Griffin Capital

The Advisor entity serves simultaneously as the Original Limited Partner (holding 20,000 Partnership Units for $200,000) and as the Special Limited Partner (holding the subordinated promote interest), creating a layered conflict of interest as the Advisor also directs the day-to-day business affairs of the General Partner.

“ORIGINAL LIMITED PARTNER: Griffin Capital Essential Asset Advisor II, LLC Griffin Capital Plaza 1520 Grand Avenue El Segundo, California 90245 $ 200,000 $ 200,000 20,000 SPECIAL LIMITED PARTNER: Griffin Capital Essential Asset Advisor II, LLC Griffin Capital Plaza 1520 Grand Avenue El Segundo, California 90245 None Not applicable None”

The LP Agreement expressly permits the Partnership to employ, retain, or transact business with Affiliates of the General Partner at compensation levels determined by the General Partner to be 'fair and reasonable,' with no independent third-party approval requirement for most affiliate transactions. This gives the GP broad authority to direct fees and business to related parties.

“Any Affiliate of the General Partner may be employed or retained by the Partnership and may otherwise deal with the Partnership (whether as a buyer, lessor, lessee, manager, furnisher of goods or services, broker, agent, lender or otherwise) and may receive from the Partnership any compensation, price, or other payment therefor which the General Partner determines to be fair and reasonable.”

The General Partner expressly has no obligation to consider the separate interests of Limited Partners and, in the event of a conflict between stockholder and LP interests, shall resolve such conflict in favor of the stockholders so long as the GP directly controls the Partnership.

“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 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 Partner shall be resolved in favor of the stockholders.”

When conflicts arise between REIT stockholders and Limited Partners, the Agreement provides that the General Partner shall resolve the conflict in favor of its stockholders when it cannot be resolved otherwise. Limited Partners expressly acknowledge the GP is under no obligation to consider their separate interests, including tax consequences.

“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.”

The Advisor, The GC Net Lease REIT Advisor, LLC, simultaneously serves as the fund's advisor (directing day-to-day business affairs) and holds a Limited Partnership Interest (0.90%, $200,000 capital contribution). This dual role creates a material conflict of interest between its fiduciary duties as Advisor and its economic interests as an equity holder. The Advisor is prohibited from exchanging its LP units while it serves as Advisor.

“Notwithstanding anything else in this Agreement to the contrary, The GC Net Lease REIT Advisor, LLC is prohibited from exchanging or otherwise transferring the Partnership Units purchased by it on December 26, 2008 for $200,000 cash, so long as it acting as the Advisor pursuant to the Advisory Agreement.”