1308606--3/30/2010--Cole_Credit_Property_Trust_II

related topics

{investment, property, distribution}

{loan, real, estate}

{tax, income, asset}

{debt, indebtedness, cash}

{provision, law, control}

{interest, director, officer}

{loss, insurance, financial}

{personnel, key, retain}

{condition, economic, financial}

{operation, international, foreign}

{stock, price, share}

{gas, price, oil}

{cost, contract, operation}

{cost, regulation, environmental}

{financial, litigation, operation}

You will not have the opportunity to evaluate our future investments before we make them, which makes an investment in us more speculative. We may suffer from delays in locating suitable additional investments, which could adversely affect our ability to make distributions and the value of your investment. If our advisor loses or is unable to obtain key personnel, our 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. If we pay distributions from sources other than our cash flow from operations, we will have fewer funds available for the acquisition of properties, and your overall return may be reduced. If we internalize our management functions, your interest in us could be diluted, and we could incur other significant costs associated with being self-managed. Our rights and the rights of our stockholders to recover claims against our officers, directors and our advisor are limited, which could reduce your and our recovery against them if they cause us to incur losses. Risks Related to Conflicts of Interest A number of Cole real estate programs use investment strategies that are similar to ours, therefore our advisor and its and our executive officers will face conflicts of interest relating to the purchase and leasing of properties, and such conflicts may not be resolved in our favor. Cole Advisors II faces 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 1031 exchange 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 II and its officers and key personnel and certain of our key personnel face competing demands relating to their time, and this may cause our operating results to suffer. Our officers 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 you. Cole Advisors II 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. There is no separate counsel for us and our affiliates, which could result in conflicts of interest. Risks Related to 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 and may limit your ability to exit the investment. Maryland law also limits the ability of a third party to buy a large stake in us and exercise voting power in electing directors. 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 your investment. If you do not agree with the decisions of our board of directors, you only have limited control over changes in our policies and operations and may not be able to change such policies and operations. Our board of directors may change certain of our investment policies without stockholder approval, which could alter the nature of your investment. You are limited in your ability to sell your shares pursuant to our share redemption program and may have to hold your shares for an indefinite period of time. Your interest in Cole REIT II will be diluted if we issue additional shares. Payment of fees to Cole Advisors II and its affiliates reduces cash available for investment and distribution. We may be unable to pay or maintain cash distributions or increase distributions over time. General Risks Related to Investments in Real Estate Our operating results will be affected by economic and regulatory changes that have an adverse impact on the real estate market in general, which may prevent us from being profitable or from realizing growth in the value of our real estate properties. Many of our retail properties depend 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. 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. If a tenant declares bankruptcy, we may be unable to collect balances due under relevant leases. If a sale-leaseback transaction is re-characterized in a tenant s bankruptcy proceeding, 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 the return on your investment. We may be unable to secure funds for future tenant improvements or capital needs, which could adversely impact our ability to pay cash distributions to you. 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. Our inability to sell a property when we desire to do so could adversely impact our ability to pay cash distributions to you. 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 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. Increased operating expenses could reduce cash flow from operations and funds available to acquire investments or make distributions. The current market environment may materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. Adverse economic and geopolitical conditions may negatively affect our returns and profitability. The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions and make additional investments. 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. Real estate related taxes may increase, and if these increases are not passed on to tenants, our income will be reduced. 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 a development company for newly developed property, our earnest money deposit made to the development company may not be fully refunded. Competition with third parties in acquiring properties and other investments may reduce our profitability and the return on your investment. Our properties 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 to you and the amount of distributions. Acquiring or attempting to acquire multiple properties in a single transaction may adversely affect our operations. If we set aside insufficient capital reserves, we may be required to defer necessary capital improvements. Costs of complying with environmental laws and regulations may adversely affect our income and the cash available for any distributions. Discovery of previously undetected environmentally hazardous conditions may adversely affect our operating results. 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 of 1990, as amended, may affect cash available for distributions. Risks Associated with Debt Financing We have incurred, and expect to continue to incur, mortgage indebtedness and other borrowings, which may increase our business risks, hinder our ability to make distributions, and decrease the value of your investment. High interest 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 to you. 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 your investment. Interest-only indebtedness may increase our risk of default and ultimately may reduce our funds available for distribution to you. To hedge against exchange rate and interest rate fluctuations, we may use derivative financial instruments that may be costly and ineffective and may reduce the overall returns on your investment. If we enter into financing arrangements involving balloon payment obligations, it may adversely affect our ability to make distributions to you. Risks Associated with Co-Ownership Transactions Our participation in a co-ownership arrangement would subject us to risk that otherwise may not be present in other real estate investments. Risks Associated with Investments in Mortgage, Bridge and Mezzanine Loans and Real Estate-Related Securities We do not have substantial experience investing in mortgage, bridge or mezzanine loans, which could adversely affect our return on our loan investments. We may invest in various types of real estate-related securities. Investments in real estate-related securities 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, which may result in losses to us. The CMBS in which we have invested, and may continue to invest, are subject to all of the risks of the underlying mortgage loans, the risks of the securitization process and dislocations in the mortgage-backed securities market in general. Failure to qualify as a REIT would adversely affect our operations and our ability to make distributions. Re-characterization of the Section 1031 programs may result in a 100% tax on income from a prohibited transaction, which would diminish our cash distributions to our stockholders. Re-characterization of sale-leaseback transactions may cause us to lose our REIT status. You may have current tax liability on distributions you elect to reinvest in our common stock. If our operating partnership fails to maintain its status as a partnership, its income may be subject to taxation, which would reduce the cash available to us for distribution to you. 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 our stockholders. Legislative or regulatory action could adversely affect investors. Foreign holders of our common stock may be subject to FIRPTA tax upon the sale of their shares.

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1308606--3/30/2010--Cole_Credit_Property_Trust_II_Inc