##### 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
 March 31, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE  ACT OF 1934
 
 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
(Zip Code)(Address of principal executive offices)
 (714) 667-8252
 N/A
  þ o
  o o
  Large accelerated filer
    
    o
    
    Accelerated filer
    
    oNon-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 March 31, 2009 and December 31, 2008
    
    
    2Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three
Months Ended March 31, 2009 and 2008
    
    
    3Unaudited Condensed Consolidated Statement of (Deficit) Equity for the Three Months Ended March
31, 2009
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31,
2009 and 2008
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4.
    
    Controls and Procedures
    
    
    32Item 4T.
    
    Controls and Procedures
    
    
    32PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    34Item 1A.
    
    Risk Factors
    
    
    34Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    34Item 3.
    
    Defaults Upon Senior Securities
    
    
    34Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    34Item 5.
    
    Other Information
    
    
    34Item 6.
    
    Exhibits
    
    
    34Signatures
    
    
    35EX-10.6EX-10.7EX-10.8EX-31.1EX-31.2EX-32.1EX-32.2




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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, 2009
    
    
    December 31, 2008(Unaudited)ASSETSReal estate investments:Operating property, net
    
    $
    13,802,000
    
    
    $
    13,980,000Properties held for sale, net
    
    
    39,096,000
    
    
    
    39,548,000Investments in unconsolidated real estate
    
    
    3,004,000
    
    
    
    4,034,00055,902,000
    
    
    
    57,562,000Cash and cash equivalents
    
    
    921,000
    
    
    
    1,459,000Accounts receivable, net
    
    
    392,000
    
    
    
    369,000Accounts and loans receivable due from related parties
    
    
    783,000
    
    
    
    764,000Restricted cash
    
    
    1,788,000
    
    
    
    1,788,000Identified intangible assets, net
    
    
    996,000
    
    
    
    1,073,000Other assets related to properties held for sale
    
    
    8,339,000
    
    
    
    8,477,000Other assets, net
    
    
    681,000
    
    
    
    723,000Total assets
    
    $
    69,802,000
    
    
    $
    72,215,000LIABILITIES AND (DEFICIT) EQUITYMortgage loans payable
    
    $
    21,797,000
    
    
    $
    21,797,000Mortgage loans payable secured by properties held for sale
    
    
    47,118,000
    
    
    
    47,118,000Accounts payable and accrued liabilities
    
    
    2,147,000
    
    
    
    2,098,000Accounts and loans payable due to related parties
    
    
    193,000
    
    
    
    227,000Acquired lease liabilities, net
    
    
    114,000
    
    
    
    129,000Other liabilities related to properties held for sale, net
    
    
    421,000
    
    
    
    467,000Security deposits, prepaid rent and other liabilities
    
    
    434,000
    
    
    
    364,000Total liabilities
    
    
    72,224,000
    
    
    
    72,200,000Commitments and contingencies (Note 14)(Deficit) equity:NNN 2003 Value Fund, LLC unit holders deficit
    
    
    (2,406,000
    )
    
    
    (279,000
    )Noncontrolling interest (deficit) equity
    
    
    (16,000
    )
    
    
    294,000Total (deficit) equity
    
    
    (2,422,000
    )
    
    
    15,000Total liabilities and (deficit) equity
    
    $
    69,802,000
    
    
    $
    72,215,000
  2




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NNN 2003 VALUE FUND, LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 AND COMPREHENSIVE LOSS
 (Unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008Revenue:Rental revenue
    
    $
    600,000
    
    
    $
    768,000Expense:Rental expense
    
    
    220,000
    
    
    
    229,000General and administrative
    
    
    303,000
    
    
    
    381,000Depreciation and amortization
    
    
    274,000
    
    
    
    420,000Total expense
    
    
    797,000
    
    
    
    1,030,000Loss before other income (expense) and discontinued operations
    
    
    (197,000
    )
    
    
    (262,000
    )Other income (expense):Interest expense (including amortization of deferred financing costs)
    
    
    (428,000
    )
    
    
    (400,000
    )Interest and dividend income
    
    
    12,000
    
    
    
    95,000Other-than-temporary impairment of marketable equity securities
    
    
    
    
    
    
    (683,000
    )Equity in earnings (losses) of unconsolidated real estate
    
    
    (1,040,000
    )
    
    
    12,000Other income
    
    
    (37,000
    )
    
    
    10,000Loss from continuing operations
    
    
    (1,690,000
    )
    
    
    (1,228,000
    )Loss from discontinued operations
    
    
    (747,000
    )
    
    
    (1,331,000
    )Consolidated net loss
    
    
    (2,437,000
    )
    
    
    (2,559,000
    )Less (loss) income from continuing operations attributable to
noncontrolling interest
    
    
    (312,000
    )
    
    
    2,000Less income (loss) from discontinued operations attributable to
noncontrolling interest
    
    
    2,000
    
    
    
    (11,000
    )Loss attributable to noncontrolling interests
    
    
    (310,000
    )
    
    
    (9,000
    )Net loss attributable to NNN 2003 Value Fund, LLC
    
    $
    (2,127,000
    )
    
    $
    (2,550,000
    )Comprehensive loss:Net loss
    
    $
    (2,127,000
    )
    
    $
    (2,550,000
    )Recognition of previously unrealized loss on marketable equity securities
    
    
    
    
    
    
    646,000Unrealized gain on marketable equity securities arising during the period
    
    
    
    
    
    
    6,000Comprehensive loss attributable to NNN 2003 Value Fund, LLC
    
    $
    (2,127,000
    )
    
    $
    (1,898,000
    )
  3




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NNN 2003 VALUE FUND, LLC
 
 CONDENSED CONSOLIDATED STATEMENT OF (DEFICIT) EQUITY
For the Three Months Ended March 31, 2009
(Unaudited)
 NNN 2003 ValueNumber
    
    
    
    
    
    
    Fund, LLC
    
    
    Noncontrollingof Units
    
    
    Total
    
    
    Deficit
    
    
    InterestBALANCE  December 31, 2008
    
    
    9,970
    
    
    $
    15,000
    
    
    $
    (279,000
    )
    
    $
    294,000Net loss
    
    
    
    
    
    
    (2,437,000
    )
    
    
    (2,127,000
    )
    
    
    (310,000
    )BALANCE  March 31, 2009
    
    
    9,970
    
    
    $
    (2,422,000
    )
    
    $
    (2,406,000
    )
    
    $
    (16,000
    )
  4




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NNN 2003 VALUE FUND, LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2009 and 2008
(Unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Consolidated net loss
    
    $
    (2,437,000
    )
    
    $
    (2,559,000
    )Adjustments to reconcile net loss to net cash used in operating activities:Real estate related impairments on consolidated properties
    
    
    500,000
    
    
    
    Other than temporary impairment of marketable equity securities
    
    
    
    
    
    
    683,000Depreciation and amortization (including deferred financing costs,
deferred rent and above/below market leases)
    
    
    447,000
    
    
    
    1,223,000Equity in loss (earnings) of unconsolidated real estate
    
    
    1,040,000
    
    
    
    (12,000
    )Allowance for doubtful accounts
    
    
    100,000
    
    
    
    112,000Change in operating assets and liabilities:Accounts receivable
    
    
    (142,000
    )
    
    
    (428,000
    )Other assets
    
    
    23,000
    
    
    
    21,000Restricted cash
    
    
    (157,000
    )
    
    
    (201,000
    )Accounts payable and accrued liabilities
    
    
    15,000
    
    
    
    5,000Security deposits, prepaid rent and other liabilities
    
    
    24,000
    
    
    
    (27,000
    )Net cash used in operating activities
    
    
    (587,000
    )
    
    
    (1,183,000
    )CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (98,000
    )
    
    
    (319,000
    )Investment in unconsolidated real estate
    
    
    (10,000
    )
    
    
    Net cash used in investing activities
    
    
    (108,000
    )
    
    
    (319,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings on mortgage loans payable and other debt
    
    
    
    
    
    
    560,000Restricted cash
    
    
    157,000
    
    
    
    226,000Noncontrolling interest distributions
    
    
    
    
    
    
    (1,000
    )Payment of deferred financing costs
    
    
    
    
    
    
    (13,000
    )Distributions
    
    
    
    
    
    
    (872,000
    )Net cash provided by (used in) financing activities
    
    
    157,000
    
    
    
    (100,000
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (538,000
    )
    
    
    (1,602,000
    )CASH AND CASH EQUIVALENTS  beginning of period
    
    
    1,459,000
    
    
    
    8,208,000CASH AND CASH EQUIVALENTS  end of period
    
    $
    921,000
    
    
    $
    6,606,000SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for:Interest
    
    $
    1,284,000
    
    
    $
    1,346,000Income taxes
    
    $
    4,000
    
    
    $
    9,000NONCASH INVESTING AND FINANCING ACTIVITIES:Accrual for tenant improvements and capital expenditures
    
    $
    95,000
    
    
    $
    74,000
  5




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the Three Months Ended March 31, 2009 and 2008
 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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NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)Continued
  Interim Financial Data
  Principles of Consolidation and Basis of Presentation
 Consolidation of Variable Interest Entities,
  Use of Estimates
  Investment in Marketable Equity Securities
  7




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NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
 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.
  Accounting for Impairment or Disposal of Long-Lived Assets,
 Three MonthsEndedLine Item in Statement of Operations
    
    March 31, 2009Equity in losses of unconsolidated real estate (investments in unconsolidated real estate)
    
    $
    1,100,000Loss from discontinued operations (investments in properties held for sale)
    
    
    500,000Total real estate related impairments
    
    $
    1,600,000
  Operating Property
  8




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NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
  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;
    
    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
 9




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NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
   Quoted Prices inActive Markets
    
    
    Significant Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    Unobservable
    
    
    TotalAssets
    
    
    Inputs
    
    
    Inputs
    
    
    ImpairmentAssets
    
    March 31, 2009
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    LossesOperating property
    
    $
    13,802,000
    
    
    $
    
    
    
    $
    
    
    
    $
    13,802,000
    
    
    $
    Properties held for sale
    
    $
    39,096,000
    
    
    $
    
    
    
    $
    
    
    
    $
    39,096,000
    
    
    $
    (500,000
    )Investments in
unconsolidated real
estate
    
    $
    3,004,000
    
    
    $
    
    
    
    $
    
    
    
    $
    3,004,000
    
    
    $
    (1,100,000
    )
  Quoted Prices inActive Markets
    
    
    Significant Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsLiabilities
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalInterest rate swap
    
    $
    
    
    
    $
    23,000
    
    
    $
    
    
    
    $
    23,000
  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
 10




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NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
  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 March 31, 2008
    
    Reported
    
    
    Adjustment
    
    
    As AdjustedMinority interest in losses
    
    $
    9,000
    
    
    $
    (9,000
    )
    
    $
    Net loss / consolidated net loss
    
    $
    (2,550,000
    )
    
    $
    (9,000
    )
    
    $
    (2,559,000
    )Loss attributable to noncontrolling interests
    
    $
    
    
    
    $
    (9,000
    )
    
    $
    (9,000
    )
 Recently Issued Accounting Pronouncements
 Business Combinations
 Disclosures about Derivative Instruments and
Hedging Activities
 3.   Real Estate Investment  Operating Property
  March 31, 2009
    
    
    December 31, 2008Buildings and tenant improvements
    
    $
    14,612,000
    
    
    $
    14,613,000Land
    
    
    1,176,000
    
    
    
    1,176,00015,788,000
    
    
    
    15,789,000Less: accumulated depreciation
    
    
    (1,986,000
    )
    
    
    (1,809,000
    )$
    13,802,000
    
    
    $
    13,980,000
  11




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NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
 4.   Real Estate Investments  Properties Held for Sale
  March 31, 2009
    
    
    December 31, 2008Buildings and tenant improvements
    
    $
    34,348,000
    
    
    $
    34,535,000Land
    
    
    8,024,000
    
    
    
    8,229,00042,372,000
    
    
    
    42,764,000Less: accumulated depreciation
    
    
    (3,276,000
    )
    
    
    (3,216,000
    )$
    39,096,000
    
    
    $
    39,548,000
   5.   Real Estate Investments  Unconsolidated Real Estate
  Description
    
    Location
    
    March 31, 2009
    
    
    December 31, 2008Enterprise Technology Center
    
    Scotts Valley, CA
    
    $
    345,000
    
    
    $
    1,312,000Chase Tower
    
    Austin, TX
    
    
    1,034,000
    
    
    
    861,000Executive Center II & III
    
    Dallas, TX
    
    
    1,625,000
    
    
    
    1,861,000$
    3,004,000
    
    
    $
    4,034,000
  March 31, 2009
    
    
    December 31, 2008Balance Sheet Data:Assets (primarily real estate)
    
    $
    146,823,000
    
    
    $
    162,436,000Mortgage loans and other debt payable
    
    $
    117,861,000
    
    
    $
    118,719,000Other liabilities
    
    
    14,869,000
    
    
    
    16,102,000Equity
    
    
    14,093,000
    
    
    
    27,615,000Total liabilities and equity
    
    $
    146,823,000
    
    
    $
    162,436,000Our share of equity
    
    $
    3,004,000
    
    
    $
    4,034,000
 12




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NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
  Three Months EndedMarch 31,2009
    
    
    2008Operating Data:Revenues
    
    $
    5,955,000
    
    
    $
    6,363,000Rental and other expenses (including real estate related
impairment charges of $13,400,000)
    
    
    19,543,000
    
    
    
    6,307,000Net (loss) income
    
    $
    (13,588,000
    )
    
    $
    56,000Our equity in (loss) earnings of unconsolidated real estate
    
    $
    (1,040,000
    )
    
    $
    12,000
   Description
    
    March 31, 2009
    
    
    December 31, 2008Enterprise Technology Center
    
    $
    33,348,000
    
    
    $
    33,544,000Chase Tower
    
    
    67,182,000
    
    
    
    68,031,000Executive Center II & III
    
    
    17,331,000
    
    
    
    17,144,000$
    117,861,000
    
    
    $
    118,719,000
   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
  13




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NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
 6.   Marketable Equity Securities
  7.   Identified Intangible Assets
  March 31, 2009
    
    
    December 31, 2008In-place leases and tenant relationships,
net of accumulated amortization of
$1,099,000 and $1,022,000 as of March 31,
2009 and December 31, 2008, respectively
(with a weighted average life of 24
months and 69 months for in-place leases
and tenant relationships, respectively,
as of March 31, 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)
    
    $
    996,000
    
    
    $
    1,073,000
   8.  Other Assets
  March 31, 2009
    
    
    December 31, 2008Deferred rent receivable
    
    $
    297,000
    
    
    $
    294,000Deferred financing costs, net of
accumulated amortization of
$273,000 and $240,000 as of March
31, 2009 and December 31, 2008,
respectively
    
    
    120,000
    
    
    
    153,000Leasing commissions, net of
accumulated amortization of
$130,000 and $110,000 as of March
31, 2009 and December 31, 2008,
respectively
    
    
    262,000
    
    
    
    276,000Prepaid expenses, deposits and other
    
    
    2,000
    
    
    
    $
    681,000
    
    
    $
    723,000
 9.   Mortgage Loans Payable and Other Debt
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NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
  Total Mortgage
    
    
    Weighted AverageLoans Payable
    
    
    Interest RateMarch 31, 2009
    
    
    December 31, 2008
    
    
    March 31, 2009
    
    
    December 31, 2008Mortgage loans payable
    
    $
    68,915,000
    
    
    $
    68,915,000
    
    
    
    6.41
    %
    
    
    6.39
    %Variable rate and fixed rate:Variable rate(1)
    
    $
    43,325,000
    
    
    $
    43,325,000
    
    
    
    6.04
    %
    
    
    6.02
    %Fixed rate
    
    $
    25,590,000
    
    
    $
    25,590,000
    
    
    
    7.04
    %
    
    
    7.04
    %
 
 (1)
    
    Includes variable rate mortgage loans payable at one of our properties
with a fixed rate interest rate swap, thereby effectively fixing the
interest rate on those mortgage loans payable at a weighted average
fixed rate of 6.52% as of March 31, 2009.    Year
    
    Amount2009
    
    $
    13,533,0002010
    
    
    55,382,000Total
    
    $
    68,915,000
 Tiffany Square Loan Extension
  Executive Center I Loan Modification and Extension
  15




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NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
   901 Civic Center Drive Building Loan Extension
 Senior Loan
  Mezzanine Loan
  10. Derivative Financial Instruments
 Derivative
Instruments and Hedging Activities,
   16




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
   Notional Amount
    
    Index
    
    Rate
    
    
    Fair Value
    
    
    Instrument
    
    
    Maturity$        9,837,000
    
    LIBOR
    
    
    3.33
    %
    
    $
    
    (23,000
    )
    Swap
    
    
    05/12/2009
  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
    %901 Civic Center
    
    
    04/24/06
    
    
    
    3.1
    %
 12. 2003 Value Fund, LLC Unit Holders Deficit
     17




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
    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
  18




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
  Loan Fees
   Related Party Accounts Receivable/Payable
    14. Commitments and Contingencies
 Litigation
  Environmental Matters
  15. Concentration of Credit Risk
  19




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
   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
    
    
    
    N/AThe 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 EndedMarch 31,2009
    
    
    2008Rental revenue
    
    $
    2,142,000
    
    
    $
    2,163,000Rental expense (including general, administrative, depreciation and amortization
expense)
    
    
    1,530,000
    
    
    
    2,458,000Real estate related impairments
    
    
    500,000
    
    
    
    Income (loss) before other income (expense)
    
    
    112,000
    
    
    
    (295,000
    )Interest expense (including amortization of deferred financing costs)
    
    
    (859,000
    )
    
    
    (1,054,000
    )Other income
    
    
    
    
    
    
    18,000Loss from discontinued operations
    
    
    (747,000
    )
    
    
    (1,331,000
    )Income (loss) from discontinued operations attributable to noncontrolling interests
    
    
    2,000
    
    
    
    (11,000
    )Loss from discontinued operations attributable to NNN 2003 Value Fund, LLC
    
    $
    (749,000
    )
    
    $
    (1,320,000
 20




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##### Table of Contents



NNN 2003 VALUE FUND, LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Continued
  March 31, 2009
    
    
    December 31, 2008Land, buildings and tenant improvements, net of
accumulated depreciation of $3,276,000 and
$3,216,000, as of March 31, 2009 and December 31,
2008 respectively
    
    $
    39,096,000
    
    
    $
    39,548,000Identified intangible assets, net of accumulated
amortization of $3,117,000 and $3,070,000 as of
March 31, 2009 and December 31, 2008, respectively
    
    
    4,686,000
    
    
    
    4,752,000Lease inducements, net of accumulated amortization
of $234,000 and $94,000 as of March 31, 2009 and
December 31, 2008, respectively
    
    
    907,000
    
    
    
    1,029,000Leasing commissions, net of accumulated amortization
of $283,000 and $282,000 as of March 31, 2009 and
December 31, 2008, respectively
    
    
    1,265,000
    
    
    
    1,256,000Loan fees, net of accumulated amortization of
$863,000 and $750,000 as of March 31, 2009 and
December 31, 2008, respectively
    
    
    366,000
    
    
    
    478,000Other assets
    
    
    1,115,000
    
    
    
    962,000Total other assets
    
    
    8,339,000
    
    
    
    8,477,000Total Assets
    
    $
    47,435,000
    
    
    $
    48,025,000Mortgage loans payable
    
    $
    47,118,000
    
    
    $
    47,118,000Security deposits, prepaid rent and other liabilities
    
    
    421,000
    
    
    
    467,000Total Liabilities
    
    $
    47,539,000
    
    
    $
    47,585,000Noncontrolling interest deficit
    
    $
    (55,000
    )
    
    $
    (57,000
    )
 21




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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
   22




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##### Table of Contents



Business Strategy
  Acquisitions and Dispositions
  Critical Accounting Policies
  Factors Which May Influence Results of Operations
  Rental Revenue
  23




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##### Table of Contents



Scheduled Lease Expirations
  Sarbanes-Oxley Act
   Results of Operations
  Comparison of the Three Months Ended March 31, 2009 and 2008
 Three Months EndedMarch 31,
    
    
    Change2009
    
    
    2008
    
    
    $
    
    
    %Revenue:Rental revenue
    
    $
    600,000
    
    
    $
    768,000
    
    
    $
    (168,000
    )
    
    
    (21.9
    )%Expense:Rental expense
    
    
    220,000
    
    
    
    229,000
    
    
    
    (9,000
    )
    
    
    (3.9
    )%General and administrative
    
    
    303,000
    
    
    
    381,000
    
    
    
    (78,000
    )
    
    
    (20.5
    )%Depreciation and amortization
    
    
    274,000
    
    
    
    420,000
    
    
    
    (146,000
    )
    
    
    (34.8
    )%797,000
    
    
    
    1,030,000
    
    
    
    (233,000
    )
    
    
    (22.6
    )%Loss before other income (expense) and discontinued
operations
    
    
    (197,000
    )
    
    
    (262,000
    )
    
    
    65,000
    
    
    
    24.8
    %Other income (expense):Interest expense (including amortization of deferred

financing costs)
    
    
    (428,000
    )
    
    
    (400,000
    )
    
    
    (28,000
    )
    
    
    (7.0
    )%Interest and dividend income
    
    
    12,000
    
    
    
    95,000
    
    
    
    (83,000
    )
    
    
    (87.4
    )%Other-than-temporary impairment of marketable equity
securities
    
    
    
    
    
    
    (683,000
    )
    
    
    683,000
    
    
    
    100.0
    %
 24




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##### Table of Contents



Three Months EndedMarch 31,
    
    
    Change2009
    
    
    2008
    
    
    $
    
    
    %Equity in (loss) earnings of unconsolidated real estate
    
    
    (1,040,000
    )
    
    
    12,000
    
    
    
    (1,052,000
    )
    
    
    (8,767
    )%Other income
    
    
    (37,000
    )
    
    
    10,000
    
    
    
    (47,000
    )
    
    
    (470.0
    )%Loss from continuing operations
    
    
    (1,690,000
    )
    
    
    (1,228,000
    )
    
    
    (462,000
    )
    
    
    (37.6
    )%Discontinued operations:Loss from discontinued operations
    
    
    (747,000
    )
    
    
    (1,331,000
    )
    
    
    584,000
    
    
    
    43.9
    %Consolidated net loss
    
    
    (2,437,000
    )
    
    
    (2,559,000
    )
    
    
    122,000
    
    
    
    4.8
    %Less (loss) income attributable to noncontrolling
interest
    
    
    (312,000
    )
    
    
    2,000
    
    
    
    (314,000
    )
    
    
    (15,700
    )%Less income (loss) from discontinued operations
attributable to noncontrolling interest
    
    
    2,000
    
    
    
    (11,000
    )
    
    
    13,000
    
    
    
    118.2
    %Loss attributable to noncontrolling interests
    
    
    (310,000
    )
    
    
    (9,000
    )
    
    
    (301,000
    )
    
    
    (3,344
    )%Loss attributable to 2003 Value Fund, LLC
    
    $
    (2,127,000
    )
    
    $
    (2,550,000
    )
    
    $
    423,000
    
    
    
    16.6
    %
  Rental Revenue
  Rental Expense
  General and Administrative Expense
  Depreciation and Amortization Expense
  25




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##### 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
  Loss from Discontinued Operations
  Net Loss
  26




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##### Table of Contents



Liquidity and Capital Resources
 Ability to Continue as a Going Concern
    Current Sources of Capital and Liquidity
    Planned Sales and Valuations of Real Estate Investments
 Accounting for
Impairment or Disposal of Long-Lived Assets
 27




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##### Table of Contents



Cash Flows
    Factors which may Influence Future Sources of Capital and Liquidity
 Debt Financing
    Total MortgageLoans Payable
    
    
    Weighted AverageMarch 31, 2009 and
    
    
    Interest RateDecember 31, 2008
    
    
    March 31, 2009
    
    
    December 31, 2008Mortgage loans payable
    
    $
    68,915,000
    
    
    
    6.41
    %
    
    
    6.39
    %Variable rate and fixed rate:Variable rate(1)
    
    $
    43,325,000
    
    
    
    6.04
    %
    
    
    6.02
    %Fixed rate
    
    $
    25,590,000
    
    
    
    7.04
    %
    
    
    7.04
    %
 
 (1)
    
    Includes variable rate mortgage loans payable at one of our properties
with a fixed rate interest rate swap, thereby effectively fixing the
interest rate on those mortgage loans payable at a weighted average
fixed rate of 6.52% . 28




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##### Table of Contents



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(1)
    
    
    8,943,000
    
    
    
    08/10/2009
    
    
    
    6.52
    %
    
    VariableTiffany Square(2)
    
    
    12,395,000
    
    
    
    02/15/2010
    
    
    
    3.63
    %
    
    VariableFour Resource Square
    
    
    21,797,000
    
    
    
    03/07/2010
    
    
    
    7.25
    %
    
    VariableThe Sevens Building(3)
    
    
    21,190,000
    
    
    
    10/31/2010
    
    
    
    5.92
    %
    
    Fixed & VariableTotal consolidated mortgage loans payable
    
    $
    68,915,000Unconsolidated Properties(4):Executive Center II & III
    
    $
    14,681,000
    
    
    
    12/28/2009
    
    
    
    3.35
    %
    
    VariableEnterprise Technology Center
    
    
    33,348,000
    
    
    
    05/11/2011
    
    
    
    6.44
    %
    
    FixedChase Tower
    
    
    67,182,000
    
    
    
    06/30/2009
    
    
    
    3.95
    %
    
    VariableTotal unconsolidated mortgage loans payable
    
    $
    115,211,000
 
 (1)
    
    Includes variable rate mortgage loans payable with a fixed rate interest
rate swap, thereby effectively fixing the interest rate on those mortgage
loans payable at a weighted average fixed rate of 6.52%.
Effective May 12, 2009, the maturity date of the mortgage loan payable
secured by the 901 Civic Center property was extended for 90 days to
August 10, 2009.(2)
    
    On February 15, 2009, the maturity date of the mortgage loan payable
secured by the Tiffany Square property was extended for 12 months to
February 15, 2010 per the terms of the mortgage loan agreement.(3)
    
    Mortgage loans payable include $21,000,000 with a fixed interest rate of
5.95% and $190,000 with a variable interest rate of 2.78% as of March 31,
2009.(4)
    
    Excludes other unsecured notes payable of $2,650,000 as of March 31, 2009.   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
    
    
    $
    34,382,000
    
    
    $
    
    
    
    $
    
    
    
    $
    43,325,000Principal payments  fixed rate debt
    
    
    4,590,000
    
    
    
    21,000,000
    
    
    
    
    
    
    
    
    
    
    
    25,590,000Interest payments  variable rate debt
(based on rate in effect as of March
31, 2009)
    
    
    1,595,000
    
    
    
    352,000
    
    
    
    
    
    
    
    
    
    
    
    1,947,000Interest payments  fixed rate debt
    
    
    1,219,000
    
    
    
    1,041,000
    
    
    
    
    
    
    
    
    
    
    
    2,260,000Tenant improvement and lease
commission obligations
    
    
    95,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,000$
    16,442,000
    
    
    $
    56,775,000
    
    
    $
    
    
    
    $
    
    
    
    $
    73,217,000
 29




---



##### Table of Contents



Notional Amount
    
    Index
    
    Rate
    
    
    Fair Value
    
    
    Instrument
    
    Maturity$        9,837,000
    
    LIBOR
    
    
    3.33
    %
    
    $
    (23,000
    )
    
    Swap
    
    
    05/12/2009
 Other Liquidity Needs
   Capital Resources
 General
    30




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##### Table of Contents



Off-Balance Sheet Arrangements
  Inflation
  Recently Issued Accounting Pronouncements
 Business Combinations
 Disclosures about Derivative Instruments and
Hedging Activities
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
   31




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##### Table of Contents



Expected Maturity Date2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    Total
    
    
    Fair ValueVariable rate mortgage loans payable(1)(2)
    
    $
    8,943,000
    
    
    $
    34,382,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    43,325,000
    
    
    $
    43,325,000Weighted average interest rate on
maturing variable rate debt (based on
rates in effect as of March 31, 2009)
    
    
    6.52
    %
    
    
    5.92
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    6.04
    %
    
    
    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
    %
    
    
    
 
 (1)
    
    Includes variable rate mortgage loans payable at one of our properties
with a fixed rate interest rate swap, thereby effectively fixing the
interest rate on those mortgage loans payable at a weighted average
fixed rate of 6.52%.(2)
    
    On February 23, 2009, the maturity date of the mortgage loan payable
secured by the Tiffany Square property was extended for 12 months to
February 15, 2010 per the terms of the mortgage loan agreement.    
 Item 4. Controls and Procedures.
  
 Item 4T. Controls and Procedures.
 Evaluation of disclosure controls and procedures.
  32




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##### Table of Contents



Changes in internal control over financial reporting.
 33




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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.
  
 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.
  34




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##### Table of Contents



SIGNATURES
  NNN 2003 Value Fund, LLC(Registrant)May 15, 2009
    
    /s/ Kent W. PetersDate
    
    Kent W. PetersChief Executive Officer(principal executive officer)May 15, 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)
 35




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##### Table of Contents



EXHIBIT INDEX
   ExhibitNumber
    
    Description10.1
    
    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, 2009.10.7*
    
    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, 2009.10.8*
    
    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, 2009.31.1*
    
    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 36