##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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



| | FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011
| | ---------------------------------------------



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM             TO
|- | --------------------------------------------------------------------------------------------------------------------------------------

COMMISSION FILE NUMBER:
000-51609

Inland American Real Estate Trust, Inc.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Maryland                                                       |  | 34-2019608                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|2901 Butterfield Road, Oak Brook, Illinois                     |  | 60523                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

630-218-8000

(Registrants telephone number, including area code)





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.

Yes X     No  ̈

Indicate by
check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes
 ̈     No  ̈

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



|                           |  |                      |  |                          |  |                             
|-------------------------- |  | -------------------- |  | ------------------------ |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated filer   ̈ |  | Non-accelerated filer  X |  | Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ̈     No X

As of
May 4, 2011, there were 854,707,317 shares of the registrants common stock outstanding.









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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

TABLE OF CONTENTS



|         |  |                                                                                                                                      |  |      |    | 
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|         |  | Part I - Financial Information                                                                                                       |  | Page |   
|Item 1.  |  | Financial Statements                                                                                                                 |  |      |    | 
|         |  |                                                                                                                                     
|         |  | Consolidated Balance Sheets at March 31, 2011 (unaudited) and December 31, 2010                                                      |  |      | 1  | 
|         |  |                                                                                                                                     
|         |  | Consolidated Statements of Operations and Other Comprehensive Income for the three months ended March
 31, 2011 and 2010 (unaudited) |  |      | 2  | 
|         |  |                                                                                                                                     
|         |  | Consolidated Statement of Changes in Equity for the three months ended March 31, 2011 and 2010 (unaudited)                           |  |      | 3  | 
|         |  |                                                                                                                                     
|         |  | Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010 (unaudited)                                 |  |      | 5  | 
|         |  |                                                                                                                                     
|         |  | Notes to Consolidated Financial Statements (unaudited)                                                                               |  |      | 7  | 
|         |  |                                                                                                                                     
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                |  |      | 22 | 
|         |  |                                                                                                                                     
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                                                                           |  |      | 38 | 
|         |  |                                                                                                                                     
|Item 4   |  | Controls and Procedures                                                                                                              |  |      | 40 | 
|         |  |                                                                                                                                     
|         |  | Part II - Other Information                                                                                                          |  |      |    | 
|Item 1.  |  | Legal Proceedings                                                                                                                    |  |      | 41 | 
|         |  |                                                                                                                                     
|Item 1A. |  | Risk Factors                                                                                                                         |  |      | 41 | 
|         |  |                                                                                                                                     
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                          |  |      | 42 | 
|         |  |                                                                                                                                     
|Item 3.  |  | Defaults upon Senior Securities                                                                                                      |  |      | 43 | 
|         |  |                                                                                                                                     
|Item 4.  |  | Reserved                                                                                                                             |  |      | 43 | 
|         |  |                                                                                                                                     
|Item 5.  |  | Other information                                                                                                                    |  |      | 43 | 
|         |  |                                                                                                                                     
|Item 6.  |  | Exhibits                                                                                                                             |  |      | 43 | 
|         |  |                                                                                                                                     
|         |  | Signatures                                                                                                                           |  |      | 44 | 

This Quarterly
Report on Form 10-Q includes references to certain trademarks. Courtyard by Marriott®, Marriott®, Marriott Suites®, Residence Inn by Marriott®
and SpringHill Suites by Marriott® trademarks are the property of Marriott International, Inc.
(Marriott) or one of its affiliates. Doubletree®, Embassy Suites®, Hampton Inn®, Hilton Garden Inn®, Hilton
Hotels® and Homewood Suites by Hilton® trademarks are the property of Hilton Hotels Corporation (Hilton) or one or more of its affiliates. Hyatt Place® trademark is the property of Hyatt Corporation (Hyatt). Intercontinental Hotels ® trademark is the property of IHG. Wyndham ® and Baymont Inn & Suites
® trademarks are the property of Wyndham Worldwide. Comfort Inn
® trademark is the property of Choice Hotels International. The Aloft service name is the property of Starwood.
For convenience, the applicable trademark or service mark symbol has been omitted but will be deemed to be included wherever the above-referenced terms are used.



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Consolidated Balance Sheets

(Dollar amounts in thousands, except share
data)



|                                                                                                                          |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|------------------------------------------------------------------------------------------------------------------------- |  | - |  |  | -------------- |  | ---------- | - |  | - | ----------------- |  |  |  | ---------- | -
|                                                                                                                          |  |   |  |  | March 31, 2011 |  |            |   |  |   | December 31, 2010 | 
|Assets                                                                                                                    |  |   |  |  | (unaudited)    |  |            |   |  |   |                   | 
|Assets:                                                                                                                   |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|Investment properties:                                                                                                    |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|Land                                                                                                                      |  | $ |  |  |                |  | 1,918,129  |   |  | $ |                   |  |  |  | 1,883,486  |  
|Building and other improvements                                                                                           |  |   |  |  |                |  | 8,460,331  |   |  |   |                   |  |  |  | 8,411,621  |  
|Construction in progress                                                                                                  |  |   |  |  |                |  | 303,013    |   |  |   |                   |  |  |  | 306,673    |  
|                                                                                                                          |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|Total                                                                                                                     |  |   |  |  |                |  | 10,681,473 |   |  |   |                   |  |  |  | 10,601,780 |  
|Less accumulated depreciation                                                                                             |  |   |  |  |                |  | (1,120,834 | ) |  |   |                   |  |  |  | (1,038,829 | )
|                                                                                                                          |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|Net investment properties                                                                                                 |  |   |  |  |                |  | 9,560,639  |   |  |   |                   |  |  |  | 9,562,951  |  
|Cash and cash equivalents                                                                                                 |  |   |  |  |                |  | 150,374    |   |  |   |                   |  |  |  | 267,707    |  
|Restricted cash and escrows                                                                                               |  |   |  |  |                |  | 94,412     |   |  |   |                   |  |  |  | 96,089     |  
|Investment in marketable securities                                                                                       |  |   |  |  |                |  | 274,241    |   |  |   |                   |  |  |  | 268,726    |  
|Investment in unconsolidated entities                                                                                     |  |   |  |  |                |  | 557,524    |   |  |   |                   |  |  |  | 573,274    |  
|Accounts and rents receivable (net of allowance of $8,533 and $7,905)                                                     |  |   |  |  |                |  | 110,437    |   |  |   |                   |  |  |  | 101,465    |  
|Notes receivable                                                                                                          |  |   |  |  |                |  | 34,025     |   |  |   |                   |  |  |  | 54,047     |  
|Intangible assets, net                                                                                                    |  |   |  |  |                |  | 370,630    |   |  |   |                   |  |  |  | 386,916    |  
|Deferred costs and other assets                                                                                           |  |   |  |  |                |  | 84,382     |   |  |   |                   |  |  |  | 80,327     |  
|                                                                                                                          |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|Total assets                                                                                                              |  | $ |  |  |                |  | 11,236,664 |   |  | $ |                   |  |  |  | 11,391,502 |  
|                                                                                                                          |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|                                                                                                                          |  |   |  | 
|Liabilities and Equity                                                                                                    |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|Liabilities:                                                                                                              |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|Mortgages, notes and margins payable, net                                                                                 |  | $ |  |  |                |  | 5,495,944  |   |  | $ |                   |  |  |  | 5,532,057  |  
|Accounts payable and accrued expenses                                                                                     |  |   |  |  |                |  | 35,268     |   |  |   |                   |  |  |  | 33,672     |  
|Distributions payable                                                                                                     |  |   |  |  |                |  | 35,526     |   |  |   |                   |  |  |  | 35,267     |  
|Accrued real estate taxes                                                                                                 |  |   |  |  |                |  | 37,647     |   |  |   |                   |  |  |  | 52,479     |  
|Advance rent and other liabilities                                                                                        |  |   |  |  |                |  | 83,859     |   |  |   |                   |  |  |  | 81,043     |  
|Intangible liabilities, net                                                                                               |  |   |  |  |                |  | 79,988     |   |  |   |                   |  |  |  | 81,698     |  
|Other financings                                                                                                          |  |   |  |  |                |  | 47,762     |   |  |   |                   |  |  |  | 47,762     |  
|                                                                                                                          |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|Total liabilities                                                                                                         |  |   |  |  |                |  | 5,815,994  |   |  |   |                   |  |  |  | 5,863,978  |  
|                                                                                                                          |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|                                                                                                                          |  |   |  | 
|Noncontrolling redeemable interests                                                                                       |  |   |  |  |                |  | 264,132    |   |  |   |                   |  |  |  | 264,132    |  
|Commitments and contingencies                                                                                             |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|Stockholders equity:                                                                                                     |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|Preferred stock, $.001 par value, 40,000,000 shares authorized, none outstanding                                          |  |   |  |  |                |  | 0          |   |  |   |                   |  |  |  | 0          |  
|Common stock, $.001 par value, 1,460,000,000 shares authorized, 852,633,359 and 846,406,774 shares issued and
outstanding |  |   |  |  |                |  | 852        |   |  |   |                   |  |  |  | 846        |  
|Additional paid in capital (net of offering costs of $828,434, of which $788,272 was paid to affiliates)                  |  |   |  |  |                |  | 7,655,097  |   |  |   |                   |  |  |  | 7,605,105  |  
|Accumulated distributions in excess of net loss                                                                           |  |   |  |  |                |  | (2,570,317 | ) |  |   |                   |  |  |  | (2,409,370 | )
|Accumulated other comprehensive income                                                                                    |  |   |  |  |                |  | 53,735     |   |  |   |                   |  |  |  | 49,430     |  
|                                                                                                                          |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|                                                                                                                          |  |   |  | 
|Total Company stockholders equity                                                                                        |  |   |  |  |                |  | 5,139,367  |   |  |   |                   |  |  |  | 5,246,011  |  
|                                                                                                                          |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|                                                                                                                          |  |   |  | 
|Noncontrolling interests                                                                                                  |  |   |  |  |                |  | 17,171     |   |  |   |                   |  |  |  | 17,381     |  
|                                                                                                                          |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|                                                                                                                          |  |   |  | 
|Total equity                                                                                                              |  |   |  |  |                |  | 5,156,538  |   |  |   |                   |  |  |  | 5,263,392  |  
|                                                                                                                          |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  
|                                                                                                                          |  |   |  | 
|Total liabilities and equity                                                                                              |  | $ |  |  |                |  | 11,236,664 |   |  | $ |                   |  |  |  | 11,391,502 |  
|                                                                                                                          |  |   |  |  |                |  |            |   |  |   |                   |  |  |  |            |  

See accompanying notes to the consolidated financial statements.



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Consolidated Statements of Operations and Other Comprehensive Income

(Dollar amounts in thousands, except share data)



|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|----------------------------------------------------------------------- |  | - |  |  | ------------------------------------------- |  | ----------- | - |  | - | ------------------------------------------- |  |  |  | ----------- | -
|                                                                        |  |   |  |  | Three months endedMarch 31, 2011(unaudited) |  |             |   |  |   | Three months endedMarch 31, 2010(unaudited) | 
|Income:                                                                 |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|Rental income                                                           |  | $ |  |  |                                             |  | 163,512     |   |  | $ |                                             |  |  |  | 146,465     |  
|Tenant recovery income                                                  |  |   |  |  |                                             |  | 24,964      |   |  |   |                                             |  |  |  | 23,378      |  
|Other property income                                                   |  |   |  |  |                                             |  | 4,931       |   |  |   |                                             |  |  |  | 4,587       |  
|Lodging income                                                          |  |   |  |  |                                             |  | 132,986     |   |  |   |                                             |  |  |  | 108,920     |  
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|                                                                        |  |   |  | 
|Total income                                                            |  |   |  |  |                                             |  | 326,393     |   |  |   |                                             |  |  |  | 283,350     |  
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|Expenses:                                                               |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|General and administrative expenses                                     |  |   |  |  |                                             |  | 6,614       |   |  |   |                                             |  |  |  | 11,243      |  
|Property operating expenses                                             |  |   |  |  |                                             |  | 35,252      |   |  |   |                                             |  |  |  | 30,776      |  
|Lodging operating expenses                                              |  |   |  |  |                                             |  | 87,539      |   |  |   |                                             |  |  |  | 71,703      |  
|Real estate taxes                                                       |  |   |  |  |                                             |  | 26,345      |   |  |   |                                             |  |  |  | 24,086      |  
|Depreciation and amortization                                           |  |   |  |  |                                             |  | 109,456     |   |  |   |                                             |  |  |  | 105,304     |  
|Business manager management fee                                         |  |   |  |  |                                             |  | 10,000      |   |  |   |                                             |  |  |  | 6,000       |  
|Provision for asset impairment                                          |  |   |  |  |                                             |  | 27,967      |   |  |   |                                             |  |  |  | 0           |  
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|                                                                        |  |   |  | 
|Total expenses                                                          |  |   |  |  |                                             |  | 303,173     |   |  |   |                                             |  |  |  | 249,112     |  
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|                                                                        |  |   |  | 
|Operating income                                                        |  | $ |  |  |                                             |  | 23,220      |   |  | $ |                                             |  |  |  | 34,238      |  
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|Interest and dividend income                                            |  |   |  |  |                                             |  | 5,638       |   |  |   |                                             |  |  |  | 7,422       |  
|Other income                                                            |  |   |  |  |                                             |  | 353         |   |  |   |                                             |  |  |  | 177         |  
|Interest expense                                                        |  |   |  |  |                                             |  | (83,908     | ) |  |   |                                             |  |  |  | (67,082     | )
|Equity in loss of unconsolidated entities                               |  |   |  |  |                                             |  | (2,297      | ) |  |   |                                             |  |  |  | (3,890      | )
|Realized gain and impairment on securities, net                         |  |   |  |  |                                             |  | 3,996       |   |  |   |                                             |  |  |  | 3,763       |  
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|                                                                        |  |   |  | 
|Loss before income taxes                                                |  | $ |  |  |                                             |  | (52,998     | ) |  | $ |                                             |  |  |  | (25,372     | )
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|                                                                        |  |   |  | 
|Income tax benefit                                                      |  | $ |  |  |                                             |  | 595         |   |  | $ |                                             |  |  |  | 173         |  
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|                                                                        |  |   |  | 
|Net loss from continuing operations                                     |  | $ |  |  |                                             |  | (52,403     | ) |  | $ |                                             |  |  |  | (25,199     | )
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|                                                                        |  |   |  | 
|Loss from discontinued operations, net                                  |  | $ |  |  |                                             |  | 0           |   |  |   |                                             |  |  |  | (1,898      | )
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|                                                                        |  |   |  | 
|Net loss                                                                |  | $ |  |  |                                             |  | (52,403     | ) |  | $ |                                             |  |  |  | (27,097     | )
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|                                                                        |  |   |  | 
|Less: Net income attributable to noncontrolling interests               |  |   |  |  |                                             |  | (2,224      | ) |  |   |                                             |  |  |  | (2,242      | )
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|                                                                        |  |   |  | 
|Net loss attributable to Company                                        |  | $ |  |  |                                             |  | (54,627     | ) |  | $ |                                             |  |  |  | (29,339     | )
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|Other comprehensive income (loss):                                      |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|Unrealized gain on investment securities                                |  |   |  |  |                                             |  | 7,449       |   |  |   |                                             |  |  |  | 29,627      |  
|Reversal of unrealized gain to realized gain on investment securities   |  |   |  |  |                                             |  | (3,996      | ) |  |   |                                             |  |  |  | (3,763      | )
|Unrealized gain on derivatives                                          |  |   |  |  |                                             |  | 852         |   |  |   |                                             |  |  |  | 334         |  
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|                                                                        |  |   |  | 
|Comprehensive loss                                                      |  | $ |  |  |                                             |  | (50,322     | ) |  | $ |                                             |  |  |  | (3,141      | )
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|                                                                        |  |   |  | 
|Net loss per common share, from continuing operations                   |  | $ |  |  |                                             |  | (.06        | ) |  | $ |                                             |  |  |  | (.04        | )
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|Net loss per common share, from discontinued operations                 |  | $ |  |  |                                             |  | 0           |   |  | $ |                                             |  |  |  | 0           |  
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|Net loss per common share, basic and diluted                            |  | $ |  |  |                                             |  | (.06        | ) |  | $ |                                             |  |  |  | (.04        | )
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  
|                                                                        |  |   |  | 
|Weighted average number of common shares outstanding, basic and diluted |  |   |  |  |                                             |  | 849,843,349 |   |  |   |                                             |  |  |  | 826,716,592 |  
|                                                                        |  |   |  |  |                                             |  |             |   |  |   |                                             |  |  |  |             |  

See accompanying notes to the consolidated financial statements.



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Consolidated Statements of Changes in Equity

(Dollar amounts in thousands)

For the three months ended March 31, 2011

(unaudited)



|                                                                      |  |                     |             |  |  |   |  |                 |  |  |     |  |  |                              |  |  |  |  |           |                                                      |  |   |  |  |  |                                                     |             |  |  |   |  |                             |  |  |         |  |  |       |  |  |  |  |        |                                       |  |   |  |  |  |  |           |  |  |   |  |  |  |  |         | 
|--------------------------------------------------------------------- |  | ------------------- | ----------- |  |  | - |  | --------------- |  |  | --- |  |  | ---------------------------- |  |  |  |  | --------- | ---------------------------------------------------- |  | - |  |  |  | --------------------------------------------------- | ----------- |  |  | - |  | --------------------------- |  |  | ------- |  |  | ----- |  |  |  |  | ------ | ------------------------------------- |  | - |  |  |  |  | --------- |  |  | - |  |  |  |  | ------- | 
|                                                                      |  | Number of    Shares |             |  |  |   |  | Common    Stock |  |  |     |  |  | Additional    Paid-inCapital |  |  |  |  |           | Accumulated    Distributions in    excess of
NetLoss |  |   |  |  |  | AccumulatedOther   
 Comprehensive    Income (Loss) |             |  |  |   |  | Noncontrolling    Interests |  |  |         |  |  | Total |  |  |  |  |        | Noncontrolling    RedeemableInterests | 
|Balance at January 1, 2011                                            |  |                     | 846,406,774 |  |  | $ |  |                 |  |  | 846 |  |  | $                            |  |  |  |  | 7,605,105 |                                                      |  | $ |  |  |  |                                                     | (2,409,370) |  |  | $ |  |                             |  |  | 49,430  |  |  | $     |  |  |  |  | 17,381 |                                       |  | $ |  |  |  |  | 5,263,392 |  |  | $ |  |  |  |  | 264,132 | 
|Net income (loss)                                                     |  |                     | 0           |  |  |   |  |                 |  |  | 0   |  |  |                              |  |  |  |  | 0         |                                                      |  |   |  |  |  |                                                     | (54,627)    |  |  |   |  |                             |  |  | 0       |  |  |       |  |  |  |  | (87)   |                                       |  |   |  |  |  |  | (54,714)  |  |  |   |  |  |  |  | 2,311   | 
|Unrealized gain on investment securities                              |  |                     | 0           |  |  |   |  |                 |  |  | 0   |  |  |                              |  |  |  |  | 0         |                                                      |  |   |  |  |  |                                                     | 0           |  |  |   |  |                             |  |  | 7,449   |  |  |       |  |  |  |  | 0      |                                       |  |   |  |  |  |  | 7,449     |  |  |   |  |  |  |  | 0       | 
|Reversal of unrealized gain to realized gain on investment securities |  |                     | 0           |  |  |   |  |                 |  |  | 0   |  |  |                              |  |  |  |  | 0         |                                                      |  |   |  |  |  |                                                     | 0           |  |  |   |  |                             |  |  | (3,996) |  |  |       |  |  |  |  | 0      |                                       |  |   |  |  |  |  | (3,996)   |  |  |   |  |  |  |  | 0       | 
|Unrealized gain on derivatives                                        |  |                     | 0           |  |  |   |  |                 |  |  | 0   |  |  |                              |  |  |  |  | 0         |                                                      |  |   |  |  |  |                                                     | 0           |  |  |   |  |                             |  |  | 852     |  |  |       |  |  |  |  | 0      |                                       |  |   |  |  |  |  | 852       |  |  |   |  |  |  |  | 0       | 
|Distributions declared                                                |  |                     | 0           |  |  |   |  |                 |  |  | 0   |  |  |                              |  |  |  |  | 0         |                                                      |  |   |  |  |  |                                                     | (106,320)   |  |  |   |  |                             |  |  | 0       |  |  |       |  |  |  |  | (123)  |                                       |  |   |  |  |  |  | (106,443) |  |  |   |  |  |  |  | (2,311) | 
|Proceeds from distribution reinvestment program                       |  |                     | 6,226,585   |  |  |   |  |                 |  |  | 6   |  |  |                              |  |  |  |  | 49,992    |                                                      |  |   |  |  |  |                                                     | 0           |  |  |   |  |                             |  |  | 0       |  |  |       |  |  |  |  | 0      |                                       |  |   |  |  |  |  | 49,998    |  |  |   |  |  |  |  | 0       | 
|                                                                      |  |                     |             |  |  |   |  |                 |  |  |     |  |  |                              |  |  |  |  |           |                                                      |  |   |  |  |  |                                                     |             |  |  |   |  |                             |  |  |         |  |  |       |  |  |  |  |        |                                       |  |   |  |  |  |  |           |  |  |   |  |  |  |  |         | 
|                                                                      |  |                     |             |  |  |   |  |                 |  |  |     |  |  |                              | 
|Balance at March 31, 2011                                             |  |                     | 852,633,359 |  |  | $ |  |                 |  |  | 852 |  |  | $                            |  |  |  |  | 7,655,097 |                                                      |  | $ |  |  |  |                                                     | (2,570,317) |  |  | $ |  |                             |  |  | 53,735  |  |  | $     |  |  |  |  | 17,171 |                                       |  | $ |  |  |  |  | 5,156,538 |  |  | $ |  |  |  |  | 264,132 | 
|                                                                      |  |                     |             |  |  |   |  |                 |  |  |     |  |  |                              |  |  |  |  |           |                                                      |  |   |  |  |  |                                                     |             |  |  |   |  |                             |  |  |         |  |  |       |  |  |  |  |        |                                       |  |   |  |  |  |  |           |  |  |   |  |  |  |  |         | 

See accompanying notes to the consolidated financial statements.



-3-



---

##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Consolidated Statements of Changes in Equity

(Dollar amounts in thousands)

For the three months ended March 31, 2010

(unaudited)



|                                                                      |  |                     |             |  |  |   |  |                 |  |  |     |  |  |                              |  |  |  |  |           |                                                      |  |   |  |  |  |                                                     |             |  |  |   |  |                             |  |  |         |  |  |       |  |  |  |  |        |                                       |  |   |  |  |  |  |           |  |  |   |  |  |  |  |         | 
|--------------------------------------------------------------------- |  | ------------------- | ----------- |  |  | - |  | --------------- |  |  | --- |  |  | ---------------------------- |  |  |  |  | --------- | ---------------------------------------------------- |  | - |  |  |  | --------------------------------------------------- | ----------- |  |  | - |  | --------------------------- |  |  | ------- |  |  | ----- |  |  |  |  | ------ | ------------------------------------- |  | - |  |  |  |  | --------- |  |  | - |  |  |  |  | ------- | 
|                                                                      |  | Number of    Shares |             |  |  |   |  | Common    Stock |  |  |     |  |  | Additional    Paid-inCapital |  |  |  |  |           | Accumulated    Distributions in    excess of
NetLoss |  |   |  |  |  | AccumulatedOther   
 Comprehensive    Income (Loss) |             |  |  |   |  | Noncontrolling    Interests |  |  |         |  |  | Total |  |  |  |  |        | Noncontrolling    RedeemableInterests | 
|Balance at January 1, 2010                                            |  |                     | 823,619,190 |  |  | $ |  |                 |  |  | 824 |  |  | $                            |  |  |  |  | 7,397,831 |                                                      |  | $ |  |  |  |                                                     | (1,815,054) |  |  | $ |  |                             |  |  | 29,712  |  |  | $     |  |  |  |  | 18,869 |                                       |  | $ |  |  |  |  | 5,632,182 |  |  | $ |  |  |  |  | 264,132 | 
|Net loss                                                              |  |                     | 0           |  |  |   |  |                 |  |  | 0   |  |  |                              |  |  |  |  | 0         |                                                      |  |   |  |  |  |                                                     | (29,339)    |  |  |   |  |                             |  |  | 0       |  |  |       |  |  |  |  | (69)   |                                       |  |   |  |  |  |  | (29,408)  |  |  |   |  |  |  |  | 2,311   | 
|Unrealized gain on investment securities                              |  |                     | 0           |  |  |   |  |                 |  |  | 0   |  |  |                              |  |  |  |  | 0         |                                                      |  |   |  |  |  |                                                     | 0           |  |  |   |  |                             |  |  | 29,627  |  |  |       |  |  |  |  | 0      |                                       |  |   |  |  |  |  | 29,627    |  |  |   |  |  |  |  | 0       | 
|Reversal of unrealized gain to realized gain on investment securities |  |                     | 0           |  |  |   |  |                 |  |  | 0   |  |  |                              |  |  |  |  | 0         |                                                      |  |   |  |  |  |                                                     | 0           |  |  |   |  |                             |  |  | (3,763) |  |  |       |  |  |  |  | 0      |                                       |  |   |  |  |  |  | (3,763)   |  |  |   |  |  |  |  | 0       | 
|Unrealized gain on derivatives                                        |  |                     | 0           |  |  |   |  |                 |  |  | 0   |  |  |                              |  |  |  |  | 0         |                                                      |  |   |  |  |  |                                                     | 0           |  |  |   |  |                             |  |  | 334     |  |  |       |  |  |  |  | 0      |                                       |  |   |  |  |  |  | 334       |  |  |   |  |  |  |  | 0       | 
|Distributions declared                                                |  |                     | 0           |  |  |   |  |                 |  |  | 0   |  |  |                              |  |  |  |  | 0         |                                                      |  |   |  |  |  |                                                     | (103,426)   |  |  |   |  |                             |  |  | 0       |  |  |       |  |  |  |  | (514)  |                                       |  |   |  |  |  |  | (103,940) |  |  |   |  |  |  |  | (2,311) | 
|Proceeds from distribution reinvestment program                       |  |                     | 5,669,930   |  |  |   |  |                 |  |  | 5   |  |  |                              |  |  |  |  | 53,857    |                                                      |  |   |  |  |  |                                                     | 0           |  |  |   |  |                             |  |  | 0       |  |  |       |  |  |  |  | 0      |                                       |  |   |  |  |  |  | 53,862    |  |  |   |  |  |  |  | 0       | 
|                                                                      |  |                     |             |  |  |   |  |                 |  |  |     |  |  |                              |  |  |  |  |           |                                                      |  |   |  |  |  |                                                     |             |  |  |   |  |                             |  |  |         |  |  |       |  |  |  |  |        |                                       |  |   |  |  |  |  |           |  |  |   |  |  |  |  |         | 
|                                                                      |  |                     |             |  |  |   |  |                 |  |  |     |  |  |                              | 
|Balance at March 31, 2010                                             |  |                     | 829,289,120 |  |  | $ |  |                 |  |  | 829 |  |  | $                            |  |  |  |  | 7,451,688 |                                                      |  | $ |  |  |  |                                                     | (1,947,819) |  |  | $ |  |                             |  |  | 55,910  |  |  | $     |  |  |  |  | 18,286 |                                       |  | $ |  |  |  |  | 5,578,894 |  |  | $ |  |  |  |  | 264,132 | 
|                                                                      |  |                     |             |  |  |   |  |                 |  |  |     |  |  |                              |  |  |  |  |           |                                                      |  |   |  |  |  |                                                     |             |  |  |   |  |                             |  |  |         |  |  |       |  |  |  |  |        |                                       |  |   |  |  |  |  |           |  |  |   |  |  |  |  |         | 

See accompanying notes to the consolidated financial statements.



-4-



---

##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Consolidated Statements of Cash Flows

(Dollar amounts in thousands)



|                                                                                |  |   |  |  |                                             |  |          |   |  |  |                                             |  |  |   |  |  |  |  |          |   |  |  |  | 
|------------------------------------------------------------------------------- |  | - |  |  | ------------------------------------------- |  | -------- | - |  |  | ------------------------------------------- |  |  | - |  |  |  |  | -------- | - |  |  |  | 
|                                                                                |  |   |  |  | Three months endedMarch 31,
2011(unaudited) |  |          |   |  |  | Three months endedMarch 31,
2010(unaudited) | 
|                                                                                |  |   | 
|                                                                                |  |   | 
|Cash flows from operating activities:                                           |  |   |  |  |                                             |  |          |   |  |  |                                             |  |  |   |  |  |  |  |          |   |  |  |  | 
|Net loss                                                                        |  | $ |  |  |                                             |  | (52,403  | ) |  |  |                                             |  |  | $ |  |  |  |  | (27,097  | ) |  |  |  | 
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |   |  |  |                                             |  |          |   |  |  |                                             |  |  |   |  |  |  |  |          |   |  |  |  | 
|Depreciation and amortization                                                   |  |   |  |  |                                             |  | 109,456  |   |  |  |                                             |  |  |   |  |  |  |  | 109,137  |   |  |  |  | 
|Amortization of above and below market leases, net                              |  |   |  |  |                                             |  | (598     | ) |  |  |                                             |  |  |   |  |  |  |  | 100      |   |  |  |  | 
|Amortization of debt premiums, discounts and financing costs                    |  |   |  |  |                                             |  | 12,613   |   |  |  |                                             |  |  |   |  |  |  |  | 3,036    |   |  |  |  | 
|Straight-line rental income                                                     |  |   |  |  |                                             |  | (3,453   | ) |  |  |                                             |  |  |   |  |  |  |  | (5,034   | ) |  |  |  | 
|Provision for asset impairment                                                  |  |   |  |  |                                             |  | 27,967   |   |  |  |                                             |  |  |   |  |  |  |  | 945      |   |  |  |  | 
|Equity in loss of unconsolidated entities                                       |  |   |  |  |                                             |  | 2,297    |   |  |  |                                             |  |  |   |  |  |  |  | 3,890    |   |  |  |  | 
|Distributions from unconsolidated entities                                      |  |   |  |  |                                             |  | 1,425    |   |  |  |                                             |  |  |   |  |  |  |  | 992      |   |  |  |  | 
|Realized gain on investments in securities                                      |  |   |  |  |                                             |  | (3,996   | ) |  |  |                                             |  |  |   |  |  |  |  | (3,763   | ) |  |  |  | 
|Other non-cash adjustments                                                      |  |   |  |  |                                             |  | 648      |   |  |  |                                             |  |  |   |  |  |  |  | (263     | ) |  |  |  | 
|Changes in assets and liabilities:                                              |  |   |  |  |                                             |  |          |   |  |  |                                             |  |  |   |  |  |  |  |          |   |  |  |  | 
|Accounts and rents receivable                                                   |  |   |  |  |                                             |  | (5,519   | ) |  |  |                                             |  |  |   |  |  |  |  | (9,318   | ) |  |  |  | 
|Other assets                                                                    |  |   |  |  |                                             |  | (4,767   | ) |  |  |                                             |  |  |   |  |  |  |  | 2,923    |   |  |  |  | 
|Accounts payable and accrued expenses                                           |  |   |  |  |                                             |  | 1,063    |   |  |  |                                             |  |  |   |  |  |  |  | (108     | ) |  |  |  | 
|Advance rent and other liabilities                                              |  |   |  |  |                                             |  | 6,189    |   |  |  |                                             |  |  |   |  |  |  |  | (3,310   | ) |  |  |  | 
|Accrued real estate taxes                                                       |  |   |  |  |                                             |  | (13,620  | ) |  |  |                                             |  |  |   |  |  |  |  | (11,488  | ) |  |  |  | 
|                                                                                |  |   |  |  |                                             |  |          |   |  |  |                                             |  |  |   |  | 
|Net cash flows provided by operating activities                                 |  |   |  |  |                                             |  | 77,302   |   |  |  |                                             |  |  |   |  |  |  |  | 60,642   |   |  |  |  | 
|                                                                                |  |   |  |  |                                             |  |          |   |  |  |                                             |  |  |   |  | 
|                                                                                |  |   |  |  |                                             | 
|Cash flows from investing activities:                                           |  |   |  |  |                                             |  |          |   |  |  |                                             |  |  |   |  |  |  |  |          |   |  |  |  | 
|Purchase of investment properties                                               |  |   |  |  |                                             |  | (61,261  | ) |  |  |                                             |  |  |   |  |  |  |  | (131,835 | ) |  |  |  | 
|Acquired in-place and market lease intangibles, net                             |  |   |  |  |                                             |  | (5,165   | ) |  |  |                                             |  |  |   |  |  |  |  | (53,348  | ) |  |  |  | 
|Capital expenditures and tenant improvements                                    |  |   |  |  |                                             |  | (14,269  | ) |  |  |                                             |  |  |   |  |  |  |  | (17,612  | ) |  |  |  | 
|Investment in development projects                                              |  |   |  |  |                                             |  | (16,426  | ) |  |  |                                             |  |  |   |  |  |  |  | (11,302  | ) |  |  |  | 
|Sale of investment properties                                                   |  |   |  |  |                                             |  | 10,848   |   |  |  |                                             |  |  |   |  |  |  |  | 11,419   |   |  |  |  | 
|Purchase of investment securities                                               |  |   |  |  |                                             |  | (19,470  | ) |  |  |                                             |  |  |   |  |  |  |  | (25,665  | ) |  |  |  | 
|Sale of investment securities                                                   |  |   |  |  |                                             |  | 21,404   |   |  |  |                                             |  |  |   |  |  |  |  | 10,025   |   |  |  |  | 
|Investment in unconsolidated entities                                           |  |   |  |  |                                             |  | (98      | ) |  |  |                                             |  |  |   |  |  |  |  | (133     | ) |  |  |  | 
|Distributions from unconsolidated entities                                      |  |   |  |  |                                             |  | 9,540    |   |  |  |                                             |  |  |   |  |  |  |  | 7,583    |   |  |  |  | 
|Payment of leasing and franchise fees                                           |  |   |  |  |                                             |  | (1,900   | ) |  |  |                                             |  |  |   |  |  |  |  | (1,098   | ) |  |  |  | 
|Purchase of note receivable                                                     |  |   |  |  |                                             |  | 0        |   |  |  |                                             |  |  |   |  |  |  |  | (34,300  | ) |  |  |  | 
|Payments from notes receivable                                                  |  |   |  |  |                                             |  | 22       |   |  |  |                                             |  |  |   |  |  |  |  | 47       |   |  |  |  | 
|Restricted escrows and other assets                                             |  |   |  |  |                                             |  | 1,645    |   |  |  |                                             |  |  |   |  |  |  |  | (6,561   | ) |  |  |  | 
|                                                                                |  |   |  |  |                                             |  |          |   |  |  |                                             |  |  |   |  | 
|Net cash flows used in investing activities                                     |  |   |  |  |                                             |  | (75,130  | ) |  |  |                                             |  |  |   |  |  |  |  | (252,780 | ) |  |  |  | 
|                                                                                |  |   |  |  |                                             |  |          |   |  |  |                                             |  |  |   |  | 
|                                                                                |  |   |  |  |                                             | 
|Cash flows from financing activities:                                           |  |   |  |  |                                             |  |          |   |  |  |                                             |  |  |   |  |  |  |  |          |   |  |  |  | 
|Proceeds from the distribution reinvestment program                             |  |   |  |  |                                             |  | 49,998   |   |  |  |                                             |  |  |   |  |  |  |  | 53,862   |   |  |  |  | 
|Distributions paid                                                              |  |   |  |  |                                             |  | (106,061 | ) |  |  |                                             |  |  |   |  |  |  |  | (103,190 | ) |  |  |  | 
|Proceeds from mortgage debt and notes payable                                   |  |   |  |  |                                             |  | 56,246   |   |  |  |                                             |  |  |   |  |  |  |  | 83,619   |   |  |  |  | 
|Payoffs of mortgage debt                                                        |  |   |  |  |                                             |  | (100,585 | ) |  |  |                                             |  |  |   |  |  |  |  | (69,965  | ) |  |  |  | 
|Principal payments of mortgage debt                                             |  |   |  |  |                                             |  | (9,298   | ) |  |  |                                             |  |  |   |  |  |  |  | (2,401   | ) |  |  |  | 
|Proceeds from (paydown of) margin securities debt, net                          |  |   |  |  |                                             |  | (5,812   | ) |  |  |                                             |  |  |   |  |  |  |  | 37,336   |   |  |  |  | 
|Payment of loan fees and deposits                                               |  |   |  |  |                                             |  | (1,559   | ) |  |  |                                             |  |  |   |  |  |  |  | (1,038   | ) |  |  |  | 
|Distributions paid to noncontrolling interests                                  |  |   |  |  |                                             |  | (123     | ) |  |  |                                             |  |  |   |  |  |  |  | (514     | ) |  |  |  | 
|Distributions paid to noncontrolling redeemable interests                       |  |   |  |  |                                             |  | (2,311   | ) |  |  |                                             |  |  |   |  |  |  |  | (2,311   | ) |  |  |  | 
|                                                                                |  |   |  |  |                                             |  |          |   |  |  |                                             |  |  |   |  | 
|Net cash flows used in financing activities                                     |  |   |  |  |                                             |  | (119,505 | ) |  |  |                                             |  |  |   |  |  |  |  | (4,602   | ) |  |  |  | 
|                                                                                |  |   |  |  |                                             |  |          |   |  |  |                                             |  |  |   |  | 
|                                                                                |  |   |  |  |                                             | 
|Net decrease in cash and cash equivalents                                       |  |   |  |  |                                             |  | (117,333 | ) |  |  |                                             |  |  |   |  |  |  |  | (196,740 | ) |  |  |  | 
|Cash and cash equivalents, at beginning of period                               |  |   |  |  |                                             |  | 267,707  |   |  |  |                                             |  |  |   |  |  |  |  | 500,491  |   |  |  |  | 
|                                                                                |  |   |  |  |                                             |  |          |   |  |  |                                             |  |  |   |  | 
|                                                                                |  |   |  |  |                                             | 
|Cash and cash equivalents, at end of period                                     |  | $ |  |  |                                             |  | 150,374  |   |  |  |                                             |  |  | $ |  |  |  |  | 303,751  |   |  |  |  | 
|                                                                                |  |   |  |  |                                             |  |          |   |  |  |                                             |  |  |   |  | 

See accompanying notes to the consolidated financial statements.



-5-



---

##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Consolidated Statements of Cash Flows

(continued)

(Dollar amounts in thousands)



|                                                                      |  |   |  |  |                                             |  |         |   |  |  |                                             |  |  |   |  |  |  |  |          |   |  |  |  | 
|--------------------------------------------------------------------- |  | - |  |  | ------------------------------------------- |  | ------- | - |  |  | ------------------------------------------- |  |  | - |  |  |  |  | -------- | - |  |  |  | 
|                                                                      |  |   |  |  | Three months endedMarch 31,
2011(unaudited) |  |         |   |  |  | Three months endedMarch 31,
2010(unaudited) | 
|                                                                      |  |   | 
|                                                                      |  |   | 
|Supplemental disclosure of cash flow information:                     |  |   |  |  |                                             |  |         |   |  |  |                                             |  |  |   |  |  |  |  |          |   |  |  |  | 
|                                                                      |  |   |  |  |                                             | 
|Purchase of investment properties                                     |  | $ |  |  |                                             |  | (61,689 | ) |  |  |                                             |  |  | $ |  |  |  |  | (472,515 | ) |  |  |  | 
|Tenant and real estate tax liabilities assumed at acquisition, net    |  |   |  |  |                                             |  | 428     |   |  |  |                                             |  |  |   |  |  |  |  | 1,709    |   |  |  |  | 
|Assumption of mortgage debt at acquisition                            |  |   |  |  |                                             |  | 0       |   |  |  |                                             |  |  |   |  |  |  |  | 386,351  |   |  |  |  | 
|Non-cash discount of mortgage debt assumed                            |  |   |  |  |                                             |  | 0       |   |  |  |                                             |  |  |   |  |  |  |  | (47,380  | ) |  |  |  | 
|                                                                      |  |   |  |  |                                             |  |         |   |  |  |                                             |  |  |   |  | 
|                                                                      |  |   |  |  |                                             | 
|                                                                      |  |   |  |  |                                             |  | (61,261 | ) |  |  |                                             |  |  |   |  |  |  |  | (131,835 | ) |  |  |  | 
|                                                                      |  |   |  |  |                                             |  |         |   |  |  |                                             |  |  |   |  | 
|                                                                      |  |   |  |  |                                             | 
|Cash paid for interest, net capitalized interest of $2,481 and $958   |  | $ |  |  |                                             |  | 75,731  |   |  |  |                                             |  |  | $ |  |  |  |  | 64,405   |   |  |  |  | 
|                                                                      |  |   |  |  |                                             |  |         |   |  |  |                                             |  |  |   |  | 
|                                                                      |  |   |  |  |                                             | 
|Supplemental schedule of non-cash investing and financing activities: |  |   |  |  |                                             |  |         |   |  |  |                                             |  |  |   |  |  |  |  |          |   |  |  |  | 
|                                                                      |  |   |  |  |                                             | 
|Property acquired through exchange of notes receivable                |  | $ |  |  |                                             |  | 20,000  |   |  |  |                                             |  |  | $ |  |  |  |  | 0        |   |  |  |  | 
|                                                                      |  |   |  |  |                                             |  |         |   |  |  |                                             |  |  |   |  | 

See accompanying notes to the consolidated financial statements.



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)

The accompanying Consolidated Financial Statements have been prepared in
accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete
financial statements. Readers of this Quarterly Report should refer to the audited consolidated financial statements of Inland American Real Estate Trust, Inc. for the year ended December 31, 2010, which are included in the Companys 2010
Annual Report on Form 10-K, as certain note disclosures contained in such audited consolidated financial statements have been omitted from this Report. In the opinion of management, all adjustments (consisting of normal recurring accruals, except as
otherwise noted) necessary for a fair presentation have been included in these financial statements.

(1) Organization

Inland American Real Estate Trust, Inc. (the Company) was formed on October 4, 2004 (inception) to acquire and manage a diversified
portfolio of commercial real estate, primarily retail properties and multi-family (both conventional and student housing), office, industrial and lodging properties.

The accompanying consolidated financial statements include the accounts of the Company, as well as all wholly owned subsidiaries and consolidated joint venture investments. Wholly owned subsidiaries
generally consist of limited liability companies (LLCs) and limited partnerships (LPs). The effects of all significant intercompany transactions have been eliminated.

At March 31, 2011, the Company owned a portfolio of 983 commercial real estate properties compared to 975 properties at March 31, 2010. The breakdown by segment is as follows:



|             |  |                |  |                       
|------------ |  | -------------- |  | ----------------------
|Segment      |  | Property Count |  | Square Ft/Rooms/Units 
|Retail       |  | 736            |  | 21,998,050 square feet
|Lodging      |  | 100            |  | 15,732 rooms          
|Office       |  | 47             |  | 10,612,479 square feet
|Industrial   |  | 73             |  | 15,959,342 square feet
|Multi-Family |  | 27             |  | 9,790 units           

(2) Summary of
Significant Accounting Policies

There have been no changes to the Companys significant accounting policies in the three months
ended March 31, 2011. Refer to the Companys 2010 Form 10-K for a summary of significant accounting policies.

(3) Acquired
Properties

The Company records identifiable assets, liabilities, noncontrolling interests and goodwill acquired in a business combination
at full fair value. During the three months ended March 31, 2011 and 2010, the Company incurred $227 and $837, respectively, of acquisition and transaction costs that were recorded in general and administrative expenses on the consolidated
statements of operations and other comprehensive income.

The table below reflects acquisition activity for the three months ended
March 31, 2011.



|        |  |                     |  |      |           |  |  |   |  |                         |  |  |                   |  |  |  |                     | 
|------- |  | ------------------- |  | ---- | --------- |  |  | - |  | ----------------------- |  |  | ----------------- |  |  |  | ------------------- | 
|Segment |  | Property            |  | Date |           |  |  |   |  | Gross Acquisition
Price |  |  | Sq Ft/Units/Rooms | 
|Lodging |  | Marriott-Charleston |  |      | 2/25/2011 |  |  | $ |  |                         |  |  | 25,500            |  |  |  | 352 rooms           | 
|Retail  |  | Sparks Crossing     |  |      | 3/21/2011 |  |  |   |  |                         |  |  | 38,600            |  |  |  | 335,999 square feet | 
|        |  |                     |  |      |           |  |  |   |  |                         |  |  |                   |  |  |  |                     | 
|Total   |  |                     |  |      |           |  |  | $ |  |                         |  |  | 64,100            |  |  |  |                     | 
|        |  |                     |  |      |           |  |  |   |  |                         |  |  |                   |  |  |  |                     | 

For properties acquired during the three months ended March 31, 2011, the Company recorded revenue of $1,767
and property net income of $406, not including related expensed acquisition costs.



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)



(4) Discontinued Operations

The Company has presented separately as discontinued operations in all periods the results of operations for all disposed assets in consolidated operations. The Company disposed of zero and two assets for
the three months ended March 31, 2011 and 2010, respectively.

The components of the Companys discontinued operations
are presented below and include the results of operations for the respective periods that the Company owned such assets or was involved with the operations of such ventures during the three months ended March 31, 2011 and 2010.



|                                                              |  |   |  |  |                                  |  |          | 
|------------------------------------------------------------- |  | - |  |  | -------------------------------- |  | -------- | 
|                                                              |  |   |  |  | Three months endedMarch 31, 2010 | 
|Revenues                                                      |  | $ |  |  |                                  |  | 9,677    | 
|Expenses (including interest expense and impairments of $945) |  |   |  |  |                                  |  | (11,853) | 
|                                                              |  |   |  |  |                                  |  |          | 
|                                                              |  |  
|Operating loss from discontinued operations                   |  |   |  |  |                                  |  | (2,176)  | 
|                                                              |  |   |  |  |                                  |  |          | 
|                                                              |  |  
|Gain on sale of properties                                    |  |   |  |  |                                  |  | 278      | 
|                                                              |  |   |  |  |                                  |  |          | 
|                                                              |  |  
|Loss from discontinued operations, net                        |  | $ |  |  |                                  |  | (1,898)  | 
|                                                              |  |   |  |  |                                  |  |          | 

(5) Investment in Partially Owned Entities

Consolidated Entities

On October 11, 2005, the Company entered into a joint venture
with Minto (Delaware), LLC, or Minto Delaware who owned all of the outstanding equity of Minto Builders (Florida), Inc. (MB REIT) prior to October 11, 2005. MB REIT is not considered a VIE as defined in FASB ASC 810,
Consolidation, however the Company has a controlling financial interest in MB REIT, has the direct ability to make major decisions for MB REIT through its voting interests, and holds key management positions in MB REIT. Therefore this entity
is consolidated by the Company and the outside ownership interests are reflected as noncontrolling interests in the accompanying consolidated financial statements.

The Series A Preferred Interest in MB REIT is subject to redemption features outside of the Companys control that results in presentation outside of permanent equity. The noncontrolling interest is
reported at its redemption value as noncontrolling redeemable interests in the Companys consolidated financial statements with a balance of $264,132 as of March 31, 2011 and December 31, 2010.

The Company has ownership interests in various other entities that are considered VIEs as defined in ASC 810, and the Company is considered the primary
beneficiary of each of these entities. Therefore, these entities are consolidated by the Company. Refer to the Companys Form 10-K for year-end December 31, 2010 for details on the consolidated entities.

The applicable amounts for various consolidated VIEs are included in the consolidated balance sheets as presented in the table below.



|                                     |  |   |  |  |                                  |  |           |  |  |  |                             |  |  |  |           | 
|------------------------------------ |  | - |  |  | -------------------------------- |  | --------- |  |  |  | --------------------------- |  |  |  | --------- | 
|                                     |  |   |  |  | Three months endedMarch 31,
2011 |  |           |  |  |  | Year endedDecember 31, 2010 | 
|Net investment properties            |  | $ |  |  |                                  |  | 155,575   |  |  |  | $                           |  |  |  | 156,464   | 
|Other assets                         |  |   |  |  |                                  |  | 10,174    |  |  |  |                             |  |  |  | 10,457    | 
|                                     |  |   |  |  |                                  |  |           |  |  |  |                             |  |  |  |           | 
|Total assets                         |  |   |  |  |                                  |  | 165,749   |  |  |  |                             |  |  |  | 166,921   | 
|                                     |  |   |  | 
|Mortgages, notes and margins payable |  |   |  |  |                                  |  | (95,188)  |  |  |  |                             |  |  |  | (95,188)  | 
|Other liabilities                    |  |   |  |  |                                  |  | (50,450)  |  |  |  |                             |  |  |  | (50,538)  | 
|                                     |  |   |  |  |                                  |  |           |  |  |  |                             |  |  |  |           | 
|Total liabilities                    |  |   |  |  |                                  |  | (145,638) |  |  |  |                             |  |  |  | (145,726) | 
|                                     |  |   |  |  |                                  |  |           |  |  |  |                             |  |  |  |           | 
|                                     |  |   |  | 
|Net assets                           |  | $ |  |  |                                  |  | 20,111    |  |  |  | $                           |  |  |  | 21,195    | 
|                                     |  |   |  |  |                                  |  |           |  |  |  |                             |  |  |  |           | 



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)



Unconsolidated Entities

The entities listed below are owned by the Company and other unaffiliated parties in joint ventures. Net income, distributions and capital transactions for these properties are allocated to the Company
and its joint venture partners in accordance with the respective partnership agreements. Refer to the Companys Form 10-K for the year ended December 31, 2010 for details of each unconsolidated entity.

These entities are not consolidated by the Company and the equity method of accounting is used to account for these investments. Under the equity method
of accounting, the net equity investment of the Company and the Companys share of net income or loss from the unconsolidated entity are reflected in the consolidated balance sheets and the consolidated statements of operations and other
comprehensive income



|                                      |  |                                           |  |             |         |  |  |   |  |                |  |  |         |  |  |                   |  |  |  |  |         | 
|------------------------------------- |  | ----------------------------------------- |  | ----------- | ------- |  |  | - |  | -------------- |  |  | ------- |  |  | ----------------- |  |  |  |  | ------- | 
|                                      |  |                                           |  |             |         |  |  |   |  | Investment at  |  |  |         |  |  | Investment at     | 
|Entity                                |  | Description                               |  | Ownership % |         |  |  |   |  | March 31, 2011 |  |  |         |  |  | December 31, 2010 | 
|Net Lease Strategic Asset Fund L.P.   |  | Diversified portfolio of net lease assets |  |             | 85%     |  |  | $ |  |                |  |  | 156,901 |  |  | $                 |  |  |  |  | 160,487 | 
|                                      |  |                                           |  |             |         | 
|Cobalt Industrial REIT II             |  | Industrial portfolio                      |  |             | 36%     |  |  |   |  |                |  |  | 121,993 |  |  |                   |  |  |  |  | 124,750 | 
|                                      |  |                                           |  |             |         | 
|D.R. Stephens Institutional Fund, LLC |  | Industrial and R&D assets                 |  |             | 90%     |  |  |   |  |                |  |  | 57,092  |  |  |                   |  |  |  |  | 57,389  | 
|                                      |  |                                           |  |             |         | 
|NRF Heathcare, LLC                    |  | Senior housing portfolio                  |  |             | (a)     |  |  |   |  |                |  |  | 84,968  |  |  |                   |  |  |  |  | 87,878  | 
|                                      |  |                                           |  |             |         | 
|Centro/IA JV, LLC                     |  | Retail Shopping Centers                   |  |             | (a)     |  |  |   |  |                |  |  | 117,830 |  |  |                   |  |  |  |  | 121,534 | 
|                                      |  |                                           |  |             |         | 
|Other Unconsolidated Entities         |  | Various Real Estate investments           |  |             | Various |  |  |   |  |                |  |  | 18,740  |  |  |                   |  |  |  |  | 21,236  | 
|                                      |  |                                           |  |             |         |  |  |   |  |                |  |  |         |  |  |                   |  |  |  |  |         | 
|                                      |  |                                           |  |             |         |  |  | $ |  |                |  |  | 557,524 |  |  | $                 |  |  |  |  | 573,274 | 
|                                      |  |                                           |  |             |         |  |  |   |  |                |  |  |         |  |  |                   |  |  |  |  |         | 



|(a) | We have preferred membership interest and are entitled to a 10.5% and 11% preferred dividend in NRF Healthcare, LLC and Centro/IA JV, LLC, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------

For the three months ended March 31, 2011 and 2010, management determined that none of its unconsolidated entities were
impaired.

Combined Financial Information

The following table presents the combined financial information for the Companys investment in unconsolidated entities.



|                                                                                                                                                        |  |   |  |  |                |  |                        |  |  |   |                   |  |  |  |                        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - |  |  | -------------- |  | ---------------------- |  |  | - | ----------------- |  |  |  | ---------------------- | 
|                                                                                                                                                        |  |   |  |  | March 31, 2011 |  |                        |  |  |   | December 31, 2010 | 
|Balance Sheets:                                                                                                                                         |  |   |  |  |                |  | (dollars in thousands) |  |  |   |                   |  |  |  | (dollars in thousands) | 
|Assets:                                                                                                                                                 |  |   |  |  |                |  |                        |  |  |   |                   |  |  |  |                        | 
|Real estate, net of accumulated depreciation                                                                                                            |  | $ |  |  |                |  | 2,845,726              |  |  | $ |                   |  |  |  | 2,913,570              | 
|Real estate debt and securities investments                                                                                                             |  |   |  |  |                |  | 92,230                 |  |  |   |                   |  |  |  | 86,346                 | 
|Other assets                                                                                                                                            |  |   |  |  |                |  | 371,634                |  |  |   |                   |  |  |  | 335,640                | 
|                                                                                                                                                        |  |   |  |  |                |  |                        |  |  |   |                   |  |  |  |                        | 
|                                                                                                                                                        |  |   |  | 
|Total Assets                                                                                                                                            |  | $ |  |  |                |  | 3,309,590              |  |  | $ |                   |  |  |  | 3,335,556              | 
|                                                                                                                                                        |  |   |  |  |                |  |                        |  |  |   |                   |  |  |  |                        | 
|                                                                                                                                                        |  |   |  | 
|Liabilities and Equity:                                                                                                                                 |  |   |  |  |                |  |                        |  |  |   |                   |  |  |  |                        | 
|Mortgage debt                                                                                                                                           |  | $ |  |  |                |  | 2,043,004              |  |  | $ |                   |  |  |  | 2,063,151              | 
|Other liabilities                                                                                                                                       |  |   |  |  |                |  | 129,849                |  |  |   |                   |  |  |  | 109,265                | 
|Equity                                                                                                                                                  |  |   |  |  |                |  | 1,136,737              |  |  |   |                   |  |  |  | 1,163,140              | 
|                                                                                                                                                        |  |   |  |  |                |  |                        |  |  |   |                   |  |  |  |                        | 
|                                                                                                                                                        |  |   |  | 
|Total Liabilities and Equity                                                                                                                            |  | $ |  |  |                |  | 3,309,590              |  |  | $ |                   |  |  |  | 3,335,556              | 
|                                                                                                                                                        |  |   |  |  |                |  |                        |  |  |   |                   |  |  |  |                        | 
|                                                                                                                                                        |  |   |  | 
|Companys share of equity                                                                                                                               |  | $ |  |  |                |  | 547,484                |  |  | $ |                   |  |  |  | 563,141                | 
|Net excess of cost of investments over the net book value of underlying net assets (net of accumulated depreciation of $1,351 and
$1,446, respectively) |  |   |  |  |                |  | 10,040                 |  |  |   |                   |  |  |  | 10,133                 | 
|                                                                                                                                                        |  |   |  |  |                |  |                        |  |  |   |                   |  |  |  |                        | 
|                                                                                                                                                        |  |   |  | 
|Carrying value of investments in unconsolidated entities                                                                                                |  | $ |  |  |                |  | 557,524                |  |  | $ |                   |  |  |  | 573,274                | 
|                                                                                                                                                        |  |   |  |  |                |  |                        |  |  |   |                   |  |  |  |                        | 



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)



|                                                                        |  |   |  |  |                                  |  |          |  |  |  |                                  |  |  |  |          | 
|----------------------------------------------------------------------- |  | - |  |  | -------------------------------- |  | -------- |  |  |  | -------------------------------- |  |  |  | -------- | 
|                                                                        |  |   |  |  | Three months endedMarch 31,
2011 |  |          |  |  |  | Three months endedMarch 31,
2010 | 
|Statements of Operations:                                               |  |   |  |  |                                  |  |          |  |  |  |                                  |  |  |  |          | 
|Revenues                                                                |  | $ |  |  |                                  |  | 89,379   |  |  |  | $                                |  |  |  | 64,674   | 
|                                                                        |  |   |  |  |                                  |  |          |  |  |  |                                  |  |  |  |          | 
|Expenses:                                                               |  |   |  |  |                                  |  |          |  |  |  |                                  |  |  |  |          | 
|Interest expense and loan cost amortization                             |  | $ |  |  |                                  |  | 27,768   |  |  |  | $                                |  |  |  | 24,988   | 
|Depreciation and amortization                                           |  |   |  |  |                                  |  | 30,513   |  |  |  |                                  |  |  |  | 21,128   | 
|Operating expenses, ground rent and general and administrative expenses |  |   |  |  |                                  |  | 43,880   |  |  |  |                                  |  |  |  | 24,637   | 
|Impairments                                                             |  |   |  |  |                                  |  | 0        |  |  |  |                                  |  |  |  | 8,774    | 
|                                                                        |  |   |  |  |                                  |  |          |  |  |  |                                  |  |  |  |          | 
|                                                                        |  |   |  | 
|Total expenses                                                          |  | $ |  |  |                                  |  | 102,161  |  |  |  | $                                |  |  |  | 79,527   | 
|Net loss before gain on sale of real estate                             |  | $ |  |  |                                  |  | (12,782) |  |  |  | $                                |  |  |  | (14,853) | 
|Gain on sale of real estate                                             |  |   |  |  |                                  |  | 25       |  |  |  |                                  |  |  |  | 0        | 
|                                                                        |  |   |  |  |                                  |  |          |  |  |  |                                  |  |  |  |          | 
|                                                                        |  |   |  | 
|Net loss                                                                |  | $ |  |  |                                  |  | (12,757) |  |  |  | $                                |  |  |  | (14,853) | 
|                                                                        |  |   |  |  |                                  |  |          |  |  |  |                                  |  |  |  |          | 
|Companys share of:                                                     |  |   |  |  |                                  |  |          |  |  |  |                                  |  |  |  |          | 
|Net loss, net of excess basis depreciation of $95 and $146              |  | $ |  |  |                                  |  | (2,297)  |  |  |  | $                                |  |  |  | (3,890)  | 
|Depreciation and amortization (real estate related)                     |  | $ |  |  |                                  |  | 12,332   |  |  |  | $                                |  |  |  | 9,779    | 

The unconsolidated entities had total third
party debt of $2,043,004 at March 31, 2011 that matures as follows:



|           |  |   |  |  |  |  |           | 
|---------- |  | - |  |  |  |  | --------- | 
|2011       |  | $ |  |  |  |  | 161,808   | 
|2012       |  |   |  |  |  |  | 382,055   | 
|2013       |  |   |  |  |  |  | 195,012   | 
|2014       |  |   |  |  |  |  | 137,987   | 
|2015       |  |   |  |  |  |  | 186,825   | 
|Thereafter |  |   |  |  |  |  | 979,317   | 
|           |  |   |  |  |  |  |           | 
|           |  |  
|           |  | $ |  |  |  |  | 2,043,004 | 
|           |  |   |  |  |  |  |           | 

The debt maturities of the unconsolidated entities are not recourse to the Company and the Company has no obligation to fund
such debt maturities. It is anticipated that the ventures will be able to repay or refinance all of their debt on a timely basis.

(6) Transactions with Related Parties

The following table summarizes the Companys related party transactions for the three months ended March 31, 2011 and 2010.



|                                                    |  |  |    |   |  |   |  |                            |  |  |        |  |  |                      |  |  |  |  |       |               |  |   |  |  |  |                  |        |  |  |   |  |  |  |  |        | 
|--------------------------------------------------- |  |  | -- | - |  | - |  | -------------------------- |  |  | ------ |  |  | -------------------- |  |  |  |  | ----- | ------------- |  | - |  |  |  | ---------------- | ------ |  |  | - |  |  |  |  | ------ | 
|                                                    |  |  |    |   |  |   |  | For the three months ended |  |  |        |  |  | Unpaid amounts as of | 
|                                                    |  |  |    |   |  |   |  | March 31,2011              |  |  |        |  |  | March 31,2010        |  |  |  |  |       | March 31,2011 |  |   |  |  |  | December 31,2010 |       
|General and administrative:                         |  |  |    |   |  |   |  |                            |  |  |        |  |  |                      |  |  |  |  |       |               |  |   |  |  |  |                  |        |  |  |   |  |  |  |  |        | 
|General and administrative reimbursement            |  |  | (a | ) |  | $ |  |                            |  |  | 1,954  |  |  | $                    |  |  |  |  | 2,231 |               |  | $ |  |  |  |                  | 2,035  |  |  | $ |  |  |  |  | 1,862  | 
|Loan servicing                                      |  |  | (b | ) |  | $ |  |                            |  |  | 147    |  |  | $                    |  |  |  |  | 133   |               |  | $ |  |  |  |                  | 49     |  |  | $ |  |  |  |  | 0      | 
|Investment advisor fee                              |  |  | (c | ) |  | $ |  |                            |  |  | 382    |  |  | $                    |  |  |  |  | 332   |               |  | $ |  |  |  |                  | 257    |  |  | $ |  |  |  |  | 127    | 
|                                                    |  |  |    |   |  |   |  |                            |  |  |        |  |  |                      |  |  |  |  |       |               |  |   |  |  |  |                  |        |  |  |   |  |  |  |  |        | 
|Total general and administrative to related parties |  |  |    |   |  | $ |  |                            |  |  | 2,483  |  |  | $                    |  |  |  |  | 2,696 |               |  | $ |  |  |  |                  | 2,341  |  |  | $ |  |  |  |  | 1,989  | 
|                                                    |  |  |    |   |  |   |  |                            |  |  |        |  |  |                      |  |  |  |  |       |               |  |   |  |  |  |                  |        |  |  |   |  |  |  |  |        | 
|                                                    |  |  |    |   |  |   |  |                            | 
|Property management fees                            |  |  | (d | ) |  | $ |  |                            |  |  | 7,843  |  |  | $                    |  |  |  |  | 7,074 |               |  | $ |  |  |  |                  | 46     |  |  | $ |  |  |  |  | 100    | 
|Business manager fee                                |  |  | (e | ) |  | $ |  |                            |  |  | 10,000 |  |  | $                    |  |  |  |  | 6,000 |               |  | $ |  |  |  |                  | 10,000 |  |  | $ |  |  |  |  | 10,000 | 
|Loan placement fees                                 |  |  | (f | ) |  | $ |  |                            |  |  | 103    |  |  | $                    |  |  |  |  | 204   |               |  | $ |  |  |  |                  | 0      |  |  | $ |  |  |  |  | 0      | 



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)



|(a) | The Business Manager and its related parties are entitled to reimbursement for general and administrative expenses of the Business Manager and its related parties
relating to the Companys administration. Unpaid amounts as of March 31, 2011 and December 31, 2010 are included in accounts payable and accrued expenses on the consolidated balance sheets.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | A related party of the Business Manager provides loan servicing to the Company for an annual fee. Effective May 1, 2009, the loan servicing fees were reduced to
200 dollars per month, per loan for the Companys non-lodging properties. The Companys lodging properties will continue to be billed at 225 dollars per month, per loan and MB REIT properties at 200 dollars per month, per loan.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | The Company pays a related party of the Business Manager to purchase and monitor its investment in marketable securities.
|--- | -------------------------------------------------------------------------------------------------------------------------



|(d) | The property manager, an entity owned principally by individuals who are related parties of the Business Manager, is entitled to receive property management fees up to
4.5% of gross operating income (as defined), for management and leasing services. In addition, the property manager is entitled to receive an oversight fee of 1% of gross operating income (as defined) in operating companies purchased by the Company.
Unpaid amounts as of March 31, 2011 and December 31, 2010 are included in advanced rent and other liabilities on the consolidated balance sheets. In addition to the fee, the property manager receives reimbursements of payroll costs for
property level employees. The Company reimbursed the property manager $2,057 and $1,140 for the three months ended March 31, 2011 and 2010.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(e) | After the Companys stockholders have received a non-cumulative, non-compounded return of 5% per annum on their invested capital, the Company pays
its Business Manager an annual business management fee of up to 1% of the average invested assets, payable quarterly in an amount equal to 0.25% of the average invested assets as of the last day of the immediately preceding quarter. For
the three months ended March 31, 2011 and 2010, average invested assets were $11,321,686 and $10,992,902 and operating expenses, as defined, were $16,387 and $16,406 or 0.58% and 0.60%, respectively, of average invested assets. The Company
incurred a business manager fee of $10,000 and $6,000 for the three months ended March 31, 2011 and 2010. The Business Manager waived the remaining fee of $18,304 and $21,482, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(f) | The Company pays a related party of the Business Manager 0.2% of the principal amount of each loan placed for the Company. Such costs are capitalized as loan fees and
amortized over the respective loan term.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2011 and December 31, 2010, the Company had deposited $371
and $370, respectively, in Inland Bank and Trust, a subsidiary of Inland Bancorp, Inc., an affiliate of The Inland Real Estate Group, Inc.

The Company is party to an agreement with an LLC formed as an insurance association captive (the Captive), which is wholly-owned by the
Company and three related parties, Inland Real Estate Corporation (IRC), Inland Western Real Estate Trust, Inc. and Inland Diversified Real Estate Trust, Inc. The Company paid insurance premiums of $2,328 and $2,350 for the three months ended
March 31, 2011 and March 31, 2010, respectively.

In addition, the Company held 843,820 shares of IRC valued $8,050 as of
March 31, 2011. As of March 31, 2010 the Company held 833,820 shares of IRC valued at $7,629.



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)



(7) Notes Receivable

The Companys notes receivable balance was $34,025 and $54,047 as of March 31, 2011 and December 31, 2010, respectively, and consisted of installment notes from unrelated parties that
mature on various dates through December 2013. The notes are secured by mortgages on vacant land and hotel properties. Interest is due each month at rates ranging from 5.85% to 9.5% per annum. For the three months ended March 31, 2011 and
2010, the Company recorded interest income from notes receivable of $1,296 and $3,225, which is included in the interest and dividend income on the consolidated statements of operations and other comprehensive income.

On October 22, 2010, the Company entered into a restructure agreement with a borrower, Stan Thomas Properties on certain loans. In 2010, prior to
foreclosure, the Company recorded its note receivable at the estimated fair value of $20,000 which resulted in an impairment of $21,377. As final settlement of the restructure, the Company received title to the underlying collateral property on
March 8, 2011. The property was recorded in investment properties at its estimated fair value of $20,000.

(8) Investment in
Marketable Securities

Investment in marketable securities of $274,241 and $268,726 at March 31, 2011 and December 31, 2010,
respectively, consists of primarily preferred and common stock investments in other REITs and certain real estate related bonds which are classified as available-for-sale securities and recorded at fair value.

Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and reported as a separate component of comprehensive
income until realized. Of the investment securities held as of March 31, 2011, the Company has net accumulated other comprehensive income of $56,417, which includes gross unrealized losses of $6,868. All such gross unrealized losses on
investments have been in an unrealized loss position for less than twelve months and such investments have a related fair value of $42,968 as of March 31, 2011.

Dividend income is recognized when earned. During the three months ended March 31, 2011 and 2010, dividend income of $4,204 and $3,667 was recognized and is included in interest and dividend income
on the consolidated statements of operations and other comprehensive income.

(9) Mortgages, Notes and Margins Payable

Mortgage loans outstanding as of March 31, 2011 and December 31, 2010 were $5,468,570 and $5,508,668 and had a weighted average interest rate
of 5.2% and 5.1%, respectively. Mortgage premium and discount, net was a discount of $28,916 and $38,712 as of March 31, 2011 and December 31, 2010. As of March 31, 2011, scheduled maturities for the Companys outstanding
mortgage indebtedness had various due dates through December 2047.



|           |  |   |  |                     |           |  |                               |  |       | 
|---------- |  | - |  | ------------------- | --------- |  | ----------------------------- |  | ----- | 
|           |  |   |  | As ofMarch 31, 2011 |           |  | Weighted averageinterest rate | 
|2011       |  | $ |  |                     | 484,978   |  |                               |  | 3.83% | 
|2012       |  | $ |  |                     | 705,937   |  |                               |  | 3.97% | 
|2013       |  | $ |  |                     | 995,831   |  |                               |  | 4.83% | 
|2014       |  | $ |  |                     | 281,328   |  |                               |  | 5.59% | 
|2015       |  | $ |  |                     | 460,217   |  |                               |  | 5.45% | 
|Thereafter |  | $ |  |                     | 2,540,279 |  |                               |  | 5.85% | 

The Company is negotiating
refinancing debt maturing in 2011 with various lenders at terms that will most likely require us to pay higher interest rates and to invest additional equity in the outstanding loans. It is anticipated that the Company will be able to repay,
refinance or extend the maturities and the Company believes it has adequate sources of funds to meet short term cash needs related to these refinancings. Of the outstanding debt, approximately $675,303 is recourse to the Company.

Some of the mortgage loans require compliance with certain covenants, such as debt service ratios, investment restrictions and distribution limitations.
As of March 31, 2011, the Company was in compliance with all mortgage loan requirements except six loans



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)



with a carrying value of approximately $98,630 and one loan for a consolidated joint venture with a carrying value of $10,135; none of which are cross collateralized with any other mortgage
loans. The mortgage loans in default are not classified as current maturities, but rather by the original maturity date.

During the first
quarter of 2011, the Company fully amortized the $10,368 of a mark to market mortgage discount on three properties. The recognition of the $10,368 discount was recorded as a result of the properties mortgage loans, totaling $63,955, being in
default. If the lender takes possession of the any of the properties through a consensual transfer, we will likely recognize a gain on the forgiveness of debt comparable to the discount being recognized this period.

The Company has purchased a portion of its securities through margin accounts. As of March 31, 2011 and December 31, 2010, the Company has
recorded a payable of $56,289 and $62,101, respectively, for securities purchased on margin. At March 31, 2011 and March 31, 2010, this rate was .608% and .581%. Interest expense in the amount of $85 and $68 was recognized in interest
expense on the consolidated statements of operations and other comprehensive income for the three months ended March 31, 2011 and 2010, respectively.

(10) Derivatives

As of March 31, 2011, in connection with ten mortgages payable that
have variable interest rates, the Company has entered into interest rate swap and cap agreements, with a notional value of $405,069. The Companys interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange
for the Company making fixed rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the
strike rate on the contract in exchange for an up front premium. The interest rate swaps and cap were considered highly effective as of March 31, 2011. The fair value of the Companys swaps increased $852 during the three months ended
March 31, 2011 and is reflected in other comprehensive income (loss) on the consolidated statements of operations and other comprehensive income.

The following table summarizes interest rate swap and cap contracts outstanding as of March 31, 2011 and December 31, 2010:



|                  |  |                |                   |  |          |  |                   |              |  |  |                            |  |  |  |               |  |                |   |   |  |  |  |                                    |  |  |  |  |  |                           |   |  |  |  |  |        |   |  |  |  |  |  |   |  |  |  |  |        |   |  |  |  | 
|----------------- |  | -------------- | ----------------- |  | -------- |  | ----------------- | ------------ |  |  | -------------------------- |  |  |  | ------------- |  | -------------- | - | - |  |  |  | ---------------------------------- |  |  |  |  |  | ------------------------- | - |  |  |  |  | ------ | - |  |  |  |  |  | - |  |  |  |  | ------ | - |  |  |  | 
|Date Entered      |  | Effective Date |                   |  | End Date |  |                   | PayFixedRate |  |  | Receive FloatingRate Index |  |  |  |               |  | NotionalAmount |   |   |  |  |  | Fair
Value    December 31,    2010 |  |  |  |  |  | FairValue ofMarch 31,2011 |  
|March 28,2008     |  |                | March 28, 2008    |  |          |  | March 31, 2011    |              |  |  | 2.81%                      |  |  |  | 1 month LIBOR |  |                |   | $ |  |  |  | 50,000                             |  |  |  |  |  |                           | $ |  |  |  |  | (312   | ) |  |  |  |  |  | $ |  |  |  |  | 0      |   |  |  |  | 
|November 16, 2007 |  |                | November 20, 2007 |  |          |  | April 1, 2011     |              |  |  | 4.45%                      |  |  |  | 1 month LIBOR |  |                |   |   |  |  |  | 24,425                             |  |  |  |  |  |                           |   |  |  |  |  | (253   | ) |  |  |  |  |  |   |  |  |  |  | 3      |   |  |  |  | 
|March 28, 2008    |  |                | March 28, 2008    |  |          |  | March 27, 2013    |              |  |  | 3.32%                      |  |  |  | 1 month LIBOR |  |                |   |   |  |  |  | 33,062                             |  |  |  |  |  |                           |   |  |  |  |  | (1,819 | ) |  |  |  |  |  |   |  |  |  |  | (1,579 | ) |  |  |  | 
|December 12, 2008 |  |                | January 1, 2009   |  |          |  | December 12, 2011 |              |  |  | (1)                        |  |  |  | (1)           |  |                |   |   |  |  |  | 20,245                             |  |  |  |  |  |                           |   |  |  |  |  | 0      |   |  |  |  |  |  |   |  |  |  |  | 0      |   |  |  |  | 
|December 23, 2008 |  |                | January 5, 2009   |  |          |  | December 22, 2011 |              |  |  | 1.86%                      |  |  |  | 1 month LIBOR |  |                |   |   |  |  |  | 16,637                             |  |  |  |  |  |                           |   |  |  |  |  | (242   | ) |  |  |  |  |  |   |  |  |  |  | (186   | ) |  |  |  | 
|January 16, 2009  |  |                | January 13, 2009  |  |          |  | January 13, 2012  |              |  |  | 1.62%                      |  |  |  | 1 month LIBOR |  |                |   |   |  |  |  | 22,000                             |  |  |  |  |  |                           |   |  |  |  |  | (282   | ) |  |  |  |  |  |   |  |  |  |  | (221   | ) |  |  |  | 
|August 19, 2010   |  |                | August 31, 2010   |  |          |  | March 27, 2012    |              |  |  | 0.63%                      |  |  |  | 1 month LIBOR |  |                |   |   |  |  |  | 34,373                             |  |  |  |  |  |                           |   |  |  |  |  | (84    | ) |  |  |  |  |  |   |  |  |  |  | (77    | ) |  |  |  | 
|October 15, 2010  |  |                | November 1, 2010  |  |          |  | December 19, 2011 |              |  |  | 0.77%                      |  |  |  | 1 month LIBOR |  |                |   |   |  |  |  | 125,000                            |  |  |  |  |  |                           |   |  |  |  |  | (487   | ) |  |  |  |  |  |   |  |  |  |  | (391   | ) |  |  |  | 
|October 15, 2010  |  |                | November 1, 2010  |  |          |  | April 23, 2013    |              |  |  | 0.94%                      |  |  |  | 1 month LIBOR |  |                |   |   |  |  |  | 29,727                             |  |  |  |  |  |                           |   |  |  |  |  | (54    | ) |  |  |  |  |  |   |  |  |  |  | (3     | ) |  |  |  | 
|January 7, 2011   |  |                | January 7, 2011   |  |          |  | January 13, 2013  |              |  |  | 0.91%                      |  |  |  | 1 month LIBOR |  |                |   |   |  |  |  | 26,527                             |  |  |  |  |  |                           |   |  |  |  |  | N/A    |   |  |  |  |  |  |   |  |  |  |  | (73    | ) |  |  |  | 
|January 7, 2011   |  |                | January 7, 2011   |  |          |  | January 13, 2013  |              |  |  | 0.91%                      |  |  |  | 1 month LIBOR |  |                |   |   |  |  |  | 23,073                             |  |  |  |  |  |                           |   |  |  |  |  | N/A    |   |  |  |  |  |  |   |  |  |  |  | (64    | ) |  |  |  | 
|                  |  |                |                   |  |          |  |                   |              |  |  |                            |  |  |  |               |  |                |   |   |  |  |  |                                    |  |  |  |  |  |                           |   |  |  |  |  |        |   |  |  |  | 
|                  |  |                |                   |  |          |  |                   |              |  |  |                            |  |  |  |               |  |                | $ |   |  |  |  | 405,069                            |  |  |  |  |  |                           | $ |  |  |  |  | (3,533 | ) |  |  |  |  |  | $ |  |  |  |  | (2,591 | ) |  |  |  | 
|                  |  |                |                   |  |          |  |                   |              |  |  |                            |  |  |  |               |  |                |   |   |  |  |  |                                    |  |  |  |  |  |                           |   |  |  |  |  |        |   |  |  |  | 

(1) Interest rate cap at 4.75%.

Risk Management Objective of Using Derivatives

The Company is exposed to certain risk
arising from both its business operations and economic conditions. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its debt funding and through the
use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to add stability to interest expense and to manage its exposure to interest rate movements.



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)



Cash Flow Hedges of Interest Rate Risk

The Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a
counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently
reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three months ended March 31, 2011 and 2010, such derivatives were used to hedge the variable cash flows associated with existing
variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. The Company recorded $37 and $65 of ineffectiveness expense during the three months ended March 31, 2011 and 2010,
which is included in interest expense on the consolidated statements of operations and other comprehensive income.

The tables below present
the effect of the Companys derivative financial instruments on the consolidated statements of operations and other comprehensive income for the three months ended March 31, 2011 and 2010:



|                                                       |  |   |  |                                                                           |     |  |                                                                                          |   |  |      |  |  |                                                                                         |  |  |                                                                                                                             |                  |  |      |   |  |                                                                                                                             |  |  |        |   |  |   |  |  |  |  |      |      |  |  |                  |  |  |      |  |  |  |  |     |   |  |   |  |  |  |  |     |  
|------------------------------------------------------ |  | - |  | ------------------------------------------------------------------------- | --- |  | ---------------------------------------------------------------------------------------- | - |  | ---- |  |  | --------------------------------------------------------------------------------------- |  |  | --------------------------------------------------------------------------------------------------------------------------- | ---------------- |  | ---- | - |  | --------------------------------------------------------------------------------------------------------------------------- |  |  | ------ | - |  | - |  |  |  |  | ---- | ---- |  |  | ---------------- |  |  | ---- |  |  |  |  | --- | - |  | - |  |  |  |  | --- | -
|Derivatives in
ASC 815 Cash
Flow Hedging
Relationships |  |   |  | Amount of Gain or(Loss) Recognized inOCI on Derivative(Effective
Portion) |     |  | Location of Gain or(Loss) Reclassifiedfrom AccumulatedOCI into Income(Effective Portion) |   |  |      |  |  | Amount of Gain or(Loss) Reclassified fromAccumulated OCI 
intoIncome (EffectivePortion) |  |  | Location of Gain or(Loss) Recognized inIncome on Derivative(Ineffective Portionand
AmountExcluded fromEffectivenessTesting) |                  |  |      |   |  | Amount of Gain or(Loss) Recognized inIncome on
Derivative(Ineffective Portion andAmount Excluded fromEffectiveness Testing) | 
|                                                       |  |   |  | Three Months EndedMarch
31,                                               |     |  |                                                                                          |   |  |      |  |  | Three Months EndedMarch 31,                                                             |  |  |                                                                                                                             |                  |  |      |   |  | Three Months EndedMarch 31,                                                                                                 | 
|                                                       |  |   |  | 2011                                                                      |     |  |                                                                                          |   |  | 2010 |  |  |                                                                                         |  |  |                                                                                                                             |                  |  | 2011 |   |  |                                                                                                                             |  |  | 2010   |   |  |   |  |  |  |  |      | 2011 |  |  |                  |  |  | 2010 | 
|Interest Rate Products                                 |  | $ |  |                                                                           | 852 |  |                                                                                          | $ |  |      |  |  | 334                                                                                     |  |  |                                                                                                                             | Interest expense |  |      | $ |  |                                                                                                                             |  |  | (1,229 | ) |  | $ |  |  |  |  | (992 | )    |  |  | Interest expense |  |  | $    |  |  |  |  | (37 | ) |  | $ |  |  |  |  | (65 | )

Non-designated Hedges

The Company has entered into a put/call agreement as a part of the MB REIT transaction. This agreement is considered a derivative instrument and is
accounted for as such. The fair value of the put/call agreement is estimated using the Black-Scholes model. The fair value of the option was $849 and $1,274 and is included as a liability in advance rent and other liabilities on the consolidated
balance sheets as of March 31, 2011 and December 31, 2010, respectively, with $425 included in other income on the consolidated statements of operations and other comprehensive income at March 31, 2011. For the three months ended
March 31, 2010, $205 of income was included in other income on the consolidated statements of operations and other comprehensive income.

(11) Fair Value Measurements

Fair
Value Measurements

In accordance with ASC 820, Fair Value Measurement and Disclosures,the Company defines fair value based on the
price that would be received upon sale of an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses a fair value hierarchy that prioritizes
observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below:



| |  |  | Level 1 - Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2 - Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)



| |  |  | Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and
liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company has estimated the fair value of its financial and non-financial instruments using available market information and valuation methodologies the Company believes to be appropriate for these
purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of amounts that would be realized upon disposition.

For assets and liabilities measured at fair value on a recurring basis, quantitative disclosure of the fair value for each major category of assets and
liabilities is presented below:



|                                                 |  |   |  |                                                                   |         |  |  |   |  |                                                  |  |  |        |   |  |                                                    |  |  |  |  |      |  
|------------------------------------------------ |  | - |  | ----------------------------------------------------------------- | ------- |  |  | - |  | ------------------------------------------------ |  |  | ------ | - |  | -------------------------------------------------- |  |  |  |  | ---- | -
|                                                 |  |   |  | Fair Value Measurements at March 31, 2011                         |        
|Description                                      |  |   |  | Using Quoted Pricesin Active Marketsfor Identical Assets(Level 1) |         |  |  |   |  | Using SignificantOther ObservableInputs(Level 2) |  |  |        |   |  | Using SignificantOther UnobservableInputs(Level 3) | 
|Available-for-sale real estate equity securities |  | $ |  |                                                                   | 274,241 |  |  | $ |  |                                                  |  |  | 0      |   |  | $                                                  |  |  |  |  | 0    |  
|                                                 |  |   |  |                                                                   |         |  |  |   |  |                                                  |  |  |        |   |  |                                                    |  |  |  |  |      |  
|Total assets                                     |  | $ |  |                                                                   | 274,241 |  |  | $ |  |                                                  |  |  | 0      |   |  | $                                                  |  |  |  |  | 0    |  
|                                                 |  |   |  |                                                                   |         |  |  |   |  |                                                  |  |  |        |   |  |                                                    |  |  |  |  |      |  
|Put/call agreement in MB REIT                    |  | $ |  |                                                                   | 0       |  |  | $ |  |                                                  |  |  | 0      |   |  | $                                                  |  |  |  |  | (849 | )
|Derivative interest rate instruments             |  |   |  |                                                                   | 0       |  |  |   |  |                                                  |  |  | (2,591 | ) |  |                                                    |  |  |  |  | 0    |  
|                                                 |  |   |  |                                                                   |         |  |  |   |  |                                                  |  |  |        |   |  |                                                    |  |  |  |  |      |  
|Total liabilities                                |  | $ |  |                                                                   | 0       |  |  | $ |  |                                                  |  |  | (2,591 | ) |  | $                                                  |  |  |  |  | (849 | )
|                                                 |  |   |  |                                                                   |         |  |  |   |  |                                                  |  |  |        |   |  |                                                    |  |  |  |  |      |  



|                                                 |  |   |  |                                                                   |         |  |  |   |  |                                                  |  |  |        |   |  |                                                    |  |  |  |  |        |  
|------------------------------------------------ |  | - |  | ----------------------------------------------------------------- | ------- |  |  | - |  | ------------------------------------------------ |  |  | ------ | - |  | -------------------------------------------------- |  |  |  |  | ------ | -
|                                                 |  |   |  | Fair Value Measurements at December 31, 2010                      |        
|Description                                      |  |   |  | Using Quoted Pricesin Active Marketsfor Identical Assets(Level 1) |         |  |  |   |  | Using SignificantOther ObservableInputs(Level 2) |  |  |        |   |  | Using SignificantOther UnobservableInputs(Level 3) | 
|Available-for-sale real estate equity securities |  | $ |  |                                                                   | 253,838 |  |  | $ |  |                                                  |  |  | 0      |   |  | $                                                  |  |  |  |  | 0      |  
|Commercial mortgage backed securities            |  |   |  |                                                                   | 0       |  |  |   |  |                                                  |  |  | 0      |   |  |                                                    |  |  |  |  | 14,888 |  
|                                                 |  |   |  |                                                                   |         |  |  |   |  |                                                  |  |  |        |   |  |                                                    |  |  |  |  |        |  
|Total assets                                     |  | $ |  |                                                                   | 253,838 |  |  | $ |  |                                                  |  |  | 0      |   |  | $                                                  |  |  |  |  | 14,888 |  
|                                                 |  |   |  |                                                                   |         |  |  |   |  |                                                  |  |  |        |   |  |                                                    |  |  |  |  |        |  
|Put/call agreement in MB REIT                    |  | $ |  |                                                                   | 0       |  |  | $ |  |                                                  |  |  | 0      |   |  | $                                                  |  |  |  |  | (1,274 | )
|Derivative interest rate instruments             |  |   |  |                                                                   | 0       |  |  |   |  |                                                  |  |  | (3,533 | ) |  |                                                    |  |  |  |  | 0      |  
|                                                 |  |   |  |                                                                   |         |  |  |   |  |                                                  |  |  |        |   |  |                                                    |  |  |  |  |        |  
|Total liabilities                                |  | $ |  |                                                                   | 0       |  |  | $ |  |                                                  |  |  | (3,533 | ) |  | $                                                  |  |  |  |  | (1,274 | )
|                                                 |  |   |  |                                                                   |         |  |  |   |  |                                                  |  |  |        |   |  |                                                    |  |  |  |  |        |  

Level 1

At
March 31, 2011 and December 31, 2010, the fair value of the available for sale real estate equity securities have been estimated based upon quoted market prices for the same or similar issues when current quoted market prices are
available. Unrealized gains on investment are reflected in unrealized gain (loss) on investment securities in other comprehensive income on the consolidated statements of operations and other comprehensive income.

Level 2

To calculate the fair value of the
derivative contracts, the Company primarily uses quoted prices for similar contracts. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterpartys
nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements.



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)



Although the Company has determined that the majority of the inputs used to value its derivatives fall
within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties.
However, as of December 31, 2010, the Company has assessed the significance of the effect of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not
significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Level 3

The following table summarizes
activity for the Companys assets and liabilities measured at fair value on a recurring basis using Level 3 inputs as of March 31, 2011:



|                           |  |   |  |                |          |  |  |   |  |                     |  |  |         | 
|-------------------------- |  | - |  | -------------- | -------- |  |  | - |  | ------------------- |  |  | ------- | 
|                           |  |   |  | Level 3 Assets |          |  |  |   |  | Level 3 Liabilities | 
|Balance, December 31, 2010 |  | $ |  |                | 14,888   |  |  | $ |  |                     |  |  | (1,274) | 
|Purchases                  |  |   |  |                | 0        |  |  |   |  |                     |  |  | 0       | 
|Sales                      |  |   |  |                | (16,363) |  |  |   |  |                     |  |  | 0       | 
|Realized gains             |  |   |  |                | 1,475    |  |  |   |  |                     |  |  | 425     | 
|Unrealized gains           |  |   |  |                | 0        |  |  |   |  |                     |  |  | 0       | 
|                           |  |   |  |                |          |  |  |   |  |                     |  |  |         | 
|Balance, March 31, 2011    |  | $ |  |                | 0        |  |  | $ |  |                     |  |  | 849     | 
|                           |  |   |  |                |          |  |  |   |  |                     |  |  |         | 

The Companys valuation of its put/call agreement in MB REIT is determined using present value estimates of the put
liability based on probable dividend yields.

The following table summarizes activity for the Companys assets measured at fair value on
a non-recurring basis The Company recognized certain non-cash impairment charges to write the investments to their fair values in the period ended March 31, 2011 and 2010. The asset groups that were impaired to fair value through this
evaluation are:



|                      |  |   |  |                                                                     |        |  |                      |   |  |                             |  |  |          |  |  |                                                                     |  |  |  |  |       |                              |  |   |  |  |  |  |       | 
|--------------------- |  | - |  | ------------------------------------------------------------------- | ------ |  | -------------------- | - |  | --------------------------- |  |  | -------- |  |  | ------------------------------------------------------------------- |  |  |  |  | ----- | ---------------------------- |  | - |  |  |  |  | ----- | 
|                      |  |   |  | As of March 31, 2011                                                |        |  | As of March 31, 2010 |  
|                      |  |   |  | Fair ValueMeasurements UsingSignificantUnobservable Inputs(Level 3) |        |  |                      |   |  | TotalImpairmentGain(Losses) |  |  |          |  |  | Fair ValueMeasurementsUsing SignificantUnobservable Inputs(Level 3) |  |  |  |  |       | TotalImpairmentGain (Losses) | 
|Investment properties |  | $ |  |                                                                     | 67,250 |  |                      | $ |  |                             |  |  | (27,967) |  |  | $                                                                   |  |  |  |  | 7,250 |                              |  | $ |  |  |  |  | (945) | 
|                      |  |   |  |                                                                     |        |  |                      |   |  |                             |  |  |          |  |  |                                                                     |  |  |  |  |       |                              |  |   |  |  |  |  |       | 
|Total                 |  | $ |  |                                                                     | 67,250 |  |                      | $ |  |                             |  |  | (27,967) |  |  | $                                                                   |  |  |  |  | 7,250 |                              |  | $ |  |  |  |  | (945) | 
|                      |  |   |  |                                                                     |        |  |                      |   |  |                             |  |  |          |  |  |                                                                     |  |  |  |  |       |                              |  |   |  |  |  |  |       | 

Investment Properties

The Companys estimated fair value relating to the investment properties impairment analysis is based on a comparison of letters of intent, broker opinion of value and discounted cash flow
models, which includes contractual inflows and outflows over a specific holding period. The cash flows consist of unobservable inputs such as contractual revenues and forecasted revenues and expenses. These unobservable inputs are based on market
conditions and the Companys expected growth rates. Capitalization rates and discount rates are utilized in the model and are based upon observable rates that the Company believes to be within a reasonable range of current market rates. As of
March 31, 2011 and March 31, 2010, the impairment of the investment properties was $27,967 and $945, respectively. Certain properties were impaired prior to disposition and the related impairment charge of $0 and $945 is included in
discontinued operations for the three months ended March 31, 2011 and March 31, 2010, respectively.

Financial Instruments not
Measured at Fair Value

The table below represents the fair value of financial instruments presented at carrying values in our consolidated
financial statements as of March 31, 2011 and December 31, 2010.



|                           |  |   |  |                |           |  |                   |   |  |                      |  |  |           |  |  |                |  |  |  |  |           |                      |  |   |  |  |  |  |           | 
|-------------------------- |  | - |  | -------------- | --------- |  | ----------------- | - |  | -------------------- |  |  | --------- |  |  | -------------- |  |  |  |  | --------- | -------------------- |  | - |  |  |  |  | --------- | 
|                           |  |   |  | March 31, 2011 |           |  | December 31, 2010 |  
|                           |  |   |  | Carrying Value |           |  |                   |   |  | Estimated Fair Value |  |  |           |  |  | Carrying Value |  |  |  |  |           | Estimated Fair Value | 
|Mortgage and notes payable |  | $ |  |                | 5,468,570 |  |                   | $ |  |                      |  |  | 5,371,131 |  |  | $              |  |  |  |  | 5,508,668 |                      |  | $ |  |  |  |  | 5,408,898 | 
|Margins payable            |  | $ |  |                | 56,289    |  |                   | $ |  |                      |  |  | 56,289    |  |  | $              |  |  |  |  | 62,101    |                      |  | $ |  |  |  |  | 62,101    | 
|Notes receivable           |  | $ |  |                | 34,025    |  |                   | $ |  |                      |  |  | 32,531    |  |  | $              |  |  |  |  | 54,047    |                      |  | $ |  |  |  |  | 52,193    | 



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)



The Company estimates the fair value of its mortgages and margins payable by discounting the future cash
flows of each instrument at rates currently offered to the Company for similar debt instruments of comparable maturities by the Companys lenders. The Company estimates the fair value of its notes receivable by discounting the future cash flows
of each instrument at rates currently available to the Company for similar instruments or in the case of certain impaired loans, by determining the fair value of the collateral supporting the loan.

(12) Income Taxes

The Company is
qualified and has elected to be taxed as a real estate investment trust (REIT) under the Internal Revenue Code of 1986, as amended, for federal income tax purposes commencing with the tax year ending December 31, 2005. Since the
Company qualifies for taxation as a REIT, the Company generally will not be subject to federal income tax on taxable income that is distributed to stockholders. A REIT is subject to a number of organizational and operational requirements, including
a requirement that it currently distributes at least 90% of its REIT taxable income (subject to certain adjustments) to its stockholders. If the Company fails to qualify as a REIT in any taxable year, without the benefit of certain relief
provisions, the Company will be subject to federal and state income tax on its taxable income at regular corporate tax rates. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its
income, property or net worth and federal income and excise taxes on its undistributed income.

In 2007, the Company formed wholly-owned
taxable REIT subsidiaries in connection with the acquisition of the lodging portfolios and student housing. Taxable income from non-REIT activities managed through these taxable REIT subsidiaries is subject to federal, state, and local income taxes.
As such, the Companys taxable REIT subsidiaries are required to pay income taxes at the applicable rates. In addition, the Company is also subject to certain state and local taxes. For the three months ended March 31, 2011 and 2010, an
income tax benefit of $595 and $173 was included on the consolidated statements of operations and other comprehensive income.

(13) Segment
Reporting

The Company has five business segments: Office, Retail, Industrial, Lodging and Multi-family. The Company evaluates segment
performance primarily based on net property operations. Net property operations of the segments do not include interest expense, depreciation and amortization, general and administrative expenses, net income of noncontrolling interest and other
investment income from corporate investments. The non-segmented assets primarily include the Companys cash and cash equivalents, investment in marketable securities, construction in progress, investment in unconsolidated entities and notes
receivable.

Prior to October 1, 2010, the Company considered the net property operations of the LIP-H assets, which consisted of eight
operating office and retail properties, a segment. Due to the settlement and consolidation of the remaining Lauth assets and the disposition of four of eight LIP-H assets, the Company no longer evaluates the net property operations of these assets
as a segment. For the three months ended March 31, 2011, the assets of the LIP-H segment were classified into the appropriate segment as identified above. The Company has restated the prior years comparatives to conform with current year
presentation.

For the period ended March 31, 2011, approximately 8% of the Companys rental revenue was generated by over 400
retail banking properties leased to SunTrust Banks, Inc. Also, as of March 31, 2011, approximately 7% of the Companys rental revenue was generated by three properties leased to AT&T, Inc. As a result of the concentration of revenue
generated from these properties, if SunTrust or AT&T were to cease paying rent or fulfilling its other monetary obligations, the Company could have significantly reduced rental revenues or higher expenses until the defaults were cured or the
properties were leased to a new tenant or tenants.



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)



The following table summarizes net property operations income by segment as of and for the three months
ended March 31, 2011.



|                                                            |  |   |  |       |            |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|----------------------------------------------------------- |  | - |  | ----- | ---------- |  |  | - |  | ------ |  |  | --------- |  |  | ------ |  |  |  |  | --------- | ---------- |  | - |  |  |  | ------- | ------- |  |  | - |  | ------------ |  |  | --------- |  |  | - |  |  |  |  | -------- | 
|                                                            |  |   |  | Total |            |  |  |   |  | Office |  |  |           |  |  | Retail |  |  |  |  |           | Industrial |  |   |  |  |  | Lodging |         |  |  |   |  | Multi-Family | 
|Property rentals                                            |  | $ |  |       | 159,461    |  |  | $ |  |        |  |  | 38,578    |  |  | $      |  |  |  |  | 76,354    |            |  | $ |  |  |  |         | 21,387  |  |  | $ |  |              |  |  | 0         |  |  | $ |  |  |  |  | 23,142   | 
|Straight-line rents                                         |  |   |  |       | 3,453      |  |  |   |  |        |  |  | 1,336     |  |  |        |  |  |  |  | 1,031     |            |  |   |  |  |  |         | 989     |  |  |   |  |              |  |  | 0         |  |  |   |  |  |  |  | 97       | 
|Amortization of acquired above and below market leases, net |  |   |  |       | 598        |  |  |   |  |        |  |  | (257)     |  |  |        |  |  |  |  | 924       |            |  |   |  |  |  |         | (69)    |  |  |   |  |              |  |  | 0         |  |  |   |  |  |  |  | 0        | 
|                                                            |  |   |  |       |            |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|Total rental income                                         |  | $ |  |       | 163,512    |  |  | $ |  |        |  |  | 39,657    |  |  | $      |  |  |  |  | 78,309    |            |  | $ |  |  |  |         | 22,307  |  |  | $ |  |              |  |  | 0         |  |  | $ |  |  |  |  | 23,239   | 
|                                                            |  |   |  |       |            |  |  |   |  |        |  | 
|Tenant recovery income                                      |  |   |  |       | 24,964     |  |  |   |  |        |  |  | 7,016     |  |  |        |  |  |  |  | 16,956    |            |  |   |  |  |  |         | 855     |  |  |   |  |              |  |  | 0         |  |  |   |  |  |  |  | 137      | 
|Other property income                                       |  |   |  |       | 4,931      |  |  |   |  |        |  |  | 1,059     |  |  |        |  |  |  |  | 1,825     |            |  |   |  |  |  |         | 22      |  |  |   |  |              |  |  | 0         |  |  |   |  |  |  |  | 2,025    | 
|Lodging income                                              |  |   |  |       | 132,986    |  |  |   |  |        |  |  | 0         |  |  |        |  |  |  |  | 0         |            |  |   |  |  |  |         | 0       |  |  |   |  |              |  |  | 132,986   |  |  |   |  |  |  |  | 0        | 
|                                                            |  |   |  |       |            |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|Total income                                                |  | $ |  |       | 326,393    |  |  | $ |  |        |  |  | 47,732    |  |  | $      |  |  |  |  | 97,090    |            |  | $ |  |  |  |         | 23,184  |  |  | $ |  |              |  |  | 132,986   |  |  | $ |  |  |  |  | 25,401   | 
|                                                            |  |   |  |       |            |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|                                                            |  |   |  |       |            |  |  |   |  |        |  | 
|Operating expenses                                          |  | $ |  |       | (149,136)  |  |  | $ |  |        |  |  | (12,549)  |  |  | $      |  |  |  |  | (27,650)  |            |  | $ |  |  |  |         | (2,326) |  |  | $ |  |              |  |  | (94,278)  |  |  | $ |  |  |  |  | (12,333) | 
|                                                            |  |   |  |       |            |  |  |   |  |        |  | 
|Net property operations                                     |  | $ |  |       | 177,257    |  |  | $ |  |        |  |  | 35,183    |  |  | $      |  |  |  |  | 69,440    |            |  | $ |  |  |  |         | 20,858  |  |  | $ |  |              |  |  | 38,708    |  |  | $ |  |  |  |  | 13,068   | 
|                                                            |  |   |  |       |            |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|                                                            |  |   |  |       |            |  |  |   |  |        |  | 
|Non allocated expenses (a)                                  |  | $ |  |       | (126,070)  |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|Other income and expenses (b)                               |  | $ |  |       | (73,326)   |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|Equity in earnings (loss) of unconsolidated entities        |  | $ |  |       | (2,297)    |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|Provision for asset impairment                              |  | $ |  |       | (27,967)   |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|                                                            |  |   |  |       |            |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|Net loss from continuing operations                         |  | $ |  |       | (52,403)   |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|Net income attributable to noncontrolling interests         |  | $ |  |       | (2,224)    |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|                                                            |  |   |  |       |            |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|Net loss attributable to Company                            |  | $ |  |       | (54,627)   |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|                                                            |  |   |  |       |            |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|Balance Sheet Data:                                         |  |   |  |       |            |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|Real estate assets, net                                     |  | $ |  |       | 9,628,256  |  |  | $ |  |        |  |  | 1,710,139 |  |  | $      |  |  |  |  | 3,763,270 |            |  | $ |  |  |  |         | 951,998 |  |  | $ |  |              |  |  | 2,408,993 |  |  | $ |  |  |  |  | 793,856  | 
|Non-segmented assets                                        |  |   |  |       | 1,608,408  |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|                                                            |  |   |  |       |            |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|Total Assets                                                |  | $ |  |       | 11,236,664 |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|                                                            |  |   |  |       |            |  |  |   |  |        |  |  |           |  |  |        |  |  |  |  |           |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |           |  |  |   |  |  |  |  |          | 
|                                                            |  |   |  |       |            |  |  |   |  |        |  | 
|Capital expenditures                                        |  | $ |  |       | 14,460     |  |  | $ |  |        |  |  | 710       |  |  | $      |  |  |  |  | 3,021     |            |  | $ |  |  |  |         | 25      |  |  | $ |  |              |  |  | 10,081    |  |  | $ |  |  |  |  | 623      | 



|(a) | Non allocated expenses consist of general and administrative expenses, business manager management fee and depreciation and amortization.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

|(b) | Other income and expenses consist of interest and dividend income, interest expense, other income, realized gain and impairment on securities, net, and income tax
benefit.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)



The following table summarizes net property operations income by segment as of and for the three months
ended March 31, 2010



|                                                            |  |   |  |       |           |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 
|----------------------------------------------------------- |  | - |  | ----- | --------- |  |  | - |  | ------ |  |  | -------- |  |  | ------ |  |  |  |  | -------- | ---------- |  | - |  |  |  | ------- | ------- |  |  | - |  | ------------ |  |  | -------- |  |  | - |  |  |  |  | -------- | 
|                                                            |  |   |  | Total |           |  |  |   |  | Office |  |  |          |  |  | Retail |  |  |  |  |          | Industrial |  |   |  |  |  | Lodging |         |  |  |   |  | Multi-Family | 
|Property rentals                                            |  | $ |  |       | 141,530   |  |  | $ |  |        |  |  | 37,582   |  |  | $      |  |  |  |  | 64,523   |            |  | $ |  |  |  |         | 20,443  |  |  | $ |  |              |  |  | 0        |  |  | $ |  |  |  |  | 18,982   | 
|Straight-line rents                                         |  |   |  |       | 5,034     |  |  |   |  |        |  |  | 1,613    |  |  |        |  |  |  |  | 1,559    |            |  |   |  |  |  |         | 1,819   |  |  |   |  |              |  |  | 0        |  |  |   |  |  |  |  | 43       | 
|Amortization of acquired above and below market leases, net |  |   |  |       | (99)      |  |  |   |  |        |  |  | (164)    |  |  |        |  |  |  |  | 1,360    |            |  |   |  |  |  |         | (1,295) |  |  |   |  |              |  |  | 0        |  |  |   |  |  |  |  | 0        | 
|                                                            |  |   |  |       |           |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 
|Total rental income                                         |  | $ |  |       | 146,465   |  |  | $ |  |        |  |  | 39,031   |  |  | $      |  |  |  |  | 67,442   |            |  | $ |  |  |  |         | 20,967  |  |  | $ |  |              |  |  | 0        |  |  | $ |  |  |  |  | 19,025   | 
|                                                            |  |   |  |       |           |  |  |   |  |        |  | 
|Tenant recovery income                                      |  |   |  |       | 23,378    |  |  |   |  |        |  |  | 8,325    |  |  |        |  |  |  |  | 14,316   |            |  |   |  |  |  |         | 662     |  |  |   |  |              |  |  | 0        |  |  |   |  |  |  |  | 75       | 
|Other property income                                       |  |   |  |       | 4,587     |  |  |   |  |        |  |  | 2,202    |  |  |        |  |  |  |  | 998      |            |  |   |  |  |  |         | 10      |  |  |   |  |              |  |  | 0        |  |  |   |  |  |  |  | 1,377    | 
|Lodging income                                              |  |   |  |       | 108,920   |  |  |   |  |        |  |  | 0        |  |  |        |  |  |  |  | 0        |            |  |   |  |  |  |         | 0       |  |  |   |  |              |  |  | 108,920  |  |  |   |  |  |  |  | 0        | 
|                                                            |  |   |  |       |           |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 
|Total income                                                |  | $ |  |       | 283,350   |  |  | $ |  |        |  |  | 49,558   |  |  | $      |  |  |  |  | 82,756   |            |  | $ |  |  |  |         | 21,639  |  |  | $ |  |              |  |  | 108,920  |  |  | $ |  |  |  |  | 20,477   | 
|                                                            |  |   |  |       |           |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 
|Operating expenses                                          |  | $ |  |       | (126,565) |  |  | $ |  |        |  |  | (13,360) |  |  | $      |  |  |  |  | (21,329) |            |  | $ |  |  |  |         | (2,292) |  |  | $ |  |              |  |  | (78,851) |  |  | $ |  |  |  |  | (10,733) | 
|                                                            |  |   |  |       |           |  |  |   |  |        |  | 
|Net property operations                                     |  | $ |  |       | 156,785   |  |  | $ |  |        |  |  | 36,198   |  |  | $      |  |  |  |  | 61,427   |            |  | $ |  |  |  |         | 19,347  |  |  | $ |  |              |  |  | 30,069   |  |  | $ |  |  |  |  | 9,744    | 
|                                                            |  |   |  |       |           |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 
|                                                            |  |   |  |       |           |  |  |   |  |        |  | 
|Non allocated expenses (a)                                  |  | $ |  |       | (122,547) |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 
|Other income and expenses (b)                               |  | $ |  |       | (55,547)  |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 
|Equity in earnings (loss) of unconsolidated entities        |  | $ |  |       | (3,890)   |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 
|                                                            |  |   |  |       |           |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 
|Net loss from continuing operations                         |  | $ |  |       | (25,199)  |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 
|Loss from discontinued operations, net                      |  | $ |  |       | (1,898)   |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 
|Net income attributable to noncontrolling interests         |  | $ |  |       | (2,242)   |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 
|                                                            |  |   |  |       |           |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 
|Net loss attributable to Company                            |  | $ |  |       | (29,339)  |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 
|                                                            |  |   |  |       |           |  |  |   |  |        |  |  |          |  |  |        |  |  |  |  |          |            |  |   |  |  |  |         |         |  |  |   |  |              |  |  |          |  |  |   |  |  |  |  |          | 



|(a) | Non allocated expenses consist of general and administrative expenses, business manager management fee and depreciation and amortization.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

|(b) | Other income and expenses consist of interest and dividend income, interest expense, other income, realized gain and impairment on securities, net, and income tax
benefit.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)



(14) Earnings (loss) per Share

Basic earnings (loss) per share (EPS) are computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period (the common shares).
Diluted EPS is computed by dividing net income (loss) by the common shares plus potential common shares issuable upon exercising options or other contracts. There are an immaterial amount of potentially dilutive common shares.

The basic and diluted weighted average number of common shares outstanding was 849,843,349 and 826,716,592 for the three months ended March 31, 2011
and 2010.

(15) Commitments and Contingencies

The Company has closed on several properties which have earnout components, meaning the Company did not pay for portions of these properties that were not rent producing. The Company is obligated, under
certain agreements, to pay for those portions when the tenant moves into its space and begins to pay rent. The earnout payments are based on a predetermined formula. Each earnout agreement has a limited obligation period to pay any additional
monies. If at the end of the time period allowed certain space has not been leased and occupied, the Company will own that space without any further obligation. Based on pro forma leasing rates, the Company may pay as much as $30,153 in the future
as vacant space covered by earnout agreements is occupied and becomes rent producing.

As part of the Companys consolidated MB REIT
joint venture with Minto Delaware, the Company could be required to redeem Minto Delawares interest in MB REIT beginning on October 11, 2011 subject to the terms and conditions below:



| |  |  | On or after October 11, 2011 until October 11, 2012, Minto Holdings, an affiliate of Minto Delaware, has the option to require the Company to
purchase, in whole, but not in part, 100% of the Minto Delawares investment in the MB REIT (consisting of the series A preferred stock and common stock) for a price equal to (A) if the shares of the Companys common stock are not
listed, on the earlier of (x) the date the Company purchases Minto Delawares investment or (y) 150 days after the date written notice of the exercise of the initial purchase right is given, the sum of (1) the series A
liquidation preference, payable in cash and (2) $29,300 or (B) if the shares of the Companys stock are listed, on the earlier of (x) the date the Company purchases Minto Delawares investment or (y) 150 days after the
date written notice of the exercise of the initial purchase right is given, the sum of (1) the series A liquidation preference, payable in cash and (2) 2,934,800 shares of common stock. The series A liquidation preference is equal to
$1,276 per share for 207,000 shares of series A preferred stock plus accrued and unpaid dividends.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On or after October 11, 2012, Minto Holdings has an option to require the Company to purchase, in whole, but not in part, 100% of the Minto
Delaware investment for a price equal to (A) if the shares of the Companys common stock are not listed, on the earlier of (x) the date the Company purchases the Minto Delaware investment or (y) 150 days after written notice of a
subsequent purchase right is given, the sum of (1) the series A liquidation preference, payable in cash and (2) the fair market value (pursuant to a specified formula) of the common stock held by Minto Delaware on the date written notice
of the subsequent purchase right is given, payable in cash, or (B) if the shares of the Companys common stock are listed, on the earlier of (x) the date the Company purchases the Minto Delaware equity or (y) 150 days after
written notice of the subsequent purchase right is given, the sum of (1) the series A liquidation preference, payable in cash and (2) 2,934,800 shares of common stock.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On or after October 11, 2015, so long as the MB REIT qualifies as a domestically controlled REIT, MB REIT has the right to purchase,
in whole, but not in part, 100% of Minto Delawares investment for a price equal to (A) if the shares of the Companys common stock are not listed, the sum of (1) the series A liquidation preference, payable in cash and
(2) the fair market value (pursuant to a specified formula) of the common stock of MB REIT held by Minto Delaware or (B) if the shares of the Companys common stock are listed, the sum of (1) the series A liquidation preference,
payable in cash and (2) 2,934,800 shares of common stock.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company expects Minto Holdings to exercise its put
option in the second quarter of 2011, which requires the Company purchase the series A preferred stock and common stock for an estimated price of $293,000.



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##### Table of Contents

INLAND AMERICAN REAL ESTATE TRUST, INC.

(A Maryland Corporation)

Notes to Consolidated Financial statements

(Dollar amounts in thousands,
except data amounts)

March 31, 2011

(unaudited)



Certain leases and operating agreements within the lodging segment require the Company to reserve funds
relating to replacements and renewals of the hotels furniture, fixtures and equipment. As of March 31, 2011, the Company has funded $48,666 in reserves for future improvements. This amount is included in restricted cash and escrows on the
consolidated balance sheet as of March 31, 2011.

Contemporaneous with the Companys merger with Winston Hotels, Inc., its
wholly-owned subsidiary, Inland American Winston Hotels, Inc., referred to herein as Inland American Winston, WINN Limited Partnership, or WINN, and Crockett Capital Corporation, or Crockett, memorialized in a
development memorandum their intentions to subsequently negotiate and enter into a series of contracts to develop certain hotel properties, including without limitation a Westin Hotel in Durham, North Carolina, a Hampton Inn & Suites/Aloft
Hotel in Raleigh, North Carolina, an Aloft Hotel in Chapel Hill, North Carolina and an Aloft Hotel in Cary, North Carolina (collectively referred to herein as the development hotels).

On March 6, 2008, Crockett filed an amended complaint in the General Court of Justice of the State of North Carolina against Inland American Winston
and WINN. The amended complaint alleges that the development memorandum reflecting the parties intentions regarding the development hotels was instead an agreement that legally bound the parties. The amended complaint further claims that
Inland American Winston and WINN breached the terms of the alleged agreement by failing to take certain actions to develop the Cary, North Carolina hotel and by refusing to convey their rights in the three other development hotels to Crockett. The
amended complaint seeks, among other things, monetary damages in an amount not less than $4,800 with respect to the Cary, North Carolina property. With respect to the remaining three development hotels, the amended complaint seeks specific
performance in the form of an order directing Inland American Winston and WINN to transfer their rights in the hotels to Crockett or, alternatively, monetary damages in an amount not less than $20,100. Inland American Winston and WINN deny these
claims and, on March 26, 2008, filed a motion to dismiss the amended complaint. On March 13, 2009, the court denied the motion to dismiss. Inland American Winston and WINN have filed answers and affirmative defenses to the amended
complaint as well as counter claims against Crockett. Contemporaneously with the close of fact discovery, Crockett sought leave to amend its complaint to add another cause of action and to seek treble damages and attorneys fees, which was
granted. Expert discovery has been completed. Based upon an expert report recently received from Crockett, it was originally believed that Crocketts maximum claim, without the inclusion of treble damages or attorneys fees, was approximately
$16,800. On February 28, 2011, the Court ruled on cross motions for summary judgment, which were filed by the parties. The result of the ruling on the cross motions is that certain claims against WINN by Crockett were dismissed, including the
treble damages claim and claims relating to two of the hotel properties at issue. Most of the WINNs counter-claims against Crockett were also dismissed as a result of the ruling. Based upon the expert report referenced above, it is now
believed that the maximum claim against WINN is approximately $7,000 exclusive of any claimed interest. WINN believes a trial on these remaining claims will likely take place by the end of 2011. The outcome of this lawsuit cannot be predicted with
any certainty and management is currently unable to estimate an amount or range of potential loss that could result if an unfavorable outcome occurs.

While management does not believe that an adverse outcome in the above lawsuit would have a material adverse effect on the Companys financial condition, there can be no assurance that an adverse
outcome would not have a material effect on the Companys results of operations for any particular period.

The Company has also filed a
number of eviction actions against tenants and is involved in a number of tenant bankruptcies. The tenants in some of the eviction cases may file counterclaims against the Company in an attempt to gain leverage against the Company in connection with
the eviction. In the opinion of the Company, none of these counterclaims is likely to result in any material losses to the Company.



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##### Table of Contents

Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations

We electronically file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and all amendments to those reports with the Securities and Exchange Commission (SEC). The public may read and copy any of the reports that are filed with the SEC at the SECs Public Reference Room at 100 F Street, NE,
Washington, DC 20549-3628. The public may obtain information on the operation of the Public Reference room by calling the SEC at (800)-SEC-0330. The SEC maintains an Internet site at (www.sec.gov) that contains reports, proxy and information
statements and other information regarding issuers that file electronically.

Certain statements in this Managements Discussion
and Analysis of Financial Condition and Results of Operations and elsewhere in this Form 10-Q constitute forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Forward-looking
statements are statements that are not historical, including statements regarding managements intentions, beliefs, expectations, representations, plans or predictions of the future and are typically identified by words such as
believe, expect, anticipate, intend, estimate, may, will, should and could. Similarly, statements that describe or contain information
related to matters such as managements intent, belief or expectation with respect to the Companys financial performance, investment strategy and portfolio, cash flows, growth prospects, legal proceedings, amount and timing of anticipated
future cash distributions, estimated per share value of the Companys common stock and other matters are forward-looking statements. These forward-looking statements are not historical facts but are the intent, belief or current expectations of
the Companys management based on their knowledge and understanding of the business and industry, the economy and other future conditions. These statements are not guarantees of future performance, and stockholders should not place undue
reliance on forward-looking statements. Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors
listed and described under Risk Factors in this Quarterly Report on Form 10-Q and the Companys Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 11, 2011. These factors include, but are
not limited to: market and economic challenges experienced by the U.S. economy or real estate industry as a whole, including in the lodging industry, and the local economic conditions in the markets in which the Companys properties are
located; the Companys ability to refinance maturing debt or to obtain new financing on attractive terms; the availability of cash flow from operating activities to fund distributions; future increases in interest rates; and actions or failures
by the Companys joint venture partners or borrowers subject under our notes receivable, including development partners. The Company intends that such forward-looking statements be subject to the safe harbors created by Section 27A of the
Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of
unanticipated events or changes to future operating results.

The following discussion and analysis relates to the three months ended
March 31, 2011 and 2010 and as of March 31, 2011 and December 31, 2010. You should read the following discussion and analysis along with our Consolidated Financial Statements and the related notes included in this report.

Overview

We seek to invest in real
estate assets that we believe will produce attractive current yields and long-term risk-adjusted returns to our stockholders and to generate sustainable cash flow from our operations to fund distributions to our stockholders. To achieve these
objectives, we selectively acquire and actively manage, through affiliates of our business manager, investments in non-lodging commercial real estate. Our property managers for our non-lodging properties actively seek to lease space at favorable
rates, control expenses, and maintain strong tenant relationships. We oversee the management of our lodging facilities through active engagement with our third party managers and franchisors to maximize occupancy and daily rates as well as control
expenses.

On a consolidated basis, essentially all of our revenues and cash flows from operations for the three months ended March 31,
2011 were generated by collecting rental payments from our tenants, room revenues from lodging properties, interest income on our notes receivable investments, distributions from unconsolidated entities and dividend income earned from investments in
marketable securities. Our largest cash expense relates to the operation of our properties as well as the interest expense on our mortgages and notes payable. Our property operating expenses include, but are not limited to, real estate taxes,
regular repair and maintenance, management fees, non-lodging utilities and insurance (some of which are recoverable). Our lodging operating expenses include, but are not limited to, rooms, food and beverage, utility, administrative and marketing,
payroll, franchise and management fees and repairs and maintenance expenses.



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##### Table of Contents

In evaluating our financial condition and operating performance, management focuses on the following
financial and non-financial indicators, discussed in further detail herein:



| |  |  | Funds from Operations (FFO), a supplemental measure to net income determined in accordance with U.S. generally accepted accounting
principles (GAAP).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Economic and physical occupancy and rental rates.
| | - |  | -------------------------------------------------

| |  |  | Leasing activity and lease rollover.
| | - |  | ------------------------------------

| |  |  | Managing operating expenses.
| | - |  | ----------------------------

| |  |  | Average daily room rate, revenue per available room, and average occupancy to measure our lodging properties.
| | - |  | -------------------------------------------------------------------------------------------------------------

| |  |  | Debt maturities and leverage ratios.
| | - |  | ------------------------------------

| |  |  | Liquidity levels.
| | - |  | -----------------

Results of Operations

General

Consolidated Results of Operations

This section describes and compares our results of operations for the three months ended March 31, 2011 and 2010. We generate most of our net operating income from property operations. In order to
evaluate our overall portfolio, management analyzes the operating performance of all properties from period to period and properties we have owned and operated for the same period during each year. A total of 938 of our investment properties
satisfied the criteria of being owned for the entire three month period ended March 31, 2011 and 2010, respectively, and are referred to herein as same store properties. This analysis allows management to monitor the operations of
our existing properties for comparable periods to measure the performance of our current portfolio. Additionally, we are able to isolate the effects of our new acquisitions on net income. Unless otherwise noted, all dollar amounts are stated in
thousands (except share data, rent per square foot, revenue per available room and average daily rate).

Comparison of the three months
ended March 31, 2011 and March 31, 2010



|                                   |  |   |  |  |                                      |  |         |   |  |   |                                      |  |  |  |         |  
|---------------------------------- |  | - |  |  | ------------------------------------ |  | ------- | - |  | - | ------------------------------------ |  |  |  | ------- | -
|                                   |  |   |  |  | Three monthsended    
March 31, 2011 |  |         |   |  |   | Three monthsended    
March 31, 2010 | 
|Net loss applicable to the Company |  | $ |  |  |                                      |  | (54,627 | ) |  | $ |                                      |  |  |  | (29,339 | )
|                                   |  |   |  | 
|Net loss per share                 |  |   |  |  |                                      |  | (0.06   | ) |  |   |                                      |  |  |  | (0.04   | )

Net loss increased from $(29,339) or
$(0.04) per share for the three months ended March 31, 2010 to $(54,627) or $(0.06) for the three months ended March 31, 2011. The primary reason for the difference was the provision for asset impairment of $27,967 in 2011 compared to $945
reflected in discontinued operation for the three months ended March 31, 2010.

Rental Income, Tenant Recovery Income, Lodging
Income and Other Property Income. Except for our lodging and multi-family properties, the majority of the revenue from the properties consists of rents received under long-term operating leases. Some leases provide for the payment of fixed
base rent paid monthly in advance, and for the reimbursement by tenants of the tenants pro rata share of certain operating expenses including real estate taxes, special assessments, insurance, utilities, common area maintenance, management
fees, and certain building repairs paid by the landlord and recoverable under the terms of the lease. Under these leases, we pay all expenses and are reimbursed by the tenant for the tenants pro rata share of recoverable expenses. Certain
other tenants are subject to net leases which require the tenant to be responsible for fixed base rent as well as all costs and expenses associated with occupancy. Under net leases, where all expenses are paid directly by the tenant, expenses are
not included in the consolidated statements of operations and other comprehensive income. Under leases where all expenses are paid by us, subject to reimbursement by the tenant, the expenses are included within property operating expenses, and
reimbursements are included in tenant recovery income on the consolidated statements of operations and other comprehensive income.

Rental
income consists of basic monthly rent, straight-line rent adjustments, amortization of acquired above and below market leases, fee income, and percentage rental income recorded pursuant to tenant leases. Tenant recovery income consists of
reimbursements for real estate taxes, common area maintenance costs, management fees, and insurance costs. Lodging income consists of room revenues, food and beverage revenues, telephone revenues and miscellaneous revenues. Other property income
consists of lease termination fees and other miscellaneous property income.

Our lodging properties generate revenue through sales of rooms
and associated food and beverage services. We measure our financial performance by revenue generated per available room known as RevPAR, which is an operational measure commonly used in the hotel industry to evaluate hotel performance. RevPAR
represents the product of the average daily room rate charged and the average daily occupancy achieved but excludes other revenue generated by a hotel property, such as food and beverage, parking, telephone and other guest service revenues.



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##### Table of Contents

Below is a summary of sources of revenue for the three months ended March 31, 2011 and 2010.



|                                                           |  |   |  |  |                                 |  |         |  |  |   |                                 |  |  |  |         |  |                                  |   |  |  |  |  |         | 
|---------------------------------------------------------- |  | - |  |  | ------------------------------- |  | ------- |  |  | - | ------------------------------- |  |  |  | ------- |  | -------------------------------- | - |  |  |  |  | ------- | 
|                                                           |  |   |  |  | Three monthsended March 31,2011 |  |         |  |  |   | Three monthsended March 31,2010 |  |  |  |         |  | 2011 increase(decrease) from2010 |  
|Property rentals                                           |  | $ |  |  |                                 |  | 159,461 |  |  | $ |                                 |  |  |  | 141,530 |  |                                  | $ |  |  |  |  | 17,931  | 
|Straight-line rents                                        |  |   |  |  |                                 |  | 3,453   |  |  |   |                                 |  |  |  | 5,034   |  |                                  |   |  |  |  |  | (1,581) | 
|Amortization of acquired above and belowmarket leases, net |  |   |  |  |                                 |  | 598     |  |  |   |                                 |  |  |  | (99)    |  |                                  |   |  |  |  |  | 697     | 
|                                                           |  |   |  |  |                                 |  |         |  |  |   |                                 |  |  |  |         |  |                                  |   |  |  |  |  |         | 
|Total rental income                                        |  | $ |  |  |                                 |  | 163,512 |  |  | $ |                                 |  |  |  | 146,465 |  |                                  | $ |  |  |  |  | 17,047  | 
|Tenant recovery income                                     |  |   |  |  |                                 |  | 24,964  |  |  |   |                                 |  |  |  | 23,378  |  |                                  |   |  |  |  |  | 1,586   | 
|Other property income                                      |  |   |  |  |                                 |  | 4,931   |  |  |   |                                 |  |  |  | 4,587   |  |                                  |   |  |  |  |  | 344     | 
|Lodging income                                             |  |   |  |  |                                 |  | 132,986 |  |  |   |                                 |  |  |  | 108,920 |  |                                  |   |  |  |  |  | 24,066  | 
|                                                           |  |   |  |  |                                 |  |         |  |  |   |                                 |  |  |  |         |  |                                  |   |  |  |  |  |         | 
|Total income                                               |  | $ |  |  |                                 |  | 326,393 |  |  | $ |                                 |  |  |  | 283,350 |  |                                  | $ |  |  |  |  | 43,043  | 
|                                                           |  |   |  |  |                                 |  |         |  |  |   |                                 |  |  |  |         |  |                                  |   |  |  |  |  |         | 

Total income increased $43,043 for the three months ended March 31, 2011 over the same period of the prior year. The
increase in property revenues in 2011 was due primarily to acquisitions made in 2010 and 2011 and an increase in lodging revenue. Our overall revenue and occupancy have been stable across the segments with the exception of lodging and multi-family
segments, which had much improved operating performance as compared to the first quarter of 2010.

Property Operating Expenses and Real
Estate Taxes. Property operating expenses for properties other than lodging consist of property management fees paid to property managers and operating expenses, including costs of owning and maintaining investment properties, real
estate taxes, insurance, utilities, maintenance to the exterior of the buildings and the parking lots. Lodging operating expenses include the payroll, utilities, management fees paid to our third party operators, insurance, marketing, and other
expenses required to maintain and operate our lodging facilities.



|                            |  |   |  |  |                                  |  |         |  |  |  |                                  |  |  |   |  |  |                                  |  |         |  |  |  |  |  |  |   |  |  |  |  |        |  |  |  |  | 
|--------------------------- |  | - |  |  | -------------------------------- |  | ------- |  |  |  | -------------------------------- |  |  | - |  |  | -------------------------------- |  | ------- |  |  |  |  |  |  | - |  |  |  |  | ------ |  |  |  |  | 
|                            |  |   |  |  | Three monthsended March 
31,2011 |  |         |  |  |  | Three monthsended March 
31,2010 |  |  |   |  |  | 2011 increase(decrease) from2010 | 
|Property operating expenses |  | $ |  |  |                                  |  | 35,252  |  |  |  |                                  |  |  | $ |  |  |                                  |  | 30,776  |  |  |  |  |  |  | $ |  |  |  |  | 4,476  |  |  |  |  | 
|Lodging operating expenses  |  |   |  |  |                                  |  | 87,539  |  |  |  |                                  |  |  |   |  |  |                                  |  | 71,703  |  |  |  |  |  |  |   |  |  |  |  | 15,836 |  |  |  |  | 
|Real estate taxes           |  |   |  |  |                                  |  | 26,345  |  |  |  |                                  |  |  |   |  |  |                                  |  | 24,086  |  |  |  |  |  |  |   |  |  |  |  | 2,259  |  |  |  |  | 
|                            |  |   |  |  |                                  |  |         |  |  |  |                                  |  |  |   |  |  |                                  |  |         |  |  |  |  | 
|Total property expenses     |  | $ |  |  |                                  |  | 149,136 |  |  |  |                                  |  |  | $ |  |  |                                  |  | 126,565 |  |  |  |  |  |  | $ |  |  |  |  | 22,571 |  |  |  |  | 
|                            |  |   |  |  |                                  |  |         |  |  |  |                                  |  |  |   |  |  |                                  |  |         |  |  |  |  | 

Total operating expenses increased $22,571 for the three months ended March 31, 2011 compared to the three months ended
March 31, 2010 due primarily to effect of the properties acquired in 2010 and 2011. Lodging operating expenses increased due to increases in occupancy across the lodging segment.

Interest and Dividend Income and Realized Gain (Loss) on Securities. Interest income consists of interest earned on short term investments and notes receivable. Dividends are earned from
investments in our portfolio of marketable securities.



|                |  |   |  |  |                                 |  |       |  |  |  |                                 |  |  |   |  |  |                                  |  |       |  |  |  |  |  |  |   |  |  |  |  |        |   |  |  |  | 
|--------------- |  | - |  |  | ------------------------------- |  | ----- |  |  |  | ------------------------------- |  |  | - |  |  | -------------------------------- |  | ----- |  |  |  |  |  |  | - |  |  |  |  | ------ | - |  |  |  | 
|                |  |   |  |  | Three monthsended March 31,2011 |  |       |  |  |  | Three monthsended March 31,2010 |  |  |   |  |  | 2011 increase(decrease) from2010 | 
|Interest income |  | $ |  |  |                                 |  | 1,434 |  |  |  |                                 |  |  | $ |  |  |                                  |  | 3,755 |  |  |  |  |  |  | $ |  |  |  |  | (2,321 | ) |  |  |  | 
|Dividend income |  |   |  |  |                                 |  | 4,204 |  |  |  |                                 |  |  |   |  |  |                                  |  | 3,667 |  |  |  |  |  |  |   |  |  |  |  | 537    |   |  |  |  | 
|                |  |   |  |  |                                 |  |       |  |  |  |                                 |  |  |   |  |  |                                  |  |       |  |  |  |  | 
|Total           |  | $ |  |  |                                 |  | 5,638 |  |  |  |                                 |  |  | $ |  |  |                                  |  | 7,422 |  |  |  |  |  |  | $ |  |  |  |  | (1,784 | ) |  |  |  | 
|                |  |   |  |  |                                 |  |       |  |  |  |                                 |  |  |   |  |  |                                  |  |       |  |  |  |  | 

Interest income was $1,434 and $3,755 for the three months ended March 31, 2011 and 2010, respectively. Interest income
is earned on our cash balances and notes receivable. The decrease in interest income primarily resulted from the conversion of notes receivable to unconsolidated joint ventures and investment properties.

Dividend income, earned from our investment marketable securities, was $4,204 and $3,667 for the three months ended March 31, 2011 and 2010,
respectively.



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##### Table of Contents

Other Operating Expenses

Other operating expenses are summarized as follows:



|                                |  |   |  |  |                                 |  |         |  |  |  |                                 |  |  |   |  |  |                                  |  |         |  |  |  |  |  |  |   |  |  |  |  |        |   |  |  |  | 
|------------------------------- |  | - |  |  | ------------------------------- |  | ------- |  |  |  | ------------------------------- |  |  | - |  |  | -------------------------------- |  | ------- |  |  |  |  |  |  | - |  |  |  |  | ------ | - |  |  |  | 
|                                |  |   |  |  | Three monthsended March 31,2011 |  |         |  |  |  | Three monthsended March 31,2010 |  |  |   |  |  | 2011 increase(decrease) from2010 | 
|Depreciation and amortization   |  | $ |  |  |                                 |  | 109,456 |  |  |  |                                 |  |  | $ |  |  |                                  |  | 105,304 |  |  |  |  |  |  | $ |  |  |  |  | 4,152  |   |  |  |  | 
|Interest expense                |  |   |  |  |                                 |  | 83,908  |  |  |  |                                 |  |  |   |  |  |                                  |  | 67,082  |  |  |  |  |  |  |   |  |  |  |  | 16,826 |   |  |  |  | 
|General and administrative (1)  |  |   |  |  |                                 |  | 6,614   |  |  |  |                                 |  |  |   |  |  |                                  |  | 11,243  |  |  |  |  |  |  |   |  |  |  |  | (4,629 | ) |  |  |  | 
|Business manager management fee |  |   |  |  |                                 |  | 10,000  |  |  |  |                                 |  |  |   |  |  |                                  |  | 6,000   |  |  |  |  |  |  |   |  |  |  |  | 4,000  |   |  |  |  | 
|                                |  |   |  |  |                                 |  |         |  |  |  |                                 |  |  |   |  |  |                                  |  |         |  |  |  |  | 
|                                |  | $ |  |  |                                 |  | 209,978 |  |  |  |                                 |  |  | $ |  |  |                                  |  | 189,629 |  |  |  |  |  |  | $ |  |  |  |  | 20,349 |   |  |  |  | 
|                                |  |   |  |  |                                 |  |         |  |  |  |                                 |  |  |   |  |  |                                  |  |         |  |  |  |  | 



|(1) | Includes expenses paid to affiliates of our sponsor as described below.
|--- | -----------------------------------------------------------------------

Depreciation and amortization. The $4,152 increase in depreciation and amortization expense for the three months ended March 31, 2011 relative to the three months ended March 31,
2010 was due substantially to the impact of the properties acquired in 2010 and the first quarter of 2011.

Interest expense.A
summary of interest expense for the three months ended March 31, 2011 and 2010 appears below:



|                                                          |  |   |  |  |                                 |  |        |  |  |  |                                 |  |  |   |  |  |                                  |  |        |  |  |  |  |  |  |   |  |  |  |  |        |  |  |  |  | 
|--------------------------------------------------------- |  | - |  |  | ------------------------------- |  | ------ |  |  |  | ------------------------------- |  |  | - |  |  | -------------------------------- |  | ------ |  |  |  |  |  |  | - |  |  |  |  | ------ |  |  |  |  | 
|                                                          |  |   |  |  | Three monthsended March 31,2011 |  |        |  |  |  | Three monthsended March 31,2010 |  |  |   |  |  | 2011 increase(decrease) from2010 | 
|Debt Type:                                                |  |   |  |  |                                 |  |        |  |  |  |                                 |  |  |   |  |  |                                  |  |        |  |  |  |  |  |  |   |  |  |  |  |        |  |  |  |  | 
|Mortgages, margin and other interest expense              |  | $ |  |  |                                 |  | 71,295 |  |  |  |                                 |  |  | $ |  |  |                                  |  | 63,920 |  |  |  |  |  |  | $ |  |  |  |  | 7,375  |  |  |  |  | 
|Amortization of mortgage discounts/premiums and loan fees |  |   |  |  |                                 |  | 12,613 |  |  |  |                                 |  |  |   |  |  |                                  |  | 3,162  |  |  |  |  |  |  |   |  |  |  |  | 9,451  |  |  |  |  | 
|                                                          |  |   |  |  |                                 |  |        |  |  |  |                                 |  |  |   |  |  |                                  |  |        |  |  |  |  | 
|Total                                                     |  | $ |  |  |                                 |  | 83,908 |  |  |  |                                 |  |  | $ |  |  |                                  |  | 67,082 |  |  |  |  |  |  | $ |  |  |  |  | 16,826 |  |  |  |  | 
|                                                          |  |   |  |  |                                 |  |        |  |  |  |                                 |  |  |   |  |  |                                  |  |        |  |  |  |  | 

Interest expense increased by $16,826 for the three months ended March 31, 2011 as compared to the three months ended
March 31, 2010 due to mortgage loans that were placed upon property acquisition as well as a $10,368 amortization of a mark to market mortgage discount. The recognition of the $10,368 discount was recorded as a result of the three
properties mortgage loans, totaling $63,955, being in default. If the lender takes possession of the any of the properties through a consensual transfer, we will mostly likely recognize a gain on the forgiveness of debt comparable to the
discount being recognized this period.

Our weighted average interest rate was 5.2% and 5.1% as of March 31, 2011 and 2010, respectively.
Because we have variable rate debt, we have experienced a lower overall weighted average interest rate due to a historically low London InterBank Offered Rate (LIBOR). If LIBOR increases, we will experience higher weighted average
interest rates, which would impact our financial results.

General and Administrative Expenses. General and administrative
expenses primarily consist of legal, audit and other professional fees, acquisition related expenses, insurance, board of director fees, state and local taxes as well as salary, information technology and other administrative cost reimbursements
paid to our business manager and affiliates, and investment advisor fees. Our expenses were $6,614 for the three months ended March 31, 2011 and $11,243 for the three months ended March 31, 2010. The decrease is due primarily to a decrease
in legal and consulting costs compared to 2010. Acquisition and dead deal costs were $227 and $837 for the three months ended March 31, 2011 and 2010, respectively.

Business Manager Fee. After our stockholders have received a non-cumulative, non-compounded return of 5% per annum on their invested capital, we pay our business manager an
annual business management fee of up to 1% of the average invested assets, payable quarterly in an amount equal to 0.25% of the average invested assets as of the last day of the immediately preceding quarter. We incurred a business
management fee of $10,000 for the three months ended March 31, 2011 or .09% of average invested assets, waiving the remaining $18,304 for the three months ended March 31, 2011. We incurred a business management fee of $6,000 or .05% of
average invested assets and waived the remaining $21,482 for the three months ended March 31, 2010. We paid investment advisory fees of approximately $382 and $332 for the three months ended March 31, 2011 and 2010, respectively.

Noncontrolling Interest.The noncontrolling interest represents the interests of the third parties in Minto Builders (Florida),
Inc. (MB REIT) and various consolidated joint ventures.

Equity in Loss of Unconsolidated Entities.For the first
three months of 2011, we have equity in of loss of unconsolidated entities of $2,297. This is a decrease of $1,593 compared to the March 31, 2010 equity in losses of unconsolidated entities of $3,890.



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##### Table of Contents

Provision for Asset Impairment.For the three months ended March 31, 2011, we recorded a
provision for asset impairment of $27,967 to reduce the book value of six hotel properties and two retail properties to their respective fair values. For the three months ended March 31, 2010, a provision for asset impairment of $945 was
recorded to reflect two hotel properties at their respective fair values; this amount is reflected in discontinued operations.

Discontinued Operations. For three months ended March 31, 2011, we did not dispose of any investment properties; therefore, we did not
record income or loss from discontinued operations. For the three months ended March 31, 2010, we incurred a net loss of $1,898 on the disposed properties, which is reflected in discontinued operations.

Segment Reporting

An analysis of
results of operations by segment is below. The tables contained throughout summarize certain key operating performance measures for the three months ended March 31, 2011 and 2010.

Retail Segment



|                               |  |   |  |  |                         |  |           |  |  |   |      |  |  |  |           |  |  |  |  | 
|------------------------------ |  | - |  |  | ----------------------- |  | --------- |  |  | - | ---- |  |  |  | --------- |  |  |  |  | 
|                               |  |   |  |  | Total Retail Properties | 
|                               |  |   |  |  | As of March 31,         | 
|                               |  |   |  |  | 2011                    |  |           |  |  |   | 2010 |  |  |  |          
|Retail Properties              |  |   |  |  |                         |  |           |  |  |   |      |  |  |  |           |  |  |  |  | 
|Physical occupancy             |  |   |  |  |                         |  | 92%       |  |  |   |      |  |  |  | 91%       |  |  |  |  | 
|Economic occupancy             |  |   |  |  |                         |  | 93%       |  |  |   |      |  |  |  | 92%       |  |  |  |  | 
|Base rent per square foot      |  | $ |  |  |                         |  | 15.11     |  |  | $ |      |  |  |  | 14.90     |  |  |  |  | 
|Gross investment in properties |  | $ |  |  |                         |  | 4,219,442 |  |  | $ |      |  |  |  | 3,981,143 |  |  |  |  | 

The following table represents lease expirations for the retail segment:



|                      |  |                          |       |  |                                |  |            |                                           |  |  |                     |  |  |                                    |       |   |                         |  |       |   |  |   |       | 
|--------------------- |  | ------------------------ | ----- |  | ------------------------------ |  | ---------- | ----------------------------------------- |  |  | ------------------- |  |  | ---------------------------------- | ----- | - | ----------------------- |  | ----- | - |  | - | ----- | 
|Lease
Expiration
Year |  | Number ofExpiring Leases |       |  | GLA ofExpiringLeases (Sq. Ft.) |  |            | Annualized BaseRent of ExpiringLeases ($) |  |  | Percent ofTotal GLA |  |  | Percent ofTotalAnnualizedBase Rent |       |   | ExpiringRent/SquareFoot | 
|2011                  |  |                          | 280   |  |                                |  | 812,610    |                                           |  |  | 12,989              |  |  |                                    | 3.99  | % |                         |  | 4.00  | % |  | $ | 15.98 | 
|2012                  |  |                          | 471   |  |                                |  | 2,085,279  |                                           |  |  | 37,189              |  |  |                                    | 10.23 | % |                         |  | 11.46 | % |  | $ | 17.83 | 
|2013                  |  |                          | 332   |  |                                |  | 1,258,685  |                                           |  |  | 20,704              |  |  |                                    | 6.17  | % |                         |  | 6.38  | % |  | $ | 16.45 | 
|2014                  |  |                          | 281   |  |                                |  | 1,867,078  |                                           |  |  | 26,623              |  |  |                                    | 9.16  | % |                         |  | 8.20  | % |  | $ | 14.26 | 
|2015                  |  |                          | 332   |  |                                |  | 2,454,524  |                                           |  |  | 30,909              |  |  |                                    | 12.04 | % |                         |  | 9.52  | % |  | $ | 12.59 | 
|Thereafter            |  |                          | 1,136 |  |                                |  | 11,907,665 |                                           |  |  | 196,090             |  |  |                                    | 58.41 | % |                         |  | 60.44 | % |  | $ | 16.47 | 
|                      |  |                          |       | 
|                      |  |                          | 2,832 |  |                                |  | 20,385,841 |                                           |  |  | 324,504             |  |  |                                    | 100.0 | % |                         |  | 100.0 | % |  | $ | 15.92 | 

Our retail business is not highly
dependent on specific retailers or specific retail industries, which we believe shields the portfolio from significant revenue variances over time. The occupancy rates above are as of March 31, 2011 and 2010 and they do not represent the
average rate during that period.

Our retail business is centered on multi-tenant properties with fewer than 120,000 square feet of total
space, located in stable communities, primarily in the southwest and southeast regions of the country. Adding to this core investment profile is a select number of traditional mall properties and single-tenant properties. Among the single-tenant
properties, the largest holdings are comprised of investments in bank branches operated by SunTrust Bank and Citizens Bank, where the tenant-occupant pays rent with contractual increases over time, and bears virtually all expenses associated with
operating the facility.

Our retail tenants largely consist of necessity-based retailers such as grocery, pharmacy, moderate-fashion shoes and
clothing, and services. We have limited exposure to retail categories such as books/music/video, big-box electronics, fast-food restaurants, new-concept, and other goods-providers, which we believe are being negatively impacted the greatest by the
internet or existing economic conditions.

We have not experienced bankruptcies or receivable write-offs in our retail portfolio that have
materially impacted our result of operations in the economy or retail environment. However, we continue to actively monitor our retail tenants as a downturn in the economy could have negative impact on our tenants abilities to pay rent or our
ability to fill space that is currently vacant, or space that becomes vacant in the near future.



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##### Table of Contents

Comparison of Three Months Ended March 31, 2011 to 2010

The table below represents operating information for the retail segment of 736 and 731 properties as of March 31, 2011 and 2010 and for the same
store portfolio consisting of 714 properties acquired prior to January 1, 2010. The properties in the same store portfolio were owned for the entire three months ended March 31, 2011 and March 31, 2010.



|                                          |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|----------------------------------------- |  | - |  |  | -------------------- |  | ------ | ------------------------- |  | - | ---- |  |  |  | ------ |  | ------------------- | - |  | ---- |  |  | ------ |  |  | ------------------- |  |  |  |  | ------ |  |  | - |  |  |  |  | ------ |  |  | - |  |  |  |  | ----- | 
|                                          |  |   |  |  | Total Retail Segment |  |        | Same Store Retail Segment | 
|                                          |  |   |  |  | 2011                 |  |        |                           |  |   | 2010 |  |  |  |        |  | Increase/(Decrease) |   |  | 2011 |  |  | 2010   |  |  | Increase/(Decrease) | 
|Revenues:                                 |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|Rental income                             |  | $ |  |  |                      |  | 78,309 |                           |  |   |      |  |  |  | 67,442 |  |                     |   |  |      |  |  | 10,867 |  |  | $                   |  |  |  |  | 63,733 |  |  | $ |  |  |  |  | 64,436 |  |  | $ |  |  |  |  | (703) | 
|Tenant recovery income                    |  |   |  |  |                      |  | 16,956 |                           |  |   |      |  |  |  | 14,316 |  |                     |   |  |      |  |  | 2,640  |  |  |                     |  |  |  |  | 13,194 |  |  |   |  |  |  |  | 13,528 |  |  |   |  |  |  |  | (334) | 
|Other property income                     |  |   |  |  |                      |  | 1,825  |                           |  |   |      |  |  |  | 998    |  |                     |   |  |      |  |  | 827    |  |  |                     |  |  |  |  | 1,450  |  |  |   |  |  |  |  | 989    |  |  |   |  |  |  |  | 461   | 
|                                          |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|Total revenues                            |  | $ |  |  |                      |  | 97,090 |                           |  |   |      |  |  |  | 82,756 |  |                     |   |  |      |  |  | 14,334 |  |  | $                   |  |  |  |  | 78,377 |  |  | $ |  |  |  |  | 78,953 |  |  | $ |  |  |  |  | (576) | 
|                                          |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|Expenses:                                 |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|Property operating expenses               |  | $ |  |  |                      |  | 16,133 |                           |  |   |      |  |  |  | 12,340 |  |                     |   |  |      |  |  | 3,793  |  |  | $                   |  |  |  |  | 12,122 |  |  | $ |  |  |  |  | 11,710 |  |  | $ |  |  |  |  | 412   | 
|Real estate taxes                         |  |   |  |  |                      |  | 11,517 |                           |  |   |      |  |  |  | 8,989  |  |                     |   |  |      |  |  | 2,528  |  |  |                     |  |  |  |  | 7,942  |  |  |   |  |  |  |  | 8,565  |  |  |   |  |  |  |  | (623) | 
|                                          |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|Total operating expenses                  |  | $ |  |  |                      |  | 27,650 |                           |  |   |      |  |  |  | 21,329 |  |                     |   |  |      |  |  | 6,321  |  |  | $                   |  |  |  |  | 20,064 |  |  | $ |  |  |  |  | 20,275 |  |  | $ |  |  |  |  | (211) | 
|                                          |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|Net operating income                      |  | $ |  |  |                      |  | 69,440 |                           |  | $ |      |  |  |  | 61,427 |  |                     | $ |  |      |  |  | 8,013  |  |  | $                   |  |  |  |  | 58,313 |  |  | $ |  |  |  |  | 58,678 |  |  | $ |  |  |  |  | (365) | 
|                                          |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|Average economic occupancy for the period |  |   |  |  |                      |  | 93%    |                           |  |   |      |  |  |  | 93%    |  |                     |   |  |      |  |  | 0%     |  |  |                     |  |  |  |  | 93%    |  |  |   |  |  |  |  | 93%    |  |  |   |  |  |  |  | 0%    | 

Retail properties rental revenues
increased from $82,756 in the three months ended 2010 to $97,090 in the three months ended March 31, 2011 due to the acquisition of twenty-five retail properties in 2010. Retail properties operating expenses and real estate taxes also increased
from $21,329 in 2010 to $27,650 in 2011 as a result of these acquisitions. The same store net operating income decreased from $58,678 to $58,313 for the three months ended March 31, 2011 and 2010 which is an approximate decrease of 0.6%. The
stability of the same store retail segment performance is due to constant occupancy of 93% and comparable releasing.

Lodging Segment



|                               |  |   |  |  |                          |  |           |  |  |  |      |  |  |   |  |  |  |  |           |  |  |  |  | 
|------------------------------ |  | - |  |  | ------------------------ |  | --------- |  |  |  | ---- |  |  | - |  |  |  |  | --------- |  |  |  |  | 
|                               |  |   |  |  | Total Lodging Properties | 
|                               |  |   |  |  | As of March 31,          | 
|                               |  |   |  |  | 2011                     |  |           |  |  |  | 2010 | 
|Lodging Properties             |  |   |  |  |                          |  |           |  |  |  |      |  |  |   |  |  |  |  |           |  |  |  |  | 
|Revenue per available room     |  | $ |  |  |                          |  | 79        |  |  |  |      |  |  | $ |  |  |  |  | 73        |  |  |  |  | 
|Average daily rate             |  | $ |  |  |                          |  | 118       |  |  |  |      |  |  | $ |  |  |  |  | 111       |  |  |  |  | 
|Occupancy                      |  |   |  |  |                          |  | 67%       |  |  |  |      |  |  |   |  |  |  |  | 66%       |  |  |  |  | 
|Gross investment in properties |  | $ |  |  |                          |  | 2,891,924 |  |  |  |      |  |  | $ |  |  |  |  | 2,638,815 |  |  |  |  | 

Lodging facilities have characteristics different from those found in office, retail, industrial, and multi-family
properties (also known as traditional asset classes). Revenue, operating expenses, and net income are directly tied to the daily hotel sales operation whereas other traditional asset classes generate revenue from medium to long-term
lease contracts. In this way, net operating income is somewhat more predictable among the properties in the other traditional asset classes, though we believe that opportunities to increase revenue are, in many cases, limited because of the duration
of the existing lease contracts. Lodging facilities have the benefit of capturing increased revenue opportunities on a daily or weekly basis but are also subject to immediate decreases in revenue as a result of declines in daily rental rates and/or
daily occupancy when demand falls off quickly. Due to seasonality, we expect our revenues to be greater during the second and third quarters with lower revenues in the first and fourth quarters.

Two practices are common in the lodging industry: 1) association with national franchise organizations and 2) professional management by specialized
third-party hotel managers. Our portfolio consists of assets aligned with what we believe are the top franchise enterprises in the lodging industry: Marriott, Hilton, Intercontinental, Hyatt, Wyndham, and Choice Hotels. By doing so, we believe our
lodging operations benefit from enhanced advertising, marketing, and sales programs through a franchise arrangement while the franchisee (in this case us) pays only a fraction of the overall cost for these programs. We believe effective TV, radio,
print, on-line, and other forms of advertisement are necessary to draw customers to our lodging facilities, creating higher occupancy and rental rates, and increased revenue. Additionally, by using the franchise system we are also able to benefit
from the frequent traveler rewards programs or point awards systems which we believe further bolsters occupancy and overall daily rental rates.

Our lodging facilities are generally classified in the upscale or upper-upscale lodging categories. All of our lodging facilities are managed by third-party managers with extensive experience and skill in
hospitality operations. These third-party managers report to a dedicated, specialized group within our business manager that has, in our view, extensive expertise in lodging ownership and operation within a REIT environment. This group has daily
interaction with all third-party managers, and closely monitors all aspects



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##### Table of Contents

of our lodging interests. Additionally, this group also maintains close relationships with the franchisors to assure that each property maintains high levels of customer satisfaction, franchise
conformity, and revenue-management.

Revenue per Available Room is predicted to increase 5%-8% in 2011 as compared to 2010. We believe
revenues will continue to increase steadily as long as the Gross Domestic Product (GDP) continues to grow. For 2011, we believe that our revenue per available room should be consistent with the overall industry trends. Our third party
managers and asset management are focusing on increasing average daily rates, maintaining and growing occupancy while controlling operating costs to improve cash flow to the owner.

Comparison of Three Months Ended March 31, 2011 to March 31, 2010

The
table below represents operating information for the lodging segment of 100 and 93 properties as of March 31, 2011 and 2010 and for the same store portfolio consisting of 93 properties acquired prior to January 1, 2010. The properties in
the same store portfolio were owned for the entire three months ended March 31, 2011 and March 31, 2010.



|                           |  |   |  |  |                       |  |         |                            |  |   |      |  |  |  |         |  |                     |   |  |  |  |  |        |  |  |   |  |  |      |  |         |  |  |   |                     |  |  |  |         |  |  |   |  |  |  |  |         | 
|-------------------------- |  | - |  |  | --------------------- |  | ------- | -------------------------- |  | - | ---- |  |  |  | ------- |  | ------------------- | - |  |  |  |  | ------ |  |  | - |  |  | ---- |  | ------- |  |  | - | ------------------- |  |  |  | ------- |  |  | - |  |  |  |  | ------- | 
|                           |  |   |  |  | Total Lodging Segment |  |         | Same Store Lodging Segment | 
|                           |  |   |  |  | 2011                  |  |         |                            |  |   | 2010 |  |  |  |         |  | Increase/(Decrease) |   |  |  |  |  | 2011   |  |  |   |  |  | 2010 |  |         |  |  |   | Increase/(Decrease) | 
|Revenues:                  |  |   |  |  |                       |  |         |                            |  |   |      |  |  |  |         |  |                     |   |  |  |  |  |        |  |  |   |  |  |      |  |         |  |  |   |                     |  |  |  |         |  |  |   |  |  |  |  |         | 
|Lodging income             |  | $ |  |  |                       |  | 132,986 |                            |  | $ |      |  |  |  | 108,920 |  |                     | $ |  |  |  |  | 24,066 |  |  | $ |  |  |      |  | 119,939 |  |  | $ |                     |  |  |  | 108,920 |  |  | $ |  |  |  |  | 11,019  | 
|                           |  |   |  |  |                       |  |         |                            |  |   |      |  |  |  |         |  |                     |   |  |  |  |  |        |  |  |   |  |  |      |  |         |  |  |   |                     |  |  |  |         |  |  |   |  |  |  |  |         | 
|                           |  |   |  |  |                       |  |         |                            |  |   |      | 
|Total revenues             |  | $ |  |  |                       |  | 132,986 |                            |  | $ |      |  |  |  | 108,920 |  |                     | $ |  |  |  |  | 24,066 |  |  | $ |  |  |      |  | 119,939 |  |  | $ |                     |  |  |  | 108,920 |  |  | $ |  |  |  |  | 11,019  | 
|                           |  |   |  |  |                       |  |         |                            |  |   |      |  |  |  |         |  |                     |   |  |  |  |  |        |  |  |   |  |  |      |  |         |  |  |   |                     |  |  |  |         |  |  |   |  |  |  |  |         | 
|Expenses:                  |  |   |  |  |                       |  |         |                            |  |   |      |  |  |  |         |  |                     |   |  |  |  |  |        |  |  |   |  |  |      |  |         |  |  |   |                     |  |  |  |         |  |  |   |  |  |  |  |         | 
|Lodging operating expenses |  | $ |  |  |                       |  | 87,539  |                            |  | $ |      |  |  |  | 71,703  |  |                     | $ |  |  |  |  | 15,836 |  |  | $ |  |  |      |  | 78,553  |  |  | $ |                     |  |  |  | 71,703  |  |  | $ |  |  |  |  | 6,850   | 
|Real estate taxes          |  |   |  |  |                       |  | 6,739   |                            |  |   |      |  |  |  | 7,148   |  |                     |   |  |  |  |  | (409)  |  |  |   |  |  |      |  | 6,138   |  |  |   |                     |  |  |  | 7,148   |  |  |   |  |  |  |  | (1,010) | 
|                           |  |   |  |  |                       |  |         |                            |  |   |      |  |  |  |         |  |                     |   |  |  |  |  |        |  |  |   |  |  |      |  |         |  |  |   |                     |  |  |  |         |  |  |   |  |  |  |  |         | 
|                           |  |   |  |  |                       |  |         |                            |  |   |      | 
|Total operating expenses   |  | $ |  |  |                       |  | 94,278  |                            |  | $ |      |  |  |  | 78,851  |  |                     | $ |  |  |  |  | 15,427 |  |  | $ |  |  |      |  | 84,691  |  |  | $ |                     |  |  |  | 78,851  |  |  | $ |  |  |  |  | 5,840   | 
|                           |  |   |  |  |                       |  |         |                            |  |   |      |  |  |  |         |  |                     |   |  |  |  |  |        |  |  |   |  |  |      |  |         |  |  |   |                     |  |  |  |         |  |  |   |  |  |  |  |         | 
|                           |  |   |  |  |                       |  |         |                            |  |   |      | 
|Net operating income       |  | $ |  |  |                       |  | 38,708  |                            |  | $ |      |  |  |  | 30,069  |  |                     | $ |  |  |  |  | 8,639  |  |  | $ |  |  |      |  | 35,248  |  |  | $ |                     |  |  |  | 30,069  |  |  | $ |  |  |  |  | 5,179   | 
|                           |  |   |  |  |                       |  |         |                            |  |   |      |  |  |  |         |  |                     |   |  |  |  |  |        |  |  |   |  |  |      |  |         |  |  |   |                     |  |  |  |         |  |  |   |  |  |  |  |         | 

The lodging income increase of $24,066 is due primarily to the increase in revenue per available room (Rev/Par) which was
driven from Average Daily Rate gains of $118 compared to $111. We continue to obtain reductions in real estate taxes as reflected in the $408 decrease from 2010 to 2011 in the segment portfolio and the $1,010 decrease in the same store portfolio. On
a same store basis, the lodging segments net operating income reflects a increase from $30,069 to $35,248 or 17.2%, which is attributable to the increase in same store occupancy from 66% to 68% and ADR from $111 to $116 for the three months
ended March 31, 2011 and 2010, respectively.

Office Segment



|                               |  |   |  |  |                         |  |           |  |  |   |      |  |  |  |           | 
|------------------------------ |  | - |  |  | ----------------------- |  | --------- |  |  | - | ---- |  |  |  | --------- | 
|                               |  |   |  |  | Total Office Properties | 
|                               |  |   |  |  | As of March 31,         | 
|                               |  |   |  |  | 2011                    |  |           |  |  |   | 2010 | 
|Office Properties              |  |   |  |  |                         |  |           |  |  |   |      |  |  |  |           | 
|Physical occupancy             |  |   |  |  |                         |  | 94%       |  |  |   |      |  |  |  | 95%       | 
|Economic occupancy             |  |   |  |  |                         |  | 94%       |  |  |   |      |  |  |  | 95%       | 
|Base rent per square foot      |  | $ |  |  |                         |  | 15.59     |  |  | $ |      |  |  |  | 15.27     | 
|Gross investment in properties |  | $ |  |  |                         |  | 2,023,611 |  |  | $ |      |  |  |  | 1,978,530 | 

The following table represents lease
expirations for the office segment:



|                      |  |                          |     |  |                                |  |           |                                           |  |  |                    |  |  |                                    |       |   |                         |  |       |   |  |   |       | 
|--------------------- |  | ------------------------ | --- |  | ------------------------------ |  | --------- | ----------------------------------------- |  |  | ------------------ |  |  | ---------------------------------- | ----- | - | ----------------------- |  | ----- | - |  | - | ----- | 
|Lease
Expiration
Year |  | Number ofExpiring Leases |     |  | GLA ofExpiring Leases(Sq. Ft.) |  |           | Annualized BaseRent of ExpiringLeases ($) |  |  | Percentof TotalGLA |  |  | Percent ofTotalAnnualizedBase Rent |       |   | ExpiringRent/SquareFoot | 
|2011                  |  |                          | 25  |  |                                |  | 133,137   |                                           |  |  | 3,642              |  |  |                                    | 1.34  | % |                         |  | 2.16  | % |  | $ | 27.35 | 
|2012                  |  |                          | 22  |  |                                |  | 349,776   |                                           |  |  | 6,338              |  |  |                                    | 3.53  | % |                         |  | 3.76  | % |  | $ | 18.12 | 
|2013                  |  |                          | 32  |  |                                |  | 661,418   |                                           |  |  | 13,298             |  |  |                                    | 6.67  | % |                         |  | 7.90  | % |  | $ | 20.10 | 
|2014                  |  |                          | 52  |  |                                |  | 350,290   |                                           |  |  | 6,736              |  |  |                                    | 3.53  | % |                         |  | 4.00  | % |  | $ | 19.23 | 
|2015                  |  |                          | 41  |  |                                |  | 392,439   |                                           |  |  | 7,732              |  |  |                                    | 3.96  | % |                         |  | 4.59  | % |  | $ | 19.70 | 
|Thereafter            |  |                          | 105 |  |                                |  | 8,032,044 |                                           |  |  | 130,605            |  |  |                                    | 80.97 | % |                         |  | 77.59 | % |  | $ | 16.26 | 
|                      |  |                          |     | 
|                      |  |                          | 277 |  |                                |  | 9,919,104 |                                           |  |  | 168,351            |  |  |                                    | 100.0 | % |                         |  | 100.0 | % |  | $ | 16.97 | 



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##### Table of Contents

Our investments in office properties largely represent assets leased and occupied to either a diverse group
of tenants or to single tenants that fully occupy the space leased. Examples of the former include the IDS Center located in the central business district of Minneapolis, and Dulles Executive Plaza and Worldgate Plaza, both located in metropolitan
Washington D.C. and catering to medium to high-technology companies and federal government contractors. Examples of the latter include three buildings leased and occupied by AT&T and located in three distinct US office marketsChicago, St.
Louis, and Cleveland. In addition, our office portfolio includes properties leased on a net basis to SunTrust, with the leased locations located in the east and southeast regions of the country.

Our office properties continue to experience consistent occupancy rates and stable rental rates for more recent acquisitions. For example, in the
Minneapolis, Minnesota and Dulles, Virginia office markets, where a majority of our multi-tenant office properties are located, our high occupancy rate is consistent with the strength of the market. These rates are as of the end of the period and do
not represent the average rate during the year ended March 31, 2011 and 2010.

Comparison of Three Months Ended March 31, 2011
to March 31, 2010

The table below represents operating information for the office segment of 47 and 43 properties as of
March 31, 2011 and 2010 and for the same store portfolio consisting of 43 properties acquired prior to January 1, 2010. The properties in the same store portfolio were owned for the three months ended March 31, 2011 and March 31,
2010.



|                                          |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |         |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |         | 
|----------------------------------------- |  | - |  |  | -------------------- |  | ------ | ------------------------- |  | - | ---- |  |  |  | ------ |  | ------------------- | - |  |  |  |  | ------- |  |  | - |  |  | ---- |  | ------ |  |  | - | ------------------- |  |  |  | ------ |  |  | - |  |  |  |  | ------- | 
|                                          |  |   |  |  | Total Office Segment |  |        | Same Store Office Segment | 
|                                          |  |   |  |  | 2011                 |  |        |                           |  |   | 2010 |  |  |  |        |  | Increase/(Decrease) |   |  |  |  |  | 2011    |  |  |   |  |  | 2010 |  |        |  |  |   | Increase/(Decrease) | 
|Revenues:                                 |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |         |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |         | 
|Rental income                             |  | $ |  |  |                      |  | 39,657 |                           |  |   |      |  |  |  | 39,031 |  |                     |   |  |  |  |  | 626     |  |  | $ |  |  |      |  | 38,693 |  |  | $ |                     |  |  |  | 39,113 |  |  | $ |  |  |  |  | (420)   | 
|Tenant recovery income                    |  |   |  |  |                      |  | 7,016  |                           |  |   |      |  |  |  | 8,325  |  |                     |   |  |  |  |  | (1,309) |  |  |   |  |  |      |  | 6,695  |  |  |   |                     |  |  |  | 8,325  |  |  |   |  |  |  |  | (1,630) | 
|Other property income                     |  |   |  |  |                      |  | 1,059  |                           |  |   |      |  |  |  | 2,202  |  |                     |   |  |  |  |  | (1,143) |  |  |   |  |  |      |  | 1,058  |  |  |   |                     |  |  |  | 2,202  |  |  |   |  |  |  |  | (1,144) | 
|                                          |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |         |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |         | 
|                                          |  |   |  |  |                      |  |        |                           |  |   |      | 
|Total revenues                            |  | $ |  |  |                      |  | 47,732 |                           |  |   |      |  |  |  | 49,558 |  |                     |   |  |  |  |  | (1,826) |  |  | $ |  |  |      |  | 46,446 |  |  | $ |                     |  |  |  | 49,640 |  |  | $ |  |  |  |  | (3,194) | 
|                                          |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |         |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |         | 
|Expenses:                                 |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |         |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |         | 
|Property operating expenses               |  | $ |  |  |                      |  | 8,840  |                           |  |   |      |  |  |  | 9,213  |  |                     |   |  |  |  |  | (373)   |  |  | $ |  |  |      |  | 8,339  |  |  | $ |                     |  |  |  | 9,297  |  |  | $ |  |  |  |  | (958)   | 
|Real estate taxes                         |  |   |  |  |                      |  | 3,709  |                           |  |   |      |  |  |  | 4,147  |  |                     |   |  |  |  |  | (438)   |  |  |   |  |  |      |  | 3,483  |  |  |   |                     |  |  |  | 4,147  |  |  |   |  |  |  |  | (664)   | 
|                                          |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |         |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |         | 
|                                          |  |   |  |  |                      |  |        |                           |  |   |      | 
|Total operating expenses                  |  | $ |  |  |                      |  | 12,549 |                           |  |   |      |  |  |  | 13,360 |  |                     |   |  |  |  |  | (811)   |  |  | $ |  |  |      |  | 11,822 |  |  | $ |                     |  |  |  | 13,444 |  |  | $ |  |  |  |  | (1,622) | 
|                                          |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |         |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |         | 
|                                          |  |   |  |  |                      |  |        |                           |  |   |      | 
|Net operating income                      |  | $ |  |  |                      |  | 35,183 |                           |  | $ |      |  |  |  | 36,198 |  |                     | $ |  |  |  |  | (1,015) |  |  | $ |  |  |      |  | 34,624 |  |  | $ |                     |  |  |  | 36,196 |  |  | $ |  |  |  |  | (1,572) | 
|                                          |  |   |  |  |                      |  |        |                           |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |         |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |         | 
|                                          |  |   |  |  |                      |  |        |                           |  |   |      | 
|Average economic occupancy for the period |  |   |  |  |                      |  | 94%    |                           |  |   |      |  |  |  | 96%    |  |                     |   |  |  |  |  | (2%)    |  |  |   |  |  |      |  | 94%    |  |  |   |                     |  |  |  | 95%    |  |  |   |  |  |  |  | (1%)    | 

Office properties real estate rental
revenues decreased from $49,558 in 2010 to $47,733 in 2011 for the segment portfolio and from $49,640 in 2010 to $46,446 in 2011 for the same store portfolio. These decreases are the result of a reduction in operating expenses and real estate taxes
from 2010 to 2011, which reduced tenant recovery income. On a same store basis, other property income of $2,202 for the three months ended March 31, 2010 reflects one-time service income as compared to $1,058 for the three months ended
March 31, 2011.

Industrial Segment



|                                |  |   |  |  |                             |  |           |  |  |   |      |  |  |  |           | 
|------------------------------- |  | - |  |  | --------------------------- |  | --------- |  |  | - | ---- |  |  |  | --------- | 
|                                |  |   |  |  | Total Industrial Properties | 
|                                |  |   |  |  | As of March 31,             | 
|                                |  |   |  |  | 2011                        |  |           |  |  |   | 2010 | 
|Industrial Properties           |  |   |  |  |                             |  |           |  |  |   |      |  |  |  |           | 
|Physical occupancy              |  |   |  |  |                             |  | 91%       |  |  |   |      |  |  |  | 93%       | 
|Economic occupancy              |  |   |  |  |                             |  | 92%       |  |  |   |      |  |  |  | 95%       | 
|Base rent per square foot       |  | $ |  |  |                             |  | 5.74      |  |  | $ |      |  |  |  | 5.79      | 
|Gross investments in properties |  | $ |  |  |                             |  | 1,094,360 |  |  | $ |      |  |  |  | 1,074,115 | 



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##### Table of Contents

The following table represents lease expirations for the industrial segment:



|                      |  |                          |    |  |                                |  |            |                                           |  |  |                    |  |  |                                    |       |   |                         |  |       |   |  |  |        | 
|--------------------- |  | ------------------------ | -- |  | ------------------------------ |  | ---------- | ----------------------------------------- |  |  | ------------------ |  |  | ---------------------------------- | ----- | - | ----------------------- |  | ----- | - |  |  | ------ | 
|Lease Expiration Year |  | Number ofExpiring Leases |    |  | GLA ofExpiring Leases(Sq. Ft.) |  |            | Annualized BaseRent of ExpiringLeases ($) |  |  | Percentof TotalGLA |  |  | Percent ofTotalAnnualizedBase Rent |       |   | ExpiringRent/SquareFoot | 
|2011                  |  |                          | 14 |  |                                |  | 1,208,539  |                                           |  |  | 3,573              |  |  |                                    | 8.01  | % |                         |  | 3.68  | % |  |  | $2.96  | 
|2012                  |  |                          | 9  |  |                                |  | 855,538    |                                           |  |  | 3,514              |  |  |                                    | 5.67  | % |                         |  | 3.62  | % |  |  | $4.11  | 
|2013                  |  |                          | 10 |  |                                |  | 1,381,725  |                                           |  |  | 7,771              |  |  |                                    | 9.15  | % |                         |  | 8.01  | % |  |  | $5.62  | 
|2014                  |  |                          | 1  |  |                                |  | 23,218     |                                           |  |  | 433                |  |  |                                    | 0.15  | % |                         |  | 0.45  | % |  |  | $18.63 | 
|2015                  |  |                          | 5  |  |                                |  | 688,373    |                                           |  |  | 2,975              |  |  |                                    | 4.56  | % |                         |  | 3.07  | % |  |  | $4.32  | 
|Thereafter            |  |                          | 44 |  |                                |  | 10,939,230 |                                           |  |  | 78,747             |  |  |                                    | 72.46 | % |                         |  | 81.17 | % |  |  | $7.20  | 
|                      |  |                          |    | 
|                      |  |                          | 83 |  |                                |  | 15,096,623 |                                           |  |  | 97,013             |  |  |                                    | 100.0 | % |                         |  | 100.0 | % |  |  | $6.43  | 

Our industrial properties are located
in what we believe are active and sought-after industrial markets, including the Memphis, Tennessee airport market and the OHare Airport market of Chicago, Illinois, commonly one of the largest industrial markets in the world. The specialty
distribution centers are comprised of refrigeration or air conditioned buildings in various locations across the country. The charter schools and correctional facilities consist of nine properties under long-term triple net leases.

Comparison of Three Months Ended March 31, 2011 to March 31, 2010

The table below represents operating information for the industrial segment of 73 and 72 properties as of March 31, 2011 and 2010 and for the same store portfolio consisting of 65 properties acquired
prior to January 1, 2010.



|                                          |  |   |   |  |                          |  |        |                               |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |       | 
|----------------------------------------- |  | - | - |  | ------------------------ |  | ------ | ----------------------------- |  | - | ---- |  |  |  | ------ |  | ------------------- | - |  |  |  |  | ----- |  |  | - |  |  | ---- |  | ------ |  |  | - | ------------------- |  |  |  | ------ |  |  | - |  |  |  |  | ----- | 
|                                          |  |   |   |  | Total Industrial Segment |  |        | Same Store Industrial Segment | 
|                                          |  |   |   |  | 2011                     |  |        |                               |  |   | 2010 |  |  |  |        |  | Increase/(Decrease) |   |  |  |  |  | 2011  |  |  |   |  |  | 2010 |  |        |  |  |   | Increase/(Decrease) | 
|Revenues:                                 |  |   |   |  |                          |  |        |                               |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |       | 
|Rental income                             |  | $ |   |  |                          |  | 22,307 |                               |  |   |      |  |  |  | 20,967 |  |                     |   |  |  |  |  | 1,340 |  |  | $ |  |  |      |  | 20,749 |  |  | $ |                     |  |  |  | 20,182 |  |  | $ |  |  |  |  | 567   | 
|Tenant recovery income                    |  |   |   |  |                          |  | 855    |                               |  |   |      |  |  |  | 662    |  |                     |   |  |  |  |  | 193   |  |  |   |  |  |      |  | 855    |  |  |   |                     |  |  |  | 662    |  |  |   |  |  |  |  | 193   | 
|Other property income                     |  |   |   |  |                          |  | 22     |                               |  |   |      |  |  |  | 10     |  |                     |   |  |  |  |  | 12    |  |  |   |  |  |      |  | 10     |  |  |   |                     |  |  |  | 10     |  |  |   |  |  |  |  | 0     | 
|                                          |  |   |   |  |                          |  |        |                               |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |       | 
|                                          |  |   |   |  |                          |  |        |                               |  |   |      | 
|Total revenues                            |  |   | $ |  |                          |  | 23,184 |                               |  |   |      |  |  |  | 21,639 |  |                     |   |  |  |  |  | 1,545 |  |  | $ |  |  |      |  | 21,614 |  |  | $ |                     |  |  |  | 20,854 |  |  | $ |  |  |  |  | 760   | 
|                                          |  |   |   |  |                          |  |        |                               |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |       | 
|Expenses:                                 |  |   |   |  |                          |  |        |                               |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |       | 
|Property operating expenses               |  | $ |   |  |                          |  | 1,460  |                               |  |   |      |  |  |  | 1,534  |  |                     |   |  |  |  |  | (74)  |  |  | $ |  |  |      |  | 1,290  |  |  | $ |                     |  |  |  | 1,520  |  |  | $ |  |  |  |  | (230) | 
|Real estate taxes                         |  |   |   |  |                          |  | 866    |                               |  |   |      |  |  |  | 758    |  |                     |   |  |  |  |  | 108   |  |  |   |  |  |      |  | 830    |  |  |   |                     |  |  |  | 758    |  |  |   |  |  |  |  | 72    | 
|                                          |  |   |   |  |                          |  |        |                               |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |       | 
|                                          |  |   |   |  |                          |  |        |                               |  |   |      | 
|Total operating expenses                  |  |   | $ |  |                          |  | 2,326  |                               |  |   |      |  |  |  | 2,292  |  |                     |   |  |  |  |  | 34    |  |  | $ |  |  |      |  | 2,120  |  |  | $ |                     |  |  |  | 2,278  |  |  | $ |  |  |  |  | (158) | 
|                                          |  |   |   |  |                          |  |        |                               |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |       | 
|                                          |  |   |   |  |                          |  |        |                               |  |   |      | 
|Net operating income                      |  | $ |   |  |                          |  | 20,858 |                               |  | $ |      |  |  |  | 19,347 |  |                     | $ |  |  |  |  | 1,511 |  |  | $ |  |  |      |  | 19,494 |  |  | $ |                     |  |  |  | 18,576 |  |  | $ |  |  |  |  | 918   | 
|                                          |  |   |   |  |                          |  |        |                               |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |   |  |  |      |  |        |  |  |   |                     |  |  |  |        |  |  |   |  |  |  |  |       | 
|                                          |  |   |   |  |                          |  |        |                               |  |   |      | 
|Average economic occupancy for the period |  |   |   |  |                          |  | 93%    |                               |  |   |      |  |  |  | 95%    |  |                     |   |  |  |  |  | (2%)  |  |  |   |  |  |      |  | 95%    |  |  |   |                     |  |  |  | 95%    |  |  |   |  |  |  |  | 0%    | 

Industrial properties real estate
revenues increased from $21,639 for the three months ended March 31, 2010 to $23,184 for the three months ended March 31, 2011 mainly due to the acquisition of charter school properties in the first quarter of 2010. Our overall increase in
net operating income for the industrial same store comparison reflects stable rental income coupled with lower operating expenses.

A majority
of the tenants have net leases and they are directly responsible for operating costs and reimburse us for real estate taxes and insurance. Therefore, industrial segment operating expenses are lower than the other segments.

Multi-family Segment



|                                                    |  |   |  |                              |         |   |  |   |  |      |  |  |         |  
|--------------------------------------------------- |  | - |  | ---------------------------- | ------- | - |  | - |  | ---- |  |  | ------- | -
|                                                    |  |   |  | Total Multi-familyProperties |        
|                                                    |  |   |  | As of
March31,               |        
|                                                    |  |   |  | 2011                         |         |   |  |   |  | 2010 | 
|Multi-Family Properties                             |  |   |  |                              |         |   |  |   |  |      |  |  |         |  
|Economic occupancy                                  |  |   |  |                              | 91      | % |  |   |  |      |  |  | 86      | %
|End of month scheduled base rent per unit per month |  | $ |  |                              | 877     |   |  | $ |  |      |  |  | 878     |  
|Gross investment in properties                      |  | $ |  |                              | 898,784 |   |  | $ |  |      |  |  | 782,142 |  



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##### Table of Contents

Our portfolio contains 27 multi-family properties, each reporting stable rental rate levels. These rates are
as of the end of the period and do not represent the average rate during the three months ended March 31, 2011 and 2010.

Comparison of Three Months Ended March 31, 2011 to March 31, 2010

The table below represents operating information for the multi-family segment of 27 and 24 properties as of March 31, 2011 and 2010 and for the same store portfolio consisting of 23 properties
acquired prior to January 1, 2010. The properties in the same store portfolio were owned for the entire three months ended March 31, 2011 and March 31, 2010.



|                                          |  |                            |  |  |      |  |        |                                 |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |      |  |  |  |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|----------------------------------------- |  | -------------------------- |  |  | ---- |  | ------ | ------------------------------- |  | - | ---- |  |  |  | ------ |  | ------------------- | - |  |  |  |  | ----- |  |  | ---- |  |  |  | - |  | ---- |  |  | ------ |  |  | ------------------- |  |  |  |  | ------ |  |  | - |  |  |  |  | ----- | 
|                                          |  | Total Multi-Family Segment |  |  |      |  |        | Same Store Multi-Family Segment | 
|                                          |  |                            |  |  | 2011 |  |        |                                 |  |   | 2010 |  |  |  |        |  | Increase/(Decrease) |   |  |  |  |  |       |  |  | 2011 |  |  |  |   |  | 2010 |  |  |        |  |  | Increase/(Decrease) | 
|Revenues:                                 |  |                            |  |  |      |  |        |                                 |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |      |  |  |  |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|Rental income                             |  | $                          |  |  |      |  | 23,239 |                                 |  |   |      |  |  |  | 19,025 |  |                     |   |  |  |  |  | 4,214 |  |  |      |  |  |  | $ |  |      |  |  | 19,164 |  |  | $                   |  |  |  |  | 17,500 |  |  | $ |  |  |  |  | 1,664 | 
|Tenant property income                    |  |                            |  |  |      |  | 137    |                                 |  |   |      |  |  |  | 75     |  |                     |   |  |  |  |  | 62    |  |  |      |  |  |  |   |  |      |  |  | 116    |  |  |                     |  |  |  |  | 75     |  |  |   |  |  |  |  | 41    | 
|Other property income                     |  |                            |  |  |      |  | 2,025  |                                 |  |   |      |  |  |  | 1,377  |  |                     |   |  |  |  |  | 648   |  |  |      |  |  |  |   |  |      |  |  | 1,669  |  |  |                     |  |  |  |  | 1,283  |  |  |   |  |  |  |  | 386   | 
|                                          |  |                            |  |  |      |  |        |                                 |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |      |  |  |  |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|                                          |  |                            |  |  |      |  |        |                                 |  |   |      |  | 
|Total revenues                            |  | $                          |  |  |      |  | 25,401 |                                 |  |   |      |  |  |  | 20,477 |  |                     |   |  |  |  |  | 4,924 |  |  |      |  |  |  | $ |  |      |  |  | 20,949 |  |  | $                   |  |  |  |  | 18,858 |  |  | $ |  |  |  |  | 2,091 | 
|                                          |  |                            |  |  |      |  |        |                                 |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |      |  |  |  |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|Expenses:                                 |  |                            |  |  |      |  |        |                                 |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |      |  |  |  |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|Property operating expenses               |  | $                          |  |  |      |  | 8,819  |                                 |  |   |      |  |  |  | 7,689  |  |                     |   |  |  |  |  | 1,130 |  |  |      |  |  |  | $ |  |      |  |  | 7,698  |  |  | $                   |  |  |  |  | 7,326  |  |  | $ |  |  |  |  | 372   | 
|Real estate taxes                         |  |                            |  |  |      |  | 3,514  |                                 |  |   |      |  |  |  | 3,044  |  |                     |   |  |  |  |  | 470   |  |  |      |  |  |  |   |  |      |  |  | 2,557  |  |  |                     |  |  |  |  | 2,392  |  |  |   |  |  |  |  | 165   | 
|                                          |  |                            |  |  |      |  |        |                                 |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |      |  |  |  |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|                                          |  |                            |  |  |      |  |        |                                 |  |   |      |  | 
|Total operating expenses                  |  | $                          |  |  |      |  | 12,333 |                                 |  |   |      |  |  |  | 10,733 |  |                     |   |  |  |  |  | 1,600 |  |  |      |  |  |  | $ |  |      |  |  | 10,255 |  |  | $                   |  |  |  |  | 9,718  |  |  | $ |  |  |  |  | 537   | 
|                                          |  |                            |  |  |      |  |        |                                 |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |      |  |  |  |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|                                          |  |                            |  |  |      |  |        |                                 |  |   |      |  | 
|Net operating income                      |  | $                          |  |  |      |  | 13,068 |                                 |  | $ |      |  |  |  | 9,744  |  |                     | $ |  |  |  |  | 3,324 |  |  |      |  |  |  | $ |  |      |  |  | 10,694 |  |  | $                   |  |  |  |  | 9,140  |  |  | $ |  |  |  |  | 1,554 | 
|                                          |  |                            |  |  |      |  |        |                                 |  |   |      |  |  |  |        |  |                     |   |  |  |  |  |       |  |  |      |  |  |  |   |  |      |  |  |        |  |  |                     |  |  |  |  |        |  |  |   |  |  |  |  |       | 
|Average economic occupancy for the period |  |                            |  |  |      |  | 91%    |                                 |  |   |      |  |  |  | 86%    |  |                     |   |  |  |  |  | 5%    |  |  |      |  |  |  |   |  |      |  |  | 93%    |  |  |                     |  |  |  |  | 86%    |  |  |   |  |  |  |  | 7%    | 

Multi-family real estate rental
revenues increased from $19,025 for the three months ended March 31, 2010 to $23,239 for the three months ended March 31, 2011. The increases are mainly due to the acquisition of two properties since March 31, 2010 as well as a 5%
occupancy increase. The same store revenues increase is primarily due to the 7% increase in occupancy.

Liquidity and Capital Resources

We continually evaluate the economic and credit environment and its impact on our business. Maintaining significant capital reserves has
become a priority for all companies. At this juncture we believe we are appropriately positioned to have significant cash to utilize in executing our strategy.

Our objectives are to invest in real estate assets that produce what we believe are attractive current yield and long-term risk-adjusted returns to our stockholders and to generate sustainable and
predictable cash flow from our operations to distribute to our stockholders.

For 2011, we believe that our acquisitions will be fewer than
prior years.

Our principal demands for funds are:



| |  | to pay our expenses and the operating expenses of our properties;
|- |  | -----------------------------------------------------------------



| |  | to pay distributions to our stockholders;
|- |  | -----------------------------------------



| |  | to service or pay-down our debt;
|- |  | --------------------------------



| |  | to fund capital expenditures;
|- |  | -----------------------------



| |  | to invest in properties; and
|- |  | ----------------------------



| |  | to fund development investments.
|- |  | --------------------------------

Generally, our cash needs are funded from:



| |  | income earned on our investment properties;
|- |  | -------------------------------------------



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##### Table of Contents

| |  | interest income on investments and dividend and gain on sale income earned on our investment in marketable securities;
|- |  | ----------------------------------------------------------------------------------------------------------------------



| |  | distributions from our joint venture investments;
|- |  | -------------------------------------------------



| |  | proceeds from sales of properties;
|- |  | ----------------------------------



| |  | proceeds from borrowings on properties; and
|- |  | -------------------------------------------



| |  | issuance of shares under our distribution reinvestment plan.
|- |  | ------------------------------------------------------------

Acquisitions and Investments

We completed approximately $67 million and $573 million of
real estate acquisitions in the three months ended March 31, 2011 and 2010, respectively. These acquisitions were consummated through our subsidiaries and were funded with available cash, mortgage indebtedness, and the proceeds from the
distribution reinvestment plan.

Investments in Consolidated Developments

We have development projects that are in various stages of pre-development and development. We fund cash needs for these development activities from our working capital and by borrowings secured by the
properties. Specifically identifiable direct development and construction costs are capitalized, including, where applicable, salaries and related costs, real estate taxes and interest incurred in developing the property. These developments
encompass the retail and multi-family segments. In addition, we have purchased land and incurred pre-development costs of $89.1 million for an additional four multi-family projects.

Although the economy, in general, has started to recover, our retail developments could experience longer lease-up timelines and future leasing could be at leasing rates less than originally underwritten,
which will impact the returns that we realize in these investments

The properties under development and all amounts set forth below are as of
March 31, 2011. (Dollar amounts stated in thousands)



|            |  |                        |                |  |               |  |              |            |  |  |                                |  |  |                            |         |  |                                                 |  |         |                                    |  |  |                                       |  |  |  |        |  |  |  |              | 
|----------- |  | ---------------------- | -------------- |  | ------------- |  | ------------ | ---------- |  |  | ------------------------------ |  |  | -------------------------- | ------- |  | ----------------------------------------------- |  | ------- | ---------------------------------- |  |  | ------------------------------------- |  |  |  | ------ |  |  |  | ------------ | 
|Name        |  | Location
(City, State) |                |  | Property Type |  |              | SquareFeet |  |  | Total CostsIncurred toDate ($) |  |  | TotalEstimatedCosts ($)(a) |         |  | RemainingCosts to beFunded byInlandAmerican ($) |  |         | NotePayable asof March 31,2011 ($) |  |  | EstimatedPlaced inService Date(b) (c) | 
|Woodbridge  |  |                        | Wylie, TX      |  |               |  | Retail       |            |  |  | 519,745                        |  |  |                            | 35,673  |  |                                                 |  | 71,638  |                                    |  |  | 0                                     |  |  |  | 14,243 |  |  |  | (d)          | 
|Stone Creek |  |                        | San Marcos, TX |  |               |  | Retail       |            |  |  | 469,741                        |  |  |                            | 47,454  |  |                                                 |  | 68,836  |                                    |  |  | 0                                     |  |  |  | 10,135 |  |  |  | (d)          | 
|UCF Housing |  |                        | Orlando, FL    |  |               |  | Multi-family |            |  |  | 385,052                        |  |  |                            | 26,136  |  |                                                 |  | 67,158  |                                    |  |  | 0                                     |  |  |  | 5,628  |  |  |  | Q2  Q3 2012 | 
|            |  |                        |                |  |               |  |              |            |  |  | 1,374,538                      |  |  |                            | 109,263 |  |                                                 |  | 207,632 |                                    |  |  | 0                                     |  |  |  | 30,006 |  |  |  |              | 



|(a) | The Total Estimated Costs represent 100% of the developments estimated costs, including the acquisition cost of the land and building, if any. The Total Estimated
Costs are subject to change upon, or prior to, the completion of the development and include amounts required to lease the property.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | The Estimated Placed in Service Date represents the date the certificate of occupancy is currently anticipated to be obtained. Subsequent to obtaining the certificate
of occupancy, each property will go through a lease-up period.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Leasing activities related to multi-family properties do not begin until six to nine months prior to the placed in service date.
|--- | --------------------------------------------------------------------------------------------------------------------------------



|(d) | Stone Creek and Woodbridge are retail shopping centers and development is planned to be completed in phases. As the construction and lease-up of individual phases are
completed, the respective phase will be placed in service resulting in a range of estimated placed in service dates through 2016. The Stone Creek and Woodbridge developments are pre-leased at 63% and 46% as of March 31, 2011. The Percentage
Pre-Leased represents the percentage of square feet leased of the total projected square footage of the entire development.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As
part of the restructuring and foreclosure of the Stan Thomas properties note, we began overseeing the infrastructure activities to further the development of the Sacramento Railyards. The Railyards project is a collaborative planning effort of
various federal, state and local municipalities to develop an approximate 240 acre site north of Sacramentos central business district. The current book value is $107.9 million as of March 31, 2011. The project is scheduled to be
completed in phases, beginning in 2012-2030.



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Notes Receivable

Our notes receivable balance was $34.0 million and $54.0 million as of March 31, 2011 and December 31, 2010, respectively, and consisted of installment notes due from unrelated parties that
mature on various dates through December 2013. For the three months ended March 31, 2011 and 2010, we recorded interest income from notes receivable of $1.3 million and $3.2 million, respectively, which is included in the interest and dividend
income on the consolidated statements of operations and other comprehensive income.

On October 22, 2010, we entered into a restructure
agreement with a borrower, Stan Thomas Properties on certain loans. As final settlement of the restructure, we received title to the underlying collateral property on March 8, 2011. The property was recorded in investment properties at its
estimated fair value of $20 million.

Distributions

We declared monthly cash distributions to our stockholders per weighted average number of shares outstanding during the period from January 1, 2010 to March 31, 2011 totaling $106.3 million or
$.50 per share on an annualized basis. These cash distributions were paid with $77.3 million from our cash flow from operations, $9.5 million provided by distributions from unconsolidated entities and excess coverage from prior years. Our average
dividend reinvestment program participation was 47% for the three months ended March 31, 2011 compared to 52% for the three months ended March 31, 2010.

The following chart presents a historical view of our distribution coverage.



|                                          |  |         |           |  |      |  |          |      |  |  |          |   |  |      |          |   |      |  |          |   |  |  |         |  
|----------------------------------------- |  | ------- | --------- |  | ---- |  | -------- | ---- |  |  | -------- | - |  | ---- | -------- | - | ---- |  | -------- | - |  |  | ------- | -
|                                          |  | Q1 2011 |           |  | 2010 |  |          | 2009 |  |  | 2008     |   |  | 2007 |          |   | 2006 | 
|Cash flow provided by operations          |  | $       | 77,302    |  |      |  | 356,660  |      |  |  | 369,031  |   |  |      | 384,365  |   |      |  | 263,420  |   |  |  | 65,883  |  
|Distribution from unconsolidated entities |  | $       | 9,540     |  |      |  | 31,737   |      |  |  | 32,081   |   |  |      | 41,704   |   |      |  | 0        |   |  |  | 0       |  
|Gain on sales of properties               |  | $       | 0         |  |      |  | 55,412   |      |  |  | 0        |   |  |      | 0        |   |      |  | 0        |   |  |  | 0       |  
|Distributions declared                    |  | $       | (106,320) |  |      |  | (417,885 | )    |  |  | (405,337 | ) |  |      | (418,694 | ) |      |  | (242,606 | ) |  |  | (41,178 | )
|                                          |  |         |           | 
|Excess (deficiency)                       |  | $       | (19,478)  |  |      |  | 25,924   |      |  |  | (4,225   | ) |  |      | 7,375    |   |      |  | 20,814   |   |  |  | 24,705  |  
|                                          |  |         |           | 



|                                           |  |         |           |  |         |  |          |  
|------------------------------------------ |  | ------- | --------- |  | ------- |  | -------- | -
|                                           |  | Q1 2011 |           |  | Q1 2010 | 
|Cash flow provided by operations           |  | $       | 77,302    |  |         |  | 60,642   |  
|Distributions from unconsolidated entities |  | $       | 9,540     |  |         |  | 7,583    |  
|Distributions declared                     |  | $       | (106,320) |  |         |  | (103,426 | )
|                                           |  |         |           | 
|Excess (deficiency)                        |  | $       | (19,478)  |  |         |  | (35,201  | )
|                                           |  |         |           | 

Our cash flow from operations in the first quarter is typically our lowest of the year as a result of the seasonality in our
lodging portfolio and a large portion of real estate taxes that are paid in the first quarter. We expect our cash flow from operations to increase during the remainder of the year consistent with historical trends.

Financing Activities and Contractual Obligations

Stock Offering

Our initial offering of shares of common stock terminated as of the close
of business on July 31, 2007. We had sold a total of 469,598,762 shares in the primary offering and 9,720,991 shares pursuant to the offering of shares through the distribution reinvestment plan. A follow-on registration statement for an
offering of up to 500,000,000 shares of common stock at $10.00 each and up to 40,000,000 shares at $9.50 each pursuant to our distribution reinvestment plan was declared effective by the SEC on August 1, 2007 and terminated on April 6,
2009. Our total offering costs for both our initial and follow on-offering were approximately $828 million. On March 31, 2009, we filed a registration statement to register 50,000,000 shares to be issued under the distribution reinvestment
plan. As of March 31, 2011, we sold a total of 320,636,231 shares in the follow-on offering. As of March 31, 2011, we sold 85,204,505 shares pursuant to the offering of shares through the distribution reinvestment plan.

Share Repurchase Program

As of
December 31, 2009, we had repurchased 32,527,130 shares for $304 million under the share repurchase program. Our board of directors voted to suspend the share repurchase program until further notice, effective March 30, 2009. We did not
repurchase any shares in 2010.

Effective April 11, 2011, we will begin accepting share repurchase requests due to the death of any
beneficial owner of shares, with checks distributed by the end of the calendar quarter. There is $5 million available each quarter to repurchase shares at a price per share of $7.23, which is equal to 90% of the most recently disclosed estimated per
share value of $8.03. Additionally in accordance with the plan, the aggregate number of shares repurchased is limited to 5.0% of the total number of issued and outstanding shares during any consecutive 12 calendar month period. For the three months
ended March 31, 2011, we did not repurchase any shares.



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Borrowings

Our interest rate risk is monitored using a variety of techniques, including periodically evaluating fixed interest rate quotes on all variable rate debt and the costs associated with converting the debt
to fixed rate debt. Also, existing fixed and variable rate loans that are scheduled to mature in the next year or two are evaluated for possible early refinancing and or extension due to consideration given to current interest rates. The table below
presents, on a consolidated basis, the principal amount, weighted average interest rates and maturity date (by year) on our mortgage debt as of March 31, 2011 (dollar amounts are stated in thousands).



|                                        |  |      |         |   |      |  |         |      |  |  |         |   |  |      |         |   |            |  |         |       |  |  |           |   |  |  |           |  
|--------------------------------------- |  | ---- | ------- | - | ---- |  | ------- | ---- |  |  | ------- | - |  | ---- | ------- | - | ---------- |  | ------- | ----- |  |  | --------- | - |  |  | --------- | -
|                                        |  | 2011 |         |   | 2012 |  |         | 2013 |  |  | 2014    |   |  | 2015 |         |   | Thereafter |  |         | Total | 
|Maturing debt :                         |  |      |         |   |      |  |         |      |  |  |         |   |  |      |         |   |            |  |         |       |  |  |           |   |  |  |           |  
|Fixed rate debt (mortgage loans)        |  | $    | 93,004  |   |      |  | 132,625 |      |  |  | 547,104 |   |  |      | 234,372 |   |            |  | 334,965 |       |  |  | 2,457,036 |   |  |  | 3,799,106 |  
|Variable rate debt (mortgage loans)     |  | $    | 391,974 |   |      |  | 573,312 |      |  |  | 448,727 |   |  |      | 46,956  |   |            |  | 125,252 |       |  |  | 83,243    |   |  |  | 1,669,464 |  
|                                        |  |      |         |   |      |  |        
|Weighted average interest rate on debt: |  |      |         |   |      |  |         |      |  |  |         |   |  |      |         |   |            |  |         |       |  |  |           |   |  |  |           |  
|Fixed rate debt (mortgage loans)        |  |      | 5.06    | % |      |  | 5.49    | %    |  |  | 5.71    | % |  |      | 5.61    | % |            |  | 5.52    | %     |  |  | 5.89      | % |  |  | 5.78      | %
|Variable rate debt (mortgage loans)     |  |      | 3.54    | % |      |  | 3.62    | %    |  |  | 3.77    | % |  |      | 5.51    | % |            |  | 5.20    | %     |  |  | 4.68      | % |  |  | 3.87      | %

The debt maturity excludes mortgage
discounts associated with debt assumed at acquisition of which a discount of $28.9 million, net of accumulated amortization, is outstanding as of March 31, 2011.

We have nine interest rate swap agreements that have converted $405.1 million or 24% of our variable rate mortgage loans from variable to fixed rates. The pay rates range from 0.63% to 4.45% with maturity
dates from April 1, 2011 to April, 2013.

As of March 31, 2011, we had approximately $485.0 million and $705.9 million in mortgage
debt maturing in 2011 and 2012, respectively. We are currently negotiating refinancing on certain debt with various lenders at terms that will most likely require us to pay higher interest rates and to invest additional equity in the outstanding
loans. We currently anticipate that we will be able to repay or refinance our debt on a timely basis, and believe we have adequate sources of funds to meet our short term cash needs. However, there can be no assurance that we can obtain such
refinancing on satisfactory terms. Continued volatility in the capital markets could expose us to the risk of not being able to borrow on terms and conditions acceptable to us for future acquisitions or refinancings.

Summary of Cash Flows



|                                                  |  |   |  |  |                             |  |          |   |  |   |      |  |  |  |          |  
|------------------------------------------------- |  | - |  |  | --------------------------- |  | -------- | - |  | - | ---- |  |  |  | -------- | -
|                                                  |  |   |  |  | Three months ended March 31 | 
|                                                  |  |   |  |  | 2011                        |  |          |   |  |   | 2010 | 
|                                                  |  |   |  |  | (In thousands)              | 
|Cash provided by operating activities             |  | $ |  |  |                             |  | 77,302   |   |  | $ |      |  |  |  | 60,642   |  
|Cash used in investing activities                 |  |   |  |  |                             |  | (75,130  | ) |  |   |      |  |  |  | (252,780 | )
|Cash used in financing activities                 |  |   |  |  |                             |  | (119,505 | ) |  |   |      |  |  |  | (4,602   | )
|                                                  |  |   |  |  |                             |  |          |   |  |   |      |  |  |  |          |  
|Decrease in cash and cash equivalents             |  |   |  |  |                             |  | (117,333 | ) |  |   |      |  |  |  | (196,740 | )
|Cash and cash equivalents, at beginning of period |  |   |  |  |                             |  | 267,707  |   |  |   |      |  |  |  | 500,491  |  
|                                                  |  |   |  |  |                             |  |          |   |  |   |      |  |  |  |          |  
|Cash and cash equivalents, at end of period       |  | $ |  |  |                             |  | 150,374  |   |  | $ |      |  |  |  | 303,751  |  
|                                                  |  |   |  |  |                             |  |          |   |  |   |      |  |  |  |          |  

Cash provided by operating activities was $77.3 million and $60.6 million for the three months ended March 31, 2011 and
2010, respectively, and was generated primarily from operating income from property operations and interest and dividends.

Cash used in
investing activities was $75.1 million and $252.8 million for three months ended March 31, 2011 and 2010, respectively. During the three months ended March 31, 2011, cash was used primarily for purchases of investment properties. We used
significantly less cash in our investing activities during the three months ended March 31, 2011 than the three months ended March 31, 2010 due to the decrease in acquisitions.

Cash used in financing activities was $119.5 million and $4.6 million for the three months ended March 31, 2011 and 2010, respectively. During the three months ended March 31, 2011 and 2010, we
generated proceeds from the distribution reinvestment program of shares of approximately $50.0 million and $53.9 million. We paid down approximately $5.8 million and generated approximately $37.3 million by borrowing against our portfolio of
marketable securities for the three months ended March 31, 2011 and 2010, respectively. We generated approximately $56.2 million from borrowings secured by mortgages on our properties for the three months ended March 31, 2011. During the
three months ended March 31, 2010, we generated approximately $83.6 million from borrowings secured by mortgages on our properties. During the three months ended March 31, 2011 and 2010, we paid approximately $106.0 and $103.2,
respectively, in distributions to our common stockholders. We also paid off mortgage debt in the amount of $100.6 million and $70.0 million for the three months ended March 31, 2011 and 2010.



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##### Table of Contents

Contractual Obligations

As part of our consolidated MB REIT joint venture with Minto Delaware, we could be required to redeem Minto Delawares interest in MB REIT beginning on October 11, 2011 subject to the terms and
conditions below:



| |  |  | On or after October 11, 2011 until October 11, 2012, Minto Holdings, an affiliate of Minto Delaware, has the option to require us to
purchase, in whole, but not in part, 100% of the Minto Delawares investment in the MB REIT (consisting of the series A preferred stock and common stock) for a price equal to (A) if our shares of common stock are not listed, on the earlier
of (x) the date we purchase Minto Delawares investment or (y) 150 days after the date written notice of the exercise of the initial purchase right is given, the sum of (1) the series A liquidation preference, payable in cash and
(2) $29.3 million or (B) if the shares of our stock are listed, on the earlier of (x) the date we purchase Minto Delawares investment or (y) 150 days after the date written notice of the exercise of the initial purchase
right is given, the sum of (1) the series A liquidation preference, payable in cash and (2) 2,934,800 shares of our common stock. The series A liquidation preference is equal to $1,276 per share for 207,000 shares of series A preferred
stock plus accrued and unpaid dividends.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On or after October 11, 2012, Minto Holdings has an option to require us to purchase, in whole, but not in part, 100% of the Minto Delaware
investment for a price equal to (A) if the shares of our common stock are not listed, on the earlier of (x) the date we purchase the Minto Delaware investment or (y) 150 days after written notice of a subsequent purchase right is
given, the sum of (1) the series A liquidation preference, payable in cash and (2) the fair market value (pursuant to a specified formula) of the common stock held by Minto Delaware on the date written notice of the subsequent purchase
right is given, payable in cash, or (B) if the shares of our common stock are listed, on the earlier of (x) the date we purchase the Minto Delaware equity or (y) 150 days after written notice of the subsequent purchase right is given,
the sum of (1) the series A liquidation preference, payable in cash and (2) 2,934,800 shares of our common stock.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On or after October 11, 2015, so long as the MB REIT qualifies as a domestically controlled REIT, MB REIT has the right to purchase,
in whole, but not in part, 100% of Minto Delawares investment for a price equal to (A) if the shares of our common stock are not listed, the sum of (1) the series A liquidation preference, payable in cash and (2) the fair market
value (pursuant to a specified formula) of the common stock of MB REIT held by Minto Delaware or (B) if the shares of our common stock are listed, the sum of (1) the series A liquidation preference, payable in cash and (2) 2,934,800
shares of our common stock.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We expect Minto Holdings to exercise its put option in the second quarter of 2011, which
requires us to purchase the series A preferred stock and common stock for an estimated price of $293 million. We anticipate the sources of the cash payment to be provided by one or a combination of the following: proceeds from financings, proceeds
from property dispositions and proceeds from the distribution reinvestment program.

We have acquired several properties subject to the
obligation to pay the seller additional monies depending on the future leasing and occupancy of the property. These earnout payments are based on a predetermined formula. Each earnout agreement has a time limit regarding the obligation to pay any
additional monies. If at the end of the time period, certain space has not been leased and occupied, we will not have any further obligation. Assuming all the conditions are satisfied, as of March 31, 2011, we would be obligated to pay as much
as $30.1 million in the future as vacant space covered by these earnout agreements is occupied and becomes rent producing. The information in the above table does not reflect these contractual obligations.

Off Balance Sheet Arrangements

Unconsolidated Real Estate Joint Ventures

Unconsolidated joint ventures are those where we have substantial influence over but do not control the entity. We account for our interest in these ventures using the equity method of accounting. For
additional discussion of our investments in joint ventures, please refer to the liquidity section of Managements Discussion and Analysis of Financial Condition and Results of Operations and our Notes to Consolidated Financial Statements. Our
ownership percentage and related investment in each joint venture is summarized in the following table. (Dollar amounts stated in thousands).



|                                      |  |             |         |   |  |   |  |                             |  |  |         | 
|------------------------------------- |  | ----------- | ------- | - |  | - |  | --------------------------- |  |  | ------- | 
|Joint Venture                         |  | Ownership % |         |   |  |   |  | Investment atMarch 31, 2011 | 
|Net Lease Strategic Asset Fund L.P.   |  |             | 85      | % |  | $ |  |                             |  |  | 156,901 | 
|Cobalt Industrial REIT II             |  |             | 36      | % |  |   |  |                             |  |  | 121,993 | 
|D.R. Stephens Institutional Fund, LLC |  |             | 90      | % |  |   |  |                             |  |  | 57,092  | 
|NRF Healthcare, LLC.                  |  |             | (a      | ) |  |   |  |                             |  |  | 84,968  | 
|Centro/IA JV, LLC                     |  |             | (a      | ) |  |   |  |                             |  |  | 117,830 | 
|Other Unconsolidated Joint Ventures   |  |             | Various |   |  |   |  |                             |  |  | 18,740  | 
|                                      |  |             |         |   |  |   |  |                             |  |  |         | 
|                                      |  |             |         |   |  | $ |  |                             |  |  | 557,524 | 
|                                      |  |             |         |   |  |   |  |                             |  |  |         | 



|(a) | We have preferred membership interest and are entitled to a 10.5% and 11% preferred dividend in NRF Healthcare, LLC and Centro/IA JV, LLC, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Seasonality

The lodging segment is seasonal in nature, reflecting higher revenue and operating income during the second and third quarters. This seasonality can be expected to cause fluctuations in our net property
operations for the lodging segment. All of our other segments are not seasonal in nature.

Selected Financial Data

The following table shows our consolidated selected financial data relating to our consolidated historical financial condition and results of operations.
Such selected data should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this report (dollar amounts are stated in thousands, except per share data.)



|                                                                        |  |  |   |  |                                      |  |             |                            |  |  |             | 
|----------------------------------------------------------------------- |  |  | - |  | ------------------------------------ |  | ----------- | -------------------------- |  |  | ----------- | 
|                                                                        |  |  |   |  | As of    March 31, 2011              |  |             | As of    December 31, 2010 | 
|                                                                        |  |  |   |  |                                      |  |             |                           
|                                                                        |  |  |  
|Total assets                                                            |  |  | $ |  |                                      |  | 11,236,664  |                            |  |  | 11,391,502  | 
|                                                                        |  |  |  
|Mortgages, notes and margins payable                                    |  |  |   |  |                                      |  | 5,495,944   |                            |  |  | 5,532,057   | 
|                                                                        |  | 
|                                                                        |  |  |   |  | For the three months ended March 31, | 
|                                                                        |  |  |   |  | 2011                                 |  |             | 2010                       | 
|                                                                        |  |  |   |  |                                      |  |             |                           
|                                                                        |  |  |  
|Total income                                                            |  |  | $ |  |                                      |  | 326,393     |                            |  |  | 283,350     | 
|                                                                        |  |  |  
|Total interest and dividend income                                      |  |  | $ |  |                                      |  | 5,638       |                            |  |  | 7,422       | 
|                                                                        |  |  |  
|Net loss attributable to Company                                        |  |  | $ |  |                                      |  | (54,627)    |                            |  |  | (29,339)    | 
|                                                                        |  |  |  
|Net loss per common share, basic and diluted (a)                        |  |  | $ |  |                                      |  | (.06)       |                            |  |  | (.04)       | 
|                                                                        |  |  |  
|Distributions declared to common stockholders                           |  |  | $ |  |                                      |  | 106,320     |                            |  |  | 103,426     | 
|                                                                        |  |  |  
|Distributions declared per weighted average common share (a)            |  |  | $ |  |                                      |  | .12         |                            |  |  | .12         | 
|                                                                        |  |  |  
|Funds From Operations (a)(b)                                            |  |  | $ |  |                                      |  | 66,429      |                            |  |  | 88,720      | 
|                                                                        |  |  |  
|Cash flows provided by operating activities                             |  |  | $ |  |                                      |  | 77,302      |                            |  |  | 60,642      | 
|                                                                        |  |  |  
|Cash flows used in investing activities                                 |  |  | $ |  |                                      |  | (75,130)    |                            |  |  | (252,780)   | 
|                                                                        |  |  |  
|Cash flows used in financing activities                                 |  |  | $ |  |                                      |  | (119,505)   |                            |  |  | (4,602)     | 
|                                                                        |  |  |  
|Weighted average number of common shares outstanding, basic and diluted |  |  |   |  |                                      |  | 849,843,349 |                            |  |  | 826,716,592 | 



|(a) | The net income (loss) per share basic and diluted is based upon the weighted average number of common shares outstanding for the three months ended March 31, 2011
and 2010, respectively. The distributions per common share are based upon the weighted average number of common shares outstanding for the three months ended March 31, 2011 and 2010. See Footnote (b) below for information regarding our
calculation of FFO. Our distributions of our current and accumulated earnings and profits for federal income tax purposes are taxable to stockholders as ordinary income. Distributions in excess of these earnings and profits generally are treated as
a non-taxable reduction of the stockholders basis in the shares to the extent thereof, and thereafter as taxable gain for tax purposes. Distributions in excess of earnings and profits have the effect of deferring taxation of the amount of the
distributions until the sale of the stockholders shares, only to the extent of a shareholders basis. In order to maintain our qualification as a REIT, we must make annual distributions to stockholders of at least 90% of our REIT taxable
income, subject to certain adjustments, such as excluding net capital gains. Under certain circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet the REIT distribution requirements.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|(b) | One of our objectives is to provide cash distributions to our stockholders from cash generated by our operations. Cash generated from operations is not equivalent to
our net income from continuing operations as determined under U.S. generally accepted accounting principles or GAAP. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts
or NAREIT, an industry trade group, has promulgated a standard known as Funds from Operations, or FFO for short, which it believes more accurately reflects the operating performance of a REIT such as us. As defined by NAREIT, FFO
means net income computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization on real property and after adjustments for unconsolidated partnerships and joint ventures in which we hold an
interest. FFO is not intended to be an alternative to Net Income as an indicator of our performance nor to Cash Flows from Operating Activities as determined by GAAP as a measure of our capacity to pay distributions. We
believe that FFO is a better measure of our operating performance because FFO excludes non-cash items from GAAP net income. This allows us to compare our property performance to our investment objectives. Management uses the calculation of FFO for
several reasons. We use FFO to compare our performance to that of other REITs. FFO is calculated as follows (in thousands):
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|      |  |                                                                |  |   |  |  |                                      |  |          |      |  |  |          | 
|----- |  | -------------------------------------------------------------- |  | - |  |  | ------------------------------------ |  | -------- | ---- |  |  | -------- | 
|      |  |                                                                |  |   |  |  | For the three months ended March 31, | 
|      |  |                                                                |  |   |  |  | 2011                                 |  |          | 2010 | 
|      |  |                                                                |  |   |  |  |                                      |  |          |     
|      |  | Net loss applicable to common shares                           |  | $ |  |  |                                      |  | (54,627) |      |  |  | (29,339) | 
|Add:  |  | Depreciation and amortization:                                 |  |   |  |  |                                      |  |          |      |  |  |          | 
|      |  | Related to investment properties                               |  |   |  |  |                                      |  | 109,343  |      |  |  | 108,942  | 
|      |  | Related to investment in unconsolidated entities               |  |   |  |  |                                      |  | 12,332   |      |  |  | 9,779    | 
|Less: |  | Noncontrolling interests share:                               |  |   |  |  |                                      |  |          |      |  |  |          | 
|      |  | Depreciation and amortization related to investment properties |  |   |  |  |                                      |  | 619      |      |  |  | 662      | 
|      |  |                                                                |  |   |  |  |                                      |  |          |     
|      |  |                                                                |  |  
|      |  | Funds from operations                                          |  | $ |  |  |                                      |  | 66,429   |      |  |  | 88,720   | 
|      |  |                                                                |  |   |  |  |                                      |  |          |     

Below is additional information related to certain items that significantly impact the comparability of our Funds from
Operations and Net Income or significant non-cash items that impact our cash flow provided by operation activities from the periods presented:



|                                                                   |  |   |  |  |                                      |  |         |  |  |   |      |  |  |  |         | 
|------------------------------------------------------------------ |  | - |  |  | ------------------------------------ |  | ------- |  |  | - | ---- |  |  |  | ------- | 
|                                                                   |  |   |  |  | For the three months ended March 31, | 
|                                                                   |  |   |  |  | 2011                                 |  |         |  |  |   | 2010 | 
|                                                                   |  |   |  |  |                                      |  |         | 
|                                                                   |  |   |  | 
|Provision for asset impairment                                     |  | $ |  |  |                                      |  | 27,967  |  |  | $ |      |  |  |  | 0       | 
|Provision for asset impairment included in discontinued operations |  | $ |  |  |                                      |  | 0       |  |  | $ |      |  |  |  | 945     | 
|Straight-line rent income                                          |  | $ |  |  |                                      |  | (3,453) |  |  | $ |      |  |  |  | (5,034) | 
|Amount of above/below market leases                                |  | $ |  |  |                                      |  | (598)   |  |  | $ |      |  |  |  | 100     | 
|Amortization of mark to market debt discounts                      |  | $ |  |  |                                      |  | 9,797   |  |  | $ |      |  |  |  | 793     | 
|Acquisition and transaction costs                                  |  | $ |  |  |                                      |  | 227     |  |  | $ |      |  |  |  | 837     | 



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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to market risk associated with changes in interest rates both in terms of variable-rate debt and the price of new
fixed-rate debt upon maturity of existing debt and for acquisitions. We are also subject to market risk associated with our marketable securities investments.

Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. If market rates of interest on all of the
floating rate debt permanently increased by 1%, the increase in interest expense on the floating rate debt would decrease future earnings and cash flows by approximately $17.0 million. If market rates of interest on all of the floating rate debt
permanently decreased by 1%, the decrease in interest expense on the floating rate debt would increase future earnings and cash flows by approximately $17.0 million.

With regard to variable rate financing, we assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash
flows and by evaluating hedging opportunities. We maintain risk management control systems to monitor interest rate cash flow risk attributable to both of our outstanding or forecasted debt obligations as well as our potential offsetting hedge
positions. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on our future cash flows.

We monitor interest rate risk using a variety of techniques, including periodically evaluating fixed interest rate quotes on all variable rate debt and
the costs associated with converting the debt to fixed rate debt. Also, existing fixed and variable rate loans that are scheduled to mature in the next year or two are evaluated for possible early refinancing and or extension due to consideration
given to current interest rates. The table below presents mortgage debt principal amounts and weighted average interest rates by year and expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes (dollar amounts
are stated in thousands).



|                                        |  |   |  |  |      |  |         |      |  |  |         |  |  |      |         |  |      |  |         |            |  |  |         |  |  |  |           |  |  |  |           | 
|--------------------------------------- |  | - |  |  | ---- |  | ------- | ---- |  |  | ------- |  |  | ---- | ------- |  | ---- |  | ------- | ---------- |  |  | ------- |  |  |  | --------- |  |  |  | --------- | 
|                                        |  |   |  |  | 2011 |  |         | 2012 |  |  | 2013    |  |  | 2014 |         |  | 2015 |  |         | Thereafter |  |  | Total   | 
|Maturing debt :                         |  |   |  |  |      |  |         |      |  |  |         |  |  |      |         |  |      |  |         |            |  |  |         |  |  |  |           |  |  |  |           | 
|Fixed rate debt (mortgage loans)        |  | $ |  |  |      |  | 93,004  |      |  |  | 132,625 |  |  |      | 547,104 |  |      |  | 234,372 |            |  |  | 334,965 |  |  |  | 2,457,036 |  |  |  | 3,799,106 | 
|Variable rate debt (mortgage loans)     |  | $ |  |  |      |  | 391,974 |      |  |  | 573,312 |  |  |      | 448,727 |  |      |  | 46,956  |            |  |  | 125,252 |  |  |  | 83,243    |  |  |  | 1,669,464 | 
|                                        |  |   |  |  |      |  |         |     
|Weighted average interest rate on debt: |  |   |  |  |      |  |         |      |  |  |         |  |  |      |         |  |      |  |         |            |  |  |         |  |  |  |           |  |  |  |           | 
|Fixed rate debt (mortgage loans)        |  |   |  |  |      |  | 5.06%   |      |  |  | 5.49%   |  |  |      | 5.71%   |  |      |  | 5.61%   |            |  |  | 5.52%   |  |  |  | 5.89%     |  |  |  | 5.78%     | 
|Variable rate debt (mortgage loans)     |  |   |  |  |      |  | 3.54%   |      |  |  | 3.62%   |  |  |      | 3.77%   |  |      |  | 5.51%   |            |  |  | 5.20%   |  |  |  | 4.68%     |  |  |  | 3.87%     | 

The debt maturity excludes mortgage
discounts associated with debt assumed at acquisition of which a discount of $28.9 million, net of accumulated amortization, is outstanding as of March 31, 2011.

We may use derivative financial instruments to hedge exposures to changes in interest rates on loans secured by our properties. To the extent we do, we are exposed to credit risk and market risk. Credit
risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative
contract is negative, we owe the counterparty and, therefore, it does not possess credit risk. It is our policy to enter into these transactions with the same party providing the financing. In the alternative, we will seek to minimize the credit
risk in derivative instruments by entering into transactions with what we believe are high-quality counterparties. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. The market risk
associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

We have, and may in the future enter into, derivative positions that do not qualify for hedge accounting treatment. If these derivatives do not qualify for hedge accounting treatment, the gains or losses
resulting from their mark-to-market at the end of each reporting period are recognized as an increase or decrease in interest expense on our consolidated statements of income. In addition, we are, and may in the future be, subject to
additional expense based on the notional amount of the derivative positions and a specified spread over LIBOR.

Equity Price Risk

We are exposed to equity price risk as a result of our investments in marketable equity securities. Equity price risk changes as the
volatility of equity prices changes or the values of corresponding equity indices change.



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For the three months ended March 31, 2011 and 2010, there were no other than temporary impairments
recognized. The overall stock market and REIT stocks, including our REIT stock investments, have declined since mid-2007, which have resulted in our recognizing impairments. We believe that our investments will continue to generate dividend income
and, if the REIT market recovers, we could continue to recognize gains on sale. However, due to general economic and credit market uncertainties it is difficult to project where the REIT market and our portfolio value will be during 2011.

While it is difficult to project what factors may affect the prices of equity sectors and how much the effect might be, the table below
illustrates the impact of a ten percent increase and a ten percent decrease in the price of the equities held by us would have on the value of the total assets and our book value of as of March 31, 2011. (dollar amounts stated in thousands)



|                      |  |  |   |  |      |  |         |  |  |   |            |  |  |  |         |  |                                         |   |  |  |  |  |                                         |  |  |   |  |  |  |  |         | 
|--------------------- |  |  | - |  | ---- |  | ------- |  |  | - | ---------- |  |  |  | ------- |  | --------------------------------------- | - |  |  |  |  | --------------------------------------- |  |  | - |  |  |  |  | ------- | 
|                      |  |  |   |  | Cost |  |         |  |  |   | Fair Value |  |  |  |         |  | Hypothetical 10%Decrease inMarket
Value |   |  |  |  |  | Hypothetical 10%Increase inMarket
Value | 
|Marketable securities |  |  | $ |  |      |  | 316,016 |  |  | $ |            |  |  |  | 274,241 |  |                                         | $ |  |  |  |  | 246,817                                 |  |  | $ |  |  |  |  | 301,665 | 

Derivatives

The following table summarizes our interest rate swap and cap contracts outstanding as of March 31, 2011 (dollar amounts stated in thousands):



|                  |  |                   |  |                   |  |              |       |  |                            |  |               |  |  |   |                |  |  |  |         |  |                            |   |  |  |  |  |                           |   |  |   |  |  |  |  |        |  
|----------------- |  | ----------------- |  | ----------------- |  | ------------ | ----- |  | -------------------------- |  | ------------- |  |  | - | -------------- |  |  |  | ------- |  | -------------------------- | - |  |  |  |  | ------------------------- | - |  | - |  |  |  |  | ------ | -
|Date Entered      |  | Effective Date    |  | End Date          |  | PayFixedRate |       |  | Receive FloatingRate Index |  |               |  |  |   | NotionalAmount |  |  |  |         |  | Fair
ValueDecember 31,2010 |   |  |  |  |  | FairValue ofMarch 31,2011 |  
|March 28, 2008    |  | March 28, 2008    |  | March 31, 2011    |  |              | 2.81% |  |                            |  | 1 month LIBOR |  |  | $ |                |  |  |  | 50,000  |  |                            | $ |  |  |  |  | (312                      | ) |  | $ |  |  |  |  | 0      |  
|November 16, 2007 |  | November 20, 2007 |  | April 1, 2011     |  |              | 4.45% |  |                            |  | 1 month LIBOR |  |  |   |                |  |  |  | 24,425  |  |                            |   |  |  |  |  | (253                      | ) |  |   |  |  |  |  | 3      |  
|March 28, 2008    |  | March 28, 2008    |  | March 27, 2013    |  |              | 3.32% |  |                            |  | 1 month LIBOR |  |  |   |                |  |  |  | 33,062  |  |                            |   |  |  |  |  | (1,819                    | ) |  |   |  |  |  |  | (1,579 | )
|December 12, 2008 |  | January 1, 2009   |  | December 12, 2011 |  |              | (1)   |  |                            |  | (1)           |  |  |   |                |  |  |  | 20,245  |  |                            |   |  |  |  |  | 0                         |   |  |   |  |  |  |  | 0      |  
|December 23, 2008 |  | January 5, 2009   |  | December 22, 2011 |  |              | 1.86% |  |                            |  | 1 month LIBOR |  |  |   |                |  |  |  | 16,637  |  |                            |   |  |  |  |  | (242                      | ) |  |   |  |  |  |  | (186   | )
|January 16, 2009  |  | January 13, 2009  |  | January 13, 2012  |  |              | 1.62% |  |                            |  | 1 month LIBOR |  |  |   |                |  |  |  | 22,000  |  |                            |   |  |  |  |  | (282                      | ) |  |   |  |  |  |  | (221   | )
|August 19, 2010   |  | August 31, 2010   |  | March 27, 2012    |  |              | 0.63% |  |                            |  | 1 month LIBOR |  |  |   |                |  |  |  | 34,373  |  |                            |   |  |  |  |  | (84                       | ) |  |   |  |  |  |  | (77    | )
|October 15, 2010  |  | November 1, 2010  |  | December 19, 2011 |  |              | 0.77% |  |                            |  | 1 month LIBOR |  |  |   |                |  |  |  | 125,000 |  |                            |   |  |  |  |  | (487                      | ) |  |   |  |  |  |  | (391   | )
|October 15, 2010  |  | November 1, 2010  |  | April 23, 2013    |  |              | 0.94% |  |                            |  | 1 month LIBOR |  |  |   |                |  |  |  | 29,727  |  |                            |   |  |  |  |  | (54                       | ) |  |   |  |  |  |  | (3     | )
|January 7, 2011   |  | January 7, 2011   |  | January 13, 2013  |  |              | 0.91% |  |                            |  | 1 month LIBOR |  |  |   |                |  |  |  | 26,527  |  |                            |   |  |  |  |  | N/A                       |   |  |   |  |  |  |  | (73    | )
|January 7, 2011   |  | January 7, 2011   |  | January 13, 2013  |  |              | 0.91% |  |                            |  | 1 month LIBOR |  |  |   |                |  |  |  | 23,073  |  |                            |   |  |  |  |  | N/A                       |   |  |   |  |  |  |  | (64    | )
|                  |  |                   |  |                   |  |              |       |  |                            |  |               |  |  |   |                |  |  |  |         |  |                            |   |  |  |  |  |                           |   |  |   |  |  |  |  |        |  
|                  |  |                   |  |                   |  |              |       |  |                            |  |               |  |  | $ |                |  |  |  | 405,069 |  |                            | $ |  |  |  |  | (3,533                    | ) |  | $ |  |  |  |  | (2,591 | )
|                  |  |                   |  |                   |  |              |       |  |                            |  |               |  |  |   |                |  |  |  |         |  |                            |   |  |  |  |  |                           |   |  |   |  |  |  |  |        |  

(1) Interest rate cap at 4.75%.

We and MB REIT entered into a put/call agreement as a part of the MB REIT transaction. This agreement is considered a derivative instrument and is accounted for pursuant to ASC 815. Derivatives are
required to be recorded on the balance sheet at fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. The
fair value of the put/call agreement is estimated using the Black-Scholes model. The fair value of the option was $849 and $1,274 and is included in advance rent and other liabilities on the consolidated balance sheets as of March 31, 2011 and
December 31, 2010.



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Item 4. Controls and Procedures

Controls and Procedures

As required by
Rule 13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the Exchange Act), our management, including our principal executive officer and our principal financial officer, evaluated as of March 31,
2011, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e). Based on that evaluation, our principal executive officer and our principal financial officer concluded that our
disclosure controls and procedures, as of March 31, 2011, were effective for the purpose of ensuring that information required to be disclosed by us in this report is recorded, processed, summarized and reported within the time periods
specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including the principal executive officer and principal financial and accounting officer, as appropriate to allow timely decisions regarding
required disclosures.

Changes in Internal Control over Financial Reporting

There were no significant changes to our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) or Rule 15d-15(f)) during the three months ended March 31, 2011 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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Part II - Other Information

Item 1. Legal Proceedings

Except as otherwise described
below, there were no material developments during the three months ended March 31, 2011 in the legal proceedings described in our Annual Report on Form 10-K for the year ended December 31, 2010.

Item 1A. Risk Factors

The following risk factors supplement the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2010.

Funding distributions from sources other than cash flow from operating activities may negatively impact our ability to sustain or pay distributions and will result in us having less cash available
for other uses.

If our cash flow from operating activities is not sufficient to fully fund the payment of distributions, the level of
our distributions may not be sustainable and some or all of our distributions will be paid from other sources. For example, from time to time, our business manager has determined, in its sole discretion, to either forgo or defer a portion of the
business management fee, which has had the effect of increasing cash flow from operations for the relevant period because we have not had to use that cash to pay any fee or reimbursement which was foregone or deferred during the relevant period. We
will, however, need to use cash at some point in the future to pay any fee or reimbursement that is deferred. For the three months ended March 31, 2011, we paid a business management fee of $10 million, or approximately 0.5% of our average
invested assets on an annual basis, as well as an investment advisory fee of approximately $382 thousand, together which are less than the full 1% fee that the business manager could be paid. There is no assurance that our business manager will
forgo or defer any portion of its business management fee in the future. In addition from time to time we have used cash from the proceeds from the sales of our properties to fund distributions, and may do so in the future. To the extent
distributions are paid from these other sources, we will have less money available for other uses, such as cash needed to refinance existing indebtedness.

Two of our tenants generated a significant portion of our revenue, and rental payment defaults by these significant tenants could adversely affect our results of operations.

For the three months ended March 31, 2011, approximately 8% of our rental revenue was generated by over 400 retail banking properties leased to
SunTrust Bank. Also, for the three months ended March 31, 2011, approximately 7% of our rental revenue was generated by three properties leased to AT&T, Inc. As a result of the concentration of revenue generated from these properties, if
either SunTrust or AT&T were to cease paying rent or fulfilling its other monetary obligations, we could have significantly reduced rental revenues or higher expenses until the defaults were cured or the properties were leased to a new tenant or
tenants.

In addition to these tenants, our retail shopping center properties typically are anchored by large, nationally recognized tenants.
At any time, our tenants may experience a downturn in their business that may weaken significantly their financial condition. Further, mergers or consolidations among large retail establishments could result in the closure of existing stores or
duplicate or geographically overlapping store locations, which could include stores at our retail properties. Loss of, or a store closure by, an anchor or major tenant could significantly reduce our occupancy level or the rent we receive from our
retail properties.

Geographic concentration of our portfolio may make us particularly susceptible to adverse economic developments in
the real estate markets of those areas or natural disasters in those areas.

Because our properties are concentrated in certain
geographic areas, our operating results are likely to be impacted by economic changes affecting the real estate markets in those areas. As of March 31, 2011, approximately, 3%, 4%, 4%, 7% and 13% of our base rental income of our consolidated
portfolio, excluding our lodging facilities, was generated by properties located in the Atlanta, Minneapolis, Dallas, Chicago and Houston metropolitan areas, respectively.

Additionally, at March 31, 2011, 38 of our lodging facilities, or approximately 35% of our lodging portfolio, were located in Washington D.C. and the eight eastern seaboard states ranging from
Connecticut to Florida, including 11 hotels located in North Carolina. Additionally, 22% of our facilities were located in Texas. Adverse events in these areas, such as recessions, hurricanes or other natural disasters, could cause a loss of
revenues from these hotels. Further, several of the hotels are located near the water and are exposed to more severe weather than hotels located inland. Elements such as salt water and humidity can increase or accelerate wear on the hotels
weatherproofing and mechanical, electrical and other systems, and cause mold issues. As a result, we may incur additional operating costs and expenditures for capital improvements at these hotels. Geographic concentration also exposes us to risks of
oversupply and competition in these markets. Significant increases in the supply of certain property types, including hotels, without corresponding increases in demand could have a material adverse effect on our financial condition, results of
operations and our ability to pay distributions.



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Actions of our joint venture partners could negatively impact our performance.

As of March 31, 2011, we had entered into joint venture agreements with sixteen entities to fund the investment of office, industrial/distribution,
retail, lodging, healthcare and mixed use properties. The carrying value of our investment in these joint ventures, which we do not consolidate for financial reporting purposes, was $557.5 million. For the three months ended March 31, 2011, we
recognized losses of $2.3 million and impairments of $0 million associated with these ventures.

With respect to these investments, we are not
in a position to exercise sole decision-making authority regarding the property, partnership, joint venture or other entity. Consequently, our joint venture investments may involve risks not otherwise present with other methods of investment in real
estate. For example, our co-member, co-venturer or partner may have economic or business interests or goals which are or which become inconsistent with our business interests or goals or may take action contrary to our instructions or requests or
contrary to our policies or objectives. We have experienced these events from time to time with our current venture partners, which in some cases has resulted in litigation with these partners. There can be no assurance that an adverse outcome in
any future lawsuit will not have a material effect on our results of operations for any particular period. In addition, any litigation increases our expenses and prevents our officers and directors from focusing their time and effort on other
aspects of our business. We also face the risk that our venture partners may become bankrupt, which would mean that we and any other remaining venture partners would generally remain liable for the joint ventures liabilities, and the risk that
that our partners may fail to fund their share of any required capital contributions, which could result in us having to contribute that capital. In addition, our relationships with our venture partners are contractual in nature. These agreements
may restrict our ability to sell our interest when we desire or on advantageous terms and, on the other hand, may be terminated or dissolved under the terms of the agreements and, in each event, we may not continue to own or operate the interests or
assets underlying the relationship or may need to purchase these interests or assets at an above-market price to continue ownership.

Our investments in equity and debt securities have materially impacted, and may in the future materially impact, our results.

We have invested, and may continue to invest, in real estate related securities of both publicly traded and private real estate companies. Real estate
related equity securities are always unsecured and subordinated to other obligations of the issuer. Investments in real estate related equity securities are subject to risks of: (1) limited liquidity in the secondary trading market in the case
of unlisted or thinly traded securities; (2) substantial market price volatility resulting from changes in prevailing interest rates in the case of traded equity securities; (3) subordination to the liabilities of the entity; (4) the
operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates that could cause the issuer to redeem the securities; and (5) the possibility that earnings of the issuer may be insufficient to meet
its debt service and distribution obligations. In addition, investments in real estate related securities will involve special risks relating to the particular issuer of the securities, including the financial condition and business outlook of the
issuer. Issuers of real estate related securities generally invest in real estate or real estate related assets and are subject to the inherent risks associated with real estate related investments.

As of March 31, 2011, we had investments valued at $274.2 million in real estate related equity and debt securities. Many of the entities that we
have invested in have reduced the dividends paid on their stocks. The stock prices for these entities have declined since our initial purchase, and in certain cases we have sold these investments at a loss. There is no assurance that the stock
market in general, and the market for REIT stocks, in particular, will improve in the near future.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase Program

We adopted a share repurchase program, effective August 31, 2005, to provide limited liquidity for stockholders. Our obligation to repurchase any
shares under the program was conditioned upon our having sufficient funds available to complete the repurchase. Subject to funds being available, we limited the number of shares repurchased during any consecutive twelve month period to 5.0% of the
number of outstanding shares of common stock at the beginning of that twelve month period. Effective March 30, 2009, our board of directors voted to suspend the share repurchase program until further notice. Therefore, no shares were
repurchased during the three months ended March 31, 2011. We do not keep a record of the repurchase requests received since the March 2009 suspension.

Our board of directors adopted an Amended and Restated Share Repurchase Program, referred to herein as the Amended Program, which became effective April 11, 2011. The purpose of the
Amended Program is to authorize us to repurchase shares of our common stock, on a quarterly basis, upon the death of the beneficial owners of our shares. Under the Amended Program, we are authorized to repurchase shares at a price per share
generally equal to 90% of the most recently disclosed estimated per share value of our common stock; the current repurchase price per share is equal to $7.23 per share.

Our obligation to repurchase any shares under the Amended Program is conditioned upon our having sufficient funds available to complete the repurchase. Our board has initially reserved $5.0 million per
calendar quarter for the purpose of funding repurchases under the Amended Program. In addition, notwithstanding anything to the contrary, at no time during any consecutive twelve month period may the aggregate number of shares repurchased under the
Amended Program exceed 5.0% of the aggregate number of issued



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and outstanding shares of our common stock at the beginning of the twelve month period (the 5.0% Limit). If our funds are insufficient to repurchase all of the shares for which
repurchase requests have been submitted in a particular quarter, or if the number of shares accepted for repurchase would cause us to exceed the 5.0% Limit, we will repurchase the shares in chronological order, based upon the beneficial owners
date of death.

The Amended Program will immediately terminate if our shares are approved for listing on any national securities exchange. We
may amend or modify any provision of the Amended Program, or reject any request for repurchase, at any time in our boards sole discretion.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Reserved

Item 5. Other Information

Not Applicable.

Item 6. Exhibits

The representations, warranties and covenants made by us in any agreement filed as an exhibit to this Form 10-Q are made solely for the benefit of the parties to the agreement, including, in some
cases, for the purpose of allocating risk among the parties to the agreement, and should not be deemed to be representations, warranties or covenants to, or with, you. Moreover, these representations, warranties and covenants should not be relied
upon as accurately describing or reflecting the current state of our affairs.

The exhibits filed in response to Item 601 of
Regulation S-K are listed on the Exhibit Index attached hereto.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

INLAND AMERICAN REAL ESTATE TRUST, INC.



|      |  |                        |  |  |  |       |  |                                          
|----- |  | ---------------------- |  |  |  | ----- |  | -----------------------------------------
|      |  | /s/ Brenda G. Gujral   |  |  |  |       |  | /s/ Lori J. Foust                        
|By:   |  | Brenda G. Gujral       |  |  |  | By:   |  | Lori J. Foust                            
|      |  | President and Director |  |  |  |       |  | Treasurer and principal financial officer
|Date: |  | May 13, 2011           |  |  |  | Date: |  | May 13, 2011                             



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Exhibit Index



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NO. |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|            | 
|3.1         |  | Sixth Articles of Amendment and Restatement of Inland American Real Estate Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Registrants Form 8-K, as filed
by the Registrant with the SEC on August 26, 2010)                                                                                                                                                                                                                                                                                               
|            | 
|3.2         |  | Amended and Restated Bylaws of Inland American Real Estate Trust, Inc., effective as of April 1, 2008 (incorporated by reference to Exhibit 3.2 to the Registrants Form
8-K, as filed by the Registrant with the SEC on April 1, 2008), as amended by the Amendment to the Amended and Restated Bylaws of Inland American Real Estate Trust, Inc., effective as of January 20, 2009 (incorporated by reference to
Exhibit 3.2 to the Registrants Form 8-K, as filed by the Registrant with the SEC on January 23, 2009)
|            | 
|4.1         |  | Second Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.1 to the Registrants Form 8-K, as filed by the Registrant with
the SEC on September 23, 2010)                                                                                                                                                                                                                                                                                                                        
|            | 
|4.2         |  | Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued
shares without certificates) (incorporated by reference to Exhibit 4.4 to the Registrants Amendment No. 1 to Form S-11 Registration Statement, as filed by the Registrant with the SEC on July 31, 2007 (file number
333-139504))                                                                                                    
|            | 
|31.1        |  | Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|31.2        |  | Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|32.1        |  | Certification by Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|32.2        |  | Certification by Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|99.1        |  | Amended and Restated Share Repurchase Program, effective April 11, 2011 (incorporated by reference to Exhibit 99.3 to the Registrants Form 8-K, as filed by
the Registrant with the SEC on March 11, 2011)                                                                                                                                                                                                                                                                                                              





|* | Filed as part of this Quarterly Report on Form 10-Q.
|- | ----------------------------------------------------



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