Cole Office & Industrial REIT

The Corporation may purchase or lease assets from the Sponsor, Advisor, Directors or their Affiliates, and those parties may purchase or lease assets from the Corporation, subject to Independent Director approval and fair value requirements. This creates ongoing related-party transaction risk given Cole Capital Corporation serves as both Dealer Manager (an affiliate) and the Advisor is an affiliate of the Sponsor.

“The Corporation may purchase or lease an Asset or Assets from the Sponsor, the Advisor, a Director or any Affiliate thereof upon a finding by a majority of Directors (including a majority of Independent Directors) not otherwise interested in the transaction that such transaction is fair and reasonable to the Corporation and at a price to the Corporation no greater than the cost of the Asset to such Sponsor, Advisor, Director or Affiliate”

The Dealer Manager, Cole Capital Corporation, is an Affiliate of the Corporation, creating a conflict of interest in the distribution of Shares. Selling Commissions and dealer-manager fees flow to an affiliated entity rather than an independent third party.

“Dealer Manager . The term 'Dealer Manager' shall mean Cole Capital Corporation, an Affiliate of the Corporation, or such other Person selected by the Board to act as the dealer manager for an Offering.”

Explicit conflict resolution provision favors REIT stockholders over limited partners when interests conflict. If a conflict between Company stockholders and Limited Partners cannot be resolved neutrally, the General Partner must resolve it in favor of the Company's stockholders.

“If there is a conflict between the interests of the stockholders of the Company on one hand and the Limited Partners on the other hand, the General Partner shall endeavor in good faith to resolve the conflict in a manner not adverse to either the stockholders of the Company or the Limited Partners; provided, however, that for so long as the General Partner owns a controlling interest in the Partnership, any such conflict that cannot be resolved in a manner not adverse to either the stockholders of the General Partner or the Limited Partners shall be resolved in favor of the stockholders of the General Partner.”

The Advisor (Cole REIT Advisors III) and Dealer Manager (Cole Capital Corporation) are both Affiliates of Sponsor Cole Holdings Corporation, creating pervasive related-party conflicts across advisory, acquisition, financing, disposition, and distribution functions. The Advisor is also permitted to manage competing investment programs with similar objectives simultaneously.

“Nothing herein contained shall prevent the Advisor or its Affiliates from engaging in other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by the Advisor or its Affiliates; nor shall this Agreement limit or restrict the right of any director, officer, employee, or stockholder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person.”

The GP is expressly permitted to engage in business interests identical or substantially similar to the Partnership's business without any obligation to offer such opportunities to the Partnership or Limited Partners.

“Subject to the Articles of Incorporation and any agreements entered into by the General Partner or its Affiliates with the Partnership or a Subsidiary, or any officer, director, employee, agent, trustee, Affiliate or stockholder of the General Partner, the General Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities substantially similar or identical to those of the Partnership. Neither the Partnership nor any of the Limited Partners shall have any rights by virtue of this Agreement in any such business ventures, interests or activities.”

The LP Agreement expressly states that in conflicts between GP stockholders and Limited Partners, the General Partner may resolve disputes in favor of its stockholders, subordinating LP interests. LPs have acknowledged this conflict.

“The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, itself and its stockholders collectively, that the General Partner is under no obligation to consider the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or the tax consequences of some, but not all, of the Limited Partners) in deciding whether to cause the Partnership to take (or decline to take) any actions. In the event of a conflict between the interests of its stockholders on the one hand and the Limited Partners on the other, the General Partner shall endeavor in good faith to resolve the conflict in a manner not adverse to either its stockholders or the Limited Partners; provided, however, that for so long as the General Partner directly owns a controlling interest in the Partnership, any such conflict that the General Partner, in its sole and absolute discretion, determines cannot be resolved in a manner not adverse to either its stockholders or the Limited Partners shall be resolved in favor of its stockholders.”

Cole Holdings / Advisor must allocate investment opportunities among multiple Cole-sponsored programs with similar investment objectives that are simultaneously investing. The method of allocation is determined by the Board but creates inherent conflicts.

“If the Sponsor, Advisor, any Director or Affiliates thereof have sponsored other investment programs with similar investment objectives which have investment funds available at the same time as the Company, it shall be the duty of the Board (including the Independent Directors) to adopt the method set forth in the Company's most recent Prospectus for its Shares or another reasonable method by which investments are to be allocated to the competing investment entities and to use their best efforts to apply such method fairly to the Company.”