payable to our officers.

Over time, we generally intend to fund our cash needs for items, other than asset acquisitions and related asset improvements, from operations. Our cash needs for acquisitions will be funded primarily from the sale of shares of our common stock, including those offered for sale through our distribution reinvestment plan, and through the assumption or incurrence of debt. We may obtain a line of credit to fund acquisitions, to redeem shares pursuant to our redemption plan and for any other corporate purpose. If we obtain a line of credit, we would expect that it would afford us borrowing availability to fund redemptions.

Other potential future sources of capital include secured or unsecured financings from banks or other lenders and proceeds from the sale of assets. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures.

Borrowing Policies

We intend to use a conservative amount of financial leverage to provide additional funds to support our investment activities. We expect that after we have acquired a substantial portfolio of diversified investments, our leverage ratio will be approximately 35% to 40% of the gross value of our assets, inclusive of property and entity level debt. During the period when we are beginning our operations, we may employ greater leverage in order to more quickly build a diversified portfolio of assets. Our board of directors may from time to time modify our borrowing policy in light of then-current economic conditions, the relative costs of debt and equity capital, the fair values of our properties, general conditions in the market for debt and equity securities, growth and acquisition opportunities or other factors. Our charter restricts the amount of indebtedness that we may incur to 300% of our net assets, which approximates 75% of the cost of our investments, but does not restrict the amount of indebtedness we may incur with respect to any single investment. Notwithstanding the foregoing, our aggregate indebtedness may exceed the limit set forth in our charter, but only if such excess is approved by a majority of our independent directors. As of December 31, 2012, we had $3,960,000 of outstanding long-term indebtedness secured by the Darien Property. In addition, our joint venture investment has $10,400,000 of outstanding long-term indebtedness secured by Lehigh Valley South.

Related Party Transactions

Advisory Agreement

We will pay our advisor an advisory fee equal to a fixed component that accrues daily in an amount equal to 1/365th of 0.90% of our NAV for each class for such day. The fixed component of the advisory fee is payable quarterly in arrears. Such amounts recorded for the year ended December 31, 2012 totaled $17,407.

Additionally, we will pay a performance component calculated for each class on the basis of the total return to stockholders of the class in any calendar year, such that for any year in which the our total return per share allocable to such class exceeds 6% per annum, our advisor will receive 25% of the excess total return allocable to that class; provided that in no event will the performance component exceed 10% of the aggregate total return allocable to such class for such year. In the event our NAV per share for either class or common stock decreases below $10.00, any increase in NAV per share to $10.00 with respect to that class will not be included in the calculation of the performance component. The performance component is payable annually in arrears. No performance fee was recorded for the year ended December 31, 2012.

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Investment in Non-Consolidated Joint Venture

On October 18, 2012, CPPT Lehigh LLC, our wholly owned subsidiary, entered into a joint venture agreement with LIT Industrial Limited Partnership, a limited partnership indirectly owned by Lion Industrial Trust, a privately held REIT managed by our sponsor, to form a joint venture for the purpose of purchasing and operating a property known as Lehigh Valley South. The Company’s board of directors, including the independent directors not otherwise interested in the transaction, approved the joint venture and its terms as being fair and reasonable to the Company and on substantially the same terms and conditions as those received by other joint venturers.

Private Placement

Expense Support Agreement

On November 5, 2012, we entered into an expense support agreement with our sponsor. Pursuant to the terms of this agreement, commencing with the partial quarter ending December 31, 2012 and on a quarterly basis thereafter, our sponsor may, in its sole discretion, reimburse us for, or pay on our behalf, all or a portion of our organization, offering and operating expenses. For the partial quarter ending December 31, 2012, our sponsor has agreed to fund a portion of our organization, offering and operating expenses totaling $475,484. Once we raise $350.0 million in gross offering proceeds, we are required to reimburse our sponsor for these costs in the amount of $250,000 per quarter.

Dilution

Our net tangible book value per share is a mechanical calculation using amounts from our balance sheet. It is calculated as the total book value of our tangible assets (excluding intangible assets, such as deferred costs, goodwill and any other asset that cannot be sold separately from all other assets of the business, as well as intangible assets for which recovery of book value is subject to significant uncertainty or illiquidity), less our liabilities. It assumes that the value of real estate, and real estate related assets and liabilities diminish predictably over time as shown through the depreciation and amortization of real estate investments. Real estate values have historically risen or fallen with market conditions. Net tangible book value is used generally as a conservative measure of net worth that we do not believe reflects our estimated value per share. It is not intended to reflect the value of our assets upon an orderly liquidation in accordance with our investment objectives. Our net tangible book value reflects dilution of our common stock from the issue price as a result of (i) operating losses, which reflect accumulated depreciation and amortization of real estate investments, loan costs, acquisition costs, and unrealized losses related to our interest rate swaps, and (ii) our cumulative organization, offering and operating expenses incurred from inception which are now reflected as a payable due to our sponsor on our consolidated balance sheets. As of December 31, 2012, our net tangible book value per share was $4.49, compared with our offering price per share on December 31, 2012 of $10.05 (plus selling commissions for Class A shares only).

Critical Accounting Policies

Below is a discussion of the accounting policies that management believes are critical to operate. We consider these policies critical because they involve significant judgments and assumptions and require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. Our accounting policies have been established to conform with generally accepted accounting principles in the United States, or GAAP. The preparation of the financial statements in accordance with GAAP requires management to use judgment in the application of such policies. Such judgment affects the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other

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companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

Principles of Consolidation and Variable Interest Entities

The Financial Accounting Standards Board has issued guidance which clarifies the methodology for determining whether an entity is a variable interest entity, or VIE, and the methodology for assessing who is the primary beneficiary of a VIE. VIEs are defined as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary, and only by its primary beneficiary, which is defined as the party with both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE.

There are judgments and estimates involved in determining if an entity in which we will make an investment will be a VIE and if so, if we will be the primary beneficiary. The entity will be evaluated to determine if it is a VIE by, among other things, calculating the percentage of equity being risked compared to the total equity of the entity. The Financial Accounting Standards Board provides some guidelines as to what the minimum equity at risk should be, but the percentage can vary depending upon the industry or the type of operations of the entity and it will be up to us to determine that minimum percentage as it relates to our business and the facts surrounding each of our acquisitions. In addition, even if the entity’s equity at risk is a very low percentage, we will be required to evaluate the equity at risk compared to the entity’s expected future losses to determine if there could still in fact be sufficient equity at the entity. Determining expected future losses involves assumptions of various possibilities of the results of future operations of the entity, assigning a probability to each possibility and using a discount rate to determine the net present value of those future losses. A change in the judgments, assumptions and estimates outlined above could result in consolidating an entity that had not been previously consolidated or accounting for an investment on the equity method that had been previously consolidated, the effects of which could be material to our results of operations and financial condition.

Investment Property and Lease Intangibles

Acquisitions of properties will be accounted for utilizing the acquisition method and, accordingly, the results of operations of acquired properties will be included in our results of operations from their respective dates of acquisition. Estimates of future cash flows and other valuation techniques that we believe are similar to those used by independent appraisers will be used to record the purchase of identifiable assets acquired and liabilities assumed such as land, buildings and improvements, equipment and identifiable intangible assets and liabilities such as amounts related to in-place leases, acquired above- and below-market leases, tenant relationships, asset retirement obligations and mortgage notes payable. Values of buildings and improvements will be determined on an as-if-vacant basis. Initial valuations will be subject to change until such information is finalized, no later than 12 months from the acquisition date.

The estimated fair value of acquired in-place leases will be the costs we would have incurred to lease the properties to the occupancy level of the properties at the date of acquisition. Such estimates include the fair value of leasing commissions, legal costs and other direct costs that would be incurred to lease the properties to such occupancy levels. Additionally, we will evaluate the time period over which such occupancy levels would be achieved. Such evaluation will include an estimate of the net market-based rental revenues and net operating costs (primarily consisting of real estate taxes, insurance and utilities) that would be incurred during the lease-up period.

Acquired in-place leases as of the date of acquisition will be amortized over the remaining lease terms. Acquired above- and below-market lease values will be recorded based on the present value (using an interest rate that reflects the risks associated with the lease acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market value lease rates for the corresponding in-place leases. The capitalized above- and below-market lease values will be amortized as adjustments to rental revenue over the remaining terms of the respective leases, which includes periods covered by bargain renewal options. Should a tenant terminate its lease, the unamortized portion of the in-place lease value will be charged to amortization expense and the unamortized portion of out-of-market lease value will be charged to rental revenue.

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Value of Real Estate Portfolio

We will continually review our real estate portfolio to ascertain if there are any indicators of impairment in the value of any of our real estate assets, including deferred costs and intangibles, in order to determine if there is any need for an impairment charge. In reviewing the portfolio, we will examine the type of asset, the economic situation in the area in which the asset is located, the economic situation in the industry in which the tenant is involved and the timeliness of the payments made by the tenant under its lease, as well as any current correspondence that may have been had with the tenant, including property inspection reports. For each real estate asset owned for which indicators of impairment exist, if the undiscounted cash flow analysis yields an amount which is less than the assets’ carrying amount, an impairment loss will be recorded to the extent that the estimated fair value is lower than the asset’s carrying amount. The estimated fair value is determined using a discounted cash flow model of the expected future cash flows through the useful life of the property. Real estate assets that are expected to be disposed of are valued at the lower of carrying amount or fair value less costs to sell on an individual asset basis. Any impairment charge taken with respect to any part of our real estate portfolio will reduce our earnings and assets to the extent of the amount of any impairment charge, but it will not affect our cash flow or our distributions until such time as we dispose of the property.

Revenue Recognition

Our revenues, which are expected to be substantially derived from rental income, include rental income that our tenants pay in accordance with the terms of their respective leases reported on a straight line basis over the initial lease term of each lease. Since we anticipate that many of our leases will provide for rental increases at specified intervals, straight line basis accounting requires us to record as an asset and include in revenues, unbilled rent receivables which we will only receive if the tenant makes all rent payments required through expiration of the initial term of the lease. Accordingly, management must determine, in its judgment, that the unbilled rent receivable applicable to each specific tenant is collectible. We will review unbilled rent receivables and take into consideration the tenant’s payment history and the financial condition of the tenant. In the event that the collectability of an unbilled rent receivable is in doubt, we are required to take a reserve against the receivable or a direct write off of the receivable, which will have an adverse effect on earnings for the year in which the reserve or direct write off is taken.

Rental revenue will also include amortization of above and below market leases. Revenues relating to lease termination fees will be recognized at the time that a tenant’s right to occupy the leased space is terminated.

Review of our Policies

Our board of directors, including our independent directors, has reviewed our policies described in this Annual Report and our registration statement and determined that they are in the best interests of our stockholders because (1) they increase the likelihood that we will be able to acquire a diversified portfolio of income-producing properties, thereby reducing risk in our portfolio; (2) there are sufficient property acquisition opportunities with the attributes that we seek; (3) our executive officers, directors and affiliates of our advisor have expertise with the type of real estate investments we seek; and (4) borrowings should enable us to purchase assets and earn rental income more quickly, thereby increasing our likelihood of generating an attractive level of income for our stockholders and achieving appreciation of our NAV.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We may be exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may also be exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We may manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we may utilize a variety of financial instruments, including interest rate caps, floors, and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or

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interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for payments to holders of our common stock and that the losses may exceed the amount we invested in the instruments. As of December 31, 2012, we had $3,960,000 of variable rate debt financing, which we have hedged with an interest rate swap.

Item 8. Financial Statements and Supplementary Data

See the Index to Financial Statements at page F-1 of this report.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Our disclosure controls and procedures include our controls and other procedures designed to provide reasonable assurance that information required to be disclosed in this and other reports filed under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures. It should be noted that no system of controls can provide complete assurance of achieving a company’s objectives and that future events may impact the effectiveness of a system of controls.

Our chief executive officer and chief financial officer, together with other members of our management, after conducting an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under Exchange Act), concluded that our disclosure controls and procedures were effective [in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in our reports that we file or submit under the Exchange Act].

We are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f). Under the supervision and participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2012 based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, we concluded that our internal control over financial reporting was effective as of December 31, 2012.

The rules of the SEC do not require nor does this Annual Report include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by Item 10 will be set forth in our Definitive Proxy Statement for our 2013 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A under the Securities and Exchange Act of 1934, as amended, on or prior to April 30, 2013 (the “2013 Proxy Statement”), and is incorporated herein by reference.

Item 11. Executive Compensation

The information required by Item 11 will be set forth in the 2013 Proxy Statement and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 will be set forth in the 2013 Proxy Statement and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by Item 13 will be set forth in the 2013 Proxy Statement and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

The information regarding principal accounting fees and services and the audit committee’s pre-approval policies and procedures required by this Item 14 is incorporated herein by reference to the 2013 Proxy Statement.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)(1) Financial Statements

See the Index to Financial Statements at page F-1 of this report.

(a)(2) Financial Statement Schedules

Schedule III — Real Estate Assets and Accumulated Depreciation

S-1

Consolidated Financial Statements and Report of Ernst & Young LLP Independent Registered Accounting Firm for LIT/CPPT Lehigh Venture LLC

Report of Ernst &Young LLP Independent Registered Accounting Firm for LIT/CPPT Lehigh Venture LLC	L-1
Consolidated Balance Sheet	L-2
Consolidated Statement of Operations	L-3
Consolidated Statement of Members’ Equity	L-4
Consolidated Statement of Cash Flows	L-5

All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are not applicable and therefore have been omitted.

(a)(3) Exhibits

The exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index (following the signatures section of this Annual Report) are included herewith.

(b) Exhibits

See Item 15(a)(3) above.

(c) Financial Statement Schedule

See Item 15(a)(2) above.

Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act

The registrant will deliver to its stockholders a copy of its annual report, which will consist solely of this Annual Report on Form 10-K and, therefore, will not be furnished to the SEC. The registrant intends to deliver the 2013 Proxy Statement to its stockholders subsequent to the filing of this report. Copies of the 2013 Proxy Statement will be furnished to the SEC when it is delivered to the stockholders.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets as of December 31, 2012 and 2011	F-3

Consolidated Statements of Operations for the Years Ended December 31, 2012 and 2011	F-4

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2012 and 2011	F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 2012 and 2011	F-6

Notes to Consolidated Financial Statements	F-7

F-1

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

of Clarion Partners Property Trust Inc.

We have audited the accompanying consolidated balance sheets of Clarion Partners Property Trust Inc. (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the years then ended. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Clarion Partners Property Trust Inc. at December 31, 2012 and 2011, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

	/s/ Ernst & Young LLP

New York, New York
March 14, 2013

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Clarion Partners Property Trust Inc.

Consolidated Balance Sheets

	December 31, 2012			December 31, 2011
Assets
Investment in real estate:
Land	$	1,336,000		$	—
Building and improvements, less accumulated depreciation of $26,019	4,424,981			—
Acquired intangible lease assets, less accumulated amortization of $29,850	1,955,150			—
Total investment in real estate assets, net	7,716,131			—
Investment in non-consolidated joint venture	5,075,567			—
Cash and cash equivalents	3,707,591			200,000
Due from affiliate	476,877			—
Prepaid expenses	170,000			67,500
Other assets	—			4,573
Deferred financing costs, less accumulated amortization of $3,516	101,970			—
Total assets	$	17,248,136		$	272,073

Liabilities and Stockholders’ Equity

Due to affiliates	$	6,516,616		$	424,615
Mortgage payable	3,960,000			—
Acquired below market lease intangibles, less accumulated amortization of $8,602	563,399			—
Accrued expenses	378,312			—
Distributions payable	110,462			—
Derivative financial instrument	59,303			—
Total liabilities	$	11,588,092		$	424,615

Stockholders’ equity:
Preferred stock, $0.01 par value per share (50,000,000 shares authorized, none issued)	$	—		$	—
Common stock, $0.01 par value per share (700,000,000 Class A shares authorized, 24,850 and 20,000 Class A shares issued and outstanding at December 31, 2012 and 2011, respectively)	249			200
Common stock, $0.01 par value per share (300,000,000 Class W shares authorized, 1,211,911 and 0 Class W shares issued and outstanding at December 31, 2012 and 2011, respectively)	12,119			—
Additional paid-in capital	8,904,275			199,800
Accumulated deficit	(3,256,599		)	(352,542		)
Total stockholders’ equity	5,660,044			(152,542		)

Total liabilities and stockholders’ equity	$	17,248,136		$	272,073

See Notes to Consolidated Financial Statements.

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Clarion Partners Property Trust Inc.

Consolidated Statements of Operations

	Year Ended December 31, 2012			Year Ended December 31, 2011
Revenues:
Rental revenues	$	86,439		$	—
Tenant reimbursement income	23,999			—
Total revenue	110,438			—

Expenses:
General and administrative expenses	2,214,680			352,542
Organization costs	778,660			—
Property operating expenses	23,999			—
Advisory fees	17,407			—
Acquisition related expenses	74,682			—
Depreciation and amortization	55,869			—
Interest expense	26,367			—
Total operating expenses	3,191,664			352,542
Loss from continuing operations before equity loss from non-consolidated joint venture and expense support	(3,081,226		)	(352,542		)
Equity loss from non-consolidated joint venture	(128,550		)	—
Unrealized loss on derivative financial instrument	(59,303		)	—
Expense support	475,484			—
Net loss	$	(2,793,595	)	$	(352,542	)

Weighted average number of common shares outstanding:
Basic and diluted	256,809			20,000

Net loss per common share
Basic and diluted	$	(10.88	)	$	(17.63	)

See Notes to Consolidated Financial Statements.

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Clarion Partners Property Trust Inc.

Consolidated Statements of Stockholders’ Equity

	Common Stock Class A			Common Stock Class W			Additional						Total
	Shares	Par Value		Shares	Par Value		Paid-in Capital			Accumulated Deficit			Stockholders’ Equity

Balance at January 1, 2011	20,000	$	200	—	$	—	$	199,800		$	—		$	200,000
Issuance of common stock	—	—		—	—		—			—			—
Net loss	—	—		—	—		—			(352,542		)	(352,542		)
Balance at December 31, 2011	20,000	200		—	—		199,800			(352,542		)	(152,542		)
Issuance of common stock	4,850	49		1,211,911	12,119		12,159,547			—			12,171,715
Distributions to stockholders	—	—		—	—		—			(110,462		)	(110,462		)
Dealer manager fee	—	—		—	—		(1,417		)	—			(1,417		)
Distribution fee	—	—		—	—		(41		)	—			(41		)
Other offering costs	—	—		—	—		(3,453,614		)	—			(3,453,614		)
Net loss	—	—		—	—		—			(2,793,595		)	(2,793,595		)
Balance at December 31, 2012	24,850	$	249	1,211,911	$	12,119	$	8,904,275		$	(3,256,599	)	$	5,660,044

See Notes to Consolidated Financial Statements.

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Clarion Partners Property Trust Inc.

Consolidated Statements of Cash Flows

	Year Ended December 31, 2012			Year Ended December 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,793,595	)	$	(352,542	)
Adjustments to reconcile net loss to net cash used in operating activities:
Equity loss from non-consolidated joint venture	128,550			—
Non-cash revenue for below market lease	(8,602		)	—
Amortization of deferred financing costs	3,516			—
Depreciation and amortization	55,869			—
Unrealized loss on derivative financial instrument	59,303			—
Changes in assets and liabilities:
Due from affiliate	(476,877		)	—
Prepaid expenses	(102,500		)	(67,500		)
Other assets	4,573			(4,573		)
Due to affiliate	2,638,387			424,615
Accrued expenses	376,855			—
Net cash used in operating activities	(114,521		)	—

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate asset	(7,200,000		)	—
Contributions to non-consolidated joint venture investment	(10,301,431		)	—
Distributions from non-consolidated joint venture investment	5,097,314			—
Net cash used in investing activities	(12,404,117		)	—

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	12,171,715			—
Proceeds from mortgage note payable	3,960,000			—
Deferred financing costs paid	(105,486		)	—
Net cash provided by financing activities	16,026,229			—

Net increase in cash and cash equivalents	3,507,591			—
Cash and cash equivalents, beginning of year	200,000			200,000
Cash and cash equivalents, end of year	$	3,707,591		$	200,000

SUPPLEMENTAL DISCLOSURES OF FINANCING ACTIVITIES:
Distributions declared and unpaid	$	110,462		$	—

SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid	$	11,928		$	—

See Notes to Consolidated Financial Statements.

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements

December 31, 2012

1. Organization and Offering

Clarion Partners Property Trust Inc. (the “Company”), was formed on November 3, 2009 as a Maryland corporation and intends to qualify as a real estate investment trust (“REIT”) for federal income tax purposes for the year ended December 31, 2012. Substantially all of the Company’s business is conducted through CPT Real Estate LP, the Company’s operating partnership (the “Operating Partnership”). The Company is the sole general partner of the Operating Partnership and has contributed $199,000 to the Operating Partnership in exchange for its general partner interest. The initial limited partner of the Operating Partnership is CPT OP Partner LLC (“CPT OP Partner”), a wholly owned subsidiary of the Company, which has contributed $1,000 to the Operating Partnership. On May 16, 2011, the Company’s Registration Statement on Form S-11, as amended (File No. 333-164777) (the “Registration Statement”), for its initial public offering (the “Offering”) was declared effective by the Securities and Exchange Commission (the “SEC”).

The Company was organized to invest primarily in a diversified portfolio of (1) income-producing properties which may include office, industrial, retail, multifamily residential, hospitality and other real property types, (2) debt and equity interests backed principally by real estate (collectively, “real estate related assets”) and (3) cash, cash equivalents and other short-term investments. As discussed in Note 11, the Company was initially capitalized by issuing 20,000 Class A shares of its common stock to Clarion Partners, LLC (“Clarion Partners” or the “Sponsor”), on November 10, 2009. The Company’s fiscal year end is December 31.

CPT Advisors, LLC (the “Advisor”), a wholly owned subsidiary of Clarion Partners, manages the day-to-day operations of the Company.

The Company is offering to the public, pursuant to its Registration Statement, up to $2,000,000,000 of shares of its common stock in its primary offering and up to $250,000,000 of shares of its common stock pursuant to its distribution reinvestment plan. The Company is offering to sell any combination of Class A and Class W shares of its common stock with a dollar value up to the maximum offering amount. The Company may reallocate the shares offered between the primary offering and the distribution reinvestment plan. From May 16, 2011, the first date on which the Company’s shares were offered for sale to the public (the “Initial Offering Date”), until (1) the Company has received purchase orders for at least $10,000,000 in any combination of Class A and Class W shares of its common stock (the “Minimum Offering Amount”) and (2) the Company’s board of directors has authorized the release of the escrowed funds to the Company by November 12, 2012 (the “Escrow Period”), the per-share purchase price for shares of the Company’s common stock will be $10.00, plus, for Class A shares only, applicable selling commissions.

On October 17, 2012, Clarion Partners CPPT Coinvestment, LLC (“CPPT Coinvestment”), a wholly owned subsidiary of the Sponsor purchased 1,020,000 shares of the Company’s Class W common stock for $10.00 per share, or $10,200,000 in the aggregate, pursuant to a private placement. On November 1, 2012, following the approval of the Company’s board of directors, the Company concluded the Escrow Period and had received an additional $1,460,713 in public offering proceeds from the sale of shares of common stock. As of December 31, 2012, the Company had 1,236,761 shares of common stock outstanding for total gross proceeds of $12,371,715.

As of December 31, 2012, the Company owns one medical office property located in Darien, Connecticut containing 18,754 rentable square feet, and a 50% owned joint venture investment, which owns an industrial property located in Macungie, Pennsylvania containing 315,000 rentable square feet. These properties are 100% leased at December 31, 2012.

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company, CPT OP Partner and the Operating Partnership. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Investment in and Valuation of Real Estate Assets

The Company is required to make subjective assessments as to the useful lives of its depreciable assets. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life of the assets. Real estate assets are stated at cost, less accumulated depreciation and amortization. Amounts capitalized to real estate assets consist of the cost of acquisition, excluding acquisition related expenses, construction and any tenant improvements, major improvements and betterments that extend the useful life of the real estate and related assets and leasing costs. All repairs and maintenance are expensed as incurred.

Real estate assets, other than land, are depreciated or amortized on a straight-line basis. The estimated useful lives of the Company’s real estate and related assets by class are generally as follows:

Building		40 years
Building improvements		Shorter of remaining life of the building or useful life
Tenant improvements		Lesser of useful life or lease term
Intangible lease assets		Lesser of useful life or lease term

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate and related assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to, bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, rental concessions, and other factors, a significant decrease in a property’s revenues due to lease terminations, vacancies, co-tenancy clauses, reduced lease rates or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying value of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying value, the Company will adjust the real estate and related assets and liabilities to their respective fair values and recognize an impairment loss. Generally fair value is determined using a discounted cash flow analysis and recent comparable sales transactions. As of December 31, 2012, the Company had not identified any impairment indicators related to the Company’s properties.

When developing estimates of future cash flows, the Company makes assumptions such as future market rental rates subsequent to the expiration of current lease agreements, property operating expenses, terminal capitalization and discount rates, the number of months needed to re-lease the property, required tenant improvements and the number of years the property will be held for investment. The use of alternative assumptions in estimating future cash flows could result in a different assessment of the property’s future cash flows and a

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

different conclusion regarding the existence of impairment, the extent of such loss, if any, as well as the carrying value of the real estate and related assets.

When a real estate asset is identified as held for sale, the Company will cease depreciation and amortization of the assets and related liabilities and estimate the fair value, net of selling costs. If, in management’s opinion, the estimated fair value of the asset, net of selling costs, is less than the net book value of the asset, an adjustment to the carrying value would be recorded to reflect the estimated fair value of the property, net of selling costs. No properties were identified as held for sale as of December 31, 2012.

Allocation of Purchase Price of Real Estate and Related Assets

Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and identified intangible assets and liabilities, consisting of the value of above market and below market leases and the value of in-place leases, based in each case on their fair values. Acquisition related expenses are expensed as incurred. The Company utilizes independent third parties or performs its own analysis to assist in the determination of the fair values of the tangible and intangible assets of an acquired property (which includes land and building).

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 will be 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, the Company 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 fair values of in-place leases include direct costs associated with obtaining a new tenant and opportunity costs associated with lost rentals which are avoided by acquiring a property with an in-place lease. Direct costs associated with obtaining a new tenant include commissions and other direct costs, and are estimated in part by utilizing information obtained from independent third parties and management’s consideration of current market costs to execute a similar lease. The intangible values of opportunity costs, which are determined using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease are capitalized as intangible lease assets and are amortized to expense over the lesser of the useful life or the remaining term of the respective leases. If a lease is terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.

The determination of the fair values of the real estate and related assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, discount and capitalization rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of the Company’s purchase price, which could impact the Company’s results of operations.

Investment in Non-Consolidated Joint Venture

The Company accounts for its investment in the non-consolidated joint venture under the equity method of accounting. Accordingly, the Company reports its share of net income (losses) from its investment in the non-consolidated joint venture in the accompanying consolidated financial statements.

A joint venture investment where (a) the Company is the managing member but does not exercise substantial operating control over the entity or (b) the entity is a variable interest entity (VIE) and the Company is not deemed

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

to be the primary beneficiary, is accounted for using the equity method. If an entity is determined to be VIE, the Company consolidates the entity if it is deemed to be the primary beneficiary. The primary beneficiary is the entity that (a) has the power to direct the activities that most significantly impact the VIE and (b) that absorbs a majority of the expected losses of the VIE or a majority of the expected residual returns of the VIE, or both.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Cash equivalents may include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value and may consist of investments in money market accounts. There are no restrictions on the use of the Company’s cash balance.

Prepaid Expenses

Prepaid expenses currently include board of directors fees and insurance incurred as of the consolidated balance sheet date that relate to future periods. Any amounts with no future economic benefit are charged to earnings when identified.

Deferred Financing Costs

Deferred financing costs are the direct costs associated with obtaining financing. Such costs include commitment fees, legal fees and other third-party costs associated with obtaining commitments for financing that result in a closing of such financing. The Company amortizes these costs on a straight-line basis, which approximates the effective interest method, over the terms of the obligations, once the loan process is completed. Amortization of deferred financing costs for the year ended December 31, 2012 was $3,516, which is included in interest expense in the consolidated statements of operations.

Other Assets

Other assets at December 31, 2011 included deferred financing costs, which are the direct costs associated with obtaining financing. Such costs include commitment fees, legal fees and other third-party costs associated with obtaining commitments for financing that result in a closing of such financing. The Company amortizes these costs into interest expense on a straight-line basis, which approximates the effective interest method, over the terms of the obligations, once the loan process is completed. The financing related to these costs did close and as a result, these costs were expensed in connection with the Company breaking escrow.

Derivative Financial Instruments

In the normal course of business, the Company may use a variety of derivative instruments to manage, or hedge, interest rate risk. The Company requires that hedging derivative instruments are effective in reducing the interest rate risk exposure that they are designated to hedge. This effectiveness is essential for qualifying for hedge accounting. Some derivative instruments are associated with an anticipated transaction. In those cases, hedge effectiveness criteria also require that it be probable that the underlying transaction occurs. Instruments that meet these hedging criteria are formally designated as hedges at the inception of the derivative contract.

To determine the fair values of derivative instruments, we use a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. For the majority of financial instruments including most derivatives, long-term investments and long-term debt, standard market conventions and techniques such as discounted cash flow analysis, option pricing models, replacement cost, and termination cost are used to determine fair value. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

In the normal course of business, we are exposed to the effect of interest rate changes and limit these risks by following established risk management policies and procedures including the use of derivatives. To address exposure to interest rates, derivatives are used primarily to fix the rate on debt based on floating-rate indices and manage the cost of borrowing obligations.

The Company records all derivatives at fair value on the balance sheet and are characterized as either cash flow hedges or fair value hedges. For derivative instruments designated as hedging instruments, the gain or loss, resulting from the change in the estimated fair value of the derivative instruments, are reflected in accumulated other comprehensive income. For derivative instruments not designated as hedging instruments, the unrealized gain or loss, resulting from the change in the estimated fair value of the derivative instruments, is recognized in the consolidated statements of operations during the period of change.

The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designed and qualifies for hedge accounting treatment. If the Company elects not to apply or the hedge does not qualify for hedge accounting treatment, any changes in the fair value of these derivative instruments is recognized immediately in unrealized gains (losses) on derivative financial instruments in the consolidated statements of operations. If the derivative is designated and qualifies for hedge accounting treatment the change in the estimated fair value of the derivative is recorded in other comprehensive income (loss) to the extent that it is effective. Any ineffective portion of a derivative's change in fair value will be immediately recognized in the consolidated statements of operations.

Fair Value Measurements

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 derivative falls within Level 2 of the fair value hierarchy, the credit valuation adjustment associated with that derivative utilizes Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparty. However, as of December 31, 2012, the Company has assessed the significance of the impact of the credit valuation adjustment 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 valuation in its entirety is classified in Level 2 of the fair value hierarchy.

Organization, Offering and Operating Costs

Organization and offering expenses (other than selling commissions) include costs and expenses incurred by the Company in connection with the Company’s formation, preparing for the offering, the qualification and registration of the offering, and the marketing and distribution of the Company’s shares. Offering costs will include, but are not limited to the dealer manager and distribution fees, accounting and legal fees (including legal fees of the Dealer Manager), costs to amend the Registration Statement and to prepare prospectus supplements, printing, mailing and distribution costs, filing fees, amounts to reimburse the Advisor or its affiliates for the salaries of employees and other costs in connection with preparing supplemental sales literature, amounts to reimburse the Dealer Manager for amounts that it may pay to reimburse the bona fide due diligence expenses of any participating broker-dealers supported by detailed and itemized invoices, fees of the transfer agent, registrars, trustees, depositories and experts, the cost of educational conferences held by the Company (including the travel, meal and lodging costs of registered

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

representatives of any participating broker-dealers), and attendance fees and cost reimbursement for employees of affiliates to attend retail seminars conducted by broker-dealers.

The Advisor and Dealer Manager have agreed to fund the Company’s organization, offering and operating expenses incurred through the Escrow Period. The Company will reimburse the Advisor and the Dealer Manager for such expenses ratably on a monthly basis over the period that begins 12 months after the end of the Escrow Period and ends 60 months after the end of the Escrow Period. The Company will reimburse the Advisor and the Dealer Manager for any offering expenses incurred after the end of the Escrow Period by the Advisor and the Dealer Manager on its behalf as and when incurred; provided, however, that total organization and offering costs (including selling commissions, dealer manager and distribution fees and bona fide due diligence expenses) may not exceed 15% of the gross proceeds from the primary offering.

Organizational expenses will be expensed as incurred. Offering costs incurred by the Company and the Advisor on behalf of the Company will be deferred and charged against the proceeds of the continuous public offering as a reduction of stockholders’ equity. The Advisor has funded on behalf of the Company costs totaling approximately $6.4 million of organization, offering and operating expenses through Escrow Break, of which $3.4 million represented offering costs, $0.8 million represented organizational costs, and $2.2 million represented operating expenses, which the Company recorded in its consolidated financial statements for the year ended December 31, 2012. As of December 31, 2012, the Company had incurred a total of $3.5 million in offering costs. The Company had an outstanding payable due to affiliate of $6.5 million as recorded on the consolidated balance sheets at December 31, 2012.

On November 5, 2012, the Company entered into an expense support agreement (“Expense Support Agreement”) with its sponsor. Pursuant to the terms of the Expense Support Agreement, commencing with the partial quarter ending December 31, 2012 and on a quarterly basis thereafter, its sponsor may, in its sole discretion, reimburse the Company for, or pay on its behalf, all or a portion of its organization, offering and operating expenses. For the partial quarter ending December 31, 2012, the Sponsor has agreed to fund the organization, offering and operating expenses the Company has incurred for that period. As such, the Company recognized a receivable from the Sponsor of $475,484.

Income Taxes

The Company intends to elect to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), beginning with the Company’s taxable year ending December 31, 2012. In order to maintain the Company’s qualification as a REIT, the Company is required to, among other things, distribute at least 90% of the Company’s REIT taxable income to the Company’s stockholders and meet certain tests regarding the nature of the Company’s income and assets. As a REIT, the Company will not be subject to federal income tax with respect to the portion of the Company’s income that meets certain criteria and is distributed annually to stockholders. The Company intends to operate in a manner that allows the Company to meet the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. If the Company were to fail to meet these requirements, it could be subject to federal income tax on the Company’s taxable income at regular corporate rates. The Company would not be able to deduct distributions paid to stockholders in any year in which it fails to qualify as a REIT. The Company will also be disqualified for the four taxable years following the year during which qualification was lost unless the Company is entitled to relief under specific statutory provisions.

Basic and Diluted Earnings (Loss) per Common Share

Basic earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during each period. Diluted earnings (loss) per share includes the effects of potentially issuable common shares, but only if dilutive. There are no dilutive shares as of December 31, 2012.

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

Stock-Based Compensation

The Company has adopted a stock-based long-term incentive award plan for employees, directors, consultants and advisors. The Company accounts for this plan in accordance with ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards granted. No stock awards were issued under the plan as of December 31, 2012.

Revenue Recognition

The Company’s revenues, which are expected to be substantially derived from rental income, include rental income that our tenants pay in accordance with the terms of their respective leases reported on a straight line basis over the initial term of each lease. Since the Company anticipates that many of its leases will provide for rental increases at specified intervals, straight line basis accounting requires us to record as an asset and include in revenues, unbilled rent receivables which we will only receive if the tenant makes all rent payments required through expiration of the initial term of the lease. Accordingly, management must determine, in its judgment, that the unbilled rent receivable applicable to each specific tenant is collectible. The Company will review unbilled rent receivables and take into consideration the tenant’s payment history and the financial condition of the tenant. In the event that the collectability of an unbilled rent receivable is in doubt, we are required to take a reserve against the receivable or a direct write off of the receivable, which will have an adverse effect on earnings for the year in which the reserve or direct write off is taken.

Concentration of Credit Risk

As of December 31, 2012, the Company had cash on deposit at two financial institutions, one of which had $3.2 million in deposits which is in excess of federally insured levels; however, the Company has not experienced any losses in this account. The Company limits significant cash holdings to accounts held by financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk on its cash deposits.

As of December 31, 2012, 100% of the Company’s gross rental revenues were from a medical office building the Company owns in Connecticut. Stamford Health System, Inc. (“Stamford Health”), the sole tenant in the property, is a not-for-profit provider of comprehensive healthcare services and has a Fitch credit rating of A. In addition, the Company owns a 50% interest in a joint venture investment with a related party. The joint venture owns an industrial property located in Pennsylvania, which has 2 tenants, each occupying 157,500 square feet.

Reportable Segments

The Company’s current business plan consists of owning, managing, operating, leasing, acquiring, developing, investing in, and disposing of real estate related assets. Currently, the Company internally evaluates all of its real estate related assets as one industry segment, and, accordingly, it does not report segment information.

Interest Expense

Interest is charged to interest expense as it accrues. No interest costs were capitalized during the years ended December 31, 2012 or 2011.

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

Distributions Payable

In order to qualify as a REIT, the Company is required, among other things, to make distributions each taxable year equal to at least 90% of its taxable income excluding capital gains. To the extent funds are available, the Company intends to pay regular distributions to stockholders. Distributions are paid to stockholders of record as of the applicable record dates. The Company intends to elect to be taxed as a REIT beginning with the taxable year ended December 31, 2012.

The Company’s policy is pay distributions from cash flow from operations. However, the Company is authorized to fund distributions from any other source, including, without limitation, the proceeds of the Offering, borrowings, expense support payments from the Sponsor, the sale of properties, or other investments. Distributions may constitute a return of capital. The Company has not established a minimum distribution level and the amount of any distributions will be determined by the Company’s board of directors and will depend on, among other things, current and projected cash requirements, tax considerations and other factors deemed relevant by its board.

On October 31, 2012, the Company’s board of directors authorized and declared cash distributions for the period commencing on November 1, 2012 and ending on December 31, 2012 for each share of the Company’s Class A and Class W common stock outstanding as of December 28, 2012. Both distributions were paid on January 2, 2013. Holders of Class W shares received an amount equal to $0.09167 per share, and holders of Class A shares received an amount equal to $0.09140 per share ($0.09167 per share less an amount calculated at the end of the distribution period equal to the class-specific expenses incurred during the distribution period that are allocable to each Class A share).

Accounting Standards Updates

In May 2011, the FASB issued Accounting Standards Update No. 2011-04 (ASU 2011-04), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which amends ASC 820 to change certain fair value principles to eliminate differences between US GAAP and IFRS. ASU 2011-04 is effective for interim and annual reporting periods beginning after December 15, 2011. The adoption of ASU 2011-04 and its disclosure requirements for 2012 did not have a material impact of the Company’s consolidated financial statements.

3. Fair Value Measurements

The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities:

Cash and cash equivalents, due to/from affiliates, prepaid expenses, other assets, accrued expenses, and distributions payable — The Company considers the carrying values of these financial instruments to approximate fair value because of the short period of time between origination of the instruments and their expected realization.

Mortgage note payable — The Company estimates the fair value for its mortgage note payable based on discounted cash flow models, based on Level 3 inputs.

Derivative financial instrument - The fair value is determined by using the appropriate market-based yield curves to calculate and discount the expected cash flows. Cash flow models are based upon the appropriate fixed rate and variable rate components of the contracts, as applicable. The derivative financial instrument is classified as Level 2 as the valuation includes inputs that are other-than-quoted prices in active markets and unobservable.

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

Considerable judgment is necessary to develop estimated fair values of financial instruments. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize, or be liable for, on disposition of the financial instruments.

4. Real Estate Acquisitions

On October 31, 2012, the Company acquired one property for a gross purchase price of $7,200,000 in cash, exclusive of closing costs. The Company purchased the property with a combination of net proceeds from the private placement and with proceeds from a $3,960,000 mortgage loan as discussed in Note 6, Mortgage Note Payable. The Company allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocation:

	December 31, 2012
Land	$	1,336,000
Building and improvements	4,451,000
Acquired below-market leases	(572,000		)
Vacant Lease-Up	1,985,000
Total purchase price	$	7,200,000

The Company recorded rental revenues of $77,838 related to this property for the year ended December 31, 2012.

The following information summarizes selected financial information of the Company, as if the property was completed and the Company commenced material operations on January 1, 2011 for each period below. The table below presents the Company’s estimated revenue and net income, on a pro forma basis for the years ended December 31, 2012 and 2011, respectively.

	Year Ended December 31, 2012		Year Ended December 31, 2011
Pro Forma Basis (unaudited):
Revenue	$	459,473	$	459,473
Net income	$	459,473	$	384,791

The unaudited pro forma information for the year ended December 31, 2012 was adjusted to exclude $74,682 of acquisition costs related to this property. These costs were recognized in the unaudited pro forma information for the year ended December 31, 2011. The unaudited pro forma information is presented for information purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of the period presented, nor does it purport to represent the results of future operations.

Due to the significance of the property in the Company’s consolidated financial statements, and as the property is 100% leased to a single tenant on a long-term basis under a net lease whereby substantially all of the operating costs are the responsibility of the tenant, the Company has presented below the financial condition and results of operations of the lessee of the property. Stamford Health System, Inc. (“Stamford Health”), the lessee of the property, currently files its annual financial statements in reports filed with the State of Connecticut, and its unaudited quarterly filings with the Municipal Securities Rulemaking Board. The following summarizes the financial data regarding Stamford Health taken from previously filed public records (dollar amounts in thousands):

	For the Nine Months Ended June 30, 2012 (Unaudited)		For the Fiscal Year Ended September 30, 2011
Consolidated Statements of Operations:
Total unrestricted revenue, gains and other support	$	378,054	$	466,675
Income from operations	22,262		27,984
Excess of revenue over expenses	14,764		27,261

	As of
	June 30, 2012 (Unaudited)		As of September 30, 2011
Consolidated Balance Sheets:
Total assets	$	970,993	$	678,007
Long-term debt, net of current portion	389,354		151,881
Total liabilities	644,002		479,893
Total net assets	326,991		198,114

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

5. Acquired Intangible Lease Assets

Acquired intangible lease assets consisted of the following:

	As of December 31, 2012
Acquired in place leases, net of accumulated amortization of $29,850 (with a weighted average life of approximately 11 years).	$	1,955,150
	$	1,955,150

As of December 31, 2012, the estimated amortization expense relating to the intangible lease assets for each of the five succeeding fiscal years is as follows:

Year Ending December 31,	Amortization of In-Place Leases
2013	$	179,098
2014	$	179,098
2015	$	179,098
2016	$	179,098
2017	$	179,098

6. Mortgage Note Payable

The Company entered into a $3,960,000 mortgage loan, (the “Loan”), with Sovereign Bank, N.A (“Sovereign”). The Loan matures on October 31, 2017 and, subject to certain conditions, may be extended for up to two years. The Loan is an interest-only loan that bears interest at a variable per annum rate equal to the adjusted British Bankers Association LIBOR Rate plus 230 basis points, payable monthly. The Loan is secured by (i) a first mortgage on the Darien Property and all other assets of CPPT Darien and (ii) first priority collateral assignments of rents and other contracts with respect to the Darien Property. The Loan is non-recourse to CPPT Darien and the Company, except for customary environmental indemnification carve-outs. In addition, the Company provided a guaranty for customary recourse obligations for any loss, damage or liability suffered by the Lender that arises from certain intentional acts committed by CPPT Darien such as, for example, fraud and intentional misrepresentations. The debt service coverage ratio shall not be less than 1.50. The Loan to Value Ratio shall not be greater than 60%. The Company may prepay the loan at any time without premium or penalty, and Sovereign may accelerate the loan upon the occurrence of customary events of loan default. The Company estimates the fair value of the Loan as of December 31, 2012 to be $3,960,000.

Maturities

The following table summarizes the scheduled repayment of the mortgage note payable:

Year Ending December 31,	Principal Repayments
2013	$	—
2014	—
2015	—
2016	—
2017	3,960,000
Thereafter	—
Total	$	3,960,000

7. Derivative Financial Instrument

On October 31, 2012, the Company entered into an interest rate swap agreement (the “Swap”) with Sovereign with respect to the full principal amount of the loan. The Swap hedges the interest payment under the loan to a fixed rate of 3.31% per annum. The termination date of the Swap is November 1, 2017. The fair value of the Swap is a liability of $59,303 at December 31, 2012.

8. Acquired Below Market Lease Intangibles

Acquired below market lease intangibles consisted of the following:

	As of December 31, 2012
Acquired below-market leases, net of accumulated amortization of $8,602 (with a weighted average life of approximately 11 years).	$	563,399

The increase in net income resulting from the amortization recorded on the intangible lease liability for the year ended December 31, 2012 was $8,602, which is recorded as part of rental revenue on the consolidated statements of operations.

As of December 31, 2012, the estimated amortization of the intangible lease liability for each of the five succeeding fiscal years is as follows:

Year Ending December 31,	Amortization of Below Market Leases
2013	$	51,609
2014	$	51,609
2015	$	51,609
2016	$	51,609
2017	$	51,609

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

9. Operating Leases

The Company’s real estate property is leased to a tenant under an operating lease. As of December 31, 2012, the lease has a remaining term of approximately 11 years. The lease has a 5 year renewal option to extend the lease agreement. There are no options for early termination or rights of first refusal to purchase the property. The Company retains substantially all of the risks and benefits of ownership of the real estate asset leased. As of December 31, 2012, the future minimum rental income from the Company’s investment in the real estate asset under non-cancelable operating leases is as follows:

Year ending December 31,	Future Minimum Rental Income
2013	$	459,473
2014	459,473
2015	459,473
2016	459,473
2017	459,473
Thereafter	2,718,549
Total	$	5,015,914

10. Non-Consolidated Joint Venture Investment

On October 18, 2012, CPPT Lehigh LLC, a Delaware limited liability company (“CPPT Lehigh”), and a wholly owned subsidiary of CPT Real Estate, entered into a joint venture agreement (the “Joint Venture Agreement”) with LIT Industrial Limited Partnership, a Delaware limited partnership (“LIT”), a limited partnership indirectly owned by Lion Industrial Trust, a privately held REIT managed by the Sponsor, to form LIT/CPPT Lehigh Venture LLC (the “Venture”) for the purpose of purchasing and operating a property known as Lehigh Valley South (“Lehigh Valley South”). CPPT Lehigh contributed $9,843,750 in cash to the Venture, and LIT contributed its 50% ownership interest in Lehigh Valley South to the Venture. The Company is currently in the process of analyzing the fair value of the in-place leases; and consequently, no value has yet been assigned to the leases. Therefore, the purchase price allocation is preliminary and subject to change.

Lehigh Valley South was previously owned by Lehigh Valley South Industrial, LLC (“Lehigh Industrial”), an entity indirectly owned by LIT and Trammell Crow Company (“TCC”). LIT and TCC originally developed the property in 2008.

Pursuant to the terms of the Joint Venture Agreement, LIT will serve as the administrative member and manage the day-to-day affairs of the Venture. The Joint Venture Agreement contains a list of customary major decisions that require the approval of both Lion and CPPT Lehigh. After an initial lock-out period, which expires on April 1, 2013, either member can cause the Venture to sell Lehigh Valley South after first providing a right of first offer to the other member.

On October 25, 2012, the Venture entered into a loan agreement with Wells Fargo Bank, N.A. for a $10,400,000 property mortgage loan secured by the Venture’s real estate property. The loan matures on October 25, 2017 and may be extended for up to two years. The loan is an interest-only loan that bears interest at a variable rate equal to 1-month LIBOR plus 250 basis points, payable monthly. In connection with the proceeds from this loan, the Venture made a distribution with which, CPPT Lehigh received $5,097,314 in cash proceeds.

In addition, the Venture entered into an interest rate swap agreement with Wells Fargo Bank N.A. The notional amount of the swap is $10,400,000 and matures on October 25, 2017. Pursuant to the terms of the swap agreement,

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

the Venture pays a fixed rate of 1.10% and receives a floating rate of 1—month LIBOR. By entering into this agreement, the interest rate is fixed at a rate of 3.60%.

Presented below is a summary of the audited financial information of the Venture for the period from September 24, 2012 (Date of inception) through December 31, 2012. The amounts presented below are in thousands.

	December 31, 2012
Balance Sheet Data:
Total assets	$	19,448
Total liabilities	$	10,733
Total members’ equity	$	8,715

	Period from September 24, 2012 (Date of Inception) through December 31, 2012
Operating Data:
Total revenue	$	404
Total expenses	$	635
Net loss	$	(231	)

At December 31, 2012, the Company recognized a net loss of $128,550 which was recorded in the consolidated statements of operations. This loss primarily relates to an unrealized loss of the interest rate swap the Venture entered into of $179,072, of which the Company’s share was $89,536. The Venture also recognized depreciation and amortization expense of $147,714, of which the Company’s share was $73,857. In addition, the Company recognized additional amortization expense of $13,007, which is due to the Company’s outside basis in the Venture.

11. Equity

Under the Company’s charter, the Company has the authority to issue 1,000,000,000 shares of its common stock, 700,000,000 of which are classified as Class A shares and 300,000,000 of which are classified as Class W shares, and 50,000,000 shares of preferred stock. All shares of such stock have a par value of $0.01 per share. On November 10, 2009, Clarion Partners purchased 20,000 Class A shares of the Company’s common stock for total cash consideration of $200,000 to provide the Company’s initial capitalization. The Company’s board of directors is authorized to amend its charter, without the approval of the stockholders, to increase or decrease the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue.

On October 17, 2012, Clarion Partners CPPT Coinvestment, LLC (“CPPT Coinvestment”), a wholly owned subsidiary of the Sponsor purchased 1,020,000 shares of the Company’s Class W common stock for $10.00 per share, or $10,200,000 in the aggregate, pursuant to a private placement. On November 1, 2012, following the approval of the Company’s board of directors, the Company broke escrow and had received an additional $1,460,713 in public offering proceeds from the sale of shares of common stock. As of December 31, 2012, the Company had 1,236,761 shares of common stock outstanding for total gross proceeds of $12,371,715.

Distribution Reinvestment Plan

The Company has adopted a distribution reinvestment plan that will allow stockholders to have the cash distributions attributable to the class of shares that the stockholder owns automatically invested in additional shares of the same class. Shares are offered pursuant to the Company’s distribution reinvestment plan at NAV per share applicable to that class, calculated as of the distribution date. Stockholders who elect to participate in the distribution reinvestment plan, and who are subject to U.S. federal income taxation laws, may incur a tax liability on an amount

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

equal to the fair value on the relevant distribution date of the shares of the Company’s common stock purchased with reinvested distributions, even though such stockholders have elected not to receive the distributions used to purchase those shares of its common stock in cash. During the year ended December 31, 2012, no shares were issued under the Company’s distribution reinvestment plan.

Share Redemption Plan

The Company has adopted a redemption plan whereby on a daily basis stockholders may request the redemption of all or any portion of their shares beginning on the first day of the calendar quarter following the conclusion of the Escrow Period. The redemption price per share will be equal to the Company’s NAV per share of the class of shares being redeemed on the date of redemption.

Under the redemption plan, the total amount of net redemptions during any calendar quarter is limited to shares whose aggregate value (based on the redemption price per share on the day the redemption is effected) is 5% of the combined NAV of both classes of shares, calculated as of the last day of the previous calendar quarter, which means that net redemptions will be limited to approximately 20% of the total NAV in any 12-month period. The Company uses the term “net redemptions” to mean the excess of share redemptions (capital outflows) over share purchases (capital inflows) in the Offering. As a result, redemptions will count against the 5% cap during a calendar quarter only to the extent the aggregate value of share redemptions during the quarter exceeds the aggregate value of share purchases in the same quarter. Thus, on any business day during a calendar quarter, the maximum amount available for redemptions for that quarter will be equal to (1) 5% of the combined NAV of both classes of shares, calculated as of the last day of the previous calendar quarter, plus (2) proceeds from sales of new shares in the Offering (including reinvestment of distributions) since the beginning of the current calendar quarter, less (3) redemption proceeds paid since the beginning of the current calendar quarter. If the quarterly redemption limitation is reached during a given day, the Company will no longer accept redemptions for the remainder of the quarter, regardless of additional share purchases by investors in the Offering for the remainder of such quarter. The combined NAV of both share classes at December 31, 2012 was $12,429,448 resulting in a first quarter 2013 cap of $621,472.

On the first day following any quarter in which the Company has reached that quarter’s volume limitation for redemptions, unless the Company’s board of directors determines to suspend the redemption plan, the redemption plan will automatically and without stockholder notification, resume.

While there is no minimum holding period, shares redeemed within 365 days of the date of purchase will be redeemed at the Company’s NAV per share of the class of shares being redeemed on the date of redemption less a short-term trading discount equal to 2% of the gross proceeds otherwise payable with respect to the redemption. The Company may waive the short-term trading discount (1) with respect to redemptions resulting from death or qualifying disability or (2) in the event that a stockholder’s shares are redeemed because the stockholder has failed to maintain a minimum balance of $2,000.

In the event that any stockholder fails to maintain a minimum balance of $2,000 of shares of common stock, the Company may redeem all of the shares held by that stockholder at the redemption price per share in effect on the date it is determined that the stockholder has failed to meet the minimum balance, less the short-term trading discount of 2%, if applicable. Minimum account redemptions will apply even in the event that the failure to meet the minimum balance is caused solely by a decline in the Company’s NAV.

The Company’s board of directors has the discretion to suspend or modify the share redemption plan if (1) it determines that such action is in the best interests of the Company’s stockholders, (2) it determines that it is necessary due to regulatory changes or changes in law or (3) it becomes aware of undisclosed material information that it believes should be publicly disclosed before shares are redeemed. In addition, the Company’s board of directors may suspend the offering, including the share redemption plan, if it determines that the calculation of NAV is materially incorrect or there is a condition that restricts the valuation of a material portion of the Company’s assets.

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

Long-Term Incentive Plan

The Clarion Partners Property Trust Inc. Long-Term Incentive Plan (the “Long-Term Incentive Plan”) was adopted by the Company’s board of directors on September 22, 2010, and provides for the grant of equity awards to employees, directors, consultants and advisors. Subject to adjustment as set forth in the Long-Term Incentive Plan, the aggregate number of shares reserved and available for issuance is 4,000,000, not to exceed 2% of the Company’s total outstanding shares as of the date of any proposed grant. The vesting period of stock-based awards will be determined by the Company’s board of directors or a committee thereof, and the exercise term will be limited to ten years.

Subject to availability under the Long-Term Incentive Plan and among other restrictions as described in the Clarion Partners Property Trust Inc. Independent Directors Compensation Plan, which operates as a subplan of the Long-Term Incentive Plan, each independent director will receive an initial grant of 5,000 Class A shares of restricted stock (the “Initial Restricted Stock Grant”) on the date that the Company issues 15,000,000 shares of stock. Each new independent director that subsequently joins the board of directors will receive the Initial Restricted Stock Grant on the date he or she joins the board. Each restricted stock grant issued following the Initial Restricted Stock Grant will generally vest on the first anniversary of the grant date, except that the Initial Restricted Stock Grant will vest on the day immediately preceding the first annual stockholders meeting held after the date that the Company issues 15,000,000 shares of stock.

No stock awards were issued under the Long-Term Incentive Plan as of December 31, 2012.

12. Distributions

On October 31, 2012, the Company’s board of directors authorized and declared cash distributions for the period commencing on November 1, 2012 and ending on December 31, 2012 for each share of the Company’s Class A and Class W common stock outstanding as of December 28, 2012. Both distributions were paid on January 2, 2013 (See Note 18, Subsequent Events, for further details). Holders of Class W shares received an amount equal to $0.09167 per share, and holders of Class A shares received an amount equal to $0.09140 per share ($0.09167 per share less an amount calculated at the end of the distribution period equal to the class-specific expenses incurred during the distribution period that are allocable to each Class A share).

13. Related Party Arrangement

Advisory Agreement

The Company will pay the Advisor an advisory fee equal to a fixed component that accrues daily in an amount equal to 1/365th of 0.90% of the Company’s NAV for each class for such day. The fixed component of the advisory fee is payable quarterly in arrears. Such amounts recorded for the year ended December 31, 2012 totaled $17,407.

Additionally, the Company will pay a performance component calculated for each class on the basis of the total return to stockholders of the class in any calendar year, such that for any year in which the Company’s total return per share allocable to such class exceeds 6% per annum, the Advisor will receive 25% of the excess total return allocable to that class; provided that in no event will the performance component exceed 10% of the aggregate total return allocable to such class for such year. In the event the Company’s NAV per share for either class or common stock decreases below $10.00, any increase in NAV per share to $10.00 with respect to that class will not be included in the calculation of the performance component. The performance component is payable annually in arrears. No performance fee was recorded for the year ended December 31, 2012.

The Advisor has agreed to fund the Company’s offering and organization expenses through the escrow period. In addition, the Advisor has agreed to fund the Company’s operating expenses through the Escrow Period, including, without limitation, director compensation and legal, accounting, tax and consulting fees. The Company

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

will reimburse the Advisor for these expenses ratably on a monthly basis over the period that begins 12 months after the end of the Escrow Period ends 60 months after the end of the Escrow Period. The Escrow Period ended on November 1, 2012. These expenses totaled approximately $6.4 million, which is comprised of $3.4 million of offering costs, $0.8 million of organization costs, and $2.2 million of operating costs, which have been recorded in the Company’s consolidated financial statements. The Company had an outstanding payable due to affiliate of $6.5 million as recorded on the consolidated balance sheets at December 31, 2012.

The Company will reimburse the Advisor for all expenses paid or incurred by the Advisor in connection with the services provided to the Company, subject to the limitation that the Company will not reimburse the Advisor for any amount by which its operating expenses (including the advisory fee) at the end of the four preceding fiscal quarters exceed the greater of: (1) 2% of its average invested assets; or (2) 25% of its net income determined without reduction for any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of the Company’s assets for that period. Notwithstanding the above, the Company may reimburse the Advisor for expenses in excess of this limitation if a majority of the independent directors determines that such excess expenses are justified based on unusual and non-recurring factors.

Expense Support

On November 5, 2012, the Company entered into an expense support agreement with the Sponsor. Pursuant to the terms of this agreement, commencing with the partial quarter ending December 31, 2012 and on a quarterly basis thereafter, the Sponsor may, in its sole discretion, reimburse the Company for, or pay on its behalf, all or a portion of its organization, offering and operating expenses. For the partial quarter ending December 31, 2012, the Sponsor has agreed to fund a portion of its organization, offering and operating expenses totaling $475,484. Once the Company raises $350.0 million in gross offering proceeds, it is required to reimburse the Sponsor for these costs in the amount of $250,000 per quarter.

Joint Venture Investment

As discussed in Note 10, Non-Consolidated Joint Venture Investment, on October 18, 2012, CPPT Lehigh entered into the Joint Venture Agreement with LIT, a limited partnership indirectly owned by Lion Industrial Trust, a privately held REIT managed by the Sponsor, to form the Venture for the purpose of purchasing and operating Lehigh Valley South. The Company’s board of directors, including the independent directors not otherwise interested in the transaction, approved the joint venture and its terms as being fair and reasonable to the Company and on substantially the same terms and conditions as those received by other joint venturers.

14. Economic Dependency

The Company will be dependent on the Advisor and the Dealer Manager for certain services that are essential to the Company, including the sale of the Company’s shares of common stock, asset acquisition and disposition decisions and other general and administrative responsibilities. In the event that the Advisor or the Dealer Manager is unable to provide such services, the Company would be required to find one or more alternative service providers.

15. Income Taxes

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

to fail to meet these requirements, it could be subject to federal income tax on the Company’s taxable income at regular corporate rates. The Company would not be able to deduct distributions paid to stockholders in any year in which it fails to qualify as a REIT. The Company will also be disqualified for the four taxable years following the year during which qualification was lost unless the Company is entitled to relief under specific statutory provisions.

16. Commitments and Contingencies

Litigation

In the ordinary course of business, the Company may become subject to litigation or claims. The Company is not aware of any material pending legal proceedings of which the outcome is reasonably possible to have a material adverse effect on its results of operations, financial condition or liquidity.

Environmental Matters

In connection with the ownership and operation of real estate, the Company potentially may be liable for costs and damages related to environmental matters. The Company carries environmental liability insurance on its properties that provides coverage for remediation liability and pollution liability for third-party bodily injury and property damage claims. The Company is not aware of any environmental matters which it believes will have a material adverse effect on its consolidated financial statements.

17. Quarterly Results

Presented below is a summary of the unaudited quarterly financial information for the year ended December 31, 2012. Quarterly results for the year ended December 31, 2011 have not been presented because the Company had not begun its principal operations during such period. In the opinion of management, the information for the interim periods presented include all adjustments, which are of a normal and recurring nature, necessary to present a fair presentation for each period.

	2012
	First Quarter			Second Quarter		Third Quarter		Fourth Quarter
Revenues	$	—		$	—	$	—	$	110,438
Operating expenses	(352,542		)	—		—		3,544,206
Net income (loss)	352,542			—		—		(3,146,137		)
Basic and diluted net income (loss) per common share(1)	17.63			—		—		(28.51		)
Distributions declared per common share(2)	—			—		—		0.09

(1) Based on the weighted average number of shares outstanding for the quarter

(2) Distributions declared per common share at a rate of 0.09167 for Class W common shares, and distributions declared per common share at a rate of $0.09140 for Class A common shares ($0.09167 per share less an amount calculated at the end of the distribution period equal to the class-specific expenses incurred during the distribution period that are allocable to each Class A share.)

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Clarion Partners Property Trust Inc.

Notes to Consolidated Financial Statements (continued)

December 31, 2012

18. Subsequent Events

The Company has evaluated subsequent events through the filing of this Form 10-K.

On January 2, 2013, the Company paid its distributions that were payable at December 31, 2012. Pursuant to its distribution reinvestment plan, $14,242 was reinvested into the Company resulting in an additional 1,417 shares outstanding. The remaining amount was paid in cash.

On January 25, 2013, the Company issued and sold 125 shares of its newly designated 12.5% Series A Cumulative Non-Voting Preferred Stock, $0.01 par value per share, for a purchase price of $1,000 per share or $125,000 in the aggregate, to 125 accredited investors who were not affiliated with the Company.

On March 7, 2013, the Company’s board of directors authorized and declared cash distributions for the period commencing on January 25, 2013 and ending on June 30, 2013 for each share of the Company’s 12.5% Series A Cumulative Non-Voting Preferred Stock (the “Preferred Stock”) outstanding as of June 15, 2013. The distributions will be paid on June 28, 2013. Holders of the preferred stock will receive an amount equal to $54.17 per share.

On March 7, 2013, the Company’s board of directors authorized and declared cash distributions for the period commencing on January 1, 2013 and ending on March 31, 2013 for each share of the Company’s Class A and Class W common stock outstanding as of March 28, 2013. Both distributions will be paid on April 1, 2013. Holders of Class W shares will receive an amount equal to $0.1398 per share, and holders of Class A shares will receive an amount equal to $0.1398 per share less an amount calculated at the end of the common stock distribution period equal to the class-specific expenses incurred during the distribution period that are allocable to each Class A share.

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Clarion Partners Property Trust Inc.

Schedule III — Real Estate And Accumulated Depreciation

December 31, 2012

Column A	Column B		Column C Initial Cost				Column D Cost Capitalized Subsequent to Acquisition				Column E Gross Amount at Which Carried at Close of Period							Column F		Column G	Column H	Column I
Description	Encumbrances		Land		Building & Improvements		Land		Building & Improvements		Land		Building & Improvements		Total			Accumulated Depreciation		Date of Construction	Date Acquired	Life on Which Depreciation is Computed
The Darien Property(1)	$	3,960,000	$	1,336,000	$	4,451,000	$	—	$	—	$	1,336,000	$	4,451,000	$	5,787,000	(2)	$	26,019	1997/2008	10/2012	Various

(1) The Darien Property is a medical office building located in Darien, Connecticut.

(2) The tax basis of aggregate land, buildings and improvements as of December 31, 2012 is $7,200,000.

The changes in real estate for the year ended December 31, 2012 are as follows:

	2012
Balance at beginning of year	$	—
Property acquisitions	5,787,000
Balance at end of year	$	5,787,000

The changes in accumulated depreciation of real estate for the year ended December 31, 2012 are as follows:

	2012
Balance at beginning of year	$	—
Depreciation for the year	26,019
Balance at end of year	$	26,019

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Report of Independent Auditors

The Members of LIT/CPPT Lehigh Venture LLC

We have audited the accompanying consolidated financial statements of LIT/CPPT Lehigh Venture LLC (the “Company”), which comprise the consolidated balance sheet as of December 31, 2012 and the related consolidated statement of income, changes in members’ equity and cash flows for the period from September 24, 2012 (date of inception) through December 31, 2012 and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of LIT/CPPT Lehigh Venture LLC at December 31, 2012, and the consolidated results of its operations and its cash flows for the period from September 24, 2012 (date of inception) through December 31, 2012 in conformity with U.S. generally accepted accounting principles.

	/s/ Ernst & Young LLP

Dallas, Texas
March 7, 2013

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LIT/CPPT Lehigh Venture LLC

Consolidated Balance Sheet

December 31, 2012
(Dollars in thousands)

Assets
Commercial real estate property, at cost:
Land	$	4,565
Building and improvements	14,561
Total land and building improvements	19,126
Less accumulated depreciation	(1,607		)
Total real estate investment	17,519

Cash and cash equivalents	202
Accounts receivable	833
Deferred leasing costs, net of accumulated amortization of $94	609
Prepaid and other assets	155
Deferred financing costs, net of accumulated amortization of $3	130
Total assets	$	19,448

Liabilities and members’ equity
Mortgage note payable	$	10,400
Accounts payable and accrued expenses	115
Security deposits	39
Derivative liability	179
Total liabilities	10,733
Members’ equity	8,715
Total liabilities and members’ equity	$	19,448

See Notes to Consolidated Financial Statements.

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LIT/CPPT Lehigh Venture LLC

Consolidated Statement of Operations

For the period from September 24, 2012 (Date of Inception)

through December 31, 2012
(Dollars in thousands)

Revenues:
Rental revenue	$	301
Escalation and reimbursement revenues	103
Total revenues	404

Expenses:
Property operating expenses	41
Real estate property taxes	54
Acquisition related expenses	143
Interest expense	73
Depreciation and amortization	145
Unrealized loss on interest rate swap	179
Total expenses:	635

Net loss	$	(231	)

See Notes to Consolidated Financial Statements.

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LIT/CPPT Lehigh Venture LLC

Consolidated Statement of Members’ Equity

For the period from September 24, 2012 (Date of Inception)

through December 31, 2012
(Dollars in thousands)

	CPPT Lehigh LLC			LIT Industrial Limited Partnership			Total
Balance at September 24, 2012	$	—		$	—		$	—
Partnership contributions	9,571			9,570			19,141
Partnership distributions	(5,098		)	(5,097		)	(10,195		)
Net loss	(116		)	(115		)	(231		)
Balance at December 31, 2012	$	4,357		$	4,358		$	8,715

See Notes to Consolidated Financial Statements.

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LIT/CPPT Lehigh Venture LLC

Consolidated Statement of Cash Flows

For the period from September 24, 2012 (Date of Inception)

through December 31, 2012
(Dollars in thousands)

Operating activities
Net loss	$	(231	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	145
Amortization of deferred financing fees	3
Change in fair value of interest rate swap	179
Changes in operating assets and liabilities:
Accounts receivable	(120		)
Prepaid and other assets	50
Accounts payable and accrued expenses	77
Net cash provided by operating activities	103

Investing activities
Acquisition of real estate	(9,998		)
Net cash used in investing activities	(9,998		)

Financing activities
Borrowings from mortgage note payable	10,400
Capital contributions	9,998
Distributions to members	(10,195		)
Deferred financing costs paid	(106		)
Net cash provided by financing activities	10,097

Net increase in cash and cash equivalents	202
Cash and cash equivalents at September 24, 2012 (Date of Inception)	—
Cash and cash equivalents at December 31, 2012	$	202

Non-cash investing and financing activity
Non-cash capital contribution	$	9,570
Accrual for deferred financing costs	$	27

Supplemental disclosure of cash flow information
Cash paid for interest	$	70

See Notes to Consolidated Financial Statements.

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LIT/CPPT Lehigh Venture LLC

Notes to Consolidated Financial Statements

For the Period of September 24, 2012 (Date of Inception)

through December 31, 2012
(Dollars in thousands)

1. Organization

LIT/CPPT Lehigh LLC was formed by LIT/CPPT Lehigh Holdings LLC, a Delaware limited liability company, as its sole member on September 24, 2012. LIT/CPPT Lehigh Holdings LLC was formed by LIT/CPPT Lehigh Venture LLC (the “Company”), a Delaware limited liability company, as its sole member on September 24, 2012. The Venture was formed by CPPT Lehigh LLC (“CPPT Lehigh”), a Delaware limited liability company, and LIT Industrial Limited Partnership (“LIT”), a Delaware limited partnership on October 18, 2012 for the purpose of purchasing and operating a property known as Lehigh Valley South (“Lehigh Valley South” or the “Property”). CPPT Lehigh is a wholly owned subsidiary of Clarion Partners Property Trust Inc. (“CPPT”), a Maryland Corporation.

CPPT Lehigh contributed $9,921 in cash to the Venture, and LIT contributed $77 in cash, in addition to its 50% ownership interest in the Property. The total cash of $9,998 was used to purchase TCC’s 50% interest in the Property, including paying certain closing costs and obtaining other working capital, based on the agreed-upon fair value of the Property. As discussed in Note 2, since the Venture’s carrying amount of the Property is its historical cost, an adjustment of $350 was made to reduce the value of the property to the carrying amount, with a corresponding decrease to CPPT Lehigh’s opening equity.

2. Basis of Presentation and Significant Accounting Policies

Principles of Consolidation

The financial statements have been prepared in accordance with generally accepted accounting principles of the United States. All intercompany accounts and transactions have been eliminated in consolidation.

Commercial Real Estate Property

The Company’s commercial real estate property consists of a single industrial warehouse property containing 315,000 square feet in Macungie, Pennsylvania.

Since LIT and CPPT are affiliated through a common sponsor, Clarion Partners LLC, the formation of the Venture and contribution of LIT’s interest in the property is considered a

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LIT/CPPT Lehigh Venture LLC

Notes to Consolidated Financial Statements

For the Period of September 24, 2012 (Date of Inception)

through December 31, 2012
(Dollars in thousands)

2. Basis of Presentation and Significant Accounting Policies (continued)

common control transaction. Accordingly, the basis of the property and related assets and liabilities was carried over to the Venture at Lehigh Industrial’s historical cost as follows:

Land	$	4,565
Building and improvements	14,561
Less accumulated depreciation	(1,479		)
Accounts receivable	713
Prepaid assets	204
Deferred leasing costs, net of accumulated amortization of $77	626
Security deposits	(39		)
Accounts payable and accrued expense	(10		)
Total	$	19,141

The Property is stated at cost, less accumulated depreciation. Costs directly related to the acquisition and redevelopment of the Property is capitalized. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives.

The Property is depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:

Category		Term
Building		40 years
Building improvements		15 years
Tenant improvements		Remaining term of the lease

At December 31, 2012, building and improvements consisted of the following:

Building	$	11,932
Building and tenant improvements	2,629
Total	$	14,561

Depreciation expense amounted to $128 for the period from September 24, 2012 (date of inception) through December 31, 2012.

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LIT/CPPT Lehigh Venture LLC

Notes to Consolidated Financial Statements

For the Period of September 24, 2012 (Date of Inception)

through December 31, 2012
(Dollars in thousands)

2. Basis of Presentation and Significant Accounting Policies (continued)

On a periodic basis, management assesses whether there are any indicators that the value of the commercial real estate property may be impaired. A property’s value is impaired if the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property are less than the carrying value of the property. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property. Management of the Company does not believe that the value of the Property was impaired at December 31, 2012.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Deferred Financing Costs

Deferred financing costs represent commitment fees, legal and other third-party costs associated with obtaining commitments for financing which result in a closing of such financing. These costs are amortized over the terms of the respective agreements using the straight line method, which approximates the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Amortization expense amounted to $3 for the period from September 24, 2012 (date of inception) through December 31, 2012, which is included in interest expense in the accompanying consolidated statement of operations.

Deferred Leasing Costs

Deferred leasing costs are costs associated with the successful negotiation of leases, both external commissions and amortized on a straight-line basis over the terms of the respective leases. If an applicable lease terminates prior to the expiration of its initial lease term, the carrying amount of the costs are written-off to amortization expense. Amortization expense amounted to $17 for the period from September 24, 2012 (date of inception) through December 31, 2012, which is included in depreciation and amortization expense in the accompanying consolidated statement of operations.

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LIT/CPPT Lehigh Venture LLC

Notes to Consolidated Financial Statements

For the Period of September 24, 2012 (Date of Inception)

through December 31, 2012
(Dollars in thousands)

2. Basis of Presentation and Significant Accounting Policies (continued)

Revenue Recognition

Minimum rental revenue is recognized on a straight-line basis over the term of the lease. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in accounts receivable in the accompanying balance sheet. At December 31, 2012, the amount of accounts receivable related to straight-line rents totaled $771.

The Company establishes, on a current basis, a reserve for future potential losses, which may occur against deferred rents receivable and tenant receivables. No such allowance has been included in the consolidated balance sheet at December 31, 2012.

Derivative Instruments

To determine the fair values of derivative instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. For the majority of financial instruments including most derivatives, long-term investments and long-term debt, standard market conventions and techniques such as discounted cash flow analysis, option pricing models, replacement cost, and termination cost are used to determine fair value. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

In the normal course of business, the Company is exposed to the effect of interest rate changes and limit these risks by following established risk management policies and procedures including the use of derivatives. To address exposure to interest rates, derivatives are used primarily to fix the rate on debt based on floating-rate indices and manage the cost of borrowing obligations.

As of December 31, 2012, the Company has one derivative instrument. The derivative instrument is reported at fair value and presented on the consolidated balance sheet. Gains and

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LIT/CPPT Lehigh Venture LLC

Notes to Consolidated Financial Statements

For the Period of September 24, 2012 (Date of Inception)

through December 31, 2012
(Dollars in thousands)

2. Basis of Presentation and Significant Accounting Policies (continued)

losses related to this instrument are recognized in the consolidated statement of operations, as the derivative instrument was not formally designated as a hedge at the inception of the derivative contract.

Income Taxes

The Company is treated as a partnership for federal income tax purposes. Under current law, no federal income taxes are attributable to or payable by the Company. Accordingly, no provision has been made in the financial statements for federal income taxes. The owners are responsible for taxes on their respective shares of the Company’s net taxable income or loss. The Company accounts for certain state and local income taxes under the provisions of ASC 740, Income Taxes, which prescribes an asset and liability method of accounting for income taxes. Under ASC 740, deferred tax assets and liabilities are recognized for temporary differences between the carrying amounts of assets and financial statement reporting purposes and the amounts used for income tax purposes. A valuation allowance is recognized if it is “more likely than not” that some portion of the deferred asset will not be recognized. At December 31, 2012, there were no temporary differences giving rise to material deferred state and local taxes.

The Company recognizes the impact of tax return positions that are more likely than not to be sustained upon audit. Significant judgment is required to evaluate uncertain tax positions. The evaluation of uncertain tax positions is based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of audits and effective settlement of audit issues.

Management believes any such positions would be immaterial to the financial statements, and thus, there are no gross unrecognized tax benefits as of December 31, 2012.

We do not expect the total amount of unrecognized tax benefits to significantly change within the next twelve months.

The Company is not currently under examination by a taxing authority. The statute of limitations for examination for the Company’s major tax jurisdictions remains open for the 2012 tax year. If applicable, the Company recognizes interest and penalties related to the underpayment of income taxes as a component of current tax expense.

Use of Estimates

The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Comprehensive Income

The Company did not have any items of other comprehensive income for the period from September 24, 2012 (date of inception) through December 31, 2012.

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LIT/CPPT Lehigh Venture LLC

Notes to Consolidated Financial Statements

For the Period of September 24, 2012 (Date of Inception)

through December 31, 2012
(Dollars in thousands)

2. Basis of Presentation and Significant Accounting Policies (continued)

Concentration of Credit Risk

As of December 31, 2012, the Company had cash on deposit at one financial institution, which was not in excess of federally insured levels. The Company limits significant cash holdings to accounts held by financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk on its cash deposits.

As of December 31, 2012, 100% of the Company’s gross annualized rental revenues were from the Property, which is located in Pennsylvania. The Property has two tenants each occupying 157,500 square feet.

3. Deferred Leasing Costs

Deferred leasing costs represent commissions and legal costs paid to obtain or renew tenants. These costs are amortized over the life of the respective lease.

At December 31, 2012, deferred leasing costs consisted of the following:

Lease commissions	$	694
Lease legal costs	9
Total	$	703

The Company recorded $17 of amortization expense related to these intangibles for the period from September 24, 2012 (date of inception) through December 31, 2012. The expected amortization expense during the next five years related to the deferred leasing costs as of December 31, 2012 is as follows:

2013	$	83
2014		83
2015		83
2016		83
2017	83
Thereafter	197
	$	612

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LIT/CPPT Lehigh Venture LLC

Notes to Consolidated Financial Statements

For the Period of September 24, 2012 (Date of Inception)

through December 31, 2012
(Dollars in thousands)

4. Prepaid and Other Assets

The Company’s prepaid and other assets consist of escrows and prepaid expenses.

At December 31, 2012, prepaid and other assets consisted of the following:

Prepaid property taxes	$	142
Prepaid insurance	7
Deposits	6
Total	$	155

5. Accounts Payable and Accrued Expenses

At December 31 2012, the Company’s accounts payable and accrued expenses consisted of the following:

Accrued interest	$	31
Accrued expenses	84
Total	$	115

6. Mortgage Note Payable

On October 25, 2012, the Company entered into a loan agreement with Wells Fargo Bank, N.A. for a $10,400 property mortgage loan secured by the Company’s real estate property. The loan matures on October 25, 2017 and may be extended for up to two years. The loan is an interest-only loan that bears interest at a variable rate equal to 1-month LIBOR plus 250 basis points, payable monthly. This is a non-recourse loan to the Company except for hazardous materials indemnification carve-outs provided by the ultimate parents of the Members. In addition, the ultimate parents of the Members provided a limited guarantee for recourse obligations for any loss, damage or liability suffered by Wells Fargo Bank, N.A. that arise from certain intentional acts committed by the Company such as, for example, fraud or intentional misrepresentations. Wells Fargo Bank, N.A. may accelerate the loan upon the occurrence of events of default. The Company is required to maintain a debt yield of 12% beginning with the calendar quarter of March 31, 2013. For the period from September 24, 2012 (date of inception) through December 31, 2012, total interest expense was $53. The Company estimates the fair value of the mortgage note payable as of December 31, 2012 to be $10,400.

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LIT/CPPT Lehigh Venture LLC

Notes to Consolidated Financial Statements

For the Period of September 24, 2012 (Date of Inception)

through December 31, 2012
(Dollars in thousands)

6. Mortgage Note Payable (continued)

In connection with the proceeds from this loan, the Company made a distribution of $5,098 to CPPT Lehigh and a distribution of $5,097 to LIT.

In addition, the Company entered into an interest rate swap agreement related to the mortgage note payable (See Note 7).

7. Derivative and Hedging Activities

By using derivative instruments, the Company limits its exposure to the effect of interest rate changes. Derivatives are primarily to fix the rate on debt based on floating-rate indices and manage the cost of borrowing obligations. The Company’s derivative instrument is an interest rate swap. The carrying value of the derivative is equal to its fair value. The fair value of the interest rate swap is determined by using the appropriate market-based yield curves to calculate and discount the expected cash flows. Cash flow models are based upon the appropriate fixed rate and variable rate components of the contracts, as applicable.

All derivatives are classified as Level 2 valuations as required by ASC 820, as the valuation includes inputs that are other-than-quoted prices in active markets and unobservable.

The notional amount of the swap is $10,400 and matures on October 25, 2017. Pursuant to the terms of the swap agreement, the Company pays a fixed rate of 1.10% and receives a floating rate of 1-month LIBOR. At December 31, 2012, the interest rate swap had a fair value liability on the balance sheet of $179. This amount was recognized as an unrealized loss on the consolidated statement of operations for the period from September 24, 2012 (date of inception) through December 31, 2012. During the period from September 24, 2012 (date of inception) through December 31, 2012, the Company incurred $17 in additional interest expense, which is included in interest expense in the accompanying consolidated statement of operations.

8. Rental Income

As of December 31, 2012, the Company’s property was leased to two tenants under operating leases. The first lease commenced in October 2011 and expires on February 28, 2019. The second lease commenced in December 2011 and expires on November 30, 2021. For the period from September 24, 2012 through December 31, 2012, the Company received a combined $346 of cash payments for these two leases.

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LIT/CPPT Lehigh Venture LLC

Notes to Consolidated Financial Statements

For the Period of September 24, 2012 (Date of Inception)

through December 31, 2012
(Dollars in thousands)

8. Rental Income (continued)

The expected future minimum base rents to be received from the tenants under leases in place as of December 31, 2012 are as follows:

2013	$	1,476
2014	1,508
2015	1,539
2016	1,570
2017	1,602
Thereafter	4,121
	$	11,816

9. Subsequent Events

Subsequent events have been evaluated by the Company through March 7, 2013, the issuance date of the financial statements. No significant subsequent events have been identified that would require disclosure in the notes to the consolidated financial statements.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on March 14, 2013.

	Clarion Partners Property Trust Inc.


Date: March 14, 2013	By:	/s/ Edward L. Carey
		Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Name	Title	Date

/s/ Edward L. Carey	Chief Executive Officer and Director	March 14, 2013
	(Principal Executive Officer)

/s/ Amy L. Boyle	Chief Financial Officer, Senior	March 14, 2013
	Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer)

/s/ Stephen B. Hansen	Chairman of the Board	March 14, 2013

/s/ Douglas L. DuMond	Director	March 14, 2013

/s/ Darlene T. DeRemer	Independent Director	March 14, 2013

/s/ Jerome W. Gates	Independent Director	March 14, 2013

/s/ John K. Haahr	Independent Director	March 14, 2013

/s/ Michael J. Havala	Independent Director	March 14, 2013

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EXHIBIT INDEX

Exhibit		Description
1.1		First Amended and Restated Dealer Manager Agreement, dated as of May 6, 2011, by and among the Company, CPT Real Estate LP and ING Funds Distributor, LLC (filed as Exhibit 1.1 to Pre-Effective Amendment No. 8, filed on May 13, 2011, to the Company’s Registration Statement on Form S-11, Commission File No. 333-164777, filed on February 8, 2010 (the “Registration Statement”) and incorporated herein by reference).

1.2		Form of Participating Broker-Dealer Agreement (filed as Exhibit 1.1 to Pre-Effective Amendment No. 8, filed on May 13, 2011, to the Company’s Registration Statement and incorporated herein by reference).

3.1		Third Articles of Amendment and Restatement (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 23, 2012 and incorporated herein by reference).

3.2		Articles Supplementary (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on January 31, 2013 and incorporated herein by reference).

3.3		Bylaws (filed as Exhibit 3.3 to the Registration Statement and incorporated herein by reference).

4.1		Form of Distribution Reinvestment Plan (filed as Appendix B to Post-Effective Amendment No. 2, filed on February 24, 2012, to the Company’s Registration Statement and incorporated herein by reference).

4.2		Form of Subscription Eligibility Form for Non-Retirement Accounts (filed as Exhibit 4.2 to Post-Effective Amendment No. 4, filed on April 11, 2012, to the Company’s Registration Statement and incorporated herein by reference).

4.3		Form of Subscription Eligibility Form for Retirement Accounts (filed as Exhibit 4.3 to Post-Effective Amendment No. 4, filed on April 11, 2012, to the Company’s Registration Statement and incorporated herein by reference).

10.1		Second Amended and Restated Advisory Agreement, dated May 6, 2011 and effective May 16, 2011, by and among the Company, CPT Real Estate LP and CPT Advisors LLC (filed as Exhibit 10.1 to Pre-Effective Amendment No. 8, filed on May 13, 2011, to the Company’s Registration Statement and incorporated herein by reference).

10.2		Second Amended and Restated Escrow Agreement, dated October 17, 2012, by and among the Company, ING Investments Distributor, LLC and BNY Mellon Investment Servicing (US) Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 23, 2012 and incorporated herein by reference).

10.3		Long-Term Incentive Plan (filed as Exhibit 10.3 to Pre-Effective Amendment No. 3, filed on October 1, 2010, to the Company’s Registration Statement and incorporated herein by reference).

10.4		Independent Director Compensation Plan (filed as Exhibit 10.4 to Pre-Effective Amendment No. 3, filed on October 1, 2010, to the Company’s Registration Statement and incorporated herein by reference).

10.5		Valuation Services Agreement, effective as of August 10, 2010, by and among Altus Group U.S. Inc. and Clarion Property Trust Inc. (filed as Exhibit 10.5 to Pre-Effective Amendment No. 3, filed on October 1, 2010, to the Company’s Registration Statement and incorporated herein by reference).

10.6		Form of Indemnification Agreement (filed as Exhibit 10.6 to Pre-Effective Amendment No. 3, filed on October 1, 2010, to the Company’s Registration Statement and incorporated herein by reference).

10.7		Form of Restricted Stock Award Certificate (filed as Exhibit 10.8 to Pre-Effective Amendment No. 6, filed on March 9, 2011, to the Company’s Registration Statement and incorporated herein by reference).

10.8		First Amendment to the Second Amended and Restated Advisory Agreement, dated and effective February 24, 2012, by and among the Company, CPT Real Estate LP and CPT Advisors LLC (filed as Exhibit 10.2 to Post-Effective Amendment No. 2, filed on February 24, 2012, to the Company’s Registration Statement and incorporated herein by reference).

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10.9		Subscription Agreement for the Purchase of Class W Common Stock, dated and effective as of October 17, 2012, by and between Clarion Partners CPPT Coinvestment, LLC and the Company (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 23, 2012 and incorporated herein by reference).

10.10		Limited Liability Company Agreement, dated and effective as of October 18, 2012, by and among CPPT Lehigh, LLC and LIT Industrial Limited Partnership, for the purchase of Lehigh Valley South (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 23, 2012 and incorporated herein by reference).

10.11		Purchase and Sale Agreement, dated and effective as of September 13, 2012, by and between SHR1 LLC and CPPT Darien LLC (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 6, 2012 and incorporated herein by reference).

10.12		Loan Agreement, dated and effective as of October 31, 2012, by and between CPPT Darien LLC and Sovereign Bank, N.A., with respect to the Darien Property (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 6, 2012 and incorporated herein by reference).

10.13		Promissory Note, dated and effective as of October 31, 2012, by and between CPPT Darien LLC and Sovereign Bank, N.A., with respect to the Darien Property (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on November 6, 2012 and incorporated herein by reference).

10.14		Expense Support Agreement, dated and effective as of November 5, 2012, by and between the Company and Clarion Partners, LLC (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 9, 2012 and incorporated herein by reference).

21.1		Subsidiaries of the Registrant (filed as Exhibit 21.1 to Post-Effective Amendment No.2, filed on February 24, 2012, to the Company’s Registration Statement and incorporated herein by reference).

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*		XBRL (eXtensible Business Reporting Language). The following materials, formatted in XBRL: (i) Consolidated Balance Sheets as of December 31, 2012 and 2011, (ii) Consolidated Statements of Operations for the year ended December 31, 2012, (iii) Consolidated Statement of Stockholder’s Equity for the Year ended December 31, 2012, (iv) Consolidated Statements of Cash Flows for the year ended December 31, 2012, and (v) notes to the consolidated financial statements as of December 31, 2012. As provided in Rule 406T of Regulation S-T, this information is 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.

Clarion Partners Property Trust Inc. 10-K