##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 or
 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
  Delaware
    
    20-0122092(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)1551 N. Tustin Avenue, Suite 300, Santa Ana, California
    
    92705(Address of principal executive offices)
    
    (Zip Code)
 (714) 667-8252
 N/A
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



##### 



NNN 2003 VALUE FUND, LLC
(A Delaware limited liability company)
TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    2Unaudited Condensed Consolidated Balance Sheets as of March 31, 2010 and
December 31, 2009
    
    
    2Unaudited Condensed Consolidated Statements of Operations and Comprehensive
Loss for the Three Months Ended March 31, 2010 and 2009
    
    
    3Unaudited Condensed Consolidated Statement of (Deficit) Equity for the Three Months
Ended March 31, 2010
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2010 and 2009
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 4.
    
    Controls and Procedures
    
    
    36Item 4T.
    
    Controls and Procedures
    
    
    36PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    37Item 1A.
    
    Risk Factors
    
    
    37Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3.
    
    Defaults Upon Senior Securities
    
    
    39Item 4.
    
    [Removed and Reserved.]
    
    
    39Item 5.
    
    Other Information
    
    
    39Item 6.
    
    Exhibits
    
    
    39Signatures
    
    
    
    
    40Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   1




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements.
 NNN 2003 VALUE FUND, LLC
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31, 2010
    
    
    December 31, 2009(Unaudited)ASSETSReal estate investments:Operating properties, net
    
    $
    32,719,000
    
    
    $
    32,973,000Properties held for non-sale disposition, net
    
    
    8,495,000
    
    
    
    8,567,000Investments in unconsolidated real estate
    
    
    
    
    
    
    1,101,00041,214,000
    
    
    
    42,641,000Cash and cash equivalents
    
    
    2,099,000
    
    
    
    2,724,000Accounts receivable, net
    
    
    359,000
    
    
    
    354,000Accounts and loans receivable due from related parties, net
    
    
    466,000
    
    
    
    475,000Restricted cash
    
    
    1,551,000
    
    
    
    1,351,000Identified intangible assets, net
    
    
    2,721,000
    
    
    
    2,852,000Other assets related to properties held for non-sale disposition
    
    
    2,613,000
    
    
    
    2,579,000Other assets, net
    
    
    878,000
    
    
    
    968,000Total assets
    
    $
    51,901,000
    
    
    $
    53,944,000LIABILITIES AND (DEFICIT) EQUITYMortgage loans payable
    
    $
    43,247,000
    
    
    $
    43,179,000Mortgage loans payable secured by properties held for non-sale disposition
    
    
    16,985,000
    
    
    
    16,985,000Accounts payable and accrued liabilities
    
    
    1,968,000
    
    
    
    1,842,000Accounts and loans payable due to related parties
    
    
    263,000
    
    
    
    118,000Acquired lease liabilities, net
    
    
    62,000
    
    
    
    73,000Other liabilities related to properties held for non-sale disposition, net
    
    
    159,000
    
    
    
    142,000Security deposits, prepaid rent and other liabilities
    
    
    735,000
    
    
    
    680,000Total liabilities
    
    
    63,419,000
    
    
    
    63,019,000Commitments and contingencies (Note 13)(Deficit) equity:NNN 2003 Value Fund, LLC unit holders deficit
    
    
    (11,518,000
    )
    
    
    (9,173,000
    )Noncontrolling interest equity
    
    
    
    
    
    
    98,000Total (deficit) equity
    
    
    (11,518,000
    )
    
    
    (9,075,000
    )Total liabilities and (deficit) equity
    
    $
    51,901,000
    
    
    $
    53,944,000
   2




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(Unaudited)
 Three Months EndedMarch 31,2010
    
    
    2009Revenues:Rental revenue
    
    $
    1,725,000
    
    
    $
    1,790,000Rental revenue of operations held for non-sale disposition
    
    
    610,000
    
    
    
    469,000Total revenues
    
    
    2,335,000
    
    
    
    2,259,000Expenses:Rental expense
    
    
    832,000
    
    
    
    867,000General and administrative
    
    
    174,000
    
    
    
    303,000Depreciation and amortization
    
    
    468,000
    
    
    
    274,000Operating expenses of operations held for non-sale disposition
    
    
    570,000
    
    
    
    510,000Real estate related impairments of operations held for
non-sale disposition
    
    
    
    
    
    
    500,000Total expenses
    
    
    2,044,000
    
    
    
    2,454,000Income (loss) before other income (expense) and discontinued
operations
    
    
    291,000
    
    
    
    (195,000
    )Other income (expense):Interest expense
    
    
    (847,000
    )
    
    
    (785,000
    )Interest expense of operations held for non-sale disposition
    
    
    (496,000
    )
    
    
    (444,000
    )Interest and dividend income
    
    
    12,000
    
    
    
    12,000Equity in losses of unconsolidated real estate
    
    
    (407,000
    )
    
    
    (1,040,000
    )Other income (expense)
    
    
    4,000
    
    
    
    (37,000
    )Loss from continuing operations
    
    
    (1,443,000
    )
    
    
    (2,489,000
    )Income from discontinued operations
    
    
    
    
    
    
    52,000Consolidated net loss
    
    
    (1,443,000
    )
    
    
    (2,437,000
    )Loss attributable to noncontrolling interests
    
    
    (98,000
    )
    
    
    (310,000
    )Net loss attributable to NNN 2003 Value Fund, LLC
    
    $
    (1,345,000
    )
    
    $
    (2,127,000
    )Comprehensive loss:Consolidated net loss
    
    $
    (1,443,000
    )
    
    $
    (2,437,000
    )Other comprehensive income (loss)
    
    
    
    
    
    
    Comprehensive loss
    
    
    (1,443,000
    )
    
    
    (2,437,000
    )Comprehensive loss attributable to noncontrolling interests
    
    
    98,000
    
    
    
    310,000Comprehensive loss attributable to NNN 2003 Value Fund, LLC
    
    $
    (1,345,000
    )
    
    $
    (2,127,000
    )
   3




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 
 CONDENSED CONSOLIDATED STATEMENT OF (DEFICIT) EQUITY
(Unaudited)
 NNN 2003Number
    
    
    
    
    
    
    Value Fund, LLC
    
    
    Noncontrollingof Units
    
    
    Total Deficit
    
    
    Deficit
    
    
    Interests(Deficit) Equity Balance 
December 31, 2009
    
    
    9,970
    
    
    $
    (9,075,000
    )
    
    $
    (9,173,000
    )
    
    $
    98,000Distributions
    
    
    
    
    
    
    (1,000,000
    )
    
    
    (1,000,000
    )
    
    
    Net loss
    
    
    
    
    
    
    (1,443,000
    )
    
    
    (1,345,000
    )
    
    
    (98,000
    )Deficit Balance  March 31, 2010
    
    
    9,970
    
    
    $
    (11,518,000
    )
    
    $
    (11,518,000
    )
    
    $
    
   4




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months EndedMarch 31,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Consolidated net loss
    
    $
    (1,443,000
    )
    
    $
    (2,437,000
    )Adjustments to reconcile net loss to net cash used in operating activities:Real estate related impairments on consolidated properties
    
    
    
    
    
    
    500,000Depreciation and amortization (including deferred financing costs,
deferred rent, lease inducements and above/below market leases)
    
    
    755,000
    
    
    
    447,000Equity in losses of unconsolidated real estate
    
    
    407,000
    
    
    
    1,040,000Allowance for doubtful accounts
    
    
    58,000
    
    
    
    100,000Change in operating assets and liabilities:Accounts receivable, including accounts and loans receivable due from
related parties
    
    
    (99,000
    )
    
    
    (142,000
    )Other assets
    
    
    (198,000
    )
    
    
    23,000Restricted cash
    
    
    (193,000
    )
    
    
    (157,000
    )Accounts payable and accrued liabilities, including accounts payable to
related parties
    
    
    449,000
    
    
    
    15,000Security deposits, prepaid rent and other liabilities
    
    
    72,000
    
    
    
    24,000Net cash used in operating activities
    
    
    (192,000
    )
    
    
    (587,000
    )CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (221,000
    )
    
    
    (98,000
    )Distributions from unconsolidated real estate
    
    
    727,000
    
    
    
    Investments in unconsolidated real estate
    
    
    
    
    
    
    (10,000
    )Net cash provided by (used in) investing activities
    
    
    506,000
    
    
    
    (108,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:Restricted cash
    
    
    (7,000
    )
    
    
    157,000Borrowings on mortgage loans payable
    
    
    68,000
    
    
    
    Distributions to unit holders
    
    
    (1,000,000
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (939,000
    )
    
    
    157,000NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (625,000
    )
    
    
    (538,000
    )CASH AND CASH EQUIVALENTS  beginning of period
    
    
    2,724,000
    
    
    
    1,459,000CASH AND CASH EQUIVALENTS  end of period
    
    $
    2,099,000
    
    
    $
    921,000SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    958,000
    
    
    $
    1,284,000Cash paid for income taxes
    
    $
    
    
    
    $
    4,000NONCASH INVESTING ACTIVITIES:Accrual for tenant improvements and capital expenditures
    
    $
    42,000
    
    
    $
    95,000
   5




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 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.
 1. Organization and Description of Business
        6




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
     2. Summary of Significant Accounting Policies
  Interim Financial Data
   7




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
 Principles of Consolidation and Basis of Presentation
 Consolidation
   Use of Estimates
  Real Estate Related Impairments
  
    
    a significant negative industry or economic trend;
    
    a significant underperformance relative to historical or projected future operating results;
and
    
    a significant change in the manner in which the asset is used.
   8




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
 Property, Plant and Equipment
 Three Months EndedMarch 31,2010
    
    
    2009Real estate related
impairments of operations held
for non-sale disposition
(investments in properties held
for non-sale disposition)
    
    $
    
    
    
    $
    500,000Equity in losses of
unconsolidated real estate
(investments in unconsolidated
real estate)
    
    
    374,000
    
    
    
    998,000$
    374,000
    
    
    $
    1,498,000
  Operating Properties
   Properties Held for Non-Sale Disposition
   9




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
  Properties Held for Sale
 Property, Plant and Equipment
 
    
    management, having the authority to approve the action, commits to a plan to sell the
asset;
    
    the asset is available for immediate sale in its present condition subject only to
terms that are usual and customary for sales of such assets;
    
    an active program to locate a buyer and other actions required to complete the plan to
sell the asset have been initiated;
    
    the sale of the asset is probable and the transfer of the asset is expected to qualify
for recognition as a completed sale within one year;
    
    the asset is being actively marketed for sale at a price that is reasonable in relation
to its current fair value; and
    
    given the actions required to complete the plan, it is unlikely that significant
changes to the plan will be made or that the plan will be withdrawn.
 Property, Plant and Equipment
  Fair Value Measurements
 Fair Value Measurements
  10




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
 Fair Value
Measurements Fair Value
Measurements
    Quoted Prices inActive Markets
    
    
    Significant Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    Unobservable
    
    
    TotalAssets
    
    
    Inputs
    
    
    Inputs
    
    
    ImpairmentAssets
    
    Carrying Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    LossesOperating properties
    
    $
    32,719,000
    
    
    $
    
    
    
    $
    
    
    
    $
    32,719,000
    
    
    $
    Properties held for
non-sale disposition
    
    $
    8,495,000
    
    
    $
    
    
    
    $
    
    
    
    $
    8,495,000
    
    
    $
    
  Quoted Prices inActive Markets
    
    
    Significant Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    Unobservable
    
    
    TotalAssets
    
    
    Inputs
    
    
    Inputs
    
    
    ImpairmentAssets
    
    Carrying Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    LossesOperating properties
    
    $
    33,437,000
    
    
    $
    
    
    
    $
    
    
    
    $
    33,437,000
    
    
    $
    Properties held for
non-sale disposition
    
    $
    10,141,000
    
    
    $
    
    
    
    $
    
    
    
    $
    10,141,000
    
    
    $
    (500,000
    )Property held for sale
    
    $
    9,320,000
    
    
    $
    
    
    
    $
    
    
    
    $
    9,320,000
    
    
    $
    Investments in
unconsolidated real
estate
    
    $
    3,004,000
    
    
    $
    
    
    
    $
    
    
    
    $
    3,004,000
    
    
    $
    LiabilitiesInterest rate swap
    
    $
    (23,000
    )
    
    $
    
    
    
    $
    (23,000
    )
    
    $
    
    
    
    $
    
 Fair Value of Financial Instruments
 Financial Instruments
  11




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
  Income Taxes
  Segments
 Segment Reporting
 Recently Issued Accounting Pronouncements
 Accounting for Transfers of Financial Assets  an amendment of FASB Statement No. 140 Transfers and Servicing Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities Consolidation of Variable Interest Entities, an Interpretation
of Accounting Research Bulletin No. 51, Consolidation
 Amendments to FASB Interpretation No. 46(R)
  12




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
 Improving
Disclosures about Fair Value Measurements Fair Value Measurements and Disclosure
 3. Real Estate Investments  Operating Properties
  March 31, 2010
    
    
    December 31, 2009Buildings and tenant improvements
    
    $
    30,768,000
    
    
    $
    30,725,000Land
    
    
    5,092,000
    
    
    
    5,092,00035,860,000
    
    
    
    35,817,000Less: accumulated depreciation
    
    
    (3,141,000
    )
    
    
    (2,844,000
    )$
    32,719,000
    
    
    $
    32,973,000
  4. Real Estate Investments  Properties Held for Non-Sale Disposition
  March 31, 2010
    
    
    December 31, 2009Buildings and tenant improvements
    
    $
    8,349,000
    
    
    $
    8,349,000Land
    
    
    2,030,000
    
    
    
    2,030,00010,379,000
    
    
    
    10,379,000Less: accumulated depreciation
    
    
    (1,884,000
    )
    
    
    (1,812,000
    )$
    8,495,000
    
    
    $
    8,567,000
   13




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
  5. Real Estate Investments  Unconsolidated Real Estate
  Property
    
    Location
    
    
    March 31, 2010
    
    
    December 31, 2009Chase Tower
    
    Austin, TX
    
    $
    
    
    
    $
    727,000Enterprise Technology Center
    
    Scotts Valley, CA
    
    
    
    
    
    
    374,000Executive Center II and III
    
    Dallas, TX
    
    
    
    
    
    
    $
    
    
    
    $
    1,101,000
 Summarized Financial Information
  March 31, 2010
    
    
    December 31, 2009Assets (primarily real estate)
    
    $
    41,310,000
    
    
    $
    140,954,000Mortgage loans and other debt payable
    
    $
    48,593,000
    
    
    $
    117,582,000Other liabilities
    
    
    8,745,000
    
    
    
    15,987,000Equity
    
    
    (16,028,000
    )
    
    
    7,385,000Total liabilities and equity
    
    $
    41,310,000
    
    
    $
    140,954,000Our share of equity
    
    $
    
    
    
    $
    1,101,000
 Three Months EndedMarch 31,2010
    
    
    2009Revenues
    
    $
    2,878,000
    
    
    $
    2,811,000Rental and other expenses
    
    
    21,055,000
    
    
    
    13,446,000Loss from continuing operations
    
    
    (18,177,000
    )
    
    
    (10,635,000
    )Loss from discontinued operations
    
    
    (324,000
    )
    
    
    (2,953,000
    )Net loss
    
    $
    (18,501,000
    )
    
    $
    (13,588,000
    )Our equity in losses of unconsolidated real estate
    
    $
    (374,000
    )
    
    $
    (1,040,000
    )
   14




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
  OwnershipProperty
    
    Percentage
    
    
    March 31, 2010
    
    
    December 31, 2009Enterprise Technology Center
    
    
    8.5
    %
    
    $
    32,562,000
    
    
    $
    32,771,000Executive Center II and III
    
    
    41.1
    %
    
    
    16,031,000
    
    
    
    17,030,000Chase Tower
    
    
    14.8
    %
    
    
    
    
    
    
    67,781,000Total
    
    
    
    
    
    $
    48,593,000
    
    
    $
    117,582,000
 Chase Tower
  Executive Center II and III
 Senior and Mezzanine Loans
     15




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
  Purchase and Sale Agreement
  th
 Enterprise Technology Center
  Loan Covenants
  Unconsolidated Debt Due to Related Parties
  Amount ofNote Issue Dates
    
    LoanJune 8, 2005
    
    $
    1,000,000September 12, 2005
    
    
    200,000October 18, 2005
    
    
    240,000November 14, 2005
    
    
    5,000$
    1,445,000
   16




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
 6. Identified Intangible Assets
  March 31, 2010
    
    
    December 31, 2009In-place leases and tenant
relationships, net of accumulated
amortization of $1,854,000 and
$1,723,000 as of March 31, 2010 and
December 31, 2009, respectively
(with weighted average lives of 29
months and 61 months for in-place
leases and tenant relationships,
respectively, as of March 31, 2010
and weighted-average lives of 32
months and 64 months for in-place
leases and tenant relationships,
respectively, as of December 31,
2009)
    
    $
    2,721,000
    
    
    $
    2,852,000
  7. Other Assets
  March 31, 2010
    
    
    December 31, 2009Deferred rent receivable
    
    $
    353,000
    
    
    $
    352,000Lease commissions, net of
accumulated amortization of
$251,000 and $210,000 as of March
31, 2010 and December 31, 2009,
respectively
    
    
    366,000
    
    
    
    394,000Deferred financing costs, net of
accumulated amortization of
$806,000 and $741,000 as of March
31, 2010 and December 31, 2009,
respectively
    
    
    100,000
    
    
    
    164,000Prepaid expenses, deposits and other
    
    
    59,000
    
    
    
    58,000$
    878,000
    
    
    $
    968,000
 8. Mortgage Loans Payable and Other Debt
  Total Mortgage
    
    
    Weighted AverageLoans Payable
    
    
    Interest RateMarch 31, 2010
    
    
    December 31, 2009
    
    
    March 31, 2010
    
    
    December 31, 2009Variable rate
    
    $
    34,642,000
    
    
    $
    34,574,000
    
    
    
    12.41
    %
    
    
    7.47
    %Fixed rate
    
    
    25,590,000
    
    
    
    25,590,000
    
    
    
    7.57
    %
    
    
    7.04
    %$
    60,232,000
    
    
    $
    60,164,000
    
    
    
    10.36
    %
    
    
    7.28
    %
   Property
    
    
    Maturity
    
    
    Outstanding PrincipalProperty
    
    Classification
    
    
    Date
    
    
    March 31, 2010
    
    
    December 31, 2009Executive Center I
    
    Held for Non-Sale Disposition
    
    
    10/1/2009
    
    
    $
    4,590,000
    
    
    $
    4,590,000Tiffany Square
    
    Held for Non-Sale Disposition
    
    
    2/15/2010
    
    
    
    12,395,000
    
    
    
    12,395,000Four Resource Square
    
    Operating
    
    
    3/7/2010
    
    
    
    21,865,000
    
    
    
    21,797,000Sevens Building
    
    Operating
    
    
    10/31/2010
    
    
    
    21,382,000
    
    
    
    21,382,000$
    60,232,000
    
    
    $
    60,164,000
  17




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
 Executive Center I Loan Default
  Tiffany Square Loan Default
   Four Resource Square Loan Extension
   9. Derivative Financial Instruments
 Derivatives and
Hedging
  18




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
   10. Noncontrolling Interests
  Entity
    
    Date Acquired
    
    
    Noncontrolling InterestsNNN Enterprise Way, LLC
    
    
    05/07/2004
    
    
    
    26.7
    %NNN 901 Civic Center, LLC
    
    
    04/24/2006
    
    
    
    3.1
    %
  11. 2003 Value Fund, LLC Unit Holders Deficit
     19




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
   12. Related Party Transactions
 The Management Agreement
   Property Management Fees
  Real Estate Acquisition Fees
  Real Estate Disposition Fees
  Leasing Commissions
  Accounting Fees
   20




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
 Construction Management Fees
  Loan Fees
  Related Party Accounts Payable
  Related Party Notes Receivable
 Investments  Equity Method and Joint Ventures
  13. Commitments and Contingencies
 Litigation
  Environmental Matters
   21




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
 14. Concentration of Credit Risk
    Square
    
    
    LeaseFootage
    
    
    ExpirationTenant
    
    Property
    
    
    (Approximate)
    
    
    DateMcKesson Information Solutions, Inc.
    
    Four Resource Square
    
    
    59,000
    
    
    
    06/30/2012Westwood College of Technology
    
    Executive Center I
    
    
    45,000
    
    
    
    01/31/2013PRC, LLC
    
    Tiffany Square
    
    
    96,000
    
    
    
    05/31/2012
  Square
    
    
    LeaseFootage
    
    
    ExpirationTenant
    
    Property
    
    
    (Approximate)
    
    
    DateGSA-FBI
    
    901 Civic Center
    
    
    49,000
    
    
    
    05/03/2012McKesson Information Solutions, Inc.
    
    Four Resource Square
    
    
    59,000
    
    
    
    06/30/2012
 15. Discontinued Operations  Properties Held for Sale
 Property, Plant and Equipment
 Date DesignatedProperty
    
    Date Acquired
    
    
    for Sale
    
    
    Date Sold901 Civic Center
    
    April 24, 2006
    
    September 26, 2008
    
    July 17, 2009
  Rental revenue
    
    $
    483,000Rental expense (including general, administrative, depreciation and amortization)
    
    
    371,000Income before other expense
    
    
    112,000Interest expense
    
    
    (60,000
    )Income from discontinued operations
    
    
    52,000Income from discontinued operations attributable to noncontrolling interests
    
    
    2,000Income from discontinued operations attributable to NNN 2003 Value Fund, LLC
    
    $
    50,000
  22




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
 16. Subsequent Events
 Tiffany Square Sale
  Enterprise Technology Center Loan Default
   Four
Resource Square Loan Extension
    23




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis 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.
  Forward-Looking Statements
  Overview and Background
     24




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25




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##### Table of Contents



Business Strategy
  Acquisitions and Dispositions
  Critical Accounting Policies
  Interim Financial Data
  Factors Which May Influence Results of Operations
   26




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##### Table of Contents



Rental Revenue
  Scheduled Lease Expirations
  Sarbanes-Oxley Act
   Results of Operations
    27




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##### Table of Contents



Comparison of the Three Months Ended March 31, 2010 and 2009
 Three Months EndedMarch 31,
    
    
    Change2010
    
    
    2009
    
    
    $
    
    
    %Revenues:Rental revenue
    
    $
    1,725,000
    
    
    $
    1,790,000
    
    
    $
    (65,000
    )
    
    
    (3.6
    )%Rental revenue of operations held for
non-sale disposition
    
    
    610,000
    
    
    
    469,000
    
    
    
    141,000
    
    
    
    30.1
    %2,335,000
    
    
    
    2,259,000
    
    
    
    76,000
    
    
    
    3.4
    %Expenses:Rental expense
    
    
    832,000
    
    
    
    867,000
    
    
    
    (35,000
    )
    
    
    (4.0
    )%General and administrative
    
    
    174,000
    
    
    
    303,000
    
    
    
    (129,000
    )
    
    
    (42.6
    )%Depreciation and amortization
    
    
    468,000
    
    
    
    274,000
    
    
    
    194,000
    
    
    
    70.8
    %Operating expenses of operations held for
non-sale disposition
    
    
    570,000
    
    
    
    510,000
    
    
    
    60,000
    
    
    
    11.8
    %Real estate related impairments of operations
held for non-sale disposition
    
    
    
    
    
    
    500,000
    
    
    
    (500,000
    )
    
    
    (100.0
    )%2,044,000
    
    
    
    2,454,000
    
    
    
    (410,000
    )
    
    
    (16.7
    )%Income (loss) before other income (expense) and
discontinued operations
    
    
    291,000
    
    
    
    (195,000
    )
    
    
    486,000
    
    
    
    249.2
    %Other income (expense):Interest expense
    
    
    (847,000
    )
    
    
    (785,000
    )
    
    
    (62,000
    )
    
    
    7.9
    %Interest expense of operations held for
non-sale disposition
    
    
    (496,000
    )
    
    
    (444,000
    )
    
    
    (52,000
    )
    
    
    11.7
    %Interest and dividend income
    
    
    12,000
    
    
    
    12,000
    
    
    
    
    
    
    
    
    %Equity in losses of unconsolidated real estate
    
    
    (407,000
    )
    
    
    (1,040,000
    )
    
    
    633,000
    
    
    
    (60.9
    )%Other income (expense)
    
    
    4,000
    
    
    
    (37,000
    )
    
    
    41,000
    
    
    
    110.8
    %Loss from continuing operations
    
    
    (1,443,000
    )
    
    
    (2,489,000
    )
    
    
    1,046,000
    
    
    
    (42.0
    )%Income from discontinued operations
    
    
    
    
    
    
    52,000
    
    
    
    (52,000
    )
    
    
    (100.0
    )%Consolidated net loss
    
    $
    (1,443,000
    )
    
    $
    (2,437,000
    )
    
    $
    994,000
    
    
    
    (40.8
    )%
 Rental Revenue
  Rental Revenue of Operations Held for Non-Sale Disposition
  Rental Expense
  General and Administrative
   28




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Depreciation and Amortization
  Operating Expenses of Operations Held for Non-Sale Disposition
  Real Estate Related Impairments of Operations Held for Non-Sale Disposition
  Interest Expense
  Interest Expense of Operations Held for Non-Sale Disposition
  Interest and Dividend Income
  Equity in Losses of Unconsolidated Real Estate
   29




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##### Table of Contents



Other Income (Expense)
  Income from Discontinued Operations
  Consolidated Net Loss
  Liquidity and Capital Resources
 Ability to Continue as a Going Concern
      30




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Sources of Capital and Liquidity
     31




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##### Table of Contents



Debt Financing
   Total Mortgage Loans Payable
    
    
    Weighted-Average Interest RateMarch 31, 2010
    
    
    December 31, 2009
    
    
    March 31, 2010
    
    
    December 31, 2009Variable rate
    
    $
    34,642,000
    
    
    $
    34,574,000
    
    
    
    12.41
    %
    
    
    7.47
    %Fixed rate
    
    
    25,590,000
    
    
    
    25,590,000
    
    
    
    7.57
    %
    
    
    7.04
    %Total
    
    $
    60,232,000
    
    
    $
    60,164,000
    
    
    
    10.36
    %
    
    
    7.28
    %
  Weighted-Average
    
    
    VariablePrincipal
    
    
    
    
    
    Interest
    
    
    or FixedOutstanding
    
    
    Maturity Date
    
    
    Rate
    
    
    Interest RateConsolidated Properties:Executive Center I(1)
    
    $
    4,590,000
    
    
    
    10/01/2009
    
    
    
    15.00
    %
    
    FixedTiffany Square(2)
    
    
    12,395,000
    
    
    
    02/15/2010
    
    
    
    13.00
    %
    
    VariableFour Resource Square(3)
    
    
    21,865,000
    
    
    
    03/07/2010
    
    
    
    12.25
    %
    
    VariableSevens Building(4)
    
    
    21,382,000
    
    
    
    10/31/2010
    
    
    
    5.89
    %
    
    Fixed & VariableTotal consolidated mortgage loans payable
    
    $
    60,232,000Unconsolidated Properties:Executive Center II and III(5)
    
    $
    13,381,000
    
    
    
    01/15/2011
    
    
    
    4.73
    %
    
    VariableEnterprise Technology Center
    
    
    32,562,000
    
    
    
    05/11/2011
    
    
    
    6.44
    %
    
    FixedTotal unconsolidated mortgage loans payable
    
    $
    45,943,000
 
 (1)
    
    The mortgage loan on the Executive Center I property is in default,
and we are currently negotiating a settlement agreement with the
Executive Center I lender.(2)
    
    On May 7, 2010, the Tiffany Square property was sold to an affiliate
of the Tiffany Square lender and the mortgage loan was cancelled.(3)
    
    On April 20, 2010, the maturity date of the mortgage loan on the Four
Resource Square property was extended through November 30, 2010.(4)
    
    Includes $21,000,000 with a fixed interest rate of 5.95% and $382,000
with a variable interest rate of 2.50% as of March 31, 2010.(5)
    
    Excludes other unsecured notes payable of $2,650,000 as of March 31,
2010, which is comprised of $1,205,000 due to TIC ownership and
$1,445,000 due to our manager. These notes bear interest at 8.00% per
annum and mature on January 15, 2011.  32




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Cash Flows
     33




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Other Liquidity Needs
   Contractual Obligations
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More than1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 Years(2010)
    
    
    (2011-2012)
    
    
    (2013-2014)
    
    
    (After 2014)
    
    
    TotalPrincipal payments  variable rate debt
    
    $
    34,642,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    34,642,000Principal payments  fixed rate debt
    
    
    25,590,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,590,000Interest payments  variable rate debt (based on
rates in effect as of March 31, 2010)
(1)
    
    
    1,145,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,145,000Interest payments  fixed rate debt (2)
    
    
    729,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    729,000Tenant improvement and lease commission
obligations
    
    
    30,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,000$
    62,136,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    62,136,000
 
 (1)
    
    Includes interest payments on the mortgage loan on the Tiffany Square
property through May 7, 2010, the date the property was sold to an
entity affiliated with the Tiffany Square lender, and includes
interest payments on the mortgage loan on the Four Resource Square
property through November 30, 2010, its current maturity date.(2)
    
    Excludes interest payments on the mortgage loan on the Executive
Center I property, which became due on October 31, 2009 and for which
we are currently negotiating a settlement agreement to transfer the
property to Executive Center I lender. Off-Balance Sheet Arrangements
  Inflation
   34




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##### Table of Contents



Recently Issued Accounting Pronouncements
 Accounting for Transfers of Financial Assets  an amendment of FASB Statement No. 140 Transfers and Servicing Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities Consolidation of Variable
Interest Entities, an Interpretation of Accounting Research Bulletin No. 51, Consolidation
 Amendments to FASB Interpretation No. 46(R)
 Improving
Disclosures about Fair Value Measurements Fair Value Measurements and Disclosure
 
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
     35




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##### Table of Contents



Expected Maturity Date2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter
    
    
    Total
    
    
    Fair ValueFixed rate
mortgage loans
payable
    
    $
    25,590,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    25,590,000
    
    
    $
    25,110,000Weighted average
interest rate on
maturing fixed rate
debt
    
    
    7.57
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    7.57
    %
    
    
    Variable rate
mortgage loans
payable
    
    $
    34,642,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    34,642,000
    
    
    $
    22,827,000Weighted average
interest rate on
maturing variable
rate debt (based on
rates in effect as
of March 31, 2010)
    
    
    12.41
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    12.41
    %
    
    
    
   
 Item 4.
    
    Controls and Procedures.
  
 Item 4T.
    
    Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  36




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##### Table of Contents



PART II  OTHER INFORMATION
 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.
 
 Item 1.
    
    Legal Proceedings.
  
 Item 1A.
    
    Risk Factors.
  If we are unable to generate the necessary cash flows to meet our financial obligations,
including 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 concern.
      37




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##### Table of Contents



We will rely on the disposition of our properties to generate cash to fund our operations
and pay distributions to our unit holders.
     38




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##### Table of Contents



Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3.
    
    Defaults Upon Senior Securities.
  
 Item 4.
    
    [Removed and Reserved.]
 
 Item 5.
    
    Other Information.
  
 Item 6.
    
    Exhibits.
   39




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##### Table of Contents



SIGNATURES
  NNN 2003 Value Fund, LLC
(Registrant)May 17, 2010  Date
    /s/ Kent W. PetersKent W. PetersChief Executive Officer
(principal executive officer)May 17, 2010 Date
    /s/ Paul E. HendersonPaul E. HendersonChief Accounting Officer
Grubb & Ellis Realty Investors, LLC,
the Manager of NNN 2003 Value Fund, LLC
(principal financial officer)  40




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##### Table of Contents



EXHIBIT INDEX
   ExhibitNumber
    
    Description3.1
    
    
    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
    
    
    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).10.2
    
    
    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).10.3
    
    
    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).10.4
    
    
    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).10.5
    
    
    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).31.1*
    
    
    Certification of Chief 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 Chief 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.
 
 *
    
    Filed herewith.**
    
    Furnished herewith.  41