NNN 2002 VALUE FUND LLC - FORM 10-Q

Attached files

file	filename
EX-32.1 - EXHIBIT 32.1 - NNN 2002 VALUE FUND LLC	c08323exv32w1.htm
EX-31.1 - EXHIBIT 31.1 - NNN 2002 VALUE FUND LLC	c08323exv31w1.htm
EX-31.2 - EXHIBIT 31.2 - NNN 2002 VALUE FUND LLC	c08323exv31w2.htm
EX-32.2 - EXHIBIT 32.2 - NNN 2002 VALUE FUND LLC	c08323exv32w2.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2010


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-51098

NNN 2002 Value Fund, LLC

(Exact name of registrant as specified in its charter)


Virginia		75-3060438
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1551 N. Tustin Avenue, Suite 300
Santa Ana, California		92705
(Address of principal executive offices)		(Zip Code)

(714) 667-8252
Registrant’s telephone number, including area code:

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 such filing requirements for the past 90 days. þ Yes o 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). o Yes o 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 o		Accelerated filer o		Non-accelerated filer þ (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

As of November 12, 2010, there were 5,960 units of NNN 2002 Value Fund, LLC outstanding.

NNN 2002 VALUE FUND, LLC
(A Virginia limited liability company)

TABLE OF CONTENTS


	Page

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Statements of Net Assets (Liquidation Basis) as of September 30, 2010 (Unaudited) and December 31, 2009 (Unaudited)		2

Condensed Consolidated Statements of Changes in Net Assets (Liquidation Basis) for the Three and Nine Months Ended September 30, 2010 (Unaudited) and 2009 (Unaudited)		3

Notes to Condensed Consolidated Financial Statements (Unaudited)		4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13

Item 3. Quantitative and Qualitative Disclosures About Market Risk		20

Item 4. Controls and Procedures		20

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		21

Item 1A. Risk Factors		21

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		23

Item 3. Defaults Upon Senior Securities		23

Item 4. [Removed and Reserved.]		23

Item 5. Other Information		23

Item 6. Exhibits		23

SIGNATURES		24

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I — FINANCIAL INFORMATION


Item 1.		Financial Statements.

NNN 2002 VALUE FUND, LLC

CONDENSED CONSOLIDATED STATEMENTS OF NET ASSETS

(Liquidation Basis)

As of September 30, 2010 (Unaudited) and December 31, 2009 (Unaudited)


	September 30, 2010		December 31, 2009

ASSETS

Investment in unconsolidated real estate	$	638,000	$	572,000
Cash and cash equivalents		449,000		463,000
Asset for estimated receipts in excess of estimated costs during liquidation		1,089,000		849,000

Total assets		2,176,000		1,884,000


LIABILITIES

Commitments and contingencies (Note 8)

Net assets in liquidation	$	2,176,000	$	1,884,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

NNN 2002 VALUE FUND, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Liquidation Basis)

For the Three and Nine Months Ended September 30, 2010 (Unaudited) and 2009 (Unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Net assets in liquidation, beginning of period	$	1,921,000		$	4,013,000		$	1,884,000		$	3,980,000

Changes in net assets in liquidation:
Changes in asset for estimated receipts in excess of estimated costs during liquidation:
Operating loss		3,000			1,000			14,000			17,000
Change in estimated receipts in excess of estimated costs during liquidation		321,000			323,000			226,000			775,000

Net increase in asset for estimated receipts in excess of estimated costs during liquidation		324,000			324,000			240,000			792,000

Change in fair value of assets and liabilities:
Change in fair value of investment in unconsolidated real estate		(66,000	)		(2,235,000	)		66,000			(2,654,000	)
Change in assets and liabilities due to activity in asset for estimated receipts in excess of estimated costs during liquidation		(3,000	)		(1,000	)		(14,000	)		(17,000	)

Net (decrease) increase in fair value of assets and liabilities		(69,000	)		(2,236,000	)		52,000			(2,671,000	)

Change in net assets in liquidation		255,000			(1,912,000	)		292,000			(1,879,000	)

Net assets in liquidation, end of period	$	2,176,000		$	2,101,000		$	2,176,000		$	2,101,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

NNN 2002 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The use of the words “we,” “us” or “our” refers to NNN 2002 Value Fund, LLC, except where the context otherwise requires.

1. Organization and Description of Business

NNN 2002 Value Fund, LLC was formed as a Virginia limited liability company on May 15, 2002. We were organized for the purpose of acquiring all or a portion of up to three unspecified properties from unaffiliated sellers in accordance with our private placement memorandum dated May 15, 2002, as amended, or our Private Placement Memorandum. We expected to own and operate interests in the properties acquired for approximately three to five years after the acquisition thereof. As of September 30, 2010, we owned a 12.3% interest in one unconsolidated property, Congress Center, located in Chicago, Illinois, or the Congress Center property. References herein to our property, our one remaining unconsolidated property or our remaining asset are to our 12.3% interest in the Congress Center property.

Grubb & Ellis Realty Investors, LLC, or Grubb & Ellis Realty Investors, or our Manager, manages us pursuant to the terms of an operating agreement, or the Operating Agreement. Our Manager is primarily responsible for managing our day-to-day operations and assets. While we have no employees, certain employees and executive officers of our Manager provide services to us pursuant to the Operating Agreement. Our Manager is managed by executive officers of our Manager. Our Manager engages affiliated entities, including Triple Net Properties Realty, Inc., or Realty, to provide various services for our one remaining unconsolidated property. Realty serves as our property manager pursuant to the terms of the Operating Agreement and a property management agreement, or the Management Agreement. The Operating Agreement terminates upon our dissolution. The unit holders may not vote to terminate our Manager prior to the termination of the Operating Agreement or our dissolution except for cause. The Management Agreement terminates with respect to our one remaining unconsolidated property upon the earlier of the sale of such property or 10 years from the date of acquisition, which would be January 9, 2013. Realty may be terminated with respect to our one remaining unconsolidated property without cause prior to the termination of the Management Agreement or our dissolution, subject to certain conditions, including the payment by us to Realty of a termination fee as provided for in the Management Agreement.

Plan of Liquidation

At a special meeting of our unit holders on September 7, 2005, our unit holders approved our plan of liquidation. Our plan of liquidation contemplates the orderly sale of all of our assets, the payment of our liabilities and the winding up of operations and the dissolution of our company. We engaged an independent third party to perform financial advisory services in connection with our plan of liquidation, including rendering opinions as to whether our net real estate liquidation value range estimate and our estimated per unit distribution range were reasonable. We continually evaluate our interest in the Congress Center property and adjust our net real estate liquidation value accordingly. It is our policy that when we execute a purchase and sale agreement or become aware of market conditions or other circumstances that indicate that our current carrying value materially differs from our expected net sales price, we will adjust our liquidation value accordingly. Following the approval of our plan of liquidation by our unit holders, we adopted the liquidation basis of accounting as of August 31, 2005 and for all periods subsequent to August 31, 2005.

Our plan of liquidation gives our Manager the power to sell any and all of our assets without further approval by our unit holders and provides that liquidating distributions be made to our unit holders as determined by our Manager. Based on current conditions in the real estate market, we currently expect to sell our interest in the Congress Center property by December 31, 2012, and anticipate completing our plan of liquidation by March 31, 2013. However, our interest in the Congress Center property is held as a member of a limited liability company, or LLC, that holds an undivided tenant-in-common, or TIC, interest in the property. Because of the nature of joint ownership, we will need to agree with our co-owners on the terms of the property sale before the sale can be affected. There can be no assurance that we will agree with our co-owners on satisfactory sales terms for this property. If the parties are unable to agree, the matter could ultimately be presented to a court of law, and a judicial partition could be sought. A failure to reach an agreement with these parties regarding the sales terms of this property may significantly delay the sale of the property, which would delay and possibly reduce liquidating distributions to our unit holders. We may be unable to receive our expected value for this property because we hold a minority interest in the LLC and, thus, cannot sell our property interest held in the LLC or force the sale of the Congress Center property in its entirety.

NNN 2002 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

2. Summary of Significant Accounting Policies

The summary of significant accounting policies presented below is designed to assist in understanding our interim unaudited condensed consolidated financial statements. Such financial statements and accompanying notes are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, or GAAP, in all material respects, and have been consistently applied in preparing the accompanying interim unaudited condensed consolidated financial statements.

Interim Financial Data

Our accompanying interim unaudited condensed consolidated financial statements have been prepared by us in accordance with GAAP and under the liquidation basis of accounting effective August 31, 2005, in conjunction with the rules and regulations of the United States Securities and Exchange Commission, or the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying interim unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. Our accompanying interim unaudited condensed consolidated financial statements reflect all adjustments which are, in our view, of a normal recurring nature and necessary for a fair presentation of our financial position including net assets in liquidation and changes in net assets in liquidation for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such results may be less favorable. Our accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our 2009 Annual Report on Form 10-K, as filed with the SEC on March 5, 2010.

Principles of Consolidation

Our accompanying interim unaudited condensed consolidated financial statements include our accounts and any variable interest entities, as defined in Financial Accounting Standards Board, Accounting Standards Codification, or FASB Codification, Topic 810, Consolidation, that we have concluded should be consolidated. All material intercompany transactions and account balances have been eliminated in consolidation.

Liquidation Basis of Accounting

As a result of the approval of our plan of liquidation by our unit holders, we adopted the liquidation basis of accounting as of August 31, 2005 and for all periods subsequent to August 31, 2005. Accordingly, all assets have been adjusted to their estimated fair value (on an undiscounted basis). Liabilities, including estimated costs associated with implementing our plan of liquidation, were adjusted to their estimated settlement amounts. Minority interest liabilities were offset against the respective assets and liabilities. The valuation of our investment in unconsolidated real estate is based on current contracts, estimates and other indications of sales value net of estimated selling costs. Estimated future cash flows from property operations were made based on the anticipated sales date of the asset. Due to the uncertainty in the timing of the anticipated sale date and the cash flows therefrom, results of operations may differ materially from amounts estimated. These amounts are presented in the accompanying interim unaudited condensed consolidated statements of net assets. The net assets represent the estimated liquidation value of our assets available to our unit holders upon liquidation. The actual values realized for assets and settlement of liabilities may differ materially, perhaps in adverse ways, from the amounts estimated.

We continually evaluate our 12.3% interest in the Congress Center property and adjust our net real estate liquidation value accordingly. It is our policy that when we execute a purchase and sale agreement or become aware of market conditions or other circumstances that indicate that our present estimated liquidation value materially differs from our expected net sale price, we will adjust our liquidation value accordingly.

NNN 2002 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

Segments

FASB Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. We have determined that we have one reportable segment, with activities related to investing in an unconsolidated office building. As such, our operations have been aggregated into one reportable segment for the three and nine months ended September 30, 2010 and 2009.

Recently Issued Accounting Pronouncements

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a Replacement of FASB Statement No. 162 (now contained in FASB Codification Topic 105). FASB Codification Topic 105 establishes that the FASB Codification will become the single official source of authoritative GAAP, other than guidance issued by the SEC. Following this statement, the FASB will not issue new standards in the form of Statements, Staff Positions or Emerging Issues Task Force Abstracts. Instead, the FASB will issue Accounting Standards Updates. All guidance contained in the Codification carries an equal level of authority. The GAAP hierarchy will be modified to include only two levels of GAAP: authoritative and non-authoritative. All non-grandfathered, non-SEC accounting literature not included in the Codification became non-authoritative. The Codification, which changes the referencing of financial standards, became effective for interim and annual periods ending on or after September 15, 2009. We adopted FASB Codification Topic 105 in the quarter ended September 30, 2009 and it did not have a material impact on our consolidated financial statements.

3. Asset for Estimated Receipts in Excess of Estimated Costs during Liquidation

Under the liquidation basis of accounting, we are required to estimate the cash flows from operations and accrue the costs associated with executing and completing our plan of liquidation. Our Manager has agreed to bear all costs associated with public company filings, including legal, accounting and liquidation costs. We currently estimate that we will have operating cash inflows from our estimated receipts in excess of the estimated costs during liquidation. These amounts can vary significantly due to, among other things, the timing and estimates for executing and renewing leases, along with the estimates of tenant improvements incurred and paid, the timing of the sale of the Congress Center property, the timing and amounts associated with discharging known and contingent liabilities and the costs associated with winding up our operations. These costs are estimated and are expected to be paid over the remaining liquidation period.

Effective July 1, 2008, monthly distributions to the Congress Center property’s investors were suspended, including distributions to us. As a result of this suspension of monthly distributions, our sole source of cash flow is expected to be proceeds from the anticipated sale of our interest in the Congress Center property. It is anticipated that funds previously used for distributions will be applied by the Congress Center property towards future tenanting costs to lease spaces not covered by the lender reserve and to supplement the lender reserve funding as necessary. Prior to the suspension of distributions, we received approximately $29,000 per month in distributions from the Congress Center property.

The change in the asset for estimated receipts in excess of estimated costs during liquidation for the nine months ended September 30, 2010 was as follows:


				Cash Payments			Change in
	December 31, 2009			and (Receipts)			Estimates			September 30, 2010
Assets:
Estimated net inflows from unconsolidated operating activities	$	1,270,000		$	(1,000	)	$	339,000		$	1,608,000
Liabilities:
Liquidation costs		(421,000	)		14,000			(112,000	)		(519,000	)

Total asset for estimated receipts in excess of estimated costs during liquidation	$	849,000		$	13,000		$	227,000		$	1,089,000

NNN 2002 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

The change in the asset for estimated receipts in excess of estimated costs during liquidation for the nine months ended September 30, 2009 was as follows:


				Cash Payments			Change in
	December 31, 2008			and (Receipts)			Estimates		September 30, 2009
Assets:
Estimated net inflows from unconsolidated operating activities	$	1,148,000		$	(1,000	)	$	315,000	$	1,462,000
Liabilities:
Liquidation costs		(954,000	)		18,000			460,000		(476,000	)

Total asset for estimated receipts in excess of estimated costs during liquidation	$	194,000		$	17,000		$	775,000	$	986,000

4. Net Assets in Liquidation

Net assets in liquidation increased by $255,000, or $42.79 per unit, to $2,176,000 during the three months ended September 30, 2010, compared to net assets in liquidation of $1,921,000 as of June 30, 2010. The increase in our net assets was primarily due to an increase in our estimated receipts in excess of estimated costs during liquidation of $324,000, or $54.36 per unit. Grubb & Ellis Realty Investors, as manager of the Congress Center property, has agreed to waive a portion of its fees from the management and disposition the Congress Center property, which resulted in an increase in estimated receipts in excess of estimated costs during liquidation of approximately $227,000. The increase in net assets in liquidation was also partly due to the extension of our estimated sale date of the Congress Center property from June 30, 2011 to December 31, 2012 and the associated changes in estimates of net cash flows, which was partially offset by a decrease in the liquidation value of the Congress Center property of $66,000, or $11.07 per unit, due to a decrease in the anticipated sale price.

Net assets in liquidation decreased by $1,912,000, or $320.81 per unit, to $2,101,000 during the three months ended September 30, 2009, compared to net assets in liquidation of $4,013,000 as of June 30, 2009. The primary reason for the decrease in our net assets was due to a decrease in the liquidation value of $2,235,000 or $375.00 per unit, from our one remaining unconsolidated property as a result of a decrease in the anticipated sales price, offset by an increase in our estimated receipts in excess of estimated costs during liquidation of $324,000, or $54.36 per unit, as a result of changes in estimates of net cash flows of our one remaining unconsolidated property.

Net assets in liquidation increased by $292,000, or $48.99 per unit, to $2,176,000 during the nine months ended September 30, 2010, compared to net assets in liquidation of $1,884,000 as of December 31, 2009. The increase in our net assets was primarily due to an increase in our estimated receipts in excess of estimated costs during liquidation of $240,000, or $40.27 per unit. Grubb & Ellis Realty Investors, as manager of the Congress Center property, has agreed to waive a portion of its fees from the management and disposition the Congress Center property, which resulted in an increase in estimated receipts in excess of estimated costs during liquidation of approximately $227,000. The increase in net assets in liquidation was also partly due to the extension of our estimated sale date of the Congress Center property from June 30, 2011 to December 31, 2012 and the associated changes in estimates of net cash flows, as well as an increase in the liquidation value of the Congress Center property of $66,000, or $11.07 per unit, due to an increase in the anticipated sale price.

Net assets in liquidation decreased by $1,879,000, or $315.27 per unit, to $2,101,000 during the nine months ended September 30, 2009, compared to net assets in liquidation of $3,980,000 as of December 31, 2008. The primary reason for the decrease in our net assets was a decrease in the liquidation value of our one remaining unconsolidated property of $2,654,000, or $445.30 per unit, which is a result of a decrease in the anticipated sales price, offset by an increase of $792,000, or $132.89 per unit, in our estimated receipts in excess of estimated costs during liquidation caused by the extension of our estimated sale date from December 31, 2009 to December 31, 2010 and associated changes in estimates of net cash flows of our one remaining unconsolidated property.

NNN 2002 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

The net assets in liquidation of $2,176,000 as of September 30, 2010, plus liquidating distributions paid to our unit holders of $18,900,000 through September 30, 2010, would result in liquidating distributions to our unit holders per unit of approximately $3,695.82 for Class A, $3,522.69 for Class B and $3,387.65 for Class C, of which $3,171.22 per unit for each class has been paid. These estimates for liquidating distributions per unit include projections of costs and expenses expected to be incurred during the period required to complete our plan of liquidation. These projections could change materially based on the timing of the sale, the real estate market conditions, the performance of the Congress Center property and changes in the underlying assumptions of the projected cash flows.

5. Investment in Unconsolidated Real Estate

As of September 30, 2010 and December 31, 2009, our sole real estate investment is comprised of a 12.3% interest in the Congress Center property. The Congress Center property has a gross leaseable area, or GLA, of approximately 520,000 square feet. As of September 30, 2010, 92.8% of the total GLA of the Congress Center property was leased to 15 tenants and 78.9% was occupied by 13 tenants.

6. Unit Holders’ Equity

There are three classes of units, each with different rights with respect to distributions. As of September 30, 2010 and December 31, 2009, there were 2,000 Class A units, 2,000 Class B units and 1,960 Class C units issued and outstanding. The rights and obligations of all unit holders are governed by the Operating Agreement.

Cash from Operations, as defined in the Operating Agreement, is first distributed to all unit holders pro rata until all Class A unit holders, Class B unit holders and Class C unit holders have received a 10.0%, 9.0% and 8.0% cumulative (but not compounded) annual return on their contributed and unrecovered capital, respectively. In the event that any distribution of Cash from Operations is not sufficient to pay the return described above, all unit holders receive identical pro rata distributions, except that Class C unit holders do not receive more than an 8.0% return on their Class C units, and Class B unit holders do not receive more than a 9.0% return on their Class B units. Excess Cash from Operations is then allocated pro rata to all unit holders on a per outstanding unit basis and further distributed to the unit holders and our Manager based on predetermined ratios providing our Manager with a share of 15.0%, 20.0% and 25.0% of the distributions available to Class A units, Class B units and Class C units, respectively, of such excess Cash from Operations. We had no excess Cash from Operations for the three or nine months ended September 30, 2010 and 2009 and our Manager did not receive any such distributions for these periods.

Cash from Capital Transactions, as defined in the Operating Agreement, is used as follows: first, to satisfy our debt and liability obligations; second, to pay pro rata distributions to all unit holders in accordance with their interests until all capital contributions are reduced to zero; and third, to unit holders in accordance with the distributions as outlined above in the Cash from Operations.

There were no distributions declared during the three or nine months ended September 30, 2010 and 2009. Class A units, Class B units and Class C units have received identical per-unit distributions in the past; however, distributions, if any, will vary among the three classes of units in the future.

Following the payment of the monthly April 2005 distribution, the then board of managers of our Manager decided to discontinue the payment of monthly distributions. To the extent that prior distributions have not conformed to the distribution priorities, we intend to adjust future distributions in order to provide overall net distributions consistent with the priority provisions of the Operating Agreement. Such distributions may be distributions from capital transactions and may be completed in connection with our plan of liquidation.

7. Related Party Transactions

The Operating Agreement

Pursuant to the Operating Agreement, our Manager or its affiliates are entitled to receive the following payments and fees described below. These payments and fees were not negotiated at arm’s length and may be higher than payments and fees that would have resulted from an arm’s length transaction with an unrelated third-party entity.

NNN 2002 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

Expenses, Costs, or Fees

We have agreed to reimburse our Manager and its affiliates for certain expenses, costs and fees incurred by our Manager, including, without limitation, for the cash payments, certain closing costs, escrow deposits, loan commitment fees, project studies and travel expenses related to the analysis and dispositions of our properties. Our Manager did not incur, and therefore, was not reimbursed for any such expenses, costs or fees for the three and nine months ended September 30, 2010 and 2009.

Operating Expenses

We have agreed to reimburse our Manager or its affiliates for reasonable and necessary expenses paid or incurred by our Manager or its affiliates in connection with our operation, including any legal and accounting costs, and the costs incurred in connection with the disposition of our properties, including travel, surveys, environmental and other studies and interest expense incurred on deposits or expenses. In accordance with our plan of liquidation, the then board of managers of our Manager voted and approved that all costs associated with public company compliance would be borne by our Manager. As such, our Manager has incurred costs associated with our public company compliance, but will not be reimbursed for such costs. Our Manager did not incur any non-public company compliance costs, and therefore, was not reimbursed for any such costs for the three and nine months ended September 30, 2010 and 2009.

Distributions to Our Manager

Our Manager is entitled to receive from us distributions that relate to cash from operations and from capital transactions as discussed in Note 6, “Unit Holders’ Equity.” Our Manager did not receive any such distributions for the three and nine months ended September 30, 2010 and 2009. Based on the valuation of our one remaining unconsolidated property as of September 30, 2010 and December 31, 2009, we have reserved an estimated distribution to our Manager of $455,000 and $382,000, respectively, which is reflected in the asset for estimated receipts in excess of estimated costs during liquidation in our interim unaudited condensed consolidated statements of net assets.

The Management Agreement

Pursuant to the Operating Agreement and the Management Agreement, Realty is entitled to receive the payments and fees described below. These payments and fees were not negotiated at arm’s length and may be higher than payments and fees that would have resulted from an arm’s length negotiation and transaction with an unaffiliated third party. We only incur and pay such fees on consolidated properties, and for the three and nine months ended September 30, 2010 and 2009, we did not have any consolidated properties.

Property Management Fees

We pay Realty, for its services in managing our properties, a monthly property management fee of up to 5.0% of the gross revenues of the properties. We did not incur any property management fees for the three and nine months ended September 30, 2010 and 2009.

Lease Commissions

We pay Realty or its affiliates a leasing commission for its services in leasing any of our properties an amount equal to 6.0% of the value of any lease entered into during the term of the Management Agreement and 3.0% with respect to any lease renewal. The value of such leases will be calculated by totaling the minimum monthly rent for the term of the lease. The term of such leases will not exceed five years for purposes of the computation and will not include option periods. We did not incur any lease commissions for the three and nine months ended September 30, 2010 and 2009.

NNN 2002 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

Project Fees

We pay Realty for its services in supervising any construction or repair project in or about our properties, a construction management fee equal to 5.0% of any amount up to $25,000, 4.0% of any amount over $25,000 but less than $50,000, and 3.0% of any amount over $50,000, which is expended in any calendar year for construction or repair projects. We did not incur any construction management fees for the three and nine months ended September 30, 2010 and 2009.

Real Estate Disposition Fees

We pay Realty a real estate disposition fee equal up to 5.0% of the sales price. Third party brokers may be entitled to up to 80.0% of the 5.0% disposition fee. We did not incur any real estate disposition fees for the three and nine months ended September 30, 2010 and 2009.

Loan Fees

We pay Realty a loan fee in the amount of 1.0% of the principal amount of all loans obtained by it for our properties during the term of the Management Agreement. We did not incur any loan fees for the three and nine months ended September 30, 2010 and 2009.

8. Commitments and Contingencies

Litigation

Neither we nor the Congress Center property are presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us or the Congress Center property, which if determined unfavorably to us would have a material adverse effect on our cash flows, financial condition or results of operations.

Environmental Matters

We have a policy for monitoring the Congress Center property for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist, we are not currently aware of any environmental liability with respect to our one remaining unconsolidated property that would have a material adverse effect on our cash flows, financial condition or results of operations. Further, we are not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.

Unconsolidated Debt

Total mortgage debt of the Congress Center property was $92,424,000 and $93,486,000 as of September 30, 2010 and December 31, 2009, respectively. Our pro rata share of the mortgage debt was $11,350,000 and $11,480,000 as of September 30, 2010 and December 31, 2009, respectively.

The Congress Center property is required by the terms of its loan documents to meet certain financial covenants and other requirements. As of September 30, 2010, the Congress Center property was in compliance with all such requirements.

On February 17, 2010, we received a letter from our lender stating that our insurance policy covering the Congress Center property was deficient because several of the carriers providing coverage under our policy did not meet one or more of the carrier rating requirements as set forth in the loan documents. Since the renewal of our insurance policy on March 5, 2010, we had been working with our lender and our insurance carriers to cure the deficiencies, and our lender extended the period of time allowed to bring such deficiencies into compliance with the requirements set forth in the loan documents to September 30, 2010. On September 17, 2010, we cured the deficiencies by obtaining a new insurance policy covering the Congress Center property with an insurance carrier meeting the rating requirements as set forth in the loan documents. However, we can give no assurance that we will be able to maintain such insurance coverage in compliance with the loan documents.

NNN 2002 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

On December 21, 2006, Realty received a termination notice from Employer’s Reinsurance Corporation notifying Realty of their intent to exercise their option to terminate their lease for approximately 67,000 square feet effective January 1, 2008 at the Congress Center property. From January 1, 2008 and continuing through and including the payment date occurring on December 1, 2011, the lender is entitled to receive $83,000 on a monthly basis from the borrower. In January 2007, Employer’s Reinsurance Corporation paid $3,773,000 to the lender as an early termination fee penalty pursuant to their lease agreement. We, along with G REIT Liquidating Trust (successor of G REIT, Inc.) and T REIT Liquidating Trust (successor of T REIT, Inc.), or our affiliate co-owners, paid the remaining $27,000 of the early termination fee penalty owed to the lender. As of September 30, 2010, we have advanced $112,000 to the lender for the reserves associated with the early lease termination. It is anticipated that upon the sale of the Congress Center property, we, along with our affiliate co-owners, will receive repayment of any advances made to the lender for reserves. All payments to the lender are to be placed in a reserve account to be held by the lender for reimbursement to the borrower for tenant improvement and leasing commissions incurred in connection with re-leasing the space. In May 2009, NNN Congress Center, LLC entered into a lease agreement with the Internal Revenue Service, or IRS, for approximately 28,000 square feet of space previously leased by Employer’s Reinsurance Corporation. Occupancy is expected to commence in February 2011. The lease is for a period of ten years, seven years firm, subject to termination rights pursuant to the lease agreement at an annual rate of $31.00 per square foot. Pursuant to the lease agreement, there are scheduled annual rent increases, and various rent concessions and commission credits have been given to the IRS in lease years one and two. In June 2010, NNN Congress Center, LLC entered into a lease agreement with the Department of Justice, or DOJ, for approximately 44,000 square feet of space previously leased by Employer’s Reinsurance Corporation. Occupancy is expected to commence in April 2011. The lease is for a period of ten years, five years firm, subject to termination rights pursuant to the lease agreement at an initial annual rate of $39.00 per square foot. Pursuant to the lease agreement, there are scheduled annual rent increases, and various rent concessions have been given to the DOJ.

Other

Our other commitments and contingencies include the usual obligations of a real estate company in the normal course of business. In the opinion of management, these matters are not expected to have a material adverse affect on our financial position and consolidated results of operations.

9. Concentration of Credit Risk

Financial instruments that potentially subject us to a concentration of credit risk are primarily cash investments and accounts receivable from tenants. Cash is generally placed in money market accounts and the amount of credit exposure to any one party is limited. We have cash in financial institutions that is insured by the Federal Deposit Insurance Corporation, or FDIC, up to $250,000 per depositor per insured bank. As of September 30, 2010 and December 31, 2009, we had cash accounts in excess of FDIC insured limits. We believe this risk is not significant. Concentration of credit risk with respect to accounts receivable from tenants is limited. We perform credit evaluations of prospective tenants and security deposits are obtained upon lease execution.

As of September 30, 2010, we owned a 12.3% interest in the Congress Center property, located in the state of Illinois. Accordingly, there is a geographic concentration of risk subject to fluctuations in the state’s economy.

NNN 2002 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

As of September 30, 2010, we had no consolidated properties, however, five tenants at the Congress Center property accounted for 10.0% or more of the aggregate annual rental income at that property, as follows:


			Percentage of			Square		Lease
	2010 Annual		2010 Annual			Footage		Expiration
Tenant	Base Rent (1)		Base Rent			(Approx.)		Date
Department of Homeland Security	$	3,603,000		28.6	%		76,000	Apr. 2012
North American Co. Life and Health Insurance	$	2,522,000		20.0	%		101,000	Feb. 2012
Akzo Nobel, Inc.	$	2,176,000		17.3	%		91,000	Dec. 2019
United States Treasury Department	$	1,709,000		13.5	%		37,000	Feb. 2013
National Railroad Passenger Corporation	$	1,274,000		10.1	%		50,000	Dec. 2011


(1)		Annualized rental income is based on contractual base rent set forth in leases in effect as of September 30, 2010.

As of September 30, 2009, we had no consolidated properties, however, five tenants at the Congress Center property accounted for 10.0% or more of the aggregate annual rental income at that property, as follows:


			Percentage of			Square		Lease
	2009 Annual		2009 Annual			Footage		Expiration
Tenant	Base Rent (1)		Base Rent			(Approx.)		Date
Department of Homeland Security	$	3,538,000		28.6	%		76,000	Apr. 2012
North American Co. Life and Health Insurance	$	2,472,000		20.0	%		101,000	Feb. 2012
Akzo Nobel, Inc.	$	2,131,000		17.2	%		91,000	Dec. 2013
United States Treasury Department	$	1,677,000		13.6	%		37,000	Feb. 2013
National Railroad Passenger Corporation	$	1,249,000		10.1	%		50,000	Dec. 2011


(1)		Annualized rental income is based on contractual base rent set forth in leases in effect as of September 30, 2009.


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

The use of the words “we,” “us” or “our” refers to NNN 2002 Value Fund, LLC, except where the context otherwise requires.

The following discussion should be read in conjunction with our interim unaudited condensed consolidated financial statements and notes accompanying this Quarterly Report on Form 10-Q. Such financial statements and information have been prepared to reflect our net assets in liquidation as of September 30, 2010 and December 31, 2009 (liquidation basis), together with the changes in net assets for the three and nine months ended September 30, 2010 and 2009 (liquidation basis), respectively.

Forward-Looking Statements

Historical results and trends should not be taken as indicative of future operations. Our statements contained in this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may differ materially from those included in the forward-looking statements. We intend those forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of us, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “prospects,” or similar expressions. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have an adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions generally and the real estate market specifically; legislative/regulatory changes; availability of capital; changes in interest rates; competition in the real estate industry; supply and demand for operating properties in our current market areas; changes in accounting principles generally accepted in the United States of America, or GAAP, policies and guidelines applicable to us; predictions of the amount of liquidating distributions to be received by unit holders; statements regarding the timing of asset dispositions and the sales price we will receive for assets; the effect of the liquidation; our ongoing relationship with our Manager (as defined below); litigation; and the implementation and completion of our plan of liquidation. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the United States Securities and Exchange Commission, or the SEC.

Overview and Background

We were formed on May 15, 2002 as a Virginia limited liability company to purchase, own, operate and subsequently sell all or a portion of up to three properties. We expected to own our interests in the properties for approximately three to five years from the date of acquisition of each asset. At the time of our formation, our principal objectives were to: (i) preserve our unit holders’ capital investment; (ii) realize income through the acquisition, operation and sale of the properties; (iii) make monthly distributions to our unit holders from cash generated from operations in an amount equal to an 8.0% annual return of our unit holders’ investment; however, the distributions among the Class A unit holders, Class B unit holders and Class C unit holders will vary; and (iv) within approximately three to five years from the respective acquisition of each asset, subject to market conditions, realize income from the sale of the properties and distribute the proceeds of such sales to our unit holders.

Grubb & Ellis Realty Investors, LLC, or Grubb & Ellis Realty Investors, or our Manager, manages us pursuant to the terms of an operating agreement, or the Operating Agreement. Our Manager is primarily responsible for managing our day-to-day operations and assets. While we have no employees, certain employees and executive officers of our Manager provide services to us pursuant to the Operating Agreement. Our Manager engages affiliated entities, including Triple Net Property Realty, Inc., or Realty, to provide various services to Congress Center, located in Chicago, Illinois, or the Congress Center property, of which we own a 12.3% interest. Realty serves as our property manager pursuant to the terms of the Operating Agreement and a property management agreement, or the Management Agreement. The Operating Agreement terminates upon our dissolution. The unit holders may not vote to terminate our Manager prior to the termination of the Operating Agreement or our dissolution except for cause. The Management Agreement terminates with respect to the Congress Center property upon the earlier of the sale of such property or ten years from the date of acquisition. Realty may be terminated with respect to the Congress Center property without cause prior to the termination of the Management Agreement or our dissolution, subject to certain conditions, including the payment by us to Realty of a termination fee as provided in the Management Agreement.

Business Strategy and Plan of Liquidation

As set forth in our registration statement on Form 10, originally filed on December 30, 2004, as amended, we were not formed with the expectation that we would be an entity that is required to file reports pursuant to the Exchange Act. We became subject to the registration requirements of Section 12(g) of the Exchange Act because the aggregate value of our assets exceeded applicable thresholds and our units were held of record by 500 or more persons at December 31, 2003. As a result of registration of our securities with the SEC under the Exchange Act, we became subject to the reporting requirements of the Exchange Act. In particular, we are required to file Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K, and Current Reports on Form 8-K and otherwise comply with the disclosure requirements of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(g) of that act. As a result of (i) current market conditions and (ii) the obligation to incur costs of corporate compliance (including, without limitation, all federal, state and local regulatory requirements applicable to us, including the Sarbanes-Oxley Act of 2002, as amended), during the fourth quarter of 2004, our Manager began to investigate whether liquidation would provide our unit holders with a greater return on their investment than any other alternative. After reviewing the issues facing us, our Manager approved a plan of liquidation on June 14, 2005, which was thereafter approved by our unit holders at a special meeting of unit holders on September 7, 2005.

Our plan of liquidation contemplates the orderly sale of all of our assets, the payment of our liabilities and the winding up of operations and the dissolution of our company. We engaged an independent third party to perform financial advisory services in connection with our plan of liquidation, including rendering opinions as to whether our net real estate liquidation value range estimate and our estimated per unit distribution range were reasonable.

Accordingly, we are engaged in an ongoing liquidation of our remaining asset. As of September 30, 2010, we owned a 12.3% interest in one unconsolidated property, Congress Center, located in Chicago, Illinois, or the Congress Center property. References herein to our property, our one remaining unconsolidated property or our remaining asset are to our 12.3% interest in the Congress Center property.

We continually evaluate our investment in the Congress Center property and adjust our net real estate liquidation value accordingly. It is our policy that when we execute a purchase and sale agreement for the sale of our real property asset or become aware of market conditions or other circumstances that indicate that the current carrying value of our real property asset materially differs from our expected net sale price, we will adjust our liquidation value accordingly. Following the approval of our plan of liquidation by our unit holders on September 7, 2005, we adopted the liquidation basis of accounting as of August 31, 2005 and for all periods subsequent to August 31, 2005.

In accordance with our plan of liquidation, the Congress Center property is actively managed to seek to achieve higher occupancy rates, control operating expenses and maximize income from ancillary operations and services. Due to the adoption of our plan of liquidation, we will not acquire any new properties and are focused on liquidating our interest in the Congress Center property.

For a more detailed discussion of our plan of liquidation, including the risk factors and certain other uncertainties associated therewith, please read our definitive proxy statement filed with the SEC on August 4, 2005.

Property Dispositions

We did not have any property dispositions during the three and nine months ended September 30, 2010 and 2009.

Critical Accounting Policies

The complete listing of our Critical Accounting Policies was previously disclosed in our 2009 Annual Report on Form 10-K, as filed with the SEC on March 5, 2010.

Interim Financial Data

Our accompanying interim unaudited condensed consolidated financial statements have been prepared by us in accordance with GAAP, and under the liquidation basis of accounting effective August 31, 2005, in conjunction with the rules and regulations of the SEC. Certain information and note disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. Our accompanying interim unaudited condensed consolidated financial statements reflect all adjustments, which are, in our opinion, of a normal recurring nature and necessary for a fair presentation of our financial position including net assets in liquidation and changes in net assets in liquidation for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such results may be less favorable. Our accompanying interim unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our 2009 Annual Report on Form 10-K, as filed with the SEC on March 5, 2010.

Factors Which May Influence Future Changes in Net Assets in Liquidation

Investment in Unconsolidated Real Estate

In calculating the estimated amount of liquidating distributions to our unit holders, we assumed that we would be able to locate a buyer for the Congress Center property at an amount based on our best estimate of market value for the property. However, we may have overestimated the sales price that we will ultimately be able to obtain for this asset. If the market value of the Congress Center property declines more than 4% from our current estimate of the market value as of September 30, 2010, our investment in unconsolidated real estate would be zero.

Rental Income

The amount of rental income generated by the Congress Center property depends principally on our ability to maintain the occupancy rates of currently leased space, to lease currently available space and space available from unscheduled lease terminations at the existing rental rates and the timing of the disposition of the property. Negative trends in one or more of these factors could adversely affect our rental income in future periods.

Scheduled Lease Expirations

As of September 30, 2010, the Congress Center property was 92.8% leased to 15 tenants, and 78.9% occupied by 13 tenants. None of the leases for the existing gross leaseable area, or GLA, expire during 2010. Our leasing strategy through our plan of liquidation focuses on negotiating renewals for leases scheduled to expire and identifying new tenants or existing tenants seeking additional space to occupy the GLA for which we are unable to negotiate such renewals. For example, in January 2010, we completed an early renewal on one of our major tenants, and extended its lease expiration from December 2013 to December 2019.

Changes in Net Assets in Liquidation

Three and Nine Months Ended September 30, 2010 and 2009

The net assets in liquidation of $2,176,000 as of September 30, 2010, plus liquidating distributions paid to our unit holders of $18,900,000 through September 30, 2010, would result in liquidating distributions to our unit holders per unit of approximately $3,695.82 for Class A, $3,522.69 for Class B and $3,387.65 for Class C, of which $3,171.22 per unit for each class has been paid. These estimates for liquidating distributions per unit include projections of costs and expenses expected to be incurred during the period required to complete our plan of liquidation. These projections could change materially based on the timing of the sale, the performance of the Congress Center property and changes in the underlying assumptions of the projected cash flows.

Liquidity and Capital Resources

As of September 30, 2010, our total assets and net assets in liquidation were $2,176,000. Our ability to meet our obligations is contingent upon the disposition of our asset in accordance with our plan of liquidation. Management estimates that the net proceeds from the sale of our interest in the Congress Center property pursuant to our plan of liquidation will be adequate to pay our obligations; however, we cannot provide any assurance as to the price we will receive for the disposition of our one remaining asset or the net proceeds therefrom.

Current Sources of Capital and Liquidity

We anticipate, but cannot assure, that our cash flow from operations and sale of our interest in the Congress Center property will be sufficient during the liquidation period to fund our cash needs for payment of expenses.

Effective July 1, 2008, monthly distributions to the Congress Center property’s investors were suspended, including distributions to us. As a result of this suspension of monthly distributions, our sole source of cash flow is expected to be proceeds from the anticipated sale of the Congress Center property. It is anticipated that funds previously used for distributions will be applied towards future tenanting costs to lease spaces not covered by the lender reserve and to supplement the lender reserve funding as necessary. Prior to the suspension of distributions, we received approximately $29,000 per month in distributions from the Congress Center property. In December 2009, our Manager approved a one-time distribution to the Congress Center property’s investors for year-end tax purposes. We received approximately $97,000 from this one-time distribution.

Our plan of liquidation gives our Manager the power to sell our interest in the Congress Center property without further approval by our unit holders and provides that liquidating distributions be made to our unit holders as determined at the discretion of our Manager. Although we can provide no assurances, we currently expect to sell our interest in the Congress Center property by December 31, 2012, and anticipate completing our plan of liquidation by March 31, 2013.

Other Liquidity Needs

We believe that we will have sufficient capital resources to satisfy our liquidity needs during the liquidation period. We did not pay any liquidating distributions to our unit holders during the three and nine months ended September 30, 2010. Following payment of the monthly April 2005 distribution, the then board of managers of our Manager decided to discontinue the payment of monthly distributions. In accordance with our plan of liquidation, our Manager can make liquidating distributions from proceeds received from the sale of assets at their discretion.

As of September 30, 2010, we estimate that we will have $519,000 of commitments and expenditures during the liquidation period, comprised mainly of $455,000 in liquidating distributions to our Manager pursuant to the Operating Agreement. However, there can be no assurance that we will not exceed the amounts of these estimated expenditures.

An adverse change in the net inflows from unconsolidated operating activities or net proceeds expected from the liquidation of our one real estate asset may affect our ability to fund these items and may affect our ability to satisfy the financial covenants under our mortgages on the Congress Center property. If we fail to meet our financial covenants and are unable to reach a satisfactory resolution with the lenders, the maturity dates for the secured notes on the Congress Center property could be accelerated. Any of these circumstances could adversely affect our ability to fund working capital, liquidation costs and unanticipated cash needs.

Liquidating distributions will be determined by our Manager in its sole discretion and are dependent on a number of factors, including the amount of funds available for distribution, our financial condition, our capital expenditures on the Congress Center property, among other factors our Manager may deem relevant. To the extent any distributions are made to our unit holders in excess of accumulated earnings, the excess distributions are considered a return of capital to our unit holders for federal income tax purposes to the extent of each unit holder’s basis in our stock, and generally as capital gain thereafter.

The stated range of unit holder distributions disclosed in our plan of liquidation are estimates only and actual results may be higher or lower than estimated. The potential for variance on either end of the range could occur for a variety of reasons, including, but not limited to: (i) unanticipated costs could reduce net assets actually realized; (ii) if we wind up our business significantly faster than anticipated, some of the anticipated costs may not be necessary and net liquidation proceeds could be higher; (iii) a delay in our liquidation could result in higher than anticipated costs and net liquidation proceeds could be lower; (iv) circumstances may change and the actual net proceeds realized from the sale of our interest in the Congress Center property might be less, or significantly less, than currently estimated, including, among other reasons, the discovery of new environmental issues or loss of a tenant or tenants; and (v) actual proceeds realized from the sale of our interest in the Congress Center property may be higher than currently estimated if market values increase.

Subject to our Manager’s actions and in accordance with our plan of liquidation, we expect to meet our liquidity requirements through the completion of the liquidation, through retained cash flow, disposition of our interest in the Congress Center property, and unsecured borrowings. We do not intend to reserve funds to retire existing debt upon maturity. We will, instead, seek to refinance such debt at maturity or retire such debt through the disposition of the Congress Center property.

If we experience lower occupancy levels and reduced rental rates at the Congress Center property, reduced revenues as a result of asset sale, or increased capital expenditures and leasing costs at the Congress Center property compared to historical levels due to competitive market conditions for new and renewal leases, the effect would be a reduction of our net assets in liquidation. This estimate is based on various assumptions, which are difficult to predict, including the levels of leasing activity at year end and related leasing costs. Any changes in these assumptions could adversely impact our financial results, our ability to pay current liabilities as they come due and our other unanticipated cash needs.

Capital Resources

General

Prior to the adoption of our plan of liquidation, our primary sources of capital were our real estate operations, our ability to leverage any increased market value in the real estate assets we owned and our ability to obtain debt financing from third parties, including, our Manager or its affiliates. Prior to July 1, 2008, our primary source of capital was distributions from the Congress Center property. However, effective July 1, 2008, monthly distributions to the Congress Center property’s investors were suspended, including distributions to us. As a result of this suspension of monthly distributions, our sole source of cash flow is expected to be proceeds from the anticipated sale of the Congress Center property. It is anticipated that funds previously used for distributions will be applied towards future tenanting costs to lease spaces not covered by the lender reserve and to supplement the lender reserve funding as necessary. Prior to the suspension of distributions, we received approximately $29,000 per month in distributions from the Congress Center property. In December 2009, our Manager approved a one-time distribution to the Congress Center property’s investors for year-end tax purposes. We received approximately $97,000 from this one-time distribution.

The primary uses of cash are to fund liquidating distributions to our unit holders and operating expenses. We may also regularly require capital to invest in the Congress Center property in connection with routine capital improvements, and leasing activities, including funding tenant improvements, allowances and leasing commissions. The amounts of the leasing-related expenditures can vary significantly depending on negotiations with tenants and the willingness of tenants to pay higher base rents over the life of their leases.

In accordance with our plan of liquidation, we anticipate our source for the payment of our liquidating distributions to our unit holders to be primarily from the net proceeds from the sale of our interest in the Congress Center property.

Financing

As of September 30, 2010 and December 31, 2009, we had no consolidated mortgage loans outstanding.

We did not have any consolidated restricted cash balances as of September 30, 2010 and December 31, 2009, held as credit enhancements and as reserves for property taxes, capital expenditures and capital improvements.

We believe that our cash balance of $449,000 as of September 30, 2010, should provide sufficient liquidity to meet our cash needs during the next twelve months from September 30, 2010. While we anticipate that our existing cash balance will be sufficient to fund our cash needs for corporate related expenses for the next twelve months, we can provide no assurance that this will be the case.

Unconsolidated Debt

Commitments and Contingencies

Insurance Coverage

Property Damage, Business Interruption, Earthquake and Terrorism

The insurance coverage provided through third party insurance carriers is subject to coverage limitations. Should an uninsured or underinsured loss occur, we could lose all or a portion of our investment in, and anticipated cash flows from, the Congress Center property. In addition, there can be no assurance that third party insurance carriers will be able to maintain reinsurance sufficient to cover any losses that may be incurred.

Debt Service Requirements

As of September 30, 2010, all consolidated debt has been repaid in full.

Contractual Obligations

As of September 30, 2010, all consolidated contractual obligations have been repaid in full.

Off-Balance Sheet Arrangements

There are no off-balance sheet transactions, arrangements or obligations (including contingent obligations) that have, or are reasonably likely to have a current or future material effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Inflation

We are exposed to inflation risk as income from long-term leases is expected to be the primary source of cash flows from operations. We expect that there will be provisions in the majority of our tenant leases that would provide some protection from the impact of inflation. These provisions include rent steps, reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements on a per square foot allowance. However, due to the long-term nature of the leases, the leases may not reset frequently enough to cover inflation.


Item 3.		Quantitative and Qualitative Disclosures About Market Risk.

Market risks include risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. We believe that the primary market risk to which we would be exposed would be an interest rate risk. As of September 30, 2010, we had no outstanding consolidated debt, therefore, we believe we have no interest rate or market risk. Additionally, our unconsolidated debt related to our interest in the Congress Center property is at a fixed interest rate.

There were no material changes in the information regarding market risk that was provided in our 2009 Annual Report on Form 10-K, as filed with the SEC on March 5, 2010, other than those listed in Part II, Item 1A. Risk Factors.


Item 4.		Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our Manager’s president and chief accounting officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of September 30, 2010, was conducted under the supervision and with the participation of our Manager, including our Manager’s president and chief accounting officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our Manager’s president and chief accounting officer concluded that our disclosure controls and procedures, as of September 30, 2010, were effective.

(b) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2010, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

The use of the words “we,” “us” or “our” refers to NNN 2002 Value Fund, LLC, except where the context otherwise requires.


Item 1.		Legal Proceedings.

Litigation

Neither we nor Congress Center, located in Chicago, Illinois, or the Congress Center property, are presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us or the Congress Center property which if determined unfavorably to us would have a material adverse effect on our cash flows, financial condition or results of operations.


Item 1A.		Risk Factors.

There were no material changes from the risk factors previously disclosed in our 2009 Annual Report on Form 10-K, as filed with the Unites States Securities and Exchange Commission on March 5, 2010, except as noted below.

Our use of borrowings on the Congress Center property could result in its foreclosure and unexpected debt service expenses upon refinancing, both of which could have an adverse impact on our operations and cash flow. Additionally, restrictive covenants in our loan documents may restrict our operating activities.

We rely on borrowings to partially fund capital expenditures and other items. As of September 30, 2010, there was $92,424,000 of debt outstanding related to the Congress Center property, our proportionate share of which was $11,350,000. Accordingly, we are subject to the risks normally associated with debt financing, including, without limitation, the risk that our cash flow may not be sufficient to cover required debt service payments. There is also a risk that, if necessary, existing indebtedness will not be able to be refinanced or that the terms of such refinancing will not be as favorable as the terms of the existing indebtedness.

In addition, if we cannot meet our required mortgage payment obligations, the Congress Center property could be foreclosed upon by, or otherwise transferred to, our lender, with a consequent loss of income and asset value to us. For tax purposes, a foreclosure on our property would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but we may not receive any cash proceeds.

The mortgage on the Congress Center property contains customary restrictive covenants, including provisions that limit the borrowing subsidiary’s ability, without the prior consent of the lender, to incur additional indebtedness, further mortgage or transfer the applicable property, discontinue insurance coverage, change the conduct of its business or make loans or advances to, enter into any transaction of merger or consolidation with any third party. In addition, any future lines of credit or loans may contain financial covenants, further restrictive covenants and other obligations.

If we materially breach such covenants or obligations under the Congress Center loan agreement, the lender may have the right to seize our income from the property or legally declare a default on the loan obligation, require us to repay the debt immediately and foreclose on the property, among other remedies. If we were to breach such covenants or obligations, we may then have to sell the Congress Center property either at a loss or at a time that prevents us from achieving a higher price. Any failure to pay our indebtedness when due or failure to cure events of default could result in higher interest rates during the period of the loan default and could ultimately result in the loss of the property through foreclosure. Additionally, if the lender were to seize our income from the property, we would no longer have any discretion over the use of the income, which may adversely impact our ability to make liquidating distributions to our unit holders.

Losses for which we either could not or did not obtain insurance will adversely affect our earnings and we may be unable to comply with insurance requirements contained in mortgage or other agreements due to high insurance costs.

We endeavor to maintain comprehensive insurance on the property we own, including liability and fire and extended coverage, in amounts sufficient to permit the replacement of the one remaining unconsolidated property in the event of a total loss, subject to applicable deductibles. However, we could still suffer a loss due to the cost to repair any damage to the one remaining unconsolidated property that is not insured or is underinsured. There are types of losses, generally of a catastrophic nature, such as losses due to terrorism, wars, earthquakes, floods or acts of God that are either uninsurable or not economically insurable. If such a catastrophic event were to occur, or cause the destruction of our one remaining unconsolidated property, we could lose both our invested capital and anticipated profits from such one remaining unconsolidated property. Additionally, we could default under debt or other agreements if the cost and/or availability of certain types of insurance make it impractical or impossible to comply with covenants relating to the insurance we are required to maintain under such agreements. In such instances, we may be required to self-insure against certain losses or seek other forms of financial assurance. Additionally, inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it infeasible to use insurance proceeds to replace a property if it is damaged or destroyed. Under such circumstances, the insurance proceeds received by us might not be adequate to restore our economic position with respect to the affected property.

We may be unable to sell our interest in the Congress Center property within our expected timeframe or at our expected value.

Based on current conditions in the real estate market, we currently expect to sell our interest in the Congress Center property by December 31, 2012 and anticipate completing our plan of liquidation by March 31, 2013. Our investment in the Congress Center property is held as a member of a limited liability company, or LLC, that holds an undivided tenant-in-common, or TIC, interest in the property. Under the liquidation basis of accounting, we account for this interest at its estimated fair value. As of September 30, 2010, our proportionate share of the estimated fair value of this property was $638,000. Because of the nature of joint ownership, we will need to agree with our co-owners on the terms of the property sale before the sale can be affected. There can be no assurance that we will agree with our co-owners on satisfactory sales terms for this property. If the parties are unable to agree, the matter could ultimately be presented to a court of law, and a judicial partition could be sought. A failure to reach agreement with these parties regarding the sales terms of this property may significantly delay the sale of the property, which would delay and possibly reduce liquidating distributions to our unit holders. We may be unable to receive our expected value for this property because we hold a minority interest in the LLC and, thus, cannot sell our property interest held in the LLC or force the sale of the Congress Center property in its entirety.


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

None.


Item 3.		Defaults Upon Senior Securities.

None.


Item 4.		[Removed and Reserved.]


Item 5.		Other Information.

None.


Item 6.		Exhibits.

The exhibits listed on the Exhibit Index (following the signatures section of this report) are included, or incorporated by reference, in this quarterly report.

SIGNATURES

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


		NNN 2002 Value Fund, LLC
		(Registrant)

		By: Grubb & Ellis Realty Investors, LLC, its Manager

November 12, 2010		/s/ Jeffrey T. Hanson
Date		Jeffrey T. Hanson
		President
		Grubb & Ellis Realty Investors, LLC,
		the Manager of NNN 2002 Value Fund, LLC
		(principal executive officer)

November 12, 2010		/s/ Paul E. Henderson
Date		Paul E. Henderson
		Chief Accounting Officer
		Grubb & Ellis Realty Investors, LLC,
		the Manager of NNN 2002 Value Fund, LLC
		(principal financial officer)

EXHIBIT INDEX

Pursuant to Item 601(a)(2) of Regulation S-K, this Exhibit Index immediately precedes the exhibits.

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the period ended September 30, 2010 (and are numbered in accordance with Item 601 of Regulation S-K).


2.1		NNN 2002 Value Fund, LLC Plan of Liquidation and Dissolution, as approved by unit holders on September 7, 2005 and as currently in effect (included as Exhibit A to our Definitive Proxy Statement filed on August 4, 2005 and incorporated herein by reference)

3.1		Articles of Organization of NNN 2002 Value Fund, LLC, dated May 1, 2002 (included as Exhibit 3.1 to our Amendment No. 1 to Form 10 Registration Statement filed on February 28, 2005 and incorporated herein by reference)

10.1		Operating Agreement of NNN 2002 Value Fund, LLC, (included as Exhibit 10.1 to our Amendment No. 1 to Form 10 Registration Statement filed on February 28, 2005 and incorporated herein by reference)

10.2		Management Agreement between NNN 2002 Value Fund, LLC and Triple Net Properties Realty, Inc. (included as Exhibit 10.2 to our Amendment No. 1 to Form 10 Registration Statement filed on February 28, 2005 and incorporated herein by reference)

31.1	*	Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	*	Certification of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	**	Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

32.2	**	Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002


*		Filed herewith.

**		Furnished herewith.

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NNN 2002 VALUE FUND LLC Reports

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