See accompanying notes to condensed consolidated financial statements.

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to the condensed consolidated financial statements.

STRATEGIC REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014March 31, 2015

(Unaudited)

1. ORGANIZATION AND BUSINESS

Strategic Realty Trust, Inc. (the “Company”) was formed on September 18, 2008, as a Maryland corporation. Effective August 22, 2013, the Company changed its name from TNP Strategic Retail Trust, Inc. to Strategic Realty Trust, Inc. The Company believes it qualifies as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and has elected REIT status beginning with the taxable year ended December 31, 2009, the year in which the Company began material operations. The Company was initially capitalized by the sale of shares of common stock to Thompson National Properties, LLC (“TNP LLC”) on October 16, 2008.

On November 4, 2008, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a maximum of 100,000,000$1,000,000,000 in shares of its common stock to the public in its primary offering at $10.00 per share and 10,526,316$100,000,000 in shares of its common stock to the Company’s stockholders at $9.50 per share pursuant to its distribution reinvestment plan (“DRIP”) (collectively, the “Offering”). On August 7, 2009, the SEC declared the registration statement effective and the Company commenced the Offering. On February 7, 2013, the Company terminated the Offering and ceased offering shares of common stock in the primary offering and under the DRIP. As of the termination of the Offering on February 7, 2013 and as of September 30, 2014,March 31, 2015, the Company had accepted subscriptions for, and issued, 10,969,714 shares of common stock (net of share redemptions), including 391,182 shares of common stock pursuant to the DRIP, resulting in gross offering proceeds of $108,357,000.

On June 15, 2012, the Company filed a registration statement on Form S-11 with the SEC to register up to $900,000,000 in shares of the Company’s common stock in a follow-on public offering. The Company subsequently determined not to proceed with the follow-on public offering and on March 1, 2013, the Company requested that the SEC withdraw the registration statement for the follow-on public offering, effective immediately. As a result of the termination of the Offering and the withdrawal of the registration statement for the Company’s follow-on public offering, offering proceeds are not currently available to fund the Company’s cash needs, and will not be available untilunless the Company elects to, and is able to successfully engage in ananother offering of its securities.

On August 7, 2013,Substantially all of the Company’s business is conducted through Strategic Realty Operating Partnership, L.P., a Delaware limited partnership (the “OP”). As the Company allowedaccepted subscriptions for shares of its existing advisory agreement (the “Prior Advisory Agreement”) withcommon stock, it transferred substantially all of the Company’s prior advisor, TNP Strategic Retail Advisor, LLC (the “Prior Advisor”),net proceeds of the Offering to expire without renewal. On August 10, 2013,the OP as a capital contribution. As of March 31, 2015 and December 31, 2014, the Company entered into a new advisory agreement (the “Advisory Agreement”) withowned 96.2% of the limited partnership interest in the OP.

The Company is managed by SRT Advisor, LLC, a Delaware limited liability company (the “Advisor”). On July 15, 2014, the Advisory Agreementadvisory agreement with the Advisor (the “Advisory Agreement”) was renewed for an additional twelve months, beginning on August 10, 2014. Advisor manages the Company’s business as the Company’s external advisor pursuant to the Advisory Agreement. Advisor is an affiliate of Glenborough, LLC (together with its affiliates, “Glenborough”), a privately held full-service real estate investment and management company focused on the acquisition, management and leasing of commercial properties.

Beginning in December 2012 and ending August 10, 2013, Glenborough performed certain services for the Company pursuant to a Consulting Agreement (“Consulting Agreement”), which Consulting Agreement was cancelled when Glenborough became the Company’s Advisor.  The Company entered into the Consulting Agreement to assist it through the process of transitioning to a new external advisor as well as to provide other services. Pursuant to the Consulting Agreement, from December 2012 through April 2013, the Company agreed to pay Glenborough a monthly consulting fee of $75,000 and reimburse Glenborough for its reasonable out-of-pocket expenses. Effective May 1, 2013, the Company amended the Consulting Agreement to expand the services to include accounting provided to it by Glenborough and increased the monthly consulting fee payable to Glenborough to $90,000. On August 10, 2013, in connection with the execution of the Advisory Agreement with its advisor, Glenborough rebated $150,000 of consulting fees to the Company.

Substantially all of the Company’s business is conducted through Strategic Realty Operating Partnership, L.P. (formerly TNP Strategic Retail Operating Partnership, L.P.), a Delaware limited partnership (the “OP”). The initial limited partners of the OP were Prior Advisor and TNP Strategic Retail OP Holdings, LLC, a Delaware limited liability company (“TNP Holdings”) affiliated with Prior Advisor. Prior Advisor invested $1,000 in the OP in exchange for common units of the OP (“Common Units”) and TNP Holdings invested $1,000 in the OP in exchange for a separate class of limited partnership units (“Special Units”). As the Company accepted subscriptions for shares of its common stock, it transferred substantially all of the net proceeds of the Offering to the OP as a capital contribution. As of September 30, 2014 and December 31, 2013, the Company owned 96.2% of the limited partnership interest in the OP. As of December 31, 2013, Prior Advisor owned 0.01% of the limited partnership interest in the OP which was sold to Glenborough Property Partners, LLC (“GPP”), an affiliate of Glenborough, on January 24, 2014. Following the expiration of the Prior Advisory Agreement, the Special Units owned by TNP Holdings were redeemed for cause, as defined in the Prior Advisory Agreement. In connection with the execution of the Advisory Agreement, the Advisor or its affiliate was to contribute $1,000 to the OP in exchange for a separate class of Special Units, and this transaction was completed in April 2014.

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

The Company has invested in a portfolio of income-producing retail properties located throughout the United States, with a focus on grocery anchored multi-tenant retail centers, including neighborhood, community and lifestyle shopping centers, multi-tenant shopping centers and free standing single-tenant retail properties. As of September 30, 2014,March 31, 2015, the Company’s portfolio was comprised of 16properties, including one property held for sale,12properties with approximately 1,525,0001,060,000 rentable square feet of retail space located in 119 states. As of September 30, 2014,March 31, 2015, the rentable space at the Company’s retail properties was 87%90% leased.

On March 11, 2015, the Company formed a joint venture with Grocery Retail Grand Avenue Partners, LLC, a subsidiary of Oaktree Real Estate Opportunities Fund VI, L.P., and GLB SGO, LLC, a wholly owned subsidiary of Glenborough Property Partners, LLC (“GPP”). GPP is an affiliate of the Advisor and the Company’s property manager. See Note 4. “Investment in Unconsolidated Joint Venture” for additional information regarding the joint venture.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

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

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

The Company evaluates the need to consolidate joint ventures and variable interest entities based on standards set forth in ASC 810,Consolidation (“ASC 810”). In determining whether the Company has a controlling interest in a joint venture and/or a variable interest entity and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the partners/members, as well as, whether the entity is a variable interest entity for which the Company is the primary beneficiary. As of September 30, 2014,March 31, 2015, the Company did not have anyheld an ownership interest in one unconsolidated joint ventures or variable interestsventure (see Note 4. “Investment in any unconsolidated variable interest entities.Unconsolidated Joint Venture” for additional information).

Non-Controlling Interests

The Company’s non-controlling interests are comprised primarily of the Common Units in the OP and, until its redemption on March 12, 2015, the membership interest in SRT Secured Holdings, LLC (“Secured Holdings”), formerly known as TNP SRT Secured Holdings, LLC, one of the Company’s subsidiaries. The Company accounts for non-controlling interests in accordance with ASC 810. In accordance with ASC 810, the Company reports non-controlling interests in subsidiaries within equity in the condensed consolidated financial statements, but separate from common stockholders’ equity. Net income (loss) attributable to non-controlling interests is presented as a reduction from net income (loss) in calculating net income (loss) attributable to common stockholders on the condensed consolidated statement of operations. Acquisitions or dispositions of non-controlling interests that do not result in a change of control are accounted for as equity transactions. In addition, ASC 810 requires that a parent company recognize a gain or loss in net income when a subsidiary is deconsolidated upon a change in control. In accordance with ASC 480-10,Distinguishing Liabilities from Equity, non-controlling interests that are determined to be redeemable are carried at their fair value or redemption value as of the balance sheet date and reported as liabilities or temporary equity depending on their terms. The Company periodically evaluates individual non-controlling interests for the ability to continue to recognize the non-controlling interest as permanent equity in the condensed consolidated balance sheets. Any non-controlling interest that fails to qualify as permanent equity will be reclassified as liabilities or temporary equity. All non-controlling interests at September 30, 2014,March 31, 2015 qualified as permanent equity.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and the Company’s disclosure of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in the Company’s condensed consolidated financial statements, and actual results could differ from the estimates or assumptions used by management. Additionally, other companies may utilize different estimates that may impact the comparability of the Company’s condensed consolidated results of operations to those of companies in similar businesses. The Company considers significant estimates to include the carrying amounts and recoverability of investments in real estate, impairments, real estate acquisition purchase price allocations, allowance for doubtful accounts, estimated useful lives to determine depreciation and amortization and fair value determinations, among others.

Cash and Cash Equivalents

Cash and cash equivalents represents current bank accounts and other bank deposits free of encumbrances and having maturity dates of three months or less from the respective dates of deposit. The Company limits cash investments to financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk in cash.

Restricted Cash

Restricted cash includes escrow accounts for real property taxes, insurance, capital expenditures and tenant improvements, debt service and leasing costs held by lenders.

Revenue Recognition

Revenues include minimum rents, expense recoveries and percentage rental payments. Minimum rents are recognized on an accrual basis over the terms of the related leases on a straight-line basis when collectability is reasonably assured and the tenant has taken possession or controls the physical use of the leased property. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to:

For leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectability is reasonably assured. Recognizing rental income on a straight-line basis for leases results in recognized revenue amounts which differ from those that are contractually due from tenants on a cash basis. If the Company determines the collectability of straight-line rents is not reasonably assured, the Company limits future recognition to amounts contractually owed and paid, and, when appropriate, establishes an allowance for estimated losses.

The Company maintains an allowance for doubtful accounts, including an allowance for straight-line rent receivables, for estimated losses resulting from tenant defaults or the inability of tenants to make contractual rent and tenant recovery payments. The Company monitors the liquidity and creditworthiness of its tenants on an ongoing basis. For straight-line rent amounts, the Company’s assessment is based on amounts estimated to be recoverable over the term of the lease. The Company’s straight-line rent receivable, which is included in tenant receivables, net on the condensed consolidated balance sheets, was $1,736,000$1,283,000 and $1,411,000$1,681,000 at September 30, 2014March 31, 2015 and December 31, 2013,2014, respectively.

Certain leases contain provisions that require the payment of additional rents based on the respective tenants’ sales volume (contingent or percentage rent) and substantially all contain provisions that require reimbursement of the tenants’ allocable real estate taxes, insurance and common area maintenance costs (“CAM”). Revenue based on percentage of tenants’ sales is recognized only after the tenant exceeds its sales breakpoint. Revenue from tenant reimbursements of taxes, insurance and CAM is recognized in the period that the applicable costs are incurred in accordance with the lease agreement.

The Company recognizes gains or losses on sales of real estate in accordance with ASC 360,Property, Plant, and Equipment (“ASC 360”). Gains are not recognized until (a) a sale has been consummated; (b) the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay for the property; (c) the Company’s receivable, if any, is not subject to future subordination; and (d) the Company has transferred to the buyer the usual risks and reward of ownership, and the Company does not have a substantial continuing involvement with the property. The results of operations of income producing properties where the Company does not have a continuing involvement are presented in the discontinued operations section of the Company’s condensed consolidated statements of operations when the property has been classified as held for sale or sold prior to April 30, 2014. See “– Recent Accounting Pronouncements” below for additional information.

Valuation of TenantAccounts Receivables

The Company makes estimates of the collectability of its tenant receivables related to base rents, including deferred rents receivable, expense reimbursements and other revenue or income.

The Company analyzes tenant receivables, deferred rent receivable, historical bad debts, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, the Company will make estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. When a tenant is in bankruptcy, the Company will record a bad debt reserve for the tenant’s receivable balance and generally will not recognize subsequent rental revenue until cash is received or until the tenant is no longer in bankruptcy and has the ability to make rental payments.

Concentration of Credit Risk

A concentration of credit risk arises in the Company’s business when a nationally or regionally-based tenant occupies a substantial amount of space in multiple properties owned by the Company. In that event, if the tenant suffers a significant downturn in its business, it may become unable to make its contractual rent payments to the Company, exposing the Company to potential losses in rental revenue, expense recoveries, and percentage rent. Generally, the Company does not obtain security deposits from the nationally-based or regionally-based tenants in support of their lease obligations to the Company. The Company regularly monitors its tenant base to assess potential concentrations of credit risk. As of September 30, 2014, Schnuck Markets,March 31, 2015, Wal-Mart Stores, Inc. is the Company’s largest tenant (by square feet) and accounted for approximately 128,000100,000 square feet, or approximately 8%11% of the Company’s gross leasable area, and approximately $833,000,$500,000, or 5%4%, of the Company’s annual minimum rent. Two other large tenants, Publix Supermarkets, Inc., and Starplex Operating L.P., accounted for approximately 7% and 6%, respectively, of the Company’s annual minimum rent. No other tenantTenants that accounted for over 5% of the Company’s annual minimum rent. Thererent were noGold’s Gym, Stater Bros. Markets, and Ralphs. The outstanding receivables from Schnuck Markets, Inc., Publix Supermarkets, Inc.,for each of the tenants above at March 31, 2015 and Starplex Operating L.P. at September 30, 2014, compared to $35,000, $87,000, and $0, respectively, at December 31, 2013.2014 were as follows:

Business Combinations

The Company records the acquisition of income-producing real estate or real estate that will be used for the production of income as a business combination when the acquired property meets the definition of a business. Assets acquired and liabilities assumed in a business combination are generally measured at their acquisition-date fair values, including tenant improvements and identifiable intangible assets or liabilities. Tenant improvements recognized represent the tangible assets associated with the existing leases valued on a fair value basis at the acquisition date. Tenant improvements are classified as assets under investments in real estate and are depreciated over the remaining lease terms. Identifiable intangible assets and liabilities relate to the value of in-place operating leases which come in three formsforms: (1) leasing commissions and legal costs, which represent the value associated with “cost avoidance” of acquiring in-place leases, such as lease commissions paid under terms generally experienced in markets in which the Company operates; (2) value of in-place leases, which represents the estimated loss of revenue and of costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased; and (3) above- or below-market value of in-place leases, which represents the difference between the contractual rents and market rents at the time of the acquisition, discounted for tenant credit risks. The value of in-place leases is recorded in acquired lease intangibles and amortized over the remaining lease term. Above- or below-market-rate leases are classified in acquired lease intangibles, or in acquired below-market lease intangibles, depending on whether the contractual terms are above- or below-market. Above-market leases are amortized as a decrease to rental revenue over the remaining non-cancelable terms of the respective leases and below-market leases are amortized as an increase to rental revenue over the remaining initial lease term and any fixed rate renewal periods, if applicable.

Acquisition costs are expensed as incurred. During the nine months ended September 30, 2014 and 2013, the Company did not acquire any properties. Costs incurred in pursuit of targeted properties for acquisitions not yet closed or those determined to no longer be viable and costs incurred which are expected to result in future period disposals of property not currently classified as held for sale properties have been expensed and are also classified in the condensed consolidated statement of operations as transaction expenses.

Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require the Company to make significant assumptions to estimate market lease rates, property operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions would result in an incorrect valuation of the Company’s acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of the Company’s results of operations. These allocations also impact depreciation expense, amortization expense and gains or losses recorded on future sales of properties.

Reportable Segments

ASC 280,Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company has one reportable segment, income-producing retail properties, which consists of activities related to investing in real estate. The retail properties are geographically diversified throughout the United States, and the Company evaluates operating performance on an overall portfolio level.

Investments in Real Estate

Real property is recorded at estimated fair value at time of acquisition with subsequent additions at cost, less accumulated depreciation and amortization. Costs include those related to acquisition, development and construction, including tenant improvements, interest incurred during development, costs of pre-development and certain direct and indirect costs of development.

Depreciation and amortization is computed using a straight-line method over the estimated useful lives of the assets as follows:

Tenant improvement costs recorded as capital assets are depreciated over the shorter of (1) the tenant’s remaining lease term or (2)which the Company has determined approximates the useful life of the improvement.

Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. Significant renovations and improvements that improve or extend the useful lives of assets are capitalized.

Impairment of Long-lived Assets

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its investments in real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets may not be recoverable, the Company assesses the recoverability by estimating whether the Company will recover the carrying value of the real estate and related intangible assets through its undiscounted future cash flows (excluding interest) and its eventual disposition. If, based on this analysis, the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the investments in real estate and related intangible assets. Key inputs that the Company estimates in this analysis include projected rental rates, capital expenditures, property sale capitalization rates, and expected holding period of the property. For the three and nine months ended September 30,March 31, 2015 and 2014, the Company recordeddid not record any impairment losses of $2,500,000 and $1,400,000 on its investments in Constitution Trail and Topaz Marketplace, respectively.losses. See Note 7.8. “Fair Value Disclosures” for additional information regarding the impairment loss. The Company did not record any impairment losses during the three and nine months ended September 30, 2013.

Assets Held for Sale and Discontinued Operations

When certain criteria are met, long-lived assets are classified as held for sale and are reported at the lower of their carrying value or their fair value, less costs to sell, and are no longer depreciated. DiscontinuedFor property sales prior to May 1, 2014, discontinued operations is a component of an entity that has either been disposed of or is deemed to be held for sale and (i) the operations and cash flows of the component have been or will be eliminated from ongoing operations as a result of the disposal transaction and (ii) the entity willdoes not have any significant continuing involvement in the operations of the component after the disposal transaction. See “– Recent Accounting Pronouncements” below for additional information.For property sales on or after May 1, 2014, a disposal of a component of an entity is required to be reported as discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.

Fair Value Measurements

Under GAAP, the Company is required to measure or disclose certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other financial instruments and balances at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

When available, the Company utilizes quoted market prices or other observable inputs (Level 2 inputs), such as interest rates or yield curves, from independent third-party sources to determine fair value and classify such items in Level 1 or Level 2. In instances where the market for a financial instrument is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to use significant judgment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third partythird-party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for an asset owned by it to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and establishes a fair value by assigning weights to the various valuation sources. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets; or (ii) a present value technique that considers the future cash flows based on contractual obligations discounted by an observed or estimated market rates of comparable liabilities. The use of contractual cash flows with regard to amount and timing significantly reduces the judgment applied in arriving at fair value.

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

The Company considers the following factors to be indicators of an inactive marketmarket: (1) there are few recent transactions; (2) price quotations are not based on current information; (3) price quotations vary substantially either over time or among market makers (for example, some brokered markets); (4) indexes that previously were highly correlated with the fair values of the asset or liability are demonstrably uncorrelated with recent indications of fair value for that asset or liability; (5) there is a significant increase in implied liquidity risk premiums, yields, or performance indicators (such as delinquency rates or loss severities) for observed transactions or quoted prices when compared with the Company’s estimate of expected cash flows, considering all available market data about credit and other nonperformance risk for the asset or liability; (6) there is a wide bid-ask spread or significant increase in the bid-ask spread; (7) there is a significant decline or absence of a market for new issuances (that is, a primary market) for the asset or liability or similar assets or liabilities; and (8) little information is released publicly (for example, a principal-to-principal market).

The Company considers the following factors to be indicators of non-orderly transactionstransactions: (1) there was not adequate exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities under current market conditions; (2) there was a usual and customary marketing period, but the seller marketed the asset or liability to a single market participant; (3) the seller is in or near bankruptcy or receivership (that is, distressed), or the seller was required to sell to meet regulatory or legal requirements (that is, forced); and (4) the transaction price is an outlier when compared with other recent transactions for the same or similar assets or liabilities.

Deferred Financing Costs

Deferred financing costs represent commitment fees, loan fees, legal fees and other third-party costs associated with obtaining financing. These costs are amortized over the terms of the respective financing agreements using the straight-line method which approximates the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financings that do not close are expensed in the period in which it is determined that the financing will not close.

Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to stockholders (which is computed without regard to the dividends-paiddividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially and adversely affect the Company’s net income and net cash available for distribution to stockholders. However, the Company believes that it is organized and operates in such a manner as to qualify for treatment as a REIT. The Company may also be subject to certain state or local income taxes, or franchise taxes.

The Company evaluates tax positions taken in the condensed consolidated financial statements under the interpretation for accounting for uncertainty in income taxes. As a result of this evaluation, the Company may recognize a tax benefit from an uncertain tax position only if it is “more-likely-than-not” that the tax position will be sustained on examination by taxing authorities.

When necessary, deferred income taxes are recognized in certain taxable entities. Deferred income tax is generally a function of the period’s temporary differences (items that are treated differently for tax purposes than for financial reporting purposes). A valuation allowance for deferred income tax assets is provided if all or some portion of the deferred income tax asset may not be realized. Any increase or decrease in the valuation allowance is generally included in deferred income tax expense.

The Company’s tax returns remain subject to examination and consequently, the taxability of the distributions is subject to change.

Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed after adjusting the basic EPS computation for the effect of potentially dilutive securities outstanding during the period. The effect of non-vested shares, if dilutive, is computed using the treasury stock method. The Company accounts for non-vested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) as participating securities, which are included in the computation of earnings per share pursuant to the two-class method. The Company’s excess of distributions over earnings related to participating securities are shown as a reduction in income (loss) attributable to common stockholders in the Company’s computation of EPS.

Reclassification

Assets sold or held for sale have been reclassified on the condensed consolidated balance sheets. For operating properties sold prior to April 30,May 1, 2014,the related operating results have been reclassified from continuing to discontinued operations on the condensed consolidated statements of operations, andoperations. For operating properties sold on or after May 1, 2014, the related operating results of assets sold or held for sale from the prior year have been reclassifiedremain in continuing operations on the condensed consolidated statements of operations to conform to current period presentation.

Recent Accounting Pronouncements

In April 2014,unless the FASB issued Accounting Standards Update (“ASU”) No. 2014-08,Presentation of Financial Statements and Property, Plant, and Equipment. ASU No. 2014-08 raises the criteria for reporting discontinued operations on an entity’s financial statements. Under the revised standard, a disposal of a component of an entity is required to be reported as discontinued operations only if the disposal representssold properties represent a strategic shift that hashave had (or will have) a major effect on an entity’sthe Company’s operations and financial results. ASU No. 2014-08 is effective for annual periods beginning on or after December 15, 2014, and early adoption is permitted but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued. As the Company’s disposals generally do not represent a strategic shift, the adoption of ASU No. 2014-08 should eliminate the need to report such disposals as discontinued operations on the Company’s financial statements for any disposals that were not previously classified as discontinued operations. As permitted by the standard, the Company has elected to early adopt the provisions of ASU No. 2014-08 and is applying the provisions prospectively for all disposals after April 30, 2014.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers. ASU No. 2014-09 outlines a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers. ASU No. 2014-09 is effective for annual periods beginning on or after December 15, 2016,2017, and early adoption is not permitted. The Company is in the process of evaluating the future impact of the guidance on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15,Presentation of Financial Statements – Going Concern. ASU No. 2014-15 provides guidance regarding management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new guidance requires that management evaluate for each annual and interim reporting period whether conditions exist that give rise to substantial doubt about the entity’s ability to continue as a going concern within one year from the financial statement issuance date, and if so, provide related disclosures. Disclosures are only required if conditions give rise to substantial doubt, whether or not the substantial doubt is alleviated by management’s plans. No disclosures are required specific to going concern uncertainties if an assessment of the conditions does not give rise to substantial doubt. Substantial doubt exists when conditions and events, considered in the aggregate, indicate that it is probable that a company will be unable to meet its obligations as they become due within one year after the financial statement issuance date. The guidance is effective for interim and annual periods beginning after December 15, 2016. Early adoption is permitted. The Company does not anticipate that the adoption of this guidance will have a material impact on the Company's consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03,Interest – Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires reporting entities to present debt issuance costs related to a note as a direct deduction from the face amount of that note presented in the balance sheet. ASU 2015-03 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. A reporting entity may apply the amendments in the ASU retrospectively to all prior periods. The Company does not anticipate that the adoption of this guidance will have a material impact on the Company’s consolidated financial statements.

3. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALEREAL ESTATE INVESTMENTS

The Company did not have any property acquisitions for the three months ended March 31, 2015 and 2014. On March 11, 2015, the Company sold the following three properties for the aggregate gross sales price of $53.6 million:

⁽¹⁾The original purchase price for Osceola Village included an additional pad which was sold prior to this transaction.

The sale of the three properties did not represent a strategic shift that will have a major effect on the Company’s operations and financial results and, as a result, was not included in discontinued operations for the three months ended March 31, 2015. The Company’s consolidated statements of operations include net operating losses of approximately $289,000 and $493,000 for the three months ended March 31, 2015 and 2014, respectively, relating to the results of operations for the three sold properties.

The sale was completed in connection with the formation of the joint venture as defined and further described in Note 4. “Investment in Unconsolidated Joint Venture.” The three properties were sold to the joint venture, and the closing of the sale was conditioned on the Company receiving a 19% membership interest in the joint venture. In exchange for this 19% membership interest, the Company contributed $4.5 million to the joint venture, which amount was credited against the Company’s sale of the three properties to the joint venture. Of the net sales proceeds from the sale of the three properties, $36.4 million was used by the Company to retire the debt associated with the sold properties.

Pro Forma Financial Information

The pro forma financial information below is based upon the Company’s historical condensed consolidated statements of operations for the three months ended March 31, 2015 and 2014, adjusted to give effect to the above sales transactions as if they had been completed at the beginning of 2015 and 2014, respectively. The pro forma financial information is presented for information purposes only, and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of 2015 and 2014, respectively, nor does it purport to represent results of operations for future periods.

The Company reports operating properties sold in periods prior to April 30,May 1, 2014, as discontinued operations. The results of these discontinued operations are included as a separate component on the condensed consolidated statements of operations under the caption “Discontinued operations”.

On January 8, 2014, the Company completed the sale of Visalia Marketplace in Visalia, California for a gross sales price of $21,100,000.$21.1 million. The Company originally acquired Visalia Marketplace in June 2012 for $19,000,000.$19 million. In accordance with the terms of the loan documents withdocumentswith KeyBank at the time of the sale, 80% of the net proceeds from the sale were released from escrow to pay down and reduce the prior line of credit balance with KeyBank.  The Company classified assets and liabilities (including the line of credit) related to Visalia Marketplace as held for sale in the consolidated balance sheet at December 31, 2013.KeyBank. The results of operations related to Visalia Marketplace continue to be classified as discontinued operations for the three and nine months ended September 30, 2014 and 2013 because the property was classified as such in previously issued financial statements.

On December 20, 2013, the Company completed the sale of Craig Promenade in Las Vegas, Nevada for a gross sales price of $10,100,000. The Company originally acquired Craig Promenade in March 2011 for $12,800,000. On February 19, 2013, the Company completed the sale of the McDonald’s parcel at Willow Run Shopping Center in Westminster, Colorado for a gross sales price of $1,050,000, and then on October 31, 2013, the Company completed the sale of the entire Willow Run Shopping Center for a gross sales price of $10,825,000. The Company originally acquired Willow Run Shopping Center in May 2012 for $11,550,000. The results of operations related to Craig Promenade and Willow Run Shopping Center were classified as discontinued operations for the three and nine months ended September 30, 2013.March 31, 2014.

On November 9, 2012, TNP SRT Lahaina Gateway, LLC, the Company’s wholly-owned subsidiary (“TNP SRT Lahaina”), financed TNP SRT Lahaina’s acquisition of a ground lease interest in the Lahaina Gateway property, a multi-tenant necessity retail center located in Lahaina, Hawaii, with the proceeds of a loan (the “Lahaina Loan”) from DOF IV REIT Holdings, LLC (the “Lahaina Lender”). On August 1, 2013, in order to resolve its obligations under the Lahaina Loan, mitigate certain risks presented by the terms of the Lahaina Loan and avoid potential litigation and foreclosure proceedings (and the associated costs and delays), TNP SRT Lahaina granted and conveyed all of TNP SRT Lahaina’s right, title and interest in and to the leasehold estate in the Lahaina Gateway property, including all leases, improvements, licenses and permits and personal property related thereto, to DOF IV Lahaina, LLC, an affiliate of the Lahaina Lender, pursuant to a deed in lieu of foreclosure agreement by and among theThe Company TNP SRT Lahaina and the Lahaina Lender. The results of operations related to Lahaina Gateway were classified asdid not have any discontinued operations for the three and nine months ended September 30, 2013, and for the year ended DecemberMarch 31, 2013, the Company realized a loss of $5,404,000 associated with the deed in lieu transaction (see Note 6. “Notes Payable”).

On January 22, 2013, the Company completed the sale of Waianae Mall in Waianae, Hawaii for a gross sales price of $30,500,000. The Company originally acquired Waianae Mall in June 2010 for $25,688,000. The results of operations related to Waianae Mall were classified as discontinued operations for the three and nine months ended September 30, 2013.

2015. The components of income and expense relating to discontinued operations for the three and nine months ended September 30,March 31, 2014, and 2013, are shown below.

During the three months ended September 30, 2014, theThe Company placed San Jacinto Esplanade in San Jacinto, California on the marketdid not have any assets held for sale and on September 15,at March 31, 2015. On November 21, 2014, the Company entered into a sales contract with a buyer to sell the property.purchase an undeveloped parcel at Osceola Village in Kissimmee, Florida. The gross sales price is $5,700,000,was $875,000, and the sale iswas expected to close in May 2015. Subsequently, as noted above, on or around November 20, 2014. AsMarch 11, 2015, the pendingentire Osceola Village property was sold to the joint venture. The land value associated with the parcel was classified as held for sale does not represent a strategic shift inat December 31, 2014, and the Company’s portfolio, San Jacinto is not reported as discontinued operations on the Company’s financial statements. The major classes of assets and liabilities related to assets held for sale included in the condensed consolidated balance sheets areat December 31, 2014 were as follows:

Amounts above are beingwere presented at their carrying value which the Company believesbelieved to be lower than their estimated fair value less costs to sell.

4. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE

Entry into Joint Venture Agreement

On March 11, 2015, the Company, through a wholly owned subsidiary, entered into the Limited Liability Company Agreement of SGO Retail Acquisition Venture, LLC (the “Joint Venture Agreement”) to form a joint venture with Grocery Retail Grand Avenue Partners, LLC, a subsidiary of Oaktree Real Estate Opportunities Fund VI, L.P. (“Oaktree”), and GLB SGO, LLC, a wholly owned subsidiary of Glenborough Property Partners, LLC (“GPP” and together with the Company and Oaktree, the “Members”). GPP is an affiliate of Glenborough and an affiliate of our Advisor.

The Joint Venture Agreement provides for the ownership and operation of SGO Retail Acquisition Venture, LLC (the “Joint Venture”), in which the Company owns a 19% interest, GPP owns a 1% interest, and Oaktree owns an 80% interest. In exchange for ownership in the Joint Venture, the Company contributed $4.5 million to the Joint Venture, which amount was credited against its sale of the Initial Properties (as defined below) to the Joint Venture (as described below), GPP contributed $0.2 million to the Joint Venture, and Oaktree contributed $19.1 million to the Joint Venture. The Company advanced $7.0 million to Oaktree to finance a portion of Oaktree’s capital contribution to the Joint Venture in exchange for a recourse demand note from Oaktree at a rate of 7% interest. The Company has the right to call back the advanced funds upon 12 days written notice.

Sale of Initial Properties to Joint Venture

On March 11, 2015, as part of the formation of the Joint Venture, the Company, through TNP SRT Osceola Village, LLC, its indirect wholly owned subsidiary, SRT Constitution Trail, LLC, a wholly owned subsidiary of Secured Holdings, and TNP SRT Aurora Commons, LLC, a wholly owned subsidiary of Secured Holdings, entered into a Purchase and Sale Agreement effective March 11, 2015 to sell the multitenant retail property located in Kissimmee, Florida commonly known as the Osceola Village (“Osceola Village”), the retail shopping center development located in Normal, Illinois commonly known as Constitution Trail (“Constitution Trail”), and the multitenant retail center and office property located in Aurora, Ohio commonly known as the Aurora Commons (“Aurora Commons” and together with Osceola Village and Constitution Trail, the “Initial Properties”) to the Joint Venture. At the time of the sale Secured Holdings was jointly owned by the OP and SRT Secured Holdings Manager, LLC (“SRT Manager”), an affiliate of Glenborough. Secured Holdings distributed the proceeds of the sale of the Initial Properties to its members. As a result, on March 12, 2015 Secured Holdings paid SRT Manager approximately $2.1 million in full redemption of its 8.33% membership interest in Secured Holdings.

The closing of the sale was conditioned on the Joint Venture issuing the Company a 19% membership interest and GPP a 1% membership interest in the Joint Venture. The cash sale price for the Initial Properties was $22.0 million for Osceola Village, $23.1 million for Constitution Trail, and $8.5 million for Aurora Commons. Gross proceeds from the sale totaled $53.6 million of which $36.4 million was used to retire the notes payable balances associated with the Initial Properties, and $4.5 million was credited against the Company’s sale of the Initial Properties to the Joint Venture and served as the Company’s capital contribution to the Joint Venture.  As discussed above, another $7.0 million was loaned to Oaktree on a short-term demand note basis to enhance the Company’s short-term returns related to the proceeds of the Joint Venture, and the note receivable asset and the remaining net proceeds, after the payment of closing costs and expenses, of $3.8 million are available to the Company as working capital and/or the possible acquisition of additional real estate assets.

Due to the related party membership interests in the Joint Venture, the sale of the Initial Properties is considered a partial sale in accordance with Accounting Standards Codification (“ASC”) 360-20 Subtopic,Property, Plant, and Equipment – Real Estate Sales. The related party interests consist of the Company’s 19% and GPP’s 1% membership interests in the Joint Venture. As a result, the Company deferred $1.2 million, representing 20%, of the total realized gain from the sale of the Initial Properties to the Joint Venture.

Accounting for Investment in Unconsolidated Joint Venture

The Company evaluated its investment in the Joint Venture and deemed that requirements for consolidation were not met. As such, the Company accounts for its investment in the Joint Venture under the equity method of accounting. Under the equity method of accounting, the Company records its initial investment in the Joint Venture at cost and subsequently adjusts cost for the Company’s share of Joint Venture income or loss and cash contributions and distributions each period.

The following table summarizes the Company’s investment in unconsolidated joint ventures as of March 31, 2015 and December 31, 2014:

5. FUTURE MINIMUM RENTAL INCOME

Operating Leases

The Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of September 30, 2014,March 31, 2015, the leases at the Company’s properties have remaining terms (excluding options to extend) of up to 22 years with21 yearswith a weighted-average remaining term (excluding options to extend) of sevensix years. The leases may have provisions to extend the lease agreements, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit and/or a letter of credit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying condensed consolidated balance sheets and totaled $425,000$327,000 and $391,000$437,000 as of September 30, 2014March 31, 2015 and December 31, 2013,2014, respectively.

As of September 30, 2014,March 31, 2015, the future minimum rental income from the Company’s properties under non-cancelable operating leases was as follows:

5.6. ACQUIRED LEASE INTANGIBLES AND BELOW-MARKET LEASE LIABILITIES

As of September 30, 2014March 31, 2015 and December 31, 2013,2014, the Company’s acquired lease intangibles and below-market lease liabilities were as follows:

Increases (decreases) in net income (loss) as a result of amortization of the Company’s lease intangibles and below-market lease liabilities for the three and nine months ended September 30,March 31, 2015 and 2014, and 2013, were as follows:

6.7. NOTES PAYABLE

As of September 30, 2014March 31, 2015 and December 31, 2013,2014, the Company’s notes payable excluding notes payable that may be classified under liabilities related to assets held for sale, consisted of the following:

During the three months ended September 30,March 31, 2015 and 2014, and 2013, the Company incurred $2,062,000 and $2,187,000,$1,694,000and $2,219,000, respectively, of interest expense, which included the amortization and write-off of deferred financing costs of $177,000 and $345,000, respectively.

During the nine months ended September 30, 2014 and 2013, the Company incurred $6,505,000 and $6,931,000, respectively, of interest expense, which included the amortization and write-off of deferred financing costs of $584,000 and $774,000,$162,000and $203,000, respectively.

As of September 30, 2014March 31, 2015 and December 31, 2013,2014, interest expense payable was $439,000$420,000 and $979,000,$1,080,000, respectively.

The following is a schedule of future principal payments for all of the Company’s notes payable outstanding as of September 30, 2014:March 31, 2015:

KeyBank Amended and Restated Credit Facility Agreement

On August 4, 2014,In connection with the sale of Constitution Trail and Aurora Commons to the Joint Venture on March 11, 2015 (see Note 4. “Investment in Unconsolidated Joint Venture”), the Company entered into anused a portion of the net sale proceeds to pay off the entire $19 million outstanding balance under the Amended and Restated Revolving Credit Agreement (the “Amended and Restated Credit Facility”) with KeyBank. The Company will maintain the Amended and Restated Credit Facility for future cash needs.

Prior to the pay off, on August 4, 2014, the Company entered into the Amended and Restated Credit Facility with KeyBank to amend and restate an original 2010 Credit Facility (defined below) in its entirety and to establish a revolving credit facility with an initial maximum aggregate commitment of $30,000,000$30 million (as adjusted, the “Facility Amount”). Subject to certain terms and conditions contained in the loan documents, the Company may request that the Facility Amount be increased to a maximum of $60,000,000.$60 million. The Amended and Restated Credit Facility iswas initially secured by the San Jacinto Esplanade, Aurora Commons and Constitution Trail.Trail properties.

The Amended and Restated Credit Facility matures on August 4, 2017. The Company has the right to prepay the Amended and Restated Credit Facility in whole at any time or in part from time to time, subject to the payment of certain expenses, costs or liabilities potentially incurred by the lenders as a result of the prepayment and subject to certain other conditions contained in the loan documents.

Each loan made pursuant to the Amended and Restated Credit Facility will be either a LIBOR rate loan or a base rate loan, at the election of the Company, plus an applicable margin, as defined. Monthly payments are interest only with the entire principal balance and all outstanding interest due at maturity. The Company will pay KeyBank an unused commitment fee, quarterly in arrears, which will accrue at 0.30% per annum if the usage under the Amended and Restated Credit Facility is less than or equal to 50% of the Facility Amount, and 0.20% per annum if the usage under the Amended and Restated Credit Facility is greater than 50% of the Facility Amount.

The Company is providing a guaranty of all of its obligations under the Amended and Restated Credit Facility and all other loan documents in connection with the Amended and Restated Credit Facility. The Company also paid Glenborough a financing coordination fee of $300,000 in connection with the Amended and Restated Credit Facility.

On August 4, 2014, as required by the Amended and Restated Credit Facility, the OP contributed 100% of its sole membership interest in SRT Constitution Trail, LLC, which ownsowned the Constitution Trail property, to Secured Holdings (the “Constitution Transaction”) for additional membership interests in Secured Holdings. At the time, Secured Holdings iswas jointly owned by the OP and SRT Secured Holdings Manager, LLC (“SRT Manager”), an affiliate of Glenborough.Manager. Prior to the Constitution Transaction, the OP owned 88% of the membership interests in Secured Holdings and SRT Manager owned 12% of the membership interests in Secured Holdings. Following the Constitution Transaction, the OP ownsowned 91.67% of the membership interests in Secured Holdings, and SRT Manager ownsowned 8.33% of the membership interests in Secured Holdings which was derived based on the fair value of the property atproperties as of the date of the contribution. Subsequently, Secured Holdings paid SRT Manager approximately $2.1 million in full redemption of SRT Manager’s 8.33% membership interest in Secured Holdings.

In connection with the Constitution Transaction, the entire outstanding notes payable balance due to Constitution Trail’s prior lender was fully paid, and theConstitution Trail’s remaining $295,000 in unamortized deferred financing costs was written off. The new outstanding principal balance of the Amended and Restated Credit Facility was $20,800,000,$20.8 million, as of August 4, 2014.

The original line of credit was entered into on December 17, 2010 between the Company, through its subsidiary, Secured Holdings, and KeyBank (and certain other lenders, collectively, the “Lenders”) to establish a secured revolving credit facility with an initial maximum aggregate commitment of $35,000,000$35 million (the “2010 Credit Facility”). On August 4, 2014, the 2010 Credit Facility was replaced by the Amended and Restated Credit Facility.

Borrowings underFacility, and there were no remaining unamortized deferred financing costs associated with the 2010 Credit Facility were secured by (1) pledges by the Company, the OP, Secured Holdings, and certain subsidiaries of Secured Holdings, of their respective direct and indirect equity ownership interests in, as applicable, any subsidiary of Secured Holdings or the Company which directly or indirectly owns real property, subject to certain limitations and exceptions; (2) guarantees, granted by the Company and the OP on a joint and several basis, of the prompt and full payment of all of the obligations under the 2010 Credit Facility; (3) a security interest granted in favor of KeyBank with respect to all operating, depository, escrow and security deposit accounts and all cash management services of the Company, the OP, Secured Holdings and any other borrower under the 2010 Credit Facility; and (4) a deed of trust, assignment agreement, security agreement and fixture filing in favor of KeyBank with respect to the San Jacinto Esplanade and Aurora Commons properties. As discussed below, due to the Company’s events of default under the 2010 Credit Facility, the Company entered into a forbearance agreement with KeyBank.at that time.

Under the 2010 Credit Facility, the Company was required to comply with certain restrictive and financial covenants. In January 2013, the Company became aware of a number of events of default under the 2010 Credit Facility relating to, among other things, the Company’s failure to use the net proceeds from its sale of shares in the Offering and the sale of its assets to repay borrowings under the 2010 Credit Facility as required by the 2010 Credit Facility and its failure to satisfy certain financial covenants under the 2010 Credit Facility (collectively, the “Existing Events of Default”). The Company also failed to comply with certain financial covenants at March 31, 2013. Due to the Existing Events of Default, the Lenders became entitled to exercise all of their rights and remedies under the 2010 Credit Facility and applicable law.

On April 1, 2013, the Company, the OP, certain subsidiaries of the OP which are borrowers under the 2010 Credit Facility (collectively, the “Borrowers”) and KeyBank, as lender and agent for the other Lenders, entered into a forbearance agreement (the “Forbearance Agreement”) which amended the terms of the 2010 Credit Facility and provided for certain additional agreements with respect to the Existing Events of Default. On July 31, 2013, the OP, the Borrowers and KeyBank entered into an amendment to the Forbearance Agreement which extended the forbearance period under the Forbearance Agreement. Pursuant to the terms of the Forbearance Agreement (as amended), KeyBank and the other Lenders agreed to forbear the exercise of their rights and remedies with respect to the Existing Events of Default until the earliest to occur of (1) January 31, 2014; (2) the Company’s default under or breach of any of the representations or covenants under the Forbearance Agreement; or (3) the date any additional events of defaults (other than the Existing Events of Default) under the 2010 Credit Facility occurred or became known to KeyBank or any other Lender.

On December 11, 2013, the Company, the OP, the Borrowers and KeyBank entered into the second amendment to Forbearance Agreement. The second forbearance amendment amended the Forbearance Agreement and the 2010 Credit Facility as follows:

As previously reported, in connection with the Forbearance Agreement, the Borrowers and KeyBank entered into a fee letter pursuant to which the Borrowers paid KeyBank a forbearance fee (the “Fee Letter”). On July 31, 2013, in connection with the first amendment to the Forbearance Agreement, the Borrowers and KeyBank amended the Fee Letter and the Borrowers paid KeyBank an additional forbearance fee. On December 11, 2013, in connection with the second forbearance amendment, the Borrowers and KeyBank further amended the Fee Letter and the Borrowers agreed to pay an additional forbearance fee.

On July 31, 2014, in connection with the negotiation of the Amended and Restated Credit Facility, KeyBank agreed to extend the forbearance period under the Forbearance Agreement to August 14, 2014.

Waianae Loan Assumption

On January 22, 2013, the Company sold the Waianae Mall in Waianae, Hawaii to an unaffiliated buyer for a final sales price of $29,763,000. The mortgage loan secured by the Waianae Mall with an outstanding balance of $19,717,000 was assumed by the buyer in connection with the sale. The Company incurred a disposition fee to Prior Advisor of $893,000 in connection with the sale.

Lahaina Loan

In connection with the acquisition of Lahaina Gateway property on November 9, 2012, the Company, through TNP SRT Lahaina, borrowed $29,000,000 from the Lahaina Lender. The entire unpaid principal balance of the Lahaina Loan and all accrued and unpaid interest thereon was due and payable in full on October 1, 2017. The Lahaina Loan bore interest at a rate of 9.483% per annum for the initial 12 months, and then 11.429% for the remainder of the term of the loan. On each of December 1, 2012, January 1, 2013, and February 1, 2013, the Company was required to make a mandatory principal prepayment of $333,333, such that the Company would prepay an aggregate $1,000,000 of the outstanding principal balance of the Lahaina Loan, no later than February 1, 2013.

On January 14, 2013, the Company received a letter of default from the Lahaina Lender in connection with the certain Guaranty of Recourse Obligations by the Company and Anthony W. Thompson, the Company’s chairman and co-chief executive officer at the time, for the benefit of the Lahaina Lender, pursuant to which the Company and Mr. Thompson guaranteed the obligations of TNP SRT Lahaina under the Lahaina Loan. The letter of default stated that two events of default existed under the Lahaina Loan as a result of the failure of TNP SRT Lahaina to (1) pay a deposit into a rollover account; and (2) pay two mandatory principal payments. The Lahaina Lender requested payment of the missed deposit into the rollover account, the two overdue mandatory principal payments, and late payment charges and default interest in the aggregate amount of $1,281,000 by January 18, 2013. On January 22, 2013, the Company used a portion of the proceeds from the sale of the Waianae Mall (discussed above) to pay the entire amount requested by Lahaina Lender and cure the events of default described in the letter of default under the Lahaina Loan.

Since the acquisition of the Lahaina Gateway property on November 9, 2012, cash from operations from the Lahaina Gateway property was not sufficient to support the property’s operating expenses, the debt service obligations under the Lahaina Loan, and the various cash reserve requirements imposed by the Lahaina Lender. As a result, since the acquisition of the Lahaina Gateway property, the Company had supported the property’s cash requirements with cash from operations generated by other properties within the Company’s portfolio. In addition to the property cash flow issues, the Lahaina Loan contained a number of provisions that potentially exposed the Company to increased risk and constrained its ability to make certain strategic decisions. In order to settle the Company’s obligations under the Lahaina Loan and avoid potential litigation and foreclosure proceedings (and the associated delays and expenses), relating to the Lahaina Gateway property, on August 1, 2013, the Company entered into a deed in lieu of foreclosure agreement with the Lahaina Lender (the “DIL Agreement”). Pursuant to the DIL Agreement, the Company conveyed title to the Lahaina Gateway property to a designee of the Lahaina Lender in exchange for the Lahaina Lender’s agreement not to seek payment from the Company for any amounts owed under the Lahaina Loan, subject to certain exceptions as set forth in the DIL Agreement and the agreements entered into in connection therewith. For the year ended December 31, 2013, the Company realized a loss of $5,404,000 associated with the deed in lieu transaction which was derived from the carrying value of all of Lahaina Gateway’s assets of $34,070,000 less the carrying value of all of its liabilities of $28,666,000, on August 1, 2013.

KeyBank Mezzanine Loan

On June 13, 2012, the Company, through TNP SRT Portfolio II Holdings, LLC obtained a mezzanine loan from KeyBank in the original principal amount of $2,000,000. The proceeds of the mezzanine loan were used to refinance the portions of the 2010 Credit Facility secured by Morningside Marketplace, Cochran Bypass (Bi-Lo Grocery Store), Ensenada Square, Florissant Marketplace and Turkey Creek. The mezzanine loan was repaid in full in January 2013 using a portion of the proceeds from the sale of the Waianae Mall.

7.8. FAIR VALUE DISCLOSURES

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

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

The following table provides the carrying values and fair values of the Company’s notes payable related to continuing operations as of September 30, 2014March 31, 2015 and December 31, 2013:2014:

As part of the Company’s ongoing evaluation of the Company’s real estate portfolio, the Company estimates the fair value of its investments in real estate by obtaining outside independent appraisals on all of the properties. With the exception of Constitution Trail and Topaz Marketplace, all appraisals presented values in excess of the carrying value of such properties as of September 30, 2014. During the three months ended September 30, 2014, the Company re-evaluated the strategy and possible holding periods of its properties and determined that the holding periods for Constitution Trail and Topaz Marketplace may be significantly reduced. As a result, for the three and nine months ended September 30, 2014, the Company recorded impairment losses of $2,500,000 and $1,400,000 on its investments in Constitution Trail and Topaz Marketplace, respectively, based on the properties’ excess carrying value over its appraised value at September 30, 2014.

8.9. EQUITY

Common Stock

Under the Company’s Articles of Amendment and Restatement (the “Charter”), the Company has the authority to issue 400,000,000 shares of common stock. All shares of common stock have a par value of $0.01 per share. On October 16, 2008, the Company issued 22,222 shares of common stock to TNP LLC for an aggregate purchase price of $200,000. As of December 31, 2013, Sharon D. Thompson, the spouse of Anthony W. Thompson, the Company’s former co-chief executive officer and former president, independently owned 111,111 shares of the Company’s common stock for which she paid an aggregate purchase price of $1,000,000$1 million and TNP LLC, which is controlled by Mr. Thompson, owned 22,222 shares of the Company’s common stock. On January 24, 2014, GPP purchased both the 22,222 and 111,111 shares of the Company from TNP LLC and Sharon D. Thompson, respectively, for $8.00 per share. ThatThe share purchase transaction was part of a larger settlement of issues relating to the 2013 annual meeting proxy contest, and doeswas not necessarilyconsidered an arm’s length transaction. Therefore, the share purchase price may not reflect a market price or value for such securities. 

On February 7, 2013, the Company terminated the Offering and ceased offering shares of common stock in the primary offering and under the DRIP. As of the termination of the Offering on February 7, 2013, the Company had accepted subscriptions for, and issued, 10,969,714 shares of common stock (net of share redemptions), including 391,182 shares of common stock pursuant to the DRIP, resulting in gross offering proceeds of $108,357,000.approximately $108.4 million.

Common Units

PriorThe Company’s prior advisor, TNP Strategic Retail Advisor, LLC, invested $1,000 in the OP in exchange for Common Units of the OP which were sold to GPP on January 24, 2014. On May 26, 2011, in connection with the acquisition of Pinehurst Square East, a retail property located in Bismarck, North Dakota, the OP issued 287,472 Common Units to certain of the sellers of Pinehurst Square East who elected to receive Common Units for an aggregate value of approximately $2,587,000,$2.6 million, or $9.00 per Common Unit. On March 12, 2012, in connection with the acquisition of Turkey Creek, a retail property located in Knoxville, Tennessee, the OP issued 144,324 Common Units to certain of the sellers of Turkey Creek who elected to receive Common Units for an aggregate value of approximately $1,371,000,$1.4 million, or $9.50 per Common Unit.

Member Interests

On July 9, 2013, SRT Manager made a cash investment of $1,929,000approximately $1.9 million in Secured Holdings pursuant to a Membership Interest Purchase Agreement by and among the Company, SRT Manager, Secured Holdings, and the OP, which resulted in SRT Manager owning a 12% membership interest in Secured Holdings and the OP owning the remaining 88% membership interest in Secured Holdings. The Company’s independent directors negotiated and approved the transaction in order to help enable the Company to meet its short-term liquidity needs for operations, as well as to build working capital for future operations. Following the Constitution Transaction on August 4, 2014 (see Note 6.7. “Notes Payable”), the OP ownsowned a 91.67% membership interest in Secured Holdings and SRT Manager ownsowned a 8.33% membership interest in Secured Holdings.

As In connection with the sale of September 30, 2014,Secured Holding’s two properties to the Joint Venture (see Note 4. “Investment in Unconsolidated Joint Venture”), Secured Holdings owns threepaid SRT Manager approximately $2.1 million in full redemption of the 16 multi-tenant retail propertiesthen current value of its remaining 8.33% membership interest in the Company’s property portfolio.Secured Holdings.

Preferred Stock

The Charter authorizes the Company to issue 50,000,000 shares of $0.01 par value preferred stock. As of September 30, 2014March 31, 2015 and December 31, 2013,2014, no shares of preferred stock were issued and outstanding.

Share Redemption Program

The Company’s share redemption program allows for share repurchases by the Company when certain criteria are met by requesting stockholders. Share repurchases pursuant to the share redemption program are made at the sole discretion of the Company. The number of shares to be redeemed during any calendar year is limited to no more than (1) 5% of the weighted average of the number of shares of the Company’s common stock outstanding during the prior calendar year; and (2) those that could be funded from the net proceeds from the sale of shares under the DRIP in the prior calendar year plus such additional funds as may be borrowed or reserved for that purpose by the Company’s board of directors. The Company reserves the right to reject any redemption request for any reason or no reason or to amend or terminate the share redemption program at any time.

Effective January 15, 2013, the Company suspended its share redemption program, including redemptions upon death and disability, and the Company did not redeem any common shares under its share redemption program during the three and nine months ended September 30, 2014March 31, 2015 and 2013.2014. On April 1, 2015, the board of directors of the Company approved the reinstatement of the share redemption program and adopted an Amended and Restated Share Redemption Program (see Note 14. “Subsequent Events” for a description of the Amended and Restated Share Redemption Program).

Distributions

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

For so long as the Company remained in default underUnder the terms of the 2010Amended and Restated Credit Facility, KeyBank prohibited the payment of distributions to investors in the Company. Effective January 15, 2013, the Company announced that it would no longer be making monthly distributions. On December 9, 2013, the Company announced that it had successfully modified the 2010 Credit Facility such that the Company may re-establishpay distributions to its investors so long as the total amount paid does not exceed 100% of the Adjusted Funds from Operations (on a trailing 12-month basis commencing on April 1, 2013), as defined in the 2010 Credit Facility agreement and pursuant to the terms and conditions of the Amended and Restated Credit Facility, there are certain restrictions on the amount of distributions that are tied to the Company’s Adjusted Funds from Operations (as defined in the Amended and Restated Credit Facility), provided, however, that the Company is not restricted from making any distributions necessary in order to maintain its status as a REIT. 

As a result, on December 9, 2013 and again on March 24, 2014, the Company declared a quarterly distribution in the amount of $0.05 per share on the outstanding common shares of the Company, payable to stockholders of record as of December 31, 2013 and March 31, 2014, which were paid on January 31, 2014 and April 30, 2014, respectively. For the three months ended June 30, 2014 and September 30, 2014, the Company declared quarterly distributions in the amount of $0.06 per share on the outstanding common shares, payable to stockholders of record as of June 30, 2014 and September 30, 2014, respectively. The distributions were paid on July 30, 2014 and October 31, 2014, respectively. The Company’s board of directors will continue to evaluateevaluates the Company’s ability to make future quarterly distributions based on the Company’s other operational cash needs.

The following table setstables set forth the distributions declared to the Company’s common stockholders and Common Unit holders for the ninethree months ended September 30, 2014,March 31, 2015, and the year ended December 31, 2013,2014, respectively:

Distribution Reinvestment Plan

The Company adopted the DRIP to allow common stockholders to purchase additional shares of the Company’s common stock through the reinvestment of distributions, subject to certain conditions. The Company registered and reserved 10,526,316 shares of its common stock for sale pursuant to the DRIP. The DRIP was terminated effective February 7, 2013 in connection with the expiration of the Offering and the Company’s deregistration of all of the unsold shares registered for sale pursuant to the Offering. As a result, for the three and nine months ended September 30, 2014, no distributions were reinvested, and no shares of common stock were issued under the DRIP. For the nine months ended September 30, 2013, $246,000 in distributions were reinvested and 25,940 shares of common stock were issued under the DRIP.

9.10. EARNINGS PER SHARE

EPS is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted EPS is computed after adjusting the basic EPS computation for the effect of potentially dilutive securities outstanding during the period. The effect of non-vested shares, if dilutive, is computed using the treasury stock method. The Company applies the two-class method for determining EPS as its outstanding shares of non-vested restricted stock are considered participating securities as dividend payments are not forfeited even if the underlying award does not vest. The Company’s excess of distributions over earnings related to participating securities are shown as a reduction in income (loss) attributable to common stockholders in the Company’s computation of EPS.

The following table sets forth the computation of the Company’s basic and diluted earnings (loss) per share:share for the three months ended March 31, 2015 and 2014:

10.11. INCENTIVE AWARD PLAN

The Company adopted an incentive award plan on July 7, 2009 (the “Incentive Award Plan”) that provides for the grant of equity awards to its employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the grant of non-qualified and incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards or cash-based awards. The Company has reserved 2,000,000 shares of common stock for stock grants pursuant to the Incentive Award Plan.

Pursuant to the Company’s Amended and Restated Independent Directors Compensation Plan, which is a sub-plan of the Incentive Award Plan (the “Directors Plan”), the Company granted each of its independent directors an initial grant of 5,000 shares of restricted stock (the “initial restricted stock grant”) following the Company’s raising of the $2,000,000$2 million minimum offering amount in the Offering on November 12, 2009. Each new independent director that subsequently joined the board of directors received the initial restricted stock grant on the date he or she joined the board of directors. In addition, until the Company terminated the Offering on February 7, 2013, on the date of each of the Company’s annual stockholders meetings at which an independent director was re-elected to the board of directors, he or she may have received 2,500 shares of restricted stock. The restricted stock vests one-third on the date of grant and one-third on each of the next two anniversaries of the grant date. The restricted stock will become fully vested and non-forfeitable in the event of an independent director’s termination of service due to his or her death or disability, or upon the occurrence of a change in control of the Company.

For the three months ended September 30,March 31, 2014, and 2013, the Company recognized compensation expense of $4,000 and $8,000, respectively,of$8,000 related to restricted common stock grants to its independent directors, which is included in general and administrative expense in the Company’s accompanying condensed consolidated statements of operations. For the nine months ended September 30, 2014 and 2013, the Company recognized compensation expense of $18,000 and $33,000, respectively. Shares of restricted common stock have full voting rights and rights to dividends.

As of September 30, 2014 and December 31, 2013, there was $51 and $18,000, respectively,2014, all of total unrecognizedthe compensation expense related to non-vested shares of restricted common stock. As of September 30, 2014, this expense is expected to be realized over the remaining period of the year. As of September 30, 2014stock has been recognized, and December 31, 2013, 1,667 and 3,333 shares of restricted common stock remain unvested with a fair value of $15,000 and $30,000, respectively. During the nine months ended September 30, 2014, there were no restricted stock grants issued and 1,666 shares of restricted stock vested.

A summary ofduring the changes in restricted stock grants for the ninethree months ended September 30, 2014, is presented below:March 31, 2015.

11.12. RELATED PARTY TRANSACTIONS

Pursuant to the Prior Advisory Agreement by and among the Company, the OP and the Prior Advisor, the Company was obligated to pay Prior Advisor specified fees upon the provision of certain services related to the investment of funds in real estate and real estate-related investments, management of the Company’s investments and for other services. Pursuant to the dealer manager agreement (the “Dealer Manager Agreement”) by and among the Company, the OP, and TNP Securities, LLC (the “Dealer Manager” or “TNP Securities”), prior to the termination of the Offering, the Company was obligated to pay the Dealer Manager certain commissions and fees in connection with the sales of shares in the Offering. Subject to certain limitations, the Company was also obligated to reimburse Prior Advisor and Dealer Manager for organization and offering costs incurred by Prior Advisor and Dealer Manager on behalf of the Company, and the Company was obligated to reimburse Prior Advisor for acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company. The Company records all related party fees as incurred, subject to any limitations described in the Prior Advisory Agreement.

On August 7, 2013, the Company allowed the Prior Advisory Agreement with the Prior Advisor to expire without renewal, and on August 10, 2013, the Company entered into the Advisory Agreement with Advisor. On July 15, 2014, the Advisory Agreement with the Advisor was renewed for an additional twelve months, beginning on August 10, 2014. The Advisor manages the Company’s business as the Company’s external advisor pursuant to the Advisory Agreement. Pursuant to the Advisory Agreement, the Company will pay Advisor specified fees for services related to the investment of funds in real estate and real estate-related investments, management of the Company’s investments and for other services.

On July 9, 2013, SRT Manager, an affiliate of the Advisor, acquired an initial 12% membership interest in Secured Holdings, the Company’s wholly-ownedwholly owned subsidiary. Following the Constitution Transaction on August 4, 2014 (see Note 6.7. “Notes Payable”), SRT Manager’s membership interests in Secured Holdings decreased to 8.33%., and followingthe sale of Secured Holding’s two properties to the Joint Venture (see Note 4. “Investment in Unconsolidated Joint Venture”), Secured Holdings paid SRT Manager approximately $2.1 million in full redemption of the then current value of its remaining 8.33% membership interest in Secured Holdings.

On January 24, 2014, GPP purchased 22,222 and 111,111 shares of the Company from TNP LLC and Sharon D. Thompson, respectively, for $8.00 per share. ThatThe share purchase transaction was part of a larger settlement of issues relating to the 2013 annual meeting proxy contest, and doeswas not necessarilyconsidered an arm’s length transaction. Therefore, the share purchase price may not reflect a market price or value for such securities (see Note 8.9. “Equity”).

On March 11, 2015, the Company sold Osceola Village, Constitution Trail, and Aurora Commons for the aggregate gross sales price of $53.6 million. The sale of the three properties was completed in connection with the formation of the Joint Venture as defined and further described in Note 4. “Investment in Unconsolidated Joint Venture.” The three properties were sold to the Joint Venture, and the closing of the sale was conditioned on the Company receiving a 19% membership interest in the Joint Venture. In exchange for this 19% membership interest, the Company contributed $4.5 million to the Joint Venture, which amount was credited against the Company’s sale of the three properties to the Joint Venture. Of the net sales proceeds from the sale of the three properties, $36.4 million was used by the Company to retire the debt associated with the sold properties.

Summary of Related Party Fees

Summarized separately below are the Prior Advisor and Advisor related party costs incurred by the Company for the three and nine months ended September 30,March 31, 2015 and 2014, and 2013, respectively, and payable as of September 30, 2014March 31, 2015 and December 31, 2013:2014: