UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________

FORM 10-Q

_________________________________________________

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2014
	For the quarterly period ended September 30, 2014



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______ to _______

Commission file number 000-54248

__________________________________

SIGNATURE OFFICE REIT, INC.

(Exact name of registrant as specified in its charter)

__________________________________

Maryland		26-0500668
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
6200 The Corners Pkwy., Suite 250Norcross, Georgia		30092-3365
6200 The Corners Pkwy., Suite 100Norcross, Georgia		30092-3365
(Address of principal executive offices)		(Zip Code)
Registrant's telephone number, including area code		(770) ~~449~~243-~~7800~~4449

6200 The Corners Pkwy., Suite 250 Norcross, Georgia 30092-3365

N/A

(Former name, former address, and former fiscal year, if changed since last report)

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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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



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

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

Number of shares outstanding of the registrant's

only class of common stock, as of October 31, 2014: 20,473,024 shares

Table of Contents

FORM 10-Q

SIGNATURE OFFICE REIT, INC.

TABLE OF CONTENTS

			Page No.
PART I.	FINANCIAL INFORMATION
	Item 1.	Condensed Consolidated Financial Statements	4
		Consolidated Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013	5
		Consolidated Balance Sheets as of September 30, 2014 (unaudited) and December 31, 2013	5
		Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2014 (unaudited) and 2013 (unaudited)	6
		Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2014 (unaudited) and 2013 (unaudited)	6
		Consolidated Statements of Comprehensive Income (Loss) for the Three Months and Six Months Ended June 30, 2014 (unaudited) and 2013 (unaudited)	7
		Consolidated Statements of Comprehensive Income (Loss) for the Three Months and Nine Months Ended September 30, 2014 (unaudited) and 2013 (unaudited)	7
		Consolidated Statements of Stockholders' Equity for the Six Months Ended June 30, 2014 (unaudited) and 2013 (unaudited)	8
		Consolidated Statements of Stockholders' Equity for the Nine Months Ended September 30, 2014 (unaudited) and 2013 (unaudited)	8
		Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 (unaudited) and 2013 (unaudited)	9
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 (unaudited) and 2013 (unaudited)	9
		Condensed Notes to Consolidated Financial Statements (unaudited)	10
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3635
	Item 4.	Controls and Procedures	3635
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	3735
	Item 1A.	Risk Factors	3736
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3736
	Item 3.	Defaults Upon Senior Securities	3836
	Item 4.	Mine Safety Disclosures	3836
	Item 5.	Other Information	3836
	Item 6.	Exhibits	3936

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this quarterly report on Form 10-Q of Signature Office REIT, Inc. and subsidiaries ("Signature Office REIT," "we," "our" or "us") other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in those acts. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, including known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as "may," "will," "expect," "intend," "anticipate," "estimate," "believe," "continue," or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the U. S. Securities and Exchange Commission ("SEC"). We make no representations or warranties (express or implied) about the accuracy of any such forward-looking statements contained in this report, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Any such forward-looking statements are subject to risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual conditions, our ability to accurately anticipate results expressed in such forward-looking statements, including our ability to generate positive cash flow from operations, make distributions to stockholders, and maintain the value of our real estate properties, may be significantly hindered. See Item 1A in Signature Office REIT's Annual Report on Form 10-K for the year ended December 31, 2013, for a discussion of some of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements. The risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2013 are not the only ones we face, but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also harm our business.

Table of Contents


PART I.	FINANCIAL INFORMATION


ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The information furnished in the accompanying consolidated balance sheets and related consolidated statements of operations, comprehensive income (loss), stockholders' equity and cash flows reflect all normal and recurring adjustments that are, in management's opinion, necessary for a fair and consistent presentation of the aforementioned financial statements.

The accompanying consolidated financial statements should be read in conjunction with the condensed notes to Signature Office REIT's financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations included in this quarterly report on Form 10-Q and with Signature Office REIT's Annual Report on Form 10-K for the year ended December 31, 2013. Signature Office REIT's results of operations for the three months and ~~six~~nine months ended ~~June~~September 30, 2014 are not necessarily indicative of the operating results expected for the full year.

Table of Contents

SIGNATURE OFFICE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	June 30, 2014			December 31, 2013
	September 30, 2014			December 31, 2013
Assets:
Real estate assets, at cost:
Land	$	55,733,041		$	55,733,041
Buildings and improvements, less accumulated depreciation of $43,503,615 and $34,488,062 as of June 30, 2014 and December 31, 2013, respectively	397,206,394			406,067,891
Buildings and improvements, less accumulated depreciation of $48,138,762 and $34,488,062 as of September 30, 2014 and December 31, 2013, respectively	392,568,980			406,067,891
Intangible lease assets, less accumulated amortization of $24,404,724 and $19,294,426 as of June 30, 2014 and December 31, 2013, respectively	41,592,955			46,734,316
Intangible lease assets, less accumulated amortization of $26,869,577 and $19,294,426 as of September 30, 2014 and December 31, 2013, respectively	38,883,455			46,734,316
Construction in progress	438,~~194~~555			—
Total real estate assets	~~494~~487,~~575~~194,~~584~~031			508,535,248
Cash and cash equivalents	76,~~669~~305,~~227~~850			7,394,979
Tenant receivables, net of allowance for doubtful accounts of $85,099 and $63,736 as ofJune 30, 2014 and December 31, 2013, respectively	13,593,548			13,385,314
Tenant receivables, net of allowance for doubtful accounts of $127,407 and $63,736 as of September 30, 2014 and December 31, 2013, respectively	14,169,494			13,385,314
Prepaid expenses and other assets	~~951~~1,~~623~~938,934			1,641,381
Deferred financing costs, less accumulated amortization of $3,787,359 and $3,485,202 as ofJune 30, 2014 and December 31, 2013, respectively	1,877,477			2,479,378
Deferred financing costs, less accumulated amortization of $4,063,841 and $3,485,202 as of September 30, 2014 and December 31, 2013, respectively	1,600,995			2,479,378
Intangible lease origination costs, less accumulated amortization of $8,413,289 and $6,584,549 as of June 30, 2014 and December 31, 2013, respectively	18,529,217			20,357,957
Intangible lease origination costs, less accumulated amortization of $9,413,589 and $6,584,549 as of September 30, 2014 and December 31, 2013, respectively	17,510,894			20,357,957
Deferred lease costs, less accumulated amortization of $1,687,603 and $1,197,248 as of June 30, 2014 and December 31, 2013, respectively	6,214,755			6,745,189
Deferred lease costs, less accumulated amortization of $1,888,043 and $1,197,248 as of September 30, 2014 and December 31, 2013, respectively	6,390,862			6,745,189
Investments in development authority bonds	115,000,000			115,000,000
Total assets	$	~~658~~650,~~411~~111,~~431~~060		$	675,539,446
Liabilities:
Line of credit	$	6259,~~900~~000,000		$	42,500,000
Notes payable	100,000,000			124,900,000
Accounts payable and accrued expenses	78,~~361~~278,~~031~~569			8,091,277
Accrued capital expenditures and deferred lease costs	~~103~~530,~~199~~904			487,825
Deferred income	6,~~090~~257,~~915~~853			5,919,573
Intangible lease liabilities, less accumulated amortization of $666,735 and $493,613 as of June 30, 2014 and December 31, 2013, respectively	1,131,639			1,304,761
Intangible lease liabilities, less accumulated amortization of $753,295 and $493,613 as of September 30, 2014 and December 31, 2013, respectively	1,045,079			1,304,761
Obligations under capital leases	115,000,000			115,000,000
Total liabilities	~~292~~290,~~586~~112,~~784~~405			298,203,436
Commitments and Contingencies (Note 5)
Redeemable Common Stock	—			3,988,217
Stockholders' Equity:
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 20,473,024 and 20,443,176 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively	204,730			204,432
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 20,473,024 and 20,443,176 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively	204,730			204,432
Additional paid-in capital	453,828,351			452,981,513
Cumulative distributions in excess of earnings	(8894,~~439~~664,~~459~~799		)	(76,492,911		)
Redeemable common stock	—			(3,988,217		)
Accumulated other comprehensive income	~~231~~630,~~025~~373			642,976
Total stockholders' equity	~~365~~359,~~824~~998,~~647~~655			373,347,793
Total liabilities, redeemable common stock and stockholders' equity	$	~~658~~650,~~411~~111,~~431~~060		$	675,539,446

See accompanying notes.

Table of Contents

SIGNATURE OFFICE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	(Unaudited)						(Unaudited)
	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2014			2013			2014			2013
Revenues:
Rental income	$	13,~~173~~108,~~677~~131		$	13,~~284~~219,~~921~~585		$	2639,~~523~~632,~~945~~076		$	2639,~~548~~768,~~515~~100
Tenant reimbursements	5,~~158~~722,~~063~~637			3,~~859~~763,~~891~~919			1016,~~319~~042,~~602~~239			711,~~644~~408,~~953~~872
Other property income	~~319~~730,~~973~~829			—32,755			~~349~~1,~~141~~079,970			—32,755
	18,651,713			17,144,812			37,192,688			34,193,468
	19,561,597			17,016,259			56,754,285			51,209,727
Expenses:
Property operating costs	6,~~193~~576,~~327~~340			5,~~635~~711,~~169~~878			1219,~~597~~173,~~077~~417			1116,~~244~~955,~~021~~899
Asset and property management fees:
Related-party	—			1,~~220~~513,~~098~~259			—			23,~~468~~981,~~183~~442
Other	~~242~~266,~~450~~265			~~334~~256,~~225~~330			~~517~~783,~~397~~662			~~497~~754,~~829~~159
Depreciation	4,~~569~~686,~~573~~089			4,~~431~~508,~~200~~784			913,~~017~~703,~~743~~832			813,~~730~~239,~~620~~404
Amortization	23,~~987~~068,~~482~~347			2,~~738~~854,~~498~~382			58,~~746~~814,~~580~~927			58,~~569~~423,~~348~~730
General and administrative	12,~~565~~146,~~255~~489			1477,~~278,578~~548			35,~~144~~290,~~383~~872			23,~~632~~109,~~131~~679
Acquisition fees and expenses	—			~~673~~74,~~233~~930			—			1,~~523~~598,~~127~~057
	15,558,087			16,311,001			31,023,180			32,665,259
	16,743,530			15,397,111			47,766,710			48,062,370
Real estate operating income	32,~~093~~818,~~626~~067			~~833~~1,~~811~~619,148			68,~~169~~987,~~508~~575			13,~~528~~147,~~209~~357
Other income (expense):
Interest expense	(3,~~095~~065,~~550~~581		)	(3,~~077~~042,~~691~~384		)	(69,~~186~~252,~~702~~283		)	(69,~~285~~328,~~808~~192		)
Interest and other income	1,~~725~~757,~~209~~100			1,725,~~122~~136			35,~~455~~212,~~366~~466			35,~~450~~175,~~220~~356
	(1,370,341		)	(1,352,569		)	(2,731,336		)	(2,835,588		)
	(1,308,481		)	(1,317,248		)	(4,039,817		)	(4,152,836		)
Income (loss) before income tax expense	1,~~723~~509,~~285~~586			~~(518~~301,~~758~~900		)	34,~~438~~947,~~172~~758			(1,~~307~~005,~~379~~479		)
Income tax expense	(2657,~~075~~541		)	(4757,~~812~~223		)	(61118,~~143~~684		)	(99156,~~417~~640		)
Net income (loss)	$	1,~~697~~452,~~210~~045		$	~~(566~~244,~~570~~677	)	$	34,~~377~~829,~~029~~074		$	(1,~~406~~162,~~796~~119	)
Per-share net income (loss) – basic and diluted	$	0.0807		$	(0.0301	)	$	0.1724		$	(0.0706	)
Weighted-average common shares outstanding – basic and diluted	20,~~477~~473,~~539~~024			1920,~~859~~416,~~741~~703			20,~~456~~462,~~567~~113			19,~~067~~522,~~673~~291

See accompanying notes.

Table of Contents

SIGNATURE OFFICE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	(Unaudited)						(Unaudited)
	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2014			2013			2014			2013
Net income (loss)	$	1,~~697~~452,~~210~~045		$	~~(566~~244,~~570~~677	)	$	34,~~377~~829,~~029~~074		$	(1,~~406~~162,~~796~~119	)
Other comprehensive income (loss):
Market value adjustment to interest rate swap	~~(406~~399,~~943~~348		)	1(523,~~246,126~~598		)	(~~411~~12,~~951~~603		)	1816,~~340,357~~759
Comprehensive income (loss)	$	1,~~290~~851,~~267~~393		$	~~679~~(278,~~556~~921	)	$	24,~~965~~816,~~078~~471		$	(66345,~~439~~360	)

See accompanying notes.

Table of Contents

SIGNATURE OFFICE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2014 AND 2013 (UNAUDITED)

	Common Stock					AdditionalPaid-InCapital			Cumulative Distributions in Excess of Earnings			Redeemable Common Stock			Accumulated Other Comprehensive Income (Loss)			TotalStockholders'Equity
	Shares		Amount
Balance, December 31, 2013	20,443,176		$	204,432		$	452,981,513		$	(76,492,911	)	$	(3,988,217	)	$	642,976		$	373,347,793
Issuance of common stock	157,299		1,573			3,734,285			—			—			—			3,735,858
Redemption of common stock	(127,451	)	(1,275		)	(2,887,350		)	—			—			—			(2,888,625		)
Decrease in redeemable common stock	—		—			—			—			3,988,217			—			3,988,217
Distributions to common stockholders ($0.75 per share)	—		—			—			(15,323,577		)	—			—			(15,323,577		)
Distributions to common stockholders ($1.13 per share)	—		—			—			(23,000,962		)	—			—			(23,000,962		)
Other offering costs	—		—			(97		)	—			—			—			(97		)
Net income	—		—			—			34,~~377~~829,~~029~~074			—			—			34,~~377~~829,~~029~~074
Market value adjustment to interest rate swap	—		—			—			—			—			(~~411~~12,~~951~~603		)	(~~411~~12,~~951~~603		)
Balance, June 30, 2014	20,473,024		$	204,730		$	453,828,351		$	(88,439,459	)	$	—		$	231,025		$	365,824,647
Balance, September 30, 2014	20,473,024		$	204,730		$	453,828,351		$	(94,664,799	)	$	—		$	630,373		$	359,998,655

	Common Stock					AdditionalPaid-InCapital			Cumulative Distributions in Excess of Earnings			Redeemable Common Stock			Accumulated Other Comprehensive Income (Loss)			TotalStockholders'Equity
	Shares		Amount
Balance, December 31, 2012	17,548,812		$	175,488		$	388,347,427		$	(47,246,703	)	$	(5,080,308	)	$	(353,515	)	$	335,842,389
Issuance of common stock	3,~~010~~168,~~871~~620		3031,~~109~~686			7478,~~885~~630,~~195~~149			—			—			—			7478,~~915~~661,~~304~~835
Redemption of common stock	(68334,~~036~~228	)	(~~680~~3,342		)	(17,~~544~~593,~~977~~370		)	—			—			—			(17,~~545~~596,~~657~~712		)
Increase in redeemable common stock	—		—			—			—			(2,643,154		)	—			(2,643,154		)
Decrease in redeemable common stock	—		—			—			—			353,483			—			353,483
Distributions to common stockholders ($0.68 per share)	—		—			—			(13,010,748		)	—			—			(13,010,748		)
Distributions to common stockholders ($1.06 per share)	—		—			—			(20,635,152		)	—			—			(20,635,152		)
Commissions and discounts on stock sales and related dealer-manager fees	—		—			(6,473,522		)	—			—			—			(6,473,522		)
Other offering costs	—		—			(1,~~458~~457,~~031~~810		)	—			—			—			(1,~~458~~457,~~031~~810		)
Net loss	—		—			—			(1,~~406~~162,~~796~~119		)	—			—			(1,~~406~~162,~~796~~119		)
Market value adjustment to interest rate swap	—		—			—			—			—			1816,~~340,357~~759			1816,~~340,357~~759
Balance, June 30, 2013	20,491,647		$	204,917		$	453,756,092		$	(61,664,247	)	$	(7,723,462	)	$	986,842		$	385,560,142
Balance, September 30, 2013	20,383,204		$	203,832		$	451,452,874		$	(69,043,974	)	$	(4,726,825	)	$	463,244		$	378,349,151

See accompanying notes.

Table of Contents

SIGNATURE OFFICE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	(Unaudited)
	Six Months Ended
	Nine Months Ended
	June 30,
	September 30,
	2014			2013
Cash Flows from Operating Activities:
Net income (loss)	$	34,~~377~~829,~~029~~074		$	(1,~~406~~162,~~796~~119	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Straight-line rental income	(~~878~~957,~~301~~204		)	(35,~~987~~930,~~333~~357		)
Depreciation	913,~~017~~703,~~743~~832			813,~~730~~239,~~620~~404
Amortization	711,~~287~~176,~~334~~418			610,~~987~~545,~~908~~223
Noncash interest expense	~~601~~878,~~901~~383			~~602~~904,~~964~~446
Changes in assets and liabilities, net of acquisitions:
Decrease (increase) in other tenant receivables	448,942			(641,419		)
Increase in other tenant receivables	(48,101		)	(895,825		)
Decrease in prepaid expenses and other assets	275,617			47,052
Increase in prepaid expenses and other assets	(313,822		)	(808,543		)
Decrease in accounts payable and accrued expenses	(730,246		)	(1,476,134		)
Increase (decrease) in accounts payable and accrued expenses	187,292			(763,188		)
Decrease in due to affiliates	—			(412,~~959~~966		)
Increase in deferred income	~~171~~338,~~342~~280			~~234~~850,~~375~~805
Net cash provided by operating activities	1929,~~571~~794,~~361~~152			815,~~678~~566,~~278~~880
Cash Flows from Investing Activities:
Additions to real estate assets and other capital expenditures	(~~257~~266,~~912~~695		)	(8,~~486~~878,~~854~~354		)
Deferred lease costs paid	(62,760		)	(13,~~284~~882,~~711~~830		)
Net cash used in investing activities	(~~320~~329,~~672~~455		)	(912,~~771~~761,~~565~~184		)
Cash Flows from Financing Activities:
Proceeds from lines of credit and notes payable	2530,~~650~~150,000			713,500,000
Repayments of lines of credit and notes payable	(3038,~~150~~550,000		)	(6568,~~500~~000,000		)
Issuance of common stock	3,735,858			7478,~~876~~622,~~287~~818
Redemptions of common stock	(2,888,625		)	(17,~~627~~678,~~474~~529		)
Distributions paid to stockholders	(1119,~~587~~265,~~719~~104		)	(711,~~312~~190,~~692~~563		)
Distributions paid to stockholders and reinvested in shares of our common stock	(3,735,858		)	(610,~~773~~519,~~170~~703		)
Commissions on stock sales and related dealer-manager fees paid	—			(6,~~642~~648,~~331~~460		)
Other offering costs paid	(97		)	(1,546,~~413~~192		)
Net cash used in financing activities	(1830,~~976~~553,~~441~~826		)	(713,~~025~~460,~~793~~629		)
Net change in cash and cash equivalents	~~274~~(1,~~248~~089,129		)	(810,~~119~~654,~~080~~933		)
Cash and cash equivalents, beginning of period	7,394,979			15,955,896
Cash and cash equivalents, end of period	$	76,~~669~~305,~~227~~850		$	75,~~836~~300,~~816~~963

See accompanying notes.

Table of Contents

SIGNATURE OFFICE REIT, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~JUNE~~SEPTEMBER 30, 2014 (unaudited)


1.	Organization

Signature Office REIT, Inc. ("Signature Office REIT") is a Maryland corporation that has elected to be taxed as a real estate investment trust ("REIT") for federal income tax purposes and engages in the acquisition and ownership of commercial real estate properties. Signature Office REIT's stock is not listed on a national securities exchange. Signature Office REIT was formed in 2007 and commenced operations in 2010. Substantially all of Signature Office REIT's business is conducted through Signature Office Operating Partnership, L.P. ("Signature Office OP"), a Delaware limited partnership. Signature Office REIT is the sole general partner of Signature Office OP. Signature Office Income Holdings, LLC ("Signature Office Holdings"), a Delaware limited liability company, is the sole limited partner of Signature Office OP. Signature Office REIT owns 100% of the interests of Signature Office Holdings and possesses full legal control and authority over the operations of Signature Office OP and Signature Office Holdings. References to Signature Office REIT herein shall include Signature Office REIT and its subsidiaries, including Signature Office OP, and Signature Office Holdings, unless stated otherwise.

Signature Office REIT operates a diversified portfolio of commercial real estate consisting of high-quality, income-generating office properties located in the United States primarily leased to creditworthy companies. As of ~~June~~September 30, 2014, Signature Office REIT owned 13 office properties consisting of approximately 2.6 million square feet. As of ~~June~~September 30, 2014, these office properties were 9998.39% leased.

From June 2010 through June 2013, Signature Office REIT raised equity proceeds through its initial public offering (the "Initial Offering") of 230 million shares of common stock, of which 30 million shares were offered through a distribution reinvestment plan ("DRP"). Signature Office REIT terminated the primary portion of the Initial Offering on June 12, 2013. Signature Office REIT continued to raise equity proceeds through the DRP through March 2014, after which the DRP was terminated. Signature Office REIT raised aggregate net offering proceeds of approximately $460.3 million, including net offering proceeds from the DRP of approximately $29.5 million, substantially all of which have been invested in real properties and related assets.

From its inception through December 31, 2013, Signature Office REIT operated as an externally advised REIT pursuant to an advisory agreement, under which Wells Core Office Income REIT Advisory Services, LLC (the "Advisor"), a subsidiary of Wells Real Estate Funds, Inc. ("WREF"), performed certain key functions on behalf of Signature Office REIT, including, among others, the investment of capital proceeds and management of day-to-day operations. The advisory agreement, as amended and restated (the "Revised Advisory Agreement"), was effective beginning on June 11, 2013 and replaced the previous agreement between Signature Office REIT and the Advisor in effect through June 10, 2013 (the "Original Advisory Agreement"). The Advisor contracted with Wells Capital, Inc. ("Wells Capital") and Wells Management Company, Inc. ("Wells Management"), also wholly owned subsidiaries of WREF, to engage their employees to carry out, among others, the key functions enumerated above on behalf of Signature Office REIT. On December 31, 2013, Signature Office REIT terminated the Revised Advisory Agreement and became a self-managed company on January 1, 2014 (the "Self-Management Transition Date"). As a result, management of day-to-day operations ~~(except for certain investor services)~~ is now performed by employees of Signature Office REIT. Contemporaneous with the termination of the Revised Advisory Agreement, Signature Office REIT entered into a Transition Services Agreement (the "TSA") with WREF for the period from January 1, 2014 through June 30, 2014 pursuant to which WREF and its affiliates provided certain consulting, support and transitional services (as set forth in the TSA) to Signature Office REIT at its direction in order to facilitate its successful transition to self-management. On June 30, 2014, Signature Office REIT entered into the first amendment to the TSA with WREF (the "TSA Amendment"), inwhich ~~order~~extended ~~to extend~~ the expiration date of the TSA as it ~~relates~~related to certain transfer agent and client services functions from June 30, 2014 to September 30, 2014. For additional details about Signature Office REIT's transition to self-management and the TSA, please refer to Note 8.

Signature Office REIT's stock is not listed on a national securities exchange. However, Signature Office REIT's charter requires that in the event that Signature Office REIT's stock is not listed on a national securities exchange by July 31, 2020, Signature Office REIT must either seek stockholder approval to extend or amend this listing deadline or seek stockholder approval to begin liquidating investments and distributing the resulting proceeds to the stockholders. If

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Signature Office REIT seeks stockholder approval to extend or amend this listing date and does not obtain it, Signature Office REIT would then be required to seek stockholder approval to liquidate. In this circumstance, if Signature Office REIT seeks and does not obtain approval to liquidate, Signature Office REIT would not be required to list or liquidate and could continue to operate indefinitely as an unlisted company.


2.	Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The consolidated financial statements of Signature Office REIT have been prepared in accordance with the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. In the opinion of management, the statements for these unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Results for these interim periods are not necessarily indicative of a full year's results.

Signature Office REIT owns a controlling financial interest in Signature Office OP and Signature Office Holdings and, accordingly, includes the accounts of these entities in its consolidated financial statements. The financial statements of Signature Office OP and Signature Office Holdings are prepared using accounting policies consistent with those used by Signature Office REIT. All intercompany balances and transactions have been eliminated in consolidation.

For further information, refer to the financial statements and footnotes included in Signature Office REIT's Annual Report on Form 10-K for the year ended December 31, 2013.

Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("ASU 2014-08"). ASU 2014-08 changes the criteria for transactions that qualify to be reported as discontinued operations, and enhances disclosures for transactions that meet the new criteria in this area. ASU 2014-08 limits discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on the entity’s operations and financial results. ASU 2014-08 requires expanded disclosures for discontinued operations including more information about the assets, liabilities, revenues, and expenses of discontinued operations. ASU 2014-08 also requires an entity to disclose the pretax profit or loss of an individually significant component of an entity that does not qualify for discontinued operations reporting. ASU 2014-08 is effective for the period beginning on January 1, 2015; however, early adoption is permitted. Signature Office REIT adopted the amendments in ASU 2014-08 effective January 1, 2014; however, Signature Office REIT did not dispose of any real estate assets during the ~~six~~nine months ended ~~June~~September 30, 2014. The adoption of ASU 2014-08 has not had a material impact on Signature Office REIT's financial statements or disclosures.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 changes the criteria for the recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services using a five-step determination process. The five-step process includes (i) identifying the contract with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the performance obligations, and (v) recognizing revenue as the entity satisfies a performance obligation. Lease contracts are specifically excluded from ASU 2014-09; however, disposals of real estate assets are subject to the derecognition requirements included in ASU 2014-09. ASU 2014-09 will be effective for Signature Office REIT for the period beginning on January 1, 2017, and early adoption is not permitted. Signature Office REIT is currently evaluating the impact that the adoption of ASU 2014-09 may have on its financial statements or disclosures.

Fair Value Measurements

Signature Office REIT estimates the fair value of its assets and liabilities (where currently required under GAAP) consistent with the provisions of the accounting standard for fair value measurements and disclosures. Under this guidance, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. While various techniques and assumptions can be used to estimate fair value depending on the nature of the asset or liability, the accounting standard for fair

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~~Fair~~value ~~Value~~measurements ~~Measurements~~and disclosures provides the following fair value technique parameters and hierarchy, depending upon availability:

Level 1 - Assets or liabilities valued based on quoted prices in active markets for identical assets or liabilities.

Level 2 - Assets or liabilities valued based on observable market data for similar instruments.

Level 3 - Assets or liabilities for which significant valuation assumptions are not readily observable in the market; instruments valued based on the best available data, some of which is internally developed, and considers risk premiums that a market participant would require.

Intangible Assets and Liabilities Arising from In-Place Leases where Signature Office REIT is the Lessor

As of ~~June~~September 30, 2014 and December 31, 2013, Signature Office REIT had the following gross intangible in-place lease assets and liabilities:

	As of June 30, 2014
	As of September 30, 2014
	Intangible Lease Assets						Intangible Lease Origination Costs			Intangible Below-Market In-Place Lease Liabilities
	Above-Market In-PlaceLease Assets			Absorption Period Costs
Gross	$	13,~~875~~782,~~997~~682		$	5251,~~121~~970,~~682~~350		$	26,~~942~~924,~~506~~483		$	1,798,374
Accumulated Amortization	(67,~~494~~084,~~396~~570		)	(1719,~~910~~785,~~328~~007		)	(89,413,~~289~~589		)	(~~666~~753,~~735~~295		)
Net	$	76,~~381~~698,~~601~~112		$	3432,~~211~~185,~~354~~343		$	1817,~~529~~510,~~217~~894		$	1,~~131~~045,~~639~~079
	As of December 31, 2013
	Intangible Lease Assets						Intangible Lease Origination Costs			Intangible Below-Market In-Place Lease Liabilities
	Above-Market In-PlaceLease Assets			Absorption Period Costs
Gross	$	13,875,997		$	52,152,745		$	26,942,506		$	1,798,374
Accumulated Amortization	(5,222,847		)	(14,071,579		)	(6,584,549		)	(493,613		)
Net	$	8,653,150		$	38,081,166		$	20,357,957		$	1,304,761

For the three months and nine months ended September 30, 2014 and 2013, Signature Office REIT recognized the following amortization of intangible lease assets and liabilities:



	Intangible Lease Assets				Intangible Lease Origination Costs		Intangible Below-Market In-Place Lease Liabilities
	Above-Market In-Place Lease Assets		Absorption Period Costs		Intangible Lease Origination Costs		Intangible Below-Market In-Place Lease Liabilities
For the three months ended September 30:
2014	$	683,489	$	2,026,011	$	1,018,323	$	86,560
2013	$	583,662	$	1,936,998	$	902,004	$	86,560

For the nine months ended September 30:
2014	$	1,955,038	$	5,895,823	$	2,847,063	$	259,682
2013	$	1,750,987	$	5,732,413	$	2,646,956	$	259,682

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~~For~~The ~~the~~remaining ~~three~~net ~~months~~intangible lease assets and ~~six~~liabilities ~~months~~as ~~ended~~of ~~June~~September 30, 2014 ~~and~~will ~~2013,~~be ~~Signature~~amortized ~~Office~~as ~~REIT recognized the following amortization of intangible lease assets and liabilities~~follows:

	Intangible Lease Assets				Intangible Lease Origination Costs		Intangible Below-Market In-Place Lease Liabilities
	Above-Market In-PlaceLease Assets		Absorption Period Costs
For the three months ended June 30:
For the three months ending December 31, 2014	$	662,615	$	2,037,283	$	1,107,993	$	86,561
2014	$	686,382	$	2,009,372	$	954,096	$	86,561
For the year ending December 31:
2013	$	583,663	$	1,851,190	$	872,448	$	86,561
2015	2,113,990		6,986,793		3,295,862		343,758
For the six months ended June 30:
2016	2,073,744		6,561,683		3,132,357		115,146
2014	$	1,271,549	$	3,869,812	$	1,828,740	$	173,122
2017	1,029,770		5,142,067		2,665,043		115,146
2013	$	1,167,325	$	3,795,415	$	1,744,952	$	173,122
2018	565,245		4,323,063		2,295,336		115,146
2019	252,748		2,694,522		1,588,231		99,059
Thereafter	—		4,439,932		3,426,072		170,263
Total	$	6,698,112	$	32,185,343	$	17,510,894	$	1,045,079
Weighted-Average Amortization Period	3 years		6 years		6 years		5 years

The remaining net intangible lease assets and liabilities as of June 30, 2014 will be amortized as follows:

	Intangible Lease Assets				Intangible Lease Origination Costs		Intangible Below-Market In-Place Lease Liabilities
	Above-Market In-PlaceLease Assets		Absorption Period Costs
For the six months ending December 31, 2014	$	1,346,103	$	3,965,287	$	1,898,532	$	173,121
For the year ending December 31:
2015	2,113,990		6,988,529		3,299,892		343,758
2016	2,073,744		6,584,788		3,185,971		115,146
2017	1,029,770		5,165,172		2,718,658		115,146
2018	565,245		4,346,168		2,348,950		115,146
2019	252,749		2,717,627		1,642,204		99,059
Thereafter	—		4,443,783		3,435,010		170,263
Total	$	7,381,601	$	34,211,354	$	18,529,217	$	1,131,639
Weighted-Average Amortization Period	4 years		6 years		7 years		5 years

Investments in Development Authority Bonds and Obligations Under Capital Leases

In connection with the acquisition of the 64 & 66 Perimeter Center Buildings, Signature Office REIT has assumed investments in development authority bonds and corresponding obligations under capital leases of land and buildings totaling $115.0 million. The local development authority issued bonds to a developer to finance the renovation of these buildings, which were then leased back to the developer under a capital lease. This structure enabled the developer to receive property tax abatements over the concurrent terms of the development authority bonds and capital leases. The remaining property tax abatement benefits transferred to Signature Office REIT upon assumption of the bonds and corresponding capital leases at acquisition. The development authority bonds and the obligations under the capital leases were both recorded at their net present values at the time of acquisition, which Signature Office REIT believes approximate fair value. The related amounts of interest income and expense are recognized as earned in equal amounts and, accordingly, do not impact net income (loss).

Fair Value of Debt Instruments

Signature Office REIT applied the provisions of the accounting standard for fair value measurements and disclosures in estimations of fair value of its debt instruments based on Level 2 assumptions. The fair values of its debt instruments were based on discounted cash flow analysis using the current market borrowing rates for similar types of borrowing arrangements as of the measurement dates (see Note 3 for additional information). The discounted cash flow method of assessing fair value results in a general approximation of value, and such value may never actually be realized.

Redeemable Common Stock

Under Signature Office REIT's share redemption program, as amended (the "Amended SRP"), the decision to honor redemptions, subject to certain plan requirements and limitations, fell outside the control of Signature Office REIT. Prior to the termination of the Amended SRP effective April 30, 2014, Signature Office REIT recorded redeemable common stock in the temporary equity section of its consolidated balance sheet. Signature Office REIT's Amended SRP required Signature Office REIT to honor redemption requests made within two years following a stockholder's death, qualifying disability or qualification for federal assistance in connection with the payment of costs of confinement to a long-term care facility, of a stockholder, subject to certain limitations. Signature Office REIT's capacity to honor redemptions was limited to the lesser of (i) the amount of net proceeds raised under the DRP during the immediately preceding 12-month period, or (ii) 5% of the weighted-average numbers of shares outstanding in the immediately preceding 12-month period. Accordingly, as of December 31, 2013, redeemable common stock was measured at an amount equal to the net proceeds raised under the DRP less amounts redeemed during the immediately preceding 12-

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~~arrangements~~month asperiod. ofAs ~~the~~a ~~measurement~~result ~~dates~~of ~~(see~~the ~~Note~~termination 3of ~~for~~the ~~additional~~Amended ~~information).~~SRP, ~~The~~effective ~~discounted~~April ~~cash~~30, ~~flow~~2014, ~~method~~no ofamounts ~~assessing~~were ~~fair~~recorded ~~value~~as ~~results~~temporary inequity aas ~~general approximation~~ of ~~value~~September 30, ~~and~~2014. ~~such~~See ~~value~~Note ~~may~~6 ~~never~~for ~~actually~~additional ~~be realized~~information.

Redeemable Common Stock

Interest Rate Swaps

Signature Office REIT has entered into an interest rate swap contract (see Note 4 for additional information), and may enter into future interest rate swap contracts, to hedge its exposure to changing interest rates on variable rate debt instruments. Signature Office REIT does not enter into derivative or interest rate transactions for speculative purposes; however, certain of its derivatives may not qualify for hedge accounting treatment. Signature Office REIT records the fair value of its interest rate swap either as prepaid expenses and other assets or as accounts payable and accrued expenses. Changes in the fair value of the effective portion of interest rate swaps that are designated as cash flow hedges are recorded as other comprehensive income (loss), while changes in the fair value of the ineffective portion of a hedge, if any, is recognized in earnings. Changes in the fair value of interest rate swaps that do not qualify for hedge accounting treatment, if any, are recorded as gain (loss) on interest rate swaps. Amounts received or paid under interest rate swap agreements are recorded as interest expense for contracts that qualify for hedge accounting treatment and as gain (loss) on interest rate swaps for contracts that do not qualify for hedge accounting treatment.

Signature Office REIT applied the provisions of the accounting standard for fair value measurements and disclosures in recording its interest rate swap at fair value. The fair value of the interest rate swap, classified under Level 2, was determined using a third-party proprietary model that is based on prevailing market data for contracts with matching durations, current and anticipated LIBOR information, and reasonable estimates about relevant future market conditions.

Income Taxes

Signature Office REIT has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), and has operated as such beginning with its taxable year ended December 31, 2010. To qualify as a REIT, Signature Office REIT must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its REIT taxable income, as defined by the Code, to its stockholders. As a REIT, Signature Office REIT generally will not be subject to federal income tax on taxable income it distributes to stockholders. If Signature Office REIT fails to qualify as a REIT in any taxable year, it will then be subject to federal and state income taxes on its 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 during which qualification is lost unless the Internal Revenue Service ("IRS") grants Signature Office REIT relief under certain statutory provisions.

Signature Office REIT may perform certain additional, noncustomary services for tenants of its buildings through taxable REIT subsidiaries; however, any earnings related to such services are subject to federal and state income taxes. In addition, for Signature Office REIT to continue to qualify as a REIT, Signature Office REIT must limit its investments in taxable REIT subsidiaries to 25% of the value of the total assets of Signature Office REIT. On December 13, 2011, Signature Office OP formed Wells Core REIT TRS, LLC ("TRS"), a wholly owned subsidiary organized as a Delaware corporation. Through December 31, 2013, Signature Office REIT elected to treat TRS as a taxable REIT subsidiary. On December 9, 2013, Signature Office REIT elected to treat TRS as a disregarded entity, effective January 1, 2014.

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Signature Office OP formed Wells Core REIT TRS, LLC ("TRS"), a wholly owned subsidiary organized as a Delaware corporation. Through December 31, 2013, Signature Office REIT elected to treat TRS as a taxable REIT subsidiary. On December 9, 2013, Signature Office REIT elected to treat TRS as a disregarded entity, effective January 1, 2014.

Deferred tax assets and liabilities represent temporary differences between the financial reporting basis and the tax basis of assets and liabilities based on the enacted rates expected to be in effect when the temporary differences reverse. Deferred tax expense or benefits are recognized in the financial statements according to the changes in deferred tax assets or liabilities between years. Valuation allowances are established to reduce deferred tax assets when it becomes more likely than not that such assets, or portions thereof, will not be realized. No provision for federal income taxes has been made in the accompanying consolidated financial statements, other than the provision relating to TRS, as Signature Office REIT has made distributions in excess of taxable income for the periods presented.

Signature Office REIT is subject to certain state and local taxes related to property operations in certain locations, which have been provided for in the accompanying consolidated financial statements. Signature Office REIT records interest and penalties related to uncertain tax positions as general and administrative expense in the accompanying consolidated statements of operations.

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3. Line of Credit and Notes Payable

As of ~~June~~September 30, 2014 and December 31, 2013, Signature Office REIT had the following indebtedness outstanding:

	Outstanding Balance as of
Facility	~~June~~September 30, 2014		December 31, 2013
Signature Revolving Facility	$	6259,~~900~~000,000	$	42,500,000
Signature Term Loan	100,000,000		100,000,000
Technology Way Loan	—		24,900,000
Total indebtedness	$	~~162~~159,~~900~~000,000	$	167,400,000

Signature Unsecured Debt Facility

Signature Office REIT is a party to an unsecured credit facility (the "Signature Unsecured Debt Facility") with a syndicate of banks led by Regions Bank ("Regions"), U.S. Bank National Association ("U.S. Bank"), and JPMorgan Chase Bank, N.A. ("JPMorgan"). Under the Signature Unsecured Debt Facility, Signature Office REIT may borrow up to a total of $300 million (the "Facility Amount"), subject to availability. The Facility Amount is comprised of a revolving credit facility in an amount up to $200 million (the "Signature Revolving Facility") and a term loan facility in an amount up to $100 million (the "Signature Term Loan"). The Signature Revolving Facility and the Signature Term Loan will be due and payable in full on September 26, 2015 and September 26, 2017, respectively,. Signature Office REIT has the option to extend the Signature Revolving Facility for two periods of 12 months each subject to satisfaction of certain conditions, including (i) no existence of default, (ii) no material adverse effect has occurred in the financial condition of Signature Office REIT, (iii) compliance with covenants set forth in the Signature Unsecured Debt Facility, and (iv) payment of an extension fee equal to 0.25% of the amount committed under the Signature Revolving Facility. Signature Office REIT intends to either refinance the Signature Unsecured Debt Facility prior to the maturity of the Signature Revolving Facility in September 2015 or to exercise the first of two 12-month extension options available. The proceeds of the Signature Unsecured Debt Facility may be used by Signature Office REIT to acquire properties and for working capital, capital expenditures and other general corporate purposes. Draws under the Signature Unsecured Debt Facility are supported by properties directly owned by the Signature Office REIT's subsidiaries that Signature Office REIT has elected to add to the borrowing base. These borrowing base properties are not available to be used as collateral for any other debt arrangements. Proceeds from the Signature Revolving Facility were used to repay the Technology Way Loan in full upon its maturity on June 27, 2014.

The Signature Unsecured Debt Facility contains certain restrictive covenants. As of ~~June~~September 30, 2014, Signature Office REIT believes it was in compliance with all financial covenants of its outstanding debt obligations.

Fair Value of Outstanding Debt

As of ~~June~~September 30, 2014 and December 31, 2013, the fair value of Signature Office REIT's total indebtedness approximated its carrying value. Signature Office REIT estimated the fair values of its debt instruments based on discounted cash flow analysis using the current incremental borrowing rates for similar types of borrowing arrangements obtained from multiple market participants as of the respective reporting dates. The discounted cash flow method of assessing fair value results in a general approximation of value, and such value may never actually be realized.

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Weighted-Average Interest Rate and Interest Paid

As of ~~June~~September 30, 2014 and December 31, 2013, the weighted-average interest rate on Signature Office REIT's outstanding debt, after consideration of the interest rate swap, was approximately 2.1819% and 2.22%, respectively. Signature Office REIT made the following interest payments on its borrowings:

Three Months Ended

~~Six~~Nine Months Ended

June 30,

September 30,

2014

2013

2014

2013

Signature Revolving Facility

~~342~~469,~~748~~197

~~529~~370,~~776~~627

~~688~~1,~~770~~157,967

1,~~107~~477,~~194~~821

Signature Term Loan

456,667

~~489~~481,~~972~~389

~~915~~1,~~039~~371,706

~~944~~1,~~639~~426,028

Technology Way Loan

~~175,683~~—

~~140~~139,~~105~~438

271,403

~~277~~416,~~524~~962

~~975~~925,~~098~~864

1991,~~159,853~~454

12,~~875~~801,~~212~~076

23,~~329~~320,~~357~~811

No interest was capitalized during the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013.

4. Interest Rate Swap

Signature Office REIT entered into an interest rate swap agreement with JPMorgan on September 26, 2012, to hedge its exposure to changing interest rates on $75.0 million of the Signature Term Loan (the "Interest Rate Swap"). The Interest Rate Swap was effective as of September 26, 2013 and matures on September 26, 2017. Under the terms of the Interest Rate Swap, Signature Office REIT pays interest at a fixed rate of 0.891% per annum and receives LIBOR-based interest payments from JPMorgan on a notional amount of $75.0 million. Beginning September 26, 2013, the Interest Rate Swap effectively fixed the interest rate on $75.0 million of the Signature Term Loan at 0.891% plus a margin of 1.65% to 2.40%, based on Signature Office REIT's then current leverage ratio.

The following table provides additional information related to the Interest Rate Swap as of ~~June~~September 30, 2014 and December 31, 2013:

		Estimated Fair Value as of
Instrument Type	Balance Sheet Classification	~~June~~September 30, 2014		December 31, 2013
Derivatives designated as hedging instruments:
Interest rate swap	Prepaid expenses and other assets	$	~~231~~630,~~025~~373	$	642,976

During the three months and ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, Signature Office REIT recorded the following amounts related to the Interest Rate Swap:

	Three months ended June 30,						Six months ended June 30,
	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Market value adjustment to interest rate swap designated as a hedging instrument and included in other comprehensive income	$	~~(406~~399,~~943~~348	)	$	1(523,~~246,126~~598	)	$	(~~411~~12,~~951~~603	)	$	1816,~~340,357~~759
Previously recorded loss reclassified from accumulated other comprehensive income into interest expense	$	(~~140~~141,~~481~~379	)	$	—(7,406	)	$	(~~276~~418,~~729~~108	)	$	—(7,406	)

Signature Office REIT estimates that approximately $~~450~~403,000 will be reclassified from accumulated other comprehensive income to interest expense over the next 12 months. During the periods presented, there was no hedge ineffectiveness on the Interest Rate Swap required to be recognized in earnings, and there were no derivative instruments that did not qualify for hedge accounting treatment.

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5. Commitments and Contingencies

Obligations Under Capital Leases

The 64 & 66 Perimeter Center Buildings are subject to capital leases of land and buildings. Each of these obligations is completely offset by the principal balances and corresponding interest receivable from related investments in development authority bonds, which mature in 2027. The required payments under the terms of the leases are as follows as of ~~June~~September 30, 2014:

For the six months ending December 31, 2014	$	3,450,000
For the three months ending December 31, 2014	$	1,725,000
For the year ending December 31:
2015	6,900,000
2016	6,900,000
2017	6,900,000
2018	6,900,000
2019	6,900,000
Thereafter	165,025,000
	202,975,000
	201,250,000
Amounts representing interest	(8786,~~975~~250,000		)
Total	$	115,000,000

Commitments Under Existing Lease Agreements

Certain lease agreements include provisions that, at the option of the tenant, may obligate Signature Office REIT to expend capital to expand an existing property or provide other expenditures for the benefit of the tenant, including the following:

Building		Tenant		Tenant Allowance Obligations as of June 30, 2014(1)
Westway One Building		Cameron Solutions		$142,068

(1) Represents tenant allowance obligations required by certain lease agreements that are not accrued as of June 30, 2014.

Litigation

From time to time, Signature Office REIT is party to legal proceedings that arise in the ordinary course of its business. Management makes assumptions and estimates concerning the likelihood and amount of any reasonably possible loss relating to these matters using the latest information available. Signature Office REIT records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, Signature Office REIT accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, Signature Office REIT accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, Signature Office REIT discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, Signature Office REIT discloses the nature and estimate of the possible loss of the litigation. Signature Office REIT does not disclose information with respect to litigation where an unfavorable outcome is considered to be remote. Signature Office REIT is not currently involved in any legal proceedings for which the outcome is expected to have a material effect on the results of operations or financial condition of Signature Office REIT. Signature Office REIT is not aware of any legal proceedings contemplated by governmental authorities.

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6. Stockholders' Equity

Share Redemption Program

The board of directors of Signature Office REIT previously adopted a share redemption program, or the Amended SRP, which was amended and restated on August 22, 2013. The Amended SRP allowed stockholders who held their shares for more than one year to sell their shares back to Signature Office REIT, subject to certain limitations and penalties. The Amended SRP was terminated effective April 30, 2014. All redemption requests submitted prior to the termination of the Amended SRP were subject to the limits on the dollar value and number of shares that could be redeemed under the terms of the Amended SRP. InAs ~~April~~of ~~2014~~September 30, ~~requests~~2014 ~~for~~and ~~redemption~~December 31, of2013, ~~shares~~approximately ~~that~~$17.0 ~~were~~million, ~~not sought within two years of a stockholder's death~~ or qualifying disability or in connection with a stockholder (or a stockholder's spouse) qualifying for federal assistance for confinement to a long-term care facility ("Ordinary Redemptions") exceeded the limits of the Amended SRP and739,031 ~~as such~~shares, ~~were~~and ~~prorated pursuant to the terms of the Amended SRP at a rate of approximately 7~~$14.~~0%.~~2 Asmillion, ofor ~~April 30~~611,580 ~~2014~~shares, ~~approximately 141~~respectively,~~424~~ ~~shares~~ of Signature Office REIT's common stock ~~were~~had ~~tendered~~been ~~for redemption and not~~ redeemed ~~as a result of the limit on the dollar value of shares that may be redeemed under the terms of the Amended SRP~~. These shares tendered for redemption that could not be redeemed prior to the termination of the Amended SRP on April 30, 2014 are no longer held in queue for redemption at a later date under the Amended SRP or otherwise.

As ~~of June 30, 2014 and December 31, 2013, approximately $~~17~~.0 million, or 739,031 shares, and $14.2 million, or 611,580 shares, respectively, of Signature Office REIT's common stock had been redeemed.~~

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7. Supplemental Disclosures of Noncash Activities

Outlined below are significant noncash investing and financing transactions for the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, respectively:

	Six Months Ended
	Nine Months Ended
	June 30,
	September 30,
	2014			2013
Commissions on stock sales and related dealer-manager fees due to affiliate	$	—		$	6,129
Market value adjustment to interest rate swap that qualifies for hedge accounting treatment	$	(12,603	)	$	816,759
Market value adjustment to interest rate swap that qualifies for hedge accounting treatment	$	(411,951	)	$	1,340,357
Accrued capital expenditures and deferred lease costs	$	414,025		$	205,202
Accrued capital expenditures and deferred lease costs	$	39,000		$	275,594
Discounts applied to issuance of common stock under primary offering	$	—		$	39,017
Discounts applied to issuance of common stock under DRP	$	196,624		$	~~356~~553,~~483~~669
(Decrease) increase in redeemable common stock	$	(3,988,217	)	$	2,643,154
Decrease in redeemable common stock	$	(3,988,217	)	$	(353,483	)

8. Related-Party Transactions

Transition Services Agreement

On January 1, 2014, Signature Office REIT entered into the TSA with WREF for the period from January 1, 2014 through June 30, 2014, pursuant to which WREF and its affiliates provided certain consulting, support and transitional services (as set forth in the TSA) to Signature Office REIT at the direction of Signature Office REIT in order to facilitate its successful transition to self-management.

In exchange for the services provided by WREF under the TSA, Signature Office REIT paid WREF a monthly consulting fee of $51,267 (the "Consulting Fee"). In addition to the Consulting Fee, Signature Office REIT paid directly or reimbursed WREF for any third-party expenses paid or incurred by WREF and its affiliates on behalf of Signature Office REIT in connection with the services provided pursuant to the TSA; provided, however, that (1) WREF obtained written approval from Signature Office REIT prior to incurring any third-party expenses for the account of, or reimbursable by, Signature Office REIT and (2) Signature Office REIT was not required to reimburse WREF for any administrative service expenses, including WREF's overhead, personnel costs and costs of goods used in the performance of services under the TSA. In addition, the TSA also provided that WREF provide Signature Office REIT a portion of the office space currently used and occupied by WREF (the "Office Space") for the period from January 1, 2014 to June 30, 2014 in exchange for monthly rent of $4,552.

On June 30, 2014, Signature Office REIT entered into the TSA Amendment, which extended the expiration date of the TSA as it related to certain transfer agent and client services functions from June 30, 2014 to September 30, 2014. Pursuant to the TSA Amendment, WREF and its affiliates continued to provide support for the transfer agent and client services functions (as set forth in the TSA Amendment) through September 30, 2014 to Signature Office REIT in exchange for a monthly consulting fee of $6,500 (the "Amended Consulting Fee"). All other transitional services described in the TSA expired on June 30, 2014, in accordance with its terms. The TSA Amendment expired on September 30, 2014 in accordance with its terms.

Corporate Office Lease Agreement

Effective June 27, 2014, Signature Office REIT entered into an agreement with Wells REF - 6200 The Corners Parkway Owner, LLC, a subsidiary of WREF, to lease 4,221 square feet, or approximately 3%, of an office building located in Norcross, Georgia and owned by WREF (the "6200 The Corners Parkway Building") to serve as Signature Office REIT's corporate headquarters. This lease does not indicate any other business relationship between WREF and Signature Office REIT except one of a landlord and tenant. The 41-month lease commenced in September 2014. Following a five-month rental abatement period, annual base rent per square foot will be $17.00 with an annual rent escalation of 3%. In addition to annual base rent, Signature Office REIT is required to reimburse WREF for its pro rata share of all operating costs and real estate taxes that exceed the costs for the base year. From July 1, 2014 through

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~~performance~~commencement of ~~services under~~ the ~~TSA.~~corporate Inoffice ~~addition~~lease agreement, ~~the~~WREF ~~TSA~~continued ~~also~~to ~~provided that WREF~~ provide Signature Office REIT ~~a portion of~~ the ~~office space currently used and occupied by WREF (the "~~Office Space~~") for the period from January 1~~, ~~2014~~pursuant to ~~June~~the 30TSA, ~~2014~~at inthe ~~exchange for~~ monthly ~~rent~~rental rate of $4,552.

On June 30, 2014, Signature Office REIT entered into the TSA Amendment in order to extend the expiration date of the TSA as it relates to certain transfer agent and client services functions from June 30, 2014 to September 30, 2014. Pursuant to the TSA Amendment, WREF and its affiliates will continue to provide support for the transfer agent and client services functions (as set forth in the TSA Amendment) to Signature Office REIT in exchange for a monthly consulting fee of $6,500 (the "Amended Consulting Fee"). All other transitional services described in the TSA expired on June 30, 2014, in accordance with its terms. The TSA Amendment will remain in effect until September 30, 2014, unless otherwise terminated in accordance with the terms of the TSA.

Corporate Office Lease Agreement

Effective June 27, 2014, Signature Office REIT entered into an agreement with Wells REF - 6200 The Corners Parkway Owner, LLC, a subsidiary of WREF, to lease 4,221 square feet, or approximately 3%, of an office building located in Norcross, Georgia and owned by WREF (the "6200 The Corners Parkway Building") to serve as Signature Office REIT's corporate headquarters. This lease does not indicate any other business relationship between WREF and Signature Office REIT except one of a landlord and tenant. The 41-month lease is expected to commence in August 2014. Following a five-month rental abatement period, annual base rent per square foot will be $17.00 with an annual rent escalation of 3%. In addition to annual base rent, Signature Office REIT is required to reimburse WREF for its pro rata share of all operating costs and real estate taxes that exceed the costs for the base year. Until the lease commences, WREF will continue to provide Signature Office REIT the Office Space, pursuant to the TSA, at the current monthly rental rate of $4,552.

Advisory Agreements

Through June 10, 2013, Signature Office REIT was party to the Original Advisory Agreement with the Advisor. Under the Original Advisory Agreement, Signature Office REIT paid a monthly asset management fee equal to one-twelfth of 0.75% of the cost of (i) the properties owned other than through joint ventures and (ii) initial investments in joint ventures plus Signature Office REIT's allocable share of additional capital improvements made by the joint venture. In addition, the Original Advisory Agreement entitled the Advisor to (i) payment of a debt financing fee equal to 0.20% annually of the total capacity of all third-party financing arrangements (whether or not drawn), originated, obtained, or otherwise assumed by or for Signature Office REIT, not to exceed, in the aggregate, 0.50% of the amount available under any particular financing arrangement or refinancing of such arrangements, (ii) the reimbursement of costs and expenses the Advisor incurred in fulfilling its duties as the asset manager, including wages and salaries of its employees, (iii) acquisition fees of 2.0% of gross offering proceeds from the primary offering and DRP, subject to certain limitation, and (iv) reimbursement for expenses paid to third parties in connection with acquisitions or potential acquisitions. Under the terms of the Original Advisory Agreement, Signature Office REIT was obligated to reimburse the Advisor for organization and offering expenses in an amount equal to the lesser of actual costs incurred or 2.0% of total gross offering proceeds raised from the sale of shares of its common stock to the public under the Initial Offering.

Effective June 11, 2013 through December 31, 2013, Signature Office REIT was party to the Revised Advisory Agreement with the Advisor, pursuant to which Signature Office REIT paid a monthly asset management fee equal to one-twelfth of (a) 1.00% of the cost of the properties owned other than through joint ventures and initial investments in joint ventures plus Signature Office REIT's allocable share of capital improvements made by the joint venture (“Adjusted Cost”), for so long as the Adjusted Cost was less than or equal to $605,000,000 and (b) 0.50% of Adjusted Cost over $605,000,000. In addition, the Revised Advisory Agreement eliminated (i) the debt financing fee and (ii) the reimbursement of costs and expenses the Advisor incurred in fulfilling its duties as the asset manager, including wages and salaries of its employees. All other terms of the Revised Advisory Agreement were materially consistent with the Original Advisory Agreement in effect through June 10, 2013.

Dealer-Manager Agreement

Signature Office REIT was party to a dealer-manager agreement (the "Dealer-Manager Agreement") with Wells Investment Securities, Inc. ("WIS"), whereby WIS, an affiliate of Wells Capital, performed the dealer-manager function for Signature Office REIT's Initial Offering. For these services, WIS earned a commission of up to 7.0% of the gross offering proceeds from the sale of the shares of Signature Office REIT, all of which was re-allowed to participating broker/dealers. Signature Office REIT paid no commissions on shares issued under the DRP.

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for Signature Office REIT's Initial Offering. For these services, WIS earned a commission of up to 7% of the gross offering proceeds from the sale of the shares of Signature Office REIT, all of which was re-allowed to participating broker/dealers. Signature Office REIT paid no commissions on shares issued under the DRP.

Additionally, Signature Office REIT was required to pay WIS a dealer-manager fee of 2.5% of the gross offering proceeds from the sale of Signature Office REIT's stock at the time the shares were sold. Under the Dealer-Manager Agreement, up to 1.5% of the gross offering proceeds was re-allowed by WIS to participating broker/dealers. Signature Office REIT paid no dealer-manager fees on shares issued under the DRP.

The payment of fees under the Dealer-Manager Agreement ceased on June 10, 2013 in connection with the termination of the primary portion of the Initial Offering. The Dealer-Manager Agreement was terminated on December 16, 2013 in connection with WIS ceasing its participation in the DRP.

Master Property Management, Leasing, and Construction Agreement

Prior to Signature Office REIT's transition to self-management on January 1, 2014, Signature Office REIT, the Advisor, and Wells Management, an affiliate of Wells Capital, were party to a Master Property Management, Leasing, and Construction Management Agreement (the "Management Agreement") under which Wells Management was entitled to receive the following fees and reimbursements in consideration for supervising the management, leasing, and construction activities of certain Signature Office REIT properties:


•	property management fees negotiated for each property managed by Wells Management; typically this fee was equal to a percentage of the gross monthly income collected for that property for the preceding month;

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•

leasing commissions for new, renewal, or expansion leases entered into with respect to any property for which Wells Management served as leasing agent equal to a percentage as negotiated for that property of the total base rental and operating expenses to be paid to Signature Office REIT during the applicable term of the lease, provided, however, that no commission was payable as to any portion of such term beyond 10 years;


•	construction management fees for projects overseen by Wells Management, such as capital projects, new construction, and tenant improvements, which fees were to be market-based and negotiated for each property managed by Wells Management; and


•	other fees as negotiated with the addition of each specific property covered under the agreement.

The Management Agreement was terminated on December 31, 2013 in connection with Signature Office REIT's transition to self-management.

Limitation on Operating Expenses

As of June 30, 2014, Signature Office REIT had the responsibility of limiting total operating expenses, as defined by its charter, to no more than the greater of 2% of average invested assets at the end of any fiscal quarter or 25% of net income, as defined by its charter, for the four previous consecutive quarters then ended unless the board of directors determines that such excess expenses were justified based on unusual and nonrecurring factors and such excess expenses were disclosed in a public filing. Total operating expenses mean all expenses paid or incurred by Signature Office REIT, as determined under GAAP, that are in any way related to its operation, including advisory fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of its stock; (b) interest payments; (c) taxes; (d) noncash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees to the extent permitted by Signature Office REIT's charter; and (f) acquisition fees, acquisition expenses (including expenses relating to potential acquisitions that do not close), real estate commissions on the resale of property and other expenses connected with the acquisition, disposition, management and ownership of real estate interests, mortgage loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property). For the four consecutive quarters ended June 30, 2014, Signature Office REIT's total operating expenses did not exceed the above-referenced limitations.

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Related-Party Costs

Pursuant to the terms of the agreements described above, Signature Office REIT incurred the following related-party costs for the three months and ~~six~~nine months ended ~~June~~September 30, 2014 and 2013:

	Three Months Ended					~~Six~~Nine Months Ended
	June 30,					June 30,
	September 30,					September 30,
	2014		2013			2014		2013
Consulting fees	$	~~153~~19,~~801~~500	$	—		$	~~307~~327,~~602~~102	$	—
Rent expense	139,~~656~~104		—			2736,~~312~~416		—
Commissions, net of discounts(1)(2)	—		~~2,137,927~~—			—		4,731,169
Asset management fees	—		1,~~220~~513,~~098~~259			—		23,~~355~~869,~~883~~142
Dealer-manager fees, net of discounts(1)	—		~~772,456~~—			—		1,703,336
Acquisition fees	—		~~689~~74,~~353~~930			—		1,~~497~~572,~~526~~456
Other offering costs(1)	—		~~649,858~~—			—		1,~~458~~425,~~031~~623
Administrative reimbursements	—		~~590~~(1,~~640~~674		)	—		1,~~321~~319,~~034~~360
Debt financing fees	—		~~126,350~~—			—		288,800
Property management fees	—		—			—		112,300
Total	$	~~167~~28,~~457~~604	$	61,~~186~~586,~~682~~515		$	~~334~~363,~~914~~518	$	1315,~~468~~022,~~079~~186


⁽¹⁾	Commissions, dealer-manager fees, and other offering costs are charged against stockholders' equity, as incurred.

(2) All commissions were re-allowed to participating broker/dealers during the three months and ~~six~~nine months ended ~~June~~September 30, 2013.

Signature Office REIT incurred no related-party construction fees or leasing commissions during the three months and ~~six~~nine months ended ~~June~~September 30, 2014 and 2013.

9. Subsequent Event

Declaration of Distributions

On ~~August~~November 612, 2014, Signature Office REIT's board of directors declared a distribution to stockholders for the ~~third~~fourth quarter of 2014 in the amount of $0.375 per share (a 6.0% annualized yield on a $25.00 original share price) on the outstanding shares of common stock payable to stockholders of record as of ~~September~~December 15, 2014. Such distributions will be paid in ~~September~~December 2014.

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

The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements and notes thereto. See also "Cautionary Note Regarding Forward-Looking Statements" preceding Part I, as well as our consolidated financial statements and the notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2013.

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Overview

We operate a diversified portfolio of commercial real estate consisting of high-quality, income-producing office properties primarily leased to creditworthy entities located in major metropolitan areas throughout the United States. Portfolio data as of ~~June~~September 30, 2014 and 2013 is as follows:

	June 30,
	September 30,
	2014	2013
Total number of properties/buildings	13 / 15	13 /15
Total square feet	2,623,527	2,623,527
Percent of total square feet leased	9998.39%	99.3%

We have elected to be taxed as a REIT for federal income tax purposes and have operated as such beginning with our taxable year ended December 31, 2010.

From June 2010 through June 2013, we raised gross offering proceeds of approximately $527.7 million through the issuance of common stock under our Initial Offering, including proceeds from our DRP, and we have used those proceeds, net of fees, to invest in real estate and repay borrowings used to acquire real estate properties in advance of raising equity proceeds. We continued to raise equity proceeds through the DRP through March 2014, after which the DRP was terminated. As a result, starting with the second quarter of 2014, all distributions are expected to be paid in cash and will not be reinvested in shares of our common stock. In addition, the Amended SRP was terminated effective April 30, 2014.

From inception through December 31, 2013, we had no paid employees and were externally advised and managed by the Advisor and Wells Management, wholly owned subsidiaries of WREF. On January 1, 2014, upon the termination of the Revised Advisory Agreement and the hiring of the employees necessary to perform the requisite corporate functions previously performed by the Advisor and its affiliates, we completed our transition to a self-managed company. From January 1, 2014 through June 30, 2014, we received certain services from WREF, as specified in the TSA, to assist in our transition to becoming a self-managed company. On June 30, 2014, we entered into the TSA Amendment, which extended the expiration date of the TSA as it relates to certain transfer agent and client services functions from June 30, 2014 to September 30, 2014. These transactions have resulted in, and are expected to continue to result in, increased general and administrative expenses due to the employment-related costs and other costs we incur as a self-managed company. Such increases in general and administrative expenses are offset by the elimination of the payment of related-party asset management fees to the Advisor, likely resulting in a net cost savings to us. For additional details, please refer to Note 8 of the accompanying consolidated financial statements.

Following our initial fundraising and acquisition phases, we have continued to concentrate our efforts on actively managing our assets ~~and exploring a variety of strategic options~~, including enhancing the composition of our portfolio and its total return potential for our stockholders. In doing so, we may elect to make strategic acquisitions and dispositions and look to enter into favorable debt transactions. In addition, we are currently exploring a variety of strategic options which could result in the execution of a transaction well in advance of July 31, 2020, the date by which we must have listed on a national securities exchange or sought stockholder approval to (i) extend or amend this listing deadline or (ii) begin liquidation.

~~Our~~ operating strategy entails actively managing our portfolio to generate sufficient cash flow from operations to meet our required obligations and to provide current income in the form of cash distributions to our investors; managing lease expirations with a goal of achieving diversified lease expiration dates; maintaining a moderate leverage profile; considering appropriate actions for future lease expirations resulting in receipt of increased rents over longer terms; and controlling administrative operating expenses as a percentage of revenues. With our goals of providing current income to our stockholders and preserving their capital, we view our most significant challenges as (i) addressing the risks associated with our lease expiration dates, specifically in 2017 and 2019, and (ii) repaying or refinancing our outstanding borrowings as they become due.21

Per the terms of our charter, we presently intend to effect a transaction by July 31, 2020 that will provide liquidity to all of our stockholders, although we will explore other liquidity options as favorable opportunities arise. A transaction

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~~well~~Our inoperating ~~advance~~strategy ofentails ~~2020~~actively ~~may~~managing beour inportfolio to generate sufficient cash flow from operations to meet our ~~best~~required ~~interest.~~obligations ~~Notwithstanding~~and to provide current income in the ~~execution~~form of ~~such~~cash distributions to our investors; managing lease expirations with a ~~transaction,~~goal of achieving diversified lease expiration dates; maintaining a moderate leverage profile; considering appropriate actions for future lease expirations resulting in receipt of increased rents over longer terms; and controlling administrative operating expenses as a percentage of revenues. With our ~~shares~~goals ~~remain~~of ~~illiquid,~~providing current income to our stockholders and preserving their capital, we ~~may~~view ~~not~~our ~~effect~~most asignificant ~~liquidity~~challenges ~~event~~as ~~before~~(i) oraddressing ~~even~~the byrisks associated with our ~~original~~lease ~~targeted~~expiration ~~date~~dates, ofspecifically ~~July~~in 312017 and 2019, ~~2020.~~and (ii) repaying or refinancing our outstanding borrowings as they become due.

Liquidity and Capital Resources

Overview

During 2014, we continued to actively manage our real estate portfolio in order to maximize cash flow from operations, to meet our required obligations and to provide current income in the form of cash distributions to our investors. We anticipate that our primary sources of future capital will be derived from operating cash flows from our real estate portfolio asand ~~well as~~ draws from our credit facility. The Signature Unsecured Debt Facility is comprised of the $200 million Signature Revolving Facility and the $100 million Signature Term Loan, which mature on September 26, 2015 and September 26, 2017, respectively. We do not expect the results of operations to provide sufficient cash flow to pay off the Signature Revolving Facility. We have the option to extend the Signature Revolving Facility for two periods of 12 months each subject to satisfaction of certain conditions, including (i) no existence of default, (ii) no material adverse effect has occurred in our financial condition, (iii) compliance with covenants set forth in the Signature Unsecured Debt Facility, and (iv) payment of an extension fee equal to 0.25% of the amount committed under the Signature Revolving Facility. We intend to either refinance the Signature Unsecured Debt Facility prior to the maturity of the Signature Revolving Facility in September 2015 or to exercise the first of two 12-month extension options available to us.

We expect that our primary uses of capital will continue to include stockholder distributions and funding capital improvements to our existing properties, as well as potential future acquisitions of real estate properties. Stockholder distributions will be largely dependent upon, among other things, the amount of cash generated from our operating activities, our determination of near-term cash needs for capital expenditures at our properties and debt repayments, and our expectations of future operating cash flow generated from our properties.

In determining how and when to allocate cash resources in the future, we will initially consider the source of the cash. Substantially all cash raised from operations, after payments of periodic operating expenses and certain capital expenditures required for our properties, is anticipated to be used to pay distributions to stockholders. Therefore, to the extent that cash flows from operations are lower, distributions are anticipated to be lower as well. In addition, distributions may be lower to the extent that operating cash flow is reserved to fund future capital expenditures for our existing portfolio in order to achieve our investment objectives. Substantially all net proceeds generated from debt financing will be available to fund capital improvement to our existing properties, as well as potential future acquisitions of real estate properties, and to pay down outstanding borrowings.

Short-Term Liquidity and Capital Resources

During the ~~six~~nine months ended ~~June~~September 30, 2014, net cash provided by operating activities was approximately $1929.68 million, which consisted primarily of rental receipts and tenant reimbursements in excess of payments for property operating costs, property management fees, and general and administrative costs, such as salaries, legal, accounting and other professional fees. During the ~~six~~nine months ended ~~June~~September 30, 2014, we paid total distributions to stockholders, including amounts reinvested in our common stock pursuant to the DRP, of approximately $1523.30 million, which were fully funded with net cash provided by operating activities. We expect to use the majority of our future net cash flow from operating activities to fund distributions to stockholders (please refer to the Distributions section below for additional information). To the extent that future net cash flow from operating activities exceeds distributions to stockholders, we intend to make repayments on the Signature Revolving Facility.

~~During~~ ~~the six months ended June 30, 2014, net cash used for investing activities was approximately $0.3 million, which primarily related to capital improvements at the Duke Bridges Buildings.~~22

Net cash used in financing activities for the six months ended June 30, 2014 was approximately $19.0 million. During the six months ended June 30, 2014, we generated net proceeds from the sale of common stock under the DRP, net of payments for offering costs and redemptions, of approximately $0.8 million, substantially all of which was used to pay down debt. During the six months ended June 30, 2014, we received gross debt proceeds of approximately $25.7 million from the Signature Revolving Facility, which were used to repay the $24.9 million balance of the Technology Way Loan in full upon its maturity on June 27, 2014 and partially fund redemptions of our common stock under the Amended SRP. During the six months ended June 30, 2014, we made total debt repayments of approximately $30.2 million, consisting of $24.9 million on the Technology Way Loan and approximately $5.3 million on the Signature Revolving Facility.

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WeDuring ~~expect to utilize~~ the ~~residual~~nine ~~cash~~months ~~balance~~ended ~~of approximately $7.7 million as of June~~September 30, 2014, tonet ~~satisfy~~cash ~~current~~used ~~and~~for ~~future~~investing ~~liabilities.~~activities Wewas ~~believe~~approximately ~~that we have adequate liquidity and capital resources to meet our current obligations as they come due~~$0.3 ~~As of July 31~~million, ~~2014,~~which weprimarily ~~had~~related ~~access~~ to ~~the~~capital ~~borrowing~~improvements ~~capacity~~at ~~under~~ the ~~Signature~~Duke ~~Unsecured~~Bridges ~~Debt Facility of $140~~Buildings.~~1 million.~~

OnNet ~~August~~cash used in financing activities for the nine months ended September 630, 2014, ~~our~~was ~~board~~approximately of$30.6 ~~directors~~million. ~~declared~~During athe ~~quarterly~~nine ~~distribution~~months ~~for~~ended ~~stockholders~~September 30, of2014, ~~record~~we asreceived gross debt proceeds of ~~September~~approximately ~~15,~~$30.2 ~~2014~~million infrom anthe ~~amount~~Signature ~~equal~~Revolving Facility, which were primarily used to ~~$0.375~~repay ~~per~~the ~~share~~$24.9 Wemillion ~~expect~~balance toof ~~pay~~the ~~this~~Technology ~~distribution~~Way Loan in ~~September~~full upon its maturity on June 27, 2014. During Wethe ~~intend~~nine tomonths ~~utilize~~ended ~~operating~~September 30, ~~cash~~2014, ~~flow~~we tofunded ~~fund~~redemptions ~~this~~of ~~stockholder~~our ~~distribution;~~common ~~however,~~stock ifunder ~~necessary~~the Amended SRP of $2.9 million. During the nine months ended September 30, 2014, we ~~may~~made ~~also~~total ~~utilize~~debt ~~other~~repayments ~~sources~~of approximately $38.6 million, consisting of ~~cash~~$24.9 tomillion ~~fund~~on athe ~~portion~~Technology ofWay ~~this~~Loan ~~distribution~~and approximately $13.7 million on the Signature Revolving Facility.

AsWe expect to utilize the residual cash balance of ~~June~~approximately $6.3 million as of September 30, 2014, ~~the~~to ~~Signature~~satisfy ~~Unsecured~~current ~~Debt~~and ~~Facility~~future ~~contained,~~liabilities. ~~among~~We ~~others~~believe that we have adequate liquidity and capital resources to meet our current obligations as they come due. As of October 31, 2014, we had access to the ~~following~~borrowing ~~restrictive~~capacity ~~covenants:~~under the Signature Unsecured Debt Facility of $144.0 million.

		Actual Performance
	Covenant Level	June 30, 2014
Fixed-charge coverage ratio	Greater than 1.75x	9.75
Total debt relative to total asset value	Less than 55%	27%
Secured debt relative to consolidated tangible assets	Less than 40%	0%
Secured debt, excluding non-recourse debt, relative to consolidated tangible assets	Less than 15%	0%
Tangible net worth	Greater than approximately $317.7 million(1)	$443.2 million
Net distributions paid relative to funds from operations	Less than 90%(2)	N/A(2)

On November 12, 2014, our board of directors declared a quarterly distribution for stockholders of record as of December 15, 2014 in an amount equal to $0.375 per share. We expect to pay this distribution in December 2014. We intend to utilize operating cash flow to fund this stockholder distribution; however, if necessary, we may also utilize other sources of cash to fund a portion of this distribution.

As of September 30, 2014, the Signature Unsecured Debt Facility contained, among others, the following restrictive covenants:



		Actual Performance
	Covenant Level	September 30, 2014
Fixed-charge coverage ratio	Greater than 1.75x	9.97
Total debt relative to total asset value	Less than 55%	26%
Secured debt relative to consolidated tangible assets	Less than 40%	0%
Secured debt, excluding non-recourse debt, relative to consolidated tangible assets	Less than 15%	0%
Tangible net worth	Greater than approximately $317.7 million⁽¹⁾	$445.6 million
Net distributions paid relative to funds from operations	Less than 90%⁽²⁾	N/A⁽²⁾


⁽¹⁾	Our tangible net worth must be greater than $233.8 million, plus 72.25% of the gross cash proceeds, net of redemptions paid, of all of our equity issuances consummated after September 26, 2012.

⁽²⁾

Total distributions for each fiscal year, less amounts reinvested pursuant to the DRP, cannot exceed the greater of (1) 90% of funds from operations, as defined in the Signature Unsecured Debt Facility, as long as total distributions, less amounts reinvested pursuant to the DRP, for any two consecutive quarters do not exceed 100% of funds from operations, as defined, or (2) the minimum amount required to continue to qualify as a REIT.

As of ~~June~~September 30, 2014, we believe we were in compliance and expect to remain in compliance with these, and all other, restrictive covenants of the Signature Unsecured Debt Facility.

Long-Term Liquidity and Capital Resources

Over the long term, we expect that our primary sources of capital will include proceeds from secured or unsecured financings from banks and other lenders and net cash flows from operations, including proceeds from strategic property sales. We anticipate funding distributions to our stockholders from net cash flows from operations; however, we may borrow funds to fund distributions as well.

We expect that our principal demands for capital will include operating expenses, including interest expense on any outstanding indebtedness; funding capital improvements to our existing properties, as well as potential future acquisitions of real estate properties; repayment of debt; and distributions.23

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~~investment~~We inexpect ~~additional~~that ~~real estate properties, which will allow us to further diversify~~ our ~~portfolio.~~principal ~~However,~~demands ~~our~~for ~~level~~capital ~~of leverage~~ will ~~depend~~include ~~upon~~operating ~~various factors to be considered in the sole discretion of our board of directors~~expenses, including, ~~but~~interest ~~not~~expense ~~limited~~on ~~to,~~any ~~our~~outstanding ~~ability~~indebtedness; tofunding ~~pay~~capital ~~distributions,~~improvements ~~the~~and ~~availability~~leasing ofcosts ~~real~~with ~~estate~~respect ~~properties~~to ~~meeting~~ our ~~investment~~existing ~~criteria~~properties, ~~the~~as ~~availability~~well ofas ~~debt,~~potential ~~and~~future ~~changes~~acquisitions ~~in the cost~~ of ~~debt financing. Over the long term, we intend to maintain debt levels less than the 50% debt-to-~~real- estate~~-asset~~ ~~ratio.~~properties; ~~This~~repayment ~~conservative leverage goal could reduce the amount~~ of current income we can generate for our stockholders, but it also reduces their risk of loss. We believe that preserving investor capital while generating stable current income is in the best interest of our stockholders. As of June 30, 2014, our debt~~-to-real-estate-asset~~; ratio was approximately 28%. Prior to its amendment in August 2014, our charter limited us from incurring debt in relation to our net assets in excess of 100%, unless borrowings in excess of this limit were approved by a majority of our board of directors and ~~disclosed in our next quarterly report~~distributions. ~~Our board of directors may determine that it is in our best interest to pursue leveraged acquisitions.~~

We have a policy of keeping our debt at no more than 50% of the cost of our assets (before depreciation), referred to as the debt-to-real-estate-asset ratio; however, we may borrow in excess of this threshold under some circumstances. Our working capital line of credit provides flexibility with regard to managing our capital resources. Over the short term, we expect to temporarily draw on the Signature Revolving Facility to fund capital improvements and leasing costs with respect to our existing properties, as well as potential future acquisitions of real estate properties. Additionally, we may place long-term debt on our existing properties and any properties acquired in the future. We currently intend to maintain amounts outstanding under our long-term debt arrangement so that we will have more funds available for working capital and potential investment in additional real estate properties, which will allow us to further diversify our portfolio. However, our level of leverage will depend upon various factors to be considered in the sole discretion of our board of directors, including, but not limited to, our ability to pay distributions, the availability of real estate properties meeting our investment criteria, the availability of debt, and changes in the cost of debt financing. Over the long term, we intend to maintain debt levels less than the 50% debt-to-real-estate-asset ratio. This conservative leverage goal could reduce the amount of current income we can generate for our stockholders, but it also reduces their risk of loss. We believe that preserving investor capital while generating stable current income is in the best interest of our stockholders. As of September 30, 2014, our debt-to-real-estate-asset ratio was approximately 27%. Prior to its amendment in August 2014, our charter limited us from incurring debt in relation to our net assets in excess of 100%, unless borrowings in excess of this limit were approved by a majority of our board of directors and disclosed in our next quarterly report. During the periods presented, our debt-to-net asset ratio did not exceed 100%. We expect our debt-to-net asset ratio to remain at a similar level in the near term; however, we may determine that it is in our best interest to pursue leveraged acquisitions, which would cause our debt-to-net asset ratio to increase.

Contractual Obligations and Commitments

As of September 30, 2014, our contractual obligations were as follows:

	Payments Due By Period
Contractual Obligations	Total		2014		2015-2016		2017-2018		Thereafter
Debt obligations	$	~~162~~159,~~900~~000,000	$	—	$	6259,~~900~~000,000	$	100,000,000	$	—
Estimated interest on debt obligations(1)	98,~~111~~156,~~322~~296		1871,~~778,259~~288		5,~~596~~547,~~908~~010		1,~~736~~737,~~155~~998		—
Capital lease obligations(2)	115,000,000		—		—		—		115,000,000
Tenant allowances	142,068		142,068		—		—		—
Total	$	282,156,296	$	871,288	$	64,547,010	$	101,737,998	$	115,000,000
Total	$	287,153,390	$	1,920,327	$	68,496,908	$	101,736,155	$	115,000,000


⁽¹⁾	Interest obligations on variable-rate debt are measured at the rate at which they are effectively fixed with interest rate swaps (where applicable). Interest obligations on all other debt are measured at the contractual rate.

(2) Amounts include principal obligations only. We will incur an additional $8886.03 million in interest expense on these obligations over the term of the leases. The principal obligation and related interest expense will be completely offset by our investments in development authority bonds and their corresponding interest income (see Note 2 and Note 5 to the accompanying consolidated financial statements).

Distributions

Our board of directors declares quarterly distributions based on a single record date at the end of each quarterly period. In determining the rate of stockholder distributions, our board considers a number of factors, including the current and future levels of cash available to fund stockholder distributions, which is dependent upon the operations of our properties, our current and future projected financial condition, our capital expenditure requirements, our expectations of future sources of liquidity, and the annual distribution requirements necessary to maintain our status as a REIT under the Code. When evaluating the amount of current and future cash available to fund distributions to stockholders, we consider net cash provided by operating activities (as presented in accordance with GAAP in the accompanying consolidated statements of cash flows). We also consider certain costs that were incurred for the purpose of generating future earnings and appreciation in value over the long term, including acquisition-related costs. In accordance with Accounting Standards Codification Topic 805 Business Combinations ("ASC 805"), we expense all acquisition-related costs as incurred. Acquisition-related costs include customary third-party costs, such as legal fees and expenses; costs of appraisals; accounting fees and expenses; title insurance premiums; and other closing costs. Generally, our policy is to pay distributions based on current and projected cash flow from operations after giving consideration to certain amounts excluded from cash flow from operations under GAAP. Over the long term, we expect to fund stockholder distributions principally with cash flow from operations; however, we may also use borrowings to fund stockholder distributions.

~~Our~~ board of directors declared a quarterly distribution for stockholders of record as of March 15, 2014 in the amount of $0.375 per share (a 6.0% annualized yield on a $25.00 original share price). This distribution was paid in March 24

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~~2014~~statements of cash flows). ~~Our~~We ~~board~~also ofconsider ~~directors~~certain ~~declared~~costs athat ~~quarterly~~were ~~distribution~~incurred for ~~stockholders~~the purpose of ~~record~~generating asfuture ofearnings ~~June~~and ~~13,~~appreciation ~~2014~~ in value over the ~~amount~~long ofterm, $0including acquisition-related costs.~~375~~ ~~per~~In ~~share~~accordance with Accounting Standards Codification Topic 805 Business Combinations (a"ASC 6805"), we expense all acquisition-related costs as incurred.0% ~~annualized~~Acquisition-related ~~yield~~costs oninclude acustomary ~~$25~~third-party costs, such as legal fees and expenses; costs of appraisals; accounting fees and expenses; title insurance premiums; and other closing costs.00 ~~original~~Generally, ~~share~~our ~~price)~~policy is to pay distributions based on current and projected cash flow from operations after giving consideration to certain amounts excluded from cash flow from operations under GAAP. ~~This~~Over ~~distribution~~the ~~was~~long ~~paid~~term, inwe ~~June~~expect ~~2014~~to fund stockholder distributions principally with cash flow from operations; however, we may also use borrowings to fund stockholder distributions.

~~For~~Our ~~the~~board ~~six~~of ~~months~~directors ~~ended~~declared ~~June 30,~~a ~~2014,~~quarterly wedistribution ~~paid~~for ~~total~~stockholders ~~distributions~~of torecord ~~stockholders,~~as ~~including~~of ~~amounts~~March ~~reinvested~~15, 2014 in ~~our~~the ~~common~~amount ~~stock~~of ~~pursuant~~$0.375 toper ~~the~~share ~~DRP,~~(a of6.0% ~~approximately~~annualized yield on a $1525.300 ~~million~~original share price). ~~During~~This ~~the~~distribution ~~same~~was ~~period,~~paid ~~net~~in ~~cash~~March ~~provided~~2014. byOur ~~operating~~board ~~activities~~of ~~was~~directors ~~approximately~~declared a quarterly distribution for stockholders of record as of June 13, 2014 in the amount of $190.6375 ~~million~~per share (a 6.0% Asannualized yield on a ~~result,~~$25.00 ~~the~~original ~~distributions~~share price). This distribution was paid toin ~~common~~June ~~stockholders~~2014. Our board of directors declared a quarterly distribution for ~~the~~stockholders ~~six~~of ~~months~~record ~~ended~~as ~~June 30~~of September 15, 2014~~, as~~ ~~described~~in ~~above,~~the ~~were~~amount ~~fully~~of ~~funded~~$0.375 ~~with~~per ~~cash~~share ~~provided~~(a by6.0% ~~operating~~annualized ~~activities~~yield on a $25.00 original share price). This distribution was paid in September 2014.

OnFor ~~August~~the nine months ended September 630, 2014, ~~our~~we ~~board~~paid oftotal ~~directors~~distributions ~~declared a distribution~~ to stockholders, ~~for~~including ~~the~~amounts ~~third~~reinvested ~~quarter~~in ofour ~~2014~~common instock pursuant to the ~~amount~~DRP, of approximately $23.0 million.~~375~~ ~~per~~During ~~share on~~ the ~~outstanding~~same ~~shares~~period, ofnet ~~common~~cash ~~stock~~provided ~~payable~~by tooperating ~~stockholders~~activities ofwas ~~record~~approximately ~~as of September 15, 2014~~$29.8 ~~This rate equates to a 6~~million.0% ~~annualized~~As ~~yield on~~ a ~~$25.00~~result, ~~original~~the ~~share~~distributions ~~price~~paid ~~and~~to iscommon ~~consistent~~stockholders ~~with~~for the ~~quarterly~~nine ~~distribution~~months ~~rates~~ended ~~declared~~September 30, ~~since~~2014, as ~~the~~described ~~second~~above, ~~quarter~~were offully ~~2011.~~funded ~~Such~~with ~~distributions~~cash ~~will~~provided beby ~~paid~~operating ~~in September 2014~~activities.

On November 12, 2014, our board of directors declared a distribution to stockholders for the fourth quarter of 2014 in the amount of $0.375 per share on the outstanding shares of common stock payable to stockholders of record as of December 15, 2014. This rate equates to a 6.0% annualized yield on a $25.00 original share price and is consistent with the quarterly distribution rates declared since the second quarter of 2011. Such distributions will be paid in December 2014.

Results of Operations

Overview

Our real estate operating results improved for the three months and ~~six~~nine months ended ~~June~~September 30, 2014, as compared to the same periods in 2013, primarily due to the expiration of a majority of State Farm's operating expense reimbursement abatements at the 64 & 66 Perimeter Center Buildings and the elimination of related-party advisory fees and expenses related to our transition to self-management, partially offset by an increase in general and administrative expenses due to employment-related costs and other costs we incur as a self-managed company.

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Comparison of the three months ended ~~June~~September 30, 2014 versus the three months ended ~~June~~September 30, 2013

The following table sets forth data from our consolidated statements of operations for the three months ended ~~June~~September 30, 2014 and 2013, respectively, as well as each balance as a percentage of total revenues for the same periods presented:

	Three months ended June 30, 2014			% of Revenues		Three months ended June 30, 2013			% of Revenues		$ Increase (Decrease)			% Increase (Decrease)
	Three months ended September 30, 2014			% of Revenues		Three months ended September 30, 2013			% of Revenues		$ Increase (Decrease)			% Increase (Decrease)
Revenues:
Rental income	$	13,~~173~~108,~~677~~131		7067	%	$	13,~~284~~219,~~921~~585		7778	%	$	(111,~~244~~454	)	(1	)%
Tenant reimbursements	5,~~158~~722,~~063~~637			2829	%	3,~~859~~763,~~891~~919			2322	%	1,~~298~~958,~~172~~718			3452	%
Other property income	~~319~~730,~~973~~829			24	%	—32,755			—	%	~~319~~698,~~973~~074			~~N/M~~2,131	%
Total revenues	1819,~~651~~561,~~713~~597			100	%	17,~~144~~016,~~812~~259			100	%	12,~~506~~545,~~901~~338			915	%
Expenses:
Property operating costs	6,~~193~~576,~~327~~340			3334	%	5,~~635~~711,~~169~~878			3334	%	~~558~~864,~~158~~462			1015	%
Asset and property management fees:
Related-party	—			—	%	1,~~220~~513,~~098~~259			78	%	(1,~~220~~513,~~098~~259		)	(100	)%
Other	~~242~~266,~~450~~265			21	%	~~334~~256,~~225~~330			2	%	~~(91~~9,~~775~~935		)	~~(27~~4	)%
Depreciation	4,~~569~~686,~~573~~089			24	%	4,~~431~~508,~~200~~784			26	%	~~138~~177,~~373~~305			34	%
Amortization	23,~~987~~068,~~482~~347			16	%	2,~~738~~854,~~498~~382			1617	%	~~248~~213,~~984~~965			97	%
General and administrative	12,~~565~~146,~~255~~489			811	%	1477,~~278,578~~548			73	%	~~286~~1,~~677~~668,941			22349	%
Acquisition fees and expenses	—			—	%	~~673~~74,~~233~~930			4—	%	(~~673~~74,~~233~~930		)	(100	)%
Total expenses	1516,~~558~~743,~~087~~530			8386	%	1615,~~311~~397,~~001~~111			9590	%	~~(752~~1,~~914~~346,419		)	(59	)%
Real estate operating income	32,~~093~~818,~~626~~067			1714	%	~~833~~1,~~811~~619,148			510	%	21,~~259~~198,~~815~~919			~~271~~74	%
Other income (expense):
Interest expense	(3,~~095~~065,~~550~~581		)	(1716	)%	(3,~~077~~042,~~691~~384		)	(18	)%	1723,~~859~~197			1	%
Interest and other income	1,~~725~~757,~~209~~100			9	%	1,725,~~122~~136			10	%	8731,964			02	%
Income (loss) before income tax expense	1,723,285			9	%	(518,758		)	N/M		2,242,043			432	%
Income before income tax expense	1,509,586			8	%	301,900			2	%	1,207,686			400	%
Income tax expense	(2657,~~075~~541		)	0(1	)%	(4757,~~812~~223		)	0(1	)%	~~(21,737~~318		)	~~(45~~1	)%
Net income (loss)	$	1,697,210		9	%	$	(566,570	)	N/M		$	2,263,780		400	%
Net income	$	1,452,045		7	%	$	244,677		1	%	$	1,207,368		493	%
Per-share net income (loss) - basic and diluted	$	0.08				$	(0.03	)			$	0.11		367	%
Per-share net income - basic and diluted	$	0.07				$	0.01				$	0.06		600	%

Revenues

Tenant reimbursements increased $12.30 million, or 3452%, for the three months ended ~~June~~September 30, 2014 compared to the same period in 2013, primarily as a result of (i) the expiration of a majority of State Farm's operating expense reimbursement abatements at the 64 & 66 Perimeter Center Buildings in December 2013 and (ii) an increase in property operating costs, as described below, of which a portion is reimbursed by our tenants.

Other property income increased $0.37 million for the three months ended ~~June~~September 30, 2014 compared to the same period in 2013, due to (i) an early lease termination option exercised by Leidos, effective December 31, 2014, for approximately 29,000 square feet of its space in the Franklin Center Building and (ii) an agreement reached with JP Morgan to terminate the remaining floor of its lease at the Royal Ridge Building effective January 23, 2015. ~~The~~These lease ~~termination~~terminations will result in a total ~~contraction~~termination penalty ~~fee~~fees from Leidos and JP Morgan of approximately $1.0 million and $1.8 million, respectively, payable to us and recognized on a straight-line basis from ~~March~~the ~~2014~~early termination notice dates through December 2014 and January 2015, respectively. This income is offset by additional depreciation and amortization related to the acceleration of depreciation and amortization for the remaining tangible and intangible lease assets associated with the early lease ~~termination~~terminations. We are currently marketing the ~~termination~~terminated space for lease in both properties.

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Expenses

Property operating costs increased $0.69 million, or 1015%, for the three months ended ~~June~~September 30, 2014 compared to the same period in 2013, primarily as a result of an increase in (i) real estate tax expenses at 7601 Technology Way, the Franklin Center Building, 4650 Lakehurst Court, and the 64 & 66 Perimeter Center Buildings, (ii) repairs and maintenance work completed at several properties, and (iii) utility and maintenance expenses at the 64 & 66 Perimeter Center Buildings due to an increase in occupancy in 2014. Asset and property management fees decreased $1.5 million, or 85%, for the three months ended September 30, 2014 compared to the same period in 2013, as a result of no longer incurring related-party asset management fees due to our transition to self-management and termination of the Revised Advisory Agreement effective December 31, 2013. Property operating costs and management fees represented approximately 35% and 44% of total revenues for the three months ended September 30, 2014 and September 30, 2013, respectively.

General and administrative expenses increased $1.7 million, or 349%, for the three months ended September 30, 2014 compared to the same period in 2013, representing 11% and 3% of revenues, respectively, primarily as a result of the employment-related costs and other costs we incur as a self-managed company and costs incurred in connection with the exploration of strategic options. The increase in general and administrative expenses, excluding the impact of $0.5 million of costs incurred in connection with the exploration of strategic options, was offset by the elimination of the advisory fees and expenses previously paid to the Advisor as an externally managed company, resulting in net cost savings to us of approximately $0.3 million, or 16%, for the three months ended September 30, 2014.

Other Income (Expense)

Interest expense remained relatively stable for the three months ended September 30, 2014 compared to the same period in 2013. Future levels of interest expense will vary, primarily based on the amounts of future borrowings and the costs of borrowings. Future borrowings will be used primarily to invest in additional capital expenditures, including improvements to our existing properties, as well as potential future acquisitions of real estate properties.

Net Income

Our net income increased $1.2 million, or 493%, for the three months ended September 30, 2014 compared to the same period in 2013, primarily due to an increase in our real estate operating income of $1.2 million as a result of the expiration of a majority of State Farm's operating expense reimbursement abatements at the 64 & 66 Perimeter Center Buildings in December 2013, and the elimination of advisory fees and expenses previously paid to the Advisor as an externally managed company, partially offset by the increase in general and administrative expenses related to employment-related costs and other costs incurred as a self-managed company and costs incurred in connection with the exploration of strategic options. Our net income per share improved to $0.07 for the three months ended September 30, 2014 compared to $0.01 for the three months ended September 30, 2013 due to the improvement in our net income discussed above.

Except as noted in the sections above and absent any additional acquisitions, we expect that real estate operating results in the near term will remain relatively stable as compared to the third quarter of 2014.

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~~4650~~Comparison ~~Lakehurst~~of ~~Court, and (ii) utility and maintenance expenses at~~ the 64nine ~~& 66 Perimeter Center Buildings due to an increase in occupancy in 2014. Asset and property management fees decreased $1.3 million, or 84%, for the three~~ months ended ~~June~~September 30, 2014 ~~compared~~versus to the ~~same~~nine period in 2013, as a result of no longer incurring related-party asset management fees due to our transition to self-management and termination of the Revised Advisory Agreement effective December 31, 2013. Property operating costs and management fees represented approximately 35% and 42% of total revenues for the three months ended ~~June~~September 30, ~~2014 and June 30,~~ 2013~~, respectively.~~

~~General~~The ~~and~~following ~~administrative~~table ~~expenses~~sets ~~increased~~forth ~~$0.3~~data ~~million,~~from orour ~~22%,~~consolidated statements of operations for the ~~three~~nine months ended ~~June~~September 30, 2014 ~~compared~~and ~~to the same period in~~ 2013, ~~representing 8% and 7% of revenues,~~ respectively, ~~primarily~~ as awell ~~result~~as ofeach ~~the~~balance ~~employment-related costs and other costs we incur~~ as a ~~self-managed~~percentage ~~company. The increase in general and administrative expenses was offset by the elimination~~ of ~~the~~total ~~advisory~~revenues ~~fees and expenses previously paid to the Advisor as an externally managed company, resulting in net cost savings to us of approximately $0.9 million, or 37%,~~ for the ~~three~~same ~~months~~periods ~~ended June 30, 2014.~~ presented:

Acquisition fees and expenses decreased $0.7 million, or 100%, for the three months ended June 30, 2014 compared to the same period in 2013, primarily as a result of the expiration of our Initial Offering on June 10, 2013. Absent any additional acquisitions, we do not expect to incur any future acquisition fees and expenses in future periods.



	Nine months ended September 30, 2014			% of Revenues		Nine months ended September 30, 2013			% of Revenues		$ Increase (Decrease)			% Increase (Decrease)
Revenues:
Rental income	$	39,632,076		70	%	$	39,768,100		78	%	$	(136,024	)	0	%
Tenant reimbursements	16,042,239			28	%	11,408,872			22	%	4,633,367			41	%
Other property income	1,079,970			2	%	32,755			0	%	1,047,215			3,197	%
Total revenues	56,754,285			100	%	51,209,727			100	%	5,544,558			11	%
Expenses:
Property operating costs	19,173,417			34	%	16,955,899			33	%	2,217,518			13	%
Asset and property management fees:
Related-party	—			—	%	3,981,442			8	%	(3,981,442		)	(100	)%
Other	783,662			1	%	754,159			1	%	29,503			4	%
Depreciation	13,703,832			24	%	13,239,404			26	%	464,428			4	%
Amortization	8,814,927			16	%	8,423,730			17	%	391,197			5	%
General and administrative	5,290,872			9	%	3,109,679			6	%	2,181,193			70	%
Acquisition fees and expenses	—			—	%	1,598,057			3	%	(1,598,057		)	(100	)%
Total expenses	47,766,710			84	%	48,062,370			94	%	(295,660		)	(1	)%
Real estate operating income	8,987,575			16	%	3,147,357			6	%	5,840,218			186	%
Other income (expense):
Interest expense	(9,252,283		)	(16	)%	(9,328,192		)	(18	)%	(75,909		)	(1	)%
Interest and other income	5,212,466			9	%	5,175,356			10	%	37,110			1	%
Income (loss) before income tax expense	4,947,758			9	%	(1,005,479		)	N/M		5,953,237			592	%
Income tax expense	(118,684		)	0	%	(156,640		)	0	%	(37,956		)	(24	)%
Net income (loss)	$	4,829,074		9	%	$	(1,162,119	)	N/M		$	5,991,193		516	%
Per-share net income (loss) - basic and diluted	$	0.24				$	(0.06	)			$	0.30		500	%

~~Other Income (Expense)~~Revenues

~~Interest~~Tenant ~~expense~~reimbursements ~~remained~~increased ~~relatively~~$4.6 ~~stable~~million, or 41%, for the ~~three~~nine months ended ~~June~~September 30, 2014 compared to the same period in 2013., ~~Future~~primarily ~~levels~~as ofa ~~interest~~result ~~expense~~of ~~will~~(i) ~~vary,~~the ~~primarily~~expiration ~~based~~of ona ~~the~~majority ~~amounts~~ of ~~future~~State ~~borrowings~~Farm's ~~and~~operating ~~the~~expense ~~costs~~reimbursement ofabatements ~~borrowings.~~at ~~Future~~the ~~borrowings~~64 ~~will~~& be66 ~~used~~Perimeter ~~primarily~~Center toBuildings ~~invest~~ in ~~additional~~December ~~capital~~2013 ~~expenditures,~~and ~~including~~(ii) ~~improvements~~an toincrease ~~our~~in ~~existing~~property ~~properties~~operating costs, as ~~well~~described asbelow, ~~potential~~of ~~future~~which ~~acquisitions~~a ofportion ~~real~~is ~~estate~~reimbursed ~~properties~~by our tenants.

~~Net~~Other ~~Income~~property income increased $1.0 million for the nine months ended September 30, 2014 compared to the same period in 2013, due to (~~Loss~~i) an early lease termination option exercised by Leidos, effective December 31, 2014, for approximately 29,000 square feet of its space in the Franklin Center Building and (ii) an agreement reached with JP Morgan to terminate the remaining floor of its lease at the Royal Ridge Building effective January 23, 2015. These lease terminations will result in total termination penalty fees from Leidos and JP Morgan of approximately $1.0 million and $1.8 million, respectively, payable to us and recognized on a straight-line basis from the early termination notice dates through December 2014 and January 2015, respectively. This income is offset by additional depreciation and amortization related to the acceleration of depreciation and amortization for the remaining tangible and intangible lease assets associated with the early lease terminations. We are currently marketing the terminated space for lease in both properties.

Our net income increased to $1.7 million for the three months ended June 30, 2014 from a net loss of $0.6 million for the three months ended June 30, 2013, primarily due to an increase in our real estate operating income of $2.3 million as a result of the expiration of a majority of State Farm's operating expense reimbursement abatements at the 64 & 66 Perimeter Center Buildings in December 2013, and the elimination of advisory fees and expenses previously paid to the Advisor as an externally managed company, partially offset by the increase in employment-related costs and other costs incurred as a self-managed company. Our net income per share improved to $0.08 for the three months ended June 30, 2014 from a net loss per share of $0.03 for the three months ended June 30, 2013 due to the improvement in our net income discussed above.

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Comparison of the six months ended June 30, 2014 versus the six months ended June 30, 2013

The following table sets forth data from our consolidated statements of operations for the six months ended June 30, 2014 and 2013, respectively, as well as each balance as a percentage of total revenues for the same periods presented:

	Six months ended June 30, 2014			% of Revenues		Six months ended June 30, 2013			% of Revenues		$ Increase (Decrease)			% Increase (Decrease)
Revenues:
Rental income	$	26,523,945		71	%	$	26,548,515		78	%	$	(24,570	)	0	%
Tenant reimbursements	10,319,602			28	%	7,644,953			22	%	2,674,649			35	%
Other property income	349,141			1	%	—			0	%	349,141			N/M
Total revenues	37,192,688			100	%	34,193,468			100	%	2,999,220			9	%
Expenses:
Property operating costs	12,597,077			34	%	11,244,021			33	%	1,353,056			12	%
Asset and property management fees:
Related-party	—			—	%	2,468,183			8	%	(2,468,183		)	(100	)%
Other	517,397			1	%	497,829			1	%	19,568			4	%
Depreciation	9,017,743			24	%	8,730,620			26	%	287,123			3	%
Amortization	5,746,580			16	%	5,569,348			16	%	177,232			3	%
General and administrative	3,144,383			8	%	2,632,131			8	%	512,252			19	%
Acquisition fees and expenses	—			—	%	1,523,127			4	%	(1,523,127		)	(100	)%
Total expenses	31,023,180			83	%	32,665,259			96	%	(1,642,079		)	(5	)%
Real estate operating income	6,169,508			17	%	1,528,209			4	%	4,641,299			304	%
Other income (expense):
Interest expense	(6,186,702		)	(17	)%	(6,285,808		)	(18	)%	(99,106		)	(2	)%
Interest and other income	3,455,366			9	%	3,450,220			10	%	5,146			0	%
Income (loss) before income tax expense	3,438,172			9	%	(1,307,379		)	N/M		4,745,551			363	%
Income tax expense	(61,143		)	0	%	(99,417		)	0	%	(38,274		)	(38	)%
Net income (loss)	$	3,377,029		9	%	$	(1,406,796	)	N/M		$	4,783,825		340	%
Per-share net income (loss) - basic and diluted	$	0.17				$	(0.07	)			$	0.24		343	%

Revenues

Tenant reimbursements increased $2.7 million, or 35%, for the six months ended June 30, 2014 compared to the same period in 2013, primarily as a result of (i) the expiration of a majority of State Farm's operating expense reimbursement abatements at the 64 & 66 Perimeter Center Buildings in December 2013 and (ii) an increase in property operating costs, as described below, of which a portion is reimbursed by our tenants.

Other property income increased $0.3 million for the six months ended June 30, 2014 compared to the same period in 2013, due to an early lease termination option exercised by Leidos, effective December 31, 2014, for approximately 29,000 square feet of its space in the Franklin Center Building. The lease termination will result in a total contraction penalty fee of approximately $1.0 million payable to us and recognized on a straight-line basis from March 2014 through December 2014. We expect other property income to continue to increase throughout 2014 as we recognize the remaining portion of the related lease termination income. In addition, we expect an increase in depreciation and amortization throughout 2014 related to the acceleration of depreciation and amortization for the remaining tangible and intangible lease assets associated with the early lease termination. We are currently marketing the termination space for lease.

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Expenses

Property operating costs increased $12.42 million, or 1213%, for the ~~six~~nine months ended ~~June~~September 30, 2014 compared to the same period in 2013, primarily as a result of an increase in (i) real estate tax expenses at 7601 Technology Way, 4650 Lakehurst Court, ~~and~~ the Franklin Center Building, and the 64 & 66 Perimeter Center Buildings, (ii) repairs and maintenance work completed at several properties, (iii) utility and maintenance expenses at the 64 & 66 Perimeter Center Buildings due to an increase in occupancy in 2014, and (~~iii~~iv) seasonal maintenance costs at several properties due to extreme weather conditions experienced in 2014. Asset and property management fees decreased $2.4.0 million, or 83%, for the ~~six~~nine months ended ~~June~~September 30, 2014 compared to the same period in 2013, as a result of no longer incurring related-party asset management fees due to our transition to self-management and termination of the Revised Advisory Agreement effective December 31, 2013. Property operating costs and management fees represented approximately 35% and 42% of total revenues for the ~~six~~nine months ended ~~June~~September 30, 2014 and ~~June~~September 30, 2013, respectively.

General and administrative expenses increased $02.52 million, or 1970%, for the ~~six~~nine months ended ~~June~~September 30, 2014 compared to the same period in 2013, representing 9% and 6% of revenues, respectively, primarily as a result of the employment-related costs and other costs we incur as a self-managed company. ~~General~~ and ~~administrative~~costs ~~expenses~~incurred ~~represented~~in 8%connection ofwith ~~revenues~~the inexploration ~~both~~of ~~periods~~strategic options. The increase in general and administrative expenses, excluding the impact of $0.6 million of costs incurred in connection with the exploration of strategic options, was offset by the elimination of the advisory fees and expenses previously paid to the Advisor as an externally managed company, resulting in net cost savings to us of approximately $12.82 million, or 3732%, for the ~~six~~nine months ended ~~June~~September 30, 2014.

Acquisition fees and expenses decreased $1.56 million, or 100%, for the ~~six~~nine months ended ~~June~~September 30, 2014 compared to the same period in 2013, as a result of the expiration of our Initial Offering on June 10, 2013. Absent any additional acquisitions, we do not expect to incur any future acquisition fees and expenses in future periods.

Other Income (Expense)

Interest expense remained relatively stable for the ~~six~~nine months ended ~~June~~September 30, 2014 compared to the same period in 2013. Future levels of interest expense will vary, primarily based on the amounts of future borrowings and the costs of borrowings. Future borrowings will be used primarily to invest in additional capital expenditures, including improvements to our existing properties, as well as potential future acquisitions of real estate properties.

Net Income (Loss)

Our net income increased to $3.4.8 million for the ~~six~~nine months ended ~~June~~September 30, 2014 from a net loss of $1.42 million for the ~~six~~nine months ended ~~June~~September 30, 2013, primarily due to an increase in our real estate operating income of $45.68 million as a result of the expiration of a majority of State Farm's operating expense reimbursement abatements at the 64 & 66 Perimeter Center Buildings in December 2013, and the elimination of advisory fees and expenses previously paid to the Advisor as an externally managed company, partially offset by the increase in general and administrative expenses related to employment-related costs and other costs incurred as a self-managed company and costs incurred in connection with the exploration of strategic options. Our net income per share improved to $0.1724 for the ~~six~~nine months ended ~~June~~September 30, 2014 from a net loss per share of $0.0706 for the ~~six~~nine months ended ~~June~~September 30, 2013 due to the improvement in our net income discussed above.

Funds From Operations and Adjusted Funds From Operations

Funds from Operations ("FFO"), as defined by the National Association of Real Estate Investment Trusts ("NAREIT"), is a non-GAAP financial measure considered by some equity REITs in evaluating operating performance. We compute FFO in accordance with NAREIT's definition as GAAP net income (loss) adjusted to exclude: gains (losses) on sales of real estate, impairments of real estate assets, real estate-related depreciation and amortization and adjustments for unconsolidated partnerships and joint ventures. We consider FFO a useful measure of our performance because it principally adjusts for the effects of GAAP depreciation and amortization of real estate assets, which assumes that the value of real estate diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe that FFO provides a meaningful supplemental measure of our performance. We believe

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unconsolidated partnerships and joint ventures. We consider FFO a useful measure of our performance because it principally adjusts for the effects of GAAP depreciation and amortization of real estate assets, which assumes that the value of real estate diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe that FFO provides a meaningful supplemental measure of our performance. We believe that the use of FFO, combined with the required GAAP presentations, is beneficial in improving our investors' understanding of our operating results and allowing for comparisons among other companies who define FFO as we do.

We do not, however, believe that FFO is the only measure of the sustainability of our operating performance. Changes in GAAP accounting and reporting rules that were put into effect after the establishment of NAREIT's definition of FFO in 1999 result in the inclusion of a number of items in FFO that do not correlate with the sustainability of our operating performance (e.g., acquisition expenses and amortization of certain in-place lease intangible assets and liabilities, among others). Therefore, in addition to FFO, we present Adjusted Funds from Operations ("AFFO"), a non-GAAP measure. AFFO is calculated by adjusting FFO to exclude the income and expenses that we believe are not reflective of the sustainability of our ongoing operating performance, as further explained below:

•

Additional amortization of lease assets (liabilities). GAAP implicitly assumes that the value of intangible lease assets (liabilities) diminishes predictably over time and, thus, requires these charges to be recognized ratably over the respective lease terms. Such intangible lease assets (liabilities) arise from the allocation of acquisition price related to the value of opportunity costs associated with lost rentals, the value of tenant relationships, and the value of effective rental rates of in-place leases that are above or below market rates of comparable leases at the time of acquisition. Like real estate values, market lease rates in aggregate have historically risen or fallen with local market conditions. As a result, management believes that, by excluding these charges, AFFO provides useful supplemental information that is reflective of the performance of our real estate investments and that is useful in assessing the sustainability of our operations.

•

Straight-line rental income. In accordance with GAAP, rental payments are recognized as income on a straight-line basis over the terms of the respective leases. Thus, for any given period, straight-line rental income represents the difference between the contractual rental billings for that period and the average rental billings over the lease term for the same length of time. This application results in income recognition that can differ significantly from the current contract terms. By adjusting for this item, we believe AFFO provides useful supplemental information reflective of the realized economic impact of our leases, which is useful in assessing the sustainability of our operating performance.

•

Real estate acquisition-related costs. Acquisition expenses are incurred for investment purposes (i.e., to promote portfolio appreciation and generation of future earnings over the long term) and, therefore, do not correlate with the ongoing operations of our portfolio. We believe that excluding these items from AFFO provides supplemental information indicative of the sustainability of our operations. This exclusion also improves comparability of our reporting periods and of our company with other real estate operators.

•

Noncash interest expense. This item represents amortization of financing costs paid in connection with executing our debt instruments. GAAP requires these items to be recognized over the remaining term of the respective debt instrument, which may not correlate with the ongoing operations of our real estate portfolio. By excluding these items, we believe that AFFO provides supplemental information that allows for better comparability of reporting periods, which is useful in assessing the sustainability of our operations.

•

Master lease proceeds. In conjunction with certain acquisitions, we may enter into a master lease agreement with a seller, whereby the seller is obligated to pay us rent pertaining to certain spaces impacted by existing rental abatements. In accordance with GAAP, master lease proceeds are recorded as an adjustment to the basis of real estate assets at the time of acquisition, and, accordingly, are not included in revenues, net income, or FFO. This application results in income recognition that can differ significantly from current contract terms. By adjusting for this item, we believe AFFO is reflective of the realized economic impact of our leases (including master leases) that is useful in assessing the sustainability of our operating performance.

~~Presentation~~ of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and AFFO the same way, so comparisons with other REITs may not be meaningful. FFO and AFFO should not be considered alternatives to 30

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Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and AFFO the same way, so comparisons with other REITs may not be meaningful. FFO and AFFO should not be considered alternatives to GAAP net income. Rather, these measures should be reviewed in conjunction with GAAP measurements, including GAAP net income, as an indication of our performance. FFO and AFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments and uncertainties, nor is either measure indicative of funds available to fund our cash needs, including our ability to make distributions.

Reconciliations of our net income (loss) to FFO and AFFO for the three months and ~~six~~nine months ended ~~June~~September 30, 2014 and 2013 are provided below:

Three Months Ended

~~Six~~Nine Months Ended

June 30,

September 30,

2014

2013

2014

2013

Reconciliation of Net Income (Loss) to FFO and AFFO:

Net income (loss)

1,~~697~~452,~~210~~045

~~(566~~244,~~570~~677

)

34,~~377~~829,~~029~~074

(1,~~406~~162,~~796~~119

)

Adjustments:

Depreciation of real estate assets

4,~~568~~684,~~478~~613

4,~~431~~508,~~200~~784

913,~~015~~700,~~553~~166

813,~~730~~239,~~620~~404

Amortization of lease-related costs

23,~~987~~068,~~482~~347

2,~~738~~854,~~498~~382

58,~~746~~814,~~580~~927

58,~~569~~423,~~348~~730

Total Funds From Operations adjustments

7,~~555~~752,960

7,~~169~~363,~~698~~166

1422,~~762~~515,~~133~~093

1421,~~299~~663,~~968~~134

Funds From Operations

9,~~253~~205,~~170~~005

67,~~603~~607,~~128~~843

1827,~~139~~344,~~162~~167

1220,~~893~~501,~~172~~015

Other income (expenses) included in net income (loss) that do not correlate with our operations:

Additional amortization of lease assets

820,~~966~~737

~~693~~702,~~982~~933

12,~~540~~361,~~754~~491

12,~~418~~121,~~560~~493

Straight-line rental income

(~~315~~78,~~888~~903

)

(1,~~993~~943,~~744~~024

)

(~~878~~957,~~301~~204

)

(35,~~987~~930,~~333~~357

)

Real estate acquisition-related costs

—

~~673~~74,~~233~~930

—

1,~~523~~598,~~127~~057

Noncash interest expense

~~300~~276,~~419~~482

301,482

~~601~~878,~~901~~383

~~602~~904,~~964~~446

Master lease proceeds

~~116~~42,~~750~~984

2,~~472~~550,~~240~~916

~~462~~504,~~002~~986

47,~~813~~364,~~599~~515

Adjusted Funds From Operations

10,~~175~~266,~~417~~305

89,~~750~~295,~~321~~080

1930,~~865~~131,~~518~~823

1726,~~264~~559,~~089~~169

Weighted-average common shares outstanding – basic and diluted

20,~~477~~473,~~539~~024

1920,~~859~~416,~~741~~703

20,~~456~~462,~~567~~113

19,~~067~~522,~~673~~291

FFO per common share - basic and diluted

0.45

0.3337

01.8934

01.6805

AFFO per common share - basic and diluted

0.50

0.4446

01.9747

01.9136

Election as a REIT

We have elected to be taxed as a REIT under the Code and have operated as such beginning with our taxable year ended December 31, 2010. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our adjusted taxable income, as defined in the Code, to our stockholders, computed without regard to the dividends-paid deduction and by excluding our net capital gain. As a REIT, 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, we will then be subject to federal income taxes on our taxable income for that year and for the four years following the year during which qualification is lost, unless the IRS grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available ~~for distribution to our stockholders. However, we believe that we are organized and operate in such a manner as to qualify for treatment as a REIT for federal income tax purposes.~~

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for distribution to our stockholders. However, we believe that we are organized and operate in such a manner as to qualify for treatment as a REIT for federal income tax purposes.

We may perform additional, noncustomary services for tenants of buildings that we own through taxable REIT subsidiaries, including any real estate or non-real-estate-related services; however, any earnings related to such services are subject to federal and state income taxes. In addition, for us to continue to qualify as a REIT, we must limit our investments in taxable REIT subsidiaries to 25% of the value of our total assets. TRS is a wholly owned subsidiary of Signature Office REIT that is organized as a Delaware limited liability company. Through December 31, 2013, we elected to treat TRS as a taxable REIT subsidiary. On December 9, 2013, we elected to treat TRS as a disregarded entity, effective January 1, 2014.

Deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted rates expected to be in effect when the temporary differences reverse. Deferred tax expense or benefits are recognized in the financial statements according to the changes in deferred tax assets or liabilities between years. Valuation allowances are established to reduce deferred tax assets when it becomes more likely than not that such assets, or portions thereof, will not be realized. No provision for federal income taxes has been made in our accompanying consolidated financial statements, other than the provision relating to TRS, as we made distributions in excess of taxable income for the periods presented.

We are subject to certain state and local taxes related to property operations in certain locations, which have been provided for in our accompanying consolidated financial statements. We record interest and penalties related to uncertain tax positions, if any, as general and administrative expense in the accompanying consolidated statements of operations.

Inflation

We are exposed to inflation risk, as income from long-term leases is intended to be the primary source of our cash flows from operations. There are provisions in the majority of our tenant leases that are intended to protect us from, and mitigate the risk of, the impact of inflation. These provisions include rent steps; reimbursement billings for operating expense pass-through charges; real estate tax and insurance reimbursements; or in some cases, annual reimbursement of operating expenses above a certain allowance. However, due to the long-term nature of the leases, the leases may not reset frequently enough to fully cover inflation.

Application of Critical Accounting Policies

Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and 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. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

Investment in Real Estate Assets

We are required to make subjective assessments as to the useful lives of our depreciable assets. We consider the period of future benefit of the assets to determine the appropriate useful lives. These assessments have a direct impact on net income. The estimated useful lives of our assets by class are as follows:

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Buildings	40 years
Building improvements	5-25 years
Site improvements	15 years
Tenant improvements	Shorter of lease term or economic life
Furniture, fixtures, and equipment	3-5 years
Intangible lease assets	Lease term

Evaluating the Recoverability of Real Estate Assets

We continually monitor events and changes in circumstances that could indicate that the carrying amounts of the real estate and related intangible assets of both operating properties and properties under construction in which we have an ownership interest, either directly or through investments in joint ventures, may not be recoverable.

When indicators of potential impairment are present that suggest that the carrying amounts of real estate assets and related intangible assets may not be recoverable, we assess the recoverability of these assets by determining whether the respective carrying values will be recovered through the estimated undiscounted future operating 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 values, we adjust the carrying value of the real estate assets and related intangible assets to the estimated fair values, pursuant to the property, plant, and equipment accounting standard for the impairment or disposal of long-lived assets, and recognize an impairment loss. Estimated fair values are calculated based on the following information, in order of preference, depending upon availability: (i) recently quoted market price(s) for the subject property, or highly comparable properties, under sufficiently active and normal market conditions, or (ii) the present value of future cash flows, including estimated residual value. We have determined that there has been no impairment in the carrying value of our real estate assets and related intangible assets to date.

Projections of expected future operating cash flows require that we estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. The subjectivity of assumptions used in the future cash flow analysis, including discount rates, could result in an incorrect assessment of the property's fair value and could result in the misstatement of the carrying value of our real estate assets and related intangible assets and net income (loss).

Allocation of Purchase Price of Acquired Assets

Upon the acquisition of real properties, we allocate the purchase price of properties to tangible assets, consisting of land and building, site improvements, and identified intangible assets and liabilities, including the value of in-place leases, based in each case on our estimate of their fair values.

The fair values of the tangible assets of an acquired property (which includes land and building) are determined by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to land and building based on our determination of the relative fair value of these assets. We determine the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors we consider in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases, including leasing commissions and other related costs. In estimating carrying costs, we include real estate taxes, insurance, and other operating expenses during the expected lease-up periods based on current market demand.

Intangible Assets and Liabilities Arising from In-Place Leases Where We Are the Lessor

As further described below, in-place leases where we are the lessor may have values related to direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals that are avoided by acquiring an in-place lease, tenant relationships, and effective contractual rental rates that are above or below market rates:

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•

Direct costs associated with obtaining a new tenant, including commissions, tenant improvements, and other direct costs, are estimated based on management's consideration of current market costs to execute a similar lease. Such direct costs are included in intangible lease origination costs in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases.

•

The value of opportunity costs associated with lost rentals avoided by acquiring an in-place lease is calculated based on the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Such opportunity costs are included in intangible lease assets in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases.


•	The value of tenant relationships is calculated based on the expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. Values associated with tenant relationships are included in intangible lease assets in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases.

•

The value of effective rental rates of in-place leases that are above or below the market rates of comparable leases is calculated based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be received pursuant to the in-place leases and (ii) management's estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining terms of the leases. The capitalized above-market and below-market lease values are recorded as intangible lease assets or liabilities and are amortized as an adjustment to rental income over the remaining terms of the respective leases.

See Note 2 to our accompanying consolidated financial statements included herein for a tabular presentation of our intangible in-place lease assets and liabilities and related amortization expense.

Evaluating the Recoverability of Intangible Assets and Liabilities

The values of intangible lease assets and liabilities are determined based on assumptions made at the time of acquisition and have defined useful lives, which correspond with the lease terms. There may be instances in which intangible lease assets and liabilities become impaired, and we are required to expense the remaining asset or liability immediately or over a shorter period of time. Lease restructurings, including, but not limited to, lease terminations and lease extensions, may impact the value and useful life of in-place leases. In-place leases that are terminated, partially terminated, or modified will be evaluated for impairment if the original in-place lease terms have been modified. In situations where the discounted cash flows of the modified in-place lease stream are less than the discounted cash flows of the original in-place lease stream, we reduce the carrying value of the intangible lease assets to reflect the modified lease terms and recognize an impairment loss. For lease extensions of in-place leases that are executed more than one year prior to the original lease expiration date, the useful life of the intangible lease assets and liabilities will be extended over the new lease term with the exception of those components, such as lease commissions and tenant allowances, which have been renegotiated for the extended term. Renegotiated in-place lease components, such as lease commissions and tenant allowances, will be amortized over the shorter of the useful life of the asset or the new lease term. We have determined that there has been no impairment in the carrying value of our intangible assets to date.

Related-Party Transactions and Agreements

During 2013, we were party to agreements with the Advisor, WIS, and Wells Management whereby we paid certain fees and reimbursements to the Advisor, WIS, and Wells Management for acquisition fees, selling commissions, dealer-manager fees, property management fees, asset management fees, reimbursement of other offering costs, and reimbursement of operating costs. In connection with the closing of the primary portion of our Initial Offering and our transition to self-management, we terminated the related agreements on or before December 31, 2013. For the period from January 1, 2014 through June 30, 2014, we were party to the TSA with WREF, a former related party, pursuant to which WREF and its affiliates provide certain consulting, support and transitional services to us in order to facilitate our successful transition to self-management. From July 1, 2014 through September 30, 2014, we ~~are~~were party to the ~~TSA~~

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TSA Amendment, which ~~extends~~extended services under the TSA as it ~~relates~~related to certain transfer agent and client services functions. Effective June 27, 2014, we entered into an agreement with Wells REF - 6200 The Corners Parkway Owner, LLC, a subsidiary of WREF, to lease 4,221 square feet, or approximately 3%, of the 6200 The Corners Parkway Building to serve as our corporate headquarters. This lease does not indicate any other business relationship between us and WREF except one of a landlord and tenant. See Note 8 to our accompanying consolidated financial statements included herein for a discussion of the various related-party agreements and the related transactions, fees, and reimbursements.

Commitments and Contingencies

We are subject to certain commitments and contingencies with regard to certain transactions. Refer to Note 5 ~~and Note 8~~ of our accompanying consolidated financial statements for further explanation. ~~Examples~~An example of such commitments and contingencies ~~include:~~includes obligations under capital leases.

• obligations under capital leases; and

• commitments under existing lease agreements.

Subsequent Event

Declaration of Distributions

On ~~August~~November 612, 2014, our board of directors declared a distribution to stockholders for the ~~third~~fourth quarter of 2014 in the amount of $0.375 per share (a 6.0% annualized yield on a $25.00 original share price) on the outstanding shares of common stock payable to stockholders of record as of ~~September~~December 15, 2014. Such distributions will be paid in ~~September~~December 2014.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Omitted pursuant to Regulation S-K, Item 305(e).


ITEM 4.	CONTROLS AND PROCEDURES

Management's Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods in SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Principal Executive Officer and our Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~June~~September 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.	OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

From time to time, we are party to legal proceedings, which arise in the ordinary course of our business. We are not currently involved in any legal proceedings of which the outcome is reasonably likely to have a material adverse effect ~~on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by governmental authorities.~~

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on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by governmental authorities.


ITEM 1A.	RISK FACTORS

There have been no material changes from the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013.


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

(a) There were no unregistered sales of equity securities during the quarter ended ~~June~~September 30, 2014.


(b)	Not applicable.

Period	Total Number of Shares Redeemed(1)	Average Price Paid per Share	Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program(2)	Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
April 2014	14,168	$22.65	14,168	(3)
May 2014	—	N/A	—
June 2014	—	N/A	—

(1) All purchases of our equity securities by us in the three months ended June 30, 2014 were made pursuant to the Amended SRP.

(2) We announced the commencement of the program on June 10, 2010, and it was subsequently amended on November 8, 2011, August 13, 2012 and August 22, 2013. The Amended SRP was terminated effective April 30, 2014.

(3) During the period presented, we limited the dollar value and number of shares that may be redeemed under the program as described below.

Our board of directors previously adopted a share redemption program, as amended, referred to as the Amended SRP, pursuant to which investors could sell their shares to us subject to numerous restrictions. The Amended SRP was terminated effective April 30, 2014. In April 2014, Ordinary Redemption (defined below) requests exceeded the limits of the Amended SRP and, as such, were prorated pursuant to the terms of the Amended SRP at a rate of approximately 7.0% respectively. All shares tendered for redemption that could not be redeemed prior to April 30, 2014 are no longer held in queue for redemption at a later date under the Amended SRP or otherwise.

In addition to the one-year holding period for “Ordinary Redemptions” (redemptions not sought within two years of a stockholder’s death, qualifying disability or qualification for federal assistance in connection with the payment of costs of confinement to a long-term care facility), through its termination, effective April 30, 2014, the Amended SRP was subject to the following limitations on the dollar value and number of shares that we could redeem:

• We did not redeem shares on any day to the extent that such redemptions would cause the amount of Ordinary Redemptions during the 12-month period ending on such day to exceed 70% of the net proceeds from the DRP during the same 12-month period.

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• We limited all redemptions so that the aggregate of such redemptions during the 12-month period ending on such redemption date did not exceed:

• 100% of the net proceeds from our DRP during such 12-month period; or

• 5% of the weighted-average number of shares outstanding in such 12-month period.

We did not redeem any share that had been transferred for value by a stockholder. After a transfer for value, the transferee and all subsequent holders of the share were not eligible to participate in the Amended SRP with respect to the shares so transferred. For additional details about the termination of the Amended SRP, see Note 6 to the accompanying consolidated financial statements.


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES


(a)	There have been no defaults with respect to any of our indebtedness.


(b)	Not applicable.


ITEM 4.	MINE SAFETY DISCLOSURES

Not applicable.


ITEM 5.	OTHER INFORMATION

(a) During the ~~second~~third quarter of 2014, there was no information that was required to be disclosed in a report on Form 8-K that was not disclosed in a report on Form 8-K.

Declaration of Distributions

On ~~August~~November 612, 2014, our board of directors declared a distribution to stockholders for the ~~third~~fourth quarter of 2014 in the amount of $0.375 per share (a 6% annualized yield on a $25.00 original share price) on the outstanding shares of common stock payable to stockholders of record as of ~~September~~December 15, 2014. Such distributions will be paid in ~~September~~December 2014.

Submission of Matters to a Vote of Security Holders

On August 6, 2014, we held our annual meeting of stockholders for the purpose of:

1)electing the following individuals to our board of directors: Frank M. Bishop, Stephen J. LaMontagne, and Harvey E. Tarpley;

2)considering and voting upon four proposals to amend our charter to:

A.eliminate certain provisions that had previously been required by state securities administrators in connection with our Initial Offering or that relate to such required provisions;

B.add language to specify that the charter provision regarding the requirements of tender offers will apply until we list our shares on a national securities exchange;

C.add a provision that enables us to declare and pay a dividend of one class of our stock to the holders of shares of another class of stock; and

D.eliminate a provision that exempts us from the application of Subtitle 8 of Title 3 of the Maryland General Corporation Law.

3)considering and voting upon a proposal to permit our board of directors to adjourn the annual meeting, if necessary, to solicit additional proxies in favor of the foregoing proposals if there are not sufficient votes for the proposals; and

4)attending to other business properly presented at the meeting.

Table of Contents

All of the director nominees were elected to serve as directors until the next annual meeting of the stockholders and until their successors are duly elected and qualified. The number of votes cast for and votes withheld for each of the director nominees were as follows:

Name	Votes For	Votes Withheld
Frank M. Bishop	11,152,946	511,599
Stephen J. LaMontagne	11,142,526	522,019
Harvey E. Tarpley	11,140,872	523,673

The proposals to amend our charter were approved. The number of votes cast for, the number of votes cast against, and votes abstaining were as follows:

Name	Votes For	Votes Against	Abstain
Proposal 2.A (Eliminate Certain Charter Provisions)	10,475,805	456,281	732,459
Proposal 2.B (Tender Offer Provision Requirements)	10,644,569	375,336	644,640
Proposal 2.C (Add Dividend Provision)	10,311,357	611,467	741,721
Proposal 2.D (Eliminate Subtitle 8 of Title 3 Exemption)	10,353,334	427,055	884,156

We did not hold a vote on the last proposal as it was not necessary to adjourn the annual meeting to solicit additional proxies in favor of the proposals to amend our charter.

Amendment and Restatement of Charter

On August 6, 2014, at the annual meeting of our stockholders, our stockholders approved the Second Articles of Amendment, which were effective when filed with the State Department of Assessments and Taxation of Maryland on August 7, 2014. The Second Articles of Amendment are filed as Exhibit 3.1 hereto and are incorporated into this report by reference.

Amendment and Restatement of Bylaws

On August 6, 2014, our board of directors authorized and approved the Second Amended and Restated Bylaws, which amend and restate the Amended and Restated Bylaws, adopted by our board of directors on February 17, 2011. Under the Second Amended and Restated Bylaws, a majority of our outstanding voting stock will be required to call a special meeting of stockholders, as opposed to 10% or more of our outstanding voting stock as required under the Amended and Restated Bylaws. The Second Amended and Restated Bylaws were effective immediately upon effectiveness of the Second Articles of Amendment. The information set forth above with respect to the Second Amended and Restated Bylaws does not purport to be complete in scope and is qualified in its entirety by the full text of the Second Amended and Restated Bylaws, which are filed as Exhibit 3.2 hereto and are incorporated into this report by reference.


(b)	There are no material changes to the procedures by which stockholders may recommend nominees to our board of directors since the filing of our proxy statement on Schedule 14A in respect of our 2014 annual stockholders' meeting.


ITEM 6.	EXHIBITS

The exhibits required to be filed with this report are set forth on the Exhibit Index hereto and incorporated by reference herein.

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SIGNATURES

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

		SIGNATURE OFFICE REIT, INC.(Registrant)
August 7, 2014		/s/ Glen F. Smith
November 12, 2014		/s/ Glen F. Smith
		Glen F. SmithSenior Vice President, Chief Financial Officer and Principal Financial Officer

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EXHIBIT INDEX TO

~~SECOND~~THIRD QUARTER 2014 FORM 10-Q OF

SIGNATURE OFFICE REIT

ExhibitNo.			Description
3.1*			Second Articles of Amendment and Restatement
3.1			Second Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed with the Commission on August 7, 2014)
3.2*			Second Amended and Restated Bylaws
3.2			Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q filed with the Commission on August 7, 2014)
4.1			Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to Exhibit 4.2 to Pre-Effective Amendment No. 4 to the Registration Statement on Form S-11 (No. 333-163411) filed with the Commission on June 4, 2010.)
31.1*			Certification of the Principal Executive Officer of the Company, pursuant to Securities Exchange Act Rules 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*			Certification of the Principal Financial Officer of the Company, pursuant to Securities Exchange Act Rules 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*			Certification of the Principal Executive Officer and Principal Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*			XBRL Instance Document.
101.SCH*			XBRL Taxonomy Extension Schema.
101.CAL*			XBRL Taxonomy Extension Calculation Linkbase.
101.DEF*			XBRL Taxonomy Extension Definition Linkbase.
101.LAB*			XBRL Taxonomy Extension Label Linkbase.
101.PRE*			XBRL Taxonomy Extension Presentation Linkbase.

__________


*	Filed herewith.

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