NOTE 4. INVESTMENTS IN UNCONSOLIDATED ENTITIES

The Company’s investment in unconsolidated entities is as follows:

	September 30, 2017		December 31, 2016
Rich Uncles Real Estate Investment Trust I ("REIT I")	$	3,487,639	$	3,523,809
RU Martin Street Santa Clara ("TIC") (1)		11,168,667		-
	$	14,656,306	$	3,523,809

(1) The Company’s investment in unconsolidated entities includes $626,073 of acquisition fees to affiliates.

REIT I

The Company’s investment in REIT I represented an approximate 4.38% and 4.39% ownership interest as of September 30, 2017 and December 31, 2016, respectively. Through March 31, 2017, the Company had recorded its share of equity in the earnings (losses) of REIT I based on estimates of REIT I’s results of operations. In July 2017, REIT I’s financial statements for the year ended December 31, 2016 were prepared and audited. The Company’s equity in earnings (losses) of REIT I for the year ended December 31, 2016 should have been equity in earnings of $30,038 rather than equity in losses of $79,271 which was recorded. The Company’s equity pick up for the three months ended March 31, 2017 should have been equity in earnings of $18,813 rather than the equity in earnings of $7,957 which was recorded. For the three months ended September 30, 2017, the Company recorded equity in earnings from REIT I of $688. For the nine months ended September 30, 2017, the Company recorded equity in earnings from REIT I of $168,043, which included $109,309 related to periods prior to January 1, 2017 as described above.

The following is summarized financial information for REIT I:

	Three months ended				Nine months ended
	September 30,				September 30,
	2017		2016		2017		2016
Total revenue	$	3,277,854	$	1,917,889	$	9,512,071	$	4,163,249
Net income (loss)	$	10,468	$	(120,874)	$	1,342,330	$	(2,521,867)

TIC

On September 28, 2017, the Company acquired a 72.71% TIC interest in the Fujifilm property. The remaining 27.29% undivided interest in the Fujifilm property is held by Hagg Lane II, LLC (23.37%) and Hagg Lane III, LLC (3.92%). The manager of Hagg Lane II, LLC and Hagg Lane III, LLC is a board member of the Sponsor. The Fujifilm property does not qualify as a VIE and consolidation is not required as the Company does not control the TIC. Therefore, the Company accounts for its interest in the TIC using the equity method. The Company receives 72.71% of the cash flow distributions and recognizes 72.71% of the results of operations.

At September 30, 2017, Fujifilm had real estate assets of $29,625,072, total assets of $29,988,240, mortgage note payable of $14,500,000 and total liabilities of $14,311,258. The equity pick-up (72.71% of net income) for three days during the period ended September 30, 2017 was immaterial and therefore not recorded.

The Company’s equity in earnings in unconsolidated entities is as follows:

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2017		2016		2017		2016
REIT I	$	688	$	(4,300)	$	168,043	$	(4,300)
TIC		-		-		-		-
	$	688	$	(4,300)	$	168,043	$	(4,300)