1308606--3/23/2006--Cole_Credit_Property_Trust_II

related topics

{investment, property, distribution}

{loan, real, estate}

{stock, price, share}

{interest, director, officer}

{tax, income, asset}

{debt, indebtedness, cash}

{provision, law, control}

{personnel, key, retain}

{financial, litigation, operation}

{condition, economic, financial}

{loss, insurance, financial}

{cost, regulation, environmental}

{stock, price, operating}

{operation, natural, condition}

{customer, product, revenue}

{gas, price, oil}

{cost, contract, operation}

There is no public trading market for our shares, and there may never be one; therefore, it will be difficult for an investor to sell their shares. If we, through Cole Advisors, are unable to find suitable investments, then we may not be able to achieve our investment objectives or pay distributions. We may suffer from delays in locating suitable investments, which could adversely affect our ability to make distributions and the value of a stockholders investment. If we are unable to raise substantial funds, we will be limited in the number and type of investments we may make and the value of an investor s investment in us will fluctuate with the performance of the specific properties we acquire. If our advisor loses or is unable to obtain key personnel, our ability to implement our investment strategies could be delayed or hindered, which could adversely affect our ability to make distributions and the value of an investor s investment. Our rights and the rights of our stockholders to recover claims against our officers, directors and our advisor are limited, which could reduce an investor s and our recovery against them if they cause us to incur losses. Risks Related to Conflicts of Interest Cole Advisors faces conflicts of interest relating to the purchase and leasing of properties, and such conflicts may not be resolved in our favor, which could adversely affect our investment opportunities. Cole Advisors will face conflicts of interest relating to joint ventures, which could result in a disproportionate benefit to the other venture partners at our expense. We may participate in Tenant-in -Common Programs with affiliates of our advisor that will not be the result of arm s-length negotiations and will result in conflicts of interest. Cole Advisors and its officers and employees and certain of our key personnel face competing demands relating to their time, and this may cause our operating results to suffer. Our officers and some of our directors face conflicts of interest related to the positions they hold with affiliated entities, which could hinder our ability to successfully implement our business strategy and to generate returns to stockholders. Cole Advisors faces conflicts of interest relating to the incentive fee structure under our advisory agreement, which could result in actions that are not in the long-term best interests of our stockholders. There is no separate counsel for us and our affiliates, which could result in conflicts of interest. Risks Related to Our Offering and Our Corporate Structure The limit on the number of shares a person may own may discourage a takeover that could otherwise result in a premium price to our stockholders. Our charter permits our board of directors to issue stock with terms that may subordinate the rights of common stockholders or discourage a third party from acquiring us in a manner that might result in a premium price to our stockholders. Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired. If we are required to register as an investment company under the Investment Company Act, we could not continue our business, which may significantly reduce the value of a stockholders investment. Stockholders are bound by the majority vote on matters on which they are entitled to vote, and therefore, their vote on a particular matter may be superceded by the vote of others. If stockholders do not agree with the decisions of our board of directors, they only have limited control over changes in our policies and operations and may not be able to change such policies and operations. Stockholders are limited in their ability to sell shares pursuant to our share redemption program and may have to hold their shares for an indefinite period of time. We established the offering price on an arbitrary basis; as a result, the actual value of a stockholder s investment may be substantially less than what a stockholder would pay. Because the dealer manager is one of our affiliates, investors do not have the benefit of an independent review of the prospectus or us, as is customarily performed in underwritten offerings. A stockholder s interests will be diluted if we issue additional shares. Payment of fees to Cole Advisors and its affiliates will reduce cash available for investment and distribution. We may be unable to pay or maintain cash distributions or increase distributions over time. If we are unable to obtain funding for future capital needs, cash distributions to our stockholders and the value of our investments could decline. General Risks Related to Investments in Real Estate Our operating results would be affected by economic and regulatory changes that have an adverse impact on the real estate market in general, and we cannot assure stockholders that we will be profitable or that we will realize growth in the value of our real estate properties. Most of our properties depend upon a single tenant for all of their rental income, and our financial condition and ability to make distributions may be adversely affected by the bankruptcy or insolvency, a downturn in the business or a lease termination of a single tenant. If a tenant declares bankruptcy, we may be unable to collect balances due under relevant leases. If a sale-leaseback transaction is re-characterized, our financial condition could be adversely affected. Properties that have vacancies for a significant period of time could be difficult to sell, which could diminish a stockholder s return on investment. We may obtain only limited warranties when we purchase a property. We may be unable to secure funds for future tenant improvements, which could adversely impact our ability to pay cash distributions to our stockholders. Our inability to sell a property when we desire to do so could adversely impact our ability to pay cash distributions to stockholders. We may not be able to sell our properties at a price equal to, or greater than, the price for which we purchased such property, which may lead to a decrease in the value of our assets. We have, and in the future 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. Rising expenses could reduce cash flow and funds available for future acquisitions. Adverse economic conditions will negatively affect our returns and profitability. If we suffer losses that are not covered by insurance or that are in excess of insurance coverage, we could lose invested capital and anticipated profits. Terrorist attacks, such as the attacks that occurred in New York and Washington, D.C. on September 11, 2001, and other acts of violence or war may affect the markets in which we operate, our operations and our profitability. Real estate related taxes may increase, and if these increases are not passed on to tenants, our income will be reduced. Revenue from our properties depends on the amount of our tenants retail revenue, making us vulnerable to general economic downturns and other conditions affecting the retail industry. CC Rs may restrict our ability to operate a property. Our operating results may be negatively affected by potential development and construction delays and resultant increased costs and risks. If we contract with an affiliated development company for newly developed property, we cannot guarantee that our earnest money deposit made to the development company will be fully refunded. Competition with third parties in acquiring properties and other investments may reduce our profitability and the return on a stockholders investment. Our properties will face competition that may affect tenants ability to pay rent and the amount of rent paid to us may affect the cash available for distributions and the amount of distributions. Delays in acquisitions of properties may have an adverse effect on a stockholder s investment. Costs of complying with governmental laws and regulations, including those relating to environmental matters, may adversely affect our income and the cash available for any distributions. If we sell properties by providing financing to purchasers, defaults by the purchasers would adversely affect our cash flows. Our recovery of an investment in a mortgage that has defaulted may be limited. Our costs associated with complying with the Americans with Disabilities Act may affect cash available for distributions. Risks Associated with Debt Financing We may incur mortgage indebtedness and other borrowings, which may increase our business risks. High mortgage rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire and the amount of cash distributions we can make. Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders. Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to pay distributions to our stockholders. We have broad authority to incur debt, and high debt levels could hinder our ability to make distributions and could decrease the value of stockholder s investment. Our independent directors approved, and we expect that during the term of the Offering we will again request that our independent directors approve our ability to incur debt greater than the debt limit discussed above. Risks Associated with Section 1031 Exchange Transactions and Tenant-in -Common Investments We may have increased exposure to liabilities from litigation as a result of our participation in a Tenant-in -Common Program. We may be subject to risks associated with Tenant-in -Common Programs inherent in ownership of co-tenancy interests with non-affiliated third parties. We will be subject to risks associated with the co-tenants in our co-tenancy arrangements that otherwise may not be present in other real estate investments. Failure to qualify as a REIT would adversely affect our operations and our ability to make distributions. Certain fees paid to Cole OP II may affect our REIT status. Recharacterization of the Tenant-in -Common Programs may result in a 100% tax on income from a prohibited transaction, which would diminish our cash distributions to stockholders. Recharacterization of sale-leaseback transactions may cause us to lose our REIT status. Stockholders may have tax liability on distributions you elect to reinvest in our common stock. In certain circumstances, we may be subject to federal and state income taxes as a REIT, which would reduce our cash available for distribution to stockholders. Legislative or regulatory action could adversely affect investors. Foreign purchasers of our common stock may be subject to FIRPTA tax upon the sale of their shares.

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1308606--3/23/2006--Cole_Credit_Property_Trust_II_Inc