UNITED STATES ~~SECURITIES~~ ~~AND EXCHANGE COMMISSION~~

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, ~~2010~~2011

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

For the transition period from to

Commission file number: 0-51295

NNN 2003 VALUE FUND, LLC

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		20-0122092 (I.R.S. Employer Identification No.)
Delaware		20-0122092
1551 N. Tustin Avenue, Suite 300, Santa Ana, California (Address of principal executive offices)		92705 (Zip Code)
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1551 N. Tustin Avenue, Suite 200, Santa Ana, California		92705
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (714) ~~667~~975-~~8252~~2999

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


Title of each class		Name of each exchange on which registered
None		None

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

Class A LLC Membership Interests ~~Class B~~ ~~LLC Membership Interests Class C LLC Membership Interests (Title of class)~~

~~Indicate~~Class byB ~~check~~LLC ~~mark~~Membership ifInterests ~~the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ~~

~~Indicate~~Class byC ~~check~~LLC ~~mark~~Membership ~~if the registrant is not required to file reports pursuant to Section~~Interests ~~13 or Section 15(d) of the Act. Yes o No þ~~

~~Indicate by check mark whether the registrant~~ (~~1) has~~Title ~~filed all reports required to be filed by Sections 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~~class), ~~and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o~~

Indicate by check mark ~~whether~~if the registrant ~~has~~is ~~submitted~~a ~~electronically~~well-known ~~and~~seasoned ~~posted on its corporate Web site~~issuer, ifas ~~any,~~defined ~~every~~in ~~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~~Securities ~~12 months (or such shorter period that the registrant was required to submit and post such files)~~Act. Yes o ¨ No x o

Indicate by check mark if ~~disclosure~~the ofregistrant ~~delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter)~~ is not ~~contained~~required ~~herein, and will not be contained,~~ to ~~the~~file ~~best~~reports ofpursuant ~~registrant’s~~to ~~knowledge,~~Section 13 ~~in definitive proxy~~ or ~~information statements incorporated by reference in Part~~Section ~~III~~15(d) of ~~this~~the ~~Form 10-K or any amendment to this Form 10-K~~Act. Yes ¨ No x þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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

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

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

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

As of June 30, ~~2010~~2011, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the outstanding units held by non-affiliates of the registrant was approximately $49,850,000 (based on the price for which each unit was sold). No established market exists for the registrant’s units.

As of March 1815, ~~2011~~2012, there were 9,970 units of NNN 2003 Value Fund, LLC outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

NNN 2003 VALUE FUND, LLC

TABLE OF CONTENTS

	Page
PART I
Item 1. Business	3	3
Item 1A. Risk Factors	7	7
Item 1B. Unresolved Staff Comments	21	7
Item 2. Properties	22	7
Item 3. Legal Proceedings	23	8
Item 4. [Removed and Reserved.]	23
Item 4. Mine Safety Disclosures		8
PART II
Item 5. Market for Registrant’s Common Equity, Related Unit Holder Matters and Issuer Purchases of Equity Securities	24	9
Item 6. Selected Financial Data	25	9
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25	10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	39	17
Item 8. Financial Statements and Supplementary Data	40	17
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	40	17
Item 9A. Controls and Procedures	40	17
Item 9B. Other Information	40	18
PART III
Item 10. Directors, Executive Officers and Corporate Governance	41	19
Item 11. Executive Compensation	42	20
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Unit Holder Matters	43	21
Item 13. Certain Relationships and Related Transactions, and Director Independence	43	21
Item 14. Principal Accounting Fees and Services	45	22
PART IV
Item 15. Exhibits and Financial Statement Schedules	46	24
SIGNATURES	73	46
Exhibit 21.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

Forward-Looking Statements

Historical results and trends should not be taken as indicative of future operations. Our statements contained in this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Actual results may differ materially from those included in the forward-looking statements. We intend those forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of us, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “prospects,” or similar expressions. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions generally and the real estate market specifically; sales prices, lease renewals and new leases; legislative/regulatory changes; availability of capital; changes in interest rates; our ability to service our debt, competition in the real estate industry; the supply and demand for operating properties in our current and proposed market areas; changes in accounting principles generally accepted in the United States of America, or GAAP, policies and guidelines applicable to us; our ongoing relationship with our manager (as defined below); and litigation. These risks and uncertainties should be considered in evaluating forward looking statements and undue reliance should not be placed on such statements. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the United States Securities and Exchange Commission, or the SEC.

PART I

Item 1.

Business.

The use of the words “we,” “us,” or “our” refers to NNN 2003 Value Fund, LLC and its subsidiaries, except where the context otherwise requires.

Our Company

NNN 2003 Value Fund, LLC was formed as a Delaware limited liability company on June 19, 2003. We were organized to acquire, own, operate and subsequently sell our ownership interests in a number of unspecified properties believed to have higher than average potential for capital appreciation, or value-added properties. AsIn ~~of December 31~~2011, ~~2010,~~ we ~~held~~disposed of our three remaining interests in ~~three~~ commercial office properties, comprised of two consolidated properties and one unconsolidated property. Our two consolidated properties ~~consist~~disposed of in 2011 consisted of Sevens Building, located in St. Louis, Missouri, or the Sevens Building property, and Four Resource Square, located in Charlotte, North Carolina, or the Four Resource Square property., ~~Our~~and our unconsolidated property interest ~~consists~~was of an 8.5% ~~ownership~~ interest in Enterprise Technology Center, located in Scotts Valley, California, or the Enterprise Technology Center property. We currently intend to dispose of all of our remaining properties and pay distributions to our unit holders from available funds, if any. We do not anticipate acquiring any additional real estate properties at this time.

~~Our~~The mortgage ~~ability~~loan tofor ~~continue~~the Sevens Building property, which had an outstanding principal balance of $21,494,000 as aof ~~going~~December 31, ~~concern~~2010, ismatured ~~dependent~~on ~~upon~~October 31, ~~our~~2010 ~~ability~~and was in default due to ~~generate~~non-payment of the outstanding principal balance upon ~~necessary~~maturity. ~~cash~~The ~~flows~~mortgage ~~and/or~~loan ~~retain~~documents for the ~~necessary~~Sevens ~~financing~~Building property included an option to ~~meet~~extend ~~our~~the ~~obligations~~maturity ~~and~~date ~~pay~~for an additional 12 months beyond October 31, 2010; however, we determined that it was not in the best interest of our unit ~~liabilities~~holders asto ~~they~~attempt ~~come~~to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. ~~During~~Furthermore, the ~~year~~estimated ~~ended~~value ~~December~~of the Sevens Building property was significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the Sevens Building property would exceed the principal balance by the end of the potential extension term. On March 317, ~~2010~~2011, we ~~had~~received a ~~loss~~letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building ~~continuing~~property ~~operations~~pursuant to our default on the mortgage loan for the Sevens Building property. On March 25, 2011, the successor trustee appointed by the Sevens Building lender conducted a public auction and sold the Sevens Building property to General Electric Credit Equities, an entity affiliated with the Sevens Building lender, as buyer, for a sale price of $617,~~623~~400,000. ~~and~~As ~~certain~~a result of the sale, our ~~mortgage~~100% ~~loans~~ownership ~~went~~interest ~~into~~in ~~default~~the Sevens Building property was sold and conveyed to the buyer and a trustee’s deed was recorded on the Sevens Building property in favor of the buyer. We did not receive any cash proceeds from the sale of the Sevens Building property. On April 29, 2011, we transferred $850,000 to the Sevens Building ~~Accordingly~~lender, ~~there~~which isrepresented ~~substantial~~the ~~doubt~~approximate ~~about~~amount ~~our~~of ~~ability~~net cash generated by the Sevens Building property subsequent to ~~continue~~the asdefault aon ~~going~~the ~~concern~~mortgage loan on October 31, 2010.

The mortgage loan for the Sevens Building property, which had an outstanding principal balance of $21,494,000 as of December 31, 2010, matured on October 31, 2010 and is currently in default due to non-payment of the outstanding principal balance upon maturity. The loan documents include an option to extend the maturity date for an additional 12 months beyond October 31, 2010; however, we determined that it was not in the best interest of our unit holders to attempt to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. Further, the estimated value of the Sevens Building property is significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the property would exceed the principal balance by the end of the potential extension term. As such, we had been in discussions with the Sevens Building lender regarding our options for transferring the Sevens Building property to the Sevens Building lender, including foreclosure, deed-in-lieu of foreclosure, or another form of transfer. However, on March 7, 2011, we received a letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building property pursuant to our default on the mortgage loan for the Sevens Building property. A successor trustee has been appointed by the Sevens Building lender to conduct a public auction for the sale of the Sevens Building property, which is set to take place on March 25, 2011.

In addition, the mortgage loan for the Four Resource Square property, which had an outstanding principal balance of $21,977,000 as of December 31, 2010, had an original maturity date of November 30, 2010 but was extended to January 20, 2011. The mortgage loan documents included an option to extend the maturity date for an additional 12 months beyond November 30, 2010; however, we determined that it was not in the best interest of our unit holders to attempt to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. Further, the estimated value of the Four Resource Square property was significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the property would exceed the principal balance by the end of the potential extension term. As such, on January 20, 2011, we sold the Four Resource Square property to an entity affiliated with the Four Resource Square lender for a sales price equal to the outstanding principal balance of the mortgage loan of $21,977,000. We did not receive any cash proceeds from the sale of the property.

The ~~maturities~~mortgage ofloan for the ~~mortgage~~Four ~~loans~~Resource onSquare ~~the~~property, ~~Sevens~~which ~~Building~~had ~~and~~an ~~Four~~outstanding ~~Resource Square~~principal ~~properties~~balance of $21,977,000 ~~the~~as ~~subsequent~~of ~~sale~~December 31, 2010, had an original maturity date of November 30, 2010, but was extended to January 20, 2011. The mortgage loan documents for the Four Resource Square property toincluded an ~~entity~~option ~~affiliated~~to ~~with~~extend ~~its~~the ~~lender~~maturity date for noan ~~cash~~additional ~~proceeds~~12 ~~and~~months beyond November 30, 2010; however, we determined that it was not in the ~~expected~~best ~~foreclosure~~interest of our unit holders to attempt to extend the ~~Sevens~~maturity ~~Building~~date ~~property~~due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we ~~also~~did not expect ~~will~~would ~~result~~be inrecovered nothrough ~~cash~~property ~~proceeds~~operations over the subsequent 12 months. Furthermore, ~~combined~~the ~~with~~estimated ~~our~~value ~~loss~~of ~~from~~the ~~continuing~~Four ~~operations~~Resource Square property was significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the Four Resource Square property would exceed the principal balance by the end of the potential extension ~~raises~~term. ~~substantial~~On ~~doubt~~January 20, ~~about~~2011, ~~our~~we ~~ability~~sold the Four Resource Square property to ~~continue~~an asentity affiliated with the Four Resource Square lender for a ~~going~~sales ~~concern~~price equal to the outstanding principal balance of the mortgage loan of $21,977,000. We did not receive any cash proceeds from the sale of the Four Resource Square property.

~~Grubb~~The &mortgage ~~Ellis~~loan ~~Realty~~for ~~Investors,~~the ~~LLC,~~Enterprise orTechnology Center ~~Grubb~~property &had ~~Ellis~~been ~~Realty~~in ~~Investors,~~default orsince ~~our~~April 11, ~~manager~~2010, ~~manages~~ usdue ~~pursuant~~to the inability to pay in full the ~~terms~~monthly interest and principal payment due on that date or within five days of anthat ~~operating~~date. ~~agreement~~Further, oron May 11, 2011, the ~~Operating~~mortgage ~~Agreement.~~loan ~~While~~for wethe ~~have~~Enterprise noTechnology ~~employees~~Center property, ~~certain~~which ~~executive~~had ~~officers~~a ~~and~~then ~~employees~~outstanding balance of ~~our~~$32,562,000, ~~manager~~matured ~~provide~~and ~~services~~was tonot ~~us pursuant~~repaid, totriggering ~~the~~an ~~Operating~~additional ~~Agreement~~event of default. ~~Our~~On ~~manager~~July 15, ~~engages~~2011, ~~affiliated~~LBUSB ~~entities~~2004-C4 Enterprise Way, ~~including~~L.P., ~~Triple~~an ~~Net~~entity affiliated with ~~Properties~~UBS ~~Realty~~Real Estate Investments, Inc., or ~~Realty,~~the toEnterprise ~~provide~~Technology ~~certain~~Center ~~services~~lender, tofiled ~~us.~~a ~~Realty~~complaint ~~serves~~against asNNN ~~our property~~Enterprise ~~manager~~Way, ~~pursuant~~LLC toand the ~~terms~~other 31 tenant-in-common, or TIC, owners of the ~~Operating~~Enterprise ~~Agreement~~Technology ~~and~~Center a property ~~management~~seeking judicial ~~agreement~~foreclosure, orspecific performance for the ~~Management~~appointment ~~Agreement~~of a receiver and injunctive relief. ~~The~~On ~~Operating~~July 21, ~~Agreement~~2011, ~~terminates~~the ~~upon~~court ~~our~~ordered ~~dissolution. The~~the ~~unit~~appointment ~~holders~~of ~~may~~a ~~not~~receiver ~~vote~~and togranted ~~terminate~~injunctive ~~our~~relief. ~~manager~~As ~~prior~~a toresult, ~~the~~on ~~termination~~July 25, of2011, the ~~Operating~~receiver ~~Agreement~~appointed orby ~~our~~the ~~dissolution,~~court ~~except~~took ~~for~~possession ~~cause.~~of ~~The~~the ~~Management~~Enterprise ~~Agreement~~Technology ~~terminates~~Center ~~with~~property ~~respect~~and has been instructed to ~~each~~ ofproceed ~~our~~with ~~properties~~a ~~upon~~private sale of the ~~earlier~~property ofunder the ~~sale~~supervision of ~~each~~the ~~respective~~court. ~~property~~In oraddition, ~~December~~on July 3129, ~~2013.~~ ~~Realty~~2011, ~~may~~the beappointed ~~terminated~~trustee filed ~~without~~a ~~cause~~notice ~~prior~~of default and election to ~~the~~sell ~~termination~~under deed of trust on behalf of the ~~Management~~Enterprise ~~Agreement or~~Technology ~~our~~Center ~~dissolution,~~lender. ~~subject~~The totrustee’s ~~certain~~sale ~~conditions,~~occurred ~~including~~on ~~the~~November 29, ~~payment~~2011. byWe usdid tonot ~~Realty~~receive ofany ~~a termination~~cash ~~fee~~proceeds asfrom ~~provided~~the insale of the ~~Management~~Enterprise Technology ~~Agreement~~Center property.

~~Our~~As ~~manager’s~~a ~~principal~~result ~~executive~~of ~~offices~~the ~~are~~dispositions ~~located~~of atall ~~1551~~of N.our ~~Tustin~~remaining ~~Avenue,~~property ~~Suite 300~~interests, ~~Santa~~ ~~Ana,~~we ~~California~~adopted ~~92705~~the liquidation ~~and~~basis ~~its~~of ~~telephone~~accounting ~~number~~on ~~is (714)~~December ~~667-8252~~1, 2011. We ~~make~~are ~~our~~currently ~~periodic~~in ~~and current~~the ~~reports~~process ~~available~~of ~~through~~winding up our ~~manager’s~~operations, ~~website~~which atwe ~~www.gbe-realtyinvestors.com~~expect aswill ~~soon~~be ~~as reasonably~~completed ~~practicable~~within ~~after such materials are electronically filed with~~ the ~~United~~next ~~States Securities~~three ~~and~~to ~~Exchange~~nine ~~Commission~~months, orat ~~the~~which ~~SEC.~~time ~~They~~we ~~are~~will ~~also~~distribute ~~available~~any ~~for~~remaining ~~printing when accessed~~available ~~through~~funds ~~our~~to ~~manager’s website. We do not maintain~~ our ~~own~~unit ~~website~~holders orand ~~have~~will ancease ~~address or telephone number separate from our manager. Since we pay fees~~ to ~~our~~be ~~manager~~a ~~for~~going ~~its services, we do not pay rent for the use of their space~~concern.

Our Manager

On August 10, 2011, Daymark Realty Advisors, Inc., parent company of our manager, NNN Realty Investors, LLC (formerly, Grubb & Ellis Realty Investors, LLC), was acquired by IUC-SOV, LLC, an entity affiliated with Sovereign Capital Management and Infinity Real Estate. NNN Realty Investors, LLC, or our manager, manages us pursuant to the terms of an operating agreement, as amended, or the Operating Agreement. While we have no employees, certain executive officers and employees of our manager provide services to us pursuant to the Operating Agreement. Our manager engages affiliated entities, including Daymark Properties Realty, Inc. (formerly, Triple Net Properties Realty, Inc.), or Realty, to provide certain services to us. Realty serves as our property manager pursuant to the terms of the Operating Agreement and a property management agreement, as amended, or the Management Agreement. The Operating Agreement terminates upon our dissolution. The unit holders may not vote to terminate our manager prior to the termination of the Operating Agreement or our dissolution, except for cause. The Management Agreement terminates with respect to each of our properties upon the earlier of the sale of each respective property or December 31, 2013. Realty may be terminated without cause prior to the termination of the Management Agreement or our dissolution, subject to certain conditions, including the payment by us to Realty of a termination fee as provided in the Management Agreement.

Our manager’s principal executive offices are located at 1551 N. Tustin Avenue, Suite 200, Santa Ana, California 92705 and its telephone number is (714) 975-2999. We make our periodic and current reports available through our manager’s website at www.daymarkrealtyadvisors.com as soon as reasonably practicable after such materials are electronically filed with the United States Securities and Exchange Commission, or the SEC. They are also available for printing when accessed through our manager’s website. We do not maintain our own website or have an address or telephone number separate from those of our manager.

Investment Objectives and Policies

Business Strategy

Our primary business strategy was to acquire, own, operate and subsequently sell our ownership interests in a number of unspecified properties believed to have higher than average potential for capital appreciation, or value-added properties. ~~As of December 31, 2010, we held interests in three commercial office properties, comprised of two consolidated properties and one unconsolidated property.~~ Our principal objectives initially were to: (i) have the potential within approximately one to five years, subject to market conditions, to realize income on the sale of our properties; (ii) realize income through the acquisition, operation, development and sale of our properties or our interests in our properties; and (iii) make periodic distributions to our unit holders from cash generated from operations and capital transactions. WeDuring ~~currently~~2011, ~~intend~~we todisposed ~~dispose~~ of ~~all of~~ our remaining ~~properties~~property interests and ~~pay~~are ~~distributions~~currently toin ~~our~~the ~~unit~~process ~~holders~~of ~~from~~liquidating ~~available~~our ~~funds, if any~~assets. ~~We do not anticipate acquiring any additional real estate properties at this time.~~

Operating Strategies

Our primary operating strategy iswas to maximize returns to our investors through strategies designed to address the current economic and market factors adversely impacting our properties and are aimed at: (i) preserving cash flow from our operations; (ii) minimizing losses from our distressed assets; (iii) enhancing the performance and value of our properties where feasible; and (iv) generating cash from the sale of the assets, if possible. ~~Our~~Historically, our management strategies ~~include~~have included:

•

disposing of our under-performing or non-performing assets through the sale of such properties or returning these properties to our mortgage lenders through a deed-in-lieu of foreclosure of the property;

•

improving rental income and cash flow of our properties by aggressively marketing rentable space, renewal of existing leases and raising rents when feasible;

•

controlling operating expenses by centralization of asset and property management, leasing, marketing, accounting, renovation and data processing activities;

•

emphasizing regular maintenance and periodic renovation to meet the needs of current or prospective tenants in order to position our properties for sale at the highest possible price; and

• refinancing properties when favorable terms ~~are~~were available to increase cash flow.

Disposition Strategies

We ~~consider~~considered various factors when evaluating potential property dispositions including, without limitation, the following:

•

our liquidity and capital needs;

•

our evaluation of outstanding debt, including maturity dates, defeasance costs (if applicable), assumability, loan-to-value ratio and ability to refinance;

•

our desire to exit non-performing markets and dispose of under- or non-performing assets;

•

whether the property is strategically located;

•

tenant composition and lease rollover for the property;

•

general economic conditions and outlook, including job growth in the local market;

•

the general quality of the asset; and

•

our ability to sell the property at a price we believe would provide the best return to our unit holders in light of all facts and circumstances.

Our manager has total discretion with respect to the disposition of our ownership interests in our properties.

Financing Policies

We have financed our investments through a combination of equity and secured debt. As of December 31, 2010, our consolidated properties were subject to existing mortgage loans payable with an aggregate principal balance of $43,471,000, consisting of $21,000,000, or 48.3%, of fixed rate mortgage loans payable at a weighted-average interest rate of 10.95% per annum and $22,471,000, or 51.7%, of variable rate mortgage loans payable at a weighted-average interest rate of 7.26% per annum.

From time to time, we may utilize certain derivative financial instruments to limit interest rate risk. The derivatives we enter into are those which are used for hedging purposes rather than speculation. As of December 31, 2010, we did not hold any derivative instruments.

Tax Status

We are a pass-through entity for income tax purposes, and taxable income (loss) is reported by our unit holders on their individual tax returns. Accordingly, no provision has been made for income taxes in the accompanying consolidated statements of operations, except for insignificant amounts related to state franchise and gross margin taxes.

Distribution Policy

We have three classes of membership interests, or units, each having different rights with respect to distributions. As of December 31, ~~2010~~2011, 4,000 Class A units, 3,170 Class B units and 2,800 Class C units were outstanding. The rights and obligations of all unit holders are governed by the Operating Agreement. The declaration of distributions is determined by our manager. The timing and amount of distributions ~~will~~depends ~~depend~~ on our actual cash flow, financial condition, capital requirements and such other factors our manager may deem relevant.

5Effective November 1, 2008, we suspended monthly cash distributions to all unit holders. Instead, we pay periodic distributions to unit holders from available funds, if any. During the years ended December 31, 2011, 2010 and 2009, we distributed an aggregate of $500,000, $2,500,000 and $0, respectively, of available funds to our unit holders.

Effective November 1, 2008, we suspended monthly cash distributions to all unit holders. Instead, we will pay periodic distributions to unit holders from available funds, if any. During the years ended December 31, 2010, 2009 and 2008, we distributed $2,500,000, $0, and $2,908,000, respectively, of available funds to our unit holders. In addition, we distributed $500,000 of available funds to our unit holders on March 15, 2011.

Competition

We ~~compete~~competed with a considerable number of other real estate companies seeking to lease space and sell properties, some of which ~~may have~~ had greater marketing and financial resources than we dodid. Principal factors of competition in our business are the quality of properties (including the design and condition of improvements), leasing terms (including rent and other charges and allowances for tenant improvements), attractiveness and convenience of location, the quality and breadth of tenant services provided and reputation as an owner and operator of properties in the relevant market. Our ability to compete also ~~depends~~ depended on, among other factors, trends in the national, regional and local economies, financial condition and operating results of ~~current and prospective~~ tenants, availability and cost of capital, including capital raised by incurring debt, construction and renovation costs, taxes, governmental regulations, legislation and population trends.

When we ~~dispose~~disposed of our properties, we ~~are~~were in competition with sellers of similar properties to locate suitable purchasers, which may ~~result~~have resulted in us receiving lower net proceeds from the sale.

As of December 31, 2010, we held interests in three properties located in California, Missouri and North Carolina. Our properties may face competition in these geographic regions from other sellers, including other properties owned, operated or managed by our manager or its affiliates.

Government Regulation

Many laws and government regulations ~~are~~ were applicable to our properties, and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently.

Costs of Compliance with the Americans with Disabilities Act. Under the Americans with Disabilities Act of 1990, or ADA, all public accommodations must meet federal requirements for access and use by disabled persons. Although we believe that we ~~are~~were in substantial compliance with ~~present~~ the requirements of the ADA, none of our properties ~~have~~had been audited, nor ~~have~~had investigations of our properties been conducted to determine compliance. We may incur additional costs in connection with the ADA. Additional federal, state and local laws also may require modifications to our properties or restrict our ability to renovate our properties. We cannot predict the cost of compliance with the ADA or other legislation. If we incur substantial costs to comply with the ADA or any other legislation, our financial condition, results of operations, cash flow and ability to satisfy our debt service obligations could be adversely affected.

Costs of Government Environmental Regulation and Private Litigation. Environmental laws and regulations hold us liable for the costs of removal or remediation of certain hazardous or toxic substances which may be on our properties. These laws could impose liability without regard to whether we are responsible for the presence or release of the hazardous materials. Government investigations and remediation actions may have substantial costs and the presence of hazardous substances on a property could result in personal injury or similar claims by private plaintiffs. Various laws also impose liability on persons who arrange for the disposal or treatment of hazardous or toxic substances for the cost of removal or remediation of hazardous substances at the disposal or treatment facility. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. As the owner and operator of our properties, we may be deemed to have arranged for the disposal or treatment of hazardous or toxic substances.

Use of Hazardous Substances by Some of our Tenants. Some of our tenants may handle hazardous substances and wastes on our properties as part of their routine operations. Environmental laws and regulations subject these tenants, and potentially us, to liability resulting from such activities. We require tenants, in their leases, to comply with these environmental laws and regulations and to indemnify us for any related liabilities. We are unaware of any material noncompliance, liability or claim relating to hazardous or toxic substances or petroleum products in connection with any of our properties.

~~Other~~Costs ~~Federal,~~of ~~State~~Government Environmental Regulation and ~~Local~~Private ~~Regulations~~Litigation. ~~Our~~Environmental laws ~~properties~~and ~~are~~regulations ~~subject~~held tous ~~various~~liable ~~federal, state~~for ~~and~~the ~~local~~costs ~~regulatory~~of ~~requirements,~~removal ~~such~~or asremediation ~~state~~of ~~and~~certain ~~local~~hazardous ~~fire~~or ~~and~~toxic ~~life~~substances ~~safety~~which ~~requirements~~may have been on our properties. If weThese ~~fail~~laws tocould ~~comply~~have ~~with~~imposed ~~these~~liability ~~various~~without ~~requirements,~~regard to whether we ~~may~~were ~~incur~~responsible ~~governmental~~for ~~fines~~the presence or ~~private damage~~release ~~awards~~of the hazardous materials. ~~While~~Government weinvestigations ~~believe~~and ~~that~~remediation ~~our~~actions ~~properties~~may ~~are~~have ~~currently~~substantial incosts ~~material~~and ~~compliance~~the ~~with~~presence ~~all~~ of ~~these~~hazardous ~~regulatory~~substances ~~requirements,~~on wea doproperty ~~not~~could ~~know~~have ~~whether~~resulted ~~existing~~in ~~requirements~~personal ~~will~~injury ~~change~~ or ~~whether~~ ~~future~~similar ~~requirements~~claims ~~will~~by ~~require~~private plaintiffs. usVarious tolaws ~~make~~also ~~significant~~impose ~~unanticipated~~liability ~~expenditures.~~on ~~We believe,~~persons ~~based~~who inarrange ~~part~~for onthe ~~engineering~~disposal ~~reports~~or ~~which~~treatment ~~are~~of ~~generally~~hazardous ~~obtained~~or attoxic ~~the~~substances ~~time~~for ~~we acquire~~ the ~~properties,~~cost ~~that~~of ~~all~~removal or remediation of ~~our~~hazardous ~~properties~~substances ~~comply~~at inthe ~~all~~disposal ~~material~~or ~~respects~~treatment ~~with~~facility. ~~current~~These laws ~~regulations.~~often ~~However,~~impose ifliability wewhether ~~were~~or ~~required~~not tothe ~~make~~person ~~significant~~arranging ~~expenditures~~for ~~under~~the ~~applicable regulations,~~disposal ~~our~~ever ~~financial~~owned ~~condition,~~or ~~results~~operated the disposal facility. As the owner and operator of ~~operations~~our properties, ~~cash~~we ~~flow~~may ~~and~~have ~~ability~~been deemed to ~~satisfy~~have ~~our debt~~arranged ~~service~~for ~~obligations~~the ~~could~~disposal beor ~~adversely~~treatment ~~affected.~~of hazardous or toxic substances.

~~Significant~~Use of Hazardous Substances by Some of our Tenants. Some of our tenants may have handled hazardous substances and wastes on our properties as part of their routine operations. Environmental laws and regulations subjected these tenants, and potentially us, to liability resulting from such activities. We required tenants, in their leases, to comply with these environmental laws and regulations and to indemnify us for any related liabilities. We are unaware of any material noncompliance, liability or claim relating to hazardous or toxic substances or petroleum products in connection with any of our properties.

AsOther ofFederal, ~~December 31~~State and Local Regulations. Our properties were subject to various federal, ~~2010~~state and local regulatory requirements, ~~one~~such ~~tenant~~as atstate ~~our~~and ~~consolidated~~local ~~properties~~fire ~~represented~~and 10life safety requirements.0% If we failed to comply with these various requirements, we may have incured governmental fines or ~~more~~private damage awards. We believe that our properties were in material compliance with all of ~~aggregate~~these ~~annual~~regulatory ~~rental~~requirements. ~~revenue~~We believe, based in part on ~~contractual~~engineering ~~base~~reports ~~rent~~which ~~from~~are ~~leases~~generally inobtained ~~effect~~at the time we acquire the properties, asthat all of our properties complied in ~~follows:~~ all material respects with regulations.

Percentage of

2010 Annualized

Lease Expiration

Tenant

Base Rent

Property

Date

McKesson Information Solutions, Inc.

23.1

Four Resource Square

06/30/12

On January 20, 2011, the Four Resource Square property was sold to an entity affiliated with the Four Resource Square lender for a sales price equal to the outstanding principal balance of the mortgage loan of $21,977,000. We did not receive any cash proceeds from the sale of the property.

Geographic Concentration

As of December 31, 2010, we held interests in two consolidated properties, with one property each located in: (i) Missouri, which accounted for 52.7% of our annualized base rent; and (ii) North Carolina, which accounted for 47.3% of our annualized base rent. Accordingly, there is a geographic concentration of risk subject to fluctuations in each state’s economy.

Employees

We have no ~~employees~~full-time or ~~executive~~part-time ~~officers~~employees. Substantially all work performed for us is performed by employees ~~and executive officers~~ of our manager or its affiliates.

Financial Information About Segments

We ~~are~~were in the business of owning, managing, operating, leasing, developing, investing in and disposing of office buildings and value-add commercial office properties. We internally ~~evaluate~~ evaluated all of our properties as one industry segment and, accordingly, we do not report segment information.

Item 1A.

Risk Factors.

~~If we are unable to generate the necessary cash flows to meet our financial obligations, including~~Not the payment of outstanding principal balances and accrued interest on our mortgage loans, our lenders may declare us in default of the loans and exercise their remedies under the loan agreements, including foreclosure on the properties, which could have a material adverse effect on our financial position, results of operations and cash flows and has created substantial doubt about our ability to continue as a going concernapplicable.

Our ability to continue as a going concern is dependent upon our ability to generate the necessary cash flows and/or retain the necessary financing to meet our obligations and pay our liabilities as they come due. During the year ended December 31, 2010, we had a loss from continuing operations of $6,623,000 and certain of our mortgage loans went into default. Accordingly, there is substantial doubt about our ability to continue as a going concern.

The mortgage loan for the Sevens Building property, which had an outstanding principal balance of $21,494,000 as of December 31, 2010, matured on October 31, 2010 and is currently in default due to non-payment of the outstanding principal balance upon maturity. The mortgage loan documents include an option to extend the maturity date for an additional 12 months beyond October 31, 2010; however, we determined that it was not in the best interest of our unit holders to attempt to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. Further, the estimated value of the Sevens Building property is significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the property would exceed the principal balance by the end of the potential extension term. As such, we had been in discussions with the Sevens Building lender regarding our options for transferring the Sevens Building property to the Sevens Building lender, including foreclosure, deed-in-lieu of foreclosure, or another form of transfer. However, on March 7, 2011, we received a letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building property pursuant to our default on the mortgage loan for the Sevens Building property. A successor trustee has been appointed by the Sevens Building lender to conduct a public auction for the sale of the Sevens Building property, which is set to take place on March 25, 2011.

The maturities of the mortgage loans on the Sevens Building and Four Resource Square properties, the subsequent sale of the Four Resource Square property to an entity affiliated with its lender for no cash proceeds and the expected foreclosure of the Sevens Building property, which we also expect will result in no cash proceeds, combined with our loss from continuing operations, raises substantial doubt about our ability to continue as a going concern.

Our accompanying consolidated financial statements have been prepared assuming that we will be able to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

We rely on the disposition of our properties to generate cash to fund our operations and pay distributions to our unit holders.

As of December 31, 2010, we had two remaining consolidated properties, the Sevens Building and Four Resource Square properties. The mortgage loan for the Sevens Building property, which had an outstanding principal balance of $21,494,000 as of December 31, 2010, matured on October 31, 2010 and is currently in default due to non-payment of the outstanding principal balance upon maturity. The mortgage loan documents include an option to extend the maturity date for an additional 12 months beyond October 31, 2010; however, we determined that it was not in the best interest of our unit holders to attempt to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. Further, the estimated value of the Sevens Building property is significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the property would exceed the principal balance by the end of the potential extension term. As such, we had been in discussions with the Sevens Building lender regarding our options for transferring the Sevens Building property to the Sevens Building lender, including foreclosure, deed-in-lieu of foreclosure, or another form of transfer. However, on March 7, 2011, we received a letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building property pursuant to our default of the mortgage loan for the Sevens Building property. A successor trustee has been appointed by the Sevens Building lender to conduct a public auction for the sale of the Sevens Building property, which is set to take place on March 25, 2011.

As a result of the dispositions of the Tiffany Square property, the Executive Center I property and the Four Resource Square property for no cash proceeds, as well as the expected foreclosure of the Sevens Building property, which is also expected to result in no cash proceeds to us, our ability to generate cash to fund our operations and/or pay future distributions to our unit holders is significantly limited.

Since our cash flow is not assured, we may not pay distributions in the future.

Our ability to pay distributions has been adversely affected by the risks described herein. Effective November 1, 2008, we suspended monthly cash distributions to our unit holders. Although we distributed $2,500,000 of available funds to our unit holders during the year ended December 31, 2010 and distributed $500,000 on March 15, 2011, we cannot assure our unit holders that we will be able to pay distributions in the future. We also cannot assure our unit holders that the receipt of proceeds from future property dispositions, if any, will necessarily increase our cash available for distribution to our unit holders. Our total distributions to our unit holders will ultimately be significantly less than their initial investment.

Our use of borrowings to fund or partially fund our previous acquisitions and improvements on properties could result in foreclosures and unexpected debt service expenses upon refinancing, both of which could have an adverse impact on our operations and cash flow, and restrictive covenants in our mortgage loan documents may restrict our operating or disposition activities.

We have relied on and continue to rely on borrowings and other external sources of financing to fund or partially fund the costs of our previous investments, capital expenditures and other items. Accordingly, we are subject to the risks normally associated with debt financing, including, without limitation, the risk that our cash flow may not be sufficient to cover required debt service payments. There is also a risk that, if necessary, existing indebtedness will not be able to be refinanced or that the terms of such refinancing will not be as favorable as the terms of the existing indebtedness.

In addition, if we cannot meet our required mortgage payment obligations, the property or properties subject to such mortgage indebtedness could be foreclosed upon by, or otherwise transferred to, their respective lenders, which would result in loss of income and asset value to us. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our basis in the property, we would recognize income on foreclosure, but we may not receive any cash proceeds.

The mortgages on our properties contain customary restrictive covenants such as satisfaction of certain debt service coverage and other ratios. The mortgages also include provisions that may limit our ability, without the prior consent of the lender, to incur additional indebtedness, further mortgage or transfer the applicable property, discontinue insurance coverage, change the conduct of its business or make loans or advances to, enter into any transaction of merger or consolidation with, or acquire the business, assets or equity of, any third party. In addition, any future lines of credit or mortgage loans may contain financial covenants, further restrictive covenants and other obligations.

We have materially breached certain covenants or obligations in our debt agreements. As a result, the lender may seize our income from the property securing the mortgage loan or legally declare a default on the obligation, require us to repay the debt immediately and foreclose on the property securing the mortgage loan. We may then have to sell our properties either at a loss or at a time that prevents us from achieving a higher price. The failure to pay our indebtedness when due or failure to cure events of default could result in higher interest rates during the period of the loan default and could ultimately result in the loss of our properties through foreclosure. Additionally, if the lender were to seize the income from the property securing a mortgage loan, we would no longer have any discretion over the use of the income, which may prevent us from making distributions to our unit holders.

As discussed above in Item 1A., Risk Factors, the mortgage loan for the Sevens Building property, which had an outstanding principal balance of $21,494,000 as of December 31, 2010, matured on October 31, 2010 and is currently in default due to non-payment of the outstanding principal balance upon maturity. On March 7, 2011, we received a letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building property pursuant to our default on the mortgage loan for the Sevens Building property. A successor trustee has been appointed by the Sevens Building lender to conduct a public auction for the sale of the Sevens Building property, which is set to take place on March 25, 2010.

If we are not able to sell our properties in a timely manner, we may experience severe liquidity problems, may not be able to meet our obligations to our creditors and ultimately may become subject to bankruptcy proceedings.

In the event we are not able to sell our properties within a reasonable period of time and for a reasonable amount, or if our expenses exceed our estimates, we may experience severe liquidity problems and not be able to meet our financial obligations to our creditors in a timely manner. If we cannot meet our obligations to our creditors in a timely manner, we may ultimately become subject to bankruptcy proceedings.

Most, if not all, of our properties were purchased at a time when the commercial real estate market was experiencing substantial influxes of capital investment and competition for properties; therefore, our properties may not maintain their current value and may experience further decreases in value.

The commercial real estate market experienced a substantial influx of capital from investors prior to the recent market turmoil. This substantial flow of capital, combined with significant competition for real estate, resulted in inflated purchase prices for such assets. Most, if not all, of our properties were purchased in such an environment, therefore, we are subject to the risk that if the real estate market ceases to attract the same level of capital investment in the future as it has attracted, or if the number of companies seeking to acquire such assets decreases, our returns will be lower. The current estimated values of all of our remaining properties are less than our purchase price for such properties, and we can give no assurance that our properties will maintain their current value, or that the value will not continue to decrease even further.

Due to the risks involved in the ownership of real estate, including adverse real estate market conditions and our dependence upon our tenants to pay rent, there is no guarantee of any return on our unit holders’ investments and our unit holders may lose some or all of their remaining investment.

Our investments are subject to varying degrees of risk that generally arise from the ownership of real estate. Adverse changes at our properties beyond our control would substantially reduce our income from operations and decrease the values of our properties. These changes include, among others, the following:

• downturns in national, regional or local economic conditions where our properties are located, which generally will negatively impact the demand for office space and rental rates;

• changes in local market conditions such as an oversupply, including space available by sublease, or a reduction in demand, making it more difficult for us to lease space at attractive rental rates or at all;

• competition from other properties, which could cause us to lose current or prospective tenants or cause us to reduce rental rates;

• the ability to pay for adequate maintenance, insurance, utility, security and other operating costs, including real estate taxes and debt service payments, that are not necessarily reduced when circumstances such as market factors and competition cause a reduction in income from a property;

• changes in federal, state or local regulations and controls affecting rents, prices of goods, interest rates, fuel and energy consumption;

• changes in laws and governmental regulations, including those governing real estate usage, zoning and taxes; and

• changes in interest rates and the availability of financing.

A default by a tenant or the failure of a tenant’s guarantor to fulfill its obligations, or other early termination of a lease could, depending upon the size of the leased premises and our manager’s ability to successfully find a substitute tenant, have a material adverse effect on our revenues. As of December 31, 2010, rent paid by the ten largest tenants at our consolidated properties represented 63.4% of our annualized rental revenues. Based upon the current estimated values, our properties have decreased in value since we purchased them due to these changes, among others, and may continue to decrease in value even further, therefore, the value of our unit holders’ investments have likewise decreased and they may lose some or all of their remaining investment.

If we do not meet certain minimum financial covenants required by loans secured by our properties, or obtain waivers from the lenders, the lenders may declare us in default and exercise remedies under the loan agreements, including foreclosures on the properties, which could have a material adverse effect on our financial position, results of operations and cash flows and has created substantial doubt about our ability to continue as a going concern.

Our existing mortgage loans payable contain restrictive financial and non-financial covenants and certain of our mortgage loans payable require us to maintain specified financial ratios. Our ability to comply with these covenants may be affected by many events beyond our control and our future operating results may not allow us to comply with the covenants, or in the event of a default, to remedy that default. Our failure to comply with those financial covenants, certain non-financial covenants or to comply with the other restrictions contained in our existing credit agreements could result in a default, which could cause such indebtedness under our existing credit agreements to become immediately due and payable. In the event that we are in default, we may not be able to access alternative funding sources, or, if available to us, we may not be able to do so on favorable terms and conditions.

As of December 31, 2010, we were in default on the mortgage loan for the Sevens Building property, which had an outstanding principal balance of $21,494,000 as of December 31, 2010. On March 7, 2011, we received a letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building property pursuant to our default on the mortgage loan for the Sevens Building property. A successor trustee has been appointed by the Sevens Building lender to conduct a public auction for the sale of the Sevens Building property, which is set to take place on March 25, 2010. The expected foreclosure of the Sevens Building property, as well as the recent sale of the Four Resource Square property to an entity affiliated with its lender for no cash proceeds, raises substantial doubt about our ability to continue as a going concern.

Upon the sale of our properties, we may have to pay prepayment fees or defeasance charges on our mortgages.

Some of our mortgage loans may contain penalties in the event of the prepayment of that mortgage. The sale of our remaining assets may trigger substantial penalties unless the purchaser assumes (and/or is allowed to assume) the corresponding mortgage. We may be unsuccessful in negotiating the assumption of any underlying mortgage in connection with the sale of our remaining assets, which could negatively affect the amount of cash available for distribution to our unit holders.

Interest-only indebtedness may increase our risk of default and ultimately may reduce our funds available for distribution to our unit holders.

We have financed or may refinance our properties using interest-only mortgage indebtedness. During the interest-only period, the amount of each scheduled payment will be less than that of a traditional amortizing mortgage loan. The principal balance of the mortgage loan will not be reduced (except in the case of prepayments) because there are no scheduled monthly payments of principal during this period. After the interest-only period, we will be required either to make scheduled payments of amortized principal and interest or to make a lump-sum or “balloon” payment at maturity. These required principal or balloon payments will increase the amount of our scheduled payments and may increase our risk of default under the related mortgage loan. If the mortgage loan has an adjustable interest rate, the amount of our scheduled payments also may increase at a time of rising interest rates. Increased payments and substantial principal or balloon maturity payments will reduce the funds available for distribution to our unit holders because cash otherwise available for distribution will be required to pay principal and interest associated with these mortgage loans.

The ongoing market disruptions may adversely affect our operating results and financial condition.

The global financial markets have been undergoing pervasive and fundamental disruptions. The continuation or intensification of any such volatility may have an adverse impact on the availability of credit to businesses generally and could lead to a further weakening of the U.S. and global economies. To the extent that turmoil in the financial markets continues and/or intensifies, it has the potential to materially affect: (i) the value of our properties; (ii) our ability to make principal and interest payments on, or refinance, any outstanding debt when due; (iii) the ability of our tenants to enter into new leasing transactions or satisfy rental payments under existing leases; and/or (iv) our ability to continue as a going concern. The ongoing market disruptions could also affect our operating results and financial condition as follows:

• Debt and Equity Markets — Our results of operations are sensitive to the volatility of the credit markets. The real estate debt markets have been experiencing volatility as a result of certain factors, including the tightening of underwriting standards by lenders and credit rating agencies and the significant inventory of unsold commercial mortgage-backed securities in the market. Credit spreads for major sources of capital have widened significantly as investors have demanded a higher risk premium. This is resulting in lenders increasing the cost for debt financing. This may result in our property operations generating lower overall economic returns and a reduced level of cash flows, which could potentially impact our ability to pay distributions to our unit holders. In addition, the ongoing dislocations in the debt markets have reduced the amount of capital that is available to finance real estate, which, in turn: (1) limits the ability of real estate investors to benefit from reduced real estate values or to realize enhanced returns on real estate investments; (2) has slowed real estate transaction activity; and (3) may result in an inability to refinance debt as it becomes due, all of which may reasonably be expected to have a material impact, favorable or unfavorable, on revenues, income and/or cash flows from the acquisition and operations of real estate and mortgage loans. In addition, the state of the debt markets could have an impact on the overall amount of capital being invested in real estate, which may result in price or value decreases of real estate assets and impact our ability to dispose of our properties. The negative impact on the credit markets may also have material adverse effect on prospective buyers of our properties resulting from, but not limited to, an inability to assume the current loans on our properties and /or otherwise finance the acquisition of our properties on favorable terms, if at all, increased financing costs, stricter loan-to-value ratios requiring significantly higher cash down payments upon purchase or financing with increasingly restrictive covenants. The negative impact of the adverse changes in the credit markets and on the real estate sector generally may have a material adverse effect on our operations.

• Valuations — The ongoing market volatility will likely make the valuation of our properties more difficult. There may be significant uncertainty in the valuation, or in the stability of the value, of our properties that could result in a substantial decrease in the value of our properties. As a result, we may not be able to recover the carrying amount of our properties, which may require us to recognize further impairment charges in our statements of operations.

• Government Intervention — The pervasive and fundamental disruptions that the global financial markets have been undergoing have led to extensive and unprecedented governmental intervention. Although the government intervention is intended to stimulate the flow of capital and to undergird the U.S. economy in the short term, it is impossible to predict the actual effect of the government intervention and what effect, if any, additional interim or permanent governmental intervention may have on the financial markets and/or the effect of such intervention on us and our results of operations. In addition, there is a high likelihood that regulation of the financial markets will be significantly increased in the future, which could have a material impact on our operating results and financial condition.

We may be unable to secure funding for future capital improvements, which could adversely impact our ability to attract or retain tenants and subsequently fund our operations.

In order to attract and retain tenants, our properties may be required to expend funds for capital improvements. In addition, our properties may require substantial funds for renovations in order to be sold, upgraded or repositioned in the market. If any of our properties have insufficient capital reserves, it would have to obtain financing from other sources. Our properties have established capital reserves in amounts that we, in our discretion, believe are necessary. However, lenders also may require escrow of capital reserves in excess of any established reserves. If these reserves or any reserves otherwise established are designated for other uses or are insufficient to meet a property’s cash needs, that property may have to obtain financing to fund its cash requirements. We cannot assure our unit holders that sufficient financing will be available to any of our properties or, if available, will be available to them on economically feasible terms or on terms that would be considered acceptable. Moreover, certain reserves required by lenders may be designated for specific uses and may not be available for capital purposes such as future capital improvements. Additional borrowing for capital improvements will increase interest expense, which could have a material adverse effect on our ability to fund our operations.

If we sell properties by providing financing to purchasers, defaults by the purchasers would adversely affect our cash flows from operations.

If and when we sell our properties, we intend to use our best efforts to sell them for cash. However, in some instances we may sell our properties by providing financing to purchasers. When we provide financing to purchasers, we will bear the risk that the purchaser may default on its obligations under the financing, which could negatively impact cash flows from operations. Even in the absence of a purchaser default, the distribution of sale proceeds, or their reinvestment in other assets, will be delayed until the promissory notes or other property we may accept upon the sale are actually paid, sold, refinanced or otherwise disposed of. In some cases, we may receive initial down payments in cash and other property in the year of sale in an amount less than the selling price, and subsequent payments will be spread over a number of years. If any purchaser defaults under a financing arrangement with us, it could negatively impact our ability to pay cash distributions to our unit holders.

If we are subjected to a forced or voluntary liquidation, our unit holders may not receive any profits resulting from the sale of one of our properties, or receive such profits in a timely manner, because we may provide financing to the purchaser of such property.

If we are subjected to a forced or voluntary liquidation, we may sell our properties either subject to or upon the assumption of any then outstanding mortgage debt or, alternatively, may provide financing to purchasers. We may take a purchase money obligation secured by a mortgage as partial payment. We do not have any limitations or restrictions on our taking such purchase money obligations. To the extent we receive promissory notes or other property instead of cash from sales, such proceeds, other than any interest payable on those proceeds, will not be included in net sale proceeds until and to the extent the promissory notes or other property are actually paid, sold, refinanced or otherwise disposed of. In many cases, we will receive initial down payments in the year of sale in an amount less than the selling price and subsequent payments will be spread over a number of years. Therefore, our unit holders may experience a delay in the distribution of the proceeds of a sale until such time.

Our results of operations, our ability to pay distributions to our unit holders and our ability to dispose of our properties are subject to general economic and regulatory factors we cannot control or predict.

Our results of operations are subject to the risks of a national economic slowdown or disruption, other changes in national, regional or local economic conditions or changes in tax, real estate, environmental or zoning laws. The following factors have had an effect on income from our properties, our ability to dispose of properties, and yields from our properties:

• poor economic times may result in defaults by tenants of our properties and borrowers. We have been required to provide rent concessions or reduced rental rates to maintain or increase occupancy levels;

• job transfers and layoffs may cause vacancies to increase and a lack of future population and job growth may make it difficult to maintain or increase occupancy levels;

• increases in supply of competing properties or decreases in demand for our properties may impact our ability to maintain or increase occupancy levels;

• early termination of leases could lead to lower occupancy levels and reduced operating results;

• changes in interest rates and availability of debt financing could render the sale of properties difficult or unattractive;

• periods of high interest rates will reduce cash flow from leveraged properties; and

• increased insurance premiums, real estate taxes or energy or other expenses may reduce funds available for distribution or, to the extent such increases are passed through to tenants, may lead to tenant defaults. Also, any such increased expenses may make it difficult to increase rents to tenants on turnover, which may limit our ability to increase our returns.

Our previous acquisition strategy of purchasing value-added properties increases the risk of owning real estate and has adversely affected our results of operations, our ability to pay distributions to our unit holders and our ability to dispose of properties in a timely manner, and could continue to do so in the future.

Our previous acquisition strategy of purchasing value-added properties subjects us to even greater risks than those generally associated with investments in real estate. Value-added properties generally have some negative component, such as location in a poor economic market, significant vacancy, lower than average leasing rates or the need for capital improvements. If we are unable to take advantage of the value-added component following our acquisition of a property, we may be unable to generate adequate cash flows from that property. In addition, if we desire to sell that property, we may not be able to generate a profit or even recoup the original purchase price. As a result, our investment in value-added properties could reduce the amount of cash generated from our results of operations, our ability to profitably dispose of our properties and our ability to pay distributions to our unit holders.

Distributions paid by us have included, and may in the future include, a return of capital.

Distributions paid by us in the past have included a return of capital, and any future distributions paid to our unit holders may include a return of capital, rather than a return on capital for our unit holders.

Our properties face significant competition.

We face significant competition from other property owners, operators and developers. All or substantially all of our properties face competition from similar properties in the same markets. Such competition may affect our ability to attract and retain tenants and may reduce the rents we are able to charge. These competing properties may have vacancy rates higher than our properties, which may cause their owners to rent space at lower rental rates than those charged by us or to provide greater tenant improvement allowances or other leasing concessions than we are willing to provide. This combination of circumstances could adversely affect our results of operations, liquidity and financial condition, which could reduce distributions to our unit holders. As a result, we may be required to provide rent concessions, incur charges for tenant improvements and other inducements, or we may not be able to timely lease the space, all of which would adversely affect our results of operations, liquidity and financial condition. In the event that we elect to acquire additional properties, we will compete with other buyers who are also interested in acquiring such properties, which may result in an increase in the cost that we pay for such properties or may result in us ultimately not being able to acquire such properties. At the time we elect to dispose of our properties, we will be in competition with sellers of similar properties to locate suitable purchasers, which may result in us receiving lower proceeds from their disposal or receiving no net proceeds at all.

We incur significant and potentially increasing costs in connection with Exchange Act and Sarbanes-Oxley Act compliance and we may become subject to liability for any failure to comply.

As a result of our obligation to register our securities with the SEC under the Securities Exchange Act of 1934, as amended, or the Exchange Act, we are subject to Exchange Act rules and related reporting requirements. This compliance with the reporting requirements of the Exchange Act requires timely filing of Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K, among other actions. Further, recently enacted and proposed laws, regulations and standards relating to corporate governance and disclosure requirements applicable to public companies, including the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, and new SEC regulations have increased the costs of corporate governance, reporting and disclosure practices which are now required of us. Our efforts to comply with applicable laws and regulations, including requirements of the Exchange Act and the Sarbanes-Oxley Act, are expected to involve significant, and potentially increasing, costs. In addition, these laws, rules and regulations create the potential for new legal bases for administrative enforcement, civil and criminal proceedings against us in the event of non-compliance, thereby increasing our risks of liability and potential sanctions.

The Sarbanes-Oxley Act and related laws, regulations and standards relating to corporate governance and disclosure requirements applicable to public companies have increased the costs of corporate governance, reporting and disclosure practices which are now required of us. We were formed prior to the enactment of these new corporate governance standards and did not intend to become subject to those provisions. As a result, we did not have all of the necessary procedures and policies in place at the time of their enactment. Any failure to comply with the Sarbanes-Oxley Act could result in fees, fines, penalties or administrative remedies.

Lack of diversification and illiquidity of real estate may make it difficult for us to sell underperforming properties or recover our investment in one or more properties.

Our business is subject to risks associated with investment solely in real estate. Real estate investments are relatively illiquid. Our ability to vary our portfolio in response to changes in economic and other conditions is limited. We cannot provide assurance that we will be able to dispose of a property when we want or need to. Consequently, the sales price for any property may not recoup or exceed the amount of our investment.

Lack of geographic diversity may expose us to regional economic downturns that could adversely impact our operations or our ability to recover our investment in one or more properties.

Our portfolio lacks geographic diversity due to the fact that, as of December 31, 2010, we held property ownership interests in only three states: California, Missouri and North Carolina. As of March 18, 2011, we hold property ownership interests in only California and Missouri. This geographic concentration of properties exposes us to economic downturns in these regions, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics, increased telecommuting, terrorist targeting of high-rise structures, infrastructure quality, state budgetary constraints and priorities, increases in real estate and other taxes, costs of complying with government regulations or increased regulation and other factors. A recession in any of these states could adversely affect our ability to generate or increase operating revenues, attract new tenants or dispose of properties. In addition, our properties may face competition in these states from other properties owned, operated or managed by our manager or its affiliates. Our manager or its affiliates have interests that may vary from our interests in such states.

Our success is dependent on the performance of our manager, its executive officers and employees.

Our ability to achieve our investment objectives and to conduct our operations is dependent upon the performance of our manager, its executive officers and its employees in the determination of any financing arrangements, the management and disposition of our assets and the operation of our day-to-day activities. We rely on the management ability of our manager as well as the management of any entities or ventures in which we co-invest. If our manager suffers or is distracted by adverse financial or operational problems in connection with its operations unrelated to us, our manager’s ability to allocate time and/or resources to our operations may be adversely affected. If our manager is unable to allocate sufficient resources to oversee and perform our operations for any reason, our results of operations would be adversely impacted.

Our manager has become aware of bankruptcy filings effected by two unaffiliated, individual investor entities, who are minority owners in two tenant-in-common, or TIC, programs that were originally sponsored by our manager. Our manager provided non-recourse/carve-out guarantees for each of these properties, which only impose liability on our Manager if certain acts prohibited by the loan documents take place. Liability under these non-recourse/carve-out guarantees may be triggered by the voluntary bankruptcy filings made by the two unaffiliated, individual investor entities. As a consequence of these bankruptcy filings, our manager may become liable under these guarantees and related indemnification obligations for the benefit of the mortgage lender in connection with these TIC programs. While our manager’s ultimate liability under these guarantees is uncertain as a result of numerous factors, including, without limitation, the amount of the lender’s credit bids at the time of foreclosure, the ultimate disposition of the individual bankruptcy proceedings, and the defenses our manager may raise under the guarantees, such liability may be in an amount in excess of our manager’s net worth. Our manager is investigating the facts and circumstances surrounding these events, and the potential liabilities related thereto, and intends to vigorously dispute any imposition of any liability under any such guarantee or indemnity obligation.

Our manager has also been involved in multiple legal proceedings with respect to one of these TIC programs, including an action pending in state court in Austin, Texas, or the Texas Action, and an arbitration proceeding being conducted in California, or the Arbitration. In the Texas Action, our manager and an affiliate are pursuing claims against the developers and sellers of the property and other defendants to recover damages arising from undisclosed ground movement. The outcome of the Texas Action, and the damages, if any, that our manager and its affiliate will recover, are uncertain. In the Arbitration, TIC investors are asserting, among other things, that our manager should bear responsibility for alleged diminution in the value of the property and their investments as a result of ground movement. The Arbitration has been bifurcated into two phases. In the first phase, the arbitrator ruled in favor of the TIC investors, finding, among other things, that the TIC investors had properly terminated the property management agreement for cause. The second phase of the Arbitration involves the TICs’ claims for damages. The hearing will be conducted in June 2011 and will result in the arbitrator’s determination of whether the TICs have proven any of their claims and what damages, if any, should be awarded against our manager. Our manager is vigorously defending against those claims. Our manager has tendered this matter to its insurance carriers for indemnification and will vigorously pursue coverage. While the outcome of the second phase of the Arbitration is uncertain, an adverse determination by the arbitrator could result in a material and adverse effect on our manager’s financial condition, results of operations and cash flows.

Our success is dependent on the performance of our manager, which could be adversely impacted by the performance of its parent company.

Our manager is a wholly owned direct subsidiary of NNN Realty Advisors, Inc., or NNNRA, which is a wholly owned indirect subsidiary of Grubb & Ellis Company, or Grubb & Ellis. Our ability to achieve our investment objectives and to conduct our operations is dependent upon the performance of our manager, its executive officers and its employees. If our manager suffers or is distracted by adverse financial or operational problems in connection with NNNRA or Grubb & Ellis, our manager’s ability to allocate time and/or resources to our operations may be adversely affected. If our manager is unable to allocate sufficient resources to oversee and perform our operations for any reason, our results of operations would be adversely impacted.

NNNRA is a guarantor on the mortgage loans of several TIC programs that it has sponsored. Under the guaranty agreements, NNNRA is required to maintain a specified level of minimum net worth. As of December 31, 2010, NNNRA’s net worth was below the contractually specified levels with respect to approximately 30 percent of its managed TIC programs. While this circumstance does not, in and of itself, create any direct recourse liability for NNNRA, failure to meet the minimum net worth on these programs could result in the imposition of an event of default under these TIC loan agreements and NNNRA potentially becoming liable for up to $6.0 million, in the aggregate, of certain partial-recourse guarantee obligations of the underlying mortgage debt for certain of these TIC programs. To date, no events of default have been declared.

In addition, Grubb & Ellis’ business is sensitive to trends in the general economy, as well as the commercial real estate and credit markets. The current macroeconomic environment and accompanying credit crisis has negatively impacted the value of commercial real estate assets, contributing to a general slowdown in Grubb & Ellis’ industry, which Grubb & Ellis anticipates will continue through 2011. A prolonged and pronounced recession could continue or accelerate the reduction in overall transaction volume and size of sales and leasing activities that Grubb & Ellis has already experienced, and could continue to put downward pressure on Grubb & Ellis’ revenues and operating results. To the extent that any decline in Grubb & Ellis’ revenues and operating results impacts the performance of NNNRA or our manager, our financial condition and results of operations could also suffer.

Our properties may face competition from other properties owned, operated or managed by our manager or its affiliates.

As of March 18, 2011, our manager or its affiliates, G REIT Liquidating Trust (successor of G REIT, Inc.), T REIT Liquidating Trust (successor of T REIT, Inc.) and NNN 2002 Value Fund, LLC, or NNN 2002 Value Fund, as well as other private TIC investment programs and other real estate investment programs, currently own, operate or manage properties that may compete with our properties in California and Missouri. These properties may compete with our properties, which may affect: (i) our ability to attract and retain tenants; (ii) the rents we are able to charge; and (iii) the value of our investments in our properties. Our manager’s or its affiliates’ interest in, operation of, or management of these other properties may create conflicts between our manager’s fiduciary obligations to us and its fiduciary obligations to, or pecuniary interest in, these competing properties. Our manager’s management of these properties may also limit the time and services that our manager devotes to us because it will be providing similar services to these other properties.

Our manager’s past performance is not a predictor of our future results.

Neither the track record of our manager in managing us, nor its performance with entities similar to ours, shall imply or predict (directly or indirectly) any level of our future performance or the future performance of our manager. Our manager’s performance and our performance is dependent on future events and is, therefore, inherently uncertain. Past performance cannot be relied upon to predict future events for a variety of factors, including, without limitation, varying business strategies, different local and national economic circumstances, different supply and demand characteristics relevant to buyers and sellers of assets, varying degrees of competition and varying circumstances pertaining to the capital markets.

Our co-ownership arrangements with affiliated entities may not reflect solely our unit holders’ best interests and may subject these investments to increased risks.

We have acquired our interests in the Enterprise Technology Center property through co-ownership arrangements with one or more affiliates of our manager and/or entities that are also managed by our manager. The terms of these co-ownership arrangements may be more favorable to the other co-owners than to our unit holders. In addition, key decisions, such as a sale, refinancing and new or amended leases, must be approved by the unanimous consent of the co-owners.

Our co-ownership arrangements contain risks not present in wholly owned properties.

Investing in properties through co-ownership arrangements, including investments held through TIC investment programs or through partial ownership interests in limited liability companies, subjects those investments to risks not present in a wholly owned property, including, without limitation, the following:

• the risk that the co-owner(s) in the investment might become bankrupt;

• the risk that the co-owner(s) may at any time have economic or business interests or goals which are inconsistent with our business interests or goals;

• the risk that the co-owner(s) may be unable to make required payments on loans under which we are jointly and severally liable;

• the risk that all the co-owners may not approve refinancings, leases and lease amendments requiring unanimous consent of co-owners that would have adverse consequences for our unit holders,

• the risk that the co-owner(s) may breach the terms of a loan secured by a co-owned property, thereby triggering an event of default that affords the lender the right to exercise all of its remedies under the loan documents, including possible foreclosure of the entire property; or • the risk that the co-owner(s) may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives, such as selling a property at a time when it would have adverse consequences to us.

Actions by co-owner(s) might have the result of subjecting the applicable property to liabilities in excess of those otherwise contemplated and may have the effect of reducing our available cash. The co-ownership arrangements generally limit our ability to manage properties in our sole judgment and best interests including, without limitation, decisions regarding capital improvements, renewing or entering new tenant leases, refinancing a property or selling a property. It also may be difficult for us to sell our interest in any co-ownership arrangement at the time we deem it best for our unit holders.

The conflicts of interest of our manager and its executive officers with us may mean that we will not be managed by our manager solely in the best interests of our unit holders.

Our manager’s executives have conflicts of interest relating to the management of our business and property. Accordingly, those parties may make decisions or take actions based on factors other than in the best interest of our unit holders.

Our manager also advises G REIT Liquidating Trust and T REIT Liquidating Trust and manages NNN 2002 Value Fund, as well as other private TIC programs and other real estate investment programs, all of which may compete with us or otherwise have similar business interests and/or investment objectives. Some of the executive officers of our manager also serve as officers and directors of such programs.

Additionally, our manager is a wholly owned indirect subsidiary of Grubb & Ellis and certain executive officers and employees of our manager own de-minimis interests in Grubb & Ellis. As officers, directors, and partial owners of entities that do business with us or that have interests in competition with our own interests, these individuals will experience conflicts between their obligations to us and their obligations to, and pecuniary interests in, our manager, Grubb & Ellis and their affiliated entities. These conflicts of interest could:

• limit the time and services that our manager devotes to us, because it will be providing similar services to G REIT Liquidating Trust, T REIT Liquidating Trust, NNN 2002 Value Fund and other real estate investment programs and properties;

• impair our ability to compete for tenants in geographic areas where other properties are advised by our manager and its affiliates; and

• impair our ability to compete for the acquisition or disposition of properties with other real estate entities that are also advised by our manager and its affiliates and seeking to acquire or dispose of properties at or about the same time as us.

If our manager breaches its fiduciary obligations to us, we may not meet our investment objectives, which could reduce the expected cash available for distribution to our unit holders.

We may dispose of assets to affiliates of our manager, which could result in us entering into transactions on less favorable terms than we would receive from a third party.

We may dispose of assets to affiliates of our manager. Affiliates of our manager may make substantial profits in connection with such transactions and may owe fiduciary and/or other duties to the selling or purchasing entity in these transactions, and conflicts of interest between us and the selling or purchasing entities could exist in such transactions. These conflicts could result in transactions based on terms that are less favorable to us than we would receive from a third party.

The absence of arm’s length bargaining may mean that our agreements are not as favorable to unit holders as these agreements otherwise would have been.

Any existing or future agreements between us and our manager, Realty or their affiliates were not and will not be reached through arm’s length negotiations. Thus, such agreements may not solely reflect our unit holders’ interests as a unit holder. For example, the Operating Agreement and the Management Agreement were not the result of arm’s length negotiations. As a result, these agreements may be relatively more favorable to the other counterparty than to us.

Losses for which we either could not or did not obtain insurance will significantly increase our losses and we may be unable to comply with insurance requirements contained in mortgage or other agreements due to high insurance costs.

We endeavor to maintain comprehensive insurance on the properties we own, including liability and fire and extended coverage, in amounts sufficient to permit the replacement of the properties in the event of a total loss, subject to applicable deductibles. However, we could still suffer a loss due to the cost to repair any damage to the properties that is not insured or is underinsured. There are types of losses, generally of a catastrophic nature, such as losses due to terrorism, wars, earthquakes, floods or acts of God that are either uninsurable or not economically insurable. If such a catastrophic event were to occur, or cause the destruction of one or more of our properties, we could lose both our invested capital and anticipated profits from such properties. Additionally, we could default under debt or other agreements if the cost and/or availability of certain types of insurance make it impractical or impossible to comply with covenants relating to the insurance we are required to maintain under such agreements. In such instances, we may be required to self-insure against certain losses or seek other forms of financial assurance. Additionally, inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it infeasible to use insurance proceeds to replace a property if it is damaged or destroyed. Under such circumstances, the insurance proceeds received by us might not be adequate to restore our economic position with respect to the affected property.

Increases in our insurance rates could adversely affect our cash flow and our ability to fund our operations.

We cannot assure that we will be able to renew our insurance coverage at our current or reasonable rates or that we can estimate the amount of potential increases of policy premiums. Furthermore, most, if not all, of our mortgage loans contain restrictive covenants regarding the ratings of our insurance carriers, which we may not be able to comply with if our insurance carriers do not have the required ratings and we are unable to obtain new policies from properly rated insurance carriers without undue cost to us. As a result, our cash flow could be adversely impacted by increased premiums. In addition, the sales prices of our properties may be affected by these rising costs and adversely affect our ability to fund our operations.

Terrorist attacks and other acts of violence or war may affect the markets in which we operate and have a material adverse effect on our financial condition, results of operations and our unit holders’ investment.

Terrorist attacks may negatively affect our operations and our unit holders’ investment. We have acquired real estate assets located in areas that are susceptible to attack. These attacks may directly impact the value of our assets through damage, destruction, loss or increased security costs. Although we may obtain terrorism insurance, we may not be able to obtain sufficient coverage to fund any losses we may incur. Risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Further, certain losses resulting from these types of events are uninsurable or not insurable at reasonable costs.

More generally, any terrorist attack, other act of violence or war, including armed conflicts, could result in increased volatility in, or damage to, the U.S. and worldwide financial markets and economy, all of which could adversely affect our tenants’ ability to pay rent on their leases or our ability to borrow money, which could have a material adverse effect on our financial condition, results of operations and our unit holders’ investment.

Costs of complying with governmental laws and regulations related to environmental protection and human health and safety may be high.

All real property investments and the operations conducted in connection with such investments are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. Some of these laws and regulations may impose joint and several liability on customers, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal.

Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of removing or remediating hazardous or toxic substances on such real property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, the presence of hazardous substances, or the failure to properly remediate those substances, may adversely affect our ability to sell, rent or pledge such real property as collateral for future borrowings. Environmental laws also may impose restrictions on the manner in which real property may be used or businesses may be operated. Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. Future laws, ordinances or regulations may impose material environmental liability. Additionally, our tenants’ operations, the existing condition of land when we buy it, operations in the vicinity of our real properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our real properties. In addition, there are various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply, and which may subject us to liability in the form of fines or damages for noncompliance. In connection with the acquisition and ownership of our real properties, we may be exposed to such costs in connection with such regulations. The cost of defending against environmental claims, of any damages or fines we must pay, of compliance with environmental regulatory requirements or of remediating any contaminated real property could materially and adversely affect our business, lower the value of our assets or results of operations and, consequently, lower the amounts available for distribution to our unit holders.

There is currently no public market for our units. Therefore, it will likely be difficult for our unit holders to sell their units and, if our unit holders are able to sell their units, they may elect to do so at a substantial discount from the price our unit holders paid.

There currently is no public market for our units. Additionally, the Operating Agreement contains restrictions on the ownership and transfer of our unit holders’ units, and these restrictions may inhibit our unit holders’ ability to sell their units. It may be difficult for our unit holders to sell their units promptly or at all. If our unit holders are able to sell their units, our unit holders may only be able to do so at a substantial discount from the price our unit holders paid.

We could be treated as a publicly traded partnership for U.S. federal income tax purposes.

We could be deemed to be a publicly traded partnership for U.S. federal income tax purposes if our interests are either (i) traded on an established securities market, or (ii) readily tradable on a secondary market (or the substantial equivalent thereof). If we are treated as a publicly traded partnership, we may be taxed as a corporation unless we meet certain requirements as to the nature of our income. In such circumstances, our income (including gains from the sale of our assets, if any) would be subject to corporate-level tax, which could reduce distributions to our unit holders. While we do not believe that we will be taxed as a corporation, we have not requested a ruling from the Internal Revenue Service, or the IRS, and there can be no assurance that the IRS will not successfully challenge our status as a partnership.

The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to repay debt obligations and fund operations.

The Federal Deposit Insurance Corporation, or FDIC, insures amounts up to $250,000 per depositor per insured bank. We currently have cash and cash equivalents deposited in certain financial institutions in excess of federally insured levels. If any of the banking institutions in which we have deposited funds ultimately fails, we may lose the amount of our deposits over any federally-insured amount. The loss of our deposits could reduce the amount of cash we have available to repay debt obligations and fund operations, which could result in a decline in the value of our unit holders’ investments.

Our properties are subject to property taxes that may increase in the future, which could adversely affect our ability to sell them to fund our operations.

Our properties are subject to property taxes that may increase as tax rates change and as they are reassessed by taxing authorities. If property taxes increase, our ability to fund our operations and sell our properties could be adversely affected.

We do not expect to register as an investment company under the Investment Company Act of 1940 and, therefore, our unit holders will not be entitled to its benefits and protections; and our operating in a manner to avoid registration may reduce cash available for distributions to unit holders.

We believe that we will not operate in a manner that requires us to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. Investment companies subject to the Investment Company Act are required to comply with a variety of substantive requirements such as requirements relating to:

• limitations on the capital structure of the entity;

• restrictions on certain investments;

• prohibitions on transactions with affiliated entities; and

• public reporting disclosures, record keeping, voting procedures, proxy disclosure and similar corporate governance rules and regulations.

Many of these requirements are intended to provide benefits or protections to security holders of investment companies. Because we do not expect to be subject to these requirements, our unit holders will not be entitled to these benefits or protections.

In order to maintain our exemption from regulation under the Investment Company Act, we must engage primarily in the business of buying real estate. In addition, in order to operate in a manner to avoid being required to register as an investment company, we may be unable to sell assets we would otherwise want to sell, and we may need to sell assets we would otherwise wish to retain. This may possibly lower our unit holders’ returns.

If we are required to register as an investment company under the Investment Company Act, the additional expenses and operational limitations associated with such registration may reduce our unit holders’ investment return.

We do not expect that we will operate in a manner that requires us to register as an investment company under the Investment Company Act. However, the analysis relating to whether a company qualifies as an investment company can involve technical and complex rules and regulations. If we own assets that qualify as investment securities, as such term is defined under this Investment Company Act, and the value of such assets exceeds 40.0% of the value of our total assets, we may be deemed to be an investment company. It is possible that many, if not all, of our interests in real estate may be held through other entities and some or all of these interests in other entities may be deemed to be investment securities.

If we held investment securities and the value of these securities exceeded 40.0% of the value of our total assets we may be required to register as an investment company. Investment companies are subject to a variety of substantial requirements that could significantly impact our operations. The costs and expenses we would incur to register and operate as an investment company, as well as the limitations placed on our operations, could have a material adverse impact on our operations and our unit holders’ investment return.

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

Item 1B.

Unresolved Staff Comments.

None.

Item 2.

Properties.

~~Real~~We ~~Estate~~own ~~Investments~~no consolidated properties or interests in unconsolidated properties as of December 31, 2011. We use the office space of our manager and do not maintain separate office space. We have paid fees to our manager for its services and have not historically paid rent for the use of their office space.

As7 of December 31, 2010, we owned two consolidated office properties, with one property each located in Missouri and North Carolina, with an aggregate gross leaseable area, or GLA, of approximately 349,000 square feet. We also owned an 8.5% interest in one unconsolidated office property located in California with an aggregate GLA of approximately 381,000 square feet.

The majority of the rental income from our properties consists of rent received under leases that provide for the payment of fixed minimum rent paid monthly in advance, and for the payment by tenants of a pro rata share of the real estate taxes, special assessments, insurance, utilities, common area maintenance, management fees and certain building repairs. Under the majority of our leases, we are not currently obligated to pay the tenant’s proportionate share of real estate taxes, insurance and property operating expenses up to the amount incurred during the tenant’s first year of occupancy, or base year, or a negotiated amount approximating the tenant’s pro rata share of real estate taxes, insurance and property operating expenses, or expense stop. The tenant pays their pro rata share of an increase in expenses above the base year or expense stop.

The following table presents certain additional information about our consolidated and unconsolidated properties as of December 31, 2010:

														Annual
		Date		%			GLA		Annualized		Physical			Rent Per
	Location	Acquired		Owned			(Sq Ft)		Rent(1)		Occupancy			Sq Ft(2)
Consolidated Properties:
Four Resource Square(3)	Charlotte, NC		3/7/2007		100.0	%		152,000	$	2,461,000		81.7	%	$	19.83
Sevens Building	St. Louis, MO		10/25/2007		100.0	%		197,000		2,741,000		66.0	%	$	21.05
Totals / Weighted Avg.								349,000	$	5,202,000		72.8	%	$	20.45
Unconsolidated Property:
Enterprise Technology Center(4)	Scotts Valley, CA		5/7/2004		8.5	%		381,000	$	817,000		12.5	%	$	17.17

(1)		Annualized rent is based on contractual base rent from leases in effect as of December 31, 2010.
(2)		Annual rent per square foot is the average annual rent per occupied square foot as of December 31, 2010.
(3)		The Four Resource Square property was sold to an entity affiliated with the Four Resource Square lender on January 20, 2011.
(4)		Unaffiliated TICs own 88.4% of the Enterprise Technology Center property. Unaffiliated entities own the remaining 3.1%; however, their interests are held in an entity that is also managed by our manager.

The following information applies to our consolidated properties and our investments in unconsolidated properties:

• we believe all of our properties are adequately covered by insurance and are suitable for their intended purposes;

• our properties are located in markets where we are subject to competition in attracting new tenants and retaining current tenants; and

• depreciation is provided on a straight-line basis over the estimated useful lives of the buildings and improvements, ranging from 6 to 39 years and over the shorter of the lease term or useful lives of the tenant improvements.

Lease Expirations

The following table presents information about the annual base rent of expiring leases at our consolidated properties as of December 31, 2010:

					% of Leased					% of Total
					Area			Annual Rent		Annual Rent
	Number of		Total Sq. Ft. of		Represented by			Under		Represented by
Year Ending December 31	Leases Expiring		Expiring Leases		Expiring Leases			Expiring Leases		Expiring Leases
2011 (1)		24		65,000		25.6	%	$	1,389,000		26.7	%
2012		9		103,000		40.5			2,135,000		41.0
2013		4		16,000		6.5			383,000		7.4
2014		10		39,000		15.5			819,000		15.8
2015		4		24,000		9.3			322,000		6.2
Thereafter		2		7,000		2.6			154,000		2.9
Total		53		254,000		100.0	%	$	5,202,000		100.0	%

(1) Leases that have been extended on a month-to-month basis are included with the leases scheduled to expire during the year ended December 31, 2011.

Geographic Diversification and Concentration

The following table lists the states in which our consolidated properties are located and provides certain information regarding our portfolio’s geographic diversification/concentration as of December 31, 2010:

			Aggregate		Approximate			Current		Approximate
	No. of		Rentable		% of Rentable			Annual Base		% of Aggregate
State	Properties		Square Feet		Square Feet			Rent		Annual Rent
North Carolina		1		152,000		43.6	%	$	2,461,000		47.3	%
Missouri		1		197,000		56.4			2,741,000		52.7
Total		2		349,000		100.0	%	$	5,202,000		100.0	%

Indebtedness

As of December 31, 2010, we had secured mortgage loans payable outstanding on both of our consolidated properties, representing an aggregate principal amount of $43,471,000, consisting of $21,000,000, or 48.3%, of fixed rate mortgage loans payable at a weighted-average interest rate of 10.95% per annum and $22,471,000, or 51.7%, of variable rate mortgage loans payable at a weighted-average interest rate of 7.26% per annum. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources, and Note 7, Mortgage Loans Payable, to our Consolidated Financial Statements accompanying this Annual Report on Form 10-K, for further information regarding our indebtedness.

Item 3.

Legal Proceedings.

~~Neither we nor any of our properties~~ We are not presently subject to any material litigation and, to our knowledge, no material litigation is threatened against us ~~or any of our properties~~ that, if determined unfavorably to us, would have a material adverse effect on our financial condition, results of operations or cash flows.

Item 4. ~~[Removed~~Mine ~~and~~Safety ~~Reserved~~Disclosures.]

23 Not applicable.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Unit Holder Matters and Issuer Purchases of Equity Securities.

Market Information

There is no established public trading market for our units.

As of December 31, ~~2010~~2011, there were no outstanding options or warrants to purchase our units or securities convertible into our units. In addition, there were no units that could be sold pursuant to Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, or that we have agreed to register under the Securities Act for sale by unit holders, and there were no units that are being, or have been publicly proposed to be, publicly offered by us.

Unit Holders

As of March 1815, ~~2011~~2012, there were ~~799~~804 unit holders of record with 323, ~~248~~254 and ~~266~~268 holders of Class A, Class B and Class C units, respectively. Certain of our unit holders own units in more ~~than~~ than one class of units.

Distributions

~~Effective~~We ~~November 1,~~make ~~2008,~~periodic wedistributions ~~suspended~~to ~~regular,~~unit ~~monthly~~holders ~~cash~~from available funds. The declaration of distributions tois ~~all~~determined ~~unit holders~~by our manager. ~~Instead,~~The wetiming ~~will~~and ~~make~~amount ~~periodic~~of distributions todepends ~~unit~~on ~~holders~~our ~~from~~actual ~~available~~cash ~~funds~~flow, financial ifcondition, ~~any~~capital requirements and such other factors our manager may deem relevant.

The Operating Agreement provides that Class A unit holders receive a 10.0% priority return, Class B unit holders receive a 9.0% priority return and Class C unit holders receive an 8.0% priority return.

The distributions declared per Class A unit, Class B unit and Class C unit in each quarter since January 1, ~~2008~~2009 were as follows:

Quarters Ended	2010		2009		2008
		September 30,		September 30,		September 30,
March 31	$	100	$	—	$	88
Quarters Ended	2011		2010		2009
June 30	$	100	$	—	$	88
March 31	$	50	$	100	$	—
September 30	$	50	$	—	$	87
June 30	$	—	$	100	$	—
December 31	$	—	$	—	$	29
September 30	$	—	$	50	$	—
December 31	$	—	$	—	$	—

Holders of Class A units, Class B units and Class C units have received identical per-unit distributions; however, distributions may vary among the three classes in the future. To the extent that prior distributions have been inconsistent with the distribution priorities specified in the Operating Agreement, we intend to adjust future distributions in order to provide overall net distributions consistent with the priority provisions of the Operating Agreement.

Distributions payable to our unit holders may include a return of capital. Distributions exceeding taxable income will constitute a return of capital for federal income tax purposes to the extent of a unit holder’s basis. Distributions in excess of tax basis will generally constitute capital gain.

The declaration of distributions is determined by our manager. The amount of distributions depends on our actual cash flow, financial condition, capital requirements and such other factors our manager may deem relevant.

Equity Compensation Plan Information

We ~~have~~had no equity compensation plans as of December 31, ~~2010~~2011.

Item 6.

Selected Financial Data.

~~The~~Not ~~following tables set forth our selected historical consolidated financial data as of and for the years ended December 31, 2010, 2009, 2008, 2007 and 2006~~applicable. The selected consolidated balance sheet data as of December 31, 2010 and 2009 and the selected consolidated operating and cash flow data for the years ended December 31, 2010, 2009 and 2008 have been derived from the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. The selected consolidated balance sheet data as of December 31, 2008, 2007 and 2006 and the selected consolidated operating and cash flow data for the years ended December 31, 2007 and 2006 has been derived from audited consolidated financial statements not included in this Annual Report on Form 10-K, as adjusted for reclassifications required by the Property, Plant and Equipment Topic for discontinued operations. Historical results are not necessarily indicative of the results that may be expected for any future period. The selected consolidated financial data set forth below should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements accompanying this Annual Report on Form 10-K.

	December 31,
	2010			2009			2008			2007		2006
Balance Sheet Data:
Total assets	$	32,687,000		$	53,944,000		$	72,215,000		$	108,681,000	$	77,056,000
Mortgage loans payable, including mortgage loans secured by properties held for sale and properties held for non-sale disposition	$	43,471,000		$	60,164,000		$	68,915,000		$	71,682,000	$	37,186,000
NNN 2003 Value Fund, LLC unit holders’ (deficit) equity	$	(12,068,000	)	$	(9,173,000	)	$	(279,000	)	$	30,865,000	$	34,772,000

	Years Ended December 31,
	2010			2009			2008			2007			2006
Statement of Operations Data:
Rental revenues	$	6,852,000		$	6,950,000		$	6,512,000		$	2,981,000		$	—
Real estate related impairments	$	5,300,000		$	700,000		$	12,100,000		$	—		$	—
Interest expense	$	3,244,000		$	3,179,000		$	3,180,000		$	1,717,000		$	—
Equity in earnings (losses) of unconsolidated real estate	$	619,000		$	(3,154,000	)	$	(1,031,000	)	$	(1,421,000	)	$	(1,139,000	)
Loss from continuing operations	$	(6,623,000	)	$	(5,341,000	)	$	(18,285,000	)	$	(3,820,000	)	$	(1,232,000	)
Income (loss) from discontinued operations	$	6,130,000		$	(3,749,000	)	$	(10,983,000	)	$	4,498,000		$	1,595,000
Net (loss) income attributable to NNN 2003 Value Fund, LLC	$	(395,000	)	$	(8,894,000	)	$	(28,882,000	)	$	829,000		$	381,000
Other Data:
Cash flows provided by (used in) operating activities	$	64,000		$	(811,000	)	$	(2,600,000	)	$	(4,018,000	)	$	(4,789,000	)
Cash flows provided by (used in) investing activities	$	1,663,000		$	10,922,000		$	352,000		$	(17,530,000	)	$	15,867,000
Cash flows (used in) provided by financing activities	$	(2,420,000	)	$	(8,846,000	)	$	(4,501,000	)	$	29,112,000		$	(21,194,000	)
Distributions paid	$	(2,500,000	)	$	—		$	(2,908,000	)	$	(4,090,000	)	$	(5,997,000	)
Number of consolidated properties at year end		2			4			5			5			6
Rentable square feet of consolidated properties		349,000			738,000			837,000			837,000			763,000
Occupancy of consolidated properties		72.8	%		65.7	%		66.1	%		64.9	%		52.8	%

The financial data above includes the impact of several acquisitions and dispositions of consolidated and unconsolidated properties during the periods presented. As a result, the comparability of the financial data above is limited.

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

The use of the words “we,” “us,” or “our” refers to NNN 2003 Value Fund, LLC and its subsidiaries, except where the context otherwise requires.

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto accompanying this Annual Report on Form 10-K. Such consolidated financial statements and information have been prepared to reflect our financial position as of December 31, 2010 and 2009, together with our results of operations and cash flows for the years ended December 31, 2010, 2009 and 2008.

~~Forward-Looking~~Item ~~Statements~~ 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~Historical~~The ~~results~~following ~~and~~discussion ~~trends~~ should ~~not~~ be ~~taken~~read ~~as indicative of future operations. Our statements contained~~ in ~~this~~conjunction report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Actual results may differ materially from those included in the forward-looking statements. We intend those forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of us, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “prospects,” or similar expressions. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our ~~operations and future prospects on a~~ consolidated ~~basis include,~~financial ~~but~~statements ~~are not limited to: changes in economic conditions generally~~ and ~~the~~notes ~~real~~thereto ~~estate market~~accompanying ~~specifically; sales prices, lease renewals and new leases; legislative/regulatory changes;~~this ~~availability~~Annual ofReport capital; changes in interest rates; our ability to service our debt, competition in the real estate industry; the supply and demand for operating properties in our current and proposed market areas; changes in accounting principles generally accepted in the United States of America, or GAAP, policies and guidelines applicable to us; our ongoing relationship with our manager (as defined below); and litigation. These risks and uncertainties should be considered in evaluating forward looking statements and undue reliance should not be placed on ~~such~~Form ~~statements~~10-K. ~~Additional~~ information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the United States Securities and Exchange Commission, or the SEC.

As a result of the dispositions of all of our remaining property interests, we adopted the liquidation basis of accounting on December 1, 2011. Commencing December 1, 2011, we will report our results under the liquidation basis of accounting. Periods prior to December 1, 2011 are reported under the going concern basis of accounting.

Overview and Background

~~Our~~The ~~ability~~mortgage toloan ~~continue~~for the Sevens Building property, which had an outstanding principal balance of $21,494,000 as aof ~~going~~December 31, 2010, ~~concern~~matured ison ~~dependent~~October 31, 2010 and was in default due to non-payment of the outstanding principal balance upon ~~our~~maturity. ~~ability~~The mortgage loan documents for the Sevens Building property included an option to ~~generate~~extend the maturity date for an ~~necessary~~additional ~~cash~~12 ~~flows~~months ~~and/or~~beyond ~~retain~~October 31, 2010; however, we determined that it was not in the ~~necessary~~best ~~financing~~interest of our unit holders to ~~meet~~attempt ~~our~~to ~~obligations~~extend ~~and~~the ~~pay~~maturity ~~our~~date due to the unfavorable terms of the extension option, including additional cash ~~liabilities~~outlays asfor ~~they~~an ~~come~~extension ~~due~~fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. ~~During~~Furthermore, the ~~year~~estimated ~~ended~~value ~~December~~of the Sevens Building property was significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the Sevens Building property would exceed the principal balance by the end of the potential extension term. On March 317, ~~2010~~2011, we received a letter from the Sevens Building lender indicating that it had initiated a ~~loss~~foreclosure ~~from~~action on the Sevens Building property pursuant to our default on the mortgage loan for the Sevens Building property. On March 25, 2011, the successor ~~continuing~~trustee ~~operations~~appointed by the Sevens Building lender conducted a public auction and sold the Sevens Building property to General Electric Credit Equities, an entity affiliated with the Sevens Building lender, as buyer, for a sale price of $617,~~623~~400,000. ~~and~~As a ~~certain~~result of the sale, our ~~mortgage~~100% ~~loans~~ownership ~~went~~interest ~~into~~in ~~default~~the Sevens Building property was sold and conveyed to the buyer and a trustee’s deed was recorded on the Sevens Building property in favor of the buyer. We did not receive any cash proceeds ~~Accordingly~~from the sale of the Sevens Building property. On April 29, ~~there~~2011, iswe ~~substantial~~transferred ~~doubt~~$850,000 ~~about~~to ~~our~~the ~~ability~~Sevens Building lender, which represented the approximate amount of net cash generated by the property subsequent to ~~continue~~the asdefault aon ~~going~~the ~~concern.~~mortgage loan on October 31, 2010.

The mortgage loan for the ~~Sevens~~Four ~~Building~~Resource Square property, which had an outstanding principal ~~balance~~ balance of $21,~~494~~977,000 as of December 31, 2010, ~~matured~~had onan ~~October~~original maturity date of November 3130, 2010 ~~and~~but iswas ~~currently~~extended ~~in default due~~ to ~~non-payment~~January 20, of2011. ~~the~~The ~~outstanding~~mortgage ~~principal~~loan ~~balance~~documents ~~upon~~for ~~maturity.~~the ~~The~~Four ~~mortgage~~Resource ~~loan~~Square ~~documents include~~property included an option to extend the maturity date for an additional 12 months beyond ~~October~~November 3130, 2010; however, we determined that it was not in the best interest of our unit holders to attempt to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. ~~Further~~Furthermore, the estimated value of the ~~Sevens~~Four ~~Building~~Resource Square property iswas significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the Four Resource Square property would exceed the principal balance by the end of the potential extension term. AsOn ~~such~~January 20, 2011, we ~~had~~sold ~~been in discussions with~~ the ~~Sevens~~Four ~~Building~~Resource ~~lender~~Square ~~regarding our options for transferring the Sevens Building~~ property to ~~the~~an ~~Sevens~~entity ~~Building~~affiliated ~~lender,~~with ~~including foreclosure, deed-in-lieu of foreclosure, or another form of transfer. However, on March 7, 2011, we received a letter from~~ the ~~Sevens~~Four ~~Building~~Resource Square lender ~~indicating~~ ~~that~~for ~~it had initiated~~ a ~~foreclosure~~sales ~~action~~price onequal to the ~~Sevens~~outstanding ~~Building~~principal ~~property~~balance ~~pursuant~~of ~~to our default on~~ the mortgage loan ~~for~~of ~~the Sevens Building property~~$21,977,000. AWe ~~successor~~did ~~trustee has been~~not ~~appointed~~receive byany ~~the~~cash ~~Sevens~~proceeds ~~Building~~from ~~lender to conduct a public auction for~~ the sale of the ~~Sevens Building~~Four ~~property,~~Resource ~~which~~Square ~~is set to take place on March 25, 2011~~property.

26 10

InThe ~~addition, the~~ mortgage loan for the ~~Four~~Enterprise ~~Resource~~Technology ~~Square~~Center property, ~~which~~ had anbeen ~~outstanding principal~~in ~~balance~~default ofsince April 11, ~~$21~~2010,~~977,000~~ asdue ofto ~~December 31,~~the ~~2010,~~inability ~~had~~to anpay ~~original~~in ~~maturity~~full the monthly interest and principal payment due on that date ofor ~~November 30,~~within ~~2010~~five ~~but~~days ~~was~~of ~~extended~~that todate. ~~January~~Further, on May 2011, 2011., ~~The~~the mortgage loan ~~documents~~for ~~included~~the anEnterprise ~~option~~Technology toCenter property, ~~extend~~which ~~the~~had ~~maturity~~a ~~date~~then ~~for~~outstanding anbalance ~~additional~~of ~~12 months beyond November 30~~$32, ~~2010; however~~562,000, ~~we determined~~matured ~~that~~and it was not inrepaid, ~~the~~triggering ~~best~~an ~~interest~~additional event of ~~our unit~~default. ~~holders~~On toJuly 15, ~~attempt~~2011, toLBUSB ~~extend~~2004-C4 ~~the~~Enterprise ~~maturity~~Way, ~~date~~L.P., ~~due~~an toentity ~~the~~affiliated ~~unfavorable~~with ~~terms~~UBS ofReal ~~the~~Estate Investments, Inc., or ~~extension~~the ~~option~~Enterprise Technology Center lender, ~~including~~filed ~~additional~~a ~~cash~~complaint ~~outlays~~against ~~for~~NNN anEnterprise ~~extension~~Way, ~~fee~~LLC and ~~partial~~the ~~principal prepayment,~~other ~~which~~31 wetenant-in-common, ~~did~~or ~~not~~TIC, ~~expect~~owners ~~would~~of bethe ~~recovered~~Enterprise ~~through~~Technology Center property ~~operations~~seeking ~~over~~judicial foreclosure, specific performance for the ~~subsequent~~appointment ~~12 months~~of a receiver and injunctive relief. ~~Further~~On July 21, 2011, the ~~estimated~~court ~~value~~ordered the appointment of ~~the~~a ~~Four~~receiver ~~Resource~~and ~~Square~~granted ~~property~~injunctive ~~was significantly~~relief. ~~less~~As ~~than~~a result, on July 25, 2011, the ~~outstanding~~receiver ~~principal~~appointed ~~balance~~by the court took possession of the Enterprise ~~mortgage~~Technology ~~loan,~~Center property and wehas ~~did~~been ~~not expect~~instructed ~~that~~to ~~the~~proceed ~~value~~with ofa ~~the~~private ~~property~~sale ~~would~~of ~~exceed~~ the ~~principal~~property ~~balance~~under by the ~~end~~supervision of the ~~potential~~ ~~extension term~~court. AsIn ~~such~~addition, on ~~January~~July 2029, 2011, ~~we sold~~ the ~~Four~~appointed ~~Resource~~trustee ~~Square~~filed ~~property to~~a annotice ~~entity~~of ~~affiliated~~default ~~with~~and ~~the~~election ~~Four~~to ~~Resource~~sell under ~~Square~~deed ~~lender~~of ~~for~~trust aon ~~sales~~behalf ~~price~~of ~~equal~~the toEnterprise ~~the outstanding~~Technology ~~principal~~Center ~~balance~~lender. ofThe ~~the~~trustee’s ~~mortgage~~sale ~~loan~~occurred ofon ~~$21~~November 29,~~977,000~~ 2011. We did not receive any cash proceeds from the sale of the Enterprise Technology Center property.

~~The~~We ~~maturities~~are ofcurrently ~~the~~in ~~mortgage loans on~~ the ~~Sevens~~process ~~Building~~of ~~and~~winding ~~Four~~up ~~Resource~~our ~~Square properties~~operations, ~~the~~which ~~subsequent~~we ~~sale~~expect ofwill ~~the~~be ~~Four~~completed ~~Resource~~within ~~Square property to an entity affiliated with its lender for no cash proceeds and~~ the ~~expected~~next ~~foreclosure~~three ofto ~~the~~nine ~~Sevens Building property~~months, ~~which~~at wewhich ~~also~~time ~~expect~~we will ~~result~~distribute inany noremaining ~~cash~~available ~~proceeds,~~funds ~~combined~~to ~~with~~ our ~~loss~~unit ~~from~~holders ~~continuing~~and ~~operations, raises~~will ~~substantial~~cease ~~doubt about our ability~~ to ~~continue~~be as a going concern.

Grubb & Ellis Realty Investors, LLC, or Grubb & Ellis Realty Investors, or our manager, manages us pursuant to the terms of an operating agreement, or the Operating Agreement. While we have no employees, certain executive officers and employees of our manager provide services to us pursuant to the Operating Agreement. Our ~~manager engages affiliated entities, including Triple Net~~Manager Properties Realty, Inc., or Realty, to provide certain services to us. Realty serves as our property manager pursuant to the terms of the Operating Agreement and a property management agreement, or the Management Agreement. The Operating Agreement terminates upon our dissolution. The unit holders may not vote to terminate our manager prior to the termination of the Operating Agreement or our dissolution, except for cause. The Management Agreement terminates with respect to each of our properties upon the earlier of the sale of each respective property or December 31, 2013. Realty may be terminated without cause prior to the termination of the Management Agreement or our dissolution, subject to certain conditions, including the payment by us to Realty of a termination fee as provided in the Management Agreement.

Business Strategy

Our primary business strategy was to acquire, own, operate and subsequently sell our ownership interests in a number of unspecified properties believed to have higher than average potential for capital appreciation, or value-added properties. ~~As of December 31, 2010, we held interests in three commercial office properties, including two consolidated properties and one unconsolidated property.~~ Our principal objectives initially were to: (i) have the potential within approximately one to five years, subject to market conditions, to realize income on the sale of our properties; (ii) realize income through the acquisition, operation, development and sale of our properties or our interests in our properties; and (iii) make periodic distributions to our unit holders from cash generated from operations and capital transactions. WeDuring ~~currently~~2011, ~~intend~~we todisposed ~~dispose~~ of ~~all of~~ our remaining ~~properties~~property interests and ~~pay~~are ~~distributions~~currently toin ~~our~~the ~~unit~~process ~~holders from available funds, if any. We~~of doliquidating ~~not~~our ~~anticipate acquiring any additional real estate properties at this time~~company.

Acquisitions and Dispositions

Pursuant to our Operating Agreement and Management Agreement, our manager or its affiliate is entitled to a property acquisition fee or property disposition fee in connection with our acquisition or disposition, as applicable, of properties. Certain acquisition and disposition fees paid to Realty were passed through to our manager pursuant to an agreement between our manager and Realty, or the Realty Agreement.

Acquisitions in 2011

We did not acquire any consolidated properties during the year ended December 31, 2011.

Dispositions in 2011

On January 20, 2011, we sold the Four Resource Square property to Four Resource Square, LLC, an entity affiliated with the Four Resource Square lender, for a sales price of $21,977,000, which was equal to the outstanding principal balance of the loan. We recorded a gain on extinguishment of debt related to the Four Resource Square property of $8,043,000 during the period from January 1, 2011 through November 30, 2011, which is included in the line item entitled “Income (loss) from discontinued operations” in our accompanying consolidated statement of operations for the period from January 1, 2011 through November 30, 2011.

On March 25, 2011, the successor trustee appointed by the Sevens Building lender conducted a public auction and sold the Sevens Building property to General Electric Credit Equities, an entity affiliated with the Sevens Building lender, or the buyer, for a sale price of $17,400,000. As a result of the sale, our ownership interest in the Sevens Building property was sold and conveyed to the buyer and a trustee’s deed was recorded on the Sevens Building property in favor of the buyer. We recorded a gain on extinguishment of debt related to the Sevens Building property of $5,580,000 during the period from January 1, 2011 through November 30, 2011, which is included in the line item entitled “Income (loss) from discontinued operations” in our accompanying consolidated statement of operations for the period from January 1, 2011 through November 30, 2011.

Acquisitions in 2010

We did not acquire any consolidated properties during the year ended December 31, 2010.

Dispositions in 2010

On May 7, 2010, we sold Tiffany Square, located in Colorado Springs, Colorado, or the Tiffany Square property, to Tiffany Square, LLC, an entity affiliated with the Tiffany Square lender, for a ~~sales~~ sales price of $12,395,000, which was equal to the outstanding principal balance of the mortgage loan. We did not receive any cash proceeds from the ~~transfer~~sale of the Tiffany Square property, and we did not pay our manager a disposition fee in connection with the ~~transfer~~sale of the Tiffany Square property. We recorded a gain on extinguishment of debt related to the Tiffany Square property of $4,144,000 during the year ended December 31, 2010, which is included in the line item entitled “Income (loss) from discontinued operations” in our accompanying consolidated statement of operations for the year ended December 31, 2010.

27On June 2, 2010, we completed a deed-in-lieu of foreclosure transaction whereby we transferred our ownership interest in Executive Center I, located in Dallas, Texas, or the Executive Center I property, to the Executive Center I lender in exchange for complete cancellation of the loan agreements and release of all of our liabilities, obligations and other indebtedness arising from the related loan agreements. At the time of transfer, the loan had an outstanding principal balance of $4,590,000. We did not receive any cash proceeds from the transfer of the Executive Center I property, and we did not pay our manager a disposition fee in connection with the transfer of the Executive Center I property. We recorded a gain on extinguishment of debt related to the Executive Center I property of $2,514,000 during the year ended December 31, 2010, which is included in the line item entitled “Income (loss) from discontinued operations” in our accompanying consolidated statement of operations for the year ended December 31, 2010.

On June 2, 2010, we completed a deed-in-lieu of foreclosure transaction whereby we transferred our ownership interest in Executive Center I, located in Dallas, Texas, or the Executive Center I property, to the Executive Center I lender in exchange for complete cancellation of the loan agreements and release of all of our liabilities, obligations and other indebtedness arising from the loan agreements. At the time of transfer, the loan had an outstanding principal balance of $4,590,000. We did not receive any cash proceeds from the transfer of the Executive Center I property, and we did not pay our manager a disposition fee in connection with the transfer of the property. We recorded a gain on extinguishment of debt related to the Executive Center I property of $2,514,000 during the year ended December 31, 2010, which is included in the line item entitled “Income (loss) from discontinued operations” in our accompanying consolidated statement of operations for the year ended December 31, 2010.

Acquisitions in 2009

We did not acquire any consolidated properties during the year ended December 31, 2009.

Dispositions in 2009

On July 17, 2009, we completed the sale of 901 Civic Center, located in Santa Ana, California, or the 901 Civic Center property, to an unaffiliated third party for a sales price of $11,250,000. ~~Our~~ Our net cash proceeds were $1,946,000 after payment of the related mortgage loan, closing costs and other transaction expenses. Our manager waived the disposition fee it was entitled to receive in connection with the sale of the 901 Civic Center property. We recorded a gain on sale of the 901 Civic Center property of $758,000 during the year ended December 31, 2009, which is included in the line item entitled “Income (loss) from discontinued operations” in our accompanying consolidated statement of operations for the year ended December 31, 2009. We owned a 96.9% interest in the 901 Civic Center property.

~~Acquisitions~~12 ~~and Dispositions in 2008~~

WeTable did not acquire or dispose of any consolidated properties during the year ended December 31, 2008. Contents

Critical Accounting Policies

Use of Estimates

The preparation of financial statements in accordance with GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We believe that our critical accounting policies are those that require significant judgments and estimates such as those related to revenue recognition, allowance for doubtful accounts, impairment of real estate and intangible assets, purchase price allocation, deferred assets and properties held for sale. These estimates are made and evaluated on an on-going basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could vary from those estimates, perhaps in material adverse ways, and those estimates could differ under different assumptions or conditions.

~~Revenue~~Factors ~~Recognition~~Which May Influence Future Changes in Net Assets in Liquidation and ~~Allowance~~Results ~~for~~of ~~Doubtful~~Operations ~~Accounts~~

Base rental income is recognized on a straight-line basis over the terms of the respective lease agreements in accordance with the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or Codification, Topic 840, Leases. Differences between rental income recognized and amounts contractually due under the lease agreements are credited or charged, as applicable, to rent receivable. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements. We also maintain an allowance for deferred rent receivables arising from the straight-lining of rents. We determine the adequacy of this allowance by continually evaluating individual tenant receivables considering the tenant’s financial condition, security deposits, letters of credit, lease guarantees, if applicable, and current economic conditions.

Real Estate Related Impairments

We assess the impairment of a real estate asset when events or changes in circumstances indicate that its carrying amount may not be recoverable. Indicators we consider important which could trigger an impairment review include the following:

• a significant negative industry or economic trend;

• a significant underperformance of a property relative to historical or projected future operating results; and

• a significant change in the manner in which the asset is used.

In the event that the carrying amount of a property exceeds the sum of the undiscounted cash flows (excluding interest) that are expected to result from the use and eventual disposition of the property, we would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property. The estimation of expected future net cash flows is inherently uncertain and relies on subjective assumptions dependent upon future and current market conditions and events that affect the ultimate value of the property. It requires us to make assumptions related to future rental rates, tenant allowances, operating expenditures, property taxes, capital improvements, occupancy levels, and the estimated proceeds generated from the future sale of the property. The estimation of proceeds to be generated from the future sale of the property requires us to also make estimates about capitalization rates and discount rates.

In accordance with FASB Codification Topic 360, Property, Plant and Equipment, during the years ended December 31, 2010, 2009 and 2008, we assessed the values of our consolidated properties. These valuation assessments resulted in us recognizing charges for real estate related impairments of $5,300,000, $4,000,000 and $20,700,000 against the carrying values of our consolidated real estate investments during the years ended December 31, 2010, 2009 and 2008, respectively.

Additionally, our unconsolidated properties were also assessed for impairment and impairment charges of $18,000,000, $21,570,000 and $4,200,000 were recorded against their carrying values during the years ended December 31, 2010, 2009 and 2008, respectively. Our share of these impairments was approximately $374,000, $3,115,000 and $500,000 during the years ended December 31, 2010, 2009 and 2008, respectively. Our share of the impairments recorded during the year ended December 31, 2010 was limited to the amount of our remaining investment in the unconsolidated property.

Real estate related impairments are reflected in our consolidated statements of operations as follows:

	Years Ended December 31,
	2010		2009		2008
Real estate related impairments of operations held for non-sale disposition	$	5,300,000	$	700,000	$	12,100,000
Equity in income (losses) of unconsolidated real estate		374,000		3,115,000		500,000
Income (loss) from discontinued operations		—		3,300,000		8,600,000
	$	5,674,000	$	7,115,000	$	21,200,000

The current economic conditions have affected property values and the availability of credit. If we are unable to execute on our plans for the continued operation and/or disposition of our properties, or if economic conditions affecting property values and the availability of credit decline further, our investments in real estate assets may become further impaired.

Properties Held for Non-Sale Disposition

Our properties held for non-sale disposition are stated at historical cost less accumulated depreciation, net of real estate related impairment charges. The cost of our properties held for non-sale disposition includes the cost of land and completed buildings and related improvements. Expenditures that increase the service life of the property are capitalized and the cost of maintenance and repairs is charged to expense as incurred. The cost of buildings and improvements are depreciated on a straight-line basis over the estimated useful lives of the buildings and improvements, ranging from 6 to 39 years and the shorter of the lease term or useful life, ranging from 1 to 6 years for tenant improvements. When depreciable property is retired or disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is reflected in discontinued operations.

During the year ended December 31, 2009, we elected to cease the subsidization of the operations and debt service on the non-recourse promissory note for Executive Center I, located in Dallas, Texas, or the Executive Center I property, which matured on October 1, 2009. The property was reclassified as a property held for non-sale disposition at that time, as we determined that the property would be transferred to the Executive Center I lender in the first half of 2010. In the first quarter of 2010, Tiffany Square, located in Colorado Springs, Colorado, or the Tiffany Square property, was also reclassified as a property held for non-sale disposition, as its related mortgage loan matured on February 15, 2010 and we determined that the property would be transferred to the Tiffany Square lender in the second quarter of 2010. Further, in the third quarter of 2010, we determined that the Sevens Building and Four Resource Square properties would also be transferred to their respective lenders, and have reclassified both of these properties as properties held for non-sale disposition.

Factors Which May Influence Results of Operations

Rental Revenue

The amount of rental revenue generated by our properties depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space available from unscheduled lease terminations at the existing rental rates. Negative trends in one or more of these factors could adversely affect our rental income in future periods.

Scheduled Lease Expirations

As of December 31, 2010, our two consolidated properties were 72.8% leased to 58 tenants. Leases representing approximately 25.6% of the total leased area expire during 2011. Our leasing strategy focuses on negotiating renewals for leases scheduled to expire during the year. If we are unable to negotiate such renewals, we will try to identify new tenants or collaborate with existing tenants who are seeking additional space to occupy. If the aggregate lease non-renewal factor at a property exceeds the factor we projected when we acquired the property, we evaluate any tenant relationship intangible assets in connection with our assessment of real estate assets for impairment.

Sarbanes-Oxley Act

The Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, and related laws, regulations and standards relating to corporate governance and disclosure requirements applicable to public companies, have increased the costs of compliance with corporate governance, reporting and disclosure practices which are now required of us. These costs were unanticipated at the time of our formation and may have a material impact on our results of operations. Furthermore, these costs may increase in the future, and any increased costs may affect our liquidity or capital resources and/or future distribution of funds, if any, to our unit holders. As part of our compliance with the Sarbanes-Oxley Act, we provided management’s assessment of our internal control over our financial reporting as of December 31, ~~2010~~2011 and continue to comply with such regulations.

In addition, these laws, rules and regulations create new legal bases for potential administrative enforcement, civil and criminal proceedings against us in case of non-compliance, thereby increasing the risks of liability and potential sanctions against us. We expect that our efforts to comply with these laws and regulations will continue to involve significant, and potentially increasing costs and, our failure to comply, could result in fees, fines, penalties or administrative remedies against us.

Changes in Net Assets in Liquidation

Period from December 1, 2011 through December 31, 2011

Net assets in liquidation were unchanged during the period from December 1, 2011 through December 31, 2011 at $384,000.

Results of Operations

Our operating results ~~are~~were primarily comprised of income derived from our portfolio of properties, as described below. ~~Because~~Our ~~our~~operating ~~primary~~results ~~business~~reflect ~~strategy~~the ~~was acquiring properties with greater than average appreciation potential, enhancing value and realizing gains upon~~ disposition of ~~these~~our properties, ~~our operations may reflect significant property acquisitions~~ and, ~~dispositions from~~as ~~period to period. As~~ a result, the comparability of the financial data is limited and may vary significantly from period to period.

We have made reclassifications of the operating results of all properties sold or abandoned as of ~~December~~November 3130, 2011 ~~2010~~ from “Loss from continuing operations” to “Income (loss) from discontinued operations” for all periods presented to conform with the current year financial statement presentation. In addition, we have made reclassifications from “Income (loss) from discontinued operations” to “Loss from continuing operations” for all periods presented for properties that no longer met the held for sale classification criteria as of December 31, 2010.

30 13

Comparison of the ~~Years~~Period ~~Ended~~from ~~December~~January 311, ~~2010~~2011 through November 30, 2011 and ~~2009~~the Year Ended December 31, 2010

	Years Ended December 31,						Change
		September 30,			September 30,			September 30,
	2010			2009			$			%
	Period FromJanuary 1,2011 throughNovember 30,			Year EndedDecember 31,
Revenues:
	2011			2010			Change
Rental revenue of operations held for non-sale disposition	$	6,852,000		$	6,950,000		$	(98,000	)		(1.4	)%
Interest and dividend income	$	1,000		$	23,000		$	(22,000	)
Expenses:
Other income		—			21,000			(21,000	)
Operating expenses of operations held for non-sale disposition		5,235,000			4,612,000			623,000			13.5	%
General and administrative expense		(251,000	)		(362,000	)		111,000
General and administrative		362,000			587,000			(225,000	)		(38.3	)%
Equity in earnings of unconsolidated real estate		1,000			619,000			(618,000	)
Real estate related impairments of operations held for non-sale disposition		5,300,000			700,000			4,600,000			657.1	%
(Loss) income from continuing operations		(249,000	)		301,000			(550,000	)
		10,897,000			5,899,000			4,998,000			84.7	%
Income (loss) from discontinued operations		13,398,000			(794,000	)		14,192,000
(Loss) income before other income (expense) and discontinued operations		(4,045,000	)		1,051,000			(5,096,000	)		(484.9	)%
Consolidated net income (loss)	$	13,149,000		$	(493,000	)	$	13,642,000
Other income (expense):
Interest expense of operations held for non-sale disposition		(3,244,000	)		(3,179,000	)		(65,000	)		2.0	%
Interest and dividend income		23,000			47,000			(24,000	)		(51.1	)%
Investment related impairments		—			(126,000	)		126,000			(100.0	)%
Equity in income (losses) of unconsolidated real estate		619,000			(3,154,000	)		3,773,000			119.6	%
Other income		24,000			20,000			4,000			20.0	%
Loss from continuing operations		(6,623,000	)		(5,341,000	)		(1,282,000	)		(24.0	)%
Income (loss) from discontinued operations		6,130,000			(3,749,000	)		9,879,000			263.5	%
Consolidated net loss	$	(493,000	)	$	(9,090,000	)	$	8,597,000			(94.6	)%

Rental Revenue of Operations Held for Non-Sale Disposition

Rental revenue of operations held for non-sale disposition decreased $98,000, or 1.4%, to $6,852,000 during the year ended December 31, 2010, compared to $6,950,000 for the year ended December 31, 2009.

Operating Expenses of Operations Held for Non-Sale Disposition

Operating expenses of operations held for non-sale disposition increased $623,000, or 13.5%, to $5,235,000 during the year ended December 31, 2010, compared to $4,612,000 for the year ended December 31, 2009. The increase was primarily attributable to higher depreciation expense for the Sevens Building property. The Sevens Building property was classified as held for sale for the majority of 2009 and, accordingly, was not depreciated. In the fourth quarter of 2009, the property was reclassified as held for investment, and depreciation of the building, improvements and intangible assets resumed upon reclassification.

General and Administrative

General and administrative expense decreased $225,000, or 38.3%, to $362,000 during the year ended December 31, 2010, compared to $587,000 for the year ended December 31, 2009. The decrease was primarily due to lower external audit costs and other professional fees.

Real Estate Related Impairments of Operations Held for Non-Sale Disposition

Real estate related impairments of operations held for non-sale disposition were $5,300,000 during the year ended December 31, 2010, compared to real estate related impairments of $700,000 for the year ended December 31, 2009. The larger impairments recorded during the year ended December 31, 2010 were due to impairments recorded related to the Sevens Building property, which primarily resulted from the identification of some repair and restoration work required on the property’s parking structure, as well as a decrease in our lease renewal rate estimates.

Interest Expense of Operations Held for Non-Sale Disposition

Interest expense of operations held for non-sale disposition increased $65,000, or 2.0%, to $3,244,000 during the year ended December 31, 2010, compared to $3,179,000 for the year ended December 31, 2009. The increase was primarily due to the higher default interest rate being recorded on the Sevens Building mortgage loan, which has been in default since October 31, 2010 due to non-payment of the principal balance upon maturity. This increase was partly offset by lower amortization of deferred financing fees related to the Four Resource Square mortgage loan because the fees became fully amortized upon the original maturity date of the mortgage loan on March 7, 2010.

Interest and Dividend Income

Interest and dividend income was $1,000 and $23,000 during the period from January 1, 2011 through November 30, 2011 and the year ended December 31, 2010, ~~compared~~respectively. The decrease is due to ~~$47,000~~ ~~for~~all cash being held in non-interest bearing accounts during the ~~year~~period ~~ended~~from ~~December~~January 311, ~~2009~~2011 through November 30, 2011.

Equity in Income (Losses) of Unconsolidated Real Estate

Equity in income of unconsolidated real estate was $619,000 during the year ended December 31, 2010, compared to equity in losses of unconsolidated real estate of $3,154,000 for the year ended December 31, 2009. The equity in income of unconsolidated real estate for the year ended December 31, 2010 was comprised of: (i) our share of the gain on sale and gains on the forgiveness of debt and forgiveness of management fees payable to our manager, upon the sale of Executive Center II and III, located in Dallas, Texas, or the Executive Center II and III property, (ii) the reversal of an allowance against the notes and interest receivable from the Executive Center II and III property, as the amounts were fully repaid upon the sale of the property, and (iii) our share of the $18,000,000 real estate related impairment charge recorded by the Enterprise Technology Center property, which was limited to the amount of our remaining investment in the property.

The equity in losses of unconsolidated real estate for the year ended December 31, 2009 was primarily attributable to real estate related impairment charges of $21,570,000 that were recorded at our unconsolidated real estate, of which our portion was approximately $3,115,000.

Other Income

Other income was $240 and $21,000 during the ~~year~~period ~~ended~~from ~~December~~January 311, ~~2010,~~2011 ~~compared~~through ~~to other income of $20~~November 30,~~000~~ ~~for~~2011 and the year ended December 31, ~~2009~~2010, respectively.

General and Administrative Expense

General and administrative expense decreased $111,000 to $251,000 during the period from January 1, 2011 through November 30, 2011, compared to general and administrative expense of $362,000 for the year ended December 31, 2010. The decrease was primarily due to lower external audit fees.

Equity in Earnings of Unconsolidated Real Estate

Equity in earnings of unconsolidated real estate was $1,000 during the period from January 1, 2011 through November 30, 2011, compared to equity in earnings of unconsolidated real estate of $619,000 during the year ended December 31, 2010. The equity in earnings of unconsolidated real estate for the period from January 1, 2011 through November 30, 2011 was due to residual activity at Chase Tower, or the Chase Tower property, and Executive Center II & III, or the Executive Center II and III property, which were sold in January 2010 and May 2010, respectively.

The equity in earnings of unconsolidated real estate for the year ended December 31, 2010 was comprised of: (i) our share of the gain on sale and gains on the forgiveness of debt and forgiveness of management fees payable to our manager, upon the sale of the Executive Center II and III property, (ii) the reversal of an allowance against the notes and interest receivable from the Executive Center II and III property, as the amounts were fully repaid upon the sale of the property, and (iii) our share of the $18,000,000 real estate related impairment charge recorded by the Enterprise Technology Center property, which was limited to the amount of our remaining investment in the property.

Income (Loss) from Discontinued Operations

Income from discontinued operations was $613,~~130~~398,000 during the ~~year~~period ~~ended~~from ~~December~~January 311, ~~2010~~2011 through November 30, 2011, compared to a loss from discontinued operations of $3794,~~749,~~000 for the year ended December 31, ~~2009~~2010. ~~During~~ ~~the~~The ~~year~~income ~~ended~~from ~~December 31,~~discontinued ~~2010,~~operations during the ~~income~~period from ~~discontinued~~January 1, ~~operations~~2011 through November 30, 2011 resulted primarily from the gains recognized on the extinguishment of debt ~~related~~in toconnection with the dispositions ~~Tiffany~~of the Four Resource Square and ~~Executive Center~~Sevens IBuilding properties of $48,~~144~~043,000 and $25,~~514~~580,000, respectively. The loss from discontinued operations during the year ended December 31, 2009 was primarily attributable to real estate related impairment charges totaling $3,300,000 related to the Executive Center I and Tiffany Square properties, as well as the operating losses of these properties incurred during the period, partly offset by a gain of $758,000 recognized on the sale of the 901 Civic Center property.

~~Consolidated~~The ~~Net~~loss from ~~Loss~~discontinued operations during the year ended December 31, 2010 resulted primarily from the $5,300,000 real estate related impairment charge recorded against the Sevens Building property and the operating losses incurred by all of the disposed properties during the period, partially offset by the gains recognized on the extinguishment of debt in connection with the dispositions of the Tiffany Square and Executive Center I properties of $4,144,000 and $2,514,000, respectively.

As14 ~~a result of the above, consolidated net loss was $493,000 for the year ended December 31, 2010, compared to consolidated net loss of $9,090,000 for the year ended December 31, 2009.~~

~~Comparison~~Consolidated ofNet ~~the~~Income ~~Years~~(Loss) ~~Ended December 31, 2009 and 2008~~

	Years Ended December 31,						Change
	2009			2008			$			%
Revenues:
Rental revenue of operations held for non-sale disposition	$	6,950,000		$	6,512,000		$	438,000			6.7	%
Expenses:
Operating expenses of operations held for non-sale disposition		4,612,000			6,297,000			(1,685,000	)		(26.8	)%
General and administrative		587,000			723,000			(136,000	)		(18.8	)%
Real estate related impairments of operations held for non-sale disposition		700,000			12,100,000			(11,400,000	)		(94.2	)%
		5,899,000			19,120,000			(13,221,000	)		(69.1	)%
Income (loss) before other income (expense) and discontinued operations		1,051,000			(12,608,000	)		13,659,000			108.3	%
Other income (expense):
Interest expense of operations held for non-sale disposition		(3,179,000	)		(3,180,000	)		1,000			(0.0	)%
Interest and dividend income		47,000			219,000			(172,000	)		(78.5	)%
Loss on sales of marketable securities		—			(808,000	)		808,000			—	%
Investment related impairments		(126,000	)		(900,000	)		774,000			(86.0	)%
Equity in losses of unconsolidated real estate		(3,154,000	)		(1,031,000	)		(2,123,000	)		205.9	%
Other income		20,000			23,000			(3,000	)		(13.0	)%
Loss from continuing operations		(5,341,000	)		(18,285,000	)		12,944,000			(70.8	)%
Loss from discontinued operations		(3,749,000	)		(10,983,000	)		7,234,000			(65.9	)%
Consolidated net loss	$	(9,090,000	)	$	(29,268,000	)	$	20,178,000			(68.9	)%

As a result of the above, consolidated net income was $13,149,000 for the period from January 1, 2011 through November 30, 2011, compared to consolidated net loss of $493,000 for the year ended December 31, 2010.

~~Rental~~Comparison ~~Revenue~~ of ~~Operations~~the ~~Held~~Years ~~for~~Ended December 31, ~~Non-Sale~~2010 ~~Disposition~~ and 2009

Rental revenue of operations held for non-sale disposition increased $438,000, or 6.7%, to $6,950,000 during the year ended December 31, 2009, compared to $6,512,000 for the year ended December 31, 2008. The increase was attributable to higher rental revenue at the Four Resource Square and Sevens Building properties.

		September 30,			September 30,			September 30,
	Years Ended December 31,
	2010			2009			Change

Interest and dividend income	$	23,000		$	47,000		$	(24,000	)
Other income		21,000			19,000			2,000
General and administrative expense		(362,000	)		(587,000	)		225,000
Investment related impairments		—			(126,000	)		126,000
Equity in earnings (losses) of unconsolidated real estate		619,000			(3,154,000	)		3,773,000

Income (loss) from continuing operations		301,000			(3,801,000	)		4,102,000
Loss from discontinued operations		(794,000	)		(5,289,000	)		4,495,000

Consolidated net loss	$	(493,000	)	$	(9,090,000	)	$	8,597,000

Operating Expenses of Operations Held for Non-Sale Disposition

Operating expenses of operations held for non-sale disposition decreased $1,685,000, or 26.8%, to $4,612,000 during the year ended December 31, 2009, compared to $6,297,000 for the year ended December 31, 2008. This decrease was primarily due to a $1,714,000 decrease in depreciation and amortization expense at the Four Resource Square and Sevens Building properties. Depreciation expense for the Four Resource Square property decreased due to the $5,900,000 impairment charge recorded in 2008 and the resulting lower depreciable basis. Depreciation expense for the Sevens Building property decreased because it was classified as held for sale for the majority of 2009 and was not depreciated during that period.

General and Administrative

General and administrative expense decreased $136,000, or 18.8%, to $587,000 during the year ended December 31, 2009, compared to $723,000 for the year ended December 31, 2008. The decrease was due primarily to lower tax and audit fees.

Real Estate Related Impairments of Operations held for non-sale disposition

During the year ended December 31, 2009, we reviewed our consolidated properties for impairment in accordance with FASB Codification Topic 360, Property, Plant and Equipment, as indicators of impairment were present. As a result of these impairment reviews, we recorded real estate related impairments of $600,000 related to the Sevens Building property and $100,000 related to the Four Resource Square property, for total real estate related impairments of $700,000 during the year ended December 31, 2009.

During the year ended December 31, 2008, we reviewed our consolidated properties for impairment in accordance with FASB Codification Topic 360, Property, Plant and Equipment, as indicators of impairment were present. As a result of these impairment reviews, we recorded real estate related impairments of $6,200,000 related to the Sevens Building property and $5,900,000 related to the Four Resource Square property, for total real estate related impairments of $12,100,000 during the year ended December 31, 2008.

Interest Expense of Operations Held for Non-Sale Disposition

Interest expense decreased $1,000 to $3,179,000 during the year ended December 31, 2009, compared to interest expense of $3,180,000 for the year ended December 31, 2008.

Interest and Dividend Income

Interest and dividend income ~~decreased~~was $~~172~~23,000, orand ~~78.5%, to~~ $47,000 during the ~~year~~years ended December 31, ~~2009,~~2010 ~~compared to interest~~ and ~~dividend income of $219~~2009,~~000~~ ~~for the year ended December 31, 2008, primarily due to a decrease in interest income earned on our money market accounts and our marketable securities, as all of the securities were sold during 2008~~respectively.

Loss on Sales of Marketable Securities

We did not hold any investments in marketable securities during the year ended December 31, 2009. We recorded a loss on sales of marketable securities of $808,000 during the year ended December 31, 2008. The loss was due to the sale of underperforming investments in marketable equity securities in our investment account during 2008.

Investment Related Impairments

Investment related impairments were $126,000 during the year ended December 31, 2009, compared to $900,000 during the year ended December 31, 2008. During 2009, we recorded an investment related impairment of $126,000 on Chase Tower, located in Austin, Texas, or the Chase Tower property, to adjust the investment balance to its estimated fair value as of December 31, 2009. During 2008, we recorded investment related impairments of $200,000 on the Enterprise Technology Center property, $300,000 on the Executive Center II & III property, and $400,000 on the Chase Tower property to adjust the investment balances to their estimated fair values as of December 31, 2008.

Equity in Losses of Unconsolidated Real Estate

Equity in losses of unconsolidated real estate increased $2,123,000, or 205.9%, to a loss of $3,154,000 during the year ended December 31, 2009, compared to loss of $1,031,000 for the year ended December 31, 2008. The increased loss was primarily attributable to real estate related impairment charges of $21,570,000 recorded during the year ended December 31, 2009 at our unconsolidated properties, of which our share was approximately $3,115,000, compared to real estate related impairment charges of $4,200,000 recorded during the year ended December 31, 2008 at our unconsolidated properties, of which our share was approximately $500,000. The larger impairment charges recorded during the year ended December 31, 2009 were partly offset by decreases in depreciation expense at all three unconsolidated properties, which was due to the impairment charges and the resulting lower depreciable bases, as well as the fact these properties were classified as held for sale for a portion of 2009 and were not depreciated during that period. The impairment charges recorded during 2009 exceeded any catch-up depreciation expense that would have otherwise been required upon reclassification to operating properties.

Other Income

Other income ~~decreased~~was $321,000 toand $2019,000 during the ~~year~~years ended December 31, ~~2009,~~2010 ~~compared~~and ~~to $23~~2009,~~000~~ ~~for the year ended December 31, 2008~~respectively.

34 General and Administrative

General and administrative expense decreased $225,000 to $362,000 during the year ended December 31, 2010, compared to $587,000 for the year ended December 31, 2009. The decrease was primarily due to lower external audit costs and other professional fees.

Equity in Earnings (Losses) of Unconsolidated Real Estate

Equity in earnings of unconsolidated real estate was $619,000 during the year ended December 31, 2010, compared to equity in losses of unconsolidated real estate of $3,154,000 for the year ended December 31, 2009. The equity in income of unconsolidated real estate for the year ended December 31, 2010 was comprised of: (i) our share of the gain on sale and gains on the forgiveness of debt and forgiveness of management fees payable to our manager, upon the sale of Executive Center II and III, located in Dallas, Texas, or the Executive Center II and III property, (ii) the reversal of an allowance against the notes and interest receivable from the Executive Center II and III property, as the amounts were fully repaid upon the sale of the property, and (iii) our share of the $18,000,000 real estate related impairment charge recorded by the Enterprise Technology Center property, which was limited to the amount of our remaining investment in the property.

Loss from Discontinued Operations

Loss from discontinued operations ~~decreased~~was $7794,~~234,~~000 ~~to $3,749,000~~ during the year ended December 31, ~~2009~~2010, compared to $105,~~983~~289,000 for the year ended December 31, ~~2008~~2009. The loss from discontinued operations during the year ended December 31, ~~2009~~2010 ~~was~~resulted primarily ~~attributable~~from tothe ~~real estate related impairment charges totaling~~ $35,300,000 ~~related~~real toestate ~~the~~related ~~Executive~~impairment ~~Center~~charge Irecorded ~~and~~against ~~Tiffany Square~~the ~~properties,~~Sevens asBuilding ~~well~~property asand the operating losses incurred by all of ~~these~~the disposed properties ~~incurred~~ during the period, ~~partly~~ partially offset by athe ~~gain~~gains ~~of $758,000~~ recognized on the ~~sale~~extinguishment of ~~the~~debt ~~901~~in ~~Civic~~connection ~~Center~~with ~~property.~~the ~~The loss~~dispositions ~~from~~of ~~discontinued operations during~~ the ~~year~~Tiffany ~~ended~~Square ~~December 31,~~and ~~2008~~Executive ~~was~~Center ~~mainly~~I ~~due~~properties toof ~~real estate related impairment charges totaling~~ $84,~~600~~144,000 ~~related to the 901 Civic Center, Executive Center I~~ and ~~Tiffany Square properties~~ $2,514,000, ~~in addition to the operating losses for these properties incurred during the period~~respectively.

The loss from discontinued operations during the year ended December 31, 2009 resulted primarily from the $4,000,000 real estate related impairment charges recorded against the consolidated properties and the operating losses incurred by all of the disposed properties during the period, partially offset by the $758,000 gain recognized on the sale of the 901 Civic Center property.

Consolidated Net Loss

As a result of the above, ~~our~~ consolidated net loss was $9493,~~090,~~000 for the year ended December 31, ~~2009~~2010, compared to consolidated net loss of $299,~~268~~090,000 for the year ended December 31, ~~2008~~2009.

Liquidity and Capital Resources

Ability to Continue as a Going Concern

~~Our~~As ~~ability~~a toresult ~~continue~~of asthe adispositions ~~going~~of ~~concern~~all isof ~~dependent~~our ~~upon~~remaining ~~our~~property ~~ability~~interests, towe ~~generate~~adopted the ~~necessary~~ ~~cash~~liquidation ~~flows~~basis ~~and/or~~of ~~retain~~accounting ~~the~~on ~~necessary~~December 1, ~~financing~~2011. toWe ~~meet~~are ~~our~~currently ~~obligations~~in ~~and~~the ~~pay~~process ~~our liabilities~~of aswinding ~~they~~up ~~come~~our operations, ~~due.~~which ~~During~~we ~~the~~expect ~~year~~will ~~ended~~be ~~December 31,~~completed ~~2010,~~within wethe ~~had~~next athree ~~loss~~to ~~from continuing~~nine ~~operations of $6~~months,~~623,000~~ ~~and~~at ~~certain~~which oftime ~~our~~we ~~mortgage~~will ~~loans~~distribute ~~went~~any ~~into~~remaining ~~default. Accordingly,~~available ~~there~~funds isto ~~substantial~~our ~~doubt~~unit ~~about~~holders ~~our~~and ~~ability~~will cease to ~~continue~~be as a going concern.

The mortgage loan for the Sevens Building property, which had an outstanding principal balance of $21,494,000 as of December 31, 2010, matured on October 31, 2010 and is currently in default due to non-payment of the outstanding principal balance upon maturity. The mortgage loan documents include an option to extend the maturity date for an additional 12 months beyond October 31, 2010; however, we determined that it was not in the best interest of our unit holders to attempt to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. Further, the estimated value of the Sevens Building property is significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the property would exceed the principal balance by the end of the potential extension term. As such, we had been in discussions with the Sevens Building lender regarding our options for transferring the Sevens Building property to the Sevens Building lender, including foreclosure, deed-in-lieu of foreclosure, or another form of transfer. However, on March 7, 2011, we received a letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building property pursuant to our default on the mortgage loan for the Sevens Building property. A successor trustee has been appointed by the Sevens Building lender to conduct a public auction for the sale of the Sevens Building property, which is set to take place on March 25, 2011.

Sources of Capital and Liquidity

Our primary sources of capital historically have been derived from: (i) proceeds from the sale of properties; (ii) our ability to obtain debt financing from third parties and related parties including, ~~without limitation,~~ our manager and its affiliates; and (iii) our real estate operations. ~~Our~~Currently, ~~sources~~our ofonly ~~capital~~source ~~are currently extremely limited due to the fact that we do not expect to receive any cash proceeds from the ultimate dispositions~~ of ~~our~~capital ~~remaining consolidated~~ and ~~unconsolidated~~liquidity ~~properties.~~is ~~We derive substantially all of~~ our ~~revenues~~existing ~~from tenants under leases at our properties. Our operating~~ cash ~~flow~~balance, ~~therefore,~~net ~~depends materially on the rents that we are able to charge our tenants and the ability~~ of ~~these~~future ~~tenants~~cash ~~to make their rental payments to us~~obligations. The terms of any debt financing received from our manager or its affiliates are not negotiated on an arm’s length basis and, under the terms of the Operating Agreement, we may be required to pay interest on our borrowings at a rate of up to 12.00% per annum. We may use the net proceeds from such loans for any purpose, including, without limitation, operating requirements, capital and tenant improvements, rate lock deposits and distributions.

Our primary uses of cash ~~are~~historically have been: (i) the payment of principal and interest on ~~outstanding~~ indebtedness; (ii) capital investments in our ~~existing~~ portfolio of properties; (iii) administrative costs; and (iv) distributions to our unit holders. WeCurrently, ~~may~~we ~~also~~expect ~~regularly require capital to invest in~~ our ~~existing~~future ~~portfolio~~uses of ~~operating~~cash ~~assets~~to inprimarily ~~connection~~be ~~with~~related ~~routine~~to ~~capital improvements,~~administrative ~~deferred~~costs ~~maintenance on our properties recently acquired~~ and ~~leasing~~other ~~activities, including~~costs ~~funding~~required ~~tenant improvements, allowances, leasing commissions, development of land and~~to ~~capital~~dissolve ~~improvements~~our entities. ~~The~~Any ~~amounts~~remaining ofcash ~~the~~will ~~leasing-related~~be ~~expenditures~~distributed ~~can vary significantly depending on negotiations with tenants and the willingness of tenants~~ to ~~pay~~unit ~~higher base rents over the life of the leases~~holders.

There are currently no limits or restrictions on the use of proceeds from our manager and its affiliates that would prohibit us from making the proceeds available for distribution. We may also pay distributions from cash from capital transactions, including, without limitation, the sale of one or more of our properties. Our distribution rate was at 7.0% per annum (excluding special distributions) prior to the suspension of distributions effective November 1, 2008 and was the same among all unit holders from inception through November 1, 2008. The suspension of distributions allows us to conserve approximately $290,000 per month. These funds have been applied, and it is anticipated that they will continue to be applied, towards future tenant lease up costs not covered by lender reserves and to supplement the lender reserve funding and other operating costs as necessary.

Debt Financing

One of our principal liquidity needs is related to the payment of principal and interest on outstanding indebtedness. As of December 31, 2010, we had secured mortgage loans payable outstanding on both of our consolidated properties, representing an aggregate principal amount of $43,471,000, consisting of $21,000,000, or 48.3%, of fixed rate mortgage loans payable at a weighted-average interest rate of 10.95% per annum and $22,471,000, or 51.7%, of variable rate mortgage loans payable at a weighted-average interest rate of 7.26% per annum.

The composition of our aggregate mortgage loans payable on consolidated properties as of December 31, 2010 was as follows:

	Total Mortgage Loans Payable				Weighted-Average Interest Rate
	As of December 31,				As of December 31,
	2010		2009		2010			2009
Variable rate	$	22,471,000	$	34,574,000		7.26	%		7.47	%
Fixed rate		21,000,000		25,590,000		10.95	%		7.04	%
	$	43,471,000	$	60,164,000		9.04	%		7.28	%

Additional information regarding our mortgage loans payable as of December 31, 2010 was as follows:

Weighted-

Average

Variable

Principal

Interest

or Fixed

Outstanding

Maturity Date

Rate

Interest Rate

Consolidated Properties:

Sevens Building(1)

21,494,000

10/31/2010

10.87

Fixed & Variable

Four Resource Square(2)

21,977,000

1/20/2011

7.25

Variable

43,471,000

Unconsolidated Property:

Enterprise Technology Center(3)

32,562,000

05/11/2011

11.44

Fixed

(1)		The mortgage loan on the Sevens Building property is currently in default due to non-payment of principal upon maturity. On March 7, 2011, we received a letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building property pursuant to our default on the mortgage loan for the Sevens Building property. A successor trustee has been appointed by the Sevens Building lender to conduct a public auction for the sale of the Sevens Building property, which is set to take place on March 25, 2011. The mortgage loan on the Sevens Building property includes $21,000,000 with a fixed interest rate of 5.95% per annum and a default interest rate of 10.95% per annum, and $494,000 with a variable interest rate of 2.56% per annum and a default interest rate of 7.56% per annum as of December 31, 2010.
(2)		The Four Resource Square property was sold to an entity affiliated with the lender of the Four Resource Square property on January 20, 2011.
(3)		The mortgage loan on the Enterprise Technology Center property is in default due to non-payment of monthly interest and principal, and we are currently discussing our options regarding this property with the Enterprise Technology Center lender. The mortgage loan has a fixed interest rate of 6.44% per annum and a default interest rate of 11.44% per annum.

Certain of our consolidated and unconsolidated properties financed by borrowings are required by the terms of their applicable loan documents to meet certain financial covenants and other requirements. We are currently in default on the mortgage loans on the Sevens Building and Enterprise Technology Center properties, as discussed above.

Cash Flows

Comparison of the Period from January 1, 2011 through November 30, 2011 and the Year Ended December 31, 2010

Net cash used in operating activities was $957,000 for the period from January 1, 2011 through November 30, 2011, compared to cash provided by operating activities of $64,000 for the year ended December 31, 2010. The decrease in cash flow from operating activities for the period from January 1, 2011 through November 30, 2011 was primarily due to an $898,000 transfer of cash to the Sevens Building lender subsequent to the foreclosure of this property, which represented the approximate amount of net cash generated by the property subsequent to the default on the mortgage loan on October 31, 2010.

Cash flows provided by investing activities were $104,000 for the period from January 1, 2011 through November 30, 2011, compared to $1,663,000 for the year ended December 31, 2010. The cash flows from investing activities during the period from January 1, 2011 through November 30, 2011 resulted from final distributions from the Chase Tower and Executive Center II and III properties totaling $25,000, as well as $79,000 related to the final release of escrow funds related to the sale of Southwood Tower, located in Houston, Texas, or the Southwood Tower property. The cash flows from investing activities during the year ended December 31, 2010 was primarily due to the sales of the Chase Tower and Executive Center II and III properties, which resulted in distributions totaling $1,407,000, and the receipt of payment on the $579,000 loan receivable from the Executive Center II and III property.

Cash flows used in financing activities was $549,000 for the period from January 1, 2011 through November 30, 2011, compared to cash used in financing activities of $2,420,000 for the year ended December 31, 2010. The cash used in financing activities during the period from January 1, 2011 through November 30, 2011was primarily due to the $500,000 distribution to our unit holders during the period. The cash used in financing activities during the year ended December 31, 2010 was primarily due to $2,500,000 of distributions to our unit holders during the period.

Comparison of the Years Ended December 31, 2010 and 2009

Cash provided by operating activities was $64,000 for the year ended December 31, 2010, compared to cash used in operating activities of $811,000 for the year ended December 31, 2009. The improvement in cash from operating activities was due, in part, to lower administrative costs and the collection of interest related to the loan to the Executive Center II and III property.

Cash provided by investing activities was $1,663,000 for the year ended December 31, 2010, compared to cash provided by investing activities of $10,922,000 for the year ended December 31, 2009. The cash flows from investing activities for the year ended December 31, 2010 were primarily due to the sales of the Chase Tower and Executive Center II and III properties, which resulted in distributions from unconsolidated real estate of $1,407,000, and the receipt of payment on the $579,000 loan receivable from the Executive Center II and III property. The cash provided by investing activities for the year ended December 31, 2009 was primarily due to the $11,250,000 of proceeds received from the sale of the 901 Civic Center property, which was partially offset by $329,000 of capital expenditures.

Cash used in financing activities was $2,420,000 for the year ended December 31, 2010, compared to cash used in financing activities of $8,846,000 for the year ended December 31, 2009. The cash used in financing activities during the year ended December 31, 2010 was primarily due to $2,500,000 of distributions to our unit holders during the year. The cash used in financing activities during the year ended December 31, 2009 was mainly due to the $8,943,000 principal repayment on the mortgage loan on the 901 Civic Center property in connection with the sale of the property.

Comparison of the Years Ended December 31, 2009 and 2008

Net cash used in operating activities was $811,000 for year ended December 31, 2009, compared to cash used in operating activities of $2,600,000 for the year ended December 31, 2008. This decrease in cash used in operating activities was due primarily to changes in operating assets and liabilities and improved cash operating results after non-cash reconciling items.

Cash provided by investing activities was $10,922,000 for the year ended December 31, 2009, compared to cash provided by investing activities of $352,000 for the year ended December 31, 2008. The improvement in cash flows from investing activities between the two periods was primarily due to the sale of the 901 Civic Center property during 2009, which generated proceeds of $11,250,000.

Cash used in financing activities was $8,846,000 for the year ended December 31, 2009, compared to cash used in financing activities of $4,501,000 for the year ended December 31, 2008. The increase in cash used in financing activities between the two periods was primarily due to the repayment of the loan on the 901 Civic Center property in connection with the sale of the property, which was partially offset by suspension of distributions to the unit holders effective November 1, 2008.

As a result of the above, cash and cash equivalents increased $1,265,000 for the year ended December 31, 2009 to $2,724,000, compared to a decrease in cash and cash equivalents of $6,749,000 to $1,459,000 for the year ended December 31, 2008.

Other Liquidity Needs

We have restricted cash balances of $646,000 as of December 31, 2010, which are primarily held as reserves for property taxes and insurance in connection with our mortgage loans payable. In addition, $217,000 of the restricted cash balance represents an escrow account that was funded from the proceeds of the sale of Southwood Tower, located in Houston, Texas, or the Southwood Tower property, to pay a rent guaranty to the buyer for a period of five years, which ended in December 2010. The buyer of the Southwood Tower property receives payments from this escrow account as the vacant space is leased. We are currently finalizing the allocation of the remaining funds in the escrow account, which we expect will be completed in the first half of 2011.

We estimate that our expenditures for capital improvements, tenant improvements and lease commissions not funded through loan draws will be insignificant in 2011. We have no reserves for these expenditures, and any such expenditures will be funded from net cash from operations, if any. We cannot provide assurance, however, that our required expenditures for capital improvements, tenant improvements and lease commissions will not exceed our estimates.

Contractual Obligations

The following table provides information with respect to the maturities and scheduled principal repayments of our consolidated debt balance, excluding any available extension options, as well as scheduled interest payments on our debt as of December 31, 2010:

	Payments Due by Period
	Less than						More than
	1 Year		1-3 Years		4-5 Years		5 Years
	(2011)(1)		(2012-2013)		(2014-2015)		(After 2015)		Total
Principal payments — variable rate debt	$	22,471,000	$	—	$	—	$	—	$	22,471,000
Principal payments — fixed rate debt		21,000,000		—		—		—		21,000,000
Interest payments — variable rate debt (based on rates in effect as of December 31, 2010)		89,000		—		—		—		89,000
Interest payments — fixed rate debt		—		—		—		—		—
	$	43,560,000	$	—	$	—	$	—	$	43,560,000

(1) The mortgage loan on the Sevens Building property matured on October 31, 2010 and is currently in default due to non-payment of the outstanding principal balance upon maturity. On March 7, 2011, we received a letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building property pursuant to our default on the mortgage loan for the Sevens Building property. A successor trustee has been appointed by the Sevens Building lender to conduct a public auction for the sale of the Sevens Building property, which is set to take place on March 25, 2011. The principal balance of this mortgage loan is included in the table above in the column of loans maturing in less than 1 year; however, no interest payments have been included in the table.

Off-Balance Sheet Arrangements

As of December 31, ~~2010~~2011, we had no off-balance sheet transactions nor do we currently have any such arrangements or obligations.

~~Inflation~~ Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

WeMarket ~~will~~risk beincludes ~~exposed~~risks tothat ~~inflation~~arise ~~risk as income~~ from ~~long-term~~changes ~~leases~~in isinterest ~~expected~~rates, toforeign becurrency ~~the primary~~exchange ~~source~~rates, ofcommodity ~~our~~prices, ~~cash~~equity ~~flows~~prices ~~from~~and ~~operations.~~other Wemarket ~~expect~~changes that ~~there~~affect ~~will~~market besensitive ~~provisions~~instruments. ~~in the~~In ~~majority~~pursuing of our ~~tenant~~business ~~leases~~plan, ~~that will offer some protection from~~ the ~~impact~~primary ofmarket ~~inflation.~~risk ~~These provisions~~to ~~include~~which ~~rent~~we ~~steps,~~were ~~reimbursement~~exposed ~~billings~~is ~~for~~interest ~~operating~~rate ~~expense pass-through charges, real estate tax and insurance reimbursements on a per square foot allowance basis~~risk. However, ~~due~~we ~~to the~~currently ~~long-term~~have ~~nature~~no ofsignificant ~~the~~interest ~~leases,~~rate ~~among other factors~~risk, ~~the~~as ~~leases~~we ~~may~~have ~~not~~no ~~reset~~consolidated ~~frequently enough to cover inflation~~debt.

Subsequent Events

See Note 16, Subsequent Events, to our consolidated financial statements accompanying this Annual Report on Form 10-K, for a discussion of subsequent events.

Item 7A. 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 are exposed to interest rate changes primarily as a result of our long-term debt. Our interest rate risk objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we borrow primarily at fixed rates or variable rates with the lowest margins available and, in some cases, we may enter into derivative financial instruments such as interest rate swaps, caps and treasury locks in order to seek to mitigate our interest rate risk on a related financial instrument. We do not enter into derivative or interest rate transactions for speculative purposes.

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

The table below presents, as of December 31, 2010, the consolidated principal amounts and weighted average interest rates by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes:

	Expected Maturity Date
	2011			2012			2013			2014			2015			Thereafter			Total			Fair Value
Fixed rate mortgage loans payable(1)	$	21,000,000		$	—		$	—		$	—		$	—		$	—		$	21,000,000		$	15,632,000
Weighted average interest rate on maturing fixed rate debt		10.95	%		—	%		—	%		—	%		—	%		—	%		10.95	%
Variable rate mortgage loans payable	$	22,471,000		$	—		$	—		$	—		$	—		$	—		$	22,471,000		$	14,618,000
Weighted average interest rate on maturing variable rate debt (based on rates in effect as of December 31, 2010)		7.26	%		—	%		—	%		—	%		—	%		—	%		7.26	%

(1) Our fixed rate debt, which consists only of a mortgage loan on the Sevens Building property, matured on October 31, 2010 and is currently in default. The table above assumes the mortgage loan has a maturity date of January 1, 2011.

As of December 31, 2010, we estimate the fair value of our mortgage loans payable to be approximately $30,250,000. For non-recourse mortgage loans on properties with estimated fair values of less than their respective loan balances, which is the case for both of our consolidated properties, we estimate the fair value of the mortgage loans to be equal to the estimated fair value of the properties.

As of December 31, 2010, we had fixed and variable rate mortgage loans with effective interest rates ranging from 7.25% to 10.95% per annum and a weighted average effective interest rate of 9.04% per annum. As of December 31, 2010, a 0.50% increase in London Interbank Offered Rate, or LIBOR, would have had an insignificant impact on our overall annual interest expense.

Item 8.

Financial Statements and Supplementary Data.

See the index included in Item 15. Exhibits and Financial Statement Schedules.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Changes in Registrant’s Certifying Accountant

None.

Item 9A.

Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our manager’s ~~executive vice~~ president, ~~portfolio~~and ~~management,~~chief executive officer and our manager’s chief accounting officer, as appropriate, to allow timely decisions regarding required disclosure.

As17 required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of December 31, 2010 was conducted under the supervision and with the participation of our manager, including our manager’s executive vice president, portfolio management, and chief accounting officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our manager’s executive vice president, portfolio management, and chief accounting officer concluded that our disclosure controls and procedures, as of December 31, 2010, were effective.

(b) Management’sTable Report on Internal Control over Financial Reporting. The management of our manager is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our manager’s executive vice president, portfolio management, and chief accounting officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Contents

~~Based~~As onrequired ~~our~~by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of December 31, 2011 was conducted under the ~~Internal~~supervision ~~Control-Integrated~~and ~~Framework~~with the participation of our manager, including our manager’s president and chief executive ~~vice~~officer ~~president~~and our manager’s chief accounting officer, ~~portfolio~~of ~~management~~the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our manager’s president and chief ~~accounting~~executive officer and our manager’s chief accounting officer concluded that our ~~internal~~ ~~control~~disclosure ~~over~~controls ~~financial~~and ~~reporting~~procedures, ~~was effective~~ as of December 31, ~~2010~~2011, were effective.

(cb) ~~Changes~~ inManagement’s Report on Internal Control ~~Over~~over Financial Reporting. ~~There~~The ~~were~~management noof ~~changes~~our inmanager ~~our~~ is responsible for establishing and maintaining adequate internal control over financial reporting, ~~that~~as ~~occurred~~such ~~during~~term ~~the~~is ~~quarter~~defined ~~ended~~in ~~December 31,~~Exchange ~~2010~~Act Rules 13a-15(f) and ~~that~~15d-15(f). ~~have~~Under ~~materially~~the ~~affected,~~supervision orand ~~are~~with ~~reasonably~~the ~~likely~~participation toof ~~materially~~our ~~affect~~manager’s president and chief executive officer and our manager’s chief accounting officer, we conducted an evaluation of the effectiveness of our internal control ~~over~~ over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on our evaluation under the Internal Control-Integrated Framework, our manager’s president and chief executive officer and our manager’s chief accounting officer concluded that our internal control over financial reporting was effective as of December 31, 2011.

(c) Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.

Other Information.

None.

40 18

PART III

Item 10.

Directors, Executive Officers and Corporate Governance.

We are managed by ~~Grubb~~NNN ~~& Ellis~~ Realty Investors, LLC (formerly, orGrubb & ~~our~~Ellis ~~manager~~Realty Investors, LLC), and the ~~executive officers and~~ employees of our manager provide services to us pursuant to the terms of an operating agreement~~, or the Operating Agreement~~.

Our manager shall remain our manager until: (i) we are dissolved; (ii) our manager is removed “for cause” by a majority vote of our unit holders; or (iii) our manager, with the consent of our unit holders and in accordance with the Operating Agreement, assigns its interest in us to a substitute manager. For this purpose, removal of our manager “for cause” means removal due to the:

•

gross negligence or fraud of our manager;

•

willful misconduct or willful breach of the Operating Agreement by our manager; or

•

bankruptcy, insolvency or inability of our manager to meet its obligations as they come due.

The following table and biographical descriptions set forth information with respect to our manager’s executive officers who serve as our principal executive officer and principal financial officer as of March 1810, ~~2011~~2012. We have no directors.

Name

Age

Position

Term of Office

~~Term of Office~~

Steven M. Shipp

Principal Executive Officer

Since December 2010

Todd A. Mikles

Principal Executive Officer

Since November 2011

Paul E. Henderson

3940

Principal Financial Officer

Since April 2010

~~Since April 2010~~

~~Steven~~Todd MA. ~~Shipp~~Mikles serves as ~~the executive vice~~ president, ~~portfolio~~and ~~management,~~chief ofexecutive ~~our~~officer ~~Manager, responsible for the day-to-day operations~~ of our ~~Manager’s asset management and structured finance and refinance efforts~~manager, which is a position he has held since ~~November 2010~~August 2011. InMr. Mikles ~~connection~~is ~~with~~also ~~his capacity~~the assole ~~executive~~director, ~~vice~~ president, ~~portfolio~~and ~~management,~~chief ofexecutive ~~our~~officer ~~Manager,~~of ~~Mr. Shipp~~Sovereign ~~has~~Capital ~~served~~Management ~~as our~~Group, ~~principal~~Inc. ~~executive~~(“Sovereign”), ~~officer~~a ~~since~~closely-held ~~December 2010~~California corporation. Mr. ~~Shipp~~Mikles has ~~also~~ served ~~as the principal~~in ~~executive~~those ~~officer~~capacities ofat ~~NNN~~Sovereign ~~2002~~and ~~Value~~its ~~Fund,~~predecessors ~~LLC,~~from anJanuary 1999 ~~entity~~to ~~also~~the ~~managed by our manager, since February 2011~~present. ~~From~~Since ~~November~~October ~~2008 to November~~ 2010, ~~Mr. Shipp~~Sovereign ~~previously~~has served as ~~our~~the ~~Manager’s managing~~manager ~~director~~ of ~~structured~~Lakeside ~~finance.~~Mortgage ~~From~~Fund, ~~October 1997~~LLC to(“Lakeside”) ~~June 2008,~~and Mr. ~~Shipp~~Mikles has served as athe ~~special~~principal ~~consultant~~executive toofficer ~~several~~ of ~~the~~Lakeside. ~~largest~~Since ~~commercial~~November ~~real~~2011, ~~estate~~Mr. Mikles ~~lenders~~has inalso ~~the~~served ~~nation, including~~as ~~Nomura~~the ~~Securities~~principal ~~North~~executive ~~America,~~officer ~~The Bank~~ of ~~New~~NNN ~~York~~2002 ~~Mellon~~Value ~~and Prudential Asset Management~~Fund, ~~which is a role that overlapped his career at PDG America,~~ LLC. ~~Between February 2000 and March 2001,~~ Mr. ~~Shipp~~Mikles ~~served~~began ashis ~~senior~~career ~~vice~~in ~~president of~~ finance ~~for~~in athe ~~regional~~Corporate ~~commercial retail~~Finance ~~development~~department ~~group,~~of ~~PDG~~Lehman Brothers ~~America,~~in ~~LLC~~1996. ~~Prior~~From ~~to PDG America~~there, ~~LLC,~~ Mr. ~~Shipp~~Mikles ~~served~~joined asAmresco ~~vice president~~Advisors, ofa ~~Bank~~Dallas, ~~of America’s commercial mortgage~~Texas-~~backed~~based ~~securities~~firm ~~asset~~that ~~management~~specialized ~~and securitized~~in ~~debt~~offering ~~portfolio~~advisory ~~from~~services ~~June 1993~~ to ~~June 1997.~~major Hepension ~~also~~funds ~~served as vice president~~ and ~~regional~~ ~~manager~~their oftrustees ~~loan~~on ~~administration~~making ~~for~~real ~~Bank~~estate ofloans ~~America, N.A. from September 1990~~ to ~~August 1993.~~grocery-anchored ~~Mr. Shipp began his career working for Far West Savings and Loan Association in the~~shopping ~~construction~~centers ~~loan management department. Mr. Shipp received his B.A. degree~~ in ~~Economics from~~ the ~~University~~ ofwestern ~~California,~~United ~~Irvine~~States.

Paul E. Henderson has served as the chief accounting officer of our ~~Manager~~ manager since October 2009. In connection with his capacity as chief accounting officer of our ~~Manager~~manager, Mr. Henderson has served as our principal financial officer since April 2010. Since April 2010, Mr. Henderson has also served as principal financial officer ~~for~~of NNN 2002 Value Fund, LLC. From May 2007 to August 2009, Mr. Henderson served as senior controller at LNR Property Corporation, a diversified real estate, investment, finance and management company. From January 2006 to April 2007, Mr. Henderson served as assistant corporate controller of Conexant Systems, Inc., a NASDAQ-listed semiconductor company. Between 2002 and 2005, Mr. Henderson served as director of accounting and reporting and subsequently as European controller for Hyperion Solutions Corporation, a NASDAQ-listed business performance management software company. Mr. Henderson began his career in public accounting as an associate at Arthur Andersen LLP and, subsequently, as a manager in the Global Capital Markets group of PricewaterhouseCoopers LLP. A certified public accountant, Mr. Henderson received his B.S. degree in Business Administration, with dual concentrations in Financial Management and Accounting, ~~from~~ from California Polytechnic State University, San Luis Obispo.

Fiduciary Relationship of our Manager to Us

Our manager is a fiduciary ofto us and has fiduciary duties to us and our unit holders pursuant to the Operating Agreement and under applicable law. Our manager’s fiduciary duties include responsibility for our control and management and exercising good faith and integrity in handling our affairs. Our manager has a fiduciary responsibility for the safekeeping and use of all of our funds and assets, whether or not in our immediate possession and control, and may not use or permit another to use such funds or assets in any manner except for our exclusive benefit.

~~Our~~19 ~~funds are not and will not be commingled with the funds of any other person or entity except for operating revenue from our properties.~~

Our funds are not and will not be commingled with the funds of any other person or entity.

Our manager may employ persons or firms to carry out all or any portion of our business. Some or all such persons or entities employed may be affiliates of our manager. It is not clear under current law the extent, if any, that such parties will have a fiduciary duty to us or our members. Investors who have questions concerning the fiduciary duties of our manager should consult with their own legal counsel.

Committees of our Board of Directors

We do not have our own board of directors or board committees. We rely upon our manager to provide recommendations regarding ~~acquisitions, compensation and~~ financial disclosure.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and persons who own 10.0% or more of our units, to report their beneficial ownership of our units (and any related options) to the United States Securities and Exchange Commission, or the SEC. Their initial reports must be filed using the SEC’s Form 3 and they must report subsequent unit purchases, sales, option exercises and other changes using the SEC’s Form 4, which must be filed within two business days of most transactions. In some cases, such as changes in ownership arising from gifts and inheritances, the SEC allows delayed reporting at year-end on Form 5. Officers, directors and unit holders owning more than 10.0% of our common stock are required by SEC regulations to furnish us with copies of all of reports they file pursuant to Section 16(a).

Based solely on a review of the copies of such forms furnished to us during and with respect to the fiscal year ended December 31, ~~2010~~2011 or written representations that no additional forms were required, to the best of our knowledge, all required Section 16(a) filings were timely and correctly made by reporting persons during ~~2010.~~2011, except that Paul Henderson filed his Form 3 late, and which filing was made before December 31, 2011.

Code of Ethics

We do not have our own code of ethics. ~~Grubb~~Daymark &Realty ~~Ellis~~Advisors, Inc., the parent company of our manager, has a Code of Business Conduct and Ethics that is applicable to employees of our manager who provide services to us, a copy of which ~~is available~~can atbe ~~www.grubb-ellis.com~~obtained ~~and~~ upon request and without charge by writing to NNN 2003 Value Fund, LLC at 1551 N. Tustin Avenue, Suite ~~300~~ 200, Santa Ana, California 92705.

Item 11.

Executive Compensation.

Executive and Director Compensation

Since the resignation of our previous chief executive officer in December 2010, we do not have nor do we intend to hire any employees, executive officers or directors to whom we will pay compensation. Our current principal executive officer and principal financial officer are employees of our manager and/or its affiliates and are compensated by such entities for their services to us. Our day-to-day management is performed by our manager and its affiliates. We pay these entities fees and reimburse expenses pursuant to the Operating Agreement. We do not currently intend to pay any ~~compensation~~ compensation directly to our principal executive officer or principal financial officer. As a result, we do not have a compensation policy or program ~~and have not included a compensation discussion and analysis in this Annual Report on Form 10-K~~.

42 20

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Unit Holder Matters.

Principal Unit Holders

The following table shows, as of March 1810, ~~2011~~2012, the number and percentage of units owned by:

•

any person who is known to us to be the beneficial owner of more than 5.0% of our outstanding units;

•

our manager;

•

our principal executive officer;

•

our principal financial officer; and

•

all of our directors and executive officers as a group.

	Beneficially		Percentage of
		September 30,		September 30,
	Owned		Outstanding
Name of Beneficial Owners(1)	BeneficiallyOwnedNo. of Units		Percentage ofOutstandingUnits
Name of Beneficial Owners(1)	No. of Units		Units
NNN Realty Investors, LLC (2)		-0-		0.0	%
Our manager	None			0.0	%
Todd A. Mikles		-0-		0.0	%
Steven M. Shipp	None			0.0	%
Paul E. Henderson		-0-		0.0	%
Paul E. Henderson	None			0.0	%
All of our directors and executive officers as a group(3)		-0-		0.0	%
Kent W. Peters(2)	None			0.0	%
All of our directors and executive officers as a group(3)	None			0.0	%

(1)		The address of each beneficial owner listed is 1551 N. Tustin Avenue, Suite 300, Santa Ana, California 92705.
(2)		Mr. Peters resigned as our Chief Executive Officer effective December 31, 2010.
(3)		We have no directors.

(1)	The address of each beneficial owner listed is 1551 N. Tustin Avenue, Suite 200, Santa Ana, California 92705.

(2)

(3)	We have no directors.

We are not aware of any arrangements which may, at a subsequent date, result in a change in control of us.

Equity Compensation Plan Information

We ~~have~~had no equity compensation plans as of December 31, ~~2010~~2011.

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

Our manager is primarily responsible for managing our day-to-day business affairs and assets. Our manager is a Virginia limited liability company that was formed in April of 1998 to advise syndicated limited partnerships, limited liability companies and other entities regarding the acquisition, management and disposition of real estate assets.

The Management Agreement

Our manager manages us pursuant to the terms of the Operating Agreement and the Management Agreement. While we have no employees, certain employees of our manager provide services in connection with the Operating Agreement. In addition, Realty ~~serves~~served as our property manager pursuant to the terms of the Operating Agreement and the Management Agreement.

Pursuant to the Operating Agreement and the Management Agreement, our manager and/or Realty iswere entitled to receive the payments and fees described below. Certain fees paid to Realty in the years ended December 31, ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009, were passed through to our manager or its affiliate pursuant to an agreement between our manager and Realty, or the Realty Agreement.

Property Management Fees

We ~~pay~~paid Realty a monthly property management fee of up to 5.0% of the gross receipts revenue of the properties. For the years ended December 31, ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009, we incurred property ~~management~~ management fees to Realty of $~~390~~47,000, $~~538~~390,000 and $~~547~~538,000, respectively.

Real Estate Acquisition Fees

We ~~pay~~paid Realty or its affiliate a real estate acquisition fee of up to 3.0% of the gross purchase price of a property. For the years ended December 31, ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009, we did not incur any real estate acquisition fees to Realty or its affiliate.

Real Estate Disposition Fees

We ~~pay~~paid Realty or its affiliate a real estate disposition fee of up to 5.0% of the gross sales ~~price~~ price of a property. For the years ended December 31, ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009, we did not incur any real estate disposition fees to Realty or its affiliate.

Lease Commissions

We ~~pay~~paid Realty a lease commission for its services in leasing any of our properties equal to 6.0% of the value of any lease entered into during the term of the Management Agreement and 3.0% with respect to any renewals. For the years ended December 31, ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009, we incurred lease commissions to Realty of $~~227~~0,~~000,~~ $~~157~~227,000 and $~~303~~157,000, respectively.

Accounting Fees

We ~~pay~~paid our manager accounting fees for record keeping services provided to us. For the ~~years~~ year ended December 31, 2009 ~~and 2008~~, we incurred accounting fees to our manager of $59,000 ~~and $72,000, respectively~~. Beginning January 1, 2010, all accounting fees have been waived by our manager and, as such, we did not incur any accounting fees for the ~~year~~years ended December 31, 2011 and 2010.

Construction Management Fees

We ~~pay~~paid Realty a construction management fee for its services in supervising construction and repair projects in or about our properties equal to 5.0% of any amount up to $25,000, 4.0% of any amount over $25,000 but less than $50,000 and 3.0% of any amount over $50,000, which is expended in any calendar year for construction or repair projects. For the ~~years~~year ended December 31, 2009 ~~and 2008~~, we incurred construction management fees to Realty of $4,000 ~~and $76,000, respectively~~. We We did not incur any construction management fees for the ~~year~~years ended December 31, 2011 and 2010.

Loan Fees

We ~~pay~~paid Realty or its affiliate a loan fee equal to 1.0% of the principal amount of the loan for its services in obtaining loans for our properties during the term of the Management Agreement. For the years ended December 31, ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009, we did not incur any loan fees to Realty or its affiliate.

Related Party Payables

Related party accounts payable consist primarily of amounts due related to the Management Agreement, as discussed above, and for operating expenses incurred by us and paid by our manager or its affiliates. As of December 31, ~~2010~~2011 and ~~2009~~2010, the amount payable by us was $~~32,000~~0 and $~~118~~32,000, respectively, and is included in the accompanying consolidated balance sheets in the line item entitled “Accounts ~~and loans~~ payable due to related parties.”

Related Party Receivables

On December 1, 2005, we advanced $579,000 to NNN Executive Center, LLC, an 11.5% owner of the Executive Center II and III property, an unconsolidated property, as evidenced by an unsecured note. The unsecured note provided for interest at a fixed rate of 8.00% per annum and all principal and accrued interest was originally due in full on December 1, 2008. Pursuant to the terms of the note, upon extension of the maturity dates of the mortgage loans payable on the Executive Center II and III property on December 28, 2008, the maturity date of the unsecured note was automatically extended to December 28, 2009. On March 2, 2010, the maturity date of this note was further extended to January 15, 2011. At the time of the sale of the Executive Center II and III property on May 24, 2010, the $579,000 note receivable, as well as $208,000 of accrued interest, was repaid in full.

As of December 31, 2009, the amount due to us related to the unsecured note described above, net of allowances, and for management fees due from an affiliated entity was $475,000, which is included in the accompanying consolidated balance sheet in the line item entitled “Accounts and loans receivable due from related parties, net.” There were no amounts due to us as of December 31, 2010.

Item 14.

Principal Accounting Fees and Services.

Ernst & Young LLP, or E&Y, has served as our independent auditor since October 9, 2008 and has audited our consolidated financial statements for the years ended December 31, ~~2010~~2011, 2010 ~~2009~~ and ~~2008~~2009. The following table lists the fees for services rendered by E&Y in ~~2010~~2011 and ~~2009~~2010:

Services	2010		2009
		September 30,		September 30,
Audit fees	$	210,000	$	321,000
Services	2011		2010
Audit fees	$	122,000	$	210,000
Audit-related fees		—		—
Total	$	~~210~~122,000	$	~~321~~210,000

~~Deloitte~~22 ~~& Touche LLP, or D&T, served as our independent auditor from January 12, 2005 to October 9, 2008. The following table lists the fees for services rendered by D&T in 2010 and 2009:~~

Services	2010		2009
Audit fees (1)	$	13,000	$	20,000
Audit-related fees		—		—
Total	$	13,000	$	20,000

~~(1)~~Deloitte & ~~Audit~~Touche ~~fees~~LLP, ~~billed~~or ~~in 2010 were related to the reissuance of~~ D&T~~’s audit opinion for 2007~~, ~~which~~served ~~was~~as ~~included in~~ our ~~Annual~~independent ~~Report~~auditor onfrom January 12, ~~Form~~2005 ~~10-K~~to ~~for the year ended December 31~~October 9, ~~2009~~2008. ~~Audit~~The ~~fees~~following ~~billed~~table inlists ~~2009~~the ~~were~~fees ~~related~~for toservices ~~the~~rendered ~~reissuance~~by of D&T’s ~~audit~~in ~~opinions~~2011 ~~for 2007~~ and ~~2006,~~2010: ~~which were included in our Annual Report on Form 10-K for the year ended December 31, 2008.~~

		September 30,		September 30,
Services	2011		2010
Audit fees ⁽¹⁾	$	—	$	13,000
Audit-related fees		—		—

Total	$	—	$	13,000

(1)	Audit fees billed in 2010 were related to the reissuance of D&T’s audit opinion for 2007, which was included in our Annual Report on Form 10-K for the year ended December 31, 2009.

Our manager pre-approves all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for us by our independent auditor, subject to the de minimus exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act and the rules and regulations of the SEC.

45 23

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)(1) Financial Statements:

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		September 30,
	Page
Reports of Independent Registered Public Accounting Firm		4725
Consolidated Balance Sheets as of December 31, 2010 and 2009		48
Consolidated Statement of Net Assets in Liquidation as of December 31, 2011		26
Consolidated Statements of Operations and Comprehensive (Loss) Income For the Years Ended December 31, 2010, 2009 and 2008		49
Consolidated Balance Sheet as of December 31, 2010		27
Consolidated Statements of (Deficit) Equity For the Years Ended December 31, 2010, 2009 and 2008		50
Consolidated Statement of Changes in Net Assets in Liquidation For the Period from December 1, 2011 through December 31, 2011		28
Consolidated Statements of Cash Flows For the Years Ended December 31, 2010, 2009 and 2008		51
Consolidated Statements of Operations and Comprehensive Income (Loss) Income For the Period from January 1, 2011 through November 30, 2011 and the Years Ended December 31, 2010 and 2009		29
Notes to Consolidated Financial Statements		52
Consolidated Statements of Equity (Deficit) For the Period from January 1, 2011 through November 30, 2011 and the Years Ended December 31, 2010 and 2009		30
Consolidated Statements of Cash Flows For the Period from January 1, 2011 through November 30, 2011 and the Years Ended December 31, 2010 and 2009		31
Notes to Consolidated Financial Statements		32

(a)(2) Financial Statement Schedules:

The following financial statement schedules for the ~~year~~period ~~ended~~from ~~December~~January 311, ~~2010~~2011 through November 30, 2011 are submitted herewith:

		September 30,
	Page
Valuation and Qualifying Accounts (Schedule II)		7044
Real Estate and Accumulated Depreciation (Schedule III)		7145

All schedules other than the ones listed above have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.

(a)(3) Exhibits:

The exhibits listed on the Exhibit Index (following the signatures section of this report) are included, or incorporated by reference, in this annual report.

(b) Exhibits:

See Item 15(a) (3) above.

See Item 15(a) (2) above.

46 24

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Manager and Unit Holders of ~~NNN~~ ~~2003 Value Fund, LLC~~

~~We have audited the accompanying consolidated balance sheets of~~ NNN 2003 Value Fund, LLC (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations and comprehensive (loss) income, (deficit) equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the consolidated financial statement schedules listed in the Index at Item 15(a). These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We have audited the accompanying consolidated financial statements of NNN 2003 Value Fund, LLC (the Company), which comprise the balance sheet as of December 31, 2010, the related consolidated statements of operations and comprehensive income (loss), equity (deficit), and cash flows for each of the two years ended December 31, 2010, the consolidated statements of operations and comprehensive income (loss), equity (deficit), and cash flows for the period from January 1, 2011 to November 30, 2011, the consolidated statement of net assets in liquidation as of December 31, 2011, the related consolidated statement of changes in net assets in liquidation for the period from December 1, 2011 to December 31, 2011, and the related notes to the financial statements. Our audits also included the consolidated financial statement schedules listed in the Index at Item 15(a). These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the ~~consolidated~~ financial position of the Company atas of December 31, 2010 ~~and 2009~~, ~~and~~ the ~~consolidated~~ results of its operations and its cash flows for ~~each of~~ the ~~three~~two years ~~in the period~~ ended December 31, 2010 inand ~~conformity~~for ~~with~~the ~~U.S.~~period ~~generally~~from ~~accepted~~January 1, ~~accounting~~2011 ~~principles.~~to ~~Also~~November 30, in2011, ~~our~~its ~~opinion, the~~net ~~related~~assets ~~financial~~in ~~statement~~liquidation ~~schedules~~as of December 31, ~~when~~2011, ~~considered~~and the changes in ~~relation~~its tonet ~~the~~assets ~~basic~~in ~~financial~~liquidation for ~~statements~~the ~~taken~~period asfrom aDecember 1, ~~whole~~2011 to December 31, ~~present~~2011, ~~fairly~~in accordance with accounting principles generally accepted in ~~all~~the ~~material~~United ~~respects~~States of America applied on the ~~information~~bases ~~set~~described ~~forth therein~~in the preceding paragraph.

~~The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.~~ As ~~described~~discussed in Note 1 to the consolidated financial statements, ~~the~~as ~~Company~~a ~~has incurred~~result ~~recurring~~of ~~losses~~the ~~and~~disposition ~~has~~of aits ~~working~~remaining ~~capital~~property ~~deficiency. In addition~~interests, the Company ~~has~~adopted ~~not complied~~the ~~with~~liquidation ~~certain~~basis ~~covenants~~ of ~~loan~~accounting ~~agreements~~on ~~and~~December 1, ~~does~~2011. ~~not~~As ~~have~~a ~~sufficient~~result, ~~cash~~the ~~flow~~Company tohas ~~repay mortgage~~changed ~~loans~~its ~~that~~basis ~~are~~of ~~past~~accounting ~~due~~for ~~and~~periods insubsequent ~~default.~~to ~~These~~November 30, ~~conditions~~2011 ~~raise~~from ~~substantial doubt about~~ the ~~Company’s~~ ~~ability to continue as a~~ going -concern. ~~Management’s~~basis ~~plans in regard~~ to ~~these~~a ~~matters~~liquidation ~~are also described in Note 1~~basis. ~~The financial statements do not include any adjustments that might result~~ ~~from the outcome of this uncertainty.~~

/s/ ~~Ernst~~ ERNST & ~~Young~~YOUNG LLP

Irvine, California ~~March 18,~~ ~~2011~~

47March 23, 2012

NNN 2003 VALUE FUND, LLC

CONSOLIDATED ~~BALANCE~~STATEMENT ~~SHEETS~~ OF NET ASSETS IN LIQUIDATION

	December 31,
	2010			2009
ASSETS
Real estate investments:
Properties held for non-sale disposition, net	$	27,218,000		$	41,540,000
Investments in unconsolidated real estate		24,000			1,101,000
		27,242,000			42,641,000
Cash and cash equivalents		2,031,000			2,724,000
Accounts receivable, net		79,000			354,000
Accounts and loans receivable due from related parties, net		—			475,000
Restricted cash		646,000			1,351,000
Intangible assets related to properties held for non-sale disposition, net		1,951,000			4,233,000
Other assets related to properties held for non-sale disposition, net		738,000			2,166,000
Total assets	$	32,687,000		$	53,944,000
LIABILITIES AND (DEFICIT) EQUITY
Mortgage loans payable secured by properties held for non-sale disposition	$	43,471,000		$	60,164,000
Accounts payable and accrued liabilities		613,000			1,842,000
Accounts and loans payable due to related parties		32,000			118,000
Other liabilities related to properties held for non-sale disposition		422,000			678,000
Other liabilities		217,000			217,000
Total liabilities		44,755,000			63,019,000
Commitments and contingencies (Note 13)
(Deficit) equity:
NNN 2003 Value Fund, LLC unit holders’ deficit		(12,068,000	)		(9,173,000	)
Noncontrolling interest equity		—			98,000
Total (deficit) equity		(12,068,000	)		(9,075,000	)
Total liabilities and (deficit) equity	$	32,687,000		$	53,944,000

(Liquidation Basis)

December 31, 2011

		September 30,
ASSETS

Cash and cash equivalents	$	603,000

Total assets		603,000

LIABILITIES

Accounts payable and accrued liabilities		22,000
Reserve for estimated costs in excess of receipts during liquidation		197,000

Total liabilities		219,000


Net assets in liquidation	$	384,000

The accompanying notes are an integral part of these consolidated financial statements.

48 26

NNN 2003 VALUE FUND, LLC

CONSOLIDATED ~~STATEMENTS~~BALANCE OFSHEET ~~OPERATIONS AND COMPREHENSIVE (LOSS) INCOME~~

	Years Ended December 31,
	2010			2009			2008
Revenues:
Rental revenue of operations held for non-sale disposition	$	6,852,000		$	6,950,000		$	6,512,000
Expenses:
Operating expenses of operations held for non-sale disposition		5,235,000			4,612,000			6,297,000
General and administrative		362,000			587,000			723,000
Real estate related impairments of operations held for non-sale disposition		5,300,000			700,000			12,100,000
Total expenses		10,897,000			5,899,000			19,120,000
(Loss) income before other income (expense) and discontinued operations		(4,045,000	)		1,051,000			(12,608,000	)
Other income (expense):
Interest expense of operations held for non-sale disposition		(3,244,000	)		(3,179,000	)		(3,180,000	)
Interest and dividend income		23,000			47,000			219,000
Loss on sales of marketable securities		—			—			(808,000	)
Investment related impairments		—			(126,000	)		(900,000	)
Equity in income (losses) of unconsolidated real estate		619,000			(3,154,000	)		(1,031,000	)
Other income		24,000			20,000			23,000
Loss from continuing operations		(6,623,000	)		(5,341,000	)		(18,285,000	)
Income (loss) from discontinued operations		6,130,000			(3,749,000	)		(10,983,000	)
Consolidated net loss		(493,000	)		(9,090,000	)		(29,268,000	)
Loss attributable to noncontrolling interests		(98,000	)		(196,000	)		(386,000	)
Net loss attributable to NNN 2003 Value Fund, LLC	$	(395,000	)	$	(8,894,000	)	$	(28,882,000	)
Comprehensive (loss) income:
Consolidated net loss	$	(493,000	)	$	(9,090,000	)	$	(29,268,000	)
Recognition of previously unrealized loss on marketable equity securities		—			—			646,000
Comprehensive loss		(493,000	)		(9,090,000	)		(28,622,000	)
Comprehensive loss attributable to noncontrolling interests		(98,000	)		(196,000	)		(386,000	)
Comprehensive loss attributable to NNN 2003 Value Fund, LLC	$	(395,000	)	$	(8,894,000	)	$	(28,236,000	)

(Going Concern Basis)

December 31, 2010

		September 30,
ASSETS
Real estate investments:
Properties held for non-sale disposition, net	$	27,218,000
Investments in unconsolidated real estate		24,000

		27,242,000

Cash and cash equivalents		2,031,000
Accounts receivable, net		79,000
Restricted cash		646,000
Intangible assets related to properties held for non-sale disposition, net		1,951,000
Other assets related to properties held for non-sale disposition, net		738,000

Total assets	$	32,687,000


LIABILITIES AND EQUITY (DEFICIT)
Mortgage loans payable secured by properties held for non-sale disposition	$	43,471,000
Accounts payable and accrued liabilities		613,000
Accounts and loans payable due to related parties		32,000
Other liabilities related to properties held for non-sale disposition		422,000
Other liabilities		217,000

Total liabilities		44,755,000

Commitments and contingencies (Note 12)

Equity (deficit):
NNN 2003 Value Fund, LLC unit holders’ equity (deficit)		(12,068,000	)
Noncontrolling interest equity		—

Total equity (deficit)		(12,068,000	)

Total liabilities and equity (deficit)	$	32,687,000

The accompanying notes are an integral part of these consolidated financial statements.

49 27

NNN 2003 VALUE FUND, LLC

CONSOLIDATED ~~STATEMENTS~~STATEMENT OF ~~(DEFICIT) EQUITY~~ CHANGES IN NET ASSETS IN LIQUIDATION

						NNN 2003
	Number of		Total Equity			Value Fund, LLC			Noncontrolling
	Units		(Deficit)			Equity (Deficit)			Interests
Equity Balance — January 1, 2008		9,970	$	31,547,000		$	30,865,000		$	682,000
Distributions		—		(2,910,000	)		(2,908,000	)		(2,000	)
Net loss		—		(29,268,000	)		(28,882,000	)		(386,000	)
Recognition of previously unrealized loss on marketable equity securities		—		646,000			646,000			—
Equity (Deficit) Balance — December 31, 2008		9,970		15,000			(279,000	)		294,000
Net loss		—		(9,090,000	)		(8,894,000	)		(196,000	)
Equity (Deficit) Balance — December 31, 2009		9,970		(9,075,000	)		(9,173,000	)		98,000
Distributions		—		(2,500,000	)		(2,500,000	)		—
Net loss		—		(493,000	)		(395,000	)		(98,000	)
Deficit Balance — December 31, 2010		9,970	$	(12,068,000	)	$	(12,068,000	)	$	—

(Liquidation Basis)

For the Period from December 1, 2011 through December 31, 2011

		September 30,
Unit holders’ equity as of November 30, 2011	$	581,000
Liquidation basis adjustments:
Accrued liquidation costs		(197,000	)

Net assets in liquidation as of December 1, 2011		384,000
Change in net assets in liquidation		—

Net assets in liquidation as of December 31, 2011	$	384,000

The accompanying notes are an integral part of these consolidated financial statements.

50 28

NNN 2003 VALUE FUND, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Going Concern Basis)

For the Period from January 1, 2011 through November 30, 2011 and the Years Ended

December 31, 2010 and 2009

		September 30,			September 30,			September 30,
	Period from January 1, 2011 through November 30,			Years Ended December 31,
	2011			2010			2009

Interest income	$	1,000		$	23,000		$	47,000
Other income		—			21,000			19,000
General and administrative expense		(251,000	)		(362,000	)		(587,000	)
Investment related impairments		—			—			(126,000	)
Equity in earnings (losses) of unconsolidated real estate		1,000			619,000			(3,154,000	)

(Loss) income from continuing operations		(249,000	)		301,000			(3,801,000	)
Income (loss) from discontinued operations		13,398,000			(794,000	)		(5,289,000	)

Consolidated net income (loss)		13,149,000			(493,000	)		(9,090,000	)
Loss attributable to noncontrolling interests		—			(98,000	)		(196,000	)

Net income (loss) attributable to NNN 2003 Value Fund, LLC	$	13,149,000		$	(395,000	)	$	(8,894,000	)


Comprehensive income (loss):
Consolidated net income (loss)	$	13,149,000		$	(493,000	)	$	(9,090,000	)
Other comprehensive loss		—			—			—

Comprehensive income (loss)		13,149,000			(493,000	)		(9,090,000	)
Comprehensive loss attributable to noncontrolling interests		—			(98,000	)		(196,000	)

Comprehensive income (loss) attributable to NNN 2003 Value Fund, LLC	$	13,149,000		$	(395,000	)	$	(8,894,000	)

The accompanying notes are an integral part of these consolidated financial statements.

NNN 2003 VALUE FUND, LLC

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(Going Concern Basis)

For the Period from January 1, 2011 through November 30, 2011 and the Years Ended

December 31, 2010 and 2009

		September 30,		September 30,			September 30,			September 30,
	Number of Units		Total Equity (Deficit)			NNN 2003 Value Fund, LLC Equity (Deficit)			Noncontrolling Interests
Equity (Deficit) Balance — January 1, 2009		9,970	$	15,000		$	(279,000	)	$	294,000
Net loss		—		(9,090,000	)		(8,894,000	)		(196,000	)

Equity (Deficit) Balance — December 31, 2009		9,970		(9,075,000	)		(9,173,000	)		98,000
Distributions		—		(2,500,000	)		(2,500,000	)		—
Net loss		—		(493,000	)		(395,000	)		(98,000	)

Equity (Deficit) Balance — December 31, 2010		9,970		(12,068,000	)		(12,068,000	)		—
Distributions		—		(500,000	)		(500,000	)		—
Net income		—		13,149,000			13,149,000			—

Equity (Deficit) Balance — November 30, 2011		9,970	$	581,000		$	581,000		$	—

The accompanying notes are an integral part of these consolidated financial statements.

NNN 2003 VALUE FUND, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2010			2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net loss	$	(493,000	)	$	(9,090,000	)	$	(29,268,000	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Real estate related impairments on consolidated properties		5,300,000			4,000,000			20,700,000
Investment related impairments		—			126,000			900,000
Gain on sales of real estate		—			(758,000	)		—
Gain on extinguishment of debt		(6,658,000	)		—			—
Loss on sales of marketable equity securities		—			—			808,000
Depreciation and amortization (including deferred financing costs, deferred rent, lease inducements and above/below market leases)		2,186,000			2,090,000			4,828,000
Equity in (earnings) losses of unconsolidated real estate		(619,000	)		3,154,000			1,031,000
Allowance for doubtful accounts		241,000			15,000			(228,000	)
Change in operating assets and liabilities:
Accounts receivable, including accounts receivable from related parties		249,000			(59,000	)		123,000
Other assets		(399,000	)		(584,000	)		(168,000	)
Restricted cash		128,000			528,000			63,000
Accounts payable and accrued liabilities, including accounts payable to related parties		146,000			(201,000	)		(1,212,000	)
Security deposits, prepaid rent and other liabilities		(17,000	)		(32,000	)		(177,000	)
Net cash provided by (used in) operating activities		64,000			(811,000	)		(2,600,000	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from (investments in) unconsolidated real estate		1,407,000			1,000			(224,000	)
Proceeds from sales of real estate		—			11,250,000			—
Capital expenditures		(323,000	)		(329,000	)		(1,045,000	)
Proceeds from sales of marketable equity securities		—			—			893,000
Proceeds from repayment of loans to related parties		579,000			—			—
Restricted cash		—			—			728,000
Net cash provided by investing activities		1,663,000			10,922,000			352,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on mortgage loans payable		292,000			192,000			1,119,000
Principal repayments on mortgage loans payable		—			(8,943,000	)		(3,886,000	)
Borrowings from related parties		—			—			199,000
Principal repayments on related parties borrowings		—			—			(199,000	)
Cash transfer to lender in connection with transfer of property		(213,000	)		—			—
Restricted cash		1,000			(91,000	)		1,406,000
Payment of deferred financing costs					(4,000	)		(230,000	)
Distributions to noncontrolling interests		—			—			(2,000	)
Distributions to unit holders		(2,500,000	)		—			(2,908,000	)
Net cash used in financing activities		(2,420,000	)		(8,846,000	)		(4,501,000	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(693,000	)		1,265,000			(6,749,000	)
CASH AND CASH EQUIVALENTS — beginning of year		2,724,000			1,459,000			8,208,000
CASH AND CASH EQUIVALENTS — end of year	$	2,031,000		$	2,724,000		$	1,459,000
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	3,011,000		$	4,701,000		$	5,130,000
Cash paid for income taxes	$	20,000		$	24,000		$	72,000
NONCASH INVESTING AND FINANCING ACTIVITIES:
Accrual for tenant improvements and capital expenditures	$	—		$	217,000		$	712,000
Transfer of real estate and other assets in connection with debt extinguishment	$	10,758,000		$	—		$	—
Cancellation of debt and accrued interest in connection with transfer of real estate and other assets and liabilities	$	17,629,000		$	—		$	—

(Going Concern Basis)

For the Period from January 1, 2011 through November 30, 2011 and the Years Ended

December 31, 2010 and 2009

		September 30,			September 30,			September 30,
	Period from January 1, 2011 through November 30,			Years Ended December 31,
	2011			2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss)	$	13,149,000		$	(493,000	)	$	(9,090,000	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Real estate related impairments on consolidated properties		—			5,300,000			4,000,000
Investment related impairments		—			—			126,000
Gain on sales of real estate		(79,000	)		—			(758,000	)
Gain on extinguishment of debt		(13,623,000	)		(6,658,000	)		—
Depreciation and amortization (including deferred financing costs, deferred rent, lease inducements and above/below market leases)		157,000			2,186,000			2,090,000
Equity in (earnings) losses of unconsolidated real estate		(1,000	)		(619,000	)		3,154,000
Allowance for doubtful accounts		44,000			241,000			15,000
Change in operating assets and liabilities:
Accounts receivable, including accounts receivable from related parties		(138,000	)		249,000			(59,000	)
Other assets		38,000			(399,000	)		(584,000	)
Restricted cash		(21,000	)		128,000			528,000
Accounts payable and accrued liabilities, including accounts payable to related parties		(302,000	)		146,000			(201,000	)
Security deposits, prepaid rent and other liabilities		(181,000	)		(17,000	)		(32,000	)

Net cash (used in) provided by operating activities		(957,000	)		64,000			(811,000	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from unconsolidated real estate		25,000			1,407,000			1,000
Proceeds from sales of real estate		79,000			—			11,250,000
Capital expenditures		—			(323,000	)		(329,000	)
Proceeds from repayment of loans to related parties		—			579,000			—

Net cash provided by investing activities		104,000			1,663,000			10,922,000

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on mortgage loans payable		—			292,000			192,000
Principal repayments on mortgage loans payable		—			—			(8,943,000	)
Cash transfer to lender in connection with transfer of property		(49,000	)		(213,000	)		—
Restricted cash		—			1,000			(91,000	)
Payment of deferred financing costs		—			—			(4,000	)
Distributions to unit holders		(500,000	)		(2,500,000	)		—

Net cash used in financing activities		(549,000	)		(2,420,000	)		(8,846,000	)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(1,402,000	)		(693,000	)		1,265,000
CASH AND CASH EQUIVALENTS — beginning of period		2,031,000			2,724,000			1,459,000

CASH AND CASH EQUIVALENTS — end of period	$	629,000		$	2,031,000		$	2,724,000

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	—		$	3,011,000		$	4,701,000
Cash paid for income taxes	$	—		$	20,000		$	24,000
NONCASH INVESTING AND FINANCING ACTIVITIES:
Accrual for tenant improvements and capital expenditures	$	—		$	—		$	217,000
Transfer of real estate and other assets in connection with debt extinguishment	$	29,799,000		$	10,758,000		$	—
Cancellation of debt and accrued interest in connection with transfer of real estate and other assets and liabilities	$	43,471,000		$	17,629,000		$	—

The accompanying notes are an integral part of these consolidated financial statements.

51 31

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The use of the words “we,” “us,” or “our” refers to NNN 2003 Value Fund, LLC and our subsidiaries, except where the context otherwise requires.

1. Organization and Description of Business

NNN 2003 Value Fund, LLC was formed as a Delaware limited liability company on June 19, 2003. We were organized to acquire, own, operate and subsequently sell our ownership interests in a number of unspecified properties believed to have higher than average potential for capital appreciation, or value-added properties. AsIn ~~of December 31~~2011, ~~2010,~~ we ~~held~~disposed ~~interests~~of inour three remaining interests in commercial office properties, comprised of two consolidated properties and one unconsolidated property. WeOur ~~currently~~two ~~intend~~consolidated toproperties ~~dispose~~disposed of ~~all~~in 2011 consisted of ~~our~~Sevens ~~remaining~~Building, ~~properties~~located ~~and~~in ~~pay~~St. ~~distributions~~Louis, Missouri, or the toSevens ~~our~~Building ~~unit~~property, ~~holders~~and ~~from~~Four ~~available~~Resource ~~funds~~Square, iflocated ~~any~~in Charlotte, North Carolina, or the Four Resource Square property, and our unconsolidated property interest was an 8.5% Weinterest doin ~~not~~Enterprise ~~anticipate~~Technology ~~acquiring~~Center, ~~any~~located ~~additional~~in Scotts Valley, ~~real~~California, ~~estate~~or ~~properties~~the atEnterprise ~~this~~Technology ~~time~~Center property.

~~Our~~The ~~ability~~mortgage toloan ~~continue~~for the Sevens Building property, which had an outstanding principal balance of $21,494,000 as aof ~~going~~December 31, ~~concern~~2010, ismatured ~~dependent~~on October 31, 2010 and was in default due to non-payment of the outstanding principal balance upon maturity. The mortgage loan documents for the Sevens Building property included an option to extend the maturity date for an additional 12 months beyond October 31, 2010; however, we determined that it was not in the best interest of our ~~ability~~unit holders to ~~generate~~attempt to extend the maturity date due to the ~~necessary~~unfavorable terms of the extension option, including additional cash ~~flows~~outlays for an extension fee and~~/or~~ ~~retain~~partial principal prepayment, which we did not expect would be recovered through property operations over the ~~necessary~~subsequent ~~financing~~12 tomonths. ~~meet~~Furthermore, the ~~our~~estimated ~~obligations~~value of the Sevens Building property was significantly less than the outstanding principal balance of the mortgage loan, and ~~pay~~we ~~our liabilities~~did asnot ~~they~~expect ~~come~~that ~~due.~~the ~~During~~value of the ~~year~~Sevens ~~ended~~Building ~~December~~property would exceed the principal balance by the end of the potential extension term. On March 317, ~~2010~~2011, we ~~had~~received a ~~loss~~letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building property pursuant to our default on the mortgage loan for ~~continuing~~the ~~operations~~Sevens Building property. On March 25, 2011, the successor trustee appointed by the Sevens Building lender conducted a public auction and sold the Sevens Building property to General Electric Credit Equities, an entity affiliated with the Sevens Building lender, as buyer, for a sale price of $617,~~623~~400,000. ~~and~~As ~~certain~~a result of the sale, our ~~mortgage~~100% ~~loans~~ownership ~~went~~interest ~~into~~in ~~default. Accordingly,~~the ~~there~~Sevens isBuilding ~~substantial~~property ~~doubt~~was ~~about~~sold ~~our~~and ~~ability~~conveyed to ~~continue~~the asbuyer and a ~~going~~trustee’s ~~concern~~deed was recorded on the Sevens Building property in favor of the buyer. We did not receive any cash proceeds from the sale of the Sevens Building property. On April 29, 2011, we transferred $850,000 to the Sevens Building lender, which represented the approximate amount of net cash generated by the Sevens Building property subsequent to the default on the mortgage loan on October 31, 2010.

The mortgage loan for ~~Sevens~~the ~~Building,~~Four ~~located~~Resource inSquare ~~St. Louis, Missouri, or the Sevens Building~~ property, which had an outstanding principal balance of $21,~~494~~977,000 as of December 31, 2010, ~~matured~~ onhad ~~October 31,~~an ~~2010~~original ~~and~~maturity isdate ~~currently~~of inNovember 30, ~~default~~2010, ~~due~~but towas ~~non-payment~~extended ofto ~~the~~January 20, ~~outstanding principal balance upon maturity~~2011. The mortgage loan documents ~~include~~for the Four Resource Square property included an option to extend the maturity date for an additional 12 months beyond ~~October~~November 3130, 2010; however, we determined that it was not in the best interest of our unit holders to attempt to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. ~~Further~~Furthermore, the estimated value of the ~~Sevens~~Four ~~Building~~ Resource Square property iswas significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the Four Resource Square property would exceed the principal balance by the end of the potential extension term. AsOn ~~such~~January 20, 2011, we ~~had~~sold ~~been in discussions with~~ the ~~Sevens~~Four ~~Building~~Resource ~~lender regarding~~Square ~~our options for transferring the Sevens Building~~ property to ~~the~~an ~~Sevens~~entity ~~Building~~affiliated ~~lender, including~~with ~~foreclosure, deed-in-lieu of foreclosure, or another form of transfer. However, on March 7, 2011, we received a letter from~~ the ~~Sevens~~Four ~~Building~~Resource Square lender ~~indicating~~for ~~that it had initiated~~ a sales ~~foreclosure~~price ~~action~~equal onto the ~~Sevens~~outstanding ~~Building~~principal ~~property~~balance ~~pursuant~~of ~~to our default on~~ the mortgage loan ~~for the~~of ~~Sevens Building property~~$21,977,000. AWe ~~successor~~did ~~trustee~~not ~~has~~receive ~~been~~any ~~appointed~~cash byproceeds ~~the~~from ~~Sevens Building lender to conduct a public auction for~~ the sale of the ~~Sevens~~Four ~~Building~~Resource ~~property,~~Square ~~which is set to take place on March 25, 2011~~property.

In32 addition, the mortgage loan for Four Resource Square, located in Charlotte, North Carolina, or the Four Resource Square property, which had an outstanding principal balance of $21,977,000 as of December 31, 2010, had an original maturity date of November 30, 2010 but was extended to January 20, 2011. The mortgage loan documents included an option to extend the maturity date for an additional 12 months beyond November 30, 2010; however, we determined that it was not in the best interest of our unit holders to attempt to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. Further, the estimated value of the Four Resource Square property was significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the property would exceed the principal balance by the end of the potential extension term. As such, on January 20, 2011, we sold the Four Resource Square property to an entity affiliated with the Four Resource Square lender for a sales price equal to the outstanding principal balance of the mortgage loan of $21,977,000. We did not receive any cash proceeds from the sale of the property.

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

~~Grubb~~The &mortgage ~~Ellis~~loan ~~Realty~~for ~~Investors,~~the ~~LLC,~~Enterprise orTechnology ~~Grubb~~Center &property ~~Ellis~~had ~~Realty~~been ~~Investors,~~in ordefault since ~~our~~April 11, ~~manager~~2010, ~~manages~~ usdue ~~pursuant~~to the inability to pay in full the ~~terms~~monthly interest and principal payment due on that date or within five days of anthat ~~operating~~date. ~~agreement~~Further, oron May 11, 2011, the ~~Operating~~mortgage ~~Agreement.~~loan ~~While~~for ~~we have~~the noEnterprise ~~employees~~Technology Center property, ~~certain~~which ~~executive~~had ~~officers~~a ~~and~~then ~~employees~~outstanding balance of ~~our~~$32,562,000, ~~manager~~matured ~~provide~~and ~~services~~was tonot ~~us pursuant~~repaid, totriggering ~~the~~an ~~Operating~~additional ~~Agreement.~~event ~~Our~~of ~~manager~~default. ~~engages~~On ~~affiliated~~July 15, ~~entities~~2011, ~~including~~LBUSB ~~Triple~~2004-C4 ~~Net Properties~~Enterprise ~~Realty~~Way, ~~Inc~~L.P., oran ~~Realty,~~entity toaffiliated ~~provide~~with ~~certain~~UBS ~~services~~Real toEstate usInvestments, Inc., ~~Realty~~or ~~serves~~the asEnterprise ~~our property~~Technology ~~manager~~Center ~~pursuant~~lender, tofiled ~~the~~a ~~terms~~complaint ofagainst ~~the~~NNN ~~Operating~~Enterprise ~~Agreement~~Way, LLC and athe ~~property~~other ~~management agreement~~31 tenant-in-common, or TIC, owners of the ~~Management~~Enterprise ~~Agreement.~~Technology ~~The~~Center ~~Operating~~property ~~Agreement~~seeking ~~terminates~~judicial ~~upon~~foreclosure, ~~our~~specific ~~dissolution.~~performance for ~~The~~the ~~unit~~appointment ~~holders~~of ~~may~~a ~~not~~receiver ~~vote~~and toinjunctive ~~terminate~~relief. ~~our~~On ~~manager~~July 21, ~~prior~~2011, tothe court ordered the ~~termination~~appointment of ~~the~~a ~~Operating Agreement~~receiver orand ~~our~~granted ~~dissolution~~injunctive relief. As a result, ~~except~~on ~~for~~July 25, ~~cause.~~2011, ~~The~~the ~~Management~~receiver ~~Agreement~~appointed ~~terminates~~by ~~with~~the ~~respect~~court ~~to each~~took possession of ~~our~~the Enterprise ~~properties~~Technology ~~upon~~Center ~~the~~property ~~earlier~~and has been instructed to proceed with a private sale of the ~~sale~~property under the supervision of ~~each~~the ~~respective~~court. ~~property~~In oraddition, ~~December~~on July 3129, ~~2013.~~ ~~Realty~~2011, ~~may~~the beappointed ~~terminated~~trustee ~~without~~filed ~~cause~~a ~~prior~~notice of default and election to ~~the~~sell under ~~termination~~deed of trust on behalf of the ~~Management~~Enterprise ~~Agreement or~~Technology ~~our~~Center ~~dissolution,~~lender. ~~subject~~The totrustee’s ~~certain~~sale ~~conditions,~~occurred ~~including~~on ~~the~~November 29, ~~payment~~2011. byWe usdid tonot ~~Realty~~receive ofany ~~a termination~~cash ~~fee~~proceeds asfrom ~~provided~~the insale of the ~~Management~~Enterprise ~~Agreement~~Technology Center property.

As a result of the dispositions of all of our remaining property interests, we adopted the liquidation basis of accounting on December 1, 2011. We are currently in the process of winding up our operations, which we expect will be completed within the next three to nine months, at which time we will distribute any remaining available funds to our unit holders and will cease to be a going concern.

2. Summary of Significant Accounting Policies

The summary of significant accounting policies presented below is designed to assist in understanding our consolidated financial statements. Such consolidated financial statements and the accompanying notes are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, or GAAP, in all material respects, and have been consistently applied in preparing our accompanying consolidated financial statements.

Principles of Consolidation ~~and Basis of Presentation~~

The accompanying consolidated financial statements include our accounts and those of our wholly owned subsidiaries, any majority-owned subsidiaries and any variable interest entities, or VIEs, that we have concluded should be consolidated in accordance with the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or Codification, Topic 810, Consolidation. All material intercompany transactions and account balances have been eliminated in consolidation. We ~~account~~accounted for all other unconsolidated real estate investments using the equity method of accounting. Accordingly, our share of the earnings (losses) of these real estate investments is included in consolidated net income (loss).

~~Our~~33 consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classifications of liabilities that may be necessary if we are unable to continue as a going concern.

We have evaluated subsequent events through the date of issuance of these financial statements.

Use of Estimates

The preparation of our financial statements in accordance with GAAP requires us to make estimates and judgments that affect the reported amounts of assets and liabilities as of December 31, 2010 and 2009 and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses for the years ended December 31, 2010, 2009 and 2008. Actual results could vary from those estimates, perhaps in material adverse ways, and those estimates could differ under different assumptions or conditions.

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

Basis of Presentation

Prior to December 1, 2011, our consolidated financial statements were prepared on a going concern basis, which contemplated the realization of assets and the settlement of liabilities and commitments in the normal course of business. The consolidated financial statements for periods prior to December 1, 2011 do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classifications of liabilities that may be necessary if we are unable to continue as a going concern.

As a result of the dispositions of all of our remaining property interests, we adopted the liquidation basis of accounting on December 1, 2011. Accordingly, all assets have been adjusted to their estimated fair value (on an undiscounted basis). Liabilities, including estimated costs associated with implementing our liquidation, were adjusted to their estimated settlement amounts. Actual values realized for assets and settlement of liabilities may differ materially from the amounts estimated. Due to the uncertainty in the timing of the anticipated liquidation costs and the cash flows there from, results of operations may differ materially from amounts estimated. These amounts are presented in the accompanying consolidated statement of net assets. The net assets represent the estimated liquidation value of our assets available to our unit holders upon liquidation. The actual settlement amounts realized for assets and settlement of liabilities may differ materially, perhaps in adverse ways, from the amounts estimated.

We have evaluated subsequent events through the date of issuance of these financial statements.

Use of Estimates

The preparation of our financial statements in accordance with GAAP and under the liquidation basis of accounting requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses for all periods presented. Actual results could vary from those estimates, perhaps in material adverse ways, and those estimates could differ under different assumptions or conditions.

Cash and Cash Equivalents

Cash and cash equivalents consist of all highly liquid investments with a maturity of three months or less when purchased. Short-term investments with remaining maturities of three months or less when acquired are considered cash equivalents.

Restricted Cash

Restricted cash isas of December 31, 2010 was comprised of impound reserve accounts for property taxes, insurance, ~~capital~~ capital improvements and tenant improvements, as well as an escrow account that was funded from the proceeds of the sale of ~~our~~Southwood Tower, located in Houston, Texas, or the Southwood Tower property, to pay a rent guarantee to the buyer.

Allowance for Doubtful Accounts

Tenant receivables and unbilled deferred rent receivables ~~are~~were carried net of the allowances for doubtful current tenant receivables and unbilled deferred rent. An allowance iswas maintained for ~~estimated~~ estimated losses resulting from the inability of certain tenants to meet the contractual obligations under their lease agreements. Our determination of the adequacy of these allowances is was based primarily upon evaluations of historical loss experience, individual tenant receivables considering the tenant’s financial condition, security deposits, letters of credit, lease guaranties, current economic conditions and other relevant factors. We ~~have~~had established ~~allowances~~ an allowance for doubtful accounts of $218,000 ~~and $15,000~~ as of December 31, 2010 ~~and 2009, respectively,~~ to reduce receivables to our estimate of the amount recoverable.

Marketable Securities

Marketable securities are carried at fair value and consist primarily of investments in marketable equity securities. We classify our marketable equity securities portfolio as available-for-sale. If we believe that a decline in the value of an equity security is temporary, we record the decline in other comprehensive (loss) income in unit holders’ (deficit) equity. If a decline is believed to be other than temporary, the equity security is written down to the fair value and an other-than-temporary impairment is recorded in our statement of operations. Our evaluation of other-than-temporary impairment includes, but is not limited to the following: the amount of the unrealized loss; the length of time in which the unrealized loss has existed; the financial condition of the issuer; rating agency changes on the issuer; our intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value; and all other available evidence to evaluate the realizable value of our investments. If facts and circumstances change in subsequent periods, we may ultimately record a realized loss after having initially concluded that the decline in value was temporary.

As of December 31, 2010 and 2009, we held no investments in marketable securities. During the year ended December 31, 2008, we sold all of our remaining investments in marketable securities and recorded a total loss on sale of $808,000.

Real Estate Related Impairments

We ~~assess~~assessed the impairment of a real estate asset when events or changes in circumstances ~~indicate~~ indicated that its carrying amount ~~may~~was not be recoverable. Indicators we ~~consider~~considered important which could trigger an impairment review ~~include~~included the following:

•

a significant negative industry or economic trend;

•

a significant underperformance of a property relative to historical or projected future operating results; and

• a significant change in the manner in which the asset iswas used.

In34 the event that the carrying amount of a property exceeds the sum of the undiscounted cash flows (excluding interest) that are expected to result from the use and eventual disposition of the property, we would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property. The estimation of expected future net cash flows is inherently uncertain and relies on subjective assumptions dependent upon future and current market conditions and events that affect the ultimate value of the property. It requires us to make assumptions related to future rental rates, tenant allowances, operating expenditures, property taxes, capital improvements, occupancy levels, and the estimated proceeds generated from the future sale of the property. The estimation of proceeds to be generated from the future sale of the property requires us to also make estimates about capitalization rates and discount rates.

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

In ~~accordance~~the ~~with~~event ~~FASB~~that ~~Codification~~the ~~Topic~~carrying ~~360,~~amount ~~Property,~~of ~~Plant~~a ~~and~~property ~~Equipment,~~exceeded ~~during~~the sum of the undiscounted ~~years~~cash ~~ended~~flows ~~December 31,~~(excluding ~~2010,~~interest) ~~2009~~that were expected to result from the use and ~~2008~~eventual disposition of the property, we ~~assessed~~recognized an impairment loss to the ~~values~~extent the carrying amount exceeded the estimated fair value of ~~our~~the ~~consolidated properties~~property. ~~These~~The ~~valuation~~estimation of ~~assessments~~expected ~~resulted~~future innet uscash ~~recognizing~~flows ~~charges~~was ~~for~~inherently ~~real~~uncertain ~~estate~~and relied on subjective assumptions dependent upon future and current market conditions and events that affect the ultimate value of the property. It required us to make assumptions related ~~impairments~~to offuture $5rental rates,~~300~~ tenant allowances,~~000~~ operating expenditures, $4property taxes,~~000~~ capital improvements,~~000~~ ~~and~~occupancy ~~$20~~levels,~~700,000~~ ~~against~~and the ~~carrying~~estimated ~~values~~proceeds generated from the sale of ~~our consolidated~~the ~~real~~property. ~~estate~~The ~~investments~~estimation ~~during~~of proceeds to be generated from the ~~years~~sale of ~~ended~~the ~~December 31,~~property ~~2010,~~required ~~2009~~us to also make estimates about capitalization rates and ~~2008, respectively~~discount rates.

~~Additionally,~~In ~~our~~accordance ~~unconsolidated~~with ~~properties~~FASB Codification ~~were~~Topic ~~also~~360, ~~assessed for impairment~~Property, Plant and ~~impairment charges~~Equipment, ofduring ~~$18,000,000,~~the ~~$21,570,000~~period ~~and~~from $4January 1,~~200,000~~ ~~were~~2011 ~~recorded~~through ~~against~~November 30, ~~their~~2011 ~~carrying~~and ~~values during~~ the years ended December 31, 2010, ~~2009~~ and ~~2008~~2009, ~~respectively.~~we ~~Our~~assessed ~~share~~the values of ~~these~~our consolidated properties. ~~impairments~~These ~~was~~valuation ~~approximately~~assessments ~~$374,000,~~resulted in us recognizing charges for real estate related impairments of $35,~~115~~300,000 and $~~500~~4,000,000 against the carrying values of our consolidated real estate investments during the years ended December 31, 2010, ~~2009~~ and ~~2008~~ 2009, respectively. ~~Our~~No ~~share~~impairment ofcharges ~~the~~were ~~impairment~~ recorded ~~during~~against the ~~year~~carrying ~~ended December 31,~~values ~~2010~~of ~~was~~our ~~limited~~consolidated toreal ~~the~~estate ~~amount~~investments ofduring ~~our~~the ~~remaining~~period ~~investment~~from inJanuary 1, ~~the~~2011 ~~unconsolidated property~~through November 30, 2011.

~~Real~~Additionally, ~~estate~~our ~~related~~unconsolidated ~~impairments~~properties ~~are~~were ~~reflected~~also inassessed ~~our~~for ~~consolidated~~impairment, ~~statements~~and impairment charges of ~~operations~~$18,000,000 asand $21,570,000 were ~~follows:~~recorded against their carrying values during the years ended December 31, 2010 and 2009, respectively. Our share of these impairments was approximately $374,000 and $3,115,000 during the years ended December 31, 2010 and 2009, respectively. Our share of the impairment recorded during the year ended December 31, 2010 was limited to the amount of our remaining investment in the unconsolidated property. No additional impairments were recorded against the carrying values of our unconsolidated properties during the period from January 1, 2011 through November 30, 2011.

	Years Ended December 31,
	2010		2009		2008
Real estate related impairments of operations held for non-sale disposition	$	5,300,000	$	700,000	$	12,100,000
Equity in income (losses) of unconsolidated real estate		374,000		3,115,000		500,000
Income (loss) from discontinued operations		—		3,300,000		8,600,000
	$	5,674,000	$	7,115,000	$	21,200,000

Real estate related impairments were reflected in our consolidated statements of operations as follows:

		September 30,		September 30,
	Years Ended December 31,
	2010		2009
Equity in earnings (losses) of unconsolidated real estate	$	374,000	$	3,115,000
Income (loss) from discontinued operations		5,300,000		4,000,000

	$	5,674,000	$	7,115,000

Properties Held for Non-Sale Disposition

Our properties held for non-sale disposition ~~are~~were stated at historical cost less accumulated depreciation, net of real estate related impairment charges. The cost of our properties held for non-sale disposition ~~includes~~included the cost of land and completed buildings and related improvements. Expenditures that ~~increase~~increased the service life of the property ~~are~~were capitalized and the cost of maintenance and repairs iswas charged to expense as incurred. The cost of buildings and improvements ~~are~~ were depreciated on a straight-line basis over the estimated useful lives of the buildings and improvements, ranging from six to 39 years and the shorter of the lease term or useful life, ranging from one to six years for tenant improvements. When depreciable property iswas retired or disposed of, the related costs and accumulated depreciation ~~are~~were removed from the accounts and any gain or loss iswas reflected in income (loss) from discontinued operations. in our accompanying consolidated statements of operations.

~~During~~As ~~the~~of ~~year ended~~ December 31, 2009, we elected to cease the subsidization of the operations and debt service on the non-recourse promissory note for Executive Center I, located in Dallas, Texas, or the Executive Center I property, which matured on October 1, 2009. The property was reclassified as a property held for non-sale disposition at that time, as we determined that the property would be transferred to the Executive Center I lender in the first half of 2010~~. In the first quarter of 2010~~, ~~Tiffany~~our ~~Square,~~properties ~~located in Colorado Springs, Colorado, or the Tiffany Square property, was also reclassified as a property~~ held for non-sale disposition, asconsisted ~~its related mortgage loan matured on February 15, 2010 and we determined that the property would be transferred to the Tiffany Square lender in the second quarter~~ of ~~2010. Further, in~~ the ~~third quarter of 2010, we determined that the~~ Sevens Building and Four Resource Square properties. ~~would~~As ~~also~~discussed ~~be transferred~~in toNote ~~their respective lenders~~1, Organization and ~~have~~Description ~~reclassified~~of Business, both of these properties ~~as properties~~were ~~held~~disposed ~~for~~of ~~non-sale~~during ~~disposition~~the first quarter of 2011.

55 35

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

Other Assets

Other assets consist primarily of deferred rent receivables, leasing commissions, deferred financing costs, prepaid expenses and deposits. Costs incurred for property leasing are capitalized as deferred assets. Deferred financing costs include amounts paid to lenders and others to obtain financing. Such costs are amortized using the straight-line method over the term of the related loan, which approximates the effective interest rate method. Amortization of deferred financing costs is included in interest expense in the consolidated statements of operations. Deferred leasing costs include leasing commissions that are amortized using the straight-line method over the term of the related lease.

Fair Value Measurements

FASB Codification Topic 820, Fair Value Measurements, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value instruments. It establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. Level 1 inputs are the highest priority and are quoted prices in active markets for identical assets or liabilities. Level 2 inputs reflect other than quoted prices included in Level 1 that are either observable directly or through corroboration with observable market data. Level 3 inputs are unobservable inputs, due to little or no market activity for the asset or liability, such as internally developed valuation models. If quoted market prices or inputs are not available, fair value measurements are based upon valuation models that utilize current market or independently sourced market inputs, such as interest rates, option volatilities, credit spreads and market capitalization rates. Items valued using such internally generated valuation techniques are classified according to the lowest level input that is significant to the fair value measurement. As a result, the asset or liability could be classified in either Level 2 or 3 even though there may be some significant inputs that are readily observable.

We generally ~~use~~used a discounted cash flow model to estimate the fair value of our consolidated real estate investments, unless better market comparable data iswas available. Management ~~uses~~used its best estimate in determining the key assumptions, including the expected holding period, future occupancy levels, capitalization rates, discount rates, rental rates, lease-up periods and capital expenditure requirements. In our 2010 valuation analyses, we used terminal capitalization rates ranging between 8.0% and 9.5%. Generally, if a property iswas under contract, the contract price, adjusted for selling expenses, iswas used to estimate the fair value of the property.

The following table presents the nonfinancial assets that were measured at fair value on a nonrecurring basis during the year ended December 31, 2010:

			Quoted Prices in
		September 30,		September 30,		September 30,		September 30,		September 30,
			Active Markets		Significant Other		Significant
Assets	Carrying Value		Quoted Prices inActive Marketsfor IdenticalAssetsLevel 1		Significant OtherObservableInputsLevel 2		SignificantUnobservableInputsLevel 3		TotalImpairmentLosses
			for Identical		Observable		Unobservable		Total
			Assets		Inputs		Inputs		Impairment
Assets	Carrying Value		Level 1		Level 2		Level 3		Losses
Properties held for non-sale disposition	$	27,218,000	$	—	$	—	$	27,218,000	$	(5,300,000	)
Investments in unconsolidated real estate	$	24,000	$	—	$	—	$	24,000	$	—

The following table presents nonfinancial assets that were measured at fair value on a nonrecurring basis during the year ended December 31, 2009:

			Quoted Prices in
			Active Markets		Significant Other		Significant
			for Identical		Observable		Unobservable		Total
			Assets		Inputs		Inputs		Impairment
Assets	Carrying Value		Level 1		Level 2		Level 3		Losses
Properties held for non-sale disposition	$	41,540,000	$	—	$	—	$	41,540,000	$	(4,000,000	)
Investments in unconsolidated real estate	$	1,101,000	$	—	$	—	$	1,101,000	$	(126,000	)

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

Revenue Recognition

Base rental income iswas recognized on a straight-line basis over the terms of the respective lease agreements in accordance with FASB Codification Topic 840, Leases. Differences between rental income recognized and amounts contractually due under the lease agreements ~~are~~were credited or charged, as applicable, to rent receivable.

Concentration of Credit Risk

Financial instruments that potentially subject us to a concentration of credit risk are primarily our cash ~~investments~~ and ~~accounts~~cash ~~receivable from tenants~~equivalents. Cash is generally placed in money market accounts and the amount of credit exposure to any one commercial issuer is limited. We have cash in financial institutions which is insured by the Federal Deposit Insurance Corporation, or FDIC, up to $250,000 per depositor per insured bank. As of December 31, ~~2010~~2011, we had cash ~~accounts~~ accounts in excess of FDIC insured limits. We believe this risk is not significant. ~~Concentration of credit risk with respect to accounts receivable from tenants is limited. We perform credit evaluations of prospective tenants and security deposits are obtained upon lease execution.~~

We have geographic concentration of risk subject to fluctuations in each state’s economy where we operate our consolidated properties. As of December 31, 2010, we held interests in two consolidated properties with one property each located in: (i) Missouri, which accounted for 52.7% of our aggregate annual rent; and (ii) North Carolina, which accounted for 47.3% of our aggregate annual rent.

As of December 31, 2010, tenants at our consolidated properties representing 10.0% or more of aggregate annual rental revenue, based on contractual base rent from leases in effect as of December 31, 2010, were as follows:

Percentage of

2010

Lease

Annualized

Expiration

Tenant

Base Rent

Property

Date

McKesson Information Solutions, Inc.

1,203,000

23.1

Four Resource Square

06/30/12

As of December 31, 2009, tenants at our consolidated properties representing 10.0% or more of aggregate annual rental revenue, based on contractual base rent from leases in effect as of December 31, 2009, were as follows:

			Percentage of
	2009		2009				Lease
	Annualized		Annualized				Expiration
Tenant	Base Rent		Base Rent			Property	Date
McKesson Information Solutions, Inc.	$	1,168,000		14.4	%	Four Resource Square		06/30/12
PRC, LLC	$	839,000		10.4	%	Tiffany Square		05/31/12
Westwood College of Technology	$	806,000		10.0	%	Executive Center I		01/31/13

As of December 31, 2008, tenants at our consolidated properties representing 10.0% or more of aggregate annual rental revenue, based on contractual base rent from leases in effect as of December 31, 2010, were as follows:

Percentage of

2008

Lease

Annualized

Expiration

Tenant

Base Rent

Property

Date

GSA-FBI

1,234,000

12.1

901 Civic Center

05/03/12

McKesson Information Solutions, Inc.

1,134,000

11.1

Four Resource Square

06/30/12

Fair Value of Financial Instruments

FASB Codification Topic 825, Financial Instruments, requires disclosure of the fair value of financial instruments, whether or not recognized on the face of the balance sheet, for which it is practical to estimate that value. Fair value is defined as the quoted market prices for those instruments that are actively traded in financial markets. In cases where quoted market prices are not available, fair values are estimated using presently available market information and judgments about the financial instrument, such as estimates of timing and amount of expected future cash flows. Such estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instrument.

57 36

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

Financial instruments onin our ~~condensed~~accompanying consolidated balance ~~sheets~~sheet ~~consist~~at December 31, 2010 consisted of cash and cash equivalents, accounts and loans receivable, accounts payable and accrued expenses, and mortgage loans payable. We consider the carrying values of cash and cash equivalents, accounts receivable ~~and~~ and accounts payable and accrued expenses to approximate fair value for those financial instruments because of the short period of time between origination of the instruments and their expected realization. The fair value of amounts due to ~~and from~~ related parties iswas not determinable due to their related party nature. As of December 31, 2010 ~~and 2009~~, we ~~estimate~~estimated the fair value of our consolidated mortgage loans payable to be approximately $30,250,000 ~~and $47~~,~~993,000,~~ ~~respectively,~~ compared to their carrying values of $43,471,000 ~~and $60,164,000, respectively~~. The fair value of the mortgage loans payable ~~are~~were estimated using borrowing rates for debt instruments with similar terms and maturities. For non-recourse mortgage loans payable secured by properties with estimated fair values of less than their respective loan balances, we ~~estimate~~estimated the fair value of the mortgage loans to be equal to the estimated fair value of the properties.

Income Taxes

We are a pass-through entity for income tax purposes and taxable income (loss) is reported by our unit holders on their individual tax returns. Accordingly, no provision has been made for income taxes in the accompanying consolidated statements of operations except for insignificant amounts related to state franchise and income taxes.

We follow FASB Codification Topic 740, Income Taxes, to recognize, measure, present and disclose in our ~~condensed~~accompanying consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of December 31, ~~2010~~2011 and ~~2009~~2010, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our ~~condensed~~ consolidated financial statements.

Comprehensive Income

We ~~report~~reported comprehensive income (loss) in accordance with FASB Codification Topic 220, Comprehensive Income. This statement defines comprehensive income (loss) as the changes in equity of an enterprise except those resulting from unit holders’ transactions. Accordingly, comprehensive income (loss) includes certain changes in equity that are excluded from net income (loss). Our only comprehensive income (loss) items were net income (loss) and the unrealized change in fair value of marketable securities.

Segments

FASB Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. We have determined that we have one reportable segment, with activities related to investing in office buildings and value-add commercial office properties. Our management ~~evaluates~~evaluated operating performance on an individual property level. However, as each of our properties ~~has~~had similar economic characteristics, tenants, and products and services, our properties ~~have~~were ~~been~~ aggregated into one reportable segment for ~~the years~~all ~~ended~~periods ~~December 31, 2010, 2009 and 2008~~presented.

Noncontrolling Interests

A noncontrolling interest relates to the interest in the consolidated entities that are not wholly owned by us.

3. ~~Real~~Net ~~Estate~~Assets ~~Investments~~in —Liquidation ~~Properties Held for Non-Sale Disposition~~

~~Our~~The ~~investments~~following inis ~~properties~~a ~~held~~reconciliation ~~for~~of ~~non-sale~~total ~~disposition~~unit ~~consisted~~holders’ equity under the going concern basis of accounting to net assets in liquidation under the ~~following~~liquidation basis of accounting as of ~~December~~ November 3130, ~~2010~~2011 ~~and~~(the ~~2009~~beginning net assets in liquidation):

	December 31,
		September 30,
	2010			2009
Unit holders’ equity as of November 30, 2011 — going concern basis	$	581,000
Buildings and improvements	$	26,813,000		$	39,074,000
Reserve for estimated costs in excess of receipts during liquidation		(197,000	)
Land		4,137,000			7,122,000
Adjustment to reflect the change to the liquidation basis of accounting		(197,000	)
		30,950,000			46,196,000
Estimated value of net assets in liquidation as of December 1, 2011	$	384,000
Less: accumulated depreciation		(3,732,000	)		(4,656,000	)
	$	27,218,000		$	41,540,000

58 37

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

~~Depreciation expense for the properties held for non-sale disposition was $1,111,000, $708,000 and $1,557,000 for the years ended December 31, 2010, 2009 and 2008, respectively~~4. Real ~~estate related~~Estate ~~impairment~~Investments ~~charges~~— ofProperties ~~$4,721,000,~~Held ~~$618,000 and $10,904,000 were recorded against land, buildings and improvements of our properties held~~ for ~~non~~Non-~~sale~~Sale ~~disposition~~Disposition during the years ended December 31, 2010, 2009 and 2008, respectively. In addition, real estate related impairment charges of $579,000, $82,000 and $1,196,000 were recorded against identified intangible and other assets of our properties held for non-sale disposition during the years ended December 31, 2010, 2009 and 2008, respectively.

4.Our ~~Real~~investments ~~Estate~~in ~~Investments~~properties —held ~~Unconsolidated~~for ~~Real~~non-sale ~~Estate~~ disposition consisted of the following as of December 31, 2010:

Our investments in unconsolidated real estate consisted of the following as of December 31, 2010 and 2009:

		September 30,
	December 31, 2010
Buildings and tenant improvements	$	26,813,000
Land		4,137,000

		30,950,000
Less: accumulated depreciation		(3,732,000	)

	$	27,218,000

		Ownership			December 31,
Property	Location	Percentage			2010		2009
Chase Tower	Austin, TX		14.8	%	$	6,000	$	727,000
Enterprise Technology Center	Scotts Valley, CA		8.5	%		—		374,000
Executive Center II and III	Dallas, TX		41.1	%		18,000		—
					$	24,000	$	1,101,000

As of December 31, 2010, our properties held for non-sale disposition consisted of the Sevens Building and Four Resource Square properties. As discussed in Note 1, Organization and Description of Business, both of these properties were disposed of during the first quarter of 2011.

~~Summarized~~5. ~~Financial~~Real ~~Information~~ Estate Investments — Unconsolidated Real Estate

~~Summarized~~Our ~~unaudited~~investments ~~condensed~~in ~~combined~~unconsolidated ~~financial~~real ~~information~~estate, ~~about~~which ~~our~~were ~~unconsolidated~~accounted ~~real estate~~for asunder ofthe ~~December 31,~~equity ~~2010~~method ~~and~~of ~~2009~~accounting, consisted ~~and~~of ~~for~~ the ~~years~~following ~~ended~~as of December 31, 2010~~, 2009 and 2008 is as follows~~:

	December 31,
	September 30,			September 30,
	2010				2009
Property	Location		December 31, 2010
Assets (primarily real estate, net of impairments)	$	18,591,000			$	140,954,000
Chase Tower	Austin, TX		$	6,000
Mortgage loans and other debt payable	$	32,562,000			$	117,582,000
Executive Center II and III	Dallas, TX			18,000
Other liabilities		5,258,000				15,987,000
Enterprise Technology Center	Scotts Valley, CA			—
(Deficit) equity		(19,229,000	)			7,385,000
			$	24,000
Total liabilities and equity	$	18,591,000			$	140,954,000
Our share of equity	$	24,000			$	1,101,000

	Years Ended December 31,
	2010			2009			2008
Revenues	$	2,831,000		$	6,361,000		$	6,684,000
Rental and other expenses		25,398,000			16,357,000			12,718,000
Loss from continuing operations		(22,567,000	)		(9,996,000	)		(6,034,000	)
Income (loss) from discontinued operations		2,774,000			(9,556,000	)		(2,254,000	)
Net loss	$	(19,793,000	)	$	(19,552,000	)	$	(8,288,000	)
Our equity in income (losses) of unconsolidated real estate	$	271,000		$	(2,806,000	)	$	(1,031,000	)

Total real estate related impairment charges of $18,000,000, $21,570,000 and $4,200,000 were recorded against land, buildings, capital improvements and intangible assets of our unconsolidated properties during the years ended December 31, 2010, 2009 and 2008, respectively. Our share of these real estate related impairment charges was approximately $374,000, $3,115,000 and $500,000 during the years ended December 31, 2010, 2009 and 2008, respectively, and is included in the consolidated statements of operations in the line item entitled “Equity in income (losses) of unconsolidated real estate.” Since we have no commitment to fund deficit capital accounts, the amount of losses from unconsolidated real estate that we record is limited to the amount of our remaining investment in each respective unconsolidated property. During the year ended December 31, 2010, our share of the $18,000,000 real estate related impairment charge recorded by one of our unconsolidated properties was limited to our remaining investment in that property.

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

In addition, during the year ended December 31, 2009, we recorded a $348,000 allowance against the carrying value of our note receivable of $579,000 from the Executive Center II and III property pursuant to FASB Codification Topic 323, Investments — Equity Method and Joint Ventures, as our share of losses incurred by the Executive Center II and III property exceeded the amount of our equity investment. This allowance was reversed during the year ended December 31, 2010, as the note receivable was paid in full upon the sale of the property on May 24, 2010. The allowance, as well as the subsequent reversal of the allowance, are included in the line item entitled “Equity in income (losses) of unconsolidated real estate” in the accompanying consolidated statements of operations.

We also impaired our investments in unconsolidated real estate by $126,000 and $900,000 during the years ended December 31, 2009 and 2008, respectively. These charges are included in our consolidated statements of operations in the line item entitled “Investment related impairments.” There were no investment related impairment charges recorded for our unconsolidated properties during the year ended December 31, 2010.

Mortgage Loans

Total mortgage loans and other debt payable of our unconsolidated properties consisted of the following as of December 31, 2010 and 2009:

	Ownership			December 31,
Property	Percentage			2010		2009
Chase Tower		14.8	%	$	—	$	67,781,000
Enterprise Technology Center		8.5	%		32,562,000		32,771,000
Executive Center II and III		41.1	%		—		17,030,000
				$	32,562,000	$	117,582,000

Chase Tower

On January 25, 2010, we, along with NNN Chase Tower REO, LP, an entity managed by our manager, NNN OF 8 Chase Tower REO, LP, an entity also managed by our manager, and CBD Chase Tower, LP (f/k/a ~~ERG~~ ERG Chase Tower, LP), an unaffiliated third party, sold Chase Tower, located in Austin, Texas, or the Chase Tower property, to 221 West Sixth Street, LLC, an unaffiliated third party, for an aggregate sales price of $73,850,000. We owned a 14.8% interest in the Chase Tower property. Our portion of the net cash proceeds was $526,000 after payment of the related mortgage loan, closing costs and other transaction expenses. Our manager waived the disposition fee it was entitled to receive in connection with the sale of the Chase Tower property; therefore, a disposition fee was not paid to our manager. We also received distributions of excess cash from the Chase Tower property totaling $260,000 during the year ended December 31, 2010 and received a final distribution of $6,000 in the third quarter of 2011.

Enterprise Technology Center

On April 11, 2010, Enterprise Technology Center, located in Scotts Valley, California, or the Enterprise Technology Center property, was unable to pay in full the monthly interest and principal payment due on its non-recourse mortgage loan on that date or within five days of that date, thereby triggering an event of default under the mortgage loan documents.

The property is continuing to be marketed for sale and several possible options in connection with the property are currently being discussed with the Enterprise Technology Center lender, including: (a) a sale of the property or (b) a deed-in-lieu of foreclosure of the property. We can give no assurances that the property will be sold. Therefore, the Enterprise Technology Center lender may elect to foreclose on the property or a deed-in-lieu of foreclosure of the property may be provided to the lender. However, under the terms of the loan agreement, this event of default could allow the Enterprise Technology Center lender to immediately: (i) increase the interest rate of the loan from 6.44% per annum to the default interest rate of 11.44% per annum; (ii) impose a late charge equal to the lesser of 5.0% of the amount of any payment not timely paid, or the maximum amount which may be charged under applicable law; and/or (iii) foreclose on the Enterprise Technology Center property.

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

Executive Center II and III

On May 24, 2010, we, through NNN Executive Center II and III 2003, LP, our indirect subsidiary, along with NNN Executive Center, LLC, an entity also managed by our manager, and sixteen unaffiliated third party entities sold Executive Center II and III, located in Dallas, Texas, or the Executive Center II and III property, to Boxer F2, L.P., an unaffiliated third party, for an aggregate sales price of $17,000,000. We owned a 41.1% interest in the Executive Center II and III property. Our portion of the net cash proceeds was $541,000 after payment of the related mortgage loan, closing costs and other transaction expenses. In connection with the sale of the Executive II and III property, we also received approximately $787,000 as full repayment of a note receivable and accrued interest due to us from the property. Our manager waived the disposition fee it was entitled to receive in connection with the sale of the Executive Center II and III property, therefore, a disposition fee was not paid to our manager. We also received distributions of excess cash from the Executive Center II and III property totaling $80,000 during the year ended December 31, 2010 and received a final distribution of $19,000 in the third quarter of 2011.

~~Loan~~38 ~~Covenants~~

Our unconsolidated properties that are financed by borrowings may be required by the terms of the applicable loan documents to meet certain financial covenants such as minimum loan to value, debt service coverage, performance covenants, as well as other requirements. As discussed above, the mortgage loan on the Enterprise Technology Center property is in default.

Unconsolidated Debt Due to Related Parties

Our properties may obtain financing through one or more related parties, including our manager and/or its affiliates. The Executive Center II and III property had outstanding unsecured notes due to our manager as of December 31, 2009 totaling $1,445,000. These notes bore interest at 8.00% per annum and had original maturity dates of January 1, 2009. Pursuant to the terms of the unsecured notes, upon extension of the maturity dates of the mortgage loans payable on the Executive Center II and III property on December 28, 2008, the maturity dates of the unsecured notes were automatically extended to January 1, 2010 and, on February 23, 2010, the maturity dates were further extended to January 15, 2011. Upon sale of the Executive Center II and III property on May 24, 2010, a payment of $500,000 was made toward the principal balance of these notes, and the remaining principal balance of $945,000, as well as accrued interest of $555,000, was forgiven by our manager.

In addition, on November 5, 2008, the Executive Center II and III property obtained a 90-day unsecured loan in the amount of $304,000 from NNN Realty Advisors. The unsecured note bore interest at 8.67% per annum and all principal and all accrued interest was paid in full on January 20, 2009.

5. Intangible Assets Related to Properties Held for Non-Sale Disposition

Identified intangible assets related to our properties held for non-sale disposition consisted of the following as of December 31, 2010 and 2009:

	December 31,
	2010		2009
In-place leases and tenant relationships, net of accumulated amortization of $1,881,000 and $3,224,000 as of December 31, 2010 and 2009, respectively	$	1,951,000	$	4,233,000

Amortization expense recorded on the identified intangible assets related to properties held for non-sale disposition was $587,000, $431,000 and $1,296,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

~~Estimated~~Enterprise ~~amortization~~Technology ~~expense~~Center ~~of the identified intangible assets as of December 31, 2010 for each of the five succeeding fiscal years and thereafter is as follows:~~

Year	Amount
2011	$	555,000
2012		394,000
2013		340,000
2014		272,000
2015		187,000
Thereafter		203,000
	$	1,951,000

On April 11, 2010, the Enterprise Technology Center property was unable to pay in full the monthly interest and principal payment due on its non-recourse mortgage loan on that date or within five days of that date, thereby triggering an event of default under the mortgage loan documents. On May 11, 2011, the mortgage loan for the Enterprise Technology Center property, which had an outstanding balance of $32,562,000, matured and was not repaid. Therefore, an additional event of default was triggered under the mortgage loan documents. Pursuant to the terms of the loan agreement, these events of default allowed the Enterprise Technology Center lender to immediately: (i) increase the interest rate of the loan from 6.44% per annum to the default interest rate of 11.44% per annum; (ii) impose a late charge equal to the lesser of 5.0% of the amount of any payment not timely paid, or the maximum amount which may be charged under applicable law; and/or (iii) foreclose on the Enterprise Technology Center property.

6On July 15, 2011, LBUSB 2004-C4 Enterprise Way, L.P., ~~Other~~an ~~Assets~~entity ~~Related~~affiliated towith ~~Properties~~UBS ~~Held~~Real ~~for~~Estate ~~Non~~Investments, Inc., or the Enterprise Technology Center lender, filed a complaint against NNN Enterprise Way, LLC and the other 31 tenant-~~Sale~~in-common, ~~Disposition~~or TIC, owners of the Enterprise Technology Center property seeking judicial foreclosure, specific performance for the appointment of a receiver and injunctive relief. On July 21, 2011, the court ordered the appointment of a receiver and granted injunctive relief. As a result, on July 25, 2011, the receiver appointed by the court took possession of the Enterprise Technology Center property and has been instructed to proceed with a private sale of the property under the supervision of the court. In addition, on July 29, 2011, the appointed trustee filed a notice of default and election to sell under deed of trust on behalf of the Enterprise Technology Center lender, whereby a sale of the Enterprise Technology Center property may proceed after 90 days of filing such notice. The trustee’s sale occurred on November 29, 2011.

~~Other~~Summarized ~~assets~~Financial ~~related~~Information ~~to our properties held for non-sale disposition consisted of the following as of December 31, 2010 and 2009:~~

	December 31,
	2010		2009
Deferred rent receivable	$	277,000	$	764,000
Lease commissions, net of accumulated amortization of $286,000 and $479,000 as of December 31, 2010 and 2009, respectively		321,000		744,000
Deferred financing costs, net of accumulated amortization of $0 and $925,000 as of December 31, 2010 and 2009, respectively		—		164,000
Prepaid expenses, deposits and other		140,000		494,000
	$	738,000	$	2,166,000

As of December 31, 2011 all of our investments in unconsolidated real estate have been liquidated, and we have received distributions of our share of all remaining cash. Accordingly, the presentation of summarized financial information is no longer meaningful.

76. ~~Mortgage~~Intangible ~~Loans~~Assets ~~Payable~~ Related to Properties Held for Non-Sale Disposition

WeIdentified ~~have~~intangible ~~fixed~~assets ~~and~~related ~~variable~~to ~~rate mortgage loans payable secured by~~ our ~~consolidated~~ properties held for non-sale disposition consisted of ~~$43,471,000~~the ~~and~~following ~~$60,164,000~~ as of ~~December 31, 2010 and 2009,~~ ~~respectively. As of~~ December 31, 2010: and 2009, the effective interest rates on mortgage loans payable ranged from 7.25% to 10.95% per annum and 2.50% to 12.00% per annum, respectively, and the weighted-average effective interest rates were 9.04% and 7.28% per annum, respectively.

The composition of our consolidated mortgage loans payable as of December 31, 2010 and 2009 was as follows:

		September 30,
	December 31, 2010
In-place leases and tenant relationships, net of accumulated amortization of $1,881,000	$	1,951,000

	Total Mortgage				Weighted Average
	Loans Payable				Interest Rate
	December 31, 2009		December 31, 2009		December 31, 2010			December 31, 2009
Variable rate	$	22,471,000	$	34,574,000		7.26	%		7.47	%
Fixed rate		21,000,000		25,590,000		10.95	%		7.04	%
	$	43,471,000	$	60,164,000		9.04	%		7.28	%

~~Certain~~7. ofOther ~~our~~Assets ~~consolidated~~Related ~~properties financed by borrowings are required by the terms of their applicable loan documents~~ to ~~meet~~Properties ~~certain~~Held ~~financial~~for ~~covenants~~Non-Sale ~~such~~Disposition as minimum loan to value, debt service coverage and performance covenants, as well as other requirements on a combined and individual basis. As of December 31, 2010, we were in default on the Sevens Building mortgage loan, as discussed below.

~~The~~Other ~~maturity~~assets ~~dates~~related ~~and~~to ~~outstanding~~our ~~principal~~properties ~~balances~~held offor ~~our~~non-sale ~~consolidated~~disposition ~~mortgage~~consisted ~~loans payable~~of the following as of December 31, 2010 ~~is as follows~~:

	Maturity		Outstanding Principal
		September 30,
Property	Date		December 31, 2009		December 31, 2009
	December 31, 2010
Sevens Building		10/31/2010	$	21,494,000	$	21,382,000
Deferred rent receivable	$	277,000
Four Resource Square		1/20/2011		21,977,000		21,797,000
Lease commissions, net of accumulated amortization of $286,000		321,000
Tiffany Square		N/A		—		12,395,000
Prepaid expenses, deposits and other		140,000
Executive Center I		N/A		—		4,590,000
	$	738,000
			$	43,471,000	$	60,164,000

62As of December 31, 2010, our properties held for non-sale disposition consisted of the Sevens Building and Four Resource Square properties. As discussed in Note 1, Organization and Description of Business, both of these properties were disposed of during the first quarter of 2011 and any remaining other assets were written-off.

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

~~Sevens~~8. ~~Building~~Mortgage ~~Loan~~Loans ~~Default~~ Payable Secured by Properties Held for Non-Sale Disposition

OnWe ~~October 31,~~had ~~2010,~~no ~~the~~ mortgage ~~loan~~loans ~~for~~payable ~~the~~outstanding ~~Sevens~~on ~~Building~~our ~~property~~consolidated ~~became~~properties ~~due~~as ~~and is now in default due to non-payment~~ of ~~the outstanding principal balance upon maturity. The mortgage loan documents include an option to extend the maturity date for an additional 12~~December ~~months; however~~31, ~~we determined~~2011. ~~that~~As ~~it was not in the best interest~~ of ~~our unit holders to attempt to extend the~~ ~~maturity date due to the unfavorable terms of the extension option~~December 31, ~~including additional cash outlays for an extension fee and partial principal prepayment~~2010, ~~which~~ we ~~did~~had ~~not~~fixed ~~expect~~and ~~would~~variable ~~be recovered~~rate ~~through property operations over the subsequent 12 months. Further, the estimated value of the Sevens Building property is currently less than the outstanding principal balance of the~~ mortgage ~~loan,~~loans ~~and~~payable wesecured ~~do not expect that the value of the property will exceed the principal balance~~ by ~~the~~our ~~end~~consolidated ofproperties ~~the~~held ~~potential extension term. As such, we had been in discussions with the Sevens Building lender regarding our options~~ for ~~transferring~~non-sale ~~the~~disposition ~~Sevens~~of ~~Building property to the Sevens Building lender~~$43, ~~including foreclosure~~471,000. ~~deed-in-lieu~~As of ~~foreclosure, or another form of transfer. However, on March~~December 731, ~~2011~~2010, ~~we received a letter from~~ the ~~Sevens~~effective ~~Building~~interest ~~lender indicating~~rates ~~that it had initiated a foreclosure action~~ on ~~the~~mortgage ~~Sevens~~loans ~~Building property pursuant to~~payable ~~our~~ranged ~~default~~from ~~on the mortgage loan for the Sevens Building property~~7.25% ~~A successor trustee has been appointed by the Sevens Building lender~~ to ~~conduct~~10.95% per aannum, ~~public~~and ~~auction for~~ the ~~sale~~weighted-average ofeffective ~~the~~interest ~~Sevens Building~~rate ~~property,~~was ~~which is set to take place on March~~9.04% ~~25,~~per ~~2011~~annum.

~~Four~~The composition ~~Resource~~of ~~Square~~our ~~Loan~~consolidated ~~Default~~mortgage loans payable as of December 31, ~~Extension~~2010 ~~and~~was ~~Cancellation~~ as follows:

On March 7, 2010, the mortgage loan for the Four Resource Square property matured and was in default due to non-payment of the outstanding principal balance upon maturity. On April 20, 2010, we entered into an amendment to the loan and security agreement with the Four Resource Square lender, with an effective date of March 7, 2010, to extend the maturity date of the mortgage loan to the earlier of November 30, 2010 or the date on which the mortgage loan becomes due and payable, whether by acceleration or otherwise. On November 16, 2010, we entered into a second amendment with the Four Resource Square lender to extend the maturity date of the mortgage loan to the earlier of January 20, 2011 or the date on which the mortgage loan comes due and payable, by acceleration or otherwise.

		September 30,		September 30,
	Total Mortgage Loans Payable		Weighted Average Interest Rate
Variable rate	$	22,471,000		7.26	%
Fixed rate		21,000,000		10.95	%

	$	43,471,000		9.04	%

OnSevens ~~January 10,~~Building ~~2011,~~Mortgage weLoan entered into a purchase and sale agreement with Four Resource Square, LLC, an entity affiliated with the Four Resource Square lender, for the sale of the Four Resource Square property for a sales price equal to the outstanding principal balance of the mortgage loan, plus accrued interest and any other amounts due under the mortgage loan documents as of the closing date. On January 20, 2011, we sold the Four Resource Square property to Four Resource Square, LLC, an entity affiliated with the Four Resource Square lender, for a sales price of $21,977,000, which was equal to the outstanding principal balance of the mortgage loan. This mortgage loan was fully repaid and cancelled upon the transfer of the property.

~~Tiffany~~The ~~Square~~mortgage ~~Loan~~loan ~~Extension~~for the Sevens Building property, ~~Default~~which had an outstanding principal balance of $21,494,000 as of December 31, 2010, matured on October 31, 2010 and ~~Cancellation~~was in default due to non-payment of the outstanding principal balance upon maturity. The mortgage loan documents included an option to extend the maturity date for an additional 12 months beyond October 31, 2010; however, we determined that it was not in the best interest of our unit holders to attempt to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. Further, the estimated value of the Sevens Building property was significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the property would exceed the principal balance by the end of the potential extension term. On March 7, 2011, we received a letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building property pursuant to our default on the mortgage loan for the Sevens Building property. On March 25, 2011, the successor trustee appointed by the Sevens Building lender conducted a public auction and sold the Sevens Building property to General Electric Credit Equities, an entity affiliated with the Sevens Building lender, or the buyer, for a sale price of $17,400,000. This mortgage loan was cancelled upon the transfer of the property, and we recorded a gain on extinguishment of debt of $5,580,000.

OnFour ~~February 15,~~Resource ~~2009, we exercised an extension option on our mortgage loan for the Tiffany~~ Square ~~property,~~Mortgage ~~extending~~Loan the maturity date to February 15, 2010. On February 15, 2010, our mortgage loan on the Tiffany Square property became due and was in default due to non-payment of the outstanding principal balance upon maturity.

OnThe ~~April~~mortgage loan for the Four Resource Square property, which had an outstanding principal balance of $21,977,000 as of December 831, 2010, wehad ~~entered~~an ~~into~~original amaturity ~~purchase~~date ~~and~~of ~~sale~~November 30, ~~agreement~~2010 ~~with~~but was ~~Tiffany~~extended ~~Square,~~to ~~LLC~~January 20, 2011. The mortgage loan documents included an option to extend the maturity date for an additional 12 months beyond November 30, 2010; however, we determined that it was not in the best interest of our unit ~~entity~~holders ~~affiliated~~to ~~with~~attempt to extend the ~~Tiffany~~maturity ~~Square~~date ~~lender~~due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the ~~sale~~subsequent 12 months. Further, the estimated value of the ~~Tiffany~~Four Resource Square property ~~for~~was ~~a sales~~significantly ~~price~~less ~~equal~~than to the outstanding principal balance of the mortgage loan, ~~plus~~and ~~accrued~~we ~~interest and~~did ~~any~~not ~~other~~expect ~~amounts~~that ~~due~~the ~~under~~value of the ~~mortgage~~property would ~~loan~~exceed ~~documents~~the asprincipal balance by the end of the ~~closing~~potential ~~date~~extension term. OnAs ~~May~~such, on January 720, ~~2010~~2011, we sold the ~~Tiffany~~Four Resource Square property to ~~Tiffany Square, LLC,~~ an entity affiliated with the ~~Tiffany~~ Four Resource Square lender, for a sales price ~~of $12,395,000, which was~~ equal to the outstanding principal balance of the mortgage loan of $21,977,000. This mortgage loan was ~~fully repaid and~~ cancelled upon the transfer of the property, and we recorded a gain on extinguishment of debt of $8,043,000.

Executive Center I Loan Extension, Default and Cancellation

On September 23, 2008, we exercised a third extension option on our mortgage loan for the Executive Center I property, which extended the maturity date to October 1, 2009. In the third quarter of 2009, we elected to cease the subsidization of the operations and debt service on the non-recourse promissory note for the Executive Center I property, and the mortgage loan was not repaid on October 1, 2009.

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

On June 2, 2010, we completed a deed-in-lieu of foreclosure transaction whereby we transferred our ownership interest in the Executive Center I property to the Executive Center I lender in exchange for complete cancellation of the mortgage loan agreements and release of all of our liabilities, obligations and other indebtedness arising from the mortgage loan agreements. At the time of transfer, the mortgage loan had an outstanding principal balance of $4,590,000.

8. Derivative Financial Instruments

Derivatives are recognized as either assets or liabilities in our consolidated balance sheet and are measured at fair value in accordance with FASB Codification Topic 815, Derivatives and Hedging. Since our derivative instruments are not designated as hedge instruments, they do not qualify for hedge accounting and, accordingly, changes in fair value are included as a component of interest expense in our consolidated statements of operations and comprehensive income (loss) in the period of change. We utilize derivative instruments to mitigate interest rate fluctuations on specific transactions and cash flows. We do not utilize 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 the derivative instruments due to adverse changes in market prices (interest rates). Utilizing derivative instruments allows us to effectively manage the risk of increasing interest rates with respect to the potential effects these fluctuations could have on future operations and cash flows. Credit risk is the risk that one of the parties to a derivative contract fails to perform or meet their financial obligation. We do not obtain collateral associated with derivative instruments, but monitor the credit standing of our counterparties on a regular basis. Should a counterparty fail to perform, we would incur a financial loss to the extent that the associated derivative contract was in an asset position.

In connection with the variable interest rate mortgage loans on our 901 Civic Center property, which was sold on July 17, 2009, we entered into an interest rate swap agreement in order to limit the impact of interest rate changes on our results of operations and cash flows. The terms of the swap included: (i) a notional amount of $9,837,000; (ii) a trade date and effective date of June 18, 2008; (iii) a termination date of May 12, 2009; and (iv) a fixed rate payer payment date of the first of each month, commencing on July 1, 2008 and ending on the termination date.

We paid $112,000 to reduce the swap liability during the year ended December 31, 2009. We recorded $79,000 as an addition to interest expense related to the change in the swap fair value for the years ended December 31, 2008. This interest rate swap agreement expired on May 12, 2009, and we did not renew it.

9. Noncontrolling Interests

Noncontrolling interests ~~relate~~related to interests in the following consolidated limited liability companies and property with tenant- in-common, or TIC, ownership interests that ~~are~~were not wholly-owned by us as of December 31, ~~2010~~2011 and ~~2009~~2010:

		September 30,		September 30,
Entity	Date Acquired		Noncontrolling Interests
NNN Enterprise Way, LLC		05/07/2004		26.7	%
NNN 901 Civic Center, LLC		04/24/2006		3.1	%

~~NNN~~40 901 Civic Center, LLC sold the 901 Civic Center property on July 17, 2009; however, the legal entity still exists as of December 31, 2010 in order to settle outstanding receivables and payables remaining from the operation of the property.

10. NNN 2003 Value Fund, LLC Unit Holders’ Deficit

Pursuant to our Private Placement Memorandum, we offered for sale to the public a minimum of 1,000 and a maximum of 10,000 units at a price of $5,000 per unit. We relied on the exemptions from registration provided by Rule 506 under Regulation D and Section 4(2) of the Securities Act.

There are three classes of membership interests, or units, each having different rights with respect to distributions. As of December 31, 2010 and December 31, 2009, there were 4,000 Class A units, 3,170 Class B units and 2,800 Class C units issued and outstanding. The rights and obligations of all unit holders are governed by the Operating Agreement.

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

NNN 901 Civic Center, LLC sold the 901 Civic Center property on July 17, 2009; however, the legal entity still existed as of December 31, 2010 in order to settle outstanding receivables and payables remaining from the operation of the property. The entity was dissolved during the year ended December 31, 2011.

NNN Enterprise Way, LLC’s interest in the Enterprise Technology Center property was sold at a trustee’s sale on November 29, 2011; however, the legal entity still existed as of December 31, 2011.

10. NNN 2003 Value Fund, LLC Unit Holders’ Equity (Deficit)

There are three classes of membership interests, or units, each having different rights with respect to distributions. As of December 31, 2011 and 2010, there were 4,000 Class A units, 3,170 Class B units and 2,800 Class C units issued and outstanding. The rights and obligations of all unit holders are governed by the Operating Agreement.

Cash from Operations, as defined in the Operating Agreement, is first distributed to all unit holders pro rata until all Class A unit holders, Class B unit holders and Class C unit holders have received a 10.0%, 9.0% and 8.0% cumulative (but not compounded) annual return on their contributed and unrecovered capital, respectively. In the event that any distribution of Cash from Operations is not sufficient to pay the return described above, all unit holders receive identical pro rata distributions, except that Class C unit holders do not receive more than an 8.0% return on their Class C units, and Class B unit holders do not receive more than a 9.0% return on their Class B units. Excess Cash from Operations is then allocated pro rata to all unit holders on a per outstanding unit basis and further distributed to the unit holders and our manager based on predetermined ratios providing our manager with a share of 15.0%, 20.0% and 25.0% of the distributions available to Class A units, Class B units and Class C units, respectively, of such excess Cash from Operations.

Cash from Capital Transactions, as defined in the Operating Agreement, is first used to satisfy our debt and liability obligations; then distributed pro rata to all unit holders in accordance with their membership interests until all capital contributions are reduced to zero; and lastly, in accordance with the distributions as outlined above in the Cash from Operations.

Effective November 1, 2008, we suspended regular, monthly cash distributions to all unit holders. Instead, we make periodic distributions to unit holders from available funds, if any. To date, Class A units, Class B units and Class C units have received identical per-unit distributions; however, distributions may vary among the three classes of units in the future. During the years ended December 31, ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009, we distributed $2,500,000, $~~0, and $~~2,~~908~~500,000, ~~respectively,~~and ~~of available funds to our unit holders. In addition~~$0, ~~we distributed $500~~respectively,~~000~~ of available funds to our unit holders ~~on March 15, 2011~~.

11. ~~Future~~Related ~~Minimum~~Party ~~Rental~~Transactions ~~Revenue~~

We have operating leases with tenants that expire at various dates through 2017 and, in some cases, are subject to scheduled fixed increases or adjustments based on the consumer price index. Generally, the leases grant tenants renewal options. Leases also provide for additional rents based on certain operating expenses. Future minimum rent contractually due under operating leases, excluding tenant reimbursements of certain costs, as of December 31, 2010, are summarized as follows:

Year Ending	Amount
2011	$	4,187,000
2012		2,429,000
2013		1,416,000
2014		794,000
2015		220,000
Thereafter		189,000
	$	9,235,000

A certain amount of our rental revenue is derived from tenants with leases which are subject to contingent rent provisions. These contingent rents are subject to the tenant achieving periodic revenues in excess of specified levels. For the years ended December 31, 2010, 2009 and 2008, the amount of contingent rent earned by us was not significant.

12. Related Party Transactions

The Management Agreement

65Pursuant to the Operating Agreement and the Management Agreement, our manager and/or Realty were entitled to receive the payments and fees described below. Certain fees paid to Realty in the years ended December 31, 2011, 2010 and 2009, were passed through to our manager or its affiliate pursuant to an agreement between our manager and Realty, or the Realty Agreement.

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

Pursuant to the Operating Agreement and the Management Agreement, Realty is entitled to receive the payments and fees described below. Certain fees paid to Realty in the years ended December 31, 2010, 2009 and 2008, were passed through to our manager or its affiliate pursuant to an agreement between our manager and Realty, or the Realty Agreement.

Property Management Fees

We ~~pay~~paid Realty a monthly property management fee of up to 5.0% of the gross receipts revenue of the properties. For the years ended December 31, ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009, we incurred property management fees to Realty of $~~390~~47,000, $~~538~~390,000 and $~~547~~538,000, respectively.

Real Estate Acquisition Fees

Real Estate Disposition Fees

We ~~pay~~paid Realty or its affiliate a real estate disposition fee of up to 5.0% of the gross sales price of a property. For the years ended December 31, ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009, we did not incur any real estate disposition fees to Realty or its affiliate.

Lease Commissions

Accounting Fees

Construction Management Fees

We ~~pay~~paid Realty a construction management fee for its services in supervising construction and repair projects in or about our properties equal to 5.0% of any amount up to $25,000, 4.0% of any amount over $25,000 but less than $50,000 and 3.0% of any amount over $50,000, which is expended in any calendar year for construction or repair projects. For the ~~years~~year ended December 31, 2009 ~~and 2008~~, we incurred construction management fees to Realty of $4,000 ~~and $76,000, respectively~~. We did not incur any construction management fees for the ~~year~~years ended December 31, 2011 and 2010.

Loan Fees

66Related Party Payables

Related party accounts payable consist primarily of amounts due related to the Management Agreement, as discussed above, and for operating expenses incurred by us and paid by our manager or its affiliates. As of December 31, 2011 and 2010, the amount payable by us was $0 and $32,000, respectively, and is included in the accompanying consolidated balance sheets in the line item entitled “Accounts payable due to related parties.”

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

~~Related~~12. ~~Party~~Commitments ~~Payables~~ and Contingencies

Related party accounts payable consist primarily of amounts due related to the Management Agreement, as discussed above, and for operating expenses incurred by us and paid by our manager or its affiliates. As of December 31, 2010 and 2009, the amount payable by us was $32,000 and $118,000, respectively, and is included in the accompanying consolidated balance sheets in the line item entitled “Accounts and loans payable due to related parties.”

Related Party Receivables

Other Related Party Financing

On August 29, 2008, we entered into a 365-day unsecured loan in the amount of $111,000 with NNN Realty Advisors, the parent company of our manager. The unsecured note provided for interest at 6.96% per annum, and all principal and accrued interest was paid in full on December 10, 2008.

On November 18, 2008, we entered into a 365-day unsecured loan in the amount of $88,000 from NNN Realty Advisors. The unsecured note provided for interest at 8.67% per annum, and all principal and accrued interest was paid in full on December 10, 2008.

13. Commitments and Contingencies

Litigation

Neither we nor any of our properties are presently subject to any material litigation and, to our knowledge, no material litigation is threatened against us or any of our properties that, if determined unfavorably to us, would have a material adverse effect on our financial condition, results of operations or cash flows.

~~Environmental~~13. ~~Matters~~ Discontinued Operations

WeIn ~~follow~~accordance ~~the~~with ~~policy~~FASB ofCodification ~~monitoring~~Topic ~~our~~360, ~~properties~~Property, ~~for~~Plant ~~the~~and ~~presence~~Equipment, ofthe ~~hazardous~~net orincome ~~toxic~~(loss) from ~~substances.~~consolidated ~~While~~properties ~~there~~sold, ~~can~~as bewell noas ~~assurance~~those ~~that~~classified aas ~~material~~held ~~environmental~~for ~~liability does not exist~~sale, we are ~~not~~reflected ~~currently~~in ~~aware of any environmental liability with respect to the properties that would have a material adverse effect on~~ our ~~financial~~consolidated ~~condition,~~statements ~~results~~ of operations oras ~~cash~~discontinued ~~flows. Further,~~operations wefor ~~are~~all ~~not~~periods ~~aware~~presented. ofFor ~~any~~the ~~environmental~~years ~~liabilities~~ended orDecember 31, ~~any~~2011, ~~unasserted~~2010 ~~claim~~and ~~or assessment~~2009, ~~with~~discontinued ~~respect~~operations toincluded ~~environmental~~the ~~liabilities~~net ~~that~~income we(loss) ~~believe~~of ~~would require additional disclosure or~~ the ~~recording~~following ofproperties: ~~a loss contingency.~~

		September 30,
Property	Disposition Date
Tiffany Square		May 7, 2010
Executive Center I		June 2, 2010
Four Resource Square		January 20, 2011
Sevens Building		March 25, 2011

The following table summarizes the revenue and expense components that comprised income (loss) from discontinued operations for the period from January 1, 2011 through November 30, 2011 and the years ended December 31, 2010 and 2009:

		September 30,			September 30,			September 30,
	Period from January 1, 2011 through November 30,			Years Ended December 31,
	2011			2010			2009
Rental revenue	$	964,000		$	7,787,000		$	10,411,000
Rental expenses (including general, administrative, depreciation and amortization)		(727,000	)		(6,077,000	)		(7,166,000	)
Real estate related impairments		—			(5,300,000	)		(4,000,000	)

Income (loss) before other income (expense)		237,000			(3,590,000	)		(755,000	)
Interest expense		(545,000	)		(3,866,000	)		(5,289,000	)
Other income (expense)		4,000			4,000			(3,000	)
Gain on extinguishment of debt		13,623,000			6,658,000			—
Gain on sale		79,000			—			758,000

Income (loss) from discontinued operations		13,398,000			(794,000	)		(5,289,000	)
Income from discontinued operations attributable to noncontrolling interests		—			—			57,000

Income (loss) from discontinued operations attributable to NNN 2003 Value Fund, LLC	$	13,398,000		$	(794,000	)	$	(5,346,000	)

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

14. Discontinued Operations

In accordance with FASB Codification Topic 360, Property, Plant and Equipment, the net income (loss) from consolidated properties sold, as well as those classified as held for sale, are reflected in our consolidated statements of operations as discontinued operations for all periods presented. For the years ended December 31, 2010, 2009 and 2008, discontinued operations included the net income (loss) of the following properties:

Property

Date Acquired

Date Designated Held for Sale

Date Sold

901 Civic Center

April 24, 2006

September 26, 2008

July 17, 2009

Tiffany Square

November 15, 2006

N/A

May 7, 2010

Executive Center I

December 30, 2003

N/A

June 2, 2010

The following table summarizes the revenue and expense components that comprised income (loss) from discontinued operations for the years ended December 31, 2010, 2009 and 2008:

	Years Ended December 31,
	2010			2009			2008
Rental revenue	$	935,000		$	3,461,000		$	4,695,000
Rental expenses (including general, administrative, depreciation and amortization)		(842,000	)		(2,554,000	)		(4,482,000	)
Real estate related impairments		—			(3,300,000	)		(8,600,000	)
Income (loss) before other income (expense)		93,000			(2,393,000	)		(8,387,000	)
Interest expense		(622,000	)		(2,110,000	)		(2,628,000	)
Other income (expense)		1,000			(4,000	)		32,000
Gain on extinguishment of debt		6,658,000			—			—
Gain on sale		—			758,000			—
Income (loss) from discontinued operations		6,130,000			(3,749,000	)		(10,983,000	)
Income (loss) from discontinued operations attributable to noncontrolling interests		—			57,000			(140,000	)
Income (loss) from discontinued operations attributable to NNN 2003 Value Fund, LLC	$	6,130,000		$	(3,806,000	)	$	(10,843,000	)

15. Selected Quarterly Financial Data (unaudited)

Set forth below is the unaudited selected quarterly financial data. We believe that all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts stated below to present fairly, and in accordance with generally accepted accounting principles, the unaudited selected quarterly financial data when read in conjunction with the consolidated financial statements. Previously reported amounts have been reclassified to reflect current discontinued operations in accordance with FASB Codification Topic 360, Property, Plant and Equipment.

	Quarters Ended
	December 31,			September 30,			June 30,			March 31,
	2010			2010			2010			2010
Rental revenues	$	1,632,000		$	1,790,000		$	1,710,000		$	1,720,000
Rental expenses (including general, administrative, depreciation and amortization)		1,338,000			1,303,000			1,481,000			1,475,000
Real estate related impairments		—			—			5,300,000			—
Income (loss) before other income (expense) and discontinued operations		294,000			487,000			(5,071,000	)		245,000
Equity in income (losses) of unconsolidated real estate		4,000			6,000			1,016,000			(407,000	)
Loss from continuing operations		(637,000	)		(269,000	)		(4,727,000	)		(990,000	)
Consolidated net (loss) income		(638,000	)		(275,000	)		1,864,000			(1,444,000	)
Net (loss) income attributable to NNN 2003 Value Fund, LLC		(638,000	)		(275,000	)		1,864,000			(1,346,000	)

NNN 2003 VALUE FUND, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

	Quarters Ended
	December 31,			September 30,			June 30,			March 31,
	2009			2009			2009			2009
Rental revenues	$	1,738,000		$	1,664,000		$	1,764,000		$	1,784,000
Rental expenses (including general, administrative, depreciation and amortization)		1,257,000			1,281,000			1,215,000			1,446,000
Real estate related impairments		—			100,000			600,000			—
Income (loss) before other income (expense) and discontinued operations		481,000			283,000			(51,000	)		338,000
Equity in losses of unconsolidated real estate		(395,000	)		(194,000	)		(1,525,000	)		(1,040,000	)
Loss from continuing operations		(623,000	)		(706,000	)		(2,537,000	)		(1,475,000	)
Consolidated net loss		(807,000	)		(895,000	)		(4,952,000	)		(2,436,000	)
Net loss attributable to NNN 2003 Value Fund, LLC		(809,000	)		(949,000	)		(5,010,000	)		(2,126,000	)

16. Subsequent Events

Sale of Four Resource Square

Pending Foreclosure Action of Sevens Building

On March 7, 2011, we received a letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building property pursuant to our default on the mortgage loan for the Sevens Building property, which occurred as a result of our non-payment of the principal balance of the mortgage loan on the maturity date of October 31, 2010. A successor trustee has been appointed by the Sevens Building lender to conduct a public auction for the sale of the Sevens Building property, which is set to take place on March 25, 2011.

Distribution to Unit Holders

On March 15, 2011, we distributed $500,000 of available funds to our unit holders.

NNN 2003 VALUE FUND, LLC

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

						Deductions
		September 30,		September 30,			September 30,			September 30,
	Balance at		Charged to			(Write-off of			Balance at
	Balance atBeginning ofPeriod		Charged toCosts andExpenses			Deductions(Write-off ofuncollectibleaccount)			Balance atEnd ofPeriod
	Beginning of		Costs and			uncollectible			End of
Period from January 1, 2011 through November 30, 2011 —
	Period		Expenses			account)			Period
Allowance for doubtful accounts	$	218,000	$	45,000		$	(263,000	)	$	—
Straight line rent reserve	$	216,000	$	—		$	(216,000	)	$	—
Year ended December 31, 2010 —
Allowance for doubtful accounts	$	15,000	$	241,000		$	(38,000	)	$	218,000
Straight line rent reserve	$	176,000	$	40,000		$	—		$	216,000
Year ended December 31, 2009 —
Allowance for doubtful accounts	$	—	$	15,000		$	—		$	15,000
Straight line rent reserve	$	—	$	176,000		$	—		$	176,000
Year ended December 31, 2008 —
Allowance for doubtful accounts	$	228,000	$	(228,000	)	$	—		$	—
Straight line rent reserve	$	—	$	—		$	—		$	—

70 44

NNN 2003 VALUE FUND, LLC

SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION

																				Maximum Life
																				on Which
							Gross Amount at Which Carried													Depreciation in
			Initial Costs to Company				at Close of Period													Latest Income
					Buildings and				Buildings and				Accumulated			Date		Date		Statement is
	Encumbrance		Land		Improvements		Land		Improvements		Total(a)(b)		Depreciation(c)			Constructed		Acquired		Computed
Four Resource Square (Office), Charlotte, NC	$	21,531,000	$	1,668,000	$	19,357,000	$	1,183,000	$	14,149,000	$	15,332,000	$	(2,516,000	)		2000		3/7/2007	39 years
Sevens Building (Office), St. Louis, MO		21,000,000		5,119,000		20,487,000		2,954,000		12,664,000		15,618,000		(1,216,000	)		1971		10/25/2007	39 years
Total	$	42,531,000	$	6,787,000	$	39,844,000	$	4,137,000	$	26,813,000	$	30,950,000	$	(3,732,000	)

We own no real estate assets as of November 30, 2011.

(a)		For federal income tax purposes, the aggregate cost of our four consolidated operating properties, including a property that is held for non-sale disposition, as of December 31, 2010 is $47,193,000.
(b)		A summary of activity for real estate for the years ended December 31, 2010, 2009 and 2008 is as follows:

A summary of activity for real estate and accumulated depreciation for the period from January 1, 2011 through November 30, 2011 and the years ended December 31, 2010 and 2009 is as follows:

	Years Ended December 31,
		September 30,			September 30,			September 30,
	2010			2009			2008
	Period fromJanuary 1,2011 throughNovember 30,			Years Ended December 31,
	2011			2010			2009
Real Estate:
Balances at beginning of year	$	46,196,000		$	22,132,000		$	77,337,000
Balances at beginning of period	$	30,950,000		$	46,196,000		$	22,132,000
Acquisitions of real estate properties		—			—			—
Additions to (retirements of) building and improvements		~~(143,000~~—	)		(~~173~~143,000	)		22(173,000	)
Dispositions of real estate properties		(1030,~~382~~950,000	)		—(10,382,000	)		—
Real estate related impairments		~~(4,721,000~~—	)		(34,~~461~~721,000	)		(63,~~046~~461,000	)
Balances associated with changes in reporting presentation(d)		—			27,698,000			(49,181,000	)
Balances associated with changes in reporting presentation(a)		—			—			27,698,000
Balances at end of year	$	30,950,000		$	46,196,000		$	22,132,000
Balances at end of period	$	—		$	30,950,000		$	46,196,000
	Period fromJanuary 1,2011 throughNovember 30,			Years Ended December 31,
	2011			2010			2009
Accumulated Depreciation:
Balances at beginning of period	$	3,732,000		$	4,656,000		$	2,894,000
Depreciation expense		96,000			1,111,000			788,000
Retirements		—			(223,000	)		(329,000	)
Dispositions of real estate properties		(3,828,000	)		(1,812,000	)		—
Balances associated with changes in reporting presentation(a)		—			—			1,303,000
Balances at end of period	$	—		$	3,732,000		$	4,656,000

71 (a) The balances associated with changes in reporting presentation represent real estate and accumulated depreciation related to (i) properties designated as held for sale and placed into discontinued operations or (ii) properties that no longer meet the criteria for classification as held for sale that have been reclassified as operating properties.

(c) A summary of activity for accumulated depreciation for the years ended December 31, 2010, 2009 and 2008 is as follows:

	Years Ended December 31,
	2010			2009			2008
Accumulated Depreciation:
Balances at beginning of year	$	4,656,000		$	2,894,000		$	2,740,000
Depreciation expense		1,111,000			788,000			1,223,000
Retirements		(223,000	)		(329,000	)		—
Dispositions of real estate properties		(1,812,000	)		—			—
Balances associated with changes in reporting presentation(d)		—			1,303,000			(1,069,000	)
Balances at end of year	$	3,732,000		$	4,656,000		$	2,894,000

(d) The balances associated with changes in reporting presentation represent real estate and accumulated depreciation related to (i) properties designated as held for sale and placed into discontinued operations or (ii) properties that no longer meet the criteria for classification as held for sale that have been reclassified as operating properties.

SIGNATURES

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

	NNN 2003 Value Fund, LLC (Registrant)
	NNN 2003 VALUE FUND, LLC
By:	/s/ Steven M. Shipp	Executive Vice President, Portfolio Management
	(Registrant)
	Steven M. Shipp	Grubb & Ellis Realty Investors, LLC, the Manager of NNN 2003 Value Fund, LLC
By:	/s/ TODD A. MIKLES		President and Chief Executive Officer,
	Todd A. Mikles		NNN Realty Investors, LLC, the Manager of NNN 2003 Value Fund, LLC

Date: March 1823, ~~2011~~ 2012

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

By:	/s/ ~~Steven~~TODD MA. ~~Shipp Steven M. Shipp~~MIKLES	~~Executive Vice President, Portfolio Management Grubb & Ellis Realty Investors, LLC, the Manager of NNN 2003 Value Fund, LLC (principal executive officer)~~	President and Chief Executive Officer,
Date: March 18, 2011
	Todd A. Mikles		NNN Realty Investors, LLC,
By:	/s/ Paul E. Henderson Paul E. Henderson	Chief Accounting Officer Grubb & Ellis Realty Investors, LLC, the Manager of NNN 2003 Value Fund, LLC (principal financial officer)
			the Manager of NNN 2003 Value Fund, LLC
			(principal executive officer)
Date: March 23, 2012
By:	/s/ PAUL E. HENDERSON		Chief Accounting Officer
	Paul E. Henderson		NNN Realty Investors, LLC,
			the Manager of NNN 2003 Value Fund, LLC
			(principal financial officer)
Date: March 23, 2012

~~Date:~~46 ~~March 18, 2011~~

EXHIBIT INDEX

Pursuant to Item 601(a)(2) of Regulation S-K, this Exhibit index immediately precedes the exhibits.

The following exhibits are included, or incorporated by reference, in this Annual Report on Form 10-K for the fiscal year ~~2010~~2011 (and are numbered in accordance with Item 601 of Regulation S-K).


Exhibit Number		Exhibit
3.1		Articles of Organization of NNN 2003 Value Fund, LLC, dated March 19, 2003 (included in Exhibit 3.1 to our Form 10 filed on May 2, 2005 and incorporated herein by reference)

10.1		Operating Agreement of NNN 2003 Value Fund, LLC, by and between Triple Net Properties, LLC, as the Manager, and Anthony W. Thompson, as the Initial Member (included as Exhibit 10.1 to our Form 10 filed on May 2, 2005 and incorporated herein by reference)

10.2		Management Agreement between NNN 2003 Value Fund, LLC and Triple Net Properties Realty, Inc. (included as Exhibit 10.2 to our Form 10 filed on May 2, 2005 and incorporated herein by reference)

10.3		First Amendment to Operating Agreement of NNN 2003 Value Fund, LLC, by and between Triple Net Properties, LLC, as the Manager, dated January 20, 2005 (included as Exhibit 10.3 to our Form 10-K filed on April 2, 2007 and incorporated herein by reference)

10.4		First Amendment to Management Agreement between NNN 2003 Value Fund, LLC and Triple Net Properties Realty, Inc., dated May 1, 2005 (included as Exhibit 10.4 to our Form 10-K filed on April 2, 2007 and incorporated herein by reference)

10.5		Second Amendment to Operating Agreement of NNN 2003 Value Fund, LLC, by and between Triple Net Properties, LLC, as the Manager, dated February 2, 2007 (included as Exhibit 10.7 to our Form 10-K filed on April 2, 2007 and incorporated herein by reference)

10.6		Agreement for Purchase and Sale of Real Property and Escrow Instructions by and among NNN VF 901 Civic, LLC, NNN 901 Civic, LLC and Robert Ko, dated April 21, 2009 (included as Exhibit 10.6 to our Form 10-Q filed on May 18, 2009 and incorporated herein by reference)

10.7		First Amendment to Agreement for Purchase and Sale by and among NNN VF 901 Civic, LLC, NNN 901 Civic, LLC and Robert Ko, dated May 6, 2009 (included as Exhibit 10.7 to our Form 10-Q filed on May 18, 2009 and incorporated herein by reference)

10.8		Second Amendment to Agreement for Purchase and Sale by and among NNN VF 901 Civic, LLC, NNN 901 Civic, LLC and Robert Ko, dated May 12, 2009 (included as Exhibit 10.8 to our Form 10-Q filed on May 18, 2009 and incorporated herein by reference)

10.9		Third Amendment to Agreement for Purchase and Sale by and among NNN VF 901 Civic, LLC, NNN 901 Civic, LLC and Robert Ko, dated May 12, 2009 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on May 20, 2009 and incorporated herein by reference)

10.10		Modification of Deed of Trust and Other Loan Documents dated May 15, 2009, effective as of May 12, 2009, by and among NNN VF 901 Civic, LLC, NNN 901 Civic, LLC, NNN 2003 Value Fund, LLC and Bank of America, N.A. (Senior Loan Modification) (included as Exhibit 10.2 to our Current Report on form 8-K filed on May 20, 2009 and incorporated herein by reference)

10.11		Modification of Deed of Trust and Other Loan Documents dated May 15, 2009, effective as of May 12, 2009, by and among NNN VF 901 Civic, LLC, NNN 901 Civic, LLC, NNN 2003 Value Fund, LLC and Bank of America, N.A. (Mezzanine Loan Modification) (included as Exhibit 10.3 to our Current Report on form 8-K filed on May 20, 2009 and incorporated herein by reference)

74 47


Exhibit Number		Exhibit

10.12		Fourth Amendment to Agreement for Purchase and Sale by and among NNN VF 901 Civic, LLC, NNN 901 Civic, LLC and Robert Ko, dated May 22, 2009 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on May 27, 2009 and incorporated herein by reference)

10.13		Fifth Amendment to Agreement for Purchase and Sale by and among NNN VF 901 Civic, LLC, NNN 901 Civic, LLC and Robert Ko, dated May 29, 2009 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on June 4, 2009 and incorporated herein by reference)

10.14		Sixth Amendment to Agreement for Purchase and Sale by and among NNN VF 901 Civic, LLC, NNN 901 Civic, LLC and Robert Ko, dated June 17, 2009 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on June 23, 2009 and incorporated herein by reference)

10.15		Temporary Extension Agreement by and among NNN VF Chase Tower, LLC et al. (Senior Borrowers) and PSP/MRC DEBT PORTFOLIO S-1, L.P., successor-in-interest to MMA Realty Capital, LLC the (Senior Lender) and also NNN VF Chase Tower, LLC et al. (Mezzanine Borrowers) and Transwestern Mezzanine Realty Partners II, LLC, (Mezzanine Lender) dated June 30, 2009 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on July 6, 2009 and incorporated herein by reference)

10.16		Letter Amendment to the Temporary Extension Agreement by and among NNN Chase Tower REO, LP, NNN OF 8 Chase Tower REO, LP, ERG Chase Tower, LP and NNN VF Chase Tower RE, LP and PSP/MRC Debt Portfolio S-1, LP, by and among NNN Chase Tower, LLC, NNN Chase Tower Member, LLC, NNN OF 8 Chase Tower, LLC, NNN Of 8 Chase Tower Member, LLC, NNN-ERG Chase Tower GP I, LLC, ERG Chase Tower Limited I, LP, NNN VF Chase Tower, LLC NNN VF Chase Tower Member, LLC, Grubb & Ellis Realty Investors, LLC, NNN Opportunity Fund VIII, LLC, NNN 2003 Value Fund, LLC and Transwestern Mezzanine Realty Partners II, LLC, dated July 10, 2009 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on July 14, 2009 and incorporated herein by reference)

10.17		Seventh Amendment to Agreement for Purchase and Sale by and among NNN VF 901 Civic, LLC, NNN 901 Civic, LLC and Robert Ko, effective July 15, 2009 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on July 21, 2009 and incorporated herein by reference)

10.18		Loan Modification Agreement by and among NNN Chase Tower REO, LP, NNN OF 8 Chase Tower REO, LP, ERG Chase Tower, LP and NNN VF Chase Tower RE, LP and PSP/MRC Debt Portfolio S-1, LP, dated July 17, 2009 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on July 23, 2009 and incorporated herein by reference)

10.19		Forbearance and Modification Agreement by and among NNN Chase Tower, LLC, NNN Chase Tower Member, LLC, NNN OF 8 Chase Tower, LLC, NNN Of 8 Chase Tower Member, LLC, NNN-ERG Chase Tower GP I, LLC, ERG Chase Tower Limited I, LP, NNN VF Chase Tower, LLC NNN VF Chase Tower Member, LLC, Grubb & Ellis Realty Investors, LLC, NNN Opportunity Fund VIII, LLC, Andrew Pastor, Jeffrey S. Newberg, Kirk A. Rudy, Christopher T. Ellis, David L. Roche, and Arnold B. Miller, NNN 2003 Value Fund, LLC and Transwestern Mezzanine Realty Partners II, LLC, dated July 17, 2009 (included as Exhibit 10.2 to our Current Report on Form 8-K filed on July 23, 2009 and incorporated herein by reference)

10.20		Agreement for Purchase and Sale of Real Property and Escrow Instructions between NNN VF Chase Tower REO, LP, NNN Chase Tower REO, LP, NNN OF 8 Chase Tower REO, LP and CBD Chase Tower, LP (f/k/a ERG Chase Tower, LP), and 221 West Sixth Street, LLC, effective November 19, 2009 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on November 24, 2009 and incorporated herein by reference)

75 48

Exhibit
Exhibit Number		Exhibit
Number			Exhibit
10.21		Second Amendment to Loan Documents between sixteen entities sequentially named NNN Executive Center 1, LLC through NNN Executive Center 16, LLC, NNN Executive Center, LLC, NNN Executive Center II and III 2003, LP, Grubb & Ellis Realty Investors, LLC, NNN Realty Advisors, Inc., NNN Executive Center, LLC, and Bank of America, N.A., dated as of January 31, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on February 11, 2010 and incorporated herein by reference)
	10.21		Second Amendment to Loan Documents between sixteen entities sequentially named NNN Executive Center 1, LLC through NNN Executive Center 16, LLC, NNN Executive Center, LLC, NNN Executive Center II and III 2003, LP, Grubb & Ellis Realty Investors, LLC, NNN Realty Advisors, Inc., NNN Executive Center, LLC, and Bank of America, N.A., dated as of January 31, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on February 11, 2010 and incorporated herein by reference)
10.22		Amended and Restated Promissory Note by and between NNN Executive Center, LLC, and sixteen entities sequentially named NNN Executive Center 1, LLC through NNN Executive Center 16, LLC, and NNN Executive Center II and III 2003, LP, payable to Bank of America, N.A., dated as of January 31, 2010 (included as Exhibit 10.2 to our Current Report on Form 8-K filed on February 11, 2010 and incorporated herein by reference)
	10.22		Amended and Restated Promissory Note by and between NNN Executive Center, LLC, and sixteen entities sequentially named NNN Executive Center 1, LLC through NNN Executive Center 16, LLC, and NNN Executive Center II and III 2003, LP, payable to Bank of America, N.A., dated as of January 31, 2010 (included as Exhibit 10.2 to our Current Report on Form 8-K filed on February 11, 2010 and incorporated herein by reference)
10.23		Third Modification to Deed of Trust, Security Agreement and Fixture Filing by and between NNN Executive Center, LLC, and sixteen entities sequentially named NNN Executive Center 1, LLC through NNN Executive Center 16, LLC, and NNN Executive Center II and III 2003, LP, for the benefit of Bank of America, N.A., dated as of January 31, 2010 (included as Exhibit 10.3 to our Current Report on Form 8-K filed on February 11, 2010 and incorporated herein by reference)
	10.23		Third Modification to Deed of Trust, Security Agreement and Fixture Filing by and between NNN Executive Center, LLC, and sixteen entities sequentially named NNN Executive Center 1, LLC through NNN Executive Center 16, LLC, and NNN Executive Center II and III 2003, LP, for the benefit of Bank of America, N.A., dated as of January 31, 2010 (included as Exhibit 10.3 to our Current Report on Form 8-K filed on February 11, 2010 and incorporated herein by reference)
10.24		Purchase and Sale Agreement between NNN VF Tiffany Square, LLC and Tiffany Square, LLC, dated April 8, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on April 14, 2010 and incorporated herein by reference)
	10.24		Purchase and Sale Agreement between NNN VF Tiffany Square, LLC and Tiffany Square, LLC, dated April 8, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on April 14, 2010 and incorporated herein by reference)
10.25		First Amendment to Loan and Security Agreement between NNN VF Four Resource Square, LLC, NNN 2003 Value Fund, LLC and RAIT Partnership, L.P., dated April 20, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on April 26, 2010 and incorporated herein by reference)
	10.25		First Amendment to Loan and Security Agreement between NNN VF Four Resource Square, LLC, NNN 2003 Value Fund, LLC and RAIT Partnership, L.P., dated April 20, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on April 26, 2010 and incorporated herein by reference)
10.26		Settlement Agreement between NNN Executive Center 2003, LP and Ivan Halaj and Vilma Halaj Inter Vivos Trust, dated May 28, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on June 4, 2010 and incorporated herein by reference)
	10.26		Settlement Agreement between NNN Executive Center 2003, LP and Ivan Halaj and Vilma Halaj Inter Vivos Trust, dated May 28, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on June 4, 2010 and incorporated herein by reference)
10.27		Amendment to Settlement Agreement between NNN Executive Center 2003, LP and Ivan Halaj and Vilma Halaj Inter Vivos Trust, dated June 2, 2010 (included as Exhibit 10.2 to our Current Report on Form 8-K filed on June 4, 2010 and incorporated herein by reference)
	10.27		Amendment to Settlement Agreement between NNN Executive Center 2003, LP and Ivan Halaj and Vilma Halaj Inter Vivos Trust, dated June 2, 2010 (included as Exhibit 10.2 to our Current Report on Form 8-K filed on June 4, 2010 and incorporated herein by reference)
10.28		Second Amendment to Loan and Security Agreement between NNN VF Four Resource Square, LLC, NNN 2003 Value Fund, LLC and RAIT Partnership, L.P., dated November 16, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on November 22, 2010 and incorporated herein by reference)
	10.28		Second Amendment to Loan and Security Agreement between NNN VF Four Resource Square, LLC, NNN 2003 Value Fund, LLC and RAIT Partnership, L.P., dated November 16, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on November 22, 2010 and incorporated herein by reference)
10.29		Purchase and Sale Agreement entered into by NNN VF Four Resource Square, LLC and Four Resource Square, LLC, dated January 10, 2011 (included as Exhibit 10.1 to our Current Report on Form 8-K filed January 14, 2011 and incorporated herein by reference)
	21.1	*	Subsidiaries of NNN 2003 Value Fund, LLC
10.30		Loan Assumption and Substitution Agreement and Amendment to Deed of Trust, Security Agreement and Fixture Filing by and among Four Resource Square, LLC, NNN VF Four Resource Square, LLC, and NNN 2003 Value Fund, LLC in favor of RAIT Partnership, L.P., dated January 20, 2011 (included as Exhibit 10.1 to our Current Report on Form 8-K filed January 26, 2011 and incorporated herein by reference)
	31.1	*	Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
10.31		General Warranty Deed by and between NNN VF Four Resource Square, LLC and Four Resource Square, LLC, dated January 20, 2011 (included as Exhibit 10.2 to our Current Report on Form 8-K filed January 26, 2011 and incorporated herein by reference)
	31.2	*	Certification of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
10.32		Bill of Sale by NNN VF Four Resource Square, LLC in favor of Four Resource Square, LLC, dated January 18, 2011 and effective as of January 20, 2011 (included as Exhibit 10.3 to our Current Report on Form 8-K filed January 26, 2011 and incorporated herein by reference)
	32.1	**	Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
10.33		Assignment of Leases, Service Contracts and Intangibles, Transfer of Deposits and Assumption Agreement by and between NNN VF Four Resource Square, LLC and Four Resource Square, LLC, dated January 20, 2011 (included as Exhibit 10.4 to our Current Report on Form 8-K filed January 26, 2011 and incorporated herein by reference)
	32.2	**	Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

*49 ~~Filed herewith. ** Furnished herewith.~~

76 Table of Contents


Exhibit Number		Exhibit

21.1*		Subsidiaries of NNN 2003 Value Fund, LLC

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

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

32.1**		Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

32.2**		Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith.

**	Furnished herewith.

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