1308606--3/31/2008--Cole_Credit_Property_Trust_II

related topics

{investment, property, distribution}

{loan, real, estate}

{provision, law, control}

{debt, indebtedness, cash}

{interest, director, officer}

{stock, price, share}

{personnel, key, retain}

{tax, income, asset}

{condition, economic, financial}

{loss, insurance, financial}

{cost, contract, operation}

{gas, price, oil}

{customer, product, revenue}

{cost, regulation, environmental}

There is no public trading market for our shares and there may never be one; therefore, it will be difficult for you to sell your shares. 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 implement our investment strategies could be delayed or hindered, which could adversely affect our ability to make distributions and the value of your investment. 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 Cole Advisors II will face 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 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 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 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 our stockholders. 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 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 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 our investment policies without stockholder approval, which could alter the nature of your investments. 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. We established the share price in our offering on an arbitrary basis; as a result, the actual value of your investment may be substantially less than what you pay. Because the dealer manager is one of our affiliates, investors will not have the benefit of an independent review of our prospectus as is customarily performed in underwritten offerings. 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, and we may not be profitable and may not realize growth in the value of our real estate properties. Many of our retail properties will depend upon a single tenant for all or a majority 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. A high concentration of our properties in a particular geographic area, or that have tenants in a similar industry, would magnify the effects of downturns in that geographic area or industry. 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 to our stockholders. 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. 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 our stockholders. Our inability to sell a property when we desire to do so could adversely impact our ability to pay cash distributions to our 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. Certain of our properties are subject to lock-out provisions, and in the future we may acquire or finance additional 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. 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 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 and the amount of distributions. 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 have incurred, and expect to continue to 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 your investment. 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. 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.

Full 10-K form ▸

1308606--3/31/2008--Cole_Credit_Property_Trust_II_Inc