##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 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
(State or other jurisdiction of 
incorporation or organization)
    
    20-0122092
(I.R.S. Employer
Identification No.)1551 N. Tustin Avenue, Suite 300Santa 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
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
  o þ




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##### 



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 June 30, 2009 and December 31, 2008
    
    
    2Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2009 and 2008
    
    
    3Unaudited Condensed Consolidated Statement of (Deficit) Equity for the Six Months Ended June 30, 2009
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4. Controls and Procedures
    
    
    31Item 4T. Controls and Procedures
    
    
    32PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    32Item 1A. Risk Factors
    
    
    32Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3. Defaults Upon Senior Securities
    
    
    33Item 4. Submission of Matters to a Vote of Security Holders
    
    
    33Item 5. Other Information
    
    
    33Item 6. Exhibits
    
    
    33Signatures
    
    
    34Exhibit 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
 June 30, 2009
    
    
    December 31, 2008(Unaudited)ASSETSReal estate investments:Operating property, net
    
    $
    13,625,000
    
    
    $
    13,980,000Properties held for sale, net
    
    
    38,133,000
    
    
    
    41,002,000Investments in unconsolidated real estate
    
    
    1,468,000
    
    
    
    4,034,00053,226,000
    
    
    
    59,016,000Cash and cash equivalents
    
    
    1,155,000
    
    
    
    1,459,000Accounts receivable, net
    
    
    189,000
    
    
    
    369,000Accounts and loans receivable due from related parties
    
    
    794,000
    
    
    
    764,000Restricted cash
    
    
    1,500,000
    
    
    
    1,788,000Identified intangible assets, net
    
    
    919,000
    
    
    
    1,073,000Other assets related to properties held for sale
    
    
    6,382,000
    
    
    
    7,023,000Other assets, net
    
    
    637,000
    
    
    
    723,000Total assets
    
    $
    64,802,000
    
    
    $
    72,215,000LIABILITIES AND (DEFICIT) EQUITYMortgage loans payable
    
    $
    21,797,000
    
    
    $
    21,797,000Mortgage loans payable secured by properties held for sale
    
    
    47,310,000
    
    
    
    47,118,000Accounts payable and accrued liabilities
    
    
    1,768,000
    
    
    
    2,098,000Accounts and loans payable due to related parties
    
    
    217,000
    
    
    
    227,000Acquired lease liabilities, net
    
    
    100,000
    
    
    
    129,000Other liabilities related to properties held for sale, net
    
    
    562,000
    
    
    
    467,000Security deposits, prepaid rent and other liabilities
    
    
    421,000
    
    
    
    364,000Total liabilities
    
    
    72,175,000
    
    
    
    72,200,000Commitments and contingencies (Note 14)(Deficit) equity:NNN 2003 Value Fund, LLC unit holders deficit
    
    
    (7,415,000
    )
    
    
    (279,000
    )Noncontrolling interest equity
    
    
    42,000
    
    
    
    294,000Total (deficit) equity
    
    
    (7,373,000
    )
    
    
    15,000Total liabilities and equity
    
    $
    64,802,000
    
    
    $
    72,215,000
   2




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 AND COMPREHENSIVE LOSS
 (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue:Rental revenue
    
    $
    612,000
    
    
    $
    772,000
    
    
    $
    1,212,000
    
    
    $
    1,540,000Expense:Rental expense
    
    
    244,000
    
    
    
    232,000
    
    
    
    464,000
    
    
    
    461,000General and administrative
    
    
    65,000
    
    
    
    158,000
    
    
    
    368,000
    
    
    
    539,000Depreciation and amortization
    
    
    273,000
    
    
    
    420,000
    
    
    
    547,000
    
    
    
    840,000Total expense
    
    
    582,000
    
    
    
    810,000
    
    
    
    1,379,000
    
    
    
    1,840,000Gain (loss) before other income (expense) and
discontinued operations
    
    
    30,000
    
    
    
    (38,000
    )
    
    
    (167,000
    )
    
    
    (300,000
    )Other income (expense):Interest expense (including amortization of
deferred financing costs)
    
    
    (432,000
    )
    
    
    (460,000
    )
    
    
    (860,000
    )
    
    
    (860,000
    )Interest and dividend income
    
    
    12,000
    
    
    
    62,000
    
    
    
    24,000
    
    
    
    157,000Other-than-temporary impairment of marketable
equity securities
    
    
    
    
    
    
    (110,000
    )
    
    
    
    
    
    
    (793,000
    )Equity in losses of unconsolidated real estate
    
    
    (1,525,000
    )
    
    
    (643,000
    )
    
    
    (2,565,000
    )
    
    
    (631,000
    )Other income (expense)
    
    
    (3,000
    )
    
    
    (24,000
    )
    
    
    (40,000
    )
    
    
    (14,000
    )Loss from continuing operations
    
    
    (1,918,000
    )
    
    
    (1,213,000
    )
    
    
    (3,608,000
    )
    
    
    (2,441,000
    )Loss from discontinued operations
    
    
    (3,033,000
    )
    
    
    (1,235,000
    )
    
    
    (3,780,000
    )
    
    
    (2,566,000
    )Consolidated net loss
    
    
    (4,951,000
    )
    
    
    (2,448,000
    )
    
    
    (7,388,000
    )
    
    
    (5,007,000
    )Net (loss)
income attributable to noncontrolling interest
    
    
    58,000
    
    
    
    (24,000
    )
    
    
    (252,000
    )
    
    
    (33,000
    )Net loss
attributable to NNN 2003 Value Fund LLC
    
    $
    (5,009,000
    )
    
    $
    (2,424,000
    )
    
    $
    (7,136,000
    )
    
    $
    (4,974,000
    )Comprehensive loss:Consolidated
net loss
    
    $
    (4,951,000
    )
    
    $
    (2,448,000
    )
    
    $
    (7,388,000
    )
    
    $
    (5,007,000
    )Recognition of previously unrealized loss on
marketable equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (646,000
    )Unrealized gain on marketable equity securities
arising during the period
    
    
    
    
    
    
    (33,000
    )
    
    
    
    
    
    
    (39,000
    )Comprehensive
income (loss) attributable to noncontrolling interests
    
    
    58,000
    
    
    
    (24,000
    )
    
    
    (252,000
    )
    
    
    (33,000
    )Comprehensive loss attributable to NNN 2003 Value
Fund, LLC
    
    $
    (5,009,000
    )
    
    $
    (2,391,000
    )
    
    $
    (7,136,000
    )
    
    $
    (4,289,000
    )
   3




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NNN 2003 VALUE FUND, LLC
 
 CONDENSED CONSOLIDATED STATEMENT OF (DEFICIT) EQUITY
 For the Six Months Ended June 30, 2009
 (Unaudited)
 NNN 2003 ValueNumber
    
    
    Total Equity
    
    
    Fund, LLC
    
    
    Noncontrollingof Units
    
    
    (Deficit)
    
    
    Deficit
    
    
    InterestBALANCE  December 31, 2008
    
    
    9,970
    
    
    $
    15,000
    
    
    $
    (279,000
    )
    
    $
    294,000Net loss
    
    
    
    
    
    
    (7,388,000
    )
    
    
    (7,136,000
    )
    
    
    (252,000
    )BALANCE  June 30, 2009
    
    
    9,970
    
    
    $
    (7,373,000
    )
    
    $
    (7,415,000
    )
    
    $
    42,000
   4




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NNN 2003 VALUE FUND, LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Six Months EndedJune 30,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Consolidated net loss
    
    $
    (7,388,000
    )
    
    $
    (5,007,000
    )Adjustments to reconcile net loss to net cash used in operating activities:Real estate related impairments on consolidated properties
    
    
    3,300,000
    
    
    
    Other than temporary impairment of marketable equity securities
    
    
    
    
    
    
    793,000Depreciation and amortization (including deferred financing costs,
deferred rent and above/below market leases)
    
    
    1,194,000
    
    
    
    2,315,000Equity in loss of unconsolidated real estate
    
    
    2,565,000
    
    
    
    631,000Allowance for doubtful accounts
    
    
    80,000
    
    
    
    354,000Change in operating assets and liabilities:Accounts receivable
    
    
    70,000
    
    
    
    (851,000
    )Other assets
    
    
    (166,000
    )
    
    
    945,000Restricted cash
    
    
    184,000
    
    
    
    (308,000
    )Accounts payable and accrued liabilities
    
    
    61,000
    
    
    
    (1,033,000
    )Security deposits, prepaid rent and other liabilities
    
    
    1,000
    
    
    
    (36,000
    )Net cash used in operating activities
    
    
    (99,000
    )
    
    
    (2,197,000
    )CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (479,000
    )
    
    
    (496,000
    )Investment in unconsolidated real estate
    
    
    1,000
    
    
    
    Net cash used in investing activities
    
    
    (478,000
    )
    
    
    (496,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal repayments on mortgage loans payable and other debt
    
    
    
    
    
    
    (1,468,000
    )Borrowings on mortgage loans payable and other debt
    
    
    192,000
    
    
    
    598,000Restricted cash
    
    
    104,000
    
    
    
    261,000Noncontrolling interest distributions
    
    
    
    
    
    
    (2,000
    )Payment of deferred financing costs
    
    
    (23,000
    )
    
    
    (29,000
    )Distributions
    
    
    
    
    
    
    (1,746,000
    )Net cash used in financing activities
    
    
    273,000
    
    
    
    (2,386,000
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (304,000
    )
    
    
    (5,079,000
    )CASH AND CASH EQUIVALENTS  beginning of period
    
    
    1,459,000
    
    
    
    8,208,000CASH AND CASH EQUIVALENTS  end of period
    
    $
    1,155,000
    
    
    $
    3,129,000SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for:Interest
    
    $
    2,452,000
    
    
    $
    2,726,000Income taxes
    
    $
    15,000
    
    
    $
    55,000NONCASH INVESTING AND FINANCING ACTIVITIES:Accrual for tenant improvements and capital expenditures
    
    $
    67,000
    
    
    $
    56,000
   5




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##### Table of Contents



1. Organization and Description of 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.
     2. Summary of Significant Accounting Policies
   6




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Interim Financial Data
  Principles of Consolidation and Basis of Presentation
 Consolidation of Variable Interest Entities,
  Use of Estimates
  Investment in Marketable Equity Securities
  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.
  7




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Accounting for Impairment or Disposal of Long-Lived Assets,
 Three Months
    
    
    Six MonthsEnded
    
    
    EndedLine Item in Statements of Operations
    
    June 30, 2009
    
    
    June 30, 2009Equity in losses of unconsolidated real estate (investments in
unconsolidated real estate)
    
    $
    1,649,000
    
    
    $
    2,647,000Loss from discontinued operations (investments in properties held for sale)
    
    
    2,800,000
    
    
    
    3,300,000Total real estate related impairments
    
    $
    4,449,000
    
    
    $
    5,947,000
  Operating Property
  Properties Held for Sale
  
    
    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;
  8




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
    
    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.
   Fair Value Measurement
 Fair Value Measurements
   Quoted Prices inActive Markets
    
    
    Significant Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    Unobservable
    
    
    TotalAssets
    
    
    Inputs
    
    
    Inputs
    
    
    ImpairmentAssets
    
    June 30, 2009
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    LossesProperties held for sale
    
    $
    38,133,000
    
    
    $
    
    
    
    $
    
    
    
    $
    38,133,000
    
    
    $
    (3,300,000
    )Investments in
unconsolidated real
estate
    
    $
    1,468,000
    
    
    $
    
    
    
    $
    
    
    
    $
    1,468,000
    
    
    $
    (2,647,000
    )
  Fair
Value of Financial Instruments
 Disclosures About Fair Value of Financial
Instruments
   9




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##### Table of Contents



Income Taxes
  Segments
 Disclosures about Segments of an Enterprise and Related
Information
 Noncontrolling Interests
 Noncontrolling Interests in
Consolidated Financial Statements  An Amendment of Accounting Research Bulletin No. 51
 As PreviouslyAs of December 31, 2008
    
    Reported
    
    
    Adjustment
    
    
    As AdjustedMinority interests
    
    $
    294,000
    
    
    $
    (294,000
    )
    
    $
    Noncontrolling interests equity
    
    $
    
    
    
    $
    294,000
    
    
    $
    294,000Total (deficit) equity
    
    $
    (279,000
    )
    
    $
    294,000
    
    
    $
    15,000
 As PreviouslyThree Months Ended June 30, 2008
    
    Reported
    
    
    Adjustment
    
    
    As AdjustedMinority interest in losses
    
    $
    (24,000
    )
    
    $
    (24,000
    )
    
    $
    Net loss / consolidated net loss
    
    $
    (2,424,000
    )
    
    $
    (24,000
    )
    
    $
    (2,448,000
    )Loss attributable to noncontrolling interests
    
    $
    
    
    
    $
    (24,000
    )
    
    $
    (24,000
    )
 As PreviouslySix Months Ended June 30, 2008
    
    Reported
    
    
    Adjustment
    
    
    As AdjustedMinority interest in losses
    
    $
    (33,000
    )
    
    $
    (33,000
    )
    
    $
    Net loss / consolidated net loss
    
    $
    (4,974,000
    )
    
    $
    (33,000
    )
    
    $
    (5,007,000
    )Loss attributable to noncontrolling interests
    
    $
    
    
    
    $
    (33,000
    )
    
    $
    (33,000
    )
 Recently Issued Accounting Pronouncements
 Fair Value Measurements, Effective Date of FASB Statement No. 157
 Business Combinations
  10




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Noncontrolling Interests in Consolidated
Financial Statements  An Amendment of ARB No. 51,
 Disclosures about Derivative Instruments and
Hedging Activities
 Interim Disclosures about Fair
Value of Financial Instruments,
 Subsequent Events,
 Recognition and Presentation of
Other-Than-Temporary Impairments
 Amendments to FASB Interpretation
No. 46(R)
 3. Real Estate Investment  Operating Property
  June 30, 2009
    
    
    December 31, 2008Buildings and tenant improvements
    
    $
    14,613,000
    
    
    $
    14,613,000Land
    
    
    1,176,000
    
    
    
    1,176,00015,789,000
    
    
    
    15,789,000Less: accumulated depreciation
    
    
    (2,164,000
    )
    
    
    (1,809,000
    )$
    13,625,000
    
    
    $
    13,980,000
  4. Real Estate Investments  Properties Held for Sale
  June 30, 2009
    
    
    December 31, 2008Buildings, tenant improvements, and other tenant related assets
    
    $
    34,378,000
    
    
    $
    35,989,000Land
    
    
    7,007,000
    
    
    
    8,229,00041,385,000
    
    
    
    44,218,000Less: accumulated depreciation
    
    
    (3,252,000
    )
    
    
    (3,216,000
    )$
    38,133,000
    
    
    $
    41,002,000
    5. Real Estate Investments  Unconsolidated Real Estate
  Description
    
    Location
    
    June 30, 2009
    
    
    December 31, 2008Enterprise Technology Center
    
    Scotts Valley, CA
    
    $
    348,000
    
    
    $
    1,312,000Chase Tower
    
    Austin, TX
    
    
    1,120,000
    
    
    
    861,000Executive Center II & III
    
    Dallas, TX
    
    
    
    
    
    
    1,861,000$
    1,468,000
    
    
    $
    4,034,000
  11




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##### Table of Contents



June 30, 2009
    
    
    December 31, 2008Balance Sheet Data:Assets (primarily real estate)
    
    $
    142,157,000
    
    
    $
    162,436,000Mortgage loans and other debt payable
    
    $
    118,432,000
    
    
    $
    118,719,000Other liabilities
    
    
    14,566,000
    
    
    
    16,102,000Equity
    
    
    9,159,000
    
    
    
    27,615,000Total liabilities and equity
    
    $
    142,157,000
    
    
    $
    162,436,000Our share of equity
    
    $
    1,468,000
    
    
    $
    4,034,000
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Operating Data:Revenues
    
    $
    6,172,000
    
    
    $
    5,607,000
    
    
    $
    12,127,000
    
    
    $
    11,970,000Rental and other expenses (including real estate
related impairment charges of $5,400,000 and
$18,800,000 during the three and six months ended June
30, 2009, respectively)
    
    
    11,031,000
    
    
    
    8,126,000
    
    
    
    30,575,000
    
    
    
    14,433,000Net loss
    
    $
    (4,859,000
    )
    
    $
    (2,519,000
    )
    
    $
    (18,448,000
    )
    
    $
    (2,463,000
    )Our equity in losses of unconsolidated real estate
    
    $
    (1,525,000
    )
    
    $
    (643,000
    )
    
    $
    (2,565,000
    )
    
    $
    (631,000
    )
   Description
    
    June 30, 2009
    
    
    December 31, 2008Enterprise Technology Center
    
    $
    33,161,000
    
    
    $
    33,544,000Chase Tower
    
    
    68,031,000
    
    
    
    68,031,000Executive Center II & III
    
    
    17,240,000
    
    
    
    17,144,000$
    118,432,000
    
    
    $
    118,719,000
  Senior Loan
   12




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Mezzanine Loan
      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
  6. Marketable Equity Securities
   13




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7. Identified Intangible Assets
  June 30, 2009
    
    
    December 31, 2008In-place leases and tenant
relationships, net of accumulated
amortization of $1,176,000 and
$1,022,000 as of June 30, 2009 and
December 31, 2008, respectively
(with a weighted average life of 23
months and 66 months for in-place
leases and tenant relationships,
respectively, as of June 30, 2009
and a weighted-average life of 26
months and 72 months for in-place
leases and tenant relationships,
respectively, as of December 31,
2008)
    
    $
    919,000
    
    
    $
    1,073,000
   8. Other Assets
  June 30, 2009
    
    
    December 31, 2008Deferred rent receivable
    
    $
    305,000
    
    
    $
    294,000Deferred financing costs, net of
accumulated amortization of
$305,000 and $240,000 as of June
30, 2009 and December 31, 2008,
respectively
    
    
    87,000
    
    
    
    153,000Leasing commissions, net of
accumulated amortization of
$150,000 and $110,000 as of June
30, 2009 and December 31, 2008,
respectively
    
    
    244,000
    
    
    
    276,000Prepaid expenses, deposits and other
    
    
    1,000
    
    
    
    $
    637,000
    
    
    $
    723,000
 9. Mortgage Loans Payable and Other Debt
   Total Mortgage
    
    
    Weighted AverageLoans Payable
    
    
    Interest RateJune 30, 2009
    
    
    December 31, 2008
    
    
    June 30, 2009
    
    
    December 31, 2008Mortgage loans payable
    
    $
    69,107,000
    
    
    $
    68,915,000
    
    
    
    6.93
    %
    
    
    6.39
    %Variable rate and fixed rate:Variable rate(1)
    
    $
    43,517,000
    
    
    $
    43,325,000
    
    
    
    6.87
    %
    
    
    6.02
    %Fixed rate
    
    $
    25,590,000
    
    
    $
    25,590,000
    
    
    
    7.04
    %
    
    
    7.04
    %
   14




---



##### Table of Contents



Year
    
    Amount2009
    
    $
    13,533,0002010
    
    
    55,574,000Total
    
    $
    69,107,000
 901 Civic Center Disposition
  Tiffany Square Loan Extension
  Executive Center I Loan Modification and Extension
   10. Derivative Financial Instruments
 Derivative
Instruments and Hedging Activities,
   15




---



##### Table of Contents



Notional Amount
    
    Index
    
    Rate
    
    Fair Value
    
    Instrument
    
    Maturity$9,837,000
    
    LIBOR
    
    3.33%
    
    $(112,000)
    
    Swap
    
    05/12/2009
  11. Noncontrolling Interests
  Entity
    
    Date Acquired
    
    
    Noncontrolling InterestsNNN Enterprise Way, LLC
    
    
    05/07/04
    
    
    
    26.7
    %NNN 901
Civic Center, LLC
    
    
    04/24/06
    
    
    
    3.1
    %
 12. 2003 Value Fund, LLC Unit Holders Deficit
      16




---



##### Table of Contents



13. Related Party Transactions
 The Management Agreement
   Property Management Fees
  Real Estate Acquisition Fees
  Real Estate Disposition Fees
  Leasing Commissions
  Accounting Fees
  Construction Management Fees
   17




---



##### Table of Contents



Loan Fees
   Related Party Accounts Receivable/Payable
    14. Commitments and Contingencies
 Litigation
  Environmental Matters
  15. Concentration of Credit Risk
   18




---



##### Table of Contents



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
 16. Discontinued Operations  Properties Held for Sale
  Date DesignatedProperty
    
    Date Acquired
    
    
    for Sale
    
    
    Date Sold901 Civic Center
    
    
    04/24/2006
    
    
    
    09/26/2008
    
    
    
    7/17/2009The Sevens Building
    
    
    10/25/2007
    
    
    
    10/10/2008
    
    
    
    N/ATiffany Square
    
    
    11/15/2006
    
    
    
    10/14/2008
    
    
    
    N/AExecutive Center I
    
    
    12/30/2003
    
    
    
    02/27/2009
    
    
    
    N/A
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Rental revenue
    
    $
    2,164,000
    
    
    $
    2,257,000
    
    
    $
    4,306,000
    
    
    $
    4,420,000Rental expense (including
general, administrative,
depreciation and amortization
expense)
    
    
    1,272,000
    
    
    
    2,491,000
    
    
    
    2,802,000
    
    
    
    4,949,000Real estate related impairments
    
    
    2,800,000
    
    
    
    
    
    
    
    3,300,000
    
    
    
    Loss before other expense
    
    
    (1,908,000
    )
    
    
    (234,000
    )
    
    
    (1,796,000
    )
    
    
    (529,000
    )Interest expense (including
amortization of deferred
financing costs)
    
    
    (1,125,000
    )
    
    
    (1,009,000
    )
    
    
    (1,984,000
    )
    
    
    (2,063,000
    )Other income
    
    
    
    
    
    
    8,000
    
    
    
    
    
    
    
    26,000Loss from discontinued operations
    
    
    (3,033,000
    )
    
    
    (1,235,000
    )
    
    
    (3,780,000
    )
    
    
    (2,566,000
    )Income (loss) from discontinued
operations attributable to
noncontrolling interests
    
    
    4,000
    
    
    
    (10,000
    )
    
    
    6,000
    
    
    
    (21,000
    )Loss from discontinued operations
attributable to NNN 2003 Value
Fund, LLC
    
    $
    (3,037,000
    )
    
    $
    (1,225,000
    )
    
    $
    (3,786,000
    )
    
    $
    (2,545,000
    )
  19




---



##### Table of Contents



June 30, 2009
    
    
    December 31, 2008Land, buildings, tenant improvements, and other tenant related
assets, net of accumulated depreciation of $3,252,000 and
$3,216,000, as of June 30, 2009 and December 31, 2008 respectively
    
    $
    38,133,000
    
    
    $
    41,002,000Identified intangible assets, net of accumulated amortization of
$3,128,000 and $3,070,000 as of June 30, 2009 and
December 31, 2008, respectively
    
    
    4,550,000
    
    
    
    4,752,000Lease inducements, net of accumulated amortization of $306,000 and
$94,000 as of June 30, 2009 and December 31, 2008, respectively
    
    
    341,000
    
    
    
    535,000Leasing commissions, net of accumulated amortization of $283,000 and
$282,000 as of June 30, 2009 and December 31, 2008, respectively
    
    
    1,279,000
    
    
    
    1,256,000Loan fees, net of accumulated amortization of $1,156,000 and $750,000
as of June 30, 2009 and December 31, 2008, respectively
    
    
    96,000
    
    
    
    478,000Other assets
    
    
    116,000
    
    
    
    2,000Total other assets
    
    
    6,382,000
    
    
    
    7,023,000Total Assets
    
    $
    44,515,000
    
    
    $
    48,025,000Mortgage loans payable
    
    $
    47,310,000
    
    
    $
    47,118,000Security deposits, prepaid rent and other liabilities
    
    
    562,000
    
    
    
    467,000Total Liabilities
    
    $
    47,872,000
    
    
    $
    47,585,000Noncontrolling interest deficit
    
    $
    (51,000
    )
    
    $
    (57,000
    )
 
 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
   20




---



##### Table of Contents



Overview and Background
      Business Strategy
  Acquisitions and Dispositions
   21




---



##### Table of Contents



Critical Accounting Policies
 Form 10-K,
 Factors Which May Influence Results of Operations
  Rental Revenue
  Scheduled Lease Expirations
  Sarbanes-Oxley Act
    22




---



##### Table of Contents



Results of Operations
  Comparison of the Three and Six Months Ended June 30, 2009 and 2008
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    Change
    
    
    June 30,
    
    
    Change2009
    
    
    2008
    
    
    $
    
    
    %
    
    
    2009
    
    
    2008
    
    
    $
    
    
    %Revenues:Rental revenue
    
    $
    612,000
    
    
    $
    772,000
    
    
    $
    (160,000
    )
    
    
    (20.7
    %)
    
    $
    1,212,000
    
    
    $
    1,540,000
    
    
    $
    (328,000
    )
    
    
    (21.3
    %)Expenses:Rental expense
    
    
    244,000
    
    
    
    232,000
    
    
    
    12,000
    
    
    
    5.2
    %
    
    
    464,000
    
    
    
    461,000
    
    
    
    3,000
    
    
    
    0.7
    %General and administrative
    
    
    65,000
    
    
    
    158,000
    
    
    
    (93,000
    )
    
    
    (58.9
    %)
    
    
    368,000
    
    
    
    539,000
    
    
    
    (171,000
    )
    
    
    (31.7
    %)Depreciation and amortization
    
    
    273,000
    
    
    
    420,000
    
    
    
    (147,000
    )
    
    
    (35.0
    %)
    
    
    547,000
    
    
    
    840,000
    
    
    
    (293,000
    )
    
    
    (34.9
    %)582,000
    
    
    
    810,000
    
    
    
    (228,000
    )
    
    
    (28.1
    %)
    
    
    1,379,000
    
    
    
    1,840,000
    
    
    
    (461,000
    )
    
    
    (25.1
    %)Gain (loss) before other income
(expense) and discontinued
operations
    
    
    30,000
    
    
    
    (38,000
    )
    
    
    68,000
    
    
    
    178.9
    %
    
    
    (167,000
    )
    
    
    (300,000
    )
    
    
    133,000
    
    
    
    44.3
    %Other income (expense):Interest expense (including
amortization of deferred
financing costs)
    
    
    (432,000
    )
    
    
    (460,000
    )
    
    
    28,000
    
    
    
    (6.1
    %)
    
    
    (860,000
    )
    
    
    (860,000
    )
    
    
    
    
    
    
    
    %Interest and dividend income
    
    
    12,000
    
    
    
    62,000
    
    
    
    (50,000
    )
    
    
    (80.6
    %)
    
    
    24,000
    
    
    
    157,000
    
    
    
    (133,000
    )
    
    
    (84.7
    %)Other-than-temporary impairment
of marketable equity securities
    
    
    
    
    
    
    (110,000
    )
    
    
    110,000
    
    
    
    (100.0
    %)
    
    
    
    
    
    
    (793,000
    )
    
    
    793,000
    
    
    
    (100.0
    %)Equity (loss) of
unconsolidated real estate
    
    
    (1,525,000
    )
    
    
    (643,000
    )
    
    
    (882,000
    )
    
    
    137.2
    %
    
    
    (2,565,000
    )
    
    
    (631,000
    )
    
    
    (1,934,000
    )
    
    
    306.5
    %Other (expense) income
    
    
    (3,000
    )
    
    
    (24,000
    )
    
    
    21,000
    
    
    
    (87.5
    %)
    
    
    (40,000
    )
    
    
    (14,000
    )
    
    
    (26,000
    )
    
    
    185.7
    %Loss from continuing operations
    
    
    (1,918,000
    )
    
    
    (1,213,000
    )
    
    
    (705,000
    )
    
    
    (58.1
    %)
    
    
    (3,608,000
    )
    
    
    (2,441,000
    )
    
    
    (1,167,000
    )
    
    
    (47.8
    %)Discontinued operations:Loss from discontinued operations
    
    
    (3,033,000
    )
    
    
    (1,235,000
    )
    
    
    (1,798,000
    )
    
    
    (145.6
    %)
    
    
    (3,780,000
    )
    
    
    (2,566,000
    )
    
    
    (1,214,000
    )
    
    
    (47.3
    %)Consolidated net loss
    
    
    (4,951,000
    )
    
    
    (2,448,000
    )
    
    
    (2,503,000
    )
    
    
    (102.2
    %)
    
    
    (7,388,000
    )
    
    
    (5,007,000
    )
    
    
    (2,381,000
    )
    
    
    (47.6
    %)
  23




---



##### Table of Contents



Rental Revenue
   Rental Expense
   General and Administrative Expense
   Depreciation and Amortization Expense
    24




---



##### Table of Contents



Interest Expense
   Interest and Dividend Income
   Other-than-temporary Impairment of Marketable Equity Securities
  Equity in (Loss) Earnings of Unconsolidated Real Estate
   Other (Expense) Income
    25




---



##### Table of Contents



Loss from Discontinued Operations
   Consolidated Net Loss
    26




---



##### Table of Contents



Liquidity and Capital Resources
   Current Sources of Capital and Liquidity
   Planned Sales and Valuations of Real Estate Investments
 Accounting for Impairment or Disposal of
Long-Lived Assets
  Cash Flows
   27




---



##### Table of Contents



Factors which may Influence Future Sources of Capital and Liquidity
 Debt Financing
    Mortgage
    
    
    Weighted AverageLoans Payable
    
    
    Interest RateJune 30, 2009
    
    
    December 31, 2008
    
    
    June 30, 2009
    
    
    December 31, 2008Mortgage loans payable
    
    $
    69,107,000
    

    
    $
    68,915,000
    

    
    
    6.93
    %
    
    
    6.39
    %Variable rate and fixed rate:Variable rate(1)
    
    $
    43,517,000
    

    
    $
    43,325,000
    

    
    
    6.87
    %
    
    
    6.02
    %Fixed rate
    
    $
    25,590,000
    

    
    $
    25,590,000
    

    
    
    7.04
    %
    
    
    7.04
    %
  Weighted-Average
    
    
    VariablePrincipal
    
    
    
    
    
    
    Interest
    
    
    or FixedProperty
    
    Outstanding
    
    
    Maturity Date
    
    
    Rate
    
    
    Interest RateConsolidated Properties:Executive Center I
    
    $
    4,590,000
    
    
    
    10/01/2009
    
    
    
    12.00
    %
    
    Fixed901 Civic Center
    
    
    8,943,000
    
    
    
    08/10/2009
    
    
    
    4.55
    %
    
    VariableTiffany Square
    
    
    12,395,000
    
    
    
    02/15/2010
    
    
    
    8.00
    %
    
    VariableFour Resource Square
    
    
    21,797,000
    
    
    
    03/07/2010
    
    
    
    7.25
    %
    
    VariableThe Sevens
Building(1)
    
    
    21,382,000
    
    
    
    10/31/2010
    
    
    
    5.89
    %
    
    Fixed & VariableTotal consolidated mortgage loans payable
    
    $
    69,107,000Unconsolidated Properties:Executive Center II & III(2)
    
    $
    14,590,000
    
    
    
    12/28/2009
    
    
    
    3.23
    %
    
    VariableEnterprise Technology Center
    
    
    33,161,000
    
    
    
    05/11/2011
    
    
    
    6.44
    %
    
    FixedChase Tower
    
    
    68,031,000
    
    
    
    06/30/2009
    
    
    
    3.84
    %
    
    VariableTotal unconsolidated mortgage loans payable
    
    $
    115,782,000
 
  28




---



##### Table of Contents



(1)
    
    Mortgage loans payable include $21,000,000 with a fixed interest rate of 5.95% and $382,000
with a variable interest rate of 2.57% as of June 30, 2009.(2)
    
    Excludes other unsecured notes payable of $2,650,000 as of June 30, 2009. $1,205,000 is due
to TIC ownership together with $1,445,000 due to a related party. Notes are due January 1,
2010 and are at 8.00% interest.   Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More than1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 Years(2009)
    
    
    (2010-2011)
    
    
    (2012-2013)
    
    
    (After 2013)
    
    
    TotalPrincipal payments  variable rate debt
    
    $
    8,943,000
    
    
    $
    34,574,000
    
    
    $
    
    
    
    $
    
    
    
    $
    43,517,000Principal payments  fixed rate debt
    
    
    4,590,000
    
    
    
    21,000,000
    
    
    
    
    
    
    
    
    
    
    
    25,590,000Interest payments  variable rate debt (based on
rate in effect as of June 30, 2009)
    
    
    1,338,000
    
    
    
    425,000
    
    
    
    
    
    
    
    
    
    
    
    1,763,000Interest payments  fixed rate debt
    
    
    767,000
    
    
    
    1,041,000
    
    
    
    
    
    
    
    
    
    
    
    1,808,000Tenant improvement and lease commission obligations
    
    
    67,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,000$
    15,705,000
    
    
    $
    57,040,000
    
    
    $
    
    
    
    $
    
    
    
    $
    72,745,000
  Other Liquidity Needs
   Capital Resources
 General
   29




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Inflation
  Recently Issued Accounting Pronouncements
 Fair Value Measurements, Effective Date of FASB Statement No. 157
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  An Amendment of ARB No. 51,
 Disclosures about Derivative Instruments and
Hedging Activities
 Interim Disclosures about Fair
Value of Financial Instruments,
 Subsequent Events,
 Recognition and Presentation of
Other-Than-Temporary Impairments
 Amendments to FASB Interpretation
No. 46(R)
  30




---



##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
     Expected Maturity Date2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    Total
    
    
    Fair ValueVariable rate mortgage loans payable (1)
    
    $
    8,943,000
    
    
    $
    34,574,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    43,517,000
    
    
    $
    43,517,000Weighted average interest rate on maturing
variable rate debt (based on rates in effect as
of June 30, 2009)
    
    
    4.55
    %
    
    
    5.89
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    6.87
    %
    
    
    Fixed rate mortgage loans payable
    
    $
    4,590,000
    
    
    $
    21,000,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    25,590,000
    
    
    $
    25,590,000Weighted average interest rate on maturing fixed
rate debt
    
    
    12.00
    %
    
    
    5.95
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    7.04
    %
    
    
    
    
 Item 4.
    
    Controls and Procedures.
   31




---



##### Table of Contents



Item 4T.
    
    Controls and Procedures.
 Evaluation of disclosure controls and procedures.
  Changes in internal control over financial reporting.
 
 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 pay the outstanding balances and all accrued interest on our mortgage loans
that mature within the next 12 months, the respective 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 operating activities and cash flow.
   32




---



##### Table of Contents



Our mortgage loan payable on our Executive Center I property matures on October 1, 2009 and if we
are unable to sell our Executive Center I property before the mortgage loan comes due, the lender
may declare us in default of the loan and exercise their remedies under the loan agreements,
including foreclosure on the property which would have a material adverse effect on our operations
and liquidity.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3.
    
    Defaults Upon Senior Securities.
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders.
  
 Item 5.
    
    Other Information.
  
 Item 6.
    
    Exhibits.
   33




---



##### Table of Contents



SIGNATURES
  NNN 2003 Value Fund, LLC
(Registrant)August 14, 2009
    
    
    
    /s/ Kent W. PetersDate
    
    
    
    Kent W. PetersChief Executive Officer(principal executive officer)August 14, 2009
    
    
    
    /s/ Michael J. RispoliDate
    
    
    
    Michael J. RispoliChief Financial OfficerGrubb & Ellis Realty Investors, LLC,the Manager of NNN 2003 Value Fund, LLC(principal financial officer)
  34




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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
    
    
    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 15,
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 15,
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 15,
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
    
    
    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).10.11
    
    
    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 7, 2009 and incorporated herein by reference).10.12
    
    

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).10.13
    
    
    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).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.  35