As filed with the Securities and Exchange Commission on July 12, 2013
Registration No. 333-169535
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 7
to
Form S-11
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES
Cole Real Estate Income Strategy (Daily NAV), Inc.
(Exact Name of Registrant as Specified in its Governing Instruments)
2325 East Camelback Road
Suite 1100
Phoenix, AZ 85016
(602) 778-8700
(Address, Including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)
D. Kirk McAllaster, Jr.
Cole Real Estate Income Strategy (Daily NAV), Inc.
Executive Vice President, Chief Financial Officer and Treasurer
2325 East Camelback Road
Suite 1100
Phoenix, AZ 85016
(602) 778-8700
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
Ettore A. Santucci
Goodwin Procter LLP
Exchange Place
53 State Street
Boston, MA 02109
(617) 570-1000
Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. þ
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
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Large accelerated filer ¨ | | Accelerated filer ¨ | | Non-accelerated filer þ | | Smaller reporting company ¨ |
| | | | (Do not check if a smaller reporting company) | | |
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.
This Post-Effective Amendment No. 7 consists of the following:
| | 1. | The Registrant’s final prospectus dated May 1, 2013. |
| | 2. | Supplement No. 5 dated July 12, 2013 to the Registrant’s prospectus dated May 1, 2013, included herewith, which supersedes and replaces all prior supplements to the prospectus dated May 1, 2013, and which will be delivered as an unattached document along with the prospectus dated May 1, 2013. |
| | 3. | Part II, included herewith. |
| | 4. | Signatures, included herewith. |
PROSPECTUS
Cole Real Estate Income Strategy (Daily NAV), Inc.
Maximum Offering of $4,000,000,000 — Minimum Offering of $10,000,000
Cole Real Estate Income Strategy (Daily NAV), Inc. is a newly organized corporation formed to invest primarily in single-tenant necessity commercial properties, which are leased to creditworthy tenants under long-term net leases. By utilizing this conservative and disciplined investment approach, we expect to generate a relatively predictable and stable current stream of income for investors, along with the potential for long-term capital appreciation in the value of our real estate. We intend to qualify as a real estate investment trust, or REIT, for federal income tax purposes, and we are externally managed by our advisor, Cole Real Estate Income Strategy (Daily NAV) Advisors, LLC, an affiliate of our sponsor, Cole Real Estate Investments. Our advisor has engaged a sub-advisor to assist in selecting and managing the component of our portfolio consisting of liquid assets.
We intend to offer shares of our common stock on a continuous basis and for an indefinite period of time, by filing a new registration statement before the end of each prior offering, subject to regulatory approval. We are initially offering up to $4,000,000,000 in shares of common stock, consisting of up to $3,500,000,000 in shares in our primary offering and up to $500,000,000 in shares pursuant to our distribution reinvestment plan. The per share purchase price will vary from day-to-day and, on each day, will equal the sum of our net asset value, or NAV, divided by the number of shares of our common stock outstanding as of the end of business on such day (NAV per share). On April 11, 2013, our NAV per share was $16.31. Our fund accountant calculates our NAV per share reflecting several components, including (1) estimated values of each of our commercial real estate assets, related liabilities and notes receivable secured by real estate based upon individual appraisal reports provided periodically by an independent valuation expert, (2) the price of liquid assets for which third party market quotes are available, (3) accruals of our daily distributions and (4) estimated accruals of our operating revenues and expenses. Although we do not intend to list our common stock for trading on a stock exchange or other trading market, we have adopted a redemption plan designed to provide our stockholders with limited liquidity on a daily basis for their investment in our shares.
We intend to distribute our shares principally through registered investment advisors and broker/dealers that charge their clients a fee for their services (typically referred to as wrap or fee based accounts). We received funds equal to the minimum offering amount of $10,000,000 on December 6, 2011, and broke escrow and accepted the investor’s subscription for shares of our common stock in this offering on December 7, 2011.
This investment involves a high degree of risk. You should purchase these securities only if you can afford a significant decline in, or a complete loss of, the value of your investment. See “Risk Factors” beginning on page 30 for risks to consider before buying our shares, including:
| • | | We are a “blind pool.” As of the date of this prospectus, we have acquired 14 real estate properties and we have not identified all of the specific properties that we may purchase with future offering proceeds and have a limited operating history. |
| • | | There is no public market for our shares of common stock, and our charter does not require us to effect a liquidity event at any point in time in the future. |
| • | | Our redemption plan will provide stockholders with the opportunity to redeem their shares on a daily basis, but redemptions will be subject to available liquidity and other potential restrictions. |
| • | | We may pay distributions and fund redemptions from sources other than cash flow from operations, including borrowings, proceeds from this offering or asset sales, and we have no limits on the amounts we may pay from such other sources. |
| • | | The valuation methodologies used by our independent valuation expert in arriving at the estimates of value of each of our commercial real estate assets, related liabilities and notes receivable secured by real estate (one of the components of our NAV) set forth in individual appraisal reports, each of which are prepared in accordance with valuation guidelines reviewed by the advisor and approved by our board of directors, involve subjective judgments and estimates. These estimated values are then reflected by our fund accountant in the calculation of our NAV. As a result, our NAV may not accurately reflect the actual prices at which our commercial real estate assets, related liabilities and notes receivable secured by real estate could be liquidated on any given day. |
| • | | There are substantial conflicts of interest between us and our advisor and its affiliates, including our payment of substantial fees to our advisor and its affiliates. |
| • | | This is a “best efforts” offering. If we are not able to raise a substantial amount of capital in the near term, we may have difficulties investing in properties and our ability to achieve our investment objectives could be adversely affected. |
| • | | We may suffer from delays in identifying suitable investments, which may adversely impact our results of operations and the value of your investment. |
| • | | If we fail to qualify as a REIT for federal income tax purposes and no relief provisions apply, our NAV and cash available for distribution to our stockholders could materially decrease. |
Neither the Securities and Exchange Commission, any state securities commission, nor the Attorney General of the State of New York has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The use of forecasts in this offering is prohibited. Any representation to the contrary and any predictions, written or oral, as to the amount or certainty of any present or future cash benefit or tax consequence which may flow from an investment in this program is not permitted.
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| | | Per Share | | | Total Minimum | | | Total Maximum(1) | |
Public Offering Price(2) | | $ | 15.00 | | | $ | 10,000,000 | | | $ | 4,000,000,000 | |
First Year Underwriting Compensation(3) | | $ | 0.15 | | | $ | 100,000 | | | $ | 20,000,000 | |
Proceeds to Us, Before Expenses | | $ | 14.85 | | | $ | 9,900,000 | | | $ | 3,980,000,000 | |
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| (1) | Includes shares of common stock being offered under our distribution reinvestment plan. |
| (2) | The price per share shown is based on our original sales price per share which was determined by our board of directors. The total price per share in this offering is equal the daily NAV per share, which varies from day-to-day. |
| (3) | Investors will not pay upfront selling commissions in connection with the purchase of our shares of common stock. We will pay our dealer manager an asset-based dealer manager fee that is payable in arrears on a monthly basis and accrues daily in an amount equal to 1/365th of 0.55% of our NAV for such day. At our dealer manager’s discretion it may reallow a portion of the dealer manager fee equal to an amount up to 1/365th of 0.20% of our NAV to participating broker dealers. During our first year after the escrow period, we may use up to 1% of our offering proceeds (not to exceed $2,000,000,000, in total, of offering proceeds and excluding shares issued under our distribution reinvestment plan) along with our cash flows from operations, to pay for the costs of distribution and other underwriting compensation. The total amount that will be paid over time for the asset-based dealer manager fee and other underwriting compensation depends on the average length of time for which shares remain outstanding, the term over which such amount is measured, and the performance of the Company’s investments. During the indefinite life of the Company, such amount in the aggregate from all sources could reach, but will never exceed, 10% of the aggregate amount of gross proceeds received by the Company from our primary offering (i.e., excluding proceeds from sales pursuant to our distribution reinvestment plan). See “Use of Proceeds,” and “Compensation.” |
The dealer manager of this offering, Cole Capital Corporation, a member firm of the Financial Industry Regulatory Authority, Inc., or FINRA, is an affiliate of our advisor and will offer the shares on a best efforts basis.
The date of this prospectus is May 1, 2013
©Cole Capital Advisors, Inc.
Suitability Standards
An investment in our common stock involves risk and is not suitable for all investors. There is no certainty as to the amount of distributions you may receive, liquidity under our redemption program may not be available at all times and the value of your investment may decline significantly.
In consideration of these factors, we have established minimum suitability standards for initial stockholders and subsequent purchasers of shares from our stockholders. These minimum suitability standards require that a purchaser of shares have, excluding the value of a purchaser’s home, furnishings and automobiles, either:
| | • | | a net worth of at least $250,000; or |
| | • | | a gross annual income of at least $70,000 and a net worth of at least $70,000. |
Certain states have established suitability requirements in addition to the minimum standards described above. Shares will be sold to investors in these states only if they meet the additional suitability standards set forth below:
Alabama: Investors must have a liquid net worth of at least ten times their investment in us and similar programs.
California: Investors must have either (i) a net worth of at least $250,000, or (ii) a gross annual income of at least $75,000 and a net worth of at least $75,000. In addition, the investment must not exceed ten percent (10%) of the net worth of the investor.
Iowa and New Mexico: Investors may not invest, in the aggregate, more than 10% of their liquid net worth in us and all of our affiliates.
Kansas and Massachusetts: It is recommended by the office of the Kansas Securities Commissioner and the Massachusetts Securities Division that investors in Kansas and Massachusetts not invest, in the aggregate, more than 10% of their liquid net worth in this and similar direct participation investments. For these purposes, “liquid net worth” is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities.
Kentucky, Michigan, Oregon and Pennsylvania: Investors must have a liquid net worth of at least ten times their investment in us.
Maine: Investors must have either (i) a minimum net worth of at least $250,000, or (ii) an annual gross income of at least $70,000 and a minimum net worth of $70,000. In addition, the investment in us (plus any investments in our affiliates) by an investor must not exceed ten percent (10%) of the liquid net worth of the investor.
Nebraska: Investors must have (excluding the value of their home, furnishings and automobiles) either (i) a minimum net worth of $100,000 and an annual income of $70,000, or (ii) a minimum net worth of $350,000. In addition, the investment in us must not exceed 10% of the investor’s net worth.
North Dakota: Investors must have a liquid net worth of at least ten times their investment in us and our affiliates.
Ohio: Investors may not invest in the aggregate more than 10% of their liquid net worth in our shares, our affiliates, and in other non-traded real estate investment programs. “Liquid net worth” means that portion of net worth (total assets exclusive of home, home furnishings, and automobiles minus total liabilities) that is comprised of cash, cash equivalents, and readily marketable securities.
Tennessee: Investors must have (excluding the value of their home, home furnishings and automobiles) either (i) a minimum net worth of at least $500,000, or (ii) an annual gross income of at least $100,000 and a minimum net worth of at least $100,000.
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Texas: An investor must have had (excluding the value of the investor’s home, home furnishings and automobiles), during the last tax year, or estimate that the investor will have during the current tax year, (a) a minimum net worth of $100,000 and a minimum annual gross income of $100,000, or (b) a minimum net worth of $500,000.
Because the minimum offering of our common stock is less than $400,000,000, Pennsylvania investors are cautioned to evaluate carefully our ability to accomplish fully our stated objectives and to inquire as to the current dollar volume of our subscription proceeds.
Our sponsor and affiliated dealer manager are responsible for determining if investors meet our minimum suitability standards and state specific suitability standards for investing in our common stock. In making this determination, our sponsor and affiliated dealer manager will rely on participating broker-dealers and/or information provided by investors and their advisors. In addition to the minimum suitability standards described above, each participating broker-dealer, authorized representative or any other person placing shares on our behalf, and our sponsor and affiliated dealer manager, are required to make every reasonable effort to determine that the purchase of shares is a suitable and appropriate investment for each investor.
It shall be the responsibility of your participating broker-dealer, authorized representative or other person placing shares on our behalf to make this determination, based on a review of the information provided by you, including your age, investment objectives, income, net worth, financial situation and other investments held by you, as well as whether you:
| | • | | meet the minimum income and net worth standards established in your state; |
| | • | | can reasonably benefit from an investment in our common stock based on your overall investment objectives and portfolio structure; |
| | • | | are able to bear the economic risk of the investment based on your overall financial situation; and |
| | • | | have an apparent understanding of: |
| | • | | the fundamental risks of an investment in our common stock; |
| | • | | the risk that you may lose your entire investment; |
| | • | | the limited liquidity of our common stock; |
| | • | | the restrictions on transferability of our common stock; |
| | • | | the background and qualifications of our advisor and sub-advisor; and |
| | • | | the tax, including ERISA, consequences of an investment in our common stock. |
Our sponsor, our dealer manager and each participating broker-dealer, authorized representative or other person placing shares on our behalf shall maintain records of the information used to determine that an investment in our shares is suitable and appropriate for a stockholder. The participating broker-dealer shall maintain these records for at least six years.
The income and net worth standards set forth above do not apply to participant-directed purchases under a 401(k) or other defined contribution plan where the authorized plan fiduciary has approved our shares of common stock as an available investment option under such plan. In addition, in the case of sales to fiduciary accounts the suitability standards shall be met by the fiduciary account, by the person who directly or indirectly supplied the funds for the purchase of the shares of our common stock or by the beneficiary of the account.
IMPORTANT NOTE FOR BROKER-DEALERS: This prospectus will be supplemented each month with respect to pricing information (NAV per share) and from time to time with respect to other information. All sales literature used in connection with this offering must be accompanied by (1) the
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current prospectus, (2) all prospectus supplements (other than pricing supplements) and (3) the most recent pricing supplement filed through the close of business on the business day immediately preceding delivery or, if delivered after the close of business, then through the close of business on the day such sales literature is delivered.
IMPORTANT NOTE FOR INVESTORS: Please carefully read the information in this prospectus and any accompanying prospectus supplements, which we refer to collectively as the prospectus. You should rely only on the information contained in this prospectus. Neither we, our advisor, our fund accountant or our independent valuation expert has authorized anyone to provide you with different information. This prospectus may only be used where it is legal to sell these securities. You should not assume that the information contained in this prospectus or the latest prospectus supplement is accurate as of any date later than the date hereof or thereof, as applicable or such other dates as are stated herein or therein or as of the respective dates of any documents or other information incorporated herein or therein by reference.
IMPORTANT NOTE ABOUT THIS PROSPECTUS: The term “sponsor” refers to Cole Real Estate Investments, our sponsor; the terms “advisor” and “Cole Advisors” refers to Cole Real Estate Income Strategy (Daily NAV) Advisors, LLC, our advisor and an affiliate of our sponsor; and the term “sub-advisor” refers to BlackRock Investment Management, LLC, the sub-advisor to our advisor. In this prospectus, the term “operating partnership” refers to Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP of which Cole Real Estate Income Strategy (Daily NAV), Inc. is the sole general partner. The words “we,” “us,” and “our” refer to Cole Real Estate Income Strategy (Daily NAV), Inc. and our operating partnership, taken together, unless the context requires otherwise.
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TABLE OF CONTENTS
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Questions and Answers About This Offering
Set forth below are some questions (and accompanying answers) we anticipate investors interested in this offering may have. They are not a substitute for disclosures elsewhere in this prospectus and the latest prospectus supplement furnished to you. You are strongly encouraged to read the “Prospectus Summary,” the “Risk Factors” and the remainder of this prospectus in their entirety for more detailed information about this offering before deciding to purchase shares of our common stock.
| Q: | What is a real estate investment trust, or REIT? |
| A: | In general, a REIT is a company that: |
| | • | | combines the capital of many investors to acquire or provide financing for the acquisition of real estate; |
| | • | | typically offers the benefit of a diversified real estate portfolio under professional management; |
| | • | | must distribute to investors at least 90% of its annual REIT taxable income; and |
| | • | | is able to qualify as a REIT for U.S. federal income tax purposes and is therefore generally not subject to federal corporate income taxes on its net income that it currently distributes to its stockholders, which substantially eliminates the “double taxation” (i.e., taxation at both the corporate and stockholder levels) that generally results from investments in a corporation. |
We expect to qualify as a REIT beginning with our taxable year ended December 31, 2012. We will also use the so-called UPREIT (Umbrella Partnership Real Estate Investment Trust) structure, where a REIT holds all or substantially all of its assets through a partnership the REIT controls as a general partner. We chose this structure principally because it may be attractive to sellers of real estate who wish to defer taxable gain by exchanging their asset for limited partnership interests.
| Q: | Why should I consider an investment in real estate? |
| A: | Our goal is to provide a professionally managed, diversified portfolio of institutional quality commercial real estate to investors who generally have had very limited access to such investments in the past. Allocating some portion of your portfolio to a direct investment in institutional quality commercial real estate may provide you with: |
| | • | | a reasonably predictable and stable level of current income from the investment; |
| | • | | diversification of your portfolio, by investing in an asset class that historically has not been correlated with the stock market generally; and |
| | • | | the opportunity for capital appreciation. |
| Q: | What is your investment strategy, and what types of properties do you intend to acquire? |
| A: | Under our investment strategy, we intend to invest primarily in single-tenant, necessity commercial properties, which are leased to creditworthy tenants, under long-term net leases. Our commercial properties will consist primarily of properties in the retail, office and industrial sectors that meet our investment criteria. Once all of the offering proceeds are invested, our property sector allocations will broadly reflect the composition of the National Council of Real Estate Investment Fiduciaries (NCREIF) Property Index (NPI) with the exception of multi-family and lodging, which will be excluded from our investment universe. The NPI is managed by the NCREIF and is a widely followed benchmark among institutional investors. NCREIF is a not-for-profit trade association that serves its membership, and the academic and investment community’s need for improved commercial real estate data, performance measurement, investment analysis, information standards, education, and peer group interaction. The NPI comprises performance data from retail, office, industrial, multi-family and lodging (hotel) properties. Since our strategy will focus on |
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| | income producing real estate with long term leases, we will not invest in multi-family or lodging properties that have short duration leases and have historically had volatile performance. The actual percentage of our portfolio that is invested in retail, office and industrial property categories may fluctuate due to market conditions and investment opportunities. |
We believe that our investment approach will allow us to achieve a relatively predictable and stable stream of income for investors in our common stock, along with the potential for long-term appreciation in the value of our real estate assets. For over three decades, our sponsor has developed and utilized this investment approach in acquiring and managing real estate assets primarily in the retail sector. We believe that our sponsor’s experience in the single-tenant, necessity retail sector will provide us with a competitive advantage as we invest across multiple property sectors to create a diversified real estate portfolio. In addition, our sponsor has built an organization of over 300 employees, who are experienced in the various aspects of acquiring, financing, managing and disposing of retail, office, and industrial real estate, and we believe that our access to these resources also will provide us with an advantage.
| Q: | What are “necessity commercial” properties? |
| A: | We use the term necessity commercial properties to describe retail properties for companies that provide consumers with products that are important to, and part of, their everyday lives, and to describe office and industrial properties that are essential to the business operations of a corporate tenant. |
Examples of necessity retail properties include pharmacies, home improvement stores, national superstores, restaurants and regional retailers that provide products considered necessities to that region. Historically, the retail sector of commercial real estate has been able to withstand most market cycles better than other sectors, due to the long-term resilience of consumer spending. By focusing our retail investment strategy on necessity retailers subject to long-term net leases, our objective is to provide our stockholders with a relatively stable stream of current income, while avoiding a significant decline in the value of our real estate portfolio.
Necessity office and industrial properties are essential to the business operations of a corporate tenant, typically due to one or more of the following factors:
| | • | | difficulty of replacement or prohibitive cost to relocate; |
| | • | | sole or major location for its distribution or office operations; |
| | • | | proximity to its distribution, manufacturing, research facilities or customer base; |
| | • | | lower labor, transportation and/or operating costs; |
| | • | | more stable labor force; |
| | • | | optimal access to transportation networks that enable efficient distribution; and/or |
| | • | | significant amount of tenant-funded capital improvements, such as customized computer systems and information technology infrastructure, racking and sorting systems, and cooling or refrigeration systems. |
For example, distribution facilities, warehouses, manufacturing plants and corporate or regional headquarters are often considered to be necessity office and industrial properties. We believe that necessity office and industrial properties provide a relatively greater level of stability than other office and industrial property types because necessity properties typically involve long-term leases and experience relatively low tenant turnover. We also believe that, as a result of recent and ongoing business developments, such as the role of the internet in the distribution of products, globalization of importing and exporting products and consolidation of businesses requiring office buildings to accommodate a single-tenant, there is, and we expect there will continue to be, increasing demand by commercial tenants for necessity office and industrial properties.
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| Q: | What is the experience of your sponsor and advisor in managing commercial real estate? |
| A: | References to our sponsor throughout this prospectus refer to a group of affiliated entities that, prior to April 5, 2013, were directly or indirectly controlled by Christopher H. Cole. On April 5, 2013, Cole Credit Property Trust III, Inc. (“Cole Credit Property Trust III”) acquired our sponsor pursuant to a transaction whereby Cole Holdings Corporation merged with and into CREInvestments, LLC (“CREI”), a wholly-owned subsidiary of Cole Credit Property Trust III. Prior to the merger, Cole Holdings was wholly owned by Mr. Christopher H. Cole, our chairman of the board, chief executive officer and president. Cole Holdings Corporation was also an affiliate of our sponsor, the parent company and indirect owner of Cole Real Estate Income Strategy (Daily NAV) Advisors, LLC, our advisor, and the indirect owner of Cole Capital Corporation, our dealer manager. As a result of the merger, our advisor and dealer manager are now wholly-owned by CREI. Also in connection with the merger, the property management services previously performed for us by Cole Realty Advisors, Inc. (“Cole Realty Advisors”) have been assigned to CREI Advisors, LLC (“CREI Advisors”), a wholly-owned subsidiary of CREI. Despite the indirect change in control of our advisor and dealer manager, and the assignment of these property management services to CREI Advisors, we expect that the advisory, dealer manager and property management services we receive will continue without any changes in personnel or service procedures. |
From January 1, 2003 to December 31, 2012, our sponsor and its affiliates sponsored 66 prior programs, including 61 privately offered programs and five publicly offered REITs, which are comprised of Cole Credit Property Trust II, Inc. (“Credit Property Trust II”), Cole Credit Property Trust III, Cole Corporate Income Trust, Inc. (“Cole Corporate Income Trust”), Credit Property Trust IV, Inc. (“Credit Property Trust IV”) and this program, Cole Real Estate Income Strategy (Daily NAV), Inc. (“Cole Income NAV Strategy”). These prior programs had raised approximately $8.1 billion from over 155,000 investors and had purchased 2,090 properties located in 47 states and the U.S. Virgin Islands at an acquisition cost of $12.5 billion as of December 31, 2012. Our program, Credit Property Trust IV and Cole Corporate Income Trust are each currently raising capital pursuant to their respective initial public offerings of shares of their common stock.
For over three decades, our sponsor has developed and utilized a conservative investment approach that focuses on single-tenant commercial properties, which are leased to name-brand creditworthy tenants, subject to long-term “net” leases. While our sponsor has used this investment strategy primarily in the retail sector, our sponsor has also used the same investment strategy (single-tenant commercial properties subject to long-term net leases with creditworthy tenants) in the office and industrial sector. We expect that our sponsor’s prior experience in applying this conservative and disciplined investment strategy in both the retail and corporate sectors will provide us with a competitive advantage, as our advisor, an affiliate of our sponsor, acquires and manages, on our behalf, a portfolio of necessity retail properties. In addition, our sponsor has built an organization of over 350 employees, who are experienced in the various aspects of acquiring, financing and managing commercial real estate, and we believe that our access to these resources will also provide us with a competitive advantage. A summary of the real estate programs managed over the last ten years by our sponsor, including adverse business and other developments, is set forth in the section of this prospectus captioned “Prior Performance Summary.”
Our advisor is Cole Real Estate Income Strategy (Daily NAV) Advisors, LLC, an affiliate of our sponsor that was formed solely for the purpose of managing our company. The chief executive officer and president of our advisor, and other key personnel of our advisor, have been associated with Cole Real Estate Investments for several years. For additional information about the key personnel of our advisor, see the section of this prospectus captioned “Management — The Advisor.”
| Q: | What is a perpetual-life, publicly offered, non-exchange traded REIT? |
| A: | A non-exchange traded REIT is a REIT whose shares are not listed for trading on a stock exchange or other securities market. A public non-exchange traded REIT is registered with the Securities and Exchange Commission (“SEC”) and is required to file with the SEC financial statements and other reports. |
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We use the term “perpetual-life” non-exchange traded REIT to describe an investment vehicle of indefinite duration focused principally on acquiring a portfolio of commercial real estate, where the shares of common stock are continuously available for purchase and redemption on a daily basis at a price equal to net asset value per share (“NAV per share”).
Non-exchange traded REITs have traditionally had a finite life with a specified date by which there would be some type of liquidity event for the benefit of all stockholders. In our perpetual-life structure, the investor or his financial advisor will determine when to purchase or liquidate an investment in shares of our common stock and our charter does not require us to effect a liquidity event at any point-in-time in the future. As of the date of this prospectus, we are aware of four perpetual-life, publicly offered, non-exchange traded REIT with an effective registration statement.
| Q: | How is an investment in shares of your common stock different from investing in shares of a listed REIT? |
| A: | Investing in REITs whose shares are listed for trading on a national securities exchange is one alternative for investing in commercial real estate. Shares of listed REITs, however, generally fluctuate in price with the stock market as a whole; that is, there is a relatively close relationship or correlation between changes in the price of listed REIT shares and changes in the value of the stock market generally. This close correlation suggests that the value of shares of listed REITs may be based on a variety of factors beyond the value of the listed REITs’ underlying real estate investments, such as the supply of available shares (number of sellers) and the demand for shares (number of buyers), as well as changes in investors’ short- or long-term financial market expectations in general. By comparison, the change in price of a direct investment in commercial real estate, as measured by actual transactions, historically has not been closely correlated, or in direct alignment, with the average value of the stock market generally. |
Our objective is to offer an alternative for investing in commercial real estate, where the value of your investment will be based on our NAV. Our NAV will reflect several components, one of which will be the estimated values of each of our commercial real estate assets, related liabilities and notes receivable secured by real estate contained within individual appraisal reports provided to our fund accountant by our independent valuation expert. These estimates of the values of our commercial real estate properties, which are based on information provided by our advisor, who also reviews them, will not fluctuate depending on the number of shares available for purchase in a trading market or on the number of investors looking to sell shares in a trading market. Although our advisor will periodically review and provide input on the estimates of value, our independent valuation expert will be free to accept or reject such input in its discretion. Our shares will be offered for sale on a continuous basis by the Company and redemptions will be based on the NAV per share calculated by our fund accountant, regardless of the volume of redemption requests. Because of these valuation guidelines applicable to our NAV, we expect that changes in the value of our shares will be more closely correlated, or aligned, with changes in prices of direct investments in real estate, as compared to changes in trading prices for the common stock of listed REITs. Since direct investments in real estate are not highly correlated with stock market prices generally, we expect that an investment in our shares will provide a measure of diversification to an investor’s portfolio that otherwise largely consists of stocks traded on a stock exchange.
In addition, on average, a direct investment in real estate, as measured by actual transactions, has historically exhibited significantly less volatility, or changes in value, than an investment in listed REITs. Again, since the NAV of our shares will be based on an estimate of the value of the real estate that we own, we expect that an investment in our shares will fluctuate in value, over time, less than an investment in a listed REIT.
Investors should bear in mind that investing in our shares differs from investing in listed REITs in significant ways. An investment in our shares has limited liquidity and our redemption program may be limited, modified or suspended. In contrast, an investment in a listed REIT is a liquid investment, as shares can be sold on an exchange at any time. Investing in our shares also differs from investing directly in real estate, including the expenses related to this offering and other fees and expenses that are payable.
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| Q: | How is an investment in shares of your common stock different from investing in shares of a traditional non-exchange traded REIT? |
| A: | Generally, an investment in shares of our common stock differs from a traditional non-exchange traded REIT because: |
| | • | | The per share purchase and redemption price of our common stock is based on our NAV as calculated by our fund accountant, State Street Bank and Trust Company, and may vary from day to day. Traditional non-exchange traded REITs sell shares at a fixed price throughout the offering period and typically value their common stock at least every eighteen months, thereafter. Daily pricing of our shares at NAV per share will enable investors to calculate a reasonable estimate of the total return on their investments as of any given time. |
| | • | | Contrary to traditional non-exchange traded REITs, which typically limit redemptions to 5% or less of the weighted average number of shares outstanding during the trailing twelve-month period, the goal of our redemption plan is to provide significantly greater liquidity to our stockholders by allowing for net redemptions per quarter of at least 5% of the prior quarter-end’s NAV and by maintaining a liquid reserve available to fund redemptions. There are circumstances under which our redemption program may be limited, modified or suspended. |
| | • | | Most traditional non-exchange traded REITs typically provide for a two to five year offering period and a single liquidity event, such as a listing on a national exchange or liquidation, within 10 years of the end of the offering period. In contrast, we are a perpetual-life entity with no defined life and we will continuously offer shares for purchase and allow redemptions. This will provide our stockholders with greater flexibility in determining when they want to make or liquidate their investment. |
| | • | | Finally, by targeting investors in wrap or fee based accounts, where the investor pays a fee for the investment services provided by his investment advisor or broker-dealer, we will avoid paying up-front selling commissions. We expect that our costs of distribution will be significantly lower than those of a traditional non-exchange traded REIT, resulting in a greater percentage of investors’ capital being available for investing in real estate and real estate-related investments. |
| Q: | What is the purchase price for shares of your common stock? |
| A: | The per share purchase price varies from day-to-day and, on each business day, is equal to our NAV divided by the number of shares outstanding as of the close of business on such day. After the close of business (the close of the New York Stock Exchange; generally, 4:00 p.m. Eastern Time), on each day that the New York Stock Exchange is open (a business day), we update our website, www.colecapital.com, which identifies the NAV per share for that day. Any purchase orders that we receive prior to the close of business on any business day will be executed at a price equal to our NAV per share for that day, as calculated after the close of business on that day. Purchase orders that we receive after the close of business are executed at a price equal to our NAV per share as calculated after the close of business on the next business day. Purchase orders placed on a day that is not a business day, and purchase orders pursuant to our systematic investment program that would otherwise occur on a day that is not a business day, will be executed as if they were received prior to the close of business on the immediately following business day. See “Share Purchases and Redemptions — Buying Shares” for more details. |
| Q: | How will your NAV per share be calculated? |
| A: | Our NAV per share is calculated daily as of the close of business by our fund accountant using a process that reflects (1) estimated values of each of our commercial real estate assets, related liabilities and notes receivable secured by real estate provided periodically by our independent valuation expert in individual appraisal reports, as they may be updated upon certain material events described below, (2) the price of liquid assets for which third party market quotes are available, (3) accruals of our daily distributions, and (4) estimates of daily accruals, on a net basis, of our operating revenues, expenses, debt service costs and fees. Our advisor reviews estimated values of commercial real estate assets, related liabilities and notes receivable secured by real estate provided in individual appraisal reports and if a material event in respect of |
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| | such asset or liability occurs between scheduled quarterly valuations that our advisor believes may materially affect the value thereof, our advisor will inform the independent valuation expert so that, if appropriate, the independent valuation expert can issue an update to its individual appraisal report to adjust the most recent valuations to account for the estimated impact. |
We have engaged CBRE, Inc. (formerly known as CB Richard Ellis, Inc.), which has expertise in appraising commercial real estate, to act as our independent valuation expert. CBRE provides our fund accountant with periodic estimates of the values of our commercial real estate assets, related liabilities and notes receivable secured by real estate, all or substantially all of which will be held in our operating partnership. Our assets will consist primarily of a portfolio of commercial real estate as well as notes receivable or marketable securities where the underlying collateral will typically be commercial real estate or security interests therein. We will also invest in liquid assets and hold cash and cash equivalents, which will not be valued by our independent valuation expert. Our commercial real estate-related liabilities to be valued by CBRE will consist primarily of mortgage loans secured by our commercial real estate. Our other liabilities will be estimated by our advisor for use by our fund accountant in determining NAV and will include accrued operating expenses, accrued dealer manager and advisory fees and accrued distributions to stockholders.
Upon purchase, each real estate asset is initially carried at its purchase price, plus related acquisition costs. On a quarterly basis thereafter, our independent valuation expert will value each of our commercial real estate properties and real estate assets, such that each of these investments will be valued at least once per quarter beginning with the quarter following the first full calendar quarter after we acquire the asset. Based on all information deemed relevant, our independent valuation expert will analyze the cash flow from, and other characteristics of, each commercial real estate property in our portfolio. The independent valuation expert will consider, as appropriate, valuation methodologies, opinions and judgments in compliance with the Uniform Standards of Professional Appraisal Practice and the requirements of the Code of Professional Ethics and Standards of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. See “Valuation Policies — Valuation — Valuation of Commercial Real Estate Properties and Secured Loans.”
Between quarterly valuations, our advisor will monitor our commercial real estate assets, related liabilities and notes receivable secured by real estate to determine whether a material event has occurred that our advisor believes may have a material impact on the most recent estimated values thereof as set forth in the relevant appraisal report provided by our independent valuation expert. If, in the opinion of our independent valuation expert, the event identified by our advisor, or in some circumstances an event that becomes known to the independent valuation expert through other means, is likely to have a material impact on previously provided estimated values of the affected commercial real estate assets, related liabilities and notes receivable secured by real estate, the independent valuation expert will recommend valuation adjustments that the fund accountant will then incorporate into our NAV. Any such adjustments will be estimates of the market impact of specific events based on assumptions and judgments that may or may not prove to be correct, and may also be based on limited information, as full and complete information may not be readily available. In addition to providing estimated values of our commercial real estate asset portfolio, our independent valuation expert will also provide, on a quarterly basis beginning with the quarter following the first full calendar quarter after we acquire any notes receivable, an estimate of the value of our notes receivable, primarily relying on a discounted cash flow analysis, and an estimate of the value of our mortgages, primarily by comparing the terms of our mortgages to the terms of mortgages on comparable properties, as seen in the market generally. These quarterly valuations may also be adjusted, between quarters, as described above. Liquid assets and assets that are traded with reasonable frequency will be valued by third party pricing institutions on a daily basis, assuming market quotes are available. Our advisor will periodically review and provide input on the estimated value provided by the independent valuation expert set forth in an individual appraisal report for each such asset, but the independent valuation expert will be free to accept or reject such input in its discretion. The board of directors, including a majority of the independent directors, has adopted our valuation guidelines, will be responsible for ensuring that the independent valuation expert discharges its responsibilities in accordance with our valuation guidelines, and will periodically receive and review such information about the valuation of our assets and liabilities as it deems necessary to exercise its oversight responsibility.
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Our fund accountant calculates our daily NAV at the end of each business day based on the net valuation of our operating partnership’s principal assets and liabilities, based primarily on the individual estimated values provided by the independent valuation expert as described above, together with the other components of NAV described elsewhere in this prospectus. First, the fund accountant will subtract from the net value of the operating partnership the other partnership liabilities, including estimates of accrued fees and expenses attributable to the offering, and estimates of accrued operating revenues, fees and expenses. Our fund accountant will take the resulting amount and multiply that amount by our percentage ownership interest in the operating partnership. Initially, the only limited partner is our wholly-owned subsidiary, CRI (Daily NAV), LLC, which holds a 0.1% interest. Our fund accountant will then add any assets held directly by the REIT, which should be limited to cash and cash equivalents, and subtract an estimate of any accrued liabilities of the REIT, which should be limited to certain legal, accounting and administrative costs. The result of this calculation will be our NAV as of the end of any business day.
Our NAV per share is determined by dividing our NAV on such day by the number of shares of our common stock outstanding as of the end of such day, prior to giving effect to any share purchases or redemptions to be effected on such day. See “Valuation Policies — Calculation of Our NAV Per Share” for more details about how our NAV is calculated.
| Q: | Does our independent valuation expert calculate or is it responsible for the NAV? |
| A: | Our NAV per share is calculated by our fund accountant. While our independent valuation expert will periodically provide estimated values of each of our commercial real estate assets, related liabilities and notes receivable secured by real estate based upon individual appraisal reports, our independent valuation expert is not responsible for and does not prepare our daily NAV per share. |
| Q: | How exact is the calculation of the daily NAV per share? |
| A: | Our goal is to provide a reasonable estimate of the market value of our shares. Our assets will consist principally of commercial real estate assets, the valuation of which by our independent valuation expert is subject to a number of judgments and assumptions that may not prove to be accurate. The use of different judgments or assumptions would likely result in different estimates of the value of our real estate assets. The daily calculation of our NAV per share by the fund accountant may not reflect the precise amount that might be paid for your shares in a market transaction. On any given day, our published NAV per share may not fully reflect certain material events to the extent that they are not known or their financial impact on our portfolio is not immediately quantifiable. Any resulting potential disparity in our NAV per share may be in favor of either stockholders who redeem their shares, or stockholders who buy new shares, or existing stockholders. See “Valuation Policies — Calculation of Our NAV Per Share.” |
| Q: | Will I have the opportunity to redeem my shares of common stock? |
| A: | While you should view your investment in our shares as a long-term investment with limited liquidity, we have adopted a redemption plan whereby, on any business day, stockholders may request that we redeem all or any portion of their shares. The redemption price per share on any business day will be equal NAV per share, determined as described above. Subject to limited exceptions, shares redeemed within 365 days of the date of purchase will be subject to a short-term trading fee equal to 2% of the aggregate NAV per share of such shares redeemed. See “Share Purchases and Redemptions — Redemption Plan.” |
| Q: | Will there be any limits on my ability to redeem my shares? |
| A: | Yes. While we designed our redemption plan to allow stockholders to request redemptions on any business day, of all or any portion of their shares, our ability to fulfill redemption requests is subject to a number of limitations. The vast majority of our assets will consist of commercial properties, which cannot generally be readily liquidated without impacting our ability to realize full value upon their disposition. However, to fund |
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| | our redemption plan, we will maintain a number of sources of liquidity including (i) cash, cash equivalents, other liquid investments and liquid securities and (ii) in the discretion of our advisor, a line of credit. |
In order to maintain a reasonable level of liquidity, our investment guidelines provide that we will target the following aggregate allocation to the above sources of liquidity: (1) 10% of our NAV up to $1 billion and (2) 5% of our NAV in excess of $1 billion. In addition, we may also fund redemptions from any available source of funds, including operating cash flows, borrowings, proceeds from this offering and/or the sale of our assets. Despite these sources of liquidity, we may not always have sufficient liquid resources to satisfy redemption requests and you may not always be able to redeem your shares.
Under ordinary circumstances the total amount of net redemptions during a calendar quarter is limited to five percent of our total net assets on the last business day of the preceding quarter. Redemption requests will be satisfied on a first-come, first-served basis. If net redemptions do not reach the five percent limit in a calendar quarter, the unused portion will be carried over to the next quarter, except that the maximum amount of net redemptions during any quarter can never exceed ten percent of our total net assets on the last business day of the preceding quarter. If net redemptions in a calendar quarter reach the five percent limit (plus any carried over amount), then after pro-rating redemptions for that day we will be unable to process any redemption requests for the rest of the calendar quarter. We will begin accepting redemption requests again on the first business day of the next calendar quarter, but will apply the five percent quarterly limitation on redemptions on a per-stockholder basis, instead of a first-come, first-served basis. Therefore, at any time during that quarter each stockholder will be able to redeem up to five percent of the stockholder’s investment in our shares on the last business day of the preceding quarter, plus any new investment by the stockholder in our shares during that quarter (subject to applicable short-term trading fees). The per-stockholder limit will remain in effect for the following quarter if total net redemptions are more than two and one-half percent of our net assets on the last business day of the preceding quarter. Further, to protect our operations and our non-redeeming stockholders, to prevent an undue burden on our liquidity or to preserve our status as a REIT, our board of directors may limit, or suspend our redemption program. See “Share Purchases and Redemptions — Redemption Plan — Redemption Limitations.”
| Q: | How do you intend to distribute your shares? |
| A: | We intend to distribute our shares of common stock principally through registered investment advisers and broker-dealers that are paid a fee by their clients for the services provided — typically referred to as wrap or fee based accounts. As a result, we expect that our costs of distribution will be less than the total expenses of a traditional finite-life non-exchange traded REIT. |
| Q: | Will I be charged upfront selling commissions? |
| A: | No. Investors will not pay upfront selling commissions as part of the price per share of our common stock purchased in our primary offering or issued under our distribution reinvestment plan. |
We pay our dealer manager an asset-based dealer manager fee that is payable in arrears on a monthly basis and accrues daily in an amount equal to 1/365th of 0.55% of our NAV for such day. At our dealer manager’s discretion it may reallow a portion of the dealer manager fee equal to an amount up to 1/365th of 0.20% of our NAV to participating broker dealers. See “Plan of Distribution.” We will pay the dealer manager fee until the date at which, in the aggregate, underwriting compensation from all sources, including the dealer manager fee and other underwriting compensation paid by us and our advisor and its affiliates, equals 10% of the gross proceeds from our primary offering (i.e., excluding proceeds from sales pursuant to our distribution reinvestment plan).
In addition, our advisor or its affiliates, pay on our behalf all other costs incurred in connection with our organization and the offering of our shares (excluding the dealer manager fee), including (i) our legal, accounting, printing, mailing and filing fees, charges of our escrow agent, and broker/dealer due diligence expenses; (ii) costs incurred in connection with preparing supplemental sales materials, holding educational
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conferences and attending retail seminars conducted by broker-dealers; and (iii) reimbursements for our dealer manager’s wholesaling costs, and other marketing and organization costs including payments made to participating broker-dealers. We reimburse our advisor for these costs. Reimbursement payments are made in monthly installments, but the aggregate monthly amount reimbursed can never exceed 0.75% of the aggregate gross offering proceeds from this offering, including shares issued in connection with the distribution reinvestment plan. If the sum of the total unreimbursed amount of such organization and offering costs, plus new costs incurred since the last reimbursement payment, exceeds the reimbursement limit described above for the applicable monthly installment, the excess will be eligible for reimbursement in subsequent months (subject to the 0.75% limit), calculated on an accumulated basis, until our advisor has been reimbursed in full.
| Q: | What other fees and expenses will you pay to our advisor or any of its affiliates? |
| A: | We pay our advisor a monthly advisory fee that will be payable in arrears on a monthly basis and accrue daily in an amount equal to 1/365th of 0.90% of the NAV per share for each day. We will also pay our advisor a performance fee calculated on the basis of our total return to stockholders, payable annually in arrears, such that for any calendar year in which our total return on stockholders’ capital exceeds 6% per annum, our advisor will be entitled to 25% of the excess total return but not to exceed 10% of the aggregate total return for such year. In the event the NAV per share decreases below $15.00 (“Base NAV”) the performance-based fee will not be calculated on any increase in NAV up to Base NAV. We will not pay advisory fees to the sub-advisor, as those fees will be paid by our advisor. |
Although we will not pay our advisor any acquisition, financing or other similar fees in connection with making investments, we reimburse our advisor for out-of-pocket expenses in connection with the acquisition and financing of commercial real estate properties, real estate-related assets and other investments.
Additionally, we reimburse our advisor for out-of-pocket operating expenses in connection with providing services to us, including reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of services to us other than our executive officers. The expense reimbursements that we pay to our advisor include expenses incurred by the sub-advisor on our behalf.
The payment of fees and expenses will reduce the cash available for investment and distribution and will directly impact our daily NAV. See “Compensation” for more details regarding the fees that will be paid to our advisor and its affiliates.
| Q: | Will you invest in anything other than commercial properties? |
| A: | Yes. Our portfolio also may include other income-producing real estate, as well as real estate-related investments such as mortgage, mezzanine, bridge and other loans and liquid securities. Although this is our current target portfolio, we may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forego a high quality investment because it does not precisely fit our presently expected portfolio composition. Thus, to the extent that our advisor presents us with high quality investment opportunities that allow us to meet the REIT requirements under the Internal Revenue Code of 1986, as amended (the “Code”), and that result in an overall real estate portfolio that is consistent with our investment objectives, our portfolio composition may vary from time to time. Our goal is to assemble a portfolio that is diversified by investment type, investment size and investment risk, which generates a relatively predictable and stable stream of income for investors and the potential for long-term capital appreciation in the value of our real estate assets. See the section of this prospectus captioned “Investment Objectives, Strategy and Policies — Acquisition and Investment Policies” for a more detailed discussion of all of the types of investments we may make. |
| Q: | Generally, what will be the terms of your leases? |
| A: | We will seek to secure leases from creditworthy tenants, before or at the time we acquire a property. We expect that many of our leases will be triple net or double net leases, which means that the tenant will be |
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| | primarily responsible for the cost of repairs, maintenance, property taxes, utilities, insurance and other operating costs. This helps ensure the predictability and stability of our expenses and, we believe, will result in greater predictability and stability of our cash distributions to stockholders. We intend to enter into leases that have terms of ten or more years, may include renewal options and may also include rental increases over the term of the lease. A number of our leases, however, may have a shorter term. In addition, we expect that a number of our leases will be guaranteed by the corporate parent of the tenant, ensuring that, unless the parent company goes into bankruptcy, the rent on the property will be paid, even if the individual store is closed for any reason. |
| Q: | How will you determine whether tenants are creditworthy? |
| A: | Our advisor and its affiliates have a well-established underwriting process to determine the creditworthiness of our potential tenants. The underwriting process includes analyzing the financial data and other information about the tenant, such as income statements, balance sheets, net worth, cash flow, business plans, data provided by industry credit rating services, and/or other information our advisor may deem relevant. In addition, we may obtain guarantees of leases by the corporate parent of the tenant, in which case our advisor will analyze the creditworthiness of the guarantor. In some instances, especially in sale-leaseback situations, where we are acquiring a property from a company and simultaneously leasing it back to such company under a long-term lease, we expect that we will meet with the senior management of the company to discuss the company’s business plan and strategy. |
| A: | Yes, we intend to use leverage. Our targeted leverage, after we have acquired a substantial portfolio, is 50% of the greater of cost (before deducting depreciation or other non cash reserves) or market value of our gross assets. During the period when we are acquiring our initial portfolio, we may employ greater leverage in order to build quickly a diversified portfolio of assets. Please see “Investment Objectives, Strategy and Policies” for more details. |
| Q: | How often will I receive distributions? |
| A: | We expect that our board of directors will declare distributions with a daily record date, and pay distributions monthly in arrears. Any distributions we make are at the discretion of our board of directors, and are based on, among other factors, our present and reasonably projected future cash flow. We also expect that the board of directors will set the rate of distributions at a level that will be reasonably consistent and sustainable over time. In addition, the board of directors’ discretion as to the payment of distributions is limited by the REIT distribution requirements, which generally require that we make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income. See “Description of Capital Stock — Distributions” and “Material U.S. Federal Income Tax Considerations.” |
Any distributions that we make will directly impact our NAV, by reducing the amount of our assets. Our goal is to provide a reasonably predictable and stable level of current income, through monthly distributions, while at the same time maintaining a fair level of consistency in our NAV. Over the course of your investment, your distributions plus the change in NAV per share (either positive or negative) will produce your total return.
| Q: | What will be the source of your distributions? |
| A: | We may pay distributions from sources other than cash flow from operations, including from the proceeds of this offering, from borrowings or from the sale of properties or other investments, among others, and we have no limit on the amounts we may pay from such sources. We expect that our cash flow from operations available for distribution will be lower in the initial stages of this offering until we have raised significant capital and made substantial investments. As a result, we expect that during the early stages of our |
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| | operations, and from time to time thereafter, we may pay distributions from sources other than cash flows from operations. Contrary to traditional non-exchange traded REITs, however, whose shares are typically sold and, on a limited basis, redeemed at, a fixed price that is not necessarily intended to reflect the current value of the shares, our common stock will be sold and redeemed on a daily basis at NAV per share. As a result, distributions that represent a return of capital or exceed our operating cash flow will be reflected in our daily calculation of NAV. |
| Q: | Will the distributions I receive be taxable as ordinary income? |
| A: | Unless your investment is held in a qualified tax-exempt account or we designate certain distributions as capital gain dividends, distributions that you receive generally will be taxed as ordinary income to the extent they are from current or accumulated earnings and profits. The portion of your distribution in excess of current and accumulated earnings and profits is considered a return of capital for tax purposes and will reduce the tax basis of your investment, rather than result in current tax, until your basis is reduced to zero. This, in effect, defers a portion of your tax until you redeem or sell your shares. Return of capital distributions made to you in excess of your tax basis in our stock will be treated as sales proceeds from the sale of our stock. Distributions we designate as capital gain dividends will generally be taxable at long-term capital gains rates. However, because each investor’s tax considerations are different, we recommend that you consult with your tax advisor. You also should review the section of this prospectus entitled “Material U.S. Federal Income Tax Considerations.” |
| Q: | May I reinvest my cash distributions in additional shares? |
| A: | Yes. We have adopted a distribution reinvestment plan whereby investors may elect to have their cash distributions automatically reinvested in additional shares of our common stock. The purchase price for shares purchased under our distribution reinvestment plan is equal to our NAV per share on the date that the distribution is payable, after giving effect to the distribution. Because the dealer manager fee is calculated based on NAV, it reduces NAV with respect to all shares of our common stock, including shares issued under our distribution reinvestment plan. See “Description of Capital Stock — Distribution Reinvestment Plan” for more information regarding reinvestment of distributions you may receive from us. |
| Q: | Do you expect to acquire properties and loans in transactions with your advisor or its affiliates? |
| A: | From time to time our advisor may direct certain of its affiliates to acquire properties that would be suitable investments for us or may create special purpose entities to acquire properties for the specific purpose of selling the properties to us at a later time. Subsequently, we may acquire such properties from such affiliates, but any and all acquisitions from affiliates of our advisor must be approved by a majority of our directors, including a majority of independent directors, not otherwise interested in such transactions as being fair and reasonable to us. In addition, either our purchase price in any such transaction will be limited to the cost of the property to the affiliate, including acquisition-related expenses, or a majority of our independent directors must determine that there is substantial justification for any amount above such cost and that the difference is reasonable. Further, our charter provides that in no event will the purchase price of any asset acquired from an affiliate exceed its current appraised value as determined by an independent appraiser. |
From time to time, we may borrow funds from affiliates of our advisor, including our sponsor, as bridge financing to enable us to acquire a property when offering proceeds alone are insufficient to do so and third party financing has not been arranged or is insufficient. Any and all such transactions must be approved by a majority of our directors, including a majority of our independent directors not otherwise interested in such transaction, as fair, competitive and commercially reasonable, and no less favorable to us than comparable loans between unaffiliated parties. Our advisor or its affiliates may pay costs on our behalf, pending our reimbursement, or we may defer payment of fees to our advisor or its affiliates, but neither of these transactions would be considered a loan.
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| Q: | Will you acquire properties in joint ventures, including joint ventures with affiliates? |
| A: | It is possible that we may acquire properties through one or more joint ventures in order to increase our purchasing power and diversify our portfolio of properties in terms of geographic region, property type and tenant industry group. Increased portfolio diversification reduces the risk to investors as compared to a program with less diversified investments. Our joint ventures may be with affiliates of our advisor or with non-affiliated third parties. Any joint venture with an affiliate of our advisor must be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in such transaction, as being fair and reasonable to us and on substantially the same terms and conditions as those received by other joint ventures and the cost of our investment must be supported by a current appraisal of the asset. Generally, we will only enter into a joint venture in which we will approve major decisions of the joint venture. If we do enter into joint ventures, we may assume liabilities related to joint ventures that exceed the percentage of our investment in the joint venture. |
| Q: | For whom is an investment in your shares appropriate? |
| A: | An investment in our shares may be appropriate for you if you: |
| | • | | meet the minimum suitability standards mentioned above under “Suitability Standards;” |
| | • | | seek to diversify your portfolio by allocating a portion of your portfolio to a direct, long-term investment in commercial real estate that is non-correlated to the stock market; |
| | • | | seek to receive current income through our payment of distributions; |
| | • | | wish to obtain the benefits of potential long-term capital appreciation; and |
| | • | | are able to hold your investment in our shares as a long-term investment, as our redemption program may not always be available to redeem your shares. |
| Q: | Are there any risks involved in buying our shares? |
| A: | Investing in our common stock involves a high degree of risk. If we are unable to effectively manage the impact of these risks, we may not meet our investment objectives, and therefore, you should purchase these securities only if you can afford a complete loss of your investment. Some of the more significant risks relating to this offering and an investment in our shares include: |
| | • | | We are a “blind pool.” As of April 11, 2013, we have acquired 14 real estate properties and we have not identified all of the specific assets to be purchased with the net proceeds from this offering and have a limited operating history. |
| | • | | The valuation methodologies used by our independent valuation expert in arriving at the estimates of value of each of our commercial real estate assets, related liabilities and notes receivable secured by real estate (one of the components of our NAV) are set forth in individual appraisal reports prepared in accordance with valuation guidelines approved by our board of directors and involve subjective judgments and estimates. These individual appraisal reports are periodically reviewed by our advisor. These estimated values are then reflected by our fund accountant in the calculation of our NAV. As a result, our NAV may not accurately reflect the actual prices at which our commercial real estate assets, notes receivable secured by real estate or related real estate liabilities could be liquidated on any given day. |
| | • | | There is no public market for our shares of common stock, and our charter does not require us to effect a liquidity event at any point in time in the future. |
| | • | | Our redemption plan will provide stockholders with the opportunity to redeem their shares on a daily basis, but redemptions will be subject to available liquidity and other potential restrictions. |
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| | • | | We may pay distributions, and fund redemptions, from sources other than cash flow from operations, including borrowings, proceeds from this offering or asset sales, and we have no limits on the amounts we may pay from such other sources. Payments of distributions from sources other than cash flow from operations may reduce the amount of capital we ultimately invest in real estate, which may negatively impact the value of your investment and directly impact our daily NAV per share. |
| | • | | There are substantial conflicts of interest between us and our advisor and its affiliates, including our payment of substantial fees to our advisor and its affiliates. |
| | • | | This is a “best efforts” offering. If we are not able to raise a substantial amount of capital in the near term, we may have difficulties investing in properties and our ability to achieve our investment objectives could be adversely affected. |
| | • | | We may suffer from delays in identifying suitable investments, which may adversely impact the value of your investment. |
| | • | | If we fail to qualify as a REIT for federal income tax purposes and no relief provisions apply, our NAV and cash available for distribution to our stockholders could materially decrease. |
| A: | You can buy shares pursuant to this prospectus by working with your financial advisor to (1) complete the required documentation and (2) pay for the shares at the time your purchase order is settled. Please see “Share Purchases and Redemptions — Buying Shares” for more information about how to purchase shares. |
| Q: | May I make an investment through my IRA or other tax-deferred retirement account? |
| A: | Yes. You may make an investment through your IRA or other tax-deferred retirement account. In making these investment decisions, you should consider, at a minimum, (1) whether the investment is in accordance with the documents and instruments governing your IRA, plan or other retirement account, (2) whether the investment would constitute a prohibited transaction under applicable law, (3) whether the investment satisfies the fiduciary requirements associated with your IRA, plan or other retirement account, (4) whether the investment will generate unrelated business taxable income (“UBTI”) to your IRA, plan or other retirement account, and (5) whether there is sufficient liquidity for such investment under your IRA, plan or other retirement account. You should note that an investment in shares of our common stock will not, in itself, create a retirement plan and that, in order to create a retirement plan, you must comply with all applicable provisions of the Code. |
| Q: | Is there any minimum investment required? |
| A: | Subject to limited exceptions, the minimum initial investment in shares of our common stock is $2,500. |
| Q: | What is the term or expected life of this offering? |
| A: | We have registered $3,500,000,000 in shares of our common stock to be sold in our primary offering and up to $500,000,000 in shares to be sold pursuant to our distribution reinvestment plan. It is our intent, however, to conduct a continuous offering for an indefinite period of time, by filing for additional offerings of our shares, subject to regulatory approval and continued compliance with the rules and regulations of the SEC and applicable state laws. |
We will endeavor to take all reasonable actions to avoid interruptions in the continuous offering of our shares of common stock, including filing an amendment to the registration statement with the SEC on or before such time as the most recent offering price per share represents a 20% change from the per share price set forth in the registration statement as originally declared effective by the SEC or the price per share
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set forth in the latest amendment thereto filed with the SEC. There can be no assurance, however, that we will not need to suspend our continuous offering while the SEC and, where required, state securities regulators, review such amendment until it is declared effective, if at all.
This is a “best efforts” offering, which means that our dealer manager and the participating brokers are only required to use their best efforts to sell the shares.
| Q: | Will I be notified of how my investment is doing? |
| A: | Yes. We will provide you with periodic updates on the performance of your investment with us, including: |
| | • | | three quarterly financial reports; |
| | • | | in the case of certain U.S. stockholders, an annual Internal Revenue Service, or IRS, Form 1099-DIV and/or Form 1099-B, if required, and, in the case of non-U.S. stockholders, an annual IRS Form 1042-S; |
| | • | | confirmation statements (after transactions affecting your balance, except reinvestment of distributions in us and certain transactions through the distribution reinvestment plan); |
| | • | | notification to our Maryland and New York stockholders regarding the sources of payments made to them that are not entirely from our funds from operations, which will be sent via U.S. mail with every third monthly distribution statement and/or check, as applicable; and |
| | • | | if you participate in our distribution reinvestment plan, an annual statement providing all material information regarding the plan and your participation in it, including the tax consequences thereof. |
Depending on legal requirements, we will provide this information to you via one or more of the following methods:
| | • | | U.S. mail or other courier; |
| | • | | electronic delivery; and |
| | • | | posting on our website,www.colecapital.com. |
In general, the above materials will be provided to you via U.S. mail unless you affirmatively elect to receive them via electronic delivery. Except for an annual report and any other reports required to be physically delivered to stockholders, we will not mail stockholders periodic or other reports we file with the SEC that are available to you on the SEC’s website at www.sec.gov.
In addition, on each business day, our current NAV per share is posted on our website and made publicly available on our toll-free, automated information line after it has been calculated at the end of each business day.
| Q: | When will I get my detailed tax information? |
| A: | In the case of certain U.S. stockholders, your Form 1099-DIV and/or Form 1099-B tax information, if required, will be mailed by January 31 and February 15 respectively of each year (or by February 15 if the forms are consolidated). In the case of non-U.S. stockholders, Form 1042-S will be mailed by March 15 of each year. |
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| Q: | Who can help answer my questions? |
| A: | If you have more questions about this offering or if you would like additional copies of this prospectus, you should contact your financial advisor or: |
Cole Capital Corporation
2325 E. Camelback Road, Suite 1100
Phoenix, AZ 85016
(866) 907-2653
Attn: Investor Services
www.colecapital.com
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Prospectus Summary
This summary highlights some of the most significant information contained elsewhere in this prospectus. Because it is a summary, it does not contain all of the information that may be important to you. To understand this offering fully, you should read the entire prospectus carefully, including, without limitation, the information discussed under the caption “Risk Factors” before making a decision to invest in our shares.
Cole Real Estate Income Strategy (Daily NAV), Inc.
Cole Real Estate Income Strategy (Daily NAV), Inc. is a Maryland corporation formed on July 27, 2010 to invest primarily in commercial properties, which are leased to creditworthy companies, under long-term net leases. Our commercial properties will consist of properties in the retail, office and industrial sectors that meet our investment criteria. Once all of the offering proceeds are invested, our property sector allocations will broadly reflect the composition of the NCREIF Property Index (NPI) with the exception of multi-family and lodging, which will be excluded from our investment universe. Since our strategy will focus on income producing real estate with long term leases, we will not invest in multi-family or lodging properties due to their short duration leases and historically volatile performance. The actual percentage of our portfolio that is invested in retail, office and industrial property categories may fluctuate due to market conditions and investment opportunities. We believe that our investment approach will allow us to achieve a relatively predictable and stable current stream of income for investors, along with the potential for long-term capital appreciation in the value of our real estate. In addition, an investment in our common stock will provide investors with exposure to a major asset class (commercial real estate) that historically has not been correlated with the stock market, has demonstrated less volatility than listed stocks over time and may provide diversification as part of an investment portfolio.
We are structured as a perpetual-life, non-exchange traded REIT. This means that, subject to regulatory approval of our filing for additional offerings, we will sell shares of our common stock on a continuous basis and for an indefinite period of time. We sell our shares at a price based on the daily net asset value, or NAV, of our underlying assets, as calculated by our fund accountant. Although our common stock will not be listed for trading on a stock market or other trading exchange, we expect to provide our investors with limited liquidity through a redemption program that will permit investors to request redemption of all or a portion of their shares on any business day, at the daily NAV per share, subject to certain limitations described in this prospectus. As a perpetual-life, non-exchange traded REIT, our investment strategy will not be restricted by the need to provide, and our charter does not require that we provide our stockholders with, liquidity through a single terminal “liquidity event.”
We intend to distribute our shares principally through registered investment advisors and broker/dealers that charge their clients a fee for their services, typically referred to as wrap or fee based accounts. As a result, we will not pay any upfront selling commissions and we expect that our costs of distribution will be less than the total expenses paid by a traditional defined life non-exchange traded REIT. Our advisor will pay all costs incurred in connection with our organization and offering (other than the dealer manager fee) and we will reimburse our advisor. Reimbursement payments are typically made in monthly installments, but the aggregate monthly amount reimbursed can never exceed 0.75% of the aggregate gross offering proceeds from this offering, including shares issued in connection with the distribution reinvestment plan. If the sum of the total unreimbursed amount of such organization and offering costs, plus new costs incurred since the last reimbursement payment, exceeds the reimbursement limit described above for the applicable monthly installment, the excess will be eligible for reimbursement in subsequent months (subject to the 0.75% limit), calculated on an accumulated basis, until our advisor has been reimbursed in full. See “Plan of Distribution.”
In periods when certain existing investors seek to redeem their shares, additional funds may also flow in from investors who are purchasing new shares; in these circumstances cash proceeds from the sale of new shares could be used to fund the redemptions. We believe that netting redemptions out of incoming proceeds from the
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offering is in the best interests of shareholders because of the time and transaction costs involved in investing new capital and in disposing of assets. To the extent that cash from new sales in the offering is used to fund redemptions, neither the Company’s aggregate NAV nor NAV per share are expected to be impacted.
Pursuant to the terms of this offering, we were required to deposit all subscription proceeds in escrow pursuant to the terms of an escrow agreement with UMB Bank, N.A. until we received subscriptions aggregating at least $10,000,000. On December 6, 2011, Cole Holdings Corporation, an affiliate of our sponsor, deposited $10,000,000 for the purchase of 666,666.667 shares of common stock in the offering into escrow. As a result, we satisfied the conditions of the escrow agreement and on December 7, 2011, we broke escrow and accepted the investor’s subscription for shares of our common stock in this offering, resulting in gross proceeds of $10,000,000. In connection with Cole Credit Property Trust III’s acquisition of Cole Holdings Corporation, the 666,666.667 shares of our common stock held by Cole Holdings Corporation were transferred as follows: 627,978.745 shares to CHC Investments, LLC, which is wholly-owned by Christopher H. Cole; and 38,687.922 shares to a trust of which Marc T. Nemer is the trustee. Mr. Nemer is one of our directors, and is the chief executive officer and president of our advisor and the president, secretary and treasurer of our dealer manager. We will not allow these stockholders to redeem such shares until we have raised $100,000,000 in offering proceeds in our primary offering. Redemption requests made for these shares will only be accepted (1) on the last business day of a calendar quarter, (2) after all redemption requests from all other stockholders for such quarter have been accepted and (3) to the extent that such redemptions do not cause net redemptions to exceed 5% of our total NAV as of the end of the immediately preceding quarter. Redemption requests made for these shares will otherwise be subject to the same limitations as other stockholder redemption requests as described under “Share Purchases and Redemptions — Redemption Plan.”
We intend to qualify as a REIT for federal income tax purposes beginning with our taxable year ended December 31, 2012. We intend to hold all of our investments through our operating partnership, of which we are the sole general partner. We are not a mutual fund and do not intend to register as an investment company under the Investment Company Act of 1940, of the Investment Company Act.
On February 13, 2013, we filed a registration statement on Form S-11. Registration Statement No. 333-186656, to register the offer and sale of our existing class of common stock, as well as two new classes of common stock. See “Plan of Distribution — Multiple Class Offering.”
Our offices are located at 2325 East Camelback Road, Suite 1100, Phoenix, Arizona 85016. Our telephone number is 866-907-2653. Our fax number is 888-805-1070, and the e-mail address of our investor relations department isinvestorservices@colecapital.com. We maintain a toll-free, automated information line at 866-907-2653, where you may obtain the daily determination of our NAV and the most recent offering price per share. You may find additional information about us at our website, www.colecapital.com. The contents of that website are not incorporated by reference in, and are not otherwise a part of, this prospectus.
Summary Risk Factors
An investment in our common stock involves risk and is not suitable for all investors. There is no certainty as to the amount of distributions you may receive, the value of your investment may decline and liquidity under our redemption program may not be available at all times. Some of the more significant risks relating to an investment in shares of our common stock include those listed below.
| | • | | We have a limited prior operating history and there is no assurance that we will achieve our investment objectives. In addition, because we have limited assets and have not yet identified any additional assets to be purchased with the net proceeds from this offering, this is a “blind pool” offering and you will not be able to evaluate our additional investments prior to the time of purchase. |
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| | • | | The purchase and redemption price for shares of our common stock are based on our NAV per share each business day, as calculated by our fund accountant. One component of that calculation is the estimated values of each of our commercial real estate assets, related liabilities and notes receivable secured by real estate determined periodically by our independent valuation expert pursuant to individual appraisal reports, which may be adjusted upon the occurrence of material events, all in accordance with the valuation guidelines approved by our board of directors. The appraisal reports are based on information provided by our advisor; who also reviews them. The valuation methodologies used to determine the real estate component of our NAV involve subjective judgments and estimates, and may not accurately reflect the actual price at which our net real estate and real estate related assets could be liquidated on any given day. The resulting potential disparity in our NAV may be in favor of either stockholders who redeem their shares, or stockholders who buy new shares, or existing stockholders. |
| | • | | There is no public market for our shares of common stock, we do not expect that a public market will develop and our charter does not require us to effect a liquidity event at any time in the future. Our goal is to provide stockholders with limited liquidity through redemptions at our NAV per share; however, we will be investing primarily in commercial real estate properties that cannot generally be readily liquidated. This means that there may be times during which we do not have sufficient liquid resources to satisfy all redemption requests. Further, to protect our operations and our non-redeeming stockholders, our board of directors may modify our redemption program, and under certain circumstances, our advisor may modify, limit or suspend our redemption program. As a result, our shares should be considered a potentially long-term investment with limited liquidity. |
| | • | | Our sponsor has used our investment strategy, of focusing on necessity retail, office and industrial single-tenant properties, subject to long-term net leases to creditworthy tenants, in past and current real estate programs, and, as a result, we expect that we will compete with these other programs for properties and tenants. |
| | • | | We may pay distributions and fund redemptions from sources other than cash flows from operations, including borrowings, proceeds from the sale of our common stock and proceeds from the sale of our assets, and we have no limits on the amounts we may pay from such other sources. Payments of distributions from sources other than cash flow from operations may reduce the amount of capital we ultimately invest in real estate, which may negatively impact the value of your investment and directly impact our daily NAV per share. |
| | • | | We are dependent on our advisor and its affiliates to conduct our business and to distribute our shares. There are substantial conflicts of interest between us and our advisor and its affiliates, including with respect to allocation of investment and borrowing opportunities and allocation of their time and resources. Further, we will pay substantial fees to our advisor and its affiliates, including fees based on our daily NAV. |
| | • | | This is a “best efforts” offering. If we are not able to raise a substantial amount of capital in the near term, we may have difficulties investing in properties and our ability to achieve our investment objectives, including diversification of our portfolio by property type and location, could be adversely affected. |
| | • | | We may suffer from delays if our advisor is not able to locate suitable investments, which could adversely affect our ability to pay distributions and to achieve our investment objectives. |
| | • | | Our board of directors may change certain of our investment policies without stockholder approval, which could alter the nature of your investment. |
| | • | | If we fail to qualify as a REIT for federal income tax purposes and no relief provisions apply, our NAV and cash available for distribution to our stockholders could materially decrease. |
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Our Board of Directors
We operate under the direction of our board of directors, the members of which are accountable to us and to our stockholders as fiduciaries. We have a five-member board of directors, consisting of Christopher H. Cole, Marc T. Nemer and our three independent directors, George N. Fugelsang, Richard J. Lehmann and Roger D. Snell. Our charter requires that, upon and after the commencement of this offering, a majority of our directors be independent of our advisor. Among its other responsibilities, our board of directors (including the independent directors) has adopted our valuation guidelines for establishing our NAV on each business day and our valuation guidelines pertaining to the valuation of our commercial real estate assets, related liabilities and notes receivable secured by real estate, and will periodically receive and review such information about the valuation of our assets and liabilities as it deems necessary to exercise its oversight responsibility. Our charter provides that our independent directors will also be responsible for reviewing the performance of our advisor and sub-advisor, overseeing the investments made by our advisor and sub-advisor and approving the compensation paid to our advisor and its affiliates. Our directors will be elected on an annual basis by our stockholders. See the “Conflicts of Interest — Certain Conflict Resolution Procedures” section of this prospectus.
Our Sponsor and Advisor
Our sponsor is Cole Real Estate Investments, a trade name we use to refer to a group of affiliated entities, including Cole Capital Advisors, Inc. (Cole Capital Advisors), Cole Capital Partners, LLC (Cole Capital Partners) and other affiliates of our advisors. Our sponsor has been involved in acquiring, managing and disposing of commercial real estate for over three decades. During that time, our sponsor developed and refined its investment strategy of purchasing primarily single-tenant necessity properties that are leased to brand-name creditworthy tenants, subject to long-term net leases.
Our advisor, a Delaware limited liability company, is an affiliate of our sponsor and was formed solely for the purpose of managing our affairs on a day-to-day basis. A significant number of our sponsor’s executives and employees also serve as executives and employees of our advisor. See “— Summary of Prior Offerings” below.
Our advisor is obligated to use its best efforts, subject to the oversight of our board of directors, to, among other things, manage our portfolio and provide information to our independent valuation expert concerning our portfolio. Management of our portfolio will include activities such as determining the allocation of our portfolio among retail, office and industrial real estate properties, real estate properties in other sectors and real estate-related assets. Further, portfolio management will include making decisions about the active management of our portfolio, including decisions to acquire or dispose of real estate assets. Our board of directors has delegated to our advisor broad authority to manage our business in accordance with our investment objectives, strategy, guidelines, policies and limitations. Our advisor’s role in the portfolio valuation process includes providing information about our commercial real estate assets, related liabilities and notes receivables secured by real estate to our independent valuation expert and estimating our accrued revenues and expenses. Our advisor also has the right to review estimated values set forth in individual appraisal reports prepared by our independent valuation expert prior to finalization. The independent valuation expert is free to accept or reject our advisor’s input in its discretion. Our fund accountant performs the administrative tasks necessary to calculate our daily NAV. Our advisor performs its duties and responsibilities under an advisory agreement as our fiduciary. See “Management — The Advisor.”
The Sub-Advisor
Our advisor has engaged BlackRock Investment Management, LLC to serve as its sub-advisor and perform the functions related to selecting and managing our liquid assets (cash, cash equivalents, other short-term investments, U.S. government securities, agency securities, corporate debt, liquid real estate-related, equity or debt securities and other investments for which there is reasonable liquidity). We refer to BlackRock Investment Management, LLC as the sub-advisor.
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The sub-advisor provides services related to the acquisition, management and disposition of our liquid assets, in accordance with our investment objectives, strategy, guidelines, policies and limitations. The fees paid to the sub-advisor will not be paid by us, but will instead be paid by our advisor out of the management fee that we pay to our advisor. The sub-advisor performs its duties and will serve as a fiduciary under a sub-advisory agreement with our advisor, and the sub-advisor has no contractual relationship with us. If our sub-advisor does not adequately perform its duties or fails to dedicate sufficient time to us our only recourse will be against our advisor.
Our Dealer Manager
Cole Capital Corporation, which we refer to as our dealer manager, is an affiliate of our sponsor and a member of the Financial Industry Regulatory Authority, or FINRA. Our dealer manager has distributed shares of many of our sponsor’s prior real estate programs, and has built relationships with a large number of broker-dealers throughout the country, which participated in some or all of those prior offerings. Our dealer manager will distribute the shares of our common stock on a best efforts basis, and will advise us regarding this offering, manage our relationships with participating broker-dealers and financial advisors and provide assistance in connection with compliance matters relating to the offering, including compliance regarding any sales literature that we may prepare.
Our Operating Partnership
We own, and in the future, intend to own all or substantially all of our investments through Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP, our operating partnership, in order to be organized as an UPREIT. UPREIT stands for “Umbrella Partnership Real Estate Investment Trust.” An UPREIT is a REIT that holds all or substantially all of its assets through a partnership that the REIT controls as general partner. We have elected to use an UPREIT structure primarily to facilitate acquisitions of retail, office and industrial real estate properties, as well as other types of real estate and to facilitate investments in us by certain institutional investors. A sale of property directly to a REIT is generally a taxable transaction to the selling property owner. In an UPREIT structure, a seller of appreciated property who desires to defer taxable gain on the transfer of such property may transfer the property to our operating partnership in exchange for limited partnership interests. Such exchange could be made on a tax-free basis. Being able to offer a seller the opportunity to defer taxation of gain until the seller redeems its interests in our operating partnership for cash may give us a competitive advantage in acquiring desired properties or investments relative to buyers who cannot offer this opportunity. In addition, investing in our operating partnership, rather than in shares of our common stock, may be more attractive to certain institutional or other investors due to their business or tax structure. We are the sole general partner of our operating partnership and have contributed $900 to our operating partnership in exchange for our general partner interest. Initially, the only limited partner is our wholly-owned subsidiary, CRI (Daily NAV), LLC, which holds a 0.1% interest. We refer to partnership units in the operating partnership as “OP Units.” See “Our Structure and Formation” for a chart showing our ownership structure.
Investment Objectives
Our primary investment objectives are:
| | • | | to acquire commercial properties, leased under long-term net leases to creditworthy tenants, which provide current operating cash flow; |
| | • | | to maintain a level of liquid assets as a source of funds to meet redemption requests; |
| | • | | to provide reasonably stable, current income for you through the payment of distributions; and |
| | • | | to provide the opportunity to participate in capital appreciation in the value of our investments. |
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Pursuant to our charter, these investment objectives may not be changed without the approval of our stockholders. See the “Investment Objectives, Strategy and Policies” section of this prospectus for a more complete description of our investment objectives and policies, as well as our investment restrictions. We may not achieve our investment objectives. See “Risk Factors” below.
Description of Real Estate Investments
As of April 11, 2013, our investment portfolio consisted of 14 properties located in nine states, consisting of 257,789 gross rentable square feet of commercial space, including the square feet of buildings that are on land subject to ground leases. Details of the properties are listed below.
| | | | | | | | | | | | | | | | |
Property Description | | Type | | Number of
Tenants | | | Tenant | | Rentable
Square Feet(1) | | | Purchase Price | |
Walgreens – Albuquerque, NM | | Drugstore | | | 1 | | | Walgreen Co. | | | 15,525 | | | $ | 2,475,000 | |
CVS – Austin, TX | | Drugstore | | | 1 | | | CVS Pharmacy, Inc. | | | 10,906 | | | | 3,054,150 | |
Tractor Supply – Lockhart, TX | | Home and Garden | | | 1 | | | Tractor Supply Co. of Texas LP | | | 18,800 | | | | 2,920,000 | |
Walgreens – Reidsville, NC | | Drugstore | | | 1 | | | Walgreen Co. | | | 14,550 | | | | 5,125,000 | |
The Parke – San Antonio, TX | | Shopping Center | | | 6 | | | Various | | | 105,850 | | | | 7,250,000 | |
Tractor Supply – Brunswick, GA | | Home and Garden | | | 1 | | | Tractor Supply Company | | | 19,097 | | | | 3,397,000 | |
CVS – Erie, PA | | Drugstore | | | 1 | | | Pennsylvania CVS Pharmacy, LLC | | | 10,125 | | | | 2,300,000 | |
CVS – Mansfield, OH | | Drugstore | | | 1 | | | Ohio CVS Stores, LLC | | | 10,722 | | | | 2,299,000 | |
Advance Auto – Macomb, MI | | Automotive | | | 1 | | | Advance Stores Company, Inc. | | | 7,000 | | | | 2,099,000 | |
Dollar General – Berwick, LA | | Discount Store | | | 1 | | | Dolgencorp, LLC | | | 12,466 | | | | 1,780,767 | |
Fresenius – Baton Rouge (Foster), LA | | Healthcare | | | 1 | | | Bio-Medical Applications of Louisiana, LLC | | | 7,360 | | | | 881,437 | |
Fresenius – Baton Rouge (Howell), LA | | Healthcare | | | 1 | | | Bio-Medical Applications of Louisiana, LLC | | | 7,360 | | | | 1,782,263 | |
Dollar General – Independence, MO | | Discount Store | | | 1 | | | Dolgencorp, LLC | | | 9,002 | | | | 1,417,808 | |
Dollar General – St. Joseph, MO | | Discount Store | | | 1 | | | Dolgencorp, LLC | | | 9,026 | | | | 1,435,616 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | 257,789 | | | $ | 38,217,041 | |
| | | | | | | | | | | | | | | | |
| (1) | Includes square feet of buildings that are on land subject to ground leases. |
Investment Strategy
Our investment strategy is to invest primarily in a diversified portfolio of (1) necessity commercial properties in the retail, office and industrial sectors that are leased to creditworthy tenants under long-term net leases, and are strategically located throughout the United States and U.S. protectorates, (2) notes receivable and other investments secured by commercial real estate, including the origination of loans, and (3) U.S. government securities, agency securities, corporate debt and other investments for which there is reasonable liquidity. See “Investment Objectives, Strategy and Policies” for more details regarding our investment strategy. We believe that our organization as a perpetual-life REIT will allow us to acquire and manage our investment portfolio in a more active and flexible manner, as we will not be limited by a pre-determined operational period and the need to provide a “liquidity event” at the end of that period.
Investment Policies
Our independent members of our board of directors have adopted our investment policies. Our directors will formally review, at a duly called meeting, our investment policies on an annual basis and our real estate portfolio
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on a quarterly basis or, in each case, more often as they deem appropriate. Our board of directors, including a majority of our independent directors, must approve any changes to our investment policies. Under our investment policies, our advisor is delegated broad authority to execute real estate property and real estate related investment acquisitions and dispositions. Our board of directors will at all times have ultimate oversight over our investments and may change from time to time the scope of authority delegated to our advisor which in turn will modify the scope of authority of the sub-advisor, with respect to acquisition and disposition transactions. See “Investment Objectives, Strategy and Policies” for more details regarding our investment policies.
Valuation Policies
We have engaged an independent valuation expert, CBRE, Inc., which has expertise in appraising commercial real estate assets, related liabilities and notes receivable secured by real estate, to provide, on a rolling quarterly basis, valuations of each of our commercial real estate assets, related liabilities and notes receivable secured by real estate to be set forth in individual appraisal reports, and to adjust those valuations for events known to the independent valuation expert that it believes are likely to have a material impact on previously provided estimates of the value of the affected commercial real estate assets, notes receivable secured by real estate or related real estate liabilities. All or substantially all of our commercial real estate assets, related liabilities and notes receivable secured by real estate will be held in our operating partnership. Our real estate assets will consist primarily of a portfolio of commercial real estate, as well as notes receivable, where the underlying collateral will typically be commercial real estate. Our commercial real estate related liabilities will consist primarily of mortgage loans secured by our commercial real estate. In addition, our assets will include liquid assets, which will be priced daily by third party pricing sources, and cash and cash equivalents. We will amortize asset acquisition costs over a five year period. Our liabilities will include accrued fees and operating expenses, accrued debt service costs, accrued distributions payable; accrued dealer manager fees and advisory fees, which are estimated by our advisor. Our board of directors is responsible for ensuring that the valuation expert discharges its responsibilities in accordance with our valuation guidelines, and will periodically receive and review such information about the valuation of our assets and liabilities as it deems necessary to exercise its oversight responsibility, at regularly scheduled board of director meetings. See “Valuation Policies — Valuation.”
At the end of each business day, our fund accountant calculates our NAV per share using a process that reflects (1) estimated values of each of our commercial real estate assets, related liabilities and notes receivable secured by real estate provided periodically by our independent valuation expert in individual appraisal reports, as they may be updated upon certain material events described below, (2) the price of liquid assets for which third party market quotes are available, (3) accruals of our daily distributions, and (4) estimates of daily accruals, on a net basis, of our operating revenues, expenses, debt service costs and fees. Our fund accountant determines our NAV per share by dividing our NAV on such day by the number of shares of our common stock outstanding as of the end of such day, prior to giving effect to any share purchases or redemptions to be effected on such day.
Our goal is to provide a reasonable estimate of the market value of our shares. However, the majority of our assets will consist of commercial real estate assets and, as with any commercial real estate valuation protocol, the conclusions reached by our independent valuation expert will be based on a number of judgments, assumptions and opinions about future events that may or may not prove to be correct. If a material event occurs between scheduled quarterly valuations that our advisor believes may materially affect the value of any of our commercial real estate assets, related liabilities or notes receivable secured by real estate, our advisor will inform the independent valuation expert so that, if appropriate, the independent valuation expert can adjust the most recent valuations provided in the applicable appraisal report to account for the estimated impact. The use of different judgments, assumptions or opinions would likely result in different estimates of the value of our commercial real estate investments. In addition, on any given day, our published NAV per share may not fully reflect certain material events, to the extent that the financial impact of such events on our portfolio is not immediately quantifiable. As a result, the daily calculation of our NAV per share may not reflect the precise amount that might be paid for your shares in a market transaction, and any potential disparity in our NAV per share may be in favor of either stockholders who redeem their shares, or stockholders who buy new shares, or existing stockholders.
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Daily Purchases of Shares at NAV
The per share purchase price varies from day-to-day and, on each business day, equals our NAV per share as of the end of business on such day, in each case prior to giving effect to any share purchases or redemptions to be effected on such day.
We file with the SEC after the close of business on a monthly basis a prospectus supplement disclosing the NAV per share for each business day in the preceding month, which we refer to as the pricing supplement. Each business day, we also post that business day’s NAV on our public website www.colecapital.com/cole-income-nav-strategy/daily-nav. The website contains this prospectus, including any supplements and amendments. You may also obtain the daily determination of our NAV per share by calling our toll-free, automated information line at 866-907-2653. As disclosed in “Share Purchases and Redemptions — Buying Shares,” we will disclose, on a quarterly basis in a prospectus supplement filed with the SEC, the principal valuation components of our NAV.
Any purchase orders that we receive prior to the close of the New York Stock Exchange (generally, 4:00 p.m. Eastern time) on any day the New York Stock Exchange is open for trading (a business day) will be executed at a price equal to our NAV per share for that day, as calculated after the close of business on that day. Purchase orders that we receive after the close of the New York Stock Exchange (generally, 4:00 p.m. Eastern time) will be executed at a price equal to our NAV per share as calculated after the close of business on the next business day. Purchase orders placed on a day that is not a business day, and purchase orders pursuant to our systematic investment program that would otherwise occur on a day that is not a business day, will be executed as if they were received prior to the close of business on the immediately following business day. See “Share Purchases and Redemptions — Buying Shares” for more details.
Daily Redemption of Shares at NAV
While you should view your investment as long-term, we have adopted a redemption plan, whereby on any business day, stockholders may request that we redeem all or any portion of their shares. Redemption requests received before the close of business (generally, 4:00 p.m. Eastern time) will be effected at a redemption price equal to our NAV per share calculated at the close of business on that day (that is, at the same price as any purchase orders received that day). Redemption requests received after the close of business (generally, 4:00 p.m. Eastern time) on any business day, or received on a day other than a business day, will be effected at our NAV per share calculated at the close of business on the next business day. Subject to limited exceptions, shares redeemed within 365 days of the date of purchase will be subject to a short-term trading fee equal to 2% of the aggregate NAV per share of such shares redeemed, which will inure indirectly to the benefit of our remaining stockholders. We also have the right to monitor the trading patterns of stockholders or their financial advisors and we reserve the right to reject any purchase or redemption transaction at any time based on what we deem to be a pattern of excessive, abusive or short-term trading. Requests for redemption will be settled promptly, subject to the limitations set forth below. We expect that there will be no regular secondary trading market for shares of our common stock.
Although the vast majority of our assets will consist of commercial real estate properties which cannot generally be readily liquidated without impacting our ability to realize full value upon their disposition, we will maintain a number of sources of liquidity including (i) cash equivalents, other short-term investments, U.S. government securities, agency securities, corporate debt and liquid real estate-related securities and (ii) in the discretion of our advisor, a line of credit. In order to maintain a reasonable level of liquidity, our investment guidelines provide that we will target the following aggregate allocation to the above sources of liquidity: (1) 10% of our NAV up to $1 billion and (2) 5% of our NAV in excess of $1 billion. In addition, we may also fund redemptions from any available source of funds, including operating cash flows, borrowings, proceeds from this offering and/or sales of our assets. Despite these sources of liquidity, we may not always have sufficient liquid resources to satisfy redemption requests and you may not always be able to redeem your shares under the plan.
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Under ordinary circumstances the total amount of net redemptions during a calendar quarter is limited to five percent of our total net assets on the last business day of the preceding quarter. Redemption requests will be satisfied on a first-come, first-served basis. If net redemptions do not reach the five percent limit in a calendar quarter, the unused portion will be carried over to the next quarter, except that the maximum amount of net redemptions during any quarter can never exceed ten percent of our total net assets on the last business day of the preceding quarter. If net redemptions in a calendar quarter reach the five percent limit (plus any carried over amount), after pro-rating redemptions for that day we will be unable to process any redemption requests for the rest of the calendar quarter. We will begin accepting redemption requests again on the first business day of the next calendar quarter, but will apply the five percent quarterly limitation on redemptions on a per-stockholder basis, instead of a first-come, first-served basis. Therefore each stockholder will be able to redeem at any time during that quarter up to five percent of the stockholder’s investment in our shares on the last business day of the preceding quarter, plus any new investment by the stockholder in our shares during that quarter (subject to applicable short-term trading fees). The per-stockholder limit will remain in effect for the following quarter if total net redemptions are more than two and one-half percent of our net assets on the last business day of the preceding quarter. Subject to these limits, our goal is to provide our stockholders uninterrupted access to liquidity for their investment to the maximum extent possible. Our board of directors, including a majority of independent directors, acting in accordance with their fiduciary duties to all stockholders, may modify or suspend our redemption plan in its discretion if it believes that such action is in the best interests of our stockholders. See “Shares Purchases and Redemptions — Redemption Plan — Redemption Limitations.”
Distributions
In order to qualify as a REIT, we are required to make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income. For these purposes, REIT taxable income is computed without regard to the dividends-paid deduction and excludes net capital gain. Further, REIT taxable income does not necessarily equal net income as calculated in accordance with generally accepted accounting principles in the United States, or GAAP. Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board may deem relevant. We have not established a minimum distribution level. We may pay distributions from sources other than cash flow from operations, including from the proceeds of this offering, from borrowings or from the sale of properties or other investments, among others, and we have no limit on the amounts we may pay from such sources.
We expect that our cash flow from operations available for distribution will be lower in the initial stages of this offering until we have raised significant capital and made substantial investments. As a result, we expect that during the early stages of our operations, and from time to time thereafter, we may declare distributions in anticipation of cash flow that we expect to receive during a later period and these distributions would be paid from proceeds of this offering, borrowings or any other source available to the Company. Contrary to traditional non-exchange traded REITs, however, whose shares are typically sold and, on a limited basis, redeemed at, a fixed price that is not intended to reflect the value of the shares, our common stock will be sold and redeemed on a daily basis at NAV per share. As a result, distributions that exceed our operating cash flow will be reflected in our daily calculation of NAV.
See the section of this prospectus captioned “Description of Capital Stock — Distributions” for a description of our distributions.
We have adopted a distribution reinvestment plan, whereby stockholders will be able to elect to have their cash distributions automatically reinvested in additional shares of common stock. The per share purchase price for shares purchased pursuant to the distribution reinvestment plan will be equal to our NAV per share on the distribution date, after giving effect to all distributions. No selling commissions will be charged with respect to shares purchased pursuant to the distribution reinvestment plan. See “Description of Capital Stock — Distribution Reinvestment Plan.”
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Leverage
We intend to use leverage to provide additional funds to support our investment activities. Our target leverage after we have acquired an initial substantial portfolio of diversified investments is 50% of the greater of cost (before deducting depreciation or other non cash reserves) or market value of our gross assets. During the period when we are beginning our operations and growing our portfolio, we may employ greater leverage in order to quickly build a diversified portfolio of assets. Our board of directors may from time to time modify our leverage policy in light of then-current economic conditions, relative costs of debt and equity capital, market values of our properties, general conditions in the market for debt and equity securities, growth and acquisition opportunities or other factors. Our charter generally restricts the amount of indebtedness that we may incur to 300% of our net assets, which generally approximates 75% of the cost of our investments, but does not restrict the form of indebtedness we may incur. Notwithstanding the foregoing, our aggregate indebtedness may exceed such limit, but only if such excess is approved by a majority of our independent directors and disclosed to our common stockholders within 60 days after the end of any fiscal quarter for which there is such excess. See “Investment Objectives, Strategy and Policies” for more details regarding our leverage policies.
Our Status Under the Investment Company Act
We do not believe that we are required, and we do not intend to, register as an investment company under the Investment Company Act. If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act that would restrict our activities and significantly increase our operating expenses. See “Risk Factors — Risks Related to our Corporate Structure.”
Summary of Prior Offerings
The “Prior Performance Summary” section of this prospectus contains a discussion of the programs previously offered by our sponsor, Cole Real Estate Investments, from January 1, 2003 through December 31, 2012. Certain financial results and other information relating to such programs with investment objectives similar to ours are also provided in the “Prior Performance Tables” included as Appendix A to this prospectus. The prior performance of the programs previously sponsored by Cole Real Estate Investments is not necessarily indicative of the results that we will achieve. For example, most of the prior programs were privately offered and did not bear the additional costs associated with being a publicly held entity. At the same time, we expect that our total expenses, including the costs of distributing our shares, will be lower than the total expenses of our prior public programs.
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Fees and Expenses
We will pay our dealer-manager and our advisor the fees and reimbursements described below in connection with performing services for us. We will not pay our advisor or its affiliates any separate fees for property acquisitions or dispositions, financings, property management or leasing.
| | | | |
Type of Compensation —
Recipient | | Method of Compensation | | Estimated Amount |
|
| Organization and Offering Stage |
| | |
Upfront Selling Commission | | We will not pay any upfront selling commissions. | | None |
| | |
Dealer Manager Fee —Our Dealer Manager | | We will pay our dealer manager an asset-based dealer manager fee that is payable in arrears on a monthly basis and accrues daily in an amount equal to 1/365th of 0.55% of our NAV for such day. At our dealer manager’s discretion it may reallow a portion of the dealer manager fee equal to an amount up to 1/365th of 0.20% of our NAV to participating broker dealers. Because the dealer manager fee is calculated based on NAV, it reduces NAV with respect to all shares of our common stock, including shares issued under our distribution reinvestment plan. | | The actual amount will depend on the number of shares sold, the dates on which the shares are sold, the daily NAV per share and the period of time that the investor continues to hold the shares. Assuming that (i) one-half of all $3,500,000,000 of shares registered for sale in our primary offering are sold as of the first day after the end of the escrow period, and the other half are sold one year after the end of the escrow period; (ii) all of the shares are held until the end of the two-year offering period; and (iii) our NAV per share remains at $15.00 at all times, then we estimate that the dealer manager fee will equal approximately $9,625,000 in year one after the escrow period and $19,250,000 in year two. After year two, assuming all of the shares sold continue to be held and our NAV per share remains at $15.00, the dealer manager fee will equal approximately $19,250,000 per annum. In the aggregate, underwriting compensation from all sources, including the dealer manager fee and other underwriting compensation paid to participating broker-dealers by us or by our advisor and its affiliates, will not exceed 10% of the gross proceeds from our primary offering. |
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| | | | |
Type of Compensation —
Recipient | | Method of Compensation | | Estimated Amount |
| | |
Organization and Offering Expense Reimbursement —
Our Advisor | | Our advisor has agreed to fund on our behalf all costs of our organization and offering (other than the dealer manager fee). Beginning on the date the offering proceeds are released from escrow, we will start to reimburse our advisor, without interest, for these organization and offering cost incurred both before and after the release of the escrow funds. Reimbursement payments will be made in monthly installments, but the aggregate monthly amount reimbursed can never exceed 0.75% of the aggregate gross offering proceeds from this offering, including shares issued in connection with the distribution reinvestment plan. If the sum of the total unreimbursed amount of such organization and offering costs, plus new costs incurred since the last reimbursement payment, exceeds the reimbursement limit described above for the applicable monthly installment, the excess will be eligible for reimbursement in subsequent months (subject to the 0.75% limit) calculated on an accumulated basis, until our advisor has been reimbursed in full. | | The timing and amount of reimbursements are dependent on the actual expenses incurred, the gross proceeds of shares sold, and the dates on which the shares are sold. Assuming that (i) one-half of all $4,000,000,000 of shares registered for sale in our primary offering, including shares issued under our distribution reinvestment plan, are sold as of the first day after the end of the escrow period, and the other half are sold one year after the end of the escrow period; and (ii) our NAV per share remains at $15.00 at all times, then the maximum amount of organization and offering expenses that can be reimbursed to our advisor will equal approximately $15,000,000 in year one after the escrow period and $15,000,000 in year two. |
|
Operational Stage |
| | |
Advisory Fee —
Our Advisor | | We will pay our advisor an advisory fee that will be payable in arrears on a monthly basis and accrue daily in an amount equal to 1/365th of 0.90% of our NAV for each day. | | The annualized management fee, and the actual dollar amounts, are dependent upon our monthly average NAV and, therefore, cannot be determined at the present time. Based on the following assumed levels of our monthly average NAV, our annualized management fee will be as follows: |
| | | | | | | | |
| | | Monthly
Average
NAV | | | | Total
Annualized
Advisory
Fee ($) | |
| | $1 billion | | $ | 9,000,000 | |
| | $2 billion | | $ | 18,000,000 | |
| | $4 billion | | $ | 36,000,000 | |
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| | | | |
Type of Compensation —
Recipient | | Method of Compensation | | Estimated Amount |
| | |
Acquisition Expense Reimbursement —Our Advisor | | We will not pay our advisor any acquisition, financing or other similar fees in connection with making investments. We will reimburse our advisor for out-of-pocket expenses in connection with the acquisition of commercial real estate properties, real estate-related assets and other investments, including reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of acquisition services to us other than our executive officers, provided that no reimbursement shall be made for costs of such employees of our advisor or its affiliates to the extent that such employees perform services for which our advisor receives a separate acquisition fee. | | The actual amount will depend upon actual expenses incurred and, therefore, cannot be determined at this time. |
| | |
Operating Expense Reimbursement —Our Advisor | | We will reimburse our advisor for out-of-pocket expenses in connection with providing services to us, including reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of services to us other than our executive officers. The expense reimbursements that we will pay to our advisor include expenses incurred by the sub-advisor on our behalf. | | Actual amounts are dependent upon actual expenses incurred and, therefore, cannot be determined at this time. |
| | |
Performance Fee —Our Advisor | | We will pay our advisor a performance fee calculated on the basis of our total return to stockholders, payable annually in arrears, such that for any year in which our total return on stockholders’ capital exceeds 6% per annum on a calendar year basis, our advisor will be entitled to 25% of the excess total return but not to exceed 10% of the aggregate total return for such year. In the event NAV per share decreases below Base NAV, the performance-based fee will not be calculated on any increase in NAV up to Base NAV. | | The actual amount will depend on our performance, as well as on the number of shares sold, the daily NAV per share and the period of time that the investor continues to hold the shares and, therefore, can not be determined at this time. |
Our Structure
The organizational chart in the section “Our Structure and Formation” shows our ownership structure and our relationship with our advisor, the sub-advisor, our dealer manager and CREI. Our operating partnership owns our investments in commercial properties and other assets, directly or indirectly, generally through special purpose entities.
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Conflicts of Interest
Our advisor, our dealer manager, and their respective affiliates, officers and directors will experience conflicts of interests in connection with the management of our business, including those listed below.
| | • | | Our advisor, our dealer manager and their affiliates will receive substantial fees in connection with the services provided to us, which will create potential conflicts of interest. While those fees must be approved on an annual basis by our independent directors, the approval process may be constrained, to some extent, because the independent directors are likely to consider, among other factors, our stockholders’ expectation that affiliates of Cole Real Estate Investments sponsored and will serve in the roles of our advisor and dealer manager. |
| | • | | The advisory fee and performance fee that we pay to our advisor are based upon our NAV, and our advisor is involved in estimating certain accrued fees and expenses that are part of our NAV. |
| | • | | We rely on the personnel of our advisor and its respective affiliates to manage our assets and daily operations. Our officers and our non-independent director are also officers of our advisor and are affiliated with other Cole-sponsored programs and therefore will have conflicts of interest in allocating their time and resources. |
| | • | | The management personnel of our advisor, each of whom also makes investment decisions for other Cole-sponsored programs, must determine which investment opportunities to recommend to us or another Cole-sponsored program or joint venture, some of which have investment objectives similar to ours. |
| | • | | Our dealer manager is an affiliate of our advisor and therefore is not in a position to make an independent review of us or this offering. |
Our charter contains provisions, and our independent directors have adopted policies and procedures, that are designed to mitigate many of the various conflicts of interest.
In addition, our executive officers and the chairman of our board of directors face conflicts similar to those described above because of their affiliation with our advisor and other Cole-sponsored programs. See “Conflicts of Interest.”
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Risk Factors
An investment in shares of our common stock involves substantial risks. You should carefully consider the following risk factors in addition to the other information contained in this prospectus before purchasing shares. The occurrence of any of the following risks might cause you to lose a significant part of your investment. The risks and uncertainties discussed below are not the only ones we face, but do represent those risks and uncertainties that we believe are most significant to our business, operating results, prospects and financial condition. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled “Statements Regarding Forward-Looking Information.”
Risks Related to an Investment in Cole Real Estate Income Strategy (Daily NAV), Inc.
We have a limited prior operating history and there is no assurance that we will achieve our investment objectives. Further, this is a “blind pool,” as we currently have acquired 14 real estate properties and have not identified all of the specific properties that we may purchase with future operating proceeds. For this and other reasons, an investment in our shares is speculative.
We have a limited operating history. As of April 11, 2013, we have acquired 14 real estate properties. Since we currently own a limited number of properties, and have not identified all of the specific properties that we may purchase with future operating proceeds, this is a “blind pool.” You will not be able to evaluate the economic merit of our additional investments until after these investments have been made. As a result, an investment in our shares is speculative.
You should consider our prospects in light of the risks, uncertainties and difficulties frequently encountered by companies that are, like us, in their early stage of development. To be successful in this market, we and our advisor must, among other things:
| | • | | identify and acquire investments that further our investment objectives; |
| | • | | increase awareness of the Cole Real Estate Income Strategy (Daily NAV), Inc. name within the investment products market; |
| | • | | expand and maintain our network of licensed broker-dealers and others who sell shares on our behalf and other agents; |
| | • | | rely on our advisor, and its affiliates to attract, integrate, motivate and retain qualified personnel to manage our day-to-day operations; |
| | • | | respond to competition for our targeted real estate and other investments as well as for potential investors; |
| | • | | rely on our advisor and its affiliates to continue to build and expand our operations structure to support our business; and |
| | • | | rely on our advisor, who relies on its sub-advisor, and its affiliates and our board of directors to be continuously aware of, and interpret, marketing trends and conditions. |
We may not succeed in achieving these goals, and our failure to do so could cause you to lose a significant portion of your investment. For a more detailed discussion of our investment policies, see the “Investment Objectives, Strategy and Policies — Acquisition and Investment Policies” section of this prospectus.
Your purchase and redemption of our shares is based on our NAV per share, and the daily determination of our NAV per share is based upon subjective judgments, assumptions and opinions about future events, that may or may not turn out to be correct. As a result, our daily NAV per share may not reflect the precise amount that might be paid to for your shares in a market transaction.
The purchase and redemption price for shares of our common stock is based on our NAV per share each business day, which requires an estimate of the value of our assets and liabilities — consisting principally of
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illiquid commercial real estate and illiquid commercial real estate mortgages. Although quarterly valuations of each of our commercial real estate assets, related liabilities and notes receivable secured by real estate are performed by our independent valuation expert, our advisor also monitors our commercial real estate investments for events that may be expected to have a material impact on the most recent estimated values provided by our independent valuation expert. The valuation methodologies used to estimate the value of our commercial real estate assets, related liabilities and notes receivable secured by real estate involve subjective judgments, assumptions and opinions about future events, which may or may not turn out to be correct. Any resulting potential disparity in our NAV per share may be in favor of either stockholders who redeem their shares, or stockholders who buy new shares, or existing stockholders. See “Valuation Policies — Calculation of Our NAV Per Share” for more details about how our NAV is calculated.
It may be difficult to reflect, fully and accurately, material events that may impact our daily NAV between quarterly valuations.
Since our fund accountant’s determination of our daily NAV per share is based in part on quarterly estimates of the values of each of our commercial real estate assets, related liabilities and notes receivable secured by real estate provided periodically by the independent valuation expert in individual appraisal reports in accordance with valuation guidelines approved by our board of directors, our published NAV per share on any given day may not fully reflect any or all changes in value that may have occurred since the most recent quarterly valuation. Our advisor reviews appraisal reports and monitors our commercial real estate and notes receivable assets and liabilities, but it may be difficult to reflect fully and accurately rapidly changing market conditions or material events that may impact the value of our commercial real estate assets, notes receivable secured by real estate or related real estate liabilities between periodic valuations, or to obtain quickly complete information regarding any such events. For example, an unexpected termination or renewal of a material lease, a material change in vacancies or an unanticipated structural or environmental event at a property may cause the value of a commercial real estate asset to change materially, yet obtaining sufficient relevant information after the occurrence has come to light and/or analyzing fully the financial impact of such an event may be difficult to do and may require some time. As a result, the NAV per share may not reflect a material event until such time as sufficient information is available and analyzed, and the financial impact is fully evaluated, such that our NAV may be appropriately adjusted in accordance with our valuation guidelines. Depending on the circumstance, the resulting potential disparity in our NAV may be in favor of either stockholders who redeem their shares, or stockholders who buy new shares, or existing stockholders.
NAV calculations are not governed by governmental or independent securities, financial or accounting rules or standards.
The method for calculating our NAV, including the components that are used in calculating our NAV, is not prescribed by rules of the SEC or any state securities regulatory agency. Further, there are no accounting rules or standards that prescribe which components should be used in calculating NAV, and our NAV is not audited by our independent registered public accounting firm. We calculate and publish NAV solely for purposes of establishing the daily price at which we sell and redeem shares of our common stock, and you should not view our NAV as a measure of our historical or future financial condition or performance. The components and methodology that are used by our fund accountant in calculating our NAV may differ from those used by other companies now or in the future.
In addition, our NAV calculations, to the extent that they incorporate valuations of our assets and liabilities, are not prepared in accordance with United States generally accepted accounting principles, also known as GAAP. These valuations, which are based on market values that assume a willing buyer and seller, may differ from liquidation values that could be realized in the event that we were forced to sell assets.
You should carefully review the disclosure of our valuation policies and how NAV is calculated, including the illustrative hypothetical calculation of NAV, under “Valuation Policies.”
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An investment in shares of our common stock will have limited liquidity. There is no public market for our shares of common stock and our limited redemption program may not have sufficient liquidity at all times to redeem your shares. As a result, you should purchase your shares as a long-term investment.
There is no current public market for shares of our common stock, we do not expect that a public market will ever develop and our charter does not require a liquidity event at a fixed time in the future. Therefore, redemption of shares by us will likely be the only way for you to dispose of your shares. While we designed our redemption plan to allow stockholders to request redemptions, on any business day, of all or any portion of their shares, our ability to fulfill redemption requests is subject to a number of limitations. Most significantly, the vast majority of our assets currently consist, and will consist in the future, of commercial real estate properties, which cannot generally be readily liquidated without impacting our ability to realize full value upon their disposition. Further, the redemption program is subject to quarterly redemption limits and to protect our operations, our status as a REIT, and our non-redeeming stockholders, our board of directors may modify or suspend our redemption program or limit stockholder redemptions. Additionally, subject to limited exceptions, shares of our common stock redeemed within 365 days of the date of purchase may be subject to a short-term trading fee of 2% of the aggregate NAV per share of such shares redeemed. As a result, your ability to have your shares redeemed by us may be limited, and our shares should be considered a potentially long-term investment with limited liquidity. See “Share Purchases and Redemptions — Redemption Plan — Redemption Limitations.”
Our board of directors may modify or suspend our redemption plan, which may limit your ability to redeem your shares, as prior real estate programs sponsored by Cole Real Estate Investments have done.
Our board of directors, including a majority of independent directors, may modify or suspend our redemption plan in its discretion if it believes that such action is in the interests of our stockholders. For instance, our board of directors may modify or suspend our redemption plan to prevent an undue burden on our liquidity or to preserve our status as a REIT. As a result, you may not always be able to redeem your shares and an investment in our shares should be considered a potentially long-term investment with limited liquidity.
Three prior real estate programs sponsored by Cole Real Estate Investments have suspended redemptions under their respective share redemption programs. The board of directors of Cole Credit Property Trust, Inc. (“Cole Credit Property Trust I”) determined that there was an insufficient amount of cash available for Cole Credit Property Trust I to fulfill redemption requests during the five years ended December 31, 2012, and the year ending December 31, 2013. Cole Credit Property Trust I continues to accept redemption requests which are considered for redemption if and when sufficient cash is available for Cole Credit Property Trust I to fund redemptions. The board of directors of Cole Credit Property Trust I will determine, at the beginning of each fiscal year, the maximum amount of shares that Cole Credit Property Trust I may redeem during that year. Requests relating to approximately 261,000 shares remained unfulfilled as of December 31, 2012, representing approximately $2.0 million in unfulfilled requests, based on the most recent estimated value of Cole Credit Property Trust I’s common stock of $7.75 per share. On November 10, 2009, the board of directors of Cole Credit Property Trust II voted to temporarily suspend Cole Credit Property Trust II’s share redemption program other than for requests made upon the death of a stockholder, which it continued to accept. On June 22, 2010, Cole Credit Property Trust II’s board of directors reinstated the share redemption program, with certain amendments, effective August 1, 2010. On December 6, 2012, Cole Credit Property Trust II again suspended its share redemption program in anticipation of a potential liquidity event. During the year ended December 31, 2012 Cole Credit Property Trust II received valid redemption requests relating to approximately 19.5 million shares, including requests that were unfulfilled and resubmitted from a previous period, and requests relating to approximately 6.1 million shares were redeemed for $56.9 million at an average price of $9.32 per share. Subsequent to December 31, 2012, Cole Credit Property Trust II redeemed approximately 13,000 shares for $121,000 pursuant to redemption requests received on or before December 6, 2012. The remaining redemption requests relating to approximately 13.4 million shares went unfulfilled including those requests unfulfilled and resubmitted from a previous period. On April 12, 2013, Cole Credit Property Trust III announced that its board of directors had voted to suspend its share redemption program in anticipation of a listing of its shares on the New York Stock Exchange.
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Economic events that may cause our stockholders to seek to redeem their shares may materially adversely affect our cash flow and our ability to achieve our investment objectives.
Economic events affecting the U.S. economy, such as the general negative performance of the real estate sector or the negative performance of the U.S. economy as a whole, could cause our stockholders to seek to redeem their shares. Even if we are able to satisfy all resulting redemption requests, our cash flow could be materially adversely affected. In addition, if we elect to sell valuable assets to satisfy redemption requests, our ability to achieve our investment objectives, including, without limitation, diversification of our real estate property portfolio by property type and location, moderate financial leverage, conservative operating risk and an attractive level of current income, could be materially adversely affected.
We may fund distributions from sources other than cash flow from operations, including borrowings by the REIT, proceeds from offerings of our securities or proceeds from asset sales, which may reduce the amount of capital we ultimately invest and negatively impact the value of your investment in our securities
To the extent that cash flow from operations is insufficient to fund all distributions, we may fund all or some of the distributions from borrowings by the REIT, proceeds from this offering or proceeds from the sale of assets, and we have no limits on the amounts we may pay from such other sources. The payment of distributions from sources other than cash flow from operations may reduce the amount of capital we have available to invest in real estate, negatively impact the value of your investment and reduce your overall return. We expect that, especially during the early stages of our development, as well as from time to time thereafter, we may fund distributions from sources other than cash flow.
This is our sponsor’s and advisor’s first real estate program structured as a “perpetual-life” REIT.
This is our sponsor’s first program structured as a “perpetual-life” REIT, or an investment vehicle of indefinite duration focused principally on acquiring a portfolio of real estate that has no target date for sale of the portfolio or other liquidity event. While the officers and other key personnel of our advisor and its affiliates have significant experience acquiring and managing real estate for defined life non-exchange traded REITs, and, to a more limited extent, listed REITs of indefinite duration, this is our sponsor’s first program structured as a non-exchange traded REIT with an indefinite life. Acquiring and managing a portfolio of commercial real estate that has no target liquidation event may present challenges that are different than acquiring and managing a portfolio of real estate that is expected to be owned for a limited and specified investment period. For this and other reasons, the prior performance of other REITs sponsored by Cole Real Estate Investments may not be indicative of our future results.
The amount and source of distributions we may make to our stockholders is uncertain and we may be unable to generate sufficient cash flows from our operations to make distributions to our stockholders at any time in the future.
We have not established a minimum distribution payment level, and our ability to make distributions to our stockholders may be adversely affected by a number of factors, including the risk factors described in this prospectus. Our board of directors will make determinations regarding distributions based upon, among other factors, our financial performance, our debt service obligations, our debt covenants, and capital expenditure requirements. Among the factors that could impair our ability to make distributions to our stockholders are:
| | • | | the limited size of our real estate portfolio, in the early stages of our development; |
| | • | | our inability to invest, on a timely basis and in attractive commercial properties, the proceeds from sales of our shares; |
| | • | | our inability to realize attractive risk-adjusted returns on our investments; |
| | • | | unanticipated expenses or reduced revenues that reduce our cash flow or non-cash earnings; |
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| | • | | defaults in our investment portfolio or decreases in the value of our properties; and |
| | • | | the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates. |
As a result, we may not be able to make distributions to our stockholders at any time in the future, and the level of any distributions we do make to our stockholders may not increase or even be maintained over time.
We may suffer adverse tax consequences if the amount of distributions do not comply with certain tax requirements, and we expect that a substantial portion of our distributions will be taxed as ordinary income to our stockholders.
To qualify for taxation as a REIT, we will be required to distribute annually to our stockholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains. To the extent we satisfy the 90% distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our stockholders in a calendar year is less than a minimum amount specified under the Code.
In addition, dividends that we pay to our stockholders will generally be taxable to our stockholders as ordinary income. However, a portion of our distributions may be designated by us as long-term capital gains to the extent that they are attributable to capital gain income recognized by us or may constitute a return of capital to the extent that they exceed our current and accumulated earnings and profits as determined for U.S. federal income tax purposes. A return of capital distribution is not taxable, but has the effect of reducing the basis of a stockholder’s investment in our common stock, until the distribution exceeds the stockholder’s basis. Return of capital distributions in excess of a stockholder’s tax basis in our shares will be treated as gain from the sale of shares.
We may pay some or all of our distributions, and fund some or all redemptions, from sources other than cash flow from operations, including borrowings by the REIT, proceeds from the offering of our securities or proceeds from asset sales, which may reduce the amount of capital we ultimately invest and negatively impact the value of your investment in our common stock
To the extent that cash flow from operations is insufficient to pay distributions to you or to fund redemptions, we may pay all or some of our distributions and fund all or some of our redemptions from borrowings by the REIT, proceeds from the offering of our securities or proceeds from the sale of assets, and we have no limits on the amounts we may pay from such other sources. The payment of distributions and redemptions from sources other than cash flow from operations may reduce the amount of capital we have available to invest in real estate, negatively impact the value of your investment and reduce your overall return. We expect that, especially during the early stages of our development, as well as from time to time thereafter, we may declare distributions and/or fund redemptions that exceed our cash flows from operations and in anticipation of future cash flows.
Purchases of common stock by our directors, officers and other affiliates in this offering should not influence investment decisions of independent, unaffiliated investors.
Directors, officers and other affiliates of ours may purchase shares of our common stock. There are no written or other binding commitments with respect to the acquisition of shares by these parties, and there can be no assurance as to the amount, if any, of shares of common stock these parties may acquire in the offering. Any shares purchased by our directors, officers and other affiliates will be purchased for investment purposes only. However, the investment decisions made by directors, officers and other affiliates who make such purchases should not influence your decision to invest in shares of our common stock, and you should make your own independent investment decision concerning the risks and benefits of an investment in our shares of common stock.
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We are currently conducting a “best efforts” offering. If we are not able to raise a substantial amount of capital in the near term, we may have difficulties investing in properties and our ability to achieve our investment objectives, including diversification of our portfolio by property type and location, could be adversely affected.
We are currently conducting our initial public offering which is being made on a “best efforts” basis, which means that the dealer manager and the broker-dealers participating in the offering are only required to use their best efforts to sell the shares and have no firm commitment or obligation to purchase any of the shares. As a result, we may not be able to raise a substantial amount of capital in the near term. If we are not able to accomplish this goal, we may have difficulty in identifying and purchasing suitable properties on attractive terms in order to meet our investment objectives. Therefore, there could be a delay between the time we receive net proceeds from the sale of shares of our common stock in the offering and the time we invest the net proceeds. This could cause a substantial delay in the time it takes for your investment to realize its full potential return and could adversely affect our ability to pay regular distributions of cash flow from operations to you. If we fail to timely invest the net proceeds of the offering, our ability to achieve our investment objectives, including diversification of our portfolio by property type and location, could be adversely affected. Failure to raise substantial capital could also hamper our ability to comply with REIT prohibitions on concentrations of ownership. In addition, subject to our investment policies, we are not limited in the number or size of our investments or the percentage of net proceeds that we may dedicate to a single investment. If we use all or substantially all of the proceeds from the offering to acquire one or a few investments, the likelihood of our profitability being affected by the performance of any one of our investments will increase, and an investment in our shares will be subject to greater risk.
If we raise substantially less than the maximum offering amount, we may not be able to construct a diverse portfolio of real estate and real estate-related investments, and the value of your investment in our stock may fluctuate more widely with the performance of specific investments.
We are dependent upon the proceeds to be received from our initial public offering to conduct our proposed investment activities. Our initial public offering is being made on a “best efforts” basis, whereby our dealer manager and the broker/dealers that participate in the offering are only required to use their best efforts to sell shares of our common stock and have no firm commitment or obligation to purchase any of the shares of our common stock. As a result, we do not know the amount of proceeds that will be raised in our initial public offering or that we will achieve sales of the maximum offering amount. If we raise substantially less than the maximum offering amount, we may not be able to invest in a diverse portfolio in terms of the number of investments owned, the geographic regions in which our investments are located and the types of investments that we make. Your investment in shares of our common stock would be subject to greater risk to the extent that we lack a diversified portfolio of investments. In addition, our fixed operating expenses, as a percentage of gross income, would be higher, and our financial condition and ability to pay distributions could be adversely affected if we are unable to raise substantial funds in our initial public offering.
We may suffer from delays if our advisor is not able to locate suitable investments, which could adversely affect our ability to pay distributions and to achieve our investment objectives.
If we are able to raise capital quickly during our initial public offering, we may have difficulty in identifying and purchasing suitable commercial real estate properties in a timely and efficient fashion. This may impact the value of your investment in our common stock and our ability to pay distributions to you.
Our board of directors may change certain of our investment policies without stockholder approval, which could alter the nature of your investment in our common stock.
Except for changes to the investment objectives and investment restrictions contained in our charter, which require stockholder consent to amend, our board of directors, a majority of whom are independent, may change our investment and operational policies, including our policies with respect to investments, acquisitions, growth,
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operations, indebtedness, capitalization and distributions, at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the types of investments described in this prospectus. A change in our investment strategy may, among other things, increase our exposure to interest rate risk, default risk and commercial real estate market fluctuations, all of which could materially affect our ability to achieve our investment objectives.
Our participation in a co-ownership arrangement may subject us to risks that otherwise may not be present in other real estate investments.
We may enter in co-ownership arrangements with respect to a portion of the properties we acquire. Co-ownership arrangements involve risks generally not otherwise present with an investment in real estate, such as the following:
| | • | | the risk that a co-owner may at any time have economic or business interests or goals that are or become inconsistent with our business interests or goals; |
| | • | | the risk that a co-owner may be in a position to take action contrary to our instructions or requests or contrary to our policies, objectives or status as a REIT; |
| | • | | the possibility that an individual co-owner might become insolvent or bankrupt, or otherwise default under the applicable mortgage loan financing documents, which may constitute an event of default under all of the applicable mortgage loan financing documents or allow the bankruptcy court to reject the agreements entered into by the co-owners owning interests in the property; |
| | • | | the possibility that a co-owner might not have adequate liquid assets to make cash advances that may be required in order to fund operations, maintenance and other expenses related to the property, which could result in the loss of current or prospective tenants and may otherwise adversely affect the operation and maintenance of the property, and could cause a default under the mortgage loan financing documents applicable to the property and may result in late charges, penalties and interest, and may lead to the exercise of foreclosure and other remedies by the lender; |
| | • | | the risk that a co-owner could breach agreements related to the property, which may cause a default, or result in personal liability for, the applicable mortgage loan financing documents, violate applicable securities law, result in a foreclosure or otherwise adversely affect the property and the co-ownership arrangement; |
| | • | | the risk that a default by any co-tenant would constitute a default under the applicable mortgage loan financing documents that could result in a foreclosure and the loss of all or a substantial portion of the investment made by the co-tenants; |
| | • | | the risk that we could have limited control and rights, with management decisions made entirely by a third-party; and |
| | • | | the possibility that we will not have the right to sell the property at a time that otherwise could result in the property being sold for its maximum value. |
In the event that our interests become adverse to those of the other co-owners, we may not have the contractual right to purchase the co-ownership interests from the other co-owners. Even if we are given the opportunity to purchase such co-ownership interests in the future, we cannot guarantee that we will have sufficient funds available at the time to purchase co-ownership interests from the co-owners.
We may want to sell our co-ownership interests in a given property at a time when the other co-owners in such property do not desire to sell their interests. Therefore, because we anticipate that it will be much more difficult to find a willing buyer for our co-ownership interests in a property than it would be to find a buyer for a property we owned outright, we may not be able to sell our interest in a property at the time we would like to sell.
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Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our tenant and investor relationships. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those we have outsourced. We have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that our financial results, operations, business relationships or confidential information will not be negatively impacted by such an incident.
Risks Related to Our Relationship with Our Advisor and Its Affiliates and Certain Conflicts of Interest
Our advisor and its affiliates, including our dealer manager, face conflicts of interest caused by their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders.
Our advisor and its affiliates, including our dealer manager, are entitled to substantial fees from us under the terms of the advisory agreement and the dealer manager agreement. These fees could influence the judgment of our advisor and its affiliates in performing services for us. Among other matters, these compensation arrangements could affect their judgment with respect to:
| | • | | the continuation, renewal or enforcement of our agreements with our advisor and its affiliates; |
| | • | | our advisor’s role in estimating accruals of expenses for our fund accountant’s calculation of our daily NAV, as the fees of our advisor and its affiliates are based on our NAV, however, any intentionally inaccurate estimation of the Company’s daily net operating revenues, expenses and fees by our advisor could constitute a breach of its fiduciary duty to the Company and its stockholders, and may subject our advisor to significant liability; and |
| | • | | the amount of fees paid to our advisor and its affiliates. While the fees must be approved on an annual basis by our independent directors, the approval process may be constrained, to some extent, because the independent directors are likely to consider, among other factors, our stockholders’ expectation that affiliates of Cole Real Estate Investments sponsored and will serve in the roles of our advisor and our dealer manager. |
Our advisor is responsible for estimating amounts of certain liabilities that will affect the calculation of our NAV.
Our advisor is responsible for estimating the amounts of certain liabilities that are used by our independent fund accountant to determine our daily NAV per share. These estimated amounts include estimates of accrued fees and expenses attributable to our initial public offering, accrued operating fees and expenses and accrued distributions. To the extent that these liabilities are based on estimates, this could lead to conflicts of interest with our advisor because the advisors fee is based on a percentage of our NAV, although any intentionally inaccurate estimation of the Company’s daily net operating revenues, expenses and fees by our advisor could constitute a breach of its fiduciary duty to the Company and its stockholders, and may subject our advisor to significant liability.
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Our advisor has engaged its sub-advisor to select and manage our liquid investments. Our advisor relies on the performance of its sub-advisor in implementing the liquid investments portion of our investment strategy.
Our advisor has engaged its sub-advisor to select liquid investments pursuant to a sub-advisory agreement between our advisor and its sub-advisor. We do not have a direct contractual relationship with the sub-advisor. The sub-advisor has and will continue to have substantial discretion, within our investment guidelines, to make decisions related to the acquisition, management and disposition of our liquid assets. If the sub-advisor does not succeed in implementing the liquid investments portion of our investment strategy, our performance will suffer. In addition, even though our advisor has the ability to terminate the sub-advisor with 60 days’ prior written notice it may be difficult and costly to terminate and replace the sub-advisor.
Payment of fees to our advisor and our dealer manager will reduce the cash available for investment and distribution and will increase the risk that you will not be able to recover the amount of your investment in our shares.
Our advisor and its affiliated dealer manager perform services for us in connection with the distribution of our shares, the selection and acquisition of our investments, and the management of our assets. We pay our advisor and our dealer manager fees for these services, which will reduce the amount of cash available for investments or distributions to our stockholders. The fees we pay to our advisor and its affiliates decrease the value of our portfolio and increase the risk that stockholders may receive a lower price when they request redemption of their shares than the purchase price they initially paid for their shares.
Our advisor faces conflicts of interest relating to the incentive fee structure under our advisory agreement, which could result in actions that are not necessarily in the long-term best interests of our stockholders.
Pursuant to the terms of our advisory agreement, our advisor is entitled to fees that are structured in a manner intended to provide incentives to our advisor to perform in our best interests and in the best interests of our stockholders. For example, the advisory fee is based on our NAV, and not on the costs or book value of our investments, and our advisor is entitled to an incentive fee, based on the annual performance of our stock. Nevertheless, our advisor could be motivated to recommend riskier or more speculative investments in order for us to generate the specified levels of performance that would entitle our advisor to incentive compensation.
Our advisor faces conflicts of interest with respect to the allocation of investment opportunities between us and other real estate programs that are managed by affiliates of our advisor.
We rely on our advisor to identify and select potential real estate investment opportunities on our behalf. At the same time, our advisor’s affiliates and our advisor’s officers manage other real estate programs sponsored by Cole Real Estate Investments that may have investment objectives and investment strategies that are similar to our objectives and strategies. As a result, our advisor could face conflicts of interest in allocating real estate acquisition opportunities as they become available. While the other real estate programs sponsored by Cole Real Estate Investments have allocation procedures in place, there is a risk that our advisor’s allocation of investment properties may result in our acquiring a property that provides lower returns to us than a property purchased by another real estate program sponsored by Cole Real Estate Investments. In addition, we may acquire properties in geographic areas where other real estate programs sponsored by Cole Real Estate Investments own properties. If one of the other real estate programs sponsored by Cole Real Estate Investments attracts a tenant that we are competing for, we could suffer a loss of revenue due to delays in locating another suitable tenant. Similar conflicts of interest may arise if our advisor recommends that we make or purchase mortgage loans or participations in mortgage loans, since other real estate programs sponsored by Cole Real Estate Investments may be competing with us for these investments. You will not have the opportunity to evaluate the manner in which these conflicts of interest are resolved before or after making your investment.
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Our officers face conflicts of interest related to the positions they hold with affiliated entities, which could hinder our ability to implement successfully our business strategy and to generate returns to you.
Each of our executive officers, including Mr. Cole, who also serves as the chairman of our board of directors, also is an officer or director of our advisor, our dealer manager or their affiliates. In addition, our executive officers serve as officers of one or more entities affiliated with our advisor that provide investment management advice to other Cole-sponsored real estate programs, as well as executive officers and/or board members of these other real estate programs. As a result, these individuals owe fiduciary duties to these other entities and their stockholders, members and limited partners. These additional fiduciary duties may create conflicts with the duties that they owe to us and to our stockholders. There is a risk that their loyalties to these other entities could result in actions or inactions that are detrimental to our business, which could harm the implementation of our investment strategy and our investment and leasing opportunities. Conflicts between the best interests of our business and the best interests of these other entities are most likely to arise from involvement in activities related to (1) allocation of new acquisition opportunities, (2) allocation of their time, (3) allocation of tenants, (4) allocation of opportunities to sell assets, and (5) allocation of our dealer manager’s time. If these individuals were to act or fail to act in a manner that was detrimental to our business, or favor one entity over another, they could be subject to liability for breach of their fiduciary duty to us and our stockholders. If these potential conflicts are not appropriately managed, we may not be able to implement our investment strategy in a successful manner, generate cash needed to pay distributions to you and maintain or increase the value of our assets.
We depend on our advisor, and we may not be able to find a suitable replacement if our advisor terminates the advisory agreement.
We depend on our advisor, and we may not be able to find a suitable replacement if our advisor terminates the advisory agreement. Our ability to make distributions and achieve our investment objectives is dependent upon the performance of our advisor in the acquisition of real estate properties and other real estate-related assets, the management of our portfolio, the selection of tenants for our properties and the determination of any financing arrangements. If our advisor suffers or is distracted by adverse financial or operational problems in connection with its operations unrelated to us, our advisor may be unable to allocate sufficient time and resources to our operations. If our advisor is unable to allocate sufficient resources to oversee and perform our operations for any reason, we may be unable to achieve our investment objectives or pay distributions to our stockholders. See “Conflicts of Interest — Transactions with Our Advisor and its Affiliates.”
Our success depends to a significant degree upon certain key personnel of our advisor. If our advisor loses or is unable to obtain key personnel ability to achieve our investment objectives could be delayed or hindered, which could adversely affect our ability to pay distributions to you and the value of your investment.
Our success depends to a significant degree upon the contributions of certain executive officers and other key personnel of our advisor, as listed beginning on page 104 of this prospectus, each of whom would be difficult to replace. We cannot guarantee that all of these key personnel, or any particular person, will remain affiliated with us, our sponsor and/or our advisor. If any of our key personnel were to cease their affiliation with our advisor, our operating results could suffer. Further, we currently do not separately maintain key person life insurance on Mr. Cole or any other person and we may not do so in the future. We believe that our future success depends, in large part, upon our advisor’s ability to hire and retain highly skilled managerial, operational and marketing personnel. Competition for such personnel is intense, and we cannot assure you that our sponsor or advisor will be successful in attracting and retaining such skilled personnel. If our advisor loses or is unable to obtain the services of key personnel, our ability to implement our investment strategies could be delayed or hindered, and the value of your investment may decline.
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The termination or replacement of our advisor could trigger a repayment event under our mortgage loans for some of our properties and the credit agreement governing for any line of credit we obtain.
Lenders for certain of our properties may request provisions in the mortgage loan documentation that would make the termination or replacement of our advisor an event requiring the immediate repayment of the full outstanding balance of the loan. If we elect to obtain a line of credit and are able to do so, the termination or replacement of our advisor could trigger repayment of outstanding amounts under the credit agreement governing our line of credit. If a repayment event occurs with respect to any of our properties, our ability to achieve our investment objectives could be materially adversely affected.
Our board of directors will not approve, in advance, the investment decisions made by our advisor.
Our board of directors has approved investment guidelines that delegate to our advisor the authority to execute (1) real estate property acquisitions and dispositions and (2) investments in other real estate-related assets, and to (3) contract with a sub-advisor to purchase and sell liquid assets, liquid real estate-related securities, cash and cash equivalents, in each case so long as such investments are consistent with our investment guidelines. As a result, our advisor has substantial latitude within these broad parameters in determining the types of assets that are proper investments for us. Our directors do not review, in advance, the investment decisions made by our advisor or sub-advisor. Instead, the directors review our investment guidelines on an annual basis and our investment portfolio on a quarterly basis or, in each case, as often as they deem appropriate. In conducting these periodic reviews, our directors rely primarily on information provided to them by our advisor. Furthermore, transactions entered into on our behalf by our advisor may be costly, difficult or impossible to unwind when they are subsequently reviewed by our board of directors.
The dealer manager is an affiliate of our advisor, and, therefore, you will not have the benefit of an independent review of the prospectus or of us that customarily is performed in underwritten offerings.
The dealer manager, Cole Capital Corporation, is an affiliate of our advisor and, as a result, is not in a position to make an independent review of us or of this offering. Accordingly, you will have to rely on your own broker-dealer or financial advisor to make an independent review of the terms of this offering. If your broker-dealer or financial advisor conducts an independent review of this offering, and/or engages an independent due diligence reviewer to do so on its behalf, we expect that we will pay or reimburse the expenses associated with such review, which may create conflicts of interest. If your broker-dealer or financial advisor does not conduct such a review, you will not have the benefit of an independent review of the terms of this offering.
Our dealer manager may compensate its registered employees who market and sell this investment more than it compensates them to market and sell other investments sponsored by Cole Real Estate Investments.
Our dealer manager may have a compensation program for its registered employees who market and sell this investment that may be different from the compensation program it has for the marketing and sale of other investments sponsored by Cole Real Estate Investments. This compensation program may result in Cole Capital Corporation’s registered employees receiving more or less compensation for the marketing and sale of this investment than for the marketing and sale of other programs. Such a compensation program may create a conflict of interest, by motivating our dealer manager’s registered employees to promote one investment over another investment sponsored by Cole Real Estate Investments. You and your participating broker dealer must determine if this investment is appropriate for you.
Our charter permits us to acquire assets and borrow funds from affiliates of our advisor, and any such transaction could result in conflicts of interest.
Our charter permits us to acquire assets and borrow funds from affiliates of our advisor on a limited basis as set forth below, and any such transaction could result in a conflict of interest.
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Our advisor may create special purpose entities to acquire properties for the specific purpose of selling the properties to us, and we may acquire such properties, provided that any and all acquisitions from affiliates of our advisor must be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in such transaction, as being fair and reasonable to us and either the purchase price to us is no greater than the cost of the property to the affiliate of our advisor, including acquisition related expenses, or a majority of our independent directors determines that there is substantial justification for any amount above such cost and that the difference is reasonable. Further, we will not acquire a property from an affiliate of our advisor if the cost to us would exceed the property’s current appraised value as determined by an independent appraiser.
From time to time, we may borrow funds from affiliates of our advisor, including our sponsor, as bridge financing to enable us to acquire a property when offering proceeds alone are insufficient to do so and third party financing has not been arranged or is insufficient. Any and all such transactions must be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in such transaction as fair, competitive and commercially reasonable, and no less favorable to us than comparable loans between unaffiliated parties under the same circumstances. Finally, our advisor or its affiliates may pay costs on our behalf, pending our reimbursement, or we may defer payment of fees to our advisor or its affiliates, but neither of these transactions would be considered a loan under our charter.
Our advisor faces conflicts of interest relating to joint ventures or other co-ownership arrangements that we enter into with other real estate programs sponsored by Cole Real Estate Investments, which could result in a disproportionate benefit to another real estate program sponsored by Cole Real Estate Investments.
We may enter into joint ventures with other real estate programs sponsored by Cole Real Estate Investments for the acquisition, development or improvement of properties, as well as the acquisition of real estate-related investments. Officers and key persons of our advisor also are officers and key persons of other REITs sponsored by Cole Real Estate Investments and their advisors, the general partners of other real estate programs sponsored by Cole Real Estate Investments partnerships and/or the advisors or fiduciaries of other real estate programs sponsored by Cole Real Estate Investments. These officers and key persons will face conflicts of interest in determining which real estate program sponsored by Cole Real Estate Investments, should enter into any particular joint venture or co-ownership arrangement. These persons also may have a conflict in structuring the terms of the relationship between us and the Cole-sponsored co-venturer or co-owner, as well as conflicts of interests in managing the joint venture.
In the event we enter into joint venture or other co-ownership arrangements with another real estate program sponsored by Cole Real Estate Investments, our advisor and its affiliates may have a conflict of interest when determining when and whether to buy or sell a particular property, or to make or dispose of another real estate-related investment. In addition, if a Cole-sponsored co-venturer or co-owner becomes listed for trading on a national securities exchange, that entity may develop more divergent goals and objectives than ours, since we do not expect to be listed for trading. In the event we enter into a joint venture or other co-ownership arrangement with a real estate program sponsored by Cole Real Estate Investments that has a defined life, the joint venture may be required to sell its properties earlier than we may desire to sell the properties. Even if the terms of any joint venture or other co-ownership agreement between us and another real estate program sponsored by Cole Real Estate Investments grant us the right of first refusal to buy such properties, we may not have sufficient funds or borrowing capacity to exercise our right of first refusal under these circumstances.
Since our advisor and the advisors to other real estate programs sponsored by Cole Real Estate Investments are under common control, agreements and transactions between or among the parties with respect to any joint venture or other co-ownership arrangement will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers or co-owners, which may result in the co-venturer or co-owner receiving benefits greater than the benefits that we receive. We have adopted certain procedures for dealing with potential conflicts of interest as described in the section of this prospectus captioned “Conflicts of Interest — Certain Conflict Resolution Procedures.”
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Risks Related to Investments in Real Estate
Many of our properties are dependent upon a single tenant, or a limited number of major tenants, for all or a majority of its rental income; therefore, our financial condition and ability to make distributions to you may be adversely affected by the bankruptcy or insolvency, a downturn in the business or a lease termination, of a single tenant.
Our properties may be occupied by only one tenant or derive a majority of their rental income from a limited number of major tenants and, therefore, the success of those properties is materially dependent on the financial stability of such tenants. Such tenants face competition within their industries and other factors that could reduce their ability to make next payments. Lease payment defaults by such tenants could cause us to reduce the amount of distributions we pay. A default of a single or major tenant on its lease payments to us would cause us to lose revenue from the property and force us to find an alternative source of revenue to meet any expenses associated with the property and prevent a foreclosure if the property is subject to a mortgage. In the event of a default by a single or major tenant, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-letting the property. If a lease is terminated, we may not be able to lease the property for the rent previously received or sell the property without incurring a loss. A default by a single or major tenant, the failure of a guarantor to fulfill its obligations or other premature termination of a lease to such a tenant, or such tenant’s election not to extend a lease upon its expiration, could have an adverse effect on our financial condition and our ability to pay distributions to you.
In addition, any of our major tenants, or any guarantor of one of our major tenant’s lease obligations, could be subject to bankruptcy proceeding pursuant to Title 11 of the bankruptcy laws of the United States. The bankruptcy of such a tenant or lease guarantor could delay our efforts to collect past due balances under the relevant lease, and could ultimately preclude full collection of these sums. Such an event also could cause a decrease or cessation of current rental payments, reducing our operating cash flows and the amount available for distributions to you. In the event a major tenant or lease guarantor declares bankruptcy, the tenant or its trustee may not assume our lease or its guaranty. If a given lease or guaranty is not assumed, our operating cash flows and the amounts available for distributions to you may be adversely affected. Accordingly, the bankruptcy of a major tenant could have a material adverse effect on our ability to pay distributions to you.
To the extent we acquire industrial properties, the demand for and profitability of our industrial properties may be adversely affected by fluctuations in manufacturing activity in the United States.
We may invest in industrial properties that share some of the same core characteristics as our other commercial properties. To the extent we acquire industrial properties, such properties may be adversely affected if manufacturing activity decreases in the United States. Trade agreements with foreign countries have given employers the option to utilize less expensive non-US manufacturing workers. The outsourcing of manufacturing functions could lower the demand for our industrial properties. Moreover, an increase in the cost of raw materials or decrease in the demand of housing could cause a slowdown in manufacturing activity, such as furniture, textiles, machinery and chemical products, and our profitability may be adversely affected.
If a major tenant declares bankruptcy, we may be unable to collect balances due under relevant leases, which could have a material adverse effect on our financial condition and ability to pay distributions to you.
We may experience concentration in one or more tenants. Any of our tenants, or any guarantor of one of our tenant’s lease obligations, could be subject to a bankruptcy proceeding pursuant to Title 11 of the bankruptcy laws of the United States. The bankruptcy of a tenant or lease guarantor could delay our efforts to collect past due balances under the relevant lease, and could ultimately preclude full collection of these sums. Such an event also could cause a decrease or cessation of current rental payments, reducing our operating cash flows and the amount available for distributions to you. In the event a tenant or lease guarantor declares bankruptcy, the tenant or its trustee may not assume our lease or its guaranty. If a given lease or guaranty is not assumed, our operating cash flows and the amounts available for distributions to you may be adversely affected. Accordingly, the bankruptcy of a major tenant could have a material adverse effect on our ability to pay distributions to you.
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If a sale-leaseback transaction is re-characterized in a tenant’s bankruptcy proceeding, our financial condition could be adversely affected.
We may enter into sale-leaseback transactions, whereby we would purchase a property and then lease the same property back to the person from whom we purchased it. In the event of the bankruptcy of a tenant, a transaction structured as a sale-leaseback may be re-characterized as either a financing or a joint venture, either of which outcomes could adversely impact our financial condition, cash flow and the amount available for distributions to you.
If the sale-leaseback were re-characterized as a financing, we might not be considered the owner of the property, and we would have the status of a creditor in relation to the tenant. In that event, we would no longer have the right to sell or encumber our ownership interest in the property. Instead, we would have a claim against the tenant for the amounts owed under the lease, with the claim arguably secured by the property. The tenant/debtor might have the ability to propose a plan restructuring the term, interest rate and amortization schedule of its outstanding balance. If confirmed by the bankruptcy court, we could be bound by the new terms, and prevented from foreclosing our lien on the property. If the sale-leaseback were re-characterized as a joint venture, we could be treated as co-venturer with the lessee with regard to the property. As a result, we could be held liable, under some circumstances, for debts incurred by the lessee relating to the property.
Our real estate investments may include special use single-tenant properties that may be difficult to sell or re-lease upon lease terminations.
We intend to invest in necessity single-tenant commercial properties, a number of which may include special use single-tenant properties. If the leases on these properties are terminated or not renewed, we may have difficulty re-leasing or selling these properties to a party other than the tenant due to the special purpose for which the property may have been designed. Therefore, we may be required to expend substantial funds to renovate the property or make rent concessions in order to lease the property to another tenant or sell the property. These and other limitations may adversely impact the cash flows from, or lead to a decline in value of, these special use single-tenant properties.
A high concentration of our properties in a particular geographic area, or with tenants in a similar industry, would magnify the effects of downturns in that geographic area or industry.
In the event that we have a concentration of properties in any particular geographic area, any adverse situation that disproportionately impacts that geographic area would have a magnified adverse impact on our portfolio. Similarly, if tenants of our properties become concentrated in a certain industry or industries, any adverse impact on that industry generally would have a disproportionately adverse impact on our portfolio.
Our portfolio of properties includes retail properties. Our performance, therefore, is linked to the market for retail space generally and a downturn in the retail market could have an adverse effect on the value of your investment in our common stock.
The market for retail space has been and could be adversely affected by weaknesses in the national, regional and local economies, the adverse financial condition of some large retailing companies, the ongoing consolidation in the retail sector, excess amounts of retail space in a number of markets and competition for tenants with other shopping centers in our markets. Customer traffic to these shopping areas may be adversely affected by the closing of stores in the same shopping center, or by a reduction in traffic to these stores resulting from a regional economic downturn, a general downturn in the local area where our store is located, or a decline in the desirability of the shopping environment of a particular shopping center. A reduction in customer traffic could have a material adverse effect on our business, financial condition and results of operations.
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Our operating results will be affected by economic and regulatory changes that impact the real estate market in general.
We are subject to risks generally attributable to the ownership of real property, including:
| | • | | changes in global, national, regional or local economic, demographic or capital market conditions; |
| | • | | current and future adverse national real estate trends, including increasing vacancy rates, which may negatively impact resale value, declining rental rates and general deterioration of market conditions; |
| | • | | changes in supply of or demand for similar properties in a given market or metropolitan area that will result in changes in market rental rates or occupancy levels; |
| | • | | increased competition for real property investments targeted by our investment strategy; |
| | • | | bankruptcies, financial difficulties or lease defaults by our tenants; |
| | • | | changes in interest rates and availability of financing; and |
| | • | | changes in government rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws. |
All of these factors are beyond our control. Any negative changes in these factors could affect our ability to meet our obligations and make distributions to stockholders.
We face risks associated with property acquisitions, which may adversely impact our ability to pay distributions and the value of your investment in our common stock.
We intend to acquire properties and portfolios of properties, including large portfolios that will increase our size and result in changes to our capital structure. Our acquisition activities and their success are subject to the following risks:
| | • | | we may be unable to complete an acquisition after making a non-refundable deposit and incurring certain other acquisition-related costs; |
| | • | | we may be unable to obtain financing for acquisitions on favorable terms or at all; |
| | • | | acquired properties may fail to perform as expected; |
| | • | | the actual costs of repositioning or redeveloping acquired properties may be greater than our estimates; |
| | • | | acquired properties may be located in new markets in which we may face risks associated with a lack of market knowledge or understanding of the local economy, lack of business relationships in the area and unfamiliarity with local governmental and permitting procedures; and |
| | • | | we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations. |
These acquisition risks may reduce our ability to pay distributions and may negatively impact the value of your investment in our common stock.
Many of our assets are public places such as shopping centers. Because these assets are public places, crimes, violence and other incidents beyond our control may occur, which could result in a reduction of business traffic at our properties and could expose us to civil liability.
Because many of our assets are open to the public, they are exposed to a number of incidents that may take place within their premises and that are beyond our control or our ability to prevent, which may harm our consumers and visitors. Some of our assets may be located in large urban areas, which can be subject to elevated
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levels of crime and urban violence. If violence escalates, we may lose tenants or be forced to close our assets for some time. If any of these incidents were to occur, the relevant asset could face material damage to its image and the property could experience a reduction of business traffic due to lack of confidence in the premises’ security. In addition, we may be exposed to civil liability and be required to indemnify the victims, which could adversely affect us. Should any of our assets be involved in incidents of this kind, our business, financial condition and results of operations could be adversely affected.
Increased competition from alternative retail channels could adversely impact our retail tenants’ profitability and ability to make timely lease payments to us.
Traditional retailers face increasing competition from alternative retail channels, including factory outlet centers, wholesale clubs, mail order catalogs, television shopping networks and various forms of e-commerce. The increasing competition from such alternative retail channels could adversely impact our retail tenants’ profitability and ability to make timely lease payments to us. If our retail tenants are unable to make timely lease payments to us, our operating cash flows could be adversely affected.
The current market environment may adversely affect our operating results, financial condition and ability to pay distributions to our stockholders.
The global financial markets have undergone pervasive and fundamental disruptions since mid-2007. The disruptions in the global financial markets had an adverse impact on the availability of credit to businesses generally. To the extent that the global economic recession continues and/or intensifies, it has the potential to materially adversely affect the value of our properties and other investments we make, the availability or the terms of financing that we may anticipate utilizing, and our ability to make principal and interest payments on, or refinance, any outstanding debt when due, and/or, for our leased properties, the ability of our tenants to enter into new leasing transactions or satisfy rental payments under existing leases. The current market environment also could affect our operating results and financial condition as follows:
| | • | | Debt Market — Since 2010, the volume of mortgage lending for commercial real estate has been increasing and lending terms have improved and continue to improve; however the real estate debt markets could begin experiencing increasing volatility as a result of certain factors, including the tightening of underwriting standards by lenders and credit rating agencies. Should overall borrowing costs increase, either by increases in the index rates or by increases in lender spreads, our operations may generate lower returns. In addition, dislocations in the debt markets could reduce the amount of capital that is available to finance real estate, which, in turn: (1) limits the ability of real estate investors to make new acquisitions and to potentially benefit from reduced real estate values or to realize enhanced returns on real estate investments; (2) could slow real estate transaction activity; and (3) may result in an inability to refinance debt as it becomes due. In addition, deterioration in the state of the debt markets could have a material adverse impact on the overall amount of capital being invested in real estate, which may result in price or value decreases of real estate assets and impact our ability to raise equity capital. In addition, the failure of any lending source with which we entered, or enter, into a credit facility or line of credit would adversely affect our ability to meet our obligations if we were unable to replace the funding source. |
| | • | | Real Estate Market — The global economic recession caused commercial real estate values to decline substantially. The U.S. commercial real estate markets began a recovery in 2010 which has continued through 2011 and 2012 and into 2013. However, if the global recession were to persist or worsen, or it were to affect the U.S. financial markets, there may be uncertainty in the valuation, or in the stability of the value, of the properties we own or may acquire that could result in a substantial decrease in the value of our properties. Consequently, we may not be able to recover the carrying amount of our properties, which may require us to recognize an impairment charge in earnings. |
| | • | | Government Intervention— The disruptions in the global financial markets have led to extensive and unprecedented government intervention. Although the government intervention is intended to stimulate |
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| | the flow of capital and to strengthen the U.S. economy in the short term, it is impossible to predict the actual effect of the government intervention and what effect, if any, additional interim or permanent governmental intervention may have on the financial markets and/or the effect of such intervention on us. |
The insurance we carry on our real estate may be insufficient to pay for all potential losses or damage to our properties.
Generally, our tenants are responsible for insuring their goods and premises and, in some circumstances, may be required to reimburse us for a share of the cost of acquiring comprehensive insurance for the property, including comprehensive liability, fire, extended coverage, business interruption and rental loss insurance. Our advisor has selected policy specifications and insured limits that it believes to be appropriate and adequate given the relative risk of loss, the cost of the coverage and industry practice. Insurance policies on our properties may include some coverage for losses that are generally catastrophic in nature, such as losses due to terrorism, earthquakes and floods, but we cannot be sure that it will be adequate to cover all losses and some of our policies will be insured subject to limitations involving large deductibles or co-payments and policy limits which may not be sufficient to cover losses. If we or one or more of our tenants experience a loss which is uninsured or which exceeds policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.
We may be unable to obtain funds for future tenant improvements, which could adversely impact our ability to pay cash distributions to you, the value of our properties and our ability to attract new tenants.
When tenants do not renew their leases or otherwise vacate their space, it is usual that, in order to attract replacement tenants, we will be required to expend substantial funds for tenant improvements and tenant refurbishments to the vacated space. In addition, although we expect that our leases with tenants will require tenants to pay routine property maintenance costs and other expenses, we may be responsible for any major structural repairs, such as repairs to the foundation, exterior walls and rooftops. If we need additional capital in the future to improve or maintain our properties or for any other reason, we will have to obtain funds from available sources, if any, including operating cash flows, borrowings sales from this offering, or property sales. The use of cash from these sources may reduce the amount of capital we have available to invest in real estate, negatively impact the value of your investment and reduce your overall return. If additional capital is not available, this may adversely impact the value of the properties and our ability to attract new tenants.
We face significant competition for tenants for our properties, which may impact our ability to attract and retain tenants at reasonable rent levels.
We face significant competition from owners, operators and developers of retail real estate properties. Substantially all of our properties will face competition from similar properties in the same market. This competition may affect our ability to attract and retain tenants and may reduce the rents we are able to charge. These competing properties may have vacancy rates higher than our properties, which may result in their owners being willing to lease available space at lower prices than the space in our properties. Due to such competition, the terms and conditions of any lease that we enter into with our tenants may vary substantially from those we describe in this prospectus.
We may face potential difficulties or delays renewing leases or re-leasing space, which could adversely impact our cash flows and our ability to pay distributions.
We derive a significant portion of our revenues from rent received from our tenants. We will seek to lease the rentable square feet at our real estate properties to creditworthy tenants. However, if a tenant experiences a downturn in its business or other types of financial distress, it may be unable to make timely rental payments.
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Also, when our tenants decide not to renew their leases or terminate early, we may not be able to re-let the space. Even if tenants decide to renew or lease new space, the terms of renewals or new leases, including the cost of required renovations or concessions to tenants, may be less favorable to us than current lease terms. As a result, our revenues and ability to pay distributions to stockholders could be materially adversely affected. In addition, the presence of hazardous or toxic substances on our real estate properties may adversely affect our ability to lease such property.
We are exposed to inflation risk as income from long-term leases will be the primary source of our cash flows from operations.
We are exposed to inflation risk, as income from long-term leases will be the primary source of our cash flows from operations. Leases of long-term duration or which include renewal options that specify a maximum rate increase may result in below-market lease rates over time if we do not accurately estimate inflation or market lease rates. Provisions of our leases designed to mitigate the risk of inflation and unexpected increases in market lease rates, such as periodic rental increases, may not adequately protect us from the impact of inflation or unexpected increases in market lease rates. If we are subject to below-market lease rates on a significant number of our properties pursuant to long-term leases, our cash flow from operations and financial position may be adversely affected.
We may have difficulty selling our real estate properties, which may limit our flexibility and ability to pay distributions.
Because real estate investments are relatively illiquid, it could be difficult for us to promptly sell one or more of our real estate properties on favorable terms. This may limit our ability to change our portfolio promptly in response to adverse changes in the performance of any such property or economic or market trends. In addition, federal tax laws that impose a 100% excise tax on gains from sales of dealer property by a REIT (generally, property held for sale, rather than investment) could limit our ability to sell properties and may affect our ability to sell properties without adversely affecting returns to our stockholders. These restrictions could adversely affect our ability to achieve our investment objectives.
We may acquire or finance properties with lock-out provisions, which may prohibit us from selling a property, or may require us to maintain specified debt levels for a period of years on some properties.
A lock-out provision is a provision that prohibits the prepayment of a loan during a specified period of time. Lock-out provisions may include terms that provide strong financial disincentives for borrowers to prepay their outstanding loan balance and exist in order to protect the yield expectations of investors. We expect that many of our properties will be subject to lock-out provisions. Lock-out provisions could materially restrict us from selling or otherwise disposing of or refinancing properties when we may desire to do so. Lock-out provisions may prohibit us from reducing the outstanding indebtedness with respect to any properties, refinancing such indebtedness on a non-recourse basis at maturity, or increasing the amount of indebtedness with respect to such properties. Lock-out provisions could impair our ability to take other actions during the lock-out period that could be in the best interests of our stockholders and, therefore, may have an adverse impact on the value of our shares relative to the value that would result if the lock-out provisions did not exist. In particular, lock-out provisions could preclude us from participating in major transactions that could result in a disposition of our assets or a change in control even though that disposition or change in control might he in the best interests of our stockholders.
In the event we obtain options to acquire real estate properties, we may lose the amount paid for such options whether or not the underlying property is purchased.
We may obtain options to acquire certain real estate properties. The amount paid for an option, if any, is normally surrendered if the property is not purchased and may or may not be credited against the purchase price if the property is purchased. Any unreturned option payments will reduce the amount of cash available for further investments or distributions to our stockholders.
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We may obtain only limited warranties when we purchase a property and would have only limited recourse in the event our due diligence did not identify any issues that lower the value of our property.
The seller of a property often sells such property in its “as is” condition on a “where is” basis and “with all faults,” without any warranties of merchantability or fitness for a particular use or purpose. In addition, purchase agreements may contain only limited warranties, representations and indemnifications that will only survive for a limited period after the closing. The purchase of properties with limited warranties increases the risk that we may lose some or all of our invested capital in the property, as well as the loss of rental income from that property.
Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of co-venturers and disputes between us and our co-venturers.
We may co-invest in the future with third parties through partnerships or other entities, which we collectively refer to as joint ventures, acquiring non-controlling interests in or sharing responsibility for managing the affairs of the joint venture. In such event, we would not be in a position to exercise sole decision-making authority regarding the joint venture. Investments in joint ventures may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their required capital contributions. Co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the co-venturer would have full control over the joint venture. Disputes between us and co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. Consequently, actions by or disputes with co-venturers might result in subjecting properties owned by the joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our co-venturers.
Costs of complying with governmental laws and regulations may reduce our net income and the cash available for distributions to our stockholders.
Real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. We could be subject to liability in the form of fines or damages for noncompliance with these laws and regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid hazardous materials, the remediation of contaminated property associated with the disposal of solid and hazardous materials and other health and safety-related concerns.
From time to time, we may acquire properties, or interests in properties, with known adverse environmental conditions where we believe that the environmental liabilities associated with these conditions are quantifiable and that the acquisition will yield an attractive risk-adjusted return. In such an instance, we will estimate the costs of environmental investigation, clean-up and monitoring into the amount we will pay for such properties. Further, in connection with property dispositions, we may agree to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties.
Our properties may be subject to the Americans with Disabilities Act of 1990, as amended, or the ADA. Under the ADA, all places of public accommodation must meet federal requirements related to access and use by persons with disabilities. The ADA’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. Additional or new federal, state and local laws also may require modifications to our properties, or restrict our ability to renovate properties. We will attempt to acquire properties that comply with the ADA and other similar legislation or place the burden on the seller or other third party, such as a tenant, to ensure compliance with such legislation.
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However, we cannot assure you that we will be able to acquire properties or allocate responsibilities in this manner. If we cannot, or if changes to the ADA mandate further changes to our properties, then our funds used for ADA compliance may reduce cash available for distributions and the amount of distributions to you.
In some instances, our advisor may rely on third party property managers to operate our properties and leasing agents to lease vacancies in our properties.
Under our advisory agreement, our advisor is obligated to manage our properties and find tenants to lease our vacant properties. We expect that, in some instances, our advisor will rely on third party property managers and leasing agents. The third party property managers will have significant decision-making authority with respect to the management of our properties. Our ability to direct and control how our properties are managed may be limited. We will not supervise any of the property managers or leasing agents or any of their respective personnel on a day-to-day basis. Thus, the success of our business may depend in part on the ability of our third party property managers to manage the day-to-day operations and the ability of our leasing agents to lease vacancies in our properties. Any adversity experienced by our property managers or leasing agents could adversely impact the operation and profitability of our properties and, consequently, our ability to achieve our investment objectives, including, without limitation, diversification of our real estate properties portfolio by property type and location, moderate financial leverage, conservative levels of operating risk and an attractive level of current income.
Risks Related to Investments in Real Estate-Related Assets
The real estate-related equity securities in which we may invest are subject to specific risks relating to the particular issuer of the securities and may be subject to the general risks of investing in subordinated real estate securities.
We may invest in equity securities of both publicly traded and private real estate companies, which involves a higher degree of risk than debt securities due to a variety of factors, including that such investments are subordinate to creditors and are not secured by the issuer’s property. Our investments in real estate-related equity securities will involve special risks relating to the particular issuer of the equity securities, including the financial condition and business outlook of the issuer. Issuers of real estate-related equity securities generally invest in real estate or real estate-related assets and are subject to the inherent risks associated with real estate discussed in this prospectus, including risks relating to rising interest rates.
The value of the real estate-related securities in which we may invest may be volatile.
The value of real estate-related securities fluctuates in response to issuer, political, market and economic developments. In the short term, equity prices can fluctuate dramatically in response to these developments. Different parts of the market and different types of equity securities can react differently to these developments and they can affect a single issuer, multiple issuers within an industry or economic sector or geographic region or the market as a whole. The real estate industry is sensitive to economic downturns. The value of securities of companies engaged in real estate activities can be affected by changes in real estate values and rental income, property taxes, interest rates and tax and regulatory requirements.
Commercial mortgage-backed securities (“CMBS”), in which we may invest are subject to several types of risks that may adversely impact our performance.
CMBS are bonds that evidence interests in, or are secured by, a single commercial mortgage loan or a pool of commercial mortgage loans. Accordingly, the mortgage-backed securities we invest in are subject to all the risks of the underlying mortgage loans, including the risks of prepayment or default.
In a rising interest rate environment, the value of CMBS may be adversely affected when repayments on underlying mortgage loans do not occur as anticipated, resulting in the extension of the security’s effective
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maturity and the related increase in interest rate sensitivity of a longer-term instrument. The prices of lower credit quality securities are generally less sensitive to interest rate changes than more highly rated assets but more sensitive to adverse economic downturns or individual issuer developments. A projection of an economic downturn, for example, could cause a decline in the price of lower credit quality securities because the ability of obligors of mortgages underlying CMBS to make principal and interest payments or to refinance may be impaired. In this case, existing credit support in the securitization structure may be insufficient to protect us against loss of our principal on these securities. The value of CMBS also may change due to shifts in the market’s perception of issuers and regulatory or tax changes adversely affecting the mortgage securities markets as a whole. In addition, CMBS are subject to the credit risk associated with the performance of the underlying mortgage properties.
CMBS are also subject to several risks created through the securitization process. Certain subordinate CMBS are paid interest only to the extent that there are funds available to make payments. To the extent the collateral pool includes a large percentage of delinquent loans, there is a risk that interest payment on subordinate CMBS will not be fully paid. Subordinate securities of CMBS are also subject to greater risk than those CMBS that are more highly rated.
The mortgage instruments in which we may invest may be impacted by unfavorable real estate market conditions, which could result in losses to us.
If we make investments in mortgage loans or mortgage-backed securities, we will be at risk of loss on those investments, including losses as a result of defaults on mortgage loans. These losses may be caused by many conditions beyond our control, including general prevailing local, national and global economic conditions, economic conditions affecting real estate values, tenant defaults and lease expirations, interest rate levels and the other economic and liability risks associated with real estate described above under the heading “— Risks Related to Investments in Real Estate,” as well as, among other things:
| | • | | competition from comparable types of properties; |
| | • | | success of tenant businesses; |
| | • | | property management decisions; |
| | • | | changes in use of property; |
| | • | | shift of business processes and functions offshore; |
| | • | | property location and condition; |
| | • | | changes in specific industry segments; |
| | • | | declines in regional or local real estate values, or rental or occupancy rates; and |
| | • | | increases in interest rates, real estate tax rates and other operating expenses. |
If we acquire a property by foreclosure following defaults under our mortgage loan investments, we will bear a risk of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage loan, which could have a material adverse effect on our ability to achieve our investment objectives. We do not know whether the values of the property securing any of our real estate securities investments will remain at the levels existing on the dates we initially make the related investment. If the values of the underlying properties drop, our risk will increase and the values of our interests may decrease.
Delays in liquidating defaulted mortgage loan investments could reduce our investment returns.
If there are defaults under our mortgage loan investments, we may not be able to foreclose on or obtain a suitable remedy with respect to such investments. Specifically, we may not be able to repossess and sell the underlying properties quickly, which could reduce the value of our investment. For example, an action to
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foreclose on a property securing a mortgage loan is regulated by state statutes and rules and is subject to many of the delays and expenses of lawsuits if the defendant raises defenses or counterclaims. Additionally, in the event of default by a mortgagor, these restrictions, among other things, may impede our ability to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due to us on the mortgage loan.
The mezzanine loans in which we may invest will involve greater risks of loss than senior loans secured by income-producing real properties, which may result in losses to us.
We may invest in mezzanine loans that take the form of subordinated loans secured by second mortgages on the underlying real property or loans secured by a pledge of the ownership interests of either the entity owning the real property or the entity that owns the interest in the entity owning the real property. These types of investments involve a higher degree of risk than long-term senior first-lien mortgage loans secured by income producing real property because the investment may become unsecured as a result of foreclosure by the senior lender. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt. As a result, we may not recover some or all of our investment. In addition, mezzanine loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the real property and increasing the risk of loss of principal.
Interest rate and related risks may cause the value of our real estate-related assets to be reduced.
Interest rate risk is the risk that fixed income securities such as preferred and debt securities, and to a lesser extent dividend paying common stocks, will decline in value because of changes in market interest rates. Generally, when market interest rates rise, the market value of such securities will decline, and vice versa. Our investment in such securities means that the net asset value of our shares may tend to decline if market interest rates rise.
During periods of rising interest rates, the average life of certain types of securities may be extended because of slower than expected principal payments. This may lock in a below-market interest rate, increase the security’s duration and reduce the value of the security. This is known as extension risk. During periods of declining interest rates, an issuer may be able to exercise an option to prepay principal earlier than scheduled, which is generally known as “call risk” or “prepayment risk.” If this occurs, we may be forced to reinvest in lower yielding securities. This is known as “reinvestment risk.” Preferred and debt securities frequently have call features that allow the issuer to repurchase the security prior to its stated maturity. An issuer may redeem an obligation if the issuer can refinance the debt at a lower cost due to declining interest rates or an improvement in the credit standing of the issuer. These risks may reduce the value of our real estate-related securities investments.
A proposed change in U.S. accounting standards for leases could reduce the overall demand to lease our properties.
The existing accounting standards for leases require lessees to classify their leases as either capital or operating leases. Under a capital lease, both the leased asset, which represents the tenant’s right to use the property, and the contractual lease obligation are recorded on the tenant’s balance sheet if one of the following criteria are met: (i) the lease transfers ownership of the property to the lessee by the end of the lease term; (ii) the lease contains a bargain purchase option; (iii) the non-cancellable lease term is more than 75% of the useful life of the asset; or (iv) if the present value of the minimum lease payments equals 90% or more of the leased property’s fair value. If the terms of the lease do not meet these criteria, the lease is considered an operating lease, and no leased asset or contractual lease obligation is recorded by the tenant.
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In order to address concerns raised by the SEC regarding the transparency of contractual lease obligations under the existing accounting standards for operating leases, the U.S. Financial Accounting Standards Board (the “FASB”) and the International Accounting Standards Board (the “IASB”) initiated a joint project to develop new guidelines to lease accounting. The FASB and IASB (collectively the “Boards”) recently issued exposure drafts, which propose substantial changes to the current lease accounting standards, primarily by eliminating the concept of operating lease accounting. As a result, a lease asset and obligation will be recorded on the tenant’s balance sheet for all lease arrangements. In addition, the proposed standards will impact the method in which contractual lease payments will be recorded. In order to mitigate the financial statement impact of the proposed lease accounting, tenants may seek to negotiate certain terms within new lease arrangements or modify terms in existing lease arrangements, such as shorter lease terms or fewer extension options, which would generally have less impact on tenant balance sheets. Also, tenants may reassess their lease-versus-buy strategies. This could result in a greater renewal risk, a delay in investing our offering proceeds, or shorter lease terms, all of which may negatively impact the Company’s operations and ability to pay its distributions.
The Exposure Drafts do not include a proposed effective date, are still being deliberated, and are subject to change. The Boards intend to complete their deliberations and publish a revised exposure draft during the first half of 2013; however, a final standard is not expected to be issued until 2013 or 2014.
Risks Associated with Debt Financing
Poor credit market conditions could impair our ability to access debt financing, which could materially affect our ability to achieve our investment objectives.
We have financed, and intend to continue to finance a portion of the purchase price of our real estate properties by borrowing funds. Severe dislocations and liquidity disruptions in the U.S. credit markets could significantly harm our ability to access capital. In the future, we may not be able to access debt capital with favorable terms in a cost efficient manner, or at all, which could materially affect our ability to achieve our investment objectives.
We have incurred mortgage indebtedness and other borrowings, which may increase our business risks, could hinder our ability to make distributions and could decrease the value of your investment.
We have financed and continue to finance a portion of the purchase price of properties by borrowing funds. Under our charter, we have a limitation on borrowing which precludes us from borrowing in excess of 300% of the value of our net assets. Net assets for purposes of this calculation are defined to be our total assets (other than intangibles), valued at cost prior to deducting depreciation or other non-cash reserves, less total liabilities. Generally speaking, the preceding calculation is expected to approximate 75% of the cost of our properties before non-cash reserves and depreciation. Our board of directors, including our independent directors has adopted a policy limiting our borrowing to 60%, absent special approval by a majority or our independent directors. Currently we have sought and received approval of our independent directors to exceed this limit because we are currently in the process of raising our equity capital to acquire our portfolio.
In addition, we may incur mortgage debt and pledge some or all of our properties as security for that debt to obtain funds to acquire additional properties or for working capital. We may also obtain a line of credit to provide a flexible borrowing source which generally will allow us borrow funds to satisfy the REIT tax qualification requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders. Furthermore, we may borrow under a line of credit if we otherwise deem it necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes or avoid taxes on undistributed income.
High debt levels will cause us to incur higher interest charges, which would result in higher debt service payments and could be accompanied by restrictive covenants. If there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage debt on that property, then the amount available for distributions to stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss since
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defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the value of your investment. For tax purposes, a foreclosure on any of our properties will 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 will recognize taxable income on foreclosure, but we would not receive any cash proceeds. We may give full or partial guarantees to lenders of mortgage debt to the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgage contains cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties. If any of our properties are foreclosed upon due to a default, our ability to pay cash distributions to our stockholders will be adversely affected.
If we draw on a line of credit to fund redemptions or for any other reason, our leverage will increase.
We have obtained a line of credit which could provide for a ready source of liquidity to fund redemptions of shares of our common stock, in the event that redemption requests exceed our operating cash flows, liquid assets and net proceeds from our continuous offering. There can be no assurances that we will be able to obtain future lines of credit on reasonable terms given the recent volatility in the capital markets. In addition, we may not be able to obtain additional lines of credit of an appropriate size for our business until such time as we have a substantial portfolio, or at all. If we borrow under a line of credit to fund redemptions of shares of our common stock, our leverage will increase until we receive additional net proceeds from our continuous offering, additional operating cash flows or sell some of our assets to repay outstanding indebtedness.
Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to make distributions to our stockholders.
We have incurred, and in the future may incur additional indebtedness that bears interest at variable rate. Interest we pay on our debt obligations will reduce cash available for distributions. To the extent that we incur variable rate debt, increases in interest rates could increase our interest costs, which could reduce our cash flows and our ability to make distributions to you. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments in properties at times which may not permit realization of the maximum return on such investments.
Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.
When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property or discontinue insurance coverage. In addition, loan documents may limit our ability to replace the property manager or terminate certain operating or lease agreements related to the property. These or other limitations may adversely affect our flexibility to make distributions to investors in our common stock and our ability to achieve our investment objectives.
If we enter into financing arrangements involving balloon payment obligations, it may adversely affect our ability to make distributions to our stockholders.
Some of our financing arrangements may require us to make a lump-sum or “balloon” payment at maturity. Our ability to make a balloon payment at maturity is uncertain and may depend upon our ability to obtain additional financing or our ability to sell the particular property. At the time the balloon payment is due, we may or may not be able to refinance the balloon payment on terms as favorable as the original loan or sell the particular property at a price sufficient to make the balloon payment. The effect of a refinancing or sale could affect the rate of return to stockholders and the projected time of disposition of our assets.
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Failure to hedge effectively against interest rate changes may materially adversely affect our ability to achieve our investment objectives.
Subject to any limitations required to maintain qualification as a REIT, we may seek to manage our exposure to interest rate volatility by using interest rate hedging arrangements, such as interest rate cap or collar agreements and interest rate swap agreements. These agreements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements and that these arrangements may not be effective in reducing our exposure to interest rate changes. These interest rate hedging arrangements may create additional assets and/or liabilities from time to time that may be held or liquidated separately from the underlying property or loan for which they were originally established. We have adopted a policy relating to the use of derivative financial instruments to hedge interest rate risks related to our borrowings. This policy governs our use of derivative financial instruments to manage the interest rates on our variable rate borrowings. See “Investment Objectives, Strategy and Policies — Acquisition and Investment Policies.” Hedging may reduce the overall returns on our investments. Failure to hedge effectively against interest rate changes may have a material adverse effect on our ability to achieve our investment objectives.
If we sell properties by providing financing to purchasers, defaults by the purchasers could adversely affect our cash flow from operations.
In some instances we may sell our properties by providing financing to purchasers. When we provide financing to purchasers, we will bear the risk that the purchaser may default on its obligations under the financing, which could negatively impact cash flow from operations. Even in the absence of a purchaser default, the distribution of sale proceeds, or their reinvestment in other assets, will be delayed until the promissory notes or other property we may accept upon the sale are actually paid, sold, refinanced or otherwise disposed of. In some cases, we may receive initial down payments in cash and other property in the year of sale in an amount less than the selling price, and subsequent payments will be spread over a number of years. If any purchaser defaults under a financing arrangement with us, it could negatively impact our ability to pay cash distributions to you.
Risks Related to Our Corporate Structure
Your interest in us will be diluted if we issue additional shares.
Our stockholders will not have preemptive rights to any shares we issue in the future. Our charter authorizes us to issue 500,000,000 shares of capital stock, of which 490,000,000 shares are designated as common stock and 10,000,000 shares are designated as preferred stock. Our board of directors may increase the aggregate number of authorized shares of capital stock or the number of authorized shares of capital stock of any class or series without stockholder approval. After you purchase shares of our common stock in this offering, our board of directors may elect, without stockholder approval, to: (1) sell additional shares in this or future public offerings; (2) issue equity interests in private offerings; (3) issue shares upon the exercise of the options we may grant to our independent directors or future employees; (4) issue shares to our advisor, its successors or assigns, in payment of an outstanding fee obligation; or (5) issue shares to sellers of properties we acquire in connection with an exchange of limited partnership interests of our operating partnership. To the extent we issue additional shares after your purchase in this offering, you will not experience dilution in the value of your shares given that our common stock is valued daily based on our NAV. However, to the extent we issue additional shares after your purchase in this offering, your percentage ownership interest will be diluted.
Our charter limits the number of shares a person may own, which may discourage a takeover that could otherwise result in a premium price to our stockholders.
Our charter, with certain exceptions, authorizes our board of directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. Unless exempted by our board of directors, no person may beneficially or constructively own more than 9.8% in value or number of shares, whichever is more restrictive of
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our outstanding capital stock or more than 9.8% in value or number of shares, whichever is more restrictive, of our outstanding common stock. A person that did not acquire beneficially or constructively more than 9.8% of our shares may become subject to our charter restrictions if redemptions by other stockholders cause such person’s holdings to exceed 9.8% of our outstanding shares. Our 9.8% ownership limitation may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for our stockholders.
Our charter permits our board of directors to issue stock with terms that may subordinate the rights of the holders of our common stock or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.
Subject to its fiduciary duties to stockholders, our board of directors may classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of any such stock without stockholder approval. Thus, our board of directors in the exercise of its business judgment could authorize the issuance of preferred stock with terms and conditions that could have priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might otherwise provide a premium price to holders of our common stock.
Our rights and the rights of our stockholders to recover claims against our directors and officers are limited, which could reduce your and our recovery against them if they cause us to incur losses.
Maryland law provides that a director will not have any liability as a director so long as he or she performs his or her duties in accordance with the applicable standard of conduct. In addition, subject to any limitations required by the Statement of Policy Regarding Real Estate Investment Trusts published by the North American Securities Administrators Association (which we refer to as the NASAA REIT Guidelines), Maryland law and our charter provide that no director or officer shall be liable to us or our stockholders for monetary damages unless the director or officer (1) actually received an improper benefit or profit in money, property or services or (2) was actively and deliberately dishonest as established by a final judgment. Moreover, our charter requires us to indemnify our directors and officers, subject to any limitations required by the NASAA REIT Guidelines and Maryland law. As a result, you and we may have more limited rights against our directors or officers than might otherwise exist under common law, which could reduce your and our recovery from these persons if they act in a manner that causes us to incur losses. See “Indemnification and Limitation of Liability.”
Certain provisions of Maryland law could inhibit transactions or changes of control under circumstances that could otherwise provide stockholders with the opportunity to realize a premium.
Certain provisions of the Maryland General Corporation Law applicable to us prohibit business combinations with:
| | • | | any person who beneficially owns 10% or more of the voting power of our outstanding voting stock, which we refer to as an “interested stockholder;” |
| | • | | an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was an interested stockholder; or |
| | • | | an affiliate of an interested stockholder. |
These prohibitions last for five years after the most recent date on which the interested stockholder became an interested stockholder. Thereafter, any business combination with the interested stockholder or an affiliate of the
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interested stockholder must be recommended by our board of directors and approved by the affirmative vote of at least 80% of the votes entitled to be cast by holders of outstanding shares of our common stock, and two-thirds of the votes entitled to be cast by holders of our shares other than shares held by the interested stockholder. These requirements could have the effect of inhibiting a change in control even if a change in control were in our stockholders’ best interest. These provisions of Maryland law do not apply, however, to business combinations that are approved or exempted by our board of directors prior to the time that someone becomes an interested stockholder. See “Certain provisions of Maryland Law and of our Charter and Bylaws — Business Combinations.”
Our UPREIT structure may result in potential conflicts of interest with limited partners in our operating partnership whose interests may not be aligned with those of our stockholders.
Our directors and officers have duties to our corporation and our stockholders under Maryland law in connection with their management of the corporation. At the same time, we, as general partner, have fiduciary duties under Delaware law to our operating partnership and to the limited partners in connection with the management of our operating partnership. If we admit outside limited partners to our operating partnership, our duties as general partner of our operating partnership and its partners may come into conflict with the duties of our directors and officers to the corporation and our stockholders. Under Delaware law, a general partner of a Delaware limited partnership owes its limited partners the duties of good faith and fair dealing. Other duties, including fiduciary duties, may be modified or eliminated in the partnership’s partnership agreement. The partnership agreement of our operating partnership provides that, for so long as we own a controlling interest in our operating partnership, any conflict that cannot be resolved in a manner not adverse to either our stockholders or the limited partners will be resolved in favor of our stockholders.
Additionally, the partnership agreement expressly limits our liability by providing that we and our officers, directors, agents and employees, will not be liable or accountable to our operating partnership for losses sustained, liabilities incurred or benefits not derived if we or our officers, directors, agents or employees acted in good faith. In addition, our operating partnership is required to indemnify us and our officers, directors, employees, agents and designees to the extent permitted by applicable law from and against any and all claims arising from operations of our operating partnership, unless it is established that: (1) the act or omission was committed in bad faith, was fraudulent or was the result of active and deliberate dishonesty; (2) the indemnified party received an improper personal benefit in money, property or services; or (3) in the case of a criminal proceeding, the indemnified person had reasonable cause to believe that the act or omission was unlawful.
The provisions of Delaware law that allow the fiduciary duties of a general partner to be modified by a partnership agreement have not been tested in a court of law, and we have not obtained an opinion of counsel covering the provisions set forth in the partnership agreement that purport to waive or restrict our fiduciary duties.
If we internalize our management functions, we may be unable to obtain key personnel, which could adversely affect our operations and the value of your investment.
If we were to internalize our management functions, certain key employees of the advisor may not become our employees, but may instead remain employees of our advisor or its affiliates. An inability to manage an internalization transaction effectively could thus result in our incurring additional costs, including potentially significant litigation costs; or experiencing operational issues that could divert our management’s attention from management of our investments and negatively impact the value of your investment.
Your investment return may be reduced if we are deemed to be an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
We do not intend, or expect to be required, to register as an investment company under the Investment Company Act. Rule 3a-1 under the Investment Company Act generally provides that an issuer will not be deemed to be an “investment company” provided that (1) it does not hold itself out as being engaged primarily,
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or propose to engage primarily, in the business of investing, reinvesting or trading securities and (2) no more than 45% of the value of its assets (exclusive of government securities and cash items) and no more than 45% of its net income after taxes (for the past four fiscal quarters combined) is derived from securities other than government securities, securities issued by employees’ securities companies, securities issued by certain majority owned subsidiaries of such company and securities issued by certain companies that are controlled primarily by such company. If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:
| | • | | limitations on capital structure; |
| | • | | restrictions on specified investments; |
| | • | | requirements that we add directors who are independent of us, our advisor and its affiliates; |
| | • | | restrictions or prohibitions on retaining earnings; |
| | • | | restrictions on leverage or senior securities; |
| | • | | restrictions on unsecured borrowings; |
| | • | | requirements that our income be derived from certain types of assets; |
| | • | | prohibitions on transactions with affiliates; and |
| | • | | compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses. |
If we were required to register as an investment company but failed to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of us and liquidate our business.
Registration with the SEC as an investment company would be costly, would subject our company to a host of complex regulations, and would divert the attention of management from the conduct of our business. In addition, the purchase of real estate that does not fit our investment guidelines and the purchase or sale of investment securities or other assets to preserve our status as a company not required to register as an investment company could materially adversely affect our NAV, the amount of funds available for investment, and our ability to pay distributions to our stockholders.
Risks Related to Federal Income Taxes and Our Status as a REIT
Failure to qualify as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our stockholders.
We believe that our organization and proposed ownership and method of operation will enable us to meet the requirements for qualification and taxation as a REIT. However, we cannot assure you that we will qualify as such. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code as to which there are only limited judicial and administrative interpretations and involves the determination of facts and circumstances not entirely within our control. Future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT or the federal income tax consequences of such qualification.
If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders because:
| | • | | we would not be allowed a deduction for dividends paid to stockholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates; |
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| | • | | we could be subject to the U.S. federal alternative minimum tax and possibly increased state and local taxes; and |
| | • | | unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT. |
In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our common stock. See “Material U.S. Federal Income Tax Considerations” for a discussion of material U.S. federal income tax consequences relating to us and the return on an investment in our common stock.
Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.
Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. For example, to the extent we satisfy the 90% distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our stockholders in a calendar year is less than a minimum amount specified under the Code. Further, any taxable REIT subsidiary (“TRS”) we establish will be subject to regular corporate U.S. federal, state and local taxes. Any of these taxes would decrease cash available for distribution to stockholders.
REIT distribution requirements could adversely affect our liquidity and may force us to borrow funds or sell assets during unfavorable market conditions.
In order to maintain our qualification as a REIT and to meet the REIT distribution requirements, we may need to borrow funds on a short-term basis or sell assets, even if the then-prevailing market conditions are not favorable for these borrowings or sales. Our cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for U.S. federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt service or amortization payments. The insufficiency of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short- and long-term debt or sell equity securities in order to fund distributions required to maintain our qualification as a REIT.
The opinion of our tax counsel regarding our status as a REIT does not guarantee our ability to remain a REIT.
We received an opinion of Goodwin Procter LLP, dated December 5, 2011, to the effect that we will be organized in conformity with the requirements for qualification and taxation as a REIT under the Code and that, as of the date of the opinion, our prior, current and proposed ownership organization and method of operations, as then represented by us to Goodwin Procter LLP, will allow us to satisfy the requirements for qualification and taxation as a REIT under the Code, commencing with our taxable year ended December 31, 2012. The opinion of Goodwin Procter LLP is based on various assumptions and on our representations to Goodwin Procter LLP as of the date of the opinion concerning our current and continuing organization, our prior, current and proposed ownership and operations, and other matters relating to our ability to qualify as a REIT. The opinion is expressly conditioned upon the accuracy of such assumptions and representations, which Goodwin Procter LLP has not verified and will not verify, including an assumption to the effect that we are successful in avoiding “dividend equivalent” redemptions (as discussed below in “Material U.S. Federal Income Tax Considerations — Taxation of U.S. Stockholders — Redemptions of Common Stock.”). Moreover, our qualification and taxation as a REIT will depend upon our ability to meet, through actual annual operating results, distribution levels, diversity of share ownership, and the various and complex REIT qualification tests imposed under the Code, the results of
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which have not been and will not be reviewed or verified by Goodwin Procter LLP. Accordingly, no assurance can be given that we will in fact satisfy such requirements. The opinion of Goodwin Procter LLP is based upon the law as of the date of the opinion, which is subject to change either prospectively or retroactively. Opinions of counsel impose no obligation on counsel to advise us or the holders of our common stock of any subsequent change in the matters stated, represented or assumed, or of any subsequent change in the applicable law. Changes in applicable law could modify the conclusions expressed in the opinion. Unlike a ruling from the IRS, an opinion of Goodwin Procter LLP is not binding on the IRS, and no assurance can be given that the IRS could not successfully challenge our qualification as a REIT.
If we fail to invest a sufficient amount of the net proceeds from selling our stock in real estate assets within one year from the receipt of the proceeds, we could fail to qualify as a REIT.
Temporary investment of the net proceeds from sales of our stock in short-term securities and income from such investment generally will allow us to satisfy various REIT income and asset requirements, but only during the one-year period beginning on the date we receive the net proceeds. If we are unable to invest a sufficient amount of the net proceeds from sales of our stock in qualifying real estate assets within such one-year period, we could fail to satisfy one or more of the gross income or asset tests and/or we could be limited to investing all or a portion of any remaining funds in cash or cash equivalents. If we fail to satisfy any such income or asset test, unless we are entitled to relief under certain provisions of the Code, we could fail to qualify as a REIT. See “Material U.S. Federal Income Tax Considerations.”
If we form a taxable REIT subsidiary (“TRS”), our overall tax liability could increase.
Any domestic TRS we form will be subject to U.S. federal, state and local income tax on its taxable income. Accordingly, although our ownership of any TRSs may allow us to participate in the operating income from certain activities that our REIT could not participate in, that operating income will be fully subject to income tax. The after-tax net income of any TRS would be available for distribution to us, however any dividends received by our REIT from its TRSs will only be qualifying income for the 95% REIT income test, not the 75% REIT income test. If we have any non-U.S. TRSs, then they may be subject to tax in jurisdictions where they operate and on certain U.S. source income, and, under special rules dealing with foreign subsidiaries, they may generate income that is nonqualifying for either of the REIT income tests.
If we form a TRS, our ownership of such TRS would be subject to limitations and our transactions with any such TRS would cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.
Overall, no more than 25% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs. In addition, the Code limits the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. We will monitor the value of our respective investments in any TRSs we may form for the purpose of ensuring compliance with TRS ownership limitations and intend to structure our transactions with any such TRSs on terms that we believe are arm’s-length to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with the 25% TRS limitation or to avoid application of the 100% excise tax.
If our operating partnership is treated as a corporation for U.S. federal income tax purposes, we will cease to qualify as a REIT.
Our operating partnership currently is a disregarded entity for U.S. federal income tax purposes. Our operating partnership will become a partnership for U.S. federal income tax purposes if and when it issues interests to a person other than the company or an entity disregarded from the company for tax purposes. As a
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partnership, our operating partnership would not be subject to U.S. federal income tax on its income. Instead, each of its partners, including us, would be required to take into account its allocable share of the operating partnership’s income. No assurance can be provided, however, that the IRS would not challenge our operating partnership’s status as a partnership for U.S. federal income tax purposes, or that a court would not sustain such a challenge. If the IRS were successful in treating our operating partnership as a corporation for tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, cease to qualify as a REIT. Also, our operating partnership would become subject to U.S. federal, state and local income tax, which would reduce significantly the amount of cash available for debt service and for distribution to its partners, including us.
Dividends payable by REITs generally do not qualify for reduced tax rates under current law.
Certain dividends payable by regular domestic corporations to individual U.S. stockholders, are eligible for preferential federal income tax rates applicable to long term capital gains. The more favorable rates applicable to regular corporate dividends under current law could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.
Complying with REIT requirements may cause us to forego otherwise attractive opportunities or to liquidate otherwise attractive investments.
To qualify as a REIT, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our capital stock. In order to meet these tests, we may be required to forego investments we might otherwise make. Thus, compliance with the REIT requirements may hinder our performance.
In addition, if we fail to comply with certain asset ownership tests at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification. As a result, we may be required to liquidate otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.
Our ability to dispose of some of our properties may be constrained by their tax attributes.
Federal tax laws may limit our ability to sell properties and this may affect our ability to sell properties without adversely affecting returns to our stockholders. These restrictions may reduce our ability to respond to changes in the performance of our investments and could adversely affect our financial condition and results of operations.
Our ability to dispose of some of our properties is constrained by their tax attributes. Properties which we own for a significant period of time or which we acquire through tax deferred contribution transactions in exchange for partnership interests in our operating partnership often have low tax bases. If we dispose of low-basis properties outright in taxable transactions, we may recognize a significant amount of taxable gain that we must distribute to our stockholders in order to avoid tax, and potentially in order to meet the minimum distribution requirements of the Code for REITs, which in turn would impact our cash flow. In some cases, without incurring additional costs we may be restricted from disposing of properties contributed in exchange for our partnership interests under tax protection agreements with contributors. To dispose of low basis or tax-protected properties efficiently we may use like-kind exchanges, which qualify for non-recognition of taxable gain, but can be difficult to consummate and result in the property for which the disposed assets are exchanged inheriting their low tax bases and other tax attributes (including tax protection covenants).
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You may be restricted from acquiring or transferring certain amounts of our common stock.
In order to maintain our REIT qualification, among other requirements, no more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals, as defined in the Code to include certain kinds of entities, during the last half of any taxable year, other than the first year for which a REIT election is made. To assist us in qualifying as a REIT, our charter contains an aggregate stock ownership limit and a common stock ownership limit. Generally, any shares of our stock owned by affiliated owners will be added together for purposes of the aggregate stock ownership limit, and any shares of common stock owned by affiliated owners will be added together for purposes of the common stock ownership limit.
If anyone attempts to transfer or own shares in a way that would violate the aggregate stock ownership limit or the common stock ownership limit (or would prevent us from continuing to qualify as a REIT), unless such ownership limits have been waived by our board of directors, those shares instead will be deemed transferred to a trust for the benefit of a charitable beneficiary and will be either redeemed by us or sold to a person whose ownership of the shares will not violate the aggregate stock ownership limit or the common stock ownership limit and will not prevent us from qualifying as a REIT. If this transfer to a trust fails to prevent such a violation or our disqualification as a REIT, then the initial intended transfer or ownership will be null and void from the outset. Anyone who acquires or owns shares in violation of the aggregate stock ownership limit or the common stock ownership limit, unless such ownership limit or limits have been waived by our board of directors, or the other restrictions on transfer or ownership in our charter bears the risk of a financial loss when the shares are redeemed or sold if the NAV of our stock falls between the date of purchase and the date of redemption or sale.
The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.
We may acquire mezzanine loans, for which the IRS has provided a safe harbor but not rules of substantive law. Pursuant to the safe harbor, if a mezzanine loan meets certain requirements, it will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% income test. To the extent that any of our mezzanine loans do not meet all of the requirements for reliance on the safe harbor, such loans may not be real estate assets and could adversely affect our REIT status.
Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.
The REIT provisions of the Code substantially limit our ability to hedge our liabilities. Generally, income from a hedging transaction we enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets does not constitute “gross income” for purposes of the 75% or 95% gross income tests, provided certain circumstances are satisfied. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both of the gross income tests. As a result of these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because a domestic TRS would be subject to tax on income or gains resulting from hedges entered into by it or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in our TRSs will generally not provide any tax benefit, except for being carried forward for use against future taxable income in the TRSs.
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The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.
Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to be a REIT, we will not be allowed a deduction for dividends paid to stockholders in computing our taxable income and will be subject to U.S. federal income tax at regular corporate rates, which may have adverse consequences on our total return to our stockholders.
Investments outside the U.S. could present additional complications to our ability to satisfy the REIT qualification requirements and may subject us to additional taxes.
Operating in functional currencies other than the U.S. dollar and in environments in which real estate transactions are customarily structured differently than they are in the U.S. or are subject to different legal rules may complicate our ability to structure non-U.S. investments in a manner that enables us to satisfy the REIT qualification requirements. In addition, non-U.S. investments may subject us to various non-U.S. tax liabilities, including withholding taxes.
The IRS may take the position that gains from sales of property are subject to a 100% prohibited transaction tax.
We may have to sell assets from time to time to fund redemption requests, to satisfy our REIT distribution requirements, to satisfy other REIT requirements, or for other purposes. It is possible that the IRS may take the position that one or more sales of our properties may be a prohibited transaction, which is a sale of property held by us primarily for sale in the ordinary course of our trade or business. If we are deemed to have engaged in a prohibited transaction, our gain from such sale would be subject to a 100% tax. The Code sets forth a safe harbor under which a REIT may, under certain circumstances, sell property without risking the imposition of the 100% tax, but there is no assurance that we will be able to qualify for the safe harbor. We do not intend to hold property for sale in the ordinary course of business, but there is no assurance that the IRS will not challenge our position, especially if we make frequent sales or sales of property in which we have short holding periods.
You may have a current tax liability on distributions you elect to reinvest in our common stock.
If you participate in our distribution reinvestment plan, you will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not a tax-free return of capital. As a result, unless you are a tax-exempt entity, you may have to use funds from other sources to pay your tax liability on the reinvested distributions.
Possible legislative or other actions affecting REITs could adversely affect our stockholders and us.
The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect our stockholders or us. We cannot predict whether, when, in what forms, or with what effective dates, the tax laws applicable to our stockholders or us will be changed.
We may be subject to adverse tax consequences if certain sale-leaseback transactions are not characterized by the IRS as “true leases.”
We may purchase investments in real estate properties and lease them back to the sellers of such properties. In the event the IRS does not characterize such leases as “true leases,” we could be subject to certain adverse tax consequences, including an inability to deduct depreciation expense and cost recovery relating to such property, and under certain circumstances, we could fail to qualify as a REIT as a result.
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Risks Related to Employee Benefit Plans and Individual Retirement Accounts
In some cases, if you fail to meet the fiduciary and other standards under ERISA, the Code or common law as a result of an investment in our stock, you could be subject to liability for losses as well as civil penalties.
There are special considerations that apply to investing in our shares on behalf of pension, profit sharing or 401(k) plans, health or welfare plans, individual retirement accounts or Keogh plans. If you are investing the assets of any of the entities identified in the prior sentence in our common stock, you should satisfy yourself that:
| | • | | your investment is consistent with your fiduciary obligations under applicable law, including common law, ERISA and the Code; |
| | • | | your investment is made in accordance with the documents and instruments governing the trust, plan or IRA, including a plan’s investment policy; |
| | • | | your investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA, if applicable, and other applicable provisions of ERISA and the Code; |
| | • | | your investment will not impair the liquidity of the trust, plan or IRA; |
| | • | | your investment will not produce “unrelated business taxable income” for the plan or IRA; |
| | • | | you will be able to value the assets of the plan annually in accordance with ERISA requirements and applicable provisions of the applicable trust, plan or IRA document; and |
| | • | | your investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code. |
Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA, the Code, or other applicable statutory or common law may result in the imposition of civil penalties, and can subject the fiduciary to liability for any resulting losses as well as equitable remedies. In addition, if an investment in our shares constitutes a prohibited transaction under the Code, the “disqualified person” that engaged in the transaction may be subject to the imposition of excise taxes with respect to the amount invested.
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Statements Regarding Forward-Looking Information
We make statements in this prospectus, and in the information incorporated by reference, that are forward-looking statements within the meaning of the federal securities laws. The words “believe,” “estimate,” “expect,” “anticipate,” “intend,” “plan,” “seek,” “may,” and similar expressions or statements regarding future periods are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this prospectus or in the information incorporated by reference into this prospectus.
The forward-looking statements included in this prospectus are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:
| | • | | our ability to effectively deploy the proceeds raised in this offering; |
| | • | | our ability to raise a substantial amount of capital in the near term; |
| | • | | changes in economic conditions generally and the real estate and securities markets specifically; |
| | • | | legislative or regulatory changes (including changes to the laws governing the taxation of REITs); |
| | • | | the effect of financial leverage, including changes in interest rates, availability of credit, loss of flexibility due to negative and affirmative covenants, refinancing risk at maturity and generally the increased risk of loss if our investments fail to perform as expected; |
| | • | | our ability to access sources of liquidity when we have the need to fund redemptions of common stock in excess of the proceeds from the sales of shares of our common stock in our continuous offering and the consequential risk that we may not have the resources to satisfy redemption requests; and |
Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this prospectus. All forward-looking statements are made as of the date of this prospectus and the risk that actual results will differ materially from the expectations expressed in this prospectus will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this prospectus, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this prospectus, including, without limitation, the risks described under “Risk Factors,” the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this prospectus will be achieved.
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Use of Proceeds
We have established a minimum offering of $10,000,000 in shares of our common stock and a maximum offering of $4,000,000,000 in shares of our common stock, including up to $500,000,000 shares pursuant to our distribution reinvestment plan. We sell shares of our common stock at a price that varies from day-to-day and, on any given day, is equal to our NAV per share.
We will not pay any upfront commissions on sales of shares of our common stock and our advisor has agreed to fund on our behalf all costs of our organization and this offering (other than the dealer manager fee). During our first year after the escrow period, we may use up to 1% of our offering proceeds (not to exceed $2,000,000,000, in total, of offering proceeds over such period and excluding shares issued under our distribution re-investment plan) along with our cash from operations, to pay for the costs of distribution and other underwriting compensation, while we grow our portfolio of real estate and real estate-related assets. After the first year, we expect that all distribution costs will be paid from our operating cash flow. As a result, we expect that approximately 99% of our aggregate gross offering proceeds will be available for investment in the purchase of real estate, real estate-related and other assets.
The table sets forth estimated figures assuming the sale of shares of our common stock representing (i) the minimum offering amount of $10,000,000 and no shares issued under our distribution reinvestment plan and (ii) the maximum offering amount of $4,000,000,000, excluding all of the $500,000,000 in shares under our distribution reinvestment plan. We may reallocate the shares of our common stock we are offering between the primary offering and our distribution reinvestment plan. We will only use the proceeds raised in this offering for the purposes set forth in this prospectus and in a manner approved by our board of directors, who serve as fiduciaries to our stockholders. Because amounts in this table are estimates, they may not accurately reflect the actual receipt or use of the offering proceeds.
| | | | | | | | | | | | | | | | |
| | | Minimum Offering of
$10,000,000 (Excluding
Distribution Reinvestment
Plan) | | | Maximum Offering of
$3,500,000,000 (Excluding
Distribution Reinvestment
Plan) | |
| | | Amounts | | | Percent | | | Amounts | | | Percent | |
Gross Offering Proceeds(1) | | $ | 10,000,000 | | | | 100.00% | | | $ | 3,500,000,000 | | | | 100.00% | |
Less: | | | | | | | | | | | | | | | | |
First Year Underwriting Compensation(2) | | | 100,000 | | | | 1.00% | | | | 20,000,000 | | | | 0.57% | |
| | | | | | | | | | | | | | | | |
Net Proceeds | | $ | 9,900,000 | | | | 99.00% | | | $ | 3,480,000,000 | | | | 99.43% | |
| | | | | | | | | | | | | | | | |
| (1) | We intend to conduct a continuous offering of an unlimited number of shares of our common stock over an unlimited time period by filing a new registration statement prior to the end of the three-year period described in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”); however, in certain states this offering is subject to annual extensions. |
| (2) | During our first year after our escrow period, we anticipate that we may use up to the lesser of 1% of our offering proceeds (or $20,000,000 which corresponds to 1% of total offering proceeds of $2,000,000,000), excluding shares issued under our distribution reinvestment plan, along with our cash flows from operations, to pay for items included within the definition of “underwriting compensation,” even though they do not constitute upfront selling commissions, while we grow our portfolio of real estate assets. The dollar amounts in the table are based on the assumption that our NAV remains at $15.00 throughout the offering period and that $2,000,000,000 of shares are sold during that first year. See “Plan of Distribution — Compensation of Our Dealer Manager and Other Participating Broker-Dealers — Selling Commissions and Asset-Based Dealer Manager Fee.” |
We intend to contribute the proceeds from this offering to our operating partnership. Our operating partnership will use the proceeds received from us: (1) to make investments in accordance with our investment
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strategy and policies; (2) to reduce borrowings and repay indebtedness incurred under various financing instruments into which it may enter, and (3) to fund redemption activity.
In periods when certain existing investors seek to redeem their shares, additional funds may also flow in from investors who are purchasing new shares; in these circumstances cash proceeds from the sale of new shares could be used to fund the redemptions. We believe that netting redemptions out of incoming proceeds from the offering is in the best interests of shareholders because of the time and transaction costs involved in investing new capital and in disposing of assets. To the extent that cash from new sales in the offering is used to fund redemptions, neither the Company’s aggregate NAV nor NAV per share are expected to be impacted.
Our advisor will pursue opportunities to purchase investments with the objective of building a diversified portfolio of investments. See “Investment Objectives, Strategy and Policies — Real Property Investments” for a description of the properties that we have acquired as of the date of this prospectus. We may enter into purchase options to allow us to acquire properties on future dates following the receipt of sufficient proceeds from this offering to make the investments. In light of the continuous nature of this offering, the identification and disclosure of actual property acquisitions will be an ongoing process. At any given point in time we will be actively pursuing multiple investment opportunities, with due diligence and negotiations at different stages of advancement. See “Risk Factors — Risks Related to an Investment in Cole Real Estate Income Strategy (Daily NAV), Inc.”
Our advisor, directly or through an affiliate, has agreed to fund organizational expenses and expenses incurred in connection with the offering (other than the dealer manager fee), including: (i) our legal, accounting, printing, mailing and filing fees, due diligence expenses that are included in a detailed and itemized invoice (such as expenses related to a review of this offering by one or more independent due diligence reviewers engaged by broker-dealers participating in this offering); (ii) amounts incurred in connection with holding our own educational conferences and sponsoring and/or attending conferences conducted by our participating broker-dealers for performing these services; and (iii) other marketing and organization costs, including payments made to participating broker-dealers. We estimate that such expenses paid to, or on behalf of, our dealer manager or participating broker-dealers will equal approximately 1.95% of the maximum gross offering proceeds, excluding shares issued under our distribution reinvestment plan. See “Plan of Distribution.”
Reimbursement payments will be made in monthly installments, but the aggregate monthly amount reimbursed can never exceed 0.75% of the aggregate gross offering proceeds from this offering, including shares issued in connection with the distribution reinvestment plan. If the sum of the total unreimbursed amount of such organization and offering costs, plus new costs incurred since the last reimbursement payment, exceeds the reimbursement limit described above for the applicable monthly installment, the excess will be eligible for reimbursement in subsequent months (subject to the 0.75% limit), calculated on an accumulated basis, until our advisor has been reimbursed in full. See “Compensation.”
We will also pay our dealer manager an asset-based dealer manager fee that is payable in arrears on a monthly basis and accrues daily based on our NAV until the date at which, in the aggregate, underwriting compensation from all sources, including the dealer manager fee and other underwriting compensation paid by us and our advisor and its affiliates, equals 10% of the gross proceeds from our primary offering. See “Compensation” for more details regarding this and other amounts payable to our advisor and its affiliates.
We may pay distributions from proceeds raised in this offering in anticipation of future cash flows, and we have not placed a limit on the amount of such proceeds we may use to pay distributions or redemptions. To the extent that our operating cash flow is insufficient to cover organization and offering expenses, costs of distribution and amounts payable to our advisor and its affiliates, we may use funds from any source for such purposes, including borrowings, asset sales and proceeds from this offering. See “Our Structure and Formation” and “Compensation.”
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Investment Objectives, Strategy and Policies
Investment Objectives
Our primary investment objectives are:
| | • | | to acquire commercial properties, leased under long-term net leases to creditworthy tenants, which provide current operating cash flow; |
| | • | | to maintain a level of liquid assets as a source of funds to meet redemption requests; |
| | • | | to provide reasonably stable, current income for you through the payment of distributions; and |
| | • | | to provide the opportunity to participate in capital appreciation in the value of our investments. |
Pursuant to our charter, these investment objectives may not be changed without the approval of our stockholders. We may not achieve any of these objectives. See the “Risk Factors” section of this prospectus.
Our Potential Competitive Strengths
We believe that we will be able to distinguish ourselves from other owners, operators, acquirers and developers of commercial properties. We believe our long-term success will be supported through the following potential competitive strengths:
| | • | | Cole’s Disciplined Investment Approach. Our advisor intends to utilize a disciplined investment approach developed and utilized by our sponsor over the last 30 years. Our sponsor’s investment approach focuses on acquiring necessity commercial and other income-producing properties, many of which share certain core characteristics, including a principal, creditworthy tenant in a long-term net lease and a strategic location. In addition, our sponsor’s investment strategy targets properties that typically have high occupancy rates (greater than 90%) and low to moderate leverage (0% to 50% loan to value). Our sponsor and its affiliates developed and refined this investment approach over a period of several decades, and throughout a variety of market conditions. While our sponsor historically applied their investment approach principally in the retail sector, our sponsor has utilized this investment approach in the corporate sector as well. Through this disciplined investment approach, we expect to achieve a relatively predictable and stable stream of income, which will provide a principal source of return for our investors in our common stock, plus the potential for capital appreciation in the value of our real estate assets. |
| | • | | Experienced Advisor. Mr. Cole, our chief executive officer and president and Mr. Roberts, our advisor’s executive vice president and managing director of real estate have over 33 and 26 years of commercial real estate experience, respectively. Additionally, our advisor’s executive management team has extensive real estate and public company operating experience. Further, our sponsor has built an organization of over 350 employees who are experienced in the various aspects of acquiring, financing, managing and disposing of commercial real estate, and most of these employees will serve as dual employees acting in part, on behalf of our advisor. |
| | • | | Successful Credit Underwriting Experience. Cole Real Estate Investments has demonstrated an ability to successfully underwrite the tenants that occupy the real estate assets of Cole-sponsored real estate programs. The combined portfolios of Cole Credit Property Trust I, Cole Credit Property Trust II and Cole Credit Property Trust III have a 98% occupancy rate, as of December 31, 2012. |
| | • | | Strong Industry Relationships. We believe that our extensive network of industry relationships with the real estate brokerage, development and investor communities will enable us to successfully execute our acquisition and investment strategies. These relationships augment our ability to source acquisitions in off-market transactions outside of competitive marketing processes, capitalize on development opportunities and capture repeat business and transaction activity. Our strong relationships with the tenant and leasing brokerage communities aid in attracting and retaining tenants. |
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| | • | | Ability to Purchase Properties for Cash. We expect that one of our competitive advantages will be our ability to purchase properties for cash and to close transactions quickly. We believe our ability to purchase properties for cash will expedite our acquisition process and make us an attractive purchaser to potential sellers of properties, particularly those sellers motivated by time constraints. Cole Capital Corporation, the broker-dealer affiliate of our sponsor, has successfully raised capital for our sponsor’s affiliated real estate portfolios, and we expect that, through their well-developed distribution capabilities and relationships with other broker-dealers, Cole Capital Corporation will be successful in selling shares on our behalf. |
While we believe that these factors will help distinguish us from our competitors and contribute to our long-term success, there is no guarantee that they will provide us with any actual competitive advantages.
Investment Strategy
Our investment strategy is to invest primarily in a diversified portfolio of (1) necessity commercial properties in the retail, office and industrial sectors that are leased to creditworthy tenants under long-term net leases, and are strategically located throughout the United States and U.S. protectorates, (2) notes receivable secured by commercial real estate, including the origination of loans, and (3) U.S. government securities, agency securities and corporate debt and other investments for which there is reasonable liquidity. Our investment in commercial properties is limited to the retail, office and industrial sectors that meet our investment criteria. Our property sector allocations will vary according to market conditions and availability of investment opportunities but will broadly reflect the composition of the NCREIF Property Index (NPI), without multi-family and lodging properties. The NPI is managed by the NCREIF and is a widely followed benchmark amongst institutional investors. NCREIF is a not-for-profit trade association that serves its membership, and the academic and investment community’s need for improved commercial real estate data, performance measurement, investment analysis, information standards, education, and peer group interaction. The NPI comprises performance data from retail, office, industrial, multi-family and lodging (hotel) properties. Since our strategy will focus on income producing real estate with long term leases, we will not invest in multi-family or lodging properties that have short duration leases and have historically had volatile performance. For these and other reasons, we do not intend for our performance to be consistent with the performance of the NPI. The actual percentage of our portfolio that is invested in retail, office and industrial property categories may fluctuate due to market conditions and investment opportunities.
Acquisition and Investment Policies
Our board of directors, including our independent directors, has adopted investment policies. Our directors will formally review at a duly called meeting our investment policies on an annual basis and our portfolio on a quarterly basis or, in each case, more often as they deem appropriate. Changes to our investment policies must be approved by our board of directors, including a majority of our independent directors. Our board of directors may revise our investment policies, which we describe in more detail below, without the concurrence of our stockholders. However, our board of directors will not amend our charter, including any investment policies that are provided in our charter, without the concurrence of a majority of the outstanding shares, except for amendments that do not adversely affect the rights, preferences and privileges of our stockholders.
Our investment policies delegate to our advisor broad authority to execute real estate property acquisitions and dispositions. Our board of directors will at all times have ultimate oversight over our investments and may change from time to time the scope of authority delegated to our advisor with respect to acquisition and disposition transactions.
Commercial Real Estate Properties
Our commercial real estate investments will primarily consist of single-tenant, necessity commercial properties, which are leased to creditworthy tenants under long-term net leases and provide current operating cash flow. We use the term necessity commercial properties to describe retail properties that are important to
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customers and office and industrial properties that are essential to the business operations of a corporate tenant. Over time, we expect our property sector allocations to broadly reflect the composition of the NPI with the exception of multi-family and lodging, which will be excluded from our investment universe. The actual percentage of our portfolio that is invested in the retail, office and industrial property categories may fluctuate due to market conditions and investment opportunities.
Necessity retail describes companies that provide consumers with products that are important to, and part of, their everyday lives. Examples of necessity retail properties include pharmacies, home improvement stores, national superstores, restaurants and regional retailers that provide products considered necessities to that region. Historically, the retail sector of commercial real estate has been able to withstand most market cycles better than other sectors, due to the long-term resilience of consumer spending. By focusing our retail investment strategy on necessity retailers subject to long-term net leases, our objective is to provide our stockholders with a relatively stable stream of current income, while avoiding a significant decline in the value of our real estate portfolio.
Necessity office and industrial properties are essential to the business operations of a corporate tenant, typically due to one or more of the following factors:
| | • | | difficulty of replacement or prohibitive cost to relocate; |
| | • | | sole or major location for its distribution or office operations; |
| | • | | proximity to its distribution, manufacturing, research facilities or customer base; |
| | • | | lower labor, transportation and/or operating costs; |
| | • | | more stable labor force; |
| | • | | optimal access to transportation networks that enable efficient distribution; and/or |
| | • | | significant amount of tenant-funded capital improvements, such as customized computer systems and information technology infrastructure, racking and sorting systems, and cooling or refrigeration systems. |
For example, distribution facilities, warehouses, manufacturing plants and corporate or regional headquarters are often considered to be necessity office and industrial properties. We believe that necessity office and industrial properties provide a relatively greater level of stability than other office and industrial property types because necessity properties typically involve long-term leases and experience relatively low tenant turnover. We also believe that, as a result of recent and ongoing business developments, such as the role of the internet in the distribution of products, globalization of importing and exporting products and consolidation of businesses requiring office buildings to accommodate a single-tenant, there is, and we expect there will continue to be, increasing demand by commercial tenants for necessity office and industrial properties.
For over three decades, our sponsor has developed and utilized this investment approach in acquiring and managing real estate assets. We believe that our sponsor’s experience will provide us with a competitive advantage. In addition, our sponsor has built an organization of over 350 employees, who are experienced in the various aspects of acquiring, financing, managing and selling commercial real estate, and we believe that our access to these resources also will provide us with an advantage.
Our goal is to acquire a portfolio of commercial properties that are diversified by way of location and industry, in order to minimize the potential adverse impact of economic slow-downs or downturns in local markets or a specific industry. There is no limitation on the number, size or type of properties that we may acquire or on the percentage of net proceeds of this offering that may be invested in a single property. The number and mix of properties comprising our portfolio will depend upon real estate market conditions and other circumstances existing at the time we acquire properties, and the amount of proceeds we raise in this offering. We are not restricted to investments in commercial properties and we will not forego a high quality investment because it does not precisely fit our expected portfolio composition.
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We intend to incur debt to acquire properties where our advisor determines that incurring such debt is in our best interests. In addition, from time to time, we may acquire some properties without financing and later incur mortgage debt secured by one or more of such properties if favorable financing terms are available. We will use the proceeds from these loans to acquire additional properties and maintain liquidity. See “— Borrowing Policies” below for a more detailed description of our borrowing intentions and limitations.
Retail Real Estate Properties We expect the portion of our portfolio allocated to retail real estate properties will focus on regional or national name brand retail businesses with creditworthy and established track records. It is our present intention to hold substantially all of the retail properties that we acquire for a period in excess of five years. We will also pursue properties leased to tenants representing a variety of retail industries to avoid concentration in any one industry. These industries include all types of retail establishments, such as big box retailers, convenience stores, drug stores and restaurant properties. We expect that some of these investments will provide long-term value by virtue of their size, location, quality and condition, and lease characteristics. We currently expect that substantially all of our retail properties acquisitions will be in the United States, including U.S. protectorates.
We believe that focusing on the acquisition of single-tenant and multi-tenant necessity retail properties net leased to creditworthy tenants presents lower investment risks and greater stability than many other sectors of today’s commercial real estate market. By acquiring a large number of single-tenant and multi-tenant retail properties, we believe that lower than expected results of operations from one or a few investments will not necessarily preclude our ability to realize our investment objective of cash flow from our overall portfolio. We believe this approach can result in less risk to investors than an investment approach that targets other asset classes. In addition, we believe that retail properties under long-term triple net and double net leases offer a distinct investment advantage since these properties generally require less management and operating capital, have less recurring tenant turnover and, with respect to single-tenant properties, often offer superior locations that are less dependent on the financial stability of adjoining tenants. In addition, since we intend to acquire properties that are geographically diverse, we expect to minimize the potential adverse impact of economic slowdowns or downturns in local markets.
Many retail companies today are entering into sale-leaseback arrangements as a strategy for applying capital that would otherwise be applied to their real estate holdings to their core operating businesses. We believe that our investment strategy will enable us to take advantage of the increased emphasis on retailers’ core business operations in today’s competitive corporate environment as many retailers attempt to divest from real estate assets.
Office and Industrial Real Estate Properties We expect that our office properties will include recently constructed, high quality, low, mid- or high-rise office buildings that are necessary to a principal tenant, subject to a long-term net lease, and used for purposes such as a corporate, regional or product-specific headquarters. We also expect that our industrial property portfolio will include recently constructed, high quality industrial properties that are necessary to a single principal tenant, subject to a long-term net lease, and used for purposes such as warehousing, distribution, light manufacturing, research and development, or industrial flex facilities. It is our present intention to hold substantially all of the office and industrial properties that we acquire for a period of more than seven years.
We expect that some of our office and industrial properties will be multi-tenant properties, anchored by one or more principal tenants, who are creditworthy and subject to long-term net leases. We expect that, from time to time, we may invest in corporate development projects, designed to construct an income producing office or industrial property to serve one or more creditworthy tenants.
Real Estate Underwriting Process. In evaluating potential property acquisitions consistent with our investment objectives, our advisor will apply its well-established underwriting process to determine the creditworthiness of potential tenants. Similarly, our advisor will apply its credit underwriting criteria to possible
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new tenants when we are re-leasing properties in our portfolio. Our advisor’s underwriting process includes analyzing the financial data and other available information about the tenant, such as income statements, balance sheets, net worth, cash flow, business plans, data provided by industry credit rating services, and/or other information our advisor may deem relevant. Generally, these tenants must have a proven track record in order to meet the credit tests applied by our advisor. In addition, we may obtain guarantees of leases by the corporate parent of the tenant, in which case our advisor will analyze the creditworthiness of the guarantor. In many instances, especially in sale-leaseback situations, where we are acquiring a property from a company and simultaneously leasing it back to the company under a long-term lease, we will meet with the senior management to discuss the company’s business plan and strategy.
When using debt rating agencies, a tenant typically will be considered creditworthy when the tenant has an “investment grade” debt rating by Moody’s of Baa3 or better, credit rating by Standard & Poor’s of BBB– or better, or its payments are guaranteed by a company with such rating. Changes in tenant credit ratings, coupled with future acquisition and disposition activity, may increase or decrease our concentration of creditworthy tenants in the future.
Moody’s ratings are opinions of future relative creditworthiness based on an evaluation of franchise value, financial statement analysis and management quality. The rating given to a debt obligation describes the level of risk associated with receiving full and timely payment of principal and interest on that specific debt obligation and how that risk compares with that of all other debt obligations. The rating, therefore, provides one measure of the ability of a company to generate cash in the future.
A Moody’s debt rating of Baa3, which is the lowest investment grade rating given by Moody’s, is assigned to companies which, in Moody’s opinion, have adequate financial security. However, certain protective elements may be lacking or may be unreliable over any given period of time. A Moody’s debt rating of AAA, which is the highest investment grade rating given by Moody’s, is assigned to companies which, in Moody’s opinion, have exceptional financial security. Thus, investment grade tenants will be judged by Moody’s to have at least adequate financial security, and will in some cases have exceptional financial security.
Standard & Poor’s assigns a credit rating to companies and to each issuance or class of debt issued by a rated company. A Standard & Poor’s credit rating of BBB–, which is the lowest investment grade rating given by Standard & Poor’s, is assigned to companies that, in Standard & Poor’s opinion, exhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the company to meet its financial commitments. A Standard & Poor’s credit rating of AAA+, which is the highest investment grade rating given by Standard & Poor’s, is assigned to companies that, in the opinion of Standard & Poor’s, have extremely strong capacities to meet their financial commitments. Thus, investment grade tenants will be judged by Standard & Poor’s to have at least adequate protection parameters, and will in some cases have extremely strong financial positions.
While we will utilize ratings by Moody’s and Standard & Poor’s, when available, as one factor in determining whether a tenant is creditworthy, our advisor will also consider other factors in determining whether a tenant is creditworthy, for the purpose of meeting our investment objective. For example, our advisor’s underwriting process will look at other debt agencies, such as Dun & Bradstreet, along with our advisor’s own analysis of the financial condition of the tenant and/or the guarantor, the operating history of the property with the tenant, the tenant’s market share and track record within the tenant’s industry segment, the general health and outlook of the tenant’s industry segment, the strength of the tenant’s management team and/or the terms and length of the lease at the time of the acquisition.
Description of Leases. We expect, in most instances, to acquire tenant properties with existing double net or triple net leases. A triple net lease typically requires tenants to pay all or a majority of the operating expenses, including real estate taxes, special assessments and sales and use taxes, utilities, maintenance, insurance and building repairs related to the property, in addition to the lease payments. A double net lease typically requires
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tenants to pay for property taxes and insurance, in addition to the lease payments. Not all of our leases will be net leases. When spaces in a property become vacant, existing leases expire, or we acquire properties under development or requiring substantial refurbishment or renovation, we anticipate entering into net leases.
Typically, we expect to enter into leases that have terms of ten years or more. We may acquire properties under which the lease term has partially expired. We also may acquire properties with shorter lease terms if the property is in an attractive location, if the property is difficult to replace, or if the property has other significant favorable real estate attributes. Under most commercial leases, tenants are obligated to pay a predetermined annual base rent. Some of the leases also will contain provisions that increase the amount of base rent payable at points during the lease term. We expect that many of our leases will contain periodic rent increases. Generally, the leases require each tenant to procure, at its own expense, commercial general liability insurance, as well as property insurance covering the building for the full replacement value and naming the ownership entity and the lender, if applicable, as the additional insured on the policy. Tenants will be required to provide proof of insurance by furnishing a certificate of insurance to our advisor on an annual basis. The insurance certificates will be tracked and reviewed for compliance by our advisor’s property and risk management departments.
As a precautionary measure, we may obtain, to the extent available, secondary liability insurance, as well as loss of rents insurance that covers one year of annual rent in the event of a rental loss. In addition, some leases require that we procure insurance for both commercial general liability and property damage; however, generally the premiums are fully reimbursable from the tenant. In such instances, the policy will list us as the named insured and the tenant as the additional insured.
We may purchase properties and lease them back to the sellers of such properties. While we intend to use our best efforts to structure any such sale-leaseback transaction (as well as other leases) so that the lease will be characterized as a “true lease” and so that we are treated as the owner of the property for federal income tax purposes, the IRS could challenge this characterization. In the event that any sale-leaseback transaction (or other leases) is re-characterized as a financing transaction for federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed and in certain circumstances we could lose our REIT status. See the “Material U.S. Federal Income Tax Considerations — Qualification as a REIT — Income Tests — Sale-Leaseback Transactions” section of this prospectus.
Other Possible Commercial Real Estate Investments. Although we expect to invest primarily in necessity retail, office and industrial properties, we also may invest in other income-producing properties, where the properties share some of the same characteristics as our core properties, including one or more principal, creditworthy tenants, long-term leases, and/or strategic locations. We may also invest in ground leases.
Ownership Structure. Our investment in real estate generally takes the form of holding fee title or a long-term leasehold estate. We expect to acquire such interests either directly through our operating partnership or indirectly through limited liability companies, limited partnerships or other entities owned and/or controlled by our operating partnership. We may acquire properties by acquiring the entity that holds the desired properties. We also may acquire properties through investments in joint ventures, partnerships, co-tenancies or other co-ownership arrangements with third parties, including the developers of the properties or affiliates of our advisor. See the section captioned “Operating Partnership Agreement” in this prospectus and the “— Joint Venture Investments” section below.
Investment Decisions. Our advisor has substantial discretion with respect to the selection of our specific investments, subject to our investment and borrowing policies, and our policies are approved by our independent directors. In pursuing our investment objectives and making investment decisions on our behalf, our advisor evaluates the proposed terms of the investment against all aspects of the transaction, including the condition and financial performance of the asset, the terms of existing leases, the creditworthiness of the tenant or tenants, and property location and characteristics. Because the factors considered, including the specific weight we place on each factor, vary for each potential investment, we do not, and are not able to, assign a specific weight or level of importance to any particular factor.
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Our advisor procures and reviews an independent valuation estimate on each and every proposed investment. In addition, our advisor, to the extent such information is available, considers the following:
| | • | | tenant rolls and tenant creditworthiness; |
| | • | | a property condition report; |
| | • | | unit level store performance; |
| | • | | property location, visibility and access; |
| | • | | age of the property, physical condition and curb appeal; |
| | • | | neighboring property uses; |
| | • | | local market conditions, including vacancy rates; |
| | • | | area demographics, including trade area population and average household income; and |
| | • | | neighborhood growth patterns and economic condition. |
Our advisor also reviews the terms of each existing lease by considering various factors, including:
| | • | | tenant purchase options; |
| | • | | scope of the landlord’s maintenance, repair and replacement requirements; |
| | • | | projected net cash flow yield; and |
| | • | | projected internal rates of return. |
Environmental Matters. All real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, and the remediation of contamination associated with disposals. State and federal laws in this area are constantly evolving, and we intend to take commercially reasonable steps, a summary of which is described below, to protect ourselves from the impact of these laws.
We generally will not purchase any property unless and until we obtain what is generally referred to as a “Phase I” environmental site assessment and are generally satisfied with the environmental status of the property. However, we may purchase a property without obtaining such assessment if our advisor determines the assessment is not necessary under the circumstances. A Phase I environmental site assessment basically consists of a visual survey of the building and the property in an attempt to identify areas of potential environmental concerns, visually observing neighboring properties to asses surface conditions or activities that may have an adverse environmental impact on the property, and contacting local governmental agency personnel who perform a regulatory agency file search in an attempt to determine any known environmental concerns in the immediate vicinity of the property. A Phase I environmental site assessment does not generally include any sampling or testing of soil, ground water or building materials from the property and may not reveal all environmental hazards on a property.
We expect that some of the properties that we will acquire may contain, at the time of our investment, or may have contained prior to our investment, underground storage tanks for the storage of petroleum products and
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other hazardous or toxic substances. All of these operations create a potential for the release of petroleum products or other hazardous or toxic substances. Some of our potential properties may be adjacent to or near other properties that have contained or then currently contain underground storage tanks used to store petroleum products or other hazardous or toxic substances. In addition, certain of our potential properties may be on or adjacent to or near other properties upon which others, including former owners or tenants of our properties, have engaged, or may in the future engage, in activities that may release petroleum products or other hazardous or toxic substances.
From time to time, we may acquire properties, or interests in properties, with known adverse environmental conditions where we believe that the environmental liabilities associated with these conditions are quantifiable and that the acquisition will yield a superior risk-adjusted return. In such an instance, we will underwrite the costs of environmental investigation, clean-up and monitoring into the cost. Further, in connection with property dispositions, we may agree to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties.
Conditions to Closing Our Acquisitions. Generally, we condition our obligation to close the purchase of any investment on the delivery and verification of certain documents from the seller or developer, including, where appropriate:
| | • | | plans and specifications; |
| | • | | evidence of marketable title, subject to such liens and encumbrances as are acceptable to our advisor; |
| | • | | financial statements covering recent operations of properties having operating histories; |
| | • | | title and liability insurance policies; and |
| | • | | tenant estoppel certificates. |
In addition, we will take such steps as we deem necessary with respect to potential environmental matters. See the section of the prospectus, above, entitled “— Environmental Matters.”
We may enter into purchase and sale arrangements with a seller or developer of a suitable property under development or construction. In such cases, we will be obligated to purchase the property at the completion of construction, provided that the construction conforms to definitive plans, specifications, and costs approved by us in advance. In such cases, prior to our acquiring the property, we generally would receive a certificate of an architect, engineer or other appropriate party, stating that the property complies with all plans and specifications. If renovation or remodeling is required prior to the purchase of a property, we expect to pay a negotiated maximum amount to the seller upon completion.
In determining whether to purchase a particular property, we may obtain an option to purchase such property. The amount paid for an option, if any, normally is forfeited if the property is not purchased and normally is credited against the purchase price if the property is purchased.
In the purchasing, leasing and developing of properties, we are subject to risks generally incident to the ownership of real estate. See the “Risk Factors — Risks Related to Investments in Real Estate” section of this prospectus.
Joint Venture Investments
We may enter into joint ventures, partnerships, co-tenancies and other co-ownership arrangements with third parties, including affiliates of our advisor, for the acquisition, development or improvement of properties or the acquisition of other real estate-related investments. We may also enter into such arrangements with real estate
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developers, owners and other unaffiliated third parties for the purpose of developing, owning and operating real properties. In determining whether to invest in a particular joint venture, our advisor will evaluate the underlying real property or other real estate-related investment using the same criteria described above in “— Investment Decisions” for the selection of our real property investments. Our advisor also will evaluate the joint venture or co-ownership partner and the proposed terms of the joint venture or a co-ownership arrangement.
Our general policy is to invest in joint ventures only when we will have a right of first refusal to purchase the co-venturer’s interest in the joint venture if the co-venturer elects to sell such interest. In the event that the co-venturer elects to sell all or a portion of the interests held in any such joint venture, however, we may not have sufficient funds to exercise our right of first refusal to buy the other co-venturer’s interest in the joint venture. It is also possible that joint venture partners may resist granting us a right of first refusal or may insist on a different methodology for unwinding the joint venture if one of the parties wishes to liquidate its interest.
Our advisor’s officers and key persons may have conflicts of interest in determining which Cole-sponsored program should enter into any particular joint venture agreement. The co-venturer may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. In addition, our advisor’s officers and key persons may face a conflict in structuring the terms of the relationship between our interests and the interests of the co-venturer and in managing the joint venture. Since some or all of our advisor’s officers and key persons will also advise the co-venturer, agreements and transactions between us and any other Cole-sponsored co-venturer will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers, which may result in the co-venturer receiving benefits greater than the benefits that we receive. In addition, we may assume liabilities related to the joint venture that exceed the percentage of our investment in the joint venture.
We may enter into joint ventures with other Cole real estate programs, or with our sponsor, our advisor, one or more of our directors, or any of their respective affiliates, only if a majority of our directors (including a majority of our independent directors) not otherwise interested in the transaction approve the transaction as being fair and reasonable to us and on substantially the same terms and conditions as those received by unaffiliated joint venturers, and the cost of our investment must be supported by a current appraisal of the asset.
Development and Construction of Properties
We may invest in properties on which improvements are to be constructed or completed or which require substantial renovation or refurbishment. We expect that joint ventures would be the exclusive vehicle through which we would invest in build-to-suit properties. Any such joint ventures will make up no more than 20% of our total assets and our general policy is to structure them as follows:
| | • | | we may enter into a joint venture with the future tenant whereby we will provide a portion of the equity or debt financing; |
| | • | | we would accrue a preferred return during construction on any equity investment; |
| | • | | the properties will be developed by third parties; and |
| | • | | consistent with our general policy regarding joint venture investments, we would have a right of first refusal to purchase the co-investor’s interest. |
In the event that we may elect to engage in development or construction projects, in order to help ensure performance by the builders of properties that are under construction, completion of such properties will be guaranteed at the contracted price by a completion guaranty, completion bond or performance bond. Our advisor may rely upon the substantial net worth of the contractor or developer or a personal guarantee accompanied by financial statements showing a substantial net worth provided by an affiliate of the person entering into the construction or development contract as an alternative to a completion bond or performance bond. Development of real estate properties is subject to risks relating to a builder’s ability to control construction costs or to build in conformity with plans, specifications and timetables. See the “Risk Factors — Risks Related to Investments in Real Estate” section of this prospectus.
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We may make periodic progress payments or other cash advances to developers and builders of our properties prior to completion of construction only upon receipt of an architect’s certification as to the percentage of the project then completed and as to the dollar amount of the construction then completed. We intend to use such additional controls on disbursements to builders and developers as we deem necessary or prudent. We may directly employ one or more project managers, to plan, supervise and implement the development of any unimproved properties that we may acquire. Such persons would be compensated directly by us.
In addition, we may invest in unimproved properties or in mortgage loans secured by such properties, provided that we will not invest more than 10% of our total assets in unimproved properties or in mortgage loans secured by such properties. We will consider a property to be an unimproved property if it was not acquired for the purpose of producing rental or other operating cash flows, has no development or construction in process at the time of acquisition and no development or construction is planned to commence within one year of the acquisition.
Investing in and Originating Loans
The criteria that our advisor will use in making or investing in loans on our behalf is substantially the same as those involved in acquiring our investment in properties. We do not intend to make loans to other persons, to underwrite securities of other issuers or to engage in the purchase and sale of any types of investments other than those relating to real estate. However, unlike our property investments which we expect to hold in excess of five years for retail properties and seven years for office and industrial properties, we expect that the average duration of loans will typically be one to five years. We are not limited as to the amount of gross offering proceeds that we may apply to mortgage loan investments.
We do not expect to make or invest in loans that are not directly or indirectly secured by real estate. We will not make or invest in mortgage loans on any one property if the aggregate amount of all mortgage loans outstanding on the property, including our loan, would exceed an amount equal to 85% of the appraised value of the property, as determined by an independent third party appraiser, unless we find substantial justification due to other underwriting criteria. We may find such justification in connection with the purchase of loans in cases in which we believe there is a high probability of our foreclosure upon the property in order to acquire the underlying assets and in which the cost of the loan investment does not exceed the fair market value of the underlying property. We will not invest in or make loans unless an appraisal has been obtained concerning the underlying property, except for those loans insured or guaranteed by a government or government agency.
We may invest in first, second and third mortgage loans, mezzanine loans, bridge loans, wraparound mortgage loans, construction mortgage loans on real property, loans on leasehold interest mortgages, and CMBS held as long-term investments. However, we will not make or invest in any loans that are subordinate to any mortgage or equity interest of our advisor or any of its or our affiliates. We also may invest in participations in mortgage loans. A mezzanine loan is a loan made in respect of certain real property but is secured by a lien on the ownership interests of the entity that, directly or indirectly, owns the real property. A bridge loan is short term financing, for an individual or business, until permanent or the next stage of financing, can be obtained. Second mortgage and wraparound loans are secured by second or wraparound deeds of trust on real property that is already subject to prior mortgage indebtedness. A wraparound loan is one or more junior mortgage loans having a principal amount equal to the outstanding balance under the existing mortgage loan, plus the amount actually to be advanced under the wraparound mortgage loan. Under a wraparound loan, we would generally make principal and interest payments on behalf of the borrower to the holders of the prior mortgage loans. Third mortgage loans are secured by third deeds of trust on real property that is already subject to prior first and second mortgage indebtedness. Construction loans are loans made for either original development or renovation of property. Construction loans in which we would generally consider an investment would be secured by first deeds of trust on real property for terms of six months to two years. Loans on leasehold interests are secured by an assignment of the borrower’s leasehold interest in the particular real property. These loans are generally for terms of from six months to 15 years. The leasehold interest loans are either amortized over a period that is shorter than the
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lease term or have a maturity date prior to the date the lease terminates. These loans would generally permit us to cure any default under the lease. Mortgage participation investments are investments in partial interests of mortgages of the type described above that are made and administered by third-party mortgage lenders.
In evaluating prospective loan investments, our advisor will consider factors such as the following:
| | • | | the ratio of the investment amount to the underlying property’s value; |
| | • | | the property’s potential for capital appreciation; |
| | • | | expected levels of rental and occupancy rates; |
| | • | | the condition and use of the property; |
| | • | | current and projected cash flow of the property; |
| | • | | potential for rent increases; |
| | • | | the degree of liquidity of the investment; |
| | • | | the property’s income-producing capacity; |
| | • | | the quality, experience and creditworthiness of the borrower; |
| | • | | general economic conditions in the area where the property is located; |
| | • | | in the case of mezzanine loans, the ability to acquire the underlying real property; and |
| | • | | other factors that our advisor believes are relevant. |
In addition, we will seek to obtain a customary lender’s title insurance policy or commitment as to the priority of the mortgage or condition of the title. We will also consider the requirements of the REIT rules, which may limit our ability to make certain loan investments. Because the factors considered, including the specific weight we place on each factor, will vary for each prospective loan investment, we do not, and are not able to, assign a specific weight or level of importance to any particular factor.
We may originate loans from mortgage brokers or personal solicitations of suitable borrowers, or may purchase existing loans that were originated by other lenders. Our advisor will evaluate all potential loan investments to determine if the security for the loan and the loan-to-value ratio meets our investment criteria and objectives. Most loans that we will consider for investment would provide for monthly payments of interest and some may also provide for principal amortization, although many loans of the nature that we will consider provide for payments of interest only and a payment of principal in full at the end of the loan term. We will not originate loans with negative amortization provisions.
We do not have any policies directing the portion of our assets that may be invested in construction loans, mezzanine loans, bridge loans, loans secured by leasehold interests and second, third and wraparound mortgage loans. However, we recognize that these types of loans are riskier than first deeds of trust or first priority mortgages on income-producing, fee-simple properties, and we expect to minimize the amount of these types of loans in our portfolio, to the extent that we make or invest in loans at all. Our advisor will evaluate the fact that these types of loans are riskier in determining the rate of interest on the loans. We do not have any policy that limits the amount that we may invest in any single loan or the amount we may invest in loans to any one borrower. We are not limited as to the amount of gross offering proceeds that we may use to invest in or originate loans.
Our loan investments may be subject to regulation by federal, state and local authorities and subject to various laws and judicial and administrative decisions imposing various requirements and restrictions, including among other things, regulating credit granting activities, establishing maximum interest rates and finance charges, requiring disclosures to customers, governing secured transactions and setting collection, repossession
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and claims handling procedures and other trade practices. In addition, certain states have enacted legislation requiring the licensing of mortgage bankers or other lenders and these requirements may affect our ability to effectuate our proposed investments in loans. Commencement of operations in these or other jurisdictions may be dependent upon a finding of our financial responsibility, character and fitness. We may determine not to make loans in any jurisdiction in which the regulatory authority determines that we have not complied in all material respects with applicable requirements.
Liquid Investment Portfolio
Investment in Liquid Securities. To the extent permitted by the REIT rules, we intend for our liquid investment portfolio to primarily consist of U.S. government securities, agency securities and corporate debt. We use the term “agency” to refer to a U.S. government agency such as the Government National Mortgage Association, or Ginnie Mae, or a federally-chartered corporation such as the Federal National Mortgage Association, or Fannie Mae, or the Federal Home Loan Mortgage Corporation, or Freddie Mac.
We may also invest in liquid real estate-related securities, including equity and debt securities of companies whose shares are listed for trading on a national securities exchange and are engaged in real estate activities. Listed companies engaged in real estate activities may include, for example, REITs. Our investments in securities of companies engaged in activities related to real estate will involve special risks relating to the particular issuer of the securities, including the financial condition and business outlook of the issuer.
We may also make investments in CMBS to the extent permitted by the REIT rules. CMBS are securities that evidence interests in, or are secured by, a single commercial mortgage loan or a pool of commercial mortgage loans. CMBS are generally pass-through certificates that represent beneficial ownership interests in common law trusts whose assets consist of defined portfolios of one or more commercial mortgage loans. They are typically issued in multiple tranches whereby the more senior classes are entitled to priority distributions from the trust’s income. Losses and other shortfalls from expected amounts to be received on the mortgage pool are borne by the most subordinate classes, which receive payments only after the more senior classes have received all principal and/or interest to which they are entitled. CMBS are subject to all of the risks of the underlying mortgage loans. We may invest in investment grade and non-investment grade CMBS classes.
Additionally, we may acquire exchange traded funds, or ETFs, and mutual funds focused on REITs and real estate companies. To a lesser extent we may also invest in traded securities that are unrelated to real estate and make other investments or enter into transactions designed to limit our exposure to market volatility, illiquidity, interest rate or other risks related to our real-estate related, equity or debt, securities subject to complying with the REIT rules.
Cash, Cash Equivalents and Other Short-Term Investments. Our cash, cash equivalents and other short-term investments may include investments in money market instruments, cash and other cash equivalents (such as high-quality short-term debt instruments, including commercial paper, certificates of deposit, bankers’ acceptances, repurchase agreements and interest-bearing time deposits), to the extent consistent with our qualification as a REIT.
Other Investments
Although it is our expectation that our portfolio will consist primarily of commercial real estate, as well as notes receivable, liquid assets and cash and cash equivalents, we may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forego a high quality investment because it does not precisely fit our presently expected portfolio composition. Thus, to the extent that our advisor presents us with high quality investment opportunities that allow us to meet the REIT requirements under the Code, and that result in an overall real estate portfolio that is consistent with our investment objectives, our portfolio composition may vary from time to time.
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Borrowing Policies
Our advisor believes that utilizing borrowing is consistent with our investment objective of maximizing the return to investors and providing us with added liquidity. By operating on a leveraged basis, we have more funds available for investment in properties. This allows us to make more investments than would otherwise be possible, resulting in a more diversified portfolio.
At the same time, our advisor believes in utilizing leverage in a moderate fashion. Under our charter we may not make or invest in mortgage loans, including construction loans, on any one property if the aggregate amount of all mortgage loans on such property would exceed an amount equal to 85% of the appraised value of such property unless substantial justification exists for exceeding such limit because of the presence of other underwriting criteria. Additionally, our charter limits our aggregate borrowings to 75% of the greater of cost (or 300% of net assets) (before deducting depreciation or other non-cash reserves) or market value of our gross assets, unless excess borrowing is approved by a majority of the independent directors and disclosed to our stockholders in the next quarterly report along with the justification for such excess borrowing. Consistent with our advisor’s approach toward the moderate use of leverage our board of directors has adopted a policy to further limit our borrowings to 60% of the greater of cost (before deducting depreciation or other non-cash reserves) or market value of our gross assets, unless additional borrowing is approved by a majority of the independent directors and disclosed to our stockholders in the next quarterly report along with a justification for such excess borrowing. During the initial period of this offering, our board of directors, including a majority of our independent directors has approved exceeding this limit because we will then be in the process of raising our equity capital to acquire our portfolio. After we have acquired a substantial portfolio, our advisor will target a leverage of 50% of the greater of cost (before deducting depreciation or other non-cash reserves) or fair market value of our gross assets.
Our advisor uses its best efforts to obtain financing on the most favorable terms available to us. Lenders may have recourse to assets not securing the repayment of the indebtedness. Our advisor may refinance properties during the term of a loan only in limited circumstances, such as when a decline in interest rates makes it beneficial to prepay an existing mortgage, when an existing mortgage matures or if an attractive investment becomes available and the proceeds from the refinancing can be used to purchase such investment. The benefits of the refinancing may include increased cash flow resulting from reduced debt service requirements, an increase in dividend distributions from proceeds of the refinancing, if any, and an increase in property ownership if some refinancing proceeds are reinvested in real estate.
Our ability to increase our diversification through borrowing may be adversely impacted if banks and other lending institutions reduce the amount of funds available for loans secured by real estate. When interest rates on mortgage loans are high or financing is otherwise unavailable on a timely basis, we may purchase properties for cash with the intention of obtaining a mortgage loan for a portion of the purchase price at a later time. To the extent that we do not obtain mortgage loans on our properties, our ability to acquire additional properties will be restricted and we may not be able to adequately diversify our portfolio.
Our sponsor, our advisor, any of our directors and any of their respective affiliates will not make loans to us, except that we may borrow funds from affiliates of our advisor, including our sponsor, as bridge financing to enable us to acquire a property when offering proceeds alone are insufficient to do so and third party financing has not been arranged or is insufficient. Any and all such transactions must be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in such transactions as being fair, competitive and commercially reasonable and on terms and conditions no less favorable to us than those available from unaffiliated third parties.
In an effort to have adequate cash available to support our redemption plan, our advisor may determine to reserve borrowing capacity under our line of credit. Our advisor could then elect to borrow against this line of credit in its discretion in order to fund redemption requests.
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Disposition Policies
We intend to hold each property we acquire for an extended period, generally in excess of five years for retail properties and seven years for office and industrial properties. Holding periods for other real estate-related investments may vary. Regardless of intended holding periods, circumstances might arise that could cause us to determine to sell an asset before the end of the expected holding period if we believe the sale of the asset would be in the best interests of our stockholders. The determination of whether a particular asset should be sold or otherwise disposed of will be made after consideration of relevant factors, including prevailing and projected economic conditions, current tenant rolls and tenant creditworthiness, whether, depending on the assets tax attributes, we could apply the proceeds from the sale of the asset to make other investments, whether disposition of the asset would increase cash flow, and whether the sale of the asset would be a prohibited transaction under the Code or otherwise impact our status as a REIT. The selling price of a property that is net leased will be determined in large part by the amount of rent payable under the lease. If a tenant has a repurchase option at a formula price, we may be limited in realizing any appreciation. In connection with our sales of properties we may lend the purchaser all or a portion of the purchase price. In these instances, our taxable income may exceed the cash received in the sale.
Investment Limitations, In General
Our charter places numerous limitations on us with respect to the manner in which we may invest our funds or issue securities. We will not:
| | • | | borrow in excess of 75% of the greater of the aggregate cost (or 300% of net assets) (before deducting depreciation or other non-cash reserves) or fair market value of all assets owned by us, unless approved by a majority of our independent directors and disclosed to our stockholders in our next quarterly report along with the justification for such excess borrowing (although our board of directors has adopted a policy to reduce this limit from 75% to 60%); |
| | • | | make investments in unimproved property or mortgage loans on unimproved property in excess of 10% of our total assets; |
| | • | | make or invest in mortgage loans unless an appraisal is obtained concerning the underlying property, except for those mortgage loans insured or guaranteed by a government or government agency; |
| | • | | make or invest in mortgage loans, including construction loans, on any one property if the aggregate amount of all mortgage loans on such property would exceed an amount equal to 85% of the appraised value of such property unless substantial justification exists for exceeding such limit because of the presence of other underwriting criteria; |
| | • | | invest in indebtedness secured by a mortgage on real property that is subordinate to the lien or other indebtedness of our advisor, any director, our sponsor or any of our affiliates; |
| | • | | invest in real estate contracts of sale, otherwise known as land sale contracts, unless the contract is in recordable form and is appropriately recorded in the chain of title; |
| | • | | invest in commodities or commodity futures contracts, except for futures contracts when used solely for the purpose of hedging in connection with our ordinary business of investing in real estate assets and mortgages; |
| | • | | issue equity securities on a deferred payment basis or other similar arrangement; |
| | • | | issue debt securities in the absence of adequate cash flow to cover debt service; |
| | • | | issue equity securities that are assessable after we have received the consideration for which our board of directors authorized their issuance; |
| | • | | issue equity securities redeemable solely at the option of the holder, which restriction has no effect on our share redemption plan or the ability of our operating partnership to issue redeemable partnership interests; |
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| | • | | issue options or warrants to our advisor, our directors, our sponsor or any of their respective affiliates except on the same terms as such options or warrants are sold to the general public and provided that such options or warrants do not exceed ten percent of our outstanding shares on the date of grant; |
| | • | | make any investment that we believe will be inconsistent with our objectives of qualifying and remaining qualified as a REIT unless and until our board of directors determines, in its sole discretion, that REIT qualification is not in our best interests; |
| | • | | invest in debt secured by a mortgage on real property which is subordinate to the lien of other debt, except where the amount of junior debt, plus the outstanding amount of senior debt, does not exceed 90% of the appraised value of the property, if after giving effect thereto, the value of all such investments would not then exceed 25% of our tangible assets; |
| | • | | engage in securities trading, or engage in the business of underwriting; or |
| | • | | acquire properties or loans from affiliates, except as noted in “Conflicts of Interest — Transactions with Our Advisor and its Affiliates.” |
In addition, our charter includes many other investment limitations in connection with transactions with affiliated entities or persons, which limitations are described below under the “Conflicts of Interest” section of this prospectus. Our charter also includes restrictions on roll-up transactions, which are described under the “Description of Capital Stock” section of this prospectus.
Investment Limitations to Avoid Registration as an Investment Company
We intend to conduct our operations and the operations of our operating partnership so that each is exempt from registration as an investment company under the Investment Company Act. Under the Investment Company Act, in relevant part, a company is an “investment company” if:
| | • | | pursuant to Section 3(a)(1)(A), it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; and |
| | • | | pursuant to Section 3(a)(1)(C), it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of its total assets on an unconsolidated basis. “Investment securities” excludes U.S. Government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act. |
We intend to acquire real estate and real estate-related assets directly, for example, by acquiring fee interests in real property, or by purchasing interests, including controlling interests, in REITs or other “real estate operating companies,” such as real estate management companies and real estate development companies, that own real property. We also may acquire real estate assets through investments in joint venture entities, including joint venture entities in which we may not own a controlling interest. We anticipate that our assets generally will be held in wholly and majority-owned subsidiaries of the company, each formed to hold a particular asset.
Because we are organized as a holding company that conducts its business primarily through our operating partnership, which in turn is a holding company that conducts its business through its subsidiaries, we intend to conduct our operations and the operations of our operating partnership so that each will comply with the 40% test. In addition, we expect that most, if not all, of our wholly-owned and majority-owned subsidiaries will not be relying on exemptions under either Section 3(c)(1) or 3(c)(7) of the Investment Company Act. Consequently, interests in these subsidiaries (which are expected to constitute most, if not all, of our assets) generally will not constitute “investment securities.” Accordingly, we believe that the company and most, if not all, of its wholly- and majority-owned subsidiaries will not be considered investment companies under Section 3(a)(1)(C) of the Investment Company Act.
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In addition, we believe that we, our operating partnership and any subsidiaries of our operating partnership will not be considered investment companies under Section 3(a)(1)(A) of the Investment Company Act because none of these entities will engage primarily or hold themselves out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, we, our operating partnership and any subsidiaries will be primarily engaged in non-investment company businesses related to real estate. Consequently, we expect that we, our operating partnership and any subsidiaries will be able to conduct our respective operations such that none of these entities will be required to register as an investment company under the Investment Company Act.
The determination of whether an entity is a majority-owned subsidiary of our company is made by us. The Investment Company Act defines a majority-owned subsidiary of a person as a company 50% or more of the outstanding voting securities of which are owned by such person, or by another company which is a majority-owned subsidiary of such person. The Investment Company Act further defines voting securities as any security presently entitling the owner or holder thereof to vote for the election of directors of a company. We intend to treat entities in which we own at least a majority of the outstanding voting securities as majority owned subsidiaries for purposes of the 40% test. We do not intend to request that the SEC staff approve our treatment of any particular entity as a majority-owned subsidiary and the SEC staff has not done so. If the SEC staff were to disagree with our treatment of one or more subsidiary entities as majority-owned subsidiaries, we would need to adjust our strategy and our assets in order to continue to comply with the 40% test. Any such adjustment in our strategy could have a material adverse effect on us.
Even if the value of investment securities held by any of our wholly-owned or majority-owned subsidiaries were to exceed 40% of their respective total assets, we expect that such subsidiaries would be able to rely on the exclusion from the definition of “investment company” provided by Section 3(c)(5)(C) of the Investment Company Act, which is available for entities primarily engaged in the business of “purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exclusion, as interpreted by the staff of the SEC, generally requires that at least 55% of an entity’s assets must be comprised of mortgages and other liens on and interests in real estate, also known as “qualifying assets,” and at least 80% of the entity’s assets must be comprised of additional qualifying assets and a broader category of assets that we refer to as “real estate-related assets” under the Investment Company Act. Additionally, no more than 20% of the entity’s assets may be comprised of miscellaneous assets.
We will classify our assets for purposes of the Investment Company Act, including our 3(c)(5)(C) exclusion, in large measure upon no-action positions taken by the SEC staff in the past. These no-action positions were issued in accordance with factual situations that may be substantially different from the factual situations we may face, and a number of these no-action positions were issued more than ten years ago. Accordingly, no assurance can be given that the SEC will concur with our classification of our assets.
For purposes of determining whether we satisfy the exclusion provided by Section 3(c)(5)(C), as interpreted by the staff of the SEC, we will classify the assets in which we invest as follows:
| | • | | Real Property. Based on the no-action letters issued by the SEC staff, we will classify our fee interests in real properties as qualifying assets. In addition, based on no-action letters issued by the SEC staff, we will treat our investments in joint ventures, which in turn invest in qualifying assets such as real property, as qualifying assets only if we have the right to approve major decisions affecting the joint venture; otherwise, such investments will be classified as real estate-related assets. We expect that no less than 55% of our assets will consist of investments in real property, including any joint ventures that we control. |
| | • | | Securities. We intend to treat as real estate-related assets debt and equity securities of both non-majority owned publicly traded and private companies primarily engaged in real estate businesses, including REITs and other real estate operating companies, and securities issued by pass-through entities of which substantially all of the assets consist of qualifying assets or real estate-related assets. |
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| | • | | Loans. Based on the no-action letters issued by the SEC staff, we will classify our investments in various types of whole loans as qualifying assets, as long as the loans are “fully secured” by an interest in real estate at the time we originate or acquire the loan. However, we will consider loans with loan-to-value ratios in excess of 100% to be real estate-related assets. We will treat our mezzanine loan investments as qualifying assets so long as they are structured as “Tier 1” mezzanine loans in accordance with the guidance published by the SEC staff in a no-action letter that discusses the classifications of Tier 1 mezzanine loans under Section 3(c)(5)(C) of the Investment Company Act. |
Qualification for exemption from registration under the Investment Company Act will limit our ability to make certain investments. For example, these restrictions may limit the ability of the company and its subsidiaries to invest directly in mortgage-related securities that represent less than the entire ownership in a pool of mortgage loans, debt and equity tranches of securitizations and certain asset-backed securities and real estate companies or in assets not related to real estate. Although we intend to monitor our portfolio, there can be no assurance that we will be able to maintain this exemption from registration for our company or each of our subsidiaries.
A change in the value of any of our assets could negatively affect our ability to maintain our exemption from regulation under the Investment Company Act. To maintain our exemption, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may have to acquire additional assets that we might not otherwise have acquired or may have to forego opportunities to acquire assets that we would otherwise want to acquire and would be important to our investment strategy.
Change in Investment Policies
Our charter requires that our independent directors review our investment policies at least annually to determine that the policies we follow are in the best interests of our stockholders. Each determination and the basis for that determination shall be set forth in the minutes of the meetings of our board of directors. The methods of implementing our investment policies also may vary as new real estate development trends emerge and new investment techniques are developed. The methods of implementing our investment policies, except as otherwise provided in our organizational documents, may be altered by a majority of our directors, including a majority of the independent directors, without the approval of our stockholders.
Real Property Investments
We engage in the acquisition and ownership of commercial properties in the retail, office and industrial sectors that are leased to creditworthy tenants under long-term net leases, and are strategically located throughout the United States and U.S. protectorates.
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As of April 11, 2013, we, through separate wholly-owned limited liability companies and limited partnerships, owned 14 properties located in nine states, consisting of 257,789 gross rentable square feet of commercial space. The properties were acquired through the use of proceeds from our initial public offering and proceeds from our line of credit. Our properties as of April 11, 2013 are listed below in order of date of acquisition:
| | | | | | | | | | | | | | | | | | | | |
Property Description | | Date Acquired | | Year
Built | | Purchase
Price | | | Initial
Yield (1) | | | Average
Yield (2) | | | Physical
Occupancy | |
Walgreens – Albuquerque, NM | | December 7, 2011 | | 1995 | | $ | 2,475,000 | | | | 7.90% | | | | 7.90% | | | | 100% | |
CVS – Austin, TX (4) | | December 8, 2011 | | 1997 | | | 3,054,150 | | | | 7.01% | | | | 7.01% | | | | 100% | |
Tractor Supply – Lockhart, TX (4) | | December 8, 2011 | | 2008 | | | 2,920,000 | | | | 7.87% | | | | 8.91% | | | | 100% | |
Walgreens – Reidsville, NC (4) | | December 8, 2011 | | 2008 | | | 5,125,000 | | | | 7.06% | | | | 7.06% | | | | 100% | |
The Parke – San Antonio, TX | | December 9, 2011 | | 2008 | | | 7,250,000 | | | | 6.50% | | | | 7.67% | | | | 95% | (3) |
Tractor Supply – Brunswick, GA | | December 9, 2011 | | 2008 | | | 3,397,000 | | | | 7.80% | | | | 8.85% | | | | 100% | |
CVS – Erie, PA | | December 9, 2011 | | 1999 | | | 2,300,000 | | | | 7.65% | | | | 7.65% | | | | 100% | |
CVS – Mansfield, OH | | December 9, 2011 | | 1998 | | | 2,299,000 | | | | 7.35% | | | | 7.35% | | | | 100% | |
Advance Auto – Macomb, MI | | December 20, 2011 | | 2009 | | | 2,099,000 | | | | 8.30% | | | | 8.30% | | | | 100% | |
Dollar General – Berwick, LA | | November 30, 2012 | | 2012 | | | 1,780,767 | | | | 7.30% | | | | 7.37% | | | | 100% | |
Fresenius – Baton Rouge (Foster), LA | | January 22, 2013 | | 2006 | | | 881,437 | | | | 9.19% | | | | 9.34% | | | | 100% | |
Fresenius – Baton Rouge (Howell), LA | | January 22, 2013 | | 2008 | | | 1,782,263 | | | | 7.59% | | | | 8.36% | | | | 100% | |
Dollar General – Independence, MO | | March 15, 2013 | | 2012 | | | 1,417,808 | | | | 7.30% | | | | 7.37% | | | | 100% | |
Dollar General – St. Joseph, MO | | April 2, 2013 | | 2013 | | | 1,435,616 | | | | 7.30% | | | | 7.79% | | | | 100% | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | $ | 38,217,041 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| (1) | Purchase price does not include acquisition related expenses. |
| (2) | Initial yield is calculated as the effective annualized rental income for the in-place lease at the respective property divided by the property purchase price, exclusive of acquisition related expenses. In general, our properties are subject to long-term triple net or double net leases, and the future costs associated with the double net leases are unpredictable and may reduce the yield. We expect the majority of our properties will be subject to triple net leases. Accordingly, our management believes that effective annualized rental income is a more appropriate figure from which to calculate initial yield than net operating income. |
| (3) | Average yield is calculated as the average annual rental income, adjusted for any rent concessions or abatements, if any, for the in-place lease over the non-cancellable lease term at the respective property divided by the property purchase price, exclusive of acquisition related expenses. In general, our properties are subject to long-term triple net or double net leases, and the future costs associated with the double net leases are unpredictable and may reduce the yield. We expect the majority of our properties will be subject to triple net leases. Accordingly, our management believes that average annual rental income is a more appropriate figure from which to calculate average yield than net operating income. |
| (4) | These properties were acquired from Series C, LLC (“Series C”), an affiliate of our advisor. A majority of our board of directors (including all of our independent directors) not otherwise interested in the acquisitions approved them as being fair and reasonable us, and determined that the aggregate cost to us was equal to the aggregate cost of the properties to Series C (including acquisition related expenses). In addition, the aggregate purchase price of the properties, exclusive of closing costs, was less than the aggregate current appraised values of the properties. |
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The following table sets forth the principal provisions of the lease term for the major tenants at each of the properties listed above:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Property | | Major Tenants (1) | | Total
Square Feet
Leased | | | % of Total
Rentable
Square Feet | | | Renewal
Options (2) | | Effective
Annual
Base Rent (3) | | | Effective
Base Rent
per
Square Foot (3) | | | Lease Term (4) | |
Walgreens – Albuquerque, NM | | Walgreen Co. | | | 15,525 | | | | 100 | % | | 4/5 yr. | | $ | 195,574 | | | $ | 12.60 | | | 12/7/2011 | | | 4/30/2026 | |
CVS – Austin, TX | | CVS Pharmacy, Inc. | | | 10,906 | | | | 100 | % | | 5/5 yr. | | | 214,000 | | | | 19.62 | | | 12/8/2011 | | | 9/30/2036 | |
Tractor Supply – Lockhart, TX | | Tractor Supply
Co. of Texas LP | | | 18,800 | | | | 100 | % | | 4/5 yr. | | | 229,680 | (5) | | | 12.22 | | | 12/8/2011 | | | 7/31/2023 | |
Walgreens – Reidsville, NC | | Walgreen Co. | | | 14,550 | | | | 100 | % | | (6) | | | 362,050 | | | | 24.88 | | | 12/8/2011 | | | 10/31/2033 | |
The Parke – San Antonio, TX | | Kohl’s Illinois Inc. | | | — | (7) | | | 85 | % (8) | | 6/5 yr. | | | 190,000 | (5) | | | 0.46 | (9) | | 12/9/2011 | | | 1/31/2028 | |
| | JPMorgan Chase
Bank, NA | | | — | (7) | | | 4 | % (8) | | 4/5 yr. | | | 150,000 | (5) | | | 3.44 | (9) | | 12/9/2011 | | | 9/30/2027 | |
| | McDonald’s USA,
LLC | | | — | (7) | | | 4 | % (8) | | 4/5 yr. | | | 90,000 | (5) | | | 1.20 | (9) | | 12/9/2011 | | | 10/11/2029 | |
| | Sprint PCS | | | 3,400 | | | | 3 | % (8) | | 1/5 yr. | | | 88,400 | | | | 26.00 | | | 10/15/2012 | | | 10/31/2017 | |
Tractor Supply – Brunswick, GA | | Tractor Supply
Company | | | 19,097 | | | | 100 | % | | 4/5 yr. | | | 265,000 | (5) | | | 13.88 | | | 12/9/2011 | | | 6/6/2023 | |
CVS – Erie, PA | | Pennsylvania CVS
Pharmacy, LLC | | | 10,125 | | | | 100 | % | | 6/5 yr. | | | 176,000 | | | | 17.38 | | | 12/9/2011 | | | 1/31/2037 | |
CVS – Mansfield, OH | | Ohio CVS Stores,
LLC | | | 10,722 | | | | 100 | % | | 6/5 yr. | | | 169,000 | | | | 15.76 | | | 12/9/2011 | | | 1/31/2037 | |
Advance Auto – Macomb, MI | | Advance Stores
Company, Inc. | | | 7,000 | | | | 100 | % | | 3/5 yr. | | | 174,226 | | | | 24.89 | | | 12/20/2011 | | | 7/31/2024 | |
Dollar General – Berwick, LA | | Dolgencorp, LLC | | | 12,466 | | | | 100 | % | | 4/5 yr. | | | 129,996 | (10) | | | 10.43 | | | 11/30/2012 | | | 10/31/2027 | |
Fresenius – Baton Rouge (Foster), LA | | Bio-Medical
Applications of
Louisiana,
LLC (11) | | | 7,360 | | | | 100 | % | | 3/5 yr. | | | 80,960 | (12) | | | 11.00 | | | 1/22/2013 | | | 12/31/2022 | |
Fresenius – Baton Rouge (Howell), LA | | Bio-Medical
Applications of
Louisiana,
LLC (11) | | | 7,360 | | | | 100 | % | | 3/5 yr. | | | 135,277 | (13) | | | 18.38 | | | 1/22/2013 | | | 12/31/2022 | |
Dollar General – Independence, MO | | Dolgencorp, LLC | | | 9,002 | | | | 100 | % | | 4/5 yr. | | | 103,500 | (10) | | | 11.50 | | | 3/15/2013 | | | 1/31/2028 | |
Dollar General –
St. Joseph, MO | | Dolgencorp, LLC | | | 9,026 | | | | 100 | % | | 4/5 yr. | | | 104,800 | (10) | | | 11.61 | | | 4/2/2013 | | | 2/29/2028 | |
| (1) | Major tenants include those tenants that occupy greater than 10% of the rentable square feet of the property, or those tenants whose annual rental revenue accounts for greater than 10% of the property’s annual rental revenue. |
| (2) | Represents number of renewal options and the term of each option. |
| (3) | Effective annual base rent and effective base rent per square foot includes adjustments for rent concessions or abatements, if any. |
| (4) | Represents lease term beginning with the later of the purchase date or the rent commencement date through the end of the non-cancellable lease term, assuming no renewals are exercised. In general, these properties are subject to long term triple or double net leases that require the tenants to pay substantially all operating expenses in addition to base rent. |
| (5) | The annual base rent under the lease increases every five years by 10% of the then-current annual base rent. |
| (6) | The lease for the Walgreens property located in Reidsville, NC continues for 50 years following the end of the non-cancellable portion of the lease term, provided that the tenant has the right to terminate the lease as of the last day of any month during such 50-year period upon 12 months’ prior notice. |
| (7) | Subject to a ground lease. |
| (8) | Percentage based on square feet of the building. |
| (9) | The base rent per square foot is based on the square footage of the land parcel as the property is subject to a ground lease. |
| (10) | The annual base rent under the lease increases by 3% of the then-current annual base rent at the beginning of the eleventh lease year. |
| (11) | Each individual lease has a corporate guarantee from Fresenius Medical Care Holdings, Inc., a wholly owned subsidiary of Fresenius Medical Care AG & Co. |
| (12) | The annual base rent under the lease increases on April 1, 2016 by 0.75% of the then-current annual base rent, and 0.75% every calendar year thereafter. |
| (13) | The annual base rent under the lease increases on November 1, 2013 by 10% of the then-current annual base rent. The annual base rent under the leases increases on November 1, 2018 by 0.75% of the then-current annual base rent, and 0.75% every calendar year thereafter. |
Placement of Debt on Certain Real Property Investments
On December 8, 2011, our operating partnership entered into a secured revolving credit facility (the “Credit Facility”) providing for up to $50.0 million of borrowings pursuant to a credit agreement (the “Credit
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Agreement”) with J.P. Morgan Securities, LLC, as sole lead arranger and sole bookrunner, JPMorgan Chase Bank, N.A. (“JPMorgan Chase”) as administrative agent, and other lending institutions that may become parties to the Credit Agreement (collectively, with JPMorgan Chase, the “Lenders”).
The Credit Facility allows our operating partnership to borrow up to $50.0 million in revolving loans (the “Revolving Loans”, with the maximum amount outstanding not to exceed the borrowing base (the “Borrowing Base”), calculated as (1) 70% of the aggregate value allocated to each qualified property comprising eligible collateral (collectively, the “Qualified Properties”) during the period from December 8, 2011 through the earlier of January 7, 2013 or the date selected by the Company by written notice (the “Tier One Period”) and (2) 65% of the value allocated to the Qualified Properties during the period from January 8, 2013 to the earlier of December 8, 2014 or the date selected by the Company by written notice (the “Tier Two Period”).
As of April 11, 2013, the Borrowing Base under the Credit Facility was approximately $21.0 million based on the value allocated to the Qualified Properties. Up to 15.0% of the total amount available may be used for issuing letters of credit and up to 10.0% of the Credit Facility, not to exceed $15.0 million may be used for short term (ten day) advances. Subject to meeting certain conditions described in the Credit Agreement and the payment of certain fees, the amount of the Credit Facility may be increased up to a maximum of $250.0 million. The Credit Facility matures on December 8, 2014. As of April 11, 2013, our operating partnership had outstanding borrowings of approximately $12.7 million
The Revolving Loans bear interest at rates depending upon the type of loan specified by our operating partnership. For a Eurodollar rate loan, as defined in the Credit Agreement, the interest rate will be equal to the one-month LIBOR (the “Eurodollar Rate”) for the interest period, plus the applicable rate (the “Eurodollar Applicable Rate”). The Eurodollar Applicable Rate is based upon the applicable period then in effect, and ranges from 2.55% during the Tier Two Period to 2.70% during the Tier One Period. For floating rate loans, the interest rate will be a per annum amount equal to the applicable rate (the “Floating Applicable Rate”) plus the greatest of (1) the Federal Funds Rate plus 0.5%; (2) JPMorgan Chase’s Prime Rate; or (3) LIBOR plus 1.0%. The Floating Applicable Rate is based upon the applicable period then in effect, and ranges from 1.55% during the Tier Two Period to 1.70% during the Tier One Period. As of April 11, 2013, amounts outstanding on the Credit Facility accrued interest at an annual rate of 2.80%.
Tenant Lease Expirations
The following table sets forth the aggregate lease expirations for each of our properties that have been acquired as of April 11, 2013 for each of the next ten years and thereafter, assuming no renewal options are exercised. For purposes of the table, the Total Annual Base Rent Expiring column represents annualized rental revenue, on a straight line basis, for each lease that expires during the respective year.
| | | | | | | | | | | | | | |
Year Ending December 31, | | Number of Leases
Expiring | | Square Feet Expiring | | | Total Annual Base
Rent Expiring | | | % of Total Annual
Base Rent | |
2013 | | — | | | — | | | $ | — | | | | — | % |
2014 | | — | | | — | | | | — | | | | — | % |
2015 | | — | | | — | | | | — | | | | — | % |
2016 | | — | | | — | | | | — | | | | — | % |
2017 | | 1 | | | 3,400 | | | | 84,971 | | | | 3 | % |
2018 | | — | | | — | | | | — | | | | — | % |
2019 | | — | | | — | | | | — | | | | — | % |
2020 | | — | | | — | | | | — | | | | — | % |
2021 | | — | | | — | | | | — | | | | — | % |
2022 | | 3 | | | 17,220 | | | | 280,305 | | | | 9 | % |
2023 | | 3 | | | 39,697 | | | | 607,879 | | | | 19 | % |
Thereafter | | 12 | | | 197,472 | | | | 2,152,818 | | | | 69 | % |
| | | | | | | | | | | | | | |
| | 19 | | | 257,789 | | | $ | 3,125,973 | | | | 100 | % |
| | | | | | | | | | | | | | |
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Depreciable Tax Basis
For federal income tax purposes, the aggregate depreciable basis in the properties noted above is approximately $24.0 million. When we calculate depreciation expense for federal income tax purposes, we depreciate buildings and improvements over a 40-year recovery period, land improvements over a 20-year recovery period and furnishings and equipment over a 12-year recovery period using a straight-line method and a mid-month convention. The depreciable basis in the properties noted above is estimated, as of April 11, 2013, as follows:
| | | | | | |
Wholly-owned Property | | | | Depreciable Tax Basis | |
Walgreens – Albuquerque, NM | | | | $ | 1,610,982 | |
CVS – Austin, TX | | | | | 1,637,297 | |
Tractor Supply – Lockhart, TX | | | | | 2,455,681 | |
Walgreens – Reidsville, NC | | | | | 4,515,455 | |
The Parke – San Antonio, TX | | | | | 338,847 | (1) |
Tractor Supply – Brunswick, GA | | | | | 2,959,191 | |
CVS – Erie, PA | | | | | 1,284,848 | |
CVS – Mansfield, OH | | | | | 2,021,338 | |
Advance Auto – Macomb, MI | | | | | 1,380,881 | |
Dollar General – Berwick, LA | | | | | 1,400,152 | |
Fresenius – Baton Rouge (Foster), LA | | | | | 708,639 | |
Fresenius – Baton Rouge (Howell), LA | | | | | 1,432,143 | |
Dollar General – Independence, MO | | | | | 1,139,918 | |
Dollar General – St. Joseph, MO | | | | | 1,154,235 | |
| | | | | | |
| | | | $ | 24,039,607 | |
| | | | | | |
| | (1) | Depreciable basis excludes any ground leases. |
We currently have no plans for any renovations, improvements or development of the properties listed above and we believe the properties are adequately insured. We intend to obtain adequate insurance coverage for all future properties that we acquire.
Our advisor and its affiliates are continually evaluating various potential property investments and engaging in discussions and negotiations with sellers, developers and potential tenants regarding the purchase and development of properties. If we believe that a reasonable probability exists that we will acquire a specific property, this prospectus will be supplemented to disclose the negotiations and pending acquisition of such property. We expect that this will normally occur upon the signing of a purchase agreement for the acquisition of a specific property, but may occur before or after such signing or upon the satisfaction or expiration of major contingencies in any such purchase agreement, depending on the particular circumstances surrounding each potential investment. A supplement to this prospectus will describe any improvements proposed to be constructed upon the respective real property and other information that we consider appropriate for an understanding of the transaction. Further data will be made available after any pending acquisition is consummated, also by means of a supplement to this prospectus, if appropriate. You should understand that the disclosure of any proposed acquisition cannot be relied upon as an assurance that we will ultimately consummate such acquisition or that the information provided concerning the proposed acquisition will not change prior to any actual purchase.
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Selected Financial Data
The following data should be read in conjunction with our consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2012 incorporated by reference into this prospectus.
The selected financial data presented below has been derived from our audited financial statements as of and for the years ended December 31, 2012 and 2011, and the period ended December 31, 2010, respectively.
| | | | | | | | | | | | |
| | | Year Ended | | | Period from July 27, 2010
(Date of Inception) to
December 31, 2010 | |
| | | December 31,
2012 | | | December 31,
2011 | | |
Balance Sheet Data: | | | | | | | | | | | | |
Total investment in real estate assets, net | | $ | 33,102,369 | | | $ | 31,745,130 | | | $ | — | |
Cash and cash equivalents | | $ | 997,676 | | | $ | 1,134,899 | | | $ | 200,000 | |
Total assets | | $ | 35,209,238 | | | $ | 33,429,084 | | | $ | 200,000 | |
Line of credit | | $ | 20,640,300 | | | $ | 21,440,300 | | | $ | — | |
Due to affiliates | | $ | 335,109 | | | $ | 1,085,314 | | | $ | — | |
Acquired below market lease intangibles, net | | $ | 902,350 | | | $ | 951,395 | | | $ | — | |
Total liabilities | | $ | 22,558,486 | | | $ | 23,761,555 | | | $ | — | |
Total stockholders’ equity | | $ | 8,880,412 | | | $ | 9,667,529 | | | $ | 200,000 | |
Operating Data: | | | | | | | | | | | | |
Total revenues | | $ | 2,687,727 | | | $ | 155,274 | | | $ | — | |
General and administrative expenses | | $ | 889,518 | | | $ | 62,087 | | | $ | — | |
Property operating expenses | | $ | 192,587 | | | $ | 6,981 | | | $ | — | |
Advisory expenses | | $ | 198,511 | | | $ | 6,033 | | | $ | — | |
Acquisition related expenses | | $ | 21,394 | | | $ | 416,572 | | | $ | — | |
Depreciation and amortization | | $ | 650,539 | | | $ | 26,473 | | | $ | — | |
Operating income (loss) | | $ | 735,178 | | | $ | (362,872 | ) | | $ | — | |
Interest expense | | $ | (815,052 | ) | | $ | (54,024 | ) | | $ | — | |
Net loss | | $ | (79,749 | ) | | $ | (416,896 | ) | | $ | — | |
Cash Flow Data: | | | | | | | | | | | | |
Cash flows provided by (used) in operating activities | | $ | 674,831 | | | $ | (69,287 | ) | | $ | — | |
Cash flows used in investing activities | | $ | (3,270,473 | ) | | $ | (29,913,525 | ) | | $ | — | |
Cash flows provided by financing activities | | $ | 2,458,419 | | | $ | 30,917,711 | | | $ | 200,000 | |
Per Common Share Data: | | | | | | | | | | | | |
Net loss—basic and diluted | | $ | (0.11 | ) | | $ | (7.29 | ) | | $ | — | |
Distributions declared(1) | | $ | 0.84 | | | $ | 0.05 | | | $ | — | |
Weighted average shares outstanding—basic and diluted | | | 722,190 | | | | 57,169 | | | | 13,334 | |
| (1) | For 2011, distributions declared per common share calculated at a rate of $0.002260274 per share per day for the period from December 8, 2011 through December 31, 2011. |
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Valuation Policies
Our Independent Valuation Expert
Our board of directors has retained CBRE as its independent valuation expert. CBRE has expertise in appraising commercial real estate. CBRE will be provided with access to all of the information in our possession about our commercial real estate investments that it may deem relevant to the discharge of its responsibilities. CBRE will also have access to other sources of information as a result of its affiliated businesses. The compensation we pay to the independent valuation expert will not be based on the estimated values of the commercial real estate assets, related liabilities and notes receivable secured by real estate. Our independent valuation expert is not affiliated with us, or with our advisor or its affiliates. Our board of directors may replace the independent valuation expert at any time by majority vote (including a majority vote of our independent directors).
Our board of directors, including a majority of our independent directors, has adopted valuation guidelines to be used by our independent valuation expert in connection with estimating the values of our commercial real estate assets, related liabilities and notes receivable secured by real estate. Our independent valuation expert will review our valuation guidelines and methodologies with our advisor and our board of directors at least annually. Any changes to our valuation guidelines will require the approval of our board of directors, including a majority of our independent directors. We will publicly announce any changes to the identity or role of the independent valuation expert or material changes to our valuation guidelines in reports we file with the SEC and/or via our website.
The independent valuation expert will discharge its responsibilities under the oversight of our board of directors and in accordance with our valuation guidelines. Our board will not be involved in the day to day valuation of our assets and liabilities, but will periodically receive and review such information about the valuation of our assets and liabilities as it deems necessary to exercise its oversight responsibility, at regularly scheduled board of directors meetings. The valuations performed by our independent valuation expert will be one of several components to be used by our fund accountant in its calculation of our NAV per share, in the manner described below.
While our independent valuation expert will periodically provide estimated values of each of our commercial real estate assets, related liabilities and notes receivable secured by real estate based upon individual appraisal reports, our independent valuation expert will not be responsible for or prepare our daily NAV per share.
Additional Information Regarding the Engagement for Valuation Services. We have contracted to receive valuation services from CBRE pursuant to that certain master agreement for real estate valuation services between CBRE and us dated September 1, 2011, a copy of which has been filed as Exhibit 10.2 to the registration statement of which this prospectus forms a part. The following is a brief description of such agreement, which is qualified in its entirety by reference to such exhibit, which is incorporated by reference herein.
Pursuant to our master agreement for real estate valuation services, CBRE’s individual appraisal reports for each asset and liability will be addressed solely to the Company to assist our fund accountant in establishing an estimated value of our commercial real estate and real estate related assets and related liabilities. CBRE’s appraisal reports to be provided to us will not constitute a recommendation to any person to purchase or sell any shares of our common stock. CBRE’s appraisal reports will not be addressed to the public and may not be relied upon by any other person to establish an estimated value of our common stock.
In preparing its appraisal reports, CBRE will not, and will not be requested to, solicit third party indications of interest for our common stock in connection with possible purchases thereof or the acquisition of all or any part of the Company. CBRE’s analyses, opinions, and conclusions will be developed, in conformity with the
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Uniform Standards of Professional Appraisal Practice, as well as the requirements of the state where the real property is located. The reported analyses, opinions, and conclusions to be developed will be prepared in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. The use of the reports are subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
In conducting its investigation and analyses, CBRE will take into account such accepted financial and commercial procedures and considerations as it deems relevant, which may include, without limitation, the review of documents, materials and information provided by us to CBRE, such as: (i) historical operating revenues and expenses of the properties; (ii) lease agreements on the properties; (iii) the revenues and expenses of the properties; (iv) information regarding recent or planned capital expenditures; and (v) any other information relevant to valuing the real estate property.
In connection with its review, while CBRE may review the information supplied or otherwise made available to it by us for reasonableness, CBRE will assume and rely upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to it by any other party, and will not undertake any duty or responsibility to verify independently any of such information. CBRE will not make or obtain an independent valuation or appraisal of any other assets or liabilities (contingent or otherwise) of the Company other than our commercial real estate and real estate related assets and related liabilities. With respect to operating or financial forecasts and other information and data to be provided to or otherwise to be reviewed by or discussed with CBRE, CBRE will assume that such forecasts and other information and data were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of our management, board of directors and advisor, and will rely upon us to advise CBRE promptly if any information previously provided becomes inaccurate or was required to be updated during the period of its review.
In performing its analyses, CBRE will make numerous other assumptions with respect to industry performance, general business, economic and regulatory conditions and other matters, many of which are beyond CBRE’s control and our control, as well as certain factual matters. For example, CBRE will assume that we have clear and marketable title to each commercial real estate property valued, that no title defects exist unless specifically informed to the contrary, that improvements were made in accordance with law, that no hazardous materials are present or were present previously, that no deed restrictions exist, and that no changes to zoning ordinances or regulations governing use, density or shape are pending or being considered. Furthermore, CBRE’s analysis, opinions and conclusions will necessarily be based upon market, economic, financial and other circumstances and conditions existing prior to the valuation, and any material change in such circumstances and conditions may affect CBRE’s analysis and conclusions.
The foregoing is a summary of the standard assumptions, qualifications and limitations that generally apply to CBRE’s appraisal reports. All of the CBRE appraisal reports, including the analysis, opinions and conclusions set forth in such reports, are qualified by the assumptions, qualifications and limitations set forth in the respective appraisal reports.
The analyses to be performed by CBRE will not address the market value of the Company’s common stock. The prices at which the Company’s commercial real estate properties may actually be sold could differ from CBRE’s analyses. Among its other responsibilities, our board of directors has adopted our valuation guidelines for establishing our NAV on each business day. Consequently, the analyses contained in the CBRE individual appraisal reports should not be viewed as being determinative of the value of our common stock.
CBRE is actively engaged in the business of undertaking the valuation of commercial real estate properties in connection with public offerings, private placements, business combinations and similar transactions. CBRE has been engaged by the Company to deliver valuation reports and will receive fees upon the delivery of such reports. In addition, we have agreed to indemnify CBRE against certain liabilities arising out of this engagement.
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CBRE is an affiliate of CBRE Group, Inc., a parent holding company of affiliated companies that are engaged in the ordinary course of business in many areas related to commercial real estate and related services. In the two years prior to the date hereof, CBRE and its affiliates have provided a number of commercial real estate and financial advisory services for us and our affiliates and have received fees in connection with such services. CBRE and its affiliates may from time to time in the future perform other commercial real estate and financial advisory services for us and our affiliates in transactions related to the properties that are the subjects of the valuations, so long as such other services do not adversely affect the independence of the applicable CBRE appraiser as certified in the applicable appraisal report.
In the ordinary course of its business, CBRE, its affiliates, directors and officers may structure and effect transactions for its own account or for the accounts of its customers in commercial real estate assets of the same kind and in the same markets as the Company’s assets.
Valuation
Valuation of Commercial Real Estate Properties and Secured Loans
Wholly Owned Commercial Real Estate Properties. Our independent valuation expert will value on a rolling basis each of our wholly owned real estate properties held, directly or indirectly, by our operating partnership at least once per quarter beginning with the quarter following the first full calendar quarter after we acquire the property. The independent valuation expert will collect all reasonably available material information that it deems relevant, including information about the properties from our advisor, the independent valuation expert’s own sources, market information from public sources, the expert’s own proprietary data, and, when deemed necessary by our independent valuation expert, a physical inspection. The independent valuation expert will also review trends in capitalization rates, discount rates, interest rates, leasing rates, as well as a variety of macro- and micro-economic factors.
Based on the available information, the independent valuation expert will estimate the value of that property. The independent valuation expert will consider, as appropriate, valuation methodologies, opinions and judgments, to the extent consistent with our valuation guidelines as adopted by our board of directors, and with the recommendations set forth in the Uniform Standards of Professional Appraisal Practice and the requirements of the Code of Professional Ethics and Standards of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.
Between quarterly valuations, our advisor will monitor our real estate investments to determine whether a material event has occurred that our advisor believes may have a material impact on the most recent estimated values provided by our independent valuation expert. If, in the opinion of our independent valuation expert, an event identified by our advisor, or in some circumstances an event that becomes known to the independent valuation expert through other means, is likely to have a material impact on previously provided estimated values of the affected commercial real estate assets, notes receivable secured by real estate or related real estate liabilities, the independent valuation expert will recommend valuation adjustments that the fund accountant will then incorporate into our NAV. For example, an unexpected termination or renewal of a material lease, a material change in vacancies or an unanticipated structural or environmental event at a property or capital market events may cause the value of a property to change materially. Our independent valuation expert will determine the appropriate adjustment to be made to the estimated value of the property based on the information available. Any such adjustments will be estimates of the market impact of specific events as they occur, based on assumptions and judgments that may or may not prove to be correct, and may also be based on the limited information readily available at that time.
Upon acquisition, commercial properties will initially be carried at cost (purchase price plus all related acquisition costs and expenses, such as legal fees and closing costs) until the investment has been held for one full calendar quarter following the quarter of acquisition. Thereafter, commercial properties will be valued on a rolling basis each quarter by our independent valuation expert. We will amortize acquisition costs and expenses
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over a five year period. The independent valuation expert may perform valuations at any time during a quarter, based on its judgment. We will allocate the acquisition costs and expenses incurred in connection with the acquisition of multiple commercial properties that are not directly related to any single property among the applicable properties, generally pro rata based on relative purchase price of each property.
Commercial Real Estate Properties Held Through Joint Ventures. The estimated values of real estate properties held by joint ventures that we invest in will be determined by our independent valuation expert on the same basis as wholly-owned commercial real estate properties. Once the independent valuation expert has estimated the value of a joint venture real estate property, the value of our interest in the joint venture will be calculated by applying a percentage based on the distribution provisions of the applicable joint venture agreements to the value of the underlying real estate property held by the joint venture. Newly acquired properties held in a joint venture will be initially carried at cost and subsequently valued in the manner, and at the times, described above for wholly owned properties.
Loans and Other Investments Secured by Real Estate. Notes receivable and mezzanine loans held for long-term investment, which will typically be secured directly or indirectly by real estate, will initially be carried at our acquisition cost (purchase price plus all related acquisition costs and expenses, such as legal fees and closing costs) until the investment has been held by us for one full calendar quarter following the calendar quarter of acquisition. Thereafter, our independent valuation expert will value these assets on a rolling basis each quarter, and we will amortize the acquisition costs over a five year period. Typically, notes receivable will be valued by using a discounted cash flow analysis to estimate the value of the remaining loan payments and any balloon payment at maturity. In projecting the cash flow and the discount rate, various factors will be considered, including among others the quality of the underlying real estate collateral, loan-to value ratio, payment history and the remaining term of the notes. In addition, consideration will be given to the general real estate market conditions and prevailing interest rates.
Valuation of Other Illiquid Real Estate Related Assets
To the extent we invest in CMBS and privately placed, illiquid securities of real estate-related operating businesses (other than joint ventures that hold real estate properties), such as real estate development or management companies, those investments will initially be valued by at cost (purchase price plus all related acquisition costs and expenses, such as legal fees and closing costs) and thereafter will be valued quarterly on a rolling basis at fair value as determined in good faith by one or more third party pricing services that we will retain for this purpose (which may, under certain circumstances, include CBRE, subject to their acceptance of the additional engagement). Acquisition costs will be amortized over a five year period. In evaluating the fair value of our interests in certain commingled investment vehicles (such as private real estate funds), the third party pricing service performing the valuation may rely upon values periodically assigned to such interests by the respective issuers or affiliated investment advisers.
Valuation of Liquid Investment Portfolio
Liquid Real Estate-Related Securities. Liquid debt and equity real estate-related securities that are not restricted as to salability or transferability will be valued daily, on the basis of information provided by third parties and not by the independent valuation expert. Generally, to the extent the information is available to our fund accountant, such securities will be valued at the price of the last trade executed at or prior to closing on the valuation day or, in the absence of such trade, the last “bid” price. The value of liquid equity and debt real estate-related securities that are restricted as to salability or transferability will be adjusted for a discount. In determining the amount of such discount, consideration will be given to the nature and length of such restriction and the relative volatility of the market price of the security.
Valuation of Liquid Non-Real Estate-Related Assets. Liquid non-real estate-related assets include credit rated government and corporate debt securities, agency securities, publicly traded equity securities, cash and cash equivalents and other investments designed to limit our exposure to market volatility, illiquidity, interest rate or
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other risks related to our real-estate related, equity or debt securities. Liquid non-real estate-related assets will be valued daily based on information provided by third party pricing services and not by the independent valuation expert.
Valuation of Our Commercial Real Estate Related Liabilities
Our independent valuation expert will estimate the values of our commercial real estate-related liabilities, such as loans where we are the borrower, by using industry accepted methodologies specific to each type of liability. Typically, mortgage loans collateralized by our real estate will be valued by comparing the differences between the contractual loan terms and current market loan terms. This comparison would generally involve the present value of the remaining contractual payments and maturity amount at a market based interest rate. The market interest rate would reflect the risks associated with the loan, such as loan-to-value ratio, remaining loan term, the quality of the underlying collateral or other security, and credit risk, among other factors. Various sources could be used to estimate market terms for a specific loan, including published materials and market information gathered by other valuation experts.
Commercial real estate-related liabilities, such as loans, will initially be carried at cost (loan proceeds less all related costs and expenses, such as legal fees and closing costs) until the loan has been outstanding for one full calendar quarter following the quarter we enter into the loan. Thereafter, the independent valuation expert will estimate the value of these liabilities each quarter on a rolling basis, and we will amortize the related loan costs over the remaining loan term. The valuations may be performed at any time during a quarter based on the judgment of our independent valuation expert. We will allocate the financing costs and expenses incurred in connection with obtaining multiple loans that are not directly related to any single loan among the applicable loans, generally pro rata based on the amount of proceeds from each loan.
Role of Our Advisor and Our Board in the Valuation Process
The estimates of the values of our real estate and real estate related assets and liabilities will be reviewed by our advisor for consistency with our valuation guidelines and the overall reasonableness of the valuation conclusions. Our independent valuation expert may consider any comments received from our advisor to its individual appraisal reports, but the final estimated values of our commercial real estate assets, related liabilities and notes receivable secured by real estate shall be determined by our independent valuation expert and provided by our independent valuation expert to our fund accountant, State Street Bank and Trust Company.
At regularly scheduled board of directors meetings, our independent expert will be available to meet with our board of directors to review valuation information, as well as our valuation guidelines and the operation and results of the valuation process generally. Our board of directors will have the right to engage additional experts to review the valuation of our investments, if deemed appropriate.
Calculation of Our NAV Per Share
We have retained State Street Bank and Trust Company to serve as our fund accountant to calculate our daily NAV per share, which uses a process that reflects (1) estimated values of each of our commercial real estate assets, related liabilities and notes receivable secured by real estate provided periodically by our independent valuation expert in individual appraisal reports, as they may be updated upon certain material events described below, (2) daily updates in the price of liquid assets for which third party market quotes are available, (3) accruals of our daily distributions, and (4) estimates of daily accruals, on a net basis, of our operating revenues, expenses, debt service costs and fees. If a material event occurs between scheduled quarterly valuations that our advisor believes may materially affect the value of our commercial real estate assets, notes receivable secured by real estate or related real estate liabilities, our advisor will inform the independent valuation expert review so that, if appropriate, the expert can adjust the most recent valuations to account for the estimated impact.
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Our fund accountant calculates our NAV per share daily by beginning with the most recent estimated market values of our operating partnership’s commercial real estate assets, related liabilities and notes receivable secured by real estate provided by our independent valuation expert in individual appraisal reports in accordance with valuation guidelines approved by our board of directors. The latest value of liquid assets and assets that are traded with reasonable frequency, as determined by third party pricing institutions, will then be added. Our fund accountant will then subtract from the net value of the operating partnership’s real estate and real estate related assets and liabilities any other partnership liabilities, including the advisor’s estimates of accrued fees and expenses attributable to the offering, accrued operating fees and expenses and accrued distributions. These liabilities are estimated by our advisor based on (1) recent and estimated operating data with respect to each of our commercial real estate properties, as well as our portfolio of real estate related assets; (2) estimates of advisory fees payable to our advisor (both the fixed component and the performance-based component) based on historical and projected performance over the applicable period; (3) projections of dealer manager fees payable to our dealer manager; and (4) recent and estimated data for all other income earned and expenses payable by us. From time to time, but no less frequently than at the end of each calendar month, our advisor will, to the extent necessary, adjust the accruals to reflect actual operating results and to reflect appropriately the outstanding receivable, payable and other account balances. After taking into account the daily estimate of accrued liabilities, our advisor will take the resulting amount and multiply that amount by our percentage ownership interest in the operating partnership. As of the date of this prospectus, we own, directly or indirectly, 100% of the ownership interest in our operating partnership.
While our independent valuation expert periodically provides estimated values of each of our commercial real estate assets, related liabilities and notes receivable secured by real estate based upon individual appraisal reports, our independent valuation expert is not responsible for and does not prepare our daily NAV per share.
Our fund accountant will then add any assets held by the REIT, which should be limited to cash and cash equivalents, and subtract an estimate of any accrued liabilities of the REIT to the extent such liabilities are not reimbursable by the operating partnership, which should be limited to accrued distributions and certain legal, accounting and administrative costs. Distributions will reflect the daily distribution rate set by our board of directors. The daily accrual of estimated liabilities of the REIT will also include the reimbursement of organization and offering expenses paid by our advisor on our behalf. We intend to reimburse these amounts up to 0.75% of the aggregate gross offering proceeds. However, as we expect our investor’s average hold period to be approximately five years, solely for the purposes of calculating our NAV, the amounts payable to our advisor will be amortized over an estimated five year period and included in our NAV on a daily basis. The result of this calculation is our NAV as of the end of any business day. Our NAV per share will be determined by dividing our NAV on such day by the number of shares of our common stock outstanding as of the end of such business day, prior to giving effect to any share purchases or redemptions to be effected on such day. We will disclose on a quarterly basis in a prospectus supplement filed with the SEC, the primary components of the Company’s NAV and that certain components are based on appraisal reports provided by the independent valuation expert.
At regularly scheduled board of directors meetings, our board will review the process by which our advisor estimated accrued liabilities and our fund accountant calculated the NAV per share and the operation and results of the process to determine NAV per share generally.
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The table below provides a hypothetical illustration of how various factors could affect the calculation of our NAV at the end of any given business day. All amounts shown in the hypothetical calculation below are for illustrative purposes only and are not indicative of our current or projected financial condition or performance.
| | | | |
| | | NAV | |
Beginning NAV on Hypothetical Business Day(1) | | $ | 2,000,000,000 | |
Daily Portion of: | | | | |
Portfolio Income (Loss) on Real Estate Portfolio and All Other Assets, Before Fees(2) | | | 493,000 | |
Advisory Fee, Dealer Manager Fee and Performance Fee | | | (121,000 | ) |
Accrued Dividend/Distribution | | | (329,000 | ) |
Increase (Decrease) in Market or Appraised Value of Assets and Liabilities | | | 548,000 | |
| | | | |
NAV Before Sales and Redemptions of Shares | | | 2,000,591,000 | |
Sales of Shares(3) | | | 5,479,000 | |
Redemptions of Shares(3) | | | (191,000 | ) |
| | | | |
Ending NAV on Hypothetical Business Day | | $ | 2,005,879,000 | |
| | | | |
| (1) | NAV at the beginning of a hypothetical business day will reflect all sales and redemptions of shares made on the prior business day. |
| (2) | Portfolio Income (Loss) represents the net accrual of operating income, expenses, debt service costs and offering and organization costs, and excludes the daily portion of the Advisory Fee, Dealer Manager Fee and Performance Fee, shown on the next line in the table above. |
| (3) | Daily sales and redemptions of shares at NAV will not increase or decrease our NAV per share because sales and redemptions of shares on each business day will be made at that day’s NAV. |
Limits on the Calculation of Our NAV Per Share
The overarching principle of our valuation guidelines is to produce reasonable estimated values for each of our investments, or the price that would be received for that investment in orderly transactions between market participants. However, the majority of our assets will consist of real estate assets and, as with any real estate valuation protocol, the conclusions reached by our independent valuation expert will be based on a number of judgments, assumptions and opinions about future events that may or may not prove to be correct. The use of different judgments, assumptions or opinions would likely result in a different estimate of the value of our real estate investments. Any resulting potential disparity in our NAV per share may be in favor of either stockholders who redeem their shares, or stockholders who buy new shares, or existing stockholders, depending on the circumstances at the time.
In addition, on any given day, our published NAV per share may not fully reflect certain material events, to the extent that the financial impact of such events on our portfolio is not immediately quantifiable. Between quarterly valuations, our advisor will monitor our real estate investments to determine whether a material event has occurred that our advisor believes may have a material impact on the most recent estimated values provided by our independent valuation expert. If, in the opinion of our independent valuation expert, an event identified by the advisor, or in some circumstances an event that becomes known to the independent valuation expert through other means, is likely to have a material impact on previously provided estimated values of the affected real estate or real estate related assets or liabilities, the independent valuation expert will recommend valuation adjustments that the fund accountant will then incorporate into our NAV. Our independent valuation expert will determine the appropriate adjustment to be made to the estimated value of the property based on the information available. Any such adjustments will be estimates of the market impact of specific events as they occur, based on assumptions and judgments that may or may not prove to be correct, and may also be based on limited information that is readily available at that time. Any potential disparity in our NAV from this estimate or from the independent valuation expert’s determination that no adjustment is necessary may be in favor of either stockholders who redeem their shares, or stockholders who buy new shares, or existing stockholders, depending on the circumstances at the time.
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Historical NAV per share
The table below provides the components of our NAV, as determined by State Street, and the computation of NAV per share as of December 31, 2012 and September 30, 2012. Our NAV per share is posted daily on our website athttps://www.colecapital.com/cole-income-nav-strategy/daily-nav. Our NAV is not prepared in accordance with GAAP. Investors should refer to our financial statements and accompanying footnotes and disclosure under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, incorporated by reference into this prospectus, for our net book value on a per share basis in accordance with GAAP, which is our stockholders’ equity divided by shares outstanding as of the date of measurement. Our NAV is calculated using a detailed set of valuation methodologies, as described under the heading “Valuation Policies”.(1) When the fair value of our assets and liabilities is calculated for the purposes of determining our NAV per share, the calculation is done using the fair value methodologies detailed within the FASB Accounting Standards Codification under Topic 820, FairValue Measurements and Disclosures.(2) Our NAV is not audited or reviewed by our independent registered public accounting firm.
| | | | |
| | | As of
December 31, 2012
(unaudited) | |
Newly Acquired Real Estate Properties(3) | | $ | 1,911,268 | |
Operating Real Estate Properties(4) | | | 32,180,000 | |
| | | | |
Total Real Estate Properties | | | 34,091,268 | |
Real Estate Related Securities and Real Estate Related Assets | | | — | |
Acquisition Expenses and Deferred Financing Costs | | | 703,407 | |
Cash, Marketable Securities and Other Assets | | | 1,122,797 | |
| | | | |
Total Assets | | | 35,917,472 | |
Newly Incurred Debt(5) | | | 200,000 | |
Outstanding Debt(6) | | | 20,440,300 | |
Accrued Liabilities | | | 555,600 | |
| | | | |
Total Liabilities | | | 21,195,900 | |
| | | | |
NAV | | $ | 14,721,572 | |
| | | | |
Number of Shares of Common Stock Issued and Outstanding | | | 914,037 | |
| | | | |
NAV Per Share(7) | | $ | 16.11 | |
| | | | |
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| | | | |
| | | As of
September 30, 2012
(unaudited) | |
Newly Acquired Real Estate Properties(3) | | $ | — | |
Operating Real Estate Properties(4) | | | 31,780,000 | |
| | | | |
Total Real Estate Properties | | | 31,780,000 | |
Real Estate Related Securities and Real Estate Related Assets | | | — | |
Acquisition Expenses and Deferred Financing Costs | | | 751,177 | |
Cash, Marketable Securities and Other Assets | | | 787,617 | |
| | | | |
Total Assets | | | 33,318,794 | |
Newly Incurred Debt(5) | | | — | |
Outstanding Debt(6) | | | 21,440,300 | |
Accrued Liabilities | | | 371,277 | |
| | | | |
Total Liabilities | | | 21,811,577 | |
| | | | |
NAV | | $ | 11,507,217 | |
| | | | |
Number of Shares of Common Stock Issued and Outstanding | | | 727,613 | |
| | | | |
NAV Per Share(7) | | $ | 15.82 | |
| | | | |
| (1) | Our valuation policies, which address specifically each category of our assets and liabilities and are applied separately from the preparation of our financial statements in accordance with GAAP, involve adjustments from historical cost. There are certain factors which cause NAV to be different from net book value on a GAAP basis. For NAV purposes, our real estate properties and real estate related liabilities are valued by CBRE, our independent valuation expert, on a rolling quarterly basis once the investment or liability has been held for one full calendar quarter. CBRE does not prepare and is not responsible for our NAV or our daily NAV per share. For GAAP purposes, these assets and liabilities are generally recorded at depreciated or amortized cost. Other factors, including straight-lining of rent for GAAP purposes and the treatment of acquisition related expenses and organization and offering costs, will cause our GAAP net book value to be different from our NAV. |
| (2) | No rule or regulation mandates the manner for calculating NAV. While our NAV calculation methodologies are consistent with standard industry practices for valuing private real estate funds, they involve significant professional judgment in the application of both observable and unobservable attributes, and there is no established practice among publicly-offered REITs, listed or unlisted, for calculating NAV. As a result, our methodologies or assumptions may differ from other REITs’ methodologies or assumptions. |
| (3) | This amount represents the estimated value of our newly acquired real estate properties and capital expenditures, which are valued at cost until the investment has been held for one full calendar quarter following the quarter of acquisition, and thereafter will be valued by our independent valuation expert. |
| (4) | This amount represents the sum of the estimated values of each of our operating real estate properties, excluding newly acquired real estate properties which are valued at cost until the investment has been held for one full calendar quarter following the quarter of acquisition, contained in the individual property appraisal reports provided by CBRE. After a property valuation is performed by CBRE, it provides its appraisal report to us and to State Street, and State Street adds all the property values from all of the appraisal reports it has received from CBRE to arrive at the total estimated value of our operating real estate properties. CBRE does not prepare, and is not responsible for, our daily NAV per share or for calculating the total estimated value of our operating real estate properties. |
| (5) | This amount represents the estimated value of our newly incurred real estate-related liabilities, which are valued at cost until the loan has been outstanding for one full calendar quarter following the quarter we enter into the loan, and thereafter will be valued by CBRE. This amount also includes amounts drawn on our line of credit subsequent to valuation by CBRE. |
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| (6) | This amount represents the estimated value of our commercial real estate-related liabilities contained in the fair value analysis provided by CBRE. After a loan valuation is performed by CBRE, it provides its fair value analysis to us and State Street, who compiles the estimated value of our real estate-related liabilities. CBRE does not prepare, and is not responsible for, our daily NAV per share or for calculating the total estimated value of our debt. |
| (7) | See “Risk Factors” for the limitations and risks associated with our NAV per share, including the risk that the components of NAV and the methodologies used by us and State Street in the discharge of our or their respective responsibilities in connection with it may differ from those used by other companies now or in the future. |
In the preparation of individual appraisal reports, CBRE primarily applied an income capitalization approach and relied on modeling assumptions to estimate the value of our operating real estate properties. Key assumptions, as of December 31, 2012, which vary from property to property, market to market and period to period, include capitalization rates (ranging from 6.75% to 8.00%), annual market rent growth rates (ranging from 2.50% to 3.00%), and a ten-year holding period. Changes in these assumptions would impact the calculation of the value of our real estate assets. For example, assuming all other factors remain unchanged, our advisor has calculated that a reduction in the implied capitalization rate of 0.25% would cause the total estimated value of our operating real estate properties to increase by $1.1 million in the aggregate as of December 31, 2012. This is only a mathematical illustration and is not intended to qualify the values reflected above. See “Risk Factors” and “Valuation Policies” for a discussion on the limitations and risks associated with the utilization of judgments and assumptions in valuing our operating real estate properties.
In the preparation of our loan valuation report, CBRE compared our current contract loan terms to market loan terms and calculated the present value of the projected contract payments discounted by a market-based interest rate. Interest rate estimates are based on a variety of factors including the duration of the loan term, loan-to-value ratio, debt coverage ratio requirements, real estate location, as well as other risk-related factors such as the tenants’ credit profile. A change in the estimated interest rate would impact the calculation of the value of our outstanding debt. For example, assuming all other factors remain unchanged, our advisor has calculated that a reduction in the implied interest rate of 0.25% would cause the total estimated value of our outstanding debt to increase by $97,000 in the aggregate, using a discounted cash flow approach as of December 31, 2012. This is only a mathematical illustration and is not intended to qualify the value reflected above. See “Risk Factors” and “Valuation Policies” for a discussion on the limitations and risks associated with the utilization of judgments and assumptions in valuing our operating debt.
The following table provides our NAV per share for each quarter following the commencement of our operations:
| | |
Date | | NAV Per Share |
12/31/2011 | | $14.99 |
3/31/2012 | | $15.00 |
6/30/2012 | | $15.75 |
9/30/2012 | | $15.82 |
12/31/2012 | | $16.11 |
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Our Structure and Formation
Cole Real Estate Income Strategy (Daily NAV), Inc. was formed as a Maryland corporation on July 27, 2010. Our operating partnership was formed as a Delaware limited partnership on July 27, 2010.
In order to be organized as an UPREIT, we intend to contribute the proceeds from this offering to our operating partnership and to hold all or substantially all of our assets and conduct our operations through the operating partnership. UPREIT stands for “Umbrella Partnership Real Estate Investment Trust.” An UPREIT is a REIT that holds all or substantially all of its assets through a partnership which the REIT controls as general partner. We have elected to use an UPREIT structure to facilitate real estate property acquisitions and to facilitate investments in us by certain institutional investors. A sale of property directly to a REIT is generally a taxable transaction to the selling property owner. In an UPREIT structure, a seller of appreciated property who desires to defer taxable gain on the transfer of such property may transfer the property to our operating partnership in exchange for limited partnership interests. Such exchange generally could be made on a tax-free basis. Being able to offer a seller the opportunity to defer taxation of gain until the seller redeems its interests in our operating partnership for cash may give us a competitive advantage in acquiring desired properties or investments relative to buyers who cannot offer this opportunity. In addition, investing in our operating partnership, rather than in shares of our common stock, may be more attractive to certain institutional or other investors due to their business or tax structure.
We are the sole general partner of our operating partnership and CRI (Daily NAV), LLC, our wholly-owned subsidiary, is the limited partner. As the sole general partner of our operating partnership, we have the exclusive power under the partnership agreement to manage and conduct its business, subject to certain limited approval and voting rights of the limited partners described more fully in “Operating Partnership Agreement.” Pursuant to the terms of our advisory agreement, we will delegate to our advisor authority to make decisions related to our and our operating partnership’s day-to-day business, the acquisition, management and disposition of assets and the selection of property managers and other service providers.
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The following chart shows our ownership structure and our relationship with our advisor, its sub-advisor and our dealer manager:
| (1) | CREInvestments, LLC, an affiliate of our sponsor, currently owns 13,333 shares of our common stock, which represents 0.7% of the outstanding shares of common stock, as of April 11, 2013. Pursuant to our charter, CREInvestments, LLC is prohibited from selling the 13,333 shares of our common stock for so long as Cole Real Estate Investments remains our sponsor; provided, however, that CREInvestments, LLC may transfer ownership of all or a portion of the 13,333 shares of our common stock to other affiliates of our sponsor. |
| (2) | CRI (Daily NAV), LLC currently owns less than a 0.1% limited partner interest in our operating partnership. As we continue to admit investors in this offering, this percentage will be reduced. |
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Management
Board of Directors
We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders as fiduciaries. Our board of directors expects to retain Cole Real Estate Income Strategy (Daily NAV) Advisors, LLC as our advisor to manage our day-to-day affairs and the acquisition and disposition of our investments, subject to our board of directors’ supervision. Prior to the effective date of this offering, our charter has been reviewed and ratified by our board of directors, including a majority of the independent directors. This ratification by our board of directors is required by the NASAA REIT Guidelines.
Our charter and bylaws provide that the number of directors on our board of directors may be established by a majority of the entire board of directors, but may not be more than 15, nor, upon and after the commencement of this offering, fewer than three; provided, however, that there may be fewer than three directors at any time that we have only one stockholder of record. Our charter provides that, in general, upon and after commencement of this offering, a majority of the directors must be independent directors. An “independent director” is a person who is not, and within the last two years has not been, directly or indirectly associated with us or any of our affiliates or with our sponsor, our advisor or any of their affiliates by virtue of (1) ownership of an interest in our sponsor, our advisor or any of their affiliates, (2) employment by us, our sponsor our advisor or any of our or their affiliates, (3) service as an officer or director of our sponsor, our advisor or any of their affiliates, (4) performance of services, (5) service as a director of more than three REITs organized by our sponsor or advised by our advisor, or (6) maintenance of a material business or professional relationship with our sponsor, our advisor or any of their affiliates. Each director deemed to be independent pursuant to our charter also will be independent in accordance with the NASAA REIT Guidelines. There are no family relationships among any of our directors or officers, or officers of our advisor. Each director who is not an independent director must have at least three years of relevant experience demonstrating the knowledge and experience required to successfully acquire and manage the type of assets being acquired by us. At least one of our independent directors must have at least three years of relevant real estate experience. We currently have a total of five directors, including a majority of independent directors. Mr. Snell has more than three years of relevant real estate experience.
Each director will serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualifies. Although the number of directors may be increased or decreased, provided that a minimum of three directors will serve on the board at all times, a decrease will not have the effect of shortening the term of any incumbent director.
Any director may resign at any time and may be removed with or without cause by the stockholders upon the affirmative vote of at least a majority of all the votes entitled to be cast generally in the election of directors. The notice of any special meeting called to remove a director will indicate that the purpose, or one of the purposes, of the meeting is to determine if the director shall be removed. None of the members of our board of directors, our advisor or any of their affiliates may vote or consent on matters submitted to the stockholders regarding the removal of our advisor or any director or any of their affiliates or any transaction between us and any of them. In determining the requisite percentage in interest required to approve such a matter, shares owned by members of our board of directors and their respective affiliates will not be included.
Any vacancy created by the death, resignation, removal, adjudicated incompetence or other incapacity of a director may be filled only by a vote of a majority of the remaining directors. Any vacancy created by an increase in the number of directors must be filled by an affirmative vote of the board of directors, including a majority of the independent directors. Independent directors shall nominate replacements for vacancies in the independent director positions or to fill newly-created independent director positions. If at any time there are no directors in office, successor directors shall be elected by the stockholders. Each director will be bound by our charter and bylaws.
Our board of directors will not be required to devote all of their time to our business and only are required to devote the time to our affairs as their duties require. Our directors meet quarterly, in person or by teleconference,
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or more frequently if necessary. Consequently, in the exercise of their responsibilities, the directors will rely heavily on our advisor and on information provided by our advisor. Our directors have a fiduciary duty to our stockholders to supervise the relationship between us and our advisor. Our board of directors is empowered to fix the compensation of all officers that it selects and approve the payment of compensation to directors for services rendered to us.
Our board of directors has adopted written policies on investments and borrowing, the general terms of which are set forth in this prospectus. The directors may revise those policies or establish further written policies on investments and borrowings and monitor our administrative procedures, investment operations and performance to ensure that the policies are fulfilled and are in the best interest of our stockholders. In addition, our board of directors (including the independent directors) has adopted and is responsible for our valuation guidelines for establishing NAV and our valuation guidelines pertaining to the valuation of commercial real estate assets, related liabilities and notes receivable secured by real estate and will periodically review valuation information.
Additionally, our board of directors will be responsible for reviewing our fees and expenses on at least an annual basis and with sufficient frequency to determine that the expenses incurred are in the best interest of the stockholders. In addition, a majority of the directors, including a majority of the independent directors who are not otherwise interested in the transaction, must approve all transactions with our advisor or its affiliates. The independent directors also will be responsible for reviewing the performance of our advisor and determining that the compensation to be paid to our advisor is reasonable in relation to the nature and quality of services to be performed and that the provisions of the advisory agreement are being carried out. The independent directors will consider such factors as they deem relevant, including:
| | • | | the amount of the fees paid to our advisor in relation to the size, composition and performance of our investments; |
| | • | | the success of our advisor in generating appropriate investment opportunities; |
| | • | | rates charged to other REITs, especially REITs of similar structure, and to investors other than REITs by advisors performing similar services; |
| | • | | additional revenues realized by our advisor and its affiliates through their relationship with us, whether we pay them or they are paid by others with whom we do business; |
| | • | | our advisor’s performance in selecting, overseeing and managing its sub-advisor; |
| | • | | the quality and extent of service and advice furnished by our advisor and the performance of our investment portfolio; and |
| | • | | the quality of our portfolio relative to the investments generated by our advisor or its affiliates for its other clients. |
The advisory agreement has a term expiring November 30, 2012, and may be renewed for an unlimited number of successive one-year periods. Either party may terminate the advisory agreement upon 60 days’ written notice without cause or penalty. Fees payable to our advisor pursuant to the advisory agreement, including any fees that may be paid upon termination of the advisory agreement, are described below under the caption “— The Advisory Agreement” and the section of this prospectus captioned “Compensation.”
Committees of Our Board of Directors
Our board of directors will be responsible for supervising our entire business. However, our bylaws provide that our board of directors may establish such committees as the board of directors believes appropriate and in our best interests. Our board of directors will appoint the members of the committee in the board of directors’ discretion. Our charter and bylaws require that a majority of the members of each committee of our board of directors is comprised of independent directors.
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Our board of directors has established an audit committee, which consists of George N. Fugelsang and Roger D. Snell, both of whom are independent directors. Mr. Snell serves as the chairman of our audit committee. The audit committee, by approval of at least a majority of its members, will select the independent registered public accounting firm to audit our annual financial statements, review with the independent registered public accounting firm the plans and results of the audit engagement, approve the audit and non-audit services provided by the independent registered public accounting firm, review the independence of the independent registered public accounting firm, consider the range of audit and non-audit fees and review the adequacy of our internal accounting controls. Our board of directors has adopted a charter for the audit committee that sets forth its specific functions and responsibilities.
In addition, our advisor will establish a valuation committee. The valuation committee will be responsible for determining the value of securities and other assets we hold in circumstances where the current market prices or other valuations are not available from the fund accountant, the independent valuation expert or other third party pricing services. The members of the valuation committee will be appointed by our advisor’s chief executive officer. Our board of directors has adopted valuation policies that set forth the specific functions and responsibilities of the valuation committee.
Duties of Independent Directors
In accordance with the NASAA REIT Guidelines, a majority of our independent directors generally must approve corporate actions that directly relate to the following:
| | • | | any transfer or sale of our sponsor’s initial investment in us; provided however, our sponsor may not sell its initial investment while it remains our sponsor, but our sponsor may transfer the shares to an affiliate; |
| | • | | the duties of our directors, including ratification of our charter, the written policies on investments and borrowing, the monitoring of administrative procedures, investment operations and our performance and the performance of our advisor; |
| | • | | the advisory agreement; |
| | • | | liability and indemnification of our directors, advisor and its affiliates; |
| | • | | fees, compensation and expenses, including organization and offering expense reimbursements, acquisition expenses, total operating expenses (including amounts paid to the transfer agent, fund accountant, and the independent valuation expert), real estate commissions on the resale of property, incentive fees, and advisor compensation; |
| | • | | any change or modification of our statement of objectives; |
| | • | | real property appraisals; |
| | • | | our borrowing policies; |
| | • | | annual and special meetings of stockholders; |
| | • | | election of our directors; and |
| | • | | our distribution reinvestment plan. |
In addition, our board of directors (including the independent directors) is responsible for our valuation guidelines for establishing NAV and our valuation guidelines pertaining to the valuation of commercial real estate assets, related liabilities and notes receivable secured by real estate to be provided quarterly by our independent valuation expert in separate appraisal reports, and to periodically review such information as it deems necessary to exercise its oversight responsibility.
Compensation of Directors
We pay to each of our independent directors a retainer of $50,000 per year, plus an additional retainer of $7,500 to the chairman of the audit committee. We also pay $2,000 for each meeting of our board of
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directors or committee thereof the director attends in person ($2,500 for the attendance in person by the chairperson of the audit committee at each meeting of the audit committee) and $250 for each meeting the director attends by telephone. In the event there is a meeting of the board of directors and one or more committees thereof in a single day, the fees paid to each director will be limited to $2,500 per day ($3,000 per day for the chairperson of the audit committee if there is a meeting of such committee). All directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at each meeting of our board of directors. If a director is also an employee of our company or our advisor or their affiliates, we will not pay compensation for services rendered as a director. We will not compensate Messrs. Cole or Nemer for their service to us on the board of directors.
Executive Officers and Directors
Our board of directors has elected Christopher H. Cole to serve as our chief executive officer and president, D. Kirk McAllaster, Jr. to serve as our executive vice president, chief financial officer and treasurer. Although most of the services Mr. Cole and Mr. McAllaster provide to our company are in their roles as executive officers of our advisor, they have certain duties in their capacity as executive officers of our company arising from Maryland corporate law, our charter and bylaws. We do not directly compensate Mr. Cole, Mr. McAllaster, or Mr. Nemer for their services as executive officers or directors of our company, nor do we reimburse our advisor or any affiliate of our advisor for their salaries or benefits. We have provided below certain information about our executive officers and directors.
| | | | |
Name | | Age* | | Position(s) |
| | |
Christopher H. Cole | | 60 | | Chairman of our Board of Directors, Chief Executive Officer and President |
D. Kirk McAllaster, Jr. | | 46 | | Executive Vice President, Chief Financial Officer and Treasurer |
Marc T. Nemer | | 40 | | Director |
George N. Fugelsang | | 72 | | Independent Director |
Richard J. Lehmann | | 68 | | Independent Director |
Roger D. Snell | | 57 | | Independent Director |
Christopher H. Colehas served as our chairman, chief executive officer and president since our formation in July 2010. He also served as the chief executive officer of our advisor from its formation in July 2010 until June 2011. Mr. Cole has served as the chairman, chief executive officer and president of Cole Credit Property Trust IV since its formation in July 2010. He served as CEO of Cole REIT Advisors IV, LLC (“CCPT IV Advisors”) from July 2010 until June 2011. Mr. Cole has also served as the chairman, chief executive officer and president of Cole Corporate Income Trust since April 2010. He served as the chief executive officer of Cole Corporate Income Advisors, LLC (“CCI Advisors”) from April 2010 until June 2011. Mr. Cole has served as the chairman, chief executive officer and president of Cole Credit Property Trust I since its formation in March 2004. He served as the chief executive officer of Cole REIT Advisors, LLC (“CCPT I Advisors”) from its formation in April 2004 until June 2011 and as its president from April 2004 until March 2007 and from October 2007 until April 2010. Mr. Cole has served as the chairman, chief executive officer and president of Cole Credit Property Trust II since its formation in September 2004. He served as the chief executive officer of Cole REIT Advisors II, LLC (“CCPT II Advisors”) from its formation in September 2004 until June 2011 and as its president from September 2004 until March 2007 and from October 2007 until April 2010. Mr. Cole has served as the executive chairman, of the board of Cole Credit Property Trust III since April 5, 2013, and he previously served as the chief executive officer and president of Cole Credit Property Trust III from its formation in January 2008 until April 2013. He served as the chief executive officer of Cole REIT Advisors III, LLC (“CCPT III Advisors”) from its
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formation in January 2008 until June 2011, as its president from January 2008 until April 2010, and as its treasurer from January 2008 until September 2008. Mr. Cole has served as the chairman, chief executive officer and president of Cole Office & Industrial REIT (CCIT II), Inc. (“Cole Office and Industrial REIT”) since March 2013.
Mr. Cole was the sole stockholder of Cole Holdings Corporation from its formation in August 2004 until April 2013 and served as its chairman since October 2007 until April 2013 and previously served as chief executive officer from August 2004 until June 2011, as president and treasurer from August 2004 until April 2010, and as its secretary from October 2007 to April 2010. Mr. Cole has also been engaged as a general partner in the structuring and management of real estate limited partnerships since February 1979. Mr. Cole previously served as the treasurer of Cole Realty Advisors, Inc. (“Cole Realty Advisors”) from its formation in November 2002 until September 2009, as its chief executive officer from December 2002 until June 2011, as president from November 2002 until March 2007 and from October 2007 until September 2009, and as its secretary from November 2002 until December 2002. Mr. Cole previously served as the treasurer of Cole Capital Partners, LLC (“Cole Capital Partners”) from January 2003 until April 2010, as its chief executive officer from January 2003 until June 2011, and its president from January 2003 to March 2007 and from October 2007 until April 2010. Mr. Cole previously served as the treasurer of Cole Capital Advisors, Inc. (“Cole Capital Advisors”) from its formation in November 2002 until April 2010, as its chief executive officer from December 2002 until June 2011, as its president from November 2002 until March 2007 and from October 2007 until April 2010, and as its secretary from November 2002 until December 2002.
Mr. Cole has served as the chief executive officer and treasurer of the Cole Growth Opportunity Fund I GP, LLC since its formation in March 2007. Mr. Cole served as the executive vice president and treasurer of Cole Capital Corporation from December 2002 until January 2008. Mr. Cole has been the sole director of Cole Capital Corporation since December 2002. Mr. Cole was selected to serve as a director of our company based upon Mr. Cole’s experience and relationships in the non-exchange traded REIT and real estate industries, along with his knowledge of the Cole Real Estate Investments organization.
D. Kirk McAllaster, Jr. has served as our executive vice president, chief financial officer and treasurer since our formation in July 2010. He also has served as executive vice president and chief financial officer (REITs and real estate funds) of our advisor since January 2012 and as its executive vice president and chief financial officer from its formation in July 2010 until January 2012. He has served as executive vice president, chief financial officer and treasurer of Cole Corporate Income Trust since its formation in April 2010 and as its secretary from April 2010 until August 2010 and from January 2011 until March 2011. Mr. McAllaster has served as executive vice president and chief financial officer (REITs and real estate funds) of CCI Advisors since January 2012 and as its executive vice president and chief financial officer from its formation in April 2010 until January 2012. Mr. McAllaster has also served as executive vice president and chief financial officer of Cole Credit Property Trust I and Cole Credit Property Trust II since October 2007, as the treasurer of each since May 2011, and has been a member of the board of directors of Cole Credit Property Trust I since May 2008. He has served as executive vice president and chief financial officer (REITs and real estate funds) of CCPT I Advisors and CCPT II Advisors since January 2012, and previously served as executive vice president and chief financial officer of each from March 2007 until January 2012, and as vice president, finance of each from December 2005 until March 2007. He has served as executive vice president, chief financial officer and treasurer of Cole Credit Property Trust III since its formation in January 2008, and served as its secretary from January 2008 to November 2010. He also has served as executive vice president and chief financial officer (REITs and real estate funds) of CCPT III Advisors since January 2012 and as its executive vice president and chief financial officer from its formation in January 2008 until January 2012. Mr. McAllaster has served as executive vice president, chief financial officer and treasurer of Cole Credit Property Trust IV since its formation in July 2010. He also has served as executive vice president and chief financial officer (REITs and real estate funds) of CCPT IV Advisors since January 2012 and as its executive vice president and chief financial officer from its formation in July 2010 until January 2012. Mr. McAllaster has served as the executive vice president, chief financial officer and treasurer of Cole Office and Industrial REIT since March 2013. He has served as executive vice president and
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chief financial officer (REITs and real estate funds) of Cole Corporate Income Advisors II, LLC (“CCIT II Advisors”) since its formation in February 2013. Mr. McAllaster has served as executive vice president and chief financial officer (REITs and real estate funds) of Cole Realty Advisors since January 2012 and as its treasurer since September 2009, and previously served as executive vice president and chief financial officer from March 2007 until January 2012. Mr. McAllaster has served as executive vice president and chief financial officer (REITs and real estate funds) of Cole Capital Partners and Cole Capital Advisors since January 2012, and previously served as executive vice president and chief financial officer of each from March 2007 until January 2012 and as vice president, finance of each from December 2005 until March 2007. Prior to joining Cole in May 2003, Mr. McAllaster worked for six years with Deloitte & Touche LLP, most recently as audit senior manager. He has over 20 years of accounting and finance experience in public accounting and private industry. Mr. McAllaster received a B.S. from California State Polytechnic University — Pomona with a major in Accounting. He is a Certified Public Accountant licensed in the states of Arizona and Tennessee and is a member of the American Institute of CPAs and the Arizona Society of CPAs.
Marc T. Nemerhas served as a director of the Company since January 2012, and serves as president and chief executive officer of our advisor. Mr. Nemer has served as the chief executive officer and president of Cole Credit Property Trust III since April 5, 2013, and previously served as chief executive officer of Cole Holdings Corporation from June 2011 to April 2013, and as its president from April 2010 to April 2013. He has served as the president, secretary and treasurer of Cole Capital Corporation since January 2008. Mr. Nemer has served as a member of the boards of directors of Cole Credit Property Trust I and Cole Credit Property Trust III since May 2010, and previously served as a member of the boards of directors of Cole Corporate Income Trust and Cole Credit Property Trust IV from January 2011 until April 2013 and from March 2012 until April 2013 respectively. Mr. Nemer has served as chief executive officer of CCPT IV Advisors since June 2011 and as its president since its formation in July 2010. Mr. Nemer has served as the chief executive officer of CCI Advisors since June 2011 and as its president since April 2010. Mr. Nemer has served as chief executive officer for CCPT I Advisors and CCPT II Advisors since June 2011 and as president of each since April 2010, and previously served for each as executive vice president and managing director of capital markets from March 2008 until April 2010, and as executive vice president, securities and regulatory affairs from October 2007 until March 2008. He has served as chief executive officer of CCPT III Advisors since June 2011, and its president since April 2010, and previously served as executive vice president and managing director of capital markets from September 2008 until April 2010, and as executive vice president, securities and regulatory affairs from its formation in January 2008 until September 2008. Mr. Nemer has served as chief executive officer and president of CCIT II Advisors since its formation in February 2013. Mr. Nemer has served as chief executive officer of Cole Realty Advisors since June 2011 and previously served as its executive vice president and managing director of capital markets from March 2008 to June 2011, as its executive vice president, securities and regulatory affairs from October 2007 until March 2008, and as its vice president, legal services and compliance from March 2007 until October 2007. He has served as chief executive officer of Cole Capital Advisors and Cole Capital Partners since June 2011 and as president of each since April 2010, and previously served as executive vice president and managing director of capital markets of each from March 2008 to April 2010, as executive vice president, securities and regulatory affairs of each from October 2007 until March 2008 and as vice president, legal services and compliance of each from March 2007 until October 2007. Mr. Nemer also served as legal counsel to Cole Capital Advisors from February 2006 to March 2007. Prior to joining Cole, Mr. Nemer was an attorney with the international law firm Latham & Watkins LLP, where he specialized in securities offerings (public and private), corporate governance, and mergers and acquisitions from July 2000 until February 2006. Prior to that, Mr. Nemer worked at the international law firm Skadden, Arps, Slate, Meagher & Flom LLP, where he worked as an attorney in a similar capacity from August 1998 until July 2000. Mr. Nemer earned a J.D. from Harvard Law School in 1998 and a B.A. from the University of Michigan in 1995. Mr. Nemer was selected to serve as a director of the Company because of his extensive knowledge and relationships within the non-exchange traded REIT industry, his knowledge of the Cole Real Estate Investments organization in his capacity as its chief executive officer and president, and his legal, regulatory and compliance experience, all of which are expected to bring valuable insight to the board of directors.
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George N. Fugelsanghas served as our director since September 2011. Mr. Fugelsang has served as a member of the board of directors of Cole Credit Property Trust II since May 2010, as a member of its audit committee since June 2010 and as a member of its compensation committee since May 2011. From 1994 through 2001, Mr. Fugelsang was chief executive officer of Dresdner Kleinwort Benson North America, the U.S.-based investment banking business of Dresdner Bank AG, where he was responsible for all of Dresdner Bank AG’s activities in North America. From 1996 until 2001, Mr. Fugelsang was also chairman of the board of Dresdner Bank Mexico, S.A., chairman of the board of Dresdner Bank Canada and a member of the board of directors of Dresdner RCM Global Investors LLC. Mr. Fugelsang served on the board of managers of Mrs. Fields’ Famous Brands, LLC from May 2004 until July 2008. Mr. Fugelsang also served on the boards of trustees of the Institute of International Bankers and the Thunderbird School of Global Management, and as a member of the board of directors of Advanced Research Technologies of Montreal, Canada. He was also a member of the board of the New York City Partnership, the German American Chamber of Commerce, Inc., and a director of the Foreign Policy Association in New York. Mr. Fugelsang formerly served on the advisory board of the Monterey Institute of International Studies, an affiliate of Middlebury College. Mr. Fugelsang was selected to serve as a director because of his experience as the chief executive officer of an investment bank, his extensive financing experience and his general business accomplishments, all of which are expected to bring valuable insight to the board of directors.
Richard J. Lehmann has served as a director of the Company since January 2012. He has served as the founding principal of The Biltmore Bank of Arizona and chairman of Bank Capital Corporation, its holding company, since 2002. Mr. Lehmann began his banking career with Citibank in 1969. When he left Citibank in 1988 he was senior corporate officer for Europe, Middle East and Africa. In 1988, he became chairman and chief executive officer of Valley National Bank of Arizona and served in that capacity until the bank was sold to Banc One Corporation in 1993. Mr. Lehmann remained with the combined company and was appointed president and chief operating officer of Banc One and as a member of its board of directors in 1995. Following the merger of Banc One with First Chicago NBD Corporation to form Bank One Corporation in 1998, Mr. Lehmann served as vice chairman of the combined entity with responsibility for all consumer banking activities until his retirement on December 31, 1999. Mr. Lehmann also serves on the boards of directors and the compensation committee of Knight Transportation, Inc. and as director and chairman of the finance and investments committee of the TGen Foundation, as well as on the advisory board of the Mayo Clinic Arizona. He previously served on the boards of eFunds Corporation, iCrossing, Inc., Moore Corporation, and the Thunderbird School of Global Management. Prior civic activities include board participation with the Phoenix Art Museum, Ohio State University Hospital, Greater Phoenix Leadership, United Way of Greater Phoenix (campaign Chairman), and The Nature Conservancy of Arizona. Mr. Lehmann received an MBA and BA from the University of Washington. Mr. Lehmann was selected to serve as a director because of his experience as a financial services industry executive, with strong leadership, finance and global experience, all of which are expected to bring valuable insight to the board of directors.
Roger D. Snellhas served as our director since September 2011. Mr. Snell has been chief investment officer of Veritas Investments, a multi-family real estate investment firm, since January 2012. From February 2003 until June 2012, Mr. Snell was the managing director of SIP Investment Partners, a commercial real estate investment firm. From February 1997 to June 2002, Mr. Snell was president and chief executive officer of Peregrine Real Estate Investment Trust, a publicly-traded commercial real estate and hotel property REIT that was reorganized into a private company named WinShip Properties. Prior to joining Peregrine, Mr. Snell was managing director of Snell & Co., LLC, an investment advisory firm, in 1996, and president and chief executive officer of Perini Investment Properties, a publicly traded REIT focusing on commercial real estate and hotel properties (later renamed Pacific Gateway Properties), from January 1993 to January 1996. Prior to joining Perini, Mr. Snell held various leadership positions in other commercial real estate development companies. Mr. Snell received an MBA from Harvard Business School and a B.S. degree from the University of California, Berkeley. Mr. Snell was selected to serve as a director because of his experience as a real estate industry executive with executive investment, capital markets and portfolio management expertise, all of which are expected to bring valuable insight to the board of directors.
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The Advisor
Our advisor is Cole Real Estate Income Strategy (Daily NAV) Advisors, LLC, an affiliate of our sponsor, Cole Real Estate Investments. Our executive officers and the chairman of our board of directors also are officers, key personnel and/or members of our advisor. Our advisor currently has no paid employees; however, our advisor’s affiliates have over 350 full-time employees, many of whom will serve as dual employees, of our advisor and of affiliates of our advisor, and dedicate a portion of his or her time providing services to our advisor. All of our day-to-day operations will be managed by our advisor.
Our advisor has contractual and fiduciary responsibility to us and our stockholders pursuant to the advisory agreement.
The officers and key personnel of our advisor or certain affiliates are as follows:
| | | | |
Name | | Age* | | Position(s) |
| | |
Marc T. Nemer | | 40 | | President and Chief Executive Officer |
| | |
Jeffrey C. Holland | | 41 | | Executive Vice President and Head of Capital Markets |
Chong P. Huan | | 55 | | Executive Vice President and Head of Technology & Infrastructure |
Dr. David J. Lynn | | 51 | | Executive Vice President and Chief Investment Strategist |
Stephan Keller | | 45 | | Executive Vice President and Chief Financial Officer |
D. Kirk McAllaster, Jr. | | 46 | | Executive Vice President and Chief Financial Officer (REITs and Real Estate Funds) |
John M. Pons | | 49 | | Executive Vice President, Secretary, and General Counsel, Real Estate |
Thomas W. Roberts | | 54 | | Executive Vice President and Head of Real Estate Investments |
Mitchell A. Sabshon | | 61 | | Executive Vice President and Chief Operating Officer |
* As of April 11, 2013.
The backgrounds of Messrs. Nemer and McAllaster are described in the “— Executive Officers and Directors” section above. Below is a brief description of the other officers and key employees of our advisor.
Jeffrey C. Hollandhas served as executive vice president and head of capital markets of our advisor since January 2011. In this role, he provides strategic direction and oversees external and internal sales, marketing, broker-dealer relations, due diligence and securities operations. He also serves as executive vice president and head of capital markets of Cole Capital Advisors, Cole Capital Partners, CCPT I Advisors, CCPT II Advisors, CCPT III Advisors, CCI Advisors, CCPT IV Advisors and CCIT II Advisors. Prior to joining Cole Real Estate Investments in December 2010, Mr. Holland held several roles at BlackRock, Inc.’s U.S. Retail division, an asset management business focused on financial advisor-intermediated distribution channels, including chief operating officer from 2008 to 2010 and co-head of product development and management from 2006 to 2008. Prior to joining BlackRock, Mr. Holland served as vice president, consulting services, for Raymond James & Associates from 2003 to 2006. Mr. Holland served at Capital Resource Advisors from 1999 to 2003, most recently as director in the Business Strategies Group. From 1996 to 1999, he worked as an engagement manager for McKinsey & Company, Inc. Mr. Holland earned a JD from Harvard Law School and a BA from the University of Puget Sound.
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Chong P. Huan has served as executive vice president and head of technology & infrastructure our advisor since January 2012, and previously served as executive vice president and chief technology officer of our advisor from January 2011 to January 2012. In this role, he is responsible for oversight of all facilities and technology operations, including facilities management, technology infrastructure and application development, strategic planning and information management. He also serves as executive vice president and head of technology & infrastructure of Cole Capital Advisors, Cole Capital Partners, CCPT I Advisors, CCPT II Advisors, CCPT III Advisors, CCI Advisors, CCPT IV Advisors and CCIT II Advisors. Prior to joining Cole Real Estate Investments, Mr. Huan served as principal and founder of CIR Solutions LLC, an information technology consulting firm, from 2009 to 2010. Mr. Huan served as chief technology officer and managing director for Citi Global Investment Research from 2007 to 2009. Prior to joining Citi Global Investment Research, he served as senior information officer and vice president of AIG Investment in 2007, chief information officer and senior managing director of New York Life Investment Management from 2000 to 2006, and head of information technology in the Americas with UBS Private Banking and Asset Management from 1996 to 2000. Mr. Huan holds an Executive Masters in technology management from The Wharton School, University of Pennsylvania and an MBA from Northeastern University, and received a BS in engineering with honors from Oxford, U.K. He is also a Moore Fellow at the University of Pennsylvania’s School of Engineering and Applied Sciences.
David Lynn, Ph.D. has served as executive vice president and chief investment strategist of our advisor since January 2013. In this role, he is responsible for leading our advisor’s real estate investment strategy and continually enhancing Cole Real Estate Investments’ product offerings. He also works on a broad range of initiatives across the Cole Real Estate Investments organization, including serving as the firm’s economist. Dr. Lynn also serves as executive vice president and chief investment strategist of Cole Capital Advisors, Cole Capital Partners, CCPT I Advisors, CCPT II Advisors, CCPT III Advisors, CCI Advisors, and CCPT IV Advisors. Prior to joining Cole Real Estate Investments in January 2013, Dr. Lynn was the chief executive officer and founder of LCM, LLC, a real estate investment management firm, during 2012, and a managing director, partner, global head and founder of the Investment Strategy and Research Group, and generalist portfolio manager with Clarion Partners, a commercial real estate investment manager, from 2007 to 2012. Prior to joining Clarion Partners, Dr. Lynn was managing director, global head of strategy and research and portfolio manager with AIG Global Real Estate from 2005 to 2007; senior director, development with Avalonbay, Inc., a REIT specializing in Class A multifamily and mixed-use properties, from 2002 to 2005; and vice president of GE Capital Real Estate/Bidcom.com JV, a real estate technology firm, from 1999 to 2001. Dr. Lynn also previously served as vice president, investment and development, of Keppel Corporation, a real estate investment firm based in Singapore, from 1995 to 1999; national development manager for the property development and management division of Target Corporation from 1991 to 1994; and development manager for The Boston Redevelopment Authority from 1988 to 1991. Dr. Lynn earned a Ph.D. from the London School of Economics, with a specialization in financial economics; an MBA from the MIT Sloan School of Business; an MA in City and Regional Planning and Real Estate from Cornell University; and a BA from the University of California at Berkeley.
Stephan Kellerhas served as executive vice president and chief financial officer of our advisor since January 2012. In this role, he is responsible for leading our advisor’s accounting and reporting functions. He also focuses on corporate strategy, corporate business planning, treasury, controls and corporate financing activities. Mr. Keller also serves as executive vice president and chief financial officer of Cole Capital Advisors, Cole Capital Partners, CCPT I Advisors, CCPT II Advisors, CCPT III Advisors, CCI Advisors, CCPT IV Advisors and CCIT II Advisors. Prior to joining Cole Real Estate Investments as executive vice president and chief financial officer in November 2011, Mr. Keller worked for UBS AG from 1992 to 2011, including serving as vice chairman, investment banking of the Financial Institutions Group from 2010 to 2011, group treasurer from 2006 to 2010, chief risk officer of UBS Investment Bank from 2004 to 2006 and chief risk officer for the U.S. Wealth Management business from 2002 to 2004. Mr. Keller received his M.B.A. from the University of St. Gallen, Switzerland.
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John M. Ponshas served as executive vice president and general counsel, real estate of our advisor since its formation in July 2010. Mr. Pons also has served as our advisor’s secretary since January 2011. Mr. Pons has served as executive vice president and general counsel of CCPT III Advisors since its formation in January 2008, and previously served as its chief operating officer from January 2008 until May 2008. Mr. Pons served as secretary of Cole Credit Property Trust II from its formation in September 2004 until November 2010. He served as a member of Cole Credit Property Trust II’s board of directors from September 2004 until November 2004. Mr. Pons has served as executive vice president, general counsel and secretary of CCPT II Advisors since September 2008, and previously served as its executive vice president, chief administrative officer, general counsel and secretary from October 2007 until September 2008, as its executive vice president, chief operating officer, general counsel and secretary from March 2007 until October 2007, as its senior vice president and general counsel from December 2005 until March 2007, as its senior vice president and counsel from August 2005 until December 2005 and as its vice president, counsel and secretary from September 2004 until August 2005. Mr. Pons also served as secretary for Cole Credit Property Trust I from March 2004 to January 2011 and was a member of its board of directors from March 2004 until May 2010. He has served as executive vice president, general counsel and secretary of CCPT I Advisors since September 2008, and previously served as its executive vice president, chief administrative officer, general counsel and secretary from October 2007 until September 2008, as its executive vice president, chief operating officer, general counsel and secretary from March 2007 until October 2007, as its senior vice president and general counsel from December 2005 until March 2007, as its senior vice president and counsel from August 2005 until December 2005 and as its vice president, counsel and secretary from March 2004 until August 2005. He has served as executive vice president and general counsel, real estate for CCPT IV Advisors since its formation in July 2010. Mr. Pons has served as executive vice president and general counsel, real estate of CCI Advisors since its formation in April 2010, and as its secretary since January 2011, and previously served as its secretary from April 2010 until August 2010. He has served as executive vice president, secretary and general counsel, real estate of CCIT II Advisors since its formation in February 2013. Mr. Pons has served as executive vice president, general counsel and secretary of Cole Realty Advisors since September 2008, and previously served as its executive vice president, chief administrative officer, general counsel and secretary from October 2007 until September 2008, as its executive vice president, chief operating officer and general counsel from March 2007 until October 2007, and as its senior vice president from January 2006 until March 2007. He has served as executive vice president, general counsel and secretary of Cole Capital Advisors and Cole Capital Partners since September 2008, and previously served for each as its executive vice president, chief administrative officer, general counsel and secretary from October 2007 until September 2008, as its executive vice president, chief operating officer and general counsel from March 2007 until October 2007, as its senior vice president and general counsel from December 2005 until March 2007, as its senior vice president and counsel from August 2005 until December 2005, and as its vice president and counsel from September 2003 until August 2005. Prior to joining Cole Real Estate Investments in September 2003, Mr. Pons was an associate general counsel and assistant secretary with GE Capital Franchise Finance Corporation since December 2001. He was in private practice prior thereto. Before attending law school, Mr. Pons was a Captain in the United States Air Force where he served from 1988 until 1992. Mr. Pons received a B.S. degree in Mathematics from Colorado State University and a M.S. degree in Administration from Central Michigan University before earning his J.D. (Order of St. Ives) in 1995 at the University of Denver.
Thomas W. Robertshas served as executive vice president and head of real estate investments of our advisor since January 2013, and previously served as managing director of real estate of our advisor from its formation in July 2010 to January 2013. He has served as president of Cole Realty Advisors since September 2009. Mr. Roberts has also served as executive vice president and managing director of real estate or, since January 2013, head of real estate investments, of Cole Capital Advisors, Cole Capital Partners, CCPT I Advisors, CCPT II Advisors and CCPT III Advisors since September 2009 and of CCIT II Advisors since its formation in February 2013. He has served as executive vice president and managing director of real estate or, since January 2013, head of real estate investments, for CCI Advisors and CCPT IV Advisors since their formation in April 2010 and July 2010, respectively. Prior to joining Cole Real Estate Investments, Mr. Roberts served as president and chief executive officer of Opus West Corporation, a Phoenix-based real estate developer, from March 1993 until May 2009. Mr. Roberts also worked as vice president, real estate
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development for the Koll Company from 1986 until 1990. In July 2009, Opus West Corporation filed for Chapter 11 bankruptcy protection. Mr. Roberts received a B.S. from Arizona State University. Mr. Roberts has been active in many professional and community organizations including the Greater Phoenix Economic Council, International Council of Shopping Centers, National Association of Industrial and Office and Properties, Young Presidents Organization, Urban Land Institute, Phoenix Boys and Girls Club, and Xavier College Preparatory Board of Trustees.
Mitchell A. Sabshonhas served as executive vice president and chief operating officer of our advisor since January 2011. In this role, he is responsible for corporate finance, asset management, property management, leasing and high yield portfolio management. He also works on a broad range of initiatives across the Cole Real Estate Investments organization, including issues pertaining to corporate and portfolio strategy, product development and systems. He has also serves as executive vice president and chief operating officer of Cole Capital Advisors, Cole Capital Partners, CCPT I Advisors, CCPT II Advisors, CCPT III Advisors, CCI Advisors, CCPT IV Advisors and CCIT II Advisors. Prior to joining Cole Real Estate Investments in November 2010, Mr. Sabshon served as managing partner and chief investment officer of EndPoint Financial LLC, an advisory firm providing acquisition and finance advisory services to equity investors, from 2008 to 2010. Mr. Sabshon served as chief investment officer and executive vice president of GFI Capital Resources Group, Inc., a national owner-operator of multifamily properties, from 2007 to 2008. Prior to joining GFI, Mr. Sabshon served with Goldman Sachs & Company from 2004 to 2007 and from 1997 to 2002 in several key strategic roles, including president and chief executive officer of Goldman Sachs Commercial Mortgage Capital and head of the Insurance Client Development Group. From 2002 to 2004, Mr. Sabshon was executive director of the U.S. Institutional Sales Group at Morgan Stanley. Mr. Sabshon held various positions at Lehman Brothers Inc. from 1991 to 1997, most recently as senior vice president in the Real Estate Investment Banking Group. Prior to joining Lehman Brothers, Mr. Sabshon was an attorney in the Real Estate Structured Finance group of Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Sabshon received his JD from Hofstra University School of Law and a BA from George Washington University.
In addition to the officers and key personnel listed above, our advisor employs personnel on a dual basis with the other entities that comprise our sponsor who have extensive experience in selecting, managing and selling commercial properties similar to the properties sought to be acquired by us. As of the date of this prospectus, our wholly-owned subsidiary, CRI (Daily NAV), LLC, is the sole limited partner of our operating partnership.
The Advisory Agreement
Many of the services we expect to be performed by our advisor in managing our day-to-day activities pursuant to the advisory agreement are summarized below. We believe that our advisor currently has sufficient staff and experience so as to be capable of fulfilling the duties set forth in the advisory agreement. This summary is provided to illustrate the material functions that our advisor will perform for us as our advisor, and it is not intended to identify each and every task to be performed by our advisors. Under the terms of the advisory agreement, our advisor will undertake to use its commercially reasonable best efforts to present to us investment opportunities consistent with our investment policies and objectives as adopted by our board of directors. In its performance of this undertaking, our advisor, either directly or indirectly by engaging an affiliate or an unaffiliated third party, shall, among other duties and subject to the supervision of our board of directors:
| | • | | find, evaluate, present and recommend to us investment opportunities consistent with our investment policies and objectives; |
| | • | | participate in formulating our financial valuation and other policies, consistent with achieving our investment objectives; |
| | • | | monitor the independent valuation expert’s valuation process to ensure that it complies with our valuation guidelines and report on such compliance to our board of directors on a quarterly basis; |
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| | • | | serve as our investment and financial advisor and provide research and economic and statistical data in connection with our assets and our investment policies; |
| | • | | determine the proper allocation of our investments between retail, corporate office and industrial properties and real estate-related assets and cash, cash equivalents and other short-term investments; |
| | • | | select its sub-advisor, joint venture and strategic partners, and service providers for us such as our transfer agent and fund accountant and structure corresponding agreements; |
| | • | | provide the daily management and perform and supervise the various administrative functions reasonably necessary for our management and operations; |
| | • | | provide property management and leasing services; |
| | • | | hire, direct and establish policies for employees who will have direct responsibility for the operations of each property we acquire, which may include, but is not limited to, on-site managers and building and maintenance personnel; |
| | • | | direct the purchase of equipment and supplies, and supervise all maintenance activity, for our properties; |
| | • | | investigate, select, and, on our behalf, engage and conduct business with such third parties as our advisor deems necessary to the proper performance of our advisor’s obligations under the advisory agreement; |
| | • | | consult with, and provide information to, our officers and our board of directors and assist our board of directors in formulating and implementing our financial policies; |
| | • | | structure and negotiate the terms and conditions of our real estate acquisitions, sales or joint ventures; |
| | • | | review and analyze each property’s operating and capital budget; |
| | • | | acquire properties and make investments on our behalf in compliance with our investment objectives and policies; |
| | • | | arrange, structure and negotiate financing and refinancing of properties; |
| | • | | enter into leases of property and service contracts for assets and, to the extent necessary, perform all other operational functions for the maintenance and administration of such assets, including the servicing of mortgages; |
| | • | | actively manage our real estate portfolio in accordance with our investment objectives, strategies and policies; |
| | • | | prepare and review on our behalf, with the participation of one designated principal executive officer and principal financial officer, all reports and returns required by the SEC, IRS and other state or federal governmental agencies; and |
| | • | | dispose of properties on our behalf in compliance with our investment objectives, strategies and policies. |
It is the duty of the board of directors to evaluate the capabilities of our advisor before entering into the advisory agreement, and to evaluate the performance of our advisor before renewing the advisory agreement. The criteria used in such evaluation will be reflected in the minutes of the applicable meetings of our board of directors. The advisory agreement has a term ending November 30, 2013, and may be renewed for an unlimited number of successive one-year periods thereafter. Additionally, either party may terminate the advisory agreement without cause or penalty upon 60 days’ written notice. If we elect to terminate the agreement, we must obtain the approval of a majority of our independent directors. In the event of the termination of our advisory agreement, our advisor is required to cooperate with us and take all reasonable steps requested by us to assist our board of directors in making an orderly transition of the advisory function.
We will pay our advisor an advisory fee that will be payable in arrears on a monthly basis and accrue daily in an amount equal to 1/365th of 0.90% of our NAV for each day. Any portion of this fee may be deferred and paid in a subsequent year.
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As compensation for services provided pursuant to the advisory agreement, we will also pay our advisor a performance-based fee calculated based on our annual total return to stockholders (defined below), payable annually in arrears. The performance fee will be calculated such that for any calendar year in which the total return per share exceeds 6%, which we refer to as the 6% return, our advisor will receive 25% of the excess total return above the 6% return, but in no event will we pay our advisor more than 10% of the aggregate total return for such year. However, in the event the NAV per share of our existing class of common stock decreases below the Base NAV, the performance-based fee will not be calculated on any increase in NAV of our existing class of common stock up to the Base NAV. In addition, the performance fee will not be paid with respect to any calendar year in which the NAV per share as of the last business day of the calendar year (the “Ending NAV”) is less than the Base NAV. The Base NAV is subject to downward adjustment in the event that our board of directors, including a majority of the independent directors, determines that such an adjustment is necessary to provide an appropriate incentive to our advisor to perform in a manner that seeks to maximize stockholder value and is in the best interests of our stockholders. In the event of any stock dividend, stock split, recapitalization or similar change in our capital structure, the Base NAV shall be ratably adjusted to reflect the effect of any such event.
The total return to stockholders is defined as the change in NAV per share plus distributions per share. The NAV per share calculated on the last trading day of a calendar year shall be the amount against which changes in NAV per share are measured during the subsequent calendar year. Therefore, payment of the performance-based component of the advisory fee (1) is contingent upon our actual annual total return exceeding the 6% return and Ending NAV per share being greater than the Base NAV, (2) will vary in amount based on our actual performance, (3) cannot cause our total return as a percentage of stockholders’ invested capital for the year to be reduced below 6%, and (4) is payable to our advisor if our total return exceeds the 6% return in a particular calendar year, even if the total return to stockholders (or any particular stockholder) on a cumulative basis over any longer or shorter period has been less than 6% per annum. The advisor will not be obligated to return any portion of advisory fees paid based on our subsequent performance.
Our advisor will calculate our total return for each calendar year as the sum of capital appreciation or depreciation, measured by the change in NAV, and cumulative distributions for such year. Our advisor will begin the calculation with respect to each calendar year by taking the sum of (i) the Ending NAV and (ii) the cumulative distributions per share for the year, and then (iii) subtracting the NAV per share at the beginning of such year (the “Starting NAV”) provided, however, that if the Starting NAV is less than the Base NAV, the Base NAV shall be used as the Starting NAV for purposes of this calculation. Our advisor will then divide the resulting amount by the Starting NAV (or, if the Base NAV is used as the Starting NAV pursuant to the preceding sentence, the Base NAV) to calculate the total return per share, expressed as a percentage. If the total return per share exceeds 6% and the Ending NAV is greater than the Base NAV, then the performance-based fee is calculated by multiplying the excess percentage (the percentage above 6%) by 25%, and then multiplying the resulting amount by the Starting NAV (or, if the Base NAV is used as the Starting NAV in the total return calculation, the Base NAV). Finally, that amount is multiplied by the weighted average number of shares outstanding during the year (to reflect share issuances and/or share redemptions during the year) to arrive at the total amount of the performance-based fee payable, subject to the limitation set forth above that in no event will the performance-based fee exceed 10% of the annual total return for the calendar year for which the performance-based fee is being determined. The performance-based fee will be calculated daily and an estimated accrual will be included in our calculation of NAV based on an estimated annualized distribution rate combined with the year to date capital appreciation or depreciation.
In the event the advisory agreement is terminated on a day other than the last business day of a calendar year, the fee will be calculated on the basis of a prorated 6% priority return and our actual total return to stockholders through the date of termination, and will be paid to our advisor promptly following completion of the necessary calculation.
We will reimburse our advisor for the expenses incurred in connection with its provision of advisory and administrative services including acquisition and financing services, such as the portion of the salaries paid to
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employees of our sponsor who are dual employees of our advisor (including executive officers and key personnel of our advisor who are not also executive officers of our company) that are attributed to services rendered by our advisor in connection with our operations, including non-offering related legal and accounting services; provided, however, that we will not reimburse our advisor for the salaries and benefits paid to our executive officers.
The NASAA REIT Guidelines require that we include in our charter a provision that requires that any gain from the sale of assets that we may pay our advisor or an entity affiliated with our advisor be reasonable. Such a share in gain from the sale of assets is presumed reasonable if it does not exceed 15% of the balance of the net sale proceeds remaining after payment to common stockholders, in the aggregate, of an amount equal to 100% of the original issue price of the common stock, plus an amount equal to 6% of the original issue price of the common stock per year cumulative. Because we intend to be an investment vehicle of indefinite duration, as opposed to a finite-life vehicle that returns capital to investors following a single liquidation event, such as upon sale of its assets, as contemplated by the NASAA REIT Guidelines, we do not currently intend to pay incentive fees to our advisor in connection with the sale of our assets. Rather, our advisor will be entitled to receive performance compensation, if any, calculated based on the total return to stockholders exceeding an annual rate of 6%, measured over each calendar year during the term of the advisory agreement, the payment of which is not limited to asset disposition transactions.
Our advisor or its affiliates will pay on our behalf all other costs incurred in connection with our organization and the offering of our shares (excluding the dealer manager fee), including (i) our legal, accounting, printing, mailing and filing fees, charges of our escrow agent, and broker/dealer due diligence expenses; (ii) amounts to reimburse our advisor for the portion of the salaries paid to employees of its affiliates that are attributed to services rendered to our advisor in connection with preparing supplemental sales materials for us, holding educational conferences and attending retail seminars conducted by broker-dealers; and (iii) reimbursement for our dealer manager’s wholesaling costs, other marketing and organization costs including payments made to participating broker-dealers. Reimbursement payments are typically made in monthly installments, but the aggregate monthly amount reimbursed can never exceed 0.75% of the aggregate gross offering proceeds from this offering, including shares issued in connection with the distribution reinvestment plan. If the sum of the total unreimbursed amount of such organization and offering costs, plus new costs incurred since the last reimbursement payment, exceeds the reimbursement limit described above for the applicable monthly installment, the excess will be eligible for reimbursement in subsequent months (subject to the 0.75% limit), calculated on an accumulated basis, until our advisor has been reimbursed in full.
Our advisor must reimburse us at least annually for fees paid to the advisor in any year to the extent that such fees to the advisor cause our total operating expenses to exceed the greater of (1) 2% of our average invested assets, or (2) 25% of our net income, which is defined as our total revenues less total expenses for any given period excluding reserves for depreciation and bad debt. “Average invested assets” means the average monthly book value of our assets invested directly or indirectly in equity interests and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by us, as determined under GAAP, that are in any way related to our operation, including advisory fees and any amounts we may pay to intermediaries for record keeping, account maintenance services and other administrative services provided to our stockholders, but excluding: (a) the expenses of raising capital such as organizational and offering expenses, legal, audit, accounting, underwriting, brokerage, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer and registration of shares of our common stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees; and (f) acquisition expenses (including expenses relating to potential acquisitions that we do not close), real estate commissions on the resale of real property and other expenses connected with the acquisition, disposition, management and ownership of real estate interests, mortgage loans or other real property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).
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Notwithstanding the foregoing, to the extent that total operating expenses payable by us exceed these limits and the independent directors determine that the excess expenses were justified based on unusual and nonrecurring factors which they deem sufficient, our advisor may be paid in future periods for the full amount of the excess expenses, or any portion thereof. Within 60 days after the end of any fiscal quarters for which our total operating expenses for the four consecutive fiscal quarters then ended exceed these limits, we will send our stockholders a written disclosure of such fact, together with an explanation of the factors our independent directors considered in arriving at the conclusion that such excess expenses were justified. Our independent directors will review the total fees for operating expenses paid to our advisor to determine if they are reasonable in light of, among other factors, our performance, our net assets and our net income and the fees and expenses of other comparable unaffiliated REITs.
Our independent directors will evaluate at least annually whether the compensation that we contract to pay to our advisor is reasonable in relation to the nature and quality of services performed and that such compensation is within the limits prescribed by our charter. The independent directors will supervise the performance of our advisor and the compensation we pay to it to determine that the provisions of the advisory agreement are being carried out. For a list of the factors our independent directors will consider in evaluating the fees paid to our advisor, see the “Management — Board of Directors” section of this prospectus.
Other than the fees described above, neither our advisor nor its affiliates will be entitled to any additional fees for acquiring our properties, managing our properties, leasing our properties or assisting in the disposition of our properties.
Officers, employees and affiliates of our advisor engage in other business ventures and, as a result, their resources will not be dedicated exclusively to our business. However, pursuant to the advisory agreement, our advisor will be required to devote sufficient resources to our administration to discharge its obligations.
Our advisor may assign the advisory agreement to an affiliate upon approval of a majority of our independent directors. The advisory agreement also provides that our advisor may engage one or more sub-advisors to assist our advisor in providing services. We may assign or transfer the advisory agreement to a successor entity; provided that at least a majority of our independent directors determines that any such successor advisor possesses sufficient qualifications to perform the advisory function and to justify the compensation payable to our advisor. Our independent directors will base their determination on the general facts and circumstances that they deem applicable, including the overall experience and specific industry experience of the successor advisor and its management. Other factors that will be considered are the compensation to be paid to the successor advisor and any potential conflicts of interest that may occur.
Our advisor’s principal assets will be its cash balances and its advisory agreement with the Company, and the revenues associated with such agreement. In addition, our advisor is covered by an errors and omissions insurance policy. If our advisor is held liable for a breach of fiduciary duty, the Company expects that the liability would be paid by our advisor from its cash balances or by the insurance policy.
The fees payable to our advisor under the advisory agreement are described in further detail in the “Compensation” section of this prospectus.
The above summary is provided to illustrate the material functions which our advisor will perform for us as our advisor and it is not intended to include all of the services which may be provided to us by our advisor or third parties. The advisory agreement provides that our advisor may engage one or more sub-advisors to assist our advisor in providing these services.
The Sub-Advisory Agreement
Our advisor has engaged BlackRock Investment Management, LLC, a leading provider of investment advisory solutions, to serve as its sub-advisor and has entered into a sub-advisory agreement with the
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sub-advisor, pursuant to which the sub-advisor will serve as a fiduciary under the sub-advisory agreement and provide advisory services relating to selection, acquisitions, management and dispositions of our liquid assets (cash, cash equivalents, other short-term investments, U.S. government securities, agency securities, corporate debt, liquid, real estate-related, equity or debt securities and other investments for which there is reasonable liquidity). The sub-advisor will provide services related to the acquisition, management and disposition of our liquid assets and the selection of those assets in accordance with our investment objectives, strategy, guidelines, policies and limitations. The sub-advisory agreement may be terminated by our advisor or by the sub-advisor at any time. The fees paid to the sub-advisor will not be paid by us, but will instead be paid by our advisor out of the management fee that we will pay to our advisor. The sub-advisor will also be reimbursed for expenses incurred on our behalf. In the event the sub-advisory agreement is terminated, the sub-advisor will be paid all accrued and unpaid fees and expense reimbursements. The expense reimbursements that we will pay to our advisor include expenses incurred by the sub-advisor on our behalf that our advisor is required to reimburse to the sub-advisor under the sub-advisory agreement. Notwithstanding the terms of our advisor’s engagement of the sub-advisor, our advisor will be ultimately responsible to us for the performance of all of the matters entrusted to it pursuant to the advisory agreement, however, it will not have a fiduciary or contractual relationship with us. If our sub-advisor does not adequately perform its duties or fails to dedicate sufficient time to us our only recourse will be against our advisor.
Investment Decisions
The primary responsibility for the investment decisions of our advisor and its affiliates, the negotiation for the purchase and sale of these investments, and the management of our assets resides with Christopher H. Cole and the other executive officers and key personnel of our advisor. The backgrounds of the officers of our advisor are described in the “— Executive Officers and Directors” and “— The Advisor” sections above. Our board of directors is responsible for supervising and monitoring the activities of our advisor.
Affiliated Dealer Manager
Cole Capital Corporation, our dealer manager, is a member firm of FINRA. Cole Capital Corporation was organized in December 1992 for the purpose of participating in and facilitating the distribution of securities of real estate programs sponsored by Cole Real Estate Investments, its affiliates and its predecessors, all of whom are affiliated with our sponsor.
Cole Capital Corporation will advise us regarding this offering, manage our relationships with participating broker-dealers and financial advisors and provide assistance in connection with compliance matters relating to the offering, including compliance regarding any sales literature that we may prepare. It may also sell a limited number of shares at the retail level. The compensation we will pay to Cole Capital Corporation in connection with this offering is described in the section of this prospectus captioned “Compensation.” See also “Plan of Distribution — General.”
Cole Capital Corporation is wholly-owned by Cole Capital Advisors, which is an indirect wholly-owned subsidiary of Cole Credit Property Trust III. Cole Capital Corporation is an affiliate of our advisor. The backgrounds of the officers of Cole Capital Corporation are described in the “— Executive Officers and Directors” and “— The Advisor” sections of this prospectus.
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Compensation
We have no paid employees. Our advisor and its affiliates manage our day-to-day affairs. The following table summarizes all of the compensation, fees and reimbursements we will pay to our advisor and its affiliates, including our dealer manager. See the “Plan of Distribution” section of this prospectus. We will not pay our advisor or its affiliates any separate fees for property acquisitions or dispositions, financings, property management or leasing. This table assumes the shares are sold through distribution channels associated with the highest possible dealer manager fee.
| | | | | | |
Type of Compensation —
Recipient(1) | | Method of Compensation | | Estimated Amount |
| Organization and Offering Stage |
| | |
Upfront Selling Commission | | We will not pay any upfront selling commissions.(2) | | None |
| | |
Dealer Manager Fee — Our Dealer Manager(3) | | We will pay our dealer manager an asset-based dealer manager fee that is payable in arrears on a monthly basis and accrues daily in an amount equal to 1/365th of 0.55% of our NAV for such day. At our dealer manager’s discretion it may reallow a portion of the dealer manager fee equal to an amount up to 1/365th of 0.20% of our NAV to participating broker dealers. Because the dealer manager fee is calculated based on NAV, it reduces NAV with respect to all shares of our common stock, including shares issued under our distribution reinvestment plan. | | The actual amount will depend on the number of shares sold, the dates on which the shares are sold, the daily NAV per share and the period of time that the investor continues to hold the shares. Assuming that (i) one-half of all $3,500,000,000 of shares registered for sale in our primary offering are sold as of the first day after the end of the escrow period, and the other half are sold one year after the end of the escrow period; (ii) all of the shares are held until the end of the two-year offering period; and (iii) our NAV per share remains at $15.00 at all times, then we estimate that the dealer manager fee will equal approximately $9,625,000 in year one after the escrow period and $19,250,000 in year two. After year two, assuming all of the shares sold continue to be held and our NAV per share remains at $15.00, the dealer manager fee will equal approximately $19,250,000 per annum. In the aggregate, underwriting compensation from all sources, including the dealer manager fee and other underwriting compensation paid to participating broker-dealers by us or by our advisor and its affiliates, will not exceed 10% of the gross proceeds from our primary offering. |
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| | | | | | |
Type of Compensation —
Recipient(1) | | Method of Compensation | | Estimated Amount |
Organization and Offering Expense Reimbursement — Our Advisor(4) | | Our advisor has agreed to fund on our behalf all costs of our organization and offering (other than the dealer manager fee). We reimburse our advisor, without interest, for these organization and offering cost incurred both before and after the release of the escrow funds. Reimbursement payments will be made in monthly installments, but the aggregate monthly amount reimbursed can never exceed 0.75% of the aggregate gross offering proceeds from this offering, including shares issued in connection with the distribution reinvestment plan. If the sum of the total unreimbursed amount of such organization and offering costs, plus new costs incurred since the last reimbursement payment, exceeds the reimbursement limit described above for the applicable monthly installment, the excess will be eligible for reimbursement in subsequent months (subject to the 0.75% limit), calculated on an accumulated basis, until our advisor has been reimbursed in full. | | The timing and amount of reimbursements are dependent on the actual expenses incurred, the gross proceeds of shares sold, and the dates on which the shares are sold. Assuming that (i) one-half of all $4,000,000,000 of shares registered for sale in our primary offering, including shares issued under our distribution reinvestment plan, are sold as of the first day after the end of the escrow period, and the other half are sold one year after the end of the escrow period; and (ii) our NAV per share remains at $15.00 at all times, then the maximum amount of organization and offering expenses that can be reimbursed to our advisor will equal approximately $15,000,000 in year one after the escrow period and $15,000,000 in year two. |
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| Operational Stage |
| | |
Advisory Fee — Our Advisor(5) | | We will pay our advisor an advisory fee that will be payable in arrears on a monthly basis and accrue daily in an amount equal to 1/365th of 0.90% of our NAV for each day. | | The annualized management fee, and the actual dollar amounts, are dependent upon our monthly average NAV and, therefore, cannot be determined at the present time. Based on the following assumed levels of our monthly average NAV, our annualized management fee will be as follows: |
| | | |
| | | | | Monthly Average
NAV | | Total Annualized
Advisory Fee ($) |
| | | | $1 billion | | $ 9,000,000 |
| | | | $2 billion | | $18,000,000 |
| | | | $4 billion | | $36,000,000 |
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| | | | | | |
Type of Compensation —
Recipient(1) | | Method of Compensation | | Estimated Amount |
Acquisition Expense Reimbursement — Our Advisor(6) | | We will not pay our advisor any acquisition, financing or other similar fees in connection with making investments. We will reimburse our advisor for out-of-pocket expenses in connection with the acquisition of commercial real estate properties, real estate-related assets and other investments, including reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of acquisition services to us other than our executive officers, provided that no reimbursement shall be made for costs of such employees of our advisor or its affiliates to the extent that such employees perform services for which our advisor receives a separate acquisition fee. | | The actual amount will depend upon actual expenses incurred and, therefore, cannot be determined at this time. |
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Operating Expense Reimbursement — Our Advisor(7) | | We will reimburse our advisor for out-of-pocket expenses in connection with providing services to us, including reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of services to us other than our executive officers. The expense reimbursements that we will pay to our advisor include expenses incurred by the sub-advisor on our behalf. | | Actual amounts are dependent upon actual expenses incurred and, therefore, cannot be determined at this time. |
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Performance Fee — Our Advisor | | We will pay our advisor a performance fee calculated on the basis of our total return to stockholders, payable annually in arrears, such that for any year in which our total return on stockholders’ capital exceeds 6% per annum, on a calendar year basis, our advisor will be entitled to 25% of the excess total return but not to exceed 10% of the aggregate total return for such year. In the event our NAV per share decreases below Base NAV, the performance-based fee will not be calculated on any increase in NAV up to Base NAV. | | The actual amount will depend on our performance, as well as on the number of shares sold, the daily NAV per share and the period of time that the investor continues to hold the shares and, therefore, can not be determined at this time. |
| (1) | We will pay all fees and expenses in cash, shares of our common stock, a non-interest bearing promissory note or any combination of the foregoing, as may be agreed upon by both parties. |
| (2) | Although we will not pay any upfront selling commission in connection with this offering, an investor in our shares may be subject to transactional fees or expenses that their intermediary would ordinarily charge them in connection with a purchase of securities. |
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| (3) | We will cease paying dealer manager fees at the date at which, in the aggregate, underwriting compensation from all sources, including the dealer manager fee and other underwriting compensation paid by us and our advisor and its affiliates, equals 10% of the gross proceeds from our primary offering (i.e., excluding proceeds from sales pursuant to our distribution reinvestment plan). This limitation is intended to ensure that we satisfy the FINRA requirement that total underwriting compensation paid in connection with this offering from any source (including from our advisor and its affiliates), does not exceed 10% of the gross proceeds of our primary offering. Our advisor and its affiliates may pay additional amounts, without reimbursement by us, associated with the sale and distribution of our shares, which may include amounts paid to participating broker/dealers based on among other things, the number of shares that were originally sold with the assistance of the participating broker-dealer or the extent of stockholder record keeping services, account maintenance services and other administrative services provided by the participating broker-dealer. Any such payments would indirectly be recouped by our sponsor, which indirectly wholly-owns our advisor, through the receipt of the dealer-manager fee. Also, such payments will be deemed to be “underwriting compensation” by FINRA and will be subject to the 10% of gross offering proceeds limit on underwriting compensation. Our dealer-manager has agreed to waive its right to receive its dealer-manager fee for the period from January 1, 2012 to June 30, 2012. Accordingly, no such fees have been accrued during the period indicated. |
| (4) | Our advisor, directly or through an affiliate, has agreed to fund organizational expenses and expenses incurred in connection with the offering, including: (i) our legal, accounting, printing, mailing and filing fees, due diligence expenses that are included in a detailed and itemized invoice (such as expenses related to a review of this offering by one or more independent due diligence reviewers engaged by broker-dealers participating in this offering); (ii) amounts to reimburse our advisor for the portion of the salaries paid to employees of its affiliates that are attributed to services rendered to our advisor in connection with the preparation of supplemental sales materials for us, holding our own educational conferences and attending retail seminars conducted by our participating broker-dealers for performing these services; and (iii) reimbursement of our dealer-manager’s wholesaling costs, other marketing and organization costs, including (a) payments made to participating broker-dealers for performing these services, (b) the dealer-manager’s wholesaling commissions, salaries and expense reimbursement, (c) the dealer-manager’s due diligence costs and legal fees and (d) costs associated with business entertainment, logoed items and sales incentives. Under no circumstances may the total organization and offering expenses from all sources exceed 15% of the gross proceeds from the primary offering of our shares (i.e. excluding proceeds from sales pursuant to our distribution reinvestment plan). Expenses related to educational conferences and retail seminars described in (ii) above, expenses related to our dealer-manager’s wholesaling costs and payments to participating broker-dealers described in (iii) above, and expenses described in (iii)(b) and (iii)(c) above, will constitute underwriting compensation, subject to the underwriting limit of 10% of gross offering proceeds. |
| (5) | Our advisor agreed to waive its right to receive its advisory fee for the period from January 1, 2012 to June 30, 2012. Accordingly, no such fees were accrued during that period. |
| (6) | We will pay all expenses incurred in connection with the acquisition of our investments, including legal and accounting fees and expenses, brokerage commissions payable to unaffiliated third parties, travel expenses, costs of appraisals (including independent third party appraisals), nonrefundable option payments on property not acquired, engineering, due diligence, title insurance and other expenses related to the selection and acquisition of investments, whether or not acquired. While most of the acquisition expenses are expected to be paid to third parties, a portion of the out-of-pocket acquisition expenses, such as travel or due diligence expenses, may be reimbursed to our advisor or its affiliates. Acquisition expenses, together with any acquisition fees paid to third parties for a particular real estate-related asset, will in no event exceed 6% of the gross purchase price. In addition, the expenses we pay to our advisor include expenses incurred by its sub-advisor on our behalf that our advisor is required to reimburse to its sub-advisor under the sub-advisory agreement. |
| (7) | Our advisor must reimburse us at least annually for reimbursements paid to our advisor in any year to the extent that such reimbursements to our advisor cause our operating expenses to exceed the greater of (1) 2% of our average invested assets, which generally consists of the average book value of our real properties |
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| | before reserved for depreciation or bad debts and the average book value of securities or (2) 25% of our net income, which is defined as our total revenues less total expenses for any given period excluding reserves for depreciation and bad debt, unless the independent directors have determined that such excess expenses were justified based on unusual and non-recurring factors. “Average invested assets” means the average monthly book value of our assets invested directly or indirectly in equity interests and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by us, as determined under GAAP, that are in any way related to our operation, including management fees and any amounts we may pay to intermediaries for expenses related to record keeping, account maintenance services and other administrative services provided to our stockholders, but excluding: (a) the expenses of raising capital such as organizational and offering expenses, legal, audit, accounting, underwriting, brokerage, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer and registration of shares of our common stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of our assets; and (f) acquisition fees, acquisition expenses (including expenses relating to potential acquisitions that we do not close), real estate commissions on the resale of real property and other expenses connected with the acquisition, disposition, management and ownership of real estate interests, mortgage loans or other real property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property). Our advisor has agreed to waive its right to receive its operating expense reimbursements for the period from January 1, 2011 to December 31, 2012. Accordingly, no such expenses have been accrued during the period indicated. |
The following table summarizes the compensation, fees and reimbursements paid or payable to our advisor and its affiliates related to the organization and offering stage during the following periods:
| | | | | | | | |
| | | Year Ended December 31, | |
| | | 2012 | | | 2011 | |
Offering: | | | | | | | | |
Dealer manager fees | | $ | 33,628 | | | $ | 3,687 | |
Dealer manager fees reallowed by Cole Capital | | $ | 207 | | | $ | — | |
Organization and offering expense reimbursement | | $ | 27,970 | | | $ | 75,000 | |
Cole Capital waived its right to receive its dealer-manager fee for the six months ended June 30, 2012; accordingly, no such amounts were recorded during the six months ended June 30, 2012.
All organization and offering expenses associated with the sale of the Company’s common stock (excluding the dealer manager fee) are paid for by Cole Advisors or its affiliates and can be reimbursed by the Company up to 0.75% of the aggregate gross offering proceeds. As of December 31, 2012, Cole Advisors or its affiliates had paid organization and offering costs of $9.0 million in connection with our Offering, of which $8.9 million was not included in the financial statements of the Company because such costs were not a liability of the Company as they exceeded 0.75% of gross proceeds from the Offering. As the Company raises additional proceeds from the Offering, these costs may become payable.
The following table summarizes any compensation, fees and reimbursements paid or payable to our advisor and its affiliates related to the operational stage during the following periods:
| | | | | | | | |
| | | Year Ended December 31, | |
| | | 2012 | | | 2011 | |
Acquisitions, Operations and Performance: | | | | | | | | |
Acquisition expense reimbursement | | $ | — | | | $ | — | |
Advisory fee | | $ | 55,046 | | | $ | 6,033 | |
Operating expense reimbursement | | $ | — | | | $ | — | |
Performance fee | | $ | 143,465 | | | $ | — | |
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Our advisor has waived its right to receive advisory fees for the six months ended June 30, 2012; accordingly, no such amounts were recorded during the six months ended June 30, 2012. In addition, our advisor has waived its right to receive operating expense reimbursements for the period from January 1, 2011 through December 31, 2012; accordingly, we did not reimburse our advisor for any such expenses during the periods indicated.
At least a majority of our independent directors must determine, from time to time but at least annually, that our total fees and expenses are reasonable in light of our investment performance, net assets, net income and the fees and expenses of other comparable unaffiliated REITs. Each such determination will be reflected in the minutes of our board of directors. For a list of the factors our independent directors will consider, in evaluating the fees paid to our advisor, see the “Management — Board of Directors” section of this prospectus. Our independent directors shall also supervise the performance of our advisor and the compensation that we pay to it to determine that the provisions of our advisory agreement are being carried out.
Our advisor is obligated to exercise good faith and integrity in all its dealings with respect to our affairs pursuant to the advisory agreement. See the “Management — The Advisory Agreement” section of this prospectus.
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Indemnification and Limitation of Liability
We are permitted to limit the liability of our directors and officers, and to indemnify and advance expenses to our directors, officers and other agents, only to the extent permitted by Maryland law and the NASAA REIT Guidelines. Subject to the limits described below, our charter contains a provision that eliminates directors’ and officers’ liability for money damages, requires us to indemnify and, in certain circumstances, advance expenses to our directors, our officers, our advisor and its affiliates and permits us to indemnify our employees and agents. To the extent that our board of directors determines the Maryland General Corporation Law conflicts with the provisions set forth in the NASAA REIT Guidelines, the NASAA REIT Guidelines will control, unless the provisions of the Maryland General Corporation Law are mandatory under Maryland law.
In accordance with Maryland law our charter includes a provision limiting the liability of our directors and officers to our stockholders and us for money damages, except for liability resulting from (i) actual receipt of an improper benefit or profit in money, property or services or (ii) active and deliberate dishonesty established by a final judgment and that is material to the cause of action.
The Maryland General Corporation Law requires us (unless our charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful in the defense of any proceeding to which he is made or threatened to be made a party by reason of his service in that capacity. The Maryland General Corporation Law allows directors and officers to be indemnified against judgments, penalties, fines, settlements and expenses actually incurred by them in connection with any proceeding unless it is established that:
| | • | | an act or omission of the director or officer was material to the cause of action adjudicated in the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty; |
| | • | | the director or officer actually received an improper personal benefit in money, property or services; or |
| | • | | with respect to any criminal proceeding, the director or officer had reasonable cause to believe his act or omission was unlawful. |
A court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct or was adjudged liable on the basis that personal benefit was improperly received. The Maryland General Corporation Law permits us to advance reasonable expenses to a director or officer upon receipt of (i) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification and (ii) a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed if it is ultimately determined that the standard of conduct was not met.
In addition to the above limitations of the Maryland General Corporation Law, and as set forth in the NASAA REIT Guidelines, our charter further limits our ability to indemnify our directors for losses or liability suffered by them or hold harmless our directors for losses or liability suffered by us by requiring that the following additional conditions are met:
| | • | | the party seeking indemnification has determined, in good faith, that the course of conduct that caused the loss or liability was in our best interests; |
| | • | | the party seeking indemnification was acting on our behalf or performing services for us; |
| | • | | in the case of non-independent directors the liability or loss was not the result of negligence or misconduct by the party seeking indemnification; |
| | • | | in the case of independent directors, the liability or loss was not the result of gross negligence or willful misconduct by the party seeking indemnification; and |
| | • | | the indemnification or agreement to hold harmless is recoverable only out of our net assets and not from the stockholders. |
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We have also agreed to indemnify and hold harmless our advisor, its sub-advisor and its affiliates performing services for us from specific claims and liabilities arising out of the performance of their obligations under the advisory agreement so long as the following conditions are met:
| | • | | our advisor, its sub-advisor and its affiliates have determined, in good faith, that the course of conduct that caused the loss or liability was in our best interests; |
| | • | | our advisor, its sub-advisor and its affiliates were acting on our behalf or performing services for us; and |
| | • | | the liability or loss was not the result of negligence or misconduct by our advisor and its affiliates. |
As a result, our stockholders and we may be entitled to a more limited right of action than they and we would otherwise have if these indemnification rights were not included in the advisory agreement.
The general effect to our stockholders of any arrangement under which we agree to insure or indemnify any persons against liability is a potential reduction in distributions resulting from our payment of premiums associated with insurance or indemnification payments in excess of amounts covered by insurance. In addition, indemnification could reduce the legal remedies available to our stockholders and us against our officers and directors. However, indemnification does not reduce the exposure of directors and officers to liability under federal or state securities laws, nor does it limit the stockholders’ ability to obtain injunctive relief or other equitable remedies for a violation of a director’s or an officer’s duties to us, although the equitable remedies may not be an effective remedy in some circumstances.
The SEC and some state securities commissions take the position that indemnification against liabilities arising under the Securities Act is against public policy and unenforceable.
Under our charter, indemnification of our directors and our advisor or its affiliates will not be allowed for liabilities arising from or out of a violation of state or federal securities laws, unless one or more of the following conditions are met:
| | • | | there has been a successful adjudication on the merits in favor of the indemnitee of each count involving alleged securities law violations; |
| | • | | such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction; or |
| | • | | a court of competent jurisdiction approves a settlement of the claims against the indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which our securities were offered as to indemnification for violations of securities laws. |
Our charter provides that the advancement of our funds to our directors, our advisor or our advisor’s affiliates for legal expenses and other costs incurred as a result of any legal action for which indemnification is being sought is permissible only if all of the following conditions are satisfied: (i) the legal action relates to acts or omissions with respect to the performance of duties or services on behalf of us; (ii) our directors, our advisor or our advisor’s affiliates provide us with written affirmation of their good faith belief that they have met the standard of conduct necessary for indemnification; (iii) the legal action is initiated by a third party who is not a stockholder or, if the legal action is initiated by a stockholder acting in his or her capacity as such, a court of competent jurisdiction approves such advancement; and (iv) our directors, our advisor or our advisor’s affiliates agree in writing to repay the advanced funds to us together with the applicable legal rate of interest thereon, in cases in which such persons are found not to be entitled to indemnification.
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Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of the date of this prospectus, information regarding the number and percentage of shares owned by each director, our chief executive officer, each executive officer, all directors and executive officers as a group, and any person known to us to be the beneficial owner of more than 5% of outstanding shares of our common stock. As of April 11, 2013, we had 403 stockholders. Beneficial ownership is determined in accordance with the rules of the SEC and includes securities over which a person has the right to acquire within 60 days. Except as indicated, to our knowledge, the person named in the table has sole voting and investing power with respect to all shares beneficially owned by it. As used herein, “voting power” is the power to vote or direct the voting of shares and “investment power” is the power to dispose or direct the disposition of shares. The address for each of our directors and executive officers is in care of our principal executive offices at 2325 East Camelback Road, Suite 1100, Phoenix, AZ 85016.
| | | | | | | | |
Name of Beneficial Owner | | Number of Shares
Beneficially Owned | | | Percent of All
Shares(1) | |
Christopher H. Cole, Chairman of the Board of Directors, Chief Executive Officer and President(2) | | | 627,979 | | | | 33.8 | % |
D. Kirk McAllaster, Jr., Executive Vice President, Chief Financial Officer and Treasurer | | | — | | | | — | |
Marc T. Nemer, Director(3) | | | 38,688 | | | | 2.1 | % |
George N. Fugelsang, Director | | | — | | | | — | |
Richard J. Lehmann, Director | | | — | | | | — | |
Roger D. Snell, Director | | | — | | | | — | |
All directors and executive officers as a group | | | 666,667 | | | | 35.9 | % |
Charles Schwab & Co. Inc. f/b/o Daniel G. Crockett Nashville, TN 37215 | | | 124,602 | | | | 6.7 | % |
| (1) | For purposes of calculating the percentage beneficially owned, the number of shares of common stock deemed outstanding includes approximately 1.9 million shares outstanding as of April 11, 2013. Beneficial ownership is determined in accordance with the rules of the SEC that deem shares to be beneficially owned by any person or group who has or shares voting and investment power with respect to such shares. |
| (2) | These shares are owned by CHC Investments, LLC, which is wholly-owned by Mr. Cole. |
| (3) | Shares held by a revocable trust for which Mr. Nemer serves as trustee and has voting and investment power. |
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Operating Partnership Agreement
We have summarized the material terms and provisions of the Limited Partnership Agreement of Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP, which we refer to as the “partnership agreement.” This summary is not complete. For more detail, you should refer to the partnership agreement itself, which is filed as an exhibit to the registration statement of which this prospectus is part. For purposes of this section, references to “we,” “our,” “us” and “the company” refer to Cole Real Estate Income Strategy (Daily NAV), Inc.
Management of Our Operating Partnership
Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP, our operating partnership, was formed on July 27, 2010 to acquire and hold assets on our behalf. Our operating partnership is currently disregarded from us for U.S. federal income tax purposes. As a result, for purposes of satisfying the asset and gross income tests for qualification as a REIT for federal income tax purposes, the assets and income of our operating partnership will be deemed to be assets and income of the company.
We intend to hold substantially all of our assets in our operating partnership or in subsidiary entities in which our operating partnership owns an interest. This is commonly referred to as the “UPREIT” structure, which stands for “Umbrella Partnership Real Estate Investment Trust.” We have elected to use an UPREIT structure for a number of reasons, including to facilitate commercial real estate property acquisitions because this structure provides an owner of appreciated property the ability to defer taxable gain on the transfer of such property to us. In order to achieve this benefit, an owner may transfer the property to our operating partnership in exchange for limited partnership interests in the operating partnership. Being able to offer an owner of real estate the opportunity to defer taxation of gain until it redeems its interests in our operating partnership for cash may give us a competitive advantage in acquiring desired properties or investments relative to buyers who cannot offer this opportunity. In addition, investing in our operating partnership, rather than in shares of our common stock, may be more attractive to certain institutional or other investors due to their business or tax structure.
We are the sole general partner of our operating partnership. As the sole general partner of our operating partnership, we will have the exclusive power to manage and conduct the business of our operating partnership. A general partner is accountable to a limited partnership as a fiduciary and consequently must exercise good faith and integrity in handling partnership affairs. Neither our advisor nor any other limited partner of our operating partnership may transact business for our operating partnership, or participate in management activities or decisions, except as provided in the partnership agreement and as required by applicable law. We may not be removed as general partner by the limited partners. Our board of directors will at all times have ultimate oversight and policy-making authority, including responsibility for governance, financial controls, compliance and disclosure with respect to our operating partnership. Pursuant to an advisory agreement, which will be effective as of the initial offering date, however, we will delegate to our advisor authority to make decisions related to our and our operating partnership’s day-to-day business, the acquisition, management and disposition of assets and the selection of property managers and other service providers, in accordance with our investment objectives, strategy, guidelines, policies and limitations.
Our advisor has expressly acknowledged and any future limited partners of our operating partnership will expressly acknowledge that we, as general partner, are acting for our benefit, and the benefit of the limited partners of our operating partnership and our stockholders collectively. Neither we nor our board of directors is under any obligation to give priority to the separate interests of the limited partners of our operating partnership or our stockholders in deciding whether to cause our operating partnership to take or decline to take any actions. If there is a conflict between the interests of our stockholders on one hand and our operating partnership’s limited partners on the other, we will endeavor in good faith to resolve the conflict in a manner not adverse to either our stockholders or our operating partnership’s limited partners; provided, however, that for so long as we own a controlling interest in our operating partnership, any conflict that cannot be resolved in a manner not adverse to
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either our stockholders or our operating partnership’s limited partners will be resolved in favor of our stockholders. We are not liable under the partnership agreement to our operating partnership or to any of its limited partners for monetary damages for losses sustained, liabilities incurred, or benefits not derived by such limited partners in connection with such decisions, provided that we have acted in good faith.
The partnership agreement requires that our operating partnership be operated in a manner that will enable us to: (1) satisfy the requirements for qualification as a REIT for federal income tax purposes, unless we otherwise cease to qualify as a REIT; (2) avoid any federal income or excise tax liability; and (3) ensure that our operating partnership will not be classified as a “publicly traded partnership” that is taxable as a corporation from and after the time at which it is no longer disregarded from us. See “Material U.S. Federal Income Tax Considerations.”
Capital Contributions and Distributions
We intend to contribute the proceeds from this offering to our operating partnership as capital contributions. These capital contributions will be reflected in our capital account in our operating partnership. In the future, we may issue another class of common stock with a different fee and expense structure than our current common stock. In exchange for our capital contribution in connection with the issuance of such a new class of common stock, our operating partnership will issue us interests in the operating partnership with a fee and expense structure that mirrors the new class of common stock.
If our operating partnership requires additional funds at any time in excess of capital contributions made by us, our operating partnership may borrow funds from a financial institution or other lender. In addition, as sole general partner of our operating partnership, we will have the ability to cause our operating partnership to issue additional limited partnership interests, including preferred limited partnership interests. These additional interests may be issued in connection with the admission of additional limited partners upon the transfer to our operating partnership of real estate properties or other assets, if our board of directors concludes in good faith that such admittance and the terms of the partnership interests issued to such additional limited partners are in our best interest.
The partnership agreement generally provides that our operating partnership will, except upon the liquidation of our operating partnership, distribute cash to the partners of our operating partnership in accordance with their relative percentage interests, generally on at least a quarterly basis, in amounts determined by us as general partner. In the event that our operating partnership were to liquidate, after payment of debts and obligations, any remaining assets of our operating partnership will be distributed in accordance with the distribution provisions of the partnership agreement to the extent of each partner’s positive capital account balance.
Redemption Rights
Pursuant to the partnership agreement, any future limited partners, other than us, will receive redemption rights, which will enable them to cause the operating partnership to redeem their limited partnership interests in exchange for cash based on, as applicable, the NAV per share of our common stock or shares of the corresponding class or series of our capital stock if we have multiple classes or series of capital stock at the time of redemption, assuming redemption of the number of shares that would correspond, on a one-for-one basis, to the partnership interests being redeemed. This one-for-one correspondence may be adjusted upon the occurrence of certain events such as share dividends, share subdivisions or combinations. We expect to fund any cash redemptions out of available cash or borrowings. Requests for redemption of limited partnership interests will be subject to the same condition and limitations applicable at the time to requests for redemption of shares of our common stock. See “Share Purchases and Redemptions.” Accordingly, under our redemption program, limited partners will be treated as if they had requested redemption of the full number of shares of our common stock on the basis of which the cash redemption amount for their limited partnership interests is to be calculated and as if
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they had held such shares from the date their partnership interests were issued to them. Notwithstanding the foregoing, a limited partner will not be entitled to exercise its redemption rights if the redemption would cause us to fail to qualify as a REIT under the Code or would cause our operating partnership to be treated as a publicly traded partnership taxable as a corporation.
Transferability of General Partner Interest
We may not (1) voluntarily withdraw as the general partner of our operating partnership, (2) engage in any merger, consolidation or other business combination or (3) transfer our general partnership interest in our operating partnership (except to a wholly owned subsidiary), unless: (A) the transaction in which such withdrawal, business combination or transfer occurs results in the limited partners receiving or having the right to receive an amount of cash, securities or other property equal in value to the amount they would have received if they held, as applicable, shares of our common stock or shares of the corresponding class or series of capital stock if we have multiple classes or series of capital stock prior to such transaction; or (B) in the case of a merger or other business combination, the successor entity contributes substantially all of its assets to our operating partnership in return for an interest in our operating partnership and agrees to assume all obligations of the general partner of our operating partnership.
We may also enter into a business combination or we may transfer our general partnership interest upon the receipt of the consent of a majority-in-interest of the limited partners of our operating partnership, other than interests held by us. With certain exceptions, the limited partners may not transfer their interests in our operating partnership, in whole or in part, without our written consent, as general partner.
Exculpation
We, as general partner, will not be liable to our operating partnership or limited partners for errors in judgment or other acts or omissions not amounting to willful misconduct or gross negligence since provision has been made in the partnership agreement for exculpation of the general partner. Therefore, purchasers of interests in our operating partnership have a more limited right of action than they would have absent the limitation in the partnership agreement.
Indemnification
The partnership agreement provides for the indemnification of us, as general partner, by our operating partnership for liabilities we incur in dealings with third parties on behalf of our operating partnership. To the extent that the indemnification provisions purport to include indemnification of liabilities arising under the Securities Act, in the opinion of the SEC, such indemnification is contrary to public policy and therefore unenforceable.
Tax Matters
From and after the time at which our operating partnership is no longer disregarded from us, we will be our operating partnership’s tax matters partner and, as such, have the authority to make tax elections under the Code on our operating partnership’s behalf.
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Conflicts of Interest
We are subject to various conflicts of interest arising out of our relationship with our advisor and its affiliates, including conflicts related to the arrangements pursuant to which we compensate our advisor and its affiliates. While our independent directors act on our behalf, our agreements and compensation arrangements with our advisor and its affiliates may be impacted by the fact that our stockholders invested with the understanding and expectation that an affiliate of Cole Real Estate Investments would act as our advisor. See the “Compensation” section of this prospectus. Some of the potential conflicts of interest in our transactions with our advisor and its affiliates, and certain conflict resolution procedures set forth in our charter, are described below.
Our officers and affiliates of our advisor will try to balance our interests with the interests of other Cole-sponsored programs to whom they owe duties. However, to the extent that these persons take actions that are more favorable to other entities than to us, these actions could have a negative impact on our financial performance and, consequently, on distributions to you and the value of your investment. In addition, our directors, officers and certain of our stockholders may engage for their own account in business activities of the types conducted or to be conducted by our subsidiaries and us. For a description of some of the risks related to these conflicts of interest, see the “Risk Factors” section of this prospectus.
Our independent directors have an obligation to function on our behalf in all situations in which a conflict of interest may arise, and are aided by independent counsel for the independent directors. Furthermore, all of our directors have a fiduciary obligation to act on behalf of our stockholders.
Interests in Other Real Estate Programs and Other Concurrent Offerings
Affiliates of our advisor act as an advisor to, and Christopher H. Cole, our chairman, president and chief executive officer, and D. Kirk McAllaster, Jr., our executive vice president, chief financial officer and treasurer, act as officers and/or directors of Cole Credit Property Trust I, Cole Credit Property Trust II, Cole Credit Property Trust III, Cole Corporate Income Trust, Cole Credit Property Trust IV, and one additional real estate investment program that currently is in registration for its initial public offering, all of which are REITs offered, distributed and managed by affiliates of our advisor. Marc T. Nemer, one of our directors, also is a director of Cole Credit Property Trust I and Cole Credit Property Trust III, and one of our independent directors also is an independent director of Cole Credit Property Trust II. In addition, all of these REITs employ our sponsor’s investment strategy, which primarily focuses on single-tenant corporate and retail properties subject to long term net leases to creditworthy tenants. Cole Credit Property Trust I, Cole Credit Property Trust II, Cole Credit Property Trust III and Cole Credit Property Trust IV focus primarily on the retail sector, while Corporate Income Trust focuses on office and industrial properties. The common investment strategy used by each REIT would permit them to purchase certain properties that may also be suitable for our portfolio.
Cole Credit Property Trust I and Cole Credit Property Trust II are no longer offering shares for investment and are not currently pursuing the acquisition of additional properties. In the event Cole Credit Property Trust I or Cole Credit Property Trust II sells one or more of its assets, either company may seek to acquire additional properties, which may be similar to properties in which we invest. On January 22, 2013, Cole Credit Property Trust II entered into an Agreement and Plan of Merger with Spirit Realty Capital, Inc., a publicly listed REIT. The transaction is expected to close during the third quarter of 2013. Cole Credit Property Trust III is no longer offering shares for investment to the public; however, Cole Credit Property Trust III continues to invest in real estate. Cole Corporate Income Trust commenced an initial public offering of up to $2.975 billion of shares of common stock in February 2011. Cole Credit Property Trust IV’s initial public offering of up to 250,000,000 shares of common stock was declared effective by the SEC on January 26, 2012 and it commenced sales of its common stock in the offering on March 1, 2012. Cole Credit Property Trust III and Cole Credit Property Trust IV are active investors in real estate and real estate-related investments, and the investment objectives and strategies of Cole Credit Property Trust III and Cole Credit Property Trust IV overlap with our investment objective and strategy, thereby increasing the likelihood of potential acquisitions being appropriate for Cole Credit Property Trust III, Cole Credit Property Trust
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IV and for us. Cole Corporate Income Trust is also an active investor in real estate and real estate-related investments, and, although Cole Corporate Income Trust focuses primarily on the office and industrial sector, we anticipate that many investments that will be appropriate for investment by us also will be appropriate for investment by Cole Corporate Income Trust. The additional real estate investment program sponsored by Cole Real Estate Investments that is currently seeking registration for its initial public offering is seeking to register up to $2.975 billion in shares of its common stock. See “— Potential Conflicts in Acquiring, Leasing and Reselling of Properties” below.
In addition, during the period from January 1, 2003 to December 31, 2012, an affiliate of our advisor had issued approximately $114.2 million of debt pursuant to four private offerings, the proceeds of which were used to acquire single and multi-tenant properties in various states. In addition, during the same period, Cole Real Estate Investments sponsored 53 tenant-in-common and Delaware Statutory Trust real estate programs, 52 of which are still in operation as of December 31, 2012. Cole Real Estate Investments also sponsored Cole Growth Opportunity Fund I, L.P. (“CGOF”), which is currently operating. CGOF does not have similar investment objectives to this program. Affiliates of our advisor may, from time to time, sponsor additional tenant-in common and/or Delaware statutory trust real estate programs, which may invest in, and compete for, properties that would be suitable investments under our investment criteria. During the period from January 1, 2003 to December 31, 2012, affiliates of our advisor and of our executive officers also served as officers and directors of general partners of two limited partnerships that have invested in unimproved and improved real properties located in various states, including Cole Credit Property Fund, LP (“CCPF”) and Cole Credit Property Fund II, LP (“CCPF II”). See the “Prior Performance Summary” section of this prospectus. Affiliates of our executive officers and entities owned or managed by such affiliates also may acquire or develop real estate for their own accounts, and have done so in the past. Furthermore, affiliates of our executive officers and entities owned or managed by such affiliates intend to form additional real estate investment entities in the future, whether public or private, which can be expected to have the same or similar investment objectives and targeted assets as we have, and such persons may be engaged in sponsoring one or more of such entities at approximately the same time as our shares of common stock are being offered. Our advisor, its affiliates and affiliates of our executive officers are not obligated to present to us any particular investment opportunity that comes to their attention, even if such opportunity is of a character that might be suitable for investment by us. Our advisor and its affiliates likely will experience conflicts of interest as they simultaneously perform services for us and other Cole-sponsored real estate programs.
While our board has adopted a policy limiting the types of transactions that may be conducted by us with our advisor and its affiliates, including other Cole-sponsored real estate programs, such transactions are subject to an inherent conflict of interest. Similarly, joint ventures involving affiliates of our advisor also give rise to conflicts of interest. In addition, our board of directors may encounter conflicts of interest in enforcing our rights against any affiliate in the event of a default by or disagreement with an affiliate or in invoking powers, rights or options pursuant to any agreement between us and our advisor, any of its affiliates or another Cole-sponsored real estate program.
Transactions with Our Advisor and its Affiliates
We rely on our advisor for the day-to-day operation of our business. As a result of the interests of members of its management in other real estate programs sponsored by Cole Real Estate Investments and the fact that they also are engaged, and will continue to engage, in other business activities, our advisor and its officers, key persons and respective affiliates may have conflicts of interest in allocating their time between us and other real estate programs sponsored by Cole Real Estate Investments and other activities in which they are involved. However, our advisor believes that it and its affiliates have sufficient personnel to discharge fully their responsibilities to all of the real estate programs sponsored by Cole Real Estate Investments and other ventures in which they are involved.
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In addition, our executive officers also serve as officers and/or directors of our advisor, our dealer manager and/or their affiliates. As a result, each of our executive officers owes fiduciary duties to these other entities, as applicable, which may conflict with the fiduciary duties that he owes to us and our stockholders. If these individuals were to act or fail to act in a manner that was detrimental to our business, or favor one entity over another, they could be subject to liability for breach of their fiduciary duty to us and our stockholders.
From time to time our advisor may direct certain of its affiliates to acquire properties that would be suitable investments for us or may create special purpose entities to acquire properties for the specific purpose of selling the properties to us at a later time. Subsequently, we may acquire such properties from such affiliates, but any and all acquisitions from affiliates of our advisor must be approved by a majority of our directors, including a majority of independent directors, not otherwise interested in such transactions as being fair and reasonable to us. In addition our purchase price in any such transaction will be limited to the cost of the property to the affiliate, including acquisition-related expenses, unless a majority of the independent directors determines that there is substantial justification for any amount that exceeds such cost and that the difference is reasonable. Further, our charter provides that in no event will the purchase price of any asset acquired from an affiliate of our advisor exceed its current appraised value as determined by an independent appraiser.
During the year ended December 31, 2011, we acquired a 100% interest in three single tenant net leased properties, for an aggregate purchase price of $11.1 million, from Series C, LLC (“Series C”), an affiliate of our advisor. The acquisitions were funded with proceeds from our ongoing public offering of common stock combined with proceeds from our secured revolving credit facility. A majority of our board of directors (including all of our independent directors) not otherwise interested in the acquisitions, approved the acquisitions as being fair and reasonable to the Company, and determined that the aggregate cost of the properties was equal to the aggregate cost of the properties to Series C (including acquisition related expenses). In addition, the aggregate purchase price of the properties, exclusive of closing costs, was less than the aggregate then-current appraised values of the properties.
From time to time, we may borrow funds from affiliates of our advisor, including our sponsor, as bridge financing to enable us to acquire a property when offering proceeds alone are insufficient to do so and third party financing has not been arranged. Any and all such transactions must be approved by a majority of our directors, including a majority of our independent directors not otherwise interested in such transaction, as fair, competitive and commercially reasonable, and no less favorable to us than comparable loans between unaffiliated parties. Our advisor or its affiliates may pay costs on our behalf, pending our reimbursement, or we may defer payment of fees to our advisor or its affiliates, but neither of these transactions would be considered a loan. By way of example only, the prohibition on loans would not restrict advances of cash for legal expenses or other costs incurred as a result of any legal action for which indemnification is being sought.
Our charter does not prohibit us from entering into transactions other than those described above with our directors, our advisor, our sponsor or any of their affiliates, subject to compliance with the requirements set forth under “— Certain Conflict Resolution Procedures,” including approval by a majority of our directors, including a majority of the independent directors, not otherwise interested in such transactions as being fair and reasonable to us and no less favorable to us than comparable terms and conditions available from unaffiliated third parties. Although we do not currently anticipate entering into any such transactions, we may sell investments to or acquire investments from affiliates of our advisor, make loans to or borrow from affiliates of our advisor and lease assets to or from affiliates of our advisor. In addition, we would not be precluded from internalizing our advisor if our board of directors were to determine an internalization transaction to be in the best interests of our stockholders.
Competition in Acquiring, Leasing and Reselling of Properties
There is a risk that a potential investment would be suitable for one or more real estate programs sponsored by Cole Real Estate Investments, in which case the officers of our advisor will have a conflict of interest allocating the investment opportunity to us or another program. There is a risk that our advisor will choose a
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property that provides lower returns to us than a property purchased by another Cole-sponsored program. However, in such event, our advisor, with oversight by our board of directors, will determine which program will be first presented with the opportunity. See “— Certain Conflict Resolution Procedures” for details of the factors used to make that determination. Additionally, our advisor may cause a prospective tenant to enter into a lease for property owned by another Cole-sponsored program. In the event that these conflicts arise, our best interests may not be met when persons acting on our behalf and on behalf of other real estate programs sponsored by Cole Real Estate Investments decide whether to allocate any particular property to us or to another Cole-sponsored program.
Conflicts of interest will exist to the extent that we may acquire, or seek to acquire, properties in the same geographic areas where properties owned by other real estate programs sponsored by Cole Real Estate Investments are located. In such a case, a conflict could arise in the acquisition or leasing of properties in the event that we and another real estate program sponsored by Cole Real Estate Investments were to compete for the same properties or tenants, or a conflict could arise in connection with the resale of properties in the event that we and another real estate program sponsored by Cole Real Estate Investments were to attempt to sell similar properties at the same time including in particular in the event another real estate program sponsored by Cole Real Estate Investments liquidates at approximately the same time as us. Conflicts of interest may also exist at such time as we or affiliates of our advisor managing property on our behalf seek to employ developers, contractors or building managers, as well as under other circumstances. Our advisor will seek to reduce conflicts relating to the employment of developers, contractors or building managers by making prospective employees aware of all such properties seeking to employ such persons. In addition, our advisor will seek to reduce conflicts that may arise with respect to properties available for sale or rent by making prospective purchasers or tenants aware of all such properties. However, these conflicts cannot be fully avoided in that there may be established differing compensation arrangements for employees at different properties or differing terms for re-sales or leasing of the various properties.
Any other real estate program sponsored by Cole Real Estate Investments, whether or not currently existing, might also compete with us in the sale of our assets. Our advisor and its affiliates will face conflicts of interest in determining which properties from which portfolios might be appropriate for sale to different potential purchasers.
Potential Conflicts in Joint Venture and Co-ownership Arrangements with Affiliates of Our Advisor
We may enter into joint ventures or other co-ownership arrangements with other Cole-sponsored programs (as well as other parties) for the acquisition, development or improvement of properties and other investments. See the “Investment Objectives, Strategy and Policies — Acquisition and Investment Policies — Joint Venture Investments” section of this prospectus. Our advisor and its affiliates may have conflicts of interest in determining which Cole-sponsored program should enter into any particular joint venture or co-ownership agreement. The co-venturer or co-owner may have economic or business interests or goals which are or which may become inconsistent with our business interests or goals. In addition, should any such joint venture be consummated, our advisor may face a conflict in structuring the terms of the relationship between our interests and the interest of the co-venturer or co-owner, and in managing the joint venture or other co-ownership arrangement. Since our advisor and its affiliates will negotiate the terms of any agreements or transactions between us and a Cole-sponsored co-venturer or co-owner, we will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers or co-owners. However, in such event, our advisor will act according to policies adopted by our board of directors, including that the joint venture as must be and reasonable to us and on substantially the same terms and conditions as those received by the other joint venturers, and the cost of our investment must be supported by a current appraisal of the asset.
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Potential Conflicts Arising From Receipt of Fees and Other Compensation by Our Advisor and Its Affiliates
Our advisor will receive substantial fees from us. These compensation arrangements could influence our advisor’s advice to us, as well as the judgment of the personnel of our advisor who serve as our officers or directors. Among other matters, the compensation arrangements could affect the judgment of our advisor’s personnel with respect to:
| | • | | the continuation, renewal or enforcement of our agreements with our advisor and its affiliates, including the advisory agreement and the dealer manager agreement, and the amounts we pay under such agreements; |
| | • | | the advisory fee and performance fee that we pay to our advisor are based upon our NAV, and our advisor is involved in estimating certain accrued fees and expenses that are part of our NAV; |
| | • | | our advisor could be motivated to recommend riskier or more speculative investments in order for us to generate the specified levels of performance that would entitle our advisor to incentive compensation; and |
| | • | | the decision to buy or sell an asset based on whether it will increase or decrease our NAV as opposed to whether it is the most suitable investment for our portfolio. |
We will pay advisory fees to our advisor regardless of the quality of the services it provides during the term of the advisory agreement. Our advisor, however, has a fiduciary duty to us. If our advisor fails to act in our best interests, then it will have violated this duty. The advisory agreement may be terminated by us or our advisor on 60 days’ notice.
Potential Conflicts of Our Advisor’s Affiliated Dealer Manager
Since Cole Capital Corporation, our dealer manager, is an affiliate of our advisor, we will not have the benefit of an independent due diligence review and investigation of the type normally performed by an unaffiliated, independent underwriter in connection with the offering of securities. Accordingly, you will have to rely on your own financial intermediary to make an independent review of the terms of this offering. If your financial intermediary conducts an independent review of this offering, and/or engages an independent due diligence reviewer to do so on its behalf, we expect that we will pay or reimburse the expenses associated with such review, which may create conflicts of interest. If your financial intermediary does not conduct such a review, you will not have the benefit of an independent review of the terms of this offering. See the “Plan of Distribution” section of this prospectus.
In addition, the sale of our shares of common stock in this offering will result in dealer manager fees to Cole Capital Corporation, our dealer manager and an affiliate of our advisor. Further, our dealer manager may have a compensation program for its registered employees who market and sell this investment to participating broker-dealers that may be different from the compensation program it has for the marketing and sale of other Cole-sponsored investments. Different compensation programs may result in Cole Capital Corporation’s registered employees receiving different compensation for the marketing and sale of our investment than for the marketing and sale of other programs. Such a compensation program may create a conflict of interest by motivating our dealer manager’s registered employees to promote this investment over other Cole-sponsored investments, or to promote investments in such other programs over this investment.
Potential Conflicts of Our Advisor’s Affiliated Property Manager
Our properties are, and we anticipate that properties we acquire in the future will be, managed and leased by our property manager, CREI Advisors, an affiliate of our advisor, pursuant to property management and leasing agreements. We expect CREI Advisors to also serve as property manager for properties owned by other real estate programs sponsored by Cole Real Estate Investments, some of which may be in competition with our properties.
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Certain Conflict Resolution Procedures
In order to reduce or eliminate certain potential conflicts of interest, our charter contains a number of restrictions relating to (1) transactions we may enter into with our advisor and its affiliates, (2) certain future offerings, and (3) allocation of investment opportunities among real estate programs sponsored by Cole Real Estate Investments. These restrictions include, among others, the following:
| | • | | We will not purchase or lease properties from our sponsor, our advisor, any of our directors or any of their respective affiliates, unless (1) a majority of the directors, including a majority of the independent directors, not otherwise interested in such transaction determines that such transaction is fair and reasonable to us, and (2) either (A) the purchase price is no greater than the cost of the property to the seller, including acquisition-related expenses, or (B) a majority of the independent directors determines that there is substantial justification for any amount above such cost and that the difference is reasonable. In no event will we acquire any property from an affiliate at an amount in excess of its current appraised value as determined by an independent appraiser. |
| | • | | We will not sell or lease properties to our sponsor, our advisor, any of our directors or any of their respective affiliates, unless (1) a majority of the directors, including a majority of the independent directors, not otherwise interested in such transaction determines that such transaction is fair and reasonable to us and on terms and conditions not less favorable to us than those available from unaffiliated third parties, and (2) either (A) the sale is greater than the cost of the property to us, including acquisition-related expenses, or (B) a majority of the independent directors determines that there is substantial justification for any amount below such cost, and that the difference is reasonable. In no event will we sell any property to an affiliate at an amount less than its current appraised value as determined by an independent appraiser. |
| | • | | Our sponsor, our advisor, any of our directors and any of their respective affiliates will not make loans to us, except that we may borrow funds from affiliates of our advisor, including our sponsor, as bridge financing to enable us to acquire a property when offering proceeds alone are insufficient to do so and third party financing has not been arranged or is insufficient. Any and all such transactions must be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in such transactions as being fair competitive and commercially reasonable and no less favorable to us than comparable loans between unaffiliated parties under the same circumstances. |
| | • | | In the event that an investment opportunity becomes available that may be suitable for both us and one or more other Cole-sponsored program, and for which more than one of such entities has sufficient uninvested funds, then our advisor, and the advisors of the other programs, with oversight by their respective boards of directors, will examine the following factors, among others, in determining the entity for which the investment opportunity is most appropriate: |
| | • | | the investment objective of each entity; |
| | • | | the anticipated operating cash flows of each entity and the cash requirements of each entity; |
| | • | | the effect of the acquisition both on diversification of each entity’s investments by type of property, geographic area and tenant concentration; |
| | • | | the amount of funds available to each program and the length of time such funds have been available for investment; |
| | • | | the policy of each program relating to leverage of properties; |
| | • | | the income tax effects of the purchase to each entity; and |
| | • | | the size of the investment. |
If, in the judgment of the advisors, the investment opportunity may be equally appropriate for more than one program, then the entity that has had the longest period of time elapse since it was offered an investment opportunity will first be offered such investment opportunity.
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If a subsequent development, such as a delay in the closing of the acquisition or a delay in the construction of a property, causes any such investment, in the opinion of the advisors, to be more appropriate for an entity other than the entity that committed to make the investment, the advisors may determine that another program sponsored by Cole Real Estate Investments will make the investment. Our board of directors, including the independent directors, has a duty to ensure that the method used for the allocation of the acquisition of properties by two or more Cole-sponsored programs seeking to acquire similar types of properties is applied fairly to us.
Employees
We have no direct employees. The employees of Cole Advisors and its affiliates provide services to us related to acquisition and disposition, property management, asset management, financing, accounting, investor relations and administration. The employees of Cole Capital, our dealer manager, provide wholesale brokerage services. We are dependent on our advisor and its affiliates for services that are essential to us, including the sale of shares of our common stock, asset acquisition decisions, property management and other general administrative responsibilities. In the event that these companies were unable to provide these services to us, we would be required to obtain such services from other sources. Cole Advisors has waived its right to receive operating expense reimbursements for the year ended December 31, 2012 and 2011. However, when these reimbursements are no longer waived, we will reimburse Cole Advisors and its affiliates for expenses incurred in connection with its provision of administrative, acquisition, property management, asset management, financing, accounting and investor relation services, including personnel costs, subject to certain limitations.
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PRIOR PERFORMANCE SUMMARY
Prior Investment Programs
The information presented in this section and in the Prior Performance Tables attached to this prospectus provides relevant summary information on the historical experience of the real estate programs managed over the last ten years by our sponsor, Cole Real Estate Investments, including certain officers and directors of our advisor. The prior performance of the programs previously sponsored by Cole Real Estate Investments is not necessarily indicative of the results that we will achieve. For example, many of the prior programs were privately offered and did not bear a fee structure similar to ours, or the additional costs associated with being a publicly held entity. Therefore, you should not assume that you will experience returns comparable to those experienced by investors in prior real estate programs sponsored by Cole Real Estate Investments.
We intend to conduct this offering in conjunction with future offerings by one or more public and private real estate entities sponsored by Cole Real Estate Investments. To the extent that such entities have the same or similar objectives as ours or involve similar or nearby properties, such entities may be in competition with the properties acquired by us. See the “Conflicts of Interest” section of this prospectus for additional information.
The Prior Performance Tables set forth information as of the dates indicated regarding the prior programs subject to public reporting requirements, including (1) experience in raising and investing funds (Table I); (2) compensation to the sponsor and its affiliates (Table II); (3) annual operating results of prior real estate programs (Table III); and (4) results of sales or disposals of properties (Table V). The Company has not included the results of completed programs (Table IV) since none of the prior public real estate programs sponsored by Cole Real Estate Investments have completed their operations during the five years ended December 31, 2012. Additionally, Table VI, which is contained in Part II of the registration statement for this offering and which is not part of this prospectus, contains certain additional information relating to properties acquired by these prior real estate programs. We will furnish copies of such tables to any prospective investor upon request and without charge. The purpose of this prior performance information is to enable you to evaluate accurately the experience of our advisor and its affiliates in sponsoring like programs. The following discussion is intended to summarize briefly the objectives and performance of the prior real estate programs and to disclose any material adverse business developments sustained by them. As of December 31, 2012, approximately 98% of the prior real estate programs had investment objectives similar to those of this program, based on number of programs.
Summary Information
Prior Private Programs
During the period from January 1, 2003 to December 31, 2012, Cole Real Estate Investments sponsored 61 privately offered programs, including two limited partnerships, four debt offerings, 27 Delaware Statutory Trusts, 26 tenant-in-common programs and Cole Credit Property Trust I, a privately offered REIT, each with similar investment objectives to those of this program, and one limited partnership that did not have similar investment objectives to this program. As of December 31, 2012, such privately offered prior programs have raised approximately $637.8 million from approximately 5,500 investors.
With respect to the two privately offered limited partnerships, Cole Credit Property Fund I, LP (“CCPF”) and Cole Credit Property Fund II, LP (“CCPF II”), sponsored by Cole Real Estate Investments during the period from January 1, 2003 to December 31, 2012, which had similar investment objectives to this program, affiliates of our advisor have been general partners in each limited partnership. In total, limited partnership interests were sold to approximately 1,000 investors, raising approximately $49.5 million of capital. The foregoing partnerships have purchased 23 single-tenant retail and commercial properties for an approximate acquisition cost of $117.0 million. The properties were located in the following states: three in Tennessee; three in Oklahoma; two in California; two in Ohio; and one each in Alabama, Florida, Indiana, Iowa, Kentucky, Michigan, Missouri, New Mexico, New York, South Carolina, Texas, Virginia and Washington. The properties have been purchased on terms varying from all cash to market rate financing. As of December 31, 2012, each of the limited
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partnerships has completed operations and all of the 23 properties have been sold, 22 of which were sold to Cole Credit Property Trust II for $121.2 million. In accordance with Cole Credit Property Trust II’s charter, Cole Credit Property Trust II’s board of directors, including all of its independent directors, not otherwise interested in the transactions, approved these purchases as being fair and reasonable to Cole Credit Property Trust II at a price in excess of the cost paid by the affiliated seller, and determined that there was substantial justification for the excess cost. In addition, the limited partners of the two privately offered limited partnerships approved the sales. CCPF and CCPF II achieved average annual returns of approximately 8.07% and 9.36%, respectively, during the life of the respective partnership through the date of liquidation.
With respect to the one privately offered limited partnership sponsored by Cole Real Estate Investments during the period from January 1, 2003 to December 31, 2012, CGOF, which did not have similar investment objectives to this program, an affiliate of our advisor serves as the general partner. Unlike the investment approach of our sponsor’s other programs, which were designed to provide current income through the payment of cash distributions, CGOF is designed to invest in properties located in high growth markets in the early stages of development, where value added investment strategies could be implemented with the objective of realizing appreciation through the sale or other form of disposition of properties. As of December 31, 2012, CGOF had raised approximately $26.3 million from approximately 400 investors and owned directly, or indirectly through investments in joint ventures, a total of four properties including three properties in Arizona and one property in Nevada for an aggregate cost of approximately $27.3 million, including development related costs. As of December 31, 2012, none of these properties had been sold.
In addition to the partnerships described above, as of December 31, 2012, affiliates of our advisor had issued an aggregate of approximately $114.2 million in collateralized senior notes through four privately offered debt programs and had acquired 123 single-tenant retail properties, 40 single-tenant commercial properties, three multi-tenant retail properties and one land parcel in 38 states for an aggregate acquisition cost of approximately $1.0 billion. The debt offerings are considered to be prior programs, as proceeds were primarily used to invest in single-tenant income-producing retail and commercial properties. One of the primary purposes of the note programs was to enable Cole Real Estate Investments to acquire assets that might be suitable for its tenant-in-common program and Delaware Statutory Trust program and for acquisition by one of its equity programs pending such time as the respective program had sufficient capital and/or corporate approval to acquire the asset. As of December 31, 2012, all of the properties had been sold, of which eight were sold to Cole Credit Property Trust I, one land parcel was sold to CGOF, 17 were sold to Cole Credit Property Trust II, six were sold to Cole Credit Property Trust III, one was sold to Cole Corporate Income Trust, 26 were sold to participants in Cole Real Estate Investment’s tenant-in-common program, 52 were sold to participants in Cole Real Estate Investment’s Delaware Statutory Trust program and the remaining 52 properties were sold to unrelated third parties. As of December 31, 2012, an affiliate of our advisor had redeemed at par all $114.2 million in collateralized senior notes.
In addition, Cole Real Estate Investments offered properties to Section 1031 exchange investors through the sale of tenant-in-common ownership interests in such properties. As of December 31, 2012, aggregate ownership interests in 26 properties of approximately $171.4 million had been sold in 26 private offerings of properties located in 15 states. The value of such tenant-in-common ownership interests was determined by the aggregate purchase price, including acquisition costs, of the properties. In addition, Cole Real Estate Investments offered properties through a Delaware statutory trust program whereby beneficial interests were offered in trusts that acquired real property. As of December 31, 2012, aggregate ownership interests in 52 properties of approximately $176.1 million had been sold in 27 private offerings of properties located in 21 states. The value of such beneficial interests was determined by the aggregate purchase price, including acquisition costs, of the real property acquired. As of December 31, 2012, one of the properties offered through a tenant-in-common ownership program had been sold; however, each of the remaining programs described in this paragraph were still in operation and have similar investment objectives to this program.
On April 6, 2004, Cole Credit Property Trust I commenced a private placement of shares of its common stock for $10.00 per share, subject to certain volume and other discounts. Cole Credit Property Trust I completed
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the private placement on September 16, 2005, after having raised aggregate gross proceeds of approximately $100.3 million. As of December 31, 2012, Cole Credit Property Trust I, which has similar investment objectives to this program, had approximately 1,400 investors, and had acquired 42 single-tenant retail properties located in 19 states for an aggregate acquisition cost of approximately $199.1 million. Additionally, as of December 31, 2012, Cole Credit Property Trust I had sold six properties for $42.2 million. Cole Credit Property Trust I disclosed in its private placement memorandum a targeted liquidity event by February 1, 2016. Such targeted date has not yet occurred, and Cole Credit Property Trust I has not had a liquidity event. See the Prior Performance Tables for additional information regarding this program.
Upon written request, any potential investor may obtain, without charge, the most recent annual report on Form 10-K filed with the Securities and Exchange Commission by Cole Credit Property Trust I within the last 24 months. For a reasonable fee, Cole Credit Property Trust I will provide copies of any exhibits to such Form 10-K.
During the period from January 1, 2003 to December 31, 2012, the prior private programs purchased 227 properties located in 40 states. The table below gives information about these properties by region.
| | | | | | | | |
| | | Properties Purchased | |
Location | | Number | | | % of Total
Purchase Price | |
South | | | 112 | | | | 43.8 | % |
Midwest | | | 63 | | | | 30.6 | % |
West | | | 29 | | | | 19.4 | % |
Northeast | | | 23 | | | | 6.2 | % |
| | | | | | | | |
| | | 227 | | | | 100.0 | % |
| | | | | | | | |
Based on the aggregate purchase price of the 227 properties, approximately 79.2% were single-tenant retail properties, approximately 10.2% were multi-tenant retail properties, 9.8% were single-tenant commercial properties, and approximately 0.8% was land. The following table shows a breakdown of the aggregate amount of the acquisition and development costs of the properties purchased by the prior private real estate programs sponsored by Cole Real Estate Investments as of December 31, 2012:
| | | | | | | | | | | | |
Type of Property | | New | | | Used | | | Construction | |
Retail/Commercial | | | 29.1 | % | | | 69.7 | % | | | 1.2 | % |
Land | | | — | | | | 100 | % | | | — | |
As of December 31, 2012, these private programs had sold 188, or 82.8% of the total 227 properties purchased, of which 39 properties were sold to Cole Credit Property Trust II, six properties were sold to Cole Credit Property Trust III, one property was sold to Cole Corporate Income Trust and 142 properties were sold to unrelated third parties. Of the 142 properties sold to unrelated third parties, 26 properties were sold to participants in Cole Real Estate Investment’s tenant-in-common program and 52 properties were sold to participants in Cole Real Estate Investment’s Delaware Statutory Trust program. The original purchase price of the properties that were sold was approximately $1.2 billion, and the aggregate sales price of such properties was approximately $1.3 billion.
During the three years ended December 31, 2012, the prior private real estate programs purchased one single-tenant commercial property located in San Antonio, Texas for $32.9 million.
Prior Public Programs
Cole Real Estate Investments sponsored five publicly offered REITs, Cole Credit Property Trust II, Cole Credit Property Trust III, Cole Corporate Income Trust, Cole Income NAV Strategy and Cole Credit Property
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Trust IV, during the period from January 1, 2003 to December 31, 2012. Each of the publicly offered REITs have similar investment objectives to our program. As of December 31, 2012, Cole Credit Property Trust II had raised approximately $2.3 billion from approximately 41,000 investors, Cole Credit Property Trust III had raised approximately $4.9 billion from approximately 102,000 investors, Cole Credit Property Trust IV had raised approximately $298.4 million from approximately 7,500 investors, Cole Corporate Income Trust had raised approximately $167.8 million from approximately 5,000 investors and Cole Income NAV Strategy had raised approximately $13.7 million from approximately 100 investors. For more detailed information about the experience of our sponsor in raising and investing funds and compensation paid to the sponsors of Cole Credit Property Trust II, Cole Credit Property Trust III, Cole Credit Property Trust IV, Cole Corporate Income Trust and Cole Income NAV Strategy, see Tables I and II of the Prior Performance Tables.
On June 27, 2005, Cole Credit Property Trust II commenced an initial public offering of shares of its common stock for $10.00 per share, subject to certain volume and other discounts, in a primary offering, and for $9.50 per share pursuant to a distribution reinvestment plan. Cole Credit Property Trust II terminated its initial public offering on May 22, 2007 and commenced a follow-on public offering on May 23, 2007. Pursuant to the follow-on offering, Cole Credit Property Trust II offered and sold shares of its common stock for $10.00 per share, subject to certain volume and other discounts, in a primary offering, and for $9.50 per share pursuant to its distribution reinvestment plan. Cole Credit Property Trust II terminated its follow-on offering on January 2, 2009, although it continued to offer and sell shares of its common stock to existing Cole Credit Property Trust II stockholders pursuant to its distribution reinvestment plan. On December 6, 2012, the Cole Credit Property Trust II board of directors voted to suspend the distribution reinvestment plan and the share redemption program. As of December 31, 2012, Cole Credit Property Trust II had raised approximately $2.3 billion from approximately 41,000 investors and had acquired 417 single-tenant retail properties, 314 single-tenant commercial properties, and 23 multi-tenant retail properties in 45 states and the U.S. Virgin Islands for an aggregate acquisition cost of approximately $3.3 billion or a total of 754 properties. On January 22, 2013, Cole Credit Property Trust II entered into an agreement and plan of merger with Spirit a publicly listed REIT. The merger agreement provides for the merger of Spirit with and into Cole Credit Property Trust II, with Cole Credit Property Trust II continuing as the surviving corporation. The name of the surviving corporation is expected to be “Spirit Realty Capital, Inc.” The completion of the merger and the other transactions contemplated by the merger agreement are subject to various conditions, including approval by the holders of a majority of the outstanding shares of Cole Credit Property Trust II. The merger is expected to close during the third quarter of 2013.
On October 1, 2008, Cole Credit Property Trust III commenced an initial public offering of shares of its common stock for $10.00 per share, subject to certain volume and other discounts, in a primary offering, and for $9.50 per share pursuant to a distribution reinvestment plan. Cole Credit Property Trust III terminated its initial public offering on October 1, 2010 and commenced a follow-on public offering on October 1, 2010. Pursuant to the follow-on offering, Cole Credit Property Trust III sold shares of its common stock for $10.00 per share, subject to certain volume and other discounts, in a primary offering, and for $9.50 per share pursuant to its distribution reinvestment plan. Cole Credit Property Trust III ceased issuing shares in its follow-on offering on April 27, 2012, although it continues to offer and sell shares pursuant to its distribution reinvestment plan. As of December 31, 2012, Cole Credit Property Trust III had raised approximately $4.9 billion from approximately 102,000 investors and had acquired 825 single-tenant retail properties, 137 single-tenant commercial properties, 72 multi-tenant retail properties, seven office/industrial properties and two land parcels under construction in 47 states for an aggregate acquisition cost of approximately $7.2 billion, or a total of 1,043 properties, which includes three consolidated joint ventures. In addition, through seven unconsolidated joint venture arrangements as of December 31, 2012, Cole Credit Property Trust III had interests in 12 properties comprising 2.3 million gross rentable square feet of commercial space. On April 5, 2013, Cole Credit Property Trust III completed a transaction whereby Cole Holdings Corporation merged with and into CREInvestments, LLC (“CREI”), a wholly-owned subsidiary of Cole Credit Property Trust III. Prior to the merger, Cole Holdings was wholly owned by Mr. Christopher H. Cole. Cole Credit Property Trust III intends to list its shares of common stock on the New York Stock Exchange following its 2013 annual meeting of stockholders. There can be no assurance
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that Cole Credit Property Trust III will successfully list its common stock on the New York Stock Exchange or that, if it is successful in listing, an active trading market for its common stock will develop and be sustained or the price at which its common stock may trade.
On January 26, 2012, Cole Credit Property Trust IV commenced an initial public offering of shares of its common stock for $10.00 per share, subject to certain volume and other discounts, in a primary offering, and for $9.50 per share pursuant to a distribution reinvestment plan. On April 13, 2012, the conditions of the escrow agreement were satisfied, and thereafter Cole Credit Property Trust IV commenced principal operations. As of December 31, 2012, Cole Credit Property Trust IV had raised approximately $298.4 million from approximately 7,500 investors and had acquired 81 single-tenant retail properties and eight multi-tenant properties in 27 states for an aggregate acquisition cost of approximately $513.6 million.
On February 10, 2011, Cole Corporate Income Trust commenced an initial public offering of shares of its common stock for $10.00 per share, subject to certain volume and other discounts, in a primary offering, and for $9.50 per share pursuant to a distribution reinvestment plan. The board of directors of Cole Corporate Income Trust approved closing the primary offering in the third quarter of 2013 and intends to continue to sells shares of their common stock pursuant to Cole Corporate Income Trust’s distribution reinvestment plan. As of December 31, 2012, Cole Corporate Income Trust had raised approximately $167.8 million from approximately 5,000 investors and had acquired 12 single-tenant commercial properties and one office property in nine states for an aggregate acquisition cost of approximately $294.9 million.
On December 6, 2011, Cole Income NAV Strategy commenced an initial public offering of up to $4.0 billion in shares of its common stock at an initial offering price of $15.00 per share. The conditions of the escrow agreement were satisfied on December 7, 2011, and thereafter, the per share purchase price of Cole Income NAV Strategy’s common stock varies from day-to-day and, on any given business day, is equal to its net asset value divided by the number of shares of its common stock outstanding as of the end of business on such day. The purchase price for shares under the distribution reinvestment program is equal to the NAV per share on the date that the distribution is payable, after giving effect to the distribution. As of December 31, 2012, Cole Income NAV Strategy had raised approximately $13.7 million from approximately 100 investors and had acquired nine single-tenant commercial properties and one multi-tenant retail property in eight states for an aggregate acquisition cost of approximately $32.7 million.
During the period from January 1, 2003 to December 31, 2012, the prior public real estate programs purchased 1,909 properties located in 47 states and the U.S. Virgin Islands as of December 31, 2012. The table below gives information about these properties by region.
| | | | | | | | |
| | | Properties Purchased | |
Location | | Number | | | % of Total
Purchase Price | |
South | | | 1,087 | | | | 48.1 | % |
Midwest | | | 495 | | | | 21.3 | % |
West | | | 196 | | | | 19.9 | % |
Northeast | | | 130 | | | | 10.6 | % |
U.S. Virgin Islands | | | 1 | | | | 0.1 | % |
| | | | | | | | |
| | | 1,909 | | | | 100.0 | % |
| | | | | | | | |
Based on the aggregate purchase price of the 1,909 properties, approximately 48.5% were single-tenant retail properties, approximately 25.1% were multi-tenant retail properties, approximately 21.4% were single-tenant commercial properties, 4.9% were office/industrial properties and approximately 0.1% was land.
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The following table shows a breakdown of the aggregate amount of the acquisition and development costs of the properties purchased by the prior public real estate programs sponsored by Cole Real Estate Investments as of December 31, 2012:
| | | | | | | | | | | | |
Type of Property | | New | | | Used | | | Construction | |
Retail/Commercial | | | 10.9 | % | | | 89.0 | % | | | 0.1 | % |
Land | | | — | | | | 99.6 | % | | | 0.4 | % |
As of December 31, 2012, two of the prior public programs had sold 30 properties for $581.3 million.
During the three years ended December 31, 2012, the prior public real estate programs had purchased 1,082 properties located in 47 states. The table below gives information about these properties by region.
| | | | | | | | |
| | | Properties Purchased | |
Location | | Number | | | % of Total
Purchase Price | |
South | | | 574 | | | | 45.9 | % |
Midwest | | | 301 | | | | 18.6 | % |
West | | | 121 | | | | 22.6 | % |
Northeast | | | 86 | | | | 12.9 | % |
| | | | | | | | |
| | | 1,082 | | | | 100.0 | % |
| | | | | | | | |
Based on the aggregate purchase price of the 1,082 properties, approximately 42.6% were single-tenant retail properties, approximately 28.7% were multi-tenant retail properties, approximately 21.2% were single-tenant commercial properties, 7.4% were office/industrial properties, and approximately 0.1% was land. Each of the prior public programs used a combination of proceeds from the offering of common stock and debt financing, including mortgage notes payable, revolving lines of credit and mezzanine financing to acquire these properties.
Upon written request, any potential investor may obtain, without charge, the most recent annual report on Form 10-K filed with the Securities and Exchange Commission by Cole Credit Property Trust II, Cole Credit Property Trust III, Cole Credit Property Trust IV, Cole Corporate Income Trust and Cole Income NAV Strategy within the last 24 months. For a reasonable fee, Cole Credit Property Trust II, Cole Credit Property Trust III, Cole Credit Property Trust IV, Cole Corporate Income Trust and Cole Income NAV Strategy will provide copies of any exhibits to such Form 10-K.
Liquidity Track Record
Prior Private Programs
Of the 61 prior private programs sponsored by Cole Real Estate Investments discussed above, 35 programs disclosed a targeted date or time frame for liquidation in their private placement memorandum. Of the 35 programs that made such disclosure, six programs liquidated by the date or within the time frame set forth in their private placement memorandum. With respect to the remaining 29 programs, the targeted date or time frame for liquidation has not yet occurred, and those programs were still in operation as of December 31, 2012.
Prior Public Programs
Of the five prior public programs sponsored by Cole Real Estate Investments discussed above, two programs, Cole Credit Property Trust II and Cole Credit Property Trust III, have publicly disclosed, subsequent to December 31, 2012, a time frame for liquidity events.
As noted above, on January 22, 2013, Cole Credit Property Trust II entered into an agreement and plan of merger with Spirit. If the merger is completed pursuant to the merger agreement, each Spirit stockholder will
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receive 1.9048 shares of Cole Credit Property Trust II common stock for each share of Spirit common stock held immediately prior to the effective time of the merger (which equates to an inverse exchange ratio of 0.525 shares of Spirit common stock for one share of Cole Credit Property Trust II common stock). Cole Credit Property Trust II stockholders will continue to hold their existing shares of Cole Credit Property Trust II common stock. The exchange ratio is fixed and will not be adjusted to reflect changes in the value of Cole Credit Property Trust II common stock or the stock price of Spirit common stock occurring prior to the completion of the merger. Based on the closing price of Spirit common stock on the New York Stock Exchange of $19.17 on March 25, 2013, the inverse exchange ratio represented approximately $10.06 in Spirit common stock for each share of Cole Credit Property Trust II common stock. The shares of combined company common stock are expected to trade on the New York Stock Exchange under the symbol “SRC.” The completion of the merger and the transactions contemplated by the merger agreement is subject to various conditions, including approval by the holders of a majority of the outstanding shares of Cole Credit Property Trust II. The transaction is expected to close during the third quarter of 2013.
As previously noted above, On April 5, 2013, Cole Credit Property Trust III completed a transaction whereby Cole Holdings Corporation merged with and into CREI. Cole Credit Property Trust III intends to list its shares of common stock on the New York Stock Exchange following its 2013 annual meeting of stockholders.
Cole Corporate Income Trust disclosed in its prospectus that it expects to engage in a strategy to provide its investors with liquidity at a time and in a method recommended by its advisor and determined by its independent directors to be in the best interests of its stockholders. Cole Corporate Income Trust’s board of directors approved closing of Cole Corporate Income Trust’s primary offering in the third quarter of 2013; however, the timing and method of any liquidity event for Cole Corporate Income Trust is undetermined as of December 31, 2012. Cole Income NAV Strategy is structured as a perpetual-life, non-exchange traded REIT, which means that, subject to regulatory approval of registrations for additional future offerings, it will be selling shares of its common stock on a continuous basis and for an indefinite period of time. Finally, Cole Credit Property Trust IV has not established a targeted date or time frame for pursuing a liquidity event, although it has disclosed in its prospectus that it expects to engage in a strategy to provide its investors with liquidity at a time and in a method recommended by its advisor and determined by its independent directors to be in the best interests of its stockholders. Accordingly, the timing and method of any liquidity event for Cole Credit Property Trust IV is undetermined as of December 31, 2012.
Adverse Business and Other Developments
Adverse changes in general economic conditions have occasionally affected the performance of the prior programs. The following discussion presents a summary of significant adverse business developments or conditions experienced by Cole Real Estate Investment’s prior programs over the past ten years that may be material to investors in this offering.
Share Valuation
Cole Credit Property Trust stated in its private placement memorandum that after two years from the last offering of its shares of common stock, Cole Credit Property Trust would provide an estimated value per share for the principal purpose of assisting fiduciaries of plans subject to the annual reporting requirements of ERISA, and IRA trustees or custodians, which prepare reports relating to an investment in Cole Credit Property Trust’s shares of common stock. On January 15, 2013, Cole Credit Property Trust announced that its board of directors approved an estimated value of Cole Credit Property Trust’s common stock of $7.75 per share as of December 31, 2012. This is a decrease from the previously reported estimated value of Cole Credit Property
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Trust’s common stock of $7.95 per share as of December 31, 2011, announced by Cole Credit Property Trust on January 13, 2012, but an increase from the $7.65 per share estimated value as of December 31, 2010 and 2009, announced January 13, 2011 and February 1, 2010, respectively. The shares of Cole Credit Property Trust’s common stock were originally sold at a gross offering price of $10.00 per share. The principal reason for the decrease in share value beginning with the December 31, 2009 valuation was a decline in real estate values, despite Cole Credit Property Trust’s properties maintaining a 100% occupancy rate. The decline in values resulted from disruptions in the credit markets and the general economic conditions. In determining an estimated value of Cole Credit Property Trust’s shares of common stock in January 2012 and January 2013, the board of directors of Cole Credit Property Trust relied upon information provided by an independent investment banking firm that specializes in providing real estate financial services and information provided by Cole Credit Property Trust Advisors. In determining an estimated value of Cole Credit Property Trust’s shares of common stock in January 2011 and February 2010, the board of directors of Cole Credit Property Trust relied on information provided by an independent consultant that specializes in valuing commercial real estate companies, and information provided by Cole Credit Property Trust Advisors. The statement of value was only an estimate and may not reflect the actual value of Cole Credit Property Trust’s shares of common stock. Accordingly, there can be no assurance that the estimated value per share would be realized by Cole Credit Property Trust’s stockholders if they were to attempt to sell their shares or upon liquidation.
In February 2009, FINRA informed broker dealers that sell shares of non-exchange traded REITs that broker dealers may not report, in a customer account statement, an estimated value per share that is developed from data more than 18 months old. To assist broker dealers in complying with the FINRA notice, the board of directors of Cole Credit Property Trust II established an estimated value of Cole Credit Property Trust II’s common stock of $9.35 per share as of July 27, 2011. This was an increase from the previously reported estimated share value of $8.05 per share announced on June 22, 2010. The shares of Cole Credit Property Trust II’s common stock were originally sold at a gross offering price of $10.00 per share. The principal reason for the initial decrease in share value was a decline in real estate values resulting from disruptions in the credit markets and the general economic conditions, in addition to a decline in Cole Credit Property Trust II’s occupancy rate to 94%. Cole Credit Property Trust II’s occupancy rate increased to 96% as of December 31, 2012. In determining an estimated value of Cole Credit Property Trust II’s shares of common stock in July 2011, the board of directors of Cole Credit Property Trust II relied upon information provided by an independent investment banking firm that specializes in providing real estate financial services and information provided by Cole Credit Property Trust II Advisors. In determining an estimated value of Cole Credit Property Trust II’s shares of common stock in June 2010, the board of directors of Cole Credit Property Trust II relied upon information provided by an independent consultant that specializes in valuing commercial real estate companies and information provided by Cole Credit Property Trust II Advisors. On January 23, 2013, Cole Credit Property Trust II’s board of directors established an estimated value of Cole Credit Property Trust II’s common stock of $9.45 per share as of January 23, 2013. This is an increase from the $9.35 per share and $8.05 per share estimated values announced by the Cole Credit Property Trust II board of directors on July 27, 2011 and June 22, 2010, respectively. The statements of value were only an estimate and may not reflect the actual value of Cole Credit Property Trust II’s shares of common stock. Accordingly, there can be no assurance that the estimated value per share would be realized by Cole Credit Property Trust II’s stockholders if they were to attempt to sell their shares or upon liquidation.
Distributions and Redemptions
From June 2005 through February 2010, Cole Credit Property Trust paid a 7.00% annualized distribution rate based upon a purchase price of $10.00 per share. However, beginning in March 2010, Cole Credit Property Trust reduced its annualized distribution rate to 5.00% based on a purchase price of $10.00 per share, or 6.50% based on the most recent estimated value of $7.75 per share. The principal reasons for the lower distribution rate were the approximately $50.0 million of fixed rate debt that was to mature by year-end 2010 and the prevailing credit markets, which dictated higher interest rates upon refinancing and amortization provisions, requiring Cole Credit Property Trust to pay down a portion of the principal on a monthly basis over the life of the loan. As of
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December 31, 2012, Cole Credit Property Trust had paid approximately $47.6 million in cumulative distributions since inception. These distributions were fully funded by net cash provided by operating activities.
Pursuant to Cole Credit Property Trust’s share redemption program, the company may use up to 1% of its annual cash flow, including operating cash flow not intended for distributions, borrowings, and capital transactions such as sales or refinancings, to satisfy redemption requests. Accordingly, Cole Credit Property Trust’s board of directors must determine at the beginning of each fiscal year the maximum amount of shares that Cole Credit Property Trust may redeem during that year. Cole Credit Property Trust’s board of directors determined that there was an insufficient amount of cash available for redemptions during the five years ended December 31, 2012 and the year ending December 31, 2013. Cole Credit Property Trust continues to accept redemption requests which are considered for redemption if and when sufficient cash is available to fund redemptions. Requests relating to approximately 261,000 shares remained unfulfilled as of December 31, 2012.
From October 2005 through February 2006, Cole Credit Property Trust II paid a 6.00% annualized distribution rate based upon a purchase price of $10.00 per share; from March 2006 through June 2006, Cole Credit Property Trust II paid a 6.25% annualized distribution rate based upon a purchase price of $10.00 per share; from July 2006 through June 2007, Cole Credit Property Trust II paid a 6.50% annualized distribution rate based upon a purchase price of $10.00 per share; from July 2007 through June 2009, Cole Credit Property Trust II paid a 7.00% annualized distribution rate based upon a purchase price of $10.00 per share; and from July 2009 through the date of this prospectus, Cole Credit Property Trust II paid a 6.25% annualized distribution rate based upon a purchase price of $10.00 per share, or a 6.61% annualized distribution rate based on the most recent estimate of the value of $9.45 per share. The principal reason for the reduction of the distribution rate was the drop in the occupancy rate of the Cole Credit Property Trust II portfolio from 99% on December 31, 2008, to 95% at September 30, 2009, resulting in lower revenue. Cole Credit Property Trust II’s occupancy rate as of December 31, 2012 was 96%.
As of December 31, 2012, Cole Credit Property Trust II had paid approximately $667.5 million in cumulative distributions since inception. These distributions were funded by net cash provided by operating activities of approximately $603.0 million, offering proceeds of approximately $9.9 million, net sale proceeds in excess of Cole Credit Property Trust II’s investment in marketable securities of approximately $21.5 million, net sale proceeds and return of capital in excess of Cole Credit Property Trust II’s investment from Cole Credit Property Trust II’s interest in joint ventures of approximately $5.9 million, principal payments from mortgage notes receivable and real estate under direct financing leases of $13.3 million and net borrowings of approximately $13.9 million. As of December 31, 2012, Cole Credit Property Trust II had expensed approximately $9.9 million in cumulative real estate acquisition expenses, which reduced operating cash flows. Cole Credit Property Trust II treats its real estate acquisition expenses as funded by offering proceeds. Therefore, for consistency, real estate acquisition expenses are treated in the same manner in describing the sources of distributions, to the extent that distributions paid exceed net cash provided by operating activities.
Pursuant to Cole Credit Property Trust II’s share redemption program in effect during 2009, redemptions were limited to 3% of the weighted average number of shares outstanding during the prior calendar year, other than for redemptions requested upon the death of a stockholder. During 2009, Cole Credit Property Trust II funded redemptions up to this limit. On November 10, 2009, Cole Credit Property Trust II’s board of directors voted to temporarily suspend Cole Credit Property Trust II’s share redemption program other than for requests made upon the death of a stockholder. The board considered many factors in making this decision, including the expected announcement of an estimated value of Cole Credit Property Trust II’s common stock in June 2010 and continued uncertainty in the economic environment and credit markets. On June 22, 2010, Cole Credit Property Trust II’s board of directors reinstated the share redemption program, with certain amendments, effective August 1, 2010. Under the terms of the revised share redemption program, during any calendar year, Cole Credit Property Trust II would redeem shares on a quarterly basis, up to one-fourth of 3% of the weighted average number of shares outstanding during the prior calendar year (including shares requested for redemption upon the death of a stockholder). In addition, funding for redemptions for each quarter would be limited to the net
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proceeds received from the sale of shares, in the respective quarter, under Cole Credit Property Trust II’s distribution reinvestment plan. During the year ended December 31, 2012, Cole Credit Property Trust II received valid redemption requests pursuant to the share redemption program, as amended, relating to approximately 19.5 million shares, including those requests unfulfilled and resubmitted from a previous period, and requests relating to approximately 6.1 million shares were redeemed for $56.9 million at an average price of $9.32 per share. The remaining redemption requests relating to approximately 13.4 million shares went unfulfilled, including those requests unfulfilled and resubmitted from a previous period. Requests for redemption that are not fulfilled in a period may be resubmitted by stockholders in a subsequent period. Unfulfilled requests for redemption are not carried over automatically to subsequent redemption periods. A valid redemption request is one that complies with the applicable requirements and guidelines of the share redemption program, as amended. On December 6, 2012, Cole Credit Property Trust II suspended its share redemption program in anticipation of a potential liquidity event. As a result of the suspension of the share redemption program, all redemption requests received from stockholders during the fourth quarter of 2012 on or before December 6, 2012 and that were determined to be in good order on or before December 12, 2012 were honored in accordance with the terms, conditions and limitation of the share redemption program. Cole Credit Property Trust II did not process or accept any requests for redemption received after December 6, 2012 and will not process or accept any future requests until such time as the Cole Credit Property Trust II board of directors may approve resumption of the share redemption program.
Cole Credit Property Trust III’s board of directors began declaring distributions in January 2009, after the company commenced business operations. Cole Credit Property Trust III paid a 6.50% annualized distribution rate based upon a $10.00 per share purchase price for the period commencing on January 6, 2009 through March 31, 2009. During the period commencing on April 1, 2009 and ending on March 31, 2010, Cole Credit Property Trust III paid a 6.75% annualized distribution rate based upon a $10.00 per share purchase price. Cole Credit Property Trust III paid a 7.00% annualized distribution rate based upon a $10.00 per share purchase price for the period commencing on April 1, 2010 and ending on December 31, 2010. Cole Credit Property Trust III paid a 6.50% annualized distribution rate to stockholders of record during the period commencing January 1, 2011 through the date of this prospectus. The principal reason for the reduction of the distribution rate was to align more closely the distribution rate with Cole Credit Property Trust III’s present operating income.
As of December 31, 2012, Cole Credit Property Trust III had paid approximately $624.9 million in cumulative distributions since inception. These distributions were funded by net cash provided by operating activities of approximately $424.0 million, offering proceeds of approximately $200.6 million and distributions received in excess of income from unconsolidated joint ventures of approximately $0.4 million. As of December 31, 2012, Cole Credit Property Trust III had expensed approximately $200.6 million in cumulative real estate acquisition expenses which reduced operating cash flows. Cole Credit Property Trust III treats its real estate acquisition expenses as funded by offering proceeds. Therefore, for consistency, real estate acquisition expenses are treated in the same manner in describing the sources of distributions, to the extent that distributions paid exceed net cash provided by operating activities.
Cole Credit Property Trust III’s share redemption program provides, in general, that the number of shares Cole Credit Property Trust III may redeem is limited to 5% of the weighted average number of shares outstanding during the trailing twelve-month period prior to the end of the fiscal quarter for which redemptions are paid. In addition, the cash available for redemption is limited to the proceeds from the sale of shares pursuant to its distribution reinvestment plan. As of December 31, 2012, Cole Credit Property Trust III had redeemed in full all valid redemption requests received in good order. A valid redemption request is one that complies with the applicable requirements and guidelines of Cole Credit Property Trust III’s share redemption program. On April 12, 2013, Cole Credit Property Trust III announced that its board of directors had voted to suspend its share redemption program in anticipation of the listing of its shares. As a result of the suspension of the share redemption program, all redemption requests received from stockholders during the second quarter of 2013 and determined by Cole Credit Property Trust III to be in good order on or before April 22, 2013 will be honored in accordance with the terms, conditions and limitations of the share redemption program; however, Cole Credit
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Property Trust III will not process or accept any requests for redemption received after April 22, 2013, or which are not in good order before the close of business on April 22, 2013.
Cole Credit Property Trust IV’s board of directors began declaring distributions in April 2012, after the company commenced business operations. Cole Credit Property Trust IV paid a 6.25% annualized distribution rate based upon a $10.00 per share purchase price for the period commencing on April 14, 2012, through the date of this prospectus. As of December 31, 2012, Cole Credit Property Trust IV had paid approximately $3.9 million in cumulative distributions since inception. These distributions were fully funded proceeds from the offering. As of December 31, 2012, Cole Credit Property Trust IV had expensed approximately $14.4 million in cumulative real estate acquisition expenses which reduced operating cash flows. Cole Credit Property Trust IV treats its real estate acquisition expenses as funded by offering proceeds. Therefore, for consistency, real estate acquisition costs are treated in the same manner in describing the sources of distributions, to the extent that distributions paid exceed net cash provided by operating activities.
From October 2011 through the date of this prospectus, Cole Corporate Income Trust paid a 6.50% annualized distribution rate based on a purchase price of $10.00 per share. As of December 31, 2012, Cole Corporate Income Trust has paid approximately $4.1 million in cumulative distributions since inception. The distributions were funded by net cash provided by operating activities of approximately $433,000 and offering proceeds of approximately $3.7 million. As of December 31, 2012, Cole Corporate Income Trust had expensed approximately $6.9 million in cumulative real estate acquisition expenses which reduced operating cash flows. Cole Corporate Income Trust treats its real estate acquisition expenses as funded by offering proceeds. Therefore, for consistency, real estate acquisition expenses are treated in the same manner in describing the sources of distributions, to the extent that distributions paid exceed net cash provided by operating activities.
The remaining programs sponsored by Cole Real Estate Investments have fulfilled all valid redemption requests and fully funded distributions with operating cash flows.
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Description of Capital Stock
The following summary of the material terms of our capital stock does not purport to be complete and is subject to and qualified in its entirety by reference to Maryland law and our charter. Our charter provides that we may issue up to 490,000,000 shares of common stock and 10,000,000 shares of preferred stock. Our charter authorizes our board of directors to amend our charter to increase the aggregate number of authorized shares or the number of authorized shares of any class or series without stockholder approval. At the commencement of this offering, 13,333 shares of our common stock were issued and outstanding, all of which were owned by Cole Holdings Corporation, and no shares of preferred stock were issued and outstanding. CREI, as the successor to Cole Holdings Corporation, continues to hold 13,333 shares of our common stock.
On September 20, 2011, our sole stockholder approved an amendment to our charter to authorize a reverse stock split of our common stock at a ratio of two-for-three, and our board authorized the implementation of the reverse stock split on September 20, 2011. Effective on September 21, 2011, every three shares of the Company issued and outstanding common stock were combined into two shares of common stock.
Common Stock
The holders of shares of our common stock are entitled to one vote per share on all matters voted on by stockholders, including the election of our directors. Our charter does not provide for cumulative voting in the election of directors. Therefore, the holders of a majority of the outstanding shares of our common stock can elect our entire board of directors. Subject to any preferential rights of any outstanding series of preferred shares, the holders of shares of our common stock are entitled to such distributions as may be authorized from time to time by our board of directors out of legally available funds and declared by us and, in the event that we were ever liquidated, would be entitled to receive all assets available for distribution to stockholders. All shares of our common stock issued in the offering will be fully paid and non-assessable shares of common stock. Holders of shares of our common stock will not have preemptive rights, which means that you will not have an automatic option to purchase any new shares of common stock that we issue, or have appraisal rights, unless our board of directors determines that appraisal rights apply, with respect to all or any classes or series of our common stock, to one or more transactions occurring after the date of such determination in connection with which stockholders would otherwise be entitled to exercise such rights. Stockholders are not liable for our acts or obligations. In the future, our board of directors may authorize a separate class of common stock with different fees and expenses than our current class of common stock.
We will not issue certificates for shares of our common stock. Shares of our common stock will be held in “uncertificated” form which will eliminate the physical handling and safekeeping responsibilities inherent in owning transferable share certificates and eliminate the need to return a duly executed share certificate to effect a transfer. DST Systems, Inc. acts as our registrar and as the transfer agent for shares of our common stock, while State Street Bank and Trust Company will act as our custodian. Transfers can be effected simply by mailing a transfer and assignment form, which we will provide to you at no charge, to:
DST Systems, Inc.
P.O. Box 219312
Kansas City, MO 64121-9312
Preferred Stock
Our charter authorizes our board of directors to classify and reclassify any unissued shares of our common stock and preferred stock into other classes or series of stock without stockholder approval. Prior to issuance of shares of each class or series, our board of directors is required by the Maryland General Corporation Law and by our charter to set, subject to our charter restrictions on transfer of our stock, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption for each class or series. Thus, our board of directors could authorize the
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issuance of shares of common stock or preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or change in control that might involve a premium price for holders of our common stock or otherwise be in their best interest. Our board of directors has no present plans to issue preferred stock, but may do so at any time in the future without stockholder approval. Our board of directors may also set the terms of shares of preferred stock that rank senior to shares of our common stock as to dividends, in liquidation and/or with respect to other rights. Preferred stock may be issued without stockholder approval in unlimited amounts and we may issue preferred stock in the future to raise additional equity capital. However, the issuance of preferred stock must be approved by a majority of our independent directors not otherwise interested in the transaction, who will have access, at our expense, to our legal counsel or to independent legal counsel.
Meetings, Special Voting Requirements and Access to Records
An annual meeting of the stockholders is held each year at our principal executive office or such other location convenient to stockholders upon reasonable notice and on a specific date which will be at least 30 days after delivery of our annual report. The board of directors, including the independent directors, shall be required to take reasonable steps to insure that this requirement is met. Special meetings of stockholders may be called only upon the request of a majority of the directors, a majority of the independent directors, the chairman or the president and must be called by our secretary upon the written request of stockholders entitled to cast at least 10% of the votes entitled to be cast at the meeting on any matter that may property be considered at a meeting of stockholders. Upon receipt of a written request, either in person or by mail, stating the purposes of the special meeting, our sponsor shall provide all stockholders, within 10 days after receipt of said request, written notice, either in person or by mail, of a special meeting and the purposes of such meeting to be held on a date not less than 15 or more than 60 days after the distribution of such notice, at a time and place specified in the request, or if none is specified, a time and place convenient to stockholders. The presence either in person or by proxy of stockholders entitled to cast at least 50% of the votes entitled to be cast at the meeting on any matter will constitute a quorum. Generally, the affirmative vote of a majority of all votes cast is necessary to take stockholder action, except that the affirmative vote of a majority of the shares entitled to vote and represented in person or by proxy at a meeting at which a quorum is present is required to elect a director.
Under the Maryland General Corporation Law and our charter, stockholders are generally entitled to vote at a duly held meeting at which a quorum is present on (1) the amendment of our charter, (2) our dissolution or (3) our merger or consolidation or the sale or other disposition of all or substantially all of our assets. Under our charter, these matters require the affirmative vote of stockholders entitled to cast at least a majority of the votes entitled to be cast on the matter.
The advisory agreement and the sub-advisory agreement are approved annually by our directors including a majority of the independent directors. While the stockholders do not have the ability to vote to replace our advisor or its sub-advisor or to select its replacements, stockholders do have the ability, by the affirmative vote of a majority of the votes entitled to be cast generally in the election of directors, to remove a director from our board of directors.
Any stockholder will be permitted access to our corporate records at all reasonable times and may inspect and copy any of them for a reasonable charge. Inspection of our records by the office or agency administering the securities laws of a jurisdiction will be provided upon reasonable notice and during normal business hours. An alphabetical list of the names, addresses and telephone numbers of our stockholders, along with the number of shares of our stock held by each of them, will be maintained as part of our books and records and will be available for inspection by any stockholder or the stockholder’s designated agent at our office. The stockholder list will be updated at least quarterly to reflect changes in the information contained therein. A copy of the list will be mailed to any stockholder who requests the list within 10 days of the receipt of the request. A stockholder may request a copy of the stockholder list in connection with matters relating to voting rights and the exercise of stockholder rights under federal proxy laws. A stockholder requesting a list will be required to pay reasonable costs of postage and duplication. We have the right to request that a requesting stockholder represent to us that
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the list will not be used to pursue commercial interests. In addition to the foregoing, stockholders have rights under Rule 14a-7 under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), which provides that, upon the request of investors and the payment of the expenses of the distribution, we are required to distribute specific materials to stockholders in the context of the solicitation of proxies for voting on matters presented to stockholders or, at our option, provide requesting stockholders with a copy of the list of stockholders so that the requesting stockholders may make the distribution of proxies themselves. If a proper request for the stockholder list is not honored, then the requesting stockholder will be entitled to recover certain costs incurred in compelling the production of the list as well as actual damages suffered by reason of the refusal or failure to produce the list.
Restriction on Ownership of Shares of Capital Stock
For us to qualify as a REIT, no more than 50% in value of the outstanding shares of our stock may be owned, directly or indirectly through the application of certain attribution rules under the Code by any five or fewer individuals, as defined in the Code to include specified entities, during the last half of any taxable year. In addition, the outstanding shares of our stock must be owned by 100 or more persons during at least 335 days of a 12-month taxable year or during a proportionate part of a shorter taxable year. These ownership tests do not apply in our first taxable year for which we elect to be taxed as a REIT. In addition, we must meet requirements regarding the nature of our gross income to qualify as a REIT. One of these requirements is that at least 75% of our gross income for each calendar year must consist of specified types of income, such as rents from real property and certain income from other real property investments. The rents received by our operating partnership from any tenant will not qualify as rents from real property, which could result in our loss of REIT status, if we own, actually or constructively within the meaning of certain provisions of the Code, 10% or more of the ownership interests in that tenant. To assist us in preserving our status as a REIT, among other purposes, our charter contains limitations on the ownership and transfer of shares of our stock which prohibit: (1) any person or entity from owning or acquiring, directly or indirectly, more than 9.8% of the value or number of shares, whichever is more restrictive, of our then outstanding capital stock or more than 9.8% of the value or number of shares, whichever is more restrictive, of our then outstanding common stock; and (2) any transfer of or other event or transaction with respect to shares of capital stock that would result in the beneficial ownership of our outstanding shares of capital stock by fewer than 100 persons. In addition, our charter prohibits any transfer of, or other event with respect to, shares of our capital stock that (a) would result in us being “closely held” within the meaning of Section 856(h) of the Code, (b) would cause any of our income that would otherwise qualify as “rents from real property” for purposes of Section 856(d) of the Code to fail to so qualify or (c) would otherwise cause us to fail to qualify as a REIT.
Our charter provides that the shares of our capital stock that, if transferred, would violate any of the foregoing limitations, will be transferred automatically to a trust effective on the day before the purported transfer of such shares of our capital stock. We will designate a trustee of the share trust. We will also name a charitable organization as beneficiary of the share trust. The trustee will receive all distributions on the shares of our capital stock in the share trust and will hold such distributions or distributions in trust for the benefit of the beneficiary. The trustee also will vote the shares of capital stock in the share trust and, subject to Maryland law, will have the authority (1) to rescind as void any vote cast by the intended transferee prior to our discovery that the shares have been transferred to the share trust and (2) to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary. The intended transferee will acquire no rights in such shares of capital stock, unless, in the case of a transfer that would cause a violation of the 9.8% ownership limit, the transfer is exempted (prospectively or retroactively) by our board of directors from the ownership limit based upon receipt of information (including certain representations and undertakings from the intended transferee) that such transfer would not result in our failing to qualify as a REIT. In addition, our charter provides that any transfer of shares of our capital stock that would result in shares of our capital stock being owned by fewer than 100 persons will be null and void and the intended transferee will acquire no rights in such shares of our capital stock.
The trustee will transfer the shares of our capital stock to a person whose ownership of shares of our capital stock will not violate the ownership limits. The transfer will be made no earlier than 20 days after the later of our
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receipt of notice that shares of our capital stock have been transferred to the share trust or the date we determine that a purported transfer of shares of stock has occurred. During this 20-day period, we will have the option of repurchasing such shares of our capital stock. Upon any such transfer or repurchase, the purported transferee or holder will receive a per share price equal to the lesser of (1) the price per share in the transaction that resulted in the transfer of such shares to the, share trust (or, in the case of a gift, devise or other transaction, the NAV per share on the date of the gift, devise or other transaction) or (2) the NAV per share on the date we accept the offer to repurchase, in the case of a purchase by us, or the price received by the trustee net of any expenses, in the case of a sale by the trustee. The charitable beneficiary will receive any excess amounts. In the case of a liquidation, holders of such shares will receive a ratable amount of our remaining assets available for distribution to shares of the applicable class or series taking into account all shares of such class or series. The trustee will distribute to the purported transferee or holder an amount equal to the lesser of the amounts received with respect to such shares or the price per share in the transaction that resulted in the transfer of such shares to the share trust (or, in the case of a gift, devise or other transaction, the NAV per share at the time of the gift, devise or other transaction) and will distribute any remaining amounts to the charitable beneficiary.
Any person who acquires or attempts to acquire shares of our capital stock in violation of the foregoing restrictions or who owns shares of our capital stock that were transferred to any such share trust is required to give immediate written notice to us of such event, and any person who purports to transfer or receive shares of our capital stock subject to such limitations is required to give us 15 days written notice prior to such purported transaction. In both cases, such persons must provide to us such other information as we may request to determine the effect, if any, of such event on our status as a REIT. The foregoing restrictions will continue to apply until our board of directors determines it is no longer in our best interest to continue to qualify as a REIT or that compliance is no longer required for REIT qualification.
The ownership limits do not apply to a person or persons that our board of directors exempts from the ownership limit upon appropriate assurances that our qualification as a REIT is not jeopardized. Any person who owns 5% or more (or such lower percentage applicable under Treasury Regulations) of the outstanding shares of our capital stock during any taxable year will be asked to deliver a statement or affidavit setting forth the number of shares of our capital stock beneficially owned.
Distributions
We pay distributions monthly in arrears and have daily record dates. Therefore, new investors are entitled to distributions immediately upon the purchase of their shares. We also expect that the board of directors will set the rate of distributions at a level that will be reasonably consistent and sustainable over time. Stockholders will be entitled to declared distributions on each of their shares from the time the shares are issued to the stockholder until the time we pay redemption proceeds to redeem the shares.
We are required to make distributions sufficient to satisfy the requirements for qualification as a REIT for federal income tax purposes. Generally, income distributed will not be taxable to us under the Code if we distribute at least 90% of our REIT taxable income each year (computed without regard to the dividends paid deduction and our net capital gain). Distributions are authorized at the discretion of our board of directors, in accordance with our earnings, present and reasonably projected future cash flows and general financial condition. Our board of directors’ discretion is directed, in substantial part, by its obligation to cause us to comply with the REIT requirements.
Our board of directors authorized a daily distribution, based on 365 days in the calendar year 2011, of $0.002260274 per share for stockholders of record as of each day of the period commencing on December 8, 2011 and ending on December 31, 2011. The payment for each of the daily distributions for this period was made in January 2012.
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Our board of directors authorized a daily distribution based on 366 days in the calendar year of $0.002254099 per share and $0.002383836 per share for stockholders of record as of the close of business on each day of the period commencing on January 1, 2012 and ending on September 30, 2012 and the period commencing on October 1, 2012 and ending on December 31, 2012, respectively.
As of December 31, 2012, cumulative since inception, we have declared $642,852 of distributions and we have paid $577,558, of which $570,033 was paid in cash and $7,525 was reinvested in shares of our common stock pursuant to the distribution reinvestment plan. For the year ended December 31, 2011, we declared $36,888 of distributions, none of which were paid until 2012. Our net loss was $496,645 as of December 31, 2012, cumulative since inception, and $416,896 for the year ended December 31, 2011. For the year ended December 31, 2012, we had net loss of $79,749. The following table presents distributions and source of distributions for the periods indicated below:
| | | | | | | | | | | | | | | | |
| | | Cumulative Paid Since
Inception | | | Year Ended
December 31, 2012 | |
| | | Amount | | | Percent | | | Amount | | | Percent | |
Distributions paid in cash | | $ | 570,033 | | | | 99.9 | % | | $ | 570,033 | | | | 99.9 | % |
Distributions reinvested | | $ | 7,525 | | | | 0.1 | % | | $ | 7,525 | | | | 0.1 | % |
| | | | | | | | | | | | | | | | |
Total distributions | | $ | 577,558 | | | | 100.0 | % | | $ | 577,558 | | | | 100.0 | % |
| | | | | | | | | | | | | | | | |
| | | | |
Sources of distributions: | | | | | | | | | | | | | | | | |
Net cash provided by operating activities | | $ | 577,558 | | | | 100.0 | % | | $ | 577,558 | | | | 100.0 | % |
| | | | | | | | | | | | | | | | |
Total sources | | $ | 577,558 | | | | 100.0 | % | | $ | 577,558 | | | | 100.0 | % |
| | | | | | | | | | | | | | | | |
We are not prohibited from distributing our own securities in lieu of making cash distributions to stockholders, provided that the securities distributed to stockholders are readily marketable. The receipt of marketable securities in lieu of cash distributions may cause stockholders to incur transaction expenses in liquidating the securities. We do not have any current intention to list the shares of our common stock on a national securities exchange, nor is it expected that a public market for the shares of common stock will develop.
Although we intend to fund the payment of distributions solely from cash flow from operations, we may pay distributions from other sources, including the sale of assets, the proceeds from this offering, borrowings and the issuance of additional securities, and we have no limit on the amounts we may pay from such other sources. If we fund distributions from financings or the net proceeds from this offering, we will have less funds available for investment in real estate properties, real estate-related assets and other investments, and this may cause subsequent investors to experience dilution. We expect that our cash flow from operations available for distribution will be lower in the initial stages of this offering until we have raised significant capital and made substantial investments. Further, because we may receive income at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund expenses, we expect that during the early stages of our operations and from time to time thereafter, we may declare distributions in anticipation of cash flow that we expect to receive during a later period and these distributions would be paid in advance of our actual receipt of these funds. In these instances, we expect to look to third party borrowings, our offering proceeds or other sources to fund our distributions. Additionally, we will make certain payments to our advisor and dealer manager for services provided to us. See “Compensation.” Such payments will reduce the amount of cash available for distributions. Finally, payments to fulfill redemption requests under our redemption plan will also reduce funds available for distribution to remaining stockholders.
Our distributions may constitute a return of capital to the extent that they exceed our current and accumulated earnings and profits as determined for tax purposes. However, unlike shares of a traditional non-exchange traded REIT which are typically sold and, on a limited basis, redeemed at a fixed price, our
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common stock will be sold and redeemed on a daily basis at NAV. As a result, any return of capital will be reflected in our daily NAV unlike the offer and redemption price of a typical non-exchange traded REIT which may not reflect a significant return of capital until the non-exchange traded REIT performs a valuation of the REIT or liquidates.
Distribution Reinvestment Plan
We have adopted a distribution reinvestment plan, whereby stockholders will be able to elect to have their cash distributions automatically reinvested in additional shares of our common stock. All such distributions will be immediately reinvested in our shares on behalf of the participants on the business day such distribution would have been paid to such stockholder.
The per share purchase price for shares purchased pursuant to the distribution reinvestment plan will be equal to our NAV per share on the distribution date, after giving effect to all distributions. No selling commissions will be payable with respect to shares purchased pursuant to the distribution reinvestment plan. Because the dealer manager fee is calculated based on NAV, it reduces NAV with respect to all shares of our common stock issued under our distribution reinvestment plan. Shares acquired under the distribution reinvestment plan will entitle the participant to the same rights and be treated in the same manner as those purchased in this offering.
We reserve the right to amend any aspect of our distribution reinvestment plan without the consent of our stockholders, provided that notice of any material amendment is provided to participants at least ten days prior to the effective date of that amendment. In addition, we may terminate the distribution reinvestment plan for any reason at any time upon ten days’ prior written notice to participants. A stockholder’s participation in the plan will be terminated to the extent that a reinvestment of such stockholder’s distributions in our shares would cause the percentage ownership or other limitations contained in our charter to be violated. Participants may terminate their participation in the distribution reinvestment plan with ten days’ prior written notice to us and we will provide participants with the opportunity to withdraw from the distribution reinvestment plan at least annually.
Account Statements
Within 90 days after the end of each fiscal year, we will mail to each participant a statement of account describing, as to such participant: (1) the distributions reinvested during the year; (2) the number of shares purchased during the year; (3) the per share purchase price for such shares; (4) the total number of shares purchased on behalf of the participant under the plan; and (5) tax information with respect to income earned on shares under the plan for the calendar year will be sent to each applicable participant. The statement will also advise the participant that the participant is required to notify the administrator of the plan in the event that there is any material change in the participant’s financial condition or if any representation made by the participant under the subscription agreement for the participant’s initial purchase of shares becomes inaccurate.
Tax Consequences of Participation
If a stockholder elects to participate in the distribution reinvestment plan and is subject to federal income taxation, the stockholder will be treated as if he or she has received the distribution from us in cash and then applied such distribution to the purchase of additional shares. The stockholder will be taxed on the amount of such distribution as ordinary income to the extent such distribution is from current or accumulated earnings and profits, unless we have designated all or a portion of the distribution as a capital gain dividend in which event the distribution will be treated as long-term capital gain. See “Material U.S. Federal Income Tax Considerations.”
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Certain Provisions of Maryland Law and of Our Charter and Bylaws
The following summary of certain provisions of Maryland law and of our charter and bylaws does not purport to be complete and is subject to and qualified in its entirety by reference to Maryland law and our amended and restated charter and bylaws, forms of which are filed as exhibits to the registration statement of which this prospectus is a part. See “Where You Can Find More Information.”
Changes to Our Investment Objectives
Our charter lists the following as our primary investment objectives:
| | • | | to acquire commercial properties, leased under long-term net leases to creditworthy tenants, which provide current operating cash flow; |
| | • | | to maintain a level of liquid assets as a source of funds to meet redemption requests; |
| | • | | to provide reasonably stable, current income for you through the payment of cash distributions; and |
| | • | | to provide the opportunity to participate in capital appreciation in the value of our investments. |
These investment objectives may not be changed without our stockholders consenting to amend our charter as described in “Description of Capital Stock — Meetings, Special Voting Requirements and Access to Records.”
Business Combinations
Under the Maryland General Corporation Law, business combinations between a Maryland corporation and an interested stockholder or the interested stockholder’s affiliate are prohibited for five years after the most recent date on which the stockholder becomes an interested stockholder. For this purpose, the term “business combinations” includes mergers, consolidations, share exchanges or, in circumstances specified in the Maryland General Corporation Law, asset transfers and certain issuances or reclassifications of equity securities. An “interested stockholder” is defined for this purpose as: (1) any person who beneficially owns 10% or more of the voting power of the corporation’s outstanding voting stock; or (2) an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding stock of the corporation. A person is not an interested stockholder under the Maryland General Corporation Law if the board of directors approved in advance the transaction by which he otherwise would become an interested stockholder. However, in approving the transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board of directors.
After the five-year prohibition, any business combination between the corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least: (1) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation, voting together as a single voting group; and (2) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares of stock held by the interested stockholder or its affiliate with whom the business combination is to be effected, or held by an affiliate or associate of the interested stockholder, voting together as a single voting group.
These super majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under the Maryland General Corporation Law, for their shares of common stock in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares of common stock.
None of these provisions of the Maryland General Corporation Law will apply, however, to business combinations that are approved or exempted by the board of directors of the corporation prior to the time that the
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interested stockholder becomes an interested stockholder. Pursuant to the business combination statute, our board of directors has exempted any business combination involving us and any person. Consequently, the five-year prohibition and the super majority vote requirements will not apply to business combinations between us and any person. As a result, any person may be able to enter into business combinations with us that may not be in the best interest of our stockholders, without compliance with the super majority vote requirements and other provisions of the statute.
Should our board of directors opt into the business combination statute, it may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.
Control Share Acquisitions
The Maryland General Corporation Law provides that control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by the affirmative vote of stockholders entitled to cast two-thirds of the votes entitled to be cast on the matter. Shares of common stock owned by the acquiror, by officers or by employees who are directors of the corporation are not entitled to vote on the matter. “Control shares” are voting shares of stock which, if aggregated with all other shares of stock owned by the acquiror or with respect to which the acquiror has the right to vote or to direct the voting of, other than solely by virtue of revocable proxy, would entitle the acquiror to exercise voting power in electing directors within one of the following ranges of voting powers:
| | • | | one-tenth or more but less than one-third; |
| | • | | one-third or more but less than a majority; or |
| | • | | a majority or more of all voting power. |
Control shares do not include shares of stock the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. Except as otherwise specified in the statute, a “control share acquisition” means the acquisition of issued and outstanding control shares. Once a person who has made or proposes to make a control share acquisition has undertaken to pay expenses and has satisfied other required conditions, the person may compel the board of directors to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares of stock. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting. If voting rights are not approved for the control shares at the meeting or if the acquiring person does not deliver an “acquiring person statement” for the control shares as required by the statute, the corporation may redeem any or all of the control shares for their fair value, except for control shares for which voting rights have previously been approved. Fair value is to be determined for this purpose without regard to the absence of voting rights for the control shares, and is to be determined as of the date of the last control share acquisition or of any meeting of stockholders at which the voting rights for control shares are considered and not approved.
If voting rights for control shares are approved at a stockholders’ meeting and the acquiror becomes entitled to vote a majority of the shares of stock entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares of stock as determined for purposes of these appraisal rights may not be less than the highest price per share paid in the control share acquisition. Some of the limitations and restrictions otherwise applicable to the exercise of dissenters’ rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares of stock acquired in a merger or consolidation or on a stock exchange if the corporation is a party to the transaction or to acquisitions approved or exempted by the charter or bylaws of the corporation. As permitted by the Maryland General Corporation Law, we have provided in our bylaws that the control share provisions of the Maryland General Corporation Law will not apply to any acquisition by any person of shares of our stock, but the board of directors retains the discretion to change this provision in the future.
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Unsolicited Takeover Statutes
Subtitle 8 of Title 3 of the Maryland General Corporation Law permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three independent directors to elect to be subject, without a stockholder vote, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions:
| | • | | maintaining a classified board of directors; |
| | • | | requiring two-thirds stockholder vote for removing a director; |
| | • | | requiring that the number of directors be fixed only by vote of the board of directors; |
| | • | | requiring that a vacancy on the board of directors be filled only by the remaining directors and for the remainder of the full term of the class of directors in which the vacancy occurred; and |
| | • | | a request by a majority of stockholders for the calling of a special meeting of stockholders. |
Pursuant to Subtitle 8, we have elected to provide that vacancies on our board of directors be filled only by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred. Through provisions in our charter and bylaws unrelated to Subtitle 8, we vest in the board of directors the exclusive power to fix the number of directors, provided that the number is not less than three.
Amendment to Our Charter and Bylaws
The amendment of our charter generally requires the affirmative vote of the holders of a majority of shares of our stock then outstanding and entitled to vote thereon. Our board of directors may not amend our charter (without the concurrence by our stockholders) except (1) if such amendment is necessary or advisable for us to qualify as a REIT under the Code and for purposes of maintaining such qualification, (2) to increase the authorized but unissued shares of our common stock that we may issue and (3) to change our corporate name or the designation or par value of any class or series of our shares. Our board of directors has the exclusive power to adopt, alter or repeal any provision of our bylaws or to make new bylaws upon the concurrence of the majority of our stockholders, except for amendments that do not adversely affect the rights, preferences and privileges of stockholders and therefore do not require stockholder consent.
Voting with Respect to Certain Matters
With respect to shares of common stock owned by our advisor, our directors or any of their respective affiliates, none of our advisor, its sub-advisor, our directors, nor any of their respective affiliates may vote or consent on matters submitted to the stockholders regarding the removal of our advisor, directors or any of their respective affiliates or any transaction between us and any of them. In determining the requisite percentage in interest of shares of our common stock necessary to approve a matter on which our advisor, directors or any affiliate may not vote or consent, any shares owned by any of them will not be included.
Advance Notice of Director Nominations and New Business
Our bylaws provide that, with respect to an annual meeting of stockholders, nominations of individuals for election to our board of directors and the proposal of business to be considered by stockholders may be made at an annual meeting of stockholders at which directors are to be elected only (1) by or at the direction of our board of directors or (2) by a stockholder who was a stockholder of record both at the time of provision of notice and at the time of the meeting, is entitled to vote at the meeting in the election of each individual 50 nominated and has complied with the advance notice procedures set forth in our bylaws.
With respect to special meetings of stockholders, only the business specified in our notice of meeting may be brought before the meeting. Nominations of individuals for election to our board of directors may be made at
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a special meeting of stockholders at which directors are to be elected only (1) pursuant to our notice of the meeting, (2) by or at the direction of our board of directors or (3) provided that our board of directors has determined that directors will be elected at such meeting, by a stockholder who was a stockholder of record both at the time of provision of notice and at the time of the meeting, is entitled to vote at the meeting and has complied with the advance notice provisions set forth in our bylaws. For more information on our board of directors, including their term and the filling of board vacancies, see the “Management — General” section of this prospectus.
Anti-Takeover Effect of Certain Provisions of Maryland Law and of Our Charter and Bylaws
Our charter and bylaws and Maryland law contain provisions that may delay, defer or prevent a change of control or other transaction that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders, including the power of our board of directors to issue additional shares of our common stock, the restrictions on ownership and transfer of our shares and advance notice requirements for director nominations and stockholder proposals. Likewise, if we opted into the business combination provisions of the Maryland General Corporation Law or the provision in the bylaws opting out of the control share acquisition provisions of the Maryland General Corporation Law were rescinded, these provisions of the Maryland General Corporation Law could have similar anti-takeover effects. See “Risk Factors — Risks Related to Our Corporate Structure — Our Charter limits the number of shares a person may own, which may discourage a takeover that could otherwise result in a premium price to our stockholders” and “Certain provisions of Maryland law could inhibit transactions or changes of control under circumstances that could otherwise provide stockholders with the opportunity to realize a premium.”
Indemnification and Limitation of Directors’, Officers’ and Others’ Liability
Our organizational documents limit the personal liability of our stockholders, directors and officers for monetary damages to the extent permitted under current provisions of Maryland law in effect from time to time and the limitations of the NASAA REIT Guidelines. In addition, our directors and officers are covered by a liability insurance policy. See “Indemnification and Limitation of Liability” for a more detailed discussion regarding indemnification of our directors, officers and others under Maryland law and the NASAA REIT Guidelines.
Extraordinary Transactions
Under Maryland law, a Maryland corporation generally cannot amend its charter or merge unless such is approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter unless a lesser percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is set forth in the company’s charter. Our charter provides that such actions must be approved by a majority of all of the votes entitled to be cast on the matter. Similarly, our charter requires the affirmative vote of a majority of the votes entitled to be cast to approve a dissolution or sale of all or substantially all of our assets. Because operating assets may be held by a company’s subsidiaries, as in our situation, this may mean that a subsidiary of a company can transfer all of its assets without any vote of the company’s stockholders.
REIT Qualification
Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without approval of our stockholders, if it determines that it is no longer in our best interests to qualify, or to attempt to qualify, as a REIT. Our board of directors may revoke our REIT election for any number of reasons, including if it determines that we need to retain cash in order to satisfy certain business objectives and commitments, including but not limited to, the repayment of debts. The retention of such funds would preclude us from satisfying the requirement that we distribute at least 90% of our REIT taxable income annually. In addition, our board of directors could determine that certain other REIT requirements, including but not limited to, the income or asset tests and ownership limitations prohibit certain business opportunities that would be in our and our stockholders’ best interests to pursue.
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Restrictions on Roll-Up Transactions
In accordance with our charter, in connection with any proposed transaction considered a “roll-up transaction” (as defined below) involving us and the issuance of securities of an entity that would be created or would survive after the successful completion of the roll-up transaction, an appraisal of all of our assets shall be obtained from a competent independent appraiser. The assets shall be appraised on a consistent basis, and the appraisal shall be based on the evaluation of all relevant information and shall indicate the value of the assets as of a date immediately prior to the announcement of the proposed roll-up transaction. The appraisal shall assume an orderly liquidation of the assets over a 12-month period. The terms of the engagement of the independent appraiser shall clearly state that the engagement is for our benefit and the benefit of our stockholders. A summary of the appraisal, indicating all material assumptions underlying the appraisal, shall be included in a report to stockholders in connection with any proposed roll-up transaction. If the appraisal will be included in a prospectus used to offer the securities of a roll-up entity, the appraisal shall be filed with the SEC and the states.
A “roll-up transaction” is a transaction involving the acquisition, merger, conversion or consolidation, directly or indirectly, of us and the issuance of securities of another entity, or a roll-up entity, that would be created or would survive after the successful completion of such transaction. The term roll-up transaction does not include:
| | • | | a transaction involving securities of a corporation that have been for at least 12 months listed on a national securities exchange; or |
| | • | | a transaction involving our conversion to a corporate, company, or association form if, as a consequence of the transaction, there will be no significant adverse change in any of the following: stockholder voting rights; the term of our existence; compensation to our advisor; or our investment objectives. |
In connection with a proposed roll-up transaction, the person sponsoring the roll-up transaction must offer to common stockholders who vote “no” on the proposal the choice of:
(1) accepting the securities of a roll-up entity offered in the proposed roll-up transaction; or
(2) one of the following:
(a) remaining as holders of shares of our common stock and preserving their interests therein on the same terms and conditions as existed previously; or
(b) receiving cash in an amount equal to the stockholder’s pro rata share of the appraised value of our net assets.
We are prohibited from participating in any proposed roll-up transaction:
| | • | | that would result in the stockholders having voting rights in a roll-up entity that are less than those provided in our charter, including rights with respect to the election and removal of directors, annual reports, annual and special meetings, amendment of our charter, and our dissolution; |
| | • | | that includes provisions that would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the roll-up entity, except to the minimum extent necessary to preserve the tax status of the roll-up entity, or which would limit the ability of an investor to exercise the voting rights of its securities of the roll-up entity on the basis of the number of shares held by that investor; |
| | • | | in which investor’s rights to access of records of the roll-up entity will be less than those provided in the section of this prospectus entitled “Description of Capital Stock — Meetings, Special Voting Requirements and Access to Records;” or |
| | • | | in which any of the costs of the roll-up transaction would be borne by us if the roll-up transaction is rejected by the stockholders. |
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Tender Offers by Stockholders
Our charter provides that any tender offer, including any “mini-tender” offer, must comply with Regulation 14D of the Exchange Act, including the notice and disclosure requirements. The offering person must provide our company notice of such tender offer at least ten business days before initiating the tender offer. If the offering person does not comply with the provisions set forth above, our company will have the right to redeem that person’s shares and any shares acquired in such tender offer. In addition, the non-complying person will be responsible for all of our company’s expenses in connection with that person’s noncompliance.
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Material U.S. Federal Income Tax Considerations
The following summary addresses U.S. federal income tax considerations related to our election to be subject to tax as a REIT that we anticipate to be material to holders of our common stock. This summary does not address any foreign, state, or local tax consequences of holding, selling or redeeming our common stock. The provisions of the Code concerning the U.S. federal income tax treatment of a REIT are highly technical and complex; the following discussion sets forth only certain aspects of those provisions. This summary is intended to provide you with general information only and is not intended as a substitute for careful tax planning.
This summary is based on provisions of the Code, applicable final and temporary Treasury Regulations, judicial decisions, and administrative rulings and practice, all in effect as of the date of this prospectus, and should not be construed as legal or tax advice. No assurance can be given that future legislative or administrative changes or judicial decisions will not affect the accuracy of the descriptions or conclusions contained in this summary. In addition, any such changes may be retroactive and apply to transactions entered into prior to the date of their enactment, promulgation or release. We do not expect to seek a ruling from the IRS regarding any of the U.S. federal income tax issues discussed in this prospectus, and no assurance can be given that the IRS will not challenge any of the positions we take and that such a challenge will not succeed. This discussion is for your general information only and is not tax advice. It does not purport to address all aspects of federal income taxation that may be relevant to you in light of your particular investment circumstances, or if you are a type of investor subject to special tax rules.Prospective purchasers of our common stock are urged to consult their tax advisors prior to any investment in our common stock concerning the potential U.S. federal, state, local, and foreign tax consequences of the investment with specific reference to their own tax situations.
Except as otherwise noted, references in this discussion of “Material U.S. Federal Income Tax Considerations” to “we,” “our,” “us” and “our company” refer only to Cole Real Estate Income Strategy (Daily NAV), Inc. and not to its subsidiaries or other lower-tier entities, except as otherwise indicated.
Taxation of Our Company
We intend to elect to be taxed as a REIT beginning with our taxable year ended December 31, 2012. We believe that we are organized, and expect to operate, in such a manner to qualify for taxation as a REIT. From the date of our formation and until the day following the date on which we issued shares to shareholders other than Cole Holdings Corporation, we were a qualified subchapter S subsidiary of Cole Holdings Corporation, and therefore were disregarded as an entity separate from Cole Holdings Corporation for U.S. federal income tax purposes.
We received an opinion of Goodwin Procter LLP, dated December 5, 2011, to the effect that we will be organized in conformity with the requirements for qualification and taxation as a REIT under the Code and that, as of the date of the opinion; our prior, current and proposed ownership organization and method of operations, as then represented by us to Goodwin Procter LLP, will allow us to satisfy the requirements for qualification and taxation as a REIT under the Code, commencing with our taxable year ended December 31, 2012. The opinion of Goodwin Procter LLP is based on various assumptions and on our representations to Goodwin Procter LLP as of the date of the opinion concerning our current and continuing organization, our prior, current and proposed ownership and operations, and other matters relating to our ability to qualify as a REIT. The opinion is expressly conditioned upon the accuracy of such assumptions and representations, which Goodwin Procter LLP has not verified and will not verify, including an assumption to the effect that we are successfully avoiding “dividend equivalent” redemptions, as discussed below in “— Taxation of U.S. Stockholders — Redemptions of Common Stock.” Moreover, our qualification and taxation as a REIT will depend upon our ability to meet, through actual annual operating results, distribution requirements, diversity of share ownership, and the various and complex REIT qualification tests imposed under the Code, the results of which have not been and will not be reviewed or verified by Goodwin Procter LLP. See “— Qualification as a REIT” below. Accordingly, no assurance can be given that we will in fact satisfy such requirements. The opinion of Goodwin Procter LLP is based upon the law
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as of the date of the opinion, which is subject to change either prospectively or retroactively. Opinions of counsel impose no obligation on counsel to advise us or the holders of our common stock of any subsequent change in the matters stated, represented or assumed, or of any subsequent change in the applicable law. Changes in applicable law could modify the conclusions expressed in the opinion. Unlike a ruling from the IRS, an opinion of Goodwin Procter LLP is not binding on the IRS, and no assurance can be given that the IRS could not successfully challenge our qualification as a REIT.
Because we issued shares to persons other than Cole Holding Corporation in 2012, we intend that our first REIT taxable year will be our taxable year ended December 31, 2012.
If we qualify as a REIT, we generally will be allowed to deduct dividends paid to our stockholders, and, as a result, we generally will not be subject to U.S. federal income tax on that portion of our ordinary income and net capital gain that we currently distribute to our stockholders. We expect to make distributions to our stockholders on a regular basis as necessary to avoid material U.S. federal income tax and to comply with the REIT requirements. See “— Qualification as a REIT — Annual Distribution Requirements” below.
Notwithstanding the foregoing, even if we qualify for taxation as a REIT, we nonetheless may be subject to U.S. federal income tax in certain circumstances, including the following:
| | • | | We will be required to pay U.S. federal income tax on our undistributed REIT taxable income, including net capital gain; |
| | • | | We may be subject to the “alternative minimum tax”; |
| | • | | We may be subject to tax at the highest corporate rate on certain income from “foreclosure property” (generally, property acquired by reason of default on a lease or indebtedness held by us); |
| | • | | We will be subject to a 100% U.S. federal income tax on net income from “prohibited transactions” (generally, certain sales or other dispositions of property, sometimes referred to as “dealer property,” held primarily for sale to customers in the ordinary course of business) unless the gain is realized in a “taxable REIT subsidiary,” or TRS, or such property has been held by us for at least two years and certain other requirements are satisfied; |
| | • | | If we fail to satisfy the 75% gross income test or the 95% gross income test (discussed below), but nonetheless maintain our qualification as a REIT pursuant to certain relief provisions, we will be subject to a 100% U.S. federal income tax on the greater of (i) the amount by which we fail the 75% gross income test or (ii) the amount by which we fail the 95% gross income test, in either case, multiplied by a fraction intended to reflect our profitability; |
| | • | | If we fail to satisfy any of the asset tests, other than a failure of the 5% or the 10% asset tests that qualifies under the De Minimis Exception, and the failure qualifies under the General Exception, as described below under “— Qualification as a REIT — Asset Tests,” then we will have to pay an excise tax equal to the greater of (i) $50,000 and (ii) an amount determined by multiplying the net income generated during a specified period by the assets that caused the failure by the highest U.S. federal income tax applicable to corporations; |
| | • | | If we fail to satisfy any REIT requirements other than the income test or asset test requirements, described below under “— Qualification as a REIT — Income Tests” and “— Qualification as a REIT — Asset Tests,” respectively, and we qualify for a reasonable cause exception, then we will have to pay a penalty equal to $50,000 for each such failure; |
| | • | | We will be subject to a 4% nondeductible excise tax if certain distribution requirements are not satisfied; |
| | • | | We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record-keeping requirements intended to monitor our compliance with rules relating to the composition of a REIT’s stockholders, as described below in “— Recordkeeping Requirements”; |
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| | • | | If we dispose of an asset acquired by us from a C corporation in a transaction in which we took the C corporation’s tax basis in the asset, we may be subject to tax at the highest regular corporate rate on the appreciation inherent in such asset as of the date of acquisition by us; |
| | • | | We will be required to pay a 100% tax on any redetermined rents, redetermined deductions, and excess interest. In general, redetermined rents are rents from real property that are overstated as a result of services furnished to any of our non-TRS tenants by one of our TRSs. Redetermined deductions and excess interest generally represent amounts that are deducted by a TRS for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s-length negotiations; and |
| | • | | Income earned by our TRSs or any other subsidiaries that are C corporations will be subject to tax at regular corporate rates. |
No assurance can be given that the amount of any such U.S. federal income taxes will not be substantial. In addition, we and our subsidiaries may be subject to a variety of taxes, including payroll taxes and state, local and foreign income, property and other taxes on assets and operations. We could also be subject to tax in situations and on transactions not presently contemplated.
Qualification as a REIT
In General
The REIT provisions of the Code apply to a domestic corporation, trust, or association (i) that is managed by one or more trustees or directors, (ii) the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest, (iii) that properly elects to be taxed as a REIT and such election has not been terminated or revoked, (iv) that is neither a financial institution nor an insurance company, (v) that uses a calendar year for U.S. federal income tax purposes, (vi) that would be taxable as a domestic corporation but for the special Code provisions applicable to REITs and (vii) that meets the additional requirements discussed below.
Ownership Tests
Commencing with our second REIT taxable year, (i) the beneficial ownership of our common stock must be held by 100 or more persons during at least 335 days of a 12-month taxable year (or during a proportionate part of a taxable year of less than 12 months) for each of our taxable years and (ii) during the last half of each taxable year, no more than 50% in value of our shares may be owned, directly or indirectly, by or for five or fewer individuals (the “5/50 Test”). Share ownership for purposes of the 5/50 Test is determined by applying the constructive ownership provisions of Section 544(a) of the Code, subject to certain modifications. The term “individual” for purposes of the 5/50 Test includes a private foundation, a trust providing for the payment of supplemental unemployment compensation benefits, and a portion of a trust permanently set aside or to be used exclusively for charitable purposes. A “qualified trust” described in Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code generally is not treated as an individual for purposes of the 5/50 Test; rather, shares held by it are treated as owned proportionately by its beneficiaries.
We believe that we will satisfy the above ownership requirements. In addition, our charter restricts ownership and transfers of our shares that would violate these requirements, although these restrictions may not be effective in all circumstances to prevent a violation. We will be deemed to have satisfied the 5/50 Test for a particular taxable year if we have complied with all the requirements for ascertaining the ownership of our outstanding shares in that taxable year and have no reason to know that we have violated the 5/50 Test.
Income Tests
In order to maintain qualification as a REIT, we must annually satisfy two gross income requirements:
(1) First, at least 75% of our gross income (excluding gross income from prohibited transactions and certain other income and gains as described below) for each taxable year must be derived, directly or
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indirectly, from investments relating to real property or mortgages on real property or from certain types of temporary investments (or any combination thereof). Qualifying income for the purposes of this 75% gross income test generally includes: (a) rents from real property, (b) interest on debt secured by mortgages on real property or on interests in real property, (c) dividends or other distributions on, and gain from the sale of, shares in other REITs, (d) gain from the sale of real estate assets (other than gain from prohibited transactions), (e) income and gain derived from foreclosure property, and (f) income from certain types of temporary investments; and
(2) Second, in general, at least 95% of our gross income (excluding gross income from prohibited transactions and certain other income and gains as described below) for each taxable year must be derived from the real property investments described above and from other types of dividends and interest, gain from the sale or disposition of shares or securities that are not dealer property, or any combination of the above.
For purposes of the 75% and the 95% gross income tests, we are treated as receiving our proportionate share of our operating partnership’s gross income (and our proportionate share of the income of any other partnerships, or entities taxed as partnerships, in which our operating partnership invests).
Rents we receive will qualify as rents from real property in satisfying the gross income requirements for a REIT described above only if several conditions are met. First, the amount of rent must not be based in whole or in part on the income or profits of any person. However, an amount received or accrued generally will not be excluded from the term “rents from real property” solely by reason of being based on a fixed percentage or percentages of receipts or sales. Second, rents received from a “related party tenant” will not qualify as rents from real property in satisfying the gross income tests unless the tenant is a TRS and either (i) at least 90% of the property is leased to unrelated tenants and the rent paid by the TRS is substantially comparable to the rent paid by the unrelated tenants for comparable space, or (ii) the property leased is a “qualified lodging facility,” as defined in Section 856(d)(9)(D) of the Code, or a “qualified health care property,” as defined in Section 856(e)(6)(D)(i), and certain other conditions are satisfied. A tenant is a related party tenant if the REIT, or an actual or constructive owner of 10% or more of the REIT, actually or constructively owns 10% or more of the tenant. Third, if rent attributable to personal property, leased in connection with a lease of real property, is greater than 15% of the total rent received under the lease, then the portion of rent attributable to the personal property will not qualify as rents from real property.
Generally, for rents to qualify as rents from real property for the purpose of satisfying the gross income tests, we may provide directly only an insignificant amount of services, unless those services are “usually or customarily rendered” in connection with the rental of real property and not otherwise considered “rendered to the occupant” under the applicable tax rules. Accordingly, we may not provide “impermissible services” to tenants (except through an independent contractor from whom we derive no revenue and that meets other requirements or through a TRS) without giving rise to “impermissible tenant service income.” Impermissible tenant service income is deemed to be at least 150% of the direct cost to us of providing the service. If the impermissible tenant service income exceeds 1% of our total income from a property, then all of the income from that property will fail to qualify as rents from real property. If the total amount of impermissible tenant service income from a property does not exceed 1% of our total income from the property, the services will not disqualify any other income from the property that qualifies as rents from real property, but the impermissible tenant service income will not qualify as rents from real property.
We do not intend to charge rent that is based in whole or in part on the income or profits of any person or to derive rent from related party tenants, or rent attributable to personal property leased in connection with real property that exceeds 15% of the total rents from the real property if the treatment of any such amounts as non-qualified rent would jeopardize our status as a REIT. We also do not expect to derive impermissible tenant service income that exceeds 1% of our total income from any property if the treatment of the rents from such property as nonqualified rents could cause us to fail to qualify as a REIT.
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Distributions that we receive from a domestic TRS will be classified as dividend income to the extent of the current or accumulated earnings and profits of the TRS. Such distributions will generally constitute qualifying income for purposes of the 95% gross income test, but not under the 75% gross income test unless attributable to investments of certain new capital during the one-year period beginning on the date of receipt of the new capital. Dividends and gains from investments in non-REIT real estate stocks generally would be treated in the same manner as TRS dividends, which may limit our ability to invest in non-REIT real estate stocks. Any dividends received by us from a REIT and gains from sales of REIT stock will be qualifying income for purposes of both the 95% and 75% gross income tests.
Our advisor must reimburse us (or our operating partnership) for fees we or our operating partnership pay to it in any year to the extent that such fees cause our total operating expenses to exceed certain amounts. Any such reimbursements potentially could be treated as nonqualifying income for purposes of the 75% and 95% gross income tests. However, we do not expect to receive reimbursements of sufficient magnitude to jeopardize our status as a REIT even if such reimbursements are treated as nonqualifying income.
If we fail to satisfy one or both of the 75% or the 95% gross income tests, we may nevertheless qualify as a REIT for a particular year if we are entitled to relief under certain provisions of the Code. Those relief provisions generally will be available if our failure to meet such tests is due to reasonable cause and not due to willful neglect and we file a schedule describing each item of our gross income for such year(s) in accordance with the applicable Treasury Regulations. It is not possible, however, to state whether in all circumstances we would be entitled to the benefit of these relief provisions. As discussed above in “— Taxation of Our Company,” even if these relief provisions were to apply, we would be subject to U.S. federal income tax to the extent we fail to meet the 75% or 95% gross income tests or otherwise fail to distribute 100% of our net capital gain and taxable income.
Foreclosure property. Foreclosure property is real property (including interests in real property) and any personal property incident to such real property (1) that is acquired by a REIT as a result of the REIT having bid in the property at foreclosure, or having otherwise reduced the property to ownership or possession by agreement or process of law, after there was a default (or default was imminent) on a lease of the property or a mortgage loan held by the REIT and secured by the property, (2) for which the related loan or lease was made, entered into or acquired by the REIT at a time when default was not imminent or anticipated and (3) for which such REIT makes an election to treat the property as foreclosure property. REITs generally are subject to tax at the maximum corporate rate (currently 35%) on any net income from foreclosure property, including any gain from the disposition of the foreclosure property, other than income that would otherwise be qualifying income for purposes of the 75% gross income test. Any gain from the sale of property for which a foreclosure property election has been made will not be subject to the 100% tax on gains from prohibited transactions described above, even if the property is held primarily for sale to customers in the ordinary course of a trade or business.
Debt Instruments. We may acquire mortgage, mezzanine, bridge loans and other debt investments. Interest income constitutes qualifying mortgage interest for purposes of the 75% gross income test (as described above) to the extent that the obligation upon which such interest is paid is secured by a mortgage on real property. If we receive interest income with respect to a mortgage loan that is secured by both real property and other property, and the highest principal amount of the loan outstanding during a taxable year exceeds the fair market value of the real property on the date that we acquired or originated the mortgage loan, the interest income will be apportioned between the real property and the other collateral, and our income from the arrangement will qualify for purposes of the 75% gross income test only to the extent that the interest is allocable to the real property. Loans that are modified generally will have to be retested using the fair market value of the collateral real property securing the loan as of the date of the modification, unless the modification does not result in a deemed exchange of the unmodified note for the modified note for tax purposes, or the mortgage loan was in default or is reasonably likely to default and the modified loan substantially reduces the risk of default, in which case no re-testing in connection with the loan modification is necessary. Even if a loan is not secured by real property, or is undersecured, the income that it generates may nonetheless qualify for purposes of the 95%
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gross income test. To the extent that we derive interest income from a mortgage loan where all or a portion of the amount of interest payable is contingent, such income generally will qualify for purposes of the gross income tests only if it is based upon the gross receipts or sales, and not the net income or profits, of the borrower. This limitation does not apply, however, where the borrower leases substantially all of its interest in the property to tenants or subtenants, to the extent that the rental income derived by the borrower would qualify as rents from real property had we earned the income directly.
The application of the REIT provisions of the Code to certain mezzanine loans, which are loans secured by equity interests in an entity that directly or indirectly owns real property rather than by a direct mortgage of the real property, is not entirely clear. A safe harbor in Revenue Procedure 2003-65 provides that if a mezzanine loan meets certain requirements then the interest in respect of such mezzanine loan will be treated by the IRS as qualifying mortgage interest for purposes of the 75% income test. However, to the extent that mezzanine loans do not meet all of the requirements for reliance on the safe harbor set forth in the Revenue Procedure, such loans could adversely affect our REIT qualification if we acquired them. As such, the REIT provisions of the Code may limit our ability to acquire mortgage, mezzanine or other loans that we might otherwise desire to acquire.
We may acquire CMBS. We expect that the CMBS will be treated either as interests in a grantor trust or as interests in a REMIC for federal income tax purposes and that all interest income from our CMBS will be qualifying income for the 95% gross income test. In the case of CMBS treated as interests in grantor trusts, we would be treated as owning an undivided beneficial ownership interest in the mortgage loans held by the grantor trust. The interest on such mortgage loans would be qualifying income for purposes of the 75% gross income test to the extent that the obligation is secured by real property, as discussed above. In the case of CMBS treated as interests in a REMIC, income derived from REMIC interests will generally be treated as qualifying income for purposes of the 75% and 95% gross income tests, except that if less than 95% of the assets of the REMIC are real estate assets, then only a proportionate part of our interest in the REMIC and income derived from the interest will qualify for purposes of the 75% gross income test. Mortgage loans that may be held by a grantor trust or REMIC may not necessarily qualify as “real estate assets” for purposes of the REIT rules. As a result, it may be difficult, if not impossible, to determine whether income from certain CMBS investments will be qualifying 75% gross income. In addition, some securitizations include imbedded interest swap or cap contracts or other derivative instruments that potentially could produce some non-qualifying income for the holder of the related REMIC securities.
Hedging transactions. We may enter into hedging transactions with respect to one or more of our assets or liabilities. Hedging transactions could take a variety of forms, including interest rate swaps or cap agreements, options, futures contracts, forward rate agreements or similar financial instruments. Except to the extent as may be provided by future Treasury Regulations, any income from a hedging transaction which is clearly identified as such before the close of the day on which it was acquired, originated or entered into, including gain from the disposition or termination of such a transaction, will not constitute gross income for purposes of the 95% and 75% gross income tests, provided that the hedging transaction is entered into (i) in the normal course of our business primarily to manage risk of interest rate or price changes or currency fluctuations with respect to indebtedness incurred or to be incurred by us to acquire or carry real estate assets or (ii) primarily to manage the risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% income tests (or any property which generates such income or gain). To the extent we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both the 75% and 95% gross income tests. We intend to structure any hedging transactions in a manner that does not jeopardize our ability to qualify as a REIT.
Sale-Leaseback Transactions. We may enter into sale-leaseback transactions. It is possible that the IRS could take the position that specific sale-leaseback transactions (or certain other leases) we treat as true leases are not true leases for U.S. federal income tax purposes but are, instead, financing arrangements or loans. Successful recharacterization of a sale-leaseback transaction (or any other lease) as a financing arrangement or loan could jeopardize our REIT status.
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Foreign Investments. To the extent that we hold or acquire any investments and, accordingly, pay taxes in other countries, taxes paid by us in non-U.S. jurisdictions may not be passed through to, or used by, our stockholders as a foreign tax credit or otherwise. In addition, certain passive income earned by a non-U.S. taxable REIT subsidiary must be taken in account by us currently (whether or not distributed by the taxable REIT subsidiary) and may not be qualifying income under the 95% and 75% gross income tests.
Qualified temporary investment income. Income derived from certain types of temporary shares and debt investments made with the proceeds of sales of our stock, not otherwise treated as qualifying income for the 75% gross income test, generally will nonetheless constitute qualifying income for purposes of the 75% gross income test for the year following the sale of such stock. More specifically, qualifying income for purposes of the 75% gross income test includes “qualified temporary investment income,” which generally means any income that is attributable to shares of stock or a debt instrument, is attributable to the temporary investment of new equity capital and certain debt capital, and is received or accrued during the one-year period beginning on the date on which the REIT receives such new capital. After the one year period following a sale of our stock, income from investments of the proceeds attributable to that sale of stock will be qualifying income for purposes of the 75% income test only if derived from one of the other qualifying sources enumerated above.
Asset Tests
At the close of each quarter of our taxable year, we must also satisfy four tests relating to the nature of our assets. First, real estate assets, cash and cash items, and government securities must represent at least 75% of the value of our total assets. Second, not more than 25% of our total assets may be represented by securities other than those in the 75% asset class. Third, of the investments that are not included in the 75% asset class and that are not securities of our TRSs, (i) the value of any one issuer’s securities owned by us may not exceed 5% of the value of our total assets and (ii) we may not own more than 10% by vote or by value of any one issuer’s outstanding securities. For purposes of the 10% value test, debt instruments issued by a partnership are not classified as “securities” to the extent of our interest as a partner in such partnership (based on our proportionate share of the partnership’s equity interests and certain debt securities) or if at least 75% of the partnership’s gross income, excluding income from prohibited transactions, is qualifying income for purposes of the 75% gross income test. For purposes of the 10% value test, the term “securities” also does not include debt securities issued by another REIT, certain “straight debt” securities (for example, qualifying debt securities of a corporation of which we own no more than a de minimis amount of equity interest), loans to individuals or estates, and accrued obligations to pay rent. Fourth, securities of our TRSs cannot represent more than 25% of our total assets. Although we intend to meet these asset tests, no assurance can be given that we will be able to do so. For purposes of these asset tests, we are treated as holding our proportionate share of our operating partnership’s assets (and our proportionate share of assets of any other partnerships or entities taxed as partnerships in which our operating partnership invests). Real estate assets for purposes of the REIT rules includes stock in other REITs, but does not include stock in non-REIT companies, which may limit our ability to invest our liquid assets in stock of non-REIT real estate companies. Also, for purposes of these asset tests, the term “real estate assets” includes any property that is not otherwise a real estate asset and that is attributable to the temporary investment of new capital, but only if such property are shares or a debt instrument, and only for the one-year period beginning on the date the REIT receives such capital.
We will monitor the status of our assets for purposes of the various asset tests and will endeavor to manage our portfolio in order to comply at all times with such tests. If we fail to satisfy the asset tests at the end of a calendar quarter, other than the first calendar quarter, we will not lose our REIT status if one of the following exceptions applies:
| | • | | We satisfied the asset tests at the end of the preceding calendar quarter, and the discrepancy between the value of our assets and the asset test requirements arose from changes in the market values of our assets and was not wholly or partly caused by the acquisition of one or more non-qualifying assets; or |
| | • | | We eliminate any discrepancy within 30 days after the close of the calendar quarter in which it arose. |
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Moreover, if we fail to satisfy the asset tests at the end of a calendar quarter during a taxable year, we will not lose our REIT status if one of the following additional exceptions applies:
| | • | | De Minimis Exception: The failure is due to a violation of the 5% or 10% asset tests referenced above and is “de minimis” (meaning that the failure is one that arises from our ownership of assets the total value of which does not exceed the lesser of 1% of the total value of our assets at the end of the quarter in which the failure occurred and $10 million), and we either dispose of the assets that caused the failure or otherwise satisfy the asset tests within six months after the last day of the quarter in which our identification of the failure occurred; or |
| | • | | General Exception: All of the following requirements are satisfied: (i) the failure is not due to a “de minimis” violation of the 5% or 10% asset tests (as defined above), (ii) the failure is due to reasonable cause and not willful neglect, (iii) we file a schedule in accordance with Treasury Regulations providing a description of each asset that caused the failure, (iv) we either dispose of the assets that caused the failure or otherwise satisfy the asset tests within six months after the last day of the quarter in which our identification of the failure occurred, and (v) we pay an excise tax as described above in “— Taxation of Our Company.” |
Debt Instruments. Under recently issued IRS guidance, a loan may be treated as a qualifying real estate asset in an amount equal to the lesser of the fair market value of the loan or the fair market value of the real property securing the loan on the date the REIT acquired the loan. Although the recent guidance is not entirely clear, it appears that the non-qualifying portion of the mortgage loan will be equal to the portion of the loan’s fair market value that exceeds the value on the date of acquisition of the associated real property that is security for that loan.
Mezzanine loans that comply with the safe harbor set forth in Revenue Procedure 2003-65 described above will be treated as qualifying real estate assets for purposes of the REIT asset tests. To the extent we acquire mezzanine loans that do not comply with this safe harbor, all or a portion of such mezzanine loans may not qualify as real estate assets and our REIT status may be adversely affected. As such, the REIT provisions of the Code may limit our ability to acquire mezzanine loans that we might otherwise desire to acquire.
We expect that any CMBS that we acquire will be treated either as interests in grantor trusts or as interests in REMICs for federal income tax purposes. In the case of CMBS treated as interests in grantor trusts, we would be treated as owning our proportionate interest in the mortgage loans held by the grantor trust, all or a portion of which may qualify as real estate assets to the extent that they are secured by real property as discussed above. In the case of CMBS that is treated as an interest in a REMIC, the CMBS will generally qualify as a real estate asset, except that if less than 95% of the assets of the REMIC are real estate assets, then only a proportionate part of our interest in the REMIC will qualify as a real estate asset for REIT qualification purposes. Mortgage loans that may be held by a REMIC or grantor trust may not necessarily qualify as “real estate assets” for purposes of the REIT rules. As a result, it may be difficult, if not impossible, to determine whether our CMBS investments will be qualifying real estate assets.
Annual Distribution Requirements
In order to qualify as a REIT, we must distribute dividends (other than capital gain dividends) to our stockholders in an amount at least equal to (A) the sum of (i) 90% of our REIT taxable income, determined without regard to the dividends paid deduction and by excluding any net capital gain, and (ii) 90% of the net income (after tax), if any, from foreclosure property, minus (B) the sum of certain items of non-cash income. We generally must pay such distributions in the taxable year to which they relate, or in the following taxable year if declared before we timely file our tax return for such year and if paid on or before the first regular dividend payment after such declaration.
To the extent that we do not distribute all of our net capital gain and taxable income, we will be subject to U.S. federal, state and local tax on the undistributed amount at regular corporate income tax rates. Furthermore, if
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we should fail to distribute during each calendar year at least the sum of (i) 85% of our REIT taxable income (subject to certain adjustments) for such year, (ii) 95% of our capital gain net income for such year, and (iii) 100% of any corresponding undistributed amounts from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of such required distribution over the amounts actually distributed.
Under certain circumstances, we may be able to rectify a failure to meet the distribution requirement for a year by paying “deficiency dividends” to our stockholders in a later year that may be included in our deduction for dividends paid for the earlier year. Thus, we may be able to avoid being taxed on amounts distributed as deficiency dividends; however, we will be required to pay interest based upon the amount of any deduction taken for deficiency dividends.
In addition, dividends we pay must not be preferential. If a dividend is preferential, it will not qualify for the dividends paid deduction. To avoid paying preferential dividends, we must treat every stockholder of the class of shares with respect to which we make a distribution the same as every other stockholder of that class, and we must not treat any class of shares other than according to its dividend rights as a class. Under certain technical rules governing deficiency dividends, we could lose our ability to cure an under-distribution in a year with a subsequent year deficiency dividend if we pay preferential dividends. Preferential dividends potentially include “dividend equivalent redemptions.” Accordingly, we intend to pay dividends pro rata within each class, and to abide by the rights and preferences of each class of our shares if there is more than one, and will seek to avoid dividend equivalent redemptions. (See “— Taxation of U.S. Stockholders — Redemptions of Common Stock” below for a discussion of when redemptions are dividend equivalent and measures we intend to take to avoid them.) Under IRS rulings, we could be deemed to pay preferential dividends if we permitted stockholders to purchase shares under our distribution reinvestment plan at a price of less than 95% of the then fair market value of our stock. Because the purchase price for shares purchased pursuant to the distribution reinvestment plan will be equal to our NAV per share on the applicable distribution date, with no discount, we do not believe our distribution reinvestment plan could give rise to preferential dividends. However, if the IRS successfully challenged our valuations, so that we were deemed to have offered a discount in excess of five percent, all or a portion of our dividends in the relevant years could be deemed preferential.
We may retain and pay income tax on net long-term capital gains we received during the tax year. To the extent we so elect, (i) each stockholder must include in its income (as long-term capital gain) its proportionate share of our undistributed long-term capital gains, (ii) each stockholder is deemed to have paid, and receives a credit for, its proportionate share of the tax paid by us on the undistributed long-term capital gains, and (iii) each stockholder’s basis in its shares of our common stock is increased by the included amount of the undistributed long-term capital gains less their share of the tax paid by us.
To qualify as a REIT, we may not have, at the end of any taxable year, any undistributed earnings and profits accumulated in any non-REIT taxable year. In the event we accumulate any non-REIT earnings and profits, we intend to distribute our non-REIT earnings and profits before the end of our first REIT taxable year to comply with this requirement.
Failure to Qualify
If we fail to qualify as a REIT and such failure is not an asset test or income test failure subject to the cure provisions described above, or the result of preferential dividends, we generally will be eligible for a relief provision if the failure is due to reasonable cause and not willful neglect and we pay a penalty of $50,000 with respect to such failure.
If we fail to qualify for taxation as a REIT in any taxable year and no relief provisions apply, we generally will be subject to tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. Distributions to our stockholders in any year in which we fail to qualify as a REIT will not be deductible by us nor will they be required to be made. In such event, to the extent of our current or accumulated
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earnings and profits, all distributions to our stockholders will be taxable as dividend income. Subject to certain limitations in the Code, corporate stockholders may be eligible for the dividends received deduction, and individual, trust and estate stockholders may be eligible to treat the dividends received from us as qualified dividend income taxable as net capital gains, under the provisions of Section 1(h)(11) of the Code. Unless entitled to relief under specific statutory provisions, we also will be ineligible to elect to be taxed as a REIT again prior to the fifth taxable year following the first year in which we failed to qualify as a REIT under the Code.
Our qualification as a REIT for U.S. federal income tax purposes will depend on our continuing to meet the various requirements summarized above governing the ownership of our outstanding shares, the nature of our assets, the sources of our income, and the amount of our distributions to our stockholders. Although we intend to operate in a manner that will enable us to comply with such requirements, there can be no certainty that such intention will be realized. In addition, because the relevant laws may change, compliance with one or more of the REIT requirements may become impossible or impracticable for us.
Prohibited Transactions Tax
Any gain realized by us on the sale of any property held as inventory or other property held primarily for sale to customers in the ordinary course of business, including our share of any such gain realized by our operating partnership and taking into account any related foreign currency gains or losses, will be treated as income from a “prohibited transaction” that is subject to a 100% penalty tax. Whether property is held as inventory or primarily for sale to customers in the ordinary course of a trade or business depends upon all the facts and circumstances with respect to the particular transaction. However, the Code provides a safe harbor pursuant to which sales of properties held for at least two years and meeting certain other requirements will not give rise to prohibited transaction income.
We currently intend to hold properties for investment and to make sales of properties consistent with our investment objectives. However, we may make sales that do not satisfy the “safe harbor” requirements described above and there can be no assurance that the IRS will not contend that one or more of these sales are subject to the 100% penalty tax. The 100% tax will not apply to gains from the sale of property realized through a TRS or other taxable corporation, although such income will be subject to tax at regular corporate income tax rates.
Recordkeeping Requirements
To avoid a monetary penalty, we must request on an annual basis information from our stockholders designed to disclose the actual ownership of our outstanding shares. We intend to comply with these requirements.
Qualified REIT Subsidiaries and Disregarded Entities
If we own a corporate subsidiary that is a “qualified REIT subsidiary,” or QRS, or if we own 100% of the membership interests in a limited liability company or other unincorporated entity that does not elect to be treated as a corporation for U.S. federal income tax purposes, the separate existence of the QRS, limited liability company or other unincorporated entity generally will be disregarded for federal income tax purposes. Generally, a QRS is a corporation, other than a TRS, all of the shares of which is owned by a REIT or by other disregarded subsidiaries of the REIT. A limited liability company or other unincorporated entity 100% owned by a single member that does not elect to be treated as a corporation for U.S. federal income tax purposes (or, in the case of certain foreign entities, such an entity that affirmatively elects not to be treated as a corporation) generally is disregarded as an entity separate from its owner for federal income tax purposes. All assets, liabilities, and items of income, deduction, and credit of the QRS or disregarded entity will be treated as assets, liabilities, and items of income, deduction, and credit of its owner. If we own a QRS or a disregarded entity, neither will be subject to U.S. federal corporate income taxation, although such entities may be subject to state and local taxation in some states or foreign taxes if they do business or own property outside the United States. Our operating partnership is currently a disregarded entity and will remain so unless and until it issues interests to a person other than the Company or an entity disregarded from the Company.
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Taxation of the Operating Partnership and Subsidiary Partnerships
We expect to hold investments through entities that will be classified as partnerships for U.S. federal income tax purposes, including our operating partnership. Under the Code, a partnership is not subject to U.S. federal income tax, but is required to file a partnership tax return each year. In general, the character of each partner’s share of each item of income, gain, loss, deduction, credit, and tax preference is determined at the partnership level. Each partner is then allocated a distributive share of such items in accordance with the partnership agreement and is required to take such items into account in determining the partner’s income. Each partner includes such amount in income for any taxable year of the partnership ending within or with the taxable year of the partner, without regard to whether the partner has received or will receive any cash distributions from the partnership. Cash distributions, if any, from a partnership to a partner generally are not taxable unless and to the extent they exceed the partner’s basis in its partnership interest immediately before the distribution. Any amounts in excess of such tax basis will generally be treated as a sale of such partner’s interest in the partnership.
A REIT that is a partner in a partnership will be deemed to own its proportionate share of the assets of the partnership (other than for purposes of the 10% value test, for which the determination of our interest in partnership assets will be based on our proportionate interest in any securities issued by the partnership excluding, for these purposes, certain excluded securities as described in the Code) and will be deemed to earn its proportionate share of the partnership’s income. The assets and gross income of the partnership retain the same character in the hands of the REIT for purposes of the gross income and asset tests applicable to REITs. Thus, Cole Real Estate Income Strategy (Daily NAV), Inc.’s proportionate share of the assets and items of income of the operating partnership, including the operating partnership’s share of the assets and liabilities and items of income with respect to any partnership in which it holds an interest, will generally be treated as Cole Real Estate Income Strategy (Daily NAV), Inc.’s assets and liabilities and its items of income for purposes of applying the REIT asset and income tests if and when the operating partnership becomes a partnership for tax purposes. We control, and intend to continue to control, our operating partnership and intend to operate it consistently with the requirements for our qualification as a REIT whether our operating partnership is a disregarded entity or a partnership for tax purposes.
The partnership agreement of our operating partnership generally provides that, if and when the operating partnership becomes a partnership for tax purposes, items of operating income and loss will be allocated to the holders of operating partnership units in proportion to the number of units held by each such holder. If an allocation of partnership income or loss does not comply with the requirements of Section 704(b) of the Code and the Treasury Regulations thereunder after the time, if ever, at which the operating partnership becomes a partnership for tax purposes, the item subject to the allocation will be reallocated in accordance with the partners’ interests in the partnership. This reallocation will be determined by taking into account all of the facts and circumstances relating to the economic arrangement of the partners with respect to such item. Our operating partnership’s allocations of income and loss are intended to comply with the requirements of Section 704(b) of the Code and the Treasury Regulations promulgated thereunder, at such time, if ever, that the operating partnership becomes a partnership for tax purposes.
Under Section 704(c) of the Code, income, gain, loss and deduction attributable to appreciated or depreciated property that is contributed to a partnership in exchange for an interest in the partnership must be allocated for tax purposes in a manner such that the contributing partner is charged with, or benefits from, the unrealized gain or unrealized loss associated with the property at the time of the contribution. The amount of the unrealized gain or unrealized loss is generally equal to the difference between the fair market value, or book value, of the contributed property and the adjusted tax basis of such property at the time of the contribution. Such allocations are solely for U.S. federal income tax purposes and do not affect partnership capital accounts or other economic or legal arrangements among the partners. To the extent that any of our subsidiary partnerships, including our operating partnership, acquires appreciated (or depreciated) properties by way of capital contributions from its partners, allocations would need to be made in a manner consistent with these requirements. Similar rules apply to unrealized gain and loss in our operating partnership’s assets when the operating partnership issues new interests or redeems interests, so that the tax items attributable to such unrealized gain or loss are shared based on the partners’ percentage interests in the operating partnership prior to the issuance or redemption of the partnership interests.
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We may use our operating partnership to acquire properties in exchange for operating partnership units after the offering in order to permit the sellers of such properties to defer recognition of their tax gain. In such a transaction, our initial tax basis in the properties acquired generally will be less than the purchase price of the properties. Consequently, our depreciation deductions for such properties may be less, and our tax gain on a sale of such properties may be more, than the deductions or gain, respectively, that we would have if we acquired these properties in taxable transactions.
Any gain realized by the operating partnership on the sale of property held by it for more than one year generally will be long-term capital gain, except for any portion of such gain that is treated as depreciation or cost recovery recapture.
The discussion above assumes that our operating partnership, once it has two or more “regarded” owners for tax purposes, and any other subsidiary partnerships will be treated as “partnerships” for U.S. federal income tax purposes. Generally, a domestic unincorporated entity such as our operating partnership with two or more partners is treated as a partnership for U.S. federal income tax purposes unless it affirmatively elects to be treated as a corporation. However, certain “publicly traded partnerships” are treated as corporations for U.S. federal income tax purposes. Pursuant to Section 7704 of the Code, a partnership that does not elect to be treated as a corporation nevertheless will be treated as a corporation for U.S. federal income tax purposes if it is a “publicly traded partnership” and it does not derive at least 90% of its gross income from certain specified sources of “qualifying income” within the meaning of that provision. A “publicly traded partnership” is any partnership (i) the interests in which are traded on an established securities market or (ii) the interests in which are readily tradable on a “secondary market or the substantial equivalent thereof.” Although operating partnership units will not be traded on an established securities market, the ability to redeem partnership interests on a daily basis could give rise to a secondary market for this purpose. However, under the relevant Treasury Regulations, interests in a partnership will not be considered readily tradable on a secondary market or on the substantial equivalent of a secondary market if the partnership qualifies for specified “safe harbors,” which are based on the specific facts and circumstances relating to the partnership. For example, interests in a partnership are not readily tradable on a secondary market or the substantial equivalent thereof if (i) all interests in the partnership were issued in a transaction (or transactions) that was not required to be registered under the Securities Act, and (ii) the partnership does not have more than 100 partners at any time during the taxable year of the partnership. If our operating partnership or another subsidiary partnership were a publicly traded partnership, it would be taxed as a corporation unless at least 90% of its gross income consists of “qualifying income” under Section 7704 of the Code. Qualifying income is generally real property rents and other types of passive income, and the income requirements applicable to us to qualify as a REIT under the Code and the definition of qualifying income under the publicly traded partnership rules are very similar (but not identical). We expect that our operating partnership (if and when it becomes a partnership for U.S. federal income tax purposes) and any other subsidiary partnership will satisfy at least one of the above-mentioned safe harbors, and/or comply with the qualifying income exception, so as to avoid being taxed as a corporation under these rules. However, treatment of the operating partnership or other subsidiary partnership as a corporation could prevent us from qualifying as a REIT.
Taxable Income from Debt Instruments without Cash Payments
Investments in debt instruments may require recognition of taxable income prior to receipt of cash from our investments and may cause portions of gain to be treated as ordinary income. For example, we may purchase debt instruments at a discount from face value. To the extent we purchase any instruments at a discount in connection with their original issuances, the discount will be “original issue discount” if it exceeds certain de minimis amounts, which must be accrued on a constant yield method even though we may not receive the corresponding cash payment until maturity. To the extent debt instruments are purchased by us at a discount after their original issuances, the discount may represent “market discount.” Unlike original issue discount, market discount is not required to be included in income on a constant yield method. However, if we sell a debt instrument with market discount, we will be required to treat gain up to an amount equal to the market discount that has accrued while we held the debt instrument as ordinary income. Additionally, any principal payments we
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receive in respect of our debt instruments must be treated as ordinary income to the extent of any accrued market discount. If we ultimately collect less on a debt instrument than our purchase price and any original issue discount or accrued market discount that we have included in income, there may be limitations on our ability to use any losses resulting from that debt instrument. We may acquire distressed debt instruments that are subsequently modified by agreement with the borrower. Under applicable Treasury Regulations, these modifications may be treated as a taxable event in which we exchange the old debt instrument for a new debt instrument, the value of which may be treated as equal to the face amount of the new debt instrument. Because distressed debt instruments are typically acquired at a substantial discount from face value, the difference between our amount realized and our tax basis in the old note may be significant, resulting in significant income without any corresponding receipt of cash. Such a modification also may require us to retest the status of the modified loan for purposes of determining whether the loan is properly treated as debt for U.S. federal income tax purposes. Similarly, if we acquire a distressed debt instrument and subsequently foreclose, we could have taxable income to the extent that the fair market value of the property we receive exceeds our tax basis in the debt instrument. Such a scenario could also result in significant taxable income without any receipt of cash. In the event that any debt instruments acquired by us are delinquent as to mandatory principal and interest payments, or in the event payments with respect to a particular debt instrument are not made when due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income.
Investments in TRSs
We may form one or more subsidiaries intended to be treated as TRSs for federal income tax purposes. A TRS of ours is a corporation in which we directly or indirectly own shares and that jointly elects with us to be treated as a TRS under Section 856(l) of the Code. In addition, if one of our TRSs owns, directly or indirectly, securities representing 35% or more of the vote or value of a subsidiary corporation, that subsidiary will also be treated as a TRS of ours. A domestic TRS pays U.S. federal, state, and local income taxes at the full applicable corporate rates on its taxable income prior to payment of any dividends. A non-U.S. TRS with income from a U.S. trade or business or certain U.S. sourced income also may be subject to U.S. income taxes. A TRS owning property outside of the U.S. may pay foreign taxes. The taxes owed by a TRS could be substantial. To the extent that our TRSs are required to pay U.S. federal, state, local, or foreign taxes, the cash available for distribution by us will be reduced accordingly.
A TRS is permitted to engage in certain kinds of activities that cannot be performed directly by us without jeopardizing our qualification as a REIT. Certain payments made by any of our TRSs to us may not be deductible by the TRS (which could materially increase the TRS’s taxable income), and certain direct or indirect payments made by any of our TRSs to us may be subject to prohibited transaction taxes. In addition, we will be subject to a 100% tax on the amounts of any rents from real property, deductions, or excess interest received from a TRS that would be reduced through reapportionment under Section 482 of the Code in order to more clearly reflect the income of the TRS.
Taxation of U.S. Stockholders
The term “U.S. stockholder” means an investor that, for U.S. federal income tax purposes, is (i) a citizen or resident of the United States, (ii) a corporation or other entity treated as a corporation that is created or organized in or under the laws of the United States, any of its states or the District of Columbia, (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust, (a) if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) that has a valid election in effect under the applicable Treasury Regulations to be treated as a U.S. person under the Code.
In addition, as used herein, the term U.S. stockholder does not include any entity that is subject to special treatment under the Code, such as (i) insurance companies; (ii) tax-exempt organizations (except to the limited extent discussed below); (iii) financial institutions or broker-dealers; (iv) non-U.S. individuals and foreign corporations (except to the limited extent discussed below); (v) U.S. expatriates; (vi) persons who
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mark-to-market our shares; (vii) subchapter S corporations; (viii) U.S. stockholders whose functional currency is not the U.S. dollar; (ix) regulated investment companies; (x) holders who receive our common stock through the exercise of employee share options or otherwise as compensation; (xi) persons holding shares of our common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment; (xii) persons subject to the alternative minimum tax provisions of the Code; (xiii) persons holding our common stock through a partnership or similar pass-through entity; and (xiv) persons holding a 10% or more (by vote or value) beneficial interest in our common stock. If a partnership, entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership holding our common stock, you are urged to consult your tax advisor regarding the consequences of the ownership and disposition of shares of our common stock by the partnership. This summary assumes that stockholders hold our common stock as capital assets for U.S. federal income tax purposes, which generally means property held for investment.
Distributions
Distributions by us, other than capital gain dividends, will constitute ordinary dividends to the extent of our current and accumulated earnings and profits as determined for U.S. federal income tax purposes. In general, these dividends will be taxable as ordinary income and will not be eligible for the dividends-received deduction for corporate stockholders. Our ordinary dividends generally will not qualify as “qualified dividend income” taxed as net capital gain for U.S. stockholders that are individuals, trusts, or estates. However, distributions to U.S. stockholders that are individuals, trusts, or estates generally will constitute qualified dividend income taxed as net capital gains to the extent the U.S. stockholder satisfies certain holding period requirements and to the extent the dividends are attributable to (i) qualified dividend income we receive from other corporations, including our TRSs, and (ii) dividends paid from our undistributed earnings or from built-in gains taxed at the corporate level during the immediately preceding year and provided we properly designate the distributions as such. We do not anticipate distributing a significant amount of qualified dividend income.
To the extent that we make a distribution in excess of our current and accumulated earnings and profits (a “return of capital distribution”), the distribution will be treated first as a tax-free return of capital, reducing the tax basis in a U.S. stockholder’s shares. To the extent a return of capital distribution exceeds a U.S. stockholder’s tax basis in its shares, the distribution will be taxable as capital gain realized from the sale of such shares.
Dividends declared by us in October, November or December and payable to a stockholder of record on a specified date in any such month shall be treated both as paid by us and as received by the stockholder on December 31 of the year, provided that the dividend is actually paid by us during January of the following calendar year.
We will be treated as having sufficient earnings and profits to treat as a dividend any distribution up to the amount required to be distributed in order to avoid imposition of the 4% excise tax generally applicable to REITs if certain distribution requirements are not met. Moreover, any deficiency dividend will be treated as an ordinary or a capital gain dividend, as the case may be, regardless of our earnings and profits. As a result, stockholders may be required to treat certain distributions as taxable dividends that would otherwise result in a tax-free return of capital.
Distributions that are properly designated as capital gain dividends will be taxed as long-term capital gains (to the extent they do not exceed our actual net capital gain for the taxable year) without regard to the period for which the stockholder has held its shares. However, corporate stockholders may be required to treat up to 20% of certain capital gain dividends as ordinary income. In addition, U.S. stockholders may be required to treat a portion of any capital gain dividend as “unrecaptured Section 1250 gain,” taxable at a maximum rate of 25%, if we incur such gain. Capital gain dividends are not eligible for the dividends-received deduction for corporations.
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The REIT provisions of the Code do not require us to distribute our long-term capital gain, and we may elect to retain and pay income tax on our net long-term capital gains received during the taxable year. If we so elect for a taxable year, our stockholders would include in income as long-term capital gains their proportionate share of retained net long-term capital gains for the taxable year as we may designate. A U.S. stockholder would be deemed to have paid its share of the tax paid by us on such undistributed capital gains, which would be credited or refunded to the stockholder. The U.S. stockholder’s basis in its shares would be increased by the amount of undistributed long-term capital gains (less the capital gains tax paid by us) included in the U.S. stockholder’s long-term capital gains.
We are not precluded from making taxable stock distributions. Any such distribution would be taxed in the same manner as a distribution of cash equal to the fair market value of the stock distributed. As a result, U.S. stockholders would be required to satisfy any tax liability attributable to such stock distributions from other sources.
Passive Activity Loss and Investment Interest Limitations
Our distributions and gain from the disposition of our shares will not be treated as passive activity income and, therefore, U.S. stockholders will not be able to apply any “passive losses” against such income. With respect to non-corporate U.S. stockholders, our dividends (to the extent they do not constitute a return of capital) that are taxed at ordinary income rates will generally be treated as investment income for purposes of the investment interest limitation; however, net capital gain from the disposition of our shares (or distributions treated as such), capital gain dividends, and dividends taxed at net capital gains rates generally will be excluded from investment income except to the extent the U.S. stockholder elects to treat such amounts as ordinary income for U.S. federal income tax purposes. U.S. stockholders may not include in their own U.S. federal income tax returns any of our net operating or net capital losses.
Sale or Disposition of Common Stock
In general, any gain or loss realized upon a taxable disposition of shares of our common stock by a stockholder that is not a dealer in securities will be a long-term capital gain or loss if the shares have been held for more than one year and otherwise as a short-term capital gain or loss. However, any loss upon a sale or exchange of the shares by a U.S. stockholder who has held such shares for six months or less (after applying certain holding period rules) will be treated as a long-term capital loss to the extent of undistributed capital gains or our distributions received by the U.S. stockholder from the Company, each as required to be treated by such stockholder as long-term capital gain. All or a portion of any loss realized upon a taxable disposition of shares of our common stock may be disallowed if other shares of our common stock are purchased within 30 days before or after the disposition.
Redemptions of Common Stock
A redemption of shares will be treated under Section 302 of the Code as a taxable distribution unless the redemption satisfies one of the tests set forth in Section 302(b) of the Code enabling the redemption to be treated as a sale or exchange of the redeemed shares. A redemption that is not treated as a sale or exchange will be taxed in the same manner as regular distributions (e.g., ordinary dividend income to the extent paid out of earnings and profits unless properly designated as a capital gain dividend), and a redemption treated as a sale or exchange will be taxed in the same manner as other taxable sales discussed above.
The redemption will be treated as a sale or exchange if it (i) is “substantially disproportionate” with respect to the stockholder, (ii) results in a “complete termination” of the stockholder’s stock interest in the Company, or (iii) is “not essentially equivalent to a dividend” with respect to the stockholder, all within the meaning of Section 302(b) of the Code. In determining whether any of these tests have been met, shares considered to be owned by the stockholder by reason of certain constructive ownership rules set forth in the Code, as well as
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shares actually owned, must generally be taken into account. Because the determination as to whether any of the alternative tests of Section 302(b) of the Code is satisfied with respect to any particular redemption will depend upon the facts and circumstances as of the time the determination is made, prospective stockholders are advised to consult their own tax advisors to determine such tax treatment.
If a redemption of shares is treated as a distribution that is taxable as a dividend, the amount of the distribution would be measured by the amount of cash and the fair market value of the property received by the redeeming stockholder. In addition, although guidance is sparse, the IRS could take the position that stockholders who do not participate in any redemption treated as a dividend should be treated as receiving a constructive stock distribution taxable as a dividend in the amount of the increased percentage ownership in the Company as a result of the redemption, even though such stockholder did not actually receive cash or other property as a result of such redemption. The amount of any such constructive dividend would be added to the nonredeeming stockholder’s basis in his shares. It also is possible that under certain technical rules relating to the deduction for dividends paid, the IRS could take the position that redemptions taxed as dividends impair the Company’s ability to satisfy its distribution requirements under the Code. To avoid certain issues related to our ability to comply with the REIT distribution requirements (see “— Qualification as a REIT — Annual Distribution Requirements”), we have implemented procedures designed to track our stockholders’ percentage interests in our common stock and identify any such dividend equivalent redemptions, and we will decline to effect a redemption to the extent that we believe that it would constitute a dividend equivalent redemption. However, we cannot assure you that we will be successful in preventing all dividend equivalent redemptions.
Medicare Tax on Unearned Income
A U.S. stockholder that is an individual is subject to a 3.8% tax on the lesser of (1) the U.S. stockholder’s “net investment income” for the relevant taxable year and (2) the excess of the U.S. stockholder’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000, depending on the individual’s circumstances). A U.S. stockholder that is an estate or trust that does not fall into a special class of trusts that is exempt from such tax is subject to the same 3.8% tax on the lesser of its undistributed net investment income and the excess of its adjusted gross income over a certain threshold. A U.S. stockholder’s net investment income will include, among other things, dividends on and capital gains from the sale or other disposition of our shares. Prospective U.S. stockholders that are individuals, estates or trusts should consult their tax advisors regarding the effect, if any, of this Medicare tax on their ownership and disposition of our common stock.
Taxation of U.S. Tax-Exempt Stockholders
In General
In general, a tax-exempt organization is exempt from U.S. federal income tax on its income, except to the extent of its “unrelated business taxable income” or UBTI, which is defined by the Code as the gross income derived from any trade or business which is regularly carried on by a tax-exempt entity and unrelated to its exempt purposes, less any directly connected deductions and subject to certain modifications. For this purpose, the Code generally excludes from UBTI any gain or loss from the sale or other disposition of property (other than stock in trade or property held primarily for sale in the ordinary course of a trade or business), dividends, interest, rents from real property, and certain other items. However, a portion of any such gains, dividends, interest, rents, and other items generally is UBTI to the extent derived from debt-financed property, based on the amount of “acquisition indebtedness” with respect to such debt-financed property. Before making an investment in shares of our common stock, a tax-exempt stockholder should consult its tax advisors with regard to UBTI and the suitability of the investment in our shares.
Distributions we make to a tax-exempt employee pension trust or other domestic tax-exempt stockholder or gains from the disposition of our shares held as capital assets generally will not constitute UBTI unless the
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exempt organization’s shares are debt-financed property (e.g., the stockholder has borrowed to acquire or carry its shares). However, if we are a “pension-held REIT,” this general rule will not apply to distributions to certain pension trusts that hold more than 10% (by value) of our shares. We will be treated as a “pension-held REIT” if (i) treating certain pension trusts as individuals would cause us to fail the 5/50 Test (as defined above) and (ii) we are “predominantly held” by certain pension trusts. We will be “predominantly held” if either (i) a single such pension trust holds more than 25% by value of our shares or (ii) one or more such pension trusts, each owning more than 10% by value of our shares, hold in the aggregate more than 50% by value of our shares. In the event we are a pension-held REIT, the percentage of any dividend received from us treated as UBTI would be equal to the ratio of (a) the gross UBTI (less certain associated expenses) earned by us (treating us as if we were a pension trust and, therefore, subject to tax on UBTI) to (b) our total gross income (less certain associated expenses). A de minimis exception applies where the ratio set forth in the preceding sentence is less than 5% for any year; in that case, no dividends are treated as UBTI. We cannot assure you that we will not be treated as a pension-held REIT. Before making an investment in shares of our common stock, a tax-exempt stockholder should consult its tax advisors with regard to UBTI and the suitability of the investment in our shares.
Special Issues
Social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans that are exempt from taxation under paragraphs (7), (9), (17), and (20), respectively, of Section 501(c) of the Code are subject to different UBTI rules, which generally will require them to characterize distributions from us as UBTI.
Taxation of Non-U.S. Stockholders
The following is a summary of certain federal income tax consequences of the acquisition, ownership and disposition of our common stock applicable to non-U.S. stockholders. For purposes of this summary, a non-U.S. stockholder is a beneficial owner of our common stock that is not a U.S. stockholder, is not subject to special treatment under the Code and is either a foreign corporation or a nonresident alien individual for federal income tax purposes. The discussion is based on current law and is for general information only. It addresses only selective and not all aspects of federal income taxation.
Ordinary Dividends. The portion of dividends received by non-U.S. stockholders payable out of our earnings and profits that are not attributable to gains from sales or exchanges of U.S. real property interests and which are not effectively connected with a U.S. trade or business of the non-U.S. stockholder generally will be treated as ordinary income and will be subject to withholding tax at the rate of 30%, unless reduced or eliminated by an applicable income tax treaty. Under some treaties, lower withholding rates do not apply to dividends from REITs.
In cases where the dividend income from a non-U.S. stockholder’s investment in our common stock is, or is treated as, effectively connected with the non-U.S. stockholder’s conduct of a U.S. trade or business, the non-U.S. stockholder generally will be subject to federal income tax at graduated rates, in the same manner as U.S. stockholders are taxed with respect to such dividends, and may also be subject to the 30% branch profits tax (or a lower rate of tax under the applicable income tax treaty) on the income after the application of the income tax in the case of a non-U.S. stockholder that is a corporation. We plan to withhold U.S. income tax at the rate of 30% on the gross amount of any distribution paid to a non-U.S. stockholder (including any portion of any dividend that is payable in our stock) that is neither a capital gain dividend nor a distribution that is attributable to gain from the sale or exchange of “United States real property interests” under the Foreign Investment in Real Property Tax Act of 1980, or FIRPTA, rules described below under “— Dispositions and Redemptions of Common Stock” unless either (i) a lower treaty rate applies and the non-U.S. stockholder files with us any required IRS Form W-8 (for example, an IRS Form W-8BEN) evidencing eligibility for that reduced rate or (ii) the non-U.S. stockholder files with us an IRS Form W-8ECI claiming that the distribution is effectively connected income. The balance of this discussion assumes that dividends that we distribute to non-U.S.
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stockholders and gains non-U.S. stockholders recognize with respect to our shares are not effectively connected with the non-U.S. stockholder’s conduct of a U.S. trade or business unless deemed to be effectively connected under FIRPTA as described below under “— Dispositions and Redemptions of Common Stock.”
Non-Dividend Distributions. Distributions by us to non-U.S. stockholders that are not attributable to gains from sales or exchanges of U.S. real property interests and that exceed our earnings and profits will be a non-taxable return of the non-U.S. stockholder’s basis in its shares and, to the extent in excess of the non-U.S. stockholder’s basis, gain from the disposition of such shares, the tax treatment of which is described below. We are required to withhold tax at a 10% rate from distributions to non-U.S. stockholders that are not out of our earnings and profits. If we cannot determine at the time a distribution is made whether or not the distribution will exceed current and accumulated earnings and profits, we will withhold at the rate applicable to dividends. A non-U.S. stockholder, however, may seek a refund from the IRS of any amounts withheld that exceed the non-U.S. stockholder’s substantive federal income tax liability.
Capital Gain Dividends. Under FIRPTA, a distribution made by us to a non-U.S. stockholder, to the extent attributable to gains from dispositions of U.S. real property interests held by us directly or through pass-through subsidiaries, must be reported in U.S. federal income tax returns filed by, and are treated as effectively connected with a U.S. trade or business of, the non-U.S. stockholder. Such gains are subject to federal income tax at the rates applicable to U.S. stockholders and, in the case of a non-U.S. corporate stockholder, a 30% branch profits tax (or a lower rate of tax under the applicable income tax treaty). We are required to withhold tax at a 35% rate from distributions that are attributable to gains from the sale or exchange of U.S. real property interests.
If any class of our shares were to become regularly traded on an established securities market located in the U.S., capital gain dividends distributed to a non-U.S. stockholder who did not own more than 5% of such class of shares at any time during the one-year period ending on the date of the distribution would be recharacterized as ordinary dividends subject to the rules discussed above under “— Ordinary Dividends.” Non-U.S. stockholders should be aware that we do not expect our common stock to be regularly traded on an established securities market at any time.
Capital gain dividends that are not attributable to sales or exchanges of U.S. real property interests (e.g., that are attributable to sales of mortgages, other than shared appreciation mortgage loans), generally are not subject to federal income tax unless (i) such distribution is effectively connected with a U.S. trade or business of the non-U.S. stockholder and, if certain treaties apply, is attributable to a U.S. permanent establishment of the non-U.S. stockholder, in which case the non-U.S. stockholder will be subject to net-basis U.S. federal income tax on the dividend as if the non-U.S. stockholder were a U.S. stockholder, or (ii) such non-U.S. stockholder was present in the U.S. for 183 days or more during the taxable year and has a “tax home” in the U.S. in which case a 30% withholding tax would apply to the dividend.
However, notwithstanding that such dividends should only be subject to U.S. federal income taxation in those two instances, existing Treasury Regulations might be construed to require us to withhold on such dividends in the same manner as capital gain dividends that are attributable to gain from the disposition of U.S. real property interests, generally at the rate of 35% of the dividend (although any amounts we withhold would be creditable against the non-U.S. stockholder’s U.S. federal income tax liability).
Dispositions and Redemptions of Common Stock. Unless shares of our common stock constitute a U.S. real property interest or the distribution is attributable to gain from our sale of a U.S. real property interest (as discussed below), a sale of the shares or a redemption of the shares that is treated as a sale or exchange by a non-U.S. stockholder generally will not be subject to federal income taxation under FIRPTA. A redemption that is not treated as a sale or exchange will be taxed in the same manner as distributions under the rules described above. As discussed above, we have implemented procedures designed to identify redemptions that are treated as distributions and we intend to prevent such redemptions from occurring. See “— Taxation of U.S. Stockholders — Redemptions of Common Stock” for a discussion of when a redemption will be treated as a sale or exchange and related matters.
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Our common stock will not constitute a U.S. real property interest if we are a “domestically controlled qualified investment entity.” A domestically controlled qualified investment entity includes a REIT in which, at all times during a specified testing period, less than 50% in value of its outstanding shares are held directly or indirectly by non-U.S. stockholders. Because our shares may be purchased or redeemed daily, no assurance can be given that we are and have been during the applicable testing period, or that if we are we will remain, a domestically controlled qualified investment entity.
In the event that we do not constitute a domestically controlled qualified investment entity, a non-U.S. stockholder’s sale of our common stock nonetheless will generally not be subject to tax under FIRPTA as a sale of a U.S. real property interest, provided that (1) shares of our common stock are “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market and (2) the selling non-U.S. stockholder owned, actually or constructively, 5% or less of our outstanding common stock at all times during a specified testing period. As previously noted, however, we do not expect any of our shares to be regularly traded on an established securities market.
In addition, even if we are a domestically controlled qualified investment entity, upon disposition of our shares, a non-U.S. stockholder may be treated as having gain from the sale or exchange of a U.S. real property interest if the non-U.S. stockholder (1) disposes of an interest in our shares during the 30-day period preceding the ex-dividend date of a distribution, any portion of which, but for the disposition, would have been treated as gain from sale or exchange of a U.S. real property interest and (2) acquires, enters into a contract or option to acquire, or is deemed to acquire, other shares of our common stock within 30 days after such ex-dividend date. The foregoing rules do not apply to a transaction if the 5% regularly traded test described above is satisfied with respect to the non-U.S. stockholder. As previously noted, however, we do not expect shares of our common stock to be regularly traded on an established securities market at any time and, therefore, we do not expect the exception for non-U.S. stockholders that satisfy the 5% regularly traded test to apply.
A redemption of shares generally will be taxable under FIRPTA to the extent the distribution in the redemption of the shares is attributable to gains from our dispositions of U.S. real property interests. To the extent the distribution is not attributable to gains from our dispositions of U.S. real property interests, the excess of the amount of money and fair market value of property received in the redemption over the non-U.S. stockholder’s basis in the redeemed shares will be taxable if we are not a domestically controlled REIT. The IRS has confirmed that redemption payments may be attributable to gains from dispositions of U.S. real property interests (except when the 5% publicly traded exception would apply), but has not provided any guidance to determine when and what portion of a redemption payment is a distribution that is attributable to gains from our dispositions of U.S. real property interests. Due to the uncertainty, we may withhold at the 35% rate from all or a portion of redemption payments to non-U.S. stockholders. To the extent the amount of tax we withhold exceeds the amount of a non-U.S. stockholder’s U.S. federal income tax liability, the non-U.S. stockholder may file a U.S. federal income tax return and claim a refund.
If gain on the sale of shares of our common stock were subject to taxation under FIRPTA, the non-U.S. stockholder would be subject to the same treatment as a U.S. stockholder with respect to such gain, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals, and the purchaser of the shares could be required to withhold 10% of the purchase price and remit such amount to the IRS.
Gain from the sale of shares of our common stock that would not otherwise be subject to FIRPTA will nonetheless be taxable in the U.S. to a non-U.S. stockholder if the non-U.S. stockholder is a nonresident alien individual who was present in the U.S. for 183 days or more during the taxable year and has a “tax home” in the U.S. in which case the nonresident alien individual will be subject to a 30% tax on the individual’s capital gain.
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Information Reporting Requirements and Backup Withholding Tax
We will report to our U.S. stockholders and to the IRS the amount of distributions paid during each calendar year, and the amount of tax withheld, if any. Under the backup withholding rules, a U.S. stockholder may be subject to backup withholding at a rate of 28% with respect to distributions paid, unless such stockholder (i) is a corporation or other exempt entity and, when required, proves its status or (ii) certifies under penalties of perjury that the taxpayer identification number the stockholder has furnished to us is correct and the stockholder is not subject to backup withholding and otherwise complies with the applicable requirements of the backup withholding rules. A U.S. stockholder that does not provide us with its correct taxpayer identification number also may be subject to penalties imposed by the IRS.
We will also report annually to the IRS and to each non-U.S. stockholder the amount of dividends paid to such holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. stockholder resides under the provisions of an applicable income tax treaty. A non-U.S. stockholder may be subject to back-up withholding unless applicable certification requirements are met.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against such holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS.
Other U.S. Federal Income Tax Withholding and Reporting Requirements Under FATCA
The Foreign Account Tax Compliance Act (“FATCA”) provisions of the Code, enacted in 2010, impose withholding taxes on certain types of payments to (i) foreign financial institutions that do not agree to comply with certain diligence, reporting and withholding obligations with respect to their U.S. accounts and (ii) non-financial foreign entities that do not identify (or confirm the absence of) substantial U.S. owners. The withholding tax of 30% would apply to dividends and the gross proceeds of a disposition of our stock paid to certain foreign entities unless various information reporting requirements are satisfied. For these purposes, a foreign financial institution generally is defined as any non-U.S. entity that (i) accepts deposits in the ordinary course of a banking or similar business, (ii) is engaged in the business of holding financial assets for the account of others, or (iii) is engaged or holds itself out as being engaged primarily in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest in such assets. Withholding under this legislation on withholdable payments to foreign financial institutions and non-financial foreign entities is expected to apply after December 31, 2016 with respect to gross proceeds of a disposition of property that can produce U.S. source interest or dividends and after December 31, 2013 with respect to other withholdable payments.
Legislative or Other Actions Affecting REITs
The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. No assurance can be given as to whether, when, or in what form, the U.S. federal income tax laws applicable to us and our stockholders may be enacted. Changes to the U.S. federal tax laws and interpretations of federal tax laws could adversely affect an investment in our common stock.
State, Local and Foreign Tax
We may be subject to state, local and foreign tax in states, localities and foreign countries in which we do business or own property. The tax treatment applicable to us and our stockholders in such jurisdictions may differ from the U.S. federal income tax treatment described above.
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ERISA Considerations
The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), is a broad statutory framework that governs most U.S. retirement and other U.S. employee benefit plans. ERISA and the rules and regulations of the Department of Labor (the “DOL”) under ERISA contain provisions that should be considered by fiduciaries of employee benefit plans subject to the provisions of Title I of ERISA (“ERISA Plans”) and their legal advisors. In particular, a fiduciary of an ERISA Plan should consider whether an investment in shares of our common stock (or, in the case of a participant-directed defined contribution plan (a “Participant-Directed Plan”), making shares of our common stock available for investment under the Participant-Directed Plan) satisfies the requirements set forth in Part 4 of Title I of ERISA, including the requirements that (1) the investment satisfy the prudence and diversification standards of ERISA, (2) the investment be in the best interests of the participants and beneficiaries of the ERISA Plan, (3) the investment be permissible under the terms of the ERISA Plan’s investment policies and governing instruments and (4) the investment does not give rise to a non-exempt prohibited transaction under ERISA.
In determining whether an investment in shares of our common stock (or making our shares available as an investment option under a Participant-Directed Plan) is prudent for ERISA purposes, a fiduciary of an ERISA Plan should consider all relevant facts and circumstances including, without limitation, possible limitations on the transferability of shares of our common stock, whether the investment provides sufficient liquidity in light of the foreseeable needs of the ERISA Plan (or the participant account in a Participant-Directed Plan), and whether the investment is reasonably designed, as part of the ERISA Plan’s portfolio, to further the ERISA Plan’s purposes, taking into consideration the risk of loss and the opportunity for gain (or other return) associated with the investment. It should be noted that we will invest our assets in accordance with the investment objectives and guidelines described herein, and that neither our advisor nor any of its affiliates, nor our board of directors, has any responsibility for developing any overall investment strategy for any ERISA Plan (or the participant account in a Participant-Directed Plan) or for advising any ERISA Plan (or participant in a Participant-Directed Plan) as to the advisability or prudence of an investment in us. Rather, it is the obligation of the appropriate fiduciary for each ERISA Plan (or participant in a Participant-Directed Plan) to consider whether an investment in shares of our common stock by the ERISA Plan (or making such shares available for investment under a Participant-Directed Plan in which event it is the obligation of the participant to consider whether an investment in shares of our common stock is advisable), when judged in light of the overall portfolio of the ERISA Plan, will meet the prudence, diversification and other applicable requirements of ERISA.
Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the assets of an ERISA Plan, as well as those plans that are not subject to ERISA but that are subject to Section 4975 of the Code, such as individual retirement accounts (“IRAs”) and non-ERISA Keogh plans (collectively with ERISA Plans, “Plans”), and certain persons (referred to as “parties in interest” for purposes of ERISA or “disqualified persons” for purposes of the Code) having certain relationships to Plans, unless a statutory or administrative exemption is applicable to the transaction. A party in interest or disqualified person who engages in a non-exempt prohibited transaction may be subject to non-deductible excise taxes and other penalties and liabilities under ERISA and the Code, and the transaction might have to be rescinded. In addition, a fiduciary who causes an ERISA Plan to engage in a non-exempt prohibited transaction may be personally liable for any resultant loss incurred by the ERISA Plan and may be subject to other potential remedies.
A Plan that proposes to invest in shares of our common stock (or to make our shares available for investment under a Participant-Directed Plan) may already maintain a relationship with our advisor or one or more of its affiliates, as a result of which our advisor or such affiliate may be a “party in interest” under ERISA or a “disqualified person” under the Code, with respect to such Plan (e.g., if our advisor or such affiliate provides investment management, investment advisory or other services to that Plan). ERISA (and the Code) prohibits plan assets from being used for the benefit of a party in interest (or disqualified person). This prohibition is not triggered by “incidental” benefits to a party in interest (or disqualified person) that result from a transaction involving the Plan that is motivated solely by the interests of the Plan. ERISA (and the Code) also prohibits a
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fiduciary from using its position to cause the Plan to make an investment from which the fiduciary, its affiliates or certain parties in which it has an interest would receive a fee or other consideration or benefit. In this circumstance, Plans that propose to invest in shares of our common stock should consult with their counsel to determine whether an investment in shares of our common stock would result in a transaction that is prohibited by ERISA or the Code.
If our assets were considered to be assets of a Plan (referred to herein as “Plan Assets”), our management might be deemed to be fiduciaries of the investing Plan. In this event, the operation of the company could become subject to the restrictions of the fiduciary responsibility and prohibited transaction provisions of Title I of ERISA and/or the prohibited transaction rules of the Code.
Neither ERISA nor the Code contains a definition of Plan Assets. The DOL has promulgated a final regulation under ERISA, 29 C.F.R. § 2510.3-101 (as amended by Section 3(42) of ERISA, the “Plan Assets Regulation”), that provides guidelines as to whether, and under what circumstances, the underlying assets of an entity will be deemed to constitute Plan Assets for purposes of applying the fiduciary requirements of Title I of ERISA (including the prohibited transaction rules of Section 406 of ERISA) and the prohibited transaction provisions of Code Section 4975.
Under the Plan Assets Regulation, the assets of an entity in which a Plan or IRA makes an equity investment will generally be deemed to be assets of such Plan or IRA unless the entity satisfies one of the exceptions to this general rule. Generally, the exceptions require that the investment in the entity be one of the following:
| | • | | in securities issued by an investment company registered under the Investment Company Act; |
| | • | | in “publicly offered securities,” defined generally as interests that are “freely transferable,” “widely held” and registered with the SEC; |
| | • | | in an “operating company” which includes “venture capital operating companies” and “real estate operating companies;” or |
| | • | | in which equity participation by “benefit plan investors” is not significant. |
The shares we are offering will not be issued by a registered investment company. In addition, the Plan Assets Regulation provides that equity participation in an entity by benefit plan investors is “significant” if at any time 25% or more of the value of any class of equity interest is held by “benefit plan investors.” The term “benefit plan investors” is defined for this purpose under ERISA Section 3(42), and in calculating the value of a class of equity interests, the value of any equity interests held by our Advisor or any of its affiliates must be excluded. We anticipate that we will not qualify for this exception since we expect to have equity participation by “benefit plan investors” in excess of 25%, which would be deemed to be significant, as defined above. As a result, and because we are not a registered investment company, we do not anticipate that we will qualify for the exception for investments in which equity participation by benefit plan investors is not significant nor for the exception for investments in securities issued by a registered investment company.
As noted above, the Plan Assets Regulation provides an exception with respect to securities issued by an “operating company,” which includes a “venture capital operating company” (a “VCOC”) and a “real estate operating company” (a “REOC”). Under the Plan Assets Regulation, an entity will qualify as a VCOC if (a) on certain specified testing dates, at least 50% of the entity’s assets, valued at cost, are invested in “venture capital investments,” which are investments in operating companies (other than VCOCs) with respect to which the entity has or obtains direct contractual rights to substantially participate in the management of such operating company and (b) the entity in the ordinary course of its business actually exercises such management rights. Under the Plan Assets Regulation, an entity will constitute a REOC if (i) on certain specified testing dates, at least 50% of the entity’s assets, valued at cost, are invested in real estate that is managed or developed and with respect to which the entity has the right to substantially participate directly in the management or development of the real estate and (ii) the entity in the ordinary course of its business is engaged directly in real estate management or
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development activities. A REOC can be a venture capital investment. Because we intend to invest primarily in single tenant, triple net lease industrial and office buildings, the operating partnership may not be able to qualify as a REOC because such properties are typically not subject to sufficient ongoing management to qualify as a good REOC asset for testing purposes. In such event, we would not be able to qualify as a VCOC.
However, as noted above, if a Plan acquires “publicly offered securities,” the assets of the issuer of the securities will not be deemed to be Plan Assets under the Plan Assets Regulation. The definition of publicly offered securities requires that such securities be “widely held,” “freely transferable” and satisfy certain registration requirements under federal securities laws.
Under the Plan Assets Regulation, a class of securities will meet the registration requirements under federal securities laws if they are (i) part of a class of securities registered under section 12(b) or 12(g) of the Exchange Act or (ii) part of an offering of securities to the public pursuant to an effective registration statement under the Securities Act and the class of securities of which such security is a part is registered under the Exchange Act within 120 days (or such later time as may be allowed by the SEC) after the end of the fiscal year of the issuer during which the offering of such securities to the public occurred. We anticipate that we will meet the registration requirements under the Plan Assets Regulation. Also under the Plan Assets Regulation, a class of securities will be “widely held” if it is held by 100 or more persons independent of the issuer. We anticipate that this requirement will be easily met. Although our shares are intended to satisfy the registration requirements under this definition, and we expect that our securities will be “widely-held,” the “freely transferable” requirement must also be satisfied in order for us to qualify for the “publicly offered securities” exception.
The Plan Assets Regulation provides that “whether a security is ‘freely transferable’ is a factual question to be determined on the basis of all relevant facts and circumstances.” Our shares are subject to certain restrictions on transferability typically found in REITs that are intended to ensure that we continue to qualify as a REIT for federal income tax treatment. The Plan Assets Regulation provides, however, that where the minimum investment in an offering is $10,000 or less, the presence of a restriction on transferability intended to prohibit transfers that would result in a termination or reclassification of the entity for state or federal tax purposes will not ordinarily affect a determination that such securities are “freely transferable.” The minimum investment in our shares is $2,500 per transaction. Thus, the restrictions imposed in order to maintain our status as a REIT should not prevent the shares from being deemed “freely transferable.” Therefore, we anticipate that we will meet the “publicly offered securities” exception, although there are no assurances that we will qualify for this exception. Consequently, it is intended by our management that our assets will not constitute “Plan Assets” under ERISA or Code Section 4975.
Prospective investors that are subject to the provisions of Title I of ERISA and/or Code Section 4975 should consult with their counsel and advisors as to the provisions of Title I of ERISA and/or Code Section 4975 relevant to an investment in shares of our common stock.
As discussed above, although IRAs and non-ERISA Keogh plans are not subject to ERISA, they are subject to the provisions of Section 4975 of the Code, prohibiting transactions with “disqualified persons” and investments and transactions involving certain fiduciary conflicts. A prohibited transaction or conflict of interest could arise if the fiduciary making the decision to invest has a personal interest in or affiliation with our company or any of its respective affiliates. In the case of an IRA, a prohibited transaction or conflict of interest that involves the beneficiary of the IRA could result in disqualification of the IRA. A fiduciary for an IRA who has any personal interest in or affiliation with our company or any of its respective affiliates, should consult with his or her tax and legal advisors regarding the impact such interest may have on an investment in our shares with assets of the IRA.
Shares sold by us may be purchased or owned by investors who are investing Plan assets. Our acceptance of an investment by a Plan should not be considered to be a determination or representation by us or any of our respective affiliates that such an investment is appropriate for a Plan. In consultation with its advisors, each
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prospective Plan investor should carefully consider whether an investment in our common shares is appropriate for, and permissible under, the terms of the Plan’s governing documents.
Governmental plans, foreign plans and most church plans, while not subject to the fiduciary responsibility provisions of ERISA or the provisions of Code Section 4975, may nevertheless be subject to local, foreign, state or other federal laws that are substantially similar to the foregoing provisions of ERISA and the Code. Fiduciaries of any such plans should consult with their counsel and advisors before deciding to invest in our common shares.
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Plan of Distribution
General
We are offering up to $4,000,000,000 in shares of our common stock pursuant to this prospectus through Cole Capital Corporation, our dealer manager, a registered broker-dealer affiliated with our advisor. For additional information about our dealer manager, please see “Management — Our Dealer Manager.” We are offering to the public a maximum of $3,500,000,000 in shares of our common stock in our primary offering and up to $500,000,000 in shares of our common stock pursuant to our distribution reinvestment plan. In addition, our directors, executive officers and other affiliated persons or entities may purchase shares of our common stock at the same price as such shares are then being sold to the public in this offering. On December 6, 2011, Cole Holdings Corporation, an affiliate of our sponsor, deposited $10,000,000 for the purchase of 666,666.667 shares of common stock into escrow. As a result, we satisfied the terms of the escrow agreement and on December 7, 2011 we broke escrow. In connection with Cole Credit Property Trust III’s acquisition of Cole Holdings Corporation, the 666,666.667 shares of our common stock held by Cole Holdings Corporation were transferred as follows: 627,978.745 shares to CHC Investments, LLC, which is wholly-owned by Christopher H. Cole; and 38,687.922 shares to a trust of which Marc T. Nemer is the trustee. We will not allow these stockholders to redeem such shares until we have raised $100,000,000 in offering proceeds in our primary offering. Redemption requests made for these shares will only be accepted (1) on the last business day of a calendar quarter, (2) after all redemption requests from all other stockholders for such quarter have been accepted and (3) to the extent that such redemptions do not cause net redemptions to exceed 5% of our total NAV as of the end of the immediately preceding quarter. Redemption requests made for these shares will otherwise be subject to the same limitations as other stockholder redemption requests as described under “Share Purchases and Redemptions —Redemption Plan.” Prior to the conclusion of this offering, if any of the $500,000,000 in shares of our common stock initially allocated to the distribution reinvestment plan remain unsold after meeting anticipated obligations under the distribution reinvestment plan, we may decide to sell some or all of such shares of our common stock to the public in the primary offering. Similarly, prior to the conclusion of this offering, if the $500,000,000 shares of our common stock initially allocated to the distribution reinvestment plan have been purchased and we anticipate additional demand for shares of our common stock under our distribution reinvestment plan, we may choose to reallocate some of the $3,500,000,000 in shares of our common stock allocated to be offered in the primary offering to the distribution reinvestment plan.
The number of shares we have registered pursuant to the registration statement of which this prospectus forms a part is the number that we reasonably expect to be offered and sold within two years from the initial effective date of the registration statement. Pursuant to this prospectus, we are offering to the public all of the shares that we have registered. Although we have registered a fixed dollar amount of our shares, we intend effectively to conduct a continuous offering of an unlimited number of shares of our common stock over an unlimited time period by filing a new registration statement prior to the end of the three-year period described in Rule 415 under the Securities Act. In certain states, however, the offering may continue for one year pursuant to initial clearance by applicable state authorities, after which we will need to renew the offering period for additional one year periods (or longer, if permitted by the laws of each particular state).
All investors must meet the suitability standards discussed in the section of this prospectus entitled “Suitability Standards.” The per share purchase price for shares of our common stock varies from day-to-day and, on any given day, is equal to our NAV, divided by the number of shares of our common stock outstanding as of the end of business on such day prior to giving effect to any share purchases or redemptions to be effected on such day. Shares are being offered pursuant to our distribution reinvestment plan at NAV per share, calculated as of the end of business on the reinvestment date.
We reserve the right to terminate this offering at any time and to extend our offering term to the extent permissible under applicable law.
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Special Notice to Pennsylvania Investors
Subscription proceeds received from residents of Pennsylvania will be placed in an interest-bearing escrow account with the escrow agent until subscriptions for shares aggregating at least $200,000,000 have been received and accepted by us. If we have not raised a minimum of $200,000,000 in gross offering proceeds (including sales made to residents of other jurisdictions) by the end of each 120-day escrow period (with the initial 120-day escrow period commencing upon the effectiveness of this offering), we will notify Pennsylvania investors in writing by certified mail within 10 calendar days after the end of each 120-day escrow period that they have a right to have their investments returned to them. If a Pennsylvania investor requests the return of his or her subscription funds within 10 calendar days after receipt of the notification, we will promptly return those funds to the investor, together with interest (which interest shall be paid within five business days after the first business day of the succeeding month).
Compensation of Our Dealer Manager and Other Participating Broker-Dealers
Shares of our common stock are being offered on a “best efforts” basis, which means that no underwriter, broker-dealer or other person will be obligated to purchase any shares. We have entered into a dealer manager agreement with our dealer manager, pursuant to which it has agreed to use its best efforts to secure purchasers for the shares offered by this prospectus. We may terminate the dealer manager agreement at any time in our sole discretion.
Since the dealer manager is an affiliate of our advisor, the dealer manager is not in a position to make an independent review of us or of this offering. Accordingly, you will have to rely on your own financial intermediary to make an independent review of the terms of this offering. If your financial intermediary conducts an independent review of this offering, and/or engages an independent due diligence reviewer to do so on its behalf, we expect that we will pay or reimburse the expenses associated with such review, which may create conflicts of interest. If your financial intermediary does not conduct such a review, you will not have the benefit of an independent review of the terms of this offering.
We will not pay referral or similar fees to any accountants, attorneys or other persons in connection with the distribution of our shares.
Selling Commissions and Asset-Based Dealer Manager Fee
We will pay our dealer manager an asset-based dealer manager fee that is payable in arrears on a monthly basis and accrues daily in an amount equal to 1/365th of 0.55% of our NAV for such day. At our dealer manager’s discretion it may reallow a portion of the dealer manager fee equal to an amount up to 1/365th of 0.20% of our NAV to participating broker dealers. We will cease paying the dealer manager fees at the date at which, in the aggregate, underwriting compensation from all sources, including the dealer manager fee and other underwriting compensation paid by us and by our advisor and its affiliates, equals 10% of the gross proceeds from our primary offering (i.e. excluding proceeds from sales pursuant to our distribution reinvestment plan), calculated as of the same date that we calculate the aggregate dealer manager fee.
Other Compensation
Our advisor, directly or through an affiliate, has agreed to fund organizational expenses and expenses incurred in connection with the offering. These offering expenses include expenses incurred by our dealer manager, its employees and any participating broker-dealers which may include, but are not limited to: (i) due diligence expenses (such as expenses related to a review of this offering by one or more independent due diligence reviewers engaged by broker-dealers participating in this offering); (ii) amounts incurred in connection with holding our own educational conferences and attending retail seminars conducted by our participating broker-dealers; and (iii) other marketing and organization costs. See “Compensation” for a more detailed discussion on the organizational and offering expenses funded by our advisor and reimbursements.
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Our advisor and its affiliates may pay, without reimbursement by us, additional amounts in connection with the sale and distribution of our shares, which may include payments to participating broker-dealers. Such payments will be deemed to be “underwriting compensation” by FINRA and will be subject to the 10% of gross offering proceeds limit on underwriting compensation.
We will pay underwriting compensation until the date at which, in the aggregate, underwriting compensation from all sources, including the dealer manager fee and other underwriting compensation paid by us and our advisor and its affiliates, equals 10% of the gross proceeds from our primary offering (i.e., excluding proceeds from sales pursuant to our distribution reinvestment plan).
FINRA Rules Limiting Underwriting Compensation
As required by FINRA rules, total underwriting compensation paid to our dealer manager or participating broker/dealers, which will include asset-based dealer manager fees and any amounts paid by our sponsor and its affiliates for underwriting services that are not reimbursed by us, will not exceed 10% of the gross proceeds of our primary offering. Together with our dealer manager we will monitor the total underwriting compensation that we pay, as well as any underwriting compensation paid by our sponsor and its affiliates, and calculate the aggregate underwriting compensation on a monthly basis. We will cease paying any and all underwriting compensation at the date at which the aggregate underwriting compensation paid by us or from any other source equals 10% of the gross offering proceeds (i.e., excluding proceeds from sales pursuant to our distribution reinvestment plan), calculated as of the same date that we calculate the aggregate underwriting compensation.
FINRA rules also limit our total organization and offering expenses (including bona fide due diligence expenses and dealer manager fees) to 15% of our gross offering proceeds. After the termination of the primary offering and again after termination of the offering under our distribution reinvestment plan, our advisor has agreed to reimburse us to the extent that organization and offering expenses that we incur exceed 15% of our gross proceeds from the applicable offering.
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The following table shows the estimated amount of underwriting compensation that may be paid in connection with this offering over two years and the maximum amount of underwriting compensation that may be paid in connection with this offering over our life. The two years column assumes that we will sell the maximum of $3,500,000,000 in shares in the primary offering pursuant to this prospectus in the first two years after the escrow period and that all shares are sold through distribution channels associated with the highest possible dealer manager fees and other underwriting compensation. The point in time at which the maximum amount of the dealer manager fee and other underwriting compensation will be paid depends, among other things, on the average length of time for which our shares remain outstanding and the performance of our investments. During our indefinite life, such amount in the aggregate from all sources could reach, but will never exceed, 10% of the aggregate amount of gross proceeds received by us from our primary offering (i.e., excluding proceeds from sales pursuant to our distribution reinvestment plan).
| | | | | | | | | | | | | | | | |
| | | Two Years | | | Maximum Underwriting Compensation | |
| | | Estimated
Amount(1) | | | Percentage of
Maximum Offering
(Not Including
Distribution
Reinvestment Plan) | | | Estimated
Amount(1) | | | Percentage of
Maximum Offering
(Not Including
Distribution
Reinvestment Plan)(2) | |
Selling commissions(3) | | $ | 0 | | | | 0.000 | % | | $ | 0 | | | | 0.000 | % |
Dealer manager fee(4) | | | 0 | | | | 0.000 | | | | 154,193,206 | | | | 4.406 | |
Dealer manager fee reallowance to participating broker-dealers(5) | | | 10,500,000 | | | | 0.300 | | | | 127,272,727 | | | | 3.636 | |
Dealer manager wholesaling commissions, salaries and expense reimbursement | | | 53,729,750 | | | | 1.535 | | | | 53,729,750 | | | | 1.535 | |
Other compensation(6) | | | 8,750,000 | | | | 0.250 | | | | 8,750,000 | | | | 0.250 | |
Broker-dealer conference fees, training and education meetings, business entertainment, logoed items and sales incentives | | | 5,754,317 | | | | 0.164 | | | | 5,754,317 | | | | 0.164 | |
Due diligence allowance | | | 200,000 | | | | * | | | | 200,000 | | | | * | |
Legal fees allocable to dealer manager | | | 100,000 | | | | * | | | | 100,000 | | | | * | |
| | | | | | | | | | | | | | | | |
Total | | $ | 79,034,067 | | | | 2.258 | % | | $ | 350,000,000 | | | | 10.000 | % |
| | | | | | | | | | | | | | | | |
| (1) | For purposes of calculating the estimated fees and expenses, we assumed that our shares are sold at $15.00, our NAV per share remains at $15.00, the maximum amount of our shares available to be sold under this prospectus are sold ratably over a two year period from the beginning of this offering and those shares remain outstanding for the periods presented. |
| (2) | The total amount of underwriting compensation paid to our dealer manager and participating broker-dealers from all sources, including the dealer manager fee and any other fees and expenses paid or reimbursed by us or our sponsor and affiliates in connection with the offering, will not exceed 10% of the gross proceeds of the primary offering. Based on the assumptions used in calculating the fees and expenses in this table, we estimate that total underwriting compensation will reach 10% of the gross offering proceeds of the primary offering after approximately 18 years, assuming the full offering proceeds are raised, all investors remain invested in the program and the NAV remains constant at $15.00 per share over the period. |
| (3) | An upfront selling commission will not be paid out of the price per share of shares sold in this offering. |
| (4) | Represents the estimated amount of the dealer manager fee that will remain for the dealer manager after allocation to certain expenses noted in the table, such as the dealer manager’s wholesaling compensation. During the first two years of the offering these expenses will exceed the dealer manager fee. The dealer manager fee is paid to our dealer manager and accrues daily in an amount equal to 1/365th of 0.55% of our NAV for such day. |
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| (5) | Our dealer manager may reallow a portion of the dealer manager fee equal to an amount up to 1/365th of 0.20% of our NAV per share to participating broker-dealers. |
| (6) | Our advisor and its affiliates may pay additional amounts, without reimbursement by us, in connection with the sale and distribution of our shares, which may include payments to participating broker-dealers. The amount of such payments that may be made by our advisor and its affiliates, and total underwriting compensation including such amount, will never exceed 10% of the aggregate amount of gross proceeds received by us from our primary offering (i.e., excluding proceeds from sales pursuant to our distribution reinvestment plan). Such payments by our advisor and its affiliates to participating broker-dealers may be based on various factors, including the number of shares that were originally sold with the assistance of the participating broker-dealer or the extent of stockholder record keeping services, account maintenance services and other administrative services provided by the participating broker-dealer. |
Indemnification Expenses
To the extent permitted by law and our charter, we will indemnify the participating broker-dealers, if any, and our dealer manager against some civil liabilities, including certain liabilities under the Securities Act, and liabilities arising from breaches of our representations and warranties contained in the dealer manager agreement. If we are unable to provide this indemnification, we may contribute to payments the indemnified parties may be required to make in respect of those liabilities. Under our charter, indemnification of any person acting as a broker-dealer for us will not be allowed for liabilities arising from or out of a violation of state or federal securities laws, unless one or more of the following conditions are met:
| | • | | there has been a successful adjudication on the merits in favor of the indemnitee of each count involving alleged securities law violations; |
| | • | | such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction; or |
| | • | | a court of competent jurisdiction approves a settlement of the claims against the indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which our securities were offered as to indemnification for violations of securities laws. |
Multiple Class Offering
On February 13, 2013, we filed a registration statement on Form S-11, Registration Statement No. 333-186656 (the “New Registration Statement”), to register the offer and sale of the existing class of our common stock as well as two new classes of our common stock (the “Multi-Class Offering”), which is described in more detail in the section below captioned “The Multi-Class Offering.” Contingent upon the effectiveness of the New Registration Statement, there will be a number of changes in connection with the Multi-Class Offering that will impact existing and future stockholders. This section of the prospectus describes the Multi-Class Offering and the following potential changes in connection with the Multi-Class Offering to our:
| | (2) | advisory agreement; and |
| | (3) | dealer manager agreement. |
We will continue to offer and sell shares of our common stock pursuant to Registration Statement No. 333-169535 (the “Existing Registration Statement”) before the effectiveness of the New Registration Statement.
Charter Amendment
Our board of directors and stockholders have approved an amended and restated charter (the “Amended Charter”) that, contingent upon the effectiveness of the New Registration Statement, will create two new classes
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of shares of our common stock: Advisor Class common stock (“A Shares”) and Institutional Class common stock (“I Shares”), among other changes. Our existing shares of common stock, sold pursuant to this prospectus, will be renamed and reclassified as Wrap Class common stock (“W Shares”). A Shares would be available primarily through registered representatives of broker-dealers. I Shares would be available only for investors making an initial investment of $2,000,000 or more.
Each class of common stock would have different dealer manager compensation structures and will incur class specific expenses. The dealer manager compensation is described in more detail below in the section captioned “The Multi-Class Offering.” As a result of the different ongoing fees and expenses allocable to each share class, we anticipate that each share class, including the W Shares, would have a different NAV per share and different per share distributions.
The different classes of common stock would also have different rights upon liquidation pursuant to the Amended Charter. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, or any liquidating distribution of the Company’s assets, then each holder of shares of a particular class of common stock will be entitled to receive, ratably with each other holder of shares of such class, that portion of such aggregate assets available for distribution as the number of outstanding shares of such class held by such holder bears to the total number of outstanding shares of such class then outstanding.
Other than differing allocable fees and expenses (and as a result, differing distributions), differing NAVs per share, and differing liquidation rights as described above, W Shares, A Shares and I Shares would have identical rights and privileges. All shares would vote together for the election of directors and all other matters submitted to a vote of our stockholders except for matters specifically relevant to a single class or as required by law.
Advisory Agreement
Contingent upon the effectiveness of the New Registration Statement, we expect to enter into an amended and restated advisory agreement with our advisor (the “Amended Advisory Agreement”). We expect that the Amended Advisory Agreement will vary from the current Advisory Agreement in that the performance-based fee will be calculated based on the on the NAV for each class of common stock.
Dealer Manager Agreement
Contingent upon the effectiveness of the New Registration Statement, we expect to enter into an amended and restated dealer manager agreement with our dealer manager (the “Amended Dealer Manager Agreement”). The Amended Dealer Manager Agreement will permit our dealer manager to reallow a portion of the 0.55% of NAV annual dealer manager fee instead of an amount up to 0.20% of our NAV on an annual basis that is allowed by the current Dealer Manager Agreement. The Amended Dealer Manager Agreement will also set forth a fee structure for the A Shares and I Shares, which is described in more detail below in the section captioned “The Multi-Class Offering— Selling Commissions and Asset-Based Dealer Manager Fee and Distribution Fee.”
The Multi-Class Offering
General
Pursuant to the New Registration Statement, and contingent on the effectiveness of the New Registration Statement, we expect to offer on a “best efforts” basis a maximum of $3,500,000,000 in any combination of purchases of W Shares, A Shares and I Shares in the primary offering and up to $500,000,000 in W Shares, A Shares and I Shares pursuant to our distribution reinvestment plan. The A Shares will be available to all investors who meet our suitability requirements. We expect that A Shares will be made available primarily through registered representatives of broker-dealers. I Shares will be available for purchase in the Multi-Class Offering only for investors making an initial investment of $2,000,000 or more.
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The per share purchase price for the W Shares, A Shares and I Shares will vary from day-to-day and, on any given day, will equal the NAV for such class, divided by the number of shares of such class of stock outstanding as of the end of business on such day prior to giving effect to any share purchases or redemptions to be effected on such day, plus, for A Shares sold in the primary offering only, applicable selling commissions. Each class of shares will have a different NAV per share because certain fees are charged differently with respect to each class. Shares are being offered pursuant to our distribution reinvestment plan at NAV per share for the applicable class, calculated as of the end of business on the reinvestment date.
We reserve the right to terminate the Multi-Class Offering at any time and to extend our offering term to the extent permissible under applicable law and we may terminate the dealer manager agreement at any time in our sole discretion.
Selling Commissions and Asset-Based Dealer Manager Fee and Distribution Fee
We may charge a selling commission on A Shares sold in the primary offering of up to 3.75% of the NAV per share for A Shares on the date of purchase, which we will pay to our dealer manager. We will not charge a selling commission on W Shares or I Shares or on shares of any class sold pursuant to our distribution reinvestment plan. Selling commissions may be waived at the direction of the dealer manager. Our dealer manager may reallow a portion of selling commissions to participating broker-dealers.
We will offer volume discounts to purchasers who purchase $150,000 or more in A Shares from the same broker-dealer, whether in a single purchase or as the result of multiple purchases. The dealer manager and any participating broker-dealers and their registered representatives will be responsible for the proper implementation of any applicable volume discounts. Any reduction in the amount of the selling commissions as a result of volume discounts received may be credited to the purchasers in the form of the issuance of additional shares. The net offering proceeds we receive will not be affected by any reduction of selling commissions.
The following table illustrates the various discount levels that may be offered to purchasers for A Shares purchased in the primary offering:
| | | | |
Your Investment | | Commission as a %
of Total Price Per A Share | |
Up to $149,999.99 | | | 3.75 | % |
$150,000 to $499,999.99 | | | 3.25 | % |
$500,000 and up | | | 3.00 | % |
We will pay our dealer manager an asset-based dealer manager fee that is payable in arrears on a monthly basis and accrues daily in an amount equal to (1) 1/365th of 0.55% of our NAV for W Shares for such day, (2) 1/365th of 0.55% of our NAV for A Shares for such day and (3) 1/365th of 0.25% of our NAV for I Shares for such day. At our dealer manager’s discretion it may reallow a portion of the dealer manager fee received on W Shares, A Shares and I Shares to participating broker-dealers.
We will pay our dealer manager an asset-based distribution fee for A Shares only that is payable in arrears on a monthly basis and accrues daily in an amount equal to 1/365th of 0.50% of our NAV for A Shares for such day. At our dealer manager’s discretion it may reallow a portion of the distribution fee to participating broker-dealers. We will not pay a distribution fee on the W Shares or I Shares. We will pay the distribution fee until the date at which, in the aggregate, underwriting compensation from all sources, including selling commissions, the distribution fee, the dealer manager fee and other underwriting compensation paid by us and our advisor and its affiliates, equals 10% of the gross proceeds from the offering (i.e., excluding proceeds from sales pursuant to our distribution reinvestment plan), calculated as of the same date that we calculate the aggregate distribution fee.
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Share Purchases and Redemptions
You may buy or redeem shares of our common stock through your financial advisor, a participating broker-dealer or other financial intermediary, and in certain limited circumstances, from our transfer agent. We expect to distribute our shares principally though financial intermediaries that are paid a fee, by their client, for the investment services provided to the client (typically referred to as wrap or fee based accounts). Because an investment in our common stock involves many considerations, your financial advisor or other financial intermediary may help you with your investment decision. You should be aware that payments to your financial advisor or financial intermediary, as a direct payment by us, or payment by our advisor that is reimbursed by us, or a payment by our advisor or other affiliate without reimbursement by us, may be greater than payments made in connection with the sale of other financial products, thereby creating a potential conflict of interest. You should discuss with your financial advisor or financial intermediary any payments received as a result of your investment in our common stock.
An investment in our common stock involves risk and is not suitable for all investors. There is no certainty as to the amount of distributions you may receive, liquidity under our redemption program may not be available at all times and the value of your investment may decline significantly. In consideration of these factors, we have established minimum suitability standards for our stockholders. See “Suitability Standards” beginning on page i.
Buying Shares
Sale Prices of Our Shares
The per share price for our shares varies from day-to-day and, on any given “business day” — each day that the New York Stock Exchange is open for trading — is equal to our NAV divided by the number of shares of our common stock outstanding as of the end of business on such day, prior to giving effect to any share purchases or redemptions to be effected on such day. We refer to the daily purchase price as the NAV per share. See “Valuation Policies” for how NAV per share is calculated.
We will generally adhere to the following procedures in selling shares during the course of conducting this continuous offering:
| | • | | As soon as practicable after the close of the New York Stock Exchange (generally, 4:00 p.m. Eastern time), hereafter, the “close of business,” on each business day, our fund accountant will determine our NAV per share for that business day. As promptly as practicable following the close of business on each business day, and in any event no later than the opening of business on the next business day, we will (i) post our NAV per share for such business day on our website, www.colecapital.com, and (ii) make such NAV per share information available on our toll-free automated information line 866-907-2653. |
| | • | | On each business day, purchase orders will be accepted until the close of business. We will execute these orders at a price equal to our NAV per share determined as soon as practicable after the close of business on the business day. Orders placed after the close of business will be executed at a price equal to our NAV per share determined after the close of business — at the end of the next business day. |
| | • | | A confirmation statement will be sent promptly after the purchase date to each investor whose order was received on the purchase date (except for purchases made through the reinvestment of distributions pursuant to our distribution reinvestment plan). The confirmation statement will disclose the price at which the order was executed and will include information advising the investors as to how to obtain any supplements to the prospectus which we have filed with the SEC and made publicly available on our website, www.colecapital.com. |
| | • | | Purchase orders placed on a day that is not a business day, and purchase orders pursuant to our systematic investment program that would otherwise occur on a day that is not a business day, will be effected as if they were received prior to the close of business on the next business day. |
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You will not know at the time you decide to purchase shares of our common stock precisely the price at which your order will be executed. You will have available through our website information about the NAV per share upon which the price for our common stock was based on the immediately preceding business day, and through our prospectus, the methodology pursuant to which our NAV, and thus the price at which shares of our common stock will be sold on the current business day, is determined. Though under normal circumstances we would not anticipate that our NAV will generally vary significantly from one day to the next, there can be no assurance that will be the case. You will receive a confirmation of your purchase order and therefore will know the price at which your order was executed. On a monthly basis, we will file with the SEC a prospectus supplement disclosing the daily determination of our NAV per share for each business day in the preceding month. We will also disclose, on a quarterly basis in a prospectus supplement filed with the SEC, the primary valuation components of our NAV. Additionally, during the early stages of the Company’s life, while our portfolio is growing in size and diversification, if we become aware of facts or circumstances that are likely to materially affect our NAV on any particular day, we will disclose the information as promptly as reasonably practicable through a press release that is posted on our website and in our filings with the SEC, and we may also decline to accept purchase orders from investors until such information is disclosed or reconfirm orders that were placed after we became aware of such facts and circumstances.
In contrast to securities traded on an exchange or over-the-counter, where the price often fluctuates as a result of, among other things, the supply and demand of securities in the trading market, our NAV per share is calculated once daily using our valuation methodologies, and the price at which we sell new shares and redeem outstanding shares that day does not change depending on the volume of purchases by investors. Instead, our NAV per share is based on an estimate of the market value of our assets and liabilities, including an estimate of accrued expenses, as discussed under “Valuation Policies — Calculation of Our NAV Per Share.” We will generally sell as many shares as orders are received from investors, each day at the same price (NAV per share, without premium or discount) regardless of when orders are received during the day. If, however, we become aware of facts or circumstances that we are unable to factor into our calculation of NAV on any particular day, we may decline to accept orders from investors on that day.
How to Purchase Our Shares
Subject to limited exceptions, the minimum initial investment in shares of our common stock is $2,500.
Persons who meet the applicable minimum suitability standards described in the “Suitability Standards” section of this prospectus and suitability standards determined by such persons’ financial advisor or intermediary may purchase shares of our common stock. After you have read the entire prospectus and the current supplement(s), if any, accompanying this prospectus, and want to purchase shares, you must proceed as follows:
(1) Complete the execution copy of the applicable subscription agreement. A specimen copy of the subscription agreement, including instructions for completing it for new investors, is included in this prospectus as Appendix B. After you become a stockholder, you may purchase additional shares by completing and signing an additional investment subscription agreement, included in this prospectus as Appendix C. In either case, you may choose to make additional purchases pursuant to our systematic investment program by completing the required sections of the applicable subscription agreement. The systematic investment program is not available to Alabama, Maine or Nebraska investors.
(2) Deliver a check payable to “Cole Real Estate Income Strategy (Daily NAV), Inc.” or alternatively “Cole REIT.” However residents in Pennsylvania should make checks payable to “UMB Bank, N.A., Agent for Cole Real Estate Income Strategy (Daily NAV), Inc.” or a recognizable contraction or abbreviation thereof, including but not limited to, “UMB Bank, N.A., f/b/o Cole REIT”. Subscription funds must be accompanied by a subscription agreement similar to the one contained in this prospectus as Appendix B. Certain dealers who have “net capital,” as defined in the applicable federal securities regulations, of $250,000 or more may instruct their customers to make their checks payable directly to the dealer. In such case, the dealer will issue a check made payable to us for the purchase price of your subscription. The name of the dealer appears on the subscription agreement.
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(3) By executing the subscription agreement and paying for the shares subscribed for, you will attest that you meet the minimum net worth and/or income standards as provided in the “Suitability Standards” section of this prospectus and as stated in the subscription agreement.
If subscriptions are made through IRAs, 401(k) plans and other tax-deferred plans, an approved trustee must process through us and forward us subscriptions.
Subscriptions will be effective only upon our acceptance, and we reserve the right to reject any subscription in whole or in part. We may not accept a subscription for shares until at least five business days after the date you receive the final prospectus. Subject to compliance with Rule 15c2-4 of the Exchange Act, our dealer manager and/or the intermediaries participating in the offering will promptly submit a subscriber’s check on the business day following receipt of the subscriber’s subscription documents and check. In certain circumstances where the suitability review procedures are more lengthy than customary or the subscriber’s subscription documents or check are not in good order, our bank will hold the check in accordance with applicable legal requirements pending our acceptance of your subscription. In the future, we may provide an electronic subscription method that supplements or replaces our current subscription procedure, but any such electronic subscription method would require all the same information and representations required by our paper subscription method.
We accept or reject subscriptions within 35 days after we receive them. If your subscription agreement is rejected, your funds, without interest or reductions for offering expenses or fees, will be returned to you within ten business days after the date of such rejection. If your subscription is accepted, we will send you a confirmation of your purchase after your subscription has been accepted.
We may reject for any reason, or cancel as permitted or required by law, any subscriptions, including subscriptions pursuant to our systematic investment program. For example, we may reject any subscriptions if we believe there are questions about the legality of the subscriptions or if compliance with applicable laws would result in undue expense or delay for the Company. We may also reject any subscriptions from market timers or investors that, in our opinion, may be trading in a manner that is disruptive to our operations. See “Share Purchases and Redemptions — Excessive Trading Policies.” In addition, we reserve the right to suspend or discontinue offering our shares completely or may offer our shares only on a limited basis for a period of time or permanently.
Systematic Investment Program
Investors who desire to purchase shares in this offering at regular intervals may be able to do so by electing to participate in the systematic investment program by completing an enrollment form that we will provide upon request. Only investors who have already met the minimum purchase requirement may participate in the systematic investment program. The minimum periodic investment for our systematic investment program is $100 per purchase. We will pay dealer manager fees in connection with sales under the systematic investment program to the same extent that we pay those fees on shares sold in the primary offering outside of the systematic investment program. If you elect to participate in both the systematic investment program and our dividend reinvestment plan, distributions earned from shares purchased pursuant to the systematic investment program will automatically be reinvested pursuant to the dividend reinvestment plan. For a discussion of the dividend reinvestment plan, see “Description of Capital Stock — Distribution Reinvestment Plan.”
You will receive a confirmation of your purchases under the systematic investment program no less than quarterly. The confirmation will disclose the following information:
| | • | | the amount invested for your account during the period; |
| | • | | the date of the investment; |
| | • | | the number and price of the shares purchased by you; and |
| | • | | the total number of shares in your account. |
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You may terminate your participation in the systematic investment program at any time by providing us with written notice.
The systematic investment program is not available to Alabama, Maine or Nebraska investors.
Redemption Plan
General
While you should view the purchase of shares of our common stock as a long-term investment, we have adopted a redemption plan to provide limited liquidity, whereby on a daily basis, stockholders may request that we redeem all or any portion of their shares. Due to the illiquid nature of investments in commercial real estate, however, we may not always have sufficient liquid resources to fund redemption requests.
Under our redemption plan, on each business day, stockholders may request that we redeem all or any portion of their shares, subject to a minimum redemption amount of $500.00. Redemption requests received before the close of business (generally, 4:00 p.m. Eastern Time) will be effected at a redemption price equal to our NAV per share calculated after the close of business on that day (that is, at the same price as shares are purchased by stockholders on that day). Redemption requests received after the close of business on any business day, or received on a day other than a business day, will be effected at our NAV per share calculated after the close of business on the next business day. We refer to the day on which a redemption request is received pursuant to our redemption plan as the “redemption request day.”
The redemption price per share on any business day is our NAV per share for that day, calculated by the fund accountant after the close of business on the redemption request day, without giving effect to any share purchases or redemptions to be effected on such day. Subject to limited exceptions, stockholders who redeem their shares of our common stock within the first 365 days from the date of purchase will be subject to a short-term trading fee of 2% of the aggregate NAV per share of the shares of common stock redeemed. See “— Short-Term Trading Fees” below.
Funding and Payment of Redemption Proceeds
Funding for redemptions may come from a variety of sources available to us, including cash on hand, proceeds from this offering, cash flow from operations, proceeds from the liquidation of short-term or liquid investments, proceeds from the incurrence of indebtedness (including line of credit borrowings) and, if necessary, proceeds from the disposition of commercial real estate properties and other real estate related investments. Generally, we will pay redemption proceeds, less any applicable short-term trading fees and any applicable tax or other withholding required by law, on the next business day, but no later than the seventh business day, following the redemption request day.
Once a stockholder makes a redemption request, the redemption price that the stockholder will receive will be equal to our NAV per share as of the redemption request day less any applicable short-term trading fees. Although a stockholder will not know at the time he submits his request for redemption of shares the exact price at which such redemption request will be processed or the exact day when redemption proceeds will be paid, as of the close of business on the redemption request day, the stockholder will be contractually bound to redemption of the shares the stockholder has requested and will not be permitted to cancel the request prior to the payment of redemption proceeds. Because our NAV per share will be calculated at the close of each business day, the redemption price may fluctuate between the close of business on the redemption request day and the date on which redemption proceeds are paid. As a result, the redemption price per share that a stockholder will receive may be different from our NAV per share on the day the redemption proceeds are paid.
Redemption Limitations
Overview. Under ordinary circumstances the total amount of net redemptions during a calendar quarter is limited to five percent of our total net assets on the last business day of the preceding quarter. Stockholders can
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request redemption of all or part of their shares on any business day and redemption requests will be satisfied on a first-come, first-served basis. If net redemptions do not reach the five percent limit in a calendar quarter, the difference between the actual redemptions and the five percent limit will be carried over to the next quarter, except that the maximum amount of net redemptions during any quarter can never exceed ten percent of our total net assets on the last business day of the preceding quarter.
If net redemptions in a calendar quarter reach the five percent limit (plus any carried over amount), on the business day when the limit is reached we will fulfill redemption requests on a pro-rated basis. After that business day we will be unable to process any redemption requests for the rest of the calendar quarter in which the limit was reached. We will begin accepting redemption requests again on the first business day of the next calendar quarter, but will apply the five percent quarterly limitation on redemptions on a per-stockholder basis, instead of a first-come, first-served basis. Therefore each stockholder will be able to redeem at any time during that quarter up to five percent of the stockholder’s investment in our shares on the last business day of the preceding quarter, plus any new investment by the stockholder in our shares during that quarter (subject to applicable short-term trading fees). The per-stockholder limit will remain in effect for the following quarter if total net redemptions are more than two and one-half percent of our net assets on the last business day of the preceding quarter.
Subject to these limits, our goal is to provide our stockholders uninterrupted access to liquidity for their investment to the maximum extent possible. Our board of directors, including a majority of independent directors, acting in accordance with their fiduciary duties to all stockholders, may modify or suspend our redemption plan in its discretion if it believes that such action is in the best interests of our stockholders.
Available Liquidity. We may, in our advisor’s discretion, after taking the interests of our company as a whole and the interests of our stockholders into consideration, use cash from any available sources at our disposal to satisfy redemption requests, including, but not limited to, sales of additional shares, cash flow from operations, incurrence of indebtedness and dispositions of assets. Although our investment guidelines are designed to provide us with liquid assets to satisfy redemption requests as we receive them, it is possible that we may not always have access to sufficient liquidity to fund all redemption requests. Our investment guidelines provide that we will target the following aggregate allocation to relatively liquid investments, such as U.S. government securities, agency securities, corporate debt, publicly traded debt and equity real estate-related securities, cash, cash equivalents and other short-term investments and, in the discretion of our advisor, a line of credit (collectively, referred to as “liquid assets”): (1) 10% of our NAV up to $1 billion and (2) 5% of our NAV in excess of $1 billion. To the extent that our advisor elects to maintain borrowing capacity under a line of credit, the amount available under the line of credit will be included in calculating our liquid assets under these guidelines.
These are guidelines, and our stockholders should not expect that we will, at all times, hold liquid assets at or above the target levels or that all liquid assets will be available to satisfy redemption requests as we receive them. We anticipate that both our overall allocation to liquid assets as a percentage of our NAV and our allocation to different types of liquid assets will vary. In making these determinations our advisor will consider our receipt of proceeds from sales of additional shares, our cash flow from operations, available borrowing capacity under a line of credit, if any, or from additional mortgages on our real estate, our receipt of proceeds from sales of assets, and the anticipated use of cash to fund redemptions, as well as the availability and pricing of different investments. The amount of liquid assets will be determined by our advisor, in its sole discretion, but will be subject to review by our independent directors on a quarterly basis.
Quarterly Limits. In each calendar quarter (the “Current Quarter”) net redemptions will be limited under our redemption plan to five percent of our total NAV as of the end of the immediately preceding quarter (the “Prior Quarter”). We refer to this as the “Base Quarterly Limit.” As discussed below, there are circumstances when the unused portion of one quarter’s limit can be carried over to a subsequent quarter (the “Carryover Limit”). The Carryover Limit plus the Base Quarterly Limit will equal the actual quarterly redemption limit
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applicable to each specific quarter (the “Quarterly Limit”), but will never exceed ten percent of our total NAV as of the end of the immediately preceding quarter. In recognition of the fact that during any particular quarter some existing stockholders will choose to redeem outstanding shares while other investors purchase new shares, during the Current Quarter proceeds from the sale of new shares in this offering will be netted against funded redemptions for purposes of determining our compliance with the Quarterly Limit. On each business day we will calculate the maximum amount that remains available for redemptions as the sum of (i) the Quarterly Limit, plus (ii) proceeds from sales of new shares (including reinvestment of dividends) since the beginning of the Current Quarter, minus (iii) redemption proceeds paid since the beginning of the Current Quarter. As discussed below, we will disclose the applicable redemption limit for the current quarter and the available capacity under the redemption plan.
So long as there is availability under the Quarterly Limit, redemption requests during the Current Quarter will be satisfied on a first-come, first-served basis. If, on any business day, remaining availability under the Quarterly Limit is insufficient to satisfy all redemption requests, we will satisfy redemption requests on apro ratabasis where each stockholder who has submitted a redemption request for that business day will have an equal percentage of the dollar amount of its pending request redeemed. We may, however, prorate on a different basis if and to the extent necessary or advisable to ensure our continued qualification as a REIT for federal income tax purposes. If a stockholder’s redemption request is not completely fulfilled on any business day, the redemption request will not carry over to the next business day and the stockholder will need to submit a new request if the stockholder wants to redeem the remaining (or any additional) amount. If net redemptions during the Current Quarter reach the Quarterly Limit, no more redemption requests will be accepted by us for the balance of the Current Quarter and that fact will be disclosed to our stockholders as promptly as practicable in reports we file with the SEC and on our website. See “— Disclosure.”
If net redemptions during the Current Quarter do not reach the Base Quarterly Limit, we will add to the Base Quarterly Limit for the following quarter (the “Next Quarter”) the unused portion of the Base Quarterly Limit for the Current Quarter. As noted above, we refer to this as the “Carryover Limit.” However, the following limitations will apply: (i) the cumulative Carryover Limit will never exceed fifteen percent in total, and (ii) during any single quarter we will not add more than five percent out of the available the Carryover Limit (if greater than five percent) to the Base Quarterly Limit that would apply in the absence of any carryover, such that under no circumstances will net redemptions for a single quarter exceed ten percent of our total NAV as of the end of the immediately preceding quarter (the “Absolute Quarterly Limit”). The balance of a Carryover Limit above the Absolute Quarterly Limit will be available to be used in subsequent quarters. An example will clarify these limitations:
| | • | | as of December 31 of year 1 our total NAV is $500 million, thus the Quarterly Limit for the first quarter of year 2 is 5% of $500 million, or $25 million; |
| | • | | during the first quarter of year 2, $70 million in new shares are sold and $5 million in outstanding shares are redeemed; thus, assuming no change in NAV per share, as of March 31 of year 2 our total NAV is $565 million; |
| | • | | because net redemptions during the first quarter were zero, and therefore no portion of the Base Quarterly Limit for the first quarter was used, the Carryover Limit for the second quarter of year 2 is 5%; |
| | • | | therefore the applicable Quarterly Limit for the second quarter of year 2 is 10% (5% + 5%) of $565 million, or $56.5 million; |
| | • | | during the second quarter of year 2, $65 million in new shares are sold and $76 million in outstanding shares are redeemed; thus, assuming no change in NAV per share, as of June 30 of year 2 our total NAV is $554 million; |
| | • | | because net redemptions during the second quarter were $11 million out of a maximum availability of $56.5 million, and therefore only approximately one fifth of the 10% Quarterly Limit (2%) for the second quarter was used, the Carryover Limit for the third quarter of year 2 is 8% (10% — 2% = 8%); |
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| | • | | however, adding the Carryover Limit (8%) to the 5% Base Quarterly Limit for the third quarter would, at 13%, exceed the 10% Absolute Quarterly Limit; therefore, the applicable Quarterly Limit for the third quarter of year 2 is capped at 10% of $554 million, or approximately $55.4 million, with the balance of the Carryover Limit (13% — 10% = 3%) being available for the fourth quarter; |
| | • | | during the third quarter of year 2, $30 million in new shares are sold and $80 million in outstanding shares are redeemed; thus, assuming no change in NAV per share, as of September 30 of year 2 our total NAV is $504 million; |
| | • | | the Carryover Limit for the fourth quarter of year 2 is approximately 4%, consisting of (i) 1% carried over from the third quarter, because net redemptions during the second quarter were $50 million out of a maximum availability of $55.4 million, and therefore approximately nine tenths (9%) of the 10% applicable Quarterly Limit for the third quarter was used, plus (ii) 3% of the Carryover Limit remaining from the second quarter that was not available for use in the third quarter due to Absolute Quarterly Limit; and |
| | • | | therefore the applicable Quarterly Limit for the fourth quarter of year 2 is 9% (5% + 1% + 3%) of $504 million, or approximately $45.4 million. |
If net redemptions during the Current Quarter reach the Quarterly Limit and, after allocating available liquidity among pending redemption requests as discussed above, no more redemption requests are accepted for the balance of the Current Quarter, redemption requests during the Next Quarter will be satisfied on a stockholder by stockholder basis, instead of a first-come, first-served basis, pursuant to what we refer to as a “Flow-Regulated Limit.” The Flow-Regulated Limit will operate so that each of our stockholders will be allowed to request redemption, at any time during the Next Quarter, in one or more tranches at his or her discretion, of a total number of shares not to exceed the sum of (i) five percent of the shares of common stock the stockholder held as of the end of the Current Quarter, plus (ii) any additional shares the stockholder purchases during the Next Quarter. Under the Flow-Regulated Limit, redemption capacity and available liquidity will be allocated daily during the quarter among those stockholders who request redemption, but only up to each stockholder’s individual limit for the entire quarter. Therefore, all stockholders will be treated equally during the quarter as a whole, based on the number of shares held by each stockholder as of the end of the immediately preceding quarter, regardless of the particular day during the quarter when they choose to submit their redemption requests,
A stockholder will be permitted to make multiple requests for redemption during a quarter for which the Flow-Regulated Limit is in effect, up to the maximum number of shares such stockholder is eligible to redeem. If a stockholder submits a redemption request in excess of his individual limit, the request will automatically be deemed a request to redeem the maximum number of shares the stockholder is eligible to redeem under the Flow-Regulated Limit. The balance of that stockholder’s request will be null and void, whether or not other stockholders have requested redemptions of the full amount for which they are eligible under the Flow-Regulated Limit.
If during a quarter in which the Flow-Regulated Limit applies total redemptions for all stockholders in the aggregate are more than two and one-half percent of our total NAV as of the end of the immediately preceding quarter, then the Flow-Regulated Limit will continue to apply for the next succeeding quarter. If total redemptions for all stockholders in the aggregate during a quarter for which the Flow-Regulated Limit applies are equal to or less than two and one-half percent of our total NAV as of the end of the immediately preceding quarter, then the first-come, first-served Quarterly Limit discussed above will come back into effect for the next succeeding quarter, with the Quarterly Limit consisting of five percent plus any remaining amount of the Carryover Limit from the last quarter before the Flow-Regulated Limit went into effect (subject to the Absolute Quarterly Limit).
Board Discretion. Our board of directors may modify or suspend our redemption plan in its sole discretion if it believes that such action is in the best interest of our stockholders. Any material modifications, including any reduction of redemptions below the Quarterly Limit or suspension of our redemption plan by our
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board of directors will be disclosed to stockholders as promptly as practicable in reports we file with the SEC and via our website. As an automatic consequence of a suspension or material modification of our redemption plan by our board of directors, any Carryover Limit will lapse and no longer be available for use in subsequent quarters. In the event of a suspension or material modification of our redemption plan, our board of directors may also modify or suspend our offering of shares for sale. Any material modification or suspension of our offering of shares will be disclosed to stockholders, in the same manner as the related suspension or material modification of our redemption plan. We expect that, as part of the same or subsequent disclosure, stockholders would be notified of the anticipated timing and manner for the resumption of both redemptions and sales of shares.
REIT Restrictions. To avoid certain issues related to our ability to comply with the REIT distribution requirements (see “Material U.S. Federal Income Tax Considerations — Qualification as a REIT — Annual Distribution Requirements” above), we have implemented procedures designed to track our stockholders’ percentage interests in our common stock in order to identify any dividend equivalent redemptions, and will decline to effect a redemption to the extent that we believe that it would constitute a dividend equivalent redemption. See “Material U.S. Federal Income Tax Considerations — Taxation of U.S. Stockholders — Redemptions of Common Stock.” Redemptions also are subject to the ownership limitations described in “Description of Capital Stock — Restriction on Ownership of Shares of Capital Stock.” In such cases, we will contact you or your financial advisor for additional instructions.
Disclosure. We will provide regular disclosure to our stockholders on available capacity under the redemption plan. Any suspension or material modification of the redemption plan will be disclosed promptly in a prospectus supplement, in a current or periodic report filed with the SEC, and on our website. We will disclose as promptly as practicable in reports filed with the SEC any change in our investment guidelines regarding allocation to sources of liquidity and other material information regarding the liquidity sleeve. We will also disclose additional information to the extent material to our stockholders’ understanding of the operation of the redemption plan under the circumstances.
With respect to quarters in which a Flow-Regulated Limit is not in effect, we will disclose on our website at the beginning of the quarter (i) our total NAV as of the end of the prior quarter and (ii) the applicable Quarterly Limit for the current quarter. The applicable Quarterly Limit will range from a minimum of five percent to a maximum of ten percent, depending on the available Carryover Limit, if any. We will provide updated disclosure regarding the remaining available capacity percentage under the redemption plan in each monthly prospectus supplement in which we disclose our NAV per share for each business day during that month, as well as on our website.
If net redemptions during the quarter reach the Quarterly Limit, we will disclose as promptly as practicable in reports we file with the SEC and on our website that no additional redemption requests will be accepted for the remainder of the quarter.
With respect to quarters in which a Flow-Regulated Limit is in effect, we will disclose on our website that during the current quarter each stockholder cannot redeem more than five percent of the shares the stockholder held as of the end of the prior quarter, plus any shares the stockholder purchases during the current quarter.
If our board of directors suspends the redemption plan, or modifies the redemption plan in a material respect, including any suspension or modification that results from insufficient access to liquidity to redeem shares in accordance with the redemption plan, we will disclose as promptly as practicable the effective date of the suspension or the specifics of the modification, as applicable, in a prospectus supplement, in reports we file with the SEC, and on our website. We will also disclose at the same time any related suspension or modification of our offering of shares. In the event of suspension, as part of the same disclosure or through subsequent disclosures in reports we file with the SEC and on our website, stockholders will be informed of the timing and manner for the resumption of redemptions and, if applicable, sales of our shares.
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Redemption Process
Redemption requests must be made through your financial advisor or by contacting us. Certain redemption requests must include a signature guarantee. This is required to protect you and us from fraud. Your request must be made in writing and include a signature guarantee if any of the following situations apply:
| | • | | You wish to have more than $100,000 worth of shares redeemed; |
| | • | | The address on your account (record address) or banking information has changed within the last 30 days, depending on your account; |
| | • | | You are requesting that a check be mailed to a different address than the record address; or |
| | • | | You are requesting that redemption proceeds be paid to someone other than the account owner. |
You should be able to obtain a signature guarantee from a bank, broker, dealer, credit union (if authorized under state law), securities exchange or association, clearing agency, or savings association. A notary public cannot provide a signature guarantee.
In addition, please note the following rules with respect to redemption requests:
| | • | | Redemption proceeds relating to recently purchased shares will not be paid until the purchase payment has cleared, usually ten days; |
| | • | | Under applicable anti-money laundering regulations and other federal regulations, redemption requests may be suspended, restricted, or canceled and the proceeds may be withheld; |
| | • | | We reserve the right to reject any redemption request where, in the sole judgment of our advisor, the redemption request is inconsistent with our Excessive Trading Policy. (See “— Excessive Trading Policies” below); |
| | • | | We may require additional documentation for redemptions by a corporation, partnership, trust, agent or fiduciary; |
| | • | | The minimum redemption amount is $500.00. In addition, if a stockholder owns fewer shares of common stock than the minimum set by our advisor (currently $2,500 in shares), we may redeem those shares without the stockholder’s permission after providing at least 90 days’ notice to attain the minimum; and |
| | • | | Redemptions that are part of any systematic withdrawal program are subject to all rules and limitations applicable to redemptions generally. |
Our sponsor, advisor, sub-advisor, directors and affiliates are prohibited from receiving a fee on the redemption of shares by us.
As of December 31, 2012, we had not received any requests for redemption and we had not redeemed any shares of our common stock.
Short-Term Trading Fees
There is no minimum holding period for shares of our common stock and stockholders can redeem their shares at any time. However, our common stock is intended to be a long-term investment. The vast majority of our assets will consist of commercial real estate properties that cannot generally be readily liquidated without impacting our ability to realize full value upon their disposition. Moreover, there are incremental costs in holding cash, cash equivalents and other short-term investments, in keeping borrowing capacity available, in drawing funds under a line of credit, and in selling portfolio assets we would not otherwise have sold. In addition, executing portfolio transactions to fund redemptions may increase taxable distributions to the detriment of stockholders in taxable accounts. To offset these costs, to protect the interests of long-term stockholders and to reduce the possible impact on our performance of short-term trading in our common stock, stockholders who
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redeem their shares of our common stock within the first 365 days from the date of purchase will be subject to a short-term trading fee of 2% of the aggregate NAV of the shares of common stock redeemed. The short-term trading fee will be paid to us, not a service provider, as a reduction in the purchase price for the shares being redeemed and will inure indirectly to the benefit of our remaining stockholders. For purposes of determining whether the short-term trading fee applies, the shares that were held the longest will be redeemed first.
The short-term trading fee will not apply in certain circumstances, provided that we receive advance notice of such circumstances, such as redemptions in the event of a stockholder’s death, redemptions made as part of a systematic withdrawal plan, redemptions in connection with periodic portfolio rebalancings and redemptions of shares acquired through our distribution reinvestment plan. We reserve the right for our advisor to make special exceptions for other accounts, under limited circumstances.
Some financial intermediaries, plan sponsors or recordkeepers that hold omnibus accounts with us may be currently unable to track the trading activities of individual investors or plan participants or may be unwilling to assess short-term trading fees. In these cases we may be unable to impose short-term trading fees at the individual participant level on a look-through basis. Some of these firms may use different systems or criteria to assess, on their own behalf, fees that they may impose that may be different from, lower or higher than, or in some cases in addition to, the short-term trading fee we impose.
Excessive Trading Policies
We may use a variety of reporting tools to monitor activity in our stockholders’ accounts based on parameters designed to detect excessive trading, such as multiple “round trip” transactions above a specified dollar amount over a specified period of time. These parameters may change from time to time and involve a significant amount of discretion on the part of our advisor and our dealer manager. We may reject for any reason, or cancel as permitted or required by law, any purchase or redemption orders for shares of our common stock which our advisor, in its discretion, deems may not be in the best interests of our stockholders. For example, we may reject any purchase or redemption orders from market timers or investors that, in our advisor’s opinion, may be disruptive to our operations.
Frequent or short-term purchases and sales of our shares can harm stockholders in various ways, including reducing the returns to long-term stockholders by increasing our costs, disrupting portfolio management strategies, and potentially diluting NAV per share. Accordingly, our board of directors has adopted a policy designed to discourage excessive or short-term trading of our shares. There is the risk, however, that our policy may prove ineffective, in whole or in part, to detect or prevent all frequent or short-term trading. Our board may alter this policy at any time without prior notice to stockholders. Our board may also suspend our policy during periods of severe market turbulence or national emergency. In addition, you should ask your financial advisor or plan administrator whether they may impose, on their own behalf, different or additional limits on frequent trading.
In general, stockholders that allow a period of 365 days to pass after each investment before they redeem their shares are unlikely to violate our excessive trading policy. Nevertheless, since it is difficult to identify in advance all circumstance that might result in a pattern of disruptive trading, or even a single disruptive trade, we reserve the right to reject any purchase or redemption transaction at any time. In addition, in the event that we identify trading that we believe is inconsistent with our excessive trading policy, we reserve the right to impose, at any time, restrictions, conditions or even prohibitions on future purchases or redemptions of our common stock.
We recognize that we will distribute our shares of common stock principally through registered investment advisors and broker/dealers that are managing wrap or fee-based accounts. As a result, among the factors that our advisor will consider in enforcing our excessive trading policy will be whether the trading is directed by a financial advisor utilizing a reasonable financial model, such as an asset allocation model. We reserve the right to request, from the financial advisor or any financial intermediary, such information as our advisor may deem appropriate in order to determine whether trading is or is not excessive or otherwise potentially harmful based on various factors.
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We may also receive purchase and redemption orders from financial intermediaries that hold omnibus accounts with us, in which shares are held in the name of an intermediary on behalf of multiple beneficial owners. We generally may not be able to identify trading by a particular beneficial owner within an omnibus account, which may make it difficult or impossible to determine if that owner is engaging in excessive trading. Our ability to detect and deter excessive traders in omnibus accounts ultimately depends on the capabilities and cooperation of third-party financial firms.
For all of these reasons, there is no assurance that our monitoring tools and policies will be effective, in detecting or deterring excessive or potentially harmful trading.
Restrictions Imposed by the USA PATRIOT Act and Related Acts
In accordance with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended, the shares offered hereby may not be offered, sold, transferred or delivered, directly or indirectly, to any “prohibited person,” which generally means anyone who is:
| | • | | a “designated national,” “specially designated national,” “specially designated terrorist,” “specially designated global terrorist,” “foreign terrorist organization,” or “blocked person” within the definitions set forth in the Foreign Assets Control Regulations of the U.S. Treasury Department; |
| | • | | acting on behalf of, or an entity owned or controlled by, any government against whom the U.S. maintains economic sanctions or embargoes under the Regulations of the U.S. Treasury Department; |
| | • | | within the scope of Executive Order 13224 — Blocking Property and Prohibiting Transactions with Persons who Commit, Threaten to Commit, or Support Terrorism, effective September 24, 2001; |
| | • | | subject to additional restrictions imposed by any statutes or regulations and executive orders issued thereunder, as each such statute or regulation has been or may be amended from time to time; or |
| | • | | designated or blocked, associated or involved in terrorism, or subject to restrictions under laws, regulations, or executive orders as may apply in the future similar to those set forth above. |
If we subsequently determine that a stockholder is a “prohibited person,” we may take such action as may be necessary or appropriate under the law, including freezing the stockholder’s distributions and shares.
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Supplemental Sales Material
In addition to this prospectus, we may utilize certain sales material in connection with the offering of the shares, although only when accompanied by or preceded by the delivery of this prospectus. The sales materials may include information relating to this offering, the past performance of our advisor, and its affiliates, commercial real estate indices, such as the NPI, the performance of this offering, and as it compares to a benchmark, the performance of an investment in commercial real estate as compared to other asset classes and industry trends. The sales material may be in the form of property brochures and articles and publications concerning real estate. In certain jurisdictions, some or all of our sales material may not be permitted and will not be used in those jurisdictions.
The offering of shares is made only by means of this prospectus. Although the information contained in our supplemental sales material will not conflict with any of the information contained in this prospectus, the supplemental materials do not purport to be complete, and should not be considered a part of this prospectus or the registration statement of which this prospectus is a part.
Reports to Stockholders
We will provide periodic reports to stockholders regarding our operations over the course of the year, including quarterly financial reports. Financial information contained in all reports to stockholders will be prepared on the accrual basis of accounting in accordance with GAAP. Form 1099-DIV and/or Form 1099-B, if required, will be mailed to the stockholders by January 31 or February 15, respectively, of each year.
Our charter requires that we prepare an annual report and deliver it to our stockholders within 120 days after the end of each fiscal year. Among the matters that must be included in the annual report are:
| | • | | financial statements that are prepared in accordance with GAAP and are audited by our independent registered public accounting firm; |
| | • | | the ratio of the costs of raising capital during the year to the capital raised; |
| | • | | the aggregate amount of advisory fees and the aggregate amount of any other fees paid to our advisor and any affiliate of our advisor by us or third parties doing business with us during the year; |
| | • | | our total operating expenses for the year, stated as a percentage of our average invested assets and as a percentage of our net income; |
| | • | | a report from the independent directors that our policies are in the best interests of our stockholders and the basis for such determination; and |
| | • | | a separate report containing full disclosure of all material terms, factors and circumstances surrounding any and all transactions involving us and either of our advisor or its sub-advisor, a director or any affiliate thereof during the year, which report the independent directors are specifically charged with a duty to examine and to comment on regarding the fairness of the transactions. |
Subject to availability, you may authorize us to provide prospectuses, prospectus supplements, annual reports and other information, which we collectively refer to as stockholder information, electronically by sending us instructions in writing in a form acceptable to us. Unless you elect in writing to receive stockholder information electronically, all documents will be provided in paper form by mail. You must have internet access to use electronic delivery. While we impose no additional charge for this service, there may be potential costs associated with electronic delivery, such as on-line charges. All stockholder information will be available on our website. You may access and print all stockholder information provided through this service. As stockholder information becomes available, we will notify you of this by sending you an e-mail message that will include instructions on how to retrieve the stockholder information. If our e-mail notification is returned to us as
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“undeliverable,” we will contact you to obtain your updated e-mail address. If we are unable to obtain a valid e-mail address for you, we will resume sending a paper copy by regular U.S. mail to your address of record. You may revoke your consent for electronic delivery at any time and we will resume sending you a paper copy of all stockholder information. However, in order for us to be properly notified, your revocation must be given to us a reasonable time before electronic delivery has commenced. We will provide you with paper copies at any time upon request. Such request will not constitute revocation of your consent to receive stockholder information electronically.
Investors have the right under applicable federal and Maryland laws to obtain information about us and, at their expense, may obtain a list of names and addresses of all of the stockholders under certain conditions. See “Description of Capital Stock” and “Description of Capital Stock — Meetings, Special Voting Requirements and Access to Records.” In the event that the SEC promulgates rules or in the event that the applicable NASAA REIT Guidelines are amended so that, taking these changes into account, our reporting requirements are reduced, we may cease preparing and filing some of the aforementioned reports if our board of directors determines this action to be in our best interest and if this cessation is in compliance with the rules and regulations of the SEC and state securities laws and regulations, both as then amended.
Legal Matters
The validity of the shares of our common stock being offered hereby have been passed upon for us by Venable LLP. Goodwin Procter LLP has passed upon legal matters in connection with our qualification as a real estate investment trust.
Experts
The consolidated financial statements, and the related financial statement schedule, incorporated in this Prospectus by reference from Cole Real Estate Income Strategy (Daily NAV), Inc.’s Annual Report on Form 10-K for the year ended December 31 2012, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which is incorporated herein by reference. Such consolidated financial statements and financial statement schedule have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The statement of revenues and certain operating expenses of the MT San Antonio Property for the year ended December 31, 2010, incorporated in this Prospectus by reference from the Current Report on Form 8-K/A of Cole Real Estate Income Strategy (Daily NAV), Inc., filed with the Securities and Exchange Commission on February 17, 2012, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which is incorporated herein by reference (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the purpose and basis of presentation of the statement). Such financial statement has been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
CBRE, Inc., formerly known as CB Richard Ellis, Inc. (CBRE), an independent valuation services firm, periodically provides individual appraisal reports in respect of each of our commercial real estate, related liabilities and notes receivable assets secured by real estate in accordance with valuation guidelines approved by our board of directors for our commercial real estate portfolio. As further described under “Valuation Policies,” our fund accountant uses the estimated market values provided as well as inputs from other sources in its calculation of our daily net asset value per share. CBRE will not be responsible for or prepare our daily NAV per share.
Where You Can Find More Information
We have filed a registration statement on Form S-11 with the SEC with respect to the shares of our common stock to be issued in this offering. This prospectus is a part of that registration statement and, as permitted by SEC rules, does not include all of the information you can find in the registration statement or the exhibits to the
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registration statement. For additional information relating to us, we refer you to the registration statement and the exhibits to the registration statement. Statements contained in this prospectus as to the contents of any contract or document are necessarily summaries of such contract or document and in each instance, if we have filed the contract or document as an exhibit to the registration statement, we refer you to the copy of the contract or document filed as an exhibit to the registration statement.
After commencement of this offering, we will file annual, quarterly and special reports, proxy statements and other information with the SEC. The registration statement is, and any of these future filings with the SEC will be, available to the public over the internet at the SEC’s website at www.sec.gov. You may read and copy any filed document at the SEC’s public reference room in Washington, D.C. at 100 F. Street, N.E., Room 1580, Washington, D.C. Please call the SEC at (800) SEC-0330 for further information about the public reference room.
We also maintain a web site atwww.colecapital.com where there is additional information about our business, but the contents of the website are not incorporated by reference in or otherwise a part of this prospectus.
Incorporation of Certain Information by Reference
We have elected to “incorporate by reference” certain information into this prospectus. By incorporating by reference, we are disclosing important information to you by referring you to documents we have filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for information incorporated by reference that is superseded by information contained in this prospectus. You can access documents that are incorporated by reference into this prospectus at our website at https://www.colecapital.com/corporate-governance (URL for documents:https://www.colecapital.com/individual- investors/investing-with-cole/forms-and-literature). There is additional information about us and our advisor and its affiliates at the website, but unless specifically incorporated by reference herein as described in the paragraphs below, the contents of that site are not incorporated by reference in or otherwise a part of this prospectus.
The following documents filed with the SEC are incorporated by reference in this prospectus (Commission File No. 333-169535), except for any document or portion thereof deemed to be “furnished” and not filed in accordance with SEC rules:
| | • | | Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC on March 28, 2013; |
| | • | | Current Report on Form 8-K filed with the SEC on April 15, 2013; |
| | • | | Current Report on Form 8-K filed with the SEC on March 28, 2013; |
| | • | | Current Report on Form 8-K filed with the SEC on March 14, 2013; |
| | • | | Current Report on Form 8-K filed with the SEC on March 13, 2013; and |
| | • | | Current Report on Form 8-K filed with the SEC on February 13, 2013. |
We will provide to each person, including any beneficial owner, to whom this prospectus is delivered, upon request, a copy of any or all of the information that we have incorporated by reference into this prospectus but not delivered with this prospectus. To receive a free copy of any of the documents incorporated by reference in this prospectus, other than exhibits, unless they are specifically incorporated by reference in those documents, call or write our dealer manager, Cole Capital Corporation, at:
Cole Capital Corporation
2325 East Camelback Road, Suite 1100
Phoenix, Arizona 85016
(866) 907-2653
Attn: Investor Services
www.colecapital.com
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The information relating to us contained in this prospectus does not purport to be comprehensive and should be read together with the information contained in the documents incorporated or deemed to be incorporated by reference in this prospectus.
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APPENDIX A
PRIOR PERFORMANCE TABLES
The prior performance tables that follow present certain information regarding certain real estate programs previously sponsored by entities affiliated with our sponsor, Cole Real Estate Investments, including this program. The Company has presented all prior programs subject to public reporting requirements (“Prior Public Real Estate Programs”) that have similar investment objectives to this offering. In determining which Prior Public Real Estate Programs have similar investment objectives to this offering, the Company considered factors such as the type of real estate acquired by the program, the extent to which the program was designed to provide current income through the payment of cash distributions or to protect and preserve capital contributions, and the extent to which the program seeks to increase the value of the investments made in the program. The information in this section should be read together with the summary information in this prospectus under “Prior Performance Summary.”
These tables contain information that may aid a potential investor in evaluating the program presented. However, the purchase of our shares will not create any ownership interest in the programs included in these tables.
The following tables are included in this section:
| | • | | Table I — Experience in Raising and Investing Funds; |
| | • | | Table II — Compensation to Sponsor; |
| | • | | Table III — Operating Results of Prior Programs; and |
| | • | | Table V — Sales or Disposals of Properties. |
Table IV (Results of Completed Programs) has been omitted since none of the Prior Public Real Estate Programs sponsored by Cole Real Estate Investments have completed their operations and sold all of their properties during the five years ended December 31, 2012.
For information regarding the acquisitions of properties by Prior Public Real Estate Programs sponsored by Cole Real Estate Investments during the three years ended December 31, 2012, see Table VI contained in Part II of our registration statement, which is not a part of this prospectus. We will provide a copy of Table VI to you upon written request and without charge.
Past performance is not necessarily indicative of future results.
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TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS (UNAUDITED)
This table provides a summary of the experience of the sponsors of Prior Public Real Estate Programs for which offerings have been closed since January 1, 2010. Information is provided with regard to the manner in which the proceeds of the offerings have been applied. Also set forth below is information pertaining to the timing and length of these offerings and the time period over which the proceeds have been invested in the properties. All figures are as of December 31, 2012.
| | | | | | | | |
| | | Cole Credit Property
Trust II, Inc.(5) | | | Cole Credit Property
Trust III, Inc.(6) | |
Dollar amount offered | | $ | 2,270,000,000 | | | $ | 5,940,000,000 | |
Dollar amount raised | | | 2,266,234,296 | | | | 4,892,799,511 | |
Percentage amount raised | | | 100.0 | % | | | 100.0 | % |
Less offering expenses: | | | | | | | | |
Selling commissions and discounts retained by affiliates | | | 6.0 | % | | | 6.5 | % |
Organizational expenses(1) | | | 0.7 | % | | | 1.3 | % |
Other(2) | | | 1.6 | % | | | 1.9 | % |
Reserves | | | 0.1 | % | | | 0.1 | % |
Percent available for investment | | | 91.6 | % | | | 90.2 | % |
Acquisition costs:(3) | | | | | | | | |
Prepaid items and fees related to purchase of property | | | 1.1 | % | | | 0.5 | % |
Cash down payment | | | 88.5 | % | | | 87.7 | % |
Acquisition fees(4) | | | 2.0 | % | | | 2.0 | % |
Other | | | — | | | | — | |
| | | | | | | | |
Total acquisition cost | | | 91.6 | % | | | 90.2 | % |
Percent leverage | | | 51 | % | | | 45 | % |
Date offering began | | | 6/27/2005 | | | | 10/15/2008 | |
Length of offering (in months) | | | Ongoing | | | | Ongoing | |
Months to invest 90% of amount available for investment | | | 40 | | | | 23 | |
| (1) | Organizational expenses include legal, accounting, printing, escrow, filing, recording and other related expenses associated with the formation and original organization of the program. |
| (2) | These amounts include fees paid to our dealer manager, an affiliate of our sponsor. |
| (3) | Acquisition costs expressed as a percentage represent the costs incurred to acquire real estate with the initial capital raised in the respective offerings and do not include the costs incurred to acquire additional real estate with the proceeds from financing transactions and excess working capital. |
| (4) | Acquisition fees include fees paid to the sponsor or affiliates based upon the terms of the prospectus. |
| (5) | These amounts include Cole Credit Property Trust II, Inc.’s initial, follow-on and distribution reinvestment plan offerings. Cole Credit Property Trust II, Inc. began its initial offering on June 27, 2005 and closed its initial offering on May 22, 2007. The total dollar amount registered and available to be offered in the initial offering was $552.8 million. The total dollar amount raised in the initial offering was $547.4 million. Cole Credit Property Trust II, Inc. began its follow-on offering on May 23, 2007 and closed its follow-on offering on January 2, 2009. The total dollar amount registered and available to be offered in the follow-on offering was $1.5 billion. The total dollar amount raised in the follow-on offering was $1.5 billion. It took Cole Credit Property Trust II, Inc. 40 months to invest 90% of the amount available for investment in its initial |
Past performance is not necessarily indicative of future results.
A-2
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS (UNAUDITED) — (Continued)
| | and follow-on offerings. Cole Credit Property Trust II, Inc. began its distribution reinvestment plan offering on September 18, 2008 and suspended its distribution reinvestment plan offering on December 6, 2012. The total initial dollar amount registered and available to be offered in the distribution reinvestment plan offering is $285.0 million. The total dollar amount raised in the distribution reinvestment plan offering was $261.3 million. |
| (6) | These amounts include Cole Credit Property Trust III, Inc.’s initial and follow-on offerings. Cole Credit Property Trust III, Inc. began its initial offering on October 1, 2008 and closed its initial offering on October 1, 2010. The total dollar amount registered and available to be offered in the initial offering was $2.49 billion. The total dollar amount raised in the initial offering was $2.2 billion. Cole Credit Property Trust III, Inc. began its follow-on offering after the termination of its initial offering on October 1, 2010 and closed its follow-on offering on April 27, 2012. The total dollar amount registered and available to be offered in the follow-on offering was $2.7 billion. The total dollar amount raised in the follow-on offering was $2.6 billion. It took Cole Credit Property Trust III, Inc. 23 months to invest 90% of the amount available for investment in its initial and follow-on offerings. Cole Credit Property Trust III, Inc. registered additional shares of common stock under a distribution reinvestment plan offering, which was filed with the Securities and Exchange Commission (the SEC) on March 14, 2012 and automatically became effective with the SEC upon filing. The total initial dollar amount registered and available to be offered in the distribution reinvestment plan offering is $712.5 million. The total dollar amount raised in the distribution reinvestment plan offering was $118.0 million as of December 31, 2012. Cole Credit Property Trust III, Inc.’s board of directors has suspended the distribution reinvestment plan beginning with the distributions previously authorized by the board for the month of May 2013. |
Past performance is not necessarily indicative of future results.
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TABLE II
COMPENSATION TO SPONSOR AND AFFILIATES (UNAUDITED)
This table sets forth the compensation paid to our sponsor and its affiliates, including compensation paid out of the offering proceeds and compensation paid in connection with the ongoing operations of Prior Public Real Estate Programs that have similar investment objectives to this program, including this program. Prior Public Real Estate Programs whose offerings have closed since January 1, 2010 are shown separately with amounts as of December 31, 2012. All other Public Real Estate Programs, including this program, have been aggregated to show compensation paid during such period.
| | | | | | | | |
| | | Cole Credit Property
Trust II, Inc. | | | Cole Credit Property
Trust III, Inc. | |
Date offering commenced | | | 6/27/2005 | | | | 10/15/2008 | |
Dollar amount raised | | $ | 2,266,234,296 | | | $ | 4,892,799,511 | |
Amount paid to sponsor from proceeds of offering: | | | | | | | | |
Underwriting fees | | | 25,741,562 | | | | 67,053,734 | |
Acquisition fees and real estate commissions (1) | | | 70,450,127 | | | | 156,726,147 | |
Advisory fees | | | — | | | | — | |
Other (2) | | | 40,899,993 | | | | 98,945,850 | |
Amount of cash generated from operations before deducting payments to sponsor | | | 668,822,263 | | | | 529,289,746 | |
Amount paid to sponsor from operations: | | | | | | | | |
Property management fees | | | 27,358,496 | | | | 22,696,636 | |
Partnership management fees (3) | | | 43,873,503 | | | | 61,506,393 | |
Reimbursements | | | 12,610,645 | | | | 21,150,394 | |
Leasing commissions | | | 546,695 | | | | — | |
Other (4) | | | 125,260 | | | | 26,829 | |
Amount of property sales and refinancing before deducting payments to sponsor | | | | | | | | |
Cash | | | 129,590,077 | (5) | | | 598,722,000 | (6) |
Notes | | | — | | | | 24,250,000 | |
Amount paid to sponsor from property sales and refinancing | | | | | | | | |
Incentive fees | | | — | | | | — | |
Real estate commissions | | | 382,000 | | | | — | |
Other | | | — | | | | — | |
Past performance is not necessarily indicative of future results.
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TABLE II
COMPENSATION TO SPONSOR AND AFFILIATES (UNAUDITED) — (Continued)
| | | | |
| | | 4 Other Programs
(7) | |
Date offering commenced | | | N/A | |
Dollar amount raised | | $ | 479,935,130 | |
Amount paid to sponsor from proceeds of offering: | | | | |
Underwriting fees | | | 40,678,189 | |
Acquisition fees and real estate commissions (1) | | | 16,187,387 | |
Advisory fees | | | 204,544 | |
Other (2) | | | 8,607,518 | |
Amount of cash generated from operations before deducting payments to sponsor | | | 13,970,952 | |
Amount paid to sponsor from operations: | | | | |
Property management fees | | | 1,369,544 | |
Partnership management fees (3) | | | — | |
Reimbursements | | | 251,040 | |
Leasing commissions | | | — | |
Other (4) | | | — | |
Amount of property sales and refinancing before deducting payments to sponsor | | | | |
Cash (8) | | | 11,921,733 | |
Notes | | | 29,108,000 | |
Amount paid to sponsor from property sales and refinancing | | | | |
Incentive fees | | | — | |
Real estate commissions | | | 191,000 | |
Other | | | — | |
| (1) | Properties are acquired with a combination of funds from offering proceeds, debt and proceeds from the sale of properties and other investments. The acquisition and real estate commissions reported in this table include the total amount of fees paid to the sponsor or its affiliates regardless of the funding source for these costs. |
| (2) | Amounts primarily relate to loan coordination fees, a development fee and reimbursement of certain offering costs paid by the sponsor. |
| (3) | Amounts primarily relate to asset management fees and expenses. |
| (4) | Amounts primarily relate to construction management fees. |
| (5) | Amounts herein include gross proceeds received in connection with the sale of marketable securities of $82.1 million, the sale of unconsolidated joint ventures of $39.9 million and the sale of properties of $7.3 million. |
| (6) | Amounts herein include gross proceeds received in connection with the sale of properties of $535.3 million and the sale of marketable securities of $63.4 million. |
| (7) | Four of the offerings of the prior programs that have similar investment objectives to this program, aggregated herein, including this program, were not closed within the past three years and therefore are not shown separately. Amounts presented represent aggregate payments to the sponsor in the most recent three years for Cole Credit Property Trust, Inc., Cole Corporate Income Trust, Inc., Cole Real Estate Income Strategy (Daily NAV), Inc. and Cole Credit Property Trust IV, Inc. The programs have similar investment objectives to this program. |
| (8) | Amounts herein include gross proceeds received in connection with the sale of five properties. |
Past performance is not necessarily indicative of future results.
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TABLE III
ANNUAL OPERATING RESULTS OF PRIOR REAL ESTATE PROGRAMS (UNAUDITED)
The following sets forth the operating results of Prior Public Real Estate Programs sponsored by the sponsor of our program, the offerings of which have been closed since January 1, 2008. The information relates only to public programs with investment objectives similar to this program. All figures are as of December 31 of the year indicated.
| | | | | | | | | | | | | | | | | | | | |
| | | Cole Credit Property Trust II, Inc.
June 2005
(Unaudited) | |
| | | 2008 | | | 2009 | | | 2010 | | | 2011 | | | 2012 | |
Gross Revenues | | $ | 202,282,667 | | | $ | 276,026,961 | | | $ | 269,274,321 | | | $ | 279,520,082 | | | $ | 282,892,655 | |
Equity in income of unconsolidated joint venture | | | 470,978 | | | | 612,432 | | | | 964,828 | | | | 665,645 | | | | 1,157,096 | |
Profit (loss) on sale of properties | | | — | | | | — | | | | — | | | | 20,749,303 | (7) | | | 639,617 | (8) |
Less: | | | | | | | | | | | | | | | | | | | | |
Operating expenses(1) | | | 32,191,062 | | | | 50,986,169 | | | | 47,170,233 | | | | 50,693,841 | | | | 60,934,746 | |
Interest expense | | | 78,063,338 | | | | 98,996,703 | | | | 102,976,724 | | | | 108,185,870 | | | | 107,962,191 | |
Depreciation and amortization(2) | | | 63,858,422 | | | | 90,750,170 | | | | 85,162,219 | | | | 88,246,266 | | | | 89,239,450 | |
Impairment of real estate assets | | | 3,550,000 | | | | 13,500,000 | | | | 4,500,435 | | | | — | | | | 6,897,593 | |
| | | | | | | | | | | | | | | | | | | | |
Net Income (loss) — GAAP Basis(3) | | $ | 25,090,823 | | | $ | 22,406,351 | | | $ | 30,429,538 | | | $ | 53,809,053 | | | $ | 19,655,388 | |
| | | | | | | | | | | | | | | | | | | | |
Taxable income | | | | | | | | | | | | | | | | | | | | |
— from operations(4) | | $ | 42,432,587 | | | $ | 53,168,771 | | | $ | 45,529,029 | | | $ | 47,403,410 | | | $ | 50,073,516 | (5) |
— from gain on sale | | | — | | | | — | | | | — | | | | 22,750,362 | | | | — | |
Cash generated | | | | | | | | | | | | | | | | | | | | |
— from operations | | | 96,073,918 | | | | 116,871,698 | | | | 105,627,000 | | | | 114,449,000 | | | | 118,371,000 | |
— from sales | | | — | | | | — | | | | — | | | | 100,830,000 | | | | 28,583,000 | |
— from refinancing | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Cash generated from operations, sales and refinancing | | | 96,073,918 | | | | 116,871,698 | | | | 105,627,000 | | | | 215,279,000 | | | | 146,954,000 | |
Less: Cash distributions to investors | | | | | | | | | | | | | | | | | | | | |
— from operating cash flow | | | 96,051,343 | | | | 116,871,698 | | | | 105,627,000 | | | | 114,449,000 | | | | 118,371,000 | |
— from sales and refinancing | | | — | | | | — | | | | — | | | | 11,195,000 | | | | 9,156,000 | |
— from other(6) | | | — | | | | 18,111,554 | (9) | | | 23,623,894 | (10) | | | 5,359,000 | (11) | | | 3,851,000 | (12) |
| | | | | | | | | | | | | | | | | | | | |
Cash generated (deficiency) after cash distributions | | | 22,575 | | | | (18,111,554 | ) | | | (23,623,894 | ) | | | 84,276,000 | | | | 15,576,000 | |
Less: Special items (not including sales and refinancing) | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Cash generated (deficiency) after cash distributions and special items | | $ | 22,575 | | | $ | (18,111,554 | ) | | $ | (23,623,894 | ) | | $ | 84,276,000 | | | $ | 15,576,000 | |
| | | | | | | | | | | | | | | | | | | | |
Tax and distribution data per $1,000 invested | | | | | | | | | | | | | | | | | | | | |
Federal income tax results: | | | | | | | | | | | | | | | | | | | | |
Ordinary income (loss) | | | | | | | | | | | | | | | | | | | | |
— from operations | | $ | 21.02 | | | $ | 27.24 | | | $ | 22.03 | | | $ | 25.15 | | | $ | 26.56 | |
— from recapture | | | — | | | | — | | | | — | | | | — | | | | — | |
Capital gain (loss) | | | — | | | | — | | | | — | | | | 12.07 | | | | — | |
Cash distributions to investors | | | | | | | | | | | | | | | | | | | | |
Source (on a GAAP basis) | | | | | | | | | | | | | | | | | | | | |
— Investment income | | | 30.00 | | | | 26.00 | | | | 21.90 | | | | 22.40 | | | | 23.60 | |
— Return of capital | | | 36.00 | | | | 41.00 | | | | 40.50 | | | | 29.20 | | | | 38.50 | |
— Capital gain | | | — | | | | — | | | | — | | | | 10.90 | | | | — | |
Source (on a cash basis) | | | | | | | | | | | | | | | | | | | | |
— Sales | | | — | | | | — | | | | — | | | | 5.34 | | | | 4.33 | |
— Refinancing | | | — | | | | — | | | | — | | | | — | | | | — | |
— Operations | | | 66.00 | | | | 58.01 | | | | 50.99 | | | | 54.60 | | | | 55.95 | |
— Other(6) | | | — | | | | 8.99 | | | | 11.41 | | | | 2.56 | | | | 1.82 | |
Amount (in percentage terms) remaining invested in program properties at the end of the last year reported in the table | | | | | | | | | | | | | | | | | | | 100 | % |
Past performance is not necessarily indicative of future results.
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TABLE III
ANNUAL OPERATING RESULTS OF PRIOR REAL ESTATE PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Cole Credit Property Trust III, Inc.
October 2008
(Unaudited) | |
| | | 2008 | | | 2009 | | | 2010 | | | 2011 | | | 2012 | |
Gross Revenues | | $ | 3,621 | | | $ | 23,503,760 | | | $ | 144,833,874 | | | $ | 366,649,708 | | | $ | 581,042,087 | |
Equity in income of unconsolidated joint venture | | | — | | | | — | | | | (206,200 | ) | | | 1,474,801 | | | | 2,182,588 | |
Profit (loss) on sale of properties | | | — | | | | — | | | | — | | | | — | | | | 121,575,768 | (13) |
Less: | | | | | | | | | | | | | | | | | | | | |
Operating expenses(1) | | | 104,769 | | | | 23,312,360 | | | | 85,592,289 | | | | 128,596,358 | | | | 181,725,905 | |
Interest expense | | | — | | | | 2,538,176 | | | | 26,311,592 | | | | 87,436,309 | | | | 151,536,676 | |
Depreciation and amortization(2) | | | — | | | | 5,474,070 | | | | 39,326,534 | | | | 106,322,593 | | | | 168,099,550 | |
Net (loss) income including noncontrolling interest | | | (101,148 | ) | | | (7,820,846 | ) | | | (6,602,741 | ) | | | 45,769,249 | | | | 81,862,544 | |
Net (loss) income allocated to noncontrolling interest | | | — | | | | — | | | | (309,976 | ) | | | 474,501 | | | | 100,104 | |
| | | | | | | | | | | | | | | | | | | | |
Net (loss) income attributable to company — GAAP Basis(3) | | $ | (101,148 | ) | | $ | (7,820,846 | ) | | $ | (6,602,741 | ) | | $ | 45,294,748 | | | $ | 81,762,440 | |
| | | | | | | | | | | | | | | | | | | | |
Taxable income | | | | | | | | | | | | | | | | | | | | |
— from operations(4) | | $ | (101,148 | ) | | $ | (7,820,846 | ) | | $ | 60,372,811 | | | $ | 121,091,397 | | | $ | 153,052,943 | (5) |
— from gain on sale | | | — | | | | — | | | | — | | | | — | | | | 45,932,181 | |
Cash generated | | | | | | | | | | | | | | | | | | | | |
— from operations | | | (27,507 | ) | | | 74,038 | | | | 35,790,000 | | | | 145,681,000 | | | | 242,464,000 | |
— from sales | | | — | | | | — | | | | — | | | | — | | | | 599,535,000 | |
— from refinancing | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Cash generated from operations, sales and refinancing | | | (27,507 | ) | | | 74,038 | | | | 35,792,000 | | | | 145,681,000 | | | | 841,999,000 | |
Less: Cash distributions to investors | | | | | | | | | | | | | | | | | | | | |
— from operating cash flow | | | — | | | | 74,038 | | | | 35,792,000 | | | | 145,681,000 | | | | 242,464,000 | |
— from sales and refinancing | | | — | | | | — | | | | — | | | | — | | | | — | |
— from other(6) | | | — | | | | 21,689,962 | (14) | | | 76,821,000 | (15) | | | 49,196,000 | (16) | | | 53,188,000 | (17) |
| | | | | | | | | | | | | | | | | | | | |
Cash generated (deficiency) after cash distributions | | | (27,507 | ) | | | (21,689,962 | ) | | | (76,821,000 | ) | | | (49,196,000 | ) | | | 546,347,000 | |
Less: Special items (not including sales and refinancing) | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Cash generated (deficiency) after cash distributions and special items | | $ | (27,507 | ) | | $ | (21,689,962 | ) | | $ | (76,821,000 | ) | | $ | (49,196,000 | ) | | $ | 546,347,000 | |
| | | | | | | | | | | | | | | | | | | | |
Tax and distribution data per $1,000 invested | | | | | | | | | | | | | | | | | | | | |
Federal income tax results: | | | | | | | | | | | | | | | | | | | | |
Ordinary income (loss) | | | | | | | | | | | | | | | | | | | | |
— from operations | | $ | (505.74 | ) | | $ | (9.02 | ) | | $ | 27.86 | | | $ | 36.40 | | | $ | 37.58 | |
— from recapture | | | — | | | | — | | | | — | | | | — | | | | — | |
Capital gain (loss) | | | — | | | | — | | | | — | | | | — | | | | 11.28 | |
Cash distributions to investors | | | | | | | | | | | | | | | | | | | | |
Source (on a GAAP basis) | | | | | | | | | | | | | | | | | | | | |
— Investment income | | | — | | | | 30.00 | | | | 35.00 | | | | 39.00 | | | | 33.00 | |
— Return of capital | | | — | | | | 24.00 | | | | 29.00 | | | | 24.00 | | | | 21.00 | |
— Capital gain | | | | | | | | | | | | | | | | | | | 10.00 | |
Source (on a cash basis) | | | | | | | | | | | | | | | | | | | | |
— Sales | | | — | | | | — | | | | — | | | | — | | | | — | |
— Refinancing | | | — | | | | — | | | | — | | | | — | | | | — | |
— Operations | | | — | | | | 0.18 | | | | 20.34 | | | | 47.10 | | | | 52.49 | |
— Other(6) | | | — | | | | 53.82 | | | | 43.66 | | | | 15.90 | | | | 11.51 | |
Amount (in percentage terms) remaining invested in program properties at the end of the last year reported in the table | | | | | | | | | | | | | | | | | | | 100 | % |
Past performance is not necessarily indicative of future results.
A-7
TABLE III
ANNUAL OPERATING RESULTS OF PRIOR REAL ESTATE PROGRAMS (UNAUDITED) — (Continued)
| (1) | Operating expenses include management fees paid to affiliates for such services as accounting, property supervision, etc. |
| (2) | Depreciation of commercial real property is determined on the straight-line method over an estimated useful life of 40 years. Leasehold interests are amortized over the life of the lease. |
| (3) | Cole Credit Property Trust II, Inc. and Cole Credit Property Trust III, Inc. maintain their books on a GAAP basis of accounting rather than on a tax basis. |
| (4) | Cash generated from operation generally includes net income plus depreciation and amortization plus any decreases in accounts receivable and accrued rental income or increases in accounts payable minus any increases in accounts receivable and accrued rental income or decreases in accounts payable. |
| (5) | Due to the timing of tax return filings, amounts shown represent estimates and may change when tax returns are filed at a future date. |
| (6) | Cash distributions to investors from other sources may include sources such as cash flows in excess of distributions from prior periods, borrowings, and proceeds from the issuance of common stock. We consider the real estate acquisition expenses, which reduce cash flow from operations, to have been funded with proceeds from our ongoing public offering of shares of common stock in the offering because the expenses were incurred to acquire real estate investments |
| (7) | Consists of gain on the sale of securities of $15.6 million and gain on the sale of unconsolidated joint venture interests of $5.2 million. |
| (8) | Consists of gain on the sale of real estate assets and property condemnation. |
| (9) | Consists of proceeds from the offerings of $3.2 million, cash flows from operations in excess of distributions from previous periods of $6.8 million and borrowings of $8.1 million. |
| (10) | Consists of distributions received in excess of income from unconsolidated joint ventures of $1.6 million, proceeds from the offerings of $3.4 million, and borrowings of $18.7 million. |
| (11) | Consists of distributions received in excess of income from unconsolidated joint ventures of $2.3 million and proceeds from the offerings of $3.0 million. |
| (12) | Consists of principal payments from mortgage notes receivable and real estate under direct financing leases of $3.6 million and proceeds from the issuance of common stock of $233,000. |
| (13) | Consists of gain on the sale and condemnation of real estate assets of $109.1 million and gain on the sale of marketable securities of $12.5 million. |
| (14) | Consists of proceeds from the issuance of common stock of $18.6 million and borrowings of $3.1 million. |
| (15) | Consists of proceeds from the issuance of common stock of $58.7 million and borrowings of $18.1 million. |
| (16) | Consists of distributions received in excess of income from unconsolidated joint ventures $1.1 million and proceeds from the issuance of common stock of $48.1 million. |
| (17) | Consists of distributions received in excess of income from unconsolidated joint ventures of $5.1 million and proceeds from the issuance of common stock of $48.1 million. |
Past performance is not necessarily indicative of future results.
A-8
TABLE V
SALES OR DISPOSALS OF PROPERTIES (UNAUDITED)
This table provides summary information on the results of sales or disposals of properties since January 1, 2010 by Prior Public Real Estate Programs having similar investment objectives to those of this program. All amounts are through December 31, 2012.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Selling Price, Net of Closing Costs and GAAP Adjustments | | | Including Closing and Soft Costs | |
Property | | Date
Acquired | | | Date of
Sale | | | Cash Received
Net of Closing
Costs | | | Mortgage
Balance at
Time of Sale
(1) | | | Purchase
Money
Mortgage
Taken Back
by Program | | | Adjustments
Resulting
from
Application
of GAAP | | | Total (2) | | | Original
Mortgage
Financing | | | Total
Acquisition
Cost, Capital
Improvements,
Closing and
Soft Costs (3) | | | Total | | | Excess
(Deficiency) of
Property
Operating
Cash Receipts
Over Cash
Expenditures | |
Cole Credit Property Trust, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CarMax Merriam, KS | | | 04/04 | | | | 12/11 | | | $ | 4,660,866 | | | $ | 14,175,000 | | | | — | | | | — | | | $ | 18,835,866 | (4) | | $ | 14,175,000 | | | $ | 5,237,436 | | | $ | 19,412,436 | | | $ | 4,262,437 | |
Wawa Portfolio-Various | | | 07/04 | | | | 07/12 | | | | 5,061,248 | | | | 8,580,000 | | | | — | | | | — | | | | 13,641,248 | (5) | | | 7,688,248 | | | | 5,604,087 | | | | 13,292,335 | | | | 10,925,248 | (6) |
Walgreens Hutchinson, KS | | | 07/05 | | | | 09/12 | | | | 1,215,771 | | | | 3,462,000 | | | | — | | | | — | | | | 4,677,771 | (7) | | | 3,462,000 | | | | 2,121,134 | | | | 5,583,134 | | | | 835,402 | |
Walgreens Newton, KS | | | 07/05 | | | | 09/12 | | | | 1,013,121 | | | | 2,891,000 | | | | — | | | | — | | | | 3,904,121 | (8) | | | 2,891,000 | | | | 1,779,402 | | | | 4,670,402 | | | | 712,887 | |
Cole Credit Property Trust II, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
LBUBS 2007-C2 AJ | | | 09/08 | | | | 05/11 | | | | 29,282,000 | | | | — | | | | — | | | | — | | | | 29,282,000 | (9) | | | — | | | | 26,921,503 | | | | 26,921,503 | | | | 5,215,399 | |
JPMCC 2008-C2 A3 | | | 10/08 | | | | 04/11 | | | | 18,583,428 | | | | — | | | | — | | | | — | | | | 18,583,428 | (9) | | | — | | | | 15,402,491 | | | | 15,402,491 | | | | 2,884,531 | |
GCCFC 2007 GG11 AJ | | | 11/08 | | | | 05/11 | | | | 8,675,000 | | | | — | | | | — | | | | — | | | | 8,675,000 | (9) | | | — | | | | 5,119,125 | | | | 5,119,125 | | | | 1,501,086 | |
BSCMS 2007-GG11 T28 AM | | | 11/08 | | | | 05/11 | | | | 5,314,075 | | | | — | | | | — | | | | — | | | | 5,314,075 | (9) | | | — | | | | 2,586,098 | | | | 2,586,098 | | | | 731,398 | |
BSCMS 2005-T20 AJ | | | 01/09 | | | | 03/11 | | | | 6,001,875 | | | | — | | | | — | | | | — | | | | 6,001,875 | (9) | | | — | | | | 2,547,450 | | | | 2,547,450 | | | | 695,554 | |
BSCMS 2005-PW10 AM | | | 01/09 | | | | 03/11 | | | | 14,203,700 | | | | — | | | | — | | | | — | | | | 14,203,700 | (9) | | | — | | | | 7,947,177 | | | | 7,947,177 | | | | 1,619,721 | |
Cole/Spensa MS Portfolio AZ, LLC | | | 04/09 | | | | 09/11 | | | | 18,769,000 | | | | — | | | | — | | | | — | | | | 18,769,000 | (10) | | | — | | | | 16,758,494 | | | | 16,758,494 | | | | 2,062,493 | (11) |
Pep Boys New Hartford, NY | | | 03/08 | | | | 12/12 | | | | 2,388,346 | | | | — | | | | — | | | | — | | | | 2,380,813 | (12) | | | — | | | | 2,427,475 | | | | 2,427,475 | | | | 702,824 | |
Pep Boys Redlands, CA | | | 03/08 | | | | 12/12 | | | | 4,863,194 | | | | — | | | | — | | | | — | | | | 4,802,810 | (13) | | | — | | | | 4,732,839 | | | | 4,732,839 | | | | 2,002,037 | |
Cole Credit Property Trust III, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Walgreens/CVS Portfolio-Various | | | (15 | ) | | | 03/12 | | | | 68,408,961 | | | | — | | | | — | | | | — | | | | 68,408,961 | (14) | | | — | | | | 59,040,542 | | | | 59,040,542 | | | | 39,728,818 | (15) |
Home Depot San Jose, CA | | | 04/09 | | | | 10/12 | | | | 11,775,416 | | | | — | | | | — | | | | — | | | | 11,775,416 | (16) | | | — | | | | 8,402,164 | | | | 8,402,164 | | | | 9,334,505 | |
City Center Plaza Bellevue, WA | | | 07/10 | | | | 11/12 | | | | 364,088,989 | | | | — | | | | — | | | | — | | | | 364,088,989 | (17) | | | — | | | | 323,127,590 | | | | 323,127,590 | | | | 165,323,250 | |
Cracker Barrel Portfolio-Various | | | 06/09 | | | | 11/12 | | | | 18,448,972 | | | | — | | | | — | | | | — | | | | 18,448,972 | (18) | | | — | | | | 14,467,161 | | | | 14,467,161 | | | | 14,052,550 | (19) |
CarMax Garland, TX | | | 01/10 | | | | 11/12 | | | | 16,559,682 | | | | — | | | | — | | | | — | | | | 16,559,682 | (20) | | | — | | | | 14,594,240 | | | | 14,594,240 | | | | 10,043,245 | |
Kum & Go Portfolio-Various | | | (22 | ) | | | 11/12 | | | | 9,134,058 | | | | — | | | | — | | | | — | | | | 9,134,058 | (21) | | | — | | | | 8,301,411 | | | | 8,301,411 | | | | 5,015,044 | (22) |
Manchester Highlands St. Louis, MO | | | 08/10 | | | | 12/12 | | | | 28,632,508 | | | | 24,250,000 | | | | — | | | | — | | | | 52,882,508 | (23) | | | — | | | | 50,551,109 | | | | 50,551,109 | | | | 18,183,996 | |
On the Border Portfolio-Ramsey, NJ | | | 06/10 | | | | 12/12 | | | | 6,557,415 | | | | — | | | | — | | | | — | | | | 6,557,415 | (24) | | | — | | | | 4,548,509 | | | | 4,548,509 | | | | 5,610,544 | (25) |
Kohl’s Port Orange, FL | | | 07/09 | | | | 12/12 | | | | 11,694,723 | | | | — | | | | — | | | | — | | | | 11,694,723 | (26) | | | — | | | | 10,177,368 | | | | 10,177,368 | | | | 6,339,948 | |
JPMCC 2011-C5 D | | | 09/11 | | | | 12/12 | | | | 15,644,812 | | | | — | | | | — | | | | — | | | | 15,644,812 | (27) | | | — | | | | 12,792,426 | | | | 12,792,426 | | | | 1,034,396 | |
GSMS 2011-GC5 D | | | 10/11 | | | | 12/12 | | | | 14,565,820 | | | | — | | | | — | | | | — | | | | 14,565,820 | (27) | | | — | | | | 11,525,694 | | | | 11,525,694 | | | | 953,559 | |
WFRBS 2011-C5 F | | | 11/11 | | | | 12/12 | | | | 13,475,560 | | | | — | | | | — | | | | — | | | | 13,475,560 | (27) | | | — | | | | 9,769,121 | | | | 9,769,121 | | | | 951,923 | |
MSC 2011-C3 F | | | 10/11 | | | | 10/12 | | | | 4,601,306 | | | | — | | | | — | | | | — | | | | 4,601,306 | (27) | | | — | | | | 4,150,249 | | | | 4,150,249 | | | | 331,898 | |
MSC 2012-C4 F | | | 03/12 | | | | 10/12 | | | | 5,670,096 | | | | — | | | | — | | | | — | | | | 5,670,096 | (27) | | | — | | | | 3,831,955 | | | | 3,831,955 | | | | 157,465 | |
JPMCC 2012-C6 F | | | 04/12 | | | | 10/12 | | | | 461,393 | | | | — | | | | — | | | | — | | | | 461,393 | (27) | | | — | | | | 479,192 | | | | 479,192 | | | | 18,696 | |
JPMCC 2012 C6 G | | | 04/12 | | | | 10/12 | | | | 4,681,636 | | | | — | | | | — | | | | — | | | | 4,681,636 | (27) | | | — | | | | 3,792,758 | | | | 3,792,758 | | | | 115,457 | |
JPMCC 2012-C8 F | | | 10/12 | | | | 10/12 | | | | 4,304,476 | | | | — | | | | — | | | | — | | | | 4,304,476 | (27) | | | — | | | | 3,295,738 | | | | 3,295,738 | | | | 7,028 | |
| (1) | Mortgage balance represents face amount of assumed loans and does not represent discounted current value. |
| (2) | None of the amounts are being reported for tax purposes on the installment basis. |
| (3) | The amounts shown do not include a pro rata share of the original offering costs. There were no carried interest received in lieu of commissions in connection with the acquisition of the property. |
| (4) | Cole Credit Property Trust, Inc. recorded a taxable gain of $2.1 million related to the property sale, all of which was a capital gain. |
| (5) | Cole Credit Property Trust, Inc. recorded a taxable gain of $2.8 million related to the sale of three properties, of which $303,000 was a ordinary gain. |
| (6) | This sale represents the disposition of a three property convenience store portfolio that was owned by Cole Credit Property Trust Inc. |
Past performance is not necessarily indicative of future results.
A-9
TABLE V
SALES OR DISPOSALS OF PROPERTIES (UNAUDITED) — (Continued)
| (7) | Cole Credit Property Trust, Inc. recorded a taxable loss of $177,000 related to the property sale, all of which was a capital loss. |
| (8) | Cole Credit Property Trust, Inc. recorded a taxable loss of $126,000 related to the property sale, all of which was a capital loss. |
| (9) | Cole Credit Property Trust II, Inc. recorded a taxable gain of $21.5 million related to the sale of six CMBS, all of which was a capital gain. |
| (10) | Cole Credit Property Trust II, Inc. recorded a taxable gain of $1.2 million related to the unconsolidated joint venture sale, all of which was a capital gain. |
| (11) | This sale represents the disposition of a 10 property self-storage portfolio that was owned by Cole Credit Property Trust II Inc., through an unconsolidated joint venture. Amount included herein represents the distribution payments from the joint venture to Cole Credit Property Trust II, Inc. |
| (12) | Cole Credit Property Trust II, Inc. recorded a taxable gain of $103,000 related to the property sale, all of which was a capital gain. |
| (13) | Cole Credit Property Trust II, Inc. recorded a taxable gain of $534,000 related to the property sale, all of which was a capital gain. |
| (14) | Cole Credit Property Trust III, Inc. recorded a taxable gain of $13.3 million related to the sale of 12 properties, all of which was a capital gain. |
| (15) | This sale represents the disposition of a 12 property drugstore store portfolio that was owned by Cole Credit Property Trust III, Inc. The acquisition of these properties by Cole Credit Property Trust III Inc. were between the months of May 2009 through September 2009. |
| (16) | Cole Credit Property Trust III, Inc. recorded a taxable gain of $3.5 million related to the property sale, all of which was a capital gain. |
| (17) | Cole Credit Property Trust III, Inc. disposed of this property in a like-kind exchange under section 1031 of the Internal Revenue Code and thus, did not recognize a taxable gain on the disposal. |
| (18) | Cole Credit Property Trust III, Inc. recorded a taxable gain of $5.2 million related to the sale of five properties, all of which was a capital gain. |
| (19) | This sale represents the disposition of a five property restaurant portfolio that was owned by Cole Credit Property Trust III, Inc. |
| (20) | Cole Credit Property Trust III, Inc. recorded a taxable gain of $3.0 million related to the property sale, all of which was a capital gain. |
| (21) | Cole Credit Property Trust III, Inc. recorded a taxable gain of $1.5 million related to the sale of four properties, all of which was a capital gain. |
| (22) | This sale represents the disposition of a four property convenience store portfolio that was owned by Cole Credit Property Trust III Inc. The acquisition of these properties were between the months of December 2009 through February 2010. |
| (23) | Cole Credit Property Trust III, Inc. recorded a taxable gain of $6.0 million related to the property sale, all of which was a capital gain. |
Past performance is not necessarily indicative of future results.
A-10
TABLE V
SALES OR DISPOSALS OF PROPERTIES (UNAUDITED) — (Continued)
| (24) | Cole Credit Property Trust III, Inc. recorded a taxable gain of $2.4 million related to the sale of two properties, all of which was a capital gain. |
| (25) | This sale represents the disposition of a two property restaurant portfolio that was owned by Cole Credit Property Trust III Inc. |
| (26) | Cole Credit Property Trust III, Inc. recorded a taxable gain of $1.7 million related to the property sale, all of which was a capital gain. |
| (27) | Cole Credit Property Trust III, Inc. recorded a taxable gain of $12.5 million related to the sale of six CMBS and half of its investment in two CMBS, all of which was a capital gain. |
Past performance is not necessarily indicative of future results.
A-11
APPENDIX B
| | |
COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC. | | 
REAL ESTATE INVESTMENTS® |
| | |
INITIALSUBSCRIPTIONAGREEMENTFORTHEPURCHASEOFCOMMONSTOCK | | 866.907.2653 |
A INVESTMENT(a separate Initial Subscription Agreement is required for each initial investment)
Investors should not sign this Initial Agreement for the offering unless they have received the current final Prospectus.
| 1. | This subscription is in the amount of $ ¨ Check if amount is estimated |
| | ¨ Initial Subscription (minimum $2,500) |
| | ¨ Additional Subscription (complete all sections except for B and Dorcomplete the separate simplified Additional Subscription Agreement) |
| | Existing Cole Account Number |
| 2. | Payment will be made with: ¨ Enclosed check ¨ Funds wired ¨ Funds to follow |
| | | | |
| | | | | ¨ Checking ¨ Savings |
| Financial Institution | | | | |
| | | | | |
| Routing/Transit No. | | | | Account No. |
| B TYPE | OF REGISTRATION(please complete either section 1 or 2 but not both, and section 3, if applicable) |
| 1. | Non-Qualified Registration |
| | ¨ Individual Ownership (one signature required) |
| | ¨ Joint Tenants with Right of Survivorship (all parties must sign) |
| | ¨ Community Property (all parties must sign) |
| | ¨ Tenants-in-Common (all parties must sign) |
| | ¨ Transfer on Death (fill out TOD Form to effect designation) |
| | ¨ Uniform Gifts to Minors Act or Uniform Transfer to Minors Act |
| | (UGMA/UTMA adult custodian signature required) |
| | State of _______________________________________ |
| | Custodian for __________________________________ |
| | ¨ Corporate Ownership (authorized signature and Corporate |
| | Resolution or Cole Corporate Resolution Form required) |
| | ¨ S-corp ¨ C-corp (will default to S-corp if nothing is marked) |
| | ¨ Partnership Ownership (authorized signature and Partnership paperwork or Cole Corporate Resolution Form required) |
| | ¨ LLC Ownership (authorized signature and LLC paperwork or Cole Corporate Resolution Form required) |
| | ¨ Taxable Pension or Profit Sharing Plan |
| | (authorized signature and Plan paperwork required) |
| | ¨ Trust (trustee or grantor signatures and trust documents or |
| | Cole Trustee Certification of Investment Power required) |
Type of Trust: (Specify i.e., Family, Living, Revocable, etc.)
Name of Trust
Date of Trust Tax ID # (if applicable)
¨ Other (specify)
| 2. | Qualified Registration (make check payable to the Custodian) |
| | ¨ Simplified Employee Pension/Trust (S.E.P.) |
| | ¨ Pension or Profit Sharing Plan (exempt under 401(a)) |
| | ¨ Non-custodial ¨ Custodial |
��
| 3. | Custodian or Clearing Firm/Platform Information (send all paperwork directly to the Custodian or Clearing Firm/Platform) |
Name
Street/PO Box
City State Zip
Custodian Tax ID # (provided by Custodian)
Custodial or Clearing Firm/Platform Account #
B-1
| C REGISTRATION | INFORMATION(or Trustees if applicable) |
| | | | |
| | | | | |
| Investor Name | | | | Co-Investor Name (if applicable) |
| | | | | |
| Mailing Address | | | | Mailing Address |
| | | | | |
| City State Zip | | | | City State Zip |
| | | | | |
| Phone Business Phone | | | | Phone Business Phone |
| | | | | |
| Email Address | | | | Email Address |
| | | | | |
| SSN or Tax ID Date of Birth | | | | SSN or Tax ID Date of Birth |
| | |
| | | | | ¨ Cole Employee or Affiliate |
| Street Address (if different from mailing address or mailing address is a PO Box) | | | | |
| | | | | |
| City State Zip | | | | |
| | | | |
| D DISTRIBUTION | INSTRUCTIONS(will default to Address of Record or Custodian or Clearing Firm/Platform if nothing is marked) |
FOR CUSTODIAL OR CLEARING FIRM/PLATFORM ACCOUNTS:
| | ¨ Custodian or Clearing Firm/Platform of Record |
| | ¨ Reinvest pursuant to Distribution Reinvestment Plan |
FOR NON-CUSTODIAL OR NON-CLEARING FIRM/PLATFORM ACCOUNTS:
| | ¨ Mail to Address of Record |
| | ¨ Reinvest pursuant to Distribution Reinvestment Plan |
| | | | |
| | | | | ¨ Checking ¨ Savings |
| Financial Institution | | | | |
| | | | | |
| Routing/Transit No. | | | | Account No. |
¨ Checkif banking information is same as provided in Section A-2 | | | | |
| ¨ Mail to Brokerage Account or Third Party | | | | |
| | | | | |
| Payee Name | | | | Mailing Address |
| | | | | |
| Account No. | | | | City State Zip |
By signing this agreement, I authorize Cole Real Estate Income Strategy (Daily NAV), Inc. to deposit distributions into the account specified in Section D, and to debit that account in the amount of any distribution deposited in error. If I withdraw deposits made in error, I authorize Cole Real Estate Income Strategy (Daily NAV), Inc. to retain future distributions until the erroneous deposits are recovered. This authorization is effective until terminated in writing by either party.
B-2
E INVESTOR(S) SIGNATURES(Investor(s) must initial each of sections 1-6 and those sections of 7-14 as appropriate)
I (we) (or, in the case of fiduciary accounts, the person authorized to sign on my (our) behalf) hereby acknowledge and/or represent the following:
INVESTOR | CO-INVESTOR
| | | 1. I (we) have received the final Prospectus, whether over the Internet, on a CD-ROM, paper copies, or any other delivery method, relating to the shares of Cole Real Estate Income Strategy (Daily NAV), Inc. (Cole Income NAV) at least five business days before signing this Subscription Agreement. |
| | | 2. Excluding home, home furnishings and automobiles, I (we) either: (i) have a net worth of at least $70,000 and had during the last year or estimate that I (we) will have in the current year gross income of at least $70,000; or (ii) have a net worth of at least $250,000. In the case of sales to fiduciary accounts, the specific requirements shall be met by the beneficiary, the fiduciary account or by the donor or grantor who directly or indirectly supplies the funds for the purchase of the shares. |
| | | 3. I am (we are) purchasing the shares for my (our) own account, or if I am (we are) purchasing shares on behalf of a trust or other entity of which I am (we are) trustee(s) or authorized agent(s), I (we) have due authority to execute this Subscription Agreement and do hereby legally bind the trust or other entity of which I am (we are) trustee(s) or authorized agent(s). |
| | | 4. I (we) acknowledge that this investment is not guaranteed, and may lose value. |
| | | 5. I (we) acknowledge that distributions are not guaranteed. |
| | | 6. I (we) acknowledge that the shares are not liquid. |
| | | 7. ForAlabamaresidents: My (our) liquid net worth is at least 10 times my (our) investment in Cole Income NAV and similar programs. |
| | | 8. ForArkansas residents: By signing below, you are not representing that you have read or understand this agreement. |
| | | 9. ForCaliforniaresidents: I (we) either: (i) have a net worth of at least $75,000 and had during the last year or estimate that I (we) will have in the current year gross income of at least $75,000; or (ii) have a net worth of at least $250,000. In addition, my (our) investment in Cole Income NAV does not exceed ten percent (10%) of my (our) net worth. |
| | | 10. ForIowa and New Mexicoresidents: My (our) investment in Cole Income NAV and its affiliates does not exceed 10% of my (our) liquid net worth. |
| | | 11. ForKansas and Massachusettsresidents: I (we) acknowledge that it is recommended that I (we) should invest no more than 10% of my (our) “liquid net worth” (as defined in the Prospectus for Kansas and Massachusetts investors) in Cole Income NAV and the securities of similar direct participation programs. |
| | | 12. ForKentucky, Michigan, Oregon and Pennsylvaniaresidents: My (our) liquid net worth is at least 10 times my (our) maximum investment in Cole Income NAV. |
| | | 13. ForMaineresidents: I (we) either: (i) have a net worth of at least $250,000, or (ii) have an annual gross income of at least $70,000 and a minimum net worth of $70,000. In addition, my (our) investment in Cole Income NAV and its affiliates does not exceed ten percent (10%) of my (our) liquid net worth. |
| | | 14. ForNebraskaresidents: Excluding home, furnishings and automobiles, I (we) either: (i) have a minimum net worth of $100,000 and an annual income of $70,000, or (ii) have a minimum net worth of $350,000. In addition, my (our) investment in Cole Income NAV does not exceed 10% of my (our) net worth. |
| | | 15. ForNorth Dakotaresidents: My (our) liquid net worth is at least ten times my (our) investment in Cole Income NAV and its affiliates. |
| | | 16. ForOhio residents: My (our) investment in Cole Income NAV, its affiliates and other non-traded real estate investment programs does not in the aggregate exceed 10% of my (our) liquid net worth. “Liquid net worth” means that portion of net worth (total assets exclusive of home, home furnishings and automobiles minus total liabilities) that is comprised of cash, cash equivalents and readily marketable securities. |
| | | 17. ForTennessee residents: I (we) have (excluding the value of my (our) home, home furnishings and automobiles) either (i) a minimum net worth of at least $500,000, or (ii) an annual gross income of at least $100,000 and a minimum net worth of at least $100,000. |
| | | 18. ForTexas residents: I (we) have had (excluding the value of the my (our) home, home furnishings and automobiles), during the last tax year, or I (we) estimate that I (we) will have during the current tax year, (a) a minimum net worth of $100,000 and a minimum annual gross income of $100,000, or (b) a minimum net worth of $500,000. |
B-3
¨ By checking here I confirm I would like to go green and no longer receive in paper any documents that Cole can send to me electronically. If I decide later that I want to receive documents in paper, I can contact Cole Investor Services at 1-800-907-2653
|
SUBSTITUTE W-9: I HEREBY CERTIFYunder penalty of perjury (i) that the taxpayer identification number shown on this Subscription Agreement is true, correct and complete, (ii) that I am not subject to backup withholding either because I have not been notified that I am subject to backup withholding as a result of a failure to report all interest or distributions, or the Internal Revenue Service has notified me that I am no longer subject to backup withholding, and (iii) I am a U.S. person. |
You should not invest in Cole Income NAV unless you have read and understood this agreement and the Prospectus referred to above and understand the risks associated with an investment in Cole Income NAV. In deciding to invest in Cole Income NAV, you should rely only on the information contained in the Prospectus, and not on any other information or representations from any other person or source. Cole Income NAV and each person selling shares of Cole Income NAV common stock shall be responsible for making every reasonable effort to determine that such purchase of shares is a suitable and appropriate investment for each investor, based on the information provided by the prospective investor regarding the investor’s financial situation and investment objectives. In no event may we accept a subscription of shares until at least five business days after the date on which the subscriber receives the final prospectus. You will receive a confirmation of your purchase.
Notice is hereby given to each investor that by executing this agreement you are not waiving any rights you may have under the Securities Act of 1933, as amended, or any state securities laws.
| | | | |
| | | | | |
| Investor’s Signature Date | | | | Custodial Signature Date |
| | |
| | | | | |
| Co-Investor’s Signature Date | | | | |
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| F REGISTERED | INVESTMENT ADVISOR (RIA) REPRESENTATIVE(to be completed by selling RIA Representative) |
| | | | | | |
| 1. | | | | 2. | | |
| | Name of RIA Representative | | | | Name of RIA Firm |
| | | |
| | | | | | SEC Registered RIA ¨ Yes ¨ No State Registered RIA ¨ Yes ¨ No State Registered |
| | Mailing Address | | | |
| | City State Zip | | | | |
| | Phone Email Address Have you changed firm affiliation (since last purchase)? | | | | RIA IARD |
| | ¨ Yes ¨ No | | | | Name of Clearing Firm |
| | | | | | Name of Affiliate Broker Dealer |
G REGISTERED REPRESENTATIVE (to be completed by selling Registered Representative)
| | | | | | |
| 1. | | | | 2. | | |
| | Name of Registered Representative | | | | Name of Broker-Dealer |
| | Rep ID # | | | | Rep CRD # Have you changed firm affiliation (since last purchase)? |
| | Mailing Address | | | | ¨ Yes ¨ No |
| | City State Zip | | | | |
| | Phone Email Address | | | | |
H REPRESENTATIVE SIGNATURES
Based on the information I obtained from the investor regarding the investor’s financial situation and investment objectives, I hereby certify to Cole Capital Corporation, Cole Capital Advisors, Inc. and Cole Income NAV that I have reasonable grounds for believing that the purchase of the shares by the investor in Cole Income NAV is a suitable and appropriate investment for this investor.
| | | | |
| Signature of Registered or RIA Representative | | | | Signature of Broker/Dealer or Clearing Firm/Platform |
¨ I am completing and signing this application pursuant to a power-of-attorney from the investor. I hereby certify that such power-of-attorney is legally valid and includes within its scope my completion and execution of this application on behalf of the investor.
| | | | | | |
ONCE COMPLETE, PLEASE DELIVER THIS FORM TO: Via Fax (toll free):
1-855-394-8956 | | Via Regular Mail: COLE INCOME NAV DST Systems, Inc.
P.O. Box 219312
Kansas City, MO 64121-9312 | | Via Overnight/Express Mail: COLE INCOME NAV DST Systems, Inc.
430 West 7th Street
Kansas City, MO 64105 | |  |
| | |
| © 2011 Cole Capital Advisors, Inc. All rights reserved | | CINAV_AGMT_01 (07-11) |
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APPENDIX C
| | |
COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC. | |
REAL ESTATE INVESTMENTS® |
ADDITIONAL SUBSCRIPTION AGREEMENT FOR THE PURCHASE OF COMMON STOCK | | 866.907.2653 |
This form may be used by any current investor in Cole Real Estate Income Strategy (Daily NAV), Inc. (Cole Income NAV), who desires to purchase additional shares of Cole Income NAV and who purchased their shares directly from Cole Income NAV. Investors who acquired shares other than through use of an Initial Subscription Agreement (e.g., through a transfer of ownership or TOD) and who wish to make additional investments must complete the Cole Income NAV Initial Subscription Agreement.
A INVESTMENT (a completed Initial Subscription Agreement is required for each initial investment)
1. This subscription is in the amount of $ and is an¨ Additional Subscription
| | | | | | |
| | ¨ Check if amount is estimated | | |
2. Payment will be made with: | | ¨ Enclosed check | | ¨ Funds wired | | ¨ Funds to follow |
¨ ACH | | | | | | |
| | | | | | |
| | | | | | ¨ Checking ¨ Savings |
| | Financial Institution | | | | |
| | Routing/Transit No. | | | | Account No. |
B REGISTRATION INFORMATION
| | | | | | |
| | Existing Cole Account Registration (name of Account) | | | | SSN or Tax ID |
| | Existing Cole Account Number | | | | |
C INVESTOR(S) SIGNATURES(Investor(s) must initial each of sections 1-6 and those sections of 7-14 as appropriate)
I (we) (or, in the case of fiduciary accounts, the person authorized to sign on my (our) behalf) hereby acknowledge and/or represent the following:
INVESTOR | CO-INVESTOR
| | | 1. I (we) have received the final Prospectus, whether over the Internet, on a CD-ROM, paper copies, or any other delivery method, relating to the shares of Cole Income NAV at least five business days before signing this Subscription Agreement. |
| | | 2. Excluding home, home furnishings and automobiles, I (we) either: (i) have a net worth of at least $70,000 and had during the last year or estimate that I (we) will have in the current year gross income of at least $70,000; or (ii) have a net worth of at least $250,000. In the case of sales to fiduciary accounts, the specific requirements shall be met by the beneficiary, the fiduciary account or by the donor or grantor who directly or indirectly supplies the funds for the purchase of the shares. |
| | | 3. I am (we are) purchasing the shares for my (our) own account, or if I am (we are) purchasing shares on behalf of a trust or other entity of which I am (we are) trustee(s) or authorized agent(s), I (we) have due authority to execute this Subscription Agreement and do hereby legally bind the trust or other entity of which I am (we are) trustee(s) or authorized agent(s). |
| | | 4. I (we) acknowledge that this investment is not guaranteed, and may lose value. |
| | | 5. I (we) acknowledge that distributions are not guaranteed. |
| | | 6. I (we) acknowledge that the shares are not liquid. |
| | | 7. ForAlabamaresidents: My (our) liquid net worth is at least 10 times my (our) investment in Cole Income NAV and similar programs. |
| | | 8. ForArkansas residents: By signing below, you are not representing that you have read or understand this agreement. |
| | | 9. ForCaliforniaresidents: I (we) either: (i) have a net worth of at least $75,000 and had during the last year or estimate that I (we) will have in the current year gross income of at least $75,000; or (ii) have a net worth of at least $250,000. In addition, my (our) investment in Cole Income NAV does not exceed ten percent (10%) of my (our) net worth. |
| | | 10. ForIowa and New Mexicoresidents: My (our) investment in Cole Income NAV and its affiliates does not exceed 10% of my (our) liquid net worth. |
| | | 11. ForKansas and Massachusettsresidents: I (we) acknowledge that it is recommended that I (we) should invest no more than 10% of my (our) “liquid net worth” (as defined in the Prospectus for Kansas and Massachusetts investors) in Cole Income NAV and the securities of similar direct participation programs. |
| | | 12. ForKentucky, Michigan, Oregon and Pennsylvaniaresidents: My (our) liquid net worth is at least 10 times my (our) maximum investment in the Cole Income NAV. |
C-1
| | | 13. ForMaineresidents: I (we) either: (i) have a net worth of at least $250,000, or (ii) have an annual gross income of at least $70,000 and a minimum net worth of $70,000. In addition, my (our) investment in Cole Income NAV and its affiliates does not exceed ten percent (10%) of my (our) liquid net worth. |
| | | 14. ForNebraskaresidents: Excluding home, furnishings and automobiles, I (we) either: (i) have a minimum net worth of $100,000 and an annual income of $70,000, or (ii) have a minimum net worth of $350,000. In addition, my (our) investment in Cole Income NAV does not exceed 10% of my (our) liquid net worth. |
| | | 15. ForNorth Dakotaresidents: My (our) liquid net worth is at least ten times my (our) investment in Cole Income NAV and its affiliates. |
| | | 16. ForOhio residents: My (our) investment in Cole Income NAV, its affiliates and other non-traded real estate investment programs does not in the aggregate exceed 10% of my (our) liquid net worth. “Liquid net worth” means that portion of net worth (total assets exclusive of home, home furnishings and automobiles minus total liabilities) that is comprised of cash, cash equivalents and readily marketable securities. |
| | | 17. ForTennessee residents: I (we) have (excluding the value of my (our) home, home furnishings and automobiles) either (i) a minimum net worth of at least $500,000, or (ii) an annual gross income of at least $100,000 and a minimum net worth of at least $100,000. |
| | | 18. ForTexas residents: I (we) have had (excluding the value of the my (our) home, home furnishings and automobiles), during the last tax year, or I (we) estimate that I (we) will have during the current tax year, (a) a minimum net worth of $100,000 and a minimum annual gross income of $100,000, or (b) a minimum net worth of $500,000. |
¨ By checking here I confirm I would like to go green and no longer receive in paper any documents that Cole can send to me electronically. If I decide later that I want to receive documents in paper, I can contact Cole Investor Services at 1-800-907-2653.
|
| SUBSTITUTE W-9: I HEREBY CERTIFYunder penalty of perjury (i) that the taxpayer identification number shown on this Subscription Agreement is true, correct and complete, (ii) that I am not subject to backup withholding either because I have not been notified that I am subject to backup withholding as a result of a failure to report all interest or distributions, or the Internal Revenue Service has notified me that I am no longer subject to backup withholding, and (iii) I am a U.S. person. |
You should not invest in Cole Income NAV unless you have read and understood this agreement and the Prospectus referred to above and understand the risks associated with an investment in Cole Income NAV. In deciding to invest in Cole Income NAV, you should rely only on the information contained in the Prospectus, and not on any other information or representations from any other person or source. Cole Income NAV and each person selling shares of Cole Income NAV common stock shall be responsible for making every reasonable effort to determine that such purchase of shares is a suitable and appropriate investment for each investor, based on the information provided by the prospective investor regarding the investor’s financial situation and investment objectives. In no event may we accept a subscription of shares until at least five business days after the date on which the subscriber receives the final prospectus. You will receive a confirmation of your purchase.
Notice is hereby given to each investor that by executing this agreement you are not waiving any rights you may have under the Securities Act of 1933, as amended, or any state securities laws.
| | | | | | |
Investor’s Signature | | Date | | | | Custodial Signature Date |
Co-Investor’s Signature | | Date | | | | |
D REGISTERED INVESTMENT ADVISOR (RIA) REPRESENTATIVE (to be completed by selling RIA Representative)
| | | | |
Name of RIA Representative | | | | RIA IARD |
E REGISTERED REPRESENTATIVE (to be completed by selling Registered Representative)
| | | | |
Name of Registered Representative | | | | Rep and Branch ID # |
F REPRESENTATIVE SIGNATURES
Based on the information I obtained from the investor regarding the investor’s financial situation and investment objectives, I hereby certify to Cole Capital Corporation, Cole Capital Advisors, Inc. and Cole Income NAV that I have reasonable grounds for believing that the purchase of the shares by the investor in Cole Income NAV is a suitable and appropriate investment for this investor.
| | | | |
Signature of Registered or RIA Representative | | | | Signature of Broker/Dealer or Clearing Firm/Platform |
¨ I am completing and signing this application pursuant to a power-of-attorney from the investor. I hereby certify that such power-of-attorney is legally valid and includes within its scope my completion and execution of this application on behalf of the investor.
| | | | |
ONCE COMPLETE, PLEASE DELIVER THIS FORM TO: Via Fax (toll free): 1-855-394-8956 | | Via Regular Mail: Cole Income NAV DST Systems, Inc. P.O. Box 219312 Kansas City, MO 64121-9312 | | Via Overnight/Express Mail: Cole Income NAV DST Systems, Inc. 430 West 7th Street Kansas City, MO 64105 |
| | |
© 2011 Cole Capital Advisors, Inc. All rights reserved | | CINAV_AI_AGMT_01 (08-11) |
C-2
Appendix D
SYSTEMATIC INVESTMENT PROGRAM
Complete this form if you wish to purchase shares of Cole Real Estate Income Strategy (Daily NAV), Inc. (“Cole REIT”) at regular intervals through a transfer of funds from your bank account directly to your Cole REIT investment account. If you did not acquire your shares from Cole REIT (e.g., you acquired your shares through a transfer of ownership or a transfer on death) and you wish to purchase shares through the Systematic Investment Program, you must complete the Cole REIT subscription agreement.
PLEASE NOTE:
| | • | | Cole REIT will pay distributions per your existing instructions and if you participate in the Distribution Reinvestment Plan, distributions earned from shares purchased pursuant to the Systematic Investment Program will be reinvested pursuant to the Distribution Reinvestment Plan.To change distribution instructions, please complete the [Account Update Form]. |
| | • | | The Systematic Investment Program will terminate upon the closing of the Cole Real Estate Income Strategy (Daily NAV), Inc. offering. |
| | • | | The Systematic Investment Program is not available to Alabama, Maine or Nebraska investors. |
| | |
| Please Send To: Cole Real Estate Income Strategy (Daily NAV), Inc., c/o DST Systems, Inc. | | or Fax to: [Fax number] |
If you have any questions, please call [phone number].
|
1. INVESTOR INFORMATION (MUST MIRROR THE ORIGINAL SUBSCRIPTION AGREEMENT — SSN & DOB REQUIRED) |
| | | | | | | | | | | | | | | | | | | | | | |
| Investor 1 Name | | | | SSN/Tax ID | | | | DOB | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Investor 2 Name | | | | SSN/Tax ID | | | | DOB | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Street Address | | | | City | | | | State | | | | Zip Code | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Optional Mailing Address | | | | City | | | | State | | | | Zip Code | | |
| | | | | | | | | | |
| Phone (day) | | | | | | Phone (evening) | | | | |
| | | | | | | | | | |
| Email | | | | Account Number | | |
|
2. INVESTMENT INFORMATION |
| | | | | | |
Monthly Investment Amount ($100/monthly minimum): | | $ | | | | |
Timing of Withdrawal: (Check One)
¨ 2nd Day of Each Month –OR–
¨ 16th Day of Each Month
| | | | | | |
Start Date (month/day/year): | | | | |
| | | | | | |
Financial Institution Name | | |
| | | | | | | | | | |
Account Number | | | | ¨ | Checking | | | ¨ | Savings | |
D-1
For electronic fund transfers, signatures of bank account owners are required exactly as they appear on bank records. If account registration at the bank differs from account registration at Cole REIT, all bank account owners must sign below.
| | | | | | | | |
| | | | | | | | | |
| Signature of Account Owner | | Date | | | | Signature of joint account owner (if applicable | | Date |
*PLEASE ATTACH A PRE-PRINTED VOIDED CHECK HERE*
*The services cannot be established without a pre-printed voided check*
|
| 3. SUBSCRIPTION AGREEMENT ACKNOWLEDGMENT |
By signing Section 4 below, you represent to Cole REIT that (i) the agreements, representations and warranties made in the subscription agreement for your initial investment in shares of Cole REIT, which agreements, representations and warranties are incorporated herein, apply to all purchases made hereby; (ii) you have received a copy of the prospectus of Cole REIT, as amended and supplemented through the date hereof (the “Prospectus”); and (iii) you have (a) a minimum net worth (exclusive of home, home furnishings and personal automobiles) of at least $250,000 or (b) a minimum net worth (as previously described) of at least $70,000 and a minimum annual gross income of at least $70,000,and, if applicable, you meet the higher net worth and gross income requirements imposed by your state of primary residence as set forth in the Prospectus under “Suitability Standards.”
MUST BE SIGNED BY ALL TITLEHOLDERS
| | | | | | | | |
| | | | | | | | | |
| Signature of Investor | | Date | | | | Signature of Joint Owner, or
for Qualified Plans, of Trustee/Custodian | | Date |
You may not purchase additional shares unless you meet the applicable suitability requirements set forth in the Prospectus at the time of purchase. Please consult your Financial Representative if you have had any material changes which might affect your ability to meet the applicable suitability requirements.
D-2
Appendix E
DISTRIBUTION REINVESTMENT PLAN
COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.
EFFECTIVE AS OF SEPTEMBER 28, 2011
Cole Real Estate Income Strategy (Daily NAV), Inc., a Maryland corporation (the “Company”), has adopted this Distribution Reinvestment Plan (the “Plan”), to be administered by the Company or an unaffiliated third party (the “Administrator”) as agent for participants in the Plan (“Participants”), on the terms and conditions set forth below.
1. Election to Participate. Any holder of shares of common stock of the Company, par value $.01 per share (the “Shares”), may become a Participant in the Plan by making a written election to participate in the Plan on such purchaser’s subscription agreement at the time of subscription for Shares or by completing and executing an authorization form obtained from the Administrator or any other appropriate documentation as may be acceptable to the Administrator. Participants in the Plan generally are required to have the full amount of their cash distributions (other than “Excluded Distributions” as defined below) with respect to all Shares owned by them reinvested pursuant to the Plan. However, the Administrator shall have the sole discretion, upon the request of a Participant, to accommodate a Participant’s request for less than all of the Participant’s Shares to be subject to participation in the Plan.
2. Distribution Reinvestment. The Administrator will receive all cash distributions (other than “Excluded Distributions”) paid by the Company with respect to Shares of Participants (collectively, the “Distributions”). Participation will commence (a) immediately, in the case of Participants who make a written election to participate in the Plan on their subscription agreement at the time of their initial subscription for Shares; or (b) in the case of Participants who elect to participate in the Plan subsequent to completing their initial subscription agreement, with the next Distribution payment after receipt of the Participant’s election, provided it is received at least ten days prior to the last day of the period to which such Distribution relates. The election will apply to all Distributions attributable to such period and to all periods thereafter, unless and until termination of participation in the Plan, in accordance with Section 9. As the Distribution Period (as defined below) is presently a calendar month, a written election to participate pursuant to clause (b) above must be received by the Administrator at least ten days prior to the last business day of the month, in order to become a Plan Participant with respect to that month’s Distributions. If the period for Distribution payments shall be changed, then this paragraph shall also be changed, without the need for advance notice to Participants. As used in this Plan, the term “Excluded Distributions” shall mean those cash or other distributions designated as Excluded Distributions by the Company’s board of directors.
3. General Terms of Plan Investments.
The Administrator will apply all Distributions subject to this Plan, as follows:
(a) The Administrator will invest Distributions in Shares at a per share price equal to the Company’s net asset value per Share on the date the Distribution is paid.
(b) Selling commissions will not be paid for the Shares purchased pursuant to the Plan.
(c) Dealer manager fees will not be paid for the Shares purchased pursuant to the Plan.
(d) For each Participant, the Administrator will maintain an account which shall reflect for each period in which Distributions are paid (a “Distribution Period”) the Distributions received by the Administrator on behalf of such Participant and the number of Shares purchased on behalf of such Participant pursuant to the Plan.
(e) Distributions shall be invested in Shares by the Administrator on the payment date of such Distributions to the extent Shares are available for purchase under the Plan. If sufficient Shares are not available, any such funds that have not been invested in Shares will be distributed to Participants.
E-1
(f) Participants may acquire fractional Shares, computed to four decimal places, so that 100% of the Distributions will be used to acquire Shares. The ownership of the Shares shall be reflected on the books of the Company or its transfer agent.
(g) A Participant will not be able to acquire Shares under the Plan to the extent that such purchase would cause the Participant to exceed the ownership limits set forth in the Company’s charter, as amended, unless exempted by the board of directors.
4. Absence of Liability. Neither the Company nor the Administrator shall have any responsibility or liability as to the value of the Shares or any change in the value of the Shares acquired for the Participant’s account. Neither the Company nor the Administrator shall be liable for any act done in good faith, or for any good faith omission to act hereunder.
5. Suitability. Each Participant shall notify the Administrator in the event that, at any time during his participation in the Plan, there is any material change in the Participant’s financial condition, as compared to information previously provided to the stockholder’s broker or financial advisors, or inaccuracy of any representation under the subscription agreement for the Participant’s initial purchase of Shares. A material change shall include any anticipated or actual material decrease in net worth or annual gross income, or any other material change in circumstances that may be likely to cause the Participant to fail to meet the minimum income and net worth standards set forth in the Company’s prospectus for the Participant’s initial purchase of Shares or cause the Participant’s broker or financial advisor to determine that an investment in Shares is no longer suitable and appropriate for the Participant.
6. Reports to Participants. Within ninety (90) days after the end of each calendar year, the Administrator will mail to each Participant a statement of account describing, as to such Participant, the Distributions reinvested during the prior year, the number of Shares purchased pursuant to the Plan during the prior year, the per Share purchase price for such Shares and the total number of Shares purchased on behalf of the Participant under the Plan. Each statement also shall advise the Participant that, in accordance with Section 5 hereof, the Participant is required to notify the Administrator in the event there is any material change in the Participant’s financial condition or if any representation made by the Participant under the subscription agreement for the Participant’s initial purchase of Shares becomes inaccurate. Tax information regarding a Participant’s participation in the Plan will be sent to each Participant by the Company or the Administrator at least annually.
7. Taxes. Taxable Participants may incur a tax liability for Distributions even though they have elected not to receive their Distributions in cash but rather to have their Distributions reinvested in Shares under the Plan.
8. [reserved]
9. Termination.
(a) A Participant may terminate or modify his participation in the Plan at any time by written notice to the Administrator. To be effective for any Distribution, such notice must be received by the Administrator at least ten days prior to the last day of the Distribution Period to which it relates.
(b) As the Distribution Period is presently a calendar month, a written election to terminate must be received by the Administrator at least ten days prior to the last business day of the month, in order to terminate participation in the Plan for that month. If the period for Distribution payments shall be changed, then this paragraph shall also be changed, without the need for advance notice to Participants.
(c) A Participant’s transfer of Shares will terminate participation in the Plan with respect to such transferred Shares as of the first day of the Distribution Period in which such transfer is effective, unless the transferee of such Shares in connection with such transfer demonstrates to the Administrator that such transferee meets the requirements for participation hereunder and affirmatively elects participation by delivering an executed authorization form or other instrument required by the Administrator.
E-2
10. State Regulatory Restrictions. The Administrator is authorized to deny participation in the Plan to residents of any state or foreign jurisdiction that imposes restrictions on participation in the Plan that conflict with the general terms and provisions of this Plan, including, without limitation, any general prohibition on the payment of broker-dealer commissions for purchases under the Plan.
11. Amendment or Termination by Company.
(a) The terms and conditions of this Plan may be amended by the Company at any time, including but not limited to an amendment to the Plan to substitute a new Administrator to act as agent for the Participants, by mailing an appropriate notice at least ten (10) days prior to the effective date thereof to each Participant, provided, however, the Company may not amend the Plan to (i) provide for selling commissions or dealer manager fees to be paid for shares purchased pursuant to this Plan or (ii) to revoke a Participant’s right to terminate or modify his participation in the Plan.
(b) The Administrator may terminate a Participant’s individual participation in the Plan and the Company may terminate the Plan itself, at any time by providing ten (10) days’ prior written notice to a Participant, or to all Participants, as the case may be.
(c) After termination of the Plan or termination of a Participant’s participation in the Plan, the Administrator will send to each Participant a check for the amount of any Distributions in the Participant’s account that have not been invested in Shares. Any future Distributions with respect to such former Participant’s Shares made after the effective date of the termination of the Participant’s participation will be sent directly to the former Participant.
12. Governing Law. This Plan and the Participants’ election to participate in the Plan shall be governed by the laws of the State of Maryland.
13. Notice. Any notice or other communication required or permitted to be given by any provision of this Plan shall be in writing and, if to the Administrator, addressed to Investor Services Department, 2555 East Camelback Road, Suite 400, Phoenix, Arizona 85016, or such other address as may be specified by the Administrator by written notice to all Participants. Notices to a Participant may be given by letter addressed to the Participant at the Participant’s last address of record with the Administrator. Each Participant shall notify the Administrator promptly in writing of any changes of address.
E-3
Cole Real Estate Income Strategy (Daily NAV), Inc.
Maximum Offering of $4,000,000,000 in Shares of Common Stock
Minimum Offering of $10,000,000 in Shares of Common Stock
P R O S P E C T U S
May 1, 2013
You should rely only on the information contained in this prospectus. No dealer, salesperson or other individual has been authorized to give any information or to make any representations that are not contained in this prospectus. If any such information or statements are given or made, you should not rely upon such information or representation. This prospectus does not constitute an offer to sell any securities other than those to which this prospectus relates, or an offer to sell, or a solicitation of an offer to buy, to any person in any jurisdiction where such an offer or solicitation would be unlawful. This prospectus speaks as of the date set forth above. You should not assume that the delivery of this prospectus or that any sale made pursuant to this prospectus implies that the information contained in this prospectus will remain fully accurate and correct of any time subsequent to the date of this prospectus.
INAV-PRO-03
COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.
SUPPLEMENT NO. 5 DATED JULY 12, 2013
TO THE PROSPECTUS DATED MAY 1, 2013
This document supplements, and should be read in conjunction with, the prospectus of Cole Real Estate Income Strategy (Daily NAV), Inc. dated May 1, 2013. This Supplement No. 5 supersedes and replaces all previous supplements to the prospectus. Unless otherwise defined in this supplement, capitalized terms used in this supplement shall have the same meanings as set forth in the prospectus.
The purpose of this supplement is to describe the following:
| | (1) | the status of the offering of shares of Cole Real Estate Income Strategy (Daily NAV), Inc.; |
| | (2) | the change of our sponsor’s trade name from Cole Real Estate Investments to Cole Capital; |
| | (3) | recent real property investments; |
| | (4) | selected financial data as of March 31, 2013; |
| | (5) | an update to our historical net asset value (“NAV”) per share information; |
| | (6) | an update to the compensation, fees and reimbursements payable to our advisor and its affiliates as of March 31, 2013; |
| | (7) | an update to our distribution policy and distributions disclosure as of March 31, 2013; |
| | (8) | an update to our share redemptions as of March 31, 2013; |
| | (9) | information regarding the share redemption limit; and |
| | (10) | the incorporation of certain historical information by reference into our prospectus. |
Status of Our Public Offering
The registration statement for our initial public offering of $4,000,000,000 in shares of common stock was declared effective by the Securities and Exchange Commission on December 6, 2011. Of this amount, we are offering $3,500,000,000 in shares in a primary offering and $500,000,000 in shares pursuant to our distribution reinvestment plan. As of July 10, 2013, we had accepted investors’ subscriptions for, and issued, approximately 2.7 million shares of our common stock in the offering (including shares issued pursuant to our distribution reinvestment plan), resulting in gross proceeds to us of approximately $43.2 million. We have special escrow provisions for residents of Pennsylvania which have not been satisfied as of July 10, 2013; therefore, we have not accepted subscriptions from residents of Pennsylvania.
We are structured as a perpetual-life, non-exchange traded REIT. This means that, subject to regulatory approval of our filing for additional offerings, we will be selling shares of our common stock on a continuous basis and for an indefinite period of time. We will endeavor to take all reasonable actions to avoid interruptions in the continuous offering of our shares of common stock. There can be no assurance, however, that we will not need to suspend our continuous offering. The offering must be registered in every state in which we offer or sell shares. Generally, such registrations are for a period of one year. Thus, we may have to stop selling shares in any state in which our registration is not renewed or otherwise extended annually. We reserve the right to terminate this offering at any time and to extend our offering term to the extent permissible under applicable law.
Name Change of Our Sponsor
On June 4, 2013, Cole Credit Property Trust III, Inc. (“Cole Credit Property Trust III”) changed its name to Cole Real Estate Investments, Inc. Throughout our prospectus, our sponsor is called “Cole Real Estate Investments,” a trade name used to refer to a group of affiliated entities directly or indirectly controlled by Cole Real Estate Investments, Inc. As a result of Cole Credit Property Trust III’s name change to Cole Real Estate Investments, Inc., our sponsor’s trade name has been changed to “Cole Capital.” Therefore, all references to Cole Real Estate Investments in our prospectus now refer to Cole Capital. In addition, all references to Cole Credit Property Trust III, Inc. in our prospectus now refer to Cole Real Estate Investments, Inc.
Recent Real Property Investments
The following information supplements, and should be read in conjunction with, the subsection of our prospectus captioned “Prospectus Summary — Description of Real Estate Investments” beginning on page 21 of the prospectus.
Description of Real Estate Investments
As of July 10, 2013, our investment portfolio consisted of 20 properties located in 14 states, consisting of 309,051 gross rentable square feet of commercial space, including the square feet of buildings that are on land subject to ground leases. We acquired six properties between April 12, 2013 and July 10, 2013, which are listed below in order of their date of acquisition:
| | | | | | | | | | | | | | |
Property Description | | Type | | Number of
Tenants | | Tenant | | Rentable
Square Feet (1) | | | Purchase Price | |
Sunoco — Merritt Island, FL | | Convenience Store | | 1 | | Sunoco, Inc. (R&M) | | | 2,353 | | | $ | 2,809,105 | |
Kum & Go — Cedar Rapids, IA | | Convenience Store | | 1 | | Kum & Go, L.C. | | | 4,973 | | | | 2,566,000 | |
Natural Grocers — Prescott, AZ | | Grocery | | 1 | | Vitamin Cottage Natural Food Markets, Inc. | | | 12,848 | | | | 3,925,000 | |
FedEx — Elko, NV | | Logistics | | 1 | | FedEx Ground Package System, Inc. | | | 11,482 | | | | 2,724,000 | |
Mattress Firm — Gadsden, AL | | Home Furnishings | | 1 | | Mattress Firm, Inc. | | | 7,200 | | | | 2,030,769 | |
Dollar General — Sardis City, AL | | Discount Store | | 1 | | Dolgencorp, LLC | | | 12,406 | | | | 1,701,767 | |
| | | | | | | | | | | | | | |
| | | | | | | | | 51,262 | | | $ | 15,756,641 | |
| | | | | | | | | | | | | | |
| (1) | Includes square feet of buildings that are on land subject to ground leases, if any. |
The following information supplements and should be read in conjunction with the section of our prospectus captioned “Investment Objectives, Strategy and Policies — Real Property Investments” beginning on page 83 of the prospectus.
Real Property Investments
As of July 10, 2013, we, through separate wholly-owned limited liability companies and limited partnerships, owned 20 properties located in 14 states, consisting of 309,051 gross rentable square feet of commercial space, including the square feet of buildings that are on land subject to ground leases. The properties were acquired through the use of proceeds from our initial public offering and proceeds from our line of credit. We acquired six properties between April 12, 2013 and July 10, 2013, which are listed below in order of their date of acquisition:
| | | | | | | | | | | | | | | | | | | | | | |
Property Description | | Date Acquired | | Year
Built | | | Purchase Price
(1) | | | Initial
Yield (2) | | | Average
Yield(3) | | | Physical
Occupancy | |
Sunoco — Merritt Island, FL | | April 12, 2013 | | | 2008 | | | $ | 2,809,105 | | | | 7.45 | % | | | 9.83 | % | | | 100 | % |
Kum & Go — Cedar Rapids, IA | | May 3, 2013 | | | 2011 | | | | 2,566,000 | | | | 7.14 | % | | | 8.04 | % | | | 100 | % |
Natural Grocers — Prescott, AZ | | May 6, 2013 | | | 2012 | | | | 3,925,000 | | | | 7.76 | % | | | 7.82 | % | | | 100 | % |
FedEx — Elko, NV | | May 28, 2013 | | | 2012 | | | | 2,724,000 | | | | 7.10 | % | | | 7.10 | % | | | 100 | % |
Mattress Firm — Gadsden, AL | | June 10, 2013 | | | 2012 | | | | 2,030,769 | | | | 7.80 | % | | | 8.41 | % | | | 100 | % |
Dollar General — Sardis City, AL | | June 26, 2013 | | | 2012 | | | | 1,701,767 | | | | 7.30 | % | | | 7.38 | % | | | 100 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | $ | 15,756,641 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
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| (1) | Purchase price does not include acquisition related expenses. |
| (2) | Initial yield is calculated as the effective annualized rental income for the in-place lease at the respective property divided by the property purchase price, exclusive of acquisition related expenses. In general, our properties are subject to long-term triple net or double net leases, and the future costs associated with the double net leases are unpredictable and may reduce the yield. We expect the majority of our properties will be subject to triple net leases. Accordingly, our management believes that effective annualized rental income is a more appropriate figure from which to calculate initial yield than net operating income. |
| (3) | Average yield is calculated as the average annual rental income, adjusted for any rent concessions or abatements, if any, for the in-place lease over the non-cancellable lease term at the respective property divided by the property purchase price, exclusive of acquisition related expenses. In general, our properties are subject to long-term triple net or double net leases, and the future costs associated with the double net leases are unpredictable and may reduce the yield. We expect the majority of our properties will be subject to triple net leases. Accordingly, our management believes that average annual rental income is a more appropriate figure from which to calculate average yield than net operating income. |
The following table sets forth the principal provisions of the lease term for the major tenants of the properties listed above:
| | | | | | | | | | | | | | | | | | | | | | | | |
Property | | Major Tenants(1) | | Total
Square
Feet
Leased | | | % of Total
Rentable
Square
Feet | | | Renewal
Options(2) | | | Effective
Annual
Base
Rent (3) | | | Effective
Base Rent
per Square
Foot(3) | | | Lease Term(4) |
Sunoco — Merritt Island, FL | | Sunoco, Inc. (R&M) | | | 2,353 | | | | 100 | % | | | 3/5 year | | | $ | 209,278 | (5) | | $ | 88.94 | | | 4/12/2013 — 2/5/2029 |
Kum & Go — Cedar Rapids, IA | | Kum & Go, L.C. | | | 4,973 | | | | 100 | % | | | 4/5 year | | | $ | 183,300 | (6) | | $ | 36.86 | | | 5/3/2013 — 12/8/2031 |
Natural Grocers — Prescott, AZ | | Vitamin Cottage Natural Food Markets, Inc. | | | 12,848 | | | | 100 | % | | | 3/5 year | | | $ | 304,731 | (7) | | $ | 23.72 | | | 5/6/2013 — 8/31/2027 |
FedEx — Elko, NV | | FedEx Ground Package System, Inc. | | | 11,482 | | | | 100 | % | | | 2/5 year | | | $ | 193,401 | | | $ | 16.84 | | | 5/28/2013 — 11/30/2022 |
Mattress Firm — Gadsden, AL | | Mattress Firm, Inc. | | | 7,200 | | | | 100 | % | | | 2/5 year | | | $ | 158,400 | (8) | | $ | 22.00 | | | 6/10/2013 — 8/31/2024 |
Dollar General — Sardis City, AL | | Dolgencorp, LLC | | | 12,406 | | | | 100 | % | | | 5/5 year | | | $ | 124,229 | (9) | | $ | 10.01 | | | 6/26/2013 — 5/31/2027 |
| (1) | Major tenants include those tenants that occupy greater than 10% of the rentable square feet of the respective property. |
| (2) | Represents the number of renewal options and the term of each option. |
| (3) | Effective annual base rent and effective base rent per square foot include adjustments for rent concessions or abatements, if any. |
| (4) | Represents the lease term beginning with the later of the purchase date or the rent commencement date through the end of the non-cancellable lease term, assuming no renewals are exercised. In general, these properties are subject to long-term triple or double net leases that require the tenants to pay substantially all operating expenses in addition to base rent. |
| (5) | The annual base rent under the lease increases every three years by 10.0% of the then-current annual base rent. |
| (6) | The annual base rent under the lease increases every five years by 7.5% of the then-current annual base rent. |
| (7) | The annual base rent under the lease increases on September 1, 2022 by 2.0% of the then-current annual base rent. |
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| (8) | The annual base rent under the lease increases on September 1, 2017 and September 1, 2022 by 10.0% and 8.3% of the then-current annual base rent, respectively. |
| (9) | The annual base rent under the lease increases on June 1, 2023 by 3.0% of the then-current annual base rent. |
Tenant Lease Expirations
The following table sets forth the aggregate lease expirations for each of our properties that have been acquired as of July 10, 2013 for each of the next ten years and thereafter, assuming no renewal options are exercised. For purposes of the table, the Total Annual Base Rent Expiring column represents annualized rental revenue, on a straight line basis, for each lease that expires during the respective year.
| | | | | | | | | | | | | | |
Year Ending December 31, | | Number of Leases
Expiring | | Square Feet Expiring | | | Total Annual Base
Rent Expiring | | | % of Total Annual
Base Rent | |
2013 | | — | | | — | | | $ | — | | | | — | % |
2014 | | — | | | — | | | | — | | | | — | % |
2015 | | — | | | — | | | | — | | | | — | % |
2016 | | — | | | — | | | | — | | | | — | % |
2017 | | 1 | | | 3,400 | | | | 84,971 | | | | 2 | % |
2018 | | — | | | — | | | | — | | | | — | % |
2019 | | — | | | — | | | | — | | | | — | % |
2020 | | — | | | — | | | | — | | | | — | % |
2021 | | — | | | — | | | | — | | | | — | % |
2022 | | 4 | | | 28,702 | | | | 473,706 | | | | 11 | % |
2023 | | 3 | | | 39,697 | | | | 607,879 | | | | 14 | % |
Thereafter | | 17 | | | 237,252 | | | | 3,243,169 | | | | 73 | % |
| | | | | | | | | | | | | | |
| | 25 | | | 309,051 | | | $ | 4,409,725 | | | | 100 | % |
| | | | | | | | | | | | | | |
Depreciable Tax Basis
For federal income tax purposes, the aggregate depreciable basis of the six recently-acquired properties described in this prospectus supplement is approximately $12.7 million. When we calculate depreciation expense for federal income tax purposes, we depreciate buildings and improvements over a 40-year recovery period, land improvements over a 20-year recovery period and furnishings and equipment over a 12-year recovery period using a straight-line method and a mid-month convention. The preliminary depreciable basis of these six properties is estimated, as of July 10, 2013, as follows:
| | | | |
Wholly-owned Property | | Depreciable Tax Basis | |
Sunoco — Merritt Island, FL | | $ | 2,258,520 | |
Kum & Go — Cedar Rapids, IA | | | 2,063,064 | |
Natural Grocers — Prescott, AZ | | | 3,155,700 | |
FedEx — Elko, NV | | | 2,190,096 | |
Mattress Firm — Gadsden, AL | | | 1,632,738 | |
Dollar General — Sardis City, AL | | | 1,368,221 | |
| | | | |
| | $ | 12,668,339 | |
| | | | |
We currently have no plan for any renovations, improvements or development of the properties listed above, and we believe all of our properties are adequately insured. We intend to obtain adequate insurance coverage for all future properties that we acquire.
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Selected Financial Data
The following data supplements, and should be read in conjunction with, the section of our prospectus captioned “Selected Financial Data” on page 88 of the prospectus.
The following data should be read in conjunction with our condensed consolidated unaudited financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Quarterly Report on Form 10-Q for the three months ended March 31, 2013 incorporated by reference into this prospectus.
The selected financial data presented below has been derived from our condensed consolidated unaudited financial statements as of and for the three months ended March 31, 2013.
| | | | |
| | | As of and for the
three months ended
March 31, 2013 | |
Balance Sheet Data: | | | | |
Total investment in real estate assets, net | | $ | 37,010,242 | |
Cash and cash equivalents | | $ | 5,298,879 | |
Total assets | | $ | 43,560,140 | |
Line of credit | | $ | 15,965,100 | |
Due to affiliates | | $ | 140,277 | |
Acquired below market lease intangibles, net | | $ | 922,542 | |
Total liabilities | | $ | 17,565,602 | |
Total stockholders’ equity | | $ | 10,737,034 | |
Operating Data: | | | | |
Total revenues | | $ | 780,002 | |
General and administrative expenses | | $ | 256,375 | |
Property operating expenses | | $ | 49,634 | |
Advisory expenses | | $ | 47,270 | |
Acquisition related expenses | | $ | 67,527 | |
Depreciation and amortization | | $ | 200,918 | |
Operating income | | $ | 158,278 | |
Interest expense | | $ | 179,839 | |
Net loss | | $ | (21,561 | ) |
Cash Flow Data: | | | | |
Cash flows used in operating activities | | $ | (134,149 | ) |
Cash flows used in investing activities | | $ | (4,240,296 | ) |
Cash flows provided by financing activities | | $ | 8,675,648 | |
Per Common Share Data: | | | | |
Net loss — basic and diluted | | $ | (0.02 | ) |
Distributions declared | | $ | 0.22 | |
Weighted average shares outstanding — basic and diluted | | | 1,304,096 | |
Update to Historical NAV Per Share
The following data supplements, and should be read in conjunction with, the section of our prospectus captioned “Valuation Policies — Calculation of Our NAV Per Share — Historical NAV per share” beginning on page 96 of the prospectus.
The table below provides the components of our NAV, as determined by State Street, our independent fund accountant, and the computation of NAV per share as of March 31, 2013 and December 31, 2012. Our NAV per share is posted daily on our website athttps://www.colecapital.com/cole-income-nav-strategy/daily-nav. Our
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NAV is not prepared in accordance with GAAP. Investors should refer to our financial statements andaccompanying footnotes and disclosure under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in the accompanying prospectus, as supplemented, for our net book value on a per share basis in accordance with GAAP, which is our stockholders’ equity divided by shares outstanding as of the date of measurement. Our NAV is calculated using a detailed set of valuation methodologies, as described under the heading “Valuation Policies” in the prospectus, as supplemented.(1)When the fair value of our assets and liabilities is calculated for the purposes of determining our NAV per share, the calculation is done using the fair value methodologies detailed within the FASB Accounting Standards Codification under Topic 820,Fair ValueMeasurements and Disclosures.(2) Our NAV is not audited or reviewed by our independent registered public accounting firm.
| | | | |
| | | As of | |
| | | March 31, 2013 | |
| | | (unaudited) | |
Newly Acquired Real Estate Properties(3) | | $ | 5,858,576 | |
Operating Real Estate Properties(4) | | | 32,750,000 | |
| | | | |
Total Real Estate Properties | | | 38,608,576 | |
Real Estate Related Securities and Real Estate Related Assets | | | — | |
Acquisition Expenses and Deferred Financing Costs | | | 737,288 | |
Cash, Marketable Securities and Other Assets | | | 5,732,620 | |
| | | | |
Total Assets | | | 45,078,484 | |
Newly Incurred Debt(5) | | | — | |
Outstanding Debt(6) | | | 15,965,100 | |
Accrued Liabilities | | | 350,753 | |
| | | | |
Total Liabilities | | | 16,315,853 | |
| | | | |
NAV | | $ | 28,762,631 | |
| | | | |
Number of Shares of Common Stock Issued and Outstanding | | | 1,763,331 | |
| | | | |
NAV Per Share(7) | | $ | 16.31 | |
| | | | |
| | | | |
| | | As of | |
| | | December 31, 2012 | |
| | | (unaudited) | |
Newly Acquired Real Estate Properties(3) | | $ | 1,911,268 | |
Operating Real Estate Properties(4) | | | 32,180,000 | |
| | | | |
Total Real Estate Properties | | | 34,091,268 | |
Real Estate Related Securities and Real Estate Related Assets | | | — | |
Acquisition Expenses and Deferred Financing Costs | | | 703,407 | |
Cash, Marketable Securities and Other Assets | | | 1,122,797 | |
| | | | |
Total Assets | | | 35,917,472 | |
Newly Incurred Debt(5) | | | 200,000 | |
Outstanding Debt(6) | | | 20,440,300 | |
Accrued Liabilities | | | 555,600 | |
| | | | |
Total Liabilities | | | 21,195,900 | |
| | | | |
NAV | | $ | 14,721,572 | |
| | | | |
Number of Shares of Common Stock Issued and Outstanding | | | 914,037 | |
| | | | |
NAV Per Share(7) | | $ | 16.11 | |
| | | | |
| (1) | Our valuation policies, which address specifically each category of our assets and liabilities and are applied separately from the preparation of our financial statements in accordance with GAAP, involve adjustments from historical cost. There are certain factors which cause NAV to be different from net book value on a GAAP basis. For NAV purposes, our real estate properties and real estate related liabilities are valued by CBRE, our independent valuation expert, on a rolling quarterly basis once the investment or liability has |
6
| | been held for one full calendar quarter. CBRE does not prepare and is not responsible for our NAV or our daily NAV per share. For GAAP purposes, these assets and liabilities are generally recorded at depreciated or amortized cost. Other factors, including straight-lining of rent for GAAP purposes and the treatment of acquisition related expenses and organization and offering costs, will cause our GAAP net book value to be different from our NAV. |
| (2) | No rule or regulation mandates the manner for calculating NAV. While our NAV calculation methodologies are consistent with standard industry practices for valuing private real estate funds, they involve significant professional judgment in the application of both observable and unobservable attributes, and there is no established practice among publicly-offered REITs, listed or unlisted, for calculating NAV. As a result, our methodologies or assumptions may differ from other REITs’ methodologies or assumptions. |
| (3) | This amount represents the estimated value of our newly acquired real estate properties and capital expenditures, which are valued at cost until the investment has been held for one full calendar quarter following the quarter of acquisition, and thereafter will be valued by our independent valuation expert. |
| (4) | This amount represents the sum of the estimated values of each of our operating real estate properties, excluding newly acquired real estate properties which are valued at cost until the investment has been held for one full calendar quarter following the quarter of acquisition, contained in the individual property appraisal reports provided by CBRE. After a property valuation is performed by CBRE, it provides its appraisal report to us and to State Street, and State Street adds all the property values from all of the appraisal reports it has received from CBRE to arrive at the total estimated value of our operating real estate properties. CBRE does not prepare, and is not responsible for, our daily NAV per share or for calculating the total estimated value of our operating real estate properties. |
| (5) | This amount represents the estimated value of our newly incurred real estate-related liabilities, which are valued at cost until the loan has been outstanding for one full calendar quarter following the quarter we enter into the loan, and thereafter will be valued by CBRE. This amount also includes amounts drawn on our line of credit subsequent to valuation by CBRE. |
| (6) | This amount represents the estimated value of our commercial real estate-related liabilities contained in the fair value analysis provided by CBRE. After a loan valuation is performed by CBRE, it provides its fair value analysis to us and State Street, who compiles the estimated value of our real estate-related liabilities. CBRE does not prepare, and is not responsible for, our daily NAV per share or for calculating the total estimated value of our debt. |
| (7) | See “Risk Factors” in the accompanying prospectus, as supplemented, for the limitations and risks associated with our NAV per share, including the risk that the components of NAV and the methodologies used by us and State Street in the discharge of our or their respective responsibilities in connection with it may differ from those used by other companies now or in the future. |
In the preparation of individual appraisal reports, CBRE primarily applied an income capitalization approach and relied on modeling assumptions to estimate the value of our operating real estate properties. Key assumptions, as of March 31, 2013, which vary from property to property, market to market and period to period, include capitalization rates (ranging from 6.50% to 8.00%), annual market rent growth rates (ranging from 2.50% to 3.00%), and a ten-year holding period. Changes in these assumptions would impact the calculation of the value of our real estate assets. For example, assuming all other factors remain unchanged, our advisor has calculated that a reduction in the implied capitalization rate of 0.25% would cause the total estimated value of our operating real estate properties to increase by $1.2 million in the aggregate as of March 31, 2013. This is only a mathematical illustration and is not intended to qualify the values reflected above. See “Risk Factors” and “Valuation Policies” in the accompanying prospectus, as supplemented, for a discussion on the limitations and risks associated with the utilization of judgments and assumptions in valuing our operating real estate properties.
In the preparation of our loan valuation report, CBRE compared our current contract loan terms to market loan terms and calculated the present value of the projected contract payments discounted by a market-based interest rate. Interest rate estimates are based on a variety of factors, including the duration of the loan term, loan-to-value ratio, debt coverage ratio requirements, real estate location, as well as other risk-related factors such as the tenants’ credit profile. A change in the estimated interest rate would impact the calculation of the value of our
7
outstanding debt. For example, assuming all other factors remain unchanged, our advisor has calculated that a reduction in the implied interest rate of 0.25% would cause the total estimated value of our outstanding debt to increase by $68,000 in the aggregate, using a discounted cash flow approach as of March 31, 2013. This is only a mathematical illustration and is not intended to qualify the value reflected above. See “Risk Factors” and “Valuation Policies” in the accompanying prospectus, as supplemented, for a discussion on the limitations and risks associated with the utilization of judgments and assumptions in valuing our outstanding debt.
The following table provides our NAV per share for each quarter following the commencement of our operations:
| | | | |
Date | | NAV Per Share | |
| 12/31/2011 | | $ | 14.99 | |
| 3/31/2012 | | $ | 15.00 | |
| 6/30/2012 | | $ | 15.75 | |
| 9/30/2012 | | $ | 15.82 | |
| 12/31/2012 | | $ | 16.11 | |
| 3/31/2013 | | $ | 16.31 | |
| 6/30/2013 | | $ | 16.56 | |
Update to the Compensation, Fees and Reimbursements Payable to Our Advisor and Its Affiliates as of March 31, 2013
The following data supplements and should be read in conjunction with, the section of our prospectus captioned “Compensation” beginning on page 117 of the prospectus.
The following table summarizes the compensation, fees and reimbursements paid or payable to our advisor and its affiliates related to the organization and offering stage during the period indicated:
| | | | |
| | | For the Three Months
Ended March 31, 2013 | |
Offering: | | | | |
Dealer manager fees | | $ | 28,887 | |
Dealer manager fees reallowed by Cole Capital Corporation | | $ | 236 | |
Organization and offering expense reimbursement | | $ | 104,243 | |
As of March 31, 2013, $28,000 of the amounts shown above had been paid to our advisor and its affiliates and $105,000 had been incurred, but not yet paid, for services provided by our advisor or its affiliates in connection with the offering stage and is a liability to us.
All organization and offering expenses associated with the sale of our common stock (excluding the dealer manager fee) are paid for by Cole Advisors or its affiliates and can be reimbursed by us up to 0.75% of the aggregate gross offering proceeds. As of March 31, 2013, Cole Advisors or its affiliates had paid organization and offering costs of $9.5 million in connection with our offering, of which $9.3 million was not included in our financial statements because such costs were not a liability to us as they exceeded 0.75% of gross proceeds from our offering. As we raise additional proceeds from our offering, these costs may become payable.
The following table summarizes any compensation, fees and reimbursements paid or payable to our advisor and its affiliates related to the operational stage during the period indicated:
| | | | |
| | | For the Three Months
Ended March 31, 2013 | |
Acquisitions, Operations and Performance: | | | | |
Acquisition expense reimbursement | | $ | — | |
Advisory fee | | $ | 47,270 | |
Operating expense reimbursement | | $ | — | |
Performance fee | | $ | — | |
8
As of March 31, 2013, $12,000 of the amounts shown above had been paid to our advisor and its affiliates and $35,000 had been incurred, but not yet paid, for services provided by our advisor or its affiliates in connection with the acquisition and operations stage and is a liability to us.
Update to Our Distribution Policy and Distributions Disclosure
The following information supplements, and should be read in conjunction with, the section in our prospectus captioned “Description of Capital Stock — Distributions” beginning on page 150 of the prospectus.
As of March 31, 2013, cumulative since inception, we have declared $930,000 of distributions and we have paid $810,000, of which $774,000 was paid in cash and $36,000 was reinvested in shares of our common stock pursuant to the distribution reinvestment plan. Our net loss was $518,000 as of March 31, 2013, cumulative since inception, and $22,000 for the three months ended March 31, 2013. The following table presents distributions and source of distributions for the periods indicated below:
| | | | | | | | | | | | | | | | |
| | | Cumulative Paid
Since Inception | | | Three Months Ended
March 31, 2013 | |
| | | Amount | | | Percent | | | Amount | | | Percent | |
Distributions paid in cash | | $ | 773,569 | | | | 96% | | | $ | 203,536 | | | | 88% | |
Distributions reinvested | | | 36,131 | | | | 4% | | | | 28,606 | | | | 12% | |
| | | | | | | | | | | | | | | | |
Total distributions | | $ | 809,700 | | | | 100% | | | $ | 232,142 | | | | 100% | |
| | | | | | | | | | | | | | | | |
| | | | |
Source of distributions: | | | | | | | | | | | | | | | | |
Net cash provided by operating activities | | $ | 674,831 | | | | 83% | | | $ | 97,273 | (1) | | | 42% | |
Proceeds from the offering | | | 134,869 | | | | 17% | | | | 134,869 | (1) | | | 58% | |
| | | | | | | | | | | | | | | | |
Total sources | | $ | 809,700 | | | | 100% | | | $ | 232,142 | | | | 100% | |
| | | | | | | | | | | | | | | | |
| (1) | Includes excess amounts from prior periods. |
Net cash provided by operating activities as of March 31, 2013, cumulative since inception, was $675,000 and reflects a reduction for real estate acquisition related expenses incurred of $573,000, in accordance with GAAP. We treat our real estate acquisition related expenses as funded by proceeds from our offering. Therefore, for consistency, proceeds from the issuance of common stock as of March 31, 2013, cumulative since inception, are considered a source of our distributions to the extent that acquisition expenses have reduced net cash flows provided by operating activities. As of March 31, 2013, cumulative since inception, our distributions were funded by net cash provided by operating activities of $675,000 and proceeds from our offering of $135,000. The payment of distributions from sources other than cash provided by operating activities may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds, and may cause subsequent investors to experience dilution. This may negatively impact the value of your investment.
Share Redemptions
The following information supplements, and should be read in conjunction with, the section in our prospectus captioned “Share Purchases and Redemptions — Redemption Plan” beginning on page 193 of the prospectus.
As of March 31, 2013, cumulative since inception, we had received redemption requests for and redeemed approximately 7,200 shares of our common stock for $113,000.
Redemption Limit
The following information supplements, and should be read in conjunction with, the section in our prospectus captioned “Share Purchases and Redemptions — Redemption Plan — Redemption Limitations” beginning on page 193 of the prospectus.
As disclosed on our website, as of June 28, 2013, our NAV was $43,527,599. As of July 1, 2013, the redemption limit for the quarter ending September 30, 2013 was 10% of our NAV as of June 28, 2013. Given
9
that sales of our common stock have exceeded redemption requests quarter to date, the redemption limit as of July 1, 2013 has not been reduced below 10% of our NAV as of June 28, 2013.
Incorporation by Reference
The following information supersedes and replaces the section of our prospectus captioned “Incorporation of Certain Information by Reference” on page 203 of the prospectus.
We have elected to “incorporate by reference” certain information into this prospectus. By incorporating by reference, we are disclosing important information to you by referring you to documents we have filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for information incorporated by reference that is superseded by information contained in this prospectus. You can access documents that are incorporated by reference into this prospectus at our website at https://www.colecapital.com/sec-filings. There is additional information about us and our advisor and its affiliates at the website, but unless specifically incorporated by reference herein as described in the paragraphs below, the contents of that site are not incorporated by reference in or otherwise a part of this prospectus.
The following documents filed with the SEC are incorporated by reference in this prospectus (Commission File No. 333-169535), except for any document or portion thereof deemed to be “furnished” and not filed in accordance with SEC rules:
| | • | | Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC on March 28, 2013; |
| | • | | Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013 filed with the SEC on May 14, 2013; |
| | • | | Definitive Proxy Statement filed with the SEC on April 19, 2013 (solely to the extent specifically incorporated by reference into the Annual Report on Form 10-K for the fiscal year ended December 31, 2012); |
| | • | | Current Report on Form 8-K filed with the SEC on June 24, 2013; |
| | • | | Current Report on Form 8-K filed with the SEC on April 15, 2013; |
| | • | | Current Report on Form 8-K filed with the SEC on March 28, 2013; |
| | • | | Current Report on Form 8-K filed with the SEC on March 14, 2013; |
| | • | | Current Report on Form 8-K filed with the SEC on March 13, 2013; |
| | • | | Current Report on Form 8-K filed with the SEC on February 13, 2013; and |
| | • | | Current Report on Form 8-K/A filed with the SEC on February 17, 2012. |
We will provide to each person, including any beneficial owner, to whom this prospectus is delivered, upon request, a copy of any or all of the information that we have incorporated by reference into this prospectus but not delivered with this prospectus. To receive a free copy of any of the documents incorporated by reference in this prospectus, other than exhibits, unless they are specifically incorporated by reference in those documents, call or write our dealer manager, Cole Capital Corporation, at:
Cole Capital Corporation
2325 East Camelback Road, Suite 1100
Phoenix, Arizona 85016
(866) 907-2653
Attn: Investor Services
www.colecapital.com
The information relating to us contained in this prospectus does not purport to be comprehensive and should be read together with the information contained in the documents incorporated or deemed to be incorporated by reference in this prospectus.
INAV-SUP-05B
10
PART II
Information Not Required in the Prospectus
| Item 31. | Other Expenses of Issuance and Distribution. |
The following table itemizes the expenses incurred by us in connection with the issuance and registration of the securities being registered hereunder, other than the asset-based dealer manager fee. All amounts shown are estimates except the SEC registration fee and the FINRA filing fee.
| | | | |
SEC registration fee | | $ | 285,200 | |
FINRA filing fee | | | 75,500 | |
Printing costs | | | 2,383,500 | |
Legal fees and expenses | | | 2,250,000 | |
Accounting fees and expenses | | | 1,400,000 | |
Blue sky fees and expenses | | | 805,000 | |
Advertising and Sales Expenses | | | 10,952,365 | |
Advertising and Sales Materials | | | 7,356,500 | |
Due Diligence | | | 700,000 | |
Transfer Agent and Escrow Fees | | | 3,825,000 | |
Miscellaneous expenses | | | 631,150 | |
| | | | |
Total | | $ | 30,664,215 | |
| | | | |
| * | To be filed by amendment. |
| Item 32. | Sales to Special Parties. |
None
| Item 33. | Recent Sales of Unregistered Securities. |
On August 11, 2010, the Company sold 20,000 shares of common stock, at $10.00 per share to Cole Holdings Corporation, for a total amount of $200,000. The Company issued these shares in a private transaction exempt from the registration requirements of the Securities Act of 1933. On September 20, 2011, the Company’s board of directors authorized a reverse stock split providing for the combination of each three shares of the Company’s common stock issued and outstanding into two shares of the Company’s common stock, resulting in 13,334 shares of common stock issued to Cole Holdings Corporation subsequent to the reverse stock split.
| Item 34. | Indemnification of Directors, Officers and Others. |
Maryland law allows directors and officers to be indemnified against judgments, penalties, fines, settlements and reasonable expenses actually incurred in connection with a proceeding unless the following can be established:
| | • | | an act or omission of the director or officer was material to the cause of action adjudicated in the proceeding, and was committed in bad faith or was the result of active and deliberate dishonesty; |
| | • | | the director or officer actually received an improper personal benefit in money, property or services; or |
| | • | | with respect to any criminal proceeding, the director or officer had reasonable cause to believe his act or omission was unlawful. |
Indemnification could reduce the legal remedies available to us and the stockholders against the indemnified individuals, however.
II-1
This provision does not reduce the stockholders’ ability to obtain injunctive relief or other equitable remedies for a violation of a director’s or an officer’s duties to us or our stockholders, although the equitable remedies may not be an effective remedy in some circumstances.
Our charter, however, provides that the directors, our advisor and its affiliates will be indemnified by us for losses arising from our operation only if all of the following conditions are met:
| | • | | the directors, our advisor or its affiliates have determined, in good faith, that the course of conduct which caused the loss or liability was in our best interests; |
| | • | | the directors, our advisor or its affiliates were acting on our behalf or performing services for us; |
| | • | | in the case of affiliated directors, our advisor or its affiliates, the liability or loss was not the result of negligence or misconduct by the party seeking indemnification; and |
| | • | | in the case of independent directors, the liability or loss was not the result of gross negligence or willful misconduct by the party seeking indemnification. |
The indemnification or agreement to hold harmless is recoverable only out of our net assets and not from the stockholders.
We will not, however, indemnify our advisor and its affiliates for losses and liabilities arising from or out of alleged violations of federal or state securities laws unless one or more of the following conditions are met:
| | • | | there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee; |
| | • | | such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or |
| | • | | a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which securities of our company were offered or sold as to indemnification for violation of securities laws. |
We have agreed to indemnify and hold harmless our advisor and its affiliates performing services for us from specific claims and liabilities arising out of the performance of their obligations under the advisory agreement. As a result, we and our stockholders may be entitled to a more limited right of action than we would otherwise have if these indemnification rights were not included in the advisory agreement.
The general effect to investors of any arrangement under which any of our controlling persons, directors or officers are insured or indemnified against liability is a potential reduction in distributions resulting from our payment of premiums associated with insurance or, to the extent any such loss is not covered by insurance, our payment of indemnified loss. In addition, indemnification could reduce the legal remedies available to us and our stockholders against the officers and directors.
Insofar as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under the Securities Act of 1933, as amended (or the Securities Act), we have been informed that, in the opinion of the Securities and Exchange Commission, or the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
| Item 35. | Treatment of Proceeds from Shares Being Registered. |
Not applicable.
II-2
| Item 36. | Financial Statements and Exhibits. |
(a) Financial Statements.
The following financial statements are incorporated into this registration statement and the prospectus included herein by reference:
| | • | | The consolidated financial statements of the registrant included in the registrant’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on March 28, 2013; |
| | • | | The condensed consolidated unaudited financial statements of the registrant included in the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 filed with the SEC on May 14, 2013; and |
| | • | | The financial statements of MT San Antonio Property contained in the registrant’s Current Report on Form 8-K/A filed with the SEC on February 17, 2012. |
(b) Exhibits.
See the Exhibit Index on the page immediately preceding the exhibits for a list of exhibits filed as part of this registration statement on Form S-11, which Exhibit Index is incorporated herein by reference.
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act.
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(b) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment will be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time will be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(d) That all post-effective amendments will comply with the applicable forms, rules and regulations of the SEC in effect at the time such post-effective amendments are filed.
(e) That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of the registration statement relating to the offering, other than a registration statement relying on Rule 430B or other than a prospectus filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser
II-3
with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(f) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) any preliminary prospectus or prospectus of the registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) any free writing prospectus relating to the offering prepared by or on behalf of the registrant or used or referred to by the registrant;
(iii) the portion of any other free writing prospectus relating to the offering containing material information about the registrant or its securities provided by or on behalf of the registrant; and
(iv) any other communication that is an offer in the offering made by the registrant to the purchaser.
2. The registrant undertakes to send to each stockholder, at least on an annual basis, a detailed statement of any transactions with the advisor or its affiliates, and of fees, commissions, compensation and other benefits paid or accrued to the advisor or its affiliates for the fiscal year completed, showing the amount paid or accrued to each recipient and the services performed.
3. The registrant undertakes to provide to the stockholders the financial statements required by Form 10-K for the first full fiscal year of operations of the registrant.
4. The registrant undertakes to file a sticker supplement pursuant to Rule 424(c) under the Securities Act during the distribution period describing each property not identified in the prospectus at such time as there arises a reasonable probability that such property will be acquired and to consolidate all such stickers into a post-effective amendment filed at least once every three months, with the information contained in such amendment provided simultaneously to the existing stockholders. Each sticker supplement will disclose all compensation and fees received by the advisor and its affiliates in connection with any such acquisition. The post-effective amendment will include audited financial statements meeting the requirements Rule 3-14 of Regulation S-X only for properties acquired during the distribution period.
5. The registrant undertakes to file, after the end of the distribution period, a current report on Form 8-K containing the financial statements and additional information required by Rule 3-14 of Regulation S-X, to reflect each commitment (i.e., the signing of a binding purchase agreement) made after the end of the distribution period involving the use of 10% or more (on a cumulative basis) of the net proceeds of the offering and to provide the information contained in such report to the stockholders at least once each quarter after the distribution period of the offering has ended.
6. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions and otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
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TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED)
Table VI presents summary information on properties acquired in the three years ended December 31, 2012 by Prior Public Real Estate Programs with similar investment objectives. This table provides information regarding the general type and location of the properties and the manner in which the properties were acquired.
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | L.A. Fitness
League City, TX
Fitness & Health | | | Tractor Supply
Lowville, NY
Specialty Retail | | | Tractor Supply
Malone, NY
Specialty Retail | |
Gross leasable square footage | | | 45,000 | | | | 19,097 | | | | 19,097 | |
Date of purchase | | | 5/21/2010 | | | | 6/3/2010 | | | | 6/3/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 7,481,700 | | | | 2,246,040 | | | | 2,292,960 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 7,481,700 | | | | 2,246,040 | | | | 2,292,960 | |
Other cash expenditures expensed | | | 63,035 | | | | 31,086 | | | | 31,723 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 7,544,735 | | | $ | 2,277,126 | | | $ | 2,324,683 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | L.A. Fitness
Naperville, IL
Fitness & Health | | | CVS
Indianapolis
(21st St), IN
Drugstore | | | Tractor Supply
Elletsville, IN
Specialty Retail | |
Gross leasable square footage | | | 45,000 | | | | 12,222 | | | | 19,097 | |
Date of purchase | | | 6/30/2010 | | | | 7/21/2010 | | | | 9/13/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 9,384,000 | | | | 3,282,386 | | | | 2,658,182 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 9,384,000 | | | | 3,282,386 | | | | 2,658,182 | |
Other cash expenditures expensed | | | 66,148 | | | | 19,675 | | | | 46,081 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 9,450,148 | | | $ | 3,302,061 | | | $ | 2,704,263 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | CVS
Lincoln, IL
Drugstore | | | Ruth’s Chris
Metairie, LA
Restaurant | | | Ruth’s Chris
Sarasota, FL
Restaurant | |
Gross leasable square footage | | | 13,255 | | | | 5,189 | | | | 7,725 | |
Date of purchase | | | 9/17/2010 | | | | 9/27/2010 | | | | 9/27/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,243,600 | | | | 3,616,364 | | | | 3,078,998 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,243,600 | | | | 3,616,364 | | | | 3,078,998 | |
Other cash expenditures expensed | | | 20,032 | | | | 24,344 | | | | 20,272 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,263,632 | | | $ | 3,640,708 | | | $ | 3,099,270 | |
| | | | | | | | | | | | |
II-5
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Columbus Fish
Grandview, OH
Restaurant | | | J. Jill
Tilton, NH Distribution | | | Childtime Childcare
Cuyahoga Falls, OH
Childcare &
Development | |
Gross leasable square footage | | | 7,766 | | | | 573,000 | | | | 5,934 | |
Date of purchase | | | 9/27/2010 | | | | 9/30/2010 | | | | 12/15/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,327,054 | | | | 23,538,461 | | | | 837,082 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,327,054 | | | | 23,538,461 | | | | 837,082 | |
Other cash expenditures expensed | | | 23,975 | | | | 218,593 | | | | 34,802 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,351,029 | | | $ | 23,757,054 | | | $ | 871,884 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Childtime Childcare
Arlington, TX
Childcare &
Development | | | Childtime Childcare
Oklahoma City
(May), OK
Childcare &
Development | | | Childtime Childcare
Oklahoma City
(Penn), OK
Childcare &
Development | |
Gross leasable square footage | | | 10,856 | | | | 6,656 | | | | 6,671 | |
Date of purchase | | | 12/15/2010 | | | | 12/15/2010 | | | | 12/15/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 997,767 | | | | 529,217 | | | | 913,645 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 997,767 | | | | 529,217 | | | | 913,645 | |
Other cash expenditures expensed | | | 38,818 | | | | 28,221 | | | | 37,707 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,036,585 | | | $ | 557,438 | | | $ | 951,352 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Childtime Childcare
Rochester, NY
Childcare &
Development | | | Tutor Time
Pittsburgh, PA
Childcare &
Development | | | Childtime Childcare
Modesto (Honey), CA
Childcare &
Development | |
Gross leasable square footage | | | 4,801 | | | | 10,071 | | | | 6,464 | |
Date of purchase | | | 12/15/2010 | | | | 12/15/2010 | | | | 12/15/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 733,724 | | | | 1,222,192 | | | | 899,581 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 733,724 | | | | 1,222,192 | | | | 899,581 | |
Other cash expenditures expensed | | | 32,349 | | | | 46,330 | | | | 36,303 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 766,073 | | | $ | 1,268,522 | | | $ | 935,884 | |
| | | | | | | | | | | | |
II-6
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | CVS Azle, TX Drugstore | | | Logan’s Roadhouse
Trussville, AL
Restaurant | | | Logan’s Roadhouse
Wichita Falls, TX
Restaurant | |
Gross leasable square footage | | | 12,900 | | | | 7,236 | | | | 8,026 | |
Date of purchase | | | 12/16/2010 | | | | 12/17/2010 | | | | 12/17/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,947,000 | | | | 2,789,259 | | | | 2,789,259 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,947,000 | | | | 2,789,259 | | | | 2,789,259 | |
Other cash expenditures expensed | | | 27,188 | | | | 24,121 | | | | 25,050 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,974,188 | | | $ | 2,813,380 | | | $ | 2,814,309 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Ivex Packaging
New Castle, PA
Distribution | | | Walgreens
Mt. Pleasant, TX
Drugstore | | | Advance Auto
Irvington, NJ
Automotive Parts | |
Gross leasable square footage | | | 135,303 | | | | 14,820 | | | | 6,684 | |
Date of purchase | | | 12/20/2010 | | | | 12/21/2010 | | | | 12/22/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 5,100,000 | | | | 5,647,740 | | | | 2,297,126 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,100,000 | | | | 5,647,740 | | | | 2,297,126 | |
Other cash expenditures expensed | | | 37,769 | | | | 28,900 | | | | 58,558 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,137,769 | | | $ | 5,676,640 | | | $ | 2,355,684 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Advance Auto
Midwest City, OK
Automotive Parts | | | Advance Auto
Penns Grove, NJ
Automotive Parts | | | Advance Auto
St. Francis, WI
Automotive Parts | |
Gross leasable square footage | | | 7,000 | | | | 7,000 | | | | 6,889 | |
Date of purchase | | | 12/22/2010 | | | | 12/22/2010 | | | | 12/22/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,703,886 | | | | 1,585,823 | | | | 1,653,698 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,703,886 | | | | 1,585,823 | | | | 1,653,698 | |
Other cash expenditures expensed | | | 31,382 | | | | 45,921 | | | | 25,830 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,735,268 | | | $ | 1,631,744 | | | $ | 1,679,528 | |
| | | | | | | | | | | | |
II-7
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Advance Auto
Willingboro, NJ
Automotive Parts | | | Advance Auto
Charlotte, NC
Automotive Parts | | | Advance Auto
Dunellen, NJ
Automotive Parts | |
Gross leasable square footage | | | 6,781 | | | | 6,896 | | | | 6,781 | |
Date of purchase | | | 12/22/2010 | | | | 12/22/2010 | | | | 12/22/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,822,973 | | | | 1,656,805 | | | | 2,753,375 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,822,973 | | | | 1,656,805 | | | | 2,753,375 | |
Other cash expenditures expensed | | | 48,799 | | | | 25,629 | | | | 61,645 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,871,772 | | | $ | 1,682,434 | | | $ | 2,815,020 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Jo-Ann Fabrics
Independence, MO
Distribution | | | CVS
Fairview Township, PA
Drugstore | | | Walgreens
Richmond Hill, GA
Drugstore | |
Gross leasable square footage | | | 46,350 | | | | 10,880 | | | | 14,820 | |
Date of purchase | | | 12/23/2010 | | | | 1/27/2011 | | | | 2/25/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,625,700 | | | | 3,177,300 | | | | 5,666,666 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,625,700 | | | | 3,177,300 | | | | 5,666,666 | |
Other cash expenditures expensed | | | 28,086 | | | | 62,289 | | | | 23,894 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,653,786 | | | $ | 3,239,589 | | | $ | 5,690,560 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | CVS
St. Augustine, FL
Drugstore | | | L.A. Fitness
West Chester, OH
Fitness & Health | | | Burger King
Durham, NC
Restaurant | |
Gross leasable square footage | | | 13,220 | | | | 45,000 | | | | 2,996 | (2) |
Date of purchase | | | 4/26/2011 | | | | 4/27/2011 | | | | 4/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,039,117 | | | | 8,402,250 | | | | 854,250 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,039,117 | | | | 8,402,250 | | | | 854,250 | |
Other cash expenditures expensed | | | 22,244 | | | | 58,740 | | | | 9,443 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,061,361 | | | $ | 8,460,990 | | | $ | 863,693 | |
| | | | | | | | | | | | |
II-8
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Office Depot
Durham, NC
Office Supply | | | Office Depot
Balcones Heights, TX
Office Supply | | | Ryan’s Buffet
Decatur, AL
Restaurant | |
Gross leasable square footage | | | 20,000 | | | | 20,400 | | | | 10,956 | |
Date of purchase | | | 4/29/2011 | | | | 4/29/2011 | | | | 4/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,914,140 | | | | 3,863,760 | | | | 2,654,683 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,914,140 | | | | 3,863,760 | | | | 2,654,683 | |
Other cash expenditures expensed | | | 26,706 | | | | 29,871 | | | | 24,529 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,940,846 | | | $ | 3,893,631 | | | $ | 2,679,212 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Ryan’s Buffet
Florence, AL
Restaurant | | | Ryan’s Buffet
Dothan, AL
Restaurant | | | Ryan’s Buffet
Carrollton, GA
Restaurant | |
Gross leasable square footage | | | 10,920 | | | | 10,080 | | | | 10,553 | |
Date of purchase | | | 4/29/2011 | | | | 4/29/2011 | | | | 4/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,568,289 | | | | 2,269,500 | | | | 1,871,700 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,568,289 | | | | 2,269,500 | | | | 1,871,700 | |
Other cash expenditures expensed | | | 21,716 | | | | 22,530 | | | | 18,660 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,590,005 | | | $ | 2,292,030 | | | $ | 1,890,360 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Ryan’s Buffet
Hiram, GA
Restaurant | | | Ryan’s Buffet
Albany, GA
Restaurant | | | Ryan’s Buffet
Dawsonville, GA
Restaurant | |
Gross leasable square footage | | | 10,136 | | | | 10,942 | | | | 10,972 | |
Date of purchase | | | 4/29/2011 | | | | 4/29/2011 | | | | 4/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,994,100 | | | | 3,073,280 | | | | 1,744,200 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,994,100 | | | | 3,073,280 | | | | 1,744,200 | |
Other cash expenditures expensed | | | 18,845 | | | | 19,629 | | | | 18,298 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,012,945 | | | $ | 3,092,909 | | | $ | 1,762,498 | |
| | | | | | | | | | | | |
II-9
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Ryan’s Buffet
Corydon, IN
Restaurant | | | Ryan’s Buffet
Bowling Green, KY
Restaurant | | | Ryan’s Buffet
Lake Charles, LA
Restaurant | |
Gross leasable square footage | | | 10,170 | | | | 10,155 | | | | 11,874 | |
Date of purchase | | | 4/29/2011 | | | | 4/29/2011 | | | | 4/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,040,000 | | | | 4,048,666 | | | | 2,931,031 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,040,000 | | | | 4,048,666 | | | | 2,931,031 | |
Other cash expenditures expensed | | | 21,146 | | | | 27,896 | | | | 26,141 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,061,146 | | | $ | 4,076,562 | | | $ | 2,957,172 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Ryan’s Buffet
Johnstown, PA
Restaurant | | | Ryan’s Buffet
Picayune, MS
Restaurant | | | Ryan’s Buffet
Tupelo, MS
Restaurant | |
Gross leasable square footage | | | 10,116 | | | | 10,349 | | | | 10,349 | |
Date of purchase | | | 4/29/2011 | | | | 4/29/2011 | | | | 4/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,756,440 | | | | 2,736,364 | | | | 2,399,550 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,756,440 | | | | 2,736,364 | | | | 2,399,550 | |
Other cash expenditures expensed | | | 26,741 | | | | 24,452 | | | | 23,636 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,783,181 | | | $ | 2,760,816 | | | $ | 2,423,186 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Ryan’s Buffet
Charleston, SC
Restaurant | | | Ryan’s Buffet
Conroe, TX
Restaurant | | | Ryan’s Buffet
Princeton, WV
Restaurant | |
Gross leasable square footage | | | 11,099 | | | | 10,736 | | | | 10,888 | |
Date of purchase | | | 4/29/2011 | | | | 4/29/2011 | | | | 4/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,943,100 | | | | 4,221,607 | | | | 2,967,659 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,943,100 | | | | 4,221,607 | | | | 2,967,659 | |
Other cash expenditures expensed | | | 19,575 | | | | 39,513 | | | | 23,501 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,962,675 | | | $ | 4,261,120 | | | $ | 2,991,160 | |
| | | | | | | | | | | | |
II-10
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Best Buy
Kansas City, KS
Electronics Retail | | | Kohl’s
Olathe, KS
Department Store | | | Golden Corral
Albuquerque, NM
Restaurant | |
Gross leasable square footage | | | 46,267 | | | | 80,684 | | | | 14,100 | |
Date of purchase | | | 6/10/2011 | | | | 8/23/2011 | | | | 9/28/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 8,297,700 | | | | 8,770,082 | | | | 5,044,966 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 8,297,700 | | | | 8,770,082 | | | | 5,044,966 | |
Other cash expenditures expensed | | | 86,842 | | | | 32,047 | | | | 34,935 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 8,384,542 | | | $ | 8,802,129 | | | $ | 5,079,901 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | | | Cole Credit
Property Trust II,
Inc. | |
| | | |
| Name, location, type of property | | Tractor Supply
Mt. Sterling, KY
Specialty Retail | | | Chapel Hill Centre
Douglasville, GA
Shopping Center | | | Gallina Centro II
Collierville, TN
Shopping Center | |
Gross leasable square footage | | | 19,097 | | | | 66,970 | | | | 48,625 | |
Date of purchase | | | 10/27/2011 | | | | 10/28/2011 | | | | 11/15/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,914,285 | | | | 8,556,257 | | | | 7,229,373 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,914,285 | | | | 8,556,257 | | | | 7,229,373 | |
Other cash expenditures expensed | | | 37,330 | | | | 52,902 | | | | 70,688 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,951,615 | | | $ | 8,609,159 | | | $ | 7,300,061 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Twin Falls, ID
Drugstore | | | Walgreens
Loves Park, IL
Drugstore | | | Walgreens
Framingham, MA
Drugstore | |
Gross leasable square footage | | | 14,820 | | | | 14,490 | | | | 14,820 | |
Date of purchase | | | 1/14/2010 | | | | 1/19/2010 | | | | 1/19/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,926,600 | | | | 4,018,800 | | | | 6,082,260 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,926,600 | | | | 4,018,800 | | | | 6,082,260 | |
Other cash expenditures expensed | | | 27,767 | | | | 25,120 | | | | 26,355 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,954,367 | | | $ | 4,043,920 | | | $ | 6,108,615 | |
| | | | | | | | | | | | |
II-11
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
Name, location, type of property | |
| Carmax
Garland, TX
Auto Dealership |
| |
| Walgreens
Appleton
(Meade), WI Drugstore |
| |
| L.A. Fitness
Highland, CA
Fitness & Health |
|
Gross leasable square footage | | | 82,165 | | | | 16,853 | | | | 45,000 | |
Date of purchase | | | 1/29/2010 | | | | 2/3/2010 | | | | 2/4/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 14,280,000 | | | | 3,843,360 | | | | 9,399,300 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 14,280,000 | | | | 3,843,360 | | | | 9,399,300 | |
Other cash expenditures expensed | | | 34,240 | | | | 21,591 | | | | 24,631 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 14,314,240 | | | $ | 3,864,951 | | | $ | 9,423,931 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Cleveland (Clark),
OH Drugstore | | | Walgreens
Appleton (Northland), WI
Drugstore | | | Walgreens
Greenville, NC
Drugstore | |
Gross leasable square footage | | | 14,820 | | | | 14,490 | | | | 14,490 | |
Date of purchase | | | 2/10/2010 | | | | 2/18/2010 | | | | 2/19/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 5,559,000 | | | | 5,407,020 | | | | 6,314,935 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,559,000 | | | | 5,407,020 | | | | 6,314,935 | |
Other cash expenditures expensed | | | 25,467 | | | | 23,603 | | | | 33,705 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,584,467 | | | $ | 5,430,623 | | | $ | 6,348,640 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Lancaster, SC
Drugstore | | | Walgreens
Baytown, TX
Drugstore | | | Walgreens
North Platte, NE
Drugstore | |
Gross leasable square footage | | | 14,820 | | | | 14,820 | | | | 14,820 | |
Date of purchase | | | 2/19/2010 | | | | 2/23/2010 | | | | 2/23/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 6,015,134 | | | | 4,901,100 | | | | 5,143,421 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 6,015,134 | | | | 4,901,100 | | | | 5,143,421 | |
Other cash expenditures expensed | | | 39,359 | | | | 27,914 | | | | 25,636 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 6,054,493 | | | $ | 4,929,014 | | | $ | 5,169,057 | |
| | | | | | | | | | | | |
II-12
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Cigna Pointe
Plano, TX
Fitness & Health | | | Kum & Go
Story City, IA
Convenience Store | | | Kum & Go
Ottumwa, IA
Convenience Store | |
Gross leasable square footage | | | 209,089 | | | | 3,414 | | | | 4,177 | |
Date of purchase | | | 2/24/2010 | | | | 2/25/2010 | | | | 2/25/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 50,490,000 | | | | 2,091,000 | | | | 1,860,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 50,490,000 | | | | 2,091,000 | | | | 1,860,000 | |
Other cash expenditures expensed | | | 73,830 | | | | 28,704 | | | | 28,283 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 50,563,830 | | | $ | 2,119,704 | | | $ | 1,888,283 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Kum & Go
West Branch, IA
Convenience Store | | | Walgreens
Omaha, NE
Drugstore | | | Walgreens
Kingman, AZ
Drugstore | |
Gross leasable square footage | | | 3,164 | | | | 14,550 | | | | 15,696 | |
Date of purchase | | | 2/25/2010 | | | | 2/25/2010 | | | | 2/25/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,116,000 | | | | 5,304,000 | | | | 6,145,500 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,116,000 | | | | 5,304,000 | | | | 6,145,500 | |
Other cash expenditures expensed | | | 28,244 | | | | 25,781 | | | | 23,940 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,144,244 | | | $ | 5,329,781 | | | $ | 6,169,440 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Augusta, ME
Drugstore | | | O’Reilly Automotive
New Roads, LA
Automotive Parts | | | O’Reilly Automotive
La Place, LA
Automotive Parts | |
Gross leasable square footage | | | 14,065 | | | | 6,800 | | | | 7,000 | |
Date of purchase | | | 3/5/2010 | | | | 3/12/2010 | | | | 3/12/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 6,552,727 | | | | 837,041 | | | | 1,041,498 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 6,552,727 | | | | 837,041 | | | | 1,041,498 | |
Other cash expenditures expensed | | | 43,781 | | | | 22,658 | | | | 22,492 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 6,596,508 | | | $ | 859,699 | | | $ | 1,063,990 | |
| | | | | | | | | | | | |
II-13
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | O’Reilly Automotive
Breaux Bridge, LA
Automotive Parts | | | Cargill
Blair, NE
Distribution | | | Walgreens
North Mankato, MN
Drugstore | |
Gross leasable square footage | | | 6,800 | | | | 30,000 | | | | 14,550 | |
Date of purchase | | | 3/15/2010 | | | | 3/17/2010 | | | | 3/18/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 823,319 | | | | 5,054,103 | | | | 5,171,400 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 823,319 | | | | 5,054,103 | | | | 5,171,400 | |
Other cash expenditures expensed | | | 22,465 | | | | 40,230 | | | | 28,975 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 845,784 | | | $ | 5,094,333 | | | $ | 5,200,375 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Kohl’s
McAllen, TX
Department Store | | | Sunset Valley
Austin, TX
Shopping Center | | | CVS
New Port Richey, FL
Drugstore | |
Gross leasable square footage | | | 88,248 | | | | 147,763 | (2) | | | 13,813 | |
Date of purchase | | | 3/26/2010 | | | | 3/26/2010 | | | | 3/26/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 7,446,000 | | | | 36,210,000 | | | | 3,381,300 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 7,446,000 | | | | 36,210,000 | | | | 3,381,300 | |
Other cash expenditures expensed | | | 36,265 | | | | 111,611 | | | | 21,015 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 7,482,265 | | | $ | 36,321,611 | | | $ | 3,402,315 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Birmingham, AL
Drugstore | | | L.A. Fitness
Denton, TX
Fitness & Health | | | Aaron Rents
Valley, AL
Specialty Retail | |
Gross leasable square footage | | | 13,905 | | | | 45,000 | | | | 6,950 | |
Date of purchase | | | 3/30/2010 | | | | 3/31/2010 | | | | 3/31/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,188,520 | | | | 7,981,500 | | | | 804,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,188,520 | | | | 7,981,500 | | | | 804,000 | |
Other cash expenditures expensed | | | 24,251 | | | | 40,265 | | | | 33,843 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,212,771 | | | $ | 8,021,765 | | | $ | 837,843 | |
| | | | | | | | | | | | |
II-14
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Aaron Rents
Springdale, AR
Specialty Retail | | | Aaron Rents
Auburndale, FL
Specialty Retail | | | Aaron Rents
Redford, MI
Specialty Retail | |
Gross leasable square footage | | | 8,000 | | | | 148,922 | | | | 8,025 | |
Date of purchase | | | 3/31/2010 | | | | 3/31/2010 | | | | 3/31/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,330,000 | | | | 5,283,000 | | | | 901,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,330,000 | | | | 5,283,000 | | | | 901,000 | |
Other cash expenditures expensed | | | 47,444 | | | | 125,645 | | | | 35,604 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,377,444 | | | $ | 5,408,645 | | | $ | 936,604 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Aaron Rents
Bowling Green, OH
Specialty Retail | | | Aaron Rents
North Olmsted, OH
Specialty Retail | | | Aaron Rents
Bloomsburg, PA
Specialty Retail | |
Gross leasable square footage | | | 8,321 | | | | 7,800 | | | | 12,000 | |
Date of purchase | | | 3/31/2010 | | | | 3/31/2010 | | | | 3/31/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,180,000 | | | | 928,000 | | | | 825,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,180,000 | | | | 928,000 | | | | 825,000 | |
Other cash expenditures expensed | | | 42,707 | | | | 37,843 | | | | 45,227 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,222,707 | | | $ | 965,843 | | | $ | 870,227 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Aaron Rents
Mission, TX
Specialty Retail | | | Aaron Rents
Oneonta, AL
Specialty Retail | | | Aaron Rents
Lafayette, IN
Specialty Retail | |
Gross leasable square footage | | | 8,000 | | | | 8,000 | | | | 5,935 | |
Date of purchase | | | 3/31/2010 | | | | 3/31/2010 | | | | 3/31/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,091,000 | | | | 1,170,000 | | | | 1,102,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,091,000 | | | | 1,170,000 | | | | 1,102,000 | |
Other cash expenditures expensed | | | 39,324 | | | | 41,455 | | | | 40,369 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,130,324 | | | $ | 1,211,455 | | | $ | 1,142,369 | |
| | | | | | | | | | | | |
II-15
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Aaron Rents
Magnolia, MS
Specialty Retail | | | Aaron Rents
Kennett, MO
Specialty Retail | | | Aaron Rents
Charlotte, NC
Specialty Retail | |
Gross leasable square footage | | | 125,000 | | | | 7,276 | | | | 8,775 | |
Date of purchase | | | 3/31/2010 | | | | 3/31/2010 | | | | 3/31/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,945,000 | | | | 641,000 | | | | 1,195,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,945,000 | | | | 641,000 | | | | 1,195,000 | |
Other cash expenditures expensed | | | 79,936 | | | | 29,783 | | | | 41,605 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,024,936 | | | $ | 670,783 | | | $ | 1,236,605 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Aaron Rents Kent, OH Specialty Retail | | | Aaron Rents
Marion, SC
Specialty Retail | | | Aaron Rents
Kingsville, TX
Specialty Retail | |
Gross leasable square footage | | | 16,516 | | | | 8,000 | | | | 8,000 | |
Date of purchase | | | 3/31/2010 | | | | 3/31/2010 | | | | 3/31/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,225,000 | | | | 627,000 | | | | 1,193,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,225,000 | | | | 627,000 | | | | 1,193,000 | |
Other cash expenditures expensed | | | 46,100 | | | | 30,258 | | | | 40,424 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,271,100 | | | $ | 657,258 | | | $ | 1,233,424 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Advance Auto
Delaware, OH
Automotive Parts | | | Advance Auto
Canton, OH
Automotive Parts | | | Advance Auto
Twinsburg, OH
Automotive Parts | |
Gross leasable square footage | | | 7,000 | | | | 7,000 | | | | 6,000 | |
Date of purchase | | | 3/31/2010 | | | | 3/31/2010 | | | | 3/31/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,524,900 | | | | 1,390,260 | | | | 1,291,320 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,524,900 | | | | 1,390,260 | | | | 1,291,320 | |
Other cash expenditures expensed | | | 30,690 | | | | 30,788 | | | | 30,226 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,555,590 | | | $ | 1,421,048 | | | $ | 1,321,546 | |
| | | | | | | | | | | | |
II-16
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Advance Auto
Holland, OH
Automotive Parts | | | Applebee’s
Marion, IL
Restaurant | | | Applebee’s
Madisonville, KY
Restaurant | |
Gross leasable square footage | | | 6,000 | | | | 5,403 | | | | 5,393 | |
Date of purchase | | | 3/31/2010 | | | | 3/31/2010 | | | | 3/31/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,349,460 | | | | 1,768,680 | | | | 1,922,700 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,349,460 | | | | 1,768,680 | | | | 1,922,700 | |
Other cash expenditures expensed | | | 30,164 | | | | 22,189 | | | | 21,874 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,379,624 | | | $ | 1,790,869 | | | $ | 1,944,574 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Applebee’s Joplin, MO
Restaurant | | | Applebee’s
Farmington, MO
Restaurant | | | Applebee’s
Elizabeth City, NC
Restaurant | |
Gross leasable square footage | | | 5,386 | | | | 3,894 | | | | 4,676 | |
Date of purchase | | | 3/31/2010 | | | | 3/31/2010 | | | | 3/31/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,152,200 | | | | 2,161,992 | | | | 1,938,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,152,200 | | | | 2,161,992 | | | | 1,938,000 | |
Other cash expenditures expensed | | | 21,858 | | | | 22,065 | | | | 18,460 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,174,058 | | | $ | 2,184,057 | | | $ | 1,956,460 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Applebee’s
Vincenness, IN
Restaurant | | | Applebee’s
Memphis, TN
Restaurant | | | Applebee’s
Rolla, MO
Restaurant | |
Gross leasable square footage | | | 5,940 | | | | 4,830 | | | | 4,791 | |
Date of purchase | | | 3/31/2010 | | | | 3/31/2010 | | | | 3/31/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,882,104 | | | | 2,132,820 | | | | 2,239,920 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,882,104 | | | | 2,132,820 | | | | 2,239,920 | |
Other cash expenditures expensed | | | 20,295 | | | | 20,845 | | | | 21,225 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,902,399 | | | $ | 2,153,665 | | | $ | 2,261,145 | |
| | | | | | | | | | | | |
II-17
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Tractor Supply
Pearsall, TX
Specialty Retail | | | Walgreens
Janesville (West
Court), WI
Drugstore | | | Tractor Supply
Summerdale, AL
Specialty Retail | |
Gross leasable square footage | | | 18,948 | | | | 14,820 | | | | 19,097 | |
Date of purchase | | | 4/9/2010 | | | | 4/13/2010 | | | | 4/14/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,485,953 | | | | 4,360,500 | | | | 2,517,625 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,485,953 | | | | 4,360,500 | | | | 2,517,625 | |
Other cash expenditures expensed | | | 25,629 | | | | 24,595 | | | | 22,885 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,511,582 | | | $ | 4,385,095 | | | $ | 2,540,510 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | National Tire &
Battery Nashville, TN
Automotive Parts | | | Kum & Go
Sloan, IA
Convenience Store | | | FedEx
Beekmantown, NY
Distribution | |
Gross leasable square footage | | | 8,074 | | | | 4,794 | | | | 49,780 | |
Date of purchase | | | 4/21/2010 | | | | 4/23/2010 | | | | 4/23/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,744,047 | | | | 2,652,000 | | | | 5,431,500 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,744,047 | | | | 2,652,000 | | | | 5,431,500 | |
Other cash expenditures expensed | | | 20,821 | | | | 26,132 | | | | 28,890 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,764,868 | | | $ | 2,678,132 | | | $ | 5,460,390 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | FedEx Lafayette, IN
Distribution | | | Advance Auto
Sylvania, OH
Automotive Parts | | | Walgreens
Durham (Hwy 54),
NC Drugstore | |
Gross leasable square footage | | | 22,194 | | | | 6,000 | | | | 14,820 | |
Date of purchase | | | 4/27/2010 | | | | 4/28/2010 | | | | 4/28/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,582,860 | | | | 1,265,820 | | | | 5,916,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,582,860 | | | | 1,265,820 | | | | 5,916,000 | |
Other cash expenditures expensed | | | 23,630 | | | | 30,508 | | | | 22,973 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,606,490 | | | $ | 1,296,328 | | | $ | 5,938,973 | |
| | | | | | | | | | | | |
II-18
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Tractor Supply
Kenedy, TX
Specialty Retail | | | Academy Sports
Killeen, TX
Sporting Goods | | | Experian
Headquarters
Schaumburg, IL
Professional Services | |
Gross leasable square footage | | | 18,800 | | | | 96,645 | | | | 177,893 | |
Date of purchase | | | 4/29/2010 | | | | 4/29/2010 | | | | 4/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,526,279 | | | | 6,834,000 | | | | 30,600,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,526,279 | | | | 6,834,000 | | | | 30,600,000 | |
Other cash expenditures expensed | | | 26,672 | | | | 30,636 | | | | 60,672 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,552,951 | | | $ | 6,864,636 | | | $ | 30,660,672 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Tractor Supply
Glenpool, OK
Specialty Retail | | | Tractor Supply
Stillwater, OK
Specialty Retail | | | Tractor Supply
Gibsonia, PA
Specialty Retail | |
Gross leasable square footage | | | 19,097 | | | | 19,180 | | | | 19,097 | |
Date of purchase | | | 5/4/2010 | | | | 5/4/2010 | | | | 5/5/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,413,320 | | | | 2,475,540 | | | | 3,185,460 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,413,320 | | | | 2,475,540 | | | | 3,185,460 | |
Other cash expenditures expensed | | | 25,297 | | | | 25,591 | | | | 60,239 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,438,617 | | | $ | 2,501,131 | | | $ | 3,245,699 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Lancaster, CA
Drugstore | | | Northern Tool
Ocala, FL
Specialty Retail | | | Walgreens
Beloit, WI
Drugstore | |
Gross leasable square footage | | | 13,650 | | | | 26,054 | | | | 14,820 | |
Date of purchase | | | 5/17/2010 | | | | 5/20/2010 | | | | 5/20/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 5,647,740 | | | | 3,588,360 | | | | 4,396,200 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,647,740 | | | | 3,588,360 | | | | 4,396,200 | |
Other cash expenditures expensed | | | 42,143 | | | | 30,727 | | | | 23,002 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,689,883 | | | $ | 3,619,087 | | | $ | 4,419,202 | |
| | | | | | | | | | | | |
II-19
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Tractor Supply
Murphy, NC
Specialty Retail | | | Tractor Supply
Ballinger, TX
Specialty Retail | | | Igloo Headquarters
Katy, TX
Distribution | |
Gross leasable square footage | | | 19,097 | | | | 19,097 | | | | 914,195 | |
Date of purchase | | | 5/21/2010 | | | | 5/21/2010 | | | | 5/21/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,898,935 | | | | 2,543,595 | | | | 38,862,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,898,935 | | | | 2,543,595 | | | | 38,862,000 | |
Other cash expenditures expensed | | | 26,365 | | | | 27,186 | | | | 99,997 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,925,300 | | | $ | 2,570,781 | | | $ | 38,961,997 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Rocky Mount, NC
Drugstore | | | Kum & Go Tipton, IA
Convenience Store | | | Whole Foods
Hinsdale, IL
Grocery | |
Gross leasable square footage | | | 14,820 | | | | 5,118 | | | | 48,835 | |
Date of purchase | | | 5/26/2010 | | | | 5/28/2010 | | | | 5/28/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 5,980,260 | | | | 2,544,000 | | | | 11,842,200 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,980,260 | | | | 2,544,000 | | | | 11,842,200 | |
Other cash expenditures expensed | | | 19,953 | | | | 33,070 | | | | 28,837 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 6,000,213 | | | $ | 2,577,070 | | | $ | 11,871,037 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | AT&T
Dallas, TX
Communications | | | AutoZone
Hamilton, OH
Automotive Parts | | | AutoZone
Mt. Orab, OH
Automotive Parts | |
Gross leasable square footage | | | 206,040 | | | | 7,370 | | | | 6,816 | |
Date of purchase | | | 5/28/2010 | | | | 6/9/2010 | | | | 6/9/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 29,988,000 | | | | 1,668,720 | | | | 1,391,280 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 29,988,000 | | | | 1,668,720 | | | | 1,391,280 | |
Other cash expenditures expensed | | | 86,703 | | | | 26,959 | | | | 25,643 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 30,074,703 | | | $ | 1,695,679 | | | $ | 1,416,923 | |
| | | | | | | | | | | | |
II-20
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | AutoZone
Blanchester, OH
Automotive Parts | | | AutoZone
Trenton, OH
Automotive Parts | | | AutoZone
Nashville, TN
Automotive Parts | |
Gross leasable square footage | | | 7,370 | | | | 6,816 | | | | 6,786 | |
Date of purchase | | | 6/9/2010 | | | | 6/9/2010 | | | | 6/9/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,075,590 | | | | 1,031,220 | | | | 1,706,460 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,075,590 | | | | 1,031,220 | | | | 1,706,460 | |
Other cash expenditures expensed | | | 27,429 | | | | 26,048 | | | | 24,597 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,103,019 | | | $ | 1,057,268 | | | $ | 1,731,057 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Home Depot
Evans, GA
Home Improvement | | | Evans Exchange
Evans, GA
Shopping Center | | | Staples
Houston, TX
Office Supply | |
Gross leasable square footage | | | 131,000 | (2) | | | 65,049 | | | | 20,060 | |
Date of purchase | | | 6/11/2010 | | | | 6/11/2010 | | | | 6/17/2010 | |
Mortgage financing at date of purchase | | $ | 5,840,667 | | | $ | — | | | $ | — | |
Cash down payment | | | 324,114 | | | | 13,623,219 | | | | 3,765,840 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 6,164,781 | | | | 13,623,219 | | | | 3,765,840 | |
Other cash expenditures expensed | | | — | | | | 228,968 | | | | 25,693 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 6,164,781 | | | $ | 13,852,187 | | | $ | 3,791,533 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS
Ft. Myers, FL
Drugstore | | | Walgreens
Fort Mill, SC
Drugstore | | | Lowe’s
Sanford, ME
Home Improvement | |
Gross leasable square footage | | | 12,900 | | | | 14,820 | | | | 138,134 | (2) |
Date of purchase | | | 6/18/2010 | | | | 6/24/2010 | | | | 6/28/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 6,085,320 | | | | 4,445,969 | | | | 9,562,500 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 6,085,320 | | | | 4,445,969 | | | | 9,562,500 | |
Other cash expenditures expensed | | | 24,609 | | | | 45,257 | | | | 67,591 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 6,109,929 | | | $ | 4,491,226 | | | $ | 9,630,091 | |
| | | | | | | | | | | | |
II-21
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Stripes
San Benito, TX
Convenience Store | | | Stripes
Palmhurst, TX
Convenience Store | | | Stripes
Edinburg, TX
Convenience Store | |
Gross leasable square footage | | | 4,847 | | | | 2,925 | | | | 3,604 | |
Date of purchase | | | 6/29/2010 | | | | 6/29/2010 | | | | 6/29/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,703,214 | | | | 1,030,613 | | | | 2,473,655 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,703,214 | | | | 1,030,613 | | | | 2,473,655 | |
Other cash expenditures expensed | | | 16,030 | | | | 15,719 | | | | 15,719 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,719,244 | | | $ | 1,046,332 | | | $ | 2,489,374 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Stripes
Eagle Pass, TX
Convenience Store | | | Tractor Supply
Belchertown, MA
Specialty Retail | | | Tractor Supply
Southwick, MA
Specialty Retail | |
Gross leasable square footage | | | 4,847 | | | | 19,097 | | | | 19,097 | |
Date of purchase | | | 6/29/2010 | | | | 6/29/2010 | | | | 6/29/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,912,567 | | | | 3,712,438 | | | | 4,487,185 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,912,567 | | | | 3,712,438 | | | | 4,487,185 | |
Other cash expenditures expensed | | | 15,719 | | | | 28,218 | | | | 27,528 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,928,286 | | | $ | 3,740,656 | | | $ | 4,514,713 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Atascocita Commons
Humble, TX
Shopping Center | | | On The Border
College Station, TX
Restaurant | | | On The Border
Columbus, OH
Restaurant | |
Gross leasable square footage | | | 316,529 | (2) | | | 6,652 | | | | 7,671 | |
Date of purchase | | | 6/29/2010 | | | | 6/30/2010 | | | | 6/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 57,630,000 | | | | 2,978,865 | | | | 2,971,056 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 57,630,000 | | | | 2,978,865 | | | | 2,971,056 | |
Other cash expenditures expensed | | | 141,889 | | | | 21,830 | | | | 19,525 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 57,771,889 | | | $ | 3,000,695 | | | $ | 2,990,581 | |
| | | | | | | | | | | | |
II-22
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | On The Border
Concord Mills, NC
Restaurant | | | On The Border
Denton, TX
Restaurant | | | On The Border
DeSoto, TX
Restaurant | |
Gross leasable square footage | | | 6,102 | | | | 5,661 | | | | 9,231 | |
Date of purchase | | | 6/30/2010 | | | | 6/30/2010 | | | | 6/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,979,296 | | | | 2,880,412 | | | | 3,270,358 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,979,296 | | | | 2,880,412 | | | | 3,270,358 | |
Other cash expenditures expensed | | | 15,533 | | | | 21,315 | | | | 22,314 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,994,829 | | | $ | 2,901,727 | | | $ | 3,292,672 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Chili’s
Flanders, NJ
Restaurant | | | On The Border
Fort Worth, TX
Restaurant | | | On The Border
Garland, TX
Restaurant | |
Gross leasable square footage | | | 6,046 | | | | 7,127 | | | | 5,948 | |
Date of purchase | | | 6/30/2010 | | | | 6/30/2010 | | | | 6/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,478,532 | | | | 3,542,132 | | | | 2,221,582 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,478,532 | | | | 3,542,132 | | | | 2,221,582 | |
Other cash expenditures expensed | | | 32,252 | | | | 23,145 | | | | 18,643 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,510,784 | | | $ | 3,565,277 | | | $ | 2,240,225 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | On The Border
Kansas City, MO
Restaurant | | | On The Border
Lee’s Summit, MO
Restaurant | | | On The Border
Alpharetta, GA
Restaurant | |
Gross leasable square footage | | | 6,760 | | | | 5,780 | | | | 6,660 | |
Date of purchase | | | 6/30/2010 | | | | 6/30/2010 | | | | 6/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,564,167 | | | | 2,407,823 | | | | 2,997,871 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,564,167 | | | | 2,407,823 | | | | 2,997,871 | |
Other cash expenditures expensed | | | 15,131 | | | | 15,185 | | | | 15,080 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,579,298 | | | $ | 2,423,008 | | | $ | 3,012,951 | |
| | | | | | | | | | | | |
II-23
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | On The Border
Auburn Hills, MI
Restaurant | | | On The Border
Buford, GA
Restaurant | | | On The Border
Burleson, TX
Restaurant | |
Gross leasable square footage | | | 8,367 | | | | 6,088 | | | | 6,082 | |
Date of purchase | | | 6/30/2010 | | | | 6/30/2010 | | | | 6/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,234,227 | | | | 2,705,505 | | | | 3,257,494 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,234,227 | | | | 2,705,505 | | | | 3,257,494 | |
Other cash expenditures expensed | | | 14,950 | | | | 14,919 | | | | 22,280 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,249,177 | | | $ | 2,720,424 | | | $ | 3,279,774 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | On The Border
Lubbock, TX
Restaurant | | | On The Border
Mesa, AZ
Restaurant | | | On The Border
Mt. Laurel, NJ
Restaurant | |
Gross leasable square footage | | | 6,745 | | | | 6,586 | | | | 7,041 | |
Date of purchase | | | 6/30/2010 | | | | 6/30/2010 | | | | 6/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,313,867 | | | | 2,964,131 | | | | 2,869,419 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,313,867 | | | | 2,964,131 | | | | 2,869,419 | |
Other cash expenditures expensed | | | 22,431 | | | | 13,528 | | | | 35,538 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,336,298 | | | $ | 2,977,659 | | | $ | 2,904,957 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | On The Border
Naperville, IL
Restaurant | | | On The Border
Novi, MI
Restaurant | | | On The Border
Oklahoma City, OK
Restaurant | |
Gross leasable square footage | | | 7,086 | | | | 8,017 | | | | 7,402 | |
Date of purchase | | | 6/30/2010 | | | | 6/30/2010 | | | | 6/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,465,155 | | | | 2,881,239 | | | | 2,936,070 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,465,155 | | | | 2,881,239 | | | | 2,936,070 | |
Other cash expenditures expensed | | | 20,535 | | | | 14,703 | | | | 18,744 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,485,690 | | | $ | 2,895,942 | | | $ | 2,954,814 | |
| | | | | | | | | | | | |
II-24
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | On The Border
Peoria, AZ
Restaurant | | | Chili’s Ramsey, NJ
Restaurant | | | On The Border
Rockwall, TX
Restaurant | |
Gross leasable square footage | | | 6,506 | | | | 6,148 | | | | 6,668 | |
Date of purchase | | | 6/30/2010 | | | | 6/30/2010 | | | | 6/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,601,532 | | | | 1,850,337 | | | | 3,081,477 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,601,532 | | | | 1,850,337 | | | | 3,081,477 | |
Other cash expenditures expensed | | | 13,407 | | | | 35,468 | | | | 21,805 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,614,939 | | | $ | 1,885,805 | | | $ | 3,103,282 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | On The Border
Rogers, AR
Restaurant | | | On The Border
Tulsa, OK
Restaurant | | | On The Border
West Springfield, MA
Restaurant | |
Gross leasable square footage | | | 5,782 | | | | 7,559 | | | | 8,248 | |
Date of purchase | | | 6/30/2010 | | | | 6/30/2010 | | | | 6/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,939,417 | | | | 3,395,252 | | | | 3,954,279 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,939,417 | | | | 3,395,252 | | | | 3,954,279 | |
Other cash expenditures expensed | | | 19,997 | | | | 19,057 | | | | 17,808 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,959,414 | | | $ | 3,414,309 | | | $ | 3,972,087 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | On The Border
West Windsor, NJ
Restaurant | | | On The Border
Woodbridge, VA
Restaurant | | | AutoZone
Pearl River, LA
Automotive Parts | |
Gross leasable square footage | | | 7,913 | | | | 7,878 | | | | 7,370 | |
Date of purchase | | | 6/30/2010 | | | | 6/30/2010 | | | | 6/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,579,566 | | | | 3,569,830 | | | | 1,428,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,579,566 | | | | 3,569,830 | | | | 1,428,000 | |
Other cash expenditures expensed | | | 55,155 | | | | 29,054 | | | | 39,006 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,634,721 | | | $ | 3,598,884 | | | $ | 1,467,006 | |
| | | | | | | | | | | | |
II-25
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | AutoZone
Rapid City, SD
Automotive Parts | | | Macaroni Grill
Flanders, NJ
Restaurant | | | Macaroni Grill
Mt. Laurel, NJ
Restaurant | |
Gross leasable square footage | | | 7,370 | | | | 6,847 | | | | 7,058 | |
Date of purchase | | | 6/30/2010 | | | | 6/30/2010 | | | | 6/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,186,770 | | | | 1,343,414 | | | | 1,403,122 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,186,770 | | | | 1,343,414 | | | | 1,403,122 | |
Other cash expenditures expensed | | | 27,731 | | | | 35,695 | | | | 37,670 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,214,501 | | | $ | 1,379,109 | | | $ | 1,440,792 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Macaroni Grill
Ramsey, NJ
Restaurant | | | Macaroni Grill
West Windsor, NJ
Restaurant | | | Best Buy
Montgomery, AL
Electronics Retail | |
Gross leasable square footage | | | 8,074 | | | | 7,611 | | | | 30,505 | |
Date of purchase | | | 6/30/2010 | | | | 6/30/2010 | | | | 7/6/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,537,561 | | | | 1,562,341 | | | | 6,222,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,537,561 | | | | 1,562,341 | | | | 6,222,000 | |
Other cash expenditures expensed | | | 39,106 | | | | 27,934 | | | | 30,793 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,576,667 | | | $ | 1,590,275 | | | $ | 6,252,793 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | City Center Plaza
Bellevue, WA
Shopping Center | | | AutoZone
Hartville, OH
Automotive Parts | | | Walgreens
Leland, NC
Drugstore | |
Gross leasable square footage | | | 583,179 | | | | 7,370 | | | | 14,820 | |
Date of purchase | | | 7/9/2010 | | | | 7/14/2010 | | | | 7/15/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 316,200,000 | | | | 1,236,240 | | | | 4,901,100 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 316,200,000 | | | | 1,236,240 | | | | 4,901,100 | |
Other cash expenditures expensed | | | 727,590 | | | | 24,761 | | | | 22,506 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 316,927,590 | | | $ | 1,261,001 | | | $ | 4,923,606 | |
| | | | | | | | | | | | |
II-26
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Durham (Guess), NC
Drugstore | | | Tire Kingdom
Auburndale, FL
Automotive Parts | | | Tractor Supply
St. John, IN
Specialty Retail | |
Gross leasable square footage | | | 14,606 | | | | 6,922 | | | | 24,727 | |
Date of purchase | | | 7/20/2010 | | | | 7/20/2010 | | | | 7/28/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 5,513,350 | | | | 2,297,040 | | | | 4,549,200 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,513,350 | | | | 2,297,040 | | | | 4,549,200 | |
Other cash expenditures expensed | | | 50,012 | | | | 20,062 | | | | 10,842 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,563,362 | | | $ | 2,317,102 | | | $ | 4,560,042 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Home Depot
Slidell, LA
Home Improvement | | | Stop & Shop
Stamford, CT
Grocery | | | Home Depot
Tolleson, AZ
Home Improvement | |
Gross leasable square footage | | | 108,003 | (2) | | | 69,733 | | | | 466,694 | |
Date of purchase | | | 7/28/2010 | | | | 7/30/2010 | | | | 7/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | 15,000,000 | | | $ | — | |
Cash down payment | | | 3,777,784 | | | | 16,110,000 | | | | 31,054,152 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,777,784 | | | | 31,110,000 | | | | 31,054,152 | |
Other cash expenditures expensed | | | 58,002 | | | | 68,643 | | | | 99,537 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,835,786 | | | $ | 31,178,643 | | | $ | 31,153,689 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Advance Auto
Sapulpa, OK
Automotive Parts | | | Advance Auto
Franklin, IN
Automotive Parts | | | Advance Auto
Grand Rapids, MI
Automotive Parts | |
Gross leasable square footage | | | 6,784 | | | | 6,157 | | | | 6,133 | |
Date of purchase | | | 8/3/2010 | | | | 8/12/2010 | | | | 8/12/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,441,266 | | | | 1,490,279 | | | | 1,366,800 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,441,266 | | | | 1,490,279 | | | | 1,366,800 | |
Other cash expenditures expensed | | | 20,805 | | | | 22,545 | | | | 20,167 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,462,071 | | | $ | 1,512,824 | | | $ | 1,386,967 | |
| | | | | | | | | | | | |
II-27
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Tractor Supply
Alton, IL Specialty Retail | | | Tractor Supply
Union, MO
Specialty Retail | | | Tractor Supply Troy, MO
Specialty Retail | |
Gross leasable square footage | | | 19,097 | | | | 19,097 | | | | 19,100 | |
Date of purchase | | | 8/13/2010 | | | | 8/13/2010 | | | | 8/13/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,914,286 | | | | 2,914,286 | | | | 2,671,429 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,914,286 | | | | 2,914,286 | | | | 2,671,429 | |
Other cash expenditures expensed | | | 22,785 | | | | 25,588 | | | | 25,499 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,937,071 | | | $ | 2,939,874 | | | $ | 2,696,928 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | L.A. Fitness Dallas, TX
Fitness & Health | | | FedEx Northwood, OH
Distribution | | | Carmax Austin, TX
Auto Dealership | |
Gross leasable square footage | | | 45,000 | | | | 89,921 | | | | 55,888 | |
Date of purchase | | | 8/17/2010 | | | | 8/17/2010 | | | | 8/25/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 9,792,000 | | | | 4,970,460 | | | | 21,675,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 9,792,000 | | | | 4,970,460 | | | | 21,675,000 | |
Other cash expenditures expensed | | | 34,141 | | | | 28,367 | | | | 39,470 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 9,826,141 | | | $ | 4,998,827 | | | $ | 21,714,470 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Academy Sports
Austin, TX
Sporting Goods | | | Manchester
Highlands St. Louis, MO
Shopping Center | | | Whittwood Town
Center Whittier, CA
Shopping Center | |
Gross leasable square footage | | | 89,807 | | | | 354,073 | (2) | | | 785,674 | (2) |
Date of purchase | | | 8/26/2010 | | | | 8/26/2010 | | | | 8/27/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 10,544,760 | | | | 49,470,000 | | | | 85,170,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 10,544,760 | | | | 49,470,000 | | | | 85,170,000 | |
Other cash expenditures expensed | | | 35,790 | | | | 111,109 | | | | 198,046 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 10,580,550 | | | $ | 49,581,109 | | | $ | 85,368,046 | |
| | | | | | | | | | | | |
II-28
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Lowe’s
Ticonderoga, NY
Home Improvement | | | CVS/Tres Amigos
Ringgold, GA
Drugstore/Restaurant | | | CVS/Noble Roman
Mishawaka, IN
Drugstore/Restaurant | |
Gross leasable square footage | | | 124,631 | (2) | | | 15,029 | (2) | | | 12,376 | |
Date of purchase | | | 8/31/2010 | | | | 8/31/2010 | | | | 9/8/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 8,899,329 | | | | 4,069,800 | | | | 4,702,960 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 8,899,329 | | | | 4,069,800 | | | | 4,702,960 | |
Other cash expenditures expensed | | | 52,880 | | | | 39,661 | | | | 31,896 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 8,952,209 | | | $ | 4,109,461 | | | $ | 4,734,856 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Tractor Supply
Sellersburg, IN
Specialty Retail | | | Tractor Supply
Wauseon, OH
Specialty Retail | | | Lakeshore Crossing
Gainesville, GA
Shopping Center | |
Gross leasable square footage | | | 19,097 | | | | 19,097 | | | | 123,948 | |
Date of purchase | | | 9/13/2010 | | | | 9/13/2010 | | | | 9/15/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,658,182 | | | | 2,548,081 | | | | 9,180,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,658,182 | | | | 2,548,081 | | | | 9,180,000 | |
Other cash expenditures expensed | | | 21,251 | | | | 47,079 | | | | 44,775 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,679,433 | | | $ | 2,595,160 | | | $ | 9,224,775 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Tractor Supply
Hamilton, OH
Specialty Retail | | | Advance Auto
Bonita Springs, FL
Automotive Parts | | | Tractor Supply Nixa, MO Specialty Retail | |
Gross leasable square footage | | | 40,700 | | | | 6,880 | | | | 19,180 | |
Date of purchase | | | 9/17/2010 | | | | 9/22/2010 | | | | 9/24/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,713,600 | | | | 2,894,901 | | | | 2,395,980 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,713,600 | | | | 2,894,901 | | | | 2,395,980 | |
Other cash expenditures expensed | | | 26,369 | | | | 22,717 | | | | 24,716 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,739,969 | | | $ | 2,917,618 | | | $ | 2,420,696 | |
| | | | | | | | | | | | |
II-29
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Tractor Supply
Lawrence, KS
Specialty Retail | | | Tractor Supply
Dixon, CA
Specialty Retail | | | Albertson’s
Phoenix, AZ
Grocery | |
Gross leasable square footage | | | 19,097 | | | | 24,727 | | | | 56,742 | |
Date of purchase | | | 9/24/2010 | | | | 9/24/2010 | | | | 9/29/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,826,420 | | | | 5,117,850 | | | | 7,139,812 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,826,420 | | | | 5,117,850 | | | | 7,139,812 | |
Other cash expenditures expensed | | | 25,414 | | | | 29,290 | | | | 22,109 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,851,834 | | | $ | 5,147,140 | | | $ | 7,161,921 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Albertson’s
Mesa, AZ
Grocery | | | Albertson’s
Tucson (Silverbell),
AZ, Grocery | | | CVS
Weaverville, NC
Drugstore | |
Gross leasable square footage | | | 51,393 | | | | 60,315 | | | | 13,225 | |
Date of purchase | | | 9/29/2010 | | | | 9/29/2010 | | | | 9/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 6,188,945 | | | | 11,077,940 | | | | 6,260,296 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 6,188,945 | | | | 11,077,940 | | | | 6,260,296 | |
Other cash expenditures expensed | | | 20,959 | | | | 22,787 | | | | 34,653 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 6,209,904 | | | $ | 11,100,727 | | | $ | 6,294,949 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | L.A. Fitness
Oakdale, MN
Fitness & Health | | | Advance Auto
Janesville, WI
Automotive Parts | | | Advance Auto
Appleton, WI
Automotive Parts | |
Gross leasable square footage | | | 42,348 | | | | 6,892 | | | | 6,892 | |
Date of purchase | | | 9/30/2010 | | | | 9/30/2010 | | | | 9/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 8,807,700 | | | | 1,726,860 | | | | 1,470,840 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 8,807,700 | | | | 1,726,860 | | | | 1,470,840 | |
Other cash expenditures expensed | | | 28,524 | | | | 17,218 | | | | 17,146 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 8,836,224 | | | $ | 1,744,078 | | | $ | 1,487,986 | |
| | | | | | | | | | | | |
II-30
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | WaWa
Portsmouth, VA
Convenience Store | | | Tractor Supply
Augusta, ME
Specialty Retail | | | Shoppes at Port
Arthur Port Arthur, TX
Shopping Center | |
Gross leasable square footage | | | 5,940 | (2) | | | 19,097 | | | | 95,877 | |
Date of purchase | | | 9/30/2010 | | | | 10/12/2010 | | | | 10/12/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,346,000 | | | | 2,835,600 | | | | 15,300,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,346,000 | | | | 2,835,600 | | | | 15,300,000 | |
Other cash expenditures expensed | | | 42,648 | | | | 43,648 | | | | 65,192 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,388,648 | | | $ | 2,879,248 | | | $ | 15,365,192 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS Lynchburg, VA
Drugstore | | | CVS
Gulf Breeze, FL
Drugstore | | | Applebee’s
Wytheville, VA
Restaurant | |
Gross leasable square footage | | | 10,125 | | | | 13,225 | (2) | | | 4,352 | |
Date of purchase | | | 10/12/2010 | | | | 10/13/2010 | | | | 10/13/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,278,280 | | | | 1,904,340 | | | | 1,676,273 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,278,280 | | | | 1,904,340 | | | | 1,676,273 | |
Other cash expenditures expensed | | | 42,761 | | | | 24,052 | | | | 21,826 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,321,041 | | | $ | 1,928,392 | | | $ | 1,698,099 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Applebee’s
West Memphis, AR
Restaurant | | | Applebee’s
Swansea, IL
Restaurant | | | Applebee’s
Owatonna, MN
Restaurant | |
Gross leasable square footage | | | 4,237 | | | | 5,728 | | | | 5,459 | |
Date of purchase | | | 10/13/2010 | | | | 10/13/2010 | | | | 10/13/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,523,786 | | | | 1,888,308 | | | | 2,458,461 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,523,786 | | | | 1,888,308 | | | | 2,458,461 | |
Other cash expenditures expensed | | | 22,810 | | | | 20,885 | | | | 19,400 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,546,596 | | | $ | 1,909,193 | | | $ | 2,477,861 | |
| | | | | | | | | | | | |
II-31
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Applebee’s
Norton, VA
Restaurant | | | Applebee’s
Adrian, MI
Restaurant | | | Applebee’s
Chambersburg, PA
Restaurant | |
Gross leasable square footage | | | 3,670 | | | | 5,589 | | | | 5,553 | |
Date of purchase | | | 10/13/2010 | | | | 10/13/2010 | | | | 10/13/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,691,317 | | | | 2,285,679 | | | | 2,013,574 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,691,317 | | | | 2,285,679 | | | | 2,013,574 | |
Other cash expenditures expensed | | | 21,686 | | | | 20,530 | | | | 24,628 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,713,003 | | | $ | 2,306,209 | | | $ | 2,038,202 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Applebee’s
Horn Lake, MS
Restaurant | | | Applebee’s
Kalamazoo, MI
Restaurant | | | Applebee’s Lufkin, TX Restaurant | |
Gross leasable square footage | | | 5,035 | | | | 5,675 | | | | 5,199 | |
Date of purchase | | | 10/13/2010 | | | | 10/13/2010 | | | | 10/13/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,687,048 | | | | 2,208,849 | | | | 2,013,574 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,687,048 | | | | 2,208,849 | | | | 2,013,574 | |
Other cash expenditures expensed | | | 21,253 | | | | 20,379 | | | | 27,927 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,708,301 | | | $ | 2,229,228 | | | $ | 2,041,501 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Applebee’s
Bartlett, TN
Restaurant | | | Applebee’s Tyler, TX Restaurant | | | CompUSA
Arlington, TX
Electronics Retail | |
Gross leasable square footage | | | 4,360 | | | | 5,895 | | | | 25,612 | |
Date of purchase | | | 10/13/2010 | | | | 10/13/2010 | | | | 10/18/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,904,733 | | | | 2,772,308 | | | | 3,340,500 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,904,733 | | | | 2,772,308 | | | | 3,340,500 | |
Other cash expenditures expensed | | | 20,714 | | | | 31,597 | | | | 57,362 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,925,447 | | | $ | 2,803,905 | | | $ | 3,397,862 | |
| | | | | | | | | | | | |
II-32
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Big O Tires
Phoenix, AZ
Automotive Parts | | | FedEx Dublin, VA
Distribution | | | CVS Madison Heights, VA
Drugstore | |
Gross leasable square footage | | | 4,560 | | | | 32,105 | | | | 10,125 | |
Date of purchase | | | 10/20/2010 | | | | 10/21/2010 | | | | 10/22/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,511,028 | | | | 3,341,772 | | | | 2,973,300 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,511,028 | | | | 3,341,772 | | | | 2,973,300 | |
Other cash expenditures expensed | | | 19,396 | | | | 49,051 | | | | 41,106 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,530,424 | | | $ | 3,390,823 | | | $ | 3,014,406 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Petco & Portrait
Innovations
Lake Charles, LA
Shopping Center | | | Albertson’s
Lake Havasu City,
AZ Grocery | | | Albertson’s
Yuma, AZ Grocery | |
Gross leasable square footage | | | 17,678 | | | | 57,471 | | | | 57,835 | |
Date of purchase | | | 10/25/2010 | | | | 10/26/2010 | | | | 10/26/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,978,872 | | | | 7,245,285 | | | | 8,966,372 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,978,872 | | | | 7,245,285 | | | | 8,966,372 | |
Other cash expenditures expensed | | | 45,022 | | | | 17,503 | | | | 17,837 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,023,894 | | | $ | 7,262,788 | | | $ | 8,984,209 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Albertson’s
Scottsdale, AZ
Grocery | | | Albertson’s
Tucson (Grant), AZ
Grocery | | | Albertson’s
Fort Worth
(Oakmont), TX
Grocery | |
Gross leasable square footage | | | 62,119 | | | | 49,491 | | | | 64,886 | |
Date of purchase | | | 10/26/2010 | | | | 10/26/2010 | | | | 10/26/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 11,570,435 | | | | 5,551,817 | | | | 7,247,564 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 11,570,435 | | | | 5,551,817 | | | | 7,247,564 | |
Other cash expenditures expensed | | | 18,191 | | | | 16,144 | | | | 22,109 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 11,588,626 | | | $ | 5,567,961 | | | $ | 7,269,673 | |
| | | | | | | | | | | | |
II-33
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Albertson’s
Fort Worth (Beach),
TX Grocery | | | Albertson’s
Fort Worth (Clifford),
TX Grocery | | | Albertson’s Fort Worth (Sycamore), TX
Grocery | |
Gross leasable square footage | | | 52,700 | | | | 61,247 | | | | 58,723 | |
Date of purchase | | | 10/26/2010 | | | | 10/26/2010 | | | | 10/26/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 9,669,780 | | | | 6,424,391 | | | | 7,833,635 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 9,669,780 | | | | 6,424,391 | | | | 7,833,635 | |
Other cash expenditures expensed | | | 24,688 | | | | 21,232 | | | | 22,733 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 9,694,468 | | | $ | 6,445,623 | | | $ | 7,856,368 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Albertson’s Lafayette, LA
Grocery | | | Albertson’s Clovis, NM Grocery | | | Albertson’s Bossier City, LA
Grocery | |
Gross leasable square footage | | | 74,493 | | | | 43,484 | | | | 59,777 | |
Date of purchase | | | 10/26/2010 | | | | 10/26/2010 | | | | 10/26/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 10,974,484 | | | | 8,010,855 | | | | 7,341,428 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 10,974,484 | | | | 8,010,855 | | | | 7,341,428 | |
Other cash expenditures expensed | | | 25,432 | | | | 25,986 | | | | 21,820 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 10,999,916 | | | $ | 8,036,841 | | | $ | 7,363,248 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Albertson’s
Baton Rouge
(George), LA
Grocery | | | Albertson’s Baton Rouge
(College), LA
Grocery | | | Albertson’s Baton Rouge
(Airline), LA
Grocery | |
Gross leasable square footage | | | 66,057 | | | | 61,741 | | | | 66,430 | |
Date of purchase | | | 10/26/2010 | | | | 10/26/2010 | | | | 10/26/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 9,652,184 | | | | 8,019,573 | | | | 11,066,478 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 9,652,184 | | | | 8,019,573 | | | | 11,066,478 | |
Other cash expenditures expensed | | | 24,286 | | | | 22,774 | | | | 25,857 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 9,676,470 | | | $ | 8,042,347 | | | $ | 11,092,335 | |
| | | | | | | | | | | | |
II-34
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Albertson’s
Albuquerque
(Academy), NM
Grocery | | | Albertson’s
Albuquerque
(Lomas), NM
Grocery | | | Albertson’s
Abilene, TX
Grocery | |
Gross leasable square footage | | | 65,413 | | | | 65,145 | | | | 67,270 | |
Date of purchase | | | 10/26/2010 | | | | 10/26/2010 | | | | 10/26/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 9,180,554 | | | | 8,996,059 | | | | 8,122,046 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 9,180,554 | | | | 8,996,059 | | | | 8,122,046 | |
Other cash expenditures expensed | | | 27,705 | | | | 27,159 | | | | 22,715 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 9,208,259 | | | $ | 9,023,218 | | | $ | 8,144,761 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Albertson’s
Arlington, TX
Grocery | | | Albertson’s
Alexandria, LA
Grocery | | | Albertson’s
Fort Collins, CO
Grocery | |
Gross leasable square footage | | | 63,124 | | | | 62,117 | | | | 51,230 | |
Date of purchase | | | 10/26/2010 | | | | 10/26/2010 | | | | 10/26/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 8,580,788 | | | | 8,384,352 | | | | 8,828,668 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 8,580,788 | | | | 8,384,352 | | | | 8,828,668 | |
Other cash expenditures expensed | | | 23,528 | | | | 22,436 | | | | 21,976 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 8,604,316 | | | $ | 8,406,788 | | | $ | 8,850,644 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Albertson’s El Paso, TX
Grocery | | | Albertson’s
Farmington, NM
Grocery | | | Albertson’s
Durango, CO
Grocery | |
Gross leasable square footage | | | 55,143 | | | | 57,100 | | | | 47,481 | |
Date of purchase | | | 10/26/2010 | | | | 10/26/2010 | | | | 10/26/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 9,054,216 | | | | 5,233,715 | | | | 7,690,091 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 9,054,216 | | | | 5,233,715 | | | | 7,690,091 | |
Other cash expenditures expensed | | | 23,707 | | | | 23,005 | | | | 21,551 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 9,077,923 | | | $ | 5,256,720 | | | $ | 7,711,642 | |
| | | | | | | | | | | | |
II-35
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Albertson’s
Denver, CO
Grocery | | | Albertson’s Los Lunas, NM
Grocery | | | Albertson’s
Midland, TX
Grocery | |
Gross leasable square footage | | | 53,208 | | | | 54,349 | | | | 66,068 | |
Date of purchase | | | 10/26/2010 | | | | 10/26/2010 | | | | 10/26/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 7,834,467 | | | | 8,329,111 | | | | 11,505,417 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 7,834,467 | | | | 8,329,111 | | | | 11,505,417 | |
Other cash expenditures expensed | | | 21,571 | �� | | | 26,691 | | | | 26,316 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 7,856,038 | | | $ | 8,355,802 | | | $ | 11,531,733 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Albertson’s
Odessa, TX
Grocery | | | Albertson’s
Silver City, NM Grocery | | | Albertson’s
Weatherford, TX
Grocery | |
Gross leasable square footage | | | 61,955 | | | | 39,385 | | | | 57,671 | |
Date of purchase | | | 10/26/2010 | | | | 10/26/2010 | | | | 10/26/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 10,363,093 | | | | 7,261,509 | | | | 8,024,559 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 10,363,093 | | | | 7,261,509 | | | | 8,024,559 | |
Other cash expenditures expensed | | | 25,776 | | | | 25,096 | | | | 22,261 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 10,388,869 | | | $ | 7,286,605 | | | $ | 8,046,820 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Kohl’s Salina, KS
Department Store | | | Giant Eagle
Lancaster, OH
Grocery | | | FedEx Bossier City, LA
Distribution | |
Gross leasable square footage | | | 64,239 | | | | 92,490 | (2) | | | 64,402 | |
Date of purchase | | | 10/29/2010 | | | | 10/29/2010 | | | | 11/1/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,941,900 | | | | 15,874,161 | | | | 5,386,020 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,941,900 | | | | 15,874,161 | | | | 5,386,020 | |
Other cash expenditures expensed | | | 46,752 | | | | 44,800 | | | | 47,210 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,988,652 | | | $ | 15,918,961 | | | $ | 5,433,230 | |
| | | | | | | | | | | | |
II-36
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit Property
Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS Lake Wales, FL
Drugstore | | | CVS Auburndale, FL
Drugstore | | | Ulta Salon Jackson, TN
Specialty Retail | |
Gross leasable square footage | | | 11,220 | | | | 13,086 | | | | 9,991 | |
Date of purchase | | | 11/1/2010 | | | | 11/1/2010 | | | | 11/5/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,244,445 | | | | 2,984,744 | | | | 2,733,600 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,244,445 | | | | 2,984,744 | | | | 2,733,600 | |
Other cash expenditures expensed | | | 34,582 | | | | 34,357 | | | | 37,312 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,279,027 | | | $ | 3,019,101 | | | $ | 2,770,912 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Tractor Supply
Little Rock, AR
Specialty Retail | | | Tractor Supply
Jefferson City, MO
Specialty Retail | | | Walgreens
Tucson (River), AZ
Drugstore | |
Gross leasable square footage | | | 19,097 | | | | 19,500 | | | | 15,120 | |
Date of purchase | | | 11/9/2010 | | | | 11/9/2010 | | | | 11/12/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,507,160 | | | | 1,941,060 | | | | 5,559,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,507,160 | | | | 1,941,060 | | | | 5,559,000 | |
Other cash expenditures expensed | | | 24,595 | | | | 22,700 | | | | 44,712 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,531,755 | | | $ | 1,963,760 | | | $ | 5,603,712 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Wal-Mart
Pueblo, CO
Discount Retail | | | Volusia Square
Daytona Beach, FL
Shopping Center | | | CSAA Oklahoma City, OK
Professional Services | |
Gross leasable square footage | | | 202,847 | | | | 231,996 | (2) | | | 147,107 | |
Date of purchase | | | 11/12/2010 | | | | 11/12/2010 | | | | 11/15/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 15,300,000 | | | | 31,620,000 | | | | 29,937,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 15,300,000 | | | | 31,620,000 | | | | 29,937,000 | |
Other cash expenditures expensed | | | 39,285 | | | | 66,822 | | | | 48,037 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 15,339,285 | | | $ | 31,686,822 | | | $ | 29,985,037 | |
| | | | | | | | | | | | |
II-37
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Dell Perot Lincoln, NE
IT Services | | | Breakfast Pointe
Panama Beach City,
FL Shopping Center | | | Stripes Carrizo Springs, TX
Convenience Store | |
Gross leasable square footage | | | 150,000 | | | | 97,931 | | | | 6,838 | |
Date of purchase | | | 11/15/2010 | | | | 11/18/2010 | | | | 11/22/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 22,542,000 | | | | 16,320,000 | | | | 2,910,904 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 22,542,000 | | | | 16,320,000 | | | | 2,910,904 | |
Other cash expenditures expensed | | | 36,058 | | | | 90,888 | | | | 14,456 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 22,578,058 | | | $ | 16,410,888 | | | $ | 2,925,360 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Stripes Haskell, TX
Convenience Store | | | Stripes Laredo (La Pita
Mangana), TX
Convenience Store | | | Tractor Supply
Franklin, NC
Specialty Retail | |
Gross leasable square footage | | | 6,309 | | | | 4,679 | | | | 19,097 | |
Date of purchase | | | 11/22/2010 | | | | 11/22/2010 | | | | 11/30/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,538,604 | | | | 2,881,609 | | | | 2,927,400 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,538,604 | | | | 2,881,609 | | | | 2,927,400 | |
Other cash expenditures expensed | | | 14,606 | | | | 14,706 | | | | 25,532 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,553,210 | | | $ | 2,896,315 | | | $ | 2,952,932 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Matteson, IL
Drugstore | | | Walgreens New Albany, OH
Drugstore | | | Prairie Market Oswego, IL
Shopping Center | |
Gross leasable square footage | | | 14,550 | | | | 14,820 | | | | 113,002 | (2) |
Date of purchase | | | 11/30/2010 | | | | 12/2/2010 | | | | 12/3/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,182,000 | | | | 4,182,000 | | | | 25,602,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,182,000 | | | | 4,182,000 | | | | 25,602,000 | |
Other cash expenditures expensed | | | 21,975 | | | | 28,267 | | | | 171,389 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,203,975 | | | $ | 4,210,267 | | | $ | 25,773,389 | |
| | | | | | | | | | | | |
II-38
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens Grayson, GA
Drugstore | | | Walgreens
Tucson (Harrison),
AZ Drugstore | | | Walgreens Pueblo, CO
Drugstore | |
Gross leasable square footage | | | 14,560 | | | | 14,490 | | | | 13,813 | |
Date of purchase | | | 12/7/2010 | | | | 12/7/2010 | | | | 12/7/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,712,400 | | | | 5,197,920 | | | | 3,564,900 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,712,400 | | | | 5,197,920 | | | | 3,564,900 | |
Other cash expenditures expensed | | | 23,463 | | | | 23,999 | | | | 27,576 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,735,863 | | | $ | 5,221,919 | | | $ | 3,592,476 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Wells Fargo /
Tetronix Hillsboro,
Professional Services | | | Stearns Crossing
Bartlett, IL
Shopping Center | | | Tractor Supply
Sedalia, MO
Specialty Retail | |
Gross leasable square footage | | | 212,363 | | | | 96,613 | | | | 19,028 | |
Date of purchase | | | 12/8/2010 | | | | 12/9/2010 | | | | 12/10/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 27,540,000 | | | | 12,622,500 | | | | 2,174,640 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 27,540,000 | | | | 12,622,500 | | | | 2,174,640 | |
Other cash expenditures expensed | | | 270,111 | | | | 56,321 | | | | 22,604 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 27,810,111 | | | $ | 12,678,821 | | | $ | 2,197,244 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Sherwin Williams
Muskegon, MI
Specialty Retail | | | Kohl’s Onalaska, WI
Department Store | | | CVS Athens, GA
Drugstore | |
Gross leasable square footage | | | 8,000 | | | | 86,432 | | | | 14,781 | |
Date of purchase | | | 12/10/2010 | | | | 12/13/2010 | | | | 12/14/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,453,500 | | | | 7,395,000 | | | | 6,375,450 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,453,500 | | | | 7,395,000 | | | | 6,375,450 | |
Other cash expenditures expensed | | | 27,086 | | | | 27,010 | | | | 28,951 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,480,586 | | | $ | 7,422,010 | | | $ | 6,404,401 | |
| | | | | | | | | | | | |
II-39
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS Boca Raton, FL
Drugstore | | | CVS Brownsville, TX
Drugstore | | | CVS Cayce, SC Drugstore | |
Gross leasable square footage | | | 14,422 | | | | 13,000 | | | | 11,982 | |
Date of purchase | | | 12/14/2010 | | | | 12/14/2010 | | | | 12/14/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,850,039 | | | | 5,947,965 | | | | 5,082,330 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,850,039 | | | | 5,947,965 | | | | 5,082,330 | |
Other cash expenditures expensed | | | 25,654 | | | | 51,891 | | | | 31,954 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,875,693 | | | $ | 5,999,856 | | | $ | 5,114,284 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS City of Industry, CA
Drugstore | | | CVS Jacksonville, FL
Drugstore | | | CVS Minneapolis, MN
Drugstore | |
Gross leasable square footage | | | 12,837 | | | | 13,204 | | | | 13,000 | |
Date of purchase | | | 12/14/2010 | | | | 12/14/2010 | | | | 12/14/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,614,892 | | | | 6,838,403 | | | | 4,356,245 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,614,892 | | | | 6,838,403 | | | | 4,356,245 | |
Other cash expenditures expensed | | | 22,818 | | | | 27,771 | | | | 25,177 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,637,710 | | | $ | 6,866,174 | | | $ | 4,381,422 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS Naples, FL
Drugstore | | | CVS Southaven
(Goodman), MS
Drugstore | | | CVS The Village, OK
Drugstore | |
Gross leasable square footage | | | 12,944 | | | | 13,938 | | | | 12,939 | |
Date of purchase | | | 12/14/2010 | | | | 12/14/2010 | | | | 12/14/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,862,522 | | | | 6,916,177 | | | | 5,544,256 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,862,522 | | | | 6,916,177 | | | | 5,544,256 | |
Other cash expenditures expensed | | | 25,591 | | | | 38,429 | | | | 36,407 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,888,113 | | | $ | 6,954,606 | | | $ | 5,580,663 | |
| | | | | | | | | | | | |
II-40
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS Lawrence, KS
Drugstore | | | CVS Lawrenceville, NJ Drugstore | | | CVS Mineola, NY
Drugstore | |
Gross leasable square footage | | | 12,900 | | | | 15,260 | | | | 12,838 | |
Date of purchase | | | 12/14/2010 | | | | 12/14/2010 | | | | 12/14/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 5,519,185 | | | | 9,243,493 | | | | 4,317,320 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,519,185 | | | | 9,243,493 | | | | 4,317,320 | |
Other cash expenditures expensed | | | 26,400 | | | | 137,775 | | | | 37,204 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,545,585 | | | $ | 9,381,268 | | | $ | 4,354,524 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Childtime Childcare
Modesto (Floyd), CA
Childcare &
Development | | | Tutor Time
Downington, PA
Childcare &
Development | | | Tutor Time Austin, TX Childcare &
Development | |
Gross leasable square footage | | | 6,310 | | | | 11,757 | | | | 10,994 | |
Date of purchase | | | 12/15/2010 | | | | 12/15/2010 | | | | 12/15/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,224,999 | | | | 2,026,353 | | | | 1,752,110 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,224,999 | | | | 2,026,353 | | | | 1,752,110 | |
Other cash expenditures expensed | | | 44,399 | | | | 66,344 | | | | 57,986 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,269,398 | | | $ | 2,092,697 | | | $ | 1,810,096 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Children’s Courtyard Grand Prairie, TX
Childcare &
Development | | | Childtime Childcare
Oklahoma City
(Western), OK
Childcare &
Development | | | Childtime Childcare
Oklahoma City
(Rockwell), OK
Childcare &
Development | |
Gross leasable square footage | | | 8,409 | | | | 6,597 | | | | 6,594 | |
Date of purchase | | | 12/15/2010 | | | | 12/15/2010 | | | | 12/15/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 949,683 | | | | 767,359 | | | | 714,582 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 949,683 | | | | 767,359 | | | | 714,582 | |
Other cash expenditures expensed | | | 37,663 | | | | 33,761 | | | | 32,409 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 987,346 | | | $ | 801,120 | | | $ | 746,991 | |
| | | | | | | | | | | | |
II-41
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Childtime Childcare Bedford, OH Childcare &
Development | | | Folsum Gateway II Folsum, CA
Shopping Center | | | HealthNow Buffalo, NY Fitness & Health | |
Gross leasable square footage | | | 5,500 | | | | 115,291 | | | | 430,458 | |
Date of purchase | | | 12/15/2010 | | | | 12/15/2010 | | | | 12/16/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 796,250 | | | | 36,720,000 | | | | 86,190,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 796,250 | | | | 36,720,000 | | | | 86,190,000 | |
Other cash expenditures expensed | | | 35,640 | | | | 139,876 | | | | 366,612 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 831,890 | | | $ | 36,859,876 | | | $ | 86,556,612 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Thorntons Clarksville, IN
Convenience Store | | | Thorntons
Jeffersonville, IN
Convenience Store | | | Thorntons Franklin Park, IL
Convenience Store | |
Gross leasable square footage | | | 4,889 | | | | 3,080 | | | | 3,321 | |
Date of purchase | | | 12/17/2010 | | | | 12/17/2010 | | | | 12/17/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,029,800 | | | | 3,011,040 | | | | 3,302,760 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,029,800 | | | | 3,011,040 | | | | 3,302,760 | |
Other cash expenditures expensed | | | 10,399 | | | | 9,824 | | | | 9,765 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,040,199 | | | $ | 3,020,864 | | | $ | 3,312,525 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Thorntons
Westmont, IL
Convenience Store | | | Thorntons
Springfield, IL
Convenience Store | | | Thorntons Ottawa, IL
Convenience Store | |
Gross leasable square footage | | | 3,840 | | | | 3,034 | | | | 4,901 | |
Date of purchase | | | 12/17/2010 | | | | 12/17/2010 | | | | 12/17/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,818,880 | | | | 4,016,760 | | | | 2,728,500 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,818,880 | | | | 4,016,760 | | | | 2,728,500 | |
Other cash expenditures expensed | | | 9,765 | | | | 9,765 | | | | 9,765 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,828,645 | | | $ | 4,026,525 | | | $ | 2,738,265 | |
| | | | | | | | | | | | |
II-42
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Thorntons
Bloomington, IL
Convenience Store | | | Thorntons Joliet, IL
Convenience Store | | | Thorntons Summit, IL
Convenience Store | |
Gross leasable square footage | | | 2,971 | | | | 3,840 | | | | 3,840 | |
Date of purchase | | | 12/17/2010 | | | | 12/17/2010 | | | | 12/17/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,993,080 | | | | 3,573,060 | | | | 2,123,640 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,993,080 | | | | 3,573,060 | | | | 2,123,640 | |
Other cash expenditures expensed | | | 9,765 | | | | 9,765 | | | | 9,765 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,002,845 | | | $ | 3,582,825 | | | $ | 2,133,405 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Thorntons
Waukegan, IL
Convenience Store | | | Thorntons Roselle, IL
Convenience Store | | | Thorntons
Plainfield, IL
Convenience Store | |
Gross leasable square footage | | | 3,840 | | | | 3,080 | | | | 3,080 | |
Date of purchase | | | 12/17/2010 | | | | 12/17/2010 | | | | 12/17/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,277,660 | | | | 2,837,640 | | | | 2,306,220 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,277,660 | | | | 2,837,640 | | | | 2,306,220 | |
Other cash expenditures expensed | | | 9,765 | | | | 9,765 | | | | 9,765 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,287,425 | | | $ | 2,847,405 | | | $ | 2,315,985 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Thorntons South Elgin, IL
Convenience Store | | | Thorntons
Galloway, OH
Convenience Store | | | Thorntons Terre Haute, IN
Convenience Store | |
Gross leasable square footage | | | 3,080 | | | | 3,758 | | | | 3,080 | |
Date of purchase | | | 12/17/2010 | | | | 12/17/2010 | | | | 12/17/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,194,640 | | | | 1,999,200 | | | | 2,825,400 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,194,640 | | | | 1,999,200 | | | | 2,825,400 | |
Other cash expenditures expensed | | | 9,765 | | | | 9,824 | | | | 9,824 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,204,405 | | | $ | 2,009,024 | | | $ | 2,835,224 | |
| | | | | | | | | | | | |
II-43
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Thorntons
Henderson, KY
Convenience Store | | | Thorntons
Evansville, IN
Convenience Store | | | Thorntons
Evansville
(Rosenberger), IN
Convenience Store | |
Gross leasable square footage | | | 3,846 | | | | 2,939 | | | | 2,800 | |
Date of purchase | | | 12/17/2010 | | | | 12/17/2010 | | | | 12/17/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,136,100 | | | | 2,121,600 | | | | 2,097,120 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,136,100 | | | | 2,121,600 | | | | 2,097,120 | |
Other cash expenditures expensed | | | 9,824 | | | | 9,824 | | | | 9,824 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,145,924 | | | $ | 2,131,424 | | | $ | 2,106,944 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole
Credit Property
Trust III, Inc. | | | Cole
Credit Property
Trust III, Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Thorntons
Henderson (Green),
KY
Convenience Store | | | Thorntons Shelbyville, KY
Convenience Store | | | Thorntons
Louisville, KY
Convenience Store | |
Gross leasable square footage | | | 3,434 | | | | 3,150 | | | | 4,390 | |
Date of purchase | | | 12/17/2010 | | | | 12/17/2010 | | | | 12/17/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,041,020 | | | | 2,341,920 | | | | 2,094,060 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,041,020 | | | | 2,341,920 | | | | 2,094,060 | |
Other cash expenditures expensed | | | 9,824 | | | | 9,824 | | | | 9,824 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,050,844 | | | $ | 2,351,744 | | | $ | 2,103,884 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Thorntons
Edinburg, IN
Convenience Store | | | Thorntons
Oaklawn, IL
Convenience Store | | | Advance Auto Howell, MI
Automotive Parts | |
Gross leasable square footage | | | 3,080 | | | | 2,210 | | | | 6,782 | |
Date of purchase | | | 12/17/2010 | | | | 12/17/2010 | | | | 12/20/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,261,340 | | | | 2,179,740 | | | | 1,652,301 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,261,340 | | | | 2,179,740 | | | | 1,652,301 | |
Other cash expenditures expensed | | | 9,824 | | | | 9,765 | | | | 29,723 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,271,164 | | | $ | 2,189,505 | | | $ | 1,682,024 | |
| | | | | | | | | | | | |
II-44
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Advance Auto Salem, OH
Automotive Parts | | | Waterside
Marketplace
Chesterfield, MI
Shopping Center | | | Advance Auto
Lehigh Acres, FL
Automotive Parts | |
Gross leasable square footage | | | 6,141 | | | | 243,934 | | | | 6,913 | |
Date of purchase | | | 12/20/2010 | | | | 12/20/2010 | | | | 12/21/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,298,182 | | | | 27,030,000 | | | | 2,391,894 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,298,182 | | | | 27,030,000 | | | | 2,391,894 | |
Other cash expenditures expensed | | | 28,006 | | | | 429,126 | | | | 21,498 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,326,188 | | | $ | 27,459,126 | | | $ | 2,413,392 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Advance Auto
Bethel, OH
Automotive Parts | | | Advance Auto
Crestwood, KY
Automotive Parts | | | Advance Auto
Hillview, KY
Automotive Parts | |
Gross leasable square footage | | | 6,786 | | | | 6,124 | | | | 6,128 | |
Date of purchase | | | 12/22/2010 | | | | 12/22/2010 | | | | 12/22/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,417,399 | | | | 1,759,152 | | | | 1,441,142 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,417,399 | | | | 1,759,152 | | | | 1,441,142 | |
Other cash expenditures expensed | | | 25,501 | | | | 26,321 | | | | 26,338 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,442,900 | | | $ | 1,785,473 | | | $ | 1,467,480 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS Gainesville, TX
Drugstore | | | O’Reilly Automotive
Christiansburg, VA
Automotive Parts | | | O’Reilly Automotive San Antonio, TX
Automotive Parts | |
Gross leasable square footage | | | 13,813 | | | | 7,200 | | | | 6,800 | |
Date of purchase | | | 12/23/2010 | | | | 12/23/2010 | | | | 12/23/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,188,334 | | | | 1,187,739 | | | | 1,331,100 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,188,334 | | | | 1,187,739 | | | | 1,331,100 | |
Other cash expenditures expensed | | | 21,266 | | | | 39,077 | | | | 35,022 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,209,600 | | | $ | 1,226,816 | | | $ | 1,366,122 | |
| | | | | | | | | | | | |
II-45
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | O’Reilly Automotive
Highlands, TX
Automotive Parts | | | Red Oak Village
San Marcos, TX
Shopping Center | | | Falcon Valley
Lenexa, KS
Shopping Center | |
Gross leasable square footage | | | 6,000 | | | | 176,528 | (2) | | | 76,784 | |
Date of purchase | | | 12/23/2010 | | | | 12/23/2010 | | | | 12/23/2010 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 955,485 | | | | 22,440,000 | | | | 12,750,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 955,485 | | | | 22,440,000 | | | | 12,750,000 | |
Other cash expenditures expensed | | | 30,321 | | | | 90,950 | | | | 62,787 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 985,806 | | | $ | 22,530,950 | | | $ | 12,812,787 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Best Buy Pineville, NC
Electronics Retail | | | Walgreens
Fayetteville, NC
Drugstore | | | Stripes Fort Stockton, TX
Convenience Store | |
Gross leasable square footage | | | 50,548 | | | | 14,820 | | | | 9,950 | |
Date of purchase | | | 12/28/2010 | | | | 12/30/2010 | | | | 12/30/2010 | |
Mortgage financing at date of purchase | | $ | 5,528,999 | | | $ | — | | | $ | — | |
Cash down payment | | | 3,202,201 | | | | 6,287,672 | | | | 4,963,934 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 8,731,200 | | | | 6,287,672 | | | | 4,963,934 | |
Other cash expenditures expensed | | | 47,509 | | | | 26,432 | | | | 20,642 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 8,778,709 | | | $ | 6,314,104 | | | $ | 4,984,576 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Stripes Portales, NM
Convenience Store | | | Advance Auto
Bedford, IN
Automotive Parts | | | Staples Pensacola, FL Office Supply | |
Gross leasable square footage | | | 4,833 | | | | 6,783 | | | | 20,388 | |
Date of purchase | | | 12/30/2010 | | | | 1/4/2011 | | | | 1/6/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,629,378 | | | | 1,317,555 | | | | 4,293,318 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,629,378 | | | | 1,317,555 | | | | 4,293,318 | |
Other cash expenditures expensed | | | 20,033 | | | | 23,327 | | | | 16,353 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,649,411 | | | $ | 1,340,882 | | | $ | 4,309,671 | |
| | | | | | | | | | | | |
II-46
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS Dover, DE
Drugstore | | | Hanesbrands Rural Hall, NC
Distribution | | | O’Reilly Automotive
Houston, TX
Automotive Parts | |
Gross leasable square footage | | | 13,225 | (2) | | | 930,451 | | | | 6,800 | |
Date of purchase | | | 1/7/2011 | | | | 1/10/2011 | | | | 1/13/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,868,965 | | | | 32,334,000 | | | | 1,067,175 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,868,965 | | | | 32,334,000 | | | | 1,067,175 | |
Other cash expenditures expensed | | | 14,367 | | | | 379,861 | | | | 10,726 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,883,332 | | | $ | 32,713,861 | | | $ | 1,077,901 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | O’Reilly Automotive
Ravenna, OH
Automotive Parts | | | Albertson’s
Las Cruces, NM
Grocery | | | Pinehurst Square
Bismarck, ND
Shopping Center | |
Gross leasable square footage | | | 6,750 | | | | 51,922 | | | | 69,119 | |
Date of purchase | | | 1/25/2011 | | | | 1/28/2011 | | | | 1/28/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,121,949 | | | | 11,036,400 | | | | 10,455,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,121,949 | | | | 11,036,400 | | | | 10,455,000 | |
Other cash expenditures expensed | | | 10,310 | | | | 41,312 | | | | 59,826 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,132,259 | | | $ | 11,077,712 | | | $ | 10,514,826 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Fare
Battle Creek, MI
Grocery | | | Lowe’s
Denver, CO
Home Improvement | | | Lowe’s
Columbia, SC
Home Improvement | |
Gross leasable square footage | | | 46,625 | | | | 122,132 | (2) | | | 138,491 | (2) |
Date of purchase | | | 1/31/2011 | | | | 2/2/2011 | | | | 2/10/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 8,693,650 | | | | 13,260,000 | | | | 7,542,900 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 8,693,650 | | | | 13,260,000 | | | | 7,542,900 | |
Other cash expenditures expensed | | | 26,217 | | | | 33,777 | | | | 42,574 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 8,719,867 | | | $ | 13,293,777 | | | $ | 7,585,474 | |
| | | | | | | | | | | | |
II-47
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Best Buy Marquette, MI
Electronics Retail | | | Petco
Dardenne Prairie, MO
Specialty Retail | | | Dick’s Sporting
Goods Jackson, TN Sporting Goods | |
Gross leasable square footage | | | 30,040 | | | | 14,995 | | | | 45,000 | |
Date of purchase | | | 2/16/2011 | | | | 2/22/2011 | | | | 2/25/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 5,051,196 | | | | 2,832,540 | | | | 6,146,520 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,051,196 | | | | 2,832,540 | | | | 6,146,520 | |
Other cash expenditures expensed | | | 27,706 | | | | 28,459 | | | | 37,966 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,078,902 | | | $ | 2,860,999 | | | $ | 6,184,486 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Country Club Hills,
MO
Drugstore | | | Kohl’s Palm Coast, FL Department Store | | | Kohl’s
Saginaw, MI
Department Store | |
Gross leasable square footage | | | 14,820 | | | | 89,089 | (2) | | | 80,684 | |
Date of purchase | | | 3/9/2011 | | | | 3/10/2011 | | | | 3/10/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,947,000 | | | | 12,246,120 | | | | 7,789,740 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,947,000 | | | | 12,246,120 | | | | 7,789,740 | |
Other cash expenditures expensed | | | 28,094 | | | | 57,257 | | | | 31,906 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,975,094 | | | $ | 12,303,377 | | | $ | 7,821,646 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Apollo Group
Phoenix, AZ
Education | | | Best Buy
Norton Shores, MI
Electronics Retail | | | Walgreens Brownwood, TX
Drugstore | |
Gross leasable square footage | | | 599,664 | | | | 30,056 | | | | 14,820 | |
Date of purchase | | | 3/24/2011 | | | | 3/30/2011 | | | | 3/30/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 173,400,000 | | | | 5,397,840 | | | | 5,712,464 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 173,400,000 | | | | 5,397,840 | | | | 5,712,464 | |
Other cash expenditures expensed | | | 111,459 | | | | 26,395 | | | | 28,788 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 173,511,459 | | | $ | 5,424,235 | | | $ | 5,741,252 | |
| | | | | | | | | | | | |
II-48
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | L.A. Fitness Indianapolis, IN
Fitness & Health | | | Walgreens
Liberty Township,
OH
Drugstore | | | Walgreens
Lafayette, IN
Drugstore | |
Gross leasable square footage | | | 42,148 | | | | 14,490 | | | | 14,820 | |
Date of purchase | | | 3/31/2011 | | | | 3/31/2011 | | | | 3/31/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 8,313,000 | | | | 5,525,000 | | | | 4,299,300 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 8,313,000 | | | | 5,525,000 | | | | 4,299,300 | |
Other cash expenditures expensed | | | 42,128 | | | | 19,535 | | | | 29,535 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 8,355,128 | | | $ | 5,544,535 | | | $ | 4,328,835 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS
Edison, NJ
Drugstore | | | Northpoint Shopping
Center
Cape Coral, FL
Shopping Center | | | Oxford Exchange
Oxford, AL
Shopping Center | |
Gross leasable square footage | | | 13,052 | (2) | | | 115,840 | (2) | | | 333,866 | |
Date of purchase | | | 4/13/2011 | | | | 4/13/2011 | | | | 4/18/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,311,883 | | | | 10,200,000 | | | | 46,410,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,311,883 | | | | 10,200,000 | | | | 46,410,000 | |
Other cash expenditures expensed | | | 28,804 | | | | 48,780 | | | | 131,336 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,340,687 | | | $ | 10,248,780 | | | $ | 46,541,336 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Davita Dialysis
Grand Rapids, MI
Fitness & Health | | | Walgreens Wilmington, NC Drugstore | | | Walgreens Roanoke, VA
Drugstore | |
Gross leasable square footage | | | 8,500 | | | | 14,820 | | | | 14,820 | |
Date of purchase | | | 4/19/2011 | | | | 4/21/2011 | | | | 4/26/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,708,500 | | | | 6,090,857 | | | | 5,464,286 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,708,500 | | | | 6,090,857 | | | | 5,464,286 | |
Other cash expenditures expensed | | | 28,673 | | | | 46,688 | | | | 42,933 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,737,173 | | | $ | 6,137,545 | | | $ | 5,507,219 | |
| | | | | | | | | | | | |
II-49
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS St. Augustine
(Tuscan), FL
Drugstore | | | CVS Charlotte, NC
Drugstore | | | Walgreens
Chicago (N Canfield), IL Drugstore | |
Gross leasable square footage | | | 13,053 | | | | 12,203 | | | | 19,332 | |
Date of purchase | | | 4/26/2011 | | | | 4/26/2011 | | | | 4/28/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 5,072,009 | | | | 3,238,670 | | | | 4,747,080 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,072,009 | | | | 3,238,670 | | | | 4,747,080 | |
Other cash expenditures expensed | | | 22,460 | | | | 22,748 | | | | 31,039 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,094,469 | | | $ | 3,261,418 | | | $ | 4,778,119 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Office Depot Corsicana, TX
Office Supply | | | Office Depot
Houston, TX
Office Supply | | | Office Depot
Mobile, AL
Office Supply | |
Gross leasable square footage | | | 20,931 | | | | 20,898 | | | | 20,898 | |
Date of purchase | | | 4/29/2011 | | | | 4/29/2011 | | | | 4/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,517,360 | | | | 4,085,100 | | | | 2,873,340 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,517,360 | | | | 4,085,100 | | | | 2,873,340 | |
Other cash expenditures expensed | | | 25,541 | | | | 30,270 | | | | 28,533 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,542,901 | | | $ | 4,115,370 | | | $ | 2,901,873 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Ryan’s Buffet
Jasper, AL
Restaurant | | | Ryan’s Buffet
Prattville, AL
Restaurant | | | Fire Mountain Buffet
Cullman, AL
Restaurant | |
Gross leasable square footage | | | 10,665 | | | | 10,571 | | | | 11,003 | |
Date of purchase | | | 4/29/2011 | | | | 4/29/2011 | | | | 4/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,692,088 | | | | 2,472,855 | | | | 2,575,634 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,692,088 | | | | 2,472,855 | | | | 2,575,634 | |
Other cash expenditures expensed | | | 24,503 | | | | 23,740 | | | | 23,698 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,716,591 | | | $ | 2,496,595 | | | $ | 2,599,332 | |
| | | | | | | | | | | | |
II-50
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Ryan’s Buffet
Columbus, GA
Restaurant | | | Ryan’s Buffet
Commerce, GA
Restaurant | | | Ryan’s Buffet
Rome, GA
Restaurant | |
Gross leasable square footage | | | 10,919 | | | | 10,418 | | | | 9,745 | |
Date of purchase | | | 4/29/2011 | | | | 4/29/2011 | | | | 4/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,368,664 | | | | 2,142,000 | | | | 2,193,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,368,664 | | | | 2,142,000 | | | | 2,193,000 | |
Other cash expenditures expensed | | | 20,907 | | | | 19,063 | | | | 19,133 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,389,571 | | | $ | 2,161,063 | | | $ | 2,212,133 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Ryan’s Buffet
Paducah, KY
Restaurant | | | Ryan’s Buffet
Owensboro, KY
Restaurant | | | Fire Mountain Buffet
Bossier City, LA
Restaurant | |
Gross leasable square footage | | | 10,167 | | | | 10,382 | | | | 11,101 | |
Date of purchase | | | 4/29/2011 | | | | 4/29/2011 | | | | 4/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,222,267 | | | | 2,504,077 | | | | 3,194,411 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,222,267 | | | | 2,504,077 | | | | 3,194,411 | |
Other cash expenditures expensed | | | 24,642 | | | | 27,415 | | | | 27,060 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,246,909 | | | $ | 2,531,492 | | | $ | 3,221,471 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Fire Mountain Buffet
Horn Lake, MS
Restaurant | | | Ryan’s Buffet
Pearl, MS
Restaurant | | | Ryan’s Buffet
Asheville, NC
Restaurant | |
Gross leasable square footage | | | 10,948 | | | | 10,867 | | | | 10,624 | |
Date of purchase | | | 4/29/2011 | | | | 4/29/2011 | | | | 4/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,744,390 | | | | 2,474,374 | | | | 3,043,924 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,744,390 | | | | 2,474,374 | | | | 3,043,924 | |
Other cash expenditures expensed | | | 24,221 | | | | 23,894 | | | | 19,094 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,768,611 | | | $ | 2,498,268 | | | $ | 3,063,018 | |
| | | | | | | | | | | | |
II-51
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Ryan’s Buffet
Coon Rapids, MN
Restaurant | | | Ryan’s Buffet
Sevierville, TN
Restaurant | | | Ryan’s Buffet
Texas City, TX
Restaurant | |
Gross leasable square footage | | | 9,097 | | | | 10,982 | | | | 11,042 | |
Date of purchase | | | 4/29/2011 | | | | 4/29/2011 | | | | 4/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,984,010 | | | | 1,550,400 | | | | 2,898,805 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,984,010 | | | | 1,550,400 | | | | 2,898,805 | |
Other cash expenditures expensed | | | 20,795 | | | | 19,746 | | | | 33,573 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,004,805 | | | $ | 1,570,146 | | | $ | 2,932,378 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Ryan’s Buffet
Beckley, WV
Restaurant | | | Bi-Lo Greenwood, SC
Grocery | | | Bi-Lo
Mt. Pleasant, SC
Grocery | |
Gross leasable square footage | | | 10,790 | | | | 41,417 | | | | 64,368 | |
Date of purchase | | | 4/29/2011 | | | | 5/3/2011 | | | | 5/3/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,024,090 | | | | 4,013,700 | | | | 9,393,119 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,024,090 | | | | 4,013,700 | | | | 9,393,119 | |
Other cash expenditures expensed | | | 24,322 | | | | 30,485 | | | | 39,966 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,048,412 | | | $ | 4,044,185 | | | $ | 9,433,085 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Kohl’s
Rice Lake, WI
Department Store | | | Walgreens
Medina, OH
Drugstore | | | Walgreens
Chicago (79th St.), IL
Drugstore | |
Gross leasable square footage | | | 64,080 | | | | 14,490 | | | | 11,228 | |
Date of purchase | | | 5/5/2011 | | | | 5/5/2011 | | | | 5/5/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 6,060,926 | | | | 4,536,000 | | | | 3,540,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 6,060,926 | | | | 4,536,000 | | | | 3,540,000 | |
Other cash expenditures expensed | | | 15,934 | | | | 28,396 | | | | 50,506 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 6,076,860 | | | $ | 4,564,396 | | | $ | 3,590,506 | |
| | | | | | | | | | | | |
II-52
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Decatur, GA Drugstore | | | Walgreens
Muscatine, IA
Drugstore | | | Walgreens
Independence, MO
Drugstore | |
Gross leasable square footage | | | 14,440 | | | | 15,120 | | | | 15,120 | |
Date of purchase | | | 5/5/2011 | | | | 5/5/2011 | | | | 5/5/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,241,424 | | | | 3,300,000 | | | | 4,287,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,241,424 | | | | 3,300,000 | | | | 4,287,000 | |
Other cash expenditures expensed | | | 30,296 | | | | 25,081 | | | | 29,004 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,271,720 | | | $ | 3,325,081 | | | $ | 4,316,004 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | FedEx
McComb, MS
Distribution | | | Walgreens
LaCrosse, WI
Drugstore | | | Advance Auto
Charlotte
(Albemarle), NC
Automotive Parts | |
Gross leasable square footage | | | 26,878 | | | | 14,550 | | | | 6,874 | |
Date of purchase | | | 5/5/2011 | | | | 5/6/2011 | | | | 5/12/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,424,140 | | | | 5,479,440 | | | | 1,323,629 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,424,140 | | | | 5,479,440 | | | | 1,323,629 | |
Other cash expenditures expensed | | | 25,541 | | | | 24,680 | | | | 22,120 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,449,681 | | | $ | 5,504,120 | | | $ | 1,345,749 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Advance Auto
Rock Hill, SC Automotive Parts | | | Camp Creek
Marketplace
East Point, GA
Shopping Center | | | L.A. Fitness
Broadview, IL
Fitness & Health | |
Gross leasable square footage | | | 8,049 | | | | 424,640 | | | | 50,040 | |
Date of purchase | | | 5/12/2011 | | | | 5/13/2011 | | | | 5/18/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,156,394 | | | | 77,877,000 | | | | 10,235,700 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,156,394 | | | | 77,877,000 | | | | 10,235,700 | |
Other cash expenditures expensed | | | 25,186 | | | | 207,611 | | | | 37,850 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,181,580 | | | $ | 78,084,611 | | | $ | 10,273,550 | |
| | | | | | | | | | | | |
II-53
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Glen’s Market
Manistee, MI
Grocery | | | St. Luke’s Urgent
Care
Creve Coeur, MO
Fitness & Health | | | Banner Life Insurance
Urbana, MD
Insurance | |
Gross leasable square footage | | | 38,392 | | | | 14,862 | | | | 115,758 | |
Date of purchase | | | 5/19/2011 | | | | 5/20/2011 | | | | 6/1/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 5,875,853 | | | | 5,559,000 | | | | 38,964,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,875,853 | | | | 5,559,000 | | | | 38,964,000 | |
Other cash expenditures expensed | | | 27,987 | | | | 44,542 | | | | 525,603 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,903,840 | | | $ | 5,603,542 | | | $ | 39,489,603 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Riverside Centre
St. Augustine, FL
Shopping Center | | | Century Town Center
Vero Beach, FL
Shopping Center | | | O’Reilly Automotive
Central, LA
Automotive Parts | |
Gross leasable square footage | | | 62,000 | | | | 107,049 | (2) | | | 6,800 | |
Date of purchase | | | 6/8/2011 | | | | 6/9/2011 | | | | 6/10/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,819,500 | | | | 15,070,500 | | | | 945,540 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,819,500 | | | | 15,070,500 | | | | 945,540 | |
Other cash expenditures expensed | | | 38,274 | | | | 97,410 | | | | 24,327 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,857,774 | | | $ | 15,167,910 | | | $ | 969,867 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Advance Auto
Milwaukee, WI
Automotive Parts | | | CVS
Sherman, TX
Drugstore | | | ConAgra
Milton, PA
Food Production | |
Gross leasable square footage | | | 6,790 | | | | 10,908 | | | | 718,910 | |
Date of purchase | | | 6/10/2011 | | | | 6/10/2011 | | | | 6/14/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,842,324 | | | | 4,242,079 | | | | 29,070,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,842,324 | | | | 4,242,079 | | | | 29,070,000 | |
Other cash expenditures expensed | | | 40,405 | | | | 36,689 | | | | 350,445 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,882,729 | | | $ | 4,278,768 | | | $ | 29,420,445 | |
| | | | | | | | | | | | |
II-54
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Associated
Wholesaler Grocers
Johnston, IA
Grocery | | | Associated
Wholesaler Grocers
Des Moines
(Ingersoll), IA
Grocery | | | Associated
Wholesaler Grocers
Des Moines (Beaver),
IA
Grocery | |
Gross leasable square footage | | | 67,820 | | | | 74,412 | | | | 26,425 | |
Date of purchase | | | 6/15/2011 | | | | 6/15/2011 | | | | 6/15/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 8,568,000 | | | | 13,260,000 | | | | 4,284,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 8,568,000 | | | | 13,260,000 | | | | 4,284,000 | |
Other cash expenditures expensed | | | 31,581 | | | | 35,081 | | | | 27,642 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 8,599,581 | | | $ | 13,295,081 | | | $ | 4,311,642 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Associated
Wholesaler Grocers
Des Moines (Fleur),
IA
Grocery | | | Hobby Lobby
Avon, IN
Specialty Retail | | | Advance Auto
Vermillon, OH
Automotive Parts | |
Gross leasable square footage | | | 53,600 | | | | 56,100 | | | | 6,783 | |
Date of purchase | | | 6/15/2011 | | | | 6/17/2011 | | | | 6/21/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,346,000 | | | | 5,865,000 | | | | 1,174,167 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,346,000 | | | | 5,865,000 | | | | 1,174,167 | |
Other cash expenditures expensed | | | 25,945 | | | | 43,545 | | | | 21,144 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,371,945 | | | $ | 5,908,545 | | | $ | 1,195,311 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Advance Auto
Massillon, OH
Automotive Parts | | | Advance Auto
Monroe, MI
Automotive Parts | | | Advance Auto
South Lyon, MI
Automotive Parts | |
Gross leasable square footage | | | 6,846 | | | | 6,786 | | | | 6,765 | |
Date of purchase | | | 6/21/2011 | | | | 6/21/2011 | | | | 6/21/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,870,083 | | | | 1,636,173 | | | | 1,649,066 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,870,083 | | | | 1,636,173 | | | | 1,649,066 | |
Other cash expenditures expensed | | | 58,204 | | | | 17,586 | | | | 17,589 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,928,287 | | | $ | 1,653,759 | | | $ | 1,666,655 | |
| | | | | | | | | | | | |
II-55
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Nature Coast
Commons
Spring Hill, FL
Shopping Center | | | Walgreens
Clarkston, MI
Drugstore | | | Walgreens
Madisonville, KY
Drugstore | |
Gross leasable square footage | | | 229,501 | (2) | | | 13,905 | | | | 14,820 | |
Date of purchase | | | 6/21/2011 | | | | 6/24/2011 | | | | 6/28/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 29,580,000 | | | | 5,134,680 | | | | 4,286,380 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 29,580,000 | | | | 5,134,680 | | | | 4,286,380 | |
Other cash expenditures expensed | | | 240,669 | | | | 36,074 | | | | 33,946 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 29,820,669 | | | $ | 5,170,754 | | | $ | 4,320,326 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Springdale, AR
Drugstore | | | Stripes
Odessa, TX
Convenience Store | | | Kohl’s
Monroe, MI
Department Store | |
Gross leasable square footage | | | 14,550 | | | | 4,731 | | | | 68,727 | |
Date of purchase | | | 6/29/2011 | | | | 6/30/2011 | | | | 6/30/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | 5,300,748 | |
Cash down payment | | | 5,602,860 | | | | 2,574,304 | | | | 676,154 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,602,860 | | | | 2,574,304 | | | | 5,976,902 | |
Other cash expenditures expensed | | | 43,486 | | | | 19,734 | | | | 16,092 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,646,346 | | | $ | 2,594,038 | | | $ | 5,992,994 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Santa Rosa Commons
Pace, FL
Shopping Center | | | Tractor Supply
Grayson, KY
Specialty Retail | | | Telegraph Plaza
Monroe, MI
Shopping Center | |
Gross leasable square footage | | | 138,850 | (2) | | | 19,097 | | | | 73,186 | |
Date of purchase | | | 6/30/2011 | | | | 6/30/2011 | | | | 6/30/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 25,959,000 | | | | 2,870,280 | | | | 7,181,098 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 25,959,000 | | | | 2,870,280 | | | | 7,181,098 | |
Other cash expenditures expensed | | | 68,300 | | | | 31,315 | | | | 49,437 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 26,027,300 | | | $ | 2,901,595 | | | $ | 7,230,535 | |
| | | | | | | | | | | | |
II-56
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | California Pizza
Kitchen
Alpharetta, GA
Restaurant | | | California Pizza
Kitchen
Atlanta, GA
Restaurant | | | California Pizza
Kitchen
Grapevine, TX
Restaurant | |
Gross leasable square footage | | | 6,496 | | | | 5,996 | | | | 6,150 | |
Date of purchase | | | 7/7/2011 | | | | 7/7/2011 | | | | 7/7/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,106,976 | | | | 3,764,316 | | | | 3,437,892 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,106,976 | | | | 3,764,316 | | | | 3,437,892 | |
Other cash expenditures expensed | | | 17,520 | | | | 17,085 | | | | 24,075 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,124,496 | | | $ | 3,781,401 | | | $ | 3,461,967 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | California Pizza
Kitchen
Scottsdale, AZ
Restaurant | | | California Pizza
Kitchen
Schaumburg, IL
Restaurant | | | Shelby Corners
Utica, MI
Shopping Center | |
Gross leasable square footage | | | 6,182 | | | | 6,964 | | | | 77,088 | |
Date of purchase | | | 7/7/2011 | | | | 7/7/2011 | | | | 7/8/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,427,884 | | | | 3,877,932 | | | | 4,340,100 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,427,884 | | | | 3,877,932 | | | | 4,340,100 | |
Other cash expenditures expensed | | | 15,730 | | | | 17,587 | | | | 47,927 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,443,614 | | | $ | 3,895,519 | | | $ | 4,388,027 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Owens Corning
Newark, OH
Distribution | | | CVS Dolton, IL
Drugstore | | | CVS
Lawrenceville, GA
Drugstore | |
Gross leasable square footage | | | 480,545 | | | | 13,050 | | | | 13,279 | |
Date of purchase | | | 7/8/2011 | | | | 7/8/2011 | | | | 7/8/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 12,138,000 | | | | 5,749,555 | | | | 5,452,920 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 12,138,000 | | | | 5,749,555 | | | | 5,452,920 | |
Other cash expenditures expensed | | | 60,248 | | | | 58,917 | | | | 32,131 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 12,198,248 | | | $ | 5,808,472 | | | $ | 5,485,051 | |
| | | | | | | | | | | | |
II-57
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS
Evansville, IN
Drugstore | | | Best Buy
Kenosha, WI
Electronics Retail | | | The Crossing
Killeen, TX
Shopping Center | |
Gross leasable square footage | | | 10,125 | | | | 30,085 | | | | 60,438 | |
Date of purchase | | | 7/11/2011 | | | | 7/12/2011 | | | | 7/15/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,475,034 | | | | 6,732,000 | | | | 9,180,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,475,034 | | | | 6,732,000 | | | | 9,180,000 | |
Other cash expenditures expensed | | | 25,151 | | | | 51,986 | | | | 48,573 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,500,185 | | | $ | 6,783,986 | | | $ | 9,228,573 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Best Buy
Indianapolis, IN
Electronics Retail | | | Petsmart
Westlake Village, CA
Specialty Retail | | | Petsmart
Boca Raton, FL
Specialty Retail | |
Gross leasable square footage | | | 30,067 | | | | 25,895 | | | | 28,389 | |
Date of purchase | | | 7/20/2011 | | | | 7/21/2011 | | | | 7/21/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,845,000 | | | | 8,144,292 | | | | 9,140,628 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,845,000 | | | | 8,144,292 | | | | 9,140,628 | |
Other cash expenditures expensed | | | 53,335 | | | | 22,079 | | | | 52,003 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,898,335 | | | $ | 8,166,371 | | | $ | 9,192,631 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Petsmart
Lake Mary, FL
Specialty Retail | | | Petsmart
Plantation, FL
Specialty Retail | | | Petsmart
Tallahassee, FL
Specialty Retail | |
Gross leasable square footage | | | 26,118 | | | | 26,017 | | | | 26,738 | |
Date of purchase | | | 7/21/2011 | | | | 7/21/2011 | | | | 7/21/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,989,228 | | | | 6,981,900 | | | | 2,664,444 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,989,228 | | | | 6,981,900 | | | | 2,664,444 | |
Other cash expenditures expensed | | | 37,792 | | | | 44,105 | | | | 30,216 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,027,020 | | | $ | 7,026,005 | | | $ | 2,694,660 | |
| | | | | | | | | | | | |
II-58
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Petsmart
Evanston, IL
Specialty Retail | | | Petsmart
Braintree, MA
Specialty Retail | | | Petsmart
Oxon Hill, MD
Specialty Retail | |
Gross leasable square footage | | | 26,432 | | | | 26,000 | | | | 26,956 | |
Date of purchase | | | 7/21/2011 | | | | 7/21/2011 | | | | 7/21/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 7,155,504 | | | | 10,808,736 | | | | 5,985,564 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 7,155,504 | | | | 10,808,736 | | | | 5,985,564 | |
Other cash expenditures expensed | | | 23,730 | | | | 20,430 | | | | 22,162 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 7,179,234 | | | $ | 10,829,166 | | | $ | 6,007,726 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Petsmart
Flint, MI
Specialty Retail | | | Petsmart
Dallas, TX
Specialty Retail | | | Petsmart
Southlake, TX
Specialty Retail | |
Gross leasable square footage | | | 26,054 | | | | 26,329 | | | | 34,325 | |
Date of purchase | | | 7/21/2011 | | | | 7/21/2011 | | | | 7/21/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,823,172 | | | | 6,476,184 | | | | 8,310,348 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,823,172 | | | | 6,476,184 | | | | 8,310,348 | |
Other cash expenditures expensed | | | 92,245 | | | | 26,653 | | | | 29,380 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,915,417 | | | $ | 6,502,837 | | | $ | 8,339,728 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Food Lion
Moyock, NC
Grocery | | | Denver West Plaza
Lakewood, CO
Shopping Center | | | The Forum
Fort Myers, FL
Shopping Center | |
Gross leasable square footage | | | 38,118 | | | | 71,249 | | | | 189,642 | (2) |
Date of purchase | | | 7/21/2011 | | | | 7/22/2011 | | | | 7/22/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,527,160 | | | | 14,280,000 | | | | 34,935,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,527,160 | | | | 14,280,000 | | | | 34,935,000 | |
Other cash expenditures expensed | | | 41,007 | | | | 50,922 | | | | 90,247 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,568,167 | | | $ | 14,330,922 | | | $ | 35,025,247 | |
| | | | | | | | | | | | |
II-59
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Hobby Lobby Center
Greenville, SC
Shopping Center | | | Davita Dialysis
Douglasville, GA
Fitness & Health | | | Wal-Mart
Riverside, CA
Distribution Center | |
Gross leasable square footage | | | 68,912 | | | | 7,350 | | | | 496,064 | |
Date of purchase | | | 7/22/2011 | | | | 7/22/2011 | | | | 7/25/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 6,426,000 | | | | 1,597,320 | | | | 93,330,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 6,426,000 | | | | 1,597,320 | | | | 93,330,000 | |
Other cash expenditures expensed | | | 48,224 | | | | 23,860 | | | | 71,117 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 6,474,224 | | | $ | 1,621,180 | | | $ | 93,401,117 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Watertown, NY
Drugstore | | | Best Buy
Richmond, IN
Electronics Retail | | | Davita Dialysis
Augusta, GA
Fitness & Health | |
Gross leasable square footage | | | 14,490 | | | | 30,983 | | | | 7,200 | |
Date of purchase | | | 7/26/2011 | | | | 7/27/2011 | | | | 7/28/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 5,816,040 | | | | 4,870,500 | | | | 1,564,680 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,816,040 | | | | 4,870,500 | | | | 1,564,680 | |
Other cash expenditures expensed | | | 44,845 | | | | 39,817 | | | | 23,854 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,860,885 | | | $ | 4,910,317 | | | $ | 1,588,534 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Sam’s Club
Douglasville, GA
Warehouse Club | | | Wal-Mart
Douglasville, GA
Discount Retail | | | Walgreens
Wichita, KS
Drugstore | |
Gross leasable square footage | | | 129,562 | | | | 222,511 | | | | 15,120 | |
Date of purchase | | | 7/28/2011 | | | | 7/28/2011 | | | | 8/1/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 12,590,236 | | | | 20,865,764 | | | | 4,080,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 12,590,236 | | | | 20,865,764 | | | | 4,080,000 | |
Other cash expenditures expensed | | | 30,989 | | | | 28,116 | | | | 32,097 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 12,621,225 | | | $ | 20,893,880 | | | $ | 4,112,097 | |
| | | | | | | | | | | | |
II-60
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Bartlett, TN
Drugstore | | | Stripes
Laredo, TX
Convenience Store | | | Petsmart
Parma, OH
Specialty Retail | |
Gross leasable square footage | | | 14,490 | | | | 4,730 | | | | 26,931 | |
Date of purchase | | | 8/1/2011 | | | | 8/3/2011 | | | | 8/4/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,843,360 | | | | 2,884,980 | | | | 4,296,750 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,843,360 | | | | 2,884,980 | | | | 4,296,750 | |
Other cash expenditures expensed | | | 45,259 | | | | 18,953 | | | | 36,353 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,888,619 | | | $ | 2,903,933 | | | $ | 4,333,103 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Stop & Shop
Cranston, RI
Grocery | | | Walgreens
Dubuque, IA
Drugstore | | | The Plaza
Queen Creek, AZ
Shopping Center | |
Gross leasable square footage | | | 52,137 | (2) | | | 14,568 | | | | 70,973 | (2) |
Date of purchase | | | 8/5/2011 | | | | 8/12/2011 | | | | 8/12/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 13,791,897 | | | | 4,712,400 | | | | 13,515,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 13,791,897 | | | | 4,712,400 | | | | 13,515,000 | |
Other cash expenditures expensed | | | 63,279 | | | | 31,725 | | | | 52,911 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 13,855,176 | | | $ | 4,744,125 | | | $ | 13,567,911 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Cape Carteret, NC
Drugstore | | | Kohl’s
Brownsville, TX
Department Store | | | Highlands Ranch
Highland Ranch, CO
Shopping Center | |
Gross leasable square footage | | | 14,820 | | | | 89,915 | (2) | | | 50,511 | |
Date of purchase | | | 8/15/2011 | | | | 8/16/2011 | | | | 8/16/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,258,500 | | | | 6,701,400 | | | | 6,472,920 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,258,500 | | | | 6,701,400 | | | | 6,472,920 | |
Other cash expenditures expensed | | | 40,887 | | | | 39,114 | | | | 39,722 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,299,387 | | | $ | 6,740,514 | | | $ | 6,512,642 | |
| | | | | | | | | | | | |
II-61
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Kingman Gateway
Kingman, AZ
Shopping Center | | | CVS & Huntington
Bank
Northville, MI
Shopping Center | | | PLS Check Cashers
Tucson, AZ
Professional
Services | |
Gross leasable square footage | | | 49,208 | | | | 15,816 | (2) | | | 2,550 | |
Date of purchase | | | 8/16/2011 | | | | 8/17/2011 | | | | 8/18/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,851,120 | | | | 3,873,168 | | | | 1,374,570 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,851,120 | | | | 3,873,168 | | | | 1,374,570 | |
Other cash expenditures expensed | | | 25,823 | | | | 53,353 | | | | 24,343 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,876,943 | | | $ | 3,926,521 | | | $ | 1,398,913 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | PLS Check Cashers
Calumet Park, IL
Professional
Services | | | PLS Check Cashers
Chicago
(Diversey), IL
Professional
Services | | | PLS Check Cashers
Dallas (Camp Wisdom), TX
Professional
Services | |
Gross leasable square footage | | | 4,135 | | | | 1,267 | | | | 1,653 | |
Date of purchase | | | 8/18/2011 | | | | 8/18/2011 | | | | 8/18/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,554,247 | | | | 1,234,986 | | | | 1,419,582 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,554,247 | | | | 1,234,986 | | | | 1,419,582 | |
Other cash expenditures expensed | | | 24,343 | | | | 24,343 | | | | 24,343 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,578,590 | | | $ | 1,259,329 | | | $ | 1,443,925 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | PLS Check Cashers
Dallas (Davis), TX
Professional
Services | | | PLS Check Cashers
Fort Worth, TX
Professional
Services | | | PLS Check Cashers
Grand Prairie, TX
Professional
Services | |
Gross leasable square footage | | | 2,234 | | | | 2,492 | | | | 2,400 | |
Date of purchase | | | 8/18/2011 | | | | 8/18/2011 | | | | 8/18/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,246,279 | | | | 1,429,271 | | | | 1,273,168 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,246,279 | | | | 1,429,271 | | | | 1,273,168 | |
Other cash expenditures expensed | | | 24,343 | | | | 24,343 | | | | 24,343 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,270,622 | | | $ | 1,453,614 | | | $ | 1,297,511 | |
| | | | | | | | | | | | |
II-62
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | PLS Check Cashers
Houston, TX
Professional
Services | | | PLS Check Cashers
Kenosha, WI
Professional
Services | | | PLS Check Cashers
Mesa
(Broadway), AZ
Professional
Services | |
Gross leasable square footage | | | 1,681 | | | | 4,023 | | | | 1,960 | |
Date of purchase | | | 8/18/2011 | | | | 8/18/2011 | | | | 8/18/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,160,348 | | | | 884,132 | | | | 1,198,432 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,160,348 | | | | 884,132 | | | | 1,198,432 | |
Other cash expenditures expensed | | | 24,343 | | | | 24,343 | | | | 24,343 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,184,691 | | | $ | 908,475 | | | $ | 1,222,775 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | PLS Check Cashers
Mesquite, TX
Professional Services | | | Tractor Supply
Rincon, GA
Specialty Retail | | | Petsmart Phoenix, AZ
Specialty Retail | |
Gross leasable square footage | | | 1,734 | | | | 19,097 | | | | 365,672 | |
Date of purchase | | | 8/18/2011 | | | | 8/23/2011 | | | | 8/23/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,679,517 | | | | 2,652,000 | | | | 104,550,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,679,517 | | | | 2,652,000 | | | | 104,550,000 | |
Other cash expenditures expensed | | | 24,343 | | | | 32,476 | | | | 103,358 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,703,860 | | | $ | 2,684,476 | | | $ | 104,653,358 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Kohl’s Plaza
Napa, CA
Shopping Center | | | Walgreens
Anthony, TX
Drugstore | | | Dick’s Sporting
Goods Charleston, SC
Sporting Goods | |
Gross leasable square footage | | | 77,280 | | | | 14,820 | | | | 47,082 | |
Date of purchase | | | 8/23/2011 | | | | 8/29/2011 | | | | 8/31/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 20,221,500 | | | | 4,947,000 | | | | 7,650,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 20,221,500 | | | | 4,947,000 | | | | 7,650,000 | |
Other cash expenditures expensed | | | 49,746 | | | | 34,013 | | | | 83,400 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 20,271,246 | | | $ | 4,981,013 | | | $ | 7,733,400 | |
| | | | | | | | | | | | |
II-63
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | L.A. Fitness
Avondale, AZ
Fitness & Health | | | Walgreens
Union City, GA
Drugstore | | | Lowe’s
Miamisburg, OH
Home Improvement | |
Gross leasable square footage | | | 45,000 | | | | 14,550 | | | | 125,357 | |
Date of purchase | | | 8/31/2011 | | | | 9/9/2011 | | | | 9/9/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 8,251,263 | | | | 4,921,679 | | | | 11,883,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 8,251,263 | | | | 4,921,679 | | | | 11,883,000 | |
Other cash expenditures expensed | | | 49,382 | | | | 39,105 | | | | 84,785 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 8,300,645 | | | $ | 4,960,784 | | | $ | 11,967,785 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS
Chicago (103rd St), IL Drugstore | | | CVS
Lake Havasu, AZ
Drugstore | | | CVS
Phoenix, AZ
Drugstore | |
Gross leasable square footage | | | 10,880 | | | | 14,512 | | | | 13,013 | |
Date of purchase | | | 9/16/2011 | | | | 9/16/2011 | | | | 9/16/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 7,788,006 | | | | 6,204,368 | | | | 8,616,027 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 7,788,006 | | | | 6,204,368 | | | | 8,616,027 | |
Other cash expenditures expensed | | | 88,662 | | | | 28,581 | | | | 29,256 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 7,876,668 | | | $ | 6,232,949 | | | $ | 8,645,283 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Carmax
Henderson, NV
Auto Dealership | | | Advance Auto
Brownstown, MI
Automotive Parts | | | Advance Auto
Romulus, MI
Automotive Parts | |
Gross leasable square footage | | | 59,792 | | | | 7,000 | | | | 7,000 | |
Date of purchase | | | 9/21/2011 | | | | 9/23/2011 | | | | 9/23/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 18,780,240 | | | | 1,940,040 | | | | 1,810,500 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 18,780,240 | | | | 1,940,040 | | | | 1,810,500 | |
Other cash expenditures expensed | | | 108,170 | | | | 36,981 | | | | 36,073 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 18,888,410 | | | $ | 1,977,021 | | | $ | 1,846,573 | |
| | | | | | | | | | | | |
II-64
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Advance Auto
Washington
Township, MI
Automotive Parts | | | L.A. Fitness
Duncanville, TX
Fitness & Health | | | Best Buy
Southaven, MS
Electronics Retail | |
Gross leasable square footage | | | 7,000 | | | | 45,000 | | | | 30,000 | |
Date of purchase | | | 9/23/2011 | | | | 9/26/2011 | | | | 9/26/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,078,760 | | | | 7,344,000 | | | | 5,049,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,078,760 | | | | 7,344,000 | | | | 5,049,000 | |
Other cash expenditures expensed | | | 37,687 | | | | 50,719 | | | | 47,776 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,116,447 | | | $ | 7,394,719 | | | $ | 5,096,776 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Dimond Crossing
Anchorage, AK
Shopping Center | | | Golden Corral
Independence, MO
Restaurant | | | Glynn Isles
Brunswick, GA
Shopping Center | |
Gross leasable square footage | | | 85,356 | (2) | | | 12,767 | | | | 193,064 | |
Date of purchase | | | 9/27/2011 | | | | 9/28/2011 | | | | 9/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 14,663,010 | | | | 3,490,721 | | | | 38,760,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 14,663,010 | | | | 3,490,721 | | | | 38,760,000 | |
Other cash expenditures expensed | | | 75,278 | | | | 27,720 | | | | 155,188 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 14,738,288 | | | $ | 3,518,441 | | | $ | 38,915,188 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Emdeon
Nashville, TN
Professional Services | | | Winchester Station
Winchester, VA
Shopping Center | | | BJ’s Wholesale Club
Deptford, NJ
Warehouse Club | |
Gross leasable square footage | | | 54,558 | | | | 182,851 | (2) | | | 116,386 | |
Date of purchase | | | 9/29/2011 | | | | 9/29/2011 | | | | 9/30/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 9,792,000 | | | | 27,418,652 | | | | 17,045,187 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 9,792,000 | | | | 27,418,652 | | | | 17,045,187 | |
Other cash expenditures expensed | | | 82,700 | | | | 204,845 | | | | 40,243 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 9,874,700 | | | $ | 27,623,497 | | | $ | 17,085,430 | |
| | | | | | | | | | | | |
II-65
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | BJ’s Wholesale Club
Westminster, MD
Warehouse Club | | | BJ’s Wholesale Club
Pembroke Pines, FL
Warehouse Club | | | BJ’s Wholesale Club
Lancaster, PA
Warehouse Club | |
Gross leasable square footage | | | 109,310 | | | | 108,625 | | | | 108,447 | |
Date of purchase | | | 9/30/2011 | | | | 9/30/2011 | | | | 9/30/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 21,413,419 | | | | 14,015,195 | | | | 21,058,920 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 21,413,419 | | | | 14,015,195 | | | | 21,058,920 | |
Other cash expenditures expensed | | | 40,243 | | | | 40,243 | | | | 40,243 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 21,453,662 | | | $ | 14,055,438 | | | $ | 21,099,163 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | BJ’s Wholesale Club
Greenfield, MA
Warehouse Club | | | BJ’s Wholesale Club
Uxbridge, MA
Warehouse Club | | | BJ’s Wholesale Club
Leominster, MA
Warehouse Club | |
Gross leasable square footage | | | 69,060 | | | | 617,676 | | | | 109,544 | |
Date of purchase | | | 9/30/2011 | | | | 9/30/2011 | | | | 9/30/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 13,387,138 | | | | 28,874,555 | | | | 20,579,915 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 13,387,138 | | | | 28,874,555 | | | | 20,579,915 | |
Other cash expenditures expensed | | | 40,243 | | | | 40,743 | | | | 33,447 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 13,427,381 | | | $ | 28,915,298 | | | $ | 20,613,362 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | BJ’s Wholesale Club
Lexington Park, MD Warehouse Club | | | BJ’s Wholesale Club
Auburn, ME
Warehouse Club | | | BJ’s Wholesale Club
Boynton Beach, FL Warehouse Club | |
Gross leasable square footage | | | 91,937 | | | | 77,046 | | | | 108,758 | |
Date of purchase | | | 9/30/2011 | | | | 9/30/2011 | | | | 9/30/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 17,727,601 | | | | 14,793,291 | | | | 17,895,143 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 17,727,601 | | | | 14,793,291 | | | | 17,895,143 | |
Other cash expenditures expensed | | | 33,447 | | | | 33,447 | | | | 33,447 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 17,761,048 | | | $ | 14,826,738 | | | $ | 17,928,590 | |
| | | | | | | | | | | | |
II-66
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | BJ’s Wholesale Club
Portsmouth, NH
Warehouse Club | | | BJ’s Wholesale Club
Jacksonville, FL
Warehouse Club | | | Walgreens Xenia, OH
Drugstore | |
Gross leasable square footage | | | 118,850 | | | | 478,898 | | | | 14,550 | |
Date of purchase | | | 9/30/2011 | | | | 9/30/2011 | | | | 10/4/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 23,008,567 | | | | 20,493,215 | | | | 5,686,749 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 23,008,567 | | | | 20,493,215 | | | | 5,686,749 | |
Other cash expenditures expensed | | | 33,447 | | | | 33,447 | | | | 63,637 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 23,042,014 | | | $ | 20,526,662 | | | $ | 5,750,386 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Giant/Eagle
Columbus, OH
Grocery | | | CVS
Cherry Hill, NJ
Drugstore | | | HH Gregg
North Fayette, PA
Electronics Retail | |
Gross leasable square footage | | | 116,238 | | | | 15,225 | (2) | | | 27,689 | |
Date of purchase | | | 10/5/2011 | | | | 10/13/2011 | | | | 10/14/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 19,900,200 | | | | 6,636,492 | | | | 4,004,385 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 19,900,200 | | | | 6,636,492 | | | | 4,004,385 | |
Other cash expenditures expensed | | | 79,625 | | | | 124,627 | | | | 89,197 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 19,979,825 | | | $ | 6,761,119 | | | $ | 4,093,582 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Hobby Lobby
Logan, UT
Specialty Retail | | | PLS Check Cashers
Compton, CA
Professional Services | | | Davita Dialysis
Willow Grove, PA
Fitness & Health | |
Gross leasable square footage | | | 55,137 | | | | 1,461 | | | | 10,600 | |
Date of purchase | | | 10/20/2011 | | | | 10/26/2011 | | | | 10/28/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,998,000 | | | | 1,683,000 | | | | 3,310,136 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,998,000 | | | | 1,683,000 | | | | 3,310,136 | |
Other cash expenditures expensed | | | 42,736 | | | | 35,550 | | | | 86,012 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,040,736 | | | $ | 1,718,550 | | | $ | 3,396,148 | |
| | | | | | | | | | | | |
II-67
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Del Monte Plaza
Reno, NV
Shopping Center | | | Caremark Towers
Glenview, IL
Drugstore | | | PLS Check Cashers
Phoenix, AZ
Professional Services | |
Gross leasable square footage | | | 82,758 | | | | 195,116 | | | | 2,234 | |
Date of purchase | | | 11/2/2011 | | | | 11/3/2011 | | | | 11/4/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 18,666,000 | | | | 45,135,000 | | | | 1,053,235 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 18,666,000 | | | | 45,135,000 | | | | 1,053,235 | |
Other cash expenditures expensed | | | 58,860 | | | | 81,666 | | | | 18,362 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 18,724,860 | | | $ | 45,216,666 | | | $ | 1,071,597 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Office Depot
Alvin, TX
Office Supply | | | CVS
Bellevue, OH
Drugstore | | | CVS
Warren, OH
Drugstore | |
Gross leasable square footage | | | 21,000 | | | | 10,165 | | | | 10,127 | |
Date of purchase | | | 11/4/2011 | | | | 11/4/2011 | | | | 11/4/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,922,300 | | | | 2,041,020 | | | | 1,726,860 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,922,300 | | | | 2,041,020 | | | | 1,726,860 | |
Other cash expenditures expensed | | | 61,792 | | | | 31,409 | | | | 31,336 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,984,092 | | | $ | 2,072,429 | | | $ | 1,758,196 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS
Titusville, PA
Drugstore | | | Home Depot
Kennesaw, GA
Home Improvement | | | Tractor Supply
Bainbridge, GA
Specialty Retail | |
Gross leasable square footage | | | 10,104 | | | | 79,992 | | | | 19,097 | |
Date of purchase | | | 11/4/2011 | | | | 11/4/2011 | | | | 11/16/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,761,140 | | | | 1,640,000 | | | | 2,745,840 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,761,140 | | | | 1,640,000 | | | | 2,745,840 | |
Other cash expenditures expensed | | | 48,105 | | | | — | | | | 23,563 | |
Other cash expenditures capitalized | | | — | | | | 19,159 | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,809,245 | | | $ | 1,659,159 | | | $ | 2,769,403 | |
| | | | | | | | | | | | |
II-68
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Albuquerque, NM
Drugstore | | | Tractor Supply
Mishawaka, IN
Specialty Retail | | | MedAssets
Plano, TX
Fitness & Health | |
Gross leasable square footage | | | 15,930 | | | | 19,097 | | | | — | (3) |
Date of purchase | | | 11/17/2011 | | | | 11/18/2011 | | | | 11/22/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,439,440 | | | | 2,808,311 | | | | 6,589,060 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,439,440 | | | | 2,808,311 | | | | 6,589,060 | |
Other cash expenditures expensed | | | 32,752 | | | | 29,921 | | | | — | |
Other cash expenditures capitalized | | | — | | | | — | | | | 8,115 | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,472,192 | | | $ | 2,838,232 | | | $ | 6,597,175 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | United Technologies
Bradenton, FL
Specialty Retail | | | Davita Dialysis
Casselberry, FL
Fitness & Health | | | Hobby Lobby
Concord, NC
Specialty Retail | |
Gross leasable square footage | | | 106,790 | | | | 6,232 | | | | 60,000 | |
Date of purchase | | | 12/8/2011 | | | | 12/9/2011 | | | | 12/12/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 20,502,000 | | | | 2,346,000 | | | | 5,916,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 20,502,000 | | | | 2,346,000 | | | | 5,916,000 | |
Other cash expenditures expensed | | | 80,410 | | | | 22,387 | | | | 41,235 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 20,582,410 | | | $ | 2,368,387 | | | $ | 5,957,235 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit Property
Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Shoppes at Sugarmill
Woods
Homosassa, FL
Shopping Center | | | Bellview Plaza
Pensacola, FL
Shopping Center | | | Kohl’s
Fort Dodge, IA
Department Store | |
Gross leasable square footage | | | 53,162 | | | | 82,910 | | | | 55,858 | |
Date of purchase | | | 12/13/2011 | | | | 12/13/2011 | | | | 12/14/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 8,262,000 | | | | 8,364,000 | | | | 4,794,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 8,262,000 | | | | 8,364,000 | | | | 4,794,000 | |
Other cash expenditures expensed | | | 58,242 | | | | 41,157 | | | | 30,675 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 8,320,242 | | | $ | 8,405,157 | | | $ | 4,824,675 | |
| | | | | | | | | | | | |
II-69
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Davita Dialysis
Sanford, FL
Fitness & Health | | | Crossroads
Marketplace
Warner Robbins, GA
Shopping Center | | | Midtowne Park
Anderson, SC
Shopping Center | |
Gross leasable square footage | | | 8,586 | | | | 77,667 | (2) | | | 167,341 | |
Date of purchase | | | 12/19/2011 | | | | 12/20/2011 | | | | 12/20/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,924,340 | | | | 11,475,000 | | | | 26,112,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,924,340 | | | | 11,475,000 | | | | 26,112,000 | |
Other cash expenditures expensed | | | 17,347 | | | | 100,746 | | | | 68,670 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,941,687 | | | $ | 11,575,746 | | | $ | 26,180,670 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Cleveland Towne
Center Cleveland, TN
Shopping Center | | | RaceTrac
Atlanta, GA
Convenience Store | | | RaceTrac
Belleview, FL
Convenience Store | |
Gross leasable square footage | | | 153,118 | | | | 2,243 | | | | 5,001 | |
Date of purchase | | | 12/20/2011 | | | | 12/21/2011 | | | | 12/21/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 18,003,000 | | | | 2,550,000 | | | | 4,590,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 18,003,000 | | | | 2,550,000 | | | | 4,590,000 | |
Other cash expenditures expensed | | | 107,564 | | | | 18,971 | | | | 19,682 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 18,110,564 | | | $ | 2,568,971 | | | $ | 4,609,682 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | RaceTrac
Bessermer, AL
Convenience Store | | | RaceTrac
Denton, TX
Convenience Store
| | | RaceTrac
Houston (Hwy 6N),
TX
Convenience Store | |
Gross leasable square footage | | | 3,974 | | | | 4,030 | | | | 2,988 | |
Date of purchase | | | 12/21/2011 | | | | 12/21/2011 | | | | 12/21/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,315,000 | | | | 3,315,000 | | | | 2,244,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,315,000 | | | | 3,315,000 | | | | 2,244,000 | |
Other cash expenditures expensed | | | 21,274 | | | | 29,164 | | | | 28,446 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,336,274 | | | $ | 3,344,164 | | | $ | 2,272,446 | |
| | | | | | | | | | | | |
II-70
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | RaceTrac
Houston
(Kuykendahl), TX
Convenience Store | | | RaceTrac
Jacksonville, FL
Convenience Store | | | RaceTrac
Leesburg, FL
Convenience Store | |
Gross leasable square footage | | | 2,976 | | | | 5,138 | | | | 5,079 | |
Date of purchase | | | 12/21/2011 | | | | 12/21/2011 | | | | 12/21/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,550,000 | | | | 4,335,000 | | | | 4,335,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,550,000 | | | | 4,335,000 | | | | 4,335,000 | |
Other cash expenditures expensed | | | 26,705 | | | | 19,792 | | | | 19,792 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,576,705 | | | $ | 4,354,792 | | | $ | 4,354,792 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | RaceTrac
Mobile, AL
Convenience Store | | | AGCO Corporation
Duluth, GA
Food Production | | | Wal-Mart
Lancaster, SC
Discount Retail | |
Gross leasable square footage | | | 2,884 | | | | 125,800 | | | | 208,470 | |
Date of purchase | | | 12/21/2011 | | | | 12/22/2011 | | | | 12/22/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,836,000 | | | | 18,283,500 | | | | 14,943,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,836,000 | | | | 18,283,500 | | | | 14,943,000 | |
Other cash expenditures expensed | | | 19,562 | | | | 84,947 | | | | 75,790 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,855,562 | | | $ | 18,368,447 | | | $ | 15,018,790 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | VA Oceanside Clinic
Oceanside, CA
Fitness & Health | | | Silverado Plaza
Tucson, AZ
Shopping Center | | | Irving Oil
Belfast, ME
Convenience Store | |
Gross leasable square footage | | | 65,536 | | | | 77,691 | | | | 4,017 | |
Date of purchase | | | 12/22/2011 | | | | 12/22/2011 | | | | 12/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 55,590,000 | | | | 9,435,000 | | | | 1,007,407 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 55,590,000 | | | | 9,435,000 | | | | 1,007,407 | |
Other cash expenditures expensed | | | 47,187 | | | | 71,170 | | | | 12,564 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 55,637,187 | | | $ | 9,506,170 | | | $ | 1,019,971 | |
| | | | | | | | | | | | |
II-71
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Irving Oil
Bethel, ME
Convenience Store | | | Irving Oil
Boothbay Harbor, ME
Convenience Store | | | Irving Oil
Caribou, ME
Convenience Store | |
Gross leasable square footage | | | 5,517 | | | | 3,355 | | | | 2,918 | |
Date of purchase | | | 12/29/2011 | | | | 12/29/2011 | | | | 12/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 505,630 | | | | 907,011 | | | | 580,191 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 505,630 | | | | 907,011 | | | | 580,191 | |
Other cash expenditures expensed | | | 12,564 | | | | 12,564 | | | | 12,564 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 518,194 | | | $ | 919,575 | | | $ | 592,755 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Irving Oil
Conway, ME
Convenience Store | | | Irving Oil
Dover, NH
Convenience Store | | | Irving Oil
Fort Kent, ME
Convenience Store | |
Gross leasable square footage | | | 1,599 | | | | 2,411 | | | | 2,938 | |
Date of purchase | | | 12/29/2011 | | | | 12/29/2011 | | | | 12/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 680,000 | | | | 1,058,735 | | | | 695,678 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 680,000 | | | | 1,058,735 | | | | 695,678 | |
Other cash expenditures expensed | | | 18,306 | | | | 18,306 | | | | 12,564 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 698,306 | | | $ | 1,077,041 | | | $ | 708,242 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Irving Oil
Kennebunk, ME
Convenience Store | | | Irving Oil
Lincoln, ME
Convenience Store | | | Irving Oil
Orono, ME
Convenience Store | |
Gross leasable square footage | | | 3,617 | | | | 3,615 | | | | 2,478 | |
Date of purchase | | | 12/29/2011 | | | | 12/29/2011 | | | | 12/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,091,614 | | | | 701,189 | | | | 495,393 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,091,614 | | | | 701,189 | | | | 495,393 | |
Other cash expenditures expensed | | | 12,564 | | | | 12,564 | | | | 12,564 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,104,178 | | | $ | 713,753 | | | $ | 507,957 | |
| | | | | | | | | | | | |
II-72
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Irving Oil
Rochester, NH
Convenience Store | | | Irving Oil
Rutland, VT
Convenience Store | | | Irving Oil
Saco, ME
Convenience Store | |
Gross leasable square footage | | | 3,391 | | | | 2,478 | | | | 1,500 | |
Date of purchase | | | 12/29/2011 | | | | 12/29/2011 | | | | 12/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,007,407 | | | | 433,185 | | | | 890,535 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,007,407 | | | | 433,185 | | | | 890,535 | |
Other cash expenditures expensed | | | 18,306 | | | | 14,443 | | | | 12,564 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,025,713 | | | $ | 447,628 | | | $ | 903,099 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Irving Oil
Skowhegan, ME
Convenience Store | | | Irving Oil
West Dummerston,
VT
Convenience Store | | | Irving Oil
Westminister, VT
Convenience Store
| |
Gross leasable square footage | | | 2,999 | | | | 2,237 | | | | 3,307 | |
Date of purchase | | | 12/29/2011 | | | | 12/29/2011 | | | | 12/29/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,007,407 | | | | 528,889 | | | | 543,597 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,007,407 | | | | 528,889 | | | | 543,597 | |
Other cash expenditures expensed | | | 12,564 | | | | 14,443 | | | | 14,443 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,019,971 | | | $ | 543,332 | | | $ | 558,040 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Kyle Marketplace
Kyle, TX
Shopping Center | | | Sam’s Club
Colorado
Springs, CO
Warehouse Club | | | Indian Lakes Crossing
Virginia Beach, VA
Shopping Center | |
Gross leasable square footage | | | 219,111 | (2) | | | 128,065 | | | | 71,020 | (2) |
Date of purchase | | | 12/30/2011 | | | | 1/20/2012 | | | | 1/31/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 45,900,000 | | | | 17,646,000 | | | | 14,484,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 45,900,000 | | | | 17,646,000 | | | | 14,484,000 | |
Other cash expenditures expensed | | | 103,751 | | | | 58,335 | | | | 100,013 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 46,003,751 | | | $ | 17,704,335 | | | $ | 14,584,013 | |
| | | | | | | | | | | | |
II-73
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| Name, location, type of property | | PetSmart/Hallmark
Cincinnati, OH
Shopping Center | | | Davita Dialysis
Ft. Wayne, IN
Fitness and Health | | | HH Gregg Joliet, IL Specialty Retail | |
Gross leasable square footage | | | 33,579 | | | | 7,930 | | | | 22,541 | |
Date of purchase | | | 2/14/2012 | | | | 2/16/2012 | | | | 2/17/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 5,142,432 | | | | 2,844,780 | | | | 2,883,350 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,142,432 | | | | 2,844,780 | | | | 2,883,350 | |
Other cash expenditures expensed | | | 52,677 | | | | 29,725 | | | | 41,099 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,195,109 | | | $ | 2,874,505 | | | $ | 2,924,449 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| Name, location, type of property | | HH Gregg
Merrillville, IN
Specialty Retail | | | Fairlane Green
Allen Park, MI
Shopping Center | | | The Medicines
Company Parsippany, NJ
Office | |
Gross leasable square footage | | | 32,691 | | | | 269,598 | (2) | | | 178,978 | |
Date of purchase | | | 2/17/2012 | | | | 2/22/2012 | | | | 2/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,788,324 | | | | 47,940,000 | | | | 54,023,377 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,788,324 | | | | 47,940,000 | | | | 54,023,377 | |
Other cash expenditures expensed | | | 31,468 | | | | 222,809 | | | | 745,572 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,819,791 | | | $ | 48,162,809 | | | $ | 54,768,949 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Michael’s
Lafayette, LA
Specialty Retail | | | Outback Steakhouse
Fort Smith, AR
Restaurant | | | Outback Steakhouse
Centennial, CO
Restaurant | |
Gross leasable square footage | | | 34,458 | | | | 6,188 | | | | 6,713 | |
Date of purchase | | | 3/9/2012 | | | | 3/14/2012 | | | | 3/14/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,528,800 | | | | 3,064,807 | | | | 2,762,446 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,528,800 | | | | 3,064,807 | | | | 2,762,446 | |
Other cash expenditures expensed | | | 60,906 | | | | 8,942 | | | | 4,601 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,589,706 | | | $ | 3,073,750 | | | $ | 2,767,047 | |
| | | | | | | | | | | | |
II-74
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Outback Steakhouse
Jacksonville, FL
Restaurant | | | Outback Steakhouse
Sebring, FL
Restaurant | | | Outback Steakhouse
Fort Wayne, IN
Restaurant | |
Gross leasable square footage | | | 6,100 | | | | 6,947 | | | | 6,300 | |
Date of purchase | | | 3/14/2012 | | | | 3/14/2012 | | | | 3/14/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,884,586 | | | | 2,797,918 | | | | 3,062,599 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,884,586 | | | | 2,797,918 | | | | 3,062,599 | |
Other cash expenditures expensed | | | 13,436 | | | | 13,168 | | | | 5,618 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,898,021 | | | $ | 2,811,086 | | | $ | 3,068,217 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Outback Steakhouse
Lexington, KY
Restaurant | | | Outback Steakhouse
Baton Rouge, LA
Restaurant | | | Outback Steakhouse
Southgate, MI
Restaurant | |
Gross leasable square footage | | | 6,174 | | | | 5,885 | | | | 6,536 | |
Date of purchase | | | 3/14/2012 | | | | 3/14/2012 | | | | 3/14/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,248,407 | | | | 1,994,522 | | | | 3,391,338 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,248,407 | | | | 1,994,522 | | | | 3,391,338 | |
Other cash expenditures expensed | | | 6,412 | | | | 5,378 | | | | 17,851 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,254,819 | | | $ | 1,999,900 | | | $ | 3,409,189 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Outback Steakhouse
Lees Summit, MO
Restaurant | | | Outback Steakhouse
Las Cruces, NM
Restaurant | | | Outback Steakhouse
Garner, NC
Restaurant | |
Gross leasable square footage | | | 6,246 | | | | 6,192 | | | | 6,205 | |
Date of purchase | | | 3/14/2012 | | | | 3/14/2012 | | | | 3/14/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,578,077 | | | | 2,063,129 | | | | 2,910,573 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,578,077 | | | | 2,063,129 | | | | 2,910,573 | |
Other cash expenditures expensed | | | 4,820 | | | | 4,481 | | | | 7,414 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,582,897 | | | $ | 2,067,609 | | | $ | 2,917,987 | |
| | | | | | | | | | | | |
II-75
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| Name, location, type of property | | Outback Steakhouse
Boardman
Township, OH
Restaurant | | | Outback Steakhouse
Pittsburg, PA
Restaurant | | | Outback Steakhouse
Conroe, TX Restaurant | |
Gross leasable square footage | | | 6,161 | | | | 7,035 | | | | 6,186 | |
Date of purchase | | | 3/14/2012 | | | | 3/14/2012 | | | | 3/14/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,326,369 | | | | 2,988,976 | | | | 2,716,059 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,326,369 | | | | 2,988,976 | | | | 2,716,059 | |
Other cash expenditures expensed | | | 10,246 | | | | 37,675 | | | | 3,141 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,336,614 | | | $ | 3,026,652 | | | $ | 2,719,200 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| Name, location, type of property | | Outback Steakhouse
Houston, TX
Restaurant | | | Outback Steakhouse
McAllen, TX
Restaurant | | | Outback
Steakhouse
Colonial Heights,
VA Restaurant | |
Gross leasable square footage | | | 6,173 | | | | 6,195 | | | | 6,285 | |
Date of purchase | | | 3/14/2012 | | | | 3/14/2012 | | | | 3/14/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,989,705 | | | | 1,188,917 | | | | 3,968,905 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,989,705 | | | | 1,188,917 | | | | 3,968,905 | |
Other cash expenditures expensed | | | 4,641 | | | | 4,641 | | | | 12,013 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,994,345 | | | $ | 1,193,558 | | | $ | 3,980,917 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| Name, location, type of property | | Outback
Steakhouse
Newport News, VA
Restaurant | | | Outback
Steakhouse
Winchester, VA
Restaurant | | | Flemings
Englewood, CO
Restaurant | |
Gross leasable square footage | | | 6,039 | | | | 6,145 | | | | 6,718 | |
Date of purchase | | | 3/14/2012 | | | | 3/14/2012 | | | | 3/14/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,677,198 | | | | 4,025,427 | | | | 4,235,923 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,677,198 | | | | 4,025,427 | | | | 4,235,923 | |
Other cash expenditures expensed | | | 11,454 | | | | 12,121 | | | | 6,316 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,688,652 | | | $ | 4,037,548 | | | $ | 4,242,239 | |
| | | | | | | | | | | | |
II-76
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Bonefish Grill
Lakeland, FL
Restaurant | | | Bonefish Grill
Independence, OH
Restaurant | | | Outback Steakhouse
Independence, OH
Restaurant | |
Gross leasable square footage | | | 5,601 | | | | 5,811 | | | | 6,186 | |
Date of purchase | | | 3/14/2012 | | | | 3/14/2012 | | | | 3/14/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,656,418 | | | | 3,313,376 | | | | 2,364,840 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,656,418 | | | | 3,313,376 | | | | 2,364,840 | |
Other cash expenditures expensed | | | 12,699 | | | | 10,192 | | | | 8,514 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,669,117 | | | $ | 3,323,568 | | | $ | 2,373,355 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Bonefish Grill
Gainesville, VA
Restaurant | | | Carrabba’s
Scottsdale, AZ
Restaurant | | | Carrabba’s
Louisville, CO Restaurant | |
Gross leasable square footage | | | 5,444 | | | | 6,790 | | | | 6,971 | |
Date of purchase | | | 3/14/2012 | | | | 3/14/2012 | | | | 3/14/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,274,395 | | | | 2,168,637 | | | | 2,277,004 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,274,395 | | | | 2,168,637 | | | | 2,277,004 | |
Other cash expenditures expensed | | | 10,651 | | | | 4,936 | | | | 4,945 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,285,046 | | | $ | 2,173,573 | | | $ | 2,281,949 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Carrabba’s
Tampa, FL
Restaurant | | | Carrabba’s
Duluth, GA
Restaurant | | | Carrabba’s
Bowie, MD
Restaurant | |
Gross leasable square footage | | | 6,849 | | | | 6,330 | | | | 6,500 | |
Date of purchase | | | 3/14/2012 | | | | 3/14/2012 | | | | 3/14/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,729,172 | | | | 3,807,134 | | | | 3,885,095 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,729,172 | | | | 3,807,134 | | | | 3,885,095 | |
Other cash expenditures expensed | | | 16,416 | | | | 7,084 | | | | 46,999 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,745,588 | | | $ | 3,814,218 | | | $ | 3,932,094 | |
| | | | | | | | | | | | |
II-77
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Carrabba’s
Brooklyn, OH
Restaurant | | | Carrabba’s
Washington
Township, OH
Restaurant | | | Carrabba’s
Columbia, SC
Restaurant | |
Gross leasable square footage | | | 6,404 | | | | 6,858 | | | | 6,838 | |
Date of purchase | | | 3/14/2012 | | | | 3/14/2012 | | | | 3/14/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,118,472 | | | | 2,825,855 | | | | 3,209,427 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,118,472 | | | | 2,825,855 | | | | 3,209,427 | |
Other cash expenditures expensed | | | 10,243 | | | | 8,476 | | | | 10,312 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,128,715 | | | $ | 2,834,331 | | | $ | 3,219,738 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Carrabba’s
Johnson City, TN
Restaurant | | | West Marine Fort Lauderdale, FL Sporting Goods | | | Petsmart/Travis
Credit Union
Mercad, CA
Shopping Center | |
Gross leasable square footage | | | 6,316 | | | | 50,000 | | | | 30,849 | |
Date of purchase | | | 3/14/2012 | | | | 3/15/2012 | | | | 3/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,670,701 | | | | 13,005,000 | | | | 5,476,576 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,670,701 | | | | 13,005,000 | | | | 5,476,576 | |
Other cash expenditures expensed | | | 11,079 | | | | 58,856 | | | | 34,266 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,681,779 | | | $ | 13,063,856 | | | $ | 5,510,842 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Petsmart/Bevmo
Redding, CA
Shopping Center | | | Golden Corral
Bakersfield, CA
Restaurant | | | Golden Corral
San Angelo, TX
Restaurant | |
Gross leasable square footage | | | 44,948 | | | | 14,503 | | | | 7,852 | |
Date of purchase | | | 3/21/2012 | | | | 3/21/2012 | | | | 3/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 5,903,824 | | | | 4,611,285 | | | | 2,146,080 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,903,824 | | | | 4,611,285 | | | | 2,146,080 | |
Other cash expenditures expensed | | | 33,598 | | | | 25,986 | | | | 21,374 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,937,422 | | | $ | 4,637,271 | | | $ | 2,167,454 | |
| | | | | | | | | | | | |
II-78
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | L.A. Fitness
Oswego, IL
Fitness and
Health | | | Davita Dialysis
Lawrenceville, NJ
Fitness and
Health | | | Greenway
Commons
Houston, TX
Shopping Center | |
Gross leasable square footage | | | 45,000 | | | | 7,930 | | | | 252,999 | (2) |
Date of purchase | | | 3/23/2012 | | | | 3/23/2012 | | | | 3/23/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 9,389,100 | | | | 2,989,620 | | | | 69,615,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 9,389,100 | | | | 2,989,620 | | | | 69,615,000 | |
Other cash expenditures expensed | | | 65,834 | | | | 42,802 | | | | 173,579 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 9,454,934 | | | $ | 3,032,422 | | | $ | 69,788,579 | |
| | | | | | | | | | | | |
| | | |
Program:
| | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | San Tan
Marketplace
Gilbert, AZ
Shopping Center | | | Tractor Supply
Columbia, SC
Specialty Retail | | | MotoMart Saint Charles, MO Convenience
Store | |
Gross leasable square footage | | | 285,486 | (2) | | | 19,097 | | | | 4,116 | |
Date of purchase | | | 3/30/2012 | | | | 3/30/2012 | | | | 3/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 55,875,600 | | | | 3,156,054 | | | | 2,988,600 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 55,875,600 | | | | 3,156,054 | | | | 2,988,600 | |
Other cash expenditures expensed | | | 440,068 | | | | 38,307 | | | | 31,673 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 56,315,668 | | | $ | 3,194,361 | | | $ | 3,020,273 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit Property
Trust III, Inc. | |
| | | |
| Name, location, type of property | | Golden Corral
Spring, TX
Restaurant | | | Toys “R” Us /
Mr. Hero
Parma, OH
Shopping Center | | | Tractor Supply
Alamogordo, NM
Specialty Retail | |
Gross leasable square footage | | | 14,232 | | | | 48,320 | (2) | | | 19,097 | |
Date of purchase | | | 4/5/2012 | | | | 4/11/2012 | | | | 4/20/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,335,872 | | | | 3,823,560 | | | | 3,073,546 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,335,872 | | | | 3,823,560 | | | | 3,073,546 | |
Other cash expenditures expensed | | | 32,312 | | | | 48,354 | | | | 39,491 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,368,184 | | | $ | 3,871,914 | | | $ | 3,113,037 | |
| | | | | | | | | | | | |
II-79
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS Anderson, SC
Drugstore | | | CVS Eden, NC
Drugstore | | | CVS
Greenville, SC
Drugstore | |
Gross leasable square footage | | | 10,125 | | | | 10,125 | | | | 10,125 | |
Date of purchase | | | 4/26/2012 | | | | 4/26/2012 | | | | 4/26/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,147,289 | | | | 2,556,000 | | | | 3,389,422 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,147,289 | | | | 2,556,000 | | | | 3,389,422 | |
Other cash expenditures expensed | | | 29,909 | | | | 28,826 | | | | 34,590 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,177,198 | | | $ | 2,584,826 | | | $ | 3,424,012 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS
Kernersville, NC
Drugstore | | | CVS Madison, NC
Drugstore | | | CVS
Moonville, SC
Drugstore | |
Gross leasable square footage | | | 10,125 | | | | 10,125 | | | | 10,125 | |
Date of purchase | | | 4/26/2012 | | | | 4/26/2012 | | | | 4/26/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,553,834 | | | | 2,458,500 | | | | 2,141,244 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,553,834 | | | | 2,458,500 | | | | 2,141,244 | |
Other cash expenditures expensed | | | 29,655 | | | | 28,770 | | | | 29,757 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,583,489 | | | $ | 2,487,270 | | | $ | 2,171,001 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Goodyear
Corpus Christi, TX
Automotive Parts
& Service | | | L.A. Fitness
Easton, PA
Fitness
and Health | | | Lowe’s
Burlington, IA
Home
Improvement | |
Gross leasable square footage | | | 6,594 | | | | 37,923 | | | | 131,644 | |
Date of purchase | | | 4/27/2012 | | | | 4/27/2012 | | | | 4/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,236,401 | | | | 8,595,880 | | | | 9,064,740 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,236,401 | | | | 8,595,880 | | | | 9,064,740 | |
Other cash expenditures expensed | | | 27,621 | | | | 151,193 | | | | 46,173 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,264,022 | | | $ | 8,747,072 | | | $ | 9,110,913 | |
| | | | | | | | | | | | |
II-80
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Shoppes at
Sherbrooke Lake Worth, FL
Shopping Center | | | Amazon
Chattanooga, TN
Distribution | | | Amazon West
Columbia, SC
Distribution | |
Gross leasable square footage | | | 57,913 | | | | 1,016,148 | | | | 1,016,148 | |
Date of purchase | | | 4/27/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 10,710,000 | | | | 64,036,674 | | | | 65,820,609 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 10,710,000 | | | | 64,036,674 | | | | 65,820,609 | |
Other cash expenditures expensed | | | 66,227 | | | | 73,249 | | | | 68,394 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 10,776,227 | | | $ | 64,109,923 | | | $ | 65,889,003 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Amazon
Charleston, TN
Distribution | | | Family Dollar
Alexandria, LA
Discount Retail | | | Family Dollar
Apopka, FL
Discount Retail | |
Gross leasable square footage | | | 1,016,148 | | | | 9,216 | | | | 8,232 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 60,490,679 | | | | 779,369 | | | | 1,916,737 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 60,490,679 | | | | 779,369 | | | | 1,916,737 | |
Other cash expenditures expensed | | | 77,530 | | | | 7,379 | | | | 6,197 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 60,568,208 | | | $ | 786,748 | | | $ | 1,922,934 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Beaver, UT
Discount Retail | | | Family Dollar
Berkeley, MO
Discount Retail | | | Family Dollar
Bristol, FL
Discount Retail | |
Gross leasable square footage | | | 8,069 | | | | 7,887 | | | | 8,006 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,098,443 | | | | 1,646,635 | | | | 1,073,483 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,098,443 | | | | 1,646,635 | | | | 1,073,483 | |
Other cash expenditures expensed | | | 12,276 | | | | 7,217 | | | | 5,784 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,110,719 | | | $ | 1,653,852 | | | $ | 1,079,267 | |
| | | | | | | | | | | | |
II-81
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
El Dorado, AR
Discount Retail | | | Family Dollar
Gainesville, FL
Discount Retail | | | Family Dollar
Homedale, ID
Discount Retail | |
Gross leasable square footage | | | 8,160 | | | | 8,336 | | | | 9,236 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,126,365 | | | | 1,703,491 | | | | 1,654,456 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,126,365 | | | | 1,703,491 | | | | 1,654,456 | |
Other cash expenditures expensed | | | 5,829 | | | | 6,145 | | | | 12,593 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,132,194 | | | $ | 1,709,636 | | | $ | 1,667,049 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Houston, TX
Discount Retail | | | Family Dollar
Jacksonville, AR
Discount Retail | | | Family Dollar
Jemison, AL
Discount Retail | |
Gross leasable square footage | | | 7,848 | | | | 7,936 | | | | 8,043 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,505,479 | | | | 970,494 | | | | 1,286,187 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,505,479 | | | | 970,494 | | | | 1,286,187 | |
Other cash expenditures expensed | | | 7,002 | | | | 5,829 | | | | 6,983 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,512,481 | | | $ | 976,323 | | | $ | 1,293,171 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Kentwood, LA
Discount Retail | | | Family Dollar
Las Vegas, NV
Discount Retail | | | Family Dollar
Lufkin, TX
Discount Retail | |
Gross leasable square footage | | | 7,842 | | | | 9,995 | | | | 9,327 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,161,581 | | | | 1,488,928 | | | | 1,959,287 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,161,581 | | | | 1,488,928 | | | | 1,959,287 | |
Other cash expenditures expensed | | | 8,004 | | | | 11,292 | | | | 7,490 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,169,585 | | | $ | 1,500,220 | | | $ | 1,966,777 | |
| | | | | | | | | | | | |
II-82
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Lynn, MA
Discount Retail | | | Family Dollar
Macon, GA
Discount Retail | | | Family Dollar
McAllen, TX
Discount Retail | |
Gross leasable square footage | | | 10,240 | | | | 9,180 | | | | 9,207 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,077,474 | | | | 1,144,408 | | | | 1,456,453 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,077,474 | | | | 1,144,408 | | | | 1,456,453 | |
Other cash expenditures expensed | | | 6,954 | | | | 6,079 | | | | 6,949 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,084,428 | | | $ | 1,150,487 | | | $ | 1,463,402 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Milwaukee, WI
Discount Retail | | | Family Dollar
Montgomery, AL
Discount Retail | | | Family Dollar
Okeechobee, FL
Discount Retail | |
Gross leasable square footage | | | 7,830 | | | | 9,180 | | | | 8,043 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,649,517 | | | | 1,630,891 | | | | 1,519,416 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,649,517 | | | | 1,630,891 | | | | 1,519,416 | |
Other cash expenditures expensed | | | 6,079 | | | | 7,119 | | | | 6,100 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,655,597 | | | $ | 1,638,010 | | | $ | 1,525,516 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
Name, location, type of property | |
| Family Dollar
Penn Yan, NY
Discount Retail |
| |
| Family Dollar
Pensacola, FL
Discount Retail |
| |
| Family Dollar
Petersburg, VA Discount Retail |
|
Gross leasable square footage | | | 7,908 | | | | 7,833 | | | | 7,755 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 892,716 | | | | 950,824 | | | | 1,611,112 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 892,716 | | | | 950,824 | | | | 1,611,112 | |
Other cash expenditures expensed | | | 5,929 | | | | 5,943 | | | | 6,079 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 898,645 | | | $ | 956,767 | | | $ | 1,617,192 | |
| | | | | | | | | | | | |
II-83
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Robstown, TX
Discount Retail | | | Family Dollar
Royse City, TX
Discount Retail | | | Family Dollar San Angelo, TX Discount Retail | |
Gross leasable square footage | | | 7,848 | | | | 7,979 | | | | 9,209 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 934,410 | | | | 1,652,400 | | | | 1,514,036 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 934,410 | | | | 1,652,400 | | | | 1,514,036 | |
Other cash expenditures expensed | | | 6,367 | | | | 7,160 | | | | 7,011 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 940,777 | | | $ | 1,659,560 | | | $ | 1,521,047 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
San Antonio
(Culebra), TX
Discount Retail | | | Family Dollar San Antonio
(Marbach), TX
Discount Retail | | | Family Dollar
San Antonio (Valley Hi), TX Discount Retail | |
Gross leasable square footage | | | 9,238 | | | | 9,289 | | | | 7,942 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,469,246 | | | | 1,017,098 | | | | 1,359,519 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,469,246 | | | | 1,017,098 | | | | 1,359,519 | |
Other cash expenditures expensed | | | 6,963 | | | | 6,475 | | | | 6,844 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,476,208 | | | $ | 1,023,573 | | | $ | 1,366,364 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
St. Louis, MO Discount Retail | | | Family Dollar
Tampa (22nd St.),
FL
Discount Retail | | | Family Dollar Tyler, TX Discount Retail | |
Gross leasable square footage | | | 7,885 | | | | 9,235 | | | | 7,914 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,652,621 | | | | 1,708,626 | | | | 706,799 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,652,621 | | | | 1,708,626 | | | | 706,799 | |
Other cash expenditures expensed | | | 7,219 | | | | 5,916 | | | | 6,069 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,659,840 | | | $ | 1,714,543 | | | $ | 712,868 | |
| | | | | | | | | | | | |
II-84
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Waco, TX
Discount Retail | | | Family Dollar Altha, FL Discount Retail | | | Family Dollar
Baton
Rouge, LA Discount Retail | |
Gross leasable square footage | | | 7,902 | | | | 8,006 | | | | 8,268 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 747,672 | | | | 990,296 | | | | 1,232,115 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 747,672 | | | | 990,296 | | | | 1,232,115 | |
Other cash expenditures expensed | | | 6,123 | | | | 5,767 | | | | 8,107 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 753,795 | | | $ | 996,063 | | | $ | 1,240,222 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Battle Mountain,
NV
Discount Retail | | | Family Dollar
Beaumont (College),
TX Discount Retail | | | Family Dollar Beaumont
(Washington),
TX Discount Retail | |
Gross leasable square footage | | | 8,072 | | | | 7,838 | | | | 9,825 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,773,913 | | | | 1,142,164 | | | | 1,650,404 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,773,913 | | | | 1,142,164 | | | | 1,650,404 | |
Other cash expenditures expensed | | | 9,756 | | | | 6,611 | | | | 7,157 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,783,668 | | | $ | 1,148,775 | | | $ | 1,657,561 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Brazoria, TX
Discount Retail | | | Family Dollar
Brooklyn, MI
Discount Retail | | | Family Dollar
Casa Grande, AZ
Discount Retail | |
Gross leasable square footage | | | 7,837 | | | | 8,050 | | | | 8,050 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,287,553 | | | | 897,404 | | | | 867,441 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,287,553 | | | | 897,404 | | | | 867,441 | |
Other cash expenditures expensed | | | 6,767 | | | | 7,201 | | | | 7,538 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,294,320 | | | $ | 904,605 | | | $ | 874,978 | |
| | | | | | | | | | | | |
II-85
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Fort Mohave, AZ
Discount Retail | | | Family Dollar
Gallup, NM
Discount Retail | | | Family Dollar
Green Bay, WI
Discount Retail | |
Gross leasable square footage | | | 9,810 | | | | 9,000 | | | | 8,019 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 987,577 | | | | 1,949,530 | | | | 1,515,715 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 987,577 | | | | 1,949,530 | | | | 1,515,715 | |
Other cash expenditures expensed | | | 7,526 | | | | 8,291 | | | | 6,079 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 995,104 | | | $ | 1,957,821 | | | $ | 1,521,794 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Greenville, MS
Discount Retail | | | Family Dollar
Guadalupe, AZ
Discount Retail | | | Family Dollar
Gulfport, MS
Discount Retail | |
Gross leasable square footage | | | 8,054 | | | | 9,274 | | | | 9,214 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,102,705 | | | | 1,100,138 | | | | 1,740,132 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,102,705 | | | | 1,100,138 | | | | 1,740,132 | |
Other cash expenditures expensed | | | 6,579 | | | | 7,519 | | | | 6,579 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,109,284 | | | $ | 1,107,657 | | | $ | 1,746,711 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Hot Springs, AR
Discount Retail | | | Family Dollar
Houston (Mount),
TX
Discount Retail | | | Family Dollar
Houston (Jester), TX
Discount Retail | |
Gross leasable square footage | | | 8,320 | | | | 7,854 | | | | 7,812 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,197,022 | | | | 1,303,196 | | | | 864,224 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,197,022 | | | | 1,303,196 | | | | 864,224 | |
Other cash expenditures expensed | | | 5,829 | | | | 6,784 | | | | 6,275 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,202,851 | | | $ | 1,309,980 | | | $ | 870,499 | |
| | | | | | | | | | | | |
II-86
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Houston (Kuykendahl),
TX Discount Retail | | | Family Dollar
Kingston, OK
Discount Retail | | | Family Dollar
Marshall, TX
Discount Retail | |
Gross leasable square footage | | | 9,112 | | | | 7,970 | | | | 7,912 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,953,300 | | | | 702,970 | | | | 841,044 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,953,300 | | | | 702,970 | | | | 841,044 | |
Other cash expenditures expensed | | | 7,483 | | | | 6,079 | | | | 6,245 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,960,783 | | | $ | 709,049 | | | $ | 847,289 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Memphis (Austin), TN
Discount Retail | | | Family Dollar
Mexia, TX
Discount Retail | | | Family Dollar
Mohave Valley, AZ
Discount Retail | |
Gross leasable square footage | | | 7,800 | | | | 7,891 | | | | 7,816 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,400,105 | | | | 674,962 | | | | 664,002 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,400,105 | | | | 674,962 | | | | 664,002 | |
Other cash expenditures expensed | | | 6,079 | | | | 6,028 | | | | 7,456 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,406,184 | | | $ | 680,989 | | | $ | 671,458 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar Ocala (28th St.), FL
Discount Retail | | | Family Dollar
Ormond Beach, FL
Discount Retail | | | Family Dollar
Phoenix (Southern),
AZ Discount Retail | |
Gross leasable square footage | | | 9,151 | | | | 8,134 | | | | 10,077 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,578,406 | | | | 1,806,119 | | | | 2,089,670 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,578,406 | | | | 1,806,119 | | | | 2,089,670 | |
Other cash expenditures expensed | | | 5,912 | | | | 6,170 | | | | 7,943 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,584,318 | | | $ | 1,812,289 | | | $ | 2,097,613 | |
| | | | | | | | | | | | |
II-87
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Plant City
(Gordon), FL
Discount Retail | | | Family Dollar
Rio Grande, TX Discount Retail | | | Family Dollar
Saginaw, MI
Discount Retail | |
Gross leasable square footage | | | 8,151 | | | | 7,848 | | | | 10,000 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,310,342 | | | | 1,584,105 | | | | 1,471,334 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,310,342 | | | | 1,584,105 | | | | 1,471,334 | |
Other cash expenditures expensed | | | 6,049 | | | | 7,086 | | | | 7,267 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,316,390 | | | $ | 1,591,191 | | | $ | 1,478,601 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Seymour, IN
Discount Retail | | | Family Dollar
St. Louis (Ferry),
MO
Discount Retail | | | Family Dollar
Tallahassee, FL
Discount Retail | |
Gross leasable square footage | | | 7,934 | | | | 7,866 | | | | 8,316 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,171,283 | | | | 1,648,187 | | | | 1,683,185 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,171,283 | | | | 1,648,187 | | | | 1,683,185 | |
Other cash expenditures expensed | | | 6,897 | | | | 7,217 | | | | 6,140 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,178,180 | | | $ | 1,655,405 | | | $ | 1,689,325 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Topeka, KS
Discount Retail | | | Family Dollar
Victoria, TX
Discount Retail | | | Family Dollar
Avondale, AZ
Discount Retail | |
Gross leasable square footage | | | 9,234 | | | | 7,850 | | | | 8,171 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,816,358 | | | | 657,057 | | | | 1,656,170 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,816,358 | | | | 657,057 | | | | 1,656,170 | |
Other cash expenditures expensed | | | 7,277 | | | | 6,004 | | | | 7,757 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,823,634 | | | $ | 663,062 | | | $ | 1,663,927 | |
| | | | | | | | | | | | |
II-88
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Beaumont (Highway
105), TX
Discount Retail | | | Family Dollar
Burton, MI
Discount Retail | | | Family Dollar
Canton, OH
Discount Retail | |
Gross leasable square footage | | | 7,745 | | | | 8,050 | | | | 9,278 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,112,381 | | | | 1,472,547 | | | | 781,852 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,112,381 | | | | 1,472,547 | | | | 781,852 | |
Other cash expenditures expensed | | | 6,579 | | | | 7,267 | | | | 7,649 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,118,960 | | | $ | 1,479,815 | | | $ | 789,501 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Converse, TX
Discount Retail | | | Family Dollar
Coolidge, AZ
Discount Retail | | | Family Dollar
Dacano, CO
Discount Retail | |
Gross leasable square footage | | | 7,899 | | | | 7,857 | | | | 7,888 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 695,005 | | | | 1,024,973 | | | | 1,286,796 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 695,005 | | | | 1,024,973 | | | | 1,286,796 | |
Other cash expenditures expensed | | | 6,054 | | | | 7,486 | | | | 6,769 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 701,058 | | | $ | 1,032,459 | | | $ | 1,293,566 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Deland, FL
Discount Retail | | | Family Dollar
Fort Dodge, IA
Discount Retail | | | Family Dollar
Fort Lupton, CO
Discount Retail | |
Gross leasable square footage | | | 8,099 | | | | 7,843 | | | | 9,283 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,796,645 | | | | 693,242 | | | | 1,556,710 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,796,645 | | | | 693,242 | | | | 1,556,710 | |
Other cash expenditures expensed | | | 6,168 | | | | 6,300 | | | | 7,075 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,802,813 | | | $ | 699,542 | | | $ | 1,563,785 | |
| | | | | | | | | | | | |
II-89
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit Property
Trust III, Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Fort Myers, FL
Discount Retail | | | Family Dollar
Hernandez, NM
Discount Retail | | | Family Dollar
Houston (Veterans),
TX Discount Retail | |
Gross leasable square footage | | | 7,798 | | | | 8,000 | | | | 7,654 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,654,617 | | | | 1,959,065 | | | | 1,549,304 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,654,617 | | | | 1,959,065 | | | | 1,549,304 | |
Other cash expenditures expensed | | | 6,133 | | | | 7,886 | | | | 7,049 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,660,750 | | | $ | 1,966,951 | | | $ | 1,556,352 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Hudson, MI
Discount Retail | | | Family Dollar
Jacksonville
(Moncrief), FL
Discount Retail | | | Family Dollar
Jacksonville (Lem
Turner), FL
Discount Retail | |
Gross leasable square footage | | | 9,286 | | | | 9,198 | | | | 9,091 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,415,437 | | | | 1,341,724 | | | | 1,747,653 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,415,437 | | | | 1,341,724 | | | | 1,747,653 | |
Other cash expenditures expensed | | | 7,259 | | | | 6,056 | | | | 5,921 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,422,695 | | | $ | 1,347,781 | | | $ | 1,753,574 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit Property
Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Kansas City
(Blue Ridge), MO Discount Retail | | | Family Dollar
Kansas City
(State), KS
Discount Retail | | | Family Dollar
Kentwood, MI
Discount Retail | |
Gross leasable square footage | | | 7,843 | | | | 7,860 | | | | 10,150 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,161,744 | | | | 1,669,030 | | | | 1,256,350 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,161,744 | | | | 1,669,030 | | | | 1,256,350 | |
Other cash expenditures expensed | | | 7,045 | | | | 7,225 | | | | 7,235 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,168,790 | | | $ | 1,676,255 | | | $ | 1,263,586 | |
| | | | | | | | | | | | |
II-90
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit Property
Trust III,
Inc. | | | Cole Credit Property
Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Lakeland, FL
Discount Retail | | | Family Dollar
Leander, TX
Discount Retail | | | Family Dollar
Little Rock, AR
Discount Retail | |
Gross leasable square footage | | | 7,842 | | | | 9,207 | | | | 7,986 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,243,561 | | | | 946,770 | | | | 794,571 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,243,561 | | | | 946,770 | | | | 794,571 | |
Other cash expenditures expensed | | | 6,032 | | | | 6,383 | | | | 5,829 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,249,593 | | | $ | 953,154 | | | $ | 800,400 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Memphis (Lamar),
TN
Discount Retail | | | Family Dollar
Milton, FL Discount Retail | | | Family Dollar
Newaygo, MI
Discount Retail | |
Gross leasable square footage | | | 9,800 | | | | 8,007 | | | | 8,080 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,084,121 | | | | 1,095,078 | | | | 1,171,556 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,084,121 | | | | 1,095,078 | | | | 1,171,556 | |
Other cash expenditures expensed | | | 6,079 | | | | 5,796 | | | | 7,223 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,090,200 | | | $ | 1,100,874 | | | $ | 1,178,779 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Noonday, TX
Discount Retail | | | Family Dollar
Ocala (Maricamp),
FL Discount Retail | | | Family Dollar
Pembroke Park,
FL
Discount Retail | |
Gross leasable square footage | | | 9,196 | | | | 8,432 | | | | 8,991 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,063,260 | | | | 1,645,935 | | | | 1,939,774 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,063,260 | | | | 1,645,935 | | | | 1,939,774 | |
Other cash expenditures expensed | | | 6,526 | | | | 5,897 | | | | 6,203 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,069,786 | | | $ | 1,651,832 | | | $ | 1,945,977 | |
| | | | | | | | | | | | |
II-91
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Phoenix (McDowell),
AZ
Discount Retail | | | Family Dollar
Plant City (Baker),
FL
Discount Retail | | | Family Dollar
Port Arthur, TX
Discount Retail | |
Gross leasable square footage | | | 10,011 | | | | 9,223 | | | | 7,820 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,768,379 | | | | 1,994,147 | | | | 1,773,913 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,768,379 | | | | 1,994,147 | | | | 1,773,913 | |
Other cash expenditures expensed | | | 7,805 | | | | 6,216 | | | | 7,290 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,776,184 | | | $ | 2,000,363 | | | $ | 1,781,203 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
San Antonio (Foster),
TX Discount Retail | | | Family Dollar
San Antonio
(Zarzamora), TX Discount Retail | | | Family Dollar St. Peter, MN
Discount Retail | |
Gross leasable square footage | | | 9,235 | | | | 9,280 | | | | 8,365 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 860,661 | | | | 1,236,972 | | | | 694,753 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 860,661 | | | | 1,236,972 | | | | 694,753 | |
Other cash expenditures expensed | | | 6,271 | | | | 6,713 | | | | 7,529 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 866,931 | | | $ | 1,243,685 | | | $ | 702,282 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar Tampa (MLK), FL
Discount Retail | | | Family Dollar Abbeville, LA Discount Retail | | | Family Dollar
Alamogordo, NM
Discount Retail | |
Gross leasable square footage | | | 8,390 | | | | 9,140 | | | | 8,000 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,985,526 | | | | 1,257,396 | | | | 891,013 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,985,526 | | | | 1,257,396 | | | | 891,013 | |
Other cash expenditures expensed | | | 5,965 | | | | 8,076 | | | | 6,733 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,991,490 | | | $ | 1,265,472 | | | $ | 897,746 | |
| | | | | | | | | | | | |
II-92
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Bristol, VA Discount Retail | | | Family Dollar Cleveland
(Pearl), OH Discount Retail | | | Family Dollar
Clovis, NM
Discount Retail | |
Gross leasable square footage | | | 8,564 | | | | 12,388 | | | | 8,000 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,033,259 | | | | 2,329,259 | | | | 1,117,667 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,033,259 | | | | 2,329,259 | | | | 1,117,667 | |
Other cash expenditures expensed | | | 6,011 | | | | 9,347 | | | | 7,052 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,039,270 | | | $ | 2,338,605 | | | $ | 1,124,719 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Cockrell Hill, TX
Discount Retail | | | Family Dollar
Dallas, TX
Discount Retail | | | Family Dollar
Deltona (1401),
FL Discount Retail | |
Gross leasable square footage | | | 7,907 | | | | 9,064 | | | | 9,202 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,649,074 | | | | 1,066,374 | | | | 1,165,754 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,649,074 | | | | 1,066,374 | | | | 1,165,754 | |
Other cash expenditures expensed | | | 7,057 | | | | 6,461 | | | | 5,945 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,656,131 | | | $ | 1,072,835 | | | $ | 1,171,699 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Deltona (2901),
FL Discount Retail | | | Family Dollar
Des Moines, IA Discount Retail | | | Family Dollar
Dickinson, TX
Discount Retail | |
Gross leasable square footage | | | 8,142 | | | | 9,844 | | | | 8,540 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,770,783 | | | | 1,398,142 | | | | 1,157,494 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,770,783 | | | | 1,398,142 | | | | 1,157,494 | |
Other cash expenditures expensed | | | 6,093 | | | | 6,232 | | | | 6,559 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,776,876 | | | $ | 1,404,373 | | | $ | 1,164,053 | |
| | | | | | | | | | | | |
II-93
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Farmerville, LA
Discount Retail | | | Family Dollar
Fort Meade, FL
Discount Retail | | | Family Dollar
Houston
(Freeway), TX
Discount Retail | |
Gross leasable square footage | | | 7,830 | | | | 8,052 | | | | 9,035 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,226,995 | | | | 709,565 | | | | 1,564,732 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,226,995 | | | | 709,565 | | | | 1,564,732 | |
Other cash expenditures expensed | | | 8,031 | | | | 5,757 | | | | 6,997 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,235,026 | | | $ | 715,322 | | | $ | 1,571,729 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Indianapolis, IN Discount Retail | | | Family Dollar
Kansas City
(Meyer), MO
Discount Retail | | | Family Dollar
Kansas City
(Prospect), MO
Discount Retail | |
Gross leasable square footage | | | 7,920 | | | | 8,108 | | | | 9,911 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,042,129 | | | | 1,648,187 | | | | 2,058,848 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,042,129 | | | | 1,648,187 | | | | 2,058,848 | |
Other cash expenditures expensed | | | 6,828 | | | | 7,149 | | | | 7,294 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,048,957 | | | $ | 1,655,336 | | | $ | 2,066,142 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Kissimmee, FL
Discount Retail | | | Family Dollar
Lake City, FL
Discount Retail | | | Family Dollar
Memphis
(Millbranch), TN
Discount Retail | |
Gross leasable square footage | | | 7,965 | | | | 8,016 | | | | 10,000 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,648,888 | | | | 1,057,716 | | | | 2,127,365 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,648,888 | | | | 1,057,716 | | | | 2,127,365 | |
Other cash expenditures expensed | | | 6,063 | | | | 5,713 | | | | 6,011 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,654,951 | | | $ | 1,063,428 | | | $ | 2,133,376 | |
| | | | | | | | | | | | |
II-94
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Memphis
(Neely), TN
Discount Retail | | | Family Dollar
Middletown, OH Discount Retail | | | Family Dollar
New Orleans, LA
Discount Retail | |
Gross leasable square footage | | | 8,000 | | | | 7,833 | | | | 9,157 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,653,730 | | | | 1,122,505 | | | | 1,948,865 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,653,730 | | | | 1,122,505 | | | | 1,948,865 | |
Other cash expenditures expensed | | | 6,011 | | | | 7,987 | | | | 9,093 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,659,741 | | | $ | 1,130,492 | | | $ | 1,957,958 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Palestine, TX
Discount Retail | | | Family Dollar
Pharr, TX
Discount Retail | | | Family Dollar
Pontiac, MI
Discount Retail | |
Gross leasable square footage | | | 7,913 | | | | 7,849 | | | | 8,140 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,140,729 | | | | 1,647,744 | | | | 1,635,991 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,140,729 | | | | 1,647,744 | | | | 1,635,991 | |
Other cash expenditures expensed | | | 6,541 | | | | 7,086 | | | | 7,264 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,147,270 | | | $ | 1,654,830 | | | $ | 1,643,256 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Princeton, IN
Discount Retail | | | Family Dollar
Raymondville, TX
Discount Retail | | | Family Dollar
Roswell, NM
Discount Retail | |
Gross leasable square footage | | | 7,931 | | | | 7,840 | | | | 8,000 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 894,947 | | | | 921,094 | | | | 1,302,745 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 894,947 | | | | 921,094 | | | | 1,302,745 | |
Other cash expenditures expensed | | | 6,828 | | | | 6,281 | | | | 7,313 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 901,775 | | | $ | 927,375 | | | $ | 1,310,058 | |
| | | | | | | | | | | | |
II-95
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
San Antonio
(Cupples), TX
Discount Retail | | | Family Dollar
San Benito, TX
Discount Retail | | | Family Dollar
San Diego, TX
Discount Retail | |
Gross leasable square footage | | | 9,256 | | | | 7,803 | | | | 7,858 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,943,544 | | | | 1,016,373 | | | | 1,022,600 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,943,544 | | | | 1,016,373 | | | | 1,022,600 | |
Other cash expenditures expensed | | | 7,404 | | | | 6,406 | | | | 6,413 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,950,948 | | | $ | 1,022,779 | | | $ | 1,029,013 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Shreveport, LA
Discount Retail | | | Family Dollar
St. Petersburg
(34th), FL
Discount Retail | | | Family Dollar
Terre Haute, IN
Discount Retail | |
Gross leasable square footage | | | 7,851 | | | | 8,433 | | | | 8,070 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,516,299 | | | | 1,857,715 | | | | 670,628 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,516,299 | | | | 1,857,715 | | | | 670,628 | |
Other cash expenditures expensed | | | 8,457 | | | | 5,961 | | | | 6,828 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,524,757 | | | $ | 1,863,676 | | | $ | 677,456 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Petsmart
Bellingham, WA
Specialty Retail | | | West Marine
Harrison
Township, MI
Sporting Goods | | | Widewater
Commons
Uniontown, PA
Shopping Center | |
Gross leasable square footage | | | 25,310 | | | | 15,500 | | | | 46,702 | |
Date of purchase | | | 4/30/2012 | | | | 4/30/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,959,640 | | | | 4,080,000 | | | | 6,732,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,959,640 | | | | 4,080,000 | | | | 6,732,000 | |
Other cash expenditures expensed | | | 43,019 | | | | 37,445 | | | | 177,491 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,002,659 | | | $ | 4,117,445 | | | $ | 6,909,491 | |
| | | | | | | | | | | | |
II-96
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Eastland Center
West Covina, CA
Shopping Center | | | Advanced Auto
Frankfort, KY
Automotive
Parts | | | Advanced Auto
Georgetown, KY
Automotive Parts | |
Gross leasable square footage | | | 809,444 | (2) | | | 7,000 | | | | 7,000 | |
Date of purchase | | | 5/14/2012 | | | | 5/15/2012 | | | | 5/15/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 148,818,000 | | | | 1,768,404 | | | | 1,700,157 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 148,818,000 | | | | 1,768,404 | | | | 1,700,157 | |
Other cash expenditures expensed | | | 284,499 | | | | 31,501 | | | | 35,915 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 149,102,499 | | | $ | 1,799,905 | | | $ | 1,736,073 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Golden Corral
Akron, OH
Restaurant | | | Golden Corral
Canton, OH
Restaurant | | | Golden Corral
Cincinnati, OH
Restaurant | |
Gross leasable square footage | | | 10,445 | | | | 10,055 | | | | 10,073 | |
Date of purchase | | | 5/16/2012 | | | | 5/16/2012 | | | | 5/16/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,201,344 | | | | 2,421,979 | | | | 2,349,260 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,201,344 | | | | 2,421,979 | | | | 2,349,260 | |
Other cash expenditures expensed | | | 21,892 | | | | 23,157 | | | | 23,101 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,223,235 | | | $ | 2,445,136 | | | $ | 2,372,361 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Golden Corral
Clarksville, IN
Restaurant | | | Golden Corral
Cleveland, OH
Restaurant | | | Golden Corral
Dayton
(Kingsridge), OH Restaurant | |
Gross leasable square footage | | | 10,024 | | | | 10,441 | | | | 9,974 | |
Date of purchase | | | 5/16/2012 | | | | 5/16/2012 | | | | 5/16/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,914,366 | | | | 2,635,474 | | | | 1,651,594 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,914,366 | | | | 2,635,474 | | | | 1,651,594 | |
Other cash expenditures expensed | | | 22,570 | | | | 22,937 | | | | 22,456 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,936,937 | | | $ | 2,658,411 | | | $ | 1,674,050 | |
| | | | | | | | | | | | |
II-97
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Golden Corral
Dayton (Miller), OH
Restaurant | | | Golden Corral
Dayton, OH
Restaurant | | | Golden Corral
Elyria, OH
Restaurant | |
Gross leasable square footage | | | 9,916 | | | | 9,986 | | | | 10,583 | |
Date of purchase | | | 5/16/2012 | | | | 5/16/2012 | | | | 5/16/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,004,262 | | | | 1,916,987 | | | | 2,121,339 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,004,262 | | | | 1,916,987 | | | | 2,121,339 | |
Other cash expenditures expensed | | | 28,400 | | | | 17,761 | | | | 22,360 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,032,663 | | | $ | 1,934,748 | | | $ | 2,143,699 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Golden Corral
Fairfield, OH
Restaurant | | | Golden Corral
Grove City, OH
Restaurant | | | Golden Corral
Louisville, KY
Restaurant | |
Gross leasable square footage | | | 10,076 | | | | 10,647 | | | | 10,218 | |
Date of purchase | | | 5/16/2012 | | | | 5/16/2012 | | | | 5/16/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,580,507 | | | | 2,140,810 | | | | 2,026,157 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,580,507 | | | | 2,140,810 | | | | 2,026,157 | |
Other cash expenditures expensed | | | 22,457 | | | | 22,890 | | | | 23,328 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,602,965 | | | $ | 2,163,699 | | | $ | 2,049,485 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Golden Corral
Monroeville, PA
Restaurant | | | Golden Corral
Northfield, OH
Restaurant | | | Golden Corral
Ontario, OH
Restaurant | |
Gross leasable square footage | | | 10,406 | | | | 10,624 | | | | 10,466 | |
Date of purchase | | | 5/16/2012 | | | | 5/16/2012 | | | | 5/16/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,625,347 | | | | 1,447,492 | | | | 2,606,925 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,625,347 | | | | 1,447,492 | | | | 2,606,925 | |
Other cash expenditures expensed | | | 23,348 | | | | 22,176 | | | | 23,384 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,648,694 | | | $ | 1,469,668 | | | $ | 2,630,309 | |
| | | | | | | | | | | | |
II-98
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III, Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Golden Corral
Richmond, IN
Restaurant | | | Golden Corral
Springfield, OH
Restaurant | | | Golden Corral Toledo, OH Restaurant | |
Gross leasable square footage | | | 9,968 | | | | 10,055 | | | | 10,504 | |
Date of purchase | | | 5/16/2012 | | | | 5/16/2012 | | | | 5/16/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,381,017 | | | | 1,264,043 | | | | 3,249,147 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,381,017 | | | | 1,264,043 | | | | 3,249,147 | |
Other cash expenditures expensed | | | 22,692 | | | | 22,183 | | | | 22,748 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,403,709 | | | $ | 1,286,226 | | | $ | 3,271,895 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III, Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Goodyear
Columbia, SC Automotive
Parts & Service | | | Goodyear
Cumming (Old
Atlanta), GA
Automotive
Parts & Service | | | Goodyear
Cumming, GA
Automotive
Parts & Service | |
Gross leasable square footage | | | 7,385 | | | | 6,921 | | | | 6,870 | |
Date of purchase | | | 5/23/2012 | | | | 5/23/2012 | | | | 5/23/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,708,100 | | | | 3,064,080 | | | | 2,973,300 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,708,100 | | | | 3,064,080 | | | | 2,973,300 | |
Other cash expenditures expensed | | | 24,089 | | | | 22,951 | | | | 23,283 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,732,189 | | | $ | 3,087,031 | | | $ | 2,996,583 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III, Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | CVS Oklahoma City, OK Drugstore | | | Sherwood Retail
Center
Sherwood, AR
Shopping Center | | | O’Reilly
Automotive
Willard, OH
Automotive Parts | |
Gross leasable square footage | | | 9,889 | | | | 119,002 | | | | 6,629 | |
Date of purchase | | | 6/4/2012 | | | | 6/4/2012 | | | | 6/8/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,256,391 | | | | 5,941,500 | | | | 1,095,842 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,256,391 | | | | 5,941,500 | | | | 1,095,842 | |
Other cash expenditures expensed | | | 35,735 | | | | 77,160 | | | | 29,422 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,292,126 | | | $ | 6,018,660 | | | $ | 1,125,264 | |
| | | | | | | | | | | | |
II-99
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | AutoZone
Hernando, MS
Automotive
Parts & Service | | | Advanced Auto
Dayton, OH
Automotive Parts | | | Advanced Auto
Florence, KY
Automotive
Parts | |
Gross leasable square footage | | | 5,400 | | | | 7,000 | | | | 7,000 | |
Date of purchase | | | 6/11/2012 | | | | 6/21/2012 | | | | 6/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 942,480 | | | | 1,787,203 | | | | 1,854,159 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 942,480 | | | | 1,787,203 | | | | 1,854,159 | |
Other cash expenditures expensed | | | 35,422 | | | | 31,377 | | | | 31,820 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 977,902 | | | $ | 1,818,580 | | | $ | 1,885,979 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Advanced Auto
Mishawaka, IN
Automotive
Parts | | | Advanced Auto
Richmond, IN
Automotive Parts | | | Advanced Auto
Spring, TX
Automotive
Parts | |
Gross leasable square footage | | | 7,000 | | | | 7,000 | | | | 7,000 | |
Date of purchase | | | 6/21/2012 | | | | 6/21/2012 | | | | 6/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,706,582 | | | | 1,898,370 | | | | 1,765,334 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,706,582 | | | | 1,898,370 | | | | 1,765,334 | |
Other cash expenditures expensed | | | 29,440 | | | | 29,635 | | | | 35,384 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,736,022 | | | $ | 1,928,005 | | | $ | 1,800,718 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Tractor Supply
Middletown,
DE Specialty
Retail | | | Dick’s Sporting
Goods
Fort Gratiot, MI
Sporting Goods | | | Ulta Salon
Fort Gratiot, MI
Specialty Retail | |
Gross leasable square footage | | | 21,842 | | | | 44,255 | | | | 10,570 | |
Date of purchase | | | 6/29/2012 | | | | 6/29/2012 | | | | 6/29/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,523,229 | | | | 6,282,431 | | | | 2,033,064 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,523,229 | | | | 6,282,431 | | | | 2,033,064 | |
Other cash expenditures expensed | | | 126,090 | | | | 58,929 | | | | 59,563 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,649,319 | | | $ | 6,341,360 | | | $ | 2,092,627 | |
| | | | | | | | | | | | |
II-100
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit Property
Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Pier 1 Imports
Victoria, TX
Specialty Retail | | | O’Reilly
Automotive
Louisville, KY
Automotive Parts | | | Family Dollar
Bethel, OH
Discount Retail | |
Gross leasable square footage | | | 8,914 | | | | 6,794 | | | | 9,211 | |
Date of purchase | | | 7/2/2012 | | | | 7/10/2012 | | | | 7/11/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,111,400 | | | | 1,506,128 | | | | 1,447,736 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,111,400 | | | | 1,506,128 | | | | 1,447,736 | |
Other cash expenditures expensed | | | 34,784 | | | | 34,649 | | | | 7,041 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,146,184 | | | $ | 1,540,777 | | | $ | 1,454,777 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit Property
Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Family Dollar
Cleveland, OH
Discount Retail | | | Trader Joe’s
Lexington, KY
Grocery | | | Mattress Firm
Fairview Heights,
IL
Furniture Retail | |
Gross leasable square footage | | | 9,463 | | | | 15,162 | | | | 5,011 | |
Date of purchase | | | 7/11/2012 | | | | 7/17/2012 | | | | 7/23/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,834,836 | | | | 6,481,755 | | | | 1,082,220 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,834,836 | | | | 6,481,755 | | | | 1,082,220 | |
Other cash expenditures expensed | | | 7,231 | | | | 50,779 | | | | 22,934 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,842,067 | | | $ | 6,532,534 | | | $ | 1,105,154 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | RSA Security
Bedford, MA
Other
Professional Services | | | Gold’s Gym
Broken Arrow, OK
Fitness | | | Benihana
Maple Grove, MN
Restaurant | |
Gross leasable square footage | | | 328,232 | | | | 40,961 | | | | 6,706 | |
Date of purchase | | | 7/25/2012 | | | | 8/15/2012 | | | | 8/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 95,370,000 | | | | 6,885,000 | | | | 4,219,772 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 95,370,000 | | | | 6,885,000 | | | | 4,219,772 | |
Other cash expenditures expensed | | | 93,069 | | | | 40,334 | | | | 26,869 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 95,463,069 | | | $ | 6,925,334 | | | $ | 4,246,640 | |
| | | | | | | | | | | | |
II-101
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program:
| | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Benihana
Farmington Hills, MI Restaurant | | | Benihana
Anchorage, AK
Restaurant | | | Benihana Dallas, TX
Restaurant | |
Gross leasable square footage | | | 7,960 | | | | 7,288 | | | | 8,922 | |
Date of purchase | | | 8/21/2012 | | | | 8/21/2012 | | | | 8/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,684,216 | | | | 3,467,102 | | | | 4,500,642 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,684,216 | | | | 3,467,102 | | | | 4,500,642 | |
Other cash expenditures expensed | | | 27,482 | | | | 29,687 | | | | 26,543 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,711,698 | | | $ | 3,496,790 | | | $ | 4,527,185 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Benihana
North Bay Village, FL
Restaurant | | | Benihana Stuart, FL
Restaurant | | | Benihana
Schaumburg, IL
Restaurant | |
Gross leasable square footage | | | 9,981 | | | | 8,257 | | | | 8,636 | |
Date of purchase | | | 8/21/2012 | | | | 8/21/2012 | | | | 8/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,179,379 | | | | 3,944,357 | | | | 3,560,133 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,179,379 | | | | 3,944,357 | | | | 3,560,133 | |
Other cash expenditures expensed | | | 30,443 | | | | 30,040 | | | | 27,900 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,209,822 | | | $ | 3,974,397 | | | $ | 3,588,032 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Benihana Alpharetta, GA
Restaurant | | | Benihana
Wheeling, IL
Restaurant | | | USAA
Fayetteville, NC
Insurance Services | |
Gross leasable square footage | | | 8,795 | | | | 8,455 | | | | 5,210 | |
Date of purchase | | | 8/21/2012 | | | | 8/21/2012 | | | | 8/29/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,201,180 | | | | 923,576 | | | | 2,488,800 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,201,180 | | | | 923,576 | | | | 2,488,800 | |
Other cash expenditures expensed | | | 25,130 | | | | 24,409 | | | | 44,975 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,226,310 | | | $ | 947,986 | | | $ | 2,533,775 | |
| | | | | | | | | | | | |
II-102
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | WaWa Gap, PA
Convenience Store | | | White Oak Village
Richmond, VA
Shopping Center | | | Road Ranger
Winnebago, IL
Convenience Store | |
Gross leasable square footage | | | 5,744 | | | | 432,956 | (2) | | | 3,824 | |
Date of purchase | | | 8/29/2012 | | | | 8/30/2012 | | | | 8/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 5,818,443 | | | | 69,360,000 | | | | 4,282,635 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,818,443 | | | | 69,360,000 | | | | 4,282,635 | |
Other cash expenditures expensed | | | 115,166 | | | | 526,367 | | | | 21,562 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,933,609 | | | $ | 69,886,367 | | | $ | 4,304,198 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Stripes Brady, TX
Convenience Store | | | Stripes
Brownsville,
TX
Convenience Store | | | Stripes Corpus Christi
(Everhart), TX
Convenience Store | |
Gross leasable square footage | | | 4,675 | | | | 6,303 | | | | 4,749 | |
Date of purchase | | | 8/30/2012 | | | | 8/30/2012 | | | | 8/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,203,302 | | | | 3,675,314 | | | | 3,960,724 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,203,302 | | | | 3,675,314 | | | | 3,960,724 | |
Other cash expenditures expensed | | | 23,124 | | | | 23,732 | | | | 23,939 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,226,426 | | | $ | 3,699,046 | | | $ | 3,984,663 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Stripes Corpus Christi
(Padre), TX
Convenience Store | | | Stripes Corpus Christi
(Yorktown), TX
Convenience Store | | | Stripes Edinburg (Hwy107), TX
Convenience Store | |
Gross leasable square footage | | | 6,318 | | | | 4,738 | | | | 4,740 | |
Date of purchase | | | 8/30/2012 | | | | 8/30/2012 | | | | 8/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,794,598 | | | | 2,622,835 | | | | 3,172,885 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,794,598 | | | | 2,622,835 | | | | 3,172,885 | |
Other cash expenditures expensed | | | 23,760 | | | | 22,849 | | | | 23,091 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,818,358 | | | $ | 2,645,684 | | | $ | 3,195,977 | |
| | | | | | | | | | | | |
II-103
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program:
| | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Stripes Edinburg (Longoria), TX
Convenience Store | | | Stripes Houston, TX
Convenience Store | | | Stripes Midland (Rankin), TX
Convenience Store | |
Gross leasable square footage | | | 4,728 | | | | 3,895 | | | | 7,347 | |
Date of purchase | | | 8/30/2012 | | | | 8/30/2012 | | | | 8/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,691,635 | | | | 2,933,804 | | | | 5,796,549 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,691,635 | | | | 2,933,804 | | | | 5,796,549 | |
Other cash expenditures expensed | | | 22,573 | | | | 22,934 | | | | 25,883 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,714,208 | | | $ | 2,956,737 | | | $ | 5,822,431 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Stripes Mission (Hwy83), TX
Convenience Store | | | Stripes Odessa
(Kermit), TX
Convenience Store | | | Stripes San Angelo
(Sherwood), TX
Convenience Store | |
Gross leasable square footage | | | 9,349 | | | | 4,166 | | | | 14,734 | |
Date of purchase | | | 8/30/2012 | | | | 8/30/2012 | | | | 8/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,686,468 | | | | 7,235,810 | | | | 4,113,083 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,686,468 | | | | 7,235,810 | | | | 4,113,083 | |
Other cash expenditures expensed | | | 23,811 | | | | 27,060 | | | | 24,103 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,710,279 | | | $ | 7,262,869 | | | $ | 4,137,185 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Stripes San Angelo (Bryant), TX
Convenience Store | | | Sysmex
Lincolnshire, IL
Manufacturing | | | JoAnn Fabrics
Shakopee, MN
Sports and hobby | |
Gross leasable square footage | | | 3,727 | | | | 162,739 | | | | 17,040 | |
Date of purchase | | | 8/30/2012 | | | | 8/31/2012 | | | | 9/1/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,742,433 | | | | 50,728,000 | | | | 2,612,934 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,742,433 | | | | 50,728,000 | | | | 2,612,934 | |
Other cash expenditures expensed | | | 25,230 | | | | 152,325 | | | | 37,275 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,767,663 | | | $ | 50,880,325 | | | $ | 2,650,209 | |
| | | | | | | | | | | | |
II-104
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | L.A. Fitness Marana, AZ Fitness and Health | | | HH Gregg
Chesterfield, MO
Specialty Retail | | | Family Dollar
Loveland, OH
Discount Retail | |
Gross leasable square footage | | | 45,000 | | | | 25,000 | | | | 7,907 | |
Date of purchase | | | 9/13/2012 | | | | 9/18/2012 | | | | 9/24/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 7,875,474 | | | | 5,100,000 | | | | 1,356,660 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 7,875,474 | | | | 5,100,000 | | | | 1,356,660 | |
Other cash expenditures expensed | | | 28,128 | | | | 44,539 | | | | 7,711 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 7,903,602 | | | $ | 5,144,539 | | | $ | 1,364,371 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Trader Joe’s
Sarasota, FL
Grocery | | | Toys “R” Us/
Babys “R” Us
Coral Springs, FL
Sports and Hobby | | | Advanced Auto
Candler, NC Automotive Parts | |
Gross leasable square footage | | | 17,565 | | | | 46,079 | | | | 6,125 | |
Date of purchase | | | 9/25/2012 | | | | 9/27/2012 | | | | 9/28/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 7,377,300 | | | | 8,850,540 | | | | 1,642,200 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 7,377,300 | | | | 8,850,540 | | | | 1,642,200 | |
Other cash expenditures expensed | | | 36,069 | | | | 51,333 | | | | 31,825 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 7,413,369 | | | $ | 8,901,873 | | | $ | 1,674,025 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Hillside Town
Center
Chicago, IL
Shopping Center | | | Mattress Firm
Melbourne, FL
Home furnishings | | | Kohl’s/Academy
Sports Hixson, TN
Shopping Center | |
Gross leasable square footage | | | 164,923 | | | | 4,307 | | | | 131,578 | |
Date of purchase | | | 9/28/2012 | | | | 10/5/2012 | | | | 11/13/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 27,484,337 | | | | 1,458,600 | | | | 10,984,380 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 27,484,337 | | | | 1,458,600 | | | | 10,984,380 | |
Other cash expenditures expensed | | | 306,816 | | | | 28,745 | | | | 102,682 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 27,791,153 | | | $ | 1,487,345 | | | $ | 11,087,062 | |
| | | | | | | | | | | | |
II-105
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Sprouts
Centennial, CO
Grocery | | | Tractor Supply
Tuscaloosa, AL Specialty Retail | | | Encana Oil & Gas
Plano, TX Mining and Natural
Resources | |
Gross leasable square footage | | | 25,444 | | | | 19,290 | | | | 318,582 | |
Date of purchase | | | 11/14/2012 | | | | 11/21/2012 | | | | 11/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 9,180,000 | | | | 2,932,500 | | | | 122,400,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 9,180,000 | | | | 2,932,500 | | | | 122,400,000 | |
Other cash expenditures expensed | | | 56,913 | | | | 35,863 | | | | 105,179 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 9,236,913 | | | $ | 2,968,363 | | | $ | 122,505,179 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Dollar General
Grambling, LA Retail - Discount | | | Dollar General
Lake Charles,
LA
Retail -Discount | | | Dollar General
Orange, TX Retail - Discount | |
Gross leasable square footage | | | 9,100 | | | | 9,026 | | | | 9,026 | |
Date of purchase | | | 11/30/2012 | | | | 11/30/2012 | | | | 11/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,382,282 | | | | 1,201,029 | | | | 1,349,754 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,382,282 | | | | 1,201,029 | | | | 1,349,754 | |
Other cash expenditures expensed | | | 25,037 | | | | 24,993 | | | | 18,766 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,407,319 | | | $ | 1,226,022 | | | $ | 1,368,519 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Dollar General
Vidor, TX
Retail - Discount | | | Dollar General
Phenix City, AL Retail - Discount | | | Dollar General
Lyerly, GA Retail - Discount | |
Gross leasable square footage | | | 9,100 | | | | 9,100 | | | | 9,026 | |
Date of purchase | | | 11/30/2012 | | | | 11/30/2012 | | | | 11/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,138,823 | | | | 1,218,648 | | | | 1,259,211 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,138,823 | | | | 1,218,648 | | | | 1,259,211 | |
Other cash expenditures expensed | | | 23,799 | | | | 23,578 | | | | 23,766 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,162,622 | | | $ | 1,242,226 | | | $ | 1,282,977 | |
| | | | | | | | | | | | |
II-106
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Dollar General
Lowell, OH
Retail - Discount | | | Kohl’s
Spartanburg, SC
Department Store | | | Merrill Lynch
Hopewell
Township, NJ
Financial Services | |
Gross leasable square footage | | | 9,026 | | | | 88,904 | | | | 481,854 | |
Date of purchase | | | 11/30/2012 | | | | 12/6/2012 | | | | 12/12/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,254,531 | | | | 8,721,000 | | | | 137,700,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,254,531 | | | | 8,721,000 | | | | 137,700,000 | |
Other cash expenditures expensed | | | 25,196 | | | | 69,969 | | | | 1,530,435 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,279,727 | | | $ | 8,790,969 | | | $ | 139,230,435 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Garden Ridge
Stockbridge, GA
Grocery Store | | | Tractor Supply
Jackson, CA
Specialty Retail | | | Dollar General
Lakeland, FL
Retail - Discount | |
Gross leasable square footage | | | 141,284 | | | | 19,813 | | | | 12,406 | |
Date of purchase | | | 12/17/2012 | | | | 12/18/2012 | | | | 12/18/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 9,537,000 | | | | 5,283,600 | | | | 2,237,880 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 9,537,000 | | | | 5,283,600 | | | | 2,237,880 | |
Other cash expenditures expensed | | | 45,064 | | | | 42,670 | | | | 24,182 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 9,582,064 | | | $ | 5,326,270 | | | $ | 2,262,062 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Dollar General
Cade, LA
Retail - Discount | | | Valley Bend
Huntsville, AL
Shopping Center | | | Cigna Phoenix, AZ
Fitness and Health | |
Gross leasable square footage | | | 9,026 | | | | 805,520 | (2) | | | 90,389 | |
Date of purchase | | | 12/18/2012 | | | | 12/19/2012 | | | | 12/19/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,291,739 | | | | 73,980,600 | | | | 24,257,172 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,291,739 | | | | 73,980,600 | | | | 24,257,172 | |
Other cash expenditures expensed | | | 14,406 | | | | 260,519 | | | | 170,856 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,306,146 | | | $ | 74,241,119 | | | $ | 24,428,028 | |
| | | | | | | | | | | | |
II-107
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Giant/Eagle
Gahanna, OH
Grocery | | | Dollar General
Ponca City, OK
Retail - Discount | | | Dollar General
Tahlequah, OK
Retail - Discount | |
Gross leasable square footage | | | 95,098 | | | | 9,100 | | | | 9,026 | |
Date of purchase | | | 12/20/2012 | | | | 12/20/2012 | | | | 12/20/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 22,132,391 | | | | 1,300,500 | | | | 1,206,660 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 22,132,391 | | | | 1,300,500 | | | | 1,206,660 | |
Other cash expenditures expensed | | | 68,958 | | | | 24,523 | | | | 23,832 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 22,201,350 | | | $ | 1,325,023 | | | $ | 1,230,492 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Dollar General
Wagoner, OK
Retail - Discount | | | Pick ‘N Save Center
Wauwatosa, WI
Shopping Center | | | Wal-mart Cary, NC Discount store | |
Gross leasable square footage | | | 9,026 | | | | 69,855 | | | | 54,500 | |
Date of purchase | | | 12/20/2012 | | | | 12/21/2012 | | | | 12/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,105,680 | | | | 16,514,351 | | | | 8,801,750 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,105,680 | | | | 16,514,351 | | | | 8,801,750 | |
Other cash expenditures expensed | | | 23,831 | | | | 58,975 | | | | 44,046 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,129,511 | | | $ | 16,573,326 | | | $ | 8,845,797 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Kirklands
Wilimington, NC Home furnishings | | | Wendy’s
Henderson (Lake
Mead), NV
Restaurant | | | Wendy’s
Henderson
(Green Valley), NV
Restaurant | |
Gross leasable square footage | | | 7,100 | | | | 3,326 | | | | 3,784 | |
Date of purchase | | | 12/21/2012 | | | | 12/27/2012 | | | | 12/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,136,078 | | | | 1,380,396 | | | | 2,129,168 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,136,078 | | | | 1,380,396 | | | | 2,129,168 | |
Other cash expenditures expensed | | | 30,875 | | | | 3,600 | | | | 3,600 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,166,953 | | | $ | 1,383,996 | | | $ | 2,132,768 | |
| | | | | | | | | | | | |
II-108
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Wendy’s
Henderson
(Eastern), NV
Restaurant | | | Wendy’s Las Vegas
(E. Flamingo), NV
Restaurant | | | Wendy’s Las Vegas
(Charleston), NV
Restaurant | |
Gross leasable square footage | | | 3,162 | | | | 2,651 | | | | 3,210 | |
Date of purchase | | | 12/27/2012 | | | | 12/27/2012 | | | | 12/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,513,485 | | | | 1,031,594 | | | | 1,663,868 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,513,485 | | | | 1,031,594 | | | | 1,663,868 | |
Other cash expenditures expensed | | | 3,600 | | | | 3,600 | | | | 3,600 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,517,085 | | | $ | 1,035,194 | | | $ | 1,667,468 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit Property
Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Wendy’s
Carmel (116th
St), IN
Restaurant | | | Wendy’s Carmel (Michigan Rd), IN Restaurant | | | Wendy’s
Fishers (116th St),
IN Restaurant | |
Gross leasable square footage | | | 3,146 | | | | 3,270 | | | | 3,015 | |
Date of purchase | | | 12/27/2012 | | | | 12/27/2012 | | | | 12/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,202,142 | | | | 1,579,486 | | | | 1,404,422 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,202,142 | | | | 1,579,486 | | | | 1,404,422 | |
Other cash expenditures expensed | | | 3,617 | | | | 3,617 | | | | 3,617 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,205,759 | | | $ | 1,583,103 | | | $ | 1,408,039 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Wendy’s
Fishers
(Olivia), IN
Restaurant | | | Wendy’s
Lebanon, IN
Restaurant | | | Wendy’s
Noblesville, IN
Restaurant | |
Gross leasable square footage | | | 3,103 | | | | 3,857 | | | | 2,750 | |
Date of purchase | | | 12/27/2012 | | | | 12/27/2012 | | | | 12/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,360,000 | | | | 1,836,656 | | | | 673,399 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,360,000 | | | | 1,836,656 | | | | 673,399 | |
Other cash expenditures expensed | | | 3,617 | | | | 3,617 | | | | 3,617 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,363,617 | | | $ | 1,840,273 | | | $ | 677,016 | |
| | | | | | | | | | | | |
II-109
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Wendy’s
Greenfield, IN
Restaurant | | | Wendy’s
Indianapolis, IN
Restaurant | | | Wendy’s Avon, IN Restaurant | |
Gross leasable square footage | | | 2,356 | | | | 2,982 | | | | 3,155 | |
Date of purchase | | | 12/27/2012 | | | | 12/27/2012 | | | | 12/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 942,276 | | | | 1,405,071 | | | | 1,408,787 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 942,276 | | | | 1,405,071 | | | | 1,408,787 | |
Other cash expenditures expensed | | | 3,625 | | | | 3,625 | | | | 3,625 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 945,901 | | | $ | 1,408,697 | | | $ | 1,412,413 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Wendy’s Avon, IN Restaurant | | | Wendy’s San Antonio
(Loop 410), TX
Restaurant | | | Wendy’s San Antonio
(Southcross), TX
Restaurant | |
Gross leasable square footage | | | 3,170 | | | | 3,199 | | | | 3,299 | |
Date of purchase | | | 12/27/2012 | | | | 12/27/2012 | | | | 12/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,708,165 | | | | 1,351,894 | | | | 2,004,672 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,708,165 | | | | 1,351,894 | | | | 2,004,672 | |
Other cash expenditures expensed | | | 3,625 | | | | 3,687 | | | | 3,687 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,711,791 | | | $ | 1,355,581 | | | $ | 2,008,359 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Wendy’s San Antonio
(De Zavala), TX
Restaurant | | | Wendy’s San Antonio
(Stone Oak), TX
Restaurant | | | Wendy’s Selma, TX Restaurant | |
Gross leasable square footage | | | 3,355 | | | | 3,061 | | | | 3,277 | |
Date of purchase | | | 12/27/2012 | | | | 12/27/2012 | | | | 12/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,586,418 | | | | 781,437 | | | | 874,924 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,586,418 | | | | 781,437 | | | | 874,924 | |
Other cash expenditures expensed | | | 3,687 | | | | 3,687 | | | | 3,687 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,590,105 | | | $ | 785,124 | | | $ | 878,611 | |
| | | | | | | | | | | | |
II-110
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Wendy’s San Antonio, TX Restaurant | | | Wendy’s Schertz, TX Restaurant | | | Wendy’s San Marcos, TX
Restaurant | |
Gross leasable square footage | | | 3,064 | | | | 3,353 | | | | 2,810 | |
Date of purchase | | | 12/27/2012 | | | | 12/27/2012 | | | | 12/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 869,939 | | | | 868,988 | | | | 1,808,051 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 869,939 | | | | 868,988 | | | | 1,808,051 | |
Other cash expenditures expensed | | | 3,687 | | | | 3,687 | | | | 3,687 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 873,626 | | | $ | 872,675 | | | $ | 1,811,738 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Wendy’s Las Vegas
(Nellis), NV Restaurant | | | Wendy’s Las Vegas
(W Flamingo), NV
Restaurant | | | Wendy’s Las Vegas
(Rancho), NV
Restaurant | |
Gross leasable square footage | | | 3,710 | | | | 3,117 | | | | 3,566 | |
Date of purchase | | | 12/27/2012 | | | | 12/27/2012 | | | | 12/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,316,193 | | | | 1,321,117 | | | | 1,770,598 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,316,193 | | | | 1,321,117 | | | | 1,770,598 | |
Other cash expenditures expensed | | | 3,600 | | | | 3,600 | | | | 3,600 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,319,793 | | | $ | 1,324,717 | | | $ | 1,774,198 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Wendy’s Las Vegas
(Lake Mead), NV
Restaurant | | | Wendy’s
Bellingham, WA
Restaurant | | | Wendy’s
Bothell, WA
Restaurant | |
Gross leasable square footage | | | 3,683 | | | | 2,966 | | | | 2,987 | |
Date of purchase | | | 12/27/2012 | | | | 12/27/2012 | | | | 12/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 974,315 | | | | 1,043,479 | | | | 797,385 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 974,315 | | | | 1,043,479 | | | | 797,385 | |
Other cash expenditures expensed | | | 3,600 | | | | 3,622 | | | | 3,622 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 977,915 | | | $ | 1,047,101 | | | $ | 801,007 | |
| | | | | | | | | | | | |
II-111
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program:
| | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit Property
Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Wendy’s Port Angeles, WA
Restaurant | | | Wendy’s
Redmond, WA
Restaurant | | | Wendy’s
Silverdale, WA
Restaurant | |
Gross leasable square footage | | | 2,600 | | | | 2,752 | | | | 2,884 | |
Date of purchase | | | 12/27/2012 | | | | 12/27/2012 | | | | 12/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,853,668 | | | | 899,052 | | | | 2,847,166 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,853,668 | | | | 899,052 | | | | 2,847,166 | |
Other cash expenditures expensed | | | 3,622 | | | | 3,622 | | | | 3,622 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,857,290 | | | $ | 902,674 | | | $ | 2,850,787 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | | | Cole Credit
Property Trust III,
Inc. | |
| | | |
| Name, location, type of property | | Cost Plus La Quinta, CA
Discount store | | | East Valley Center
Saginaw, MI
Shopping Center | | | West Valley Center Saginaw, MI
Shopping Center | |
Gross leasable square footage | | | 18,262 | | | | 121,318 | | | | 283,782 | (2) |
Date of purchase | | | 12/31/2012 | | | | 12/31/2012 | | | | 12/31/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 6,094,500 | | | | 4,453,320 | | | | 26,642,237 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 6,094,500 | | | | 4,453,320 | | | | 26,642,237 | |
Other cash expenditures expensed | | | 64,941 | | | | 33,714 | | | | 72,915 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 6,159,441 | | | $ | 4,487,034 | | | $ | 26,715,152 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Advance Auto Parts North Ridgeville, OH
Automotive Parts | | | PetSmart
Wilkesboro, NC
Specialty Retail | | | Nordstrom Rack Tampa, FL
Department Store | |
Gross leasable square footage | | | 6,000 | | | | 12,259 | | | | 44,925 | |
Date of purchase | | | 4/13/2012 | | | | 4/13/2012 | | | | 4/16/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,706,460 | | | | 2,703,000 | | | | 12,238,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,706,460 | | | | 2,703,000 | | | | 12,238,000 | |
Other cash expenditures expensed | | | 33,026 | | | | 31,608 | | | | 105,750 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,739,486 | | | $ | 2,734,608 | | | $ | 12,343,750 | |
| | | | | | | | | | | | |
II-112
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens Blair, NE Drugstore | | | CVS Corpus Christi, TX
Drugstore | | | CVS Charleston, SC
Drugstore | |
Gross leasable square footage | | | 14,820 | | | | 11,306 | | | | 10,125 | |
Date of purchase | | | 4/18/2012 | | | | 4/19/2012 | | | | 4/26/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,327,272 | | | | 3,468,000 | | | | 2,180,534 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,327,272 | | | | 3,468,000 | | | | 2,180,534 | |
Other cash expenditures expensed | | | 52,103 | | | | 38,750 | | | | 30,604 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,379,375 | | | $ | 3,506,750 | | | $ | 2,211,138 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | CVS Asheville, NC Drugstore | | | O’Reilly Auto Parts
Brownfield, TX
Automotive | | | O’Reilly Auto Parts
Columbus, TX
Automotive | |
Gross leasable square footage | | | 10,125 | | | | 6,365 | | | | 6,047 | |
Date of purchase | | | 4/26/2012 | | | | 5/8/2012 | | | | 5/8/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,412,554 | | | | 984,756 | | | | 1,152,817 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,412,554 | | | | 984,756 | | | | 1,152,817 | |
Other cash expenditures expensed | | | 28,464 | | | | 25,678 | | | | 25,867 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,441,018 | | | $ | 1,010,434 | | | $ | 1,178,684 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Suffolk, VA
Drugstore | | | Walgreens
Springfield, IL
Drugstore | | | Walgreens
Montgomery, AL
Drugstore | |
Gross leasable square footage | | | 14,820 | | | | 14,820 | | | | 14,820 | |
Date of purchase | | | 5/14/2012 | | | | 5/14/2012 | | | | 5/14/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 5,023,500 | | | | 5,327,460 | | | | 4,566,540 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 5,023,500 | | | | 5,327,460 | | | | 4,566,540 | |
Other cash expenditures expensed | | | 32,339 | | | | 25,255 | | | | 39,837 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 5,055,839 | | | $ | 5,352,715 | | | $ | 4,606,377 | |
| | | | | | | | | | | | |
II-113
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Tractor Supply
Cambridge, MN
Home Improvement | | | HEB Center Waxahachie, TX Shopping Center | | | CVS
Bainbridge, GA
Drugstore | |
Gross leasable square footage | | | 18,000 | | | | 82,458 | | | | 10,125 | |
Date of purchase | | | 5/14/2012 | | | | 6/27/2012 | | | | 6/27/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,289,900 | | | | 13,260,000 | | | | 2,703,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,289,900 | | | | 13,260,000 | | | | 2,703,000 | |
Other cash expenditures expensed | | | 41,255 | | | | 65,685 | | | | 35,876 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,331,155 | | | $ | 13,325,685 | | | $ | 2,738,876 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Advance Auto
Starkville, MS
Automotive | | | AutoZone
Philipsburg, PA
Automotive | | | Benihana Golden
Valley, MN
Restaurant | |
Gross leasable square footage | | | 6,129 | | | | 7,380 | | | | 8,362 | |
Date of purchase | | | 6/29/2012 | | | | 7/27/2012 | | | | 8/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,371,863 | | | | 1,652,400 | | | | 5,466,836 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,371,863 | | | | 1,652,400 | | | | 5,466,836 | |
Other cash expenditures expensed | | | 38,564 | | | | 66,518 | | | | 27,654 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,410,427 | | | $ | 1,718,918 | | | $ | 5,494,490 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Benihana
Lauderdale by the
Sea, FL Restaurant | | | Benihana
Lombard, IL
Restaurant | | | Benihana
The Woodlands, TX
Restaurant | |
Gross leasable square footage | | | 8,965 | | | | 9,184 | | | | 10,400 | |
Date of purchase | | | 8/21/2012 | | | | 8/21/2012 | | | | 8/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,613,600 | | | | 5,520,106 | | | | 2,081,930 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,613,600 | | | | 5,520,106 | | | | 2,081,930 | |
Other cash expenditures expensed | | | 32,027 | | | | 23,848 | | | | 24,639 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,645,627 | | | $ | 5,543,954 | | | $ | 2,106,569 | |
| | | | | | | | | | | | |
II-114
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Wawa Cape May, NJ
Convenience Store | | | Wawa Galloway, NJ
Convenience Store | | | Stripes Brownsville, TX
Convenience Store | |
Gross leasable square footage | | | 5,594 | | | | 5,605 | | | | 4,765 | |
Date of purchase | | | 8/29/2012 | | | | 8/29/2012 | | | | 8/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 7,792,694 | | | | 8,286,405 | | | | 2,869,969 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 7,792,694 | | | | 8,286,405 | | | | 2,869,969 | |
Other cash expenditures expensed | | | 131,765 | | | | 138,162 | | | | 22,860 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 7,924,459 | | | $ | 8,424,567 | | | $ | 2,892,829 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Stripes
Brownwood, TX
Convenience Store | | | Stripes McAllen, TX
Convenience Store | | | Stripes Midland, TX
Convenience Store | |
Gross leasable square footage | | | 3,917 | | | | 4,715 | | | | 3,912 | |
Date of purchase | | | 8/30/2012 | | | | 8/30/2012 | | | | 8/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,012,765 | | | | 2,890,471 | | | | 6,985,941 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,012,765 | | | | 2,890,471 | | | | 6,985,941 | |
Other cash expenditures expensed | | | 23,740 | | | | 22,600 | | | | 26,933 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,036,505 | | | $ | 2,913,071 | | | $ | 7,012,874 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Stripes Mission, TX
Convenience Store | | | Stripes Odessa, TX
Convenience Store | | | Pick’n Save
Sheboygan, WI
Grocery | |
Gross leasable square footage | | | 4,728 | | | | 3,604 | | | | 70,072 | |
Date of purchase | | | 8/30/2012 | | | | 8/30/2012 | | | | 9/6/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,632,253 | | | | 6,276,919 | | | | 14,404,440 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,632,253 | | | | 6,276,919 | | | | 14,404,440 | |
Other cash expenditures expensed | | | 22,322 | | | | 26,304 | | | | 42,245 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,654,575 | | | $ | 6,303,223 | | | $ | 14,446,685 | |
| | | | | | | | | | | | |
II-115
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | The Marquis
Williamsburg, VA
Shopping Center | | | Golden Corral
Garland, TX
Restaurant | | | Ross Ft. Worth, TX
Discount Store | |
Gross leasable square footage | | | 134,911 | | | | 12,763 | | | | 32,400 | |
Date of purchase | | | 9/21/2012 | | | | 9/21/2012 | | | | 10/4/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 14,545,200 | | | | 3,981,060 | | | | 4,998,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 14,545,200 | | | | 3,981,060 | | | | 4,998,000 | |
Other cash expenditures expensed | | | 84,715 | | | | 23,773 | | | | 67,955 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 14,629,915 | | | $ | 4,004,833 | | | $ | 5,065,955 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | CVS Irving, TX
Drugstore | | | Mattress Firm
Jonesboro, AR
Furniture Store | | | Petsmart
Baton Rouge, LA
Pet Supplies | |
Gross leasable square footage | | | 10,908 | | | | 6,000 | | | | 25,265 | |
Date of purchase | | | 10/5/2012 | | | | 10/5/2012 | | | | 10/11/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,995,908 | | | | 2,232,780 | | | | 4,182,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,995,908 | | | | 2,232,780 | | | | 4,182,000 | |
Other cash expenditures expensed | | | 33,390 | | | | 36,928 | | | | 55,441 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,029,298 | | | $ | 2,269,708 | | | $ | 4,237,441 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Walgreens
Lubbock (82nd), TX
Drugstore | | | Walgreens
Lubbock (Indiana),
TX Drugstore | | | Kohl’s Hutchinson, KS
Department Store | |
Gross leasable square footage | | | 15,120 | (2) | | | 13,905 | | | | 55,000 | |
Date of purchase | | | 10/11/2012 | | | | 10/11/2012 | | | | 10/19/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 4,325,310 | | | | 3,772,470 | | | | 3,452,700 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 4,325,310 | | | | 3,772,470 | | | | 3,452,700 | |
Other cash expenditures expensed | | | 34,677 | | | | 30,307 | | | | 33,675 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 4,359,987 | | | $ | 3,802,777 | | | $ | 3,486,375 | |
| | | | | | | | | | | | |
II-116
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | CVS Cartersville, GA
Drugstore | | | Logan’s Roadhouse
Lancaster, TX
Restaurant | | | Logan’s Roadhouse
Opelika, AL
Restaurant | |
Gross leasable square footage | | | 13,225 | (2) | | | 6,555 | | | | 8,140 | |
Date of purchase | | | 10/22/2012 | | | | 10/23/2012 | | | | 10/23/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,668,320 | | | | 3,228,300 | | | | 3,019,009 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,668,320 | | | | 3,228,300 | | | | 3,019,009 | |
Other cash expenditures expensed | | | 30,504 | | | | 29,407 | | | | 27,028 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,698,824 | | | $ | 3,257,707 | | | $ | 3,046,037 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Logan’s Roadhouse Sanford, FL
Restaurant | | | Logan’s Roadhouse
Troy, OH
Restaurant | | | Advance Auto
Corydon, IN
Automotive | |
Gross leasable square footage | | | 8,670 | | | | 6,533 | | | | 6,895 | |
Date of purchase | | | 10/23/2012 | | | | 10/23/2012 | | | | 10/26/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,698,259 | | | | 3,167,100 | | | | 1,543,661 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,698,259 | | | | 3,167,100 | | | | 1,543,661 | |
Other cash expenditures expensed | | | 27,028 | | | | 29,407 | | | | 37,718 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,725,287 | | | $ | 3,196,507 | | | $ | 1,581,379 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Mattress Firm
Pineville, NC
Furniture Store | | | Tractor Supply
Newnan, GA
Home and Garden | | | Cost Plus Shopping
Center Kansas City,
MO Discount Store | |
Gross leasable square footage | | | 10,837 | | | | 19,097 | | | | 26,967 | |
Date of purchase | | | 10/29/2012 | | | | 11/6/2012 | | | | 11/13/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,456,780 | | | | 4,021,860 | | | | 3,942,300 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,456,780 | | | | 4,021,860 | | | | 3,942,300 | |
Other cash expenditures expensed | | | 37,735 | | | | 42,075 | | | | 46,721 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,494,515 | | | $ | 4,063,935 | | | $ | 3,989,021 | |
| | | | | | | | | | | | |
II-117
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Michael’s
Bowling Green, KY
Sports and Hobby | | | Tractor Supply
Spencer, WV
Home and Garden | | | Dollar General
Hanceville, AL
Discount Store | |
Gross leasable square footage | | | 18,391 | | | | 19,127 | | | | 20,707 | |
Date of purchase | | | 11/20/2012 | | | | 11/20/2012 | | | | 11/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,172,200 | | | | 3,003,900 | | | | 3,376,518 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,172,200 | | | | 3,003,900 | | | | 3,376,518 | |
Other cash expenditures expensed | | | 52,410 | | | | 51,793 | | | | 21,911 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,224,610 | | | $ | 3,055,693 | | | $ | 3,398,429 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Dollar General
Piedmont, AL
Discount Store | | | Kirkland’s
Jonesboro, AR
Home Furnishings | | | Dollar General
Maynardville, TN
Discount Store | |
Gross leasable square footage | | | 20,707 | | | | 9,000 | | | | 9,026 | |
Date of purchase | | | 11/21/2012 | | | | 11/27/2012 | | | | 11/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 3,299,382 | | | | 2,961,291 | | | | 1,252,013 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 3,299,382 | | | | 2,961,291 | | | | 1,252,013 | |
Other cash expenditures expensed | | | 21,334 | | | | 37,571 | | | | 19,866 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 3,320,716 | | | $ | 2,998,862 | | | $ | 1,271,879 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Dollar General
Lima, OH
Discount Store | | | Dollar General
Whitwell, TN
Discount Store | | | Dollar General
Cleveland, TX
Discount Store | |
Gross leasable square footage | | | 9,002 | | | | 12,406 | | | | 9,026 | |
Date of purchase | | | 11/30/2012 | | | | 11/30/2012 | | | | 11/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,368,617 | | | | 1,470,141 | | | | 1,153,411 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,368,617 | | | | 1,470,141 | | | | 1,153,411 | |
Other cash expenditures expensed | | | 59,708 | | | | 35,495 | | | | 34,141 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,428,325 | | | $ | 1,505,636 | | | $ | 1,187,552 | |
| | | | | | | | | | | | |
II-118
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Dollar General
Brownsville, TX
Discount Store | | | Dollar General
Greenwell Springs,
LA Discount Store | | | Dollar General
Breaux Bridge, LA
Discount Store | |
Gross leasable square footage | | | 9,026 | | | | 9,026 | | | | 9,100 | |
Date of purchase | | | 11/30/2012 | | | | 11/30/2012 | | | | 11/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,386,711 | | | | 1,465,949 | | | | 1,413,636 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,386,711 | | | | 1,465,949 | | | | 1,413,636 | |
Other cash expenditures expensed | | | 23,579 | | | | 23,830 | | | | 25,252 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,410,290 | | | $ | 1,489,779 | | | $ | 1,438,888 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Tire Kingdom
Tarpon Springs, FL
Automotive | | | Tractor Supply
Canon City, CO
Home and Garden | | | Hobby Lobby
Mooresville, NC
Sports and Hobby | |
Gross leasable square footage | | | 6,100 | | | | 21,924 | | | | 55,000 | |
Date of purchase | | | 11/30/2012 | | | | 11/30/2012 | | | | 11/30/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 2,129,072 | | | | 3,791,530 | | | | 5,610,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,129,072 | | | | 3,791,530 | | | | 5,610,000 | |
Other cash expenditures expensed | | | 19,547 | | | | 24,274 | | | | 24,719 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,148,619 | | | $ | 3,815,804 | | | $ | 5,634,719 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Canarsie Plaza
Brooklyn, NY
Shopping Center | | | Kohl’s CedarFalls, IA
Department Store | | | BigLots Waco, TX
Discount Store | |
Gross leasable square footage | | | 273,878 | | | | 86,584 | | | | 28,526 | |
Date of purchase | | | 12/5/2012 | | | | 12/7/2012 | | | | 12/10/2012 | |
Mortgage financing at date of purchase | | $ | 75,000,000 | | | $ | — | | | $ | — | |
Cash down payment | | | 51,480,000 | | | | 8,211,000 | | | | 2,652,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 126,480,000 | | | | 8,211,000 | | | | 2,652,000 | |
Other cash expenditures expensed | | | 520,414 | | | | 139,921 | | | | 31,754 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 127,000,414 | | | $ | 8,350,921 | | | $ | 2,683,754 | |
| | | | | | | | | | | | |
II-119
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Costco
Tallahassee, FL
Warehouse Club | | | Wal-Mart
Tallahassee, FL
Discount Store | | | Golden Corral
Houston, TX
Restaurant | |
Gross leasable square footage | | | 150,896 | (2) | | | 196,812 | (2) | | | 14,284 | |
Date of purchase | | | 12/11/2012 | | | | 12/11/2012 | | | | 12/12/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 9,904,200 | | | | 15,697,800 | | | | 4,022,880 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 9,904,200 | | | | 15,697,800 | | | | 4,022,880 | |
Other cash expenditures expensed | | | 29,284 | | | | 30,241 | | | | 20,393 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 9,933,484 | | | $ | 15,728,041 | | | $ | 4,043,273 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Old Navy &
PetSmart
Reynoldsburg, OH
Apparel/Pet Supply | | | National Tire &
Battery Cedar Hill, TX
Automotive | | | Hickory Flat Commons
Canton, GA Various | |
Gross leasable square footage | | | 28,970 | | | | 6,912 | | | | 114,751 | |
Date of purchase | | | 12/14/2012 | | | | 12/18/2012 | | | | 12/18/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 6,171,292 | | | | 2,676,480 | | | | 19,380,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 6,171,292 | | | | 2,676,480 | | | | 19,380,000 | |
Other cash expenditures expensed | | | 46,854 | | | | 15,665 | | | | 33,544 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 6,218,146 | | | $ | 2,692,145 | | | $ | 19,413,544 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Dollar General
Independence, MO
Discount Store | | | Dollar General
Rayne, LA
Discount Store | | | Dollar General
Conroe, TX
Discount Store | |
Gross leasable square footage | | | 9,100 | | | | 9,026 | | | | 9,026 | |
Date of purchase | | | 12/18/2012 | | | | 12/18/2012 | | | | 12/18/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,395,514 | | | | 1,180,741 | | | | 1,274,972 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,395,514 | | | | 1,180,741 | | | | 1,274,972 | |
Other cash expenditures expensed | | | 85,930 | | | | 17,521 | | | | 12,503 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,481,444 | | | $ | 1,198,262 | | | $ | 1,287,475 | |
| | | | | | | | | | | | |
II-120
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Dollar General
Houston, TX
Discount Store | | | Dollar General
Lubbock, TX
Discount Store | | | Big Lots
San Angelo, TX
Discount Store | |
Gross leasable square footage | | | 9,026 | | | | 9,026 | | | | 35,584 | |
Date of purchase | | | 12/18/2012 | | | | 12/18/2012 | | | | 12/19/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,632,782 | | | | 1,254,460 | | | | 3,315,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,632,782 | | | | 1,254,460 | | | | 3,315,000 | |
Other cash expenditures expensed | | | 12,871 | | | | 20,870 | | | | 35,693 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,645,653 | | | $ | 1,275,330 | | | $ | 3,350,693 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Home Depot
North Canton, OH
Home and Garden | | | Walgreens
Danville, VA
Drugstore | | | Dollar General
Ashville, AL
Discount Store | |
Gross leasable square footage | | | 111,803 | | | | 14,820 | | | | 9,026 | |
Date of purchase | | | 12/20/2012 | | | | 12/21/2012 | | | | 12/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 14,739,000 | | | | 6,008,438 | | | | 1,145,197 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 14,739,000 | | | | 6,008,438 | | | | 1,145,197 | |
Other cash expenditures expensed | | | 43,368 | | | | 64,268 | | | | 14,248 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 14,782,368 | | | $ | 6,072,706 | | | $ | 1,159,445 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Dollar General
Geneva, AL
Discount Store | | | Dollar General
Harvest, AL
Discount Store | | | Dollar General
Huntsville, AL
Discount Store | |
Gross leasable square footage | | | 9,026 | | | | 9,002 | | | | 9,026 | |
Date of purchase | | | 12/21/2012 | | | | 12/21/2012 | | | | 12/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,274,366 | | | | 1,174,103 | | | | 1,278,984 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,274,366 | | | | 1,174,103 | | | | 1,278,984 | |
Other cash expenditures expensed | | | 7,667 | | | | 12,928 | | | | 7,678 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,282,033 | | | $ | 1,187,031 | | | $ | 1,286,662 | |
| | | | | | | | | | | | |
II-121
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | |
| | | |
| Name, location, type of property | | Dollar General
Kinston, AL
Discount Store | | | Fairview Village Cary, NC
Shopping Center | | | Dick’s Oklahoma City
(3rd Street), OK
Sports and Hobby | |
Gross leasable square footage | | | 9,026 | (2) | | | 50,643 | (2) | | | 50,018 | |
Date of purchase | | | 12/21/2012 | | | | 12/21/2012 | | | | 12/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 1,102,830 | | | | 6,758,565 | | | | 9,151,752 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 1,102,830 | | | | 6,758,565 | | | | 9,151,752 | |
Other cash expenditures expensed | | | 81,895 | | | | 82,757 | | | | 12,918 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 1,184,725 | | | $ | 6,841,322 | | | $ | 9,164,670 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Credit
Property Trust IV,
Inc. | | | Cole Credit
Property Trust IV,
Inc. | | | Cole Real Estate
Income Strategy
(Daily NAV), Inc. | |
| | | |
| Name, location, type of property | | Wallace Commons
Salisbury, NC
Shopping Center | | | Dick’s Oklahoma City, OK
Sports and Hobby | | | Walgreens
Albuquerque (3400
Coors), NM
Drugstore | |
Gross leasable square footage | | | 98,509 | (2) | | | 60,500 | | | | 15,525 | |
Date of purchase | | | 12/31/2012 | | | | 12/31/2012 | | | | 12/7/2011 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | 1,732,500 | |
Cash down payment | | | 12,240,000 | | | | 12,342,000 | | | | 742,500 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 12,240,000 | | | | 12,342,000 | | | | 2,475,000 | |
Other cash expenditures expensed | | | 59,295 | | | | 96,880 | | | | 33,726 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 12,299,295 | | | $ | 12,438,880 | | | $ | 2,508,726 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Real Estate
Income Strategy
(Daily NAV), Inc. | | | Cole Real Estate
Income Strategy
(Daily NAV), Inc. | | | Cole Real Estate
Income Strategy
(Daily NAV), Inc. | |
| | | |
| Name, location, type of property | | Tractor Supply(1)
Lockhart, TX
Specialty Retail | | | Walgreens(1)
Reidsville, NC
Drugstore | | | CVS(1) Austin, TX
Drugstore | |
Gross leasable square footage | | | 18,800 | | | | 14,550 | | | | 10,906 | |
Date of purchase | | | 12/8/2011 | | | | 12/8/2011 | | | | 12/8/2011 | |
Mortgage financing at date of purchase | | $ | 2,087,400 | | | $ | 3,570,000 | | | $ | 2,030,000 | |
Cash down payment | | | 832,600 | | | | 1,555,000 | | | | 1,024,150 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,920,000 | | | | 5,125,000 | | | | 3,054,150 | |
Other cash expenditures expensed | | | 35,588 | | | | 48,632 | | | | 47,581 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,955,588 | | | $ | 5,173,632 | | | $ | 3,101,731 | |
| | | | | | | | | | | | |
II-122
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
| | | |
Program: | | Cole Real Estate
Income Strategy
(Daily NAV), Inc. | | | Cole Real Estate
Income Strategy
(Daily NAV), Inc. | | | Cole Real Estate
Income Strategy
(Daily NAV), Inc. | |
| | | |
| Name, location, type of property | | CVS
Mansfield, OH
Drugstore | | | Tractor Supply
Brunswick, GA
Specialty Retail | | | The Parke
San Antonio, TX
Shopping Center | |
Gross leasable square footage | | | 10,722 | | | | 19,097 | | | | 105,743 | (2) |
Date of purchase | | | 12/9/2011 | | | | 12/9/2011 | | | | 12/9/2011 | |
Mortgage financing at date of purchase | | $ | 1,522,500 | | | $ | 2,377,900 | | | $ | 5,075,000 | |
Cash down payment | | | 776,500 | | | | 1,019,100 | | | | 2,175,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,299,000 | | | | 3,397,000 | | | | 7,250,000 | |
Other cash expenditures expensed | | | 52,669 | | | | 23,137 | | | | 91,589 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,351,669 | | | $ | 3,420,137 | | | $ | 7,341,589 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Real Estate
Income Strategy
(Daily NAV), Inc. | | | Cole Real Estate
Income Strategy
(Daily NAV), Inc. | | | Cole Real Estate
Income Strategy
(Daily NAV), Inc. | |
| | | |
| Name, location, type of property | | CVS
Erie, PA
Drugstore | | | Advance Auto
Macomb Township,
MI
Automotive Parts | | | Dollar General Berwick, LA Discount store | |
Gross leasable square footage | | | 10,125 | | | | 7,000 | | | | 12,466 | |
Date of purchase | | | 12/9/2011 | | | | 12/20/2011 | | | | 11/30/2012 | |
Mortgage financing at date of purchase | | $ | 1,592,500 | | | $ | 1,452,500 | | | $ | — | |
Cash down payment | | | 707,500 | | | | 646,500 | | | | 1,780,767 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 2,300,000 | | | | 2,099,000 | | | | 1,780,767 | |
Other cash expenditures expensed | | | 34,129 | | | | 50,022 | | | | 20,076 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 2,334,129 | | | $ | 2,149,022 | | | $ | 1,800,843 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Corporate
Income Trust, Inc. | | | Cole Corporate
Income Trust, Inc. | | | Cole Corporate
Income Trust, Inc. | |
| | | |
| Name, location, type of property | | Medtronic(1)
San Antonio, TX
Healthcare | | | Dr. Pepper
Harvey, IL
Distribution | | | Safelite Columbus, OH
Automotive | |
Gross leasable square footage | | | 145,025 | | | | 40,410 | | | | 41,792 | |
Date of purchase | | | 6/30/2011 | | | | 4/5/2012 | | | | 4/30/2012 | |
Mortgage financing at date of purchase | | $ | 23,000,000 | | | $ | — | | | $ | — | |
Cash down payment | | | 10,507,000 | | | | 3,974,003 | | | | 4,794,000 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 33,507,000 | | | | 3,974,003 | | | | 4,794,000 | |
Other cash expenditures expensed | | | 61,839 | | | | 40,965 | | | | 42,242 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 33,568,839 | | | $ | 4,014,968 | | | $ | 4,836,242 | |
| | | | | | | | | | | | |
II-123
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | | | | | |
Program: | | Cole Corporate
Income Trust, Inc. | | | Cole Corporate
Income Trust, Inc. | | | Cole Corporate
Income Trust, Inc. | |
| | | |
| Name, location, type of property | | United Launch
Alliance
Centennial, CO
Manufacturing | | | HCA, Inc. Irving , TX
Healthcare | | | American Tire
Colorado Springs, CO
Automotive | |
Gross leasable square footage | | | 167,917 | | | | 94,137 | | | | 125,060 | |
Date of purchase | | | 7/31/2012 | | | | 9/27/2012 | | | | 9/28/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 33,201,000 | | | | 15,792,660 | | | | 8,477,220 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 33,201,000 | | | | 15,792,660 | | | | 8,477,220 | |
Other cash expenditures expensed | | | 70,865 | | | | 86,532 | | | | 43,036 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 33,271,865 | | | $ | 15,879,192 | | | $ | 8,520,256 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Corporate
Income Trust, Inc. | | | Cole Corporate
Income Trust, Inc. | | | Cole Corporate
Income Trust, Inc. | |
| | | |
| Name, location, type of property | | Elizabeth Arden
Roanoke, VA
Manufacturing | | | Honeywell Fort Mill, SC
Manufacturing | | | Amazon
Spartanburg, SC
Wholesale | |
Gross leasable square footage | | | 399,182 | | | | 60,044 | | | | 1,016,110 | |
Date of purchase | | | 11/9/2012 | | | | 11/30/2012 | | | | 12/17/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 23,970,000 | | | | 10,608,000 | | | | 64,518,273 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 23,970,000 | | | | 10,608,000 | | | | 64,518,273 | |
Other cash expenditures expensed | | | 166,363 | | | | 81,800 | | | | 80,425 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 24,136,363 | | | $ | 10,689,800 | | | $ | 64,598,698 | |
| | | | | | | | | | | | |
| | | |
Program: | | Cole Corporate
Income Trust, Inc. | | | Cole Corporate
Income Trust, Inc. | | | Cole Corporate
Income Trust, Inc. | |
| | | |
| Name, location, type of property | | Toro Ankeny, IA Wholesale | | | Compass Group
Charlotte, NC
Other Professional
Services | | | Aon Lincolnshire, IL
Other Professional
Services | |
Gross leasable square footage | | | 450,139 | | | | 284,039 | | | | 222,717 | |
Date of purchase | | | 12/17/2012 | | | | 12/19/2012 | | | | 12/21/2012 | |
Mortgage financing at date of purchase | | $ | — | | | $ | — | | | $ | — | |
Cash down payment | | | 22,919,648 | | | | 43,014,420 | | | | 23,023,440 | |
| | | | | | | | | | | | |
Contract purchase price plus acquisition fee | | | 22,919,648 | | | | 43,014,420 | | | | 23,023,440 | |
Other cash expenditures expensed | | | 36,224 | | | | 126,503 | | | | 48,138 | |
Other cash expenditures capitalized | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total acquisition cost | | $ | 22,955,871 | | | $ | 43,140,923 | | | $ | 23,071,578 | |
| | | | | | | | | | | | |
II-124
TABLE VI
ACQUISITION OF PROPERTIES BY PROGRAMS (UNAUDITED) — (Continued)
| | | | | | | | |
Program: | | Cole Corporate
Income Trust, Inc. | | | | | |
| | | |
| Name, location, type of property | | FedEx Salt Lake City, UT
Logistics | | | | | |
Gross leasable square footage | | | 150,300 | | | | | |
Date of purchase | | | 12/27/2012 | | | | | |
Mortgage financing at date of purchase | | $ | — | | | | | |
Cash down payment | | | 13,005,000 | | | | | |
| | | | | | | | |
Contract purchase price plus acquisition fee | | | 13,005,000 | | | | | |
Other cash expenditures expensed | | | 52,685 | | | | | |
Other cash expenditures capitalized | | | — | | | | | |
| | | | | | | | |
Total acquisition cost | | $ | 13,057,685 | | | | | |
| | | | | | | | |
| (1) | These properties were acquired at their original cost from an affiliate. |
| (2) | Includes square feet of buildings which are on land subject to ground leases. |
| (3) | Represents development property under construction as of December 31, 2012. |
II-125
Signatures
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that the registrant meets all of the requirements for filing on Form S-11 and has duly caused this amended Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Phoenix, State of Arizona, on this 12th day of July, 2013.
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| Cole Real Estate Income Strategy (Daily NAV), Inc. |
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| By: | | /s/ D. Kirk McAllaster, Jr. |
| | D. Kirk McAllaster, Jr. |
| | Executive Vice President, Chief Financial Officer and Treasurer |
Pursuant to the requirements of the Securities Act of 1933, as amended, this amended Registration Statement has been signed by the following persons in the capacities and on the dates as indicated.
| | | | | | |
Name | | Title | | Date |
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* Christopher H. Cole | | Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer) | | July 12, 2013 |
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/s/ D. Kirk McAllaster, Jr. D. Kirk McAllaster, Jr. | | Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) | | July 12, 2013 |
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/s/ Simon J. Misselbrook Simon J. Misselbrook | | Senior Vice President, Financial Reporting and Accounting (Principal Accounting Officer) | | July 12, 2013 |
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* George N. Fugelsang | | Director | | July 12, 2013 |
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* Richard J. Lehmann | | Director | | July 12, 2013 |
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* Marc T. Nemer | | Director | | July 12, 2013 |
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* Roger D. Snell | | Director | | July 12, 2013 |
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| *By: | | /s/ D. Kirk McAllaster, Jr. | | | | |
| | D. Kirk McAllaster, Jr. | | | | |
| | D. Kirk McAllaster, Jr., as attorney-in-fact | | | | |
Exhibit Index
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| 1.1 | | Dealer Manager Agreement between Cole Real Estate Income Strategy (Daily NAV), Inc. and Cole Capital Corporation dated December 6, 2011 (Incorporated by reference to Exhibit 1.1 to the Company’s Form 10-K (File No. 333-169535), filed on March 30, 2012). |
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| 1.2 | | Form of Selected Dealer Agreement (Incorporated by reference to Exhibit 1.2 to the Company’s post-effective amendment to Form S-11 (File No. 333-169535), filed on August 17, 2012). |
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| 3.1 | | Articles of Amendment and Restatement of Cole Real Estate Income Strategy (Daily NAV), Inc. dated December 6, 2011 (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K (File No. 333-169535), filed on December 7, 2011). |
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| 3.2 | | Bylaws of Cole Real Estate Income Strategy (Daily NAV), Inc. effective September 28, 2011 (Incorporated by reference to Exhibit 3.2 to the Company’s pre-effective amendment to Form S-11 (File No. 333-169535), filed on November 3, 2011). |
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| 3.3 | | Articles of Amendment to Articles of Amendment and Restatement effective December 22, 2011 (Incorporated by reference to Exhibit 99.1 to the Company’s Form 8-K (File No. 333-169535), filed on December 22, 2011). |
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| 3.4 | | Second Articles of Amendment to Articles of Amendment and Restatement effective May 31, 2012 (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K (File No. 333-169535), filed on June 1, 2012). |
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| 3.5 | | First Amendment to Bylaws of Cole Real Estate Income Strategy (Daily NAV), Inc., effective June 14, 2012 (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K (File No. 333-169535), filed on June 19, 2012). |
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| 3.6 | | Certificate of Correction to the Articles of Amendment and Restatement, filed January 25, 2013 (Incorporated by reference to Exhibit 3.4 to the Company’s Annual Report on Form 10-K (File No. 169535), filed on March 28, 2013.) |
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| 4.1 | | Distribution Reinvestment Plan (Included as Appendix E to the prospectus). |
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| 5.1 | | Opinion of Venable LLP as to legality of securities (Incorporated by reference to Exhibit 5.1 to the Company’s pre-effective amendment to Form S-11 (File No. 333-169535), filed on November 3, 2011). |
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| 8.1 | | Opinion of Goodwin Procter LLP as to tax matters (Incorporated by reference to Exhibit 8.1 to the Company’s pre-effective amendment to Form S-11 (File No. 333-169535), filed on December 6, 2011) |
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| 10.1 | | Advisory Agreement by and between Cole Real Estate Income Strategy (Daily NAV), Inc. and Cole Real Estate Income Strategy (Daily NAV) Advisors, LLC dated September 28, 2011 (Incorporated by reference to Exhibit 10.1 to the Company’s pre-effective amendment to Form S-11 (File No. 333-169535), filed on November 3, 2011). |
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| 10.2 | | Independent Valuation Expert Agreement by and between Cole Real Estate Income Strategy (Daily NAV), Inc. (f/k/a Cole Real Estate Income Trust, Inc.) and CB Richard Ellis, Inc. dated September 1, 2011 (Incorporated by reference to Exhibit 10.2 to the Company’s pre-effective amendment to Form S-11 (File No. 333-169535), filed on November 3, 2011). |
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| 10.3 | | Amended and Restated Escrow Agreement by and between Cole Real Estate Income Strategy (Daily NAV), Inc. and UMB Bank, N.A. (Incorporated by reference to Exhibit 10.3 to the Company’s pre-effective amendment to Form S-11 (File No. 333-169535), filed on December 6, 2011). |
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| 10.4 | | Amended and Restated Agreement of Limited Partnership of Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP dated September 28, 2011 (Incorporated by reference to Exhibit 10.4 to the Company’s pre-effective amendment to Form S-11 (File No. 333-169535), filed on November 3, 2011). |
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| 10.5 | | Purchase and Sale Agreement, dated December 8, 2011, between Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP and Series C, LLC to purchase 100% of the membership interests in Cole TS Lockhart TX, LLC (Incorporated by reference to Exhibit 10.5 to the Company’s Form 10-K (File No. 333-169535), filed on March 30, 2012). |
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| 10.6 | | Purchase and Sale Agreement, dated December 8, 2011, between Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP and Series C, LLC to purchase 100% of the membership interests in Cole WG Reidsville NC, LLC (Incorporated by reference to Exhibit 10.6 to the Company’s Form 10-K (File No. 333-169535), filed on March 30, 2012). |
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| 10.7 | | Purchase and Sale Agreement, dated December 8, 2011, between Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP and Series C, LLC to purchase 100% of the membership interests in Cole CV Austin TX, LLC (Incorporated by reference to Exhibit 10.7 to the Company’s Form 10-K (File No. 333-169535), filed on March 30, 2012). |
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| 10.8 | | Purchase Agreement and Escrow Instructions between Cole AA Macomb MI, LLC, and WXZ Retail Group/Macomb, LLC, pursuant to an Assignment of Purchase and Sale Agreement dated September 2, 2011 (Incorporated by reference to Exhibit 10.8 to the Company’s Form 10-K (File No. 333-169535), filed on March 30, 2012). |
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| 10.9 | | Master Purchase Agreement and Escrow Instructions between Cole CV Erie PA, LLC, Cole CV Mansfield OH, LLC, 12th & Parade Street Company, LLC and 1411 Lexington Avenue Company, LLC, pursuant to an Assignment of Purchase and Sale Agreement dated September 12, 2011 (Incorporated by reference to Exhibit 10.9 to the Company’s Form 10-K (File No. 333-169535), filed on March 30, 2012). |
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| 10.10 | | Purchase and Sale Agreement by and between Cole MT San Antonio TX, LLC, and HEB Grocery Company, LP, pursuant to an Assignment of Purchase and Sale Agreement dated September 6, 2011 (Incorporated by reference to Exhibit 10.10 to the Company’s Form 10-K (File No. 333-169535), filed on March 30, 2012). |
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| 10.11 | | Master Purchase Agreement and Escrow Instructions between Cole TS Brunswick GA, LLC, and RLM/TS Brunswick, LLC, pursuant to an Assignment of Purchase and Sale Agreement dated August 24, 2011 (Incorporated by reference to Exhibit 10.11 to the Company’s Form 10-K (File No. 333-169535), filed on March 30, 2012). |
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| 10.12 | | Master Purchase Agreement and Escrow Instructions between Cole WG Albuquerque NM, LLC, and Westland Devco, LLC, pursuant to an Assignment of Purchase and Sale Agreement dated August 18, 2011 (Incorporated by reference to Exhibit 10.12 to the Company’s Form 10-K (File No. 333-169535), filed on March 30, 2012). |
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| 10.13 | | Borrowing Base Revolving Line of Credit Agreement dated December 8, 2011 by and among Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP as borrower, and JPMorgan Chase Bank, N.A., as administrative agent, and the lenders referenced therein, and J.P. Morgan Securities LLC, as sole bookrunner and sole lead arranger (Incorporated by reference to Exhibit 10.13 to the Company’s Form 10-K (File No. 333-169535), filed on March 30, 2012). |
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| 10.14 | | Modification Agreement dated March 20, 2012 by and among Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP as borrower, and JPMorgan Chase Bank, N.A., as administrative agent and lender (Incorporated by reference to Exhibit 10.14 to the Company’s Form 10-K (File No. 333-169535), filed on March 30, 2012). |
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| 10.15 | | Second Modification Agreement dated September 6, 2012 by and among Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP as borrower, and JPMorgan Chase Bank, N.A., as administrative agent and lender (Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q (File No. 333-169535), filed November 9, 2012). |
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| 10.16 | | First Amendment to the Advisory Agreement by and among Cole Real Estate Income Strategy (Daily NAV), Inc., Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP and Cole Real Estate Income Strategy (Daily NAV) Advisors, LLC, dated as of February 8, 2013 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 333-169535), filed February 13, 2013). |
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| 21.1 | | List of Subsidiaries (Incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10-K (File No. 333-169535), filed on March 28, 2013). |
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| 23.1† | | Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. |
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| 23.2 | | Consent of Venable LLP (included in Exhibit 5.1). |
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| 23.3 | | Consent of Goodwin Procter LLP (included in Exhibit 8.1). |
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| 23.4† | | Consent of CBRE, Inc. |
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| 23.5† | | Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm |
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| 24.1 | | Power of Attorney (Incorporated by reference to signature page to the Company’s pre-effective amendment to the Registration Statement on Form S-11 (File No. 333-169535), filed on November 3, 2011). |
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| 24.2 | | Power of Attorney of Richard J. Lehman and Marc T. Nemer (Incorporated by reference to signature page to the Company’s post-effective amendment to Form S-11 (File No. 333-169535), filed on March 7, 2012). |
