Gramercy Property Trust 10-Q 2013 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2013

¨ 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: 000-53200

CHAMBERS STREET PROPERTIES

(Exact name of registrant as specified in its charter)

Maryland	56-2466617
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

47 Hulfish Street, Suite 210, Princeton, New Jersey 08542

(Address of principal executive offices) (Zip Code)

(609) 683-4900

(Registrant’s telephone number, including area code)

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

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  ¨

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

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

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

The number of shares outstanding of the registrant’s common shares, $0.01 par value, was 248,949,449 as of May 15, 2013.

CHAMBERS STREET PROPERTIES

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)		1
	Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012		1
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2013 and 2012		2
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2013 and  2012		3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2012		4
	Condensed Consolidated Statements of Equity for the Three Months Ended March 31, 2013 and 2012		5
	Notes to the Condensed Consolidated Financial Statements for the Three Months Ended March 31, 2013 and  2012		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		51
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		90
Item 4.	Controls and Procedures		90
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		91
Item 1A.	Risk Factors		91
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		91
Item 3.	Defaults Upon Senior Securities		92
Item 4.	Mine Safety Disclosure		92
Item 5.	Other Information		92
Item 6.	Exhibits		92
SIGNATURES			93

PART I.

FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

CHAMBERS STREET PROPERTIES

Condensed Consolidated Balance Sheets

as of March 31, 2013 and December 31, 2012 (unaudited)

(In Thousands, Except Share Data)

	March 31, 2013			December 31, 2012
ASSETS
Investments in Real Estate:
Land	$	442,554		$	378,806
Site Improvements		204,611			181,816
Buildings and Improvements		1,457,312			1,091,639
Tenant Improvements		134,413			80,679
		2,238,890			1,732,940
Less: Accumulated Depreciation and Amortization		(145,719	)		(132,129	)
Net Investments in Real Estate		2,093,171			1,600,811
Investments in Unconsolidated Entities		365,625			515,829
Construction In Progress and Other Assets—Variable Interest Entity		0			76,826
Cash and Cash Equivalents		66,692			107,355
Restricted Cash		14,786			10,998
Accounts and Other Receivables, Net of Allowance of $728 and $11, respectively		6,281			6,675
Deferred Rent		27,093			25,210
Acquired Above-Market Leases, Net of Accumulated Amortization of $25,698 and $23,364, respectively		50,225			31,855
Acquired In-Place Lease Value, Net of Accumulated Amortization of $97,239 and $89,943, respectively		224,502			162,558
Deferred Financing Costs, Net of Accumulated Amortization of $10,175 and $9,502, respectively		9,428			8,322
Lease Commissions, Net of Accumulated Amortization of $1,932 and $1,705, respectively		4,476			4,645
Other Assets		4,598			3,778
Total Assets	$	2,866,877		$	2,554,862
LIABILITIES, NON-CONTROLLING INTERESTS AND SHAREHOLDERS’ EQUITY
LIABILITIES
Notes Payable, Less Discount of $1,925 and $2,113, plus Premium of $21,387 and $7,555, respectively	$	718,077		$	492,944
Note Payable at Fair Value		8,719			9,288
Loans Payable		320,044			265,000
Security Deposits		2,216			1,811
Accounts Payable, Accrued Expenses and Other Liabilities		50,353			24,531
Accounts Payable and Accrued Expenses and Prepaid Rent—Variable Interest Entity		0			24,531
Acquired Below-Market Leases, Net of Accumulated Amortization of $20,016 and $19,077, respectively		34,889			24,582
Above-Market Ground Leases, Obligation, Net of Accumulated Amortization of $106 and $89, respectively		1,394			1,412
Property Management Fee Payable to Related Party		275			384
Investment Management Fee Payable to Related Party		3,945			10,700
Distributions Payable		37,272			37,418
Interest Rate Swaps at Fair Value—Non-Qualifying Hedge		3,907			423
Interest Rate Swap at Fair Value—Qualifying Hedges		824			1,015
Total Liabilities		1,181,915			894,039
COMMITMENTS AND CONTINGENCIES (NOTE 17)
NON-CONTROLLING INTERESTS
Operating Partnership Units		2,464			2,464
Class B Interest		200			200
Non-Controlling Interest—Variable Interest Entity		0			826
SHAREHOLDERS’ EQUITY
Common Shares of Beneficial Interest, $0.01 par value, 990,000,000 shares authorized; 249,007,366 and 249,664,156 issued and outstanding as of March 31, 2013 and December 31, 2012, respectively		2,484			2,494
Additional Paid-in-Capital		2,194,258			2,203,888
Accumulated Deficit		(495,728	)		(540,462	)
Accumulated Other Comprehensive Loss		(18,716	)		(8,587	)
Total Shareholders’ Equity		1,682,298			1,657,333
Total Liabilities, Non–Controlling Interests and Shareholders’ Equity	$	2,866,877		$	2,554,862

See accompanying notes to condensed consolidated financial statements.

1

CHAMBERS STREET PROPERTIES

Condensed Consolidated Statements of Operations

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

(In Thousands, Except Share Data)

	Three Months Ended March 31,
	2013			2012
REVENUES
Rental	$	44,040		$	35,319
Tenant Reimbursements		9,912			8,080
Total Revenues		53,952			43,399
EXPENSES
Operating and Maintenance		5,786			5,107
Property Taxes		7,474			5,376
Interest		9,304			8,756
General and Administrative		5,136			2,166
Property Management Fee to Related Party		234			382
Investment Management Fee to Related Party		500			5,962
Acquisition Expenses		1,841			1,379
Depreciation and Amortization		22,004			17,976
Transition Costs		35			0
Total Expenses		52,314			47,104
OTHER INCOME AND EXPENSES
Interest and Other Income		207			1,061
Net Settlement Payments on Interest Rate Swaps		(343	)		(161	)
(Loss) Gain on Interest Rate Swaps		(917	)		125
Loss on Note Payable at Fair Value		(25	)		(35	)
Total Other Income and (Expenses)		(1,078	)		990
INCOME (LOSS) BEFORE (PROVISION) BENEFIT FOR INCOME TAXES AND EQUITY IN INCOME OF UNCONSOLIDATED ENTITIES		560			(2,715	)
(PROVISION) BENEFIT FOR INCOME TAXES		(69	)		18
EQUITY IN INCOME OF UNCONSOLIDATED ENTITIES		4,364			542
GAIN ON CONVERSION OF EQUITY INVESTMENT TO CONTROLLING INTEREST		77,235			0
NET INCOME (LOSS)		82,090			(2,155	)
Net (Income) Loss Attributable to Non-Controlling Operating Partnership Units		(83	)		2
NET INCOME (LOSS) ATTRIBUTABLE TO CHAMBERS STREET PROPERTIES SHAREHOLDERS	$	82,007		$	(2,153	)
Basic and Diluted Net Income (Loss) Per Share Attributable to Chambers Street Properties Shareholders	$	0.33		$	(0.01	)
Weighted Average Common Shares Outstanding—Basic and Diluted		248,477,507			244,849,110
Dividends Declared Per Share	$	0.15		$	0.15

See accompanying notes to condensed consolidated financial statements.

2

CHAMBERS STREET PROPERTIES

Condensed Consolidated Statements of Comprehensive Income

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

(In Thousands)

	Three Months Ended March 31,
	2013			2012
NET INCOME (LOSS)	$	82,090		$	(2,155	)
Foreign Currency Translation (Loss) Gain		(9,141	)		6,481
Swap Fair Value Adjustments		(988	)		943
COMPREHENSIVE INCOME		71,961			5,269
Comprehensive Gain Attributable to Non-Controlling Operating Partnership Units		(73	)		(5	)
COMPREHENSIVE GAIN ATTRIBUTABLE TO CHAMBERS STREET PROPERTIES SHAREHOLDERS	$	71,888		$	5,264

See accompanying notes to condensed consolidated financial statements.

3

CHAMBERS STREET PROPERTIES

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

(In Thousands)

	Three Months Ended March 31,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)	$	82,090		$	(2,155	)
Adjustments to Reconcile Net Income (Loss) to Net Cash Flows Provided by Operating Activities:
Equity in Income of Unconsolidated Entities		(4,364	)		(542	)
Distributions from Unconsolidated Entities		10,910			9,406
Loss (Gain) on Interest Rate Swaps		917			(125	)
Loss on Note Payable at Fair Value		25			35
Gain on Conversion of Equity Investment to Controlling Interest		(77,235	)		0
Depreciation and Amortization of Building and Improvements		14,135			10,619
Amortization of Deferred Financing Costs		673			468
Amortization of Acquired In-Place Lease Value		7,640			7,202
Amortization of Above and Below Market Leases		1,373			614
Amortization of Lease Commissions		229			155
Amortization of Premium on Notes Payable		(542	)		(313	)
Share Based Compensation		440			0
Changes in Assets and Liabilities:
Accounts and Other Receivables		394			(646	)
Deferred Rent		(1,883	)		(1,976	)
Other Assets		(1,860	)		(88	)
Accounts Payable and Accrued Expenses		4,066			6,734
Investment and Property Management Fees Payable to Related Party		(6,864	)		1,999
Net Cash Flows Provided By Operating Activities		30,144			31,387
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Real Property		(63,101	)		(64,267	)
Investments in Unconsolidated Entities		0			(10,764	)
Restricted Cash		(3,788	)		(275	)
Lease Commissions		(68	)		(529	)
Improvements to Variable Interest Entity		(3,562	)		0
Improvements to Investments in Real Estate		(2,539	)		(10,258	)
Net Cash Flows Used in Investing Activities		(73,058	)		(86,093	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Common Shares—Public Offering		0			171
Proceeds from Additional Paid-in-Capital—Public Offering		0			171,085
Redemption of Common Shares		(26,912	)		(9,451	)
Payment of Offering Costs		0	)		(20,250	)
Payment of Distributions		(20,622	)		(18,048	)
Distribution to Non-Controlling Interest Operating—Partnership Units		(37	)		(37	)
Contribution from Non-Controlling Interest—Variable Interest Entity		0			140
Distribution to Non-Controlling Interest-Variable Interest Entity		(826	)		0
Borrowings on Loans Payable		280,044			0
Principal Payment on Loans Payable		(225,000	)		0
Proceeds from Notes Payable		0			0
Principal Payments on Notes Payable		(2,864	)		(3,838	)
Deferred Financing Costs		(1,641	)		(480	)
Security Deposits		406			42
Net Cash Flows Provided by Financing Activities		2,548			119,334
EFFECT OF FOREIGN CURRENCY TRANSLATION		(297	)		15
Net (Decrease) Increase in Cash and Cash Equivalents		(40,663	)		64,643
Cash and Cash Equivalents Beginning of Period		107,355			238,277
Cash and Cash Equivalents, End of the Period	$	66,692		$	302,920
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Period for Interest	$	8,342		$	8,659
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Distributions Declared and Payable	$	37,272		$	36,726
Proceeds from Dividend Reinvestment Program	$	16,796		$	14,737
Duke joint venture Contribution/Distribution—Amazon Expansion	$	19		$	291
Notes Payable Assumed on the Acquisition of Real Estate	$	216,011		$	0
Share Awards Increase in APIC	$	440		$	0
Conversion of Duke joint venture Equity Investment to Controlling Interest	$	139,738		$	0
Accounts Payable and Accrued Expenses—Construction in Progress	$	2,458		$	2,960
Accrued Offering Costs	$	0		$	242

See accompanying notes to condensed consolidated financial statements.

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CHAMBERS STREET PROPERTIES

Condensed Consolidated Statements of Equity

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

(In Thousands, Except Share Data)

	Common Shares						Additional Paid-in- Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
	Shares			Amount
Balance at January 1, 2013		249,664,156		$	2,494		$	2,203,888		$	(540,462	)	$	(8,587	)	$	1,657,333
Net Income Attributable to Chambers Street Properties Shareholders		0			0			0			82,007			0			82,007
Other Comprehensive Loss		0			0			0			0			(10,129	)		(10,129	)
Net Contributions From Public Offering of Common Shares, $0.01 Par Value		1,768,084			17			16,779			0			0			16,796
Share-Based Compensation		413,925			0			440			0			0			440
Redemption of Common Shares		(2,838,799	)		(27	)		(26,885	)		0			0			(26,912	)
Adjustment to Record Non-Controlling Interest at Redemption Value		0			0			36			0			0			36
Distributions		0			0			0			(37,273	)		0			(37,273	)
Balance at March 31, 2013		249,007,366		$	2,484		$	2,194,258		$	(495,728	)	$	(18,716	)	$	1,682,298

	Common Shares						Additional Paid-in- Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
	Shares			Amount
Balance at January 1, 2012		230,955,633		$	2,309		$	2,038,566		$	(348,602	)	$	(23,664	)	$	1,668,609
Net Loss Attributable to Chambers Street Properties Shareholders		0			0			0			(2,153	)		0			(2,153	)
Other Comprehensive Income		0			0			0			0			7,417			7,417
Net Contributions From Public Offering of Common Shares, $0.01 Par Value		18,721,834			187			185,807			0			0			185,994
Costs Associated with Public Offering		0			0			(18,384	)		0			0			(18,384	)
Redemption of Common Shares		(1,026,527	)		(10	)		(9,441	)		0			0			(9,451	)
Adjustment to Record Non-Controlling Interest at Redemption Value		0			0			(32	)		0			0			(32	)
Distributions		0			0			0			(36,726	)		0			(36,726	)
Balance at March 31, 2012		248,650,940		$	2,486		$	2,196,516		$	(387,481	)	$	(16,247	)	$	1,795,274

See accompanying notes to condensed consolidated financial statements.

5

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

1. Organization and Nature of Business

Chambers Street Properties, formerly known as CB Richard Ellis Realty Trust, was formed on March 30, 2004 under the laws of the state of Maryland. Our operating partnership, CSP Operating Partnership, LP (“CSP OP”), formerly known as CBRE Operating Partnership, L.P., was formed in Delaware on March 30, 2004. We are CSP OP’s majority owner and sole general partner. We elected to be taxed as a real estate investment trust (“REIT”) under sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), beginning with the taxable period ended December 31, 2004. We invest in real estate properties, focusing primarily on industrial (primarily warehouse/distribution/logistics) and office properties, as well as other real estate-related assets.

We operate in an umbrella partnership REIT structure in which CSP OP owns, directly or indirectly, substantially all of the properties acquired on our behalf. For each interest in our common shares that we issue, an equal interest in the limited partnership units of CSP OP is issued to us in exchange for the cash proceeds from the issuance of the interest in our common shares. We currently own approximately 99.90% of the common partnership units of CSP OP. CBRE REIT Holdings, LLC (“REIT Holdings”), an affiliate of our former investment advisor, holds the remaining interest in CSP OP through 246,361 limited partnership units representing approximately a 0.10% ownership of the total limited partnership units. In exchange for services provided to us relating to our formation and subsequent operations, REIT Holdings also owns a Class B limited partnership interest (“Class B interest”).

On July 1, 2004, we commenced operations and issued 6,844,313 common shares of beneficial interest in connection with our initial capitalization. In addition, REIT Holdings purchased 29,937 limited partnership units in CSP OP as a limited partner. During October 2004, we issued an additional 123,449 common shares of beneficial interest to an unrelated third-party investor. On October 24, 2006, we commenced an initial public offering of up to $2,000,000,000 of our common shares, and from October 24, 2006 (effective date) through January 29, 2009 (close) we accepted subscriptions from 13,270 investors, issued 60,808,967 common shares including 1,487,943 common shares issued pursuant to our dividend reinvestment plan, and received $607,345,702 in gross proceeds. On January 30, 2009, we commenced a follow-on public offering of up to $3,000,000,000 of our common shares, and from January 30, 2009 (effective date) through January 30, 2012 (close) we accepted subscriptions from 49,990 investors, issued 190,672,251 common shares including 11,170,603 common shares issued pursuant to our dividend reinvestment plan, and received $1,901,137,211 in gross proceeds. On February 3, 2012, we filed a registration statement on Form S-3 to register 25,000,000 of our common shares for up to $237,500,000 pursuant to the amended and restated dividend reinvestment plan which we subsequently amended to reflect our name change from CB Richard Ellis Realty Trust to Chambers Street Properties.

Prior to July 1, 2012, all of our business activities were managed by CBRE Advisors LLC (the “former investment advisor”) pursuant to advisory agreements. The fourth amended and restated advisory agreement (the “Fourth Amended Advisory Agreement”) terminated according to its terms on June 30, 2012, and we transitioned to a self-managed company, in accordance with a plan determined by our Board of Trustees. Our executive officers are responsible for the management of our day-to-day operations, including the supervision of our employees and third-party service providers. Acquisitions and asset management activities are now performed by our employees, with certain services provided by third parties at market rates. In addition, effective July 1, 2012, we entered into a transitional services agreement (“Transitional Services Agreement”) with CSP OP and the former investment advisor pursuant to which the former investment advisor would, at our direction, provide certain operational and consulting services to us for a term which ended on April 30, 2013.

See Note 10—“Investment Management and Other Fees to Related Parties” for a discussion of the Transitional Services Agreement.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“U.S. GAAP”) and the rules applicable to Form 10-Q and reflect all adjustments, which are, in our opinion, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim period. Certain information and footnotes required for annual financial statement presentation have been condensed or excluded pursuant to Securities and Exchange Commission (of the “SEC”) rules and regulations. Accordingly, our interim financial statements do not include all of the information and disclosures required under U.S. GAAP for complete financial statements. The

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CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

condensed consolidated financial statements and notes thereto should be read in conjunction with our current Annual Report on Form 10-K, which contains the latest available audited consolidated financial statements and notes thereto, which are as of and for the year ended December 31, 2012.

In the opinion of management, all adjustments of a normal recurring nature considered necessary in all material respects to present fairly our financial position, results of our operations and cash flows as of and for the three months ended March 31, 2013 have been made. The results of operations for the three months ended March 31, 2013 are not necessarily indicative of the results of operations to be expected for the entire year.

Principles of Consolidation

Because we are the sole general partner and majority owner of CSP OP and have majority control over their management and major operating decisions, the accounts of CSP OP are consolidated in our financial statements. The interests of REIT Holdings are reflected in non-controlling interest in the accompanying consolidated financial statements. All significant inter-company accounts and transactions are eliminated in consolidation. CBRE Global Investors, L.L.C. (“CBRE Global Investors”), an affiliate of the former investment advisor, also owns an interest in us through its ownership of 243,229 common shares of beneficial interest at March 31, 2013 and December 31, 2012.

Investment in Unconsolidated Entities

We determine if an entity is a Variable Interest Entity (“VIE”) based on several factors, including whether the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support. We make judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, then a quantitative analysis, if necessary. In a quantitative analysis, we incorporate various estimates, including estimated future cash flows, asset holding periods and discount rates, as well as estimates of the probabilities of the occurrence of various scenarios occurring. If the entity is a VIE, we then determine whether to consolidate the entity as the primary beneficiary. We determine whether an entity is a VIE and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective. If we made different judgments or utilized different estimates in these evaluations, it could result in differing conclusions as to whether or not an entity is a VIE and whether or not we consolidate such entity.

With respect to our majority limited membership interests in the Duke/Hulfish, LLC joint venture (the “Duke joint venture”), the Afton Ridge Joint Venture, LLC (“Afton Ridge”), the Goodman Princeton Holdings (Jersey) Limited joint venture (the “UK JV”) and the Goodman Princeton Holdings (LUX) SARL joint venture (the “European JV”), we considered the Accounting Standards Codification (“ASC”) Topic “Consolidation” (“FASB ASC 810”) in determining that we did not have control over the financial and operating decisions of such entities due to the existence of substantive participating rights held by the minority limited members who are also the managing members of the Duke joint venture and Afton Ridge, and the investment advisors/managers of the UK JV and the European JV, respectively. Additionally, we concluded that each of these entities was under the shared control of its’ limited members. The accounting policies applied by each of these entities are consistent with those applied by us.

We carry our investments in CBRE Strategic Partners Asia, the Duke joint venture, Afton Ridge, the UK JV and the European JV using the equity method of accounting because we have the ability to exercise significant influence (but not control) over operating and financial policies of each such entity. We eliminate transactions with such equity method entities to the extent of our ownership in each such entity. Accordingly, our share of net income (loss) of these equity method entities is included in consolidated net income (loss).

Our determination of the appropriate accounting method with respect to our investment in CB Richard Ellis Strategic Partners Asia II-A, L.P. (“CBRE Strategic Partners Asia”), which is not considered a VIE, is partially based on CBRE Strategic Partners Asia’s sufficiency of equity investment at risk which was triggered by a substantial paydown during 2009 of its subscription line of credit, which is backed by investor capital commitments to fund its operations. We account for this investment under the equity method of accounting.

CBRE Strategic Partners Asia is a limited partnership that qualifies for specialized industry accounting for investment companies. Specialized industry accounting allows investment companies to carry their investments at fair value, with changes in the fair value of the investments recorded in the statement of operations. On the basis of the guidance in ASC 970-323, the Company accounts for its

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CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

investment in CBRE Strategic Partners Asia under the equity method. As a result, and in accordance with ASC 810-10-25-15 the specialized accounting treatment, principally the fair value basis applied by CBRE Strategic Partners Asia under the investment company guide, is retained in the recognition of equity method earnings in the statement of operations of the Company. See Note 16 “Fair Value of Financial Instruments and Investments” for further discussion of the application of the fair value accounting to our investment in CBRE Strategic Partners Asia.

We evaluate our investments in unconsolidated entities for indicators of impairment during each reporting period. A series of operating losses of an investee or other factors may indicate that a decrease in value of the Company’s investment in the unconsolidated entity has occurred which is other-than-temporary. The amount of impairment recognized is the excess of the investment’s carrying amount over its estimated fair value. If a property level impairment is recorded by an unconsolidated entity related to its assets, the Company’s proportionate share is reflected in the equity in loss from unconsolidated entities with a corresponding decrease to its investment in unconsolidated entities.

Additionally, the Company considers various qualitative factors to determine if a decrease in the value of the investment is other-than-temporary. These factors include age of the venture, intent and ability for the Company to recover its investment in the entity, financial condition and long-term prospects of the entity and its underlying real estate assets, short-term liquidity needs of the unconsolidated entity, trends in the economic environments or leasing markets where its real estate assets are located, overall projected returns on investment, and any defaults under contracts with third parties (including bank debt). If the Company believes that the decline in the fair value of the investment is temporary, then no impairment is recorded.

Consolidated Variable Interest Entities

In December 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2009-17, “Consolidations” (“Topic 810”): “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.” This ASU incorporates the Statement of Financial Accounting Standards (SFAS) No. 167, “Amendments to FASB Interpretation No. 46(R),” issued by the FASB in June 2009. The amendments in this ASU replace the quantitative-based risks and rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a VIE with an approach focused on identifying which reporting entity has the power to direct the activities of a VIE that most significantly impact such entity’s economic performance and (i) the obligation to absorb losses of such entity or (ii) the right to receive benefits from such entity. ASU 2009-17 also requires additional disclosures about a reporting entity’s involvement in VIE’s, which enhances the information provided to users of financial statements.

In October 2011, one of our consolidated subsidiaries, RT Atwater Holding, LLC, entered into a real estate development venture with a subsidiary of the Trammel Crow Company (“TCC”), a wholly-owned subsidiary of CBRE Group, Inc., a former related party of ours, whereby we own 95% of the newly formed entity and TCC owns the remaining 5% of the entity. The new entity, RT/TC Atwater, LP (“Atwater”), was formed for the purpose of developing and then operating a build-to-suit suburban office and research facility for a single tenant that has agreed to a minimum lease term of 12 years starting from the completion of construction of the facility. Through the provisions of the Atwater, LP agreement, we and TCC collectively have the power to direct the activities that most significantly impact the economic performance of Atwater. Atwater was deemed a VIE and we were the entity within the related party group determined to be most closely associated with Atwater. We began to consolidate the entity at its inception in October 2011.

On February 16, 2012, we entered into a construction loan agreement with Atwater, a consolidated joint venture, to provide it with up to $49,575,000 of financing which was available for disbursements to fund construction expenditures at 1400 Atwater Drive. We received a $250,000 financing fee from the joint venture for providing this construction loan. The construction loan bore interest at 5.00% of amounts outstanding and was scheduled to mature on or before May 31, 2013, unless otherwise extended. This construction loan has been eliminated in the consolidation of Atwater for reporting purposes.

On January 30, 2013, upon substantial completion of the investment, we acquired 100% of TCC’s interest in Atwater. The cost of the acquisition was approximately $3,431,000 inclusive of the return of TCC’s original capital contribution of $826,000.

As of March 31, 2013, all of Atwater’s construction in progress and other assets, including the initial land acquisition, previously recorded to construction in progress and other assets—variable interest entity on the balance sheet, were recorded to investments in

8

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

real estate and intangible assets. See Note 3 “Acquisition of Real Estate” for a preliminary fair value determination update on this investment. The property commenced operations in January 2013.

Use of Estimates

The preparation of financial statements, in conformity with U.S. GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Segment Information

We currently operate our consolidated properties in two geographic areas, the United States and the United Kingdom. We view our consolidated property operations as three reportable segments, a Domestic Industrial segment, a Domestic Office segment and an International Office/Retail segment, which participate in the acquisition, development, ownership, and operation of high quality real estate in their respective segments.

Cash Equivalents

We consider short-term investments with maturities of three months or less when purchased to be cash equivalents. As of March 31, 2013 and December 31, 2012, cash equivalents consisted primarily of investments in money market funds.

Restricted Cash

Restricted cash represents those cash accounts for which the use of funds is restricted by loan covenants. As of March 31, 2013 and December 31, 2012, our restricted cash balance was $14,786,000 and $10,998,000, respectively, which represents amounts set aside as impounds for future property tax payments, property insurance payments and tenant improvement payments as required by our agreements with our lenders.

Accounting for Derivative Financial Instruments and Hedging Activities

All of our derivative instruments are carried at fair value on the balance sheet. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking each hedge transaction. We periodically review the effectiveness of each hedging transaction, which involves estimating future cash flows. Cash flow hedges are accounted for by recording the fair value of the derivative instrument on the balance sheet as either an asset or liability, with a corresponding amount recorded in other comprehensive income within shareholders’ equity. Calculation of a fair value of derivative instruments also requires management to use estimates. Amounts will be reclassified from other comprehensive income to the income statement in the period or periods the hedged forecasted transaction affects earnings.

Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. The changes in fair value hedges are accounted for by recording the fair value of the derivative instruments on the balance sheet as either assets or liabilities, with the corresponding amount recorded in current period earnings. We have certain interest rate swap derivatives that are designated as qualifying cash flow hedges and follow the accounting treatment discussed above. We also have certain interest rate swap derivatives that do not qualify for hedge accounting, and accordingly, changes in fair values are recognized in current earnings.

We disclose the fair values of derivative instruments and their gains and losses in a tabular format. We also provide more information about our liquidity by disclosing derivative features that are credit risk-related. Finally, we cross-reference within these footnotes to enable financial statement users to locate important information about derivative instruments (see Note 14 “Derivative Instruments” and Note 16 “Fair Value of Financial Instruments and Investments” for a further discussion of our derivative financial instruments).

9

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Investments in Real Estate and Related Long Lived Assets (Impairment Evaluation)

Our investments in real estate are stated at depreciated cost. Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives as follows:

Buildings and Improvements	39 years
Site Improvements	15 and 25 years
Tenant Improvements	Shorter of the useful lives or the terms of the related leases

Improvements and replacements are capitalized when they extend the useful life, increase capacity, or improve the efficiency of the asset. Repairs and maintenance are charged to expense as incurred. As of March 31, 2013 and December 31, 2012, we owned, on a consolidated basis, 99 and 82 real estate investments, respectively.

We assess whether there has been impairment in the value of our long-lived assets whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount to the future net cash flows, undiscounted and without interest, expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. The estimated fair value of the asset group identified for step two testing is based on either the income approach with market discount rate, terminal capitalization rate and rental rate assumptions being most critical, or on the sales comparison approach to similar properties. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell.

No impairment of long-lived assets was recognized during the three months ended March 31, 2013 and 2012.

Other Assets

Other assets include the following as of March 31, 2013 and December 31, 2012 (in thousands):

	March 31, 2013		December 31, 2012
Prepaid insurance	$	1,182	$	1,790
Prepaid real estate taxes		820		224
Other		2,596		1,764
Total	$	4,598	$	3,778

Concentration of Credit Risk

Our consolidated properties are located throughout the United States and in the United Kingdom. The ability of the tenants to honor the terms of their respective leases is dependent upon the economic, regulatory, and social factors affecting the communities in which the tenants operate. Our credit risk relates primarily to cash, restricted cash, and interest rate swap agreements. Cash accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000 through December 31, 2013.

We have not experienced any losses to date on our invested cash and restricted cash. The interest rate swap agreements create credit risk. Credit risk arises from the potential failure of counterparties to perform in accordance with the terms of their contracts. Our risk management policies define parameters of acceptable market risk and limit exposure to credit risk. Credit exposure resulting from derivative financial instruments is represented by their fair value amounts, increased by an estimate of potential adverse position exposure arising from changes over time in interest rates, maturities, and other relevant factors. We do not anticipate nonperformance by any of our counterparties.

Non-Controlling Interest Operating Partnership Units

We owned a 99.90%, partnership interest in CSP OP as of March 31, 2013, December 31, 2012 and March 31, 2012, respectively. The remaining 0.10% partnership interest as of March 31, 2013, December 31, 2012 and March 31, 2012, respectively, was owned by REIT

10

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Holdings in the form of 246,361 non-controlling operating partnership units which were exchangeable for cash or, at the Company’s discretion, on a one for one basis for common shares of the Company, with an estimated aggregate redemption value of $2,464,000.

With respect to the operating partnership units, FASB ASC 480-10 Distinguishing Liabilities from Equity requires non-controlling interests with redemption provisions that permit the issuer to settle in either cash or common shares at the option of the issuer to be further evaluated under the Codification Sub-Topic “Derivatives and Hedging—Conditions Necessary for Equity Classification” (“FASB ASC 815-40-25-10”) to determine whether permanent equity or temporary equity classification on the balance sheet is appropriate. Since the operating partnership units contain such a provision, we evaluated this guidance and determined that the operating partnership units do not meet the requirements to qualify for equity presentation. As a result, upon the adoption of FASB ASC 810 Consolidation and the related revisions to FASB ASC 480-10 the operating partnership units are presented in the temporary equity section of the consolidated balance sheets and reported at the higher of their proportionate share of the net assets of CBRE OP or fair value, with period to period changes in value reported as an adjustment to shareholder’s equity. Under the terms of the Second Amended and Restated Agreement, the fair value of the operating partnership units is determined as an amount equal to the redemption value as defined therein.

Purchase Accounting for Acquisition of Investments in Real Estate

We apply the acquisition method to all acquired real estate investments. The purchase consideration of the real estate is allocated to the acquired tangible assets, consisting primarily of land, site improvements, building and tenant improvements and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases, value of tenant relationships and acquired ground leases, based in each case on their fair values. Loan premiums, in the case of above-market rate loans, or loan discounts, in the case of below-market loans, will be recorded based on the fair value of any loans assumed in connection with acquiring the real estate.

The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is the basis for the purchase consideration allocated to land (or acquired ground lease if the land is subject to a ground lease), site improvements, building and tenant improvements based on management’s determination of the relative fair values of these assets. Management determines the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors considered by management 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. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions, legal and other related costs.

In allocating the purchase consideration of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid 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 non-cancelable term of the lease and, for below-market leases, over a period equal to the initial term plus any below-market fixed rate renewal periods. The capitalized below-market lease values, also referred to as acquired lease obligations, are amortized as an increase to rental income over the initial terms of the respective leases and any below-market fixed rate renewal periods. The capitalized above-market lease values are amortized as a decrease to rental income over the initial terms of the prospective leases.

The aggregate value of other acquired intangible assets, consisting of in-place leases and tenant relationships, is measured by the estimated cost of operations during a theoretical lease-up period to replace in-place leases, including lost revenues and any unreimbursed operating expenses, plus an estimate of deferred leasing commissions for in-place leases. This aggregate value is allocated between in-place lease value and tenant relationships based on management’s evaluation of the specific characteristics of each tenant’s lease; however, the value of tenant relationships has not been separated from in-place lease value for the real estate acquired as such value and its consequence to amortization expense is immaterial for these particular acquisitions. Should future acquisitions of properties result in allocating material amounts to the value of tenant relationships, an amount would be separately allocated and amortized over the estimated life of the relationship. The value of in-place leases is amortized to expense over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be written-off.

11

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). In the accompanying consolidated balance sheets, accumulated other comprehensive income (loss) consists of foreign currency translation adjustments and swap fair value adjustments for qualifying hedges.

Income Taxes

We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code, beginning with our taxable year ended December 31, 2004. To qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding net capital gains) as defined in the Internal Revenue Code, to our shareholders and satisfy certain other organizational and operating requirements. We generally will not be subject to U.S. federal income taxes if we distribute 100% of our net taxable income each year to our shareholders. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income taxes (including any applicable alternative minimum tax) on our taxable income at regular corporate rates and may not be able to qualify as a REIT for the four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and to U.S. federal income taxes and excise taxes on our undistributed taxable income. Except where noted below, we believe that we have met all of the REIT distribution and technical requirements for the three months ended March 31, 2013 and the year ended December 31, 2012. We intend to continue to adhere to these requirements and maintain our REIT qualification.

In order for distributions to be deductible for U.S. federal income tax purposes and count towards our distribution requirement, they must not be “preferential dividends.” A distribution will not be treated as preferential if it is pro rata among all outstanding shares of stock within a particular class. Certain aspects of the operation of our dividend reinvestment plan prior to July 2009 may have violated the prohibition against preferential dividends, and to address those issues we entered into a closing agreement with the IRS in July 2011, whereby the IRS agreed that the terms and administration of our dividend reinvestment plan did not result in our dividends paid during taxable years 2007 through 2009 being treated as preferential dividends.

Revenue Recognition and Valuation of Receivables

All leases are classified as operating leases and minimum rents are recognized on a straight-line basis over the terms of the leases. The excess of rents recognized over amounts contractually due pursuant to the underlying leases is recorded as deferred rent. In connection with various leases, we have received irrevocable stand-by letters of credit totaling $17,745,000 and $17,760,000 as security for such leases at March 31, 2013 and December 31, 2012, respectively.

Reimbursements from tenants, consisting of amounts due from tenants for common area maintenance, real estate taxes, insurance and other recoverable costs, are recognized as revenue in the period the expenses are incurred. Tenant reimbursements are recognized and presented on a gross basis, when we are the primary obligor with respect to incurring expenses and with respect to having the credit risk.

Tenant receivables and deferred rent receivables are carried net of the allowances for uncollectible current tenant receivables and deferred rent. Management’s determination of the adequacy of these allowances is based primarily upon evaluations of historical loss experience, individual receivables, current economic conditions, and other relevant factors. The allowances are increased or decreased through the provision for bad debts. The allowance for uncollectible rent receivable was $728,000 and $11,000 as of March 31, 2013 and December 31, 2012, respectively.

Offering Costs

Offering costs totaling $0 and $18,384,000 were incurred during the three months ended March 31, 2013 and 2012, respectively, and are recorded as a reduction of additional paid-in-capital in the consolidated statement of shareholders’ equity. Offering costs incurred through March 31, 2013 totaled $237,676,000. Of the total amount, $217,959,000 was incurred to CNL Securities Corp., as the former dealer manager of our public offerings (the “former dealer manager”); $3,969,000 was incurred to CBRE Group, Inc., an affiliate of the former investment advisor; $912,000 was incurred to the former investment advisor for reimbursable marketing costs and $14,836,000

12

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

was incurred to other service providers. Each party was paid the amount incurred from proceeds of our follow-on public offering. All offering costs have been paid as of March 31, 2013 and December 31, 2012.

Deferred Financing Costs and Discounts or Premiums on Notes Payable

Direct costs incurred in connection with obtaining financing are amortized over the respective term of the loan on a straight-line basis, which approximates the effective interest method.

Discounts or premiums on notes payable are amortized to interest expense based on the effective interest method.

Translation of Non-U.S. Currency Amounts

The financial statements and transactions of our United Kingdom real estate operation are recorded in their functional currency, namely the Great Britain Pound (“GBP”) and are then translated into U.S. dollars (“USD”).

Assets and liabilities of this operation are denominated in the functional currency and are then translated at exchange rates in effect at the balance sheet date. Revenues and expenses are translated at the average exchange rate for the reporting period. Translation adjustments are reported in “Accumulated Other Comprehensive Loss,” a component of Shareholders’ Equity.

The carrying value of our United Kingdom assets and liabilities fluctuate due to changes in the exchange rate between the USD and the GBP. The exchange rate of the USD to the GBP was $1.5204 and $1.6242 at March 31, 2013 and December 31, 2012, respectively. The profit and loss weighted average exchange rate of the USD to the GBP was approximately $1.5742 and $1.5736 for the three months ended March 31, 2013 and 2012, respectively.

The carrying value of our European assets and liabilities fluctuate due to changes in the exchange rate between the USD and the EUR. The exchange rate of the USD to the EUR was $1.2822 and $1.3189 at March 31, 2013 and December 31, 2012. The profit and loss weighted average exchange rate of the USD to the EUR was approximately $1.3273 and $1.3116 for the three months ended March 31, 2013 and 2012, respectively.

Class B Interest—Related Party

Effective July 1, 2004, REIT Holdings, an affiliate of the former investment advisor, was granted a Class B interest in CSP OP. The Class B interest is an equity instrument that was issued in exchange for services provided to us relating to our formation and subsequent operations. The holder is entitled to receive distributions made by CSP OP in an amount equal to 15% of all net sales proceeds on dispositions of properties or other assets (including by liquidation, merger or otherwise) after the other partners, including us, have received in the aggregate, cumulative distributions from property income, sales proceeds or other services equal to (i) the total capital contributions made to CSP OP and (ii) a 7% annual, uncompounded return on such capital contributions.

Effective May 1, 2012, we entered into the Third Amended Partnership Agreement which revised the redemption rights of the Class B interest. Accordingly, the Class B interest may be redeemed upon the earliest to occur of (i) the exercise by the holder of the Class B interest of its right to require CSP OP to redeem its interest, which right continues for five years from the date of the agreement, (ii) the fifth anniversary of the date of the agreement, (iii) certain other liquidity events, (iv) a merger or sale transaction (a “Merger or Sale”), or (v) our common shares becoming listed or admitted to trading on a national securities exchange or designated for quotation on the NASDAQ Global Select Market or the NASDAQ Global Market (a “Listing”). CSP OP may reject a redemption and institute a blackout period with respect to redemptions upon the determination by our Board of Trustees that an appraisal process would not be in the best interest of CSP OP at the time of the proposed redemption. A blackout period may only be imposed as the result of a potential Merger or Sale or potential Listing. The consideration received for the redemption of the Class B interest will depend upon the event triggering the redemption. In the event of a redemption in connection with (a) a Listing, the consideration will be determined based on the market value of our shares for a 30 day period beginning 150 days after the Listing, or (b) a Merger or Sale, the consideration will be determined based on our aggregate share value in the transaction. In the event of a redemption as a result of (a) the exercise by the holder of the Class B interest of its redemption right, (b) the fifth anniversary of the date of the agreement or (c) certain other liquidity events, consideration will be determined based on an appraisal process. If we list our common shares, we will be required to redeem the Class B interest at the time prescribed, and at an amount calculated, in accordance with the partnership agreement of CSP OP. As a

13

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

result, future changes in the fair value of the Class B interest will be deferred from recognition in the financial statements until a Listing or Merger or Sale transaction takes place.

As a result of the modification of the terms of the Class B interest pursuant to the Third Amended Partnership Agreement, it was no longer required that the Class B interest be redeemed or forfeited upon a termination of the former investment advisor as investment advisor to the Company. Consequently, we recognized an expense of $200,000 during the year ended December 31, 2012 for the current economic fair value resulting from the modification of the terms of the Class B interest.

With respect to the Class B interest in CSP OP, FASB ASC 480-10 “Distinguishing Liabilities from Equity” requires non-controlling interests with redemption provisions that permit the issuer to settle in either cash or common shares at the option of the issuer to be further evaluated under the Codification Sub-Topic “Derivatives and Hedging—Conditions Necessary for Equity Classification” (“FASB ASC 815-40-25-10”) to determine whether permanent equity or temporary equity classification on the balance sheet is appropriate. Since the Class B interest contains such a provision, we evaluated this guidance and determined that the Class B interest does not meet the requirements to qualify for equity presentation. As a result, the Class B interest in CSP OP is presented in the temporary equity section of the consolidated balance sheets and reported at fair value, with period to period changes in value reported as an adjustment to shareholder’s equity. Under the terms of the Third Amended Partnership Agreement, the fair value of the Class B Interest is determined as an amount equal to the redemption value as defined therein.

Transition Costs

We incurred certain costs in connection with our transition from being an externally managed company to a self-managed company (“Transition Costs”). These Transition Costs consist of legal, consulting and other third-party service provider costs incurred by us in order to execute on our Board of Trustees’ decision to become a self-managed company. The Transition Costs include legal and consulting costs resulting from the amendment of our management structure and various corporate relationships, including with respect to our relations with the former investment advisor, as well as exploring and implementing strategic alternatives for information technology, office space and personnel needs, among other expenses. Transition costs totaling $35,000 and $0 were incurred during the three months ended March 31, 2013 and 2012, respectively. Cumulative transition costs incurred through March 31, 2013 totaled $8,285,000.

Earnings Per Share Attributable to Chambers Street Properties Shareholders

Basic net income (loss) per share is computed by dividing income (loss) by the weighted average number of common shares outstanding during each period. The computation of diluted net income (loss) further assumes the dilutive effect of stock options, stock warrants and contingently issuable shares, if any. We have recorded net income for the three months ended March 31, 2013 and a net loss for the three months ended March 31, 2012, the effect of stock options, restricted stock grants, stock warrants and contingently issuable shares, would be anti–dilutive for the three months ended March 31, 2013 and 2012, and accordingly, the $440,000 and $0 in restricted stock awards have been excluded from the earnings per share computation. In addition, no stock options or stock warrants have ever been issued. As a result, there is no difference in basic and diluted shares.

Fair Value of Financial Instruments and Investments

We elected to apply the fair value option for one of our eligible mortgage notes payable that was newly issued debt during the year ended December 31, 2008. The measurement of the elected mortgage note payable at its fair value and its impact on the statement of operations is described in Note 15 “Fair Value Option-Note Payable” and Note 16 “Fair Value of Financial Instruments and Investments.” As of March 31, 2013 and December 31, 2012, the fair value of the mortgage Note Payable was determined using a market interest rate of 3.011% and 3.015% respectively.

We generally determine or calculate the fair value of financial instruments using appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments and our estimates for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cash flow. The Investment Manager of CBRE Strategic

14

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Partners Asia applies valuation techniques for our investment carried at fair value based upon the application of the income approach, the direct market comparison approach, the replacement cost approach or third party appraisals to the underlying assets held in the unconsolidated entity in determining the net asset value attributable to our ownership interest therein. The financial assets and liabilities recorded at fair value in our consolidated financial statements are the two interest rate swaps, one interest rate cap, our investment in CBRE Strategic Partners Asia (a real estate entity which qualifies as an investment company under the Investment Company Act), and one mortgage note payable that is economically hedged by one of the interest rate swaps.

The remaining financial assets and liabilities which are only disclosed at fair value consist of all other notes payable, the unsecured line of credit and other debt instruments. We determined the fair value of our secured notes payable and other debt instruments by performing discounted cash flow analyses using an appropriate market discount rate. We calculate the market discount rate by obtaining period-end treasury rates for fixed-rate debt, or London Inter-Bank Offering Rate (“LIBOR”) rates for variable-rate debt, for maturities that correspond to the maturities of our debt and then adding an appropriate credit spread derived from information obtained from third-party financial institutions. These credit spreads take into account factors such as our credit standing, the maturity of the debt, whether the debt is secured or unsecured, and the loan-to-value ratios of the debt.

The carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value due to their short-term maturities.

We adopted the fair value measurement criteria described herein for our non-financial assets and non-financial liabilities on January 1, 2009. The adoption of the fair value measurement criteria to our non-financial assets and liabilities did not have a material impact to our consolidated financial statements. Assets and liabilities typically recorded at fair value on a non-recurring basis include:

¡ Non-financial assets and liabilities initially measured at fair value in an acquisition or business combination;

¡ Long-lived assets measured at fair value due to an impairment assessment; and

¡ Asset retirement obligations initially measured under the ASC Topic “Asset Retirement and Environmental Obligations” (“FASB ASC 410”).

Share-based Compensation

For share-based awards for which there is no pre-established performance period, we recognize compensation costs over the service vesting period, which represents the requisite service period, on a straight-line basis.

For share-based awards in which the performance period precedes the grant date, we recognize compensation costs over the requisite service period, which includes both the performance and service vesting periods, using the accelerated attribution expense method. The requisite service period begins on the date the Compensation Committee of the Board of Trustees authorizes the award and adopts any relevant performance measures.

During the performance period for a share-based award program, we estimate the total compensation cost of the potential future awards. We then record compensation costs equal to the portion of the requisite service period that has elapsed through the end of the reporting period.

For share-based awards granted by the Company, CSP OP issues a number of common units equal to the number of common shares ultimately granted by us in respect of such awards.

Subsequent Events

In preparing our accompanying financial statements, management has evaluated subsequent events through the financial statement issuance date. We believe that the disclosures contained herein are adequate to prevent the information presented from being misleading.

15

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Adoption of Accounting Standards

New Accounting Standards

In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). This update requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income.

In January 2013, the FASB issued ASU 2013-01, Clarifying the Scope of Disclosures About Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements established by ASU 2011-11. The ASU clarifies that the scope applied to derivatives accounted for in accordance with the Derivatives and Hedging topic of the Codification, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with the Offsetting Presentation section of the Balance Sheet topic or the Presentation section of the Derivatives and Hedging topic or subject to an enforceable master netting arrangement or similar agreement.

The ASU amendment and the subsequent clarification of the amendment are effective for periods beginning on or after January 1, 2013, and must be shown for all periods shown on the balance sheet. The adoption of these ASU amendments did not have a material effect on our financial condition, results of operations, or disclosures.

Other Accounting Standards Updates not effective until after December 2012 are not expected to have a significant effect on our consolidated financial position or results of operations.

3. Acquisition of Real Estate

The fair value of the real estate acquired is allocated to the acquired tangible assets, consisting of land, site improvements, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above and below-market leases and the value of in-place leases and tenant relationships, if any, based in each case on their respective fair values. Loan premiums, in the case of above-market rate loans, or loan discounts, in the case of below-market loans, will be recorded based on the fair value of any loans assumed in connection with acquiring the real estate. Above-market ground leases will be recorded based on the respective fair value of the ground leases.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

The purchase price allocation to the assets and liabilities acquired during the three months ended March 31, 2013 and appearing in the table are preliminary (in thousands):

Property(1)	Land		Site Improvements		Building Improve- ments		Tenant Improve- ments		Acquired In- Place Lease Value		Above Market Lease Value		Below Market Lease Value		��	Premium on Notes			Purchase Price		Notes Payable Assumed			Net Assets Acquired
1400 Atwater	$	5,551	$	9,549	$	36,761	$	27,995	$	8,757	$	0	$	(3,827	)	$	0		$	84,786	$	0		$	84,786
Celebration Office Center(2)		4,903		794		9,255		658		1,943		1,300		0			(433	)		18,420		(9,130	)		9,290
22535 Colonial Pkwy(2)		1,288		524		13,135		831		3,049		0		(777	)		(377	)		17,673		(8,169	)		9,504
Northpoint III(2)		3,165		850		15,784		1,168		2,396		0		(436	)		(533	)		22,394		(10,571	)		11,823
Goodyear Crossing Ind. Park II(2)		7,603		1,961		48,176		501		5,558		2,051		0			(967	)		64,883		(20,182	)		44,701
3900 North Paramount Parkway(2)		860		367		12,623		688		2,765		1,537		0			(317	)		18,523		(7,929	)		10,594
3900 South Paramount Parkway(2)		1,065		456		14,091		554		3,182		1,905		0			(394	)		20,859		(7,929	)		12,930
1400 Perimeter Park Drive(2). .		766		316		3,550		332		1,074		234		0			(107	)		6,165		(2,403	)		3,762
Miramar I(2)		11,851		1,398		4,127		2,516		3,234		1,242		0			(456	)		23,912		(9,418	)		14,494
Miramar II(2)		9,851		978		14,843		2,058		3,418		1,369		0			(607	)		31,910		(12,686	)		19,224
McAuley Place(2)		1,562		481		20,012		1,336		2,780		6,875		(439	)		(298	)		32,309		(13,494	)		18,815
Point West I(2)		3,659		1,313		22,666		1,354		3,120		27		0			(344	)		31,795		(11,285	)		20,510
Easton III(2)		2,579		1,081		15,043		1,484		2,895		0		(2,527	)		(361	)		20,194		(6,605	)		13,589
Norman Pointe I(2)		2,883		350		28,025		1,382		4,335		1,506		(111	)		(2,138	)		36,232		(20,752	)		15,480
Norman Pointe II(2)		1,369		406		37,667		4,447		8,192		0		(3,166	)		(2,802	)		46,113		(22,847	)		23,266
The Landings I(2)		1,612		440		22,974		1,459		4,369		1,225		0			(1,830	)		30,249		(15,618	)		14,631
The Landings II(2)		1,376		316		19,409		969		2,888		670		(42	)		(1,609	)		23,977		(13,775	)		10,202
Atrium I(2)		4,230		1,381		29,926		3,644		6,116		763		0			(989	)		45,071		(23,218	)		21,853
	$	66,173	$	22,961	$	368,067	$	53,376	$	70,071	$	20,704	$	(11,325	)	$	(14,562	)	$	575,465	$	(216,011	)	$	359,454

⁽¹⁾  Fair value determinations are preliminary. Final valuations of assets and liabilities acquired are not yet complete.

⁽²⁾  Properties acquired from the Duke joint venture on March 1, 2013.

On March 1, 2013, we acquired Duke Realty’s 20% interest in 17 properties that were held in the Duke joint venture. The properties are located in major submarkets of Phoenix, Raleigh/Durham, Houston, Columbus, Cincinnati, Orlando, Ft. Lauderdale, Minneapolis and Dallas and consisted of 16 office buildings and one warehouse/distribution/logistics building totaling 3,318,402 square feet. The acquisition was structured such that membership interests in each of the subsidiaries that hold the properties were distributed to Duke Realty and CSP OP on a pro rata basis in accordance with their percentage ownership interests in the Duke joint venture (80% to CSP OP and 20% Duke Realty) and CSP OP then purchased Duke Realty’s 20% membership interests in those subsidiaries, resulting in CSP OP owning a 100% interest in each of the property- owning subsidiaries. The aggregate purchase price that CSP OP paid to Duke Realty in connection with the acquisition was approximately $98,136,000, which is 20% of approximately $490,679,000 exclusive of fees and customary closing costs, but inclusive of approximately $216,011,000 of existing mortgage financing. The transaction constituted a change in control of the previously unconsolidated 17 properties, which required a step-up in basis of all acquired assets and liabilities. This resulted in a gain of $77,235,000 at March 31, 2013.

Acquisition related expenses of $1,841,000 and $1,379,000 associated with the acquisitions of real estate were expensed as incurred during the three months ended March 31, 2013 and 2012, respectively.

Building Improvements are depreciated over 39 years; Site Improvements are depreciated over 15 and 25 years; Tenant Improvements, Acquired In-Place Lease Value, Above Market Lease Value and Below Market Lease Value are amortized over the remaining lease terms at the time of acquisition.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Unaudited pro forma results, assuming the above noted acquisitions had occurred as of January 1, 2012 for purposes of the 2013 acquisitions and assuming the above noted 2012 acquisitions had occurred as of January 1, 2011 for purposes of presenting the 2012 proforma disclosures, respectively, are presented below. Non-recurring 2013 acquisition costs totaling $1,841,000 were excluded from the 2013 pro forma and included in the year ended December 31, 2012 as an operating expense. Nonrecurring 2012 acquisition costs totaling $1,379,000 are excluded from this presentation.

These unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments, such as increased depreciation and amortization expenses as a result of tangible and intangible assets acquired in the acquisitions. These unaudited pro forma results do not purport to be indicative of what operating results would have been had the acquisitions actually occurred on January 1, 2012 or 2011 and may not be indicative of future operating results.

	Three Months Ended March 31,
	2013		2012
Revenue	$	55,962	$	50,198
Operating Income (Loss)		3,565		(2,678	)
Net Income (Loss)		84,017		(932	)
Basic and Diluted Loss Per Share	$	0.34	$	0.00
Weighted Average Shares Outstanding for Basic and Diluted Loss		248,477,507		244,849,110

4. Investments in Unconsolidated Entities

Investments in unconsolidated entities at March 31, 2013 and December 31, 2012 consist of the following (in thousands):

	March 31, 2013		December 31, 2012
CBRE Strategic Partners Asia	$	8,178	$	8,098
Duke joint venture		200,398		344,511
Afton Ridge		16,970		17,008
UK JV		34,723		37,487
European JV		105,356		108,725
	$	365,625	$	515,829

The following is a summary of the investments in unconsolidated entities for the three months ended March 31, 2013 and the year ended December 31, 2012 (in thousands):

	March 31, 2013			December 31, 2012
Investment Balance, January 1	$	515,829		$	537,631
Contributions		0			45,568
Company’s Equity in Net Income (including adjustments for basis differences)		4,364			3,959
Other Comprehensive (Loss) Income of Unconsolidated Entities		(3,920	)		1,144
Distributions		(150,648	)		(72,473	)
Investment Balance, End of Period	$	365,625		$	515,829

CBRE Strategic Partners Asia

We have agreed to a capital commitment of $20,000,000 in CBRE Strategic Partners Asia, which extended for 57 months (to October 31, 2012) after the close of the final capital commitment. As of March 31, 2013, we have contributed $17,526,000 of our capital commitment. CBRE Global Investors formed CBRE Strategic Partners Asia to purchase, reposition, develop, hold for investment and sell institutional quality real estate and related assets in targeted markets in Asia, including China, Japan, India, South Korea, Hong Kong, Singapore and other Asia Pacific markets. The initial closing date of CBRE Strategic Partners Asia was in July 2007, with additional commitments being accepted through January 2008. CBRE Strategic Partners Asia closed on January 31, 2008, with aggregate capital commitments of $394,203,000. CBRE Strategic Partners Asia has an eight-year term, which may be extended for up to two one-year periods with the approval of two-thirds of the limited partners.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

As of March 31, 2013, CBRE Strategic Partners Asia, with its parallel fund, CB Richard Ellis Strategic Asia II, L.P., had aggregate investor commitments of $394,203,000 from institutional investors including CBRE Global Investors, an affiliate of the former investment advisor. We own an ownership interest of approximately 5.07% in CBRE Strategic Partners Asia. As of March 31, 2013, CBRE Strategic Partners Asia had acquired ownership interests in ten properties, five in China and five in Japan. Two of the five ownership interests in China were sold in 2010 and one was sold in 2012. During the first quarter of 2013, the five ownership interests in Japan were sold.

We carry our investment in CBRE Strategic Partners Asia using the equity method of accounting. Those investments where we have the ability to exercise significant influence (but not control) over operating and financial policies of such entities (including certain entities where we have less than 20% ownership) are accounted for using the equity method. Accordingly, our share of the earnings or losses of these equity method entities is included in consolidated net loss.

CBRE Strategic Partners Asia is a limited partnership that qualifies for specialized industry accounting for investment companies. Specialized industry accounting allows investment companies to carry their investments at fair value, with changes in the fair value of the investments recorded in the statement of operations. On the basis of the guidance in ASC 970-323, the Company accounts for its investment in CBRE Strategic Partners Asia under the equity method. As a result, and in accordance with ASC 810-10-25-15 the specialized accounting treatment, principally the fair value basis, applied by CBRE Strategic Partners Asia under the investment company guide is retained in the recognition of equity method earnings in the statement of operations of the Company. See Note 16 “Fair Value of Financial Instruments and Investments” for further discussion of the application of the fair value accounting to our investment in CBRE Strategic Partners Asia.

Consolidated Balance Sheets of CBRE Strategic Partners Asia as of March 31, 2013 and December 31, 2012 (in thousands):

	March 31, 2013		December 31, 2012
Assets
Real Estate	$	107,037	$	161,351
Other Assets		72,318		56,054
Total Assets	$	179,355	$	217,405
Liabilities and Equity
Notes Payable	$	0	$	39,693
Other Liabilities		14,975		14,864
Total Liabilities		14,975		54,557
Company’s Equity		8,178		8,098
Other Investors’ Equity		156,202		154,750
Total Liabilities and Equity	$	179,355	$	217,405

Consolidated Statements of Operations of CBRE Strategic Partners Asia for the three months ended March 31, 2013 and 2012 (in thousands):

	Three Months Ended March 31,
	2013		2012
Total Revenues and Appreciation (Depreciation)	$	6,791	$	1,437
Total Expenses		5,259		5,179
Net Income (Loss)		1,532		(3,742	)
Company’s Equity in Net Income (Loss)	$	81	$	(195	)

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Duke Joint Venture

On May 5, 2008, we entered into a contribution agreement with Duke Realty Limited Partnership (“Duke”), a subsidiary of Duke Realty Corporation (NYSE: DRE), to form the Duke joint venture to acquire $248,900,500 in industrial real property assets (the “Industrial Portfolio”). The Industrial Portfolio consists of six bulk industrial built-to-suit, fully leased properties. On September 12, 2008, we entered into a first amendment to the contribution agreement to acquire a fully leased office building for $37,111,000 and to increase and revise the total purchase commitment to $282,400,000. We own an 80% interest and Duke owns a 20% interest in the Duke joint venture.

We entered into an operating agreement for the Duke joint venture with Duke on June 12, 2008. Duke acts as the managing member of the Duke joint venture and is entitled to receive fees in connection with the services it provides to the Duke joint venture, including asset management, construction, development, leasing and property management services. Duke is also entitled to a promoted interest in the Duke joint venture. We have joint approval rights over all major policy decisions.

On December 17, 2010, we entered into an amended and restated operating agreement for the Duke joint venture. The amended and restated operating agreement generally contains the same terms and conditions as the operating agreement dated June 12, 2008 described above, except for the following material changes: (i) Duke has been granted us a call option to acquire Duke’s entire interest in the Duke joint venture which such interest shall be valued based on the opinions of qualified appraisers and which we can elect to exercise any time after June 30, 2012 upon the occurrence and adoption by resolution of certain triggering events and (ii) the Duke joint venture has certain rights to participate in the development of certain adjacent and nearby parcels of land currently owned by Duke.

We carry our investment in the Duke joint venture on the equity method of accounting because it is an entity under common control with Duke. Those investments where we have the ability to exercise significant influence (but not control) over operating and financial policies of such entities are accounted for using the equity method. Based on Duke’s substantive participating rights as a minority limited interest holder, and based on Duke’s lack of control over the Duke joint venture in its role as a managing member of the Duke joint venture, neither Duke nor the Company, as minority owner, have substantive control of the Duke joint venture. We eliminate transactions with such equity method subsidiaries to the extent of our ownership in such entities.

On March 1, 2013, Duke Realty’s 20% interest in 17 properties that were held in the Duke joint venture was acquired by CSP OP. See Note 3 “Acquisition of Real Estate” for a further discussion of this transaction.

As of March 31, 2013, the Duke joint venture had approximately $513,000,000, excluding REIT basis adjustments, of assets, exclusive of acquisition fees and closing costs, and held interest in 20 properties, six located in Florida, three located in Ohio, two each located in Illinois, Indiana, Missouri, Texas and one each in Arizona, North Carolina and Texas.

Consolidated Balance Sheet of the Duke joint venture as of March 31, 2013 (in thousands):

	March 31, 2013		REIT  Basis Adjustments(1)		Total
Assets
Real Estate Net	$	444,351	$	2,477	$	446,828
Other Assets		68,568		0		68,568
Total Assets	$	512,919	$	2,477	$	515,396
Liabilities and Equity
Notes Payable	$	254,796	$	0	$	254,796
Other Liabilities		10,722		0		10,722
Total Liabilities		265,518		0		265,518
Company’s Equity		197,921		2,477		200,398
Other Investor’s Equity		49,480		0		49,480
Total Liabilities and Equity	$	512,919	$	2,477	$	515,396

⁽¹⁾  REIT Basis Adjustments include those costs incurred by the Company outside of the Duke joint venture that are directly capitalizable to its investment in real estate assets acquired within the Duke joint venture including acquisition costs paid to our former investment advisor prior to January 1, 2009. Thereafter such acquisition fees were expensed as incurred.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Consolidated Balance Sheet of the Duke joint venture as of December 31, 2012 (in thousands):

	December 31, 2012		REIT  Basis Adjustments(1)		Total
Assets
Real Estate Net	$	778,188	$	1,942	$	780,130
Other Assets		146,572		0		146,572
Total Assets	$	924,760	$	1,942	$	926,702
Liabilities and Equity
Notes Payable	$	472,370	$	0	$	472,370
Other Liabilities		24,179		0		24,179
Total Liabilities		496,549		0		496,549
Company’s Equity		342,569		1,942		344,511
Other Investor’s Equity		85,642		0		85,642
Total Liabilities and Equity	$	924,760	$	1,942	$	926,702

⁽¹⁾  REIT Basis Adjustments include those costs incurred by the Company outside of the Duke joint venture that are directly capitalizable to its investment in real estate assets acquired within the Duke joint venture including acquisition costs paid to our former investment advisor prior to January 1, 2009. Thereafter such acquisition fees were expensed as incurred.

Consolidated Statement of Operations of the Duke joint venture for the three months ended March 31, 2013 and 2012 (in thousands):

	Three Months Ended March 31,
	2013		2012
Total Revenues	$	18,887	$	31,393
Operating Expenses		5,464		10,452
Interest		3,516		6,154
Depreciation and Amortization		7,812		14,918
Net Income (Loss)	$	2,095	$	(131	)
Company’s Share in Net Income (Loss)		1,676		(105	)
Adjustments for REIT Basis		535		(34	)
Company’s Equity in Net Income (Loss)	$	2,211	$	(139	)

Afton Ridge Joint Venture

On September 18, 2008, we acquired a 90% ownership interest in Afton Ridge, the owner of Afton Ridge Shopping Center, from unrelated third parties. CK Afton Ridge Shopping Center, LLC, a subsidiary of Childress Klein Properties, Inc. (“CK Afton Ridge”), retained a 10% ownership interest in Afton Ridge and continues to manage Afton Ridge Shopping Center. CK Afton Ridge acts as the managing member of Afton Ridge and is entitled to receive fees, including management, construction management and property management fees. We have joint approval rights over all major operating and policy decisions.

Afton Ridge Shopping Center is located at the intersection of I-85 and Kannapolis Parkway, in Kannapolis, North Carolina. We acquired our ownership interest in Afton Ridge for approximately $45,000,000, exclusive of customary closing costs, which was funded using net proceeds from our initial public offering. Upon closing, we paid our Investment Advisor an acquisition fee of approximately $450,000. This acquisition fee is not included in the $45,000,000 total acquisition cost of Afton Ridge, but is included as additional cost basis at our wholly-owned investment subsidiary.

Afton Ridge Shopping Center is a 470,288 square foot regional shopping center, completed in 2006, in which Afton Ridge owns 296,388 rentable square feet that is currently 98% leased. One of the shopping center’s anchors, a 173,900 square foot SuperTarget, is

21

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

not owned by us. Additional anchor tenants in Afton Ridge Shopping Center are Best Buy, Marshalls, PetSmart, Dick’s Sporting Goods, Stein Mart and Ashley Furniture. Afton Ridge Shopping Center is the retail component of a 260 acre master planned mixed-use development.

On October 15, 2008, Afton Ridge obtained a $25,500,000 loan from the Metropolitan Life Insurance Company, secured by the Afton Ridge Shopping Center which was originally acquired on September 18, 2008. The loan is for a term of five years, plus a 12 month extension option, and bears interest at a fixed rate of 5.70%. Interest payments only are due monthly for the term of the loan with principal due at maturity.

We carry our investment in Afton Ridge on the equity method of accounting because it is an entity under common control with CK Afton Ridge. Those investments where we have the ability to exercise significant influence (but not control) over operating and financial policies of such entities are accounted for using the equity method. We eliminate transactions with such equity investees to the extent of our ownership in such entities.

Consolidated Balance Sheet of Afton Ridge as of March 31, 2013 (in thousands):

	March 31, 2013		REIT Basis Adjustments(1)		Total
Assets
Real Estate Net	$	43,152	$	562	$	43,714
Other Assets		2,852		0		2,852
Total Assets	$	46,004	$	562	$	46,566
Liabilities and Equity
Note Payable	$	25,500	$	0	$	25,500
Other Liabilities		2,273		0		2,273
Total Liabilities		27,773		0		27,773
Company’s Equity		16,408		562		16,970
Other Investor’s Equity		1,823		0		1,823
Total Liabilities and Equity	$	46,004	$	562	$	46,566

⁽¹⁾ REIT Basis Adjustments include those costs incurred by the Company outside of Afton Ridge that are directly capitalizable to its investment in real estate assets acquired within Afton Ridge including acquisition costs paid to our former investment advisor prior to January 1, 2009. Thereafter such acquisitions fees were expensed as incurred.

Consolidated Balance Sheet of Afton Ridge as of December 31, 2012 (in thousands):

	December 31, 2012		REIT  Basis Adjustments(1)		Total
Assets
Real Estate Net	$	43,492	$	566	$	44,058
Other Assets		2,704		0		2,704
Total Assets	$	46,196	$	566	$	46,762
Liabilities and Equity
Note Payable	$	25,500	$	0	$	25,500
Other Liabilities		2,428		0		2,428
Total Liabilities		27,928		0		27,928
Company’s Equity		16,442		566		17,008
Other Investor’s Equity		1,826		0		1,826
Total Liabilities and Equity	$	46,196	$	566	$	46,762

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

⁽¹⁾ REIT Basis Adjustments include those costs incurred outside of Afton Ridge that are directly capitalizable to its investment in real estate assets acquired within Afton Ridge including acquisition costs paid to our former investment advisor prior to January 1, 2009. Thereafter such acquisitions fees were expensed as incurred.

Consolidated Statements of Operations of Afton Ridge for the three months ended March 31, 2013 and 2012 (in thousands):

	Three Months Ended   March 31,
	2013			2012
Total Revenues	$	1,307		$	1,344
Operating Expenses		306			355
Interest		376			376
Depreciation and Amortization		436			467
Net Income	$	189		$	146
Company’s Share in Net Income	$	170		$	132
Adjustments for REIT Basis		(4	)		(5	)
Company’s Equity in Net Income	$	166		$	127

UK JV and European JV

On June 10, 2010, we entered into two joint ventures with subsidiaries of the Goodman Group (ASX: GMG), or Goodman, one of which will seek to invest in logistics focused warehouse/distribution properties in the United Kingdom, or the UK JV, and the other which will seek to invest in logistics focused warehouse/distribution properties in France, Belgium, the Netherlands, Luxembourg and Germany, or the European JV. We own an 80% interest in each joint venture and Goodman owns a 20% interest in each joint venture. The terms of each joint venture are described in more detail below.

UK JV

The shareholders’ agreement pertaining to the UK JV is by and among RT Princeton UK Holdings, LLC (our wholly-owned subsidiary), Goodman Jersey Holding Trust and Goodman Princeton Holdings (Jersey) Limited, the UK JV, for the purpose of acquiring and holding, either directly or indirectly, up to £400,000,000 in logistics focused warehouse/distribution properties. On June 10, 2010, we initially funded the UK JV with capital contributions of $26,180,000. The UK JV acquired an initial portfolio of two properties, Amber Park and Brackmills, which were previously owned by a subsidiary of Goodman and which were purchased by the UK JV simultaneously with the closing of the UK JV.

On March 19, 2012, we contributed an additional capital contribution of $10,764,000 to acquire Valley Park, Unit D from an unaffiliated third party.

As of March 31, 2013, the UK JV held interest in three properties. The three triple net single-tenant properties total 541,000 rentable square feet and are currently 100% leased.

A board of directors, comprised of members representing us and Goodman, in each case with an equal number of votes, has the responsibility for the supervision, management and major operating decisions of the UK JV and its business, except with respect to certain reserved matters which will require the unanimous approval of us and Goodman.

During the investment period, the UK JV has a right of first offer, with respect to certain logistics development or logistics investment assets considered for investment in the UK by Goodman or us. If a deadlock has arisen pertaining to a major decision regarding a specific property, either shareholder may exercise a buy-sell option in relation to the relevant property. After the initial investment period, either shareholder wishing to exit the UK JV may exercise a buy-sell option with respect to their entire interest in the UK JV.

The UK JV will pay certain fees to certain Goodman subsidiaries in connection with the services they provide to the UK JV, including but not limited to investment advisory, development management and property management services. Goodman may also be entitled to a promoted interest in the UK JV.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Consolidated Balance Sheet of UK JV as of March 31, 2013 and December 31, 2012 (in thousands):

	March 31, 2013		December 31, 2012
Assets
Real Estate Net	$	42,522	$	45,871
Other Assets		2,470		2,807
Total Assets	$	44,992	$	48,678
Liabilities and Equity
Other Liabilities	$	1,589	$	1,819
Total Liabilities		1,589		1,819
Company’s Equity		34,723		37,487
Other Investor’s Equity		8,680		9,372
Total Liabilities and Equity	$	44,992	$	48,678

Consolidated Statements of Operations of UK JV for the three months ended March 31, 2013 and 2012 (in thousands);

	Three Months Ended March  31,
	2013		2012
Total Revenues	$	1,124	$	845
Operating Expenses		146		751
Depreciation and Amortization	$	496		348
Net Income (Loss)	$	482	$	(254	)
Company’s Equity in Net Income (Loss)	$	386	$	(203	)

European JV

The shareholders’ agreement pertaining to the European JV is by and among RT Princeton CE Holdings, LLC (our wholly-owned subsidiary), Goodman Europe Development Trust acting by its trustee Goodman Europe Development Pty Ltd. and Goodman Princeton Holdings (LUX) S.À.R.L., the European JV, for the purpose of acquiring and holding, either directly or indirectly, up to€400,000,000 in logistics focused warehouse/ distribution properties. On June 10, 2010, we initially funded the European JV with capital contributions of $26,802,000. The European JV acquired an initial portfolio of two properties, Duren and Schonberg, which were previously owned by a subsidiary of Goodman and which were purchased by the European JV simultaneously with the closing of the European JV.

On July 27, 2012, the European JV closed on a loan with Dekabank Deutsche Gironzentrale (“Dekabank”) for approximately€31,100,000 (approximately $38,390,000 assuming an exchange rate of€1.00: $1.2344 at closing, or $30,712,000 at our 80% pro rata share), exclusive of customary fees and expenses. The loan is secured by the European Joint Venture’s Graben Distribution Center I and Graben Distribution Center II properties. The loan is interest only, with a fixed interest rate of 2.39% per annum, and has a five-year term. The loan may be prepaid subject to customary prepayment fees and restrictions. Interest payments are due quarterly on the loan.

On December 12, 2012 we made an additional net capital contribution of $31,781,000 to the European JV to acquire the Koblenz Distribution Center, which was previously owned by a subsidiary of Goodman. The acquisition was partially funded by a loan from Dekabank in the amount of€31,750,000.

As of March 31, 2013, the European JV held interest in six properties. The six triple net single-tenant properties total 3,232,000 rentable square feet and are currently 100% leased.

A board of directors, comprised of members representing us and Goodman, in each case with an equal number of votes, has the responsibility for the supervision, management and major operating decisions of the European JV and its business, except with respect to certain reserved matters which will require the unanimous approval of us and Goodman.

24

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

During the investment period, the European JV has a right of second offer (after another investment vehicle managed by Goodman) with respect to certain logistics development or logistics investment assets considered for investment by Goodman, and has a right of first offer with respect to certain logistics development or logistics investment assets considered for investment by us. If a deadlock has arisen pertaining to a major decision regarding a specific property, either shareholder may exercise a buy-sell option in relation to the relevant property. After the initial investment period, either shareholder wishing to exit the European JV may exercise a buy-sell option with respect to their entire interest in the European JV.

The European JV will pay certain fees to certain Goodman subsidiaries in connection with the services they provide to the European JV, including but not limited to investment advisory, development management and property management services. Certain Goodman subsidiaries may also be entitled to a promoted interest in the European JV.

Consolidated Balance Sheet of European JV as of March 31, 2013 and December 31, 2012 (in thousands):

	March 31, 2013		December 31, 2012
Assets
Real Estate Net	$	201,591	$	208,786
Other Assets		16,370		23,036
Total Assets	$	217,961	$	231,822
Liabilities and Equity
Notes Payable	$	80,587	$	82,894
Other Liabilities		5,679		13,022
Total Liabilities		86,266		95,916
Company’s Equity		105,356		108,725
Other Investor’s Equity		26,339		27,181
Total Liabilities and Equity	$	217,961	$	231,822

Consolidated Statements of Operations of European JV for the three months ended March 31, 2013 and 2012 (in thousands):

	Three Months Ended March 31,
	2013		2012
Total Revenues	$	5,090	$	2,955
Operating Expenses		1,167		406
Interest Expense		556		0
Depreciation and Amortization		1,467		1,359
Net Income	$	1,900	$	1,190
Company’s Equity in Net Income	$	1,520	$	952

5. Acquisition Related Intangible Assets

Our acquisition related intangible assets are included in the condensed consolidated balance sheets as acquired in-place lease value, acquired above market lease value and acquired below market lease value.

25

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

The following is a schedule of future amortization of acquisition related intangible assets as of March 31, 2013 (in thousands):

	Assets				Liabilities
	Above-Market Lease Value		Acquired In-Place Lease Value		Below-Market Lease Value		Above Market Ground Lease Obligations
2013 (Nine months ending December 31, 2013)	$	5,443	$	19,603	$	2,301	$	53
2014		6,037		24,096		3,057		71
2015		5,733		22,311		2,897		71
2016		2,756		18,098		2,875		71
2017		2,194		16,756		2,815		71
2018		1,964		14,934		2,521		71
Thereafter		26,098		108,704		18,423		986
	$	50,225	$	224,502	$	34,889	$	1,394

The amortization of the above and below-market lease values included in rental revenue were ($2,334,000) and $961,000 respectively, for the three months ended March 31, 2013, ($1,845,000) and $1,232,000, respectively, for the three months ended March 31, 2012. The amortization of in-place lease value included in amortization expense was $7,640,000 and $7,202,000 for the three months ended March 31, 2013 and 2012, respectively. The amortization of above market ground lease obligations was $18,000 and $18,000 for the three months ended March 31, 2013 and 2012, respectively.

6. Debt

Notes Payable secured by real property is summarized as follows (in thousands):

	Interest Rate as of							Notes Payable as of
Property	March 31, 2013			December 31, 2012			Maturity Date	March 31, 2013		December 31, 2012
Deerfield Commons I.		5.23	%		5.23	%	December 1, 2015	$	9,405	$	9,442
Bolingbrook Point III		5.26			5.26		January 1, 2015		7,900		7,900
Fairforest Bldg. 5(1)		6.33			6.33		February 1, 2024		8,703		8,840
Fairforest Bldg. 6(1)		5.42			5.42		June 1, 2019		2,325		2,402
North Rhett I(1)		5.65			5.65		August 1, 2019		2,724		2,827
North Rhett II(1)		5.20			5.20		October 1, 2020		1,774		1,822
North Rhett IV(1)		5.80			5.80		February 1, 2025		8,808		8,935
Mt Holly Bldg.(1)		5.20			5.20		October 1, 2020		1,774		1,822
Orangeburg Park Bldg.(1)		5.20			5.20		October 1, 2020		1,804		1,853
Kings Mountain I(1)		5.27			5.27		October 1, 2020		1,537		1,578
Kings Mountain II(1)		5.47			5.47		January 1, 2020		4,455		4,589
Union Cross Bldg. I(1)		5.50			5.50		July 1, 2021		2,290		2,344
Union Cross Bldg. II(1)		5.53			5.53		June 1, 2021		6,983		7,149
Thames Valley Five(2)(3)		6.42			6.42		May 30, 2013		8,575		9,160
Lakeside Office Center		6.03			6.03		September 1, 2015		8,833		8,862
Avion Midrise III & IV(4)		5.52			5.52		April 1, 2014		20,342		20,464
12650 Ingenuity Drive(5)		5.62			5.62		October 1, 2014		12,165		12,272
Maskew Retail Park(2)(6)		5.68			5.68		August 10, 2014		21,248		22,698
One Wayside Road(7)		5.66			5.66		August 1, 2015		13,648		13,745
One Wayside Road(7)		5.92			5.92		August 1, 2015		11,392		11,464
100 Tice Blvd(8)		5.97			5.97		September 15, 2017		19,959		20,094
100 Tice Blvd(8)		5.97			5.97		September 15, 2017		19,959		20,093
Ten Parkway North		4.75			4.75		January 1, 2021		12,000		12,072
4701 Gold Spike Drive(9)		4.45			4.45		March 1, 2018		10,295		10,342
1985 International Way(9)		4.45			4.45		March 1, 2018		7,154		7,186

26

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

	Interest Rate as of					Notes Payable as of
Property	March 31, 2013		December 31, 2012		Maturity Date	March 31, 2013			December 31, 2012
Summit Distribution Center(9)		4.45		4.45	March 1, 2018		6,477			6,506
3770 Deerpark Boulevard(9)		4.45		4.45	March 1, 2018		7,395			7,428
Tolleson Commerce Park II(9)		4.45		4.45	March 1, 2018		4,447			4,467
70 Hudson Street(10)		5.65		5.65	April 11, 2016		117,498			117,981
90 Hudson Street(10)		5.66		5.66	May 1, 2019		106,089			106,465
Sabal Pavilion(11)		6.38		6.38	August 1, 2013		14,700			14,700
Celebration Office Center(12)(13)		4.25		—	December 1, 2015		9,130			0
22535 Colonial Pkwy(12)(13)		4.25		—	December 1, 2015		8,169			0
Northpoint III(12)(13)		4.25		—	December 1, 2015		10,571			0
Goodyear Crossing Ind. Park II(12)(13)		4.25		—	December 1, 2015		20,182			0
3900 North Paramount Parkway(12)(13)		4.25		—	December 1, 2015		7,929			0
3900 South Paramount Parkway(12)(13)		4.25		—	December 1, 2015		7,929			0
1400 Perimeter Park Drive(12)(13) .		4.25		—	December 1, 2015		2,403			0
Miramar I(12)(13)		4.25		—	December 1, 2015		9,418			0
Miramar II(12)(13)		4.25		—	December 1, 2015		12,686			0
McAuley Place(12)		3.98		—	September 1, 2018		13,494			0
Point West I(12)		3.41		—	December 6, 2016		11,285			0
Easton III(12)		3.95		—	January 31, 2019		6,606			0
Norman Pointe I(12)		5.24		—	October 1, 2021		20,726			0
Norman Pointe II(12)		5.24		—	October 1, 2021		22,818			0
The Landings I(12)		5.24		—	October 1, 2021		15,618			0
The Landings II(12)		5.24		—	October 1, 2021		13,775			0
Atrium I(12)		3.78		—	May 31, 2018		23,218			0
Consolidated Notes Payable							698,615			487,502
Plus Premium							21,387			7,555
Less Discount							(1,925	)		(2,113	)
Consolidated Notes Payable Net of Premium / Discount						$	718,077		$	492,944

⁽¹⁾ These notes payable were assumed from the seller of these properties on August 30, 2007 as part of the property acquisitions and were recorded at estimated fair value which includes the discount. The North Rhett III loan was paid off in full on November 22, 2011 and the HJ Park—Bldg. 1 loan was paid in full on December 3, 2012.

⁽²⁾ These loans are subject to certain financial covenants (interest coverage and loan to value).

⁽³⁾ We entered into the interest rate swap agreement that fixed the GBP-based LIBOR rate at 5.41% through its expiration on May 30, 2013, and therefore including the mortgage note’s spread of 1.01% over GBP-based LIBOR, effectively fixed the mortgage note’s all-in interest rate at 6.42% per annum for its remaining term. The stated rates, not including the interest rate swap, on the mortgage note payable were 1.52% and 1.54% at March 31, 2013 and December 31, 2012, respectively, and were based on GBP LIBOR plus a spread of 1.01%.

⁽⁴⁾ The loan was assumed from the seller of Avion Midrise III & IV on November 18, 2008 and was recorded at estimated fair value which includes the discount.

⁽⁵⁾ The loan was assumed from the seller of 12650 Ingenuity Drive on August 5, 2009 and was recorded at estimated fair value which includes the discount.

⁽⁶⁾ We entered into the interest rate swap agreement that fixed the GBP-based LIBOR rate at 3.42% through its expiration on August 10, 2014, and therefore, including the mortgage note’s spread of 2.26% over GBP-based LIBOR, effectively fixed the mortgage note’s all-in interest rate at 5.68% per annum for its remaining term. The stated rates, not including the interest rate swap, on the mortgage note payable were 2.77% and 2.78% at March 31, 2013 and December 31, 2012, respectively, and were based on GBP LIBOR plus a spread of 2.26%.

27

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

⁽⁷⁾ The two loans were assumed from the seller of One Wayside Road on June 24, 2010 and were recorded at estimated fair value which includes the premiums.

⁽⁸⁾ The two loans were assumed from the seller of 100 Tice Blvd. on September 28, 2010 and were recorded at estimated fair value which includes the premiums.

⁽⁹⁾  We entered into five loans totaling $37,000,000 on February 8, 2011 that are cross-collateralized by these properties.

⁽¹⁰⁾ The two loans were assumed from the seller of 70 Hudson Street and 90 Hudson Street, respectively, on April 11, 2011 and were recorded at estimated fair value which includes the premiums.

⁽¹¹⁾ The loan was assumed from the seller of Sabal Pavilion on December 30, 2011 and was recorded at estimated fair value which includes the premium. The anticipated maturity date as presented represents the early prepayment option date prior to the automatic debt extension that would include an increase in the interest rate to 11.38% and extend until the loan is paid in full.

⁽¹²⁾ The loans were assumed in connection with the acquisition of Duke Realty’s 20% interest in the 17 properties held by the Duke joint venture on March 1, 2013 and were recorded at estimated fair value which include the premiums.

⁽¹³⁾  These nine loans are cross-collateralized.

Note Payable at Fair Value secured by real property is summarized as follows (in thousands):

	Interest Rate as of								Notes Payable as of
Property	March 31, 2013			December 31, 2012			Maturity Date		March 31, 2013			December 31, 2012
Albion Mills Retail Park(1)(2)(3) .		5.25	%		5.25	%		October 10, 2013	$	8,774		$	9,373
Less Fair Value Adjustment										(55	)		(85	)
Note Payable at Fair Value									$	8,719		$	9,288

⁽¹⁾  The loan is subject to certain financial covenants (interest coverage and loan to value).

⁽²⁾  The Albion Mills Retail Park notes payable balance is presented at cost basis. This loan is carried on our condensed consolidated balance sheet at fair value (see Note 16).

⁽³⁾  We entered into the interest rate swap agreement that fixed the GBP-based LIBOR rate at 3.94% through its expiration on October 10, 2013, and therefore, including the mortgage note’s spread of 1.31% over GBP-based LIBOR, effectively fixed the mortgage note’s all-in interest rate at 5.25% per annum for its remaining term. The stated rates, not including the interest rate swap, on the mortgage note payable were 1.82% and 1.84% at March 31, 2013 and December 31, 2012, respectively and were based on GBP LIBOR plus a spread of 1.31%.

Notes Payable

In connection with our acquisition of the Carolina Portfolio on August 30, 2007, we assumed 13 loans with principal balances totaling $66,110,000 ($62,944,000 at estimated fair value including the discount of $3,166,000) from various lenders that are secured by first deeds of trust on the properties and the assignment of related rents and leases. The loans bear interest at rates ranging from 4.98% to 6.33% per annum and mature between March 1, 2013 and February 1, 2025. The loans require monthly payments of interest and principal, fully amortized over the lives of the loans. Two of the 13 loans, North Rhett III and HJ Park—Bldg. 1, were paid off in full on November 22, 2011 and December 3, 2012, respectively. Principal payments totaling $983,000 were made during the three months ended March 31, 2013. We indemnify the lenders against environmental costs and expenses and guarantee the loans under certain conditions.

On December 27, 2007, we entered into a $9,000,000 financing agreement secured by the Bolingbrook Point III property with the Northwestern Mutual Life Insurance Company. The loan is for a term of seven years and bears a fixed interest rate of 5.26% per annum with principal due at maturity. On January 14, 2011, we paid down $1,100,000 of principal in connection with the lease termination settlement with one of the tenants.

On May 30, 2008, we entered into a £7,500,000 financing arrangement with the Royal Bank of Scotland plc. secured by the Thames Valley Five property. On July 27, 2010 we paid down the loan by £1,860,000 leaving a loan balance of £5,640,000 ($8,575,000 at

28

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

March 31, 2013). The loan is for a term of five years (with a two-year extension option) and bears interest at a variable rate adjusted quarterly, (based on nine month GBP-based LIBOR plus 1.01%. On August 14, 2008, we entered into the interest rate swap agreement that fixed the GBP-based LIBOR rate at 5.41% plus 1.01% or 6.42% per annum as of March 31, 2013, and expires on May 30, 2013. In conjunction with the loan paydown, we incurred a cost of £227,000 ($361,000 at August 3, 2010) to reduce the notional amount of the interest rate swap from £7,500,000 to £5,640,000. Interest only payments are due quarterly for the term of the loan with principal due at maturity.

On October 10, 2008, we entered into a £5,771,000 ($8,774,000 at March 31, 2013) financing agreement with the Royal Bank of Scotland plc. secured by Albion Mills Retail Park property. The loan is for a term of five years and bears interest at a variable rate adjusted quarterly, based on three month GBP-based LIBOR plus 1.31%. On November 25, 2008, we entered into the interest rate swap agreement that fixed the GBP-based LIBOR rate at 3.94% plus 1.31% or 5.25% per annum as of March 31, 2013 and expires on October 10, 2013. Interest only payments are due quarterly for the term of the loan with principal due at maturity.

On November 18, 2008, in connection with the acquisition of Avion Midrise III & IV, we assumed $20,851,000 ($22,186,000 face value less discount of $1,335,000) fixed rate mortgage loan from Capmark Finance, Inc. that bears interest at a rate of 5.52% per annum and matures on April 1, 2014. Principal and interest payments are due monthly for the remaining loan term and principal payments totaling $123,000 were made during the three months ended March 31, 2013.

On August 5, 2009, in connection with the acquisition of 12650 Ingenuity Drive, we assumed a $12,572,000 ($13,539,000 face value less a discount of $967,000) fixed rate mortgage loan from PNC Bank, National Association that bears interest at a rate of 5.62% and matures on October 1, 2014. Principal and interest payments are due monthly for the remaining loan term and principal payments totaling $108,000 were made during the three months ended March 31, 2013.

On August 10, 2009, we entered into a £13,975,000 ($21,248,000 at March 31, 2013) financing agreement with the Abbey National Treasury Services plc. secured by the Maskew Retail Park property. On September 24, 2009, we drew the full amount of the loan and concurrently entered into an interest rate swap agreement that fixed the GBP-based LIBOR rate at 3.42% plus 2.26% or 5.68% per annum for the five-year term of the loan. Interest only payments are due quarterly for the term of the loan with principal due at maturity.

On June 24, 2010, we assumed two loans in connection with the acquisition of One Wayside Road: (i) a $14,888,000 ($14,633,000 at face value plus a premium of $255,000) fixed rate mortgage loan from State Farm Life Insurance Company that bears interest at a rate of 5.66% and matures on August 1, 2015; and (ii) a $12,479,000 ($12,132,000 at face value plus a premium of $347,000) fixed rate mortgage loan from State Farm Life Insurance Company that bears interest at a rate of 5.92% and matures on August 1, 2015. Principal and interest payments are due monthly for the remaining loan terms and principal payments totaling $168,000 were made during the three months ended March 31, 2013 on the two loans.

On September 28, 2010, we assumed two loans in connection with the acquisition of 100 Tice Blvd.: (i) a $23,136,000 ($21,218,000 at face value plus a premium of $1,918,000) fixed rate loan from Principal Life Insurance Company that bears interest at a rate of 5.97%, matures on September 15, 2022 and the lender has the right to call the loan due and payable on September 15, 2017; (ii) a $23,136,000 ($21,217,000 at a face value plus a premium of $1,919,000) fixed rate mortgage from Hartford Life and Accidental Insurance Company that bears interest at a rate of 5.97%, matures on September 15, 2022 and the lender has the right to call the loan due and payable on September 15, 2017. Principal and interest payments are due monthly for the remaining loan terms and principal payments totaling $269,000 were made during the three months ended March 31, 2013 on the two loans.

On December 29, 2010, we entered into a $12,600,000 secured term loan through Woodmen of The World Life Insurance Society secured by the Ten Parkway North property. The Ten Parkway North loan bears interest at a fixed rate of 4.75% per annum and matures on January 1, 2021. Principal and interest payments are due monthly and principal payments totaling $72,000 were made during the three months ended March 31, 2013.

Beginning January 2011, principal and interest payments are due monthly on the $9,725,000 term loan secured by the Deerfield Commons I that was originally entered into on November 29, 2005. The loan bears interest at a fixed rate of 5.23% per annum and interest only payments were due monthly for the first 60 months. Principal payments totaling $37,000 were made during the three months ended March 31, 2013.

29

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

On February 8, 2011, we entered into five cross-collateralized secured term loans totaling $37,000,000 with ING USA Annuity and Life Insurance Company secured by the following properties: 4701 Gold Spike Road, $10,650,000, Summit Distribution Center, $6,700,000, Tolleson Commerce Park II, $4,600,000, 3660 Deerpark Blvd., $7,650,000 and 1985 International Way, $7,400,000. The loans bear interest at a fixed rate of 4.45% and mature on March 1, 2018. Principal and interest payments were due monthly and principal payments totaling $160,000 were made during the three months ended March 31, 2013.

On April 11, 2011, in connection with the acquisition of 70 Hudson Street, we assumed a $124,113,000 ($120,857,000 face value plus a premium of $3,256,000) fixed rate mortgage loan from Lehman Brothers Bank, FSB that bears interest at a rate of 5.65% and matures on April 11, 2016. Principal and interest payments are due monthly and principal payments totaling $483,000 were made during the three months ended March 31, 2013.

On April 11, 2011, in connection with the acquisition of 90 Hudson Street, we assumed a $120,247,000 ($117,562,000 face value plus a premium of $2,685,000) fixed rate mortgage loan from Teachers Insurance and Annuity Association of America that bears interest at a rate of 5.66% and matures on May 1, 2016. On July 14, 2011, we and Teachers Insurance and Annuity Association of America, or the Lender, agreed to modify the $117,562,000 existing mortgage loan assumed by us. The loan was modified to extend its maturity by three years, from May 1, 2016 to May 1, 2019. The 5.66% annual interest rate was unchanged but is subject to a new 30-year amortization schedule. We pre-paid approximately $8,600,000 of loan’s balance (with no pre-payment penalty) in connection with the modification. Principal and interest payments are due monthly and principal payments totaling $376,000 were made during the three months ended March 31, 2013.

On December 30, 2011, in connection with the acquisition of Sabal Pavilion, we assumed a $15,428,000 ($14,700,000 face value plus a premium of $728,000) fixed rate mortgage loan from U.S. Bank National Association that bears interest at a rate of 6.38% and matures on August 1, 2013. Interest payments are due monthly with principal due at maturity.

In connection with our acquisition of Duke Realty’s 20% interest in the 17 properties held by Duke joint venture on March 1, 2013, we assumed 14 loans encumbering the 17 properties with principal balances totaling $216,011,000 ($230,573,000 at estimated fair value including the premiums of $14,562,000) from 4 lenders that are secured by first deeds of trust on the properties and the assignment of related rents and leases. The loans bear interest at rates ranging from 3.41% to 5.25% per annum and mature between December 1, 2015 and October 1, 2021. The loans require monthly payments of interest and principal, with remaining principal due at maturity. Principal payments totaling $55,000 were made during the three months ended March 31, 2013.

Loans Payable

On May 26, 2010, we entered into a $70,000,000 revolving credit facility with Wells Fargo Bank, N.A., or the Wells Fargo Credit Facility. The initial maturity date of the Wells Fargo Credit Facility was May 26, 2014, however we could extend the maturity date to May 26, 2015, subject to certain conditions. $15,000,000 of the Wells Fargo Credit Facility was initially drawn upon closing on May 26, 2010, with $55,000,000 initially remaining available for disbursement during the term of the facility. We had the right to prepay any outstanding amount of the Wells Fargo Credit Facility, in whole or in part, without premium or penalty at any time during the term of this Wells Fargo Credit Facility, however, we initially could not reduce the outstanding principal balance below a minimum outstanding amount of $15,000,000, without reducing the total $70,000,000 Wells Fargo Credit Facility capacity. Initially, the Wells Fargo Credit Facility had a floating interest rate of 300 basis points over LIBOR, however this interest rate would be at least 4.00% for any of the outstanding balance that was not subject to an interest rate swap with an initial term of at least two years.

Upon closing on May 26, 2010, we entered into an interest rate swap agreement with Wells Fargo Bank, N.A. to effectively fix the interest rate on the initial $15,000,000 outstanding loan amount at 5.10% for the four-year term of the facility. The interest rate swap was designated as a qualifying cash flow hedge at the start date of the hedge relationship as described in Note 15 “Derivative Instruments.” The Wells Fargo Credit Facility was initially secured by our 13201 Wilfred, 3011, 3055 & 3077 Comcast Place, 140 Depot Street, Crest Ridge Corporate Center I and West Point Trade Center properties. In addition, CSP OP provided a limited guarantee for the Wells Fargo Credit Facility.

On August 31, 2010, we entered into an amended and restated credit agreement with Wells Fargo Bank, N.A. to expand the Wells Fargo Credit Facility from its initial capacity of $70,000,000 to an amended capacity of $125,000,000 (the “Amended Wells Fargo Credit Facility”). In connection with the Amended Wells Fargo Credit Facility, the minimum outstanding amount was increased to

30

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

$25,000,000 and as such an additional $10,000,000 was drawn (in addition to the $15,000,000 initially drawn on May 26, 2010) with the remaining $100,000,000 available for disbursement during the term of the facility. The Amended Wells Fargo Credit Facility was secured by an additional three of our properties, for a total of eight properties in all: 13201 Wilfred Lane, 3011, 3055 & 3077 Comcast Place, 140 Depot Street, Crest Ridge Corporate Center, West Point Trade Center, 5160 Hacienda Drive, 10450 Pacific Center Court and 225 Summit Avenue. The interest rate was reduced by 25 basis points to 275 basis points over LIBOR (which rate would apply to all withdrawals from the Amended Wells Fargo Credit Facility other than the initial $15,000,000 that was drawn on May 26, 2010) and the initial interest rate floor of 4.00% was eliminated. The initial maturity date remained May 26, 2014, however we could extend the maturity date to May 26, 2015, subject to certain conditions. The Amended Wells Fargo Credit Facility was replaced with the Unsecured Credit Facility as set forth below.

On September 13, 2012, we entered into a credit agreement (the “Credit Agreement”) with a group of lenders to provide CSP OP with an unsecured, revolving credit facility (the “Unsecured Credit Facility”) with an initial capacity of $700,000,000. The Unsecured Credit Facility replaced the Amended Wells Fargo Credit Facility, which was terminated concurrently with the closing of the Unsecured Credit Facility. The Company paid the $25,000,000 outstanding balance of the Amended Wells Fargo Credit Facility with cash on hand and expensed the unamortized deferred financing costs associated with obtaining the loan totaling $1,191,000. During the year ended December 31, 2012, $265,000,000 was drawn under the Unsecured Credit Facility with the remaining $435,000,000 available for disbursement during the term of the facility. The $265,000,000 is included in Loan Payable on our consolidated balance sheets as of December 31, 2012. The Unsecured Credit Facility has a term of four years, which term may be extended for one year at the option of CSP OP provided that CSP OP is not then in default and upon payment of customary extension fees. The Unsecured Credit Facility has no minimum outstanding balance requirements. Under certain circumstances, CSP OP may request an increase in the capacity of the Unsecured Credit Facility by up to an additional $700,000,000, to an aggregate size of $1,400,000,000, although none of the lenders has any obligation to participate in such increase. The Unsecured Credit Facility includes a $25,000,000 swingline sub-facility and a $25,000,000 letter of credit sub-facility. CSP OP paid customary arrangement and commitment fees to the lenders in connection with the Unsecured Credit Facility. The Company and certain of its subsidiaries have provided a guaranty in connection with the Unsecured Credit Facility.

The loans under the Unsecured Credit Facility will bear interest, at CSP OP’s election, based on (i) LIBOR, for interest periods of one, three or six months, plus the applicable margin, or (ii) the LIBOR Market Index Rate plus the applicable margin (if the LIBOR Market Index Rate is unavailable, the per annum rate of interest would be the Federal Funds Rate plus 1.5%, plus the applicable margin). The LIBOR Market Index Rate is LIBOR in respect of loans of one-month interest periods, determined on a daily basis, plus the applicable margin. The applicable margin is (i) for periods prior to the Company or CSP OP having a credit rating, based on the Company’s then current leverage ratio, and (ii) during such periods when the Company or CSP OP has a credit rating, based on its then current credit rating. The applicable margin can vary from (i) 1.60% to 2.35% based upon the then current leverage ratio, or (ii) 1.00% to 1.80% based upon a then current credit rating of the Company or CSP OP. As of the closing of the Unsecured Credit Facility, the current stated applicable margin was 1.60%. CSP OP will pay customary fees in connection with borrowings under the Unsecured Credit Facility. Further, CSP OP may prepay any revolving or swingline loan, in whole or in part, at any time without premium or penalty. As of March 31, 2013, outstanding borrowings of $70,044,000 bear interest at a rate of 1.81% based on 1.60% over the one month LIBOR.

Under the Unsecured Credit Facility, the Company will be subject to certain financial covenants that require, among other things: the maintenance of (i) a leverage ratio of not more than 0.60; (ii) a fixed charge coverage ratio of at least 1.50; (iii) a secured leverage ratio of not more than (a) 0.45 prior to the Unsecured Credit Facility’s second anniversary, or (b) 0.40 thereafter; (iv) an unencumbered leverage ratio of not more than 0.60; (v) a ratio of unencumbered net operating income to unsecured interest expense of at least 1.75 (unless the Company or CSP OP obtains an investment grade credit rating, in which case this requirement is eliminated); (vi) minimum tangible net worth of $1,653,403,000 plus 85% of the net proceeds of certain future equity issuances; and (vii) unencumbered asset value of at least $400,000,000. In addition, the Unsecured Credit Facility contains a number of customary non-financial covenants including those restricting liens, mergers, sales of assets, certain investments in unimproved land and mortgage receivables, intercompany transfers, transactions with affiliates and distributions.

On March 6, 2013, we entered into an unsecured term loan in the amount of $50,000,000 with TD Bank, N.A (the “TD Term Loan”). Upon closing the TD Term Loan, we simultaneously entered into an interest rate swap agreement with TD Bank to effectively fix the interest rate on the TD Term Loan at 3.425% per annum for its seven-year term, based upon the TD Term Loan’s current stated applicable margin, which may vary during its term based upon the then current leverage ratio or our then current credit rating. The TD

31

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Term Loan contains customary representations and warrants and covenants. We used the proceeds of the TD Term Loan to repay a portion of our borrowings under the Unsecured Credit Facility.

On March 7, 2013, we entered into an unsecured term loan (the “Wells Fargo Term Loan”) in the amount of $200,000,000 with Wells Fargo Bank, National Association and certain other lenders defined in the Wells Fargo Term Loan. Upon closing the Wells Fargo Term Loan, we simultaneously entered into an interest rate swap agreement with Wells Fargo to effectively fix the interest rate on the Wells Fargo Term Loan at 2.4885% per annum for its five-year term, based upon the Wells Fargo Term Loan’s current stated applicable margin, which may vary based upon the then current leverage ratio, or our then current credit rating. The Wells Fargo Term Loan contains customary representations and warrants and covenants. We used the proceeds of the Wells Fargo Term Loan to repay a portion of our borrowings under the Unsecured Credit Facility.

On March 7, 2013, we entered into a First Amendment (the “First Amendment”) to the credit agreement entered into on September 13, 2012 with a group of lenders, which provided us with an unsecured, revolving credit facility in the initial amount of $700,000,000. The First Amendment modified the Unsecured Credit Facility to among other things: (i) amend certain definitions, (ii) amend certain requirements of the guarantor, (iii) amend the requirements relating to quarterly financial statements, annual statements, compliance certificates and certain other SEC filings, (iv) amend the requirements relating to electronic delivery of information, (v) provide the Company with an option to restate the tangible net worth covenant in the event of a redemption event, (vi) remove the restriction on negative pledges, (vii) amend the restrictions on intercompany transfers and (viii) amend certain disclosure and confidentiality provisions.

The minimum principal payments due for the notes payable and our loans payable are as follows as of March 31, 2013 (in thousands):

2013 (Nine months ending December 31, 2013)	$	43,877
2014		68,853
2015		148,476
2016		204,223
2017		46,355
2018		272,070
Thereafter		243,578
	$	1,027,432

Our organizational documents contain a limitation on the amount of indebtedness that we may incur, so that unless our shares are listed on a national securities exchange, our aggregate borrowing may not exceed 300% of our net assets unless any excess borrowing is approved by a majority of our independent trustees and is disclosed to shareholders in our next quarterly report.

7. Minimum Future Rents Receivable

The following is a schedule of minimum future rentals to be received on non-cancelable operating leases from consolidated properties as of March 31, 2013 (in thousands):

2013 (Nine months ending December 31, 2013)	$	147,205
2014		195,329
2015		188,139
2016		167,922
2017		152,113
2018		150,509
Thereafter		461,716
	$	1,462,933

8. Concentrations

Tenant Revenue Concentrations

For the three months ended March 31, 2013 and 2012, respectively, there were no significant revenue concentrations.

32

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Geographic Concentrations

As of March 31, 2013, we owned 99 consolidated properties located in 19 states (Arizona, California, Colorado, Florida, Georgia, Illinois, Kansas, Kentucky, Maryland, Massachusetts, Minnesota, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Utah and Virginia) and in the United Kingdom.

As of March 31, 2012, we owned 78 consolidated properties, located in 16 states (Arizona, California, Colorado, Florida, Georgia, Illinois, Kentucky, Massachusetts, Minnesota, New Jersey, North Carolina, South Carolina, Pennsylvania, Texas, Utah and Virginia) and in the United Kingdom.

Our geographic revenue concentrations from consolidated properties for the three months ended March 31, 2013, and 2012 are as follows:

	Three Months Ended March 31,
	2013			2012
Domestic
New Jersey		20.95	%		28.25	%
Virginia		9.00			11.31
Texas		7.89			8.90
California		7.55			9.27
Florida		6.00			5.69
Minnesota		6.00			3.73
South Carolina		5.99			7.86
Massachusetts		5.09			6.11
Illinois		4.32			2.82
Arizona		4.32			4.51
Pennsylvania		3.85			0
Maryland		3.45			0
Ohio		3.31			0
North Carolina		2.99			2.73
Kansas		2.50			0
Colorado		1.27			1.45
Georgia		1.06			1.42
Kentucky		0.67			0.85
Utah		0.35			0.78
Total Domestic		96.56			95.68
International
United Kingdom		3.44			4.32
Total		100.00	%		100.00	%

33

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Our geographic long-lived asset concentrations from consolidated properties as of March 31, 2013 and December 31, 2012 are as follows:

	March 31, 2013			December 31, 2012
Domestic
New Jersey		20.05	%		25.68	%
Florida		7.62			4.42
Texas		7.05			6.28
Virginia		6.96			8.94
Ohio		6.72			0
Minnesota		6.18			3.05
South Carolina		6.15			7.78
Arizona		5.50			3.51
California		5.29			6.78
Illinois		4.19			5.35
North Carolina		4.17			2.84
Maryland		3.88			4.95
Pennsylvania		3.58			3.89
Massachusetts		3.52			4.51
Kansas		2.59			3.31
Colorado		0.97			1.25
Kentucky		0.54			0.70
Georgia		0.54			0.68
Utah		0.49			0.62
Total Domestic		95.99			94.54
International
United Kingdom		4.01			5.46
Total		100.00	%		100.00	%

9. Segment Disclosure

Our reportable segments consist of three types of commercial real estate properties, namely, Domestic Industrial Properties, Domestic Office Properties and International Office/Retail Properties. Management internally evaluates the operating performance and financial results of our segments based on net operating income. We also have certain general and administrative level activities including legal, accounting, tax preparation and shareholder servicing costs that are not considered separate operating segments. Our reportable segments are on the same basis of accounting as described in Note 2—“Basis of Presentation and Summary of Significant Accounting Policies.”

We evaluate the performance of our segments based on net operating income, defined as: rental income and tenant reimbursements less property and related expenses (operating and maintenance, property management fees, property level general and administrative expenses and real estate taxes) and excludes other non-property income and expenses, interest expense, depreciation and amortization, and our general and administrative expenses.

34

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

The following table compares the net operating income for the three months ended March 31, 2013 and 2012 (in thousands):

	Three Months Ended March 31,
	2013			2012
Domestic Industrial Properties
Revenues:
Rental	$	13,375		$	9,135
Tenant Reimbursements		3,251			2,382
Total Revenues		16,626			11,517
Property and Related Expenses:
Operating and Maintenance		843			646
General and Administrative		86			166
Property Management Fee to Related Party		75			68
Property Taxes		2,659			2,029
Total Expenses		3,663			2,909
Net Operating Income		12,963			8,608
Domestic Office Properties
Revenues:
Rental		28,885			24,389
Tenant Reimbursements		6,587			5,619
Total Revenues		35,472			30,008
Property and Related Expenses:
Operating and Maintenance		4,858			4,335
General and Administrative		74			63
Property Management Fee to Related Party		227			237
Property Taxes		4,815			3,347
Total Expenses		9,974			7,982
Net Operating Income		25,498			22,026
International Office/Retail Properties
Revenues:
Rental		1,780			1,795
Tenant Reimbursements		74			79
Total Revenues		1,854			1,874
Property and Related Expenses:
Operating and Maintenance		85			126
General and Administrative		21			48
Property Management Fee to Related Party		(68	)		77
Total Expenses		38			251
Net Operating Income		1,816			1,623

35

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

	Three Months Ended March 31,
	2013			2012
Reconciliation to Consolidated Net Income (Loss)
Total Segment Net Operating Income		40,277			32,257
Expenses:
Interest		9,304			8,756
General and Administrative		4,955			1,889
Investment Management Fee to Related Party		500			5,962
Acquisition		1,841			1,379
Depreciation and Amortization		22,004			17,976
Transition Costs		35			0
		1,638			(3,705	)
Other Income and Expenses:
Interest and Other Income		207			1,061
Net Settlement Payments on Interest Rate Swaps		(343	)		(161	)
(Loss) Gain on Interest Rate Swaps		(917	)		125
Loss on Note Payable at Fair Value		(25	)		(35	)
Income (Loss) Before (Provision) Benefit for Income Taxes and Equity in Income of Unconsolidated Entities		560			(2,715	)
(Provision) Benefit for Income Taxes		(69	)		18
Equity in Income of Unconsolidated Entities		4,364			542
Gain on Conversion of Equity Investment to Controlling Interest		77,235			0
Net Income (Loss)		82,090			(2,155	)
Net (Income) Loss Attributable to Non-Controlling Operating Partnership Units		(83	)		2
Net Income (Loss) Attributable to Chambers Street Properties Shareholders	$	82,007		$	(2,153	)

Condensed Assets	March 31, 2013		December 31, 2012
Domestic Industrial Properties	$	738,996	$	678,930
Domestic Office Properties		1,607,547		1,077,328
International Office/Retail Properties		98,656		105,502
Non-Segment Assets		421,678		616,276
Non-Segment Construction in Progress and Other Assets—Variable Interest Entity		0		76,826
Total Assets	$	2,866,877	$	2,554,862
	Three Months Ended March 31,
Capital Expenditures(1)	2013		2012
Domestic Industrial Properties	$	67,049	$	64,498
Domestic Office Properties		435,632		106
International Office/Retail Properties		0		52
Non-Segment Assets		0		302
Non-Segment Construction in Progress—Variable Interest Entity		3,562		9,567
Total Capital Expenditures	$	506,243	$	74,525

⁽¹⁾ This table presents acquisitions and improvements on real estate investments.

36

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

10. Investment Management and Other Fees to Related Parties

Prior to July 1, 2012, all of our business activities were managed by the former investment advisor pursuant to the Fourth Amended Advisory Agreement, which terminated according to its terms on June 30, 2012. Effective July 1, 2012, we entered into the Transitional Services Agreement with CSP OP and the former investment advisor pursuant to which the former investment advisor would provide certain consulting related services to us at the direction of our officers and other personnel for a term which ended on April 30, 2013. For consulting services provided to us in connection with the investment management of our assets, the former investment advisor was paid an investment management consulting fee payable in cash consisting of (i) a monthly fee equal to one-twelfth of 0.5% of the aggregate cost (before non-cash reserves and depreciation) of all real estate investments within our portfolio and (ii) a monthly fee equal to 5.0% of the aggregate monthly net operating income derived from all real estate investments within our portfolio, subject to certain adjustments. For consulting services provided to us in connection with the acquisition of assets, the former investment advisor or its affiliates was paid acquisition fees up to 1.5% of (i) the contract purchase price of real estate investments acquired by us, or (ii) when we make an investment indirectly through another entity, such investment’s pro rata share of the gross asset value of real estate investments held by that entity. The total of all acquisition consulting fees payable with respect to real estate investments did not exceed an amount equal to 6% of the contract purchase price (or 6% of funds advanced with respect to mortgages) provided, however, that a majority of the uninterested members of the Board of Trustees could approve amounts in excess of this limit.

Upon the termination date of the Transitional Services Agreement, we and the former investment advisor are required to agree on a list of unacquired real estate investments for which the former investment advisor has performed certain acquisition related consulting services (a “Qualifying Property”). If any Qualifying Property is acquired by us within the nine months following the termination of the Transitional Services Agreement then we shall pay an acquisition consulting fee equal to 0.75% of (i) the contract purchase price of the real estate investments (including debt), or (ii) when we make an investment indirectly through another entity, such investment’s pro rata share of the gross asset value of real estate investments held by that entity to the former investment advisor. Real estate investments for which there is a dispute as to whether it is a Qualifying Property that are acquired within the nine months following the termination of the Transitional Services Agreement will be submitted to arbitration.

For consulting services provided to us in connection with property management, leasing or construction services, the former investment advisor was paid based upon the customary property management, leasing and construction supervision fees applicable to the geographic location and type of property. Such fees for each service ranged from 2.0% to 5.0% of gross revenues received from a property that we owned. We paid the former investment advisor a real estate commission fee upon the sale of properties in an amount equal to the lesser of (i) one-half of the competitive real estate commission or (ii) 3% of the sales price of each property sold. The total brokerage commission paid did not exceed the lesser of the competitive real estate commission or an amount equal to 6% of the sales price of the property.

To the extent that the we assume or incur prior to the termination of the Transition Services Agreement a cost that was previously borne by the former investment advisor during the term of the Transition Services Agreement or its predecessor agreement, then amounts otherwise owed under the Transition Services Agreement are to be correspondingly reduced on a monthly basis; provided that (i) any Assumed Costs resulting from hiring of any targeted personnel are to reduce the amounts payable by us under this agreement for such month only to the extent of their base salary and benefits (as in effect immediately prior to their hiring by us) and any related other direct employer costs (but excluding any bonus amounts) earned or incurred during the month.

We reimbursed the former investment advisor for certain expenses paid or incurred in connection with services provided under the Transitional Services Agreement. In addition, the former investment advisor was only entitled to reimbursement for third party expenses incurred in connection with services provided pursuant to the Transitional Services Agreement that we approved in writing. Our sole obligation to reimburse the former investment advisor for expenses incurred related to personnel costs was to make an aggregate payment equal to $2,500,000 on the effective date of the agreement.

Previously, pursuant to the Fourth Amended Advisory Agreement, the former investment advisor and its affiliates performed services relating to the management of our assets. We also have paid fees to the former dealer manager for services it performed with respect to our prior public offerings. Items of compensation and equity participation are as follows:

37

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Offering Costs Relating to Public Offerings

Offering costs totaling $0 and $18,384,000 were incurred during the three months ended March 31, 2013 and 2012, respectively, and are recorded as a reduction of additional paid-in-capital in the consolidated statement of shareholders’ equity. Of the total amounts, $17,545,000 was incurred to CNL Securities Corp., as the former dealer manager of our follow-on public offering and $26,000 was incurred to the former investment advisor for reimbursable marketing for the three months ended March 31, 2012. Each party was paid the amount incurred from proceeds of our follow-on public offering. We believe that all offering costs incurred have been paid.

Investment Management Fee to Related Party

Prior to October 24, 2006, the former investment advisor received an annual fee equal to 0.75% of the book value of the total assets, as defined in the advisory agreement, based on the assets of CSP OP. The investment management fee was calculated monthly based on the average of total assets, as defined, during such period. On October 24, 2006, we entered into that certain amended and restated agreement of limited partnership of CSP OP (the “Amended Partnership Agreement”) and that certain amended and restated advisory agreement (the “Amended Advisory Agreement”). The Amended Advisory Agreement provided an investment management fee of (i) a monthly fee equal to one twelfth of 0.6% of the aggregate cost (before non-cash reserves and depreciation) of all real estate investments within our portfolio and (ii) a monthly fee equal to 7.0% of the aggregate monthly net operating income derived from all real estate investments within our portfolio. On January 30, 2009, we entered into that certain second amended and restated advisory agreement (the “Second Amended Advisory Agreement”) and that certain second amended agreement of limited partnership of CSP Operating Partnership, L.P. (the “Second Amended Partnership Agreement”). The Second Amended Advisory Agreement modified, among other things, the investment management fee to consist of (a) a monthly fee equal to one twelfth of 0.5% of the aggregate costs (before non-cash reserves and depreciation) of all real estate investment in our portfolio and (b) a monthly fee equal to 5.0% of the aggregate monthly net operating income derived from all real estate investments in our portfolio The Second Amended Partnership Agreement generally contained the same terms and conditions as the Amended Partnership Agreement, except for clarification regarding the timing of potential distributions that the holder of the Class B interest would have been entitled to.

On December 21, 2010, we entered into that certain third amended and restated advisory agreement (the “Third Amended Advisory Agreement”). The Third Amended Advisory Agreement contained the same terms and conditions as the Second Amended Advisory Agreement, except that the term of the agreement was extended to April 30, 2011, subject to an unlimited number of successive one-year renewals upon the mutual consent of the parties. The former investment advisor did not waive any investment management fees during the years ended December 31, 2012 and 2011, respectively.

On April 27, 2012, we entered into the Fourth Amended Advisory Agreement with CSP OP and the former investment advisor, effective May 1, 2012. The Fourth Amended Advisory Agreement generally contained the same terms and conditions as the Third Amended and Restated Advisory Agreement dated December 21, 2010, except for the following material changes: (i) the term of the agreement was modified to expire on the earlier of (a) June 30, 2012 or (b) such date that we became self-managed through the hiring of a majority of 14 identified current employees of the former investment advisor and/or its affiliates, subject to up to four successive two-month renewals; provided, however, that no renewal shall have been permitted if we became self-managed; (ii) to the extent we assume costs prior to the termination of the Fourth Amended Advisory Agreement in connection with our transition to self-management of the type which were previously borne by the former investment advisor pursuant to the Third Amended Advisory Agreement, then the fees paid to the former investment advisor would be correspondingly reduced on a monthly basis, subject to certain adjustments; and (iii) the indemnification provisions were modified to specify that we would indemnify the former investment advisor and its affiliates under any predecessor advisory agreement, future services agreement or arising from the performance of duties as an officer or trustee of the Company or another entity for which they served at our request. The Fourth Amendment and Restated Advisory Agreement terminated according to its terms on June 30, 2012.

On April 27, 2012, we entered into the Third Amended Partnership Agreement with each of the limited partners of the CSP OP, effective May 1, 2012. The Third Amended Partnership Agreement generally contains the same terms and conditions as the Second Amended Partnership Agreement, except with respect to the redemption of the Class B interest. Under the Third Amended Partnership Agreement, the Class B interest may be redeemed upon the earliest to occur of (i) the exercise by the holder of the Class B interest of its right to require CSP OP to redeem its interest, which such right continues for five years from the date of the agreement, (ii) the fifth anniversary of the date of the agreement, (iii) certain other liquidity events, (iv) a merger or sale transaction (a “Merger or Sale”), or (v) our common shares becoming listed or admitted to trading on a national securities exchange or designated for quotation on the

38

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

NASDAQ Global Select Market or the NASDAQ Global Market (a “Listing”). CSP OP may reject a redemption and institute a blackout period with respect to redemptions upon the determination by our Board of Trustees that an appraisal process would not be in the best interest of CSP OP at the time of the proposed redemption. A blackout period may only be imposed as the result of a potential Merger or Sale or potential Listing. The consideration received for the redemption of the Class B interest will depend upon the event triggering the redemption. In the event of a redemption in connection with (a) a Listing, the consideration will be determined based on the market value of our shares for a 30 day period beginning 150 days after the Listing, or (b) a Merger or Sale, the consideration will be determined based on our aggregate share value in the transaction. In the event of a redemption as a result of (a) the exercise by the holder of the Class B interest of its redemption right, (b) the fifth anniversary of the date of the agreement or (c) certain other liquidity events, the consideration will be determined based on an appraisal process. If we list our common shares, we will be required to redeem the Class B interest at the time prescribed, and at an amount calculated, in accordance with the partnership agreement of CSP OP. We recognized $200,000 in expense associated with the Class B interest during the year ended December 31, 2012.

The former investment advisor earned investment management fees of $500,000 and $5,962,000 for the three months ended March 31, 2013 and 2012, respectively. As of March 31, 2013 and December 31, 2012, the investment management fees payable to related party in our consolidated balance sheets were $3,945,000 and $10,700,000, respectively. In connection with services provided to the former investment advisor, CFG VIII, Inc., the former sub-advisor and affiliate of the former dealer manager pursuant to a sub-advisory agreement dated August 21, 2006 (which such agreement terminated by its terms on June 30, 2012 in connection with the termination of the Fourth Amended Advisory Agreement), was paid by the investment advisor $0 and $823,000 for the three months ended March 31, 2013 and 2012, respectively.

Acquisition Fee and Expenses to Related Party

The Transitional Services Agreement (and the advisory agreement prior to its termination) permitted the former investment advisor to earn an acquisition fee of up to 1.5% of (i) the purchase price of real estate investments acquired by us, including any debt attributable to such investments, or (ii) when we make an investment indirectly through another entity, such investment’s pro rata share of the gross asset value of real estate investments held by that entity. The Transitional Services Agreement expired according to its terms on April 30, 2013. The former investment advisor earned acquisition fees of $1,472,000 and $1,117,000 for the three months ended March 31, 2013 and 2012, respectively. In connection with services provided to the former investment advisor, the former sub advisor, pursuant to a sub advisory agreement, was paid by the former investment advisor acquisition fees of $0 and $209,000 for the three months ended March 31, 2013 and 2012, respectively. The former investment advisor earned $0 and $64,000 in acquisition related expenses during the three months ended March 31, 2013 and 2012. Prior to the adoption of “Business Combinations” on January 1, 2009, these acquisition fees and expenses were capitalized to investments in real estate and related intangibles. The former investment advisor earned a construction supervision fee of $838,000 and $0 during the three months ended March 31, 2013 and 2012, respectively.

Management Services to Related Party

Pursuant to the Transitional Services Agreement (and the advisory agreement prior to its termination) affiliates of the former investment advisor could also provide leasing, brokerage, property management, construction management or mortgage banking services for us. The Transitional Services Agreement expired according to its terms on April 30, 2013. CBRE Group, Inc., an affiliate of the former investment advisor, received property management fees of approximately $234,000 and $382,000 for the three months ended March 31, 2013 and 2012, respectively. As of March 31, 2013 and December 31, 2012, the property management fees payable to related party included in our consolidated balance sheets were $275,000 and $384,000, respectively. No brokerage or mortgage fees were paid to affiliates of the former investment Advisor for the three months ended March 31, 2013 and 2012.

Affiliates of the former investment advisor received leasing fees of $539,000 and $170,000 and construction management fees of $33,000 and $312,000 for the three months ended March 31, 2013 and 2012, respectively.

39

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

11. Equity Incentive Plan and Performance Bonus Plan

Equity Incentive Plan

We have adopted a 2004 equity incentive plan which was amended and restated in July 2012 to reflect our name change. The purpose of the amended and reinstated 2004 equity incentive plan is to provide us with the flexibility to use share options and other awards to provide a means of performance-based compensation. Our key employees, directors, trustees, officers, advisors, consultants or other personnel and our subsidiaries or other persons expected to provide significant services or our subsidiaries would be eligible to be granted share options, restricted shares, phantom shares, distribution equivalent rights and other share-based awards under the amended and reinstated 2004 equity incentive plan.

On April 20, 2010, our Board’s independent trustees, Messrs. Black, Reid and Orphanides, were awarded equity grants under the amended and restated 2004 equity incentive plan on the following terms: (i) each award was for $80,000 in restricted common shares of the Company (or 8,000 shares at $10.00 per share) for a total of $240,000; (ii) each award vested in its entirety, upon issuance; and (iii) the independent trustee would not be able to redeem any of the restricted common shares prior to the third anniversary of date of issuance, but retains the rights to dividends declared and paid during such restriction period. We recognized a stock based compensation expense of $240,000 during the year ended December 31, 2010 as a result of granting these awards to our independent trustees.

On June 17, 2011, our Board’s independent trustees, Messrs. Black, Reid and Orphanides, were awarded equity grants under the amended and restated 2004 equity incentive plan on the following terms: (i) each award was for $9,200 in restricted common shares of the Company (or 1,000 shares at $9.20 per share) for a total of $27,600; (ii) each award vested in its entirety, upon issuance; and (iii) the independent trustee would not be able to redeem any of the restricted common shares prior to the third anniversary of date of issuance, but retains the rights to dividends declared and paid during such restriction period. We recognized a stock based compensation expense of $27,600 during the year ended December 31, 2011 as a result of granting these awards to our independent trustees.

A total of 300,000 restricted common shares with time-based vesting were granted to Mr. Cuneo, Mr. Kianka and other members of senior management of the Company on September 25, 2012 and the grant date fair value of the awards was $3,000,000. Compensation expense will be recognized on a straight-line basis over the service vesting period of three years and will take into consideration an estimated forfeiture rate of 5%. We recognized stock based compensation expense of $0 during the three months ended March 31, 2013 as a result of granting the awards to Mr. Cuneo, Mr. Kianka and other members of senior management.

On February 7, 2013, our Board’s independent trustees, Messrs. Black, Orphanides and Salvatore, were awarded equity grants under the amended and restated 2004 equity incentive plan on the following terms: (i) (x) Mr. Black’s award was for $100,000 in common shares (or 10,000 shares at $10.00 per share) and (y) Messrs. Orphanides and Salvatore each were awarded $25,000 in common shares (or 2,500 shares at $10.00 per share) for a total of $150,000; and (ii) each award vested in its entirety, upon issuance.

On March 15, 2013, a total of 281,625 restricted common shares were granted to our named executive officers (Messrs. Cuneo, Kianka and Reid) based on each executive’s achievement of performance objectives during 2012, as determined at the discretion of our Compensation Committee. Additionally, 21 of our employees were granted 117,300 restricted common shares, in the aggregate, on March 15, 2013. One-third of the restricted shares granted to our named executive officers and employees will vest in each of the first three anniversaries of grant if the grantee is employed by the Company on such anniversary.

In the event a listing of our common shares on a national securities exchange or certain mergers, sales or other related transactions involving the Company, or certain sales of assets occurs on or prior to July 1, 2014, the Company will grant awards to members of senior management of the Company in aggregate of 375,000 common shares. These shares will be fully vested when and if granted. The grant date fair value of the awards was $3,750,000. Compensation expense has been deferred until the contingency is resolved. We expect to list our common shares on the NYSE on or about May 21, 2013. See Note 19 “—Subsequent Events.”

40

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Summary of Time-Based Restricted Common Shares

A summary of our Time-Based Restricted Common Shares from January 1, 2012 through March 31, 2013 is presented below:

	Nonvested
	Shares		Weighted-Average Grant  Date Fair Value Per Share		Vested		Total
Outstanding at January 1, 2013		300,000	$	10.00		0	$	3,000,000
Granted		398,925		10.00		0		3,989,250
Vested		0		0		0		0
Canceled		0		0		0		0
Outstanding as of March 31, 2013		698,925	$	10.00		0	$	6,989,250

Summary of Performance-Based Restricted Common Shares

A summary of Performance- Based Restricted Common Shares from January 1, 2012 through March 31, 2013 is presented below:

	Nonvested
	Shares		Weighted-Average Grant  Date Fair Value Per Share		Vested		Total
Awarded prior to January 1, 2013		375,000		10.00		0	$	3,750,000
Granted		0		0		0		0
Vested		0		0		0		0
Canceled		0		0		0		0
Outstanding as of March 31, 2013		375,000	$	10.00		0	$	3,750,000

	2013		2012
Compensation expense recorded during the three months ended March 31	$	440,000	$	0
Unamortized compensation costs	$	9,667,000	$	0
Units available for the future awards		18,884,075		19,973,000

Performance Bonus Plan

On March 19, 2013, our Board of Trustees terminated our amended and restated 2004 performance bonus plan.

12. Shareholders’ Equity

Under our current declaration of trust, we have the authority to issue a total of 1,000,000,000 shares of beneficial interest. Of the total shares authorized, 990,000,000 shares are designated as common shares with a par value of $0.01 per share and 10,000,000 shares are designated as preferred shares.

The registration statement relating to our initial public offering was declared effective by the SEC on October 24, 2006. CNL Securities Corp. was the dealer manager of our initial public offering. The registration statement covered up to $2,000,000,000 in common shares of beneficial interest, 90% of which were offered at a price of $10.00 per share, and 10% of which were offered pursuant to our dividend reinvestment plan at a purchase price equal to the higher of $9.50 per share or 95% of the fair market value of a common share on the reinvestment date, as determined by the Investment Advisor, or another firm we choose for that purpose. As of January 29, 2009, we had issued 60,808,967 common shares in our initial public offering. We terminated the initial public offering effective as of the close of business on January 29, 2009. The registration statement relating to our follow-on public offering was

41

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

declared effective by the SEC on January 30, 2009. CNL Securities Corp. was the dealer manager of this offering. The registration statement covered up to $3,000,000,000 in common shares of beneficial interest, 90% of which will be offered at a price of $10.00 per share, and 10% of which were offered pursuant to our dividend reinvestment plan at a purchase price equal to the higher of $9.50 per share or 95% of the fair market value of a common share on the reinvestment date, as determined by the Investment Advisor, or another firm we choose for that purpose. We closed our follow-on offering on January 30, 2012. From January 30, 2009 (effective date) through January 30, 2012, we received gross offering proceeds of approximately $1,901,137,211 from the sale of 190,672,251 shares. During the three months ended March 31, 2013 and 2012, we issued shares pursuant to our dividend reinvestment plan. See Note 13 “Distributions”.

During the three months ended March 31, 2013 and 2012, we repurchased 2,838,799 common shares and 1,026,527 common shares, respectively, under our Share Redemption Program for $26,912,000 and $9,451,000, respectively.

Accumulated Other Comprehensive Income

The following presents the changes in the balances of each component of accumulated other comprehensive income for the three months ended March 31, 2013 and 2012 (in thousands):

	Foreign Currency Translation  Gain (Loss)			Swap Fair  Value Adjustment			Accumulated Other Comprehensive  Income (Loss)
January 1, 2013	$	(6,164	)	$	(2,423	)	$	(8,587	)
Other Comprehensive Loss		(9,141	)		(988	)		(10,129	)
March 31, 2013	$	(15,305	)	$	(3,411	)	$	(18,716	)

	Foreign Currency Translation Gain (Loss)			Swap Fair Value Adjustment			Accumulated Other Comprehensive Income (Loss)
January 1, 2012	$	(10,579	)	$	(13,085	)	$	(23,664	)
Other Comprehensive Income		6,475			942			7,417
March 31, 2012	$	(4,104	)	$	(12,143	)	$	(16,247	)

13. Distributions

Earnings and profits, which determine the taxability of distributions to shareholders, will differ from income reported for financial reporting purposes due to the differences for federal income tax purposes including the treatment of loss on extinguishment of debt, revenue recognition, compensation expense and in the basis of depreciable assets and estimated useful lives used to compute depreciation.

The following table reconciles the distributions declared per common share to the distributions paid per common share during the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31,
	2013			2012
Distributions declared per common share	$	0.150		$	0.150
Less: Distributions declared in the current period, and paid in the subsequent period		(0.150	)		(0.150	)
Add: Distributions declared in the prior year, and paid in the current year		0.150			0.150
Distributions paid per common share	$	0.150		$	0.150

Distributions to shareholders during the three months ended March 31, 2013 and 2012 totaled $37,418,000 and $32,785,000, respectively.

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CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

We issued 1,768,084 common shares and 1,551,242 common shares pursuant to our dividend reinvestment plan for the three months ended March 31, 2013 and 2012, respectively.

14. Derivative Instruments

The following table sets forth the terms of our interest rate swap derivative instruments at March 31, 2013 (amounts in thousands):

Type of Instrument	Notional Amount		Fair Value			Pay Fixed Rate			Receive Variable Rate			Maturity Date
Non-qualifying Interest Rate Swap on Thames Valley Retail Park debt(1)	$	8,575		(69	)		5.41	%		0.51	%		May 30, 2013
Non-qualifying Interest Rate Swap on Albion Mills debt(1)	$	8,688		(155	)		3.94	%		0.51	%		October 10, 2013
Non-qualifying Interest Rate Swap on TD Term Loan	$	50,000		(651	)		1.53	%		0.21	%		March 6, 2020
Non-qualifying Interest Rate Swap on Wells Fargo Term Loan	$	200,000		(1,428	)		0.99	%		0.21	%		March 7, 2018
Non-qualifying Interest Rate Swap on Atrium I debt	$	23,140		(957	)		1.78	%		0.21	%		May 31, 2018
Non-qualifying Interest Rate Swap on Easton III debt	$	6,590		(313	)		1.95	%		0.21	%		January 31, 2019
Non-qualifying Interest Rate Swap on Point West I debt	$	11,258		(334	)		1.41	%		0.21	%		December 6, 2016
Qualifying Interest Rate Swap on Maskew Retail Park debt(1)	$	21,248		(824	)		3.42	%		0.51	%		August 10, 2014

⁽¹⁾  Based on three month GBP-based LIBOR BBA Index with variable rate reset dates every 90 days during the term of the swaps.

The following table sets forth the terms of our interest rate swap derivative instruments at December 31, 2012 (amounts in thousands):

Type of Instrument	Notional Amount		Fair Value			Pay Fixed Rate			Receive Variable Rate			Maturity Date
Non-qualifying Interest Rate Swap on Thames Valley debt(1)	$	9,160		(182	)		5.41	%		0.52	%		May 30, 2013
Non-qualifying Interest Rate Swap on Albion Mills debt(1)	$	9,280		(241	)		3.94	%		0.54	%		October 10, 2013
Qualifying Interest Rate Swap on Maskew debt(1)	$	22,698		(1,015	)		3.42	%		0.53	%		August 10, 2014

⁽¹⁾  Based on three month GBP-based LIBOR BBA Index with variable rate reset dates every 90 days during the term of the swaps.

We marked our two non-qualifying economic hedge interest rate swap instruments with notional amounts of $8,575,000 and $8,688,000 to their estimated liability value of $224,000 and $423,000 on the consolidated balance sheet at March 31, 2013 and December 31, 2012 included in Liabilities as Interest Rate Swaps at Fair Value. We recognized a gain on interest rate swaps of $172,000 and $125,000 for the three months ended March 31, 2013 and 2012, respectively, included in Gain (Loss) on Interest Rate Swaps on the Consolidated Statement of Operations.

We marked our $50,000,000 non-qualifying economic hedge interest rate swap associated with our TD term loan payable on March 11, 2013 to its estimated liability value of $651,000 and $0 as of March 31, 2013 and December 31, 2012, respectively. The interest rate swap was originally designated as a qualifying cash flow hedge of the LIBOR base payments from its inception on March 6, 2013 and subsequent to a modification of the terms of the interest rate swap on March 11, 2013, the agreement no longer qualified as a hedge for accounting purposes. We recognized a loss on interest rate swaps of $454,000 and $0 for the three months ended March 31, 2013 and 2012, respectively, included in Gain (Loss) on Interest Rate Swaps on the Consolidated Statement of Operations and an adjustment to other comprehensive loss totaling $198,000 and $0 for the three months ended March 31, 2013 and 2012, respectively.

We marked our $200,000,000 non-qualifying economic hedge interest rate swap associated with our WF term loan payable on March 12, 2013 to its estimated liability value of $1,428,000 and $0 as of March 31, 2013 and December 31, 2012, respectively. The interest rate swap was originally designated as a qualifying cash flow hedge of the LIBOR base payments from its inception on March 7, 2013 and subsequent to a modification of the terms of the interest rate swap on March 12, 2013, the agreement no longer qualified as a hedge for accounting purposes. We recognized a loss on interest rate swaps of $683,000 and $0 for the three months

43

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

ended March 31, 2013 and 2012, respectively, included in Gain (Loss) on Interest Rate Swaps on the Consolidated Statement of Operations and an adjustment to other comprehensive loss totaling $745,000 and $0 for the three months ended March 31, 2013 and 2012, respectively.

We marked our $23,140,000 non-qualifying economic hedge interest rate swap associated with our Atrium I variable-rate loan payable upon its assumption on March 1, 2013 from the Duke Joint Venture in which we had an 80% ownership interest. The estimated fair value of the interest rate swap value of $957,000 and $0 as of March 31, 2013 and December 31, 2012. We recognized a loss on interest rate swap of $25,000 and $0 for the three months ended March 31, 2013 and 2012, respectively, included in Gain (Loss) on Interest Rate Swaps on the Consolidated Statement of Operations and an adjustment to other comprehensive loss totaling $139,000 and $0 for the three months ended March 31, 2013 and 2012, respectively.

We marked our $6,590,000 non-qualifying economic hedge interest rate swap associated with our Easton III variable-rate loan payable upon its assumption on March 1, 2013 from the Duke Joint Venture in which we had an 80% ownership interest. The estimated fair value of the interest rate swap value of $313,000 and $0 as of March 31, 2013 and December 31, 2012, respectively. We recognized a loss on interest rate swap of $9,000 and $0 for the three months ended March 31, 2013 and 2012, respectively, included in Gain (Loss) on Interest Rate Swaps on the Consolidated Statement of Operations and an adjustment to other comprehensive loss totaling $42,000 and $0 for the three months ended March 31, 2013 and 2012, respectively.

We marked our $11,258,000 non-qualifying economic hedge interest rate swap associated with our Point West I variable-rate loan payable upon its assumption on March 1, 2013 from the Duke Joint Venture in which we had an 80% ownership interest. The estimated fair value of the interest rate swap value of $334,000 and $0 as of March 31, 2013 and December 31, 2012, respectively. We recognized a loss on interest rate swap of $14,000 and $0 for the three months ended March 31, 2013 and 2012, respectively, included in Gain (Loss) on Interest Rate Swaps on the Consolidated Statement of Operations and an adjustment to other comprehensive loss totaling $57,000 and $0 for the three months ended March 31, 2013 and 2012, respectively.

There were no amounts of deferred gains or losses that are reported in AOCI that are expected to be reclassified into earnings in the next 12 months.

Our $21,248,000 notional amount interest rate swap has been designated as a qualifying cash flow hedge of the LIBOR base payments due under our Maskew Retail Park variable rate note payable from its inception on September 24, 2009. The estimated fair value of the interest rate swap liability value of $824,000 and $1,015,000 as of March 31, 2013 and December 31, 2012, respectively, has resulted in a swap fair value adjustment being recorded to other comprehensive gain totaling $190,000 and $41,000 for the three months ended March 31, 2013 and 2012, respectively.

15. Fair Value Option—Note Payable

During the fourth quarter of 2008, we elected to apply the fair value option on a note payable which bears interest at a variable rate and is currently subject to an economic hedge by an interest rate swap with similar terms and the same notional amount. We have elected to apply the fair value option on the Albion Mills Retail Park variable rate note payable to match the fair value treatment of interest rate swap derivative on the same note payable thereby achieving a reduction in the artificial volatility in net income or loss that occurs when related financial assets and liabilities are measured and reported on a different basis in the consolidated financial statements.

We applied the fair value option for the Albion Mills Retail Park note payable at each reporting period. Included in loss on notes payable at fair value in the statement of operations were $25,000 and $35,000 for the three months ended March 31, 2013 and 2012, respectively. In addition, there was a $594,000 translation gain and $271,000 translation loss recorded to Other Comprehensive Income at March 31, 2013 and 2012, respectively.

16. Fair Value of Financial Instruments and Investments

We apply the three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices for identical financial instruments in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as instruments that have little to no pricing observability as of the reported date. These financial instruments do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation. We have classified the Albion Mills Retail Park notes payable as Level 3 as of March 31, 2013 and December 31, 2012 due to the lack of current market activity and our reliance on unobservable inputs to estimate the fair value of the mortgage note payable.

44

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

As of March 31, 2013 and December 31, 2012, we held certain items that are required to be measured at fair value on a recurring basis. These included cash equivalents, interest rate swap derivative contracts and our equity method investment in CBRE Strategic Partners Asia. Cash equivalents consist of short-term, highly liquid, income-producing investments, all of which have maturities of 90 days or less, including money market funds and U.S. Government obligations. Derivative instruments are related to our economic hedging activities with respect to interest rates.

The fair values of the interest rate swap derivative agreements are estimated with the assistance of a third party valuation specialist, as reviewed by the Vice President and Controller, using the market standard methodology of discounting the future expected cash payments and receipts on the pay and receive legs of the interest rate swap agreements that swap the estimated variable rate mortgage note payment stream for a fixed rate receive payment stream over the period of the loan. The variable interest rates used in the calculation of projected receipts on the interest rate swap agreements are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements (where appropriate). Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of March 31, 2013 and December 31, 2012, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. We have consistently applied these valuation techniques in all periods presented and believe we have obtained the most accurate information available for the types of derivative contracts we hold.

Our investment in CBRE Strategic Partners Asia is based on the Level 3 valuation inputs applied by the Investment Manager of this investment company utilizing the following approaches for valuing the underlying real estate related investments within the investment company:

¡ The income approach is generally based on a discounted cash flow analysis. Such an analysis for a real property includes projecting net cash flows from the property from a buyer’s perspective and computing the present value of the cash flows using a market discount rate. The cash flows include a projection of the net sales proceeds at the end of our estimate of a market participant holding period, computed using market reversionary capitalization rates and projected cash flows from the property for the year following the holding period.

¡ The direct market comparison approach to property valuation is primarily based on the principle of substitution, which holds that the value of a property tends to be set by the price that would be paid to acquire a substitute property of similar utility and desirability within a reasonable amount of time. Transactions of similar properties are analyzed and compared to the subject property. Factors affecting value include differences in the location, size, quality of construction and other physical features, property rights appraised, timing of sale, and economic and market conditions.

¡ The replacement cost approach to property valuation is a theoretical breakdown of the property into land and building components. The theory is that the value of a property can be estimated by summing the land value and the depreciated value of any improvements. While the replacement cost of the improvements can be determined by adding the labor, material, and other costs, land values must be derived from an analysis of comparable data. The cost approach is considered reliable when used on newer structures, but the method tends to become less reliable for older properties.

¡ For investments owned more than one year, except for investments under construction or incurring significant renovation, it is CBRE Strategic Partners Asia’s policy to obtain a third-party appraisal. For investments in real estate under construction or incurring significant renovation, the valuation analysis is prepared by the Investment Manager.

45

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

The following items are measured at fair value on a recurring basis at March 31, 2013 and December 31, 2012 (in thousands):

	As of March 31, 2013
				Fair Value Measurements Using:
	Total Fair Value			Quoted Markets Prices (Level 1)		Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets (Liabilities)
Cash and Cash Equivalents	$	2,497		$	2,497	$	0		$	0
Interest Rate Swaps at Fair Value—Non Qualifying Hedges	$	(3,907	)	$	0	$	(3,907	)	$	0
Interest Rate Swaps at Fair Value—Qualifying Hedges	$	(824	)	$	0	$	(824	)	$	0
Investment in CBRE Strategic Partners Asia	$	8,178		$	0	$	0		$	8,178
Note Payable at Fair Value	$	(8,719	)	$	0	$	0		$	(8,719	)
Class B Interest	$	(200	)	$	0	$	0		$	(200	)

	As of December 31, 2012
				Fair Value Measurements Using:
	Total Fair Value			Quoted Markets Prices (Level 1)		Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets (Liabilities)
Cash and Cash Equivalents	$	6,495		$	6,495	$	0		$	0
Interest Rate Swaps at Fair Value—Non Qualifying Hedges	$	(423	)	$	0	$	(423	)	$	0
Interest Rate Swaps at Fair Value—Qualifying Hedges	$	(1,015	)	$	0	$	(1,015	)	$	0
Investment in CBRE Strategic Partners Asia	$	8,098		$	0	$	0		$	8,098
Note Payable at Fair Value	$	(9,288	)	$	0	$	0		$	(9,288	)
Class B Interest	$	(200	)	$	0	$	0		$	(200	)

The following table presents our activity for the variable rate note payable and our investment in CBRE Strategic Partners Asia measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2013 (in thousands):

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)	Investment in CBRE Strategic Partners Asia		Note Payable
Balance at January 1, 2013	$	8,098	$	(9,288	)
Contributions		0		0
Distributions		0		0
Total Income (Loss) on Fair Value Adjustment		80		(25	)
Translation Adjustment in Other Comprehensive Income		0		594
Balance at March 31, 2013	$	8,178	$	(8,719	)
The Amount of Total Income (Loss) for the Period Included in Loss on Note Payable at Fair Value and Equity in Income of Unconsolidated Entities to Note Payable and Investment in Unconsolidated Entities Held at March 31, 2013	$	80	$	(25	)

46

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)	Investment in CBRE Strategic Partners Asia			Note Payable
Balance at January 1, 2012	$	8,381		$	(8,775	)
Contributions		0			0
Distributions		0			0
Total Loss on Fair Value Adjustment		(193	)		(35	)
Translation Adjustment in Other Comprehensive Income		0			(271	)
Balance at March 31, 2012	$	8,188		$	(9,081	)
The Amount of Total Income Loss for the Period Included in Loss on Note Payable at Fair Value and Equity in Income of Unconsolidated Entities to Note Payable and Investment in Unconsolidated Entities Held at March 31, 2012	$	(193	)	$	(35	)

Gains and losses (realized and unrealized) included in earnings related to the interest rate swaps, as well as for the elected fair value note payable for the three months ended March 31, 2013 and March 31, 2012 are reported as components of “Other Income and Expense” on the consolidated statements of operations.

The Company uses derivative instruments to mitigate the effects of interest rate fluctuations on specific forecasted transactions as well as recognized financial obligations or assets. The Company does not use derivative instruments for speculative or trading purposes.

The primary risks associated with derivative instruments are market and credit risk. Market risk is defined as the potential for loss in value of a derivative instrument due to adverse changes in market prices (interest rates). Utilizing derivative instruments allows the Company to effectively manage the risk of fluctuations in interest rates related to the potential effects these changes could have on future earnings and forecasted cash flows.

Credit risk is the risk that one of the parties to a derivative contract fails to perform or meet their financial obligation. The Company does not obtain collateral associated with its derivative instruments, but monitors the credit standing of its counterparties on a regular basis. Should counterparty fail to perform, the Company would incur a financial loss to the extent that the associated derivative contract was in an asset position. At March 31, 2013, the Company does not anticipate non-performance by the counterparties to its outstanding derivative contracts.

At March 31, 2013, the Company expects that the hedged forecasted transactions, for each of the outstanding qualifying cash flow hedging relationships remains probable of occurring and that no gains or losses recorded to accumulated other comprehensive loss are expected to be reclassified to earnings.

47

CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

To illustrate the effect of movements in the interest rate markets, the Company performed a market sensitivity analysis on its outstanding hedging instruments. The Company applied various basis point spreads to the underlying interest rate curves of the derivative portfolio in order to determine the instruments’ change in fair value. The following tables summarize the results of the analysis performed for the period ended March 31, 2013 and March 31, 2012, respectively (dollars in thousands):

Type of Instrument	Notional Amount		Maturity Date		Effects of Change in Interest Rates as of March 31, 2013
					-100 Basis Points			-50 Basis Points			+50 Basis Points		+100 Basis Points
Non-qualifying Interest Rate Swap on Thames Valley Retail Park debt(1)	$	8,575		May 30, 2013		(0	)		(0	)		0		0
Non-qualifying Interest Rate Swap on Albion Mills debt(1)	$	8,688		October 10, 2013		(22	)		(22	)		22		43
Non-qualifying Interest Rate Swap on TD Term Loan	$	50,000		March 6, 2020		(3,296	)		(1,668	)		1,520		3,029
Non-qualifying Interest Rate Swap on Wells Fargo Term Loan	$	200,000		March 7,2018		(8,760	)		(4,751	)		4,595		9,093
Non-qualifying Interest Rate Swap on Atrium I debt	$	23,140		May 31, 2018		(960	)		(515	)		511		1,018
Non-qualifying Interest Rate Swap on Easton III debt	$	6,590		January 31, 2019		(330	)		(170	)		167		333
Non-qualifying Interest Rate Swap on Point West I debt	$	11,258		December 6, 2016		(244	)		(184	)		191		380
Qualifying Interest Rate Swap on Maskew Retail Park debt(1)	$	21,248		August 10,2014		(141	)		(138	)		138		275

⁽¹⁾ Based on three month GBP-based LIBOR BBA Index with variable rate reset dates every 90 days during the term of the swaps.

Type of Instrument	Notional Amount		Maturity Date		Effects of Change in Interest Rates as of March 31, 2012
					-100 Basis Points			-50 Basis Points			+50 Basis Points		+100 Basis Points
Non-qualifying Interest Rate Swap on Thames Valley Retail Park debt(1)	$	9,033		May 30, 2013		(106	)		(55	)		56		112
Non-qualifying Interest Rate Swap on Albion Mills debt(1)	$	9,151		October 10, 2013		(150	)		(80	)		80		159
Qualifying Interest Rate Swap on Maskew Retail Park debt(1)	$	22,381		August 10,2014		(545	)		(283	)		283		566
Qualifying Interest Rate Swap on Pacific Corporate Park debt	$	81,000		December 7, 2017		(3,228	)		(1,957	)		1,971		4,016
Qualifying Interest Rate Swap on 100 Kimball Drive Park debt	$	32,355		March 1,2021		(2,568	)		(1,364	)		1,097		2,318
Qualifying Interest Rate Swap on Kings Mountain III debt	$	11,530		July 1,2018		(683	)		(357	)		295		621

⁽¹⁾ Based on three month GBP-based LIBOR BBA Index with variable rate reset dates every 90 days during the term of the swaps.

The estimated fair value of our investment in SP Asia is most sensitive to changes in capitalization rates for commercial properties in large urban areas in China and Japan, and among other factors, is also sensitive to currency exchange rate fluctuations and changes in the interest rates of China, Japan and the U.S., respectively. Decreases in capitalization rates and increases in interest rates generally increase the value of our investments. Changes in currency exchanges rates where the U.S. Dollar increases in value against the Chinese Yuan and Japanese Yen generally decrease the value of our investments. The estimated fair value of the Albion Mills variable rate loan is not sensitive to changes in index interest rates, but remains somewhat sensitive to changes in credit spreads available to the REIT. If credit spreads increase, the fair value of this note payable balance decreases.

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CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

Disclosure of Fair Value Financial Instruments

For disclosure purposes only, the following table summarizes our notes payable and their estimated fair value at March 31, 2013 and December 31, 2012 (in thousands):

	Book Value				Fair Value
Financial Instrument	March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012
Notes Payable(1)	$	718,077	$	492,944	$	792,532	$	514,451
Note Payable at Fair Value(1)		8,719		9,288		8,719		9,288
Total Notes Payable(1)	$	726,796	$	502,232	$	801,251	$	523,739
Loans Payable(1)	$	320,044	$	265,000	$	320,044	$	265,000

⁽¹⁾ Level 3: For purposes of this fair value disclosure, we based our fair value estimate for notes payable on our internal valuation that includes a representative sample of our lenders’ market interest rate quotes as of March 31, 2013 and December 31, 2012 for debt with similar risk characteristics and maturities. We based the Note Payable carried at fair value on a third party appraiser’s valuation, which used similar techniques as our internal valuation model as of March 31, 2013 and December 31, 2012.

These financial instruments do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation. We have classified the notes payable as Level 3 as of March 31, 2013 and December 31, 2012 due to the lack of current market activity and our reliance on unobservable inputs to estimate the fair value of the mortgage note payable.

17. Commitments and Contingencies

We have agreed to a capital commitment of up to $20,000,000 in CBRE Strategic Partners Asia. As of March 31, 2013, we funded $17,526,000 of our capital commitment. CBRE Global Investors, an affiliate of the former investment advisor, formed CBRE Strategic Partners Asia, to purchase, reposition, develop, hold for investment and sell institutional quality real estate and related assets in targeted markets in China, Japan, India, South Korea, Hong Kong, Singapore and other Asia Pacific markets. If we and all other currently committed capital investors had funded our entire commitments in CBRE Strategic Partners Asia as of March 31, 2013, we would have owned an ownership interest of approximately 5.07% in CBRE Strategic Partners Asia. A majority of our trustees (including a majority of our independent trustees) not otherwise interested in this transaction approved the transaction as being fair, competitive and commercially reasonable. CBRE Strategic Partners Asia is managed by CB Richard Ellis Investors SP Asia II, LLC or the Fund Manager, a subsidiary of CBRE Global Investors, an affiliate of the former investment advisor.

Litigation—From time to time, we and our properties may be subject to legal proceedings, which arise in the ordinary course of our business. Currently, neither our company nor any of our properties are subject to, or threatened with, any legal proceedings for which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition.

Environmental Matters—We are not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.

18. Income Taxes

We elected to be taxed as a REIT under the Internal Revenue Code commencing with our taxable year ended December 31, 2004. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we generally distribute at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding net capital gain). It is our current intention to adhere to these requirements and maintain our REIT qualification. As a REIT, we generally will not be subject to corporate level U.S. federal income tax on net income we distribute currently to our shareholders. If we fail to qualify as a REIT in any taxable year, then we will be subject to U.S. federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property and to U.S. federal income and excise taxes on our undistributed taxable income, if any.

ASC 740-10 Income Taxes requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined

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CHAMBERS STREET PROPERTIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended March 31, 2013 and 2012 (unaudited)

based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. We did not have a liability for any unrecognized benefits as of March 31, 2013. The tax years from 2008 through 2012 remain open to examination by the taxing jurisdictions to which the company is subject.

Included as a component of our tax provision, we have incurred income and other taxes (franchise, local and state government and international) related to our continuing operations in the amount of $69,000 and ($18,000), for California, Georgia, Massachusetts, Minnesota, New Jersey, North Carolina and Texas impacting our operations during the three months ended March 31, 2013 and 2012, respectively. The United Kingdom taxes real property operating results at a statutory rate of 20%. The United Kingdom taxable losses to date have generated a deferred tax asset of approximately $630,000 consisting of these net operating loss carryforwards. We have provided for a full valuation allowance of ($630,000) as of three months ended March 31, 2013 on deferred tax assets because it is not likely that future operating profits in the United Kingdom would be sufficient to absorb the net operating losses.

19. Subsequent Events

On April 26, 2013, our Board of Trustees determined that it is in the best interest of us and our shareholders to list our common shares of beneficial interest on a national securities exchange. We intend to list our common shares of beneficial interest on the NYSE under the ticker symbol “CSG.” We anticipate that our common shares of beneficial interest will be listed on the NYSE on or about May 21, 2013 (the “Listing”). The completion of the Listing is subject to certain conditions.

We also intend to commence a modified “Dutch Auction” tender offer (subject to all appropriate filings with the SEC), to purchase up to $125,000,000 of our common shares of beneficial interest. Under the terms of the proposed tender offer, we intend to select the lowest price, not greater than $10.60 nor less than $10.10 per common share of beneficial interest, net to the tendering shareholder in cash, less any applicable withholding taxes and without interest, that will allow us to purchase up to $125,000,000 of our common shares of beneficial interests or a lower amount depending upon the number of common shares properly tendered and not withdrawn. We expect to allow shareholders to tender all or a portion of their common shares in the tender offer. In the event that the tender offer is oversubscribed, proration of tendered common shares will be calculated promptly after the tender offer expires. We intend to fund the tender offer with funds available under the Unsecured Credit Facility. We expect to commence the proposed tender offer on or about May 21, 2013 in conjunction with the Listing. Wells Fargo Securities, LLC and Citigroup Global Markets Inc. will be the Dealer Managers for the proposed tender offer.

This Quarterly Report on Form 10-Q is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any securities of the Company. The tender offer will be made only pursuant to an offer to purchase, letter of transmittal and related materials that the Company intends to distribute to its shareholders and file with the SEC. The full details of the tender offer, including complete instructions on how to tender Shares, will be included in the offer to purchase, the letter of transmittal and other related materials, which the Company will distribute to shareholders and file with the SEC upon commencement of the tender offer. Shareholders are urged to carefully read the offer to purchase, the letter of transmittal and other related materials when they become available because they will contain important information, including the terms and conditions of the tender offer. Shareholders may obtain free copies of the offer to purchase, the letter of transmittal and other related materials that the Company files with the SEC at theSEC’s website athttp://www.sec.gov or by calling the information agent for the contemplated tender offer, who will be identified in the materials filed with the SEC at the commencement of the tender offer. In addition, shareholders may obtain free copies of the Company’s filings with the SEC from the Company’s website athttp://www.chambersstreet.com or by directing a request to Mr. Martin A. Reid, Chambers Street Properties, 47 Hulfish Street, Suite 210, Princeton, NJ 08542 or (609) 683-4900.

On April 26, 2013, our Board of Trustees determined that in contemplation of the Listing and the tender offer described above, our share redemption program will terminate upon the Listing, which is expected to occur on or about May 21, 2013.

On April 26, 2013, our Board of Trustees determined that in contemplation of the Listing and the tender offer described above, our dividend reinvestment plan will terminate upon the Listing, which is expected to occur on or about May 21, 2013.

On April 26, 2013, our Board of Trustees approved a quarterly distribution of $0.125 per common share, to be paid on October 11, 2013 to the holders of record of common shares on September 26, 2013.

On May 1, 2013, we paid off the Sabal Pavilion fixed rate mortgage loan in the amount of $14,700,000.

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

Explanatory Note

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements, the notes thereto, and the other financial data included elsewhere in this Form 10-Q.

Cautionary Note Regarding Forward-Looking Statements

This document contains various “forward-looking statements.” You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “would,” “could,” “should,” “seeks,” “approximately,” “intends,” “plans,” “projects,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Statements regarding the following subjects may be impacted by a number of risks and uncertainties:

¡ our business strategy;

¡ our ability to obtain future financing arrangements;

¡ estimates relating to our future distributions;

¡ our understanding of our competition;

¡ market trends;

¡ projected capital expenditures;

¡ the impact of technology on our products, operations and business; and

¡ the use of the proceeds of any offerings of securities.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks before you make an investment decision with respect to our common shares, along with the following factors that could cause actual results to vary from our forward-looking statements:

¡ our ability to complete the listing of our common shares on the NYSE;

¡ our ability to complete the tender offer;

¡ the price at which our common shares may be traded on the NYSE, which may be higher or lower than the purchase price in the tender offer;

¡ the price and time at which we may make additional repurchases of common shares following the completion of the tender offer;

¡ the number of common shares acquired in such repurchases and the terms, timing, costs, and interest rate on any indebtedness incurred to fund such repurchases;

¡ national, regional and local economic climates;

¡ changes in supply and demand for industrial and office properties;

¡ adverse changes in the real estate markets, including increasing vacancy, decreasing rental revenue and increasing insurance costs;

¡ availability and credit worthiness of prospective tenants;

¡ our ability to maintain rental rates and maximize occupancy;

¡ our ability to identify and secure acquisitions;

¡ our failure to successfully manage growth or operate acquired properties;

¡ our pace of acquisitions and/or dispositions of properties;

¡ risks related to development projects (including construction delay, cost overruns or our inability to obtain necessary permits);

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¡ payment of distributions from sources other than cash flows and operating activities;

¡ receiving corporate debt ratings and changes in the general interest rate environment;

¡ availability of capital (debt and equity);

¡ our ability to refinance existing indebtedness or incur additional indebtedness;

¡ failure to comply with our debt covenants;

¡ unanticipated increases in financing and other costs, including a rise in interest rates;

¡ the actual outcome of the resolution of any conflict;

¡ material adverse actions or omissions by any of our joint venture partners;

¡ our ability to operate as a self-managed company;

¡ availability of and ability to retain our executive officers and other qualified personnel;

¡ future terrorist attacks in the United States or abroad;

¡ the ability of CSP OP to qualify as a partnership for U.S. federal income tax purposes;

¡ our ability to qualify as a REIT for U.S. federal income tax purposes;

¡ foreign currency fluctuations;

¡ changes to accounting principles and policies and guidelines applicable to REITs;

¡ legislative or regulatory changes adversely affecting REITs and the real estate business;

¡ environmental, regulatory and/or safety requirements; and

¡ other factors discussed under Item 1A Risk Factors of this Annual Report on Form 10-K for the year ended December 31, 2012 and those factors that may be contained in any filing we make with the SEC, including Part II, Item 1A of Form 10-Qs.

Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of future events, new information or otherwise. For a further discussion of these and other factors that could impact our future results, performance or transactions, see Item 1A. “Risk Factors.”

This Quarterly Report on Form 10-Q is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any securities of the Company. The tender offer will be made only pursuant to an offer to purchase, letter of transmittal and related materials that the Company intends to distribute to its shareholders and file with the Securities and Exchange Commission (the “SEC”). The full details of the tender offer, including complete instructions on how to tender Shares, will be included in the offer to purchase, the letter of transmittal and other related materials, which the Company will distribute to shareholders and file with the SEC upon commencement of the tender offer. Shareholders are urged to carefully read the offer to purchase, the letter of transmittal and other related materials when they become available because they will contain important information, including the terms and conditions of the tender offer. Shareholders may obtain free copies of the offer to purchase, the letter of transmittal and other related materials that the Company files with the SEC at the SEC’s website athttp://www.sec.gov or by calling the information agent for the contemplated tender offer, who will be identified in the materials filed with the SEC at the commencement of the tender offer. In addition, shareholders may obtain free copies of the Company’s filings with the SEC from the Company’s website athttp://www.chambersstreet.com or by directing a request to Mr. Martin A. Reid, Chambers Street Properties, 47 Hulfish Street, Suite 210, Princeton, NJ 08542 or (609) 683-4900.

Overview

Chambers Street Properties is a self-administered and internally managed Maryland REIT led by an experienced management team that is focused on acquiring, owning and operating high-quality industrial and office properties. Our management team manages our day-to-day operations and oversees and supervises our employees and outside service providers. Acquisitions and asset management services are performed principally by us, with certain services provided by third parties. Prior to July 1, 2012, all of the business activities of the Company were managed by CBRE Advisors LLC (the “former investment advisor”) pursuant to the fourth amended and restated advisory agreement (the “Fourth Amended Advisory Agreement”), which terminated according to its terms on June 30, 2012. In addition, effective July 1, 2012, the Company entered into a transitional services agreement with CSP OP and the former investment

52

advisor pursuant to which the former investment advisor would provide certain operational and consulting services to the Company at the direction of our officers and other personnel for a term which ended on April 30, 2013.

We invest in real estate properties, focusing primarily on industrial (primarily warehouse/distribution/logistics) and office properties, as well as other real estate-related assets. We primarily target single-tenant industrial and office assets, in well-located and growing markets that are critical to the tenant’s business. A majority of these properties are subject to triple net or similar leases, where the tenant bears all or substantially all of the costs, including cost increases, for real estate taxes, utilities, insurance and ordinary repairs. We may also utilize our expertise and resources to capitalize on unique opportunities that may exist elsewhere in the marketplace. We intend to invest primarily in properties located in geographically-diverse metropolitan areas in the United States. We expect that our international investments will focus on properties typically located in significant business districts and suburban markets. Some of our domestic and international investments may be in partnership with other entities that have significant local-market expertise.

As of March 31, 2013, we owned, on a consolidated basis, 99 industrial (primarily warehouse/distribution/logistics) office and retail properties located in 19 U.S. states (Arizona, California, Colorado, Florida, Georgia, Illinois, Kansas, Kentucky, Maryland, Massachusetts, Minnesota, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Utah and Virginia) and in the United Kingdom, encompassing approximately 22,314,000 rentable square feet. Our consolidated properties were approximately 95.90% leased (based upon square feet) as of March 31, 2013. As of March 31, 2013, 72 of our consolidated properties were triple net leased to single tenants—these triple net single-tenant properties encompassed approximately 17,604,000 rentable square feet. As of March 31, 2013, certain of our consolidated properties were subject to mortgage debt, a description of which is set forth in “Financial Condition, Liquidity and Capital Resources—Financing.”

In addition, we had ownership interests in five unconsolidated entities that, as of March 31, 2013, owned interests in 32 properties. Excluding those properties owned through our investment in CBRE Strategic Partners Asia, we owned, on an unconsolidated basis, 30 industrial (primarily warehouse/distribution/logistics) office and retail properties located in nine U.S. states (Arizona, Florida, Illinois, Indiana, Missouri, North Carolina, Ohio, Tennessee and Texas) and in the United Kingdom and Europe encompassing approximately 11,748,000 rentable square feet. Our unconsolidated properties were approximately 99.04% leased (based upon square feet) as of March 31, 2013. As of March 31, 2013, 18 of our unconsolidated properties were triple net leased to single tenants—these triple net single-tenant properties encompassed approximately 10,170,000 rentable square feet. As of March 31, 2013, certain of our unconsolidated properties were subject to mortgage debt, a description of which is set forth in “-Financial Condition, Liquidity and Capital Resources—Financing.”

As of March 31, 2013, our portfolio was 96.99% leased, and the total effective annual rents for our industrial (primarily warehouse/distribution/logistics) properties, office properties and retail properties were approximately $95,878,000, $167,451,000 and $8,620,000 respectively (net of any rent concessions). The average effective annual rent per square foot for our industrial (primarily warehouse/distribution/logistics) properties, office properties and retail properties was approximately $3.89, $18.84 and $17.38, respectively (net of any rent concessions). The average effective annual rent per square foot for our triple net lease industrial and office properties was approximately $3.97 and $18.26 as of March 31, 2013, respectively (net of any rent concessions). As of March 31, 2013, approximately 56% of our annualized base rent was derived from investment grade rated tenants.

As of March 31, 2012, our portfolio was 98.27% leased, and the total effective annual rents for our industrial (primarily warehouse/distribution/logistics) properties, office properties and retail properties were approximately $79,952,000, $162,417,000, and $8,831,000 as of March 31, 2012, respectively (net of any rent concessions). The average effective annual rent per square foot for our industrial properties, office properties and retail properties was approximately $3.84, $19.15 and $17.81 as of March 31, 2012, respectively (net of any rent concessions). The average effective annual rent per square foot for our triple net lease industrial and office properties was approximately $3.93 and $17.58 as of March 31, 2012, respectively (net of any rent concessions).

Our primary objective is to maximize shareholder value through stable cash flow and long-term asset appreciation. In pursuing this objective, we target growth through acquisitions and selective built-to-suit development in markets that complement our existing portfolio, actively manage our balance sheet to maintain flexibility with conservative leverage, and seek internal growth through proactive asset management, leasing and property management oversight. Operating results at our individual properties are impacted by the supply and demand for industrial, office and retail space, trends of national and regional economies, the financial health of current and prospective tenants and their customers, capital and credit market trends, construction costs, and interest rate movements. Individual operating property performance is monitored and calculated using certain non-GAAP financial measures such as an analysis of net operating income. An analysis of net operating income as compared to local regional and national statistics may provide insight into short or longer term trends exclusive of capital markets or capital structuring issues. Interest rates are a critical factor in our results of operations. Our properties may be financed with significant amounts of debt, so changes in interest rates may affect both net income and the health of capital markets. For investments outside of the United States, in addition to monitoring local property market

53

fundamentals and capital and credit market trends, we evaluate currency hedging strategies, taxes, the stability of the local government and economy and the experience of our management team in the region.

We were formed on March 30, 2004 and commenced operations in July 2004, following an initial $55 million private placement of our common shares of beneficial interest. Jack A. Cuneo, our Founder and President and Chief Executive Officer, developed the initial business plan and obtained sponsorship from CBRE Global Investors to establish the Company. Since that time, we have raised equity capital to finance our real estate investment activities through two public offerings of our common shares of beneficial interest. Our public offerings raised an aggregate of $2,388,227,000 in gross offering proceeds, excluding proceeds associated with common shares issued under our amended and restated dividend reinvestment plan. Our common shares of beneficial interest are not currently listed on a national securities exchange, but we expect to list them on or about May 21, 2013. For more information about the listing, see “—Subsequent Events.” We were initially formed as CB Richard Ellis Realty Trust and on July 1, 2012, we changed our name to Chambers Street Properties. All of our real estate investments are held directly by, or indirectly through wholly owned subsidiaries of CSP Operating Partnership, LP (“CSP OP”) which we are the sole general partner. We have elected to be taxed as a REIT for U.S. federal income tax purposes. As a REIT, we generally will not be subject to U.S. federal income tax on that portion of our income that is distributed to our shareholders if at least 90% of our net taxable income is distributed to our shareholders

In 2010, our Board of Trustees established a Special Committee of the Board (the “Special Committee”) consisting of the Board’s independent trustees to explore and review our strategic alternatives and liquidity events in accordance with our investment objectives. The Special Committee engaged Robert A. Stanger & Co., Inc. as its financial advisor, to assist with its exploration and review of our strategic alternatives and liquidity events in accordance with our investment objectives (as discussed above). During 2011, with the assistance of its financial advisor and in consultation with the former investment advisor and our Board of Trustees, the Special Committee discussed and considered various strategic alternatives, including potentially continuing as a going concern under our current business plan, a potential liquidation of our assets either through a sale or merger of our company (including through either a bulk sale of our portfolio or through a sale of our individual properties) as well as a potential listing of our shares on a national securities exchange. In December 2011, after consideration of the recent general economic and capital market conditions, market conditions for listed REITs, credit market conditions, our operational performance, the status of our portfolio, our then current offering and our current and anticipated deployment of available capital to investments, the Special Committee and our Board of Trustees determined it was in the best interests of our shareholders for our shares to remain unlisted and to continue operations rather than commencing a liquidation of our assets. The Special Committee and our Board of Trustees believed that remaining unlisted and continuing our operations would provide us with the ability to purchase additional properties in order to continue to expand and diversify our portfolio and thus potentially better position us for a liquidity event. In April 2013, our Board of Trustees determined that it was in the best interest of us and our shareholders to pursue a listing on the NYSE, which is expected to occur on or about May 21, 2013. For more information about the listing, see “—Subsequent Events.”

Transition to Self-Management

In March 2012, the Special Committee determined that our company and its shareholders would benefit from an internal management structure in that such a structure could provide cost savings, improved distribution coverage, flexibility to pursue a variety of strategic initiatives, the ability to take advantage of opportunities created by changing market conditions and an opportunity to enhance the trading values of our common shares to the extent that we pursue and complete a listing of our common shares on a national securities exchange, the NASDAQ Global Select Market or the NASDAQ Global Market. For more information about our decision to pursue a listing on the NYSE, see “—Subsequent Events.” Our Board of Trustees, based on the recommendation of the Special Committee, authorized the Special Committee to commence a process to achieve internal management.

On April 27, 2012, we entered into a transition to self-management agreement (the “Transition to Self-Management Agreement”) with CSP OP, CBRE Global Investors, and the former investment advisor, which sets forth certain tasks to be performed by each of the parties to the agreement in order to facilitate our self-management, including but not limited to our hiring of the 19 identified employees of the former investment advisor and/or its affiliates who were dedicated to our operations. The tasks set forth in the Transition to Self-Management Agreement have been fulfilled.

Additionally, on June 29, 2012, effective June 30, 2012, we undertook several management and board changes as follows: (i) appointed Louis P. Salvatore to serve as an independent trustee, the Chairman of the Audit Committee of the Board of Trustees and as a member of each of the Compensation and Nominating and Corporate Governance Committees of the Board of Trustees, to fill the vacancy left by Peter E. DiCorpo, who stepped down as a trustee in connection with the termination of the Fourth Amended Advisory Agreement, (ii) appointed Jack A. Cuneo to serve as our President and Chief Executive Officer, (iii) appointed Philip L. Kianka to serve as our Executive Vice President and Chief Operating Officer and (iv) appointed Martin A. Reid to serve as our Executive Vice President and Chief Financial Officer. In connection with Mr. Reid’s appointment as Chief Financial Officer, Laurie E. Romanak stepped down as

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our Chief Financial Officer and Mr. Reid stepped down as the Chairman and as a member of the Audit Committee of the Board of Trustees and as a member of each of the Compensation Committee and the Conflicts Committee of the Board of Trustees. In addition, on June 19, 2012, our Board of Trustees appointed Charles E. Black to serve as the Chairman of the Board of Trustees in accordance with a provision in our bylaws that requires the chairman be an independent member.

On June 30, 2012, the Fourth Amended Advisory Agreement terminated according to its terms and, effective July 1, 2012, we entered into a transitional services agreement (the “Transitional Services Agreement”) with CSP OP and the former investment advisor pursuant to which the former investment advisor would provide certain operational and consulting related services to us at the direction of our officers and other personnel for a term which ended on April 30, 2013.

For consulting services provided to us in connection with the investment management of our assets, the former investment advisor was paid an investment management consulting fee payable in cash consisting of (i) a monthly fee equal to one-twelfth of 0.5% of the aggregate cost (before non-cash reserves and depreciation) of all real estate investments within our portfolio and (ii) a monthly fee equal to 5.0% of the aggregate monthly net operating income derived from all real estate investments within our portfolio, subject to certain adjustments. For consulting services provided to us in connection with the acquisition of assets, the former investment advisor or its affiliates was paid acquisition fees up to 1.5% of (i) the contract purchase price of real estate investments acquired by us, or (ii) when we make an investment indirectly through another entity, such investment’s pro rata share of the gross asset value of real estate investments held by that entity. The total of all acquisition consulting fees payable with respect to real estate investments did not exceed an amount equal to 6% of the contract purchase price (or 6% of funds advanced with respect to mortgages) provided, however, that a majority of the uninterested members of the Board of Trustees could approve amounts in excess of this limit.

Upon the termination date of the Transitional Services Agreement, we and the former investment advisor are required to agree on a list of unacquired real estate investments for which the former investment advisor has performed certain acquisition related consulting services (a “Qualifying Property”). If any Qualifying Property is acquired by us within the nine months following the termination of the Transitional Services Agreement then we shall pay an acquisition consulting fee equal to 0.75% of (i) the contract purchase price of the real estate investments (including debt), or (ii) when we make an investment indirectly through another entity, such investment’s pro rata share of the gross asset value of real estate investments held by that entity to the former investment advisor. Real estate investments for which there is a dispute as to whether it is a Qualifying Property that are acquired within the nine months following the termination of the Transitional Services Agreement will be submitted to arbitration.

For consulting services provided to us in connection with property management, leasing or construction services, to the extent such services were used, the former investment advisor was paid based upon the customary property management, leasing and construction supervision fees applicable to the geographic location and type of property. Such fees for each service ranged from 2.0% to 5.0% of gross revenues received from a property that we owned. We paid the former investment advisor a real estate commission fee upon the sale of properties in an amount equal to the lesser of (i) one-half of the competitive real estate commission or (ii) 3% of the sales price of each property sold. The total brokerage commission paid did not exceed the lesser of the competitive real estate commission or an amount equal to 6% of the sales price of the property.

To the extent that the Company assumes or incurs prior to the termination of the Transition Services Agreement a cost that was previously borne by the former investment advisor during the term of the Transition Services Agreement or its predecessor agreement, then amounts otherwise owed under the Transition Services Agreement are to be correspondingly reduced on a monthly basis; provided that (i) any Assumed Costs resulting from hiring of any targeted personnel are to reduce the amounts payable by the Company under this agreement for such month only to the extent of their base salary and benefits (as in effect immediately prior to their hiring by the Company) and any related other direct employer costs (but excluding any bonus amounts) earned or incurred during the month.

We reimbursed the former investment advisor for certain expenses paid or incurred in connection with services provided under the Transitional Services Agreement. In addition, the former investment advisor was only entitled to reimbursement for third party expenses incurred in connection with services provided pursuant to the Transitional Services Agreement that we approved in writing. Our sole obligation to reimburse the former investment advisor for expenses incurred related to personnel costs was to make an aggregate payment equal to $2,500,000 on the effective date of the agreement.

Business and Growth Strategies

We seek to invest in industrial and office properties that are net leased to investment grade or credit rated tenants on long-term leases at attractive prices through new acquisitions or build-to-suit projects. We believe the credit quality of many of our tenants, the lengths of our leases, the relatively modest capital expense requirements of our properties and our single-tenant focus help us to create shareholder value. We also believe that our senior management team’s extensive experience will allow us to identify and consummate

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the acquisition and development of high-quality net leased properties. Our strategy is intended to generate attractive risk-adjusted returns for our shareholders over time and across a variety of market conditions and economic cycles. We intend to execute our strategy and expand our portfolio through the following:

¡ Acquire Existing, High-Quality Net Leased Industrial and Office Properties. We believe high-quality industrial and office properties, which are net leased to single tenants with strong credit profiles, represent attractive investments. We target acquisitions in markets with above-average projected rental growth, strong tenant demand and significant barriers to new construction. Our relationships with our tenants and our network of industry contacts help us source acquisitions.

¡ Selectively Pursue Built-to-Suit Opportunities. We intend to pursue select built-to-suit opportunities that have attractive development yields and tenants with strong credit profiles under long-term triple net leases. A recent example of this strategy is the completion of our 300,000 square foot built-to-suit office development that is under a 12-year lease to Endo Health Solutions (NASDAQ: ENDP), located outside Philadelphia, Pennsylvania. In addition, we recently formed a joint venture to develop a four building, 454,801 square foot build-to-suit office complex in Malvern, Pennsylvania for Shire US, Inc., which will serve as their US corporate headquarters under a 15-year lease.

¡ Maximize Cash Flow Through Internal Growth. We seek investments that provide the potential for attractive returns to our shareholders with fixed rent escalations over long term leases that provide stable cash flow. We have typically structured our property acquisitions to achieve a positive spread between our cost of capital and the yields achieved on our investments. Our existing leases have embedded rental rate growth as the majority of our existing leases provide for periodic increases in rent.

¡ Pursue a Disciplined Capital Recycling Program. We intend to pursue a disciplined capital allocation strategy designed to maximize the value of our investments by selectively disposing of properties that are no longer consistent with our investment strategy or whose returns appear to have been maximized. To the extent that we dispose properties, we intend to redeploy the capital into investment opportunities that we believe are more attractive investments.

¡ Actively Manage a Strong and Flexible Capital Structure. We expect to maintain a prudent capital structure with access to multiple sources of equity and debt financing. We intend to continue to stagger our debt maturities and transition to become a primarily unsecured borrower. We anticipate that we will have a mix of fixed and floating-rate debt and intend to maintain modest total leverage. As a means to reduce our exposure to foreign currency fluctuations, we endeavor to place debt in the local currency on our international properties.

Market Trends

In early 2010, the commercial real estate market experienced gradual indications of market stabilization and improved access to debt financing on attractive terms began to reappear. During 2010 and into 2011, we also noted the initial signs of added competition for commercial real estate investments, particularly for high-quality stabilized properties leased to credit worthy tenants on a long-term basis, and we additionally experienced a willingness of our tenants to commit to extended lease maturities, and in some instances expand existing facilities.

As economic activity progressed in 2011 and during 2012, a slower pace of recovery in the general economy continued with a gradual improvement in certain key metrics such as exports and corporate profits. In the current environment, capital availability continues to remain concentrated on the highest quality, well-leased and strategically positioned properties that provide lower risk and stable investment return potential, and for well sponsored real estate investment programs with experienced management teams.

Throughout 2012 and into 2013, demand for quality industrial space accelerated across much of the country, but particularly in major distribution hubs. The office market is in the midst of a slow recovery following the recession, with the rate of recovery varying significantly by metropolitan area and submarket. Net lease properties performed better than other real estate segments during the recent recession, reflecting the stability provided by assets with long-term in-place leases. Construction and development of new properties has shown signs of improvement, primarily with regard to new, single-tenant, built-to-suit opportunities leased on a long-term basis. The continuation of low interest rates combined with the availability of attractively priced properties should allow us to deploy our capital on an attractive basis.

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Our Properties

The following table provides information relating to our properties, excluding those owned through our investment in CBRE Strategic Partners Asia, as of March 31, 2013. These properties consisted of 69 warehouse/distribution/logistics properties, encompassing 24,673,000 rentable square feet, 57 office properties, encompassing 8,893,000 rentable square feet and three retail properties, encompassing 496,000 rentable square feet.

Property and Market	Date Acquired		Year Built		Property Type	Our Effective Ownership			Net Rentable Square Feet (in thousands)		Percentage Leased			Approximate Total Acquisition Cost(1) (in thousands)
Domestic Consolidated Properties:
REMEC Corporate Campus 1(2) San Diego, CA		9/15/2004		1983	Office		100.00	%		34		100.00	%	$	6,833
REMEC Corporate Campus 2(2) San Diego, CA		9/15/2004		1983	Office		100.00	%		30		100.00	%		6,125
REMEC Corporate Campus 3(2) San Diego, CA		9/15/2004		1983	Office		100.00	%		37		100.00	%		7,523
REMEC Corporate Campus 4(2) San Diego, CA		9/15/2004		1983	Office		100.00	%		31		100.00	%		6,186
300 Constitution Drive(2) Boston, MA		11/3/2004		1998	Warehouse/Distribution		100.00	%		330		100.00	%		19,805
Deerfield Commons(3) Atlanta, GA		6/21/2005		2000	Office		100.00	%		122		100.00	%		21,834
505 Century Parkway(2) Dallas, TX		1/9/2006		1997	Warehouse/Distribution		100.00	%		100		100.00	%		6,095
631 International Parkway(2) Dallas, TX		1/9/2006		1998	Warehouse/Distribution		100.00	%		73		100.00	%		5,407
660 North Dorothy(2) Dallas, TX		1/9/2006		1997	Warehouse/Distribution		100.00	%		120		100.00	%		6,836
Bolingbrook Point III Chicago, IL		8/29/2007		2006	Warehouse/Distribution		100.00	%		185		100.00	%		18,170
Community Cash Complex 1(2) Spartanburg, SC		8/30/2007		1960	Warehouse/Distribution		100.00	%		206		3.50	%		2,690
Community Cash Complex 2(2) Spartanburg, SC		8/30/2007		1978	Warehouse/Distribution		100.00	%		144		76.58	%		2,225
Community Cash Complex 3(2) Spartanburg, SC		8/30/2007		1981	Warehouse/Distribution		100.00	%		116		0	%		1,701
Community Cash Complex 4(2) Spartanburg, SC		8/30/2007		1984	Warehouse/Distribution		100.00	%		33		100.00	%		547
Community Cash Complex 5(2) Spartanburg, SC		8/30/2007		1984	Warehouse/Distribution		100.00	%		53		100.00	%		824
Fairforest Building 1(2) Spartanburg, SC		8/30/2007		2000	Warehouse/Distribution		100.00	%		51		100.00	%		2,974
Fairforest Building 2(2) Spartanburg, SC		8/30/2007		1999	Warehouse/Distribution		100.00	%		104		100.00	%		5,379
Fairforest Building 3(2) Spartanburg, SC		8/30/2007		2000	Warehouse/Distribution		100.00	%		100		100.00	%		5,760
Fairforest Building 4(2) Spartanburg, SC		8/30/2007		2001	Warehouse/Distribution		100.00	%		101		100.00	%		5,640
Fairforest Building 5 Spartanburg, SC		8/30/2007		2006	Warehouse/Distribution		100.00	%		316		100.00	%		16,968
Fairforest Building 6 Spartanburg, SC		8/30/2007		2005	Warehouse/Distribution		100.00	%		101		100.00	%		7,469
Fairforest Building 7(2) Spartanburg, SC		8/30/2007		2006	Warehouse/Distribution		100.00	%		101		83.78	%		5,626
Greenville/Spartanburg Industrial Park(2) Spartanburg, SC		8/30/2007		1990	Warehouse/Distribution		100.00	%		67		100.00	%		3,388
Highway 290 Commerce Park Building 1(2) Spartanburg, SC		8/30/2007		1995	Warehouse/Distribution		100.00	%		150		100.00	%		5,388
Highway 290 Commerce Park Building 5(2) Spartanburg, SC		8/30/2007		1993	Warehouse/Distribution		100.00	%		30		100.00	%		1,420
Highway 290 Commerce Park Building 7(2) Spartanburg, SC		8/30/2007		1994	Warehouse/Distribution		100.00	%		94		100.00	%		4,889
HJ Park Building 1(2) Spartanburg, SC		8/30/2007		2003	Warehouse/Distribution		100.00	%		70		100.00	%		4,216
Jedburg Commerce Park(2) Charleston, SC		8/30/2007		2007	Warehouse/Distribution		100.00	%		513		100.00	%		41,991
Kings Mountain I Charlotte, NC		8/30/2007		1998	Warehouse/Distribution		100.00	%		100		100.00	%		5,497

57

Property and Market	Date Acquired		Year Built		Property Type	Our Effective Ownership			Net Rentable Square Feet (in thousands)		Percentage Leased			Approximate Total Acquisition Cost(1) (in thousands)
Kings Mountain II Charlotte, NC		8/30/2007		2002	Warehouse/Distribution		100.00	%		301		100.00	%		11,311
Mount Holly Building Charleston, SC		8/30/2007		2003	Warehouse/Distribution		100.00	%		101		100.00	%		6,208
North Rhett I Charleston, SC		8/30/2007		1973	Warehouse/Distribution		100.00	%		285		21.07	%		10,302
North Rhett II Charleston, SC		8/30/2007		2001	Warehouse/Distribution		100.00	%		102		100.00	%		7,073
North Rhett III(2) Charleston, SC		8/30/2007		2002	Warehouse/Distribution		100.00	%		80		100.00	%		4,812
North Rhett IV Charleston, SC		8/30/2007		2005	Warehouse/Distribution		100.00	%		316		100.00	%		17,060
Orangeburg Park Building Charleston, SC		8/30/2007		2003	Warehouse/Distribution		100.00	%		101		100.00	%		5,474
Orchard Business Park 2(2) Spartanburg, SC		8/30/2007		1993	Warehouse/Distribution		100.00	%		18		100.00	%		761
Union Cross Building I Winston-Salem, NC		8/30/2007		2005	Warehouse/Distribution		100.00	%		101		100.00	%		6,585
Union Cross Building II Winston-Salem, NC		8/30/2007		2005	Warehouse/Distribution		100.00	%		316		100.00	%		17,216
Highway 290 Commerce Park Building 2(2) Spartanburg, SC		9/24/2007		1995	Warehouse/Distribution		100.00	%		100		100.00	%		4,626
Highway 290 Commerce Park Building 6(2) Spartanburg, SC		11/1/2007		1996	Warehouse/Distribution		100.00	%		105		100.00	%		3,760
Lakeside Office Center Dallas, TX		3/5/2008		2006	Office		100.00	%		99		95.65	%		17,994
Kings Mountain III(2) Charlotte, NC		3/14/2008		2007	Warehouse/Distribution		100.00	%		542		100.00	%		25,728
Enclave on the Lake(2) Houston, TX		7/1/2008		1999	Office		100.00	%		171		100.00	%		37,827
Avion Midrise III Washington, DC		11/18/2008		2002	Office		100.00	%		72		100.00	%		21,111
Avion Midrise IV Washington, DC		11/18/2008		2002	Office		100.00	%		72		100.00	%		21,112
13201 Wilfred Lane(2) Minneapolis, MN		6/29/2009		1999	Warehouse/Distribution		100.00	%		335		100.00	%		15,340
3011, 3055 & 3077 Comcast Place(2) East Bay, CA		7/1/2009		1988	Office		100.00	%		220		100.00	%		49,000
140 Depot Street(2) Boston, MA		7/31/2009		2009	Warehouse/Distribution		100.00	%		238		100.00	%		18,950
12650 Ingenuity Drive Orlando, FL		8/5/2009		1999	Office		100.00	%		125		100.00	%		25,350
Crest Ridge Corporate Center 1(2) Minneapolis, MN		8/17/2009		2009	Office		100.00	%		116		100.00	%		28,419
West Point Trade Center(2) Jacksonville, FL		12/30/2009		2009	Warehouse/Distribution		100.00	%		602		100.00	%		29,000
5160 Hacienda Drive(2) East Bay, CA		4/8/2010		1988	Office		100.00	%		202		100.00	%		38,500
10450 Pacific Center Court(2) San Diego, CA		5/7/2010		1985	Office		100.00	%		134		100.00	%		32,750
225 Summit Ave(2) Northern NJ		6/21/2010		1966	Office		100.00	%		143		100.00	%		40,600
One Wayside Road Boston, MA		6/24/2010		1998	Office		100.00	%		201		100.00	%		55,525
100 Tice Blvd. Northern NJ		9/28/2010		2007	Office		100.00	%		209		100.00	%		67,600
Ten Parkway North Chicago, IL		10/12/2010		1999	Office		100.00	%		100		100.00	%		25,000
4701 Gold Spike Drive Dallas, TX		10/27/2010		2002	Warehouse/Distribution		100.00	%		420		100.00	%		20,300
1985 International Way Cincinnati, OH		10/27/2010		1998	Warehouse/Distribution		100.00	%		189		100.00	%		14,800
Summit Distribution Center Salt Lake City, UT		10/27/2010		2001	Warehouse/Distribution		100.00	%		275		65.22	%		13,400
3660 Deerpark Boulevard Jacksonville, FL		10/27/2010		2002	Warehouse/Distribution		100.00	%		322		100.00	%		15,300
Tolleson Commerce Park II Phoenix, AZ		10/27/2010		1999	Warehouse/Distribution		100.00	%		217		100.00	%		9,200
Pacific Corporate Park(2)(3) Washington, DC		11/15/2010		2002	Office		100.00	%		696		100.00	%		144,500

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Property and Market	Date Acquired		Year Built		Property Type	Our Effective Ownership			Net Rentable Square Feet (in thousands)		Percentage Leased			Approximate Total Acquisition Cost(1) (in thousands)
100 Kimball Drive(2) Northern NJ		12/10/2010		2006	Office		100.00	%		175		100.00	%		60,250
70 Hudson Street New York City Metro, NJ		4/11/2011		2000	Office		100.00	%		409		100.00	%		155,000
90 Hudson Street New York City Metro, NJ		4/11/2011		1999	Office		100.00	%		418		65.14	%		155,000
Millers Ferry Road(2) Dallas, TX		6/2/2011		2011	Warehouse/Distribution		100.00	%		1,020		100.00	%		40,366
Sky Harbor Operations Center(2) Phoenix, AZ		9/30/2011		2003	Office		100.00	%		396		100.00	%		53,500
1400 Atwater Drive(2) Philadelphia, PA		10/27/2011		2012	Office		100.00	%		300		100.00	%		84,786
Aurora Commerce Center Bldg. C(2) Denver, CO		11/30/2011		2007	Warehouse/Distribution		100.00	%		407		100.00	%		24,500
Sabal Pavilion Tampa, FL		12/30/2011		1998	Office		100.00	%		121		100.00	%		21,368
2400 Dralle Road(2)(3) Chicago, IL		3/20/2012		2011	Warehouse/Distribution		100.00	%		1,350		100.00	%		64,250
Midwest Commerce Center I(2) Kansas City, KS		8/16/2012		2009	Warehouse/Distribution		100.00	%		1,107		100.00	%		62,950
20000 S Diamond Lake Rd(2) Minneapolis, MN		11/7/2012		2004	Warehouse/Distribution		100.00	%		280		100.00	%		18,500
Gateway at Riverside(2) Baltimore, MD		11/30/2012		1991	Warehouse/Distribution		100.00	%		801		100.00	%		49,229
701 & 801 Charles Ewing Blvd.(2) Central NJ		12/28/2012		2009	Office		100.00	%		111		100.00	%		28,310
Mid-Atlantic Distribution Center-Bldg. A(2) Baltimore, MD		12/28/2012		2008	Warehouse/Distribution		100.00	%		672		100.00	%		43,150
Celebration Office Center(4) Orlando, FL		3/1/2013		2009	Office		100.00	%		101		100.00	%		18.420
22535 Colonial Pkwy(4) Houston, TX		3/1/2013		2009	Office		100.00	%		90		100.00	%		17,673
Northpoint III(4) Orlando, FL		3/1/2013		2001	Office		100.00	%		108		100.00	%		22,394
Goodyear Crossing Ind. Park II(4) Phoenix, AZ		3/1/2013		2009	Warehouse/Distribution		100.00	%		820		100.00	%		64,883
3900 North Paramount Parkway(4) Raleigh, NC		3/1/2013		1999	Office		100.00	%		101		100.00	%		18,523
3900 South Paramount Parkway(4) Raleigh, NC		3/1/2013		1999	Office		100.00	%		119		100.00	%		20,859
1400 Perimeter Park Drive(4) Raleigh, NC		3/1/2013		1991	Office		100.00	%		45		100.00	%		6,165
Miramar I(4) Ft. Lauderdale, FL		3/1/2013		2001	Office		100.00	%		94		100.00	%		23,912
Miramar II(4) Ft. Lauderdale, FL		3/1/2013		2001	Office		100.00	%		129		100.00	%		31,910
McAuley Place(4) Cincinnati, OH		3/1/2013		2001	Office		100.00	%		191		86.89	%		32,309
Point West I(4) Dallas, TX		3/1/2013		2008	Office		100.00	%		183		100.00	%		31,795
Easton III(4) Columbus, OH		3/1/2013		1999	Office		100.00	%		135		100.00	%		20,194
Norman Pointe I(4) Minneapolis, MN		3/1/2013		2000	Office		100.00	%		213		79.54	%		36,232
Norman Pointe II(4) Minneapolis, MN		3/1/2013		2007	Office		100.00	%		324		100.00	%		46,113
The Landings I(4) Cincinnati, OH		3/1/2013		2006	Office		100.00	%		176		100.00	%		30,249
The Landings II(4) Cincinnati, OH		3/1/2013		2007	Office		100.00	%		175		94.34	%		23,977
Atrium I(4) Columbus, OH		3/1/2013		1996	Office		100.00	%		315		100.00	%		45,071
Domestic Consolidated Properties(5)				2001						22,024		95.85	%		2,443,738

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Property and Market	Date Acquired		Year Built		Property Type	Our Effective Ownership			Net Rentable Square Feet (in thousands)		Percentage Leased			Approximate Total Acquisition Cost(1) (in thousands)
International Consolidated Properties:
602 Central Blvd.(2) Coventry, UK		4/27/2007		2001	Office		100.00	%		50		100.00	%		23,847
Thames Valley Five Reading, UK		3/20/2008		1998	Office		100.00	%		40		100.00	%		29,572
Albion Mills Retail Park Wakefield, UK		7/11/2008		2000	Retail		100.00	%		55		100.00	%		22,098
Maskew Retail Park Peterborough, UK		10/23/2008		2007	Retail		100.00	%		145		100.00	%		53,740
International Consolidated Properties(5)				2003						290		100.00	%		129,257
Consolidated Properties(5)				2002						22,314		95.90	%		2,572,995
Domestic Unconsolidated Properties(5)(6):
Buckeye Logistics Center(7) Phoenix, AZ		6/12/2008		2008	Warehouse/Distribution		80.00	%		1,009		100.00	%		52,797
Afton Ridge Shopping Center(8) Charlotte, NC		9/18/2008		2007	Retail		90.00	%		296		97.92	%		44,530
AllPoints at Anson Bldg. 1(7) Indianapolis, IN		9/30/2008		2008	Warehouse/Distribution		80.00	%		1,037		100.00	%		42,684
12200 President’s Court(7) Jacksonville, FL		9/30/2008		2008	Warehouse/Distribution		80.00	%		772		100.00	%		29,995
201 Sunridge Blvd. (7) Dallas, TX		9/30/2008		2008	Warehouse/Distribution		80.00	%		823		100.00	%		25,690
Aspen Corporate Center 500(7) Nashville, TN		9/30/2008		2008	Office		80.00	%		180		100.00	%		29,936
125 Enterprise Parkway(7) Columbus, OH		12/10/2008		2008	Warehouse/Distribution		80.00	%		1,143		100.00	%		38,088
AllPoints Midwest Bldg. I(7) Indianapolis, IN		12/10/2008		2008	Warehouse/Distribution		80.00	%		1,200		100.00	%		41,428
Fairfield Distribution Ctr. IX(7) Tampa, FL		5/13/2009		2008	Warehouse/Distribution		80.00	%		136		100.00	%		7,151
Sam Houston Crossing I(7) Houston, TX		12/21/2010		2007	Office		80.00	%		160		100.00	%		20,400
Regency Creek(7) Raleigh, NC		12/21/2010		2008	Office		80.00	%		122		100.00	%		18,000
533 Maryville Centre(7) St. Louis, MO		12/21/2010		2000	Office		80.00	%		125		100.00	%		19,102
555 Maryville Centre(7) St. Louis, MO		12/21/2010		2000	Office		80.00	%		127		90.49	%		15,578
One Conway Park(2)(7) Chicago, IL		3/24/2011		1989	Office		80.00	%		105		69.35	%		12,320
West Lake at Conway(7) Chicago, IL		3/24/2011		2008	Office		80.00	%		98		100.00	%		14,060
One Easton Oval(2)(7) Columbus, OH		3/24/2011		1997	Office		80.00	%		125		76.47	%		9,529
Two Easton Ova(2)(7) Columbus, OH		3/24/2011		1995	Office		80.00	%		129		81.92	%		10,195
Weston Pointe I(7) Ft. Lauderdale, FL		3/24/2011		1999	Office		80.00	%		98		90.62	%		15,507
Weston Pointe II(7) Ft. Lauderdale, FL		3/24/2011		2000	Office		80.00	%		97		100.00	%		18,701
Weston Pointe III(7) Ft. Lauderdale, FL		3/24/2011		2003	Office		80.00	%		97		100.00	%		18,867
Weston Pointe IV(7) Ft. Lauderdale, FL		3/24/2011		2006	Office		80.00	%		96		100.00	%		22,605
Domestic Unconsolidated Properties(5)(6)				2006						7,975		98.59	%		507,163

60

Property and Market	Date Acquired		Year Built		Property Type	Our Effective Ownership			Net Rentable Square Feet (in thousands)		Percentage Leased			Approximate Total Acquisition Cost(1) (in thousands)
International Unconsolidated Properties(6):
Amber Park(2)(9) South Normanton, UK		6/10/2010		1997	Warehouse/Distribution		80.00	%		208		100.00	%		12,514
Brackmills(2)(9) Northampton, UK		6/10/2010		1984	Warehouse/Distribution		80.00	%		187		100.00	%		13,407
Düren(2)(10) Rhine-Ruhr, Germany		6/10/2010		2008	Warehouse/Distribution		80.00	%		392		100.00	%		13,148
Schönberg(2)(10) Hamburg, Germany		6/10/2010		2009	Warehouse/Distribution		80.00	%		454		100.00	%		13,819
Langenbach(2)(10) Munich, Germany		10/28/2010		2010	Warehouse/Distribution		80.00	%		225		100.00	%		18,573
Graben Distribution Center I(10) Munich, Germany		12/20/2011		2011	Warehouse/Distribution		80.00	%		1,018		100.00	%		54,962
Graben Distribution Center II(10) Munich, Germany		12/20/2011		2011	Warehouse/Distribution		80.00	%		73		100.00	%		6,868
Valley Park, Unit D(2)(9) Rugby, UK		3/19/2012		2011	Warehouse/Distribution		80.00	%		146		100.00	%		10,247
Koblenz Distribution Center(10) Frankfurt, Germany		12/12/2012		2012	Warehouse/Distribution		80.00	%		1,070		100.00	%		63,021
International Unconsolidated Properties(5)(6)				2008						3,773		100.00	%		206,559
Unconsolidated Properties(5)				2006						11,748		99.04	%		713,722
All Properties(5)(6)				2003						34,062		96.99	%	$	3,286,717

⁽¹⁾  Approximate total acquisition cost represents the purchase price inclusive of customary costs and acquisition fees for properties acquired prior to January 1, 2009 and exclusive of customary costs and acquisition fees for properties acquired on dates subsequent to January 1, 2009.

⁽²⁾  This property is unencumbered.

⁽³⁾  Includes undeveloped land zoned for future office and warehouse/distribution/logistics use.

⁽⁴⁾  Properties acquired from the Duke joint venture on March 1, 2013.

⁽⁵⁾  Total or weighted average. Weighted average Year Built is weighted based upon approximate Total Acquisition Costs. Weighted average Percentage Leased is weighted based upon Net Rental Square feet.

⁽⁶⁾  Does not include CBRE Strategic Partners Asia properties.

⁽⁷⁾  This property is held through the Duke joint venture.

⁽⁸⁾  This property is held through the Afton Ridge joint venture.

⁽⁹⁾  This property is held through the UK JV.

⁽¹⁰⁾  This property is held through the European JV.

Single- and Multi-Tenant Property Distribution

Our single- and multi-tenant property distribution of March 31, 2013 was as follows (Net Rentable Square Feet and Approximate Total Acquisition Cost in thousands):

	Consolidated Properties						Unconsolidated Properties(1)						Consolidated & Unconsolidated Properties(1)
Property Type	Properties		Net Rentable Square Feet		Approximate Total Acquisition Cost		Properties		Net Rentable Square Feet		Approximate Total Acquisition Cost		Properties		Net Rentable Square Feet		Approximate Total Acquisition Cost
Triple Net Single-Tenant Properties(2)		72		17,604	$	1,860,108		18		10,170	$	493,195		90		27,774	$	2,353,303
Multi-Tenant Properties		19		3,588		518,679		10		1,357		178,820		29		4,945		697,499
Other Single-Tenant Properties		8		1,122		194,208		2		221		41,707		10		1,343		235,915
Total		99		22,314	$	2,572,995		30		11,748	$	713,722		129		34,062	$	3,286,717

⁽¹⁾ Number of Properties and Net Rentable Square Feet for Unconsolidated Properties are at 100%. Approximate Total Acquisition Cost for Unconsolidated Properties is at our pro rata share of effective ownership. Does not include our investment in CBRE Strategic Partners Asia.

61

⁽²⁾ Triple Net Single-Tenant Properties include certain properties that have di minimis secondary tenant(s).

Property Type Distribution

Our property type distribution as of March 31, 2013 was as follows (Net Rentable Square Feet and Approximate Total Acquisition Cost in thousands):

Domestic	Consolidated Properties						Unconsolidated Properties(1)						Consolidated & Unconsolidated Properties(1)
	Properties		Net Rentable Square Feet		Approximate Total Acquisition Cost		Properties		Net Rentable Square Feet		Approximate Total Acquisition Cost		Properties		Net Rentable Square Feet		Approximate Total Acquisition Cost
Office		44		7,333	$	1,691,218		13		1,559	$	224,800		57		8,892	$	1,916,018
Warehouse/Distribution		53		14,781		805,939		16		9,893		444,392		69		24,674		1,250,331
Retail		2		200		75,838		1		296		44,530		3		496		120,368
Total		99		22,314	$	2,572,995		30		11,748	$	713,722		129		34,062	$	3,286,717

⁽¹⁾  Number of Properties and Net Rentable Square Feet for Unconsolidated Properties are at 100%. Approximate Total Acquisition Cost for Unconsolidated Properties is at our pro rata share of effective ownership. Does not include our investment in CBRE Strategic Partners Asia.

Geographic Distribution

As of March 31, 2013, our portfolio was diversified across 22 states as well as the United Kingdom and Germany. No market accounted for more than 10% of our net rentable square feet or 15% of our approximate total acquisition cost. Our geographic distribution as of March 31, 2013 was as follows (Net Rentable Square Feet and Approximate Total Acquisition Cost in thousands):

	Consolidated Properties						Unconsolidated Properties(1)						Consolidated & Unconsolidated Properties(1)
Domestic	Properties		Net Rentable Square Feet		Approximate Total Acquisition Cost		Properties		Net Rentable Square Feet		Approximate Total Acquisition Cost		Properties		Net Rentable Square Feet		Approximate Total Acquisition Cost
New Jersey		6		1,465	$	506,760		—		—	$	—		6		1,465	$	506,760
Florida		8		1,602		187,654		6		1,296		112,826		14		2,898		300,480
Texas		9		2,276		184,293		2		983		46,090		11		3,259		230,383
Ohio		5		992		151,800		3		1,397		57,812		8		2,389		209,612
Virginia		3		840		186,723		—		—		—		3		840		186,723
Arizona		3		1,433		127,583		1		1,009		52,797		4		2,442		180,380
South Carolina		27		3,558		179,171		—		—		—		27		3,558		179,171
North Carolina		8		1,625		111,884		2		418		62,530		10		2,043		174,414
California		7		688		146,917		—		—		—		7		688		146,917
Minnesota		5		1,268		144,604		—		—		—		5		1,268		144,604
Illinois		3		1,635		107,420		2		203		26,380		5		1,838		133,800
Massachusetts		3		769		94,280		—		—		—		3		769		94,280
Maryland		2		1,473		92,379		—		—		—		2		1,473		92,379
Pennsylvania		1		300		84,786		—		—		—		1		300		84,786
Indiana		—		—		—		2		2,237		84,112		2		2,237		84,112
Kansas		1		1,107		62,950		—		—		—		1		1,107		62,950
Missouri		—		—		—		2		252		34,680		2		252		34,680
Tennessee		—		—		—		1		180		29,936		1		180		29,936
Colorado		1		407		24,500		—		—		—		1		407		24,500
Georgia		1		122		21,834		—		—		—		1		122		21,834
Kentucky		1		189		14,800		—		—		—		1		189		14,800
Utah		1		275		13,400		—		—		—		1		275		13,400
Total Domestic		95		22,024		2,443,738		21		7,975		507,163		116		29,999		2,950,901
International
Germany		—		—		—		6		3,232		170,391		6		3,232		170,391
United Kingdom		4		290		129,257		3		541		36,168		7		831		165,425
Total International		4		290		129,257		9		3,773		206,559		13		4,063		335,816
Total		99		22,314	$	2,572,995		30		11,748	$	713,722		129		34,062	$	3,286,717

62

⁽¹⁾ Number of Properties and Net Rentable Square Feet for Unconsolidated Properties are at 100%. Approximate Total Acquisition Cost for Unconsolidated Properties is at our pro rata share of effective ownership. Does not include our investment in CBRE Strategic Partners Asia.

Significant Tenants

As of March 31, 2013, no tenant accounted for more than 7.3% of our annualized base rent or 15% of our net rentable square feet. The following table details our largest tenants as of March 31, 2013 (in thousands):

	Tenant	Primary Industry	Consolidated Properties				Unconsolidated Properties(1)				Consolidated & Unconsolidated Properties(1)
			Net Rentable Square Feet		Annualized Base Rent		Net Rentable Square Feet		Annualized Base Rent		Net Rentable Square Feet		Annualized Base Rent
1.	Amazon.com(2)	Internet Retail		820	$	4,425		4,134	$	14,279		4,954	$	18,704
2.	Barclay’s Capital	Financial Services		409		12,278		—		—		409		12,278
3.	U.S. General Services Administration	Government		316		7,131		134		3,379		450		10,510
4.	Raytheon Company	Defense and Aerospace		666		10,023		—		—		666		10,023
5.	JP Morgan Chase	Financial Services		396		5,973		—		—		396		5,973
6.	Lord Abbett & Co	Financial Services		175		5,668		—		—		175		5,668
7.	Nuance Communications	Software		201		5,665		—		—		201		5,665
8.	Endo Health Solutions	Pharmaceutical and Health Care Related		300		5,592		—		—		300		5,592
9.	Eisai	Pharmaceutical and Health Care Related		209		5,189		—		—		209		5,189
10.	Comcast	Telecommunications		220		4,945		—		—		220		4,945
11.	Pharmaceutical Product Development	Pharmaceutical and Health Care Related		251		4,797		—		—		251		4,797
12.	The Coleman Company	Consumer Product		1,107		4,605		—		—		1,107		4,605
13.	Deloitte	Professional Services		175		4,390		—		—		175		4,390
14.	Clorox International	Consumer Products		1,350		4,310		—		—		1,350		4,310
15.	Barr Laboratories	Pharmaceutical and Health Care Related		142		4,061		—		—		142		4,061
16.	Conopco(3)	Consumer Products		—		—		1,595		3,864		1,595		3,864
17.	Nationwide Mutual Insurance	Insurance		315		3,660		—		—		315		3,660
18.	Eveready Battery Company	Consumer Products		—		—		168		3,568		168		3,568
19.	ConAgra Foods	Food Service and Retail		742		3,422		—		—		742		3,422
20.	NDB Capital Markets	Financial Services		97		3,400		—		—		97		3,400
21.	Carl Zeiss	Pharmaceutical and Health Care Related		202		3,337		—		—		202		3,337
22.	Whirlpool	Consumer Product		1,020		3,264		—		—		1,020		3,264
23.	American LaFrance	Vehicle Related Manufacturing		513		3,163		—		—		513		3,163
24.	NCS Pearson	Education		167		3,140		—		—		167		3,140
25.	Bob’s Discount Furniture	Home Furnishings/Home Improvement		672		2,977		—		—		672		2,977
26.	Prime Distribution Services	Logistics and Distribution		—		—		1,200		2,958		1,200		2,958
27.	Citicorp North America	Financial Services		194		2,855		—		—		194		2,855
28.	Kellogg’s	Consumer Products		—		—		1,142		2,817		1,142		2,817
29.	Time Warner	Telecommunications		134		2,814		—		—		134		2,814
30.	Royal Caribbean Cruises	Travel/Leisure		129		2,782		—		—		129		2,782

63

	Tenant	Primary Industry	Consolidated Properties				Unconsolidated Properties(1)				Consolidated & Unconsolidated Properties(1)
			Net Rentable Square Feet		Annualized Base Rent		Net Rentable Square Feet		Annualized Base Rent		Net Rentable Square Feet		Annualized Base Rent
31.	Mercy Health Partners of SW Ohio	Pharmaceutical and Health Care Related		142		2,640		—		—		142		2,640
32.	REMEC	Defense and Aerospace		133		2,579		—		—		133		2,579
33.	B&Q	Home Furnishings/Home Improvement		104		2,540		—		—		104		2,540
34.	Dr Pepper Snapple	Food Service and Retail		601		2,532		—		—		601		2,532
35.	American Home Mortgage	Financial Services		183		2,530		—		—		183		2,530
36.	Syngenta Seeds	Agriculture		116		2,473		—		—		116		2,473
37.	Disney Vacation Development	Travel/Leisure		101		2,388		—		—		101		2,388
38.	Verizon Wireless(4)	Telecommunications		—		—		180		2,375		180		2,375
39.	SBM Atlantia	Petroleum and Mining		171		2,310		—		—		171		2,310
40.	Iowa College Acquisition Corp.(5)	Education		125		2,303		—		—		125		2,303
	Other (238 tenants)			8,801		53,196		3,083		25,199		11,884		78,395
				21,399	$	199,357		11,636	$	58,439		33,035	$	257,796

⁽¹⁾ Net Rentable Square Feet for Unconsolidated Properties is at 100%. Annualized Base Rent for Unconsolidated Properties is at our pro rata share of effective ownership. Does not include our investment in CBRE Strategic Partners Asia.

⁽²⁾ Our tenants are Amazon.com.azdc, Inc., in the Buckeye Logistics Center and Goodyear Crossing Park II properties, Amazon.com.indc, LLC, in the AllPoints at Anson Bldg. 1 property, and Amazon Fulfillment GmbH, in the Graben Distribution Center I property, which are all wholly-owned subsidiaries of Amazon.com.

⁽³⁾ Our tenant is CONOPCO, Inc., a wholly-owned subsidiary of Unilever.

⁽⁴⁾ Verizon Wireless is the d/b/a for Cellco Partnership.

⁽⁵⁾ Our tenant is Iowa College Acquisitions Corp., an operating subsidiary of Kaplan, Inc. The lease is guaranteed by Kaplan Inc.

64

Tenant Industries Concentrations

Our tenants operate across a wide range of industries. As of March 31, 2013, no industry accounted for more than 14% of our annualized base rent or 25% of our Net Rentable square feet. The following table details our largest tenant industries as of March 31, 2013 (in thousands):

	Consolidated Properties				Unconsolidated Properties(1)				Consolidated & Unconsolidated Properties(1)
Primary Tenant Industry Category	Net Rentable Square Feet		Annualized Base Rent		Net Rentable Square Feet		Annualized Base Rent		Net Rentable Square Feet		Annualized Base Rent
Financial Services		1,648	$	34,609		140	$	1,570		1,788	$	36,179
Pharmaceutical and Health Care Related		1,589		27,129		316		2,627		1,905		29,756
Consumer Products		4,629		14,431		3,510		13,219		8,139		27,650
Internet Retail		1,150		5,851		4,134		14,278		5,284		20,129
Defense and Aerospace		901		15,297		—		—		901		15,297
Logistics and Distribution		964		4,347		2,243		7,933		3,207		12,280
Telecommunications		737		9,665		194		2,540		931		12,205
Government		316		7,131		133		3,379		449		10,510
Education		400		7,594		101		1,603		501		9,197
Business Services		1,228		7,427		117		1,657		1,345		9,084
Food Service and Retail		2,032		8,392		38		474		2,070		8,866
Home Furnishings/Home Improvement		1,226		7,503		70		974		1,296		8,477
Vehicle Related Manufacturing		1,423		8,073		—		—		1,423		8,073
Insurance		498		7,170		39		539		537		7,709
Professional Services		309		5,967		79		1,081		388		7,048
Software		201		5,665		15		241		216		5,906
Other Manufacturing		775		2,808		154		2,557		929		5,365
Travel and Leisure		229		5,169		11		192		240		5,361
Agriculture		227		4,588		9		99		236		4,687
Specialty Retail		413		3,130		111		1,223		524		4,353
Petroleum and Mining		174		2,365		55		646		229		3,011
Apparel Retail		136		1,759		89		642		225		2,401
Utilities		108		1,628		18		236		126		1,864
Executive Office Suites		86		1,659		12		5		98		1,664
Other Retail		—		—		48		724		48		724
Total		21,399	$	199,357		11,636	$	58,439		33,035	$	257,796

⁽¹⁾ Net Rentable Square Feet for Unconsolidated Properties is at 100%. Annualized Base Rent for Unconsolidated Properties is at our pro rata share of effective ownership. Does not include our investment in CBRE Strategic Partners Asia.

65

Tenant Lease Expirations

We have limited near term lease expirations with an average remaining lease term of 7.27 years as of March 31, 2013. In addition, approximately 89% of leases expire after 2015. The following table sets forth a schedule of expiring leases for our consolidated and unconsolidated properties as of March 31, 2013 (Expiring Net Rentable Square Feet and Expiring Base Rent in thousands):

	Consolidated Properties				Unconsolidated Properties(1)				Consolidated & Unconsolidated Properties(1)
	Expiring Net Rentable Square  Feet		Expiring Base Rent		Expiring Net Rentable Square Feet		Expiring Base Rent		Number  Of Expiring Leases		Expiring Net Rentable Square Feet		Expiring Base Rent		Percentage of Expiring Base Rent
2013 (Nine months ending December 31, 2013)		1,457	$	8,319		471	$	2,176		35		1,928	$	10,495		3.68	%
2014		1,244		7,953		110		1,572		42		1,354		9,525		3.34	%
2015		764		6,731		381		3,875		38		1,145		10,606		3.71	%
2016		1,833		31,179		233		1,901		33		2,066		33,080		11.59	%
2017		622		10,237		1,149		8,136		35		1,771		18,373		6.44	%
2018		1,135		12,246		2,083		11,731		32		3,218		23,977		8.40	%
2019		3,675		26,979		2,525		10,388		24		6,200		37,367		13.09	%
2020		1,947		18,921		30		457		13		1,977		19,378		6.79	%
2021		4,523		40,951		2,336		13,147		19		6,859		54,098		18.95	%
2022		517		5,832		1,040		4,660		5		1,557		10,492		3.67	%
Thereafter		3,682		51,475		1,278		6,646		21		4,960		58,121		20.34	%
Total		21,399	$	220,823		11,636	$	64,689		297		33,035	$	285,512		100.00	%
Weighted Average Remaining Term (years)(2)
Triple Net Single-Tenant Properties(3)				7.66				7.16						7.56
Multi-Tenant Properties				7.15				5.50						6.65
Other Single-Tenant Properties				5.96				7.87						6.42
Total Weighted Average Remaining Term (years)(2)				7.43				6.74						7.27

⁽¹⁾ Expiring Net Rentable Square Feet for Unconsolidated Properties is at 100%. Expiring Base Rent for Unconsolidated Properties is at our pro rata share of effective ownership. Does not include our investment in CBRE Strategic Partners Asia.

⁽²⁾ Weighted Average Remaining Term is the average remaining term weighted by Expiring Base Rent.

⁽³⁾ Triple Net Single-Tenant Properties include certain properties that have minimal secondary tenant(s).

66

Property Portfolio Size

Our portfolio size at the end of each quarter since commencement of our initial public offering (October 24, 2006) through March 31, 2013 is as follows (Net Rentable Square Feet and Approximate Total Acquisition Cost in thousands):

	Consolidated Properties						Unconsolidated Properties(1)						Consolidated & Unconsolidated Properties(1)
Cumulative Property Portfolio as of:	Properties		Net Rentable Square Feet		Approximate Total Acquisition Cost		Properties		Net Rentable Square Feet		Approximate Total Acquisition Cost		Properties		Net Rentable Square Feet		Approximate Total Acquisition Cost
12/31/2006		9		878	$	86,644		—		—	$	—		9		878	$	86,644
3/31/2007		9		878		86,644		—		—		—		9		878		86,644
6/30/2007		10		928		110,491		—		—		—		10		928		110,491
9/30/2007		42		5,439		348,456		—		—		—		42		5,439		348,456
12/31/2007		44		5,576		353,594		—		—		—		44		5,576		353,594
3/31/2008		47		6,257		426,856		—		—		—		47		6,257		426,856
6/30/2008		47		6,257		426,856		1		605		35,636		48		6,862		462,492
9/30/2008		49		6,483		486,777		6		3,307		193,773		55		9,790		680,550
12/31/2008		52		6,771		582,682		8		5,649		273,205		60		12,420		855,887
3/31/2009		52		6,771		582,717		8		5,649		273,130		60		12,420		855,847
6/30/2009		53		7,106		598,103		11		5,976		305,308		64		13,082		903,411
9/30/2009		57		7,805		719,822		11		5,976		305,202		68		13,781		1,025,024
12/31/2009		60		8,630		791,314		13		6,904		356,158		73		15,534		1,147,472
3/31/2010		58		8,407		748,835		18		7,392		418,818		76		15,799		1,167,653
6/30/2010		62		9,086		916,210		22		8,633		471,615		84		17,719		1,387,825
9/30/2010		63		9,295		983,810		22		8,633		471,615		85		17,928		1,455,425
12/31/2010		73		12,800		1,308,560		30		9,901		629,268		103		22,701		1,937,828
3/31/2011		73		12,800		1,308,560		43		11,950		903,508		116		24,750		2,212,068
6/30/2011		75		14,614		1,657,966		43		12,356		917,566		118		26,970		2,575,532
9/30/2011		74		13,906		1,689,048		43		12,355		918,771		117		26,261		2,607,819
12/31/2011		77		14,434		1,747,299		45		13,851		997,506		122		28,285		2,744,805
3/31/2012		78		15,784		1,824,403		46		13,997		1,007,753		124		29,781		2,832,156
6/30/2012		78		15,784		1,842,359		46		13,997		1,007,753		124		29,781		2,850,112
9/30/2012		78		16,831		1,920,218		46		13,997		1,008,246		124		30,828		2,928,464
12/31/2012		82		18,995		2,070,272		47		15,067		1,071,267		129		34,062		3,141,539
3/31/2013		99		22,314		2,572,995		30		11,748		713,722		129		34,062		3,286,717

⁽¹⁾ Net Rentable Square Feet for unconsolidated properties is at 100%. Approximate Total Acquisition Cost is at our pro rata share of effective ownership and does not include our investment in CBRE Strategic Partners Asia.

Critical Accounting Policies

Management believes our most critical accounting policies are accounting for lease revenues (including straight-line rent), regular evaluation of whether the value of a real estate asset has been impaired, real estate purchase price allocations, accounting for our derivatives and hedging activities, and fair value of financial instruments and investments, if any. Each of these items involves estimates that require management to make judgments that are subjective in nature. Management relies on its experience, collects historical data and current market data, and analyzes these assumptions in order to arrive at what it believes to be reasonable estimates. Under different conditions or assumptions, materially different amounts could be reported related to the accounting policies described below. In addition, application of these accounting policies involves the exercise of judgments on the use of assumptions as to future uncertainties and, as a result, actual results could materially differ from these estimates.

Revenue Recognition and Valuation of Receivables

All leases are classified as operating leases and minimum rents are recognized on a straight-line basis over the terms of the leases. The excess of rents recognized over amounts contractually due pursuant to the underlying leases is recorded as deferred rent. In connection with various leases, we have received irrevocable stand-by letters of credit totaling $17,745,000 and $17,760,000 as security for such leases at March 31, 2013 and December 31, 2012, respectively.

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Reimbursements from tenants, consisting of amounts due from tenants for common area maintenance, real estate taxes, insurance and other recoverable costs, are recognized as revenue in the period the expenses are incurred. Tenant reimbursements are recognized and presented on a gross basis, when we are the primary obligor with respect to incurring expenses and with respect to having the credit risk.

Tenant receivables and deferred rent receivables are carried net of the allowances for uncollectible current tenant receivables and deferred rent. Management’s determination of the adequacy of these allowances is based primarily upon evaluations of historical loss experience, individual receivables, current economic conditions, and other relevant factors. The allowances are increased or decreased through the provision for bad debts. The allowance for uncollectible rent receivable was $728,000 and $11,000 as of March 31, 2013 and December 31, 2012 , respectively.

Investments in Real Estate and Related Long-Lived Assets (Impairment Evaluation)

We record investments in real estate at cost (including third-party acquisition expenses) and we capitalize improvements and replacements when they extend the useful life or improve the efficiency of the asset. We expense costs of repairs and maintenance as incurred. We compute depreciation using the straight-line method over the estimated useful lives of our real estate assets, which we expect to be approximately 39 years for buildings and improvements, three to five years for equipment and fixtures and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.

We are required to make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in real estate. These assessments have a direct impact on our net income because, if we were to shorten the expected useful lives of our investments in real estate, we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis throughout the expected useful lives of the related assets.

We have adopted,“Accounting for the Impairment or Disposal of Long-Lived Assets” (“FASB ASC 360-10”), which establishes a single accounting model for the impairment or disposal of long-lived assets including discontinued operations. This accounting provision requires that the operations related to properties that have been sold or that we intend to sell be presented as discontinued operations in the statement of operations for all periods presented, and properties we intend to sell be designated as “held for sale” on our balance sheet.

When circumstances such as adverse market conditions indicate a possible impairment of the value of a property, we review the recoverability of the property’s carrying value. The review of recoverability is based on our estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. Our forecast of these cash flows considers factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. These factors contain subjectivity and thus are not able to be precisely estimated. If impairment exists due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. We are required to make subjective assessments as to whether there are impairments in the values of our investments in real estate.

We assess whether there has been impairment in the value of our long-lived assets whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount to the future net cash flows, undiscounted and without interest, expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. The estimated fair value of the asset group identified for step two testing is based on either the income approach with market discount rate, terminal capitalization rate and rental rate assumptions being most critical, or on the sales comparison approach to similar properties. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell.

Purchase Accounting for Acquisition of Investments in Real Estate

We apply the acquisition method to all acquired real estate investments. The purchase consideration of the real estate is allocated to the acquired tangible assets, consisting primarily of land, site improvements, building and tenant improvements and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases, value of tenant relationships and acquired ground leases, based in each case on their fair values. Loan premiums, in the case of above-market rate loans, or loan discounts, in the case of below-market loans, will be recorded based on the fair value of any loans assumed in connection with acquiring the real estate.

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The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land (or acquired ground lease if the land is subject to a ground lease), site improvements, building and tenant improvements based on management’s determination of the relative fair values of these assets. Management determines the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors considered by management 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. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions, legal and other related costs.

In allocating the purchase consideration of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid 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 non-cancelable term of the lease and, for below-market leases, over a period equal to the initial term plus any below-market fixed rate renewal periods. The capitalized below-market lease values, also referred to as acquired lease obligations, are amortized as an increase to rental income over the initial terms of the respective leases and any below-market fixed rate renewal periods. The capitalized above-market lease values are amortized as a decrease to rental income over the initial terms of the prospective leases.

The aggregate value of other acquired intangible assets, consisting of in-place leases and tenant relationships, is measured by the estimated cost of operations during a theoretical lease-up period to replace in-place leases, including lost revenues and any unreimbursed operating expenses, plus an estimate of deferred leasing commissions for in-place leases. This aggregate value is allocated between in-place lease value and tenant relationships based on management’s evaluation of the specific characteristics of each tenant’s lease; however, the value of tenant relationships has not been separated from in-place lease value for the real estate acquired as such value and its consequence to amortization expense is immaterial for these particular acquisitions. Should future acquisitions of properties result in allocating material amounts to the value of tenant relationships, an amount would be separately allocated and amortized over the estimated life of the relationship. The value of in-place leases is amortized to expense over the remaining non-cancelable periods of the respective leases.

Accounting for Derivative Financial Investments and Hedging Activities

All of our derivative instruments are carried at fair value on the balance sheet. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking each hedge transaction. We periodically review the effectiveness of each hedging transaction, which involves estimating future cash flows. Cash flow hedges are accounted for by recording the fair value of the derivative instrument on the balance sheet as either an asset or liability, with a corresponding amount recorded in other comprehensive income within shareholders’ equity. Calculation of a fair value of derivative instruments also requires management to use estimates. Amounts will be reclassified from other comprehensive income to the income statement in the period or periods the hedged forecasted transaction affects earnings.

Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. The changes in fair value hedges are accounted for by recording the fair value of the derivative instruments on the balance sheet as either assets or liabilities, with the corresponding amount recorded in current period earnings. We have certain interest rate swap derivatives that are designated as qualifying cash flow hedges and follow the accounting treatment discussed above. We also have certain interest rate swap derivatives that do not qualify for hedge accounting, and accordingly, changes in fair values are recognized in current earnings.

We disclose the fair values of derivative instruments and their gains and losses in a tabular format. We also provide more information about our liquidity by disclosing derivative features that are credit risk-related. Finally, we cross-reference within footnotes to enable financial statement users to locate important information about derivative instruments; See Note 14 “Derivative Instruments” and Note 16 “Fair Value of Financial Instruments and Investments” for a further discussion of our derivative financial instruments.

Fair Value of Financial Instruments and Investments

We elected to apply the fair value option for one of our eligible mortgage notes payable that was newly issued debt during the year ended December 31, 2008. The measurement of the elected mortgage note payable at its fair value and its impact on the statement of

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operations is described in Note 15 to the consolidated financial statements “Fair Value Option—Note Payable” and Note 16 to the condensed consolidated financial statements “Fair Value of Financial Instruments and Investments.”

We generally determine or calculate the fair value of financial instruments using the appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments and our estimates for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cash flow. The Investment Manager of CBRE Strategic Partners Asia applies valuation techniques for our investment carried at fair value based upon the application of the income approach, the direct market comparison approach, the replacement cost approach or third party appraisals to the underlying assets held in the unconsolidated entity in determining the net asset value attributable to our ownership interest therein. The financial assets and liabilities recorded at fair value in our consolidated financial statements are the seven interest rate swaps, our investment in CBRE Strategic Partners Asia (a real estate entity which qualifies as an investment company under the Investment Company Act with respect to its accounting treatment) and one mortgage note payable that is economically hedged by one of the interest rate swaps.

The remaining financial assets and liabilities which are only disclosed at fair value are comprised of all other notes payable, the unsecured line of credit and other debt instruments. We determined the fair value of our secured notes payable and other debt instruments by performing discounted cash flow analyses using an appropriate market discount rate. We calculate the market discount rate by obtaining period-end treasury rates for fixed-rate debt, or London Inter-Bank Offering Rate (“LIBOR”) rates for variable-rate debt, for maturities that correspond to the maturities of our debt and then adding an appropriate credit spread derived from information obtained from third-party financial institutions. These credit spreads take into account factors such as our credit standing, the maturity of the debt, whether the debt is secured or unsecured, and the loan-to-value ratios of the debt.

The carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value due to their short-term maturities.

We adopted the fair value measurement criteria described herein for our non-financial assets and non-financial liabilities on January 1, 2009. The adoption of the fair value measurement criteria to our non-financial assets and liabilities did not have a material impact on our consolidated financial statements. Assets and liabilities typically recorded at fair value on a non-recurring basis include:

¡ Non-financial assets and liabilities initially measured at fair value in an acquisition or business combination;

¡ Long-lived assets measured at fair value due to an impairment assessment and

¡ Asset retirement obligations initially measured under the Codification Topic “Asset Retirement and Environmental Obligations” (“FASB ASC 410”).

Rental Operations

Our reportable segments consist of three types of commercial real estate properties for which our management internally evaluates operating performance and financial results: the Domestic Industrial Properties, Domestic Office Properties and International Office/Retail Properties. We evaluate the performance of our segments based on net operating income, defined as: rental income and tenant

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reimbursements less property and related expenses (operating and maintenance, management fees and real estate taxes) and excludes other non-property income and expenses, interest expense, depreciation and amortization, and our company-level general and administrative expenses. The following tables compare the net operating income for the three months ended March 31, 2013 and 2012 (in thousands):

	Three Months Ended March 31,
	2013			2012
Domestic Industrial Properties
Revenues:
Rental	$	13,375		$	9,135
Tenant Reimbursements		3,251			2,382
Total Revenues		16,626			11,517
Property and Related Expenses:
Operating and Maintenance		843			646
General and Administrative		86			166
Property Management Fee to Related Party		75			68
Property Taxes		2,659			2,029
Total Expenses		3,663			2,909
Net Operating Income		12,963			8,608
Domestic Office Properties
Revenues:
Rental		28,885			24,389
Tenant Reimbursements		6,587			5,619
Total Revenues		35,472			30,008
Property and Related Expenses:
Operating and Maintenance		4,858			4,335
General and Administrative		74			63
Property Management Fee to Related Party		227			237
Property Taxes		4,815			3,347
Total Expenses		9,974			7,982
Net Operating Income		25,498			22,026
International Office/Retail Properties
Revenues:
Rental		1,780			1,795
Tenant Reimbursements		74			79
Total Revenues		1,854			1,874
Property and Related Expenses:
Operating and Maintenance		85			126
General and Administrative		21			48
Property Management Fee to Related Party		(68	)		77
Total Expenses		38			251
Net Operating Income		1,816			1,623
Reconciliation to Consolidated Net Income (Loss)
Total Segment Net Operating Income		40,277			32,257
Expenses:
Interest		9,304			8,756
General and Administrative		4,955			1,889
Investment Management Fee to Related Party		500			5,962
Acquisition		1,841			1,379
Depreciation and Amortization		22,004			17,976
Transition Costs		35			0
		1,638			(3,705	)
Other Income and Expenses:
Interest and Other Income		207			1,061
Net Settlement Payments on Interest Rate Swaps		(343	)		(161	)
(Loss) Gain on Interest Rate Swaps		(917	)		125
Loss on Note Payable at Fair Value		(25	)		(35	)
Income (Loss) Before (Provision) Benefit for Income Taxes and Equity in Income of Unconsolidated Entities		560			(2,715	)
(Provision) Benefit for Income Taxes		(69	)		18
Equity in Income of Unconsolidated Entities		4,364			542
Gain on Conversion of Equity Investment to Controlling Interest		77,235			0
Net Income (Loss)		82,090			(2,155	)
Net (Income) Loss Attributable to Non-Controlling Operating Partnership Units		(83	)		2
Net Income (Loss) Attributable to Chambers Street Properties Shareholders	$	82,007		$	(2,153	)

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⁽¹⁾ Total Segment Net Operating Income is a Non-GAAP financial measure which may be useful as a supplemental measure for evaluating the relationship of each reporting segment to the combined total. This measure should not be viewed as an alternative measure of operating performance to our U.S. GAAP presentations provided. Segment “Net Operating Income” is defined as operating revenues (rental income, tenant reimbursements and other property income) less property and related expenses (property expenses, including real estate taxes) before depreciation and amortization expense. The Net Operating Income segment information presented consists of the same Net Operating Income segment information disclosed in Note 9 to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Consolidated Results of Operations

Comparison of Three Months Ended March 31, 2013 to Three Months Ended March 31, 2012

Revenues

Rental

Rental revenue increased $8,721,000, or 25%, to $44,040,000 during the three months ended March 31, 2013 compared to $35,319,000 for the three months ended March 31, 2012. The increase was primarily due to the acquisitions of 2400 Dralle Road, Midwest Commerce Center I, 20000 S Diamond Lake Rd., Gateway at Riverside, 701 & 801 Charles Ewing Blvd. and Mid-Atlantic Distribution Center—Bldg. A (the “2012 Acquisitions”) during the year ended December 31, 2012 and the acquisitions of 1400 Atwater Drive and 17 properties acquired from the Duke joint venture (the “2013 Acquisitions”, together with the “2012 Acquisitions”, the “2012 and 2013 Acquisitions”) during the three months ended March 31, 2013.

Tenant Reimbursements

Tenant reimbursements increased $1,832,000, or 23%, to $9,912,000 for the three months ended March 31, 2013 compared to $8,080,000 for the three months ended March 31, 2012, primarily due to tenant reimbursement revenue from the 2012 and 2013 Acquisitions.

Expenses

Operating and Maintenance

Property operating and maintenance expenses increased $679,000, or 13%, to $5,786,000 for the three months ended March 31, 2013 compared to $5,107,000 for the three months ended March 31, 2012. The increase was primarily due to operating and maintenance expenses attributable to the 2012 and 2013 Acquisitions.

Property Taxes

Property tax expense increased $2,098,000, or 39%, to $7,474,000 for the three months ended March 31, 2013 compared to $5,376,000 for the three months ended March 31, 2012. The increase in property taxes was primarily due to the 2012 and 2013 Acquisitions.

Interest

Interest expense increased $548,000, or 6%, to $9,304,000 for the three months ended March 31, 2013 compared to $8,756,000 for the three months ended March 31, 2012 primarily as a result of assumption of debt related to the 2013 acquisitions of Duke Realty’s 20% interest in 17 properties held by the Duke joint venture and associated with our unsecured credit facility and term loans.

General and Administrative

General and administrative expense increased $2,970,000, or 137%, to $5,136,000 for the three months ended March 31, 2013 compared to $2,166,000 for the three months ended March 31, 2012. Of the total increase, $1,548,000 was due to salary and other expenses incurred as a result of internalization of Chamber Street Properties management on July 1, 2012; $678,000 was due to the increase in legal and other professional fees; $440,000 was due to an increase in share based compensation to trustees and certain senior members of management; $152,000 was due to the increase in shareholders servicing fees and report production costs; $117,000 was due to the increase in directors’ and officers’ insurance and other expenses and $35,000 was due to an increase in audit, tax and Sarbanes Oxley assistance.

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Property Management Fee and Investment Management Fee to Related Party

Property management fee and investment management fee to related party decreased $5,610,000, or 88%, to $734,000 for the three months ended March 31, 2013 compared to $6,344,000 for the three months ended March 31, 2012. The decrease is due to transition to self-management under the Transitional Services Agreement.

Acquisition Expenses

Acquisition expenses increased $462,000, or 34%, to $1,841,000 for the three months ended March 31, 2013 compared to $1,379,000 for the three months ended March 31, 2012. The increase was due to the higher value of properties acquired during three months ended March 31, 2013 as compared to those acquired during the same period in 2012.

Depreciation and Amortization

Depreciation and amortization expense increased $4,028,000, or 22%, to $22,004,000 for the three months ended March 31, 2013 as compared to $17,976,000 for the three months ended March 31, 2012. The net increase was related to 2012 and 2013 Acquisitions.

Transition Costs

During three months ended March 31, 2013, we incurred $35,000 of transition costs in connection with our transition to self-management. There was no transition costs incurred for the three months ended March 31, 2012.

Interest and Other Income

Interest and other income decreased $854,000, or 80%, to $207,000 for the three months ended March 31, 2013 compared to $1,061,000 for the three months ended March 31, 2012. The decrease was primarily due to the recognition of revenue for the lease terminations at Fairforest Bldg. 3 in 2012.

Net Settlement Payments on Interest Rate Swaps

During the three months ended March 31, 2013, we made net payments on interest rate swaps of $343,000 compared to $161,000 during the three months ended March 31, 2012. The increase is a result of lower variable interest rates for the three months ended March 31, 2013 as compared to the three months ended March 31, 2012.

(Loss) Gain on Interest Rate Swaps

During the three months ended March 31, 2013, our derivative instruments incurred a loss of $917,000 compared to a gain of $125,000 for the three months ended March 31, 2012 or a year to year change of $1,042,000. The year to year change is attributable to the upcoming 2013 Thames Valley five and Albion Mills Retail Park debt maturity and the loss of fair value on interest rate swaps on the TD and Wells Fargo loans.

Loss on Note Payable at Fair Value

Loss on the Albion Mills Retail Park note payable is $25,000 for the three months ended March 31, 2013 compared to $35,000 for the three months ended March 31, 2012. The year to year valuation change is attributable to the upcoming Albion Mills Retail Park debt maturity in October 2013.

Provision for Income Taxes

Provision for income taxes increased $87,000, or 483%, to $69,000 for the three months ended March 31, 2013 compared to a tax benefit of $18,000 for the three months ended March 31, 2012 resulting primarily from a refund of prior year taxes paid from North Carolina in 2012.

Equity in Income of Unconsolidated Entities

Equity in income of unconsolidated entities increased $3,822,000, or 705%, to $4,364,000 for the three months ended March 31, 2013 compared to $542,000 for the three months ended March 31, 2012. The increase was primarily due to improved operating performance of the Duke joint venture and CBRE Strategic Partners Asia, the acquisition of Koblenz Distribution Center by the European JV and acquisition of Valley Park, Unit D by the UK JV.

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Gain on Conversion of Equity Investment to Controlling Interest

During the three months ended March 31, 2013, gain on conversion of equity investment to controlling interest was $77,235,000 attributable to the acquisition of Duke Realty’s 20% interest in 17 properties held by the Duke joint venture. There was no gain on conversion of equity investment to controlling interest during the three months ended March 31, 2012.

Net (Income) Loss Attributable to Non-Controlling Operating Partnership Units

During the three months ended March 31, 2013, net income attributable to non-controlling interest was $83,000 compared to a net loss attributable to non-controlling interest of $2,000 for the three months ended March 31, 2012, or a year to year increase of $85,000. The increase is due to net income for the three months ended March 31, 2013 as opposed to net loss for the three months ended March 31, 2012.

Financial Condition, Liquidity and Capital Resources

Overview

Liquidity is a measurement of the ability to meet cash requirements, which principally include funding investments and ongoing commitments, to repay borrowings, to make distributions to our shareholders and other general business needs. We have suspended our share redemption plan and such plan will terminate upon the anticipated listing of our common shares on the NYSE. See “—Subsequent Events.” Our sources of funds will primarily be property operating cash flows and borrowings, including under our unsecured credit facility. Additionally, we expect other financing opportunities could provide additional sources of funds (including our anticipated listing, and future offerings of our common shares). We are no longer offering common shares pursuant to our dividend reinvestment plan and such plan will terminate upon the anticipated listing of our common shares on the NYSE. See “-Subsequent Events.” Our ability to raise funds is dependent on general economic conditions, general market conditions for REITs, and our operating performance. We believe that these cash resources will be sufficient to satisfy our cash requirements and we do not anticipate a need to raise funds from other than these sources within the next twelve months. While we may be able to anticipate and plan for certain liquidity needs, there may be unexpected increases in uses of cash that are beyond our control and which would affect our financial condition and results of operations. For example, we may be required to comply with new laws or regulations that cause us to incur unanticipated capital expenditures for our properties, thereby increasing our liquidity needs. Even if there are no material changes to our anticipated liquidity requirements, our sources of liquidity may be fewer than, and the funds available from such sources may be less than, anticipated or needed. Cash flow from operations is primarily dependent upon the occupancy level of our portfolio, the net effective rental rates achieved on our leases, the collectability of rent and operating escalations and recoveries from our tenants and the level of operating and other costs. The properties in our portfolio are located in markets throughout the United States. Positive or negative changes in economic or other conditions, adverse weather conditions and natural disasters in these markets may affect our overall performance. No single tenant accounted for more than 7.3% of our annualized base rent for the three months ended March 31, 2013.

Depending on market conditions, our debt financing may be as much as approximately 65% of the value of the cost of our assets before non-cash reserves and depreciation. The amount of debt we place on an individual property, or the amount of debt incurred by an individual entity in which we invest, may be more or less than 65% of the value of such property or the value of the assets owned by such entity, depending on market conditions and other factors.

In fact, depending on market conditions and other factors, we may choose not to place debt on our portfolio or our assets and may choose not to borrow to finance our operations or to acquire properties. Our declaration of trust currently limits our borrowing to 300% of our net assets unless any excess borrowing is approved by a majority of our independent trustees and is disclosed to our shareholders in our next quarterly report. Our declaration of trust currently defines “net assets” as our total assets (other than intangibles) at cost, before deducting depreciation, reserves for bad debts or other non-cash reserves, less total liabilities, calculated at least quarterly by us on a basis consistently applied; provided, however, that during such periods in which we are obtaining regular independent valuations of the current value of its net assets for purposes of enabling fiduciaries of employee benefit plan shareholders to comply with applicable Department of Labor reporting requirements, “net assets” means the greater of (i) the amount determined pursuant to the foregoing and (ii) the assets’ aggregate valuation established by the most recent such valuation report without reduction for depreciation, bad debts or other non-cash reserves. Any indebtedness we do incur will likely be subject to continuing covenants, and we will likely be required to make continuing representations and warranties in connection with such debt. Moreover, some or all of our debt may be secured by some or all of our assets. If we default in the payment of interest or principal on any such debt, breach any representation or warranty in connection with any borrowing or violate any covenant in any loan document, our lender may accelerate the maturity of such debt requiring us to immediately repay all outstanding principal. If we are unable to make such payment, our lender could foreclose on our assets that are pledged as collateral to such lender. The lender could also sue us or force us into bankruptcy. Any such event would have a material adverse effect on the value of our common shares. We believe that we have sufficient cash flow from operations to continue as a going concern for the next twelve months and into the foreseeable future.

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In addition to making investments in accordance with our investment objectives, we have used, and may be required to use in the future, our capital resources to make certain payments to the former investment advisor or its affiliates. During the acquisition and operational stages, certain services related to the acquisition and management of our investments and our operations were provided to us by the former investment advisor pursuant to an advisory agreement entered into in July 2004 which was amended and restated in October 2006, in December 2010 and again in April 2012. The advisory agreement terminated according to its terms on June 30, 2012. Pursuant to the advisory agreement, we made various payments to the former investment advisor, including acquisition fees, investment management fees and payments for reimbursements of certain costs incurred by the former investment advisor in providing related services to us. We also made various payments to the former investment advisor pursuant to the Transitional Services Agreement which expired on April 30, 2013. See Note 10 to the Condensed Consolidated Financial Statements “Investment Management and Other Fees to Related Parties,” for a discussion of fees and expenses paid to the former investment advisor for the years ended December 31, 2012, 2011 and 2010, respectively, and for a discussion of our transition to self-management. Additionally, we also have issued to an affiliate of our former investment advisor one Class B limited partnership interest (representing 100% of the Class B interest outstanding) in CSP OP, which certain of our executive officers own an aggregate 15% distribution interest. For a description of the Class B interest, See Note 10 to the Condensed Consolidated Financial Statements “Investment Management and Other Fees to Related Parties.” If we list our common shares, we will be required to redeem the Class B interest at the time prescribed, and at an amount calculated, in accordance with the partnership agreement of CSP OP. Lastly, during the year ended December 31, 2012, we began the process of transitioning from being an externally managed company to a self-managed company and we believe the costs incurred to accomplish this transition involve many non-recurring costs which are being excluded to arrive at Core FFO.

In order to avoid corporate-level tax on our net taxable income, we are required to pay distributions to our shareholders equal to our net taxable income. In addition, to qualify as a REIT, we generally are required to pay annual distributions to our shareholders equal to at least 90% of our net ordinary taxable income. We anticipate borrowing funds to obtain additional capital to grow our business and acquire additional real estate investments, but there can be no assurance that we will be able to do so on terms acceptable to us, if at all.

As of March 31, 2013, we had $66,692,000 cash and cash equivalents available as well as $629,956,000 available under the Unsecured Credit Facility.

We intend to list our common shares on the NYSE, which we expect to occur on or about May 21, 2013. Additionally, we intend to commence a modified “Dutch Auction” tender offer (subject to all appropriate filings with the SEC) to purchase up to $125,000,000 of our common shares. Under the terms of the proposed tender offer, we intend to select the lowest price, not greater than $10.60 nor less than $10.10 per common share, net to the tendering shareholder in cash, less any applicable withholding taxes and without interest, that will allow us to purchase up to $125,000,000 of our common shares or a lower amount depending upon the number of common shares properly tendered and not withdrawn. We expect to allow shareholders to tender all or a portion of their common shares in the tender offer. We intend to fund the tender offer with funds available under our unsecured credit facility. We expect to commence the proposed tender offer on or about May 21, 2013 in conjunction with the listing. For more information about the listing and tender offer, see “—Subsequent Events.”

This Quarterly Report on Form 10-Q is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any securities of the Company. The tender offer will be made only pursuant to an offer to purchase, letter of transmittal and related materials that the Company intends to distribute to its shareholders and file with the SEC. The full details of the tender offer, including complete instructions on how to tender Shares, will be included in the offer to purchase, the letter of transmittal and other related materials, which the Company will distribute to shareholders and file with the SEC upon commencement of the tender offer. Shareholders are urged to carefully read the offer to purchase, the letter of transmittal and other related materials when they become available because they will contain important information, including the terms and conditions of the tender offer. Shareholders may obtain free copies of the offer to purchase, the letter of transmittal and other related materials that the Company files with the SEC at the SEC’s website athttp://www.sec.gov or by calling the information agent for the contemplated tender offer, who will be identified in the materials filed with the SEC at the commencement of the tender offer. In addition, shareholders may obtain free copies of the Company’s filings with the SEC from the Company’s website athttp://www.chambersstreet.com or by directing a request to Mr. Martin A. Reid, Chambers Street Properties, 47 Hulfish Street, Suite 210, Princeton, NJ 08542 or (609) 683-4900.

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Historical Cash Flows

Our net cash provided by operating activities decreased by $1,243,000 to $30,144,000 for the three months ended March 31, 2013, compared to $31,387,000 for the three months ended March 31, 2012. The decrease was due to a number of factors, primarily the payment of expenses to related party during the three months ended March 31, 2013 that were accrued as of December 31, 2012.

Net cash used in investing activities decreased by $13,035,000 to $73,058,000 for the three months ended March 31, 2013, compared to $86,093,000 for the three months ended March 31, 2012. The decrease was mainly due to a reduction in overall year-to-year capital spending. During the three months ended March 31, 2012, we acquired 2400 Dralle Road, Valley Park, Unit D (UK JV) and expended funds on the 1400 Atwater development property. The funds expended on these 2012 transactions exceeded the funds required to purchase our partner’s 20% interest in 17 properties held by the Duke joint venture and our partner’s interest in 1400 Atwater during the three months ended March 13, 2013.

Net cash provided by financing activities decreased by $116,786,000 to $2,548,000 for the three months ended March 31, 2013, compared to $119,334,000 for the three months ended March 31, 2012. The decrease was due to a reduction in proceeds from our prior public offering of $171,256,000, an increase in shareholder redemptions of $17,461,000, an increase in distributions to shareholders of $2,574,000, an increase in deferred financing costs of $1,161,000 and a decrease of $966,000 relating to our Non-Controlling Interest-Variable Interest Entity offset by an increase in loan payable of $55,044,000, a decrease in payment of offering costs of $20,250,000, a reduction of principle payments of $974,000 and an increase of security deposits of $364,000.

Non-GAAP Supplemental Financial Measure: Funds from Operations

Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry analysts and investors consider presentations of operating results for REITs that use historical cost accounting to be insufficient by themselves. Consequently, the National Association of Real Estate Investment Trusts, or NAREIT, created Funds from Operations, or FFO, as a supplemental measure of REIT operating performance.

FFO is a non-GAAP measure that is commonly used in the real estate industry. The most directly comparable GAAP measure to FFO is net income. FFO, as we define it, is presented as a supplemental financial measure. Management believes that FFO is a useful supplemental measure of REIT performance. FFO does not present, nor do we intend for it to present, a complete picture of our financial condition and/or operating performance. We believe that net income, as computed under GAAP, appropriately remains the primary measure of our performance and that FFO, when considered in conjunction with net income, improves the investing public’s understanding of the operating results of REITs and makes comparisons of REIT operating results more meaningful.

We compute FFO in accordance with standards established by NAREIT. Modifications to the NAREIT calculation of FFO are common among REITs, as companies seek to provide financial measures that meaningfully reflect their business and provide greater transparency to the investing public as to how our management team considers our results of operations. As a result, our FFO may not be comparable to FFO as reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than we do. The revised NAREIT White Paper on FFO defines FFO as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, impairment charges and gains and losses from sales of depreciable operating property, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships and joint ventures.

Management believes that NAREIT’s definition of FFO reflects the fact that real estate, as an asset class, generally appreciates over time, and that depreciation charges required by GAAP do not always reflect the underlying economic realities. Likewise, the exclusion from NAREIT’s definition of FFO of impairment charges and gains and losses from the sales of previously depreciated operating real estate assets allows investors and analysts to readily identify the operating results of the long-term assets that form the core of a REIT’s activity and assists in comparing those operating results between periods. Thus, FFO provides a performance measure that, when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates and operating costs. Management also believes that FFO provides useful information to the investment community about our financial performance when compared to other REITs, since FFO is generally recognized as the industry standard for reporting the operations of REITs.

However, changes in the accounting and reporting rules under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that have been put into effect since the establishment of NAREIT’s definition of FFO have prompted an increase in the non-cash and non-operating items included in FFO. We calculate Core FFO as FFO exclusive of the net effects of acquisition costs and unrealized gain/loss in investments in unconsolidated entities. Core FFO, is a useful measure to management’s decision-making process. As discussed below, period to period fluctuations in the excluded items can be driven by short-term factors that are not particularly relevant to our long-term investment decisions, long-term capital structures or long-term tax planning and tax structuring decisions.

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We believe that Core FFO appropriately presents our results of operations on a comparative basis. The items that we exclude from net income are subject to significant fluctuations from period to period that cause both positive and negative effects on our results of operations, often in inconsistent and unpredictable directions. For example, our acquisition costs are primarily the result of the volume of our acquisitions completed during each period, and therefore we believe such acquisition costs are not reflective of our operating results during each period. Similarly, unrealized gains or losses that we have recognized during a given period are based primarily upon changes in the estimated fair market value of certain of our investments due to changes in market conditions and do not necessarily reflect the operating performance of these properties during the corresponding period. Lastly, during the three month period ended June 30, 2012, the Company began the process of transitioning from being an externally managed company to a self-managed company and we believe the costs incurred to accomplish this transition involve many costs which are being excluded to arrive at Core FFO.

We believe that Core FFO is useful to investors as a supplemental measure of operating performance. We believe that adjusting FFO to exclude acquisition costs provides investors a view of the performance of our portfolio over time, including after we cease to acquire properties on a frequent and regular basis and allows for a comparison of the performance of our portfolio with other REITs that are not currently engaging in acquisitions. We also believe that Core FFO may provide investors with a useful indication of our future performance, particularly after our acquisition stage, and of the sustainability of our current distribution policy. However, because Core FFO excludes acquisition costs, which are important components in an analysis of our historical performance, such supplemental measure should not be construed as a historical performance measure and may not be as useful a measure for estimating the value of our common shares.

We calculate AFFO as Core FFO exclusive of the net effects of (i) amortization associated with deferred financings costs; (ii) amortization of above- and below-market lease intangibles; (iii) amortization of premium on notes payable; (iv) deferred income taxes; (v) share-based and other non-cash compensation expense; (vi) deferred straight-line rental revenue; and (vii) recurring capital expenditures.

FFO, Core FFO and AFFO measure cash generated from operating activities not in accordance with GAAP and should not be considered as alternatives to (i) net income (determined in accordance with GAAP), as indications of our financial performance, or (ii) to cash flow from operating activities (determined in accordance with GAAP) as measures of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to make cash distributions. We believe that to further understand our performance, each of FFO, Core FFO and AFFO, should be compared with our reported net income and considered in addition to cash flows in accordance with GAAP, as presented in our Consolidated Financial Statements.

Not all REITs calculate FFO, Core FFO and AFFO (or an equivalent measure), in the same manner and therefore comparisons with other REITs may not be meaningful.

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The following table presents our FFO, Core FFO and AFFO for the three months ended March 31, 2013 and 2012 (in thousands, except share data):

	Three Months Ended March 31,
	2013			2012
Reconciliation of net income to FFO, Core FFO and AFFO
Net Income	$	82,090		$	(2,155	)
Real estate depreciation and amortization		22,004			17,976
Realized gain on conversion of equity investment to controlling interest		(77,235	)		0
Net effect of FFO adjustment from unconsolidated entities(1)		10,324			13,757
Funds from Operations	$	37,183		$	29,578
Acquisition and related costs		1,841			1,897
Loss (Gain) on Interest Rate Swaps		917			(125	)
Transition costs		35			0
Net effect of Core FFO adjustment from unconsolidated entities		(2,533	)		307
Core Funds from Operations	$	37,443		$	31,657
Amortization of deferred financing costs		611			453
Amortization of above and below market leases		1,373			614
Amortization of premium on notes payable		(542	)		(313	)
Share-based compensation		440			0
Deferred rent		(1,910	)		(1,970	)
Recurring capital expenditures		(623	)		(714	)
Net effect of AFFO adjustments from unconsolidated entities(1)		(1,305	)		(1,507	)
Adjusted Funds from Operations	$	35,487		$	28,220
Amounts per share (basic and diluted):
Net Income (Loss)	$	0.33		$	(0.01	)
Funds from Operations	$	0.15		$	0.12
Core Funds from Operations	$	0.15		$	0.13
Adjusted Funds from Operations	$	0.14		$	0.12

⁽¹⁾ Represents our share of the FFO, Core FFO, and AFFO adjustments for each of our unconsolidated entities multiplied by the percentage of income or loss recognized by us for each of these unconsolidated entities during each of the quarters.

Notes Payable

In connection with our acquisition of the Carolina Portfolio on August 30, 2007, we assumed 13 loans with principal balances totaling $66,110,000 ($62,944,000 at estimated fair value including the discount of $3,166,000) from various lenders that are secured by first deeds of trust on the properties and the assignment of related rents and leases. The loans bear interest at rates ranging from 4.98% to 6.33% per annum and mature between March 1, 2013 and February 1, 2025. The loans require monthly payments of interest and principal, fully amortized over the lives of the loans. Two of the 13 loans, North Rhett III and HJ Park – Bldg. 1, were paid off in full on November 22, 2011 and December 3, 2012, respectively. Principal payments totaling $983,000 were made during the three months ended March 31, 2013. We indemnify the lenders against environmental costs and expenses and guarantee the loans under certain conditions.

On December 27, 2007, we entered into a $9,000,000 financing agreement secured by the Bolingbrook Point III property with the Northwestern Mutual Life Insurance Company. The loan is for a term of seven years and bears a fixed interest rate of 5.26% per annum with principal due at maturity. On January 14, 2011, we paid down $1,100,000 of principal in connection with the lease termination settlement with one of the tenants.

On May 30, 2008, we entered into a £7,500,000 financing arrangement with the Royal Bank of Scotland plc. secured by the Thames Valley Five property. On July 27, 2010 we paid down the loan by £1,860,000 leaving a loan balance of £5,640,000 ($8,575,000 at March 31, 2013). The loan is for a term of five years (with a two-year extension option) and bears interest at a variable rate adjusted quarterly, (based on nine month GBP-based LIBOR plus 1.01%. On August 14, 2008, we entered into the interest rate swap agreement that fixed the GBP-based LIBOR rate at 5.41% plus 1.01% or 6.42% per annum as of March 31, 2013, and expires on May 30, 2013. In conjunction with the loan paydown, we incurred a cost of £227,000 ($361,000 at August 3, 2010) to reduce the notional amount of the interest rate swap from £7,500,000 to £5,640,000. Interest only payments are due quarterly for the term of the loan with principal due at maturity.

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On October 10, 2008, we entered into a £5,771,000 ($8,774,000 at March 31, 2013) financing agreement with the Royal Bank of Scotland plc. secured by Albion Mills Retail Park property. The loan is for a term of five years and bears interest at a variable rate adjusted quarterly, based on three month GBP-based LIBOR plus 1.31%. On November 25, 2008, we entered into the interest rate swap agreement that fixed the GBP-based LIBOR rate at 3.94% plus 1.31% or 5.25% per annum as of March 31, 2013 and expires on October 10, 2013. Interest only payments are due quarterly for the term of the loan with principal due at maturity.

On November 18, 2008, in connection with the acquisition of Avion Midrise III & IV, we assumed $20,851,000 ($22,186,000 face value less discount of $1,335,000) fixed rate mortgage loan from Capmark Finance, Inc. that bears interest at a rate of 5.52% per annum and matures on April 1, 2014. Principal and interest payments are due monthly for the remaining loan term and principal payments totaling $123,000 were made during the three months ended March 31, 2013.

On August 5, 2009, in connection with the acquisition of 12650 Ingenuity Drive, we assumed a $12,572,000 ($13,539,000 face value less a discount of $967,000) fixed rate mortgage loan from PNC Bank, National Association that bears interest at a rate of 5.62% and matures on October 1, 2014. Principal and interest payments are due monthly for the remaining loan term and principal payments totaling $108,000 were made during the three months ended March 31, 2013.

On August 10, 2009, we entered into a £13,975,000 ($21,248,000 at March 31, 2013) financing agreement with the Abbey National Treasury Services plc. secured by the Maskew Retail Park property. On September 24, 2009, we drew the full amount of the loan and concurrently entered into an interest rate swap agreement that fixed the GBP-based LIBOR rate at 3.42% plus 2.26% or 5.68% per annum for the five-year term of the loan. Interest only payments are due quarterly for the term of the loan with principal due at maturity.

On June 24, 2010, we assumed two loans in connection with the acquisition of One Wayside Road: (i) a $14,888,000 ($14,633,000 at face value plus a premium of $255,000) fixed rate mortgage loan from State Farm Life Insurance Company that bears interest at a rate of 5.66% and matures on August 1, 2015; and (ii) a $12,479,000 ($12,132,000 at face value plus a premium of $347,000) fixed rate mortgage loan from State Farm Life Insurance Company that bears interest at a rate of 5.92% and matures on August 1, 2015. Principal and interest payments are due monthly for the remaining loan terms and principal payments totaling $168,000 were made during the three months ended March 31, 2013 on the two loans.

On September 28, 2010, we assumed two loans in connection with the acquisition of 100 Tice Blvd.: (i) a $23,136,000 ($21,218,000 at face value plus a premium of $1,918,000) fixed rate loan from Principal Life Insurance Company that bears interest at a rate of 5.97%, matures on September 15, 2022 and the lender has the right to call the loan due and payable on September 15, 2017; (ii) a $23,136,000 ($21,217,000 at a face value plus a premium of $1,919,000) fixed rate mortgage from Hartford Life and Accidental Insurance Company that bears interest at a rate of 5.97%, matures on September 15, 2022 and the lender has the right to call the loan due and payable on September 15, 2017. Principal and interest payments are due monthly for the remaining loan terms and principal payments totaling $269,000 were made during the three months ended March 31, 2013 on the two loans.

On December 29, 2010, we entered into a $12,600,000 secured term loan through Woodmen of The World Life Insurance Society secured by the Ten Parkway North property. The Ten Parkway North loan bears interest at a fixed rate of 4.75% per annum and matures on January 1, 2021. Principal and interest payments are due monthly and principal payments totaling $72,000 were made during the three months ended March 31, 2013.

Beginning January 2011, principal and interest payments are due monthly on the $9,725,000 term loan secured by the Deerfield Commons I that was originally entered into on November 29, 2005. The loan bears interest at a fixed rate of 5.23% per annum and interest only payments were due monthly for the first 60 months. Principal payments totaling $37,000 were made during the three months ended March 31, 2013.

On February 8, 2011, we entered into five cross-collateralized secured term loans totaling $37,000,000 with ING USA Annuity and Life Insurance Company secured by the following properties: 4701 Gold Spike Road, $10,650,000, Summit Distribution Center, $6,700,000, Tolleson Commerce Park II, $4,600,000, 3660 Deerpark Blvd., $7,650,000 and 1985 International Way, $7,400,000. The loans bear interest at a fixed rate of 4.45% and mature on March 1, 2018. Principal and interest payments were due monthly and principal payments totaling $160,000 were made during the three months ended March 31, 2013.

On April 11, 2011, in connection with the acquisition of 70 Hudson Street, we assumed a $124,113,000 ($120,857,000 face value plus a premium of $3,256,000) fixed rate mortgage loan from Lehman Brothers Bank, FSB that bears interest at a rate of 5.65% and matures on April 11, 2016. Principal and interest payments are due monthly and principal payments totaling $483,000 were made during the three months ended March 31, 2013.

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On April 11, 2011, in connection with the acquisition of 90 Hudson Street, we assumed a $120,247,000 ($117,562,000 face value plus a premium of $2,685,000) fixed rate mortgage loan from Teachers Insurance and Annuity Association of America that bears interest at a rate of 5.66% and matures on May 1, 2016. On July 14, 2011, we and Teachers Insurance and Annuity Association of America, or the Lender, agreed to modify the $117,562,000 existing mortgage loan assumed by us. The loan was modified to extend its maturity by three years, from May 1, 2016 to May 1, 2019. The 5.66% annual interest rate was unchanged but is subject to a new 30-year amortization schedule. We pre-paid approximately $8,600,000 of loan’s balance (with no pre-payment penalty) in connection with the modification. Principal and interest payments are due monthly and principal payments totaling $376,000 were made during the three months ended March 31, 2013.

On December 30, 2011, in connection with the acquisition of Sabal Pavilion, we assumed a $15,428,000 ($14,700,000 face value plus a premium of $728,000) fixed rate mortgage loan from U.S. Bank National Association that bears interest at a rate of 6.38% and matures on August 1, 2013. Interest payments are due monthly with principal due at maturity.

In connection with our acquisition of Duke Realty’s 20% interest in 17 properties held by the Duke joint venture on March 1, 2013, we assumed 14 loans with principal balances totaling $216,011,000 ($230,573,000 at estimated fair value including the premiums of $14,562,000) from 4 lenders that are secured by first deeds of trust on the properties and the assignment of related rents and leases. The loans bear interest at rates ranging from 3.41% to 5.25% per annum and mature between December 1, 2015 and October 1, 2021. The loans require monthly payments of interest and principal, with remaining principal due at maturity. Principal payments totaling $55,000 were made during the three months ended March 31, 2013.

Loans Payable

On May 26, 2010, we entered into a $70,000,000 revolving credit facility with Wells Fargo Bank, N.A., or the Wells Fargo Credit Facility. The initial maturity date of the Wells Fargo Credit Facility was May 26, 2014, however we could extend the maturity date to May 26, 2015, subject to certain conditions. $15,000,000 of the Wells Fargo Credit Facility was initially drawn upon closing on May 26, 2010, with $55,000,000 initially remaining available for disbursement during the term of the facility. We had the right to prepay any outstanding amount of the Wells Fargo Credit Facility, in whole or in part, without premium or penalty at any time during the term of this Wells Fargo Credit Facility, however, we initially could not reduce the outstanding principal balance below a minimum outstanding amount of $15,000,000, without reducing the total $70,000,000 Wells Fargo Credit Facility capacity. Initially, the Wells Fargo Credit Facility had a floating interest rate of 300 basis points over LIBOR, however this interest rate would be at least 4.00% for any of the outstanding balance that was not subject to an interest rate swap with an initial term of at least two years.

Upon closing on May 26, 2010, we entered into an interest rate swap agreement with Wells Fargo Bank, N.A. to effectively fix the interest rate on the initial $15,000,000 outstanding loan amount at 5.10% for the four-year term of the facility. The interest rate swap was designated as a qualifying cash flow hedge at the start date of the hedge relationship as described in Note 15 “Derivative Instruments.” The Wells Fargo Credit Facility was initially secured by our 13201 Wilfred, 3011, 3055 & 3077 Comcast Place, 140 Depot Street, Crest Ridge Corporate Center I and West Point Trade Center properties. In addition, CSP OP provided a limited guarantee for the Wells Fargo Credit Facility.

On August 31, 2010, we entered into an amended and restated credit agreement with Wells Fargo Bank, N.A. to expand the Wells Fargo Credit Facility from its initial capacity of $70,000,000 to an amended capacity of $125,000,000 (the “Amended Wells Fargo Credit Facility”). In connection with the Amended Wells Fargo Credit Facility, the minimum outstanding amount was increased to $25,000,000 and as such an additional $10,000,000 was drawn (in addition to the $15,000,000 initially drawn on May 26, 2010) with the remaining $100,000,000 available for disbursement during the term of the facility. The Amended Wells Fargo Credit Facility was secured by an additional three of our properties, for a total of eight properties in all: 13201 Wilfred Lane, 3011, 3055 & 3077 Comcast Place, 140 Depot Street, Crest Ridge Corporate Center, West Point Trade Center, 5160 Hacienda Drive, 10450 Pacific Center Court and 225 Summit Avenue. The interest rate was reduced by 25 basis points to 275 basis points over LIBOR (which rate would apply to all withdrawals from the Amended Wells Fargo Credit Facility other than the initial $15,000,000 that was drawn on May 26, 2010) and the initial interest rate floor of 4.00% was eliminated. The initial maturity date remained May 26, 2014, however we could extend the maturity date to May 26, 2015, subject to certain conditions. The Amended Wells Fargo Credit Facility was replaced with the Unsecured Credit Facility as set forth below.

On September 13, 2012, we entered into a credit agreement (the “Credit Agreement”) with a group of lenders to provide CSP OP with an unsecured, revolving credit facility (the “Unsecured Credit Facility”) with an initial capacity of $700,000,000. The Unsecured Credit Facility replaced the Amended Wells Fargo Credit Facility, which was terminated concurrently with the closing of the Unsecured Credit Facility. The Company paid the $25,000,000 outstanding balance of the Amended Wells Fargo Credit Facility with cash on hand and expensed the unamortized deferred financing costs associated with obtaining the loan totaling $1,191,000. During the year ended

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December 31, 2012, $265,000,000 was drawn under the Unsecured Credit Facility with the remaining $435,000,000 available for disbursement during the term of the facility. The $265,000,000 is included in Loan Payable on our consolidated balance sheets as of December 31, 2012. The Unsecured Credit Facility has a term of four years, which term may be extended for one year at the option of CSP OP provided that CSP OP is not then in default and upon payment of customary extension fees. The Unsecured Credit Facility has no minimum outstanding balance requirements. Under certain circumstances, CSP OP may request an increase in the capacity of the Unsecured Credit Facility by up to an additional $700,000,000, to an aggregate size of $1,400,000,000, although none of the lenders has any obligation to participate in such increase. The Unsecured Credit Facility includes a $25,000,000 swingline sub-facility and a $25,000,000 letter of credit sub-facility. CSP OP paid customary arrangement and commitment fees to the lenders in connection with the Unsecured Credit Facility. The Company and certain of its subsidiaries have provided a guaranty in connection with the Unsecured Credit Facility.

The loans under the Unsecured Credit Facility will bear interest, at CSP OP’s election, based on (i) LIBOR, for interest periods of one, three or six months, plus the applicable margin, or (ii) the LIBOR Market Index Rate plus the applicable margin (if the LIBOR Market Index Rate is unavailable, the per annum rate of interest would be the Federal Funds Rate plus 1.5%, plus the applicable margin). The LIBOR Market Index Rate is LIBOR in respect of loans of one-month interest periods, determined on a daily basis, plus the applicable margin. The applicable margin is (i) for periods prior to the Company or CSP OP having a credit rating, based on the Company’s then current leverage ratio, and (ii) during such periods when the Company or CSP OP has a credit rating, based on its then current credit rating. The applicable margin can vary from (i) 1.60% to 2.35% based upon the then current leverage ratio, or (ii) 1.00% to 1.80% based upon a then current credit rating of the Company or CSP OP. As of the closing of the Unsecured Credit Facility, the current stated applicable margin was 1.60%. CSP OP will pay customary fees in connection with borrowings under the Unsecured Credit Facility. Further, CSP OP may prepay any revolving or swingline loan, in whole or in part, at any time without premium or penalty. As of March 31, 2013, outstanding borrowings of $70,044,000 bear interest at a rate of 1.81% based on 1.60% over the one month LIBOR.

Under the Unsecured Credit Facility, the Company will be subject to certain financial covenants that require, among other things: the maintenance of (i) a leverage ratio of not more than 0.60; (ii) a fixed charge coverage ratio of at least 1.50; (iii) a secured leverage ratio of not more than (a) 0.45 prior to the Unsecured Credit Facility’s second anniversary, or (b) 0.40 thereafter; (iv) an unencumbered leverage ratio of not more than 0.60; (v) a ratio of unencumbered net operating income to unsecured interest expense of at least 1.75 (unless the Company or CSP OP obtains an investment grade credit rating, in which case this requirement is eliminated); (vi) minimum tangible net worth of $1,653,403,000 plus 85% of the net proceeds of certain future equity issuances; and (vii) unencumbered asset value of at least $400,000,000. In addition, the Unsecured Credit Facility contains a number of customary non-financial covenants including those restricting liens, mergers, sales of assets, certain investments in unimproved land and mortgage receivables, intercompany transfers, transactions with affiliates and distributions.

On March 6, 2013, we entered into an unsecured term loan in the amount of $50,000,000 with TD Bank, N.A (the “TD Term Loan”). Upon closing the TD Term Loan, we simultaneously entered into an interest rate swap agreement with TD Bank to effectively fix the interest rate on the TD Term Loan at 3.425% per annum for its seven-year term, based upon the TD Term Loan’s current stated applicable margin, which may vary during its term based upon the then current leverage ratio or our then current credit rating. The TD Term Loan contains customary representations and warrants and covenants. We used the proceeds of the TD Term Loan to repay a portion of our borrowings under the Unsecured Credit Facility.

On March 7, 2013, we entered into an unsecured term loan (the “Wells Fargo Term Loan”) in the amount of $200,000,000 with Wells Fargo Bank, National Association and certain other lenders defined in the Wells Fargo Term Loan. Upon closing the Wells Fargo Term Loan, we simultaneously entered into an interest rate swap agreement with Wells Fargo to effectively fix the interest rate on the Wells Fargo Term Loan at 2.4885% per annum for its five-year term, based upon the Wells Fargo Term Loan’s current stated applicable margin, which may vary based upon the then current leverage ratio, or our then current credit rating. The Wells Fargo Term Loan contains customary representations and warrants and covenants. We used the proceeds of the Wells Fargo Term Loan to repay a portion of our borrowings under the Unsecured Credit Facility.

On March 7, 2013, we entered into a First Amendment (the “First Amendment”) to the credit agreement entered into on September 13, 2012 with a group of lenders, which provided us with an unsecured, revolving credit facility in the initial amount of $700,000,000. The First Amendment modified the Unsecured Credit Facility to among other things: (i) amend certain definitions, (ii) amend certain requirements of the guarantor, (iii) amend the requirements relating to quarterly financial statements, annual statements, compliance certificates and certain other SEC filings, (iv) amend the requirements relating to electronic delivery of information, (v) provide the Company with an option to restate the tangible net worth covenant in the event of a redemption event, (vi) remove the restriction on negative pledges, (vii) amend the restrictions on intercompany transfers and(viii) amend certain disclosure and confidentiality provisions.

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Distribution Policy

In order to qualify as a REIT under the Internal Revenue Code, we generally must make distributions to our shareholders each year in an amount at least equal to 90% of our REIT taxable income (as determined without regard to the dividends paid deduction and excluding net capital gain). Historically, we calculated our quarterly distribution based upon daily record dates and distribution declaration dates. Our Board of Trustees has determined that, beginning with the second quarter of 2013, quarterly distributions will be calculated based upon quarterly record date and distribution declaration dates. Our distribution policy is subject to revision at the discretion of our Board of Trustees without notice to you or shareholder approval. All distributions will be made by us at the discretion of our Board of Trustees and will be based upon out Board of Trustee’s evaluation of our assets, operating results, historical and projected cash flows (and source thereof), historical and projected equity offering proceeds from our offerings, historical and projected debt incurred, projected investments and capital requirements, the anticipated timing between receipt of our equity offering proceeds and investment of those proceeds, maintenance of REIT qualifications, applicable provisions of Maryland law, general economic, market and industry conditions, any liquidity event options we may pursue, and such other factors as our Board of Trustees deems relevant. We cannot assure you that we will be able to pay or maintain the levels of distributions we have historically paid or that distributions will increase over time.

It is anticipated that distributions generally will be taxable as ordinary income to our shareholders, although a portion of such distributions may be designated by us as a return of capital or as capital gain. We will furnish annually to each of our shareholders a statement setting forth distributions paid during the preceding year and their characterization as ordinary income, return of capital or capital gains.

2013 Quarter	First
Total distributions declared and paid	$	37,272,000
Distributions per share	$	0.15
Amount of distributions per share funded by cash flows provided by operating entities	$	0.1213
Amount of distributions per share funded by uninvested proceeds from financings of our properties	$	0.0287

2012 Quarters	First		Second		Third		Fourth
Total distributions declared and paid	$	36,726,000	$	37,366,000	$	37,374,000	$	37,418,000
Distributions per share	$	0.15	$	0.15	$	0.15	$	0.15
Amount of distributions per share funded by cash flows provided by operating entities		0.1282		0.1005		0.1186		0.0261
Amount of distributions per share funded by uninvested proceeds from financings of our properties		0.0218		0.0495		0.0314		0.1239

On March 28, 2013, our Board of Trustees approved a quarterly distribution of $0.15 per common share to be paid on July 12, 2013 to the holders of record of common shares on June 28, 2013.

On April 26, 2013, our Board of Trustees also approved a quarterly distribution of $0.125 per common share to be paid on October 11, 2013 to the holders of record of common shares on September 26, 2013.

For the quarter ended March 31, 2013, distributions were funded 80.88% by cash flows provided by operating activities and 19.12% from uninvested proceeds from financings of our properties. In addition, distributions totaling $16,782,000 were reinvested in our common shares pursuant to our dividend reinvestment plan during the quarter ended March 31, 2013.

Our 2012 distributions were funded 62.12% by cash flows provided by operating activities and 37.88% from uninvested proceeds from financings of our properties. In addition, 2012 distributions totaling $67,484,000 were reinvested in our common shares pursuant to our dividend reinvestment plan during 2012.

Total distributions declared and paid for the period from inception (July 1, 2004) through March 31, 2013 were $476,327,000 and total Funds from Operations for the period from inception (July 1, 2004) through March 31, 2013 were $312,286,000. For a discussion of our supplemental financial measures, see “—Non-GAAP Supplemental Financial Measure: Funds from Operations.”

To the extent that our cash available for distribution is less than the amount we are required to distribute to qualify as a REIT, we may consider various funding sources to cover any shortfall, including borrowing funds on a short-term, or possibly long-term, basis or selling properties. In addition, we may utilize these funding sources to make distributions that exceed the amount we are required to distribute to qualify as a REIT.

82

Off-Balance Sheet Arrangements

As of March 31, 2013, we had five Investments in Unconsolidated Entities: (i) a 5.07% ownership interest in CBRE Strategic Partners Asia; (ii) an 80% ownership interest in the Duke joint venture; (iii) a 90% ownership interest in Afton Ridge; (iv) an 80% ownership interest in the UK JV; and (v) an 80% ownership interest in the European JV. Our investments are discussed in Note 4, to the accompanying consolidated financial statements “Investments in Unconsolidated Entities.”

Contractual Obligations and Commitments

The following table provides information with respect to our consolidated property contractual obligations at March 31, 2013 (in thousands):

Contractual Obligations	Total			Less than One Year			One to Three Years			Three to Five Years			More than Five Years
Note Payable (and interest payments) Collateralized by Deerfield Commons I	$	(10,727	)	$	(643	)	$	(10,084	)	$	—		$	—
Note Payable (and interest payments) Collateralized by Bolingbrook Point III		(8,662	)		(416	)		(8,246	)		—			—
Notes Payable (and interest payments) Collateralized by the Carolina Portfolio		(55,498	)		(6,426	)		(12,852	)		(12,852	)		(23,368	)
Note Payable (and interest payments) Collateralized by Lakeside Office Center		(10,142	)		(650	)		(9,492	)		—			—
Note Payable (and interest payments) Collateralized by Thames Valley Five(1)		(8,805	)		(8,805	)		—			—			—
Note Payable (and interest payments) Collateralized by Albion Mills Retail Park(1)		(9,017	)		(9,017	)		—			—			—
Note Payable (and interest payments) Collateralized by Avion Midrise III & IV		(21,562	)		(1,618	)		(19,944	)		—			—
Note Payable (and interest payments) Collateralized by 12650 Ingenuity Drive		(13,234	)		(1,118	)		(12,116	)		—			—
Note Payable (and interest payments) Collateralized by Maskew Retail Park(1)		(23,210	)		(1,207	)		(22,003	)		—			—
Note Payable (and interest payments) Collateralized by One Wayside Road		(28,422	)		(2,127	)		(26,295	)		—			—
Note Payable (and interest payments) Collateralized by 100 Tice Blvd.		(49,939	)		(3,469	)		(6,939	)		(39,531	)		—
Note Payable (and interest payments) Collateralized by Ten Parkway		(15,988	)		(862	)		(1,724	)		(1,724	)		(11,678	)
Note Payable (and interest payments) Collateralized by 4701 Gold Spike Drive		(12,478	)		(644	)		(1,288	)		(10,546	)		—
Note Payable (and interest payments) Collateralized by 1985 International Way		(8,670	)		(447	)		(895	)		(7,328	)		—
Note Payable (and interest payments) Collateralized by Summit Distribution Center		(7,849	)		(405	)		(810	)		(6,634	)		—
Note Payable (and interest payments) Collateralized by 3660 Deerpark Boulevard		(8,962	)		(462	)		(925	)		(7,575	)		—
Note Payable (and interest payments) Collateralized by Tolleson Commerce Park II		(5,389	)		(278	)		(556	)		(4,555	)		—
Note Payable (and interest payments) Collateralized by 70 Hudson Street		(137,745	)		(8,585	)		(17,169	)		(111,991	)		—
Note Payable (and interest payments) Collateralized by 90 Hudson Street		(140,858	)		(6,897	)		(15,048	)		(15,048	)		(103,865	)
Note Payable (and interest payments) Collateralized by Sabal Pavilion		(14,778	)		(14,778	)		—			—			—
Note Payable (and interest payments) Collateralized by Celebration Office Center III		(10,169	)		(561	)		(9,608	)		—			—
Note Payable (and interest payments) Collateralized by 22535 Colonial Pkwy		(9,099	)		(502	)		(8,597	)		—			—
Note Payable (and interest payments) Collateralized by Northpoint III		(11,774	)		(649	)		(11,125	)		—			—
Note Payable (and interest payments) Collateralized by 3900 North Paramount Parkway		(8,831	)		(487	)		(8,344	)		—			—
Note Payable (and interest payments) Collateralized by 3900 South Paramount Parkway		(8,831	)		(487	)		(8,344	)		—			—
Note Payable (and interest payments) Collateralized by 1400 Perimeter Park Drive		(2,676	)		(148	)		(2,528	)		—			—
Note Payable (and interest payments) Collateralized by Miramar I		(10,491	)		(579	)		(9,912	)		—			—
Note Payable (and interest payments) Collateralized by Miramar II		(14,129	)		(779	)		(13,350	)		—			—
Note Payable (and interest payments) Collateralized by McAuley Place		(16,227	)		(885	)		(1,770	)		(1,770	)		(11,802	)
Note Payable (and interest payments) Collateralized by Point West I(1)		(12,678	)		(712	)		(1,386	)		(10,580	)		—
Note Payable (and interest payments) Collateralized by Easton III(1)		(8,044	)		(449	)		(871	)		(842	)		(5,882	)
Note Payable (and interest payments) Collateralized by Norman Pointe I		(29,386	)		(1,402	)		(2,804	)		(2,804	)		(22,376	)
Note Payable (and interest payments) Collateralized by Norman Pointe II		(32,352	)		(1,543	)		(3,087	)		(3,087	)		(24,635	)
Note Payable (and interest payments) Collateralized by The Landings I		(22,115	)		(1,055	)		(2,110	)		(2,110	)		(16,840	)
Note Payable (and interest payments) Collateralized by The Landings II		(19,506	)		(931	)		(1,861	)		(1,861	)		(14,853	)
Note Payable (and interest payments) Collateralized by Atrium I(1)		(27,400	)		(1,813	)		(3,507	)		(3,366	)		(18,714	)
Unsecured Credit Facility (and interest payments)		(74,429	)		(1,268	)		(2,536	)		(70,625	)		—
Unsecured Term Loans (and interest payments) (1)		(286,595	)		(6,690	)		(13,379	)		(213,172	)		(53,354	)
Total	$	(1,196,667	)	$	(89,794	)	$	(271,505	)	$	(528,001	)	$	(307,367	)

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⁽¹⁾ These contractual obligations include the expected net payments due under interest rate swap agreements where in each case we have swapped our variable interest rate payments due under the debt agreements for fixed rates of interest payments.

The following table provides information with respect to our unconsolidated property contractual obligations at March 31, 2013 (in thousands):

Contractual Obligations	Total			Less than One Year			One to Three Years			Three to Five Years			More than Five Years
Notes Payable (and interest payments) Collateralized by Duke joint venture	$	(233,066	)	$	(129,583	)	$	(11,337	)	$	(11,337	)	$	(80,809	)
Note Payable (and interest payments) Collateralized by Afton Ridge		(23,713	)		(23,713	)		—			—			—
Note Payable (and interest payments) Collateralized by European JV		(71,187	)		(1,500	)		(3,001	)		(66,686	)		—
Total	$	(327,966	)	$	(154,796	)	$	(14,338	)	$	(78,023	)	$	(80,809	)

⁽¹⁾ Unconsolidated payment amounts are at our pro rata share of effective ownership and exclude our investment in CBRE Strategic Partners Asia.

As of March 31, 2013, we had an unfunded investment commitment in CBRE Strategic Partners Asia totaling $2,474,000. The timing of future payments is uncertain.

Income Taxes

We have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2004. As a REIT, we generally will not be subject to U.S. federal income tax on income that we distribute currently to our shareholders. Under the Internal Revenue Code, REITs are subject to numerous organizational and operational requirements, including a requirement that they generally distribute at least 90% of their annual net taxable income (excluding net capital gains) to their shareholders. If we fail to qualify for taxation as a REIT in any year, our income will be taxed at regular corporate rates, and we may be precluded from qualifying for treatment as a REIT for the four-year period following our failure to qualify. Even if we qualify as a REIT, we may still be subject to state, local and foreign taxes on our income and property and to U.S. federal income and excise taxes on our undistributed gross income. Our properties located in Texas are subject to a Texas Gross Margin Tax, Deerfield Commons I is subject to a Georgia Net Worth Tax, properties located in Massachusetts are subject to a Massachusetts Net Worth Tax and properties located in North Carolina are subject to a North Carolina Franchise Tax under which we incurred a total of approximately $69,000 and ($18,000) of taxes for the three months ended March 31, 2013 and 2012, respectively.

Inflation

The real estate market has not been affected significantly by inflation in the past several years due to the relatively low inflation rate. We expect to include provisions in the majority of our tenant leases designed to protect us from the impact of inflation. These provisions will include 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. Due to the generally long-term nature of these leases, annual rent increases may not be sufficient to cover inflation and rent may be below market.

Quantitative and Qualitative Disclosures About Market Risk

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, we expect that the primary market risk to which we will be exposed is interest rate risk.

We may be exposed to the effects of interest rate changes primarily as a result of long-term debt used to maintain liquidity and fund expansion of our real estate investment portfolio and operations. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve our objectives, we will borrow primarily at fixed rates or variable rates and, in some cases, with the ability to convert variable rates to fixed rates. We may also enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on a related financial instrument. We will not enter into derivative or interest rate transactions for speculative purposes.

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Notes Payable secured by real property are summarized as follows (in thousands):

	Interest Rate as of							Notes Payable as of
Property	March 31, 2013			December 31, 2012			Maturity Date	March 31, 2013			December 31, 2012
Deerfield Commons I.		5.23	%		5.23	%	December 1, 2015	$	9,405		$	9,442
Bolingbrook Point III		5.26			5.26		January 1, 2015		7,900			7,900
Fairforest Bldg. 5(1)		6.33			6.33		February 1, 2024		8,703			8,840
Fairforest Bldg. 6(1)		5.42			5.42		June 1, 2019		2,325			2,402
North Rhett I(1)		5.65			5.65		August 1, 2019		2,724			2,827
North Rhett II(1)		5.20			5.20		October 1, 2020		1,774			1,822
North Rhett IV(1)		5.80			5.80		February 1, 2025		8,808			8,935
Mt Holly Bldg.(1)		5.20			5.20		October 1, 2020		1,774			1,822
Orangeburg Park Bldg.(1)		5.20			5.20		October 1, 2020		1,804			1,853
Kings Mountain I(1)		5.27			5.27		October 1, 2020		1,537			1,578
Kings Mountain II(1)		5.47			5.47		January 1, 2020		4,455			4,589
Union Cross Bldg. I(1)		5.50			5.50		July 1, 2021		2,290			2,344
Union Cross Bldg. II(1)		5.53			5.53		June 1, 2021		6,983			7,149
Thames Valley Five(2)(3)		6.42			6.42		May 30, 2013		8,575			9,160
Lakeside Office Center		6.03			6.03		September 1, 2015		8,833			8,862
Avion Midrise III & IV(4)		5.52			5.52		April 1, 2014		20,342			20,464
12650 Ingenuity Drive(5)		5.62			5.62		October 1, 2014		12,165			12,272
Maskew Retail Park(2)(6)		5.68			5.68		August 10, 2014		21,248			22,698
One Wayside Road(7)		5.66			5.66		August 1, 2015		13,648			13,745
One Wayside Road(7)		5.92			5.92		August 1, 2015		11,392			11,464
100 Tice Blvd(8)		5.97			5.97		September 15, 2017		19,959			20,094
100 Tice Blvd(8)		5.97			5.97		September 15, 2017		19,959			20,093
Ten Parkway North		4.75			4.75		January 1, 2021		12,000			12,072
4701 Gold Spike Drive(9)		4.45			4.45		March 1, 2018		10,295			10,342
1985 International Way(9)		4.45			4.45		March 1, 2018		7,154			7,186
Summit Distribution Center(9)		4.45			4.45		March 1, 2018		6,477			6,506
3770 Deerpark Boulevard(9)		4.45			4.45		March 1, 2018		7,395			7,428
Tolleson Commerce Park II(9)		4.45			4.45		March 1, 2018		4,447			4,467
70 Hudson Street(10)		5.65			5.65		April 11, 2016		117,498			117,981
90 Hudson Street(10)		5.66			5.66		May 1, 2019		106,089			106,465
Sabal Pavilion(11)		6.38			6.38		August 1, 2013		14,700			14,700
Celebration Office Center(12)(13)		4.25			—		December 1, 2015		9,130			0
22535 Colonial Pkwy(12)(13)		4.25			—		December 1, 2015		8,169			0
Northpoint III(12)(13)		4.25			—		December 1, 2015		10,571			0
Goodyear Crossing Ind. Park II(12)(13)		4.25			—		December 1, 2015		20,182			0
3900 North Paramount Parkway(12)(13)		4.25			—		December 1, 2015		7,929			0
3900 South Paramount Parkway(12)(13)		4.25			—		December 1, 2015		7,929			0
1400 Perimeter Park Drive(12)(13) .		4.25			—		December 1, 2015		2,403			0
Miramar I(12)(13)		4.25			—		December 1, 2015		9,418			0
Miramar II(12)(13)		4.25			—		December 1, 2015		12,686			0
McAuley Place(12)		3.98			—		September 1, 2018		13,494			0
Point West I(12)		3.41			—		December 6, 2016		11,285			0
Easton III(12)		3.95			—		January 31, 2019		6,606			0
Norman Pointe I(12)		5.24			—		October 1, 2021		20,726			0
Norman Pointe II(12)		5.24			—		October 1, 2021		22,818			0
The Landings I(12)		5.24			—		October 1, 2021		15,618			0
The Landings II(12)		5.24			—		October 1, 2021		13,775			0
Atrium I(12)		3.78			—		May 31, 2018		23,218			0
Consolidated Notes Payable									698,615			487,502
Plus Premium									21,387			7,555
Less Discount									(1,925	)		(2,113	)
Consolidated Notes Payable Net of Premium / Discount								$	718,077		$	492,944

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⁽¹⁾  These notes payable were assumed from the seller of these properties on August 30, 2007 as part of the property acquisitions and were recorded at estimated fair value which includes the discount. The North Rhett III loan was paid off in full on November 22, 2011 and the HJ Park—Bldg. 1 loan was paid in full on December 3, 2012.

⁽²⁾  These loans are subject to certain financial covenants (interest coverage and loan to value).

⁽³⁾  We entered into the interest rate swap agreement that fixed the GBP-based LIBOR rate at 5.41% through its expiration on May 30, 2013, and therefore including the mortgage note’s spread of 1.01% over GBP-based LIBOR, effectively fixed the mortgage note’s all-in interest rate at 6.42% per annum for its remaining term. The stated rates, not including the interest rate swap, on the mortgage note payable were 1.52% and 1.54% at March 31, 2013 and December 31, 2012, respectively, and were based on GBP LIBOR plus a spread of 1.01%.

⁽⁴⁾  The loan was assumed from the seller of Avion Midrise III & IV on November 18, 2008 and was recorded at estimated fair value which includes the discount.

⁽⁵⁾  The loan was assumed from the seller of 12650 Ingenuity Drive on August 5, 2009 and was recorded at estimated fair value which includes the discount.

⁽⁶⁾  We entered into the interest rate swap agreement that fixed the GBP-based LIBOR rate at 3.42% through its expiration on August 10, 2014, and therefore, including the mortgage note’s spread of 2.26% over GBP-based LIBOR, effectively fixed the mortgage note’s all-in interest rate at 5.68% per annum for its remaining term. The stated rates, not including the interest rate swap, on the mortgage note payable were 2.77% and 2.78% at March 31, 2013 and December 31, 2012, respectively, and were based on GBP LIBOR plus a spread of 2.26%.

⁽⁷⁾  The two loans were assumed from the seller of One Wayside Road on June 24, 2010 and were recorded at estimated fair value which includes the premiums.

⁽⁸⁾  The two loans were assumed from the seller of 100 Tice Blvd. on September 28, 2010 and were recorded at estimated fair value which includes the premiums.

⁽⁹⁾  We entered into five loans totaling $37,000,000 on February 8, 2011 that are cross-collateralized by these properties.

⁽¹⁰⁾  The two loans were assumed from the seller of 70 Hudson Street and 90 Hudson Street, respectively, on April 11, 2011 and were recorded at estimated fair value which includes the premiums.

⁽¹¹⁾  The loan was assumed from the seller of Sabal Pavilion on December 30, 2011 and was recorded at estimated fair value which includes the premium. The anticipated maturity date as presented represents the early prepayment option date prior to the automatic debt extension that would include an increase in the interest rate to 11.38% and extend until the loan is paid in full.

⁽¹²⁾  The loans were assumed in connection with the acquisition of Duke Realty’s 20% interest in 17 properties held by the Duke joint venture on March 1, 2013 and were recorded at estimated fair value which includes the premiums.

⁽¹³⁾  These nine loans are cross-collateralized.

Note Payable at Fair Value secured by real property is summarized as follows (in thousands):

	Interest Rate as of								Notes Payable as of December 31,
Property	March 31, 2013			December 31, 2012			Maturity Date		March 31, 2013			December 31, 2012
Albion Mills Retail Park(1)(2)(3) .		5.25	%		5.25	%		October 10, 2013	$	8,774		$	9,373
Less Fair Value Adjustment										(55	)		(85	)
Note Payable at Fair Value									$	8,719		$	9,288

⁽¹⁾  The loan is subject to certain financial covenants (interest coverage and loan to value).

⁽²⁾  The Albion Mills Retail Park notes payable balance is presented at cost basis. This loan is carried on our balance sheet at fair value (see Note 16).

⁽³⁾  We entered into the interest rate swap agreement that fixed the GBP-based LIBOR rate at 3.94% through its expiration on October 10, 2013, and therefore, including the mortgage note’s spread of 1.31% over GBP-based LIBOR, effectively fixed the mortgage note’s all-in interest rate at 5.25% per annum for its remaining term. The stated rates, not including the interest rate swap, on the mortgage note payable were 1.82% and 1.84% at March 31, 2013 and December 31, 2012, respectively and were based on GBP LIBOR plus a spread of 1.31%.

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Unconsolidated Notes Payable secured by real property are summarized as follows (in thousands):

	Interest Rate as of ,							Notes Payable as of
Property	March 31, 2013			December 31, 2012			Maturity Date	March 31, 2013		December 31, 2012
Buckeye Logistics Center(2)		5.58	%		5.58	%	October 1, 2013	$	16,000	$	16,000
Afton Ridge Shopping Center		5.70			5.70		October 1, 2013		22,950		22,950
Aspen Corporate Center 500(2)		5.58			5.58		October 1, 2013		16,960		16,960
AllPoints at Anson Bldg. 1(2)		5.58			5.58		October 1, 2013		13,600		13,600
12200 President’s Court(2)		5.58			5.58		October 1, 2013		17,280		17,280
201 Sunridge Blvd.(2).		5.58			5.58		October 1, 2013		15,520		15,520
AllPoints Midwest Bldg. 1(2)		5.58			5.58		January 1, 2014		19,200		19,200
125 Enterprise Parkway(2)		5.58			5.58		January 1, 2014		21,440		21,440
Celebration Office Center III(3)(4)		—			4.25		December 1, 2015		0		7,338
22535 Colonial Pkwy(3)(4)		—			4.25		December 1, 2015		0		6,566
Fairfield Distribution Ctr. IX		5.00			5.00		September 1, 2021		3,623		3,643
Northpoint III(3)(4)		—			4.25		December 1, 2015		0		8,497
Goodyear Crossing II(3)(4)		—			4.25		December 1, 2015		0		16,221
1400 Perimeter Park Drive(3)(4)		—			4.25		December 1, 2015		0		1,931
3900 North Paramount Parkway(3)(4)		—			4.25		December 1, 2015		0		6,373
3900 South Paramount Parkway(3)(4)		—			4.25		December 1, 2015		0		6,373
Miramar I(3)(4)		—			4.25		December 1, 2015		0		7,570
Miramar II(3)(4)		—			4.25		December 1, 2015		0		10,196
Point West I(3)(4)I		—			3.41		December 6, 2016		0		9,093
McAuley Place(3)(4)		—			3.98		September 1, 2018		0		10,864
Sam Houston Crossing I		4.42			4.42		September 1, 2021		8,582		8,619
533 & 555 Maryville Centre		5.24			5.24		October 1, 2021		19,203		19,275
Regency Creek I		5.24			5.24		October 1, 2021		8,818		8,851
Atrium I(4)		—			3.78		May 31, 2018		0		18,762
Easton III(4)		—			3.95		January 31, 2019		0		5,322
West Lake at Conway		5.00			5.00		September 1, 2021		7,556		7,598
The Landings I & II(4)		—			5.24		October 1, 2021		0		23,603
Norman Pointe I & II(4)		—			5.24		October 1, 2021		0		35,011
Weston Pointe I—IV		5.24			5.24		October 1, 2021		36,055		36,191
Graben Distribution Center I & II		2.39			2.39		July 27, 2017		31,902		32,814
Koblenz Distribution Center		2.27			2.27		November 11, 2017		32,568		33,500
Unconsolidated Notes Payable								$	291,257	$	467,161

⁽¹⁾ Unconsolidated notes payable amounts are at our pro rata share of effective ownership, which is 80% for all except for the Afton Ridge Shopping Center which is 90%.

⁽²⁾ These seven loans are cross-collateralized.

⁽³⁾ These nine loans are cross-collateralized^.

⁽⁴⁾ These loans were assumed on March 1, 2013 in connection with our acquisition of Duke Realty’s 20% interest in 17 properties previously held by the Duke joint venture and are presented in the Consolidated Notes Payables table as of March 31, 2013.

Upon the maturity of our debt, there is a market risk as to the prevailing rates at the time of refinancing. Changes in market rates on our fixed-rate debt affect the fair market value of our debt but it has no impact on interest expense or cash flow. A 100 basis point increase or decrease in interest rates on our fixed rate debt would not increase or decrease our annual interest expense on our fixed rate debt.

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The fair value of long-term debt was estimated based on current interest rates available to us for debt instruments with similar terms. The following tables summarize our financial instruments and their calculated fair value at March 31, 2013 and December 31, 2012 (in thousands):

	As of March 31, 2013
	Carrying Value			Total Fair Value
Financial Assets (Liabilities):
Interest Rate Swaps—Non Qualifying	$	(3,907	)	$	(3,907	)
Interest Rate Swaps—Qualifying		(824	)		(824	)
Notes Payable		(726,796	)		(801,251	)
Loan Payable		(320,044	)		(320,044	)

A 100 basis point increase or decrease in interest rates would increase or decrease the fair market value of our notes payable by $27,221,000 at March 31, 2013. In addition, a 100 basis point increase or decrease in interest rates would either increase or decrease annual variable interest expense as follows; approximately $86,000 on the Thames Valley Five property, approximately $88,000 on the Albion Mills Retail Park property and approximately $212,000 on the Maskew Retail Park property.

	As of December 31, 2012
	Carrying Value			Total Fair Value
Financial Assets (Liabilities):
Interest Rate Swaps—Non Qualifying	$	(423	)	$	(423	)
Interest Rate Swaps—Qualifying		(1,015	)		(1,015	)
Notes Payable		(502,232	)		(523,739	)
Loan Payable		(265,000	)		(265,000	)

In addition to changes in interest rates, the value of our real estate is subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of lessees, which may affect our ability to refinance our debt if necessary.

Debt Maturities

The following table details our consolidated and unconsolidated debt maturities as of March 31, 2013 (in thousands):

	Consolidated Debt(1)						Unconsolidated Debt(2)						Consolidated & Unconsolidated Debt (1)(2)
	Scheduled Amortization		Term Maturities		Total		Scheduled Amortization		Term Maturities		Total		Scheduled Amortization		Term Maturities		Total
2013 (Nine months ending December 31, 2013)(3)	$	11,828		32,049	$	43,877	$	1,047	$	102,310	$	103,357	$	12,875	$	134,360	$	147,235
2014		16,292		52,561		68,853		1,460		40,640		42,100		17,752		93,201		110,953
2015		16,028		132,448		148,476		1,536		—		1,536		17,564		132,448		150,012
2016		12,838		191,385		204,223		1,617		—		1,617		14,455		191,385		205,840
2017		12,028		34,327		46,355		1,701		64,470		66,171		13,729		98,797		112,526
2018		10,127		261,943		272,070		1,790		—		1,790		11,917		261,942		273,859
2019		7,447		100,785		108,232		1,884		—		1,884		9,331		100,785		110,116
2020		5,962		50,000		55,962		1,982		—		1,982		7,944		50,000		57,944
2021		3,742		70,449		74,191		1,505		69,315		70,820		5,247		139,764		145,011
2022		1,870		—		1,870		—		—		—		1,870		—		1,870
2023		1,987		—		1,987		—		—		—		1,987		—		1,987
Thereafter		1,336		—		1,336		—		—		—		1,336	��	—		1,336
Total	$	101,485	$	925,947	$	1,027,432	$	14,522	$	276,735	$	291,257	$	116,007	$	1,202,682	$	1,318,689

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Fixed and Floating Interest Rate Debt as of March 31, 2013 (in thousands):

	Consolidated Debt(1)							Unconsolidated Debt(2)							Consolidated & Unconsolidated Debt(1)(2)
	Scheduled Amortization		Term Maturities		Total			Scheduled Amortization		Term Maturities		Total			Scheduled Amortization		Term Maturities		Total
Amount
Fixed Interest Rate Debt	$	101,485	$	855,903	$	957,388		$	14,522	$	276,735	$	291,257		$	116,007	$	1,132,638	$	1,248,645
Floating Interest Rate Debt		—		70,044		70,044			—		—		—			—		70,044		70,044
Total	$	101,485	$	925,947	$	1,027,432		$	14,522	$	276,735	$	291,257		$	116,007	$	1,202,682	$	1,318,689
Weighted Average Remaining Term (years)
Fixed Interest Rate Debt						4.93							3.89							4.69
Floating Interest Rate Debt						3.46							N/A							3.46
Total						4.85							3.89							4.64
Weighted Average Interest Rate
Fixed Interest Rate Debt						4.59	%						4.74	%						4.62	%
Floating Interest Rate Debt						1.81	%						N/A							1.81	%
Total						4.40	%						4.74	%						4.47	%

⁽¹⁾ Consolidated debt amount includes a $70,044,000 outstanding balance on the Unsecured Credit Facility as of March 31, 2013. The Unsecured Credit Facility may be extended for an additional year from September 2016 to September 2017.

⁽²⁾ Unconsolidated debt amounts are at our pro rata share of effective ownership.

⁽³⁾ The Thames Valley Five consolidated debt ($8,575,000 at March 31, 2013) maturity date may be extended for an additional two years from May, 2013 to May, 2015. In addition, Afton Ridge has the option to extend the maturity date of the unconsolidated debt ($22,950,000 at March 31, 2013—our share) for one additional year from October 2013 to October 2014.

Encumbered and Unencumbered Properties

The following table details our Encumbered and Unencumbered properties as of March 31, 2013 (Approximate Acquisition Cost and Debt Balance in thousands):

	Consolidated Properties						Unconsolidated properties(1)						Consolidated & Unconsolidated Properties(1)
	Properties		Approximate Acquisition Cost		Debt Balance		Properties		Approximate Acquisition Cost		Debt Balance		Properties		Approximate Acquisition Cost		Debt Balance
Encumbered Properties		48	$	1,423,143	$	707,388		21	$	599,970	$	291,257		69	$	2,023,113	$	998,645
Unencumbered Properties		51		1,149,852		—		9		113,752		—		60		1,263,604		—
Unsecured Debt		—		—		320,044		—		—		—		—		—		320,044
Total Properties		99	$	2,572,995	$	1,027,432		30	$	713,722	$	291,257		129	$	3,286,717	$	1,318,689

⁽¹⁾ Number of Properties at 100%. Approximate Acquisition Cost and Debt Balance for Unconsolidated Properties is at our pro rata share of effective ownership. Does not include our investment in CBRE Strategic Partners Asia.

Subsequent Events

On April 26, 2013, our Board of Trustees determined that it is in the best interest of us and our shareholders to list our common shares of beneficial interest on a national securities exchange. We intend to list our common shares of beneficial interest on the NYSE under the ticker symbol “CSG.” We anticipate that our common shares of beneficial interest will be listed on the NYSE on or about May 21, 2013 (the “Listing”). The completion of the Listing is subject to certain conditions.

We also intend to commence a modified “Dutch Auction” tender offer (subject to all appropriate filings with the SEC) to purchase up to $125,000,000 of our common shares of beneficial interest. Under the terms of the proposed tender offer, we intend to select the lowest price, not greater than $10.60 nor less than $10.10 per common share of beneficial interest, net to the tendering shareholder in cash, less any applicable withholding taxes and without interest, that will allow us to purchase up to $125,000,000 of our common shares of beneficial interests or a lower amount depending upon the number of common shares properly tendered and not withdrawn. We

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expect to allow shareholders to tender all or a portion of their common shares in the tender offer. In the event that the tender offer is oversubscribed, proration of tendered common shares will be calculated promptly after the tender offer expires. We intend to fund the tender offer with funds available under the Unsecured Credit Facility. We expect to commence the proposed tender offer on or about May 21, 2013 in conjunction with the Listing. Wells Fargo Securities, LLC and Citigroup Global Markets Inc. will be the Dealer Managers for the proposed tender offer.

This Quarterly Report on Form 10-Q is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any securities of the Company. The tender offer will be made only pursuant to an offer to purchase, letter of transmittal and related materials that the Company intends to distribute to its shareholders and file with the SEC. The full details of the tender offer, including complete instructions on how to tender Shares, will be included in the offer to purchase, the letter of transmittal and other related materials, which the Company will distribute to shareholders and file with the SEC upon commencement of the tender offer. Shareholders are urged to carefully read the offer to purchase, the letter of transmittal and other related materials when they become available because they will contain important information, including the terms and conditions of the tender offer. Shareholders may obtain free copies of the offer to purchase, the letter of transmittal and other related materials that the Company files with the SEC at the SEC’s website athttp://www.sec.gov or by calling the information agent for the contemplated tender offer, who will be identified in the materials filed with the SEC at the commencement of the tender offer. In addition, shareholders may obtain free copies of the Company’s filings with the SEC from the Company’s website athttp://www.chambersstreet.com or by directing a request to Mr. Martin A. Reid, Chambers Street Properties, 47 Hulfish Street, Suite 210, Princeton, NJ 08542 or (609) 683-4900.

On April 26, 2013, our Board of Trustees determined that in contemplation of the Listing and the tender offer described above, our share redemption program will terminate upon the Listing, which is expected to occur on or about May 21, 2013.

On April 26, 2013, our Board of Trustees determined that in contemplation of the Listing and the tender offer described above, our dividend reinvestment plan will terminate upon the Listing, which is expected to occur on or about May 21, 2013.

On April 26, 2013, our Board of Trustees approved a quarterly distribution of $0.125 per common share, to be paid on October 11, 2013 to the holders of record of common shares on September 26, 2013.

On May 1, 2013, we paid off the Sabal Pavilion fixed rate mortgage loan in the amount of $14,700,000.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of quantitative and qualitative disclosures about market risk, see the “Quantitative and Qualitative Disclosures About Market Risk” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations above.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We have formally adopted a policy for disclosure controls and procedures that provides guidance on the evaluation of disclosure controls and procedures and is designed to ensure that all corporate disclosure is complete and accurate in all material respects and that all information required to be disclosed in the periodic reports submitted by us under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods and in the manner specified in the Securities and Exchange Commission’s rules and forms and that disclosure controls and procedures were effective to ensure that the information required to be disclosed by us is accumulated and communicated to our management, including our chief executive officer and chief financial offer, as appropriate to allow timely decisions regarding required disclosure. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within our company to disclose material information otherwise required to be set forth in our periodic reports.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures. Based upon that evaluation, as required by the Securities Exchange Act Rule 13(a)-15(e), our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Controls Over Financial Reporting

No changes in internal control over financial reporting occurred during the fiscal quarter ended March 31, 2013 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

We are not party to any material legal proceedings as of March 31, 2013.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors set forth in Item 1.A. to Part I of our Annual Report on Form 10-K for the year ended December 31, 2012.

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

Unregistered Sales of Securities and Repurchases of Securities

During the three months ended March 31, 2013, we did not sell any equity securities that are not registered under the Securities Act of 1933, as amended.

The following table provides information with respect to our Share Redemption Program for the three months ended March 31, 2013:

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or approximate dollar value) of Shares that May  Yet Be Purchased Under the Plans or Programs
January 1, 2013 to January 31, 2013		2,838,798.92	$	9.48		N/A		N/A
February 1, 2013 to February 28, 2013		—		—		N/A		N/A
March 1, 2013 to March 31, 2013		—		—		N/A		N/A
Total		2,838,798.92	$	9.48		N/A		N/A

Use of Proceeds from Sale of Registered Securities

The registration statement relating to our initial public offering (No. 333-127405) was declared effective on October 24, 2006. CNL Securities Corp. was the dealer manager of our initial public offering. The registration statement covered up to $2,000,000,000 in common shares of beneficial interest, 90% of which were offered at a price of $10.00 per share, and 10% of which were offered pursuant to our dividend reinvestment plan at a purchase price equal to the higher of $9.50 per share or 95% of the fair market value of a common share on the reinvestment date, as determined by the Investment Advisor or another firm we choose for that purpose. Our initial public offering was terminated effective as of the close of business on January 29, 2009. As of the close of business on January 29, 2009, we had sold a total of 60,808,967 common shares in the initial public offering, including 1,487,943 common shares which were issued pursuant to our dividend reinvestment plan. We withdrew from registration a total of 140,243,665 common shares that were registered but not sold in connection with the initial public offering. From October 24, 2006 (effective date) through January 29, 2009 (termination date), we had accepted subscriptions from 13,270 investors, issued 60,808,967 common shares and received $607,345,702 in gross offering proceeds pursuant to our initial public offering. After payment of approximately $8,290,000 in acquisition fees and related expenses, payment of approximately $26,335,000 in selling commission, $8,898,000 in dealer manager fees, $4,008,000 in marketing support fees and payment of approximately $12,147,000 in organization and offering expenses, as of January 29, 2009, we had raised aggregate net offering proceeds of approximately $548,000,000.

The registration statement relating to our follow-on public offering (No. 333-152653) was declared effective on January 30, 2009. CNL Securities Corp. was the dealer manager of our follow-on offering. The registration statement covered up to $3,000,000,000 in common shares of beneficial interest, 90% of which were offered at a price of $10.00 per share, and 10% of which were offered pursuant to our dividend reinvestment plan at a purchase price equal to the higher of $9.50 per share or 95% of the fair market value of a common share on the reinvestment date, as determined by the Investment Advisor or another firm we choose for that purpose. Our follow on offering was closed on January 30, 2012. From January 30, 2009 (effective date) through March 31, 2012, we had accepted subscriptions from 49,377 investors, issued 190,672,251 common shares and received $1,901,137,211 in gross offering proceeds pursuant to our public offering after payment of $46,057,000 in acquisition fees and related expenses, payment of approximately $108,365,000 in selling commissions, $35,900,000 in dealer manager fees, $17,833,000 in marketing support fees and payment of approximately $24,189,000 in organization and offering expenses. As of January 30, 2012, we had raised aggregate net offering proceeds of approximately $1,669,000,000.

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ITEM 3 DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

10.1	Omnibus Agreement, by and between Duke Realty Limited Partnership and CSP Operating Partnership, LP dated January 29, 2013 (filed as exhibit 10.1 to the our Current Report on Form 8-K filed on January 31, 2013 and incorporated herein by reference).
10.2	First Amendment to the Amended and Restated Limited Liability Company Agreement of Duke/Hulfish, LLC (filed as exhibit 10.1 to our Current Report on Form 8-K filed on March 7, 2013 and incorporated herein by reference).
10.3	First Amendment to Credit Agreement, dated March 7, 2013, by and among CSP Operating Partnership, LP as Borrower, Chambers Street Properties, as Parent, Wells Fargo Bank, National Association, as Administrative Agent, the financial institutions party thereto as Lenders, Wells Fargo Bank, National Association, Bank of Montreal, Barclays Bank PLC, JPMorgan Chase Bank, N.A., Regions Bank, TD Bank, Citibank, N.A., Union Bank, N.A., PNC Bank, National Association, RBS Citizens, N.A. U.S. Bank National Association, and Goldman Sachs Bank USA (filed as exhibit 10.1 to our Current Report on Form 8-K filed on March 13, 2013 and incorporated herein by reference).
10.4	Term Loan Agreement, dated March 7, 2013, by and among CSP Operating Partnership, LP as Borrower, Chambers Street Properties, as Parent, Wells Fargo Bank, National Association, as Administrative Agent, the financial institutions party thereto as Lenders, Wells Fargo Bank, National Association, Bank of Montreal, JPMorgan Chase Bank, N.A. Regions Bank, Union Bank, N.A., PNC Bank, National Association, RBS Citizens, N.A. and U.S. Bank National Association (filed as exhibit 10.2 to our Current Report on Form 8-K filed on March 13, 2013 and incorporated herein by reference).
31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
31.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.1	Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.2	Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
101*	The following materials from Chambers Street Properties’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Equity and (vi) the Notes to the Condensed Consolidated Financial Statements, furnished herewith.

* Users of this data are advised that pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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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.

	Chambers Street Properties
Date: May 15, 2013	/s/    JACK A. CUNEO
	Jack A. Cuneo
	President and Chief Executive Officer
Date: May 15, 2013	/s/    MARTIN A. REID
	Martin A. Reid
	Chief Financial Officer

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