10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒       Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2023

Or

☐       Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                     to                     .

Commission File No. 000-52596

ARES REAL ESTATE INCOME TRUST INC.

(Exact name of registrant as specified in its charter)

Maryland	30-0309068
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Tabor Center, 1200 Seventeenth Street, Suite 2900, Denver, CO	80202
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (303) 228-2200

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐	Smaller reporting company	☐
Non-accelerated filer	☒			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐    No   ☒

As of August 7, 2023, there were 28,865,771 shares of the registrant’s Class T common stock, 49,176,013 shares of the registrant’s Class S common stock, 7,065,763 shares of the registrant’s Class D common stock, 67,113,185 shares of the registrant’s Class I common stock and 49,914,011 shares of the registrant’s Class E common stock outstanding.

ARES REAL ESTATE INCOME TRUST INC.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	5
	Condensed Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	50
PART II. OTHER INFORMATION
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 5.	Other Information	53
Item 6.	Exhibits	54

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ARES REAL ESTATE INCOME TRUST INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	As of
(in thousands, except per share data)	June 30, 2023		December 31, 2022
	(Unaudited)
ASSETS
Net investment in real estate properties	$	3,595,617	$	3,605,578
Investments in unconsolidated joint venture partnerships		124,075		120,372
Investments in real estate debt and securities (includes $85,198 and $14,896 at fair value as of June 30, 2023 and December 31, 2022, respectively)		353,879		275,335
Cash and cash equivalents		12,905		13,336
Restricted cash		4,265		3,850
DST Program Loans		103,314		81,897
Other assets		90,436		74,356
Total assets	$	4,284,491	$	4,174,724
LIABILITIES AND EQUITY
Liabilities
Accounts payable and accrued expenses	$	63,773	$	58,097
Debt, net		1,664,611		1,616,475
Intangible lease liabilities, net		39,109		42,444
Financing obligations, net		1,232,793		1,130,810
Other liabilities		96,079		114,901
Total liabilities		3,096,365		2,962,727
Commitments and contingencies (Note 14)
Redeemable noncontrolling interest		17,282		18,130
Equity
Stockholders’ equity:
Preferred stock, $0.01 par value—200,000 shares authorized, none issued and outstanding		—		—
Class T common stock, $0.01 par value—500,000 shares authorized, 28,741 shares and 26,884 shares issued and outstanding, respectively		287		269
Class S common stock, $0.01 par value—500,000 shares authorized, 49,750 shares and 49,237 shares issued and outstanding, respectively		498		492
Class D common stock, $0.01 par value—500,000 shares authorized, 7,227 shares and 7,871 shares issued and outstanding, respectively		72		79
Class I common stock, $0.01 par value—500,000 shares authorized, 68,105 shares and 69,142 shares issued and outstanding, respectively		681		691
Class E common stock, $0.01 par value—500,000 shares authorized, 51,047 shares and 52,974 shares issued and outstanding, respectively		511		530
Additional paid-in capital		1,727,632		1,744,022
Distributions in excess of earnings		(1,033,940)		(973,395)
Accumulated other comprehensive income		15,872		13,148
Total stockholders’ equity		711,613		785,836
Noncontrolling interests		459,231		408,031
Total equity		1,170,844		1,193,867
Total liabilities and equity	$	4,284,491	$	4,174,724

See accompanying Notes to Condensed Consolidated Financial Statements.

3

ARES REAL ESTATE INCOME TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(in thousands, except per share data)	2023		2022		2023		2022
Revenues:
Rental revenues	$	77,204	$	73,494	$	155,164	$	135,999
Debt-related income		7,189		846		12,950		4,314
Total revenues		84,393		74,340		168,114		140,313
Operating expenses:
Rental expenses		28,839		24,896		57,139		46,210
Real estate-related depreciation and amortization		33,858		36,903		67,055		64,354
General and administrative expenses		2,973		2,594		6,017		4,631
Advisory fees		9,623		8,227		19,161		15,370
Performance participation allocation		—		6,186		—		18,379
Acquisition costs and reimbursements		1,849		1,093		3,018		2,722
Impairment loss on debt-related investment held for sale		1,260		—		3,780		—
Total operating expenses		78,402		79,899		156,170		151,666
Other expenses (income):
Equity in loss (income) from unconsolidated joint venture partnerships		203		(1,718)		2,649		(708)
Interest expense		37,882		33,774		75,427		58,184
Gain on sale of real estate property		—		(29,643)		(36,884)		(83,524)
Loss on extinguishment of debt and financing commitments, net		—		—		700		—
Gain on derivative instruments		(192)		(982)		(89)		(2,532)
Provision for current expected credit losses		(1,632)		—		3,998		—
Other income		(1,016)		(423)		(2,032)		(1,000)
Total other expenses (income)		35,245		1,008		43,769		(29,580)
Net (loss) income		(29,254)		(6,567)		(31,825)		18,227
Net loss (income) attributable to redeemable noncontrolling interests		226		60		244		(186)
Net loss (income) attributable to noncontrolling interests		6,278		919		6,827		(2,618)
Net (loss) income attributable to common stockholders	$	(22,750)	$	(5,588)	$	(24,754)	$	15,423
Weighted-average shares outstanding—basic		206,214		191,158		206,493		184,878
Weighted-average shares outstanding—diluted		264,963		224,857		263,975		217,806
Net (loss) income attributable to common stockholders per common share—basic and diluted	$	(0.11)	$	(0.03)	$	(0.12)	$	0.08

See accompanying Notes to Condensed Consolidated Financial Statements.

4

ARES REAL ESTATE INCOME TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(in thousands)	2023		2022		2023		2022
Net (loss) income	$	(29,254)	$	(6,567)	$	(31,825)	$	18,227
Change from cash flow hedging activities		10,108		1,819		3,052		13,813
Change from activities related to available-for-sale securities		(24)		—		53		—
Comprehensive (loss) income		(19,170)		(4,748)		(28,720)		32,040
Comprehensive loss (income) attributable to redeemable noncontrolling interests		148		43		221		(322)
Comprehensive loss (income) attributable to noncontrolling interests		4,247		680		6,469		(4,580)
Comprehensive (loss) income attributable to common stockholders	$	(14,775)	$	(4,025)	$	(22,030)	$	27,138

See accompanying Notes to Condensed Consolidated Financial Statements.

5

ARES REAL ESTATE INCOME TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

	Stockholders’ Equity
								Accumulated
				Additional		Distributions		Other
	Common Stock			Paid-in		in Excess of		Comprehensive		Noncontrolling		Total
(in thousands)	Shares	Amount		Capital		Earnings		Income (Loss)		Interests		Equity
FOR THE THREE MONTHS ENDED JUNE 30, 2022
Balance as of March 31, 2022	182,042	$	1,820	$	1,551,814	$	(860,546)	$	(3,266)	$	232,692	$	922,514
Net loss (excluding $60 attributable to redeemable noncontrolling interest)	—		—		—		(5,588)		—		(919)		(6,507)
Change from cash flow hedging activities (excluding $17 attributable to redeemable noncontrolling interest)	—		—		—		—		1,563		239		1,802
Issuance of common stock	14,679		147		127,869		—		—		—		128,016
Share-based compensation	—		—		50		—		—		—		50
Upfront offering costs, including selling commissions, dealer manager fees, and offering costs	—		—		(3,821)		—		—		—		(3,821)
Trailing distribution fees	—		—		(5,335)		1,259		—		—		(4,076)
Redemptions of common stock	(1,620)		(16)		(13,929)		—		—		—		(13,945)
Other noncontrolling interests net distributions	—		—		—		—		—		(40)		(40)
Distributions declared on common stock and noncontrolling interests (excludes $191 attributable to redeemable noncontrolling interest)	—		—		—		(17,920)		—		(2,966)		(20,886)
Redemption value allocation adjustment to redeemable noncontrolling interest	—		—		(1,114)		—		—		—		(1,114)
Redemptions of noncontrolling interests	—		—		(239)		—		—		(821)		(1,060)
Balance as of June 30, 2022	195,101	$	1,951	$	1,655,295	$	(882,795)	$	(1,703)	$	228,185	$	1,000,933
FOR THE THREE MONTHS ENDED JUNE 30, 2023
Balance as of March 31, 2023	207,448	$	2,075	$	1,751,993	$	(993,320)	$	7,897	$	393,098	$	1,161,743
Net loss (excluding $226 attributable to redeemable noncontrolling interest)	—		—		—		(22,750)		—		(6,278)		(29,028)
Change from securities and cash flow hedging activities (excluding $78 attributable to redeemable noncontrolling interest)	—		—		—		—		7,975		2,031		10,006
Issuance of common stock	4,122		41		36,079		—		—		—		36,120
Share-based compensation	—		—		75		—		—		—		75
Upfront offering costs, including selling commissions, dealer manager fees, and offering costs	—		—		(1,200)		—		—		—		(1,200)
Trailing distribution fees	—		—		(503)		1,463		—		(5,102)		(4,142)
Redemptions of common stock	(6,700)		(67)		(57,797)		—		—		—		(57,864)
Issuances of OP Units for DST Interests	—		—		—		—		—		84,725		84,725
Other noncontrolling interests net distributions	—		—		—		—		—		(3)		(3)
Distributions declared on common stock and noncontrolling interests (excludes $192 attributable to redeemable noncontrolling interest)	—		—		—		(19,333)		—		(5,318)		(24,651)
Redemption value allocation adjustment to redeemable noncontrolling interest	—		—		169		—		—		—		169
Redemptions of noncontrolling interests	—		—		(1,184)		—		—		(3,922)		(5,106)
Balance as of June 30, 2023	204,870	$	2,049	$	1,727,632	$	(1,033,940)	$	15,872	$	459,231	$	1,170,844

See accompanying Notes to Condensed Consolidated Financial Statements.

6

ARES REAL ESTATE INCOME TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

	Stockholders’ Equity
								Accumulated
				Additional		Distributions		Other
	Common Stock			Paid-in		in Excess of		Comprehensive		Noncontrolling		Total
(in thousands)	Shares	Amount		Capital		Earnings		Income (Loss)		Interests		Equity
FOR THE SIX MONTHS ENDED JUNE 30, 2022
Balance as of December 31, 2021	169,665	$	1,696	$	1,457,296	$	(865,844)	$	(13,418)	$	196,696	$	776,426
Net income (excluding $186 attributable to redeemable noncontrolling interest)	—		—		—		15,423		—		2,618		18,041
Change from cash flow hedging activities (excluding $136 attributable to redeemable noncontrolling interest)	—		—		—		—		11,715		1,962		13,677
Issuance of common stock	28,844		289		244,237		—		—		—		244,526
Share-based compensation	—		—		100		—		—		—		100
Upfront offering costs, including selling commissions, dealer manager fees, and offering costs	—		—		(5,401)		—		—		—		(5,401)
Trailing distribution fees	—		—		(10,372)		2,289		—		(3,823)		(11,906)
Redemptions of common stock	(3,408)		(34)		(28,466)		—		—		—		(28,500)
Issuances of OP Units for DST Interests	—		—		—		—		—		39,441		39,441
Other noncontrolling interests net distributions	—		—		—		—		—		(23)		(23)
Distributions declared on common stock and noncontrolling interests (excludes $351 attributable to redeemable noncontrolling interest)	—		—		—		(34,663)		—		(5,824)		(40,487)
Redemption value allocation adjustment to redeemable noncontrolling interest	—		—		(1,596)		—		—		—		(1,596)
Redemptions of noncontrolling interests	—		—		(503)		—		—		(2,862)		(3,365)
Balance as of June 30, 2022	195,101	$	1,951	$	1,655,295	$	(882,795)	$	(1,703)	$	228,185	$	1,000,933
FOR THE SIX MONTHS ENDED JUNE 30, 2023
Balance as of December 31, 2022	206,108	$	2,061	$	1,744,022	$	(973,395)	$	13,148	$	408,031	$	1,193,867
Net loss (excluding $244 attributable to redeemable noncontrolling interest)	—		—		—		(24,754)		—		(6,827)		(31,581)
Change from securities and cash flow hedging activities (excluding $23 attributable to redeemable noncontrolling interest)	—		—		—		—		2,724		358		3,082
Issuance of common stock	9,488		95		83,716		—		—		—		83,811
Share-based compensation	—		—		150		—		—		—		150
Upfront offering costs, including selling commissions, dealer manager fees, and offering costs	—		—		(2,637)		—		—		—		(2,637)
Trailing distribution fees	—		—		(1,296)		2,924		—		(3,970)		(2,342)
Redemptions of common stock	(10,726)		(107)		(93,212)		—		—		—		(93,319)
Issuances of OP Units for DST Interests	—		—		—		—		—		84,725		84,725
Other noncontrolling interests net distributions	—		—		—		—		—		(7)		(7)
Distributions declared on common stock and noncontrolling interests (excludes $384 attributable to redeemable noncontrolling interest)	—		—		—		(38,715)		—		(10,397)		(49,112)
Redemption value allocation adjustment to redeemable noncontrolling interest	—		—		243		—		—		—		243
Redemptions of noncontrolling interests	—		—		(3,354)		—		—		(12,682)		(16,036)
Balance as of June 30, 2023	204,870	$	2,049	$	1,727,632	$	(1,033,940)	$	15,872	$	459,231	$	1,170,844

See accompanying Notes to Condensed Consolidated Financial Statements.

7

ARES REAL ESTATE INCOME TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended June 30,
(in thousands)	2023		2022
Operating activities:
Net (loss) income	$	(31,825)	$	18,227
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Real estate-related depreciation and amortization		67,055		64,354
Straight-line rent and amortization of above- and below-market leases		(3,481)		(4,018)
Gain on sale of real estate property		(36,884)		(83,524)
Performance participation allocation		—		18,379
Impairment loss on debt-related investment held for sale		3,780		—
Equity in loss (income) of unconsolidated joint venture partnership		2,649		(708)
Loss on extinguishment of debt and financing commitments, net		700		—
Provision for current expected credit losses		3,998		—
Amortization of deferred financing costs		3,578		3,633
Financing obligation liability appreciation		4,784		12,531
Unrealized loss (gain) on derivative instruments not designated as cash flow hedges		2,325		(2,532)
Other		2,439		3,995
Changes in operating assets and liabilities
Other assets, accounts payable and accrued expenses and other liabilities		3,567		19,283
Cash settlement of accrued performance participation allocation		(23,747)		—
Net cash (used in) provided by operating activities		(1,062)		49,620
Investing activities:
Real estate acquisitions		(48,122)		(1,180,365)
Capital expenditures		(23,187)		(13,960)
Proceeds from disposition of real estate property		53,735		251,822
Investments in debt-related investments		(14,850)		(3,655)
Principal collections on debt-related investments		—		1,336
Investments in unconsolidated joint venture partnerships		(7,910)		(47,904)
Purchases of available-for-sale debt securities		(71,079)		—
Other		2,089		(48)
Net cash used in investing activities		(109,324)		(992,774)
Financing activities:
Repayments of mortgage notes		(71,141)		(1,157)
Net proceeds from (repayments of) line of credit		117,000		127,000
Proceeds from term loan		—		275,000
Redemptions of common stock		(93,319)		(28,500)
Distributions paid to common stockholders, redeemable noncontrolling interest holders and noncontrolling interest holders		(28,968)		(23,274)
Proceeds from issuance of common stock		67,832		230,603
Proceeds from financing obligations, net		159,095		393,330
Offering costs for issuance of common stock and private placements		(8,091)		(8,667)
Redemption of noncontrolling interests		(16,036)		(3,365)
Redemption of redeemable noncontrolling interests		—		(7,724)
Deferred financing costs paid		(956)		(6)
Interest rate cap premiums		(15,046)		—
Net cash provided by financing activities		110,370		953,240
Net (decrease) increase in cash, cash equivalents and restricted cash		(16)		10,086
Cash, cash equivalents and restricted cash, at beginning of period		17,186		14,352
Cash, cash equivalents and restricted cash, at end of period	$	17,170	$	24,438

See accompanying Notes to Condensed Consolidated Financial Statements.

8

ARES REAL ESTATE INCOME TRUST INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

Unless the context otherwise requires, the “Company,” “we,” “our” or “us” refers to Ares Real Estate Income Trust Inc. and its consolidated subsidiaries. We are externally managed by our advisor.

The accompanying unaudited condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain disclosures normally included in the annual audited financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been omitted. As such, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 20, 2023 (“2022 Form 10-K”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Global macroeconomic conditions, including heightened inflation, changes to fiscal and monetary policy, higher interest rates and challenges in the supply chain, coupled with the war in Ukraine, have the potential to negatively impact us. These current macroeconomic conditions may continue or aggravate and could cause the United States to experience an economic slowdown or recession. We anticipate our business and operations could be materially adversely affected by a prolonged recession in the United States.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments and eliminations, consisting only of normal recurring adjustments necessary for a fair presentation in conformity with GAAP.

As used herein, the term “commercial” refers to our office, retail and industrial properties or customers, as applicable.

Reclassifications

Certain items in our condensed consolidated balance sheets as of December 31, 2022 and our condensed consolidated statements of operations and condensed consolidated statements of cash flows for the three and six months ended June 30, 2022 have been reclassified to conform to the 2023 presentation.

9

2. INVESTMENTS IN REAL ESTATE PROPERTIES

The following table summarizes our consolidated investments in real estate properties.

	As of
(in thousands)	June 30, 2023		December 31, 2022
Land	$	693,097	$	694,998
Buildings and improvements		3,203,625		3,152,553
Intangible lease assets		316,588		317,141
Right of use asset		13,637		13,637
Investment in real estate properties		4,226,947		4,178,329
Accumulated depreciation and amortization		(631,330)		(572,751)
Net investment in real estate properties	$	3,595,617	$	3,605,578

Acquisitions

During the six months ended June 30, 2023, we acquired 100% of the following properties through asset acquisitions:

($ in thousands)	Property Type	Acquisition Date	Total Purchase Price (1)
2023 Acquisitions:
VM8 Logistics Center	Industrial	1/19/2023	$	17,511
Moreno Valley Distribution Center	Industrial	5/2/2023		33,421
Total 2023 acquisitions			$	50,932

(1) Total purchase price is equal to the total consideration paid plus any debt assumed at fair value. There was no debt assumed in connection with the 2023 acquisitions.

During the six months ended June 30, 2023, we allocated the purchase price of our acquisitions to land, building and improvements and intangible lease assets as follows:

	For the Six Months Ended
($ in thousands)	June 30, 2023
Land	$	6,121
Building and improvements		41,547
Intangible lease assets		3,052
Above-market lease assets		212
Total purchase price (1)	$	50,932

(1) Total purchase price is equal to the total consideration paid plus any debt assumed at fair value. There was no debt assumed in connection with the 2023 acquisitions.

The weighted-average amortization period for the intangible lease assets acquired in connection with our acquisitions during the six months ended June 30, 2023, as of the respective date of each acquisition, was 4.8 years.

Dispositions

During the six months ended June 30, 2023, we sold one partial retail property for net proceeds of approximately $53.7 million. We recorded a net gain on sale of approximately $36.9 million.

During the six months ended June 30, 2022, we sold five retail properties, one office property and one retail land parcel for net proceeds of approximately $251.8 million. We recorded a net gain on sale of approximately $83.5 million.

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Intangible Lease Assets and Liabilities

Intangible lease assets and liabilities as of June 30, 2023 and December 31, 2022 include the following:

	As of June 30, 2023						As of December 31, 2022
			Accumulated						Accumulated
(in thousands)	Gross		Amortization		Net		Gross		Amortization		Net
Intangible lease assets (1)	$	293,443	$	(223,894)	$	69,549	$	294,208	$	(214,201)	$	80,007
Above-market lease assets (1)		23,145		(20,106)		3,039		22,933		(19,707)		3,226
Below-market lease liabilities		(73,331)		34,222		(39,109)		(76,033)		33,589		(42,444)

(1) Included in net investment in real estate properties on the condensed consolidated balance sheets.

Rental Revenue Adjustments and Depreciation and Amortization Expense

The following table summarizes straight-line rent adjustments, amortization recognized as an increase (decrease) to rental revenues from above- and below-market lease assets and liabilities and real estate-related depreciation and amortization expense:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Increase (decrease) to rental revenue:
Straight-line rent adjustments	$	674	$	1,240	$	1,742	$	1,966
Above-market lease amortization		(213)		(185)		(399)		(354)
Below-market lease amortization		1,124		1,210		2,138		2,406
Real estate-related depreciation and amortization:
Depreciation expense	$	27,081	$	25,349	$	53,498	$	45,547
Intangible lease asset amortization		6,777		11,554		13,557		18,807

3. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURE PARTNERSHIPS

We have acquired interests in joint venture partnerships for purposes of investing in properties across the U.S. We record our investments in AREIT-McDowell Vue Parent LLC (“Vue 1400 JV”), Pathfinder Core AREIT JV NNN Holdings, LLC (“Net Lease JV I”), Pathfinder Core AREIT Net Lease Aggregator LLC (“Net Lease JV II”) and Pathfinder Core AREIT Net Lease TRS Aggregator LLC (“Net Lease JV III”) under the equity method on our condensed consolidated balance sheets as we have the ability to exercise significant influence in each partnership but do not have control of the entities. Other partners in Net Lease JV I, Net Lease JV II and Net Lease JV III are affiliates of our Advisor.

The following table summarizes our investments in unconsolidated joint venture partnerships as of June 30, 2023 and December 31, 2022:

		As of June 30, 2023		As of December 31, 2022		Investments in Unconsolidated
	Property	Ownership	Number of	Ownership	Number of	Joint Venture Partnerships as of
($ in thousands)	Type	Percentage	Properties	Percentage	Properties	As of June 30, 2023		As of December 31, 2022
Vue 1400 JV	Residential	85%	1	85%	1	$	25,179	$	25,984
Net Lease JV I	Net Lease	50%	15	50%	15		16,255		16,393
Net Lease JV II	Net Lease	50%	117	50%	117		65,296		65,763
Net Lease JV III	Net Lease	50%	28	50%	23		17,345		12,232
Total investments in unconsolidated joint venture partnerships			161		156	$	124,075	$	120,372

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4. INVESTMENTS IN REAL ESTATE DEBT AND SECURITIES

Debt-Related Investments

The following table summarizes our debt-related investments as of June 30, 2023 and December 31, 2022:

					Weighted-Average			Weighted-Average
($ in thousands)	Carrying Amount (1)		Outstanding Principal (1)		Interest Rate			Remaining Life (Years)
As of June 30, 2023
Senior loans (2)	$	161,922	$	169,915		9.5	%		1.7
Mezzanine loans		106,759		108,500		11.2			1.4
Total debt-related investments (2)	$	268,681	$	278,415		10.3	%		1.5
As of December 31, 2022
Senior loans (2)	$	151,645	$	154,622		8.5	%		2.1
Mezzanine loans		108,794		108,500		10.4			1.9
Total debt-related investments (2)	$	260,439	$	263,122		9.5	%		2.0

(1) The difference between the carrying amount and the outstanding principal amount of the debt-related investments consists of unamortized purchase discount, deferred financing costs, loan origination costs, and any recorded credit loss reserves, if applicable.

(2) As of June 30, 2023 and December 31, 2022, carrying amounts include $37.8 million and $42.0 million, respectively, related to one senior loan debt-related investment that was in default and on non-accrual status. Outstanding principal includes $43.8 million related to this senior loan as of June 30, 2023 and December 31, 2022. During the three months ended June 30, 2023, we recorded an impairment loss of $1.3 million, and during the six months ended June 30, 2023, we recorded an impairment loss of $3.8 million related to this senior loan. The impairment loss is included in impairment loss on debt-related investment held for sale on the condensed consolidated statements of operations. This senior loan is held-for-sale and therefore the carrying amount has been reduced to its fair value as of both June 30, 2023 and December 31, 2022. Weighted-average interest rate and weighted-average remaining life excludes this senior loan from its calculations.

Current Expected Credit Losses

Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, requires us to reflect current expected credit losses (“CECL”) on both the outstanding balances and unfunded commitments on loans held for investment and requires consideration of a broad range of historical experience adjusted for current conditions and reasonable and supportable forecast information to inform credit loss estimates (the “CECL Reserve”). ASU No. 2016-13 was effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. ASU No. 2016-13 was adopted by us as of January 1, 2020. Increases and decreases to expected credit losses impact earnings and are recorded within the provision for current expected credit losses in our condensed consolidated statements of operations. The CECL Reserve related to outstanding balances on loans held for investment required under ASU No. 2016-13 is a valuation account that is deducted from the amortized cost basis of our loans held for investment in our condensed consolidated balance sheets. The CECL Reserve related to unfunded commitments on loans held for investment is recorded within other liabilities in our condensed consolidated balance sheets.

We estimate our CECL Reserve primarily using a probability-weighted model that considers the likelihood of default and expected loss given default for each individual loan. Calculation of the CECL Reserve requires loan specific data, which includes capital senior to us when we are the subordinate lender, changes in net operating income, debt service coverage ratio, loan-to-value, occupancy, property type and geographic location. Estimating the CECL Reserve also requires significant judgment with respect to various factors, including (i) the appropriate historical loan loss reference data, (ii) the expected timing of loan repayments, (iii) calibration of the likelihood of default to reflect the risk characteristics of our floating rate loan portfolio and (iv) our current and future view of the macroeconomic environment. We may consider loan-specific qualitative factors on certain loans to estimate our CECL Reserve. In order to estimate the future expected loan losses relevant to our portfolio, we utilize historical market loan loss data licensed from a third-party data service. For periods beyond the reasonable and supportable forecast period, we revert back to historical loss data.

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Loan balances that are deemed to be uncollectible are written off as a realized loss and are deducted from our CECL Reserve. The write-offs are recorded in the period in which the loan balance is deemed uncollectible based on management’s judgment.

As of June 30, 2023, our CECL Reserve for our debt-related investment portfolio is $4.0 million or 1.1% of our debt- related investment commitment balance of $358.3 million, excluding debt-related investments held-for-sale. During the three months ended June 30, 2023, we recognized a decrease in provision for current expected credit losses of $1.6 million, and during the six months ended June 30, 2023, we recognized an increase in provision for current expected credit losses of $4.0 million. The debt-related investment commitment balance is comprised of $234.6 million of funded commitments and $123.7 million of unfunded commitments with associated CECL Reserves of $2.3 million and $1.7 million, respectively. The CECL Reserve for unfunded commitments is based on the unfunded portion of the loan commitment over the full contractual period over which we are exposed to credit risk through a current obligation to extend credit and is recorded as an other liability on the condensed consolidated balance sheets. The calculation of the CECL Reserve excludes one debt-related investment that is currently held for sale. There have been no write-offs or recoveries related to any of our existing debt-related investments. CECL Reserves were immaterial in prior periods.

Available-for-Sale Debt Securities

We acquire debt securities that are commercial real estate collateralized loan obligations (“CRE CLOs”) primarily for cash management and investment purposes. Additionally in the second quarter of 2023, we originated a preferred equity investment that is recognized as a debt security as it has a mandatory redemption feature and meets the definition of a security under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 320, Investments—Debt Securities. On the acquisition date, we designate investments in real estate debt securities as available-for-sale. Investments in debt securities that are classified as available-for-sale are carried at fair value. These assets are valued on a recurring basis and any unrealized holding gains and losses other than those associated with a credit loss are recorded each period in other comprehensive income. There were no credit losses associated with our available-for-sale debt securities as of and for the period ended June 30, 2023.

As of June 30, 2023 we had one preferred equity investment and one CRE CLO designated as available-for-sale debt securities. As of December 31, 2022, we had one CRE CLO designated as available-for-sale debt securities. As of June 30, 2023, the weighted-average remaining term of our CRE CLO, which is based on the estimated fully extended maturity dates of the underlying loans of the debt security, was approximately 3.6 years and the remaining term of our preferred equity investment was 3.6 years. The following table summarizes our investments in available-for-sale debt securities as of June 30, 2023 and December 31, 2022:

					Unamortized Discount
($ in thousands)	Face Amount		Amortized Cost		and Fees (1)		Unrealized Gain, Net (2)		Fair Value
As of June 30, 2023
CRE CLOs	$	14,979	$	14,881	$	98	$	79	$	14,960
Preferred equity		71,236		70,238		998		—		70,238
Total debt securities	$	86,215	$	85,119	$	1,096	$	79	$	85,198
As of December 31, 2022
CRE CLOs	$	14,979	$	14,870	$	109	$	26	$	14,896
Total debt securities	$	14,979	$	14,870	$	109	$	26	$	14,896

(1) Includes unamortized purchase discount and unamortized loan origination fees received on debt securities.

(2) Represents cumulative unrealized gain beginning from acquisition date.

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5. DEBT

A summary of our consolidated debt is as follows:

	Weighted-Average
	Effective Interest Rate as of					Balance as of
	June 30,		December 31,			June 30,		December 31,
($ in thousands)	2023		2022		Current Maturity Date	2023		2022
Line of credit (1)	5.17	%	5.72	%	November 2025	$	352,000	$	235,000
Term loan (2)	3.31		3.90		November 2026		400,000		400,000
Term loan (3)	4.26		4.56		January 2027		400,000		400,000
Fixed-rate mortgage notes	3.40		3.48		January 2027 - May 2031		309,875		380,316
Floating-rate mortgage notes (4)	4.59		4.52		October 2024 - October 2026		207,600		207,600
Total principal amount / weighted-average (5)	4.11	%	4.31	%		$	1,669,475	$	1,622,916
Less: unamortized debt issuance costs						$	(12,751)	$	(14,849)
Add: unamortized mark-to-market adjustment on assumed debt							7,887		8,408
Total debt, net						$	1,664,611	$	1,616,475
Gross book value of properties encumbered by debt						$	895,040	$	970,310

(1) The effective interest rate is calculated based on the Term Secured Overnight Financing Rate (”Term SOFR”) plus an 11.448 basis point adjustment (“Adjusted Term SOFR”), plus a margin ranging from 1.25% to 2.00% depending on our consolidated leverage ratio. As of June 30, 2023, the unused and available portions under the line of credit were approximately $548.0 million and $547.9 million, respectively. The weighted-average interest rate is the all-in interest rate, including the effects of interest rate cap agreements relating to $150.0 million in borrowings under this line of credit. The line of credit is available for general business purposes including, but not limited to, refinancing of existing indebtedness and financing the acquisition of permitted investments, including commercial properties.

(2) The effective interest rate is calculated based on Adjusted Term SOFR, plus a margin ranging from 1.20% to 1.90% depending on our consolidated leverage ratio. Total commitments for this term loan are $400.0 million. The weighted-average interest rate is the all-in interest rate, including the effects of interest rate swap agreements relating to $300.0 million in borrowings under this term loan and an interest rate cap agreement relating to $100.0 million in borrowings under this term loan.

(3) The effective interest rate is calculated based on Adjusted Term SOFR, plus a margin ranging from 1.20% to 1.90% depending on our consolidated leverage ratio. Total commitments for this term loan are $400.0 million. The weighted-average interest rate is the all-in interest rate, including the effects of interest rate swap agreements relating to $350.0 million in borrowings under this term loan and an interest rate cap agreement relating to $50.0 million in borrowings under this term loan.

(4) The effective interest rate is calculated based on either the London Interbank Offered Rate (“LIBOR”) or Adjusted Term SOFR plus a margin. As of both June 30, 2023 and December 31, 2022, our floating-rate mortgage notes were subject to interest rate spreads ranging from 1.55% to 2.50%. The weighted-average interest rate is the all-in interest rate, including the effects of interest rate cap agreements which capped the effective interest rates of our two floating-rate mortgage notes at 4.61% and 4.55%, respectively, as of June 30, 2023.

(5) The weighted-average remaining term of our consolidated borrowings was approximately 3.4 years as of June 30, 2023, excluding the impact of certain extension options.

For the three months ended June 30, 2023 and 2022, the amount of interest incurred related to our consolidated indebtedness, excluding amortization of debt issuance costs, was $20.6 million and $12.1 million, respectively. For the six months ended June 30, 2023 and 2022, the amount of interest incurred related to our consolidated indebtedness, excluding amortization of debt issuance costs, was $40.2 million and $21.8 million, respectively. See “Note 6” for the amount of interest incurred related to the DST Program (as defined below).

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As of June 30, 2023, the principal payments due on our consolidated debt during each of the next five years and thereafter were as follows:

(in thousands)	Line of Credit (1)		Term Loans		Mortgage Notes (2)		Total
Remainder of 2023		—		—		996		996
2024		—		—		129,265		129,265
2025		352,000		—		2,360		354,360
2026		—		400,000		84,214		484,214
2027		—		400,000		175,787		575,787
Thereafter		—		—		124,853		124,853
Total principal payments	$	352,000	$	800,000	$	517,475	$	1,669,475

(1) The term of the line of credit may be extended pursuant to two six-month extension options, subject to certain conditions.

(2) A $127.0 million mortgage note matures in October 2024 and the term may be extended pursuant to a one-year extension option, subject to certain conditions. A $115.0 million mortgage note matures in January 2027 and may be extended pursuant to two one-year extension options, subject to certain conditions.

In July 2017, the Financial Conduct Authority (“FCA”) that regulates LIBOR announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee (“ARRC”), which identified the Secured Overnight Financing Rate as its preferred alternative rate for LIBOR in derivatives and other financial contracts. Any changes adopted by the FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.

LIBOR has been phased out and ceased publication after June 2023. As of June 30, 2023, one of our mortgage notes had an initial or extended maturity date beyond June 2023 with exposure to LIBOR. Effective July 1, 2023, we have converted the interest rate of this mortgage note to Term SOFR and our consolidated debt no longer has exposure to LIBOR.

Debt Covenants

Our line of credit, term loans and mortgage note agreements contain various property-level covenants, including customary affirmative and negative covenants. In addition, the line of credit and term loan agreements contain certain corporate-level financial covenants, including leverage ratio, fixed charge coverage ratio and tangible net worth thresholds. We were in compliance with our debt covenants as of June 30, 2023.

Derivative Instruments

To manage interest rate risk for certain of our variable-rate debt, we use interest rate derivative instruments as part of our risk management strategy. These derivatives are designed to mitigate the risk of future interest rate increases by either providing a fixed interest rate or capping the variable interest rate for a limited, pre-determined period of time. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the interest rate swap agreements without exchange of the underlying notional amount. Interest rate caps involve the receipt of variable amounts from a counterparty at the end of each period in which the interest rate exceeds the agreed fixed price. Certain of our variable-rate borrowings are not hedged, and therefore, to an extent, we have ongoing exposure to interest rate movements.

For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss is recorded as a component of accumulated other comprehensive income (loss) (“AOCI”) on the condensed consolidated balance sheets and is reclassified into earnings as interest expense for the same period that the hedged transaction affects earnings, which is when the interest expense is recognized on the related debt. During the next 12 months, we estimate that approximately $18.0 million will be reclassified as a decrease to interest expense related to active effective hedges of existing floating-rate debt.

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As of June 30, 2023, we have two interest rate cap derivative instruments that are not designated as cash flow hedges and therefore, changes in fair value are recognized through income. As a result, in periods with high interest rate volatility, we may experience significant fluctuations in our net income (loss).

The following table summarizes the location and fair value of our consolidated derivative instruments on our condensed consolidated balance sheets:

	Number of			Fair Value
($ in thousands)	Contracts	Notional Amount			Other Assets	Other Liabilities
As of June 30, 2023
Interest rate swaps designated as cash flow hedges	12	$	650,000	$	20,689	$	—
Interest rate caps designated as cash flow hedges	3		300,000		16,208
Interest rate caps not designated as cash flow hedges	2		207,600		1,789		—
Total derivative instruments	17	$	1,157,600	$	38,686	$	—
As of December 31, 2022
Interest rate swaps designated as cash flow hedges	12	$	650,000	$	20,279	$	—
Interest rate caps not designated as cash flow hedges	2		207,600		4,169		—
Total derivative instruments	14	$	857,600	$	24,448	$	—

The following table presents the effect of our consolidated derivative instruments on our condensed consolidated financial statements:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(in thousands)	2023		2022		2023		2022
Derivative instruments designated as cash flow hedges:
Gain (loss) recognized in AOCI	$	14,146	$	787	$	10,146	$	10,862
Amount reclassified from AOCI (out of) into interest expense		(4,038)		1,032		(7,094)		2,951
Total interest expense presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded		37,882		33,774		75,427		58,184
Derivative instruments not designated as cash flow hedges:
Unrealized (loss) gain on derivative instruments recognized in other income (expenses) (1)	$	(1,101)	$	982	$	(2,325)	$	2,532
Realized gain on derivative instruments recognized in other income (expenses) (2)		1,293		—		2,414		—

(1) Unrealized (loss) gain on changes in fair value of derivative instruments relates to mark-to-market changes on our derivatives not designated as cash flow hedges.

(2) Realized gain on derivative instruments relates to interim cash settlements for our derivatives not designated as cash flow hedges.

6. DST PROGRAM

We have a program to raise capital through private placement offerings by selling beneficial interests (“DST Interests”) in specific Delaware statutory trusts holding real properties (the “DST Program”). Under the DST Program, each private placement offers interests in one or more real properties placed into one or more Delaware statutory trusts by AREIT Operating Partnership LP (the “Operating Partnership”) or its affiliates (“DST Properties”).

In order to facilitate additional capital raise through the DST Program, we have made and may continue to offer loans (“DST Program Loans”) to finance a portion of the sale of DST Interests in the trusts holding DST Properties to potential investors. As of June 30, 2023 and December 31, 2022, our DST Program Loans had a combined carrying value of $103.3 million and $81.9 million, respectively, a weighted-average interest rate of 4.86% and 4.47%, respectively, and a weighted-average maturity of 9.1 years and 9.2 years, respectively. We include our investments in DST Program Loans separately on our condensed consolidated balance sheets in the DST Program Loans line item and we include income earned from DST Program Loans in other income on our condensed consolidated statements of operations. Credit loss reserves associated with our DST Program Loans were immaterial as of and for the periods ended June 30, 2023 and 2022.

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The following table presents our DST Program activity for the three and six months ended June 30, 2023 and 2022:

		For the Three Months Ended June 30,			For the Six Months Ended June 30,
(in thousands)		2023		2022	2023		2022
DST Interests sold	$	91,712	$	161,861	193,507	$	442,663
DST Interests financed by DST Program Loans		13,300		13,205	27,315		28,032
Income earned from DST Program Loans (1)		1,249		833	2,266		1,501
Financing obligation liability appreciation (2)		1,922		8,525	4,784		12,531
Rent obligation incurred under master lease agreements (2)		14,351		11,603	27,934		20,857

(1) Included in other income and expenses on the condensed consolidated statements of operations.

(2) Included in interest expense on the condensed consolidated statements of operations.

The Operating Partnership retains a fair market value purchase option giving it the right, but not the obligation, to acquire the interests in the Delaware statutory trusts from the investors at a later time in exchange for OP Units. We record DST Interests as financing obligation liabilities for accounting purposes. If we exercise our option to reacquire a DST property by issuing OP units in exchange for DST Interests, we extinguish the financing obligation liability and record the issuance of the OP units as an issuance of equity. During the six months ended June 30, 2023 and 2022, 9.8 million partnership units (“OP Units”) in the “Operating Partnership and 4.8 million OP Units, respectively, were issued in exchange for DST Interests, for a net investment of $84.7 million and $39.4 million, respectively, in accordance with our Umbrella Partnership Real Estate Investment Trust (“UPREIT”) structure.

7. FAIR VALUE

We estimate the fair value of our financial instruments using available market information and valuation methodologies we believe to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of the amounts that we would realize upon disposition of our financial instruments.

Fair Value Measurements on a Recurring Basis

The following table presents our financial instruments measured at fair value on a recurring basis:

							Total
(in thousands)	Level 1		Level 2		Level 3		Fair Value
As of June 30, 2023
Assets:
Derivative instruments	$	—	$	38,686	$	—	$	38,686
Available-for-sale debt securities		—		14,960		70,238		85,198
Total assets measured at fair value	$	—	$	53,646	$	70,238	$	123,884
As of December 31, 2022
Assets:
Derivative instruments	$	—	$	24,448	$	—	$	24,448
Available-for-sale debt securities		—		14,896		—		14,896
Total assets measured at fair value	$	—	$	39,344	$	—	$	39,344

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Derivative Instruments. The derivative instruments are interest rate swaps and interest rate caps whose fair value is estimated using market-standard valuation models. Such models involve using market-based observable inputs, including interest rate curves. We incorporate credit valuation adjustments to appropriately reflect both our nonperformance risk and respective counterparty’s nonperformance risk in the fair value measurements, which we have concluded are not material to the valuation. Due to these derivative instruments being unique and not actively traded, the fair value is classified as Level 2. See “Note 5” above for further discussion of our derivative instruments.

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Available-for-Sale Debt Securities. The available-for-sale debt securities are either preferred equity investments in real estate properties or CRE CLOs. The fair value for CRE CLOs are estimated using third-party broker quotes, which provide valuation estimates based upon contractual cash flows, observable inputs comprising credit spreads and market liquidity. We incorporate credit valuation adjustments to appropriately reflect both our nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements, which we have concluded are not material to the valuation. Due to these CRE CLOs being unique and not actively traded, the fair value is classified as Level 2. Our preferred equity investments are unlikely to have readily available market quotations. In such cases, we will generally determine the initial value based on the acquisition price of such investment if we acquire the investment or the par value of such investment if we originate the investment. Following the initial measurement, we will determine fair value by utilizing or reviewing certain inputs that are generally considered Level 3. As of June 30, 2023, we had one preferred equity investment without a readily available market quotation. The investment was originated in May 2023, and as such, the fair value of the security was determined to equal cost as of June 30, 2023.

Nonrecurring Fair Value Measurements

As of June 30, 2023 and December 31, 2022, the fair values of cash and cash equivalents, restricted cash, tenant receivables, accounts payable and accrued expenses and distributions payable approximate their carrying values because of the short-term nature of these instruments. The table below includes fair values for certain of our financial instruments for which it is practicable to estimate fair value. The carrying values and fair values of these financial instruments were as follows:

	As of June 30, 2023				As of December 31, 2022
	Carrying		Fair		Carrying		Fair
(in thousands)	Value (1)		Value		Value (1)		Value
Assets:
Debt-related investments	$	278,415	$	272,458	$	263,122	$	260,841
DST Program Loans		103,314		99,310		81,897		79,049
Liabilities:
Line of credit	$	352,000	$	352,000	$	235,000	$	235,000
Term loans		800,000		800,000		800,000		800,000
Mortgage notes		517,475		477,969		587,916		541,558

(1) The carrying value reflects the principal amount outstanding.

8. EQUITY

Public Offerings

We intend to conduct a continuous public offering that will not have a predetermined duration, subject to continued compliance with the rules and regulations of the SEC and applicable state laws. On May 3, 2022, the SEC declared our registration statement on Form S-11 with respect to our fourth public offering of up to $10.0 billion of shares of its common stock effective, and the fourth public offering commenced the same day. We ceased selling shares of our common stock under our third public offering of up to $3.0 billion of shares immediately upon the effectiveness of the registration statement for the fourth public offering. Under the fourth public offering, we are offering up to $8.5 billion of shares of our common stock in the primary offering and up to $1.5 billion of shares of our common stock pursuant to our distribution reinvestment plan, in any combination of Class T shares, Class D shares, Class S shares and Class I shares. We may reallocate amounts between the primary offering and distribution reinvestment plan.

Pursuant to our public offerings, we offered and continue to offer shares of our common stock at the “transaction price,” plus applicable upfront selling commissions and dealer manager fees. The “transaction price” generally is equal to the net asset value (“NAV”) per share of our common stock most recently disclosed. Our NAV per share is calculated as of the last calendar day of each month for each of our outstanding classes of stock, and will be available generally within 15 calendar days after the end of the applicable month. Shares issued pursuant to our distribution reinvestment plan are offered at the transaction price, as indicated above, in effect on the distribution date. We may update a previously disclosed transaction price in cases where we believe there has been a material change (positive or negative) to our NAV per share relative to the most recently disclosed monthly NAV per share.

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During the six months ended June 30, 2023, we raised gross proceeds of approximately $83.8 million from the sale of approximately 9.5 million shares of our common stock in our ongoing public offerings, including proceeds from our distribution reinvestment plan of approximately $16.0 million.

Common Stock

The following table describes the changes in each class of common shares during the periods presented below:

	Class T	Class S	Class D	Class I	Class E	Total
(in thousands)	Shares	Shares	Shares	Shares	Shares	Shares
FOR THE THREE MONTHS ENDED JUNE 30, 2022
Balance as of March 31, 2022	19,007	40,489	7,662	59,433	55,451	182,042
Issuance of common stock:
Primary shares	2,634	5,663	388	5,165	—	13,850
Distribution reinvestment plan	100	200	38	305	186	829
Redemptions of common stock	(30)	(189)	(141)	(201)	(1,059)	(1,620)
Conversions	(39)	—	—	39	—	—
Balance as of June 30, 2022	21,672	46,163	7,947	64,741	54,578	195,101
FOR THE THREE MONTHS ENDED JUNE 30, 2023
Balance as of March 31, 2023	28,173	49,899	7,439	69,387	52,550	207,448
Issuance of common stock:
Primary shares	1,182	997	31	987	—	3,197
Distribution reinvestment plan	139	232	37	339	178	925
Redemptions of common stock	(735)	(1,378)	(189)	(2,717)	(1,681)	(6,700)
Conversions	(18)	—	(91)	109	—	—
Balance as of June 30, 2023	28,741	49,750	7,227	68,105	51,047	204,870
FOR THE SIX MONTHS ENDED JUNE 30, 2022
Balance as of December 31, 2021	16,425	35,757	6,749	54,406	56,328	169,665
Issuance of common stock:
Primary shares	5,189	10,324	1,493	10,183	—	27,189
Distribution reinvestment plan	192	393	75	607	388	1,655
Redemptions of common stock	(33)	(311)	(370)	(556)	(2,138)	(3,408)
Conversions	(101)	—	—	101	—	—
Balance as of June 30, 2022	21,672	46,163	7,947	64,741	54,578	195,101
FOR THE SIX MONTHS ENDED JUNE 30, 2023
Balance as of December 31, 2022	26,884	49,237	7,871	69,142	52,974	206,108
Issuance of common stock:
Primary shares	2,507	1,969	76	3,104	—	7,656
Distribution reinvestment plan	273	459	77	670	353	1,832
Redemptions of common stock	(804)	(1,939)	(429)	(5,274)	(2,280)	(10,726)
Conversions	(119)	24	(368)	463	—	—
Balance as of June 30, 2023	28,741	49,750	7,227	68,105	51,047	204,870

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Distributions

The following table summarizes our distribution activity (including distributions to noncontrolling interests and distributions reinvested in shares of our common stock) for the periods below:

	Amount
			Common Stock
	Declared per		Distributions		Other Cash		Reinvested in		Distribution		Gross
(in thousands, except per share data)	Common Share (1)		Paid in Cash		Distributions (2)		Shares		Fees (3)		Distributions (4)
2023
March 31	$	0.09375	$	9,912	$	5,271	$	8,009	$	1,461	$	24,653
June 30		0.09375		9,896		5,510		7,974		1,463		24,843
Total	$	0.18750	$	19,808	$	10,781	$	15,983	$	2,924	$	49,496
2022
March 31	$	0.09375	$	8,837	$	3,018	$	6,876	$	1,030	$	19,761
June 30		0.09375		9,299		3,157		7,362		1,259		21,077
September 30		0.09375		9,684		3,972		7,732		1,399		22,787
December 31		0.09375		9,859		4,559		7,923		1,478		23,819
Total	$	0.37500	$	37,679	$	14,706	$	29,893	$	5,166	$	87,444

(1) Amount reflects the total gross quarterly distribution rate authorized by our board of directors per Class T share, per Class S share, per Class D share, per Class I share and per Class E share of common stock. Distributions were declared and paid as of monthly record dates. These monthly distributions have been aggregated and presented on a quarterly basis. The distributions on Class T shares, Class S shares and Class D shares of common stock are reduced by the respective distribution fees that are payable with respect to Class T shares, Class S shares and Class D shares.

(2) Consists of distribution fees paid to Ares Wealth Management Solutions, LLC (the “Dealer Manager”) with respect to OP Units and distributions paid to holders of OP Units and other noncontrolling interest holders.

(3) Distribution fees are paid monthly to the Dealer Manager, with respect to Class T shares, Class S shares and Class D shares issued in the primary portion of our public offerings only. All or a portion of these amounts will be retained by, or reallowed (paid) to, participating broker-dealers and servicing broker-dealers.

(4) Gross distributions are total distributions before the deduction of any distribution fees relating to Class T shares, Class S shares and Class D shares issued in the primary portion of our public offerings.

Redemptions and Repurchases

Below is a summary of redemptions and repurchases pursuant to our share redemption program for the six months ended June 30, 2023 and 2022. All eligible redemption requests were fulfilled for the periods presented. Eligible redemption requests are requests submitted in good order by the request submission deadline set forth in the share redemption program. Our board of directors may modify or suspend our current share redemption programs if it deems such action to be in the best interest of our stockholders.

	For the Six Months Ended June 30,
(in thousands, except for per share data)	2023		2022
Number of shares redeemed or repurchased		10,726		3,408
Aggregate dollar amount of shares redeemed or repurchased	$	93,319	$	28,500
Average redemption or repurchase price per share	$	8.70	$	8.37

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9. REDEEMABLE NONCONTROLLING INTERESTS

The Operating Partnership’s net income and loss will generally be allocated to the general partner and the limited partners in accordance with the respective percentage interest in the OP Units issued by the Operating Partnership.

The Operating Partnership issued OP Units to the Advisor and Black Creek Diversified Property Advisors Group LLC (the “Former Sponsor”) as payment of the performance participation allocation (also referred to as the performance component of the advisory fee) pursuant to the advisory agreement. We have classified these OP Units as redeemable noncontrolling interests in mezzanine equity on the condensed consolidated balance sheets. The redeemable noncontrolling interests are recorded at the greater of the carrying amount, adjusted for its share of the allocation of income or loss and dividends, or the redemption value, which is equivalent to fair value, of such OP Units at the end of each measurement period. As of both June 30, 2023 and December 31, 2022, we had 2.0 million redeemable OP Units outstanding.

The following table summarizes the redeemable noncontrolling interests activity for the six months ended June 30, 2023 and 2022:

	For the Six Months Ended June 30,
($ in thousands)	2023		2022
Balance at beginning of the year	$	18,130	$	8,994
Settlement of prior year performance participation allocation (1)		—		15,327
Distributions to redeemable noncontrolling interests		(384)		(351)
Redemptions to redeemable noncontrolling interests (2)		—		(7,724)
Net (loss) income attributable to redeemable noncontrolling interests		(244)		186
Change from securities and cash flow hedging activities attributable to redeemable noncontrolling interests		23		136
Redemption value allocation adjustment to redeemable noncontrolling interests (3)		(243)		1,596
Ending balance	$	17,282	$	18,164

(1) There were no OP Units issued related to the 2022 performance participation allocation, as the $23.7 million payable as of December 31, 2022 was, at the election of the Advisor, settled in cash in January 2023. The 2021 performance participation allocation in the amount of $15.3 million became payable on December 31, 2021, and was issued as 1.9 million Class I OP Units in January 2022. At the direction of the Advisor and in light of our Former Sponsor having been the holder of a separate series of partnership interests in the Operating Partnership with special distribution rights (the “Special Units”) for the first six months of 2021, the holder of the Special Units designated 465,000 of these Class I OP Units to an entity owned indirectly by our Chairman at the time, Mr. Mulvihill, and 465,000 of these Class I OP Units to an entity owned indirectly by a member of our Former Sponsor. The holder of the Special Units transferred 945,000 Class I OP Units to the Advisor thereafter.

(2) At the request of the Advisor, the Operating Partnership redeemed all Class I OP Units issued to the Advisor in January 2022 for $7.7 million.

(3) Represents the adjustment recorded in order to mark to the redemption value, which is equivalent to fair value, at the end of the measurement period.

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10. NONCONTROLLING INTERESTS

OP Units

The following table summarizes the number of OP Units issued and outstanding to third-party investors (excludes interests held by redeemable noncontrolling interest holders):

	For the Six Months Ended June 30,
(in thousands)	2023		2022
Balance at beginning of period		55,079		27,180
Issuance of units		9,845		4,825
Redemption of units		(1,831)		(407)
Balance at end of period		63,093		31,598

Subject to certain restrictions and limitations, the holders of OP Units may redeem all or a portion of their OP Units for either: shares of the equivalent class of common stock, cash or a combination of both. If we elect to redeem OP Units for shares of our common stock, we will generally deliver one share of our common stock for each such OP Unit redeemed (subject to any redemption fees withheld), and such shares may, subsequently, only be redeemed for cash in accordance with the terms of our share redemption program. If we elect to redeem OP Units for cash, the cash delivered per unit will equal the then-current NAV per unit of the applicable class of OP Units (subject to any redemption fees withheld), which will equal the then-current NAV per share of our corresponding class of shares. During the three months ended June 30, 2023 and 2022, the aggregate amount of OP Units redeemed was $5.1 million and $1.1 million, respectively. During the six months ended June 30, 2023 and 2022, the aggregate amount of OP Units redeemed was $16.0 million and $3.4 million, respectively. The estimated maximum redemption value (unaudited) as of June 30, 2023 and December 31, 2022 was $533.2 million and $488.3 million, respectively.

11. RELATED PARTY TRANSACTIONS

Summary of Fees and Expenses

The table below summarizes the fees and expenses incurred by us for services provided by the Advisor and its affiliates, and by the Dealer Manager related to the services the Dealer Manager provided in connection with our public offerings and any related amounts payable:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,				Payable as of
(in thousands)	2023		2022		2023		2022		June 30, 2023		December 31, 2022
Selling commissions and dealer manager fees (1)	$	448	$	1,238	$	960	$	2,280	$	—	$	—
Ongoing distribution fees (1)(2)		2,190		1,576		4,344		2,874		759		748
Advisory fees—fixed component		9,623		8,227		19,161		15,370		2,890		2,868
Performance participation allocation (3)		—		6,186		—		18,379		—		23,747
Other expense reimbursements—Advisor (4)(5)		3,749		3,206		6,855		5,346		4,158		4,192
Other expense reimbursements—Dealer Manager		160		143		160		170		82		109
Property accounting fee (6)		481		303		970		303		481		478
DST Program selling commissions, dealer manager and distribution fees (1)		2,072		5,660		4,743		13,184		254		241
Other DST Program related costs—Advisor (5)		1,627		3,490		3,558		8,441		162		146
Total	$	20,350	$	30,029	$	40,751	$	66,347	$	8,786	$	32,529

(1) All or a portion of these amounts will be retained by, or reallowed (paid) to, participating broker-dealers and servicing broker-dealers.

(2) The distribution fees are payable monthly in arrears. Additionally, we accrue for future estimated amounts payable related to ongoing distribution fees. The future estimated amounts payable of approximately $63.3 million and $60.9 million as of June 30, 2023 and December 31, 2022, respectively, are included in other liabilities on the condensed consolidated balance sheets.

(3) The 2022 performance participation allocation in the amount of $23.7 million became payable on December 31, 2022, and the Advisor elected to settle the amounts owed in cash in January 2023.

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(4) Other expense reimbursements include certain expenses incurred for organization and offering, acquisition and general administrative services provided to us under the advisory agreement, including, but not limited to, certain expenses described below after footnote 6, allocated rent paid to both third parties and affiliates of our Advisor, equipment, utilities, insurance, travel and entertainment.

(5) Includes costs reimbursed to the Advisor related to the DST Program.

(6) The cost of the property management fee, including the property accounting fee, is generally borne by the tenant or tenants at each real property, either via a direct reimbursement to us or, in the case of tenants subject to a gross lease, as part of the lease cost. In certain circumstances, we may pay for a portion of the property management fee, including the property accounting fee, without reimbursement from the tenant or tenants at a real property.

Certain of the expense reimbursements described in the table above include a portion of the compensation expenses of officers and employees of the Advisor or its affiliates related to activities for which the Advisor did not otherwise receive a separate fee. Amounts incurred related to these compensation expenses for the three months ended June 30, 2023, and 2022 were approximately $3.5 million and $2.9 million, respectively. Amounts incurred related to these compensation expenses for the six months ended June 30, 2023, and 2022 were approximately $6.3 million and $5.4 million, respectively. No reimbursement is made for compensation of our named executive officers unless the named executive officer is providing stockholder services, as outlined in the advisory agreement.

Advisory Agreement

Ares Real Estate Income Trust Inc., the Operating Partnership and the Advisor previously entered into that certain Amended and Restated Advisory Agreement (2022), effective as of May 1, 2022 (the “2022 Advisory Agreement”). The term of the 2022 Advisory Agreement continued through April 30, 2023, subject to an unlimited number of successive one-year renewals. Ares Real Estate Income Trust Inc., the Operating Partnership and the Advisor renewed the 2022 Advisory Agreement on substantially the same terms through April 30, 2024, by entering into the Amended and Restated Advisory Agreement (2023) (the “2023 Advisory Agreement”), effective as of April 30, 2023.

On June 3, 2023, Ares Real Estate Income Trust Inc., the Operating Partnership and the Advisor amended and restated the 2023 Advisory Agreement by entering into the Second Amended and Restated Advisory Agreement (2023) (the “Amended Advisory Agreement”). The Amended Advisory Agreement amends the 2023 Advisory Agreement to provide that if the Company engages affiliates of the Advisor (“Product Specialists”) to provide certain specialist services to the Company, the Operating Partnership or any of their subsidiaries pursuant to a separate agreement approved by the Company’s independent directors, the fees and expense reimbursements paid to the Product Specialist will not be subject to the provisions of the Advisory Agreement or affect the compensation and expense reimbursements paid to the Advisor and its affiliates for services provided pursuant to the Advisory Agreement. Other immaterial changes were also made in the Amended Advisory Agreement.

Limited Partnership Agreement

On June 3, 2023, Ares Real Estate Income Trust Inc. and AREIT Incentive Fee LP, an affiliate of our Advisor, replaced the then-current limited partnership agreement of the Operating Partnership by entering into a Twelfth Amended and Restated Limited Partnership Agreement (the “Amended OP Agreement”). The Amended OP Agreement authorizes Ares Real Estate Income Trust Inc., as general partner, to cause the Operating Partnership to issue profits interests in the Operating Partnership in multiple series via award letters with the rights and obligations of such profits interests set forth in such award letters or an exhibit thereto. Other immaterial changes were also made in the Amended OP Agreement.

Student Housing Investment Arrangement

The changes in the Amended Advisory Agreement and Amended OP Agreement were made in contemplation of a Project Specialist arrangement in student housing investments. Under this arrangement, affiliates of Timberline Real Estate Ventures (“Timberline”), a fully integrated, operationally focused privately held real estate operator and investment manager specializing in the development, acquisition and operation of student housing, multifamily, and mixed-use retail/residential communities, will enter into a joint venture with affiliates of the Advisor to create a Product Specialist (collectively, with its affiliated entities, the “Student Housing Product Specialist”). The Company will, through the Operating Partnership and their subsidiaries, enter into the agreements described in further detail below with the Student Housing Product Specialist in connection with student housing investments. More specifically, for each student housing investment by the Company made through the Student Housing Product Specialist, the Student Housing

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Product Specialist will be retained under a management services agreement, engaged as property manager under a property management agreement and receive a profits interest through the Operating Partnership in such investment. The Advisor or its affiliates will have an economic interest in these agreements except the profits interests, with respect to which the Advisor and its affiliates will have no economic interest.

Each such student housing investment will be made through a subsidiary of the Company (each, an “AREIT TREV Vehicle”) that will be 100% owned, managed and controlled by the Company as the managing member of the operating company. The Company will have the sole authority to make and approve all decisions and take all actions with respect to and on behalf of each AREIT TREV Vehicle, subject to certain limited fundamental decisions which will require the consent of both the Company and the Student Housing Product Specialist. The Student Housing Product Specialist will be the non-economic administrative member of each AREIT TREV Vehicle, required to participate in and oversee the day-to-day business, affairs, management, operation and administration of the AREIT TREV Vehicle and be responsible for implementing the business plan and budget approved by the Company and otherwise implementing the Company’s decisions. If there is any material default or breach by the Student Housing Product Specialist of its obligations under the ARES TREV Vehicle’s operating agreement or the management services agreement (described below) that remains uncured (beyond any applicable notice and cure periods), the Company will have the right to remove the Student

Housing Product Specialist as the administrative member and terminate the management services agreement, the property management agreement and the profits interest.

Pursuant to a management services agreement, in consideration for the sourcing of student housing investments by the Student Housing Product Specialist, the Student Housing Product Specialist will be paid a reasonable market rate acquisition fee by the AREIT TREV Vehicle. In addition, in consideration of supervision of property management by the Student Housing Product Specialist, as well as management of the Company investment and certain accounting and tax reporting duties, the Student Housing Product Specialist will be paid a property management oversight fee by the AREIT TREV Vehicle based on reasonable market rates for such duties. To the extent that renovation work with respect to a Company investment is approved by the Company, the Student Housing Project Specialist will be paid a reasonable market rate construction management fee. If the Student Housing Product Specialist is removed as the administrative member of the applicable AREIT TREV Vehicle, or if there is an uncured breach under the management services agreement, the Company may terminate the management services agreement without penalty. Additionally, the management services agreement will terminate automatically on its terms (without penalty) upon the sale of the applicable property.

At the closing of each of our student housing investments, the AREIT TREV Vehicle will enter into a property management agreement with the Student Housing Project Specialist pursuant to which it will perform property management services in exchange for a property management fee consistent with the local market where our applicable investment is located as well as its size, scope and rental rates and otherwise consistent with an agreed fee schedule; provided that such fees will be payable on a percentage of revenue basis, considering local market rates, total number of beds and overall gross potential rent, subject to reasonable market rate minimum per investment. If (a) the Student Housing Project Specialist is removed as the administrative member of the applicable AREIT TREV Vehicle or (b) there is a bad act (e.g., gross negligence, willful misconduct) or an uncured breach by the Student Housing Project Specialist under the property management agreement, the Company may terminate the agreement without penalty. The Company may also terminate the property management agreement for convenience upon 30 days prior written notice to the Student Housing Project Specialist or if certain operating performance metrics of the property are not met, and the property management agreement automatically terminates on its terms upon the sale of the applicable property; however, if any of the foregoing terminations occurs prior to the one year anniversary of the effective date, property management fees through the first year anniversary will be due to the Student Housing Project Specialist.

With respect to each student housing investment made under this arrangement, an affiliate of the Student Housing Project Specialist will receive a profits interest through the Operating Partnership, with respect to which the Advisor and its affiliates will have no economic interest.

As of and for the periods ended June 30, 2023, there have been no student housing investments made through this arrangement nor have any fees been incurred with the Student Housing Product Specialist.

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Performance Participation Allocation

As used below, “Fund Interests” means our outstanding shares of common stock, along with OP Units, which may be or were held directly or indirectly by the Advisor, the Former Sponsor, members or affiliates of the Former Sponsor, and third parties.

The performance participation allocation is a performance-based amount that will be paid to the Advisor. This amount is calculated on the basis of the overall investment return provided to holders of Fund Interests (i.e., our outstanding shares and OP Units held by third-party investors) in any calendar year such that the Advisor will receive the lesser of (1) 12.5% of (a) the annual total return amount less (b) any loss carryforward, and (2) the amount equal to (x) the annual total return amount, less (y) any loss carryforward, less (z) the amount needed to achieve an annual total return amount equal to 5% of the NAV per Fund Interest at the beginning of such year (the “Hurdle Amount”). The foregoing calculations are calculated on a per Fund Interest basis and multiplied by the weighted-average Fund Interests outstanding during the year. In no event will the performance participation allocation be less than zero. Accordingly, if the annual total return amount exceeds the Hurdle Amount plus the amount of any loss carryforward, then the Advisor will earn a performance participation allocation equal to 100% of such excess, but limited to 12.5% of the annual total return amount that is in excess of the loss carryforward. Additionally, the Advisor will provide us with a waiver of a portion of its fees generally equal to the amount of the performance component that would have been payable with respect to the Class E shares and the Series 1 Class E OP Units held by third parties until the NAV of such shares or units exceeds $10.00 a share or unit, the benefit of which will be shared among all holders of Fund Interests.

The allocation of the performance participation interest is ultimately determined at the end of each calendar year and will be paid in Class I OP units or cash, at the election of the Advisor. The performance hurdle was not achieved as of June 30, 2023, therefore no performance participation allocation expense was recognized in our condensed consolidated statements of operations for the six months ended June 30, 2023. As the performance hurdle was achieved as of June 30, 2022, we recognized approximately $6.2 million for the three months ended June 30, 2022 and $18.4 million for the six months ended June 30, 2022, respectively, of performance participation allocation expense in our condensed consolidated statements of operations.

12. NET INCOME (LOSS) PER COMMON SHARE

The computation of our basic and diluted net income (loss) per share attributable to common stockholders is as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands, except per share data)	2023		2022		2023		2022
Net (loss) income attributable to common stockholders—basic	$	(22,750)	$	(5,588)	$	(24,754)	$	15,423
Net (loss) income attributable to redeemable noncontrolling interests		(226)		(60)		(244)		186
Net (loss) income attributable to noncontrolling interests		(6,278)		(919)		(6,827)		2,618
Net (loss) income attributable to common stockholders—diluted	$	(29,254)	$	(6,567)	$	(31,825)	$	18,227
Weighted-average shares outstanding—basic		206,214		191,158		206,493		184,878
Incremental weighted-average shares effect of conversion of noncontrolling interests		58,749		33,699		57,482		32,928
Weighted-average shares outstanding—diluted		264,963		224,857		263,975		217,806
Net (loss) income per share attributable to common stockholders:
Basic	$	(0.11)	$	(0.03)	$	(0.12)	$	0.08
Diluted	$	(0.11)	$	(0.03)	$	(0.12)	$	0.08

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13. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information and disclosure of non-cash investing and financing activities is as follows:

	For the Six Months Ended June 30,
(in thousands)	2023		2022
Supplemental disclosure of non-cash investing and financing activities:
Distributions reinvested in common stock	$	15,979	$	13,922
Increase in accrued future ongoing distribution fees		2,342		11,908
Increase in DST Program Loans receivable through DST Program capital raising		27,315		28,032
Redeemable noncontrolling interest issued as settlement of performance participation allocation		—		15,327
Issuances of OP Units for DST Interests		84,725		39,441

Restricted Cash

Restricted cash consists of lender and property-related escrow accounts. The following table presents the components of the beginning of period and end of period cash, cash equivalents and restricted cash reported within the condensed consolidated statements of cash flows:

	For the Six Months Ended June 30,
(in thousands)	2023		2022
Beginning of period:
Cash and cash equivalents	$	13,336	$	10,605
Restricted cash		3,850		3,747
Cash, cash equivalents and restricted cash	$	17,186	$	14,352
End of period:
Cash and cash equivalents	$	12,905	$	19,529
Restricted cash		4,265		4,909
Cash, cash equivalents and restricted cash	$	17,170	$	24,438

14. COMMITMENTS AND CONTINGENCIES

Litigation

We and the Operating Partnership are not presently involved in any material litigation nor, to our knowledge, is any material litigation threatened against us or our investments.

Environmental Matters

A majority of the properties we acquire have been or will be subject to environmental reviews either by us or the previous owners. In addition, we may incur environmental remediation costs associated with certain land parcels we may acquire in connection with the development of land. We have acquired or may in the future acquire certain properties in urban and industrial areas that may have been leased to or previously owned by commercial and industrial companies that discharged hazardous materials. We may purchase various environmental insurance policies to mitigate our exposure to environmental liabilities. We are not aware of any environmental liabilities that we believe would have a material adverse effect on our business, financial condition, or results of operations as of June 30, 2023.

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15. SEGMENT FINANCIAL INFORMATION

Our five reportable segments are office properties, retail properties, residential properties, industrial properties, and investments in real estate debt and securities. We have determined that investments in real estate debt and securities is a reportable segment, and we expect that the segment will continue to be of significance. As such, we have broken out investments in real estate debt and securities as a reportable segment in the tables below for all current and prior periods presented. Factors used to determine our reportable segments include the physical and economic characteristics of our properties and/or investments and the related operating activities. Our chief operating decision makers rely on net operating income, among other factors, to make decisions about allocating resources and assessing segment performance. Net operating income is the key performance metric that captures the unique operating characteristics of each segment. Net investment in real estate properties, investments in real estate debt and securities, restricted cash, tenant receivables, straight-line rent receivables and other assets directly assignable to a property or investment are allocated to the segment groupings. Corporate items that are not directly assignable to a property, such as investments in unconsolidated joint venture partnerships and DST Program Loans, are not allocated to segment groupings, but are reflected as reconciling items.

The following table reflects our total consolidated assets by business segment as of June 30, 2023 and December 31, 2022:

	As of
(in thousands)	June 30, 2023		December 31, 2022
Assets:
Office properties	$	379,863	$	377,546
Retail properties		514,625		537,147
Residential properties		1,479,797		1,495,532
Industrial properties		1,273,746		1,248,255
Investments in real estate debt and securities		353,879		275,335
Corporate		282,581		240,909
Total assets	$	4,284,491	$	4,174,724

The following table is a reconciliation of our reported net income (loss) attributable to common stockholders to our net operating income for the three and six months ended June 30, 2023 and 2022:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(in thousands)	2023		2022		2023		2022
Net (loss) income attributable to common stockholders	$	(22,750)	$	(5,588)	$	(24,754)	$	15,423
Real estate-related depreciation and amortization		33,858		36,903		67,055		64,354
General and administrative expenses		2,973		2,594		6,017		4,631
Advisory fees		9,623		8,227		19,161		15,370
Performance participation allocation		—		6,186		—		18,379
Acquisition costs and reimbursements		1,849		1,093		3,018		2,722
Impairment loss on debt-related investment held for sale		1,260		—		3,780		—
Equity in loss (income) from unconsolidated joint venture partnerships		203		(1,718)		2,649		(708)
Interest expense		37,882		33,774		75,427		58,184
Gain on sale of real estate property		—		(29,643)		(36,884)		(83,524)
Loss on extinguishment of debt and financing commitments, net		—		—		700		—
Gain on derivative instruments		(192)		(982)		(89)		(2,532)
Provision for current expected credit losses		(1,632)		—		3,998		—
Other income		(1,016)		(423)		(2,032)		(1,000)
Net (loss) income attributable to redeemable noncontrolling interests		(226)		(60)		(244)		186
Net (loss) income attributable to noncontrolling interests		(6,278)		(919)		(6,827)		2,618
Net operating income	$	55,554	$	49,444	$	110,975	$	94,103

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The following table sets forth consolidated financial results by segment for the three and six months ended June 30, 2023 and 2022:

									Debt and
(in thousands)	Office		Retail		Residential		Industrial		Securities		Consolidated
For the Three Months Ended June 30, 2023
Rental revenues	$	13,001	$	14,288	$	28,823	$	21,092	$	—	$	77,204
Debt-related income		—		—		—		—		7,189		7,189
Rental expenses		(6,442)		(3,775)		(14,070)		(4,552)		—		(28,839)
Net operating income	$	6,559	$	10,513	$	14,753	$	16,540	$	7,189	$	55,554
Real estate-related depreciation and amortization	$	4,203	$	4,043	$	9,950	$	15,662	$	—	$	33,858
For the Three Months Ended June 30, 2022
Rental revenues	$	13,148	$	16,509	$	25,824	$	18,013	$	—	$	73,494
Debt-related income		—		—		—		—		846		846
Rental expenses		(5,772)		(3,776)		(11,059)		(4,289)		—		(24,896)
Net operating income	$	7,376	$	12,733	$	14,765	$	13,724	$	846	$	49,444
Real estate-related depreciation and amortization	$	4,243	$	4,474	$	16,038	$	12,148	$	—	$	36,903
For the Six Months Ended June 30, 2023
Rental revenues	$	26,350	$	28,806	$	57,671	$	42,337	$	—	$	155,164
Debt-related income		—		—		—		—		12,950		12,950
Rental expenses		(13,072)		(7,359)		(27,260)		(9,448)		—		(57,139)
Net operating income	$	13,278	$	21,447	$	30,411	$	32,889	$	12,950	$	110,975
Real estate-related depreciation and amortization	$	8,166	$	8,078	$	19,439	$	31,372	$	—	$	67,055
For the Six Months Ended June 30, 2022
Rental revenues	$	26,780	$	33,576	$	42,178	$	33,465	$	—	$	135,999
Debt-related income		—		—		—		—		4,314		4,314
Rental expenses		(11,963)		(8,405)		(18,004)		(7,838)		—		(46,210)
Net operating income	$	14,817	$	25,171	$	24,174	$	25,627	$	4,314	$	94,103
Real estate-related depreciation and amortization	$	8,240	$	9,128	$	24,392	$	22,594	$	—	$	64,354

We consider net operating income to be an appropriate supplemental performance measure and believe net operating income provides useful information to our investors regarding our financial condition and results of operations because net operating income reflects the operating performance of our properties and excludes certain items that are not considered to be controllable in connection with the management of the properties, such as real estate-related depreciation and amortization, general and administrative expenses, advisory fees, impairment charges, interest expense, gains on sale of properties, other income and expense, gains and losses on the extinguishment of debt and noncontrolling interests. However, net operating income should not be viewed as an alternative measure of our financial performance since it excludes such items, which could materially impact our results of operations. Further, our net operating income may not be comparable to that of other real estate companies, as they may use different methodologies for calculating net operating income. Therefore, we believe net income, as defined by GAAP, to be the most appropriate measure to evaluate our overall financial performance.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References to the terms “we,” “our” or “us” refer to Ares Real Estate Income Trust Inc. and its consolidated subsidiaries. The following discussion and analysis should be read together with our unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the “Securities Act,” and Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act.” Such forward-looking statements relate to, without limitation, our future capital expenditures, distributions, acquisitions and dispositions (including the amount and nature thereof), other developments and trends of the real estate industry, business strategies and the expansion and growth of our operations. These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. Such statements are subject to a number of assumptions, risks and uncertainties which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements are generally identifiable by the use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “project,” “continue,” or the negative of these words, or other similar words or terms. Readers are cautioned not to place undue reliance on these forward-looking statements.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

● the impact of macroeconomic trends, such as the unemployment rate, availability of credit, impact of inflation, rising interest rates and the conflict in Ukraine, which may have a negative effect on the following, among other things:

● the fundamentals of our business, including overall market occupancy, space utilization for our tenants, who we refer to as customers from time-to-time herein, and rental rates;

● the financial condition of our customers, some of which are retail, financial, legal and other professional firms, our lenders, and institutions that hold our cash balances and short-term investments, which may expose us to increased risks of breach or default by these parties;

● customers’ ability to pay rent on their leases or our ability to re-lease space that is or becomes vacant; and

● the value of our real estate assets, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing secured by our properties or on an unsecured basis;

● general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, dependence on customers’ financial condition and competition from other developers, owners and operators of real estate);

● our ability to effectively raise and deploy proceeds from our ongoing public offerings;

● risks associated with the demand for liquidity under our share redemption program and our ability to meet such demand;

● risks associated with the availability and terms of debt and equity financing and the use of debt to fund acquisitions and developments, including the risk associated with interest rates impacting the cost and/or availability of financing;

● the business opportunities that may be presented to and pursued by us, changes in laws or regulations (including changes to laws governing the taxation of real estate investment trusts (“REITs”));

● conflicts of interest arising out of our relationships with the Sponsor, the Advisor and their affiliates;

● changes in accounting principles, policies and guidelines applicable to REITs;

● environmental, regulatory and/or safety requirements; and

● the availability and cost of comprehensive insurance, including coverage for terrorist acts.

For further discussion of these and other factors, see Part I, Item 1A, “Risk Factors” in our 2022 Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of future events, new information or otherwise.

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OVERVIEW

General

Ares Real Estate Income Trust Inc. is a NAV-based perpetual life REIT that was formed on April 11, 2005, as a Maryland corporation. We are primarily focused on investing in and operating a diverse portfolio of real property. As of June 30, 2023, our consolidated real property portfolio consisted of 92 properties, totaling approximately 18.7 million square feet located in 33 markets throughout the U.S. We also owned 161 properties through our unconsolidated joint venture partnerships as of June 30, 2023. Unless otherwise noted, these unconsolidated properties are excluded from the presentation of our portfolio data herein.

We have operated and elected to be treated as a REIT for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2006, and we intend to continue to operate in accordance with the requirements for qualification as a REIT. We utilize an UPREIT organizational structure to hold all or substantially all of our assets through the Operating Partnership.

As a NAV-based perpetual life REIT, we intend to conduct ongoing public primary offerings of our common stock on a perpetual basis. We also intend to conduct an ongoing distribution reinvestment plan offering for our stockholders to reinvest distributions in our shares. From time to time, we intend to file new registration statements on Form S-11 with the SEC to register additional shares of common stock so that we may continuously offer shares of common stock pursuant to Rule 415 under the Securities Act. During the six months ended June 30, 2023, we raised gross proceeds of approximately $83.8 million from the sale of approximately 9.5 million shares of our common stock in our ongoing public offerings, including proceeds from our distribution reinvestment plan of approximately $16.0 million. See “Note 8 to the Condensed Consolidated Financial Statements” for more information about our public offerings.

Additionally, we have a program to raise capital through private placement offerings by selling DST Interests. These private placement offerings are exempt from registration requirements pursuant to Section 4(a)(2) of the Securities Act. We anticipate that these interests may serve as replacement properties for investors seeking to complete like-kind exchange transactions under Section 1031 of the Code. Similar to our prior private placement offerings, we expect that the DST Program will give us the opportunity to expand and diversify our capital raise strategies by offering what we believe to be an attractive and unique investment product for investors that may be seeking replacement properties to complete like-kind exchange transactions under Section 1031 of the Code. We also offer DST Program Loans to finance no more than 50% of the purchase price of the DST Interests to certain purchasers of the interests in the Delaware statutory trusts. During the six months ended June 30, 2023, we sold $193.5 million of gross interests related to the DST Program, $27.3 million of which were financed by DST Program Loans. See “Note 6 to the Condensed Consolidated Financial Statements” for additional detail regarding the DST Program.

We currently operate in four reportable property segments: office, retail, residential and industrial. The following table summarizes our real property portfolio by property segment as of June 30, 2023:

						Average
				% of Total		Effective Annual						% of
($ and square feet in thousands,	Number of	Number of	Rentable	Rentable		Base Rent per		%		Aggregate		Aggregate
except for per square foot data)	Markets (1)	Real Properties	Square Feet	Square Feet		Square Foot (2)		Leased		Fair Value		Fair Value
Office properties	7	8	1,572	8.4	%	$	35.51	72.1	%	$	569,800	12.5	%
Retail properties	8	18	2,318	12.4			19.40	97.0			688,550	15.1
Residential properties	8	14	4,205	22.5			27.50	93.9			1,662,400	36.5
Industrial properties	28	52	10,611	56.7			6.19	97.9			1,636,800	35.9
Total real property portfolio	33	92	18,706	100.0	%	$	14.49	94.7	%	$	4,557,550	100.0	%

(1) Reflects the number of unique markets by property segment and in total. As such, the total number of markets does not equal the sum of the number of markets by property segment as certain property segments are located in the same market.

(2) Amount calculated as total annualized base rent, which includes the impact of any contractual tenant concessions (cash basis) per the terms of the lease, divided by total lease square footage as of June 30, 2023.

We currently focus our investment activities primarily across the major U.S. property sectors (industrial, residential (which includes and/or may include multi-family and other types of rental housing such as manufactured, student and single-family rental housing), office (which includes and/or may include medical office and life science laboratories) and retail). To a lesser extent, we strategically invest in and/or intend to invest in geographies outside of the U.S., which may include Canada, the United Kingdom, Europe and other

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foreign jurisdictions, and in other sectors such as triple net lease, real estate debt (which may include mortgages and subordinated interests), real estate-related securities, properties in sectors adjacent to our primary investment sectors and/or infrastructure, to create a diversified blend of current income and long-term value appreciation. Our near-term investment strategy is likely to prioritize new investments in the industrial and residential sectors due to relatively attractive fundamental conditions. We also intend to continue to hold an allocation of properties in the office and retail sectors, the latter of which is largely grocery-anchored.

Net Asset Value

Our board of directors, including a majority of our independent directors, has adopted valuation procedures, as amended from time to time, that contain a comprehensive set of methodologies to be used in connection with the calculation of our NAV. With the approval of our board of directors, including a majority of our independent directors, we have engaged Altus Group U.S. Inc., a third-party valuation firm, to serve as our independent valuation advisor (“Altus Group” or the “Independent Valuation Advisor”) with respect to helping us administer the valuation and review process for the real properties in our portfolio, providing monthly real property appraisals, reviewing annual third-party real property appraisals, providing monthly valuations of our debt-related assets (excluding DST Program Loans), reviewing the internal valuations of DST Program Loans and debt-related liabilities performed by our Advisor, providing quarterly valuations of our properties subject to master lease obligations associated with the DST Program, and assisting in the development and review of our valuation procedures. As part of this process, our Advisor reviews the estimates of the values of our real property portfolio, real estate-related assets, and other assets and liabilities within our portfolio for consistency with our valuation guidelines and the overall reasonableness of the valuation conclusions, and informs our board of directors of its conclusions. Although third-party appraisal firms, the Independent Valuation Advisor, or other pricing sources may consider any comments received from us or our Advisor or other valuation sources for their individual valuations, the final estimated fair values of our real properties are determined by the Independent Valuation Advisor and the final estimates of fair values of our real estate-related assets, our other assets, and our liabilities are determined by the applicable pricing source (which may, in certain instances be our Advisor or an affiliate of Ares), subject to the oversight of our board of directors. With respect to the valuation of our real properties, the Independent Valuation Advisor provides our board of directors with periodic valuation reports and is available to meet with our board of directors to review valuation information, as well as our valuation guidelines and the operation and results of the valuation and review process generally. Excluding real properties that are bought or sold during a given calendar year, unconsolidated real properties held through joint ventures or partnerships are valued by a third-party appraiser at least once per calendar year. For valuations during interim periods, either our Advisor will determine the estimated fair value of the real properties owned by unconsolidated affiliates or we will utilize interim valuations determined pursuant to valuation policies and procedures for such joint ventures or partnerships. All parties engaged by us in connection with our valuation procedures, including the Independent Valuation Advisor, ALPS Fund Services Inc. (“ALPS”), and our Advisor, are subject to the oversight of our board of directors. Our board of directors has the right to engage additional valuation firms and pricing sources to review the valuation process or valuations, if deemed appropriate. At least once each calendar year our board of directors, including a majority of our independent directors, reviews the appropriateness of our valuation procedures with input from the Independent Valuation Advisor. From time to time our board of directors, including a majority of our independent directors, may adopt changes to the valuation procedures if it: (1) determines that such changes are likely to result in a more accurate reflection of NAV or a more efficient or less costly procedure for the determination of NAV without having a material adverse effect on the accuracy of such determination; or (2) otherwise reasonably believes a change is appropriate for the determination of NAV. We will publicly announce material changes to our valuation procedures. See Exhibit 4.4 of this Quarterly Report on Form 10-Q for a more detailed description of our valuation procedures, including important disclosure regarding real property valuations provided by the Independent Valuation Advisor.

Our valuation procedures, which address specifically each category of our assets and liabilities and are applied separately from the preparation of our financial statements in accordance with GAAP, involve adjustments from historical cost. There are certain factors which cause NAV to be different from total equity or stockholders’ equity on a GAAP basis. Most significantly, the valuation of our real assets, which is the largest component of our NAV calculation, is provided to us by the Independent Valuation Advisor. For GAAP purposes, these assets are generally recorded at depreciated or amortized cost. Another example that will cause our NAV to differ from our GAAP total equity or stockholders’ equity is the straight-lining of rent, which results in a receivable for GAAP purposes that is not included in the determination of our NAV. The fair values of our assets and certain liabilities are determined using widely accepted methodologies and, as appropriate, the GAAP principles within the FASB Accounting Standards Codification under Topic 820, Fair Value Measurements and Disclosures and are used by ALPS in calculating our NAV per share. However, our valuation procedures and our NAV are not subject to GAAP and will not be subject to independent audit. We did not develop our valuation procedures with the intention of complying with fair value concepts under GAAP and, therefore, there could be differences between our fair values and the fair values derived from the principal market or most advantageous market concepts of establishing

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fair value under GAAP. The aggregate real property valuation of $4.56 billion compares to a GAAP basis of real properties (net of intangible lease liabilities and before accumulated amortization and depreciation) of $4.15 billion, representing a difference of approximately $403.9 million, or 9.7%.

As used below, “Fund Interests” means our outstanding shares of common stock, along with OP Units, which may be or were held directly or indirectly by the Advisor, the Former Sponsor, members or affiliates of the Former Sponsor, and third parties, and “Aggregate Fund NAV” means the NAV of all the Fund Interests.

The following table sets forth the components of Aggregate Fund NAV as of June 30, 2023 and December 31, 2022:

	As of
(in thousands)	June 30, 2023		December 31, 2022
Investments in office properties	$	569,800	$	610,850
Investments in retail properties		688,550		740,400
Investments in residential properties		1,662,400		1,685,000
Investments in industrial properties		1,636,800		1,603,500
Total investment in real estate properties		4,557,550		4,639,750
Investments in unconsolidated joint venture partnerships		148,108		141,272
Investments in real estate debt and securities		358,654		275,737
DST Program Loans		99,310		79,049
Total investments		5,163,622		5,135,808
Cash and cash equivalents		12,905		13,336
Restricted cash		4,265		3,850
Other assets		54,560		44,269
Line of credit, term loans and mortgage notes		(1,677,362)		(1,631,324)
Financing obligations associated with our DST Program		(1,208,257)		(1,141,866)
Other liabilities		(78,479)		(72,966)
Accrued performance participation allocation		—		(23,747)
Accrued advisory fees		(3,195)		(3,157)
Noncontrolling interests in consolidated joint venture partnerships		(1,672)		(1,582)
Aggregate Fund NAV	$	2,266,387	$	2,322,621
Total Fund Interests outstanding		270,008		263,232

The following table sets forth the NAV per Fund Interest as of June 30, 2023:

			Class T		Class S		Class D		Class I		Class E		OP
(in thousands, except per Fund Interest data)	Total		Shares		Shares		Shares		Shares		Shares		Units
Monthly NAV	$	2,266,387	$	241,244	$	417,587	$	60,665	$	571,656	$	428,480	$	546,755
Fund Interests outstanding		270,008		28,741		49,750		7,227		68,105		51,047		65,138
NAV Per Fund Interest	$	8.3938	$	8.3938	$	8.3938	$	8.3938	$	8.3938	$	8.3938	$	8.3938

Under GAAP, we record liabilities for ongoing distribution fees that (i) we currently owe the Dealer Manager under the terms of our dealer manager agreement and (ii) we estimate we may pay to the Dealer Manager in future periods for our Fund Interests. As of June 30, 2023, we estimated approximately $63.3 million of ongoing distribution fees were potentially payable to the Dealer Manager. We do not deduct the liability for estimated future distribution fees in our calculation of NAV since we intend for our NAV to reflect our estimated value on the date that we determine our NAV. Accordingly, our estimated NAV at any given time does not include consideration of any estimated future distribution fees that may become payable after such date.

Financing obligations associated with our DST Program, as reflected in our NAV table above, represent outstanding proceeds raised from our private placements under the DST Program due to the fact that we have an option (which may or may not be exercised) to purchase the interests in the Delaware statutory trusts and thereby acquire the real property owned by the trusts. We may acquire these properties using OP Units, cash, or a combination of both. See “Note 6 to the Condensed Consolidated Financial Statements” for additional details regarding our DST Program. We may use proceeds raised from our DST Program for the repayment of debt, acquisition of properties and other investments, distributions to our stockholders, payments under our debt obligations and master

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lease agreements related to properties in our DST Program, redemption payments, capital expenditures and other general corporate purposes. We pay our Advisor an annual, fixed component of our advisory fee of 1.10% of the consideration received for selling interests in DST Properties to third-party investors, net of upfront fees and expense reimbursements payable out of gross proceeds from the sale of such interests and DST Interests financed through DST Program Loans.

We include no discounts to our NAV for the illiquid nature of our shares, including the limitations on our stockholders’ ability to redeem shares under our share redemption program and our ability to modify or suspend our share redemption program at any time. Our NAV generally does not reflect the potential impact of exit costs (e.g. selling costs and commissions related to the sale of a property) that would likely be incurred if our assets and liabilities were liquidated or sold today. While we may use market pricing concepts to value individual components of our NAV, our per share NAV is not derived from the market pricing information of open-end real estate funds listed on stock exchanges.

Our NAV is not a representation, warranty or guarantee that: (i) we would fully realize our NAV upon a sale of our assets; (ii) shares of our common stock would trade at our per share NAV on a national securities exchange; and (iii) a stockholder would be able to realize the per share NAV if such stockholder attempted to sell his or her shares to a third party.

The valuations of our real properties as of June 30, 2023, excluding certain newly acquired properties that are currently held at cost which we believe reflects the fair value of such properties, were provided by the Independent Valuation Advisor in accordance with our valuation procedures. Certain key assumptions that were used by the Independent Valuation Advisor in the discounted cash flow analysis are set forth in the following table based on weighted-averages by property type.

									Weighted-
	Office		Retail		Residential		Industrial		Average Basis
Exit capitalization rate	6.6	%	6.4	%	5.0	%	5.4	%	5.5	%
Discount rate / internal rate of return	7.4	%	7.1	%	6.3	%	6.6	%	6.6	%
Average holding period (years)	9.5		10.0		10.0		10.0		9.9

A change in the exit capitalization and discount rates used would impact the calculation of the value of our real property. For example, assuming all other factors remain constant, the changes listed below would result in the following effects on the value of our real properties, excluding certain newly acquired properties that are currently held at cost which we believe reflects the fair value of such properties:

	Hypothetical									Weighted-
Input	Change	Office		Retail		Residential		Industrial		Average Values
Exit capitalization rate (weighted-average)	0.25% decrease	2.7	%	2.4	%	3.4	%	3.4	%	3.2	%
	0.25% increase	(2.5)	%	(2.2)	%	(3.1)	%	(3.1)	%	(2.9)	%
Discount rate (weighted-average)	0.25% decrease	2.0	%	1.9	%	2.0	%	2.1	%	2.0	%
	0.25% increase	(2.0)	%	(1.8)	%	(1.9)	%	(2.0)	%	(2.0)	%

From September 30, 2017 through November 30, 2019, we valued our debt-related investments and real estate-related liabilities generally in accordance with fair value standards under GAAP. Beginning with our valuation for December 31, 2019, our property-level mortgages and corporate-level credit facilities that are intended to be held to maturity (which for fixed rate debt not subject to interest rate hedges may be the date near maturity at which time the debt will be eligible for prepayment at par for purposes herein), including those subject to interest rate hedges, were valued at par (i.e. at their respective outstanding balances). In addition, because we utilize interest rate hedges to stabilize interest payments (i.e. to fix all-in interest rates through interest rate swaps or to limit interest rate exposure through interest rate caps) on individual loans, each loan and associated interest rate hedge is treated as one financial instrument which is valued at par if intended to be held to maturity. This policy of valuing at par applies regardless of whether any given interest rate hedge is considered as an asset or liability for GAAP purposes. Notwithstanding, if we acquire an investment and assume associated in-place debt from the seller that is above-or below-market, then consistent with how we recognize assumed debt for GAAP purposes when acquiring an asset with pre-existing debt in place, the liabilities used in the determination of our NAV will include the market value of such debt based on market value as of the closing date. The associated premium or discount on such debt as of closing that is reflected in our liabilities will then be amortized through loan maturity. Per our valuation policy, the corresponding investment is valued on an unlevered basis for purposes of determining NAV. Accordingly, all else equal, we would not recognize an immediate gain or loss to our NAV upon acquisition of an investment whereby we assume associated pre-existing

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debt that is above- or below-market. As of June 30, 2023, we classified all of our debt as intended to be held to maturity, and our liabilities included mark-to-market adjustments for pre-existing debt that we assumed upon acquisition. We currently estimate the fair value of our debt (inclusive of associated interest rate hedges) that was intended to be held to maturity as of June 30, 2023 was $75.3 million lower than the carrying value used for purposes of calculating our NAV (as described above) for such debt in aggregate; meaning that if we used the fair value of our debt rather than the carrying value used for purposes of calculating our NAV (and treated the associated hedge as part of the same financial instrument), our NAV would have been higher by approximately $75.3 million, or $0.28 per share, not taking into account all of the other items that impact our monthly NAV, as of June 30, 2023.

Reconciliation of Stockholders’ Equity and Noncontrolling Interests to NAV

The following table reconciles stockholders’ equity and noncontrolling interests per our condensed consolidated balance sheet to our NAV as of June 30, 2023:

(in thousands)	As of June 30, 2023
Total stockholders' equity	$	711,613
Noncontrolling interests		459,231
Total equity under GAAP		1,170,844
Adjustments:
Accrued distribution fee (1)		63,261
Redeemable noncontrolling interests (2)		17,282
Unrealized net real estate, financing obligations, debt and interest rate hedge appreciation (depreciation) (3)		390,555
Unrealized gain (loss) on investments in unconsolidated joint venture partnerships (4)		24,033
Accumulated depreciation and amortization (5)		597,108
Other adjustments (6)		3,304
Aggregate Fund NAV	$	2,266,387

(1) Accrued distribution fee represents the accrual for the full cost of the distribution fee for Class T, Class S, and Class D shares and OP Units. Under GAAP, we accrued the full cost of the distribution fee payable over the life of each share (assuming such share remains outstanding the length of time required to pay the maximum distribution fee) as an offering cost at the time we sold the Class T, Class S, and Class D shares. Similarly, we accrued a liability for future distribution fees we expect will be paid for our estimate of how long Class T, Class S, and Class D OP Units will be outstanding, also as an offering cost. For purposes of calculating the NAV, we recognize the distribution fee as a reduction of NAV on a monthly basis when such fee is paid and do not deduct the liability for estimated future distribution fees that may become payable after the date as of which our NAV is calculated.

(2) Redeemable noncontrolling interests are related to our OP Units, and are included in our determination of NAV but not included in equity under GAAP.

(3) Our real estate and real estate-related investments are presented at historical cost in our condensed consolidated financial statements. Additionally, our mortgage notes, term loans, line of credit and financing obligations are presented at their carrying value in our condensed consolidated financial statements. As such, any increases or decreases in the fair market value of our real estate, real estate-related investments, debt instruments or financing obligations are not included in our GAAP results. For purposes of determining our NAV, our real estate, real estate-related investments, financing obligations and certain of our debt are recorded at fair value. Notwithstanding, our property-level mortgages and corporate-level credit facilities that are intended to be held to maturity, including those subject to interest rates hedges, are valued at par (i.e. at their respective outstanding balances).

(4) Our investments in unconsolidated joint venture partnerships are presented at historical cost in our condensed consolidated financial statements. As such, any increases or decreases in the fair market value of the underlying investments or underlying debt instruments are not included in our GAAP results. For purposes of determining our NAV, the investments in the underlying real estate and certain of the underlying debt are recorded at fair value and reflected in our NAV at our proportional ownership interest.

(5) We depreciate our investments in real estate and amortize certain other assets and liabilities in accordance with GAAP. Such depreciation and amortization is not recorded for purposes of determining our NAV.

(6) Includes (i) straight-line rent receivables, which are recorded in accordance with GAAP but not recorded for purposes of determining our NAV, and (ii) other minor adjustments.

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Performance

Our NAV decreased from $8.82 per share as of December 31, 2022 to $8.39 per share as of June 30, 2023. The decrease in NAV was primarily driven by expansion in the capital market assumptions that are a major factor used in the valuation of our real estate portfolio. This decrease was partially offset by strong leasing and above-average market rent growth in our industrial and residential properties and the disposition of one partial retail property for net proceeds of approximately $53.7 million at a sale price in excess of carrying value.

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Effective December 31, 2019, our board of directors approved amendments to our valuation procedures which revised the way we value property-level mortgages, corporate-level credit facilities and associated interest rate hedges when loans, including associated interest rate hedges, are intended to be held to maturity, effectively eliminating all mark-to-market adjustments for such loans and hedges from the calculation of our NAV. The following table summarizes the impact of interest rate movements on our share class returns assuming we continued to include the mark-to-market adjustments for all borrowing-related interest rate hedge and debt instruments beginning with the December 31, 2019 NAV:

					One-Year								Since NAV
	Trailing				(Trailing		Three-Year		Five-Year		Ten-Year		Inception
(as of June 30, 2023) (1)	Three-Months		Year-to-Date		12-Months)		Annualized		Annualized		Annualized		Annualized (2)
Class T Share Total Return (with upfront selling commissions and dealer manager fees) (3)	(5.22)	%	(6.47)	%	(5.28)	%	6.56	%	5.69	%	5.80	%	6.46	%
Adjusted Class T Share Total Return (with upfront selling commissions and dealer manager fees) (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4)	(4.69)	%	(6.84)	%	(4.84)	%	8.05	%	6.25	%	6.09	%	6.72	%
Difference	(0.53)	%	0.37	%	(0.44)	%	(1.49)	%	(0.56)	%	(0.29)	%	(0.26)	%
Class T Share Total Return (without upfront selling commissions and dealer manager fees) (3)	(1.91)	%	(3.20)	%	(1.97)	%	7.79	%	6.42	%	6.12	%	6.59	%
Adjusted Class T Share Total Return (without upfront selling commissions and dealer manager fees) (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4)	(1.35)	%	(3.58)	%	(1.51)	%	9.30	%	6.99	%	6.40	%	6.85	%
Difference	(0.56)	%	0.38	%	(0.46)	%	(1.51)	%	(0.57)	%	(0.28)	%	(0.26)	%
Class S Share Total Return (with upfront selling commissions and dealer manager fees) (3)	(5.22)	%	(6.47)	%	(5.28)	%	6.56	%	5.69	%	5.80	%	6.46	%
Adjusted Class S Share Total Return (with upfront selling commissions and dealer manager fees) (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4)	(4.69)	%	(6.84)	%	(4.84)	%	8.05	%	6.25	%	6.09	%	6.72	%
Difference	(0.53)	%	0.37	%	(0.44)	%	(1.49)	%	(0.56)	%	(0.29)	%	(0.26)	%
Class S Share Total Return (without upfront selling commissions and dealer manager fees) (3)	(1.91)	%	(3.20)	%	(1.97)	%	7.79	%	6.42	%	6.12	%	6.59	%
Adjusted Class S Share Total Return (without upfront selling commissions and dealer manager fees) (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4)	(1.35)	%	(3.58)	%	(1.51)	%	9.30	%	6.99	%	6.40	%	6.85	%
Difference	(0.56)	%	0.38	%	(0.46)	%	(1.51)	%	(0.57)	%	(0.28)	%	(0.26)	%
Class D Share Total Return (3)	(1.76)	%	(2.91)	%	(1.38)	%	8.43	%	7.06	%	6.71	%	6.85	%
Adjusted Class D Share Total Return (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4)	(1.21)	%	(3.30)	%	(0.92)	%	9.96	%	7.63	%	6.99	%	7.11	%
Difference	(0.55)	%	0.39	%	(0.46)	%	(1.53)	%	(0.57)	%	(0.28)	%	(0.26)	%
Class I Share Total Return (3)	(1.70)	%	(2.79)	%	(1.13)	%	8.70	%	7.32	%	7.08	%	7.23	%
Adjusted Class I Share Total Return (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4)	(1.14)	%	(3.18)	%	(0.68)	%	10.23	%	7.90	%	7.37	%	7.50	%
Difference	(0.56)	%	0.39	%	(0.45)	%	(1.53)	%	(0.58)	%	(0.29)	%	(0.27)	%
Class E Share Return Total Return (3)	(1.70)	%	(2.79)	%	(1.13)	%	8.70	%	7.32	%	7.12	%	7.28	%
Adjusted Class E Share Total Return (continued inclusion of mark-to-market adjustments for borrowing-related interest rate hedge and debt instruments) (4)	(1.14)	%	(3.18)	%	(0.68)	%	10.23	%	7.90	%	7.41	%	7.54	%
Difference	(0.56)	%	0.39	%	(0.45)	%	(1.53)	%	(0.58)	%	(0.29)	%	(0.26)	%

(1) Performance is measured by total return, which includes income and appreciation (i.e., distributions and changes in NAV) and is a compound rate of return that assumes reinvestment of all distributions for the respective time period, and excludes upfront selling commissions and dealer manager fees paid by investors, except for returns noted “with upfront selling commissions and dealer manager fees” (“Total Return”). Past performance is not a guarantee of future results. Current performance may be higher or lower than the performance data quoted.

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(2) NAV inception was September 30, 2012, which is when we first sold shares of our common stock after converting to an NAV-based REIT on July 12, 2012. Investors in our fixed price offerings prior to NAV inception on September 30, 2012 are likely to have a lower return.

(3) The Total Returns presented are based on actual NAVs at which stockholders transacted, calculated pursuant to our valuation procedures. From NAV inception to November 30, 2019, these NAVs reflected mark-to-market adjustments on our borrowing-related interest rate hedge positions; and from September 1, 2017 to November 30, 2019, these NAVs also reflected mark-to-market adjustments on our borrowing-related debt instruments. Prior to September 1, 2017, our valuation policies dictated marking borrowing-related debt instruments to par except in certain circumstances; therefore, we did not formally track mark-to-market adjustments on our borrowing-related debt instruments during such time.

(4) The Adjusted Total Returns presented are based on adjusted NAVs calculated as if we had continued to mark our hedge and debt instruments to market following a policy change to largely exclude borrowing-related interest rate hedge and debt marks to market from our NAV calculations (except in certain circumstances pursuant to our valuation procedures), beginning with our NAV calculated as of December 31, 2019 NAV. Therefore, the NAVs used in the calculation are identical to those presented per Note (3) above from NAV inception through November 30, 2019. The adjusted NAVs include the incremental impacts to advisory fees and performance fees; however, the adjusted NAVs are not assumed to have impacted any share purchase or redemption. For calculation purposes, transactions were assumed to occur at the adjusted NAVs.

Trends Affecting Our Business

Our results of operations are affected by a variety of factors, including conditions in both the U.S. and global financial markets and the economic and political environments.

Global markets rallied during the first half of 2023, driven by normalization of the macroeconomic environment. While inflationary pressures have shown signs of moderation, the commercial real estate markets continued to be impacted by the macroeconomic environment, most notably, the Federal Reserve’s tightening monetary policy, associated borrowing cost increases and uncertainty with respect to small and regional U.S. banking demand to finance commercial real estate properties. Periods of excessive or prolonged inflation and rising interest rates may negatively impact our customers’ businesses, resulting in increased vacancy, concessions or bad debt expense, which may adversely and materially affect our net operating income and NAV.

We believe some of these market trends may be offset by the continued strong fundamentals of real estate. We believe our portfolio is well-positioned in this market environment. While we saw capitalization rates and yields widening modestly this past quarter which resulted in modest valuation declines, real estate market fundamentals remain favorable, supported by strong rent growth, low vacancy rates and demand generally outpacing supply in certain sectors like multifamily and industrial. However, there is no guarantee that our outlook will remain positive for the long-term, especially if leasing fundamentals weaken in the future.

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RESULTS OF OPERATIONS

Summary of 2023 Activities

During the six months ended June 30, 2023, we completed the following activities:

● We acquired two industrial properties for an aggregate contractual purchase price of approximately $50.8 million. We invested $7.9 million in our unconsolidated joint venture partnerships, which net acquired an additional five properties.

● We sold one partial retail property for net proceeds of approximately $53.7 million and recorded a net gain on sale of approximately $36.9 million related to the sale of this property.

● We leased approximately 2.3 million square feet of our commercial properties, which included 0.3 million square feet of new leases and 2.0 million square feet of renewals. During the first six months of 2023, rent growth on comparable commercial leases executed during the year averaged 22.5% when calculated using cash basis rental rates and 32.3% when calculated using GAAP basis rental rates. For our residential properties, rent growth on new and renewal leases executed during the year averaged 5.4%. As of June 30, 2023, rents across our industrial properties and residential properties, our two largest property segments, are estimated to be 21.9% and 7.2% below market (on a weighted-average basis), respectively, providing the opportunity for meaningful net operating income growth.

● We increased our leverage ratio from 31.8% as of December 31, 2022, to 32.7% as of June 30, 2023. Our leverage ratio for reporting purposes is calculated as the outstanding principal balance of our borrowings less cash and cash equivalents divided by the fair value of our real property, net investments in unconsolidated joint venture partnerships, investments in real estate-related securities and debt-related investments not associated with the DST Program (determined in accordance with our valuation procedures).

● We raised gross proceeds of $277.3 million from the sale of our common stock and DST Interests. This includes $83.8 million from the sale of 9.5 million shares of our common stock in our ongoing public offerings, including proceeds from our distribution reinvestment plan of approximately $16.0 million and $193.5 million of gross capital through private placement offerings by selling DST Interests, $27.3 million of which were financed by DST Program Loans.

● We redeemed 10.7 million shares of common stock at a weighted-average purchase price of $8.70 per share for an aggregate amount of $93.3 million.

● We entered into three interest rate cap agreements with a notional amount of $300.0 million that became effective in February 2023 and June 2023.

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Results for the Three and Six Months Ended June 30, 2023 Compared to Prior Periods

The following table sets forth information regarding our consolidated results of operations for the three and six months ended June 30, 2023, as compared to the three months ended March 31, 2023 and as compared to the six months ended June 30, 2022:

	For the Three Months Ended				Change				For the Six Months Ended				Change
($ in thousands, except per share data)	June 30, 2023		March 31, 2023		$		%		June 30, 2023		June 30, 2022		$		%
Revenues:
Rental revenues	$	77,204	$	77,960	$	(756)	(1.0)	%	$	155,164	$	135,999	$	19,165	14.1	%
Debt-related income		7,189		5,761		1,428	24.8			12,950		4,314		8,636	NM
Total revenues		84,393		83,721		672	0.8			168,114		140,313		27,801	19.8
Operating expenses:
Rental expenses		28,839		28,300		539	1.9			57,139		46,210		10,929	23.7
Real estate-related depreciation and amortization		33,858		33,197		661	2.0			67,055		64,354		2,701	4.2
General and administrative expenses		2,973		3,044		(71)	(2.3)			6,017		4,631		1,386	29.9
Advisory fees		9,623		9,538		85	0.9			19,161		15,370		3,791	24.7
Performance participation allocation		—		—		—	—			—		18,379		(18,379)	(100.0)
Acquisition costs and reimbursements		1,849		1,169		680	58.2			3,018		2,722		296	10.9
Impairment loss on debt-related investment held for sale		1,260		2,520		(1,260)	(50.0)			3,780		—		3,780	NM
Total operating expenses		78,402		77,768		634	0.8			156,170		151,666		4,504	3.0
Other (income) expenses:
Equity in loss (income) from unconsolidated joint venture partnerships		203		2,446		(2,243)	(91.7)			2,649		(708)		3,357	NM
Interest expense		37,882		37,545		337	0.9			75,427		58,184		17,243	29.6
Gain on sale of real estate property		—		(36,884)		36,884	100.0			(36,884)		(83,524)		46,640	55.8
Loss on extinguishment of debt and financing commitments, net		—		700		(700)	(100.0)			700		—		700	NM
(Gain) loss on derivative instruments		(192)		103		(295)	NM			(89)		(2,532)		2,443	96.5
Provision for current expected credit losses		(1,632)		5,630		(7,262)	NM			3,998		—		3,998	NM
Other income		(1,016)		(1,016)		—	—			(2,032)		(1,000)		(1,032)	NM
Total other expenses (income)		35,245		8,524		26,721	NM			43,769		(29,580)		73,349	NM
Net (loss) income		(29,254)		(2,571)		(26,683)	NM			(31,825)		18,227		(50,052)	NM
Net loss (income) attributable to redeemable noncontrolling interests		226		18		208	NM			244		(186)		430	NM
Net loss (income) attributable to noncontrolling interests		6,278		549		5,729	NM			6,827		(2,618)		9,445	NM
Net (loss) income attributable to common stockholders	$	(22,750)	$	(2,004)		(20,746)	NM	%	$	(24,754)	$	15,423	$	(40,177)	NM	%
Weighted-average shares outstanding—basic		206,214		206,774		(560)	(0.3)	%		206,493		184,878		21,615	11.7	%
Weighted-average shares outstanding—diluted		264,963		263,026		1,937	0.7	%		263,975		217,806		46,169	21.2	%
Net (loss) income attributable to common stockholders per common share—basic and diluted	$	(0.11)	$	(0.01)		(0.10)	NM	%	$	(0.12)	$	0.08	$	(0.20)	NM	%

NM = Not meaningful

Rental Revenues. Rental revenues are comprised of rental income, straight-line rent, and amortization of above- and below-market lease assets and liabilities. Total rental revenues decreased by $0.8 million for the three months ended June 30, 2023 as compared to the three months ended March 31, 2023, primarily due to lease expirations and reduced recovery revenue at certain properties during the second quarter of 2023. Total rental revenues increased by $19.2 million for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, primarily due to the increase in non-same store revenues resulting from significant net growth in our portfolio, partially offset by reduced occupancy at our Bala Pointe property. See “Same Store Portfolio Results of Operations” below for further details of the same store revenues.

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The following table presents the components of our consolidated rental revenues:

	For the Three Months Ended				Change				For the Six Months Ended June 30,				Change
(in thousands)	June 30, 2023		March 31, 2023		$		%		2023		2022		$		%
Rental income	$	75,619	$	76,064	$	(445)	(0.6)	%	$	151,683	$	131,981	$	19,702	14.9	%
Straight-line rent		674		1,068		(394)	(36.9)			1,742		1,966		(224)	(11.4)
Amortization of above- and below-market intangibles		911		828		83	10.0			1,739		2,052		(313)	(15.3)
Total rental revenues	$	77,204	$	77,960	$	(756)	(1.0)	%	$	155,164	$	135,999	$	19,165	14.1	%

Debt-Related Income. Debt-related income is comprised of interest income and amortization related to our debt-related investments and debt securities. Total debt-related income increased by $1.4 million and $8.6 million for the three and six months ended June 30, 2023 as compared to the three months ended March 31, 2023 and the six months ended June 30, 2022, respectively, primarily due to the growth of our investments in real estate debt and securities.

Rental Expenses. Rental expenses include certain property operating expenses typically reimbursed by our customers, such as real estate taxes, property insurance, property management fees, repair and maintenance and include certain non-recoverable expenses, such as consulting services and roof repairs. Total rental expenses for the three and six months ended June 30, 2023 increased by $0.5 and $10.9 million, as compared to the three months ended March 31, 2023 and the six months ended June 30, 2022, respectively, primarily due to (i) an increase in non-same store rental expenses as a result of our acquisition activity since January 1, 2022, which was partially offset by our disposition activity since January 1, 2022; and (ii) increased operating expenses across our same store residential properties, in aggregate. See “Same Store Portfolio Results of Operations” below for further details of the same store expenses.

The following table presents the various components of our rental expenses:

	For the Three Months Ended				Change				For the Six Months Ended June 30,				Change
(in thousands)	June 30, 2023		March 31, 2023		$		%		2023		2022		$		%
Real estate taxes	$	12,178	$	12,448	$	(270)	(2.2)	%	$	24,626	$	19,540	$	5,086	26.0	%
Repairs and maintenance		5,963		5,780		183	3.2			11,743		10,083		1,660	16.5
Utilities		2,439		2,888		(449)	(15.5)			5,327		5,014		313	6.2
Property management fees		1,960		1,933		27	1.4			3,893		3,284		609	18.5
Insurance		1,675		1,184		491	41.5			2,859		2,212		647	29.2
Other		4,624		4,067		557	13.7			8,691		6,077		2,614	43.0
Total rental expenses	$	28,839	$	28,300	$	539	1.9	%	$	57,139	$	46,210	$	10,929	23.7	%

All Remaining Income and Expenses. In aggregate, the remaining income and expenses increased by $26.8 million for the three months ended June 30, 2023, as compared to the three months ended March 31, 2023, primarily due to the following:

● a decrease in gain on sale of real estate property of $36.9 million related to the sale of one partial retail property.

Partially offset by:

● a decrease in provision for current expected credit loss of $7.3 million related to our debt-related investments.

In aggregate, the remaining income and expenses increased $66.9 million for the six months ended June 30, 2023, as compared to the same period in 2022, primarily due to the following:

● a decrease in gain on sale of real estate property of $46.6 million driven by lower disposition activity in 2023; and

● an increase in interest expense of $17.2 million driven primarily by higher interest expense on financing obligations associated with an increase in the sale of interests related to our DST Program and higher interest expense on certain variable interest rate debt.

Partially offset by:

● a decrease in performance participation allocation of $18.4 million as the requisite performance hurdle was met in 2022 and performance participation allocation expense was then recognized, while the performance hurdle was not met in 2023 and no performance participation allocation expense was recognized.

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Same Store Portfolio Results of Operations

Net operating income (“NOI”) is a supplemental non-GAAP measure of our property operating results. We define NOI for our properties as operating revenues less operating expenses. While we believe our net income (loss), as defined by GAAP, to be the most appropriate measure to evaluate our overall performance, we consider NOI to be an appropriate supplemental performance measure. We believe NOI provides useful information to our investors regarding our results of operations because NOI reflects the operating performance of our properties and excludes certain items that are not considered to be controllable in connection with the management of properties, such as real estate-related depreciation and amortization, general and administrative expenses, advisory fees, impairment charges, interest expense, gains on sale of properties, other income and expense, gains and losses on the extinguishment of debt and noncontrolling interests. However, NOI should not be viewed as an alternative measure of our financial performance since it excludes such items, which could materially impact our results of operations. Further, our NOI may not be comparable to that of other real estate companies, as they may use different methodologies for calculating NOI, therefore, our investors should consider net income (loss) as the primary indicator our overall financial performance.

We evaluate the performance of consolidated operating properties we own and manage using a same store analysis because the population of properties in this analysis is consistent from period to period, thereby eliminating the effects of any material changes in the composition of the aggregate portfolio on performance measures. We have defined the same store portfolio to include consolidated operating properties owned for the entirety of both the current and prior reporting periods for which the operations had been stabilized. Unconsolidated properties are excluded from the same store portfolio because we account for our interest in our joint venture partnership using the equity method of accounting; therefore, our proportionate share of income and loss is recognized in income (loss) of our unconsolidated joint venture partnership on the condensed consolidated statements of operations. Other operating properties not meeting the same store criteria are reflected in the non-same store portfolio. Our same store analysis may not be comparable to that of other real estate companies and should not be considered to be more relevant or accurate in evaluating our operating performance than current GAAP methodology.

The same store operating portfolio for the three months ended June 30, 2023 as compared to the three months ended March 31, 2023 presented below includes 90 properties totaling 18.4 million square feet owned as of January 1, 2023, which represented 98.4% of total rentable square feet as of June 30, 2023. The same store operating portfolio for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 presented below includes 60 properties totaling approximately 12.6 million square feet owned as of January 1, 2022, which represented 67.5% of total rentable square feet as of June 30, 2023.

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The following table reconciles GAAP net income (loss) to same store portfolio NOI for the three and six months ended June 30, 2023 as compared to the three and six months ended March 31, 2023 and June 30, 2022:

	For the Three Months Ended				For the Six Months Ended June 30,
(in thousands)	June 30, 2023		March 31, 2023		2023		2022
Net (loss) income attributable to common stockholders	$	(22,750)	$	(2,004)	$	(24,754)	$	15,423
Debt-related income		(7,189)		(5,761)		(12,950)		(4,314)
Real estate-related depreciation and amortization		33,858		33,197		67,055		64,354
General and administrative expenses		2,973		3,044		6,017		4,631
Advisory fees		9,623		9,538		19,161		15,370
Performance participation allocation		—		—		—		18,379
Acquisition costs and reimbursements		1,849		1,169		3,018		2,722
Impairment loss on debt-related investment held for sale		1,260		2,520		3,780		—
Equity in loss (income) from unconsolidated joint venture partnerships		203		2,446		2,649		(708)
Interest expense		37,882		37,545		75,427		58,184
Gain on sale of real estate property		—		(36,884)		(36,884)		(83,524)
Loss on extinguishment of debt and financing commitments, net		—		700		700		—
(Gain) loss on derivative instruments		(192)		103		(89)		(2,532)
Provision for current expected credit losses		(1,632)		5,630		3,998		—
Other income		(1,016)		(1,016)		(2,032)		(1,000)
Net (loss) income attributable to redeemable noncontrolling interests		(226)		(18)		(244)		186
Net (loss) income attributable to noncontrolling interests		(6,278)		(549)		(6,827)		2,618
Property net operating income	$	48,365	$	49,660	$	98,025	$	89,789
Less: Non-same store property NOI		279		156		23,579		16,331
Same store property NOI	$	48,086	$	49,504	$	74,446	$	73,458

Our real property markets are aggregated into four reportable property segments: office, retail, residential and industrial. Our property segments are based on our internal reporting of operating results used to assess performance based on the type of our properties. These property segments are comprised of the markets by which management and its operating teams conduct and monitor business. See “Note 15 to the Condensed Consolidated Financial Statements” for further information on our segments. Management considers rental revenues and NOI aggregated by property segment to be an appropriate way to analyze performance.

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The following table includes a breakout of results for our same store portfolio by property segment for rental revenues, rental expenses and NOI for the three and six months ended June 30, 2023, as compared to the three and six months ended March 31, 2023 and June 30, 2022:

	For the Three Months Ended						Change				For the Six Months Ended June 30,						Change
($ in thousands, except per square foot data)	June 30, 2023			March 31, 2023				$	%		2023			2022			$		%
Rental revenues:
Office	$	12,978		$	13,349		$	(371)	(2.8)	%	$	24,260		$	25,278		$	(1,018)	(4.0)	%
Retail		14,320			14,088			232	1.6			28,408			27,633			775	2.8
Residential		28,824			28,847			(23)	(0.1)			32,940			30,484			2,456	8.1
Industrial		20,712			21,245			(533)	(2.5)			29,848			27,903			1,945	7.0
Total same store rental revenues		76,834			77,529			(695)	(0.9)			115,456			111,298			4,158	3.7
Non-same store properties		370			431			(61)	(14.2)			39,708			24,701			15,007	60.8
Total rental revenues	$	77,204		$	77,960		$	(756)	(1.0)	%	$	155,164		$	135,999		$	19,165	14.1	%
Rental expenses:
Office	$	(6,439)		$	(6,629)		$	190	2.9	%	$	(12,430)		$	(11,147)		$	(1,283)	(11.5)	%
Retail		(3,773)			(3,315)			(458)	(13.8)			(7,088)			(7,238)			150	2.1
Residential		(14,068)			(13,189)			(879)	(6.7)			(14,819)			(12,921)			(1,898)	(14.7)
Industrial		(4,468)			(4,892)			424	8.7			(6,673)			(6,534)			(139)	(2.1)
Total same store rental expenses		(28,748)			(28,025)			(723)	(2.6)			(41,010)			(37,840)			(3,170)	(8.4)
Non-same store properties		(91)			(275)			184	66.9			(16,129)			(8,370)			(7,759)	92.7
Total rental expenses	$	(28,839)		$	(28,300)		$	(539)	(1.9)	%	$	(57,139)		$	(46,210)		$	(10,929)	(23.7)	%
Property NOI:
Office	$	6,539		$	6,720		$	(181)	(2.7)	%	$	11,830		$	14,131		$	(2,301)	(16.3)	%
Retail		10,547			10,773			(226)	(2.1)			21,320			20,395			925	4.5
Residential		14,756			15,658			(902)	(5.8)			18,121			17,563			558	3.2
Industrial		16,244			16,353			(109)	(0.7)			23,175			21,369			1,806	8.5
Total same store property NOI		48,086			49,504			(1,418)	(2.9)			74,446			73,458			988	1.3
Non-same store properties		279			156			123	78.8			23,579			16,331			7,248	44.4
Total property NOI	$	48,365		$	49,660		$	(1,295)	(2.6)	%	$	98,025		$	89,789		$	8,236	9.2	%
Same store average percentage leased:
Office		74.8	%		75.7	%						73.1	%		77.7	%
Retail		96.8			95.9							96.4			94.6
Residential		93.6			94.5							94.0			93.8
Industrial		99.4			99.7							99.6			97.8
Same store average annualized base rent per square foot:
Office	$	35.40		$	34.82						$	36.88		$	34.56
Retail		19.39			19.39							19.39			18.77
Residential		27.50			27.60							30.81			29.36
Industrial		6.09			5.96							6.50			6.18

Office Segment. For the three months ended June 30, 2023, our office segment same store NOI decreased by $0.2 million as compared to the three months ended March 31, 2023, primarily due to the lease expiration of a tenant at our Eden Prairie property during the second quarter of 2023. For the six months ended June 30, 2023, our office segment same store NOI decreased by $2.3 million as compared to the six months ended June 30, 2022, primarily due to decreased occupancy at our Bala Pointe property.

Retail Segment. For the three months ended June 30, 2023, our retail segment same store NOI decreased by $0.2 million as compared to the three months ended March 31, 2023, primarily due to increased bad debt expense at certain properties. For the six months ended June 30, 2023, our retail segment same store NOI increased by $0.9 million as compared to the six months ended June 30, 2022, primarily due to decreased bad debt expense at certain properties and increased occupancy at our Saugus property.

Residential Segment. For the three months ended June 30, 2023, our residential segment same store NOI decreased by $0.9 million as compared to the three months ended March 31, 2023, primarily due to increased repairs and maintenance and insurance operating expenses at certain of our residential properties. For the six months ended June 30, 2023, our residential segment same store NOI increased by $0.6 million, as compared to the six months ended June 30, 2022, primarily due to increased market rents, reduced vacancy and loss to lease, partially offset by increased operating expenses at certain of our residential properties.

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Industrial Segment. For the three months ended June 30, 2023, our industrial segment same store NOI remained consistent as compared to the three months ended March 31, 2023. For the six months ended June 30, 2023, our industrial segment same store NOI increased by $1.8 million as compared to the six months ended June 30, 2022, primarily due to increased occupancy at certain of our industrial properties.

ADDITIONAL MEASURES OF PERFORMANCE

Funds From Operations (“FFO”) and Adjusted Funds From Operations (“AFFO”)

We believe that FFO and AFFO, in addition to net income (loss) and cash flows from operating activities as defined by GAAP, are useful supplemental performance measures that our management uses to evaluate our consolidated operating performance. However, these supplemental, non-GAAP measures should not be considered as alternatives to net income (loss) or to cash flows from operating activities as indications of our performance and are not intended to be used as liquidity measures indicative of cash flow available to fund our cash needs, including our ability to make distributions to our stockholders. No single measure can provide users of financial information with sufficient information and only our disclosures read as a whole can be relied upon to adequately portray our financial position, liquidity and results of operations. In addition, other REITs may define FFO, AFFO and similar measures differently and choose to treat certain accounting line items in a manner different from us due to specific differences in investment and operating strategy or for other reasons.

FFO. As defined by the National Association of Real Estate Investment Trusts (“NAREIT”), FFO is a non-GAAP measure that excludes certain items such as real estate-related depreciation and amortization. We believe FFO is a meaningful supplemental measure of our operating performance that is useful to investors because depreciation and amortization in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. By excluding gains or losses on the sale of assets, we believe FFO provides a helpful additional measure of our consolidated operating performance on a comparative basis. We use FFO as an indication of our consolidated operating performance and as a guide to making decisions about future investments.

AFFO. AFFO further adjusts FFO to reflect the performance of our portfolio by adjusting for items we believe are not directly attributable to our operations. Our adjustments to FFO to arrive at AFFO include removing the impact of (i) our performance participation allocation, (ii) unrealized (gain) loss from changes in fair value of financial instruments and (iii) financing obligation liability appreciation (depreciation).

Although some REITs may present certain performance measures differently, we believe FFO and AFFO generally facilitate a comparison to other REITs that have similar operating characteristics to us. We believe investors are best served if the information that is made available to them allows them to align their analyses and evaluation with the same performance metrics used by management in planning and executing our business strategy. Neither the SEC, NAREIT, nor any regulatory body has passed judgment on the acceptability of the adjustments used to calculate AFFO. In the future, the SEC, NAREIT, or a regulatory body may decide to standardize the allowable adjustments across the non-traded REIT industry at which point we may adjust our calculations and characterizations of AFFO.

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The following unaudited table presents a reconciliation of GAAP net income (loss) to NAREIT FFO and AFFO:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands, except per share data)	2023		2022		2023		2022
GAAP net (loss) income	$	(29,254)	$	(6,567)	$	(31,825)	$	18,227
Weighted-average shares outstanding—diluted		264,963		224,857		263,975		217,806
GAAP net (loss) income per common share—diluted	$	(0.11)	$	(0.03)	$	(0.12)	$	0.08
Adjustments to arrive at FFO:
Real estate-related depreciation and amortization		33,858		36,903		67,055		64,354
Gain on sale of real estate property		—		(29,643)		(36,884)		(83,524)
Our share of adjustments from joint venture partnerships		1,288		131		4,312		2,163
NAREIT FFO	$	5,892	$	824	$	2,658	$	1,220
NAREIT FFO per common share—diluted	$	0.02	$	0.00	$	0.01	$	0.01
Adjustments to arrive at AFFO:
Performance participation allocation		—		6,186		—		18,379
Unrealized loss (gain) on financial instruments (1)		729		(982)		10,103		(2,532)
Financing obligation liability appreciation		1,922		8,525		4,784		12,531
Our share of adjustments from joint venture partnerships		(107)		(803)		179		(813)
AFFO	$	8,436	$	13,750	$	17,724	$	28,785

(1) Unrealized (gain) loss on financial instruments primarily relates to mark-to-market changes on our derivatives not designated as cash flow hedges, impairment loss on our debt-related investments and changes to our provision for current expected credit losses.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our primary sources of capital for meeting our cash requirements include debt financings, cash generated from operating activities, net proceeds from our public and private offerings and asset sales. Our principal uses of funds are distributions to our stockholders, payments under our debt obligations and payments pursuant to the master lease agreements related to properties in our DST Program, redemption payments, acquisition of properties and other investments and capital expenditures. Over time, we intend to fund a majority of our cash needs, including the repayment of debt and capital expenditures, from operating cash flows and refinancings. As of June 30, 2023, we had approximately $2.1 million of borrowings, including scheduled amortization payments, and $55.7 million of future minimum lease payments related to the properties in our DST Program coming due in the next 12 months. We expect to be able to repay our principal and interest obligations over the next 12 months and beyond through operating cash flows, refinancings, borrowings under our line of credit, proceeds from capital raise and/or disposition proceeds. Additionally, given the increase in market volatility, increased interest rates, high inflation and the potential recessionary environment, we may experience a decreased pace of net proceeds raised from our public offering, reducing our ability to purchase assets, which may similarly delay the returns generated from our investments and affect our NAV.

Our Advisor, subject to the oversight of our board of directors and, under certain circumstances, the investment committee or other committees established by our board of directors, will evaluate potential acquisitions or dispositions and will engage in negotiations with buyers, sellers and lenders on our behalf. Pending investment in property, debt, or other investments, we may decide to temporarily invest any unused proceeds from our public offerings in certain investments that are expected to yield lower returns than those earned on real estate assets. These lower returns may affect our NAV and our ability to make distributions to our stockholders. Potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from our public and private offerings, proceeds from the sale of assets and undistributed funds from operations.

As of June 30, 2023, our financial position was strong with 32.7% leverage, calculated as outstanding principal balance of our borrowings less cash and cash equivalents divided by the fair value of our real property, net investments in our unconsolidated joint venture partnerships, investments in real estate-related securities and debt-related investments not associated with the DST Program (determined in accordance with our valuation procedures). In addition, our consolidated portfolio was 93.7% occupied (94.7% leased)

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as of June 30, 2023 and is diversified across 92 properties totaling 18.7 million square feet across 33 geographic markets. Our properties contain a diverse roster of 408 commercial customers, large and small, and has an allocation based on fair value of real properties as determined by our NAV calculation of 36.5% residential, 35.9% industrial, 15.1% retail which is primarily grocery-anchored, and 12.5% office.

We believe that our cash on-hand, anticipated net offering proceeds, proceeds from our line of credit, and other financing and disposition activities should be sufficient to meet our anticipated future acquisition, operating, debt service, distribution and redemption requirements.

Cash Flows. The following table summarizes our cash flows for the following periods:

	For the Six Months Ended June 30,
(in thousands)	2023		2022		$ Change
Total cash provided by (used in):
Operating activities	$	(1,062)	$	49,620	$	(50,682)
Investing activities		(109,324)		(992,774)		883,450
Financing activities		110,370		953,240		(842,870)
Net increase in cash, cash equivalents and restricted cash	$	(16)	$	10,086	$	(10,102)

Net cash provided by operating activities decreased by approximately $50.7 million for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to changes in operating assets and liabilities of $15.7 million as compared to the prior period and the $23.7 million settlement of the 2022 performance participation allocation in cash in January 2023.

Net cash used in investing activities decreased by approximately $883.5 million for the six months ended June 30, 2023 compared to the same period in 2022, primarily due to a decrease in real estate property acquisition activity of $1.1 billion and a decrease in investment activity in unconsolidated joint venture partnerships of $40.0 million. This driver was partially offset by a decrease in proceeds from disposition of real estate property of $198.1 million and an increase in purchases of available-for-sale debt securities of $71.1 million.

Net cash provided by financing activities decreased by approximately $842.9 million for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to a decrease in net offering activity from our DST Program and public offering of $396.4 million, a decrease in net borrowing activity of $355.0 million and an increase in redemption activity of $77.5 million.

Capital Resources and Uses of Liquidity

In addition to our cash and cash equivalents balances available, our capital resources and uses of liquidity are as follows:

Line of Credit and Term Loans. As of June 30, 2023, we had an aggregate of $1.7 billion of commitments under our unsecured credit agreement, including $900.0 million under our line of credit and $800.0 million under our two term loans. As of that date, we had: (i) $352.0 million outstanding under our line of credit; and (ii) $800.0 million outstanding under our term loans. The weighted-average effective interest rate across all of our unsecured borrowings is 4.21%, which includes the effect of the interest rate swap and/or cap agreements related to $950.0 million in borrowings under our line of credit and our term loans.

As of June 30, 2023, the unused and available portions under our line of credit were $548.0 million and $547.9 million, respectively. Our $900.0 million line of credit matures in November 2025, and may be extended pursuant to two six-month extension options, subject to certain conditions, including the payment of extension fees. One $400.0 million term loan matures in November 2026, with no extension option available. Our other $400.0 million term loan matures in January 2027, with no extension option available. Our line of credit borrowings are available for general corporate purposes, including but not limited to the refinancing of other debt, payment of redemptions, acquisition and operation of permitted investments. Refer to “Note 5 to the Condensed Consolidated Financial Statements” for additional information regarding our line of credit and term loans.

In July 2017, the Financial Conduct Authority (“FCA”) that regulates LIBOR announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee (“ARRC”), which identified the Secured Overnight Financing Rate as its

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preferred alternative rate for LIBOR in derivatives and other financial contracts. Any changes adopted by the FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.

LIBOR has been phased out and ceased publication after June 2023. As of June 30, 2023, one of our mortgage notes had an initial or extended maturity date beyond June 2023 with exposure to LIBOR. Effective July 1, 2023, we have converted the interest rate of this mortgage note to Term SOFR and our consolidated debt no longer has exposure to LIBOR.

Mortgage Notes. As of June 30, 2023, we had property-level borrowings of approximately $517.5 million outstanding with a weighted-average remaining term of approximately 4.0 years. These borrowings are secured by mortgages or deeds of trust and related assignments and security interests in the collateralized properties, and had a weighted-average interest rate of 3.88%. Refer to “Note 5 to the Condensed Consolidated Financial Statements” for additional information regarding the mortgage notes.

Debt Covenants. Our line of credit, term loan and mortgage note agreements contain various property-level covenants, including customary affirmative and negative covenants. In addition, our line of credit and term loan agreements contain certain corporate level financial covenants, including leverage ratio, fixed charge coverage ratio and tangible net worth thresholds. These covenants may limit our ability to incur additional debt, or to pay distributions. We were in compliance with our debt covenants as of June 30, 2023.

Leverage. We use financial leverage to provide additional funds to support our investment activities. We may finance a portion of the purchase price of any real estate asset that we acquire with borrowings on short or long-term basis from banks, life insurance companies and other lenders. We calculate our leverage for reporting purposes as the outstanding principal balance of our borrowings less cash and cash equivalents divided by the fair value of our real property, net investment in our unconsolidated joint venture partnerships and debt-related investments not associated with the DST Program (determined in accordance with our valuation procedures). We had leverage of 32.7% as of June 30, 2023. Our current leverage target is between 40-60%. Although we will generally work to maintain our targeted leverage ratio, there are no assurances that we will maintain the targeted range disclosed above or achieve any other leverage ratio that we may target in the future. Due to the increase in interest rates in 2022, increased market volatility and the potential of a global recession in the near-term, the cost of financing or refinancing our purchase of assets may affect returns generated by our investments. Additionally, these factors may cause our borrowing capacity to be reduced, which could similarly delay or reduce benefits to our stockholders.

Future Minimum Lease Payments Related to the DST Program. As of June 30, 2023, we had $1.1 billion of future minimum lease payments related to the DST Program. The underlying interests of each property that is sold to investors pursuant to the DST Program are leased back by an indirect wholly-owned subsidiary of the Operating Partnership on a long-term basis of up to 29 years.

Offering Proceeds. For the six months ended June 30, 2023, the amount of aggregate gross proceeds raised from our public offerings (including shares issued pursuant to the distribution reinvestment plan) was $83.8 million ($79.9 million net of direct selling costs).

Distributions. To obtain the favorable tax treatment accorded to REITs, we normally will be required each year to distribute to our stockholders at least 90% of our real estate investment trust taxable income, determined without regard to the deduction for distributions paid and by excluding net capital gains. The payment of distributions is determined by our board of directors and may be adjusted at its discretion at any time. Distribution levels are set by our board of directors at a level it believes to be appropriate and sustainable based upon a review of a variety of factors including the current and anticipated market conditions, current and anticipated future performance and make-up of our investments, our overall financial projections and expected future cash needs. We intend to continue to make distributions on a monthly basis.

On June 14, 2023, our board of directors authorized an increase to the amount of monthly gross distributions for each class of our common stock, such that distributions in the amount of $0.03333 per share will be paid to stockholders of record on July 31, 2023, August 31, 2023 and September 29, 2023. The new monthly gross distribution per share reflects an increase to the amount of the previous monthly gross distribution of $0.03125 per share that has been paid since January 31, 2018. The distributions on Class T shares, Class S shares and Class D shares of our common stock will be reduced by the respective distribution fees that are payable with respect to Class T shares, Class S shares and Class D shares. The distributions will be paid on or about the last business day of each respective month to stockholders of record as of the close of business on the last business day of each respective month. There can be no assurances that this new distribution rate will be maintained in future periods.

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The following table outlines sources used, as determined on a GAAP basis, to pay total gross distributions (which are paid in cash or reinvested in shares of our common stock through our distribution reinvestment plan) for the periods indicated below:

	For the Three Months Ended June 30, 2023				For the Three Months Ended June 30, 2022
($ in thousands)	Amount		Percentage		Amount		Percentage
Distributions
Paid in cash (1)	$	16,869	67.9	%	$	13,715	65.1	%
Reinvested in shares		7,974	32.1			7,362	34.9
Total (2)	$	24,843	100.0	%	$	21,077	100.0	%
Sources of Distributions
Cash flows from operating activities	$	14,711	59.2	%	$	13,715	65.1	%
Borrowings		2,158	8.7			—	—
DRIP (3)		7,974	32.1			7,362	34.9
Total (2)	$	24,843	100.0	%	$	21,077	100.0	%

	For the Six Months Ended June 30, 2023				For the Six Months Ended June 30, 2022
($ in thousands)	Amount		Percentage		Amount		Percentage
Distributions
Paid in cash (1)	$	33,513	67.7	%	$	26,600	65.1	%
Reinvested in shares		15,983	32.3			14,238	34.9
Total (2)	$	49,496	100.0	%	$	40,838	100.0	%
Sources of Distributions
Cash flows from operating activities	$	—	—	%	$	26,600	65.1	%
Borrowings		33,513	67.7			—	—
DRIP (3)		15,983	32.3			14,238	34.9
Total (2)	$	49,496	100.0	%	$	40,838	100.0	%

(1) Includes other cash distributions consisting of: (i) distributions paid to noncontrolling interest holders; and (ii) ongoing distribution fees paid to the Dealer Manager with respect to Class T, Class S and Class D shares and OP Units.

(2) Includes distributions paid to holders of OP Units for redeemable noncontrolling interests.

(3) Stockholders may elect to have their distributions reinvested in shares of our common stock through our distribution reinvestment plan.

For the three months ended June 30, 2023 and 2022, our FFO was $5.9 million, or 23.7% of our total distributions, and $0.8 million, or 3.9% of our total distributions, respectively. For the six months ended June 30, 2023 and 2022, our FFO was $2.7 million, or 5.4% of our total distributions, and $1.2 million, or 3.0% of our total distributions, respectively. FFO is a non-GAAP operating metric and should not be used as a liquidity measure. However, management believes the relationship between FFO and distributions may be meaningful for investors to better understand the sustainability of our operating performance compared to distributions made. Refer to “Additional Measures of Performance” above for the definition of FFO, as well as a detailed reconciliation of our GAAP net income (loss) to FFO.

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Redemptions. Below is a summary of redemptions and repurchases pursuant to our share redemption program for the six months ended June 30, 2023 and 2022. All eligible redemption requests were fulfilled for the periods presented. Eligible redemption requests are requests submitted in good order by the request submission deadline set forth in the share redemption program. Our board of directors may modify or suspend our current share redemption programs if it deems such action to be in the best interest of our stockholders. Refer to Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds—Share Redemption Program” for detail regarding our share redemption program.

	For the Six Months Ended June 30,
(in thousands, except for per share data)	2023		2022
Number of shares redeemed or repurchased		10,726		3,408
Aggregate dollar amount of shares redeemed or repurchased	$	93,319	$	28,500
Average redemption or repurchase price per share	$	8.70	$	8.37

For the six months ended June 30, 2023 and 2022, we received and redeemed 100% of eligible redemption requests for an aggregate amount of approximately $93.3 million and $28.5 million, respectively, which we redeemed using cash flows from operating activities in excess of our distributions paid in cash, cash on hand, proceeds from our public offerings, proceeds from the disposition of properties, and borrowings under our line of credit. We generally repay funds borrowed from our line of credit from a variety of sources including: cash flows from operating activities in excess of our distributions; proceeds from our public offerings; proceeds from the disposition of properties and other longer-term borrowings.

For the purposes of the share redemption program, redemption requests received in a month are included on the last day of such month because that is the last day the shareholders have rights in the Company. We record these redemptions in our financial statements as having occurred on the first day of the next month following receipt of the redemption request because shares redeemed in a given month are considered outstanding through the last day of the month.

CRITICAL ACCOUNTING ESTIMATES

Our unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our unaudited condensed consolidated financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our condensed consolidated financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. For a detailed description of our critical accounting estimates, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Form 10-K. As of  June 30, 2023, our critical accounting estimates have not changed from those described in our 2022 Form 10-K.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We have been and may continue to be exposed to the impact of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows, and optimize overall borrowing costs. To achieve these objectives, we often plan to borrow on a fixed interest rate basis for longer-term debt and utilize interest rate swap and cap agreements on certain variable interest rate debt in order to limit the effects of changes in interest rates on our results of operations. As of June 30, 2023, our debt outstanding consisted of borrowings under our line of credit, term loans and mortgage notes.

Fixed Interest Rate Debt. As of June 30, 2023, our fixed interest rate debt consisted of $309.9 million under our mortgage notes and $650.0 million of borrowings under our term loans that were effectively fixed through the use of interest rate swaps. In total, our fixed interest rate debt represented 57.5% of our total consolidated debt as of June 30, 2023. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed interest rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes could affect the fair value of our fixed interest rate debt. As of June 30, 2023, the fair value and the carrying value of our consolidated fixed interest rate debt, excluding the values of any associated hedges, was $925.6 million and $959.9 million, respectively. The fair value estimate of this debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated on June 30, 2023. Given we generally expect to hold our fixed interest rate debt instruments to maturity or when they otherwise open up for prepayment at par, and the amounts due under such debt instruments should be limited to the outstanding principal balance and any accrued and unpaid interest at such time, we do not expect that the resulting change in fair value of our fixed interest rate debt instruments due to market fluctuations in interest rates, would have a significant impact on our operating cash flows.

Variable Interest Rate Debt. As of June 30, 2023, our consolidated variable interest rate debt consisted of $352.0 million of borrowings under our line of credit, $150.0 million of borrowings under our term loans and $207.6 million under our mortgage notes, which represented 42.5% of our total consolidated debt. Interest rate changes on the variable portion of our consolidated variable-rate debt could impact our future earnings and cash flows, but would not necessarily affect the fair value of such debt. As of June 30, 2023, we were exposed to market risks related to fluctuations in interest rates on $709.6 million of consolidated borrowings; however, $507.6 million of these borrowings are capped through the use of five interest rate cap agreements. A hypothetical 25 basis points increase in the all-in rate on the outstanding balance of our consolidated variable interest rate debt as of June 30, 2023, would increase our annual interest expense by approximately $0.5 million, including the effects of our interest rate cap agreements.

Derivative Instruments. As of June 30, 2023, we had 17 outstanding and effective derivative instruments, with a total notional amount of $1.2 billion. These derivative instruments were comprised of interest rate swaps and interest rate caps that were designed to mitigate the risk of future interest rate increases by either providing a fixed interest rate or capping the variable interest rate for a limited, pre-determined period of time. See “Note 5 to the Condensed Consolidated Financial Statements” for further detail on our derivative instruments. We are exposed to credit risk of the counterparty to our interest rate cap and swap agreements in the event of non-performance under the terms of the agreements. If we were not able to replace these caps or swaps in the event of non-performance by the counterparty, we would be subject to variability of the interest rate on the amount outstanding under our debt that is fixed or capped through the use of the swaps or caps, respectively.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the direction of our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2023. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of June 30, 2023, our disclosure controls and procedures were effective.

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Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the six months ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A, “Risk Factors” of our 2022 Form 10-K, which could materially affect our business, financial condition and/or future results. The risks described in our 2022 Form 10-K, are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

There have been no material changes to the risk factors disclosed in our 2022 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share Redemption Program

While stockholders may request on a monthly basis that we redeem all or any portion of their shares pursuant to our share redemption program, we are not obligated to redeem any shares and may choose to redeem only some, or even none, of the shares that have been requested to be redeemed in any particular month, in our discretion. In addition, our ability to fulfill redemption requests is subject to a number of limitations. As a result, share redemptions may not be available each month. Under our share redemption program, to the extent we choose to redeem shares in any particular month, we will only redeem shares as of the last calendar day of that month (each such date, a “Redemption Date”). Shares redeemed on the Redemption Date remain outstanding on the Redemption Date and are no longer outstanding on the day following the Redemption Date. Redemptions will be made at the transaction price in effect on the Redemption Date, except that shares that have not been outstanding for at least one year will be redeemed at 95% of the transaction price (an “Early Redemption Deduction”). The Early Redemption Deduction may be waived in certain circumstances including: (i) in the case of redemption requests arising from the death or qualified disability of the holder; (ii) in the event that a stockholder’s shares are redeemed because the stockholder has failed to maintain the $2,000 minimum account balance or (iii) with respect to shares purchased through our distribution reinvestment plan. To have his or her shares redeemed, a stockholder’s redemption request and required documentation must be received in good order by 4:00 p.m. (Eastern time) on the second to last business day of the applicable month. Settlements of share redemptions will be made within three business days of the Redemption Date. An investor may withdraw its redemption request by notifying the transfer agent before 4:00 p.m. (Eastern time) on the last business day of the applicable month.

The total amount of aggregate redemptions of Class T, Class S, Class D, Class I and Class E shares (based on the price at which the shares are redeemed) will be limited during each calendar month to 2% of the aggregate NAV of all classes as of the last calendar day of the previous quarter and in each calendar quarter will be limited to 5% of the aggregate NAV of all classes of shares as of the last calendar day of the previous calendar quarter; provided, however, that every month and quarter each class of our common stock will be allocated capacity within such aggregate limit to allow stockholders in such class to either (a) redeem shares (based on the price at which the shares are redeemed) equal to at least 2% of the aggregate NAV of such share class as of the last calendar day of the previous quarter, or, if more limiting, (b) redeem shares (based on the price at which the shares are redeemed) over the course of a given quarter equal to at least 5% of the aggregate NAV of such share class as of the last calendar day of the previous quarter (collectively referred to herein as the “2% and 5% limits”), which in the second and third months of a quarter could be less than 2% of the NAV of such share class. In the event that we determine to redeem some but not all of the shares submitted for redemption during any month, shares redeemed at the end of the month will be redeemed on a pro rata basis. Even if the class-specific allocations are exceeded for a class, the program may offer such class additional capacity under the aggregate program limits. Redemptions and pro rata treatment, if necessary, will first be applied within the class-specific allocated capacity and then applied on an aggregate basis to the extent there is remaining capacity. All unsatisfied redemption requests must be resubmitted after the start of the next month or quarter, or upon the recommencement of the share redemption program, as applicable.

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For both the aggregate and class-specific allocations described above, (i) provided that the share redemption program has been operating and not suspended for the first month of a given quarter and that all properly submitted redemption requests were satisfied, any unused capacity for that month will carry over to the second month and (ii) provided that the share redemption program has been operating and not suspended for the first two months of a given quarter and that all properly submitted redemption requests were satisfied, any unused capacity for those two months will carry over to the third month. In no event will such carry-over capacity permit the redemption of shares with aggregate value (based on the redemption price per share for the month the redemption is effected) in excess of 5% of the combined NAV of all classes of shares as of the last calendar day of the previous calendar quarter (provided that for these purposes redemptions may be measured on a net basis as described in the paragraph below).

We currently measure the foregoing redemption allocations and limitations based on net redemptions during a month or quarter, as applicable. The term “net redemptions” means, during the applicable period, the excess of our share redemptions (capital outflows) over the proceeds from the sale of our shares (capital inflows). For purposes of measuring our redemption capacity pursuant to our share redemption program, proceeds from new subscriptions in a month are included in capital inflows on the first day of the next month because that is the first day on which such shareholders have rights in the Company. Also for purposes of measuring our redemption capacity pursuant to our share redemption program, redemption requests received in a month are included in capital outflows on the last day of such month because that is the last day shareholders have rights in the Company. We record these redemptions in our financial statements as having occurred on the first day of the next month following receipt of the redemption request because shares redeemed in a given month are outstanding through the last day of the month. Net redemptions for the class-specific allocations will be based only on the capital inflows and outflows of that class, while net redemptions for the overall program limits would be based on capital inflows and outflows of all classes. Thus, for any given calendar quarter, the maximum amount of redemptions during that quarter will be equal to (i) 5% of the combined NAV of all classes of shares as of the last calendar day of the previous calendar quarter, plus (ii) proceeds from sales of new shares in this offering (including purchases pursuant to our distribution reinvestment plan) and the Class E distribution reinvestment plan offering since the beginning of the current calendar quarter. The same would apply for a given month, except that redemptions in a month would be subject to the 2% limit described above (subject to potential carry-over capacity), and netting would be measured on a monthly basis. With respect to future periods, our board of directors may choose whether the allocations and limitations will be applied to “gross redemptions,” i.e., without netting against capital inflows, rather than to net redemptions. If redemptions for a given month or quarter are measured on a gross basis rather than on a net basis, the redemption limitations could limit the amount of shares redeemed in a given month or quarter despite our receiving a net capital inflow for that month or quarter. In order for our board of directors to change the application of the allocations and limitations from net redemptions to gross redemptions or vice versa, we will provide notice to stockholders in a prospectus supplement or special or periodic report filed by us, as well as in a press release or on our website, at least 10 days before the first business day of the quarter for which the new test will apply. The determination to measure redemptions on a gross basis, or vice versa, will only be made for an entire quarter, and not particular months within a quarter.

Although the vast majority of our assets consist of properties that cannot generally be readily liquidated on short notice without impacting our ability to realize full value upon their disposition, we intend to maintain a number of sources of liquidity including (i) cash equivalents (e.g. money market funds), other short-term investments, U.S. government securities, agency securities and liquid real estate-related securities and (ii) one or more borrowing facilities. We may fund redemptions from any available source of funds, including operating cash flows, borrowings, proceeds from this offering and/or sales of our assets.

Should redemption requests, in our judgment, place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on the company as a whole, or should we otherwise determine that investing our liquid assets in real properties or other illiquid investments rather than redeeming our shares is in the best interests of the company as a whole, then we may choose to redeem fewer shares than have been requested to be redeemed, or none at all. Further, our board of directors may modify or suspend our share redemption program if it deems such action to be in our best interest and the best interest of our stockholders. If the transaction price for the applicable month is not made available by the tenth business day prior to the last business day of the month (or is changed after such date), then no redemption requests will be accepted for such month and stockholders who wish to have their shares redeemed the following month must resubmit their redemption requests. The above description of the share redemption program is a summary of certain of the terms of the share redemption program. Please see the full text of the share redemption program, which is incorporated by reference as Exhibit 4.2 to this Quarterly Report on Form 10-Q, for all the terms and conditions.

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The table below summarizes the redemption activity for the three months ended June 30, 2023, for which all eligible redemption requests were redeemed in full:

				Total Number of Shares	Maximum Number of
				Redeemed as Part of	Shares That May Yet Be
	Total Number of	Average Price		Publicly Announced	Redeemed Pursuant
(shares in thousands)	Shares Redeemed	Paid Per Share (1)		Plans or Programs	to the Program (2)
For the Month Ended:
April 30, 2023	1,959	$	8.70	1,959	—
May 31, 2023	1,981		8.63	1,981	—
June 30, 2023 (3)	2,760		8.60	2,760	—
Total	6,700	$	8.64	6,700	—

(1) Amount represents the average price paid to investors upon redemption.

(2) We limit the number of shares that may be redeemed under the share redemption program as described above.

(3) Redemption requests accepted in June 2023 are considered redeemed on July 1, 2023 for accounting purposes and, as a result, are not included in the table above. This differs from how we treat capital outflows for purposes of the limitations of our share redemption program. For purposes of measuring our redemption capacity pursuant to our share redemption program, redemption requests received in a month are included in capital outflows on the last day of such month because that is the last day shareholders have rights in the Company and we redeemed $72.8 million of shares of common stock for the three months ended June 30, 2023.

ITEM 5. OTHER INFORMATION

Distribution Reinvestment Plan Suitability Requirement

Pursuant to the terms of our distribution reinvestment plan (“DRP”), participants in the DRP must promptly notify us if at any time they fail to meet the current suitability requirements for making an investment in us.

The current suitability standards require that Class E stockholders participating in the DRP other than investors in Arizona, California, Ohio and Oregon have either:

● a net worth (exclusive of home, home furnishings and automobiles) of $150,000 or more; or

● a net worth (exclusive of home, home furnishings and automobiles) of at least $45,000 and had during the last tax year, or estimate that such investor will have during the current tax year, a minimum of $45,000 annual gross income.

The current suitability standards require that Class E stockholders participating in the DRP in Arizona, California, Ohio and Oregon have either:

● a net worth (exclusive of home, home furnishings and automobiles) of $250,000 or more; or

● a net worth (exclusive of home, home furnishings and automobiles) of at least $70,000 and had during the last tax year, or estimate that such investor will have during the current tax year, a minimum of $70,000 annual gross income.

In addition, Class E stockholders participating in the DRP in Ohio and Oregon must have a net worth of at least 10 times their investment in us and any of our affiliates. The current suitability standards for Class T, Class S, Class D and Class I stockholders participating in the DRP are listed in the section entitled “Suitability Standards” in our current Class T, Class S, Class D and Class I public offering prospectus on file at www.sec.gov and on our website at areswmsresources.com/investment-solutions/AREIT.

Stockholders can notify us of any changes to their ability to meet the suitability requirements or change their DRP election by contacting us at Ares Real Estate Income Trust Inc., Investor Relations, One Tabor Center, 1200 Seventeenth Street, Suite 2900, Denver, Colorado 80202, Telephone: (303) 228-2200.

Rule 10b5-1 Trading Plans

During the three months ended June 30, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

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ITEM 6. EXHIBITS

Exhibit Number	Description
3.1	Articles of Restatement. Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K filed with the SEC on March 21, 2012.
3.2	Articles of Amendment (name change). Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on July 12, 2012.
3.3	Articles Supplementary (Class A shares). Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the SEC on July 12, 2012.
3.4	Articles Supplementary (Class W shares). Incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K filed with the SEC on July 12, 2012.
3.5	Articles Supplementary (Class I shares). Incorporated by reference to Exhibit 3.4 to the Current Report on Form 8-K filed with the SEC on July 12, 2012.
3.6	Certificate of Correction to Articles of Restatement. Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on March 26, 2014.
3.7	Certificate of Correction to Articles of Restatement. Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on August 30, 2016.
3.8	Articles of Amendment (revised terms of share classes). Incorporated by reference to Exhibit 3.8 to the Post-Effective Amendment No. 10 to Registration Statement on Form S-11 (File No. 333-197767) filed with the SEC on September 1, 2017.
3.9	Articles of Amendment (name change). Incorporated by reference to Exhibit 3.9 to the Post-Effective Amendment No. 10 to Registration Statement on Form S-11 (File No. 333-197767) filed with the SEC on September 1, 2017.
3.10	Articles of Amendment (name change). Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on December 3, 2021.
3.11	Tenth Amended and Restated Bylaws. Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on March 3, 2023.
4.1	Fifth Amended and Restated Distribution Reinvestment Plan. Incorporated by reference to Appendix B to the Pre-Effective Amendment No. 1 to Registration Statement on Form S-11 (File No. 333-222630) filed with the SEC on August 17, 2018.
4.2	Third Amended and Restated Share Redemption Program effective as of December 1, 2021. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on December 3, 2021.
4.3	Statement regarding transfer restrictions, preferences, limitations and rights of holders of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates). Incorporated by reference to Exhibit 4.5 to the Post-Effective Amendment No. 10 to Registration Statement on Form S-11 (File No. 333-197767) filed with the SEC on September 1, 2017.
4.4	Valuation Procedures. Incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K filed with the SEC on March 15, 2022.
4.5	Multiple Class Plan. Incorporated by reference to Exhibit 4.5 to the Quarterly Report on Form 10-Q filed with the SEC on August 12, 2019.
10.1*	Second Amended and Restated Advisory Agreement (2023), effective as of June 3, 2023.
10.2*	Twelfth Amended and Restated Limited Partnership Agreement of AREIT Operating Partnership LP dated as of June 3, 2023.

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Exhibit Number	Description
10.3*	Form of Timberline Profit Interest Letter.
10.4*	Form of Property Management Agreement.
10.5*	Form of Management Services Agreement.
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1*	Consent of Altus Group U.S. Inc.
101	The following materials from Ares Real Estate Income Trust Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed on August 11, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) Condensed Consolidated Statements of Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed or furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		ARES REAL ESTATE INCOME TRUST INC.
August 11, 2023	By:	/s/ JEFFREY W. TAYLOR
		Jeffrey W. Taylor Partner, Co-President (Principal Executive Officer)
August 11, 2023	By:	/s/ LAINIE P. MINNICK
		Lainie P. Minnick Managing Director, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

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EX-10.1

Exhibit 10.1

SECOND AMENDED AND RESTATED ADVISORY AGREEMENT (2023)

among

ARES REAL ESTATE INCOME TRUST INC.,

AREIT OPERATING PARTNERSHIP LP

and

ARES COMMERCIAL REAL ESTATE MANAGEMENT LLC

TABLE OF CONTENTS

1.DEFINITIONS‌1

2.APPOINTMENT‌10

3.DUTIES OF THE ADVISOR‌10

4.AUTHORITY OF ADVISOR‌16

5.BANK ACCOUNTS‌16

6.RECORDS; ACCESS‌17

7.LIMITATIONS ON ACTIVITIES‌17

8.RELATIONSHIP WITH DIRECTORS‌17

9.FEES‌17

10.EXPENSES‌21

11.OTHER SERVICES‌23

12.REIMBURSEMENT TO THE ADVISOR‌24

13.OTHER ACTIVITIES OF THE ADVISOR.‌24

14.TERM; TERMINATION OF AGREEMENT‌25

15.TERMINATION BY THE PARTIES‌25

16.ASSIGNMENT‌25

17.PAYMENTS TO AND DUTIES OF ADVISOR UPON TERMINATION‌26

18.INDEMNIFICATION BY THE COMPANY AND THE OPERATING PARTNERSHIP‌27

19.INDEMNIFICATION BY ADVISOR‌28

20.NOTICES‌28

21.MODIFICATION‌29

22.SEVERABILITY‌29

23.CONSTRUCTION‌29

i

24.ENTIRE AGREEMENT‌29

25.INDULGENCES, NOT WAIVERS‌29

26.GENDER‌30

27.TITLES NOT TO AFFECT INTERPRETATION‌30

28.EXECUTION IN COUNTERPARTS‌30

29.INITIAL INVESTMENT‌30

ii

SECOND AMENDED AND RESTATED ADVISORY AGREEMENT (2023)

THIS SECOND AMENDED AND RESTATED ADVISORY AGREEMENT (2023) (this “Agreement”), dated and effective as of June 3, 2023, is among Ares Real Estate Income Trust Inc., a Maryland corporation (the “Company”), AREIT Operating Partnership LP, a Delaware limited partnership (the “Operating Partnership”), and Ares Commercial Real Estate Management LLC, a Delaware limited liability company (the “Advisor”).

W I T N E S S E T H

WHEREAS, the Company has qualified as a REIT (as defined below), and invests its funds in investments permitted by the terms of Sections 856 through 860 of the Code (as defined below);

WHEREAS, the Company is the general partner of the Operating Partnership and conducts all its business and makes all investments in Real Properties, Real Estate Related Securities, and Debt Investments through the Operating Partnership;

WHEREAS, the Company and the Operating Partnership desire to avail themselves of the experience, sources of information, advice, assistance and certain facilities of the Advisor and to have the Advisor undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision, of the Board of Directors of the Company all as provided herein;

WHEREAS, the Advisor is willing to undertake to render such services, subject to the supervision of the Board of Directors, on the terms and conditions hereinafter set forth;

WHEREAS, the Company, the Operating Partnership and the Advisor entered into that certain Amended and Restated Advisory Agreement (2023), dated as of April 30, 2023 (the “Prior Agreement”);

WHEREAS, the parties hereto now wish to amend and restated the Prior Agreement in its entirety.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

1.DEFINITIONS. As used in this Agreement, the following terms have the definitions hereinafter indicated:

Acquisition Expenses. Any and all expenses, exclusive of Acquisition Fees, incurred by the Company, the Operating Partnership, the Advisor, or any of their Affiliates in connection with the selection, acquisition or development of any Real Property, Real Estate Related Security or Debt Investment, whether or not acquired, including, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, nonrefundable option payments on property not acquired, accounting fees and expenses, title insurance premiums, and the costs of performing due diligence.

1

Acquisition Fees. Any and all fees and commissions, exclusive of Acquisition Expenses, paid by any Person to any other Person (including any fees or commissions paid by or to any Affiliate of the Company, the Operating Partnership or the Advisor) in connection with making or investing in Debt Investments or the purchase, development or construction of a Real Property, including real estate commissions, selection fees, development fees, construction fees, nonrecurring management fees, loan fees, points or any other fees of a similar nature. Excluded shall be development fees and construction fees paid to any Person not affiliated with the Sponsor in connection with the actual development and construction of a project.

Advisor. Ares Commercial Real Estate Management LLC, a Delaware limited liability company, any successor advisor to the Company, the Operating Partnership or any person or entity to which Ares Commercial Real Estate Management LLC or any successor advisor subcontracts substantially all of its functions. Notwithstanding the forgoing, a Person hired or retained by Ares Commercial Real Estate Management LLC to perform property and securities management and related services for the Company or the Operating Partnership that is not hired or retained to perform substantially all of the functions of Ares Commercial Real Estate Management LLC with respect to the Company or the Operating Partnership as a whole shall not be deemed to be an Advisor.

Advisory Fee. The fee payable to the Advisor pursuant to Section 9(b).

Affiliate or Affiliated. With respect to any Person, (i) any Person directly or indirectly owning, controlling or holding, with the power to vote, ten percent (10%) or more of the outstanding voting securities of such other Person; (ii) any Person ten percent (10%) or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person; (iv) any executive officer, director, trustee or general partner of such other Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner.

Annual Total Return Amount. The overall investment return, expressed as a dollar amount per OP Unit, which shall be equal to the sum of (1) the Weighted-Average Distributions per OP Unit over the applicable period, and (2) the Ending VPU, adjusted to remove the negative impact on the overall investment return from the payment or the obligation to pay, or distribute, as applicable, the Performance Component and Class-Specific Fees, less the Beginning VPU.

Articles of Incorporation. The Articles of Incorporation of the Company, as amended from time to time.

Average Invested Assets. For a specified period, the average of the aggregate book value of the assets of the Company invested, directly or indirectly, in Real Estate Related Securities, Debt Investments and Real Properties, before deducting depreciation, bad debts or other non-cash reserves, computed by taking the average of such values at the end of each month during such period.

Beginning VPU. The VPU determined as of the end of the most recent month prior to the commencement of the applicable period.

2

Board of Directors or Board. The persons holding such office, as of any particular time, under the Articles of Incorporation of the Company, whether they be the Directors named therein or additional or successor Directors.

Bylaws. The bylaws of the Company, as the same are in effect from time to time.

Cause. With respect to the termination of this Agreement, fraud, criminal conduct, willful misconduct or willful or negligent breach of fiduciary duty by the Advisor, or an uncured material breach of this Agreement by the Advisor.

Class E Unit. An OP Unit entitling the holder thereof to the rights of a holder of Class E Units as provided in the Operating Partnership Agreement.

Class-Specific Fees. Any Distribution Fee expenses accrued or allocated directly or indirectly to a particular class of OP Units or Shares.

Code. Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

Commercial Real Property. A Real Property other than a Multifamily Real Property.

Company. Company shall have the meaning set forth in the preamble of this Agreement.

Company Property. Any and all property, real, personal or otherwise, tangible or intangible, which is transferred or conveyed to the Company (including all rents, income, profits and gains therefrom), and which is owned or held by, or for the account of, the Company.

Debt Investments. The debt related investments, or such investments the Board of Directors and the Advisor mutually designate as debt related investments, which are owned from time to time by the Company or the Operating Partnership; such debt related investments include, but are not limited to, mortgage loans, B-notes, mezzanine debt, participating debt (including with equity-like features), non-traded preferred equity, convertible debt, hybrid instruments, equity instruments and other related investments.

Director. A member of the Board of Directors of the Company.

Disposition Expenses. Any and all expenses incurred by the Company, the Operating Partnership, the Advisor, or any of their Affiliates in connection with the disposition of any Real Property, Real Estate Related Security or Debt Investment, whether or not finally sold, including, without limitation, legal fees and expenses, travel and communications expenses and accounting fees and expenses.

Distribution Fees. Any ongoing distribution fees, dealer manager fees or similar fees (as distinguished from up-front or one-time selling commissions and dealer manager fees) payable pursuant to the then-current dealer manager agreement between the Company and Ares Wealth Management Solutions, LLC.

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Distributions. Any distributions of money or other property by the Company to owners of Shares, including distributions that may constitute a return of capital for federal income tax purposes.

DST Properties. Real properties that meet the following criteria: (i) tenancy-in-common or Delaware statutory trust beneficial interests in such properties have been sold by the Company or any Affiliate to third party investors and (ii) such properties are being leased by the Company or any Affiliate from the tenancy-in-common or Delaware statutory trust third party investors.

DST Property Consideration. The consideration received by the Company or any Affiliate for selling tenancy-in-common or Delaware statutory trust beneficial interests in DST Properties to third party investors, net of DST Up Front Fees.

DST Up Front Fees. Up front fees and expense reimbursements payable out of gross sale proceeds from the sale of tenancy-in-common or Delaware statutory trust beneficial interests in DST Properties, including but not limited to sales commissions, dealer manager fees and non-accountable expense allowances.

Ending VPU. The VPU as of the end of the last month in the applicable period.

Equity Shares. Transferable shares of beneficial interest of the Company of any class or series, including common shares or preferred shares.

Excess Amount. Excess Amount has the meaning set forth in Section 12.

Expense Year. Expense Year has the meaning set forth in Section 12.

Fixed Component. The non-variable component of the Advisory Fee as described in Section 9.

GAAP. Generally accepted accounting principles as in effect in the United States of America from time to time.

Good Reason. With respect to the termination of this Agreement, (i) any failure to obtain a satisfactory agreement from any successor to the Company and/or the Operating Partnership to assume and agree to perform the Company's and/or the Operating Partnership's obligations under this Agreement; or (ii) any uncured material breach of this Agreement of any nature whatsoever by the Company and/or the Operating Partnership.

Gross Proceeds. The aggregate purchase price of all Shares sold for the account of the Company through all Offerings, without deduction for Organizational and Offering Expenses.

Hurdle Amount. For the applicable period, an amount that when annualized would equal 5.0% of the Beginning VPU.

Independent Director. Independent Director shall have the meaning set forth in the Articles of Incorporation.

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Independent Expert. A person or entity with no material current or prior business or personal relationship with the Advisor or the Directors and who is engaged to a substantial extent in the business of rendering opinions regarding the value of assets of the type held by the Company.

Independent Valuation Advisor. A firm that is (i) engaged to a substantial degree in the business of conducting valuations on commercial real estate properties, (ii) not affiliated with the Advisor and (iii) engaged by the Company with the approval of the Board to appraise the Real Properties or other assets or liabilities pursuant to the Valuation Procedures.

Joint Ventures. The joint venture or partnership arrangements (other than with AREIT Operating Partnership LP) in which the Company or any of its subsidiaries is a co-venturer or general partner which are established to acquire Real Properties.

Listing. The listing of the Shares on a national securities exchange or the receipt by the Company's stockholders of securities that are listed on a national securities exchange in exchange for the Company's common stock. Upon such Listing, the Shares shall be deemed Listed.

Loss Carryforward Amount. Loss Carryforward Amount equaled zero as of September 1, 2017 and cumulatively increases from then by the absolute value of any negative Annual Total Return Amount and decrease by any positive Annual Total Return Amount, provided that the Loss Carryforward Amount shall at no time be less than zero. The effect of the Loss Carryforward Amount is that the recoupment of past Annual Total Return Amount losses will offset the positive Annual Total Return Amount for purposes of the calculation of the Performance Component.

Multifamily Real Property. A property that primarily includes residential apartment units for rent. Such properties may include commercial spaces and tenants. However, the majority of the revenue generated by the property is derived from residential rental income.

NASAA REIT Guidelines. The Statement of Policy Regarding Real Estate Investment Trusts published by the North American Securities Administrators Association on May 7, 2007, as may be amended from time to time.

NAV. Net asset value, calculated pursuant to the Valuation Procedures.

NAV Calculations. The calculations used to determine the NAV of the Company, the Shares, the Operating Partnership and the OP Units, all as provided in the Valuation Procedures.

Net Income. For any period, the Company's total revenues applicable to such period, less the total expenses applicable to such period other than additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of the Company's assets.

Offering. A public offering of Shares pursuant to a Prospectus.

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Operating Partnership. Operating Partnership has the meaning set forth in the preamble of this Agreement.

Operating Partnership Agreement. The Operating Partnership’s limited partnership agreement among the Company, as general partner, and the limited partners thereto.

Operating Partnership NAV. The NAV of the Operating Partnership, calculated pursuant to the Valuation Procedures.

OP Unit. A unit of limited partnership interest in the Operating Partnership, other than Special Partnership Units.

Organizational and Offering Expenses. Any and all cumulative costs and expenses incurred by and to be paid from the assets of the Company, including amounts reimbursable to the Advisor and its Affiliates pursuant and subject to Section 10(a)(i) hereof, in connection with the formation, qualification and registration of all of the Company’s Offerings and the subsequent marketing and distribution of Shares, including, without limitation, the following: total underwriting and brokerage discounts and commissions (including fees of the underwriters' attorneys), any expense allowance granted by the Company to the underwriter (which may include a dealer manager) or any reimbursement of expenses of the underwriter by the Company, expenses for printing, engraving, mailing and distributing costs, salaries of employees while engaged in sales activity, telephone and other telecommunications costs, all advertising and marketing expenses (including the costs related to investor and broker-dealer sales meetings), charges of transfer agents, registrars, trustees, escrow holders, depositories, experts, fees, expenses and taxes related to the filing, registration and qualification of the sale of the Shares under federal and state laws, including accountants' and attorneys' fees.

Performance Component. The variable component of the Advisory Fee as described in Section 9.

Person. An individual, corporation, partnership, trust, joint venture, limited liability company or other entity.

Private Organizational and Offering Expenses. Any and all cumulative costs and expenses incurred by and to be paid from the assets of the Company or any of its subsidiaries, including amounts reimbursable to the Advisor and its Affiliates pursuant and subject to Section 10(a)(ii) hereof, in connection with the formation and qualification of any private offerings of any securities conducted by the Company or any of its subsidiaries and the subsequent marketing and distribution of such securities, including, without limitation, the following: total underwriting and brokerage discounts and commissions (including fees of the underwriters' attorneys), any expense allowance granted by the Company or its subsidiaries to the underwriter (which may include a dealer manager) or any reimbursement of expenses of the underwriter by the Company or its subsidiaries, expenses for printing, engraving, mailing and distributing costs, salaries of employees while engaged in sales activity, telephone and other telecommunications costs, all advertising and marketing expenses (including the costs related to investor and broker-dealer sales meetings), charges of transfer agents, registrars, trustees, escrow holders,

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depositories, experts, fees, expenses and taxes related to the qualification of the sale of the securities under federal and state laws, including accountants' and attorneys' fees.

Product Specialist. Affiliates of the Advisor approved to provide services to the Company, the Operating Partnership or any of their subsidiaries pursuant to Section 9(d) of this Agreement.

Product Specialist Agreement. An agreement between the Company, the Operating Partnership or one of their subsidiaries with a Product Specialist with respect to services provided by a Product Specialist pursuant to Section 9(d) of this Agreement.

Property Accounting Services. Property Accounting Services are related to accounting for real property operations and generally acknowledged as “property accounting” by the real estate industry. Such services generally include maintaining the books and records of the property in accordance with GAAP and company policies, procedures, and internal controls, in a timely manner, and the processing of property-related cash receipts and disbursements. Examples of such property accounting services include, but are not limited to, lease administration, monthly tenant billing and collections, rental revenue accounting, accounting for doubtful accounts, preparing rental expense recovery estimates and reconciliations, recording rental expenses, processing rental expense invoices and tenant reimbursement payments, accounting and budgeting for capital improvement projects, preparing and reviewing operating budgets, assisting in reporting and cash management for loan compliance purposes, and preparing account reconciliations and operating reports. Property accounting services do not include corporate-level accounting services that include, but are not limited to, consolidation, accounting and reporting analysis, and quality control reviews of accounting and reporting of third-party property accountants to ensure the accuracy, timeliness, and consistency of property accounting results.

Prospectus. “Prospectus” has the meaning set forth in Section 2(10) of the Securities Act, including a preliminary Prospectus, an offering circular as described in Rule 256 of the General Rules and Regulations under the Securities Act or, in the case of an intrastate offering, any document by whatever name known, utilized for the purpose of offering and selling securities to the public.

Real Estate Related Securities. The real estate related securities investments, or such investments the Board of Directors and the Advisor mutually designate as Real Estate Related Securities to the extent such investments could be classified as either Real Estate Related Securities or Real Property, which are owned from time to time by the Company or the Operating Partnership.

Real Property. (i) Land, including the buildings located thereon, or (ii) land only, or (iii) the buildings only, which are owned from time to time by the Company or the Operating Partnership, either directly or through subsidiaries, joint venture arrangements or other partnerships, or (iv) such investments the Board of Directors and the Advisor mutually designate as Real Property to the extent such investments could be classified as either Real Property, Real Estate Related Securities, or Debt Investments. DST Properties shall also be deemed Real Property for the purposes of this definition.

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REIT. A “real estate investment trust” under Sections 856 through 860 of the Code or as may be amended.

Sale or Sales. Any transaction or series of transactions whereby: (A) the Company or the Operating Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys, or relinquishes its ownership of any Real Property or portion thereof, including the lease of any Real Property consisting of a building only, and including any event with respect to any Real Property which gives rise to a significant amount of insurance proceeds or condemnation awards; (B) the Company or the Operating Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest of the Company or the Operating Partnership in any Joint Venture in which it is a co-venturer or partner; (C) any Joint Venture directly or indirectly (except as described in other subsections of this definition) in which the Company or the Operating Partnership as a co-venturer or partner sells, grants, transfers, conveys, or relinquishes its ownership of any Real Property or portion thereof, including any event with respect to any Real Property which gives rise to insurance claims or condemnation awards; or (D) the Company or the Operating Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, conveys or relinquishes its interest in any mortgage or portion thereof (including with respect to any mortgage, all payments thereunder or in satisfaction thereof other than regularly scheduled interest payments) of amounts owed pursuant to such mortgage and any event which gives rise to a significant amount of insurance proceeds or similar awards; or (E) the Company or the Operating Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys, or relinquishes its ownership of any other asset not previously described in this definition or any portion thereof.

Securities. Any Equity Shares, any other stock, shares or other evidences of equity or beneficial or other interests, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in, temporary or interim certificates for, receipts for, guarantees of, or warrants, options or rights to subscribe to, purchase or acquire, any of the foregoing.

Securities Act. The Securities Act of 1933, as amended.

Shares. The shares of all classes of the common stock of the Company.

Special OP Unitholders. The holders of Special Partnership Units (as defined in the Operating Partnership Agreement) in the Operating Partnership.

Special Partnership Units. Units of limited partnership interest in the Operating Partnership designated as Special Partnership Units in the in the Operating Partnership Agreement.

Sponsor. Any Person which (i) is directly or indirectly instrumental in organizing, wholly or in part, the Company, (ii) will control, manage or participate in the management of the Company, and any Affiliate of any such Person, (iii) takes the initiative, directly or indirectly, in

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founding or organizing the Company, either alone or in conjunction with one or more other Persons, (iv) receives a material participation in the Company in connection with the founding or organizing of the business of the Company, in consideration of services or property, or both services and property, (v) has a substantial number of relationships and contacts with the Company, (vi) possesses significant rights to control Real Properties, (vii) receives fees for providing services to the Company which are paid on a basis that is not customary in the industry, or (viii) provides goods or services to the Company on a basis which was not negotiated at arm's-length with the Company. “Sponsor” does not include wholly independent third parties such as attorneys, accountants and underwriters whose only compensation is for professional services.

Stockholders. The registered holders of the Company's Shares.

Termination Date. The date of termination of this Agreement, including by non-renewal.

Termination Event. The termination or nonrenewal of this Agreement (i) in connection with a merger, sale of assets or transaction involving the Company pursuant to which a majority of the Directors then in office are replaced or removed, (ii) by the Advisor for Good Reason or (iii) by the Company and the Operating Partnership other than for Cause.

Total Operating Expenses. All costs and expenses paid or incurred by the Company, as determined under GAAP, that are in any way related to the operation of the Company or to corporate business, including the Advisory Fee, but excluding (i) the expenses of raising capital such as Organizational and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing, (ii) interest payments, (iii) taxes, (iv) non-cash expenditures such as depreciation, amortization and bad debt reserves, (v) incentive fees paid in compliance with the NASAA REIT Guidelines; (vi) Acquisition Fees and Acquisition Expenses, (vii) real estate commissions on the Sale of Real Property, and (viii) other fees and expenses connected with the acquisition, disposition, management and ownership of real estate interests, mortgage loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair, and improvement of property). The definition of “Total Operating Expenses” set forth above is intended to encompass only those expenses which are required to be treated as Total Operating Expenses under the NASAA REIT Guidelines. As a result, and notwithstanding the definition set forth above, any expense of the Company which is not part of Total Operating Expenses under the NASAA REIT Guidelines shall not be treated as part of Total Operating Expenses for purposes hereof.

2%/25% Guidelines. For any year in which the Company qualifies as a REIT, the requirement pursuant to the NASAA REIT Guidelines that, in any period of four consecutive fiscal quarters, Total Operating Expenses not exceed the greater of 2% of the Company's Average Invested Assets during such 12-month period or 25% of the Company's Net Income over the same 12-month period.

Unitholders. The holders of OP Units.

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Valuation Procedures. The valuation procedures adopted by the Board, as amended from time to time.

VPU. Average value per unit, which on any given date shall be equal to (i) the Operating Partnership NAV on such date, divided by (ii) the aggregate number of OP Units of all classes outstanding on such date.

Weighted-Average Distributions per OP Unit. For a particular period of time, an amount equal to the ratio of (i) the aggregate distributions paid or accrued in respect of all OP Units during the applicable period, divided by (ii) the weighted-average number of OP Units of all classes outstanding during the applicable period, calculated in accordance with GAAP applied on a consistent basis.

2.APPOINTMENT. The Company and the Operating Partnership hereby appoint the Advisor to serve as their advisor on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.

3.DUTIES OF THE ADVISOR. The Advisor undertakes to provide a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Directors. The Advisor is registered as an investment adviser under the Advisers Act of 1940 (the “Advisers Act”) and undertakes to perform its duties consistent with applicable law. In performance of these undertakings, subject to the supervision of the Directors and consistent with the provisions of the Articles of Incorporation and Bylaws and the Operating Partnership Agreement, the Advisor shall, either directly or by engaging an Affiliated or non-Affiliated Person:

(a) Fee-related Services.

(i) Asset Management Services. Other than services provided by Product Specialists, which shall be subject to the terms of the Product Special Agreements, the following services shall be provided by the Advisor or one of its Affiliates in consideration of the fees described in Section 9(b) of this Agreement, subject to reimbursement for expenses as provided in Section 9(a), Section 10 and Section 12, or as otherwise provided under this Agreement:

(1) participate in formulating an investment strategy and asset allocation framework consistent with achieving our investment objectives;

(2) monitor the operating performance of the investments of the Company and/or the Operating Partnership;

(3) oversee the leasing activities of the Company’s portfolio including but not limited to negotiations with prospective and existing tenants and leasing arrangements with Affiliated and non-Affiliated leasing brokers;

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(4) oversee Affiliated and non-Affiliated property managers who perform property management services for the Company or the Operating Partnership; and

(5) oversee and negotiate service contracts for the Company’s Real Properties.

(ii) Property Accounting Services. The Advisor may provide Property Accounting Services for any Real Property owned by the Company or Real Property in which the Company otherwise has an interest, such as through a joint venture. The Advisor shall provide such Property Accounting Services in consideration for the fee described in Section 9(c).

(b) Non Fee-Related Services. Other than services provided by Product Specialists, which shall be subject to the terms of the Product Special Agreements, the following services shall be provided by the Advisor or one of its Affiliates without consideration in the form of a separate fee, subject to reimbursement for expenses as provided in Section 10 and Section 12, or as otherwise provided under this Agreement:

(i) Organizational and Offering Services.

(1) assist the Company in maintaining the registration of the Shares under federal and state securities laws and complying with all federal, state and local regulatory requirements applicable to the Company in respect of the Offering (including the Sarbanes-Oxley Act of 2002, as amended), including preparing or causing to be prepared all supplements to the Prospectus, post-effective amendments to the registration statement for any Offering and financial statements required under applicable regulations and contractual undertakings and all reports and documents, if any, required under the Securities Act and the Securities Exchange Act of 1934, as amended; provided, however, that in all filings made under federal and state securities laws, the statements therein shall be made by solely the Company and not by the Advisor or any of its other Affiliates; and

(2) assist the Company in complying with all federal, state and local regulatory requirements applicable to the Company and its subsidiaries in respect of any private placements of any securities, including but not limited to tenancy-in-common or Delaware statutory trust beneficial interests in DST Properties, including preparing or causing to be prepared private placement memoranda and all supplements thereto; provided, however, that in all private placement memoranda, supplements thereto and any other offering materials, the statements therein shall be made by solely the Company and not by the Advisor or any of its other Affiliates.

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(ii) Acquisition and Disposition Services.

(1) present to the Company and the Operating Partnership potential investment opportunities;

(2) serve as the Company's and the Operating Partnership's investment and financial advisor and, as reasonably appropriate under the circumstances, provide research and economic and statistical data in connection with the Company's assets and investment policies;

(3) subject to any required Board or Board committee approval, (i) locate, analyze and select potential investments, (ii) structure and negotiate the terms and conditions of transactions pursuant to which investments will be made; (iii) oversee and coordinate the making of investments by the Company and the Operating Partnership in compliance with the investment objectives and policies of the Company; and (iv) arrange, oversee and coordinate the financing and refinancing and the making of other changes in the asset or capital structure of investments;

(4) perform due diligence on prospective investments;

(5) upon request provide the Directors with periodic reports regarding prospective investments;

(6) obtain the prior approval of the Board, any particular Directors specified by the Board or any committee of the Board, as the case may be, for any and all investments in Real Properties;

(7) oversee and coordinate the making of investments in Real Estate Related Securities or Debt Investments within the discretionary limits and authority as granted by the Board, or if no such discretionary limits have been established, with the prior approval of the Board, any particular Directors specified by the Board or any committee of the Board, as the case may be;

(8) oversee and coordinate the disposition of Real Properties, Real Estate Related Securities or Debt Investments within the discretionary limits and authority as granted by the Board, or if no such discretionary limits have been established, with the prior approval of the Board, any particular Directors specified by the Board or any committee of the Board, as the case may be; and

(9) negotiate with and engage selling brokers as necessary to dispose of Real Properties.

(iii) Financing Services.

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(1) consult with the officers and Directors of the Company and assist the Directors in the formulation and implementation of the Company's borrowing policies, and, as necessary, furnish the Directors with advice and recommendations with respect to any borrowings proposed to be undertaken by the Company and/or the Operating Partnership; and

(2) negotiate on behalf of the Company and the Operating Partnership with banks or lenders for loans to be made to the Company and the Operating Partnership, and negotiate on behalf of the Company and the Operating Partnership with investment banking firms and broker-dealers or negotiate private sales of Shares and other Securities or obtain loans for the Company and the Operating Partnership, but in no event in such a way so that the Advisor shall be acting as broker-dealer or underwriter; and provided, further, that any fees and costs payable to third parties incurred by the Advisor in connection with the foregoing shall be the responsibility of the Company or the Operating Partnership.

(iv) Accounting and Administrative Services.

(1) provide the daily management for the Company and the Operating Partnership and perform and supervise the various administrative functions reasonably necessary for the management of the Company and the Operating Partnership, unless expressly provided for elsewhere in this Agreement;

(2) provide the Company and the Operating Partnership with, or arrange for the provision to the Company and the Operating Partnership of, all necessary cash management services;

(3) consult with the Company’s officers and the Board and assist the Board in evaluating and obtaining adequate insurance coverage based upon risk management determinations;

(4) implement and coordinate the processes with respect to the NAV Calculations, and in connection therewith, obtain appraisals performed by an Independent Valuation Advisor concerning the value of the Real Properties;

(5) supervise one or more Independent Valuation Advisors and, if and when necessary, recommend to the Board its replacement; and

(6) deliver to or maintain on behalf of the Company copies of all appraisals obtained in connection with the investments in Real Properties and all valuations of Real Estate Related Securities or Debt Investments as may be required to be obtained by the Board;

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(7) in consultation with legal counsel, advise the Company regarding the maintenance of the Company’s exemption from the Investment Company Act of 1940, as amended, and monitor compliance with the requirements for maintaining an exemption from such act;

(8) in consultation with legal counsel and other tax advisers, advise the Company regarding the maintenance of the Company’s status as a REIT and monitor compliance with the various REIT qualification tests and other rules set out in the Code and the regulations promulgated thereunder;

(9) in consultation with legal counsel and other tax advisers, take all necessary actions to enable the Company and the Operating Partnership to make required tax filings and reports, including soliciting Stockholders for required information to the extent provided by the REIT provisions of the Code; and

(10) oversee and resolve all claims, disputes or controversies (including all litigation, arbitration, settlement or other proceedings or negotiations) in which the Company and the Operating Partnership may be involved or to which the Company and the Operating Partnership may be subject, arising out of the Company’s or the Operating Partnership’s day-to-day operations, subject to such limitations or parameters as may be imposed from time to time by the Board.

(v) Stockholder Services.

(1) in consultation with legal counsel, communicate on the Company’s or the Operating Partnership’s behalf with the respective holders of any of the Company’s or the Operating Partnership’s securities as required to satisfy the reporting and other requirements of any regulatory bodies or agencies and to maintain effective relations with such holders; and

(2) oversee the performance of the transfer agent and registrar.

(vi) Other Services.

(1) oversee the development, construction and improvement, including tenant improvements, of Real Properties (including DST Properties) by third parties on behalf of the Company;

(2) oversee and monitor third-party engineers, facility managers and property managers with regard to the effective building operations and maintenance of our Real Properties (including DST Properties);

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(3) oversee and coordinate the making of any private placement of OP Units, tenancy-in-common or other interests in Real Properties as may be approved by the Board;

(4) provide internal legal services, either directly to the Company or as oversight of the Company’s outside counsel, which internal legal services shall be deemed separate and not included in any of the services set forth in Section 3(a) above;

(5) investigate, select, and, on behalf of the Company and the Operating Partnership, oversee and coordinate the engagement of and business with such Persons as the Advisor deems necessary to the proper performance of its obligations hereunder (whether for a fee or not), including but not limited to consultants, accountants, correspondents, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, banks, builders, developers, property owners, real estate management companies, real estate operating companies, securities investment advisors, mortgagors, and any and all agents for any of the foregoing, including Affiliates of the Advisor, and Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services, including but not limited to entering into contracts in the name of the Company and the Operating Partnership with any of the foregoing;

(6) oversee the provision of, or provide directly, insurance management services, including, without limitation, overseeing all related brokerage relationships, managing all related premium and expense allocations, managing all related claims reporting and oversite, answering and coordinating with broker questions regarding coverage, claims, reporting, etc., coordinating required certificates of insurance, coordinating review of sponsor’s and JV partners’ builder’s risk programs, and managing renewals;

(7) from time to time, or at any time reasonably requested by the Directors, make reports to the Directors of its performance of services to the Company and the Operating Partnership under this Agreement, including reports with respect to potential conflicts of interest involving the Advisor or any of its affiliates; and

(8) do all other things reasonably necessary to assure its ability to render the services described in this Agreement.

Notwithstanding the foregoing, the Advisor may delegate any of the foregoing duties to any Person so long as the Advisor or any Affiliate remains responsible for the performance of the duties set forth in this Section 3.

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4.AUTHORITY OF ADVISOR.

(a) Pursuant to the terms of this Agreement (including the restrictions included in this Section 4 and in Section 7), and subject to the continuing and exclusive authority of the Directors over the management of the Company, the Directors hereby delegate to the Advisor the authority to take, or cause to be taken, any and all actions and to execute and deliver any and all agreements, certificates, assignments, instruments or other documents and to do any and all things that, in the judgment of the Advisor, may be necessary or advisable in connection with the Advisor’s duties described in Section 3.

(b) Notwithstanding the foregoing, any investment in Real Properties, including any acquisition of Real Property by the Company or the Operating Partnership (including any financing of such acquisition), will require the prior approval of the Board, any particular Directors specified by the Board or any committee of the Board, as the case may be.

(c) If a transaction requires approval by the Independent Directors, the Advisor will deliver to the Independent Directors all documents and other information required by them to properly evaluate the proposed transaction.

The prior approval of a majority of the Independent Directors not otherwise interested in the transaction and a majority of the Directors not otherwise interested in the transaction will be required for each transaction to which the Advisor or its Affiliates is a party. The Directors may, at any time upon the giving of written notice to the Advisor, modify or revoke the authority set forth in this Section 4. If and to the extent the Directors so modify or revoke the authority contained herein, the Advisor shall henceforth submit to the Directors for prior approval such proposed transactions involving investments in Real Property, Real Estate Related Securities, or Debt Investments as thereafter require prior approval, provided however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification.

5.BANK ACCOUNTS. The Advisor may establish and maintain one or more bank accounts in the name of the Company and the Operating Partnership and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company and/or the Operating Partnership, under such terms and conditions as the Directors may approve, provided that no funds shall be commingled with the funds of the Advisor; and the Advisor shall from time to time render appropriate accountings of such collections and payments to the Directors and to the auditors of the Company.

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6.RECORDS; ACCESS. The Advisor shall maintain appropriate records of all its activities hereunder and make such records available for inspection by the Directors and by counsel, auditors and authorized agents of the Company, at any time or from time to time during normal business hours. The Advisor shall at all reasonable times have access to the books and records of the Company and the Operating Partnership.

7.LIMITATIONS ON ACTIVITIES. Anything else in this Agreement to the contrary notwithstanding, the Advisor shall refrain from taking any action which, in its sole judgment made in good faith, would (a) adversely affect the status of the Company as a REIT, (b) subject the Company to regulation under the Investment Company Act of 1940, as amended, or (c) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, its Shares or its Securities, or otherwise not be permitted by the Articles of Incorporation or Bylaws of the Company, except if such action shall be ordered by the Directors, in which case the Advisor shall notify promptly the Directors of the Advisor's judgment of the potential impact of such action and shall refrain from taking such action until it receives further clarification or instructions from the Directors. In such event the Advisor shall have no liability for acting in accordance with the specific instructions of the Directors so given. Notwithstanding the foregoing, the Company shall hold harmless the Advisor, its directors, officers, employees and stockholders, and stockholders, directors and officers of the Advisor's Affiliates for any act or omission by the Advisor, its directors, officers or employees, or stockholders, directors or officers of the Advisor's Affiliates taken or omitted to be taken in the performance of their duties under this Agreement to the extent permitted under the Company’s Articles of Incorporation and under Section 18 hereof.

8.RELATIONSHIP WITH DIRECTORS. Subject to Section 7 of this Agreement and to restrictions advisable with respect to the qualification of the Company as a REIT, directors, officers and employees of the Advisor or an Affiliate of the Advisor or any corporate parents of an Affiliate, may serve as a Director and as officers of the Company, except that no director, officer or employee of the Advisor or its Affiliates who also is a Director or officer of the Company shall receive any compensation from the Company for serving as a Director or officer other than reasonable reimbursement for travel and related expenses incurred in attending meetings of the Directors and no such Director shall be deemed an Independent Director for purposes of satisfying the Director independence requirement set forth in the Articles of Incorporation. Notwithstanding the foregoing, directors, officers and employees of the Advisor and its Affiliates that are also Directors or officers of the Company may receive compensation from the Advisor or its Affiliates for which the Advisor or its Affiliates are reimbursed by the Company pursuant to Section 10 of this Agreement.

9.FEES.

(a) The fees described in Section 9(b) are compensation for the personnel and related employment costs incurred by the Advisor or its Affiliates in performing the applicable services, including but not limited to salaries and wages, benefits and overhead of all employees involved in the performance of such services, but not for the third-party costs incurred by the Advisor or its Affiliates in connection

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with the performance of such services, which third-party costs shall be separately reimbursed and are not included in the services provided by the Advisor and its Affiliates.

(b) Advisory Fee. The Advisor shall receive the Advisory Fee as compensation for asset management services rendered pursuant to Section 3(a)(i) hereof as follows.

(i) The Advisory Fee will be comprised of two separate components: (1) a fixed component in an amount equal to, for each month during the term of this Agreement, 1/12th of 1.10% of the sum of (a) the product of (x) the applicable monthly Operating Partnership NAV per OP Unit, before giving effect to any monthly accruals for the Advisory Fee, Distribution Fees or any distributions accrued in respect of OP Units during the applicable month, and (y) the weighted average number of OP Units outstanding during the applicable month; and (b) aggregate DST Property Consideration for all DST Properties (the “Fixed Component”); and (2) a performance component (the “Performance Component”) that is calculated as described in Section 9(b)(ii) below. Provided that this Agreement has not been terminated, the Performance Component shall be paid to the Special OP Unitholders as a performance participation interest with respect to the Special Partnership Units in the form of an allocation and distribution from the Operating Partnership pursuant to the Operating Partnership Agreement. At the election of the Special OP Unitholders, with respect to each calendar year, all or a portion of the Performance Component shall be paid instead to the Advisor as a fee as set forth in this Paragraph 9(b). If the Special OP Unitholders do not elect on or before the first day of a calendar year to have all or a portion of the Performance Component paid as a fee in cash to the Advisor, then the Performance Component with respect to such calendar year shall be paid as a distribution on the performance participation interest to the Special OP Unitholders, as the holder of the Special Partnership Units.

(ii) The Special OP Unitholders or the Advisor, as applicable, will earn a Performance Component with respect to each calendar year (or partial calendar year) in which this Agreement is in effect in an amount equal to:

(A) The lesser of (1) the amount equal to 12.5% of (a) the Annual Total Return Amount less (b) the Loss Carryforward Amount, and (2) the amount equal to (x) the Annual Total Return Amount, less (y) the Loss Carryforward Amount, less (z) the Hurdle Amount;

multiplied by:

(B) The weighted-average number of OP Units outstanding during the applicable year, calculated in accordance with GAAP as applied on a consistent basis,

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(C) Provided that the Performance Component shall at no time be less than zero.

Except as described in the definition of Loss Carryforward Amount in this Agreement, any amount by which the Annual Total Return Amount falls below the Hurdle Amount will not be carried forward to subsequent periods. If the Performance Component is payable or distributable pursuant to this Section 9(b)(ii), the Special OP Unitholders or the Advisor, as applicable, will be entitled to such payment or distribution, as applicable, even in the event that the total percentage return to Unitholders over any longer or shorter period, or the total percentage return to any particular Unitholder over the same, longer or shorter period, has been less than the Annual Total Return Amount used to calculate the Hurdle Amount. The Special OP Unitholders or the Advisor, as applicable, shall not be obligated to return any portion of any Advisory Fee paid based on the Company’s or the Operating Partnership’s subsequent performance.

(iii) The Advisory Fee will generally accrue and be payable monthly. The Fixed Component is payable monthly in arrears (after the completion of the NAV Calculations for such month). The Performance Component with respect to any calendar year is generally payable or distributable, as applicable, after the completion of the NAV Calculations for December of such year. If the Advisory Fee is payable with respect to any partial calendar month or calendar year, then the Fixed Component shall be prorated based on the number of days elapsed during any partial calendar month and the Performance Component shall be calculated based on the annualized total return amount determined using the total return achieved for the period of such partial calendar year. In the event this Agreement is terminated or its term expires without renewal, the partial period Fixed Component and Performance Component of the Advisory Fee will be calculated and due and payable upon the Termination Date. In such event, for purposes of determining the Annual Total Return Amount, the change in VPU shall be determined based on a good faith estimate of what the NAV Calculations would be as of that date.

(iv) Notwithstanding anything to the contrary in this Section 9(b), upon the triggering of a Pro-Rata Period as defined in the Company’s Second Amended and Restated Share Redemption Program, effective as of December 10, 2018 (as it may be amended from time to time, the “SRP”), payment or distribution of the Performance Component shall be deferred until all share redemption requests under the SRP are satisfied.

(v) In the event the Operating Partnership commences a liquidation of its Investments during any calendar year, the Special OP Unitholders or the Advisor, as applicable, will be paid the Advisory Fee from the proceeds of the liquidation and the Performance Component will be calculated at the

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end of the liquidation period prior to the distribution of the liquidation proceeds to the Unitholders. The calculation of the Performance Component for any partial year shall be calculated consistent with the applicable provisions of Section 9(b)(iii) above.

(vi) The measurement of the change in VPU for the purpose of calculating the Annual Total Return Amount is subject to adjustment by the Board to account for any dividend, split, recapitalization or any other similar change in the Operating Partnership’s capital structure or any distributions that the Board deems to be a return of capital if such changes are not already reflected in the Operating Partnership’s net assets.

(c) Property Accounting Fee. The Advisor may provide Property Accounting Services for any Real Property owned by the Company or Real Property in which the Company otherwise has an interest, such as through a joint venture. In exchange for Property Accounting Services provided by the Advisor, the Company shall pay the Advisor the difference between: (i) the property management fee charged with respect to each Real Property (the “Property Management Fee”), which reflects the market rate for all Real Property management services, including Property Accounting Services, based on rates charged for similar properties within the region or market in which the Real Property is located, and (ii) the amount actually paid to third-party property management firms for property management services, which excludes Property Accounting Services, which fee is based on an arms-length negotiation with a third-party property management service provider (the difference between (i) and (ii), the “Property Accounting Fee”). The tenant or tenants at each Real Property may reimburse the Company for all or a portion of the Property Management Fee.

(d) Fees for other Services. The Company (including through the Operating Partnership or other subsidiaries) may retain certain of the Advisor’s Affiliates from time to time for services relating to its investments or its operations, which may include property management services or property management oversight, construction management services, specialized expertise and dedicated resources in specific areas of real property, real estate-related securities or debt investments, leasing or leasing oversight services, corporate services, statutory services, acquisition services, transaction support services (including but not limited to coordinating with brokers, lawyers, accountants and other advisors, assembling relevant information, conducting financial and market analyses, and coordinating closing procedures), construction and development management or oversight services, and loan management and servicing, and within one or more such categories, providing services in respect of asset and/or investment administration, accounting, technology, tax preparation, finance (including but not limited to budget preparation and preparation and maintenance of corporate models), treasury, operational coordination, risk management, insurance placement, human resources, legal and compliance, valuation and reporting-related services, as well as services related to mortgage servicing, group purchasing, healthcare, consulting/brokerage, capital markets/credit origination,

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property, title and/or other types of insurance, management consulting and other similar operational matters. Any fees or reimbursements paid to the Advisor’s Affiliates for any such services will not reduce the Advisory Fee or any reimbursements that may otherwise be owed to the Advisor. Any such arrangements will be at market ratesor reimbursement of costs incurred by the Affiliate in providing the services, provided, however, that any fee approved by the Independent Directors at the entering of such Product Specialist Agreement shall be deemed to be at market rates.

(e) Loans from Affiliates. The Advisor or any Affiliate thereof may not make any loan to the Company or the Operating Partnership unless a majority of the Directors (including a majority of the Independent Directors) not otherwise interested in such loan approve the loan as being fair, competitive, and commercially reasonable and no less favorable to the Company or the Operating Partnership than loans between unaffiliated parties under the same circumstances.

(f) Payment in Shares or OP Units. The fees due under this Section 9 shall be paid in cash; provided, however, that in lieu of cash, the Advisor may elect to receive the payment of the fees due under this Section 9 in any class of Shares or OP Units.  Any such Shares or OP Units will be valued at the NAV per share applicable to such Shares or OP Units on the issue date. Such shares shall not be subject to any early redemption deduction under the Company’s share redemption program.

(g) Fee Waiver. If as of the end of the last month of the applicable period the NAV of a Class E Series 1 Unit is less than $10.00 per unit, the Advisor will waive its fees earned under this Agreement in an amount equal to the product of (a) the Performance Component for the applicable period, and (b) the weighted-average Class E Series 1 Units outstanding over the applicable period divided by the weighted-average OP Units outstanding over the same period. In this manner, the holders of each class of OP Units will benefit from this waiver pro rata in accordance with their particular class’s portion of Operating Partnership NAV.

10.EXPENSES.

(a) In addition to the compensation paid to the Advisor pursuant to Section 9 hereof, the Company or the Operating Partnership shall pay directly or reimburse the Advisor or its Affiliates for all of the expenses paid or incurred by the Advisor or its Affiliates in connection with the services they provide to the Company and the Operating Partnership pursuant to this Agreement, including, but not limited to:

(i) Organizational and Offering Expenses paid or incurred by the Advisor or any of its Affiliates; provided that after an Offering terminates, the Advisor shall reimburse the Company to the extent the Organizational and Offering Expenses with respect to such Offering that are borne by the Company exceed 15.0% of the Gross Proceeds raised in the completed Offering; the Advisor shall be responsible for the payment of all the

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Company's Organizational and Offering Expenses in excess of the maximum amount permitted;

(ii) Private Organizational and Offering Expenses paid or incurred by the Advisor or any of its Affiliates, except to the extent the Advisor or its Affiliates have agreed to receive a fee in lieu of reimbursement of such expenses therewith;

(iii) Acquisition Expenses incurred in connection with the selection and acquisition of Real Properties;

(iv) Disposition Expenses incurred in connection with the disposition of Real Properties, Real Estate Related Securities and Debt Investments;

(v) the actual cost of goods and services used by the Company and obtained from Persons not affiliated with the Advisor, other than Acquisition Expenses, including brokerage fees paid in connection with the purchase and sale of Real Estate Related Securities or Debt Investments;

(vi) interest and other costs for borrowed money, including discounts, points and other similar fees;

(vii) taxes and assessments on income of the Company or Real Properties;

(viii) costs associated with insurance required in connection with the business of the Company or by the Directors;

(ix) expenses incurred in connection with financing transactions, including the financing or refinancing of Company properties;

(x) expenses of managing and operating Real Properties owned by the Company, or Real Property in which the Company otherwise has an interest, such as through a joint venture, including, but not limited to, expenses related to Property Accounting Services provided by third parties, the expenses of which shall be paid by the direct or indirect subsidiary of the Company which owns the Real Property;

(xi) all expenses in connection with payments to the Directors and meetings of the Directors and Stockholders;

(xii) personnel and related employment costs (including, but not limited to, compensation) and overhead (including, but not limited to, allocated rent paid to both third parties and an affiliate of the Advisor, equipment, utilities, insurance, travel and entertainment, and other costs) incurred by the Advisor or its Affiliates in performing the services described in Section 3 hereof, including but not limited to compensation (whether paid in cash, stock or other forms), benefits and other overhead of all employees involved in the performance of such services, provided that no

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reimbursement shall be made for such costs in connection with the services under Section 3(a), for services provided by an Affiliate of the Adviser for which the Company pays a separate fee pursuant to a separate agreement, or for compensation of the Company’s named executive officers unless the named executive officer provides services as described in Section 3(b)(v);

(xiii) expenses associated with a Listing, if applicable, or with the issuance and distribution of Securities, such as selling commissions and fees, advertising expenses, taxes, legal and accounting fees, listing and registration fees;

(xiv) expenses connected with payments of Distributions in cash or otherwise made or caused to be made by the Company to the Stockholders;

(xv) expenses of organizing, redomesticating, merging, liquidating or dissolving the Company or of amending the Articles of Incorporation or the Bylaws;

(xvi) expenses of maintaining communications with Stockholders, including the cost of preparation, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;

(xvii) internal and external audit, accounting and legal fees and other fees for professional services relating to the operations of the Company and all such fees incurred at the request, or on behalf of, the Board, the Independent Directors or any committee of the Board;

(xviii) all other costs incurred by the Advisor or its Affiliates in performing its duties hereunder.

(b) Expenses incurred by the Advisor or its Affiliates on behalf of the Company and the Operating Partnership and payable pursuant to this Section 10 shall be reimbursed no less than monthly to the Advisor. The Advisor shall prepare a statement documenting the expenses of the Company and the Operating Partnership and the calculation of the fees and commissions due under this Agreement during each month, and shall deliver such statement to the Company and the Operating Partnership within 45 days after the end of each month.

(c) In lieu of cash, the Advisor may elect to receive the reimbursement of any of its expenses in any class of Shares.  Any such Shares will be valued at the NAV per share applicable to such Shares on the issue date and will not be eligible for redemption by the Advisor until six months from the issue date.

11.OTHER SERVICES. Should the Directors request that the Advisor or any director, officer or employee thereof render services for the Company and the Operating Partnership other than set forth in Section 3, such services shall be separately

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compensated at such rates and in such amounts as are agreed by the Advisor and the Independent Directors of the Company, subject to the limitations contained in the Articles of Incorporation, and shall not be deemed to be services pursuant to the terms of this Agreement.

12.REIMBURSEMENT TO THE ADVISOR. For any year in which the Company qualifies as a REIT, the Company shall not reimburse the Advisor at the end of any fiscal quarter Total Operating Expenses that, in the four consecutive fiscal quarters then ended (the “Expense Year”) exceed (the “Excess Amount”) the greater of 2% of Average Invested Assets or 25% of Net Income (the “2%/25% Guidelines”) for such year. Any Excess Amount paid to the Advisor during a fiscal quarter shall be repaid to the Company or, at the option of the Company, subtracted from the Total Operating Expenses reimbursed during the subsequent fiscal quarter. If there is an Excess Amount in any Expense Year and the Independent Directors determine that such excess was justified based on unusual and nonrecurring factors which they deem sufficient, then (i) the Excess Amount may be carried over and included in Total Operating Expenses in subsequent Expense Years and reimbursed to the Advisor in one or more of such years, provided that Total Operating Expenses in any Expense Year, including any Excess Amount to be paid to the Advisor, shall not exceed the 2%/25% Guidelines or (ii) the Excess Amount may be paid in the Expense Year and within 60 days after the end of such Expense Year there shall be sent to the stockholders a written disclosure of such fact, together with an explanation of the factors the Independent Directors considered in determining that such excess expenses were justified. Such determination shall be reflected in the minutes of the meetings of the Board of Directors. The Company will not reimburse the Advisor or its Affiliates for its personnel (and related employment) costs and overhead (including rent, insurance and other costs) incurred in connection with the services under Section 3(a) or services provided by an Affiliate of the Adviser for which the Company pays a separate fee pursuant to a separate agreement. All figures used in the foregoing computation shall be determined in accordance with GAAP applied on a consistent basis.

13. OTHER ACTIVITIES OF THE ADVISOR.

(a) Nothing herein contained shall prevent the Advisor or any of its Affiliates from engaging in or earning fees from 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 member, manager, director, officer, employee, or stockholder of the Advisor or its Affiliates to engage in or earn fees from any other business or to render services of any kind to any other partnership, corporation, firm, individual, trust or association and earn fees for rendering such services. The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein, and earn fees for rendering such advice and service. Specifically, it is contemplated that the Company may enter into joint ventures or other similar co-investment arrangements with certain Persons, and pursuant to the agreements governing such joint ventures or arrangements, the Advisor may be engaged (directly or

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indirectly) to provide advice and service to such Persons, in which case the Advisor will earn fees for rendering such advice and service. The parties to this Agreement hereby acknowledge that the Advisor may provide advice and render services to Persons that will compete with the Company for investments.

(b) The Advisor shall report to the Directors the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, which creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other partnership, corporation, limited liability company, firm, individual, trust or association. The Advisor or its Affiliates shall promptly disclose to the Directors knowledge of such condition or circumstance. If the Advisor, its members, managers, directors, employees 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 Directors (including the Independent Directors) to ensure that the Advisor and its Affiliates follow an allocation method that is reasonable and fairly applied. The Advisor shall provide the information necessary for the Directors to make this determination.

(c) The Advisor shall be required to use commercially reasonable efforts to present a continuing and suitable investment program to the Company which is consistent with the investment policies and objectives of the Company, but neither the Advisor nor any Affiliate of the Advisor shall be obligated generally to present any particular investment opportunity to the Company even if the opportunity is of a character that, if presented to the Company, could be taken by the Company. In the event an investment opportunity is located, the allocation procedure set forth in the Prospectus (as such procedures may be amended from time to time) shall govern the allocation of the opportunity among the Company and Affiliates of the Advisor.

14.TERM; TERMINATION OF AGREEMENT. This Agreement shall continue in force through April 30, 2024, subject to an unlimited number of successive one-year renewals upon mutual consent of the parties. It is the duty of the Directors to evaluate the performance of the Advisor annually before renewing the Agreement, and each such renewal shall be for a term of no more than one year.

15.TERMINATION BY THE PARTIES. This Agreement may be terminated (i) immediately by the Company and/or the Operating Partnership for Cause or upon the bankruptcy of the Advisor, (ii) upon 60 days written notice without Cause and without penalty by a majority of the Independent Directors of the Company or (iii) upon 60 days written notice with Good Reason by the Advisor.

16.ASSIGNMENT. This Agreement may be assigned by the Advisor to an Affiliate with the approval of a majority of the Directors (including a majority of the Independent Directors). The Advisor may assign any rights to receive fees or other payments under this Agreement to any Person without obtaining the approval of the Directors. This Agreement shall not be assigned by the Company or the Operating Partnership without

25

the consent of the Advisor, except in the case of an assignment by the Company or the Operating Partnership to a corporation, limited partnership or other organization which is a successor to all of the assets, rights and obligations of the Company or the Operating Partnership, in which case such successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company and the Operating Partnership are bound by this Agreement. For the avoidance of doubt, this Agreement may not be assigned (as such term is defined in Section 205(a)(2) of the Advisers Act) or novated by the Advisor by operation of law or otherwise without consent as required under the Advisers Act; provided, that the Advisor may assign, subcontract, delegate or otherwise transfer any of its rights and obligations hereunder to any of its Affiliates.

17.PAYMENTS TO AND DUTIES OF ADVISOR UPON TERMINATION. Payments to the Advisor of unpaid expense reimbursements pursuant to this Section 17 shall be subject to the 2%/25% Guidelines to the extent applicable.

(a) After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder except it shall be entitled to receive from the Company or the Operating Partnership within 30 days after the effective date of such termination all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this Agreement. In addition, in accordance with the provisions of Section 12, the Advisor shall be entitled to receive any Excess Amount (as defined in Section 12) for which the Independent Directors determined (before or after the Termination Date) that there was justification based on unusual and nonrecurring factors.

(b) The Advisor shall promptly upon termination:

(i) pay over to the Company and the Operating Partnership all money collected and held for the account of the Company and the Operating Partnership pursuant to this Agreement, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled;

(ii) deliver to the Directors a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Directors;

(iii) deliver to the Directors all assets, including Real Properties, Real Estate Related Securities and Debt Investments, and documents of the Company and the Operating Partnership then in the custody of the Advisor; and

(iv) cooperate with the Company and the Operating Partnership to provide an orderly management transition.

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18.INDEMNIFICATION BY THE COMPANY AND THE OPERATING PARTNERSHIP. The Company and the Operating Partnership shall indemnify and hold harmless the Advisor and its Affiliates, including their respective officers, directors, partners and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, including without limitation any liabilities, claims, damages or losses arising under any agreements related to an Offering, and related expenses, including reasonable attorneys' fees, subject to any limitations imposed by the laws of the State of Maryland or the Articles of Incorporation of the Company. Notwithstanding the foregoing, the Company and the Operating Partnership shall not provide for indemnification of the Advisor and its Affiliates, including their respective officers, directors, partners and employees, for any loss or liability suffered by the Advisor and its Affiliates, including their respective officers, directors, partners and employees, nor shall they provide that the Advisor and its Affiliates, including their respective officers, directors, partners and employees, be held harmless for any loss or liability suffered by the Company and the Operating Partnership, unless all of the following conditions are met:

(a) The Advisor has determined, in good faith, that the course of conduct which caused the loss or liability was in the best interest of the Company and the Operating Partnership;

(b) The Advisor was acting on behalf of or performing services for the Company and the Operating Partnership;

(c) Such liability or loss was not the result of negligence or misconduct by the Advisor; and

(d) Such indemnification or agreement to hold harmless is recoverable only out of the Company's net assets and not from Stockholders.

Notwithstanding the foregoing, the Advisor and its Affiliates, including their respective officers, directors, partners and employees, shall not be indemnified by the Company and the Operating Partnership for any losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities laws by the Advisor and its Affiliates, including their respective officers, directors, partners and employees, unless one or more of the following conditions are met:

(a) There has been a successful adjudication on the merits of each count involving alleged securities law violations as to the Advisor;

(b) Such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the Advisor; or

(c) A court of competent jurisdiction approves a settlement of the claims against the Advisor and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Securities and Exchange Commission and of the published position of any state securities regulatory authority in which

27

securities of the Company and the Operating Partnership were offered or sold as to indemnification for violation of securities laws.

In addition, the advancement of the Company's or the Operating Partnership's funds to the Advisor and its Affiliates, including their respective officers, directors, partners and employees, for legal expenses and other costs incurred as a result of any legal action for which indemnification is being sought is permissible only if all of the following conditions are satisfied:

(d) The legal action relates to acts or omissions with respect to the performance of duties or services on behalf of the Company or the Operating Partnership;

(e) The legal action is initiated by a third party who is not a shareholder or the legal action is initiated by a shareholder acting in his or her capacity as such and a court of competent jurisdiction specifically approves such advancement; and

(f) The Advisor undertakes to repay the advanced funds to the Company or the Operating Partnership, together with the applicable legal rate of interest thereon, in cases in which the Advisor is found not to be entitled to indemnification.

19.INDEMNIFICATION BY ADVISOR. The Advisor shall indemnify and hold harmless the Company and the Operating Partnership from contract or other liability, claims, damages, taxes or losses and related expenses including attorneys' fees, to the extent that such liability, claims, damages, taxes or losses and related expenses are incurred by reason of the Advisor's bad faith, fraud, willful misfeasance, gross misconduct, gross negligence or reckless disregard of its duties, but the Advisor shall not be held responsible for any action of the Board of Directors in following or declining to follow any advice or recommendation given by the Advisor.

20.NOTICES. Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Articles of Incorporation, the Bylaws, or accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:

To the Directors and to the Company:

Ares Real Estate Income Trust Inc.
One Tabor Center

1200 Seventeenth Street, Suite 2900
Denver, CO 80202

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To the Operating Partnership:

AREIT Operating Partnership LP
One Tabor Center

1200 Seventeenth Street, Suite 2900
Denver, CO 80202

To the Advisor:

Ares Commercial Real Estate Management LLC
2000 Avenue of the Stars, 12th Floor

Los Angeles, CA 90067

Attention: Naseem Sagati Aghili

Email: nsagati@aresmgmt.com

Any party may at any time give notice in writing to the other parties of a change in its address for the purposes of this Section 20.

21.MODIFICATION. This Agreement shall not be changed, modified, terminated, or discharged, in whole or in part, except by an instrument in writing signed by the parties hereto, or their respective successors or assignees.

22.SEVERABILITY. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

23.CONSTRUCTION. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Colorado.

24.ENTIRE AGREEMENT. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.

25.INDULGENCES, NOT WAIVERS. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

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26.GENDER. Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

27.TITLES NOT TO AFFECT INTERPRETATION. The titles of sections and subsections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.

28.EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

29.INITIAL INVESTMENT. The Advisor owns 20,000 Class E Shares, which were issued in connection with the original advisor’s initial investment in the Company of $200,000. The Advisor may not sell any of such Shares while the Advisor acts in such advisory capacity to the Company, provided, that such Shares may be transferred to Affiliates of the Advisor. The restrictions included above shall not apply to any other Securities acquired by the Advisor or its Affiliates. The Advisor shall not vote any Shares it now owns, or hereafter acquires, in any vote for the election of Directors or any vote regarding the approval or termination of any contract with the Advisor or any of its Affiliates.

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IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and Restated Advisory Agreement (2023) as of June 3, 2023.

ARES REAL ESTATE INCOME TRUST INC., a Maryland corporation

By: /s/ Lainie P. MinnickName: Lainie P. Minnick‌Title:Managing Director, Chief Financial Officer and Treasurer

AREIT OPERATING PARTNERSHIP LP, a Delaware limited partnership

By: Ares Real Estate Income Trust Inc., its General Partner

By: /s/ Lainie P. Minnick​ ​
Name: Lainie P. Minnick
Title:Managing Director, Chief Financial Officer and Treasurer

ARES COMMERCIAL REAL ESTATE MANAGEMENT LLC, a Delaware limited liability company

By: /s/ Anton FeingoldName: Anton Feingold‌Title:Authorized Signatory

EX-10.2

Exhibit 10.2

twelfth AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT


OF


AREIT Operating Partnership LP


A DELAWARE LIMITED PARTNERSHIP


JUNE 3, 2023

TABLE OF CONTENTS

Article‌PAGE

Article 1DEFINED TERMS‌1

1.1Definitions‌1

1.2Interpretation‌14

Article 2PARTNERSHIP FORMATION AND IDENTIFICATION‌14

2.1Formation‌14

2.2Name, Office and Registered Agent‌14

2.3Partners‌15

2.4Term and Dissolution‌15

2.5Filing of Certificate and Perfection of Limited Partnership‌15

2.6Certificates Describing Partnership Units and Special Partnership Units‌16

Article 3BUSINESS OF THE PARTNERSHIP‌16

Article 4CAPITAL CONTRIBUTIONS AND ACCOUNTS‌16

4.1Capital Contributions‌17

4.2Classes and Series of Partnership Units‌17

4.3Additional Capital Contributions and Issuances of Additional Partnership Interests‌17

4.4Additional Funding‌20

4.5Capital Accounts‌20

4.6Percentage Interests‌20

4.7No Interest On Contributions‌21

4.8Return Of Capital Contributions‌21

4.9No Third Party Beneficiary‌21

Article 5PROFITS AND LOSSES; DISTRIBUTIONS‌21

5.1Allocation of Profit and Loss‌21

5.2Distribution of Cash‌24

5.3REIT Distribution Requirements‌27

5.4No Right to Distributions in Kind‌28

5.5Limitations on Return of Capital Contributions‌28

5.6Distributions Upon Liquidation‌28

5.7Substantial Economic Effect‌28

Article 6RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER‌29

6.1Management of the Partnership‌29

6.2Delegation of Authority‌31

6.3Indemnification and Exculpation of Indemnitees‌32

6.4Liability of the General Partner‌33

6.5Reimbursement of General Partner‌34

6.6Outside Activities‌34

6.7Employment or Retention of Affiliates‌34

6.8General Partner Participation‌35

6.9Title to Partnership Assets‌35

i

TABLE OF CONTENTS

(continued)

Article‌PAGE

6.10Redemptions of REIT Shares‌35

6.11No Duplication of Fees or Expenses‌36

Article 7CHANGES IN GENERAL PARTNER‌36

7.1Transfer of the General Partner’s Partnership Interest‌36

7.2Admission of a Substitute or Additional General Partner‌38

7.3Effect of Bankruptcy, Withdrawal, Death or Dissolution of the sole remaining General Partner‌38

7.4Removal of a General Partner‌39

Article 8RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS‌40

8.1Management of the Partnership‌40

8.2Power of Attorney‌40

8.3Limitation on Liability of Limited Partners‌40

8.4Ownership by Limited Partner of Corporate General Partner or Affiliate‌41

8.5Redemption Right‌41

8.6Registration‌45

8.7Distribution Reinvestment Plan‌46

Article 9TRANSFERS OF LIMITED PARTNERSHIP INTERESTS‌46

9.1Purchase for Investment‌46

9.2Restrictions on Transfer of Limited Partnership Interests‌46

9.3Admission of Substitute Limited Partner‌48

9.4Rights of Assignees of Partnership Interests‌49

9.5Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner‌49

9.6Joint Ownership of Interests‌49

Article 10BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS‌50

10.1Books and Records‌50

10.2Custody of Partnership Funds; Bank Accounts‌50

10.3Fiscal and Taxable Year‌50

10.4Annual Tax Information and Report‌50

10.5Tax Matters Partner; Tax Elections; Special Basis Adjustments‌51

10.6Reports to Limited Partners‌52

10.7Safe Harbor Election‌52

Article 11AMENDMENT OF AGREEMENT; MERGER‌53

Article 12GENERAL PROVISIONS‌53

12.1Notices‌53

12.2Survival of Rights‌54

12.3Additional Documents‌54

12.4Severability‌54

12.5Entire Agreement‌54

12.6Pronouns and Plurals‌54

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TABLE OF CONTENTS

(continued)

Article‌PAGE

12.7Headings‌54

12.8Counterparts‌54

12.9Governing Law‌54

EXHIBITS

EXHIBIT A - Partners, Capital Contributions and Percentage Interests or Special Percentage Interests

EXHIBIT B - Notice of Exercise of Redemption Right

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twelfth Amended and Restated LIMITED PARTNERSHIP AGREEMENT
OF
AREIT Operating Partnership LP

This Twelfth Amended and Restated Limited Partnership Agreement (this “Agreement”) is entered into as of June 3, 2023, between Ares Real Estate Income Trust Inc., a Maryland corporation (f/k/a Black Creek Diversified Property Fund Inc.) (the “General Partner”) and the Limited Partners set forth on Exhibit A attached hereto.  

RECITALS:

A.AREIT Operating Partnership LP (f/k/a Dividend Capital Total Realty Operating Partnership LP) (the “Partnership”), was formed on April 12, 2005 as a limited partnership under the laws of the State of Delaware, pursuant to a Certificate of Limited Partnership filed with the Office of the Secretary of State of the State of Delaware on April 12, 2005.

B.The Partnership is currently governed by the Eleventh Amended and Restated Limited Partnership Agreement of the Partnership dated as of December 1, 2021 (the “Prior Agreement”).  

C.The parties desire to amend and restate the Prior Agreement as fully set forth below.

NOW, THEREFORE, in consideration of the foregoing, of mutual covenants between the parties hereto, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Prior Agreement shall be and hereby is amended and restated in its entirety as follows:

Article 1

DEFINED TERMS

1.1Definitions.  The following defined terms used in this Agreement shall have the meanings specified below:

“ACT” means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time.

“ADDITIONAL FUNDS” has the meaning set forth in Section 4.4.

“ADDITIONAL SECURITIES” means any additional REIT Shares (other than REIT Shares issued in connection with a redemption pursuant to Section 8.5 or REIT Shares issued pursuant to a dividend reinvestment plan of the General Partner) or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase REIT Shares, as set forth in Section 4.3(a)(ii).

“ADMINISTRATIVE EXPENSES” means (i) all administrative and operating costs and expenses incurred by the Partnership, (ii) those administrative costs and expenses of the General Partner, including any salaries or other payments to directors, officers or employees of the General

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Partner, and any accounting and legal expenses of the General Partner, which expenses, the Partners have agreed, are expenses of the Partnership and not the General Partner, and (iii) to the extent not included in clause (ii) above, REIT Expenses; provided, however, that Administrative Expenses shall not include any administrative costs and expenses incurred by the General Partner that are attributable to Properties or partnership interests in a Subsidiary Partnership that are owned by the General Partner directly.

“ADVISOR” or “ADVISORS” means the Person or Persons, if any, appointed, employed or contracted with by the General Partner and responsible for directing or performing the day-to-day business affairs of the General Partner, including any Person to whom the Advisor subcontracts substantially all of such functions.

“ADVISORY AGREEMENT” means the agreement between the General Partner and the Advisor pursuant to which the Advisor will direct or perform the day-to-day business affairs of the General Partner.

“AFFILIATE” means, with respect to any Person, (i) any Person directly or indirectly, owning, controlling or holding with the power to vote 10% of more of the outstanding voting securities of such other Person; (ii) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person; (iv) any executive officer, director, trustee or general partner of such other Person; and (v) any legal entity for which such Person acts an executive officer, director, trustee or general partner.  

“AFFIRMATION DATE” has the meaning provided in Section 8.5(a).

“AGGREGATE SHARE OWNERSHIP LIMIT” shall have the meaning set forth in the Articles of Incorporation.

“AGREED VALUE” means the fair market value of a Partner’s non-cash Capital Contribution as of the date of contribution as agreed to by such Partner and the General Partner.  The names and addresses of the Partners, number and Class or Series of Partnership Units or Special Partnership Units issued to each Partner, and the Agreed Value of non-cash Capital Contributions as of the date of contribution are set forth on Exhibit A.

“AGREEMENT” means this Twelfth Amended and Restated Limited Partnership Agreement, as amended, modified supplemented or restated from time to time, as the context requires.

“ANNUAL TOTAL RETURN AMOUNT” means the overall investment return, expressed as a dollar amount per Partnership Unit, which shall be equal to the sum of (1) the Weighted-Average Distributions per Partnership Unit over the applicable period, and (2) the Ending VPU, adjusted to remove the negative impact on the overall investment return from the payment or the obligation to pay, or distribute, as applicable, the Performance Allocation and Class-Specific Fees, less the Beginning VPU.

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“APPLICABLE PERCENTAGE” has the meaning provided in Section 8.5(b).

“ARTICLES OF INCORPORATION” means the Articles of Restatement of the General Partner filed with the Maryland State Department of Assessments and Taxation on March 20, 2012, as further amended or supplemented from time to time.

“BEGINNING VPU”  means the VPU determined as of the end of the most recent month prior to the commencement of the applicable period.

“CAPITAL ACCOUNT” has the meaning provided in Section 4.5.

“CAPITAL CONTRIBUTION” means the total amount of cash, cash equivalents, and the Agreed Value of any Property or other asset (other than cash or cash equivalents) contributed or agreed to be contributed, as the context requires, to the Partnership by each Partner pursuant to the terms of this Agreement.  Any reference to the Capital Contribution of a Partner shall include the Capital Contribution made by a predecessor holder of the Partnership Interest of such Partner.

“CARRYING VALUE” means, with respect to any asset of the Partnership, the asset’s adjusted net basis for federal income tax purposes or, in the case of any asset contributed to the Partnership, the fair market value of such asset at the time of contribution, reduced by any amounts attributable to the inclusion of liabilities in basis pursuant to Section 752 of the Code, except that the Carrying Values of all assets may, at the discretion of the General Partner, be adjusted to equal their respective fair market values (as determined by the General Partner), in accordance with the rules set forth in Regulations Section 1.704-1(b)(2)(iv)(f), as provided for in Section 4.5.  In the case of any asset of the Partnership that has a Carrying Value that differs from its adjusted tax basis, the Carrying Value shall be adjusted by the amount of depreciation, depletion and amortization calculated for purposes of the definition of Profit and Loss rather than the amount of depreciation, depletion and amortization determined for federal income tax purposes.

“CASH AMOUNT” means an amount of cash per Partnership Unit equal to the applicable Redemption Price determined by the General Partner.

“CERTIFICATE” means any instrument or document that is required under the laws of the State of Delaware, or any other jurisdiction in which the Partnership conducts business, to be signed and sworn to by the Partners of the Partnership (either by themselves or pursuant to the power-of-attorney granted to the General Partner in Section 8.2) and filed for recording in the appropriate public offices within the State of Delaware or such other jurisdiction to perfect or maintain the Partnership as a limited partnership, to effect the admission, withdrawal, or substitution of any Partner of the Partnership, or to protect the limited liability of the Limited Partners as limited partners under the laws of the State of Delaware or such other jurisdiction.

“CLASS” means a class of REIT Shares or Partnership Units, as the context may require.  

“CLASS E REIT SHARES” means the Class of REIT Shares designated as “Class E Common Shares” under the General Partner’s charter.

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“CLASS E UNIT” means a Partnership Unit entitling the holder thereof to the rights of a holder of a Class E Unit as provided in this Agreement, and shall be either Series 1 Class E Units or Series 2 Class E Units.

“CLASS D REIT SHARES” means the Class of REIT Shares designated as “Class D Common Shares” under the General Partner’s charter.

“CLASS D UNIT” means a Partnership Unit entitling the holder thereof to the rights of a holder of a Class D Unit as provided in this Agreement.

“CLASS I REIT SHARES” means the Class of REIT Shares designated as “Class I Common Shares” under the General Partner’s charter.

“CLASS I UNIT” means a Partnership Unit entitling the holder thereof to the rights of a holder of a Class I Unit as provided in this Agreement.

“CLASS S REIT SHARES” means the Class of REIT Shares designated as “Class S Common Shares” under the General Partner’s charter.

“CLASS S UNIT” means a Partnership Unit entitling the holder thereof to the rights of a holder of a Class S Unit as provided in this Agreement, and shall be either Series 1 Class S Units or Series 2 Class S Units.

“CLASS-SPECIFIC FEES” means any Distribution Fee expenses accrued or allocated directly or indirectly to a particular Class or Series of Partnership Units or REIT Shares.

“CLASS T REIT SHARES” means the Class of REIT Shares designated as “Class T Common Shares” under the General Partner’s charter.

“CLASS T UNIT” means a Partnership Unit entitling the holder thereof to the rights of a holder of a Class T Unit as provided in this Agreement, and shall be either Series 1 Class T Units or Series 2 Class T Units.

“CODE” means the Internal Revenue Code of 1986, as amended, and as hereafter amended from time to time.  Reference to any particular provision of the Code shall mean that provision in the Code at the date hereof and any successor provision of the Code.

“COMMISSION” means the U.S.  Securities and Exchange Commission.

“COMMON SHARE OWNERSHIP LIMIT” shall have the meaning set forth in the Articles of Incorporation.

“CONVERSION FACTOR” means 1.0, provided that in the event that the General Partner (i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (ii) subdivides its outstanding REIT Shares, or (iii) combines its outstanding REIT Shares into a smaller number of REIT Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of REIT Shares issued and outstanding on

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the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time), and the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on such date and, provided further, that in the event that an entity other than an Affiliate of the General Partner shall become General Partner pursuant to any merger, consolidation or combination of the General Partner with or into another entity (the “Successor Entity”), the Conversion Factor shall be adjusted by multiplying the Conversion Factor by the number of shares of the Successor Entity into which one REIT Share is converted pursuant to such merger, consolidation or combination, determined as of the date of such merger, consolidation or combination.  Any adjustment to the Conversion Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event; provided, however, that if the General Partner receives a Notice of Redemption after the record date, but prior to the effective date of such dividend, distribution, subdivision or combination, the Conversion Factor shall be determined as if the General Partner had received the Notice of Redemption immediately prior to the record date for such dividend, distribution, subdivision or combination.  A separate Conversion Factor shall be determined for each Class or Series of Partnership Units (other than Series 2 Class S Units) by taking into account only the outstanding REIT Shares having the same Class designation as the applicable Class of Partnership Units. The Conversion Factor for Series 2 Class S Units shall equal the Conversion Factor for Series 1 Class S Units, multiplied by the Net Asset Value Per Unit for Series 2 Class S Units and divided by the Net Asset Value Per Unit for Series 1 Class S Units.

“DEALER MANAGER” means Ares Wealth Management Solutions, LLC or such other Person or entity selected by the board of directors of the General Partner to act as the dealer manager for the Offering.

“DIRECTOR” shall have the meaning set forth in the Articles of Incorporation.

“DISTRIBUTION FEES” means any ongoing distribution fees, dealer manager fees or similar fees (as distinguished from up-front or one-time selling commissions and dealer manager fees) payable pursuant to any dealer manager agreement between the General Partner and the Dealer Manager with respect to outstanding REIT Shares or Partnership Units.

“ENDING VPU”  means the VPU as of the end of the last month in the applicable period.

“EVENT OF BANKRUPTCY” as to any Person means the filing of a petition for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of 1978 or similar provision of law of any jurisdiction (except if such petition is contested by such Person and has been dismissed within 90 days); insolvency or bankruptcy of such Person as finally determined by a court proceeding; filing by such Person of a petition or application to accomplish the same or for the appointment of a receiver or a trustee for such Person or a substantial part of his assets; commencement of any proceedings relating to such Person as a debtor under any other reorganization, arrangement, insolvency, adjustment of debt or liquidation law of any jurisdiction, whether now in existence or hereinafter in effect, either by such Person or by another, provided that if such proceeding is commenced by another, such Person indicates his approval of such proceeding, consents thereto or acquiesces therein, or such proceeding is contested by such Person and has not been finally dismissed within 90 days.

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“EXCEPTED HOLDER LIMIT” shall have the meaning set forth in the Articles of Incorporation.

“FMV Option” means a fair market value purchase option giving the Partnership the right, but not the obligation, to acquire Interests from holders thereof at a later time in exchange for Series 2 Class T Units.

“GAAP” means generally accepted accounting principles as in effect in the United States of America from time to time.

“GENERAL PARTNER” means Ares Real Estate Income Trust Inc., a Maryland corporation, and any Person who becomes a substitute or additional General Partner as provided herein, and any of their successors as General Partner, in such Person’s capacity as a General Partner of the Partnership.

“GENERAL PARTNERSHIP INTEREST” means a Partnership Interest held by the General Partner.

“GENERAL PARTNER LOAN” has the meaning provided in Section 5.2(d).

“HURDLE AMOUNT” means for the applicable period, an amount that when annualized would equal 5.0% of the Beginning VPU.

“INDEMNITEE” means (i) any Person made a party to a proceeding by reason of its status as the General Partner or a director, officer or employee of the General Partner or the Partnership, and (ii) such other Persons (including Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time, in its sole and absolute discretion.

“INDEPENDENT DIRECTORS” shall have the meaning set forth in the Articles of Incorporation.

“INTERESTS” means beneficial interests in specific Delaware statutory trusts offered in Private Placements.

“INVESTOR SERVICING FEE” means a fee paid to the dealer manager of the Private Placements equal to 0.85% per annum of the Net Asset Value Per Unit of each Resulting Series 2 Class T Unit (calculated monthly in accordance with the Valuation Procedures and in this Agreement, as they may be amended from time to time) which will be allocated to the holders of Class T Units through a reduction in their distributions.

“JOINT VENTURE” means any joint venture or general partnership arrangement in which the Partnership is a co-venturer or general partner which are established to acquire Real Property.

“LIMITED PARTNER” means any Person named as a Limited Partner on Exhibit A, including the Special OP Unitholders, Profit Interest Partners, and any Person who becomes a Substitute Limited Partner, in such Person’s capacity as a Limited Partner in the Partnership.

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“LIMITED PARTNERSHIP INTEREST” means the ownership interest of a Limited Partner in the Partnership at any particular time, including the right of such Limited Partner to any and all benefits to which such Limited Partner may be entitled as provided in this Agreement and in the Act, together with the obligations of such Limited Partner to comply with all the provisions of this Agreement and of such Act.

“LISTING” means the listing of the shares of the General Partner’s stock, previously issued by the General Partner pursuant to an effective registration statement and such shares currently registered with the Commission pursuant to an effective registration statement, on a national securities exchange or the receipt by holders of shares of the General Partner’s stock of securities that are listed on a national securities exchange in exchange for shares of the General Partner’s stock.  Upon such Listing, the shares shall be deemed “LISTED”.

“LOSS” has the meaning provided in Section 5.1(g).

“LOSS CARRYFORWARD AMOUNT”  means an amount that equaled zero as of September 1, 2017 and cumulatively increases from then by the absolute value of any negative Annual Total Return Amount and decrease by any positive Annual Total Return Amount, provided that the Loss Carryforward Amount shall at no time be less than zero. The effect of the Loss Carryforward Amount is that the recoupment of past Annual Total Return Amount losses will offset the positive Annual Total Return Amount for purposes of the calculation of the Performance Allocation.

“MINIMUM LIMITED PARTNERSHIP INTEREST” means the lesser of (i) 1% or (ii) if the total Capital Contributions to the Partnership exceeds $50 million, 1% divided by the ratio of the total Capital Contributions to the Partnership to $50 million; provided, however, that the Minimum Limited Partnership Interest shall not be less than 0.2% at any time.

“MORTGAGES” means, in connection with any mortgage financing provided, invested in, participated in or purchased by the Partnership, all of the notes, deeds of trust, mortgages, security interests or other evidences of indebtedness or obligations, which are secured by or, collateralized by, or applicable to any Real Property owned by the borrowers under such notes, deeds of trust, mortgages, security interests or other evidences of indebtedness or obligations.

“MULTPLE CLASS PLAN” means a written plan adopted by the Board of Directors of the General Partner, as such plan may be amended from time to time, that sets forth the method by which distributions among classes of REIT Shares shall be determined relative to each other, and may set forth other terms of classes of REIT Shares relative to each other.

“NAV” means net asset value, calculated pursuant to the Valuation Procedures and in this Agreement.

“NAV CALCULATIONS” means the calculations used to determine the NAV of the General Partner, the REIT Shares, the Partnership and the Partnership Units, all as provided in the Valuation Procedures and in this Agreement.

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“NET ASSET VALUE PER UNIT” means, for each Class or Series of Partnership Unit, the net asset value per unit of such Class or Series of Partnership Unit most recently determined in accordance with the Valuation Procedures and in this Agreement.

“NET ASSET VALUE PER REIT SHARE” means, for each Class of REIT Shares, the net asset value per share of such Class of REIT Shares most recently determined in accordance with the Valuation Procedures and in this Agreement.

“NOTICE OF REDEMPTION” means the Notice of Exercise of Redemption Right substantially in the form attached as Exhibit B.

“OFFER” has the meaning set forth in Section 7.1(c).

“OFFERING” means the an offer and sale of REIT Shares to the public.

“OP UNITHOLDERS” means all holders of Partnership Interests other than the Special OP Unitholders and Profit Interest Partners.

“PARTNER” means any General Partner or Limited Partner.

“PARTNER NONRECOURSE DEBT MINIMUM GAIN” has the meaning set forth in Regulations Section 1.704-2(i).  A Partner’s share of Partner Nonrecourse Debt Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(i)(5).

“PARTNERSHIP” means AREIT Operating Partnership LP, a Delaware limited partnership.

“PARTNERSHIP INTEREST” means an ownership interest in the Partnership held by either a Limited Partner or the General Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement.

“PARTNERSHIP LOAN” has the meaning provided in Section 5.2(d) hereof.

“PARTNERSHIP MINIMUM GAIN” has the meaning set forth in Regulations Section 1.704-2(d).  In accordance with Regulations Section 1.704-2(d), the amount of Partnership Minimum Gain is determined by first computing, for each Partnership nonrecourse liability, any gain the Partnership would realize if it disposed of the property subject to that liability for no consideration other than full satisfaction of the liability, and then aggregating the separately computed gains.  A Partner’s share of Partnership Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(g)(1).

“PARTNERSHIP NAV” means the NAV of the Partnership, calculated pursuant to the Valuation Procedures and in this Agreement.

“PARTNERSHIP RECORD DATE” means the record date established by the General Partner for the distribution of cash pursuant to Section 5.2, which record date shall be the same as

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the record date established by the General Partner for a distribution to its shareholders of some or all of its portion of such distribution.

“PARTNERSHIP UNIT” means a fractional, undivided share of the Partnership Interests of all Partners issued hereunder, including Class T Units, Class S Units, Class E Units, Class I Units and Class D Units, but excluding the Partnership Interests represented by Special Partnership Units and Profit Interests.  The allocation of Partnership Units of each Class and Series among the Partners shall be as set forth on Exhibit A, as such Exhibit may be amended from time to time.

“PERCENTAGE INTEREST” means the percentage ownership interest in the Partnership of each Partner, as determined by dividing the Partnership Units owned by a Partner by the total number of Partnership Units then outstanding.  The Percentage Interest of each Partner shall be as set forth on Exhibit A, as such Exhibit may be amended from time to time.

“PERFORMANCE ALLOCATION” shall have the meaning set forth in Section 5.2(c).

“PERSON” means any individual, partnership, limited liability company, corporation, joint venture, trust or other entity.

“PRIVATE PLACEMENT” means a private placement of Interests with respect to which the Partnership will be given a FMV Option.

“PROFIT” has the meaning provided in Section 5.1(g) hereof.

“PROFIT INTEREST PARTNERS” means the holders of Profit Interests; provided, that, if such holders of Profit Interests own Partnership Units, then such holders shall be OP Unitholders and not Profit Interest Partners with respect to such Partnership Units.

“PROFIT INTEREST” means a series of Partnership Interests designated by the General Partner as a Profit Interest.  The Profit Interests outstanding are set forth on Exhibit A, as such Exhibit may be amended from time to time.  

“PROPERTY” means any Real Property, Real Estate Securities or other investment in which the Partnership holds an ownership interest.

“REAL ESTATE SECURITIES” means the real estate related securities, or such investments the General Partner and the Advisor mutually designate as Real Estate Securities to the extent such investments could be classified as either Real Estate Securities or Real Property, typically consisting of (i) securities of other real estate investment trusts or real estate companies, (ii) shares of open-end and/or closed-end real estate funds, and (iii) mortgages or interests in pools of mortgages secured by real estate, which are acquired by the Partnership, either directly or through joint venture arrangements or other partnerships.

“REAL PROPERTY” means (i) the real properties, including the buildings located thereon, or (ii) the real properties only, or (iii) the buildings only, which are acquired by the Partnership, either directly or through joint venture arrangements or other partnerships, or (iv) such investments the General Partner and the Advisor mutually designate as Real Property to the extent such investments could be classified as either Real Property or Real Estate Securities.  

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“REDEMPTION PRICE” means the Value of the REIT Shares Amount as of the end of the Specified Redemption Date.

“REDEMPTION RIGHT” has the meaning provided in Section 8.5(a).

“REDEMPTION SHARES” has the meaning provided in Section 8.6(a).

“REGULATIONS” means the Federal income tax regulations promulgated under the Code, as amended and as hereafter amended from time to time.  Reference to any particular provision of the Regulations shall mean that provision of the Regulations on the date hereof and any successor provision of the Regulations.

“REGULATORY ALLOCATIONS” has the meaning set forth in Section 5.1(f).

“REIT” means a real estate investment trust under Sections 856 through 860 of the Code.

“REIT EXPENSES” means (i) costs and expenses relating to the formation and continuity of existence and operation of the General Partner and any Subsidiaries thereof (which Subsidiaries shall, for purposes hereof, be included within the definition of General Partner), including taxes, fees and assessments associated therewith, any and all costs, expenses or fees payable to any director, officer, or employee of the General Partner, (ii) costs and expenses relating to any public offering and registration of securities by the General Partner and all statements, reports, fees and expenses incidental thereto, including, without limitation, underwriting discounts and selling commissions applicable to any such offering of securities, and any costs and expenses associated with any claims made by any holders of such securities or any underwriters or placement agents thereof, (iii) costs and expenses associated with any repurchase of any securities by the General Partner, (iv) costs and expenses associated with the preparation and filing of any periodic or other reports and communications by the General Partner under federal, state or local laws or regulations, including filings with the Commission, (v) costs and expenses associated with compliance by the General Partner with laws, rules and regulations promulgated by any regulatory body, including the Commission and any securities exchange, (vi) costs and expenses associated with any 401(k) plan, incentive plan, bonus plan or other plan providing for compensation for the employees of the General Partner, (vii) costs and expenses incurred by the General Partner relating to any issuing or redemption of Partnership Interests, and (viii) all other operating or administrative costs of the General Partner incurred in the ordinary course of its business on behalf of or in connection with the Partnership.

“REIT SHARE” means a share of common stock in the General Partner (or successor entity, as the case may be), including Class T REIT Shares, Class S REIT Shares, Class E REIT Shares, Class I REIT Shares and Class D REIT Shares.

“REIT SHARES AMOUNT” means, with respect to any Class or Series of Tendered Units, a number of REIT Shares of such Class equal to the product of the number of Partnership Units of such Class or Series offered for exchange by a Tendering Party, multiplied by the Conversion Factor for such Class or Series of Partnership Units as adjusted to and including the Specified Redemption Date; provided that in the event the General Partner issues to all holders of REIT Shares rights, options, warrants or convertible or exchangeable securities entitling the shareholders

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to subscribe for or purchase REIT Shares, or any other securities or property (collectively, the “rights”), and the rights have not expired at the Specified Redemption Date, then the REIT Shares Amount shall also include the rights issuable to a holder of the REIT Shares Amount of REIT Shares on the record date fixed for purposes of determining the holders of REIT Shares entitled to rights.  

“RELATED PARTY” means, with respect to any Person, any other Person whose ownership of shares of the General Partner’s capital stock would be attributed to the first such Person under Code Section 544 (as modified by Code Section 856(h)(1)(B)).

“RESULTING SERIES 2 CLASS T UNITS” means, with respect to any Interests, the Series 2 Class T Units issued by the Partnership in connection with its exercise of the FMV Option and acquisition of the Interests.

“SAFE HARBOR” means, the election described in the Safe Harbor Regulation, pursuant to which a partnership and all of its partners may elect to treat the fair market value of a partnership interest that is transferred in connection with the performance of services as being equal to the liquidation value of that interest.

“SAFE HARBOR ELECTION” means the election by a partnership and its partners to apply the Safe Harbor, as described in the Safe Harbor Regulation and Internal Revenue Service Notice 2005-43, issued on May 19, 2005.

“SAFE HARBOR REGULATION” means Proposed Treasury Regulations Section 1.83-3(l) issued on May 19, 2005.

“SECURITIES ACT” means the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder.

“SERIES” means a series of a Class of Partnership Units, as the context may require.  

“SERIES 1 CLASS E UNITS” means Class E Units with the rights, privileges and obligations set forth for in this Agreement with respect to Series 1 Class E Units.  

“SERIES 1 CLASS S UNITS” means Class S Units with the rights, privileges and obligations set forth for in this Agreement with respect to Series 1 Class S Units.  

“SERIES 1 CLASS T UNITS” means Class T Units with the rights, privileges and obligations set forth for in this Agreement with respect to Series 1 Class T Units.  

“SERIES 2 CLASS E UNITS” means Class E Units with the rights, privileges and obligations set forth for in this Agreement with respect to Series 2 Class E Units.

“SERIES 2 CLASS S UNITS” means Class S Units with the rights, privileges and obligations set forth for in this Agreement with respect to Series 2 Class S Units.

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“SERIES 2 CLASS T UNITS” means Class T Units with the rights, privileges and obligations set forth for in this Agreement with respect to Series 2 Class T Units.

“SERVICE” means the United States Internal Revenue Service.

“SPECIAL OP UNITHOLDERS” means the holders of Special Partnership Units; provided, that, if such holders of Special Partnership Units own Partnership Units, then such holders shall be OP Unitholders and not Special OP Unitholders with respect to such Partnership Units.

“SPECIAL PARTNERSHIP UNIT” means a unit of a series of Partnership Interests, designated as Special Partnership Units.  The number of Special Partnership Units outstanding and the Special Percentage Interests in the Partnership represented by such Special Partnership Units are set forth on Exhibit A, as such Exhibit may be amended from time to time.  For the avoidance of doubt, the Special Partnership Units are separate and distinct from the Special OP Units described in Section 9.8 of the General Partner’s Articles of Incorporation, which were redeemed by the Partnership effective July 12, 2012.

“SPECIAL PERCENTAGE INTEREST” shall mean the percentage ownership interest in the Special Partnership Units of each Special OP Unitholder, as determined by dividing the Special Partnership Units owned by each Special OP Unitholder by the total number of Special Partnership Units then outstanding.  The Special Percentage Interest of each Partner shall be as set forth on Exhibit A, as such Exhibit may be amended from time to time.

“SPECIFIED REDEMPTION DATE” means, if the Affirmation Date is at least three business days before the end of a month, the last business day of such month, and otherwise the last business day of the month following the month in which the Affirmation Date occurred.

“SPONSOR PARTIES” has the meaning provided in Section 8.5(a) hereof.

“SUBSIDIARY” means, with respect to any Person, any corporation or other entity of which the general partner is such Person or of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person.

“SUBSIDIARY PARTNERSHIP” means any partnership of which the partnership interests therein are owned by the General Partner or a direct or indirect subsidiary of the General Partner.

“SUBSTITUTE LIMITED PARTNER” means any Person admitted to the Partnership as a Limited Partner pursuant to Section 9.3.  

“SUCCESSOR ENTITY” has the meaning provided in the definition of “Conversion Factor” contained herein.

“SURVIVOR” has the meaning set forth in Section 7.1(d).

“TAX MATTERS PARTNER” has the meaning described in Section 10.5(a).

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“TERMINATION EVENT” means the termination or nonrenewal of the Advisory Agreement (i) in connection with a merger, sale of assets or transaction involving the General Partner pursuant to which a majority of the directors of the General Partner then in office are replaced or removed, (ii) by the Advisor for “good reason” (as defined in the Advisory Agreement) or (iii) by the General Partner other than for “cause” (as defined in the Advisory Agreement).

“TENDERED UNITS” has the meaning provided in Section 8.5(a).

“TENDERING PARTY” has the meaning provided in Section 8.5(a).

“TOTAL EQUITY AMOUNT” means the cash purchase price of Interests in a Private Placement less the amount of any loan from the Partnership or any of its affiliates to finance a portion of such purchase price.

“TRANSACTION” has the meaning set forth in Section 7.1(c).

“TRANSFER” has the meaning set forth in Section 9.2(a).

“VALUATION PROCEDURES” means written valuation procedures adopted by the Board of Directors of the General Partner, as such procedures may be amended from time to time, that set forth the method by which the net asset value per each Class of REIT Share and Class or Series of Partnership Unit shall be calculated. Pursuant to such Valuation Procedures, certain Classes or Series of Partnership Units are each economically equivalent to a corresponding class of REIT Shares. Pursuant to this Agreement, those are as follows:

● Series 1 Class E Units and Series 2 Class E Units are economically equivalent to Class E REIT Shares.

● Series 1 Class S Units are economically equivalent to Class S REIT Shares.

● Series 1 Class T Units and Series 2 Class T Units are economically equivalent to Class T REIT Shares.

● Class D Units are economically equivalent to Class D REIT Shares.

● Class I Units are economically equivalent to Class I REIT Shares.

Series 2 Class S Units, however, are not economically equivalent to any Class of REIT Shares.  Accordingly, the Net Asset Value Per Unit of Series 2 Class S Units shall, upon their initial issuance, be set at the Net Asset Value Per Unit of Series 1 Class S Units, and thereafter adjusted as described in the Valuation Procedures as if they were a separate Class of REIT Shares, taking into account their specific economic terms (specifically, their specific dividends and ongoing Distribution Fees) set forth herein.

“VALUE” means, for each Class of REIT Shares, the fair market value per share of that Class of REIT Shares which will equal:  (i) if REIT Shares of that Class are Listed, the average closing price per share for the previous thirty business days, or (ii) if REIT Shares of that Class are not Listed, the Net Asset Value Per REIT Share for REIT Shares of that Class.

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“VPU”  means average value per Partnership Unit, which on any given date shall be equal to (i) the Partnership NAV on such date, divided by (ii) the aggregate number of Partnership Units of all Classes and Series outstanding on such date.

“WEIGHTED-AVERAGE DISTRIBUTIONS PER PARTNERSHIP UNIT”  shall mean, for a particular period of time, an amount equal to the ratio of (i) the aggregate distributions paid or accrued in respect of all Partnership Units during the applicable period, divided by (ii) the weighted-average number of Partnership Units of all Classes and Series outstanding during the applicable period, calculated in accordance with GAAP applied on a consistent basis.

1.2Interpretation.  The definitions in Section 1.1 shall apply equally to both the singular and plural forms of the terms defined.  Wherever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine and neuter forms.  For all purposes of this Agreement, the term “control” and variations thereof shall mean possession of the authority to direct or cause the direction of the management and policies of the specified entity, through the direct or indirect ownership of equity interests therein, by contract or otherwise.  As used in this Agreement, the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  As used in this Agreement, the terms “herein,” “hereof” and “hereunder” shall refer to this Agreement in its entirety.  Any references in this Agreement to “Sections” or “Articles” shall, unless otherwise specified, refer to Sections or Articles, respectively, in this Agreement.  Any references in this Agreement to an “Exhibit” shall, unless otherwise specified, refer to an Exhibit attached to this Agreement.  Each such Exhibit shall be deemed incorporated in this Agreement in full.

Article 2

PARTNERSHIP FORMATION AND IDENTIFICATION

2.1Formation.  The Partnership was formed as a limited partnership pursuant to and in accordance with the Act by, among other steps, the entering into of the initial partnership agreement (within the meaning of the Act) by the initial general partner of the Partnership and the initial limited partner of the Partnership and by the entering into and filing of the initial certificate of limited partnership (within the meaning of the Act) by the initial general partner of the Partnership with the Office of the Secretary of State of the State of Delaware.

2.2Name, Office and Registered Agent.  The name of the Partnership is AREIT Operating Partnership LP.  The specified office and place of business of the Partnership shall be One Tabor Center, 1200 Seventeenth Street, Suite 2900, Denver, Colorado 80202.  The General Partner may at any time change the location of such office, provided the General Partner gives notice to the Partners of any such change.  The name and address of the Partnership’s registered agent is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.  The sole duty of the registered agent as such is to forward to the Partnership any notice that is served on him as registered agent.

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2.3Partners.

(a)The General Partner of the Partnership is Ares Real Estate Income Trust Inc., a Maryland corporation.  Its principal place of business is the same as that of the Partnership.

(b)The Limited Partners are those Persons identified as Limited Partners on Exhibit A hereto, as amended from time to time.

2.4Term and Dissolution.

(a)The term of the Partnership shall be perpetual, except that the Partnership shall be dissolved upon the first to occur of any of the following events:

(i)The occurrence of an Event of Bankruptcy as to a General Partner or the dissolution, death, removal or withdrawal of a General Partner unless the business of the Partnership is continued pursuant to Section 7.3(b); provided that if a General Partner is on the date of such occurrence a partnership, the dissolution of such General Partner as a result of the dissolution, death, withdrawal, removal or Event of Bankruptcy of a partner in such partnership shall not be an event of dissolution of the Partnership if the business of such General Partner is continued by the remaining partner or partners, either alone or with additional partners, and such General Partner and such partners comply with any other applicable requirements of this Agreement;

(ii)The passage of ninety (90) days after the sale or other disposition of all or substantially all of the assets of the Partnership (provided that if the Partnership receives an installment obligation as consideration for such sale or other disposition, the Partnership shall continue, unless sooner dissolved under the provisions of this Agreement, until such time as such note or notes are paid in full); or

(iii)The election by the General Partner that the Partnership should be dissolved.

(b)Upon dissolution of the Partnership (unless the business of the Partnership is continued pursuant to Section 7.3(b)), the General Partner (or its trustee, receiver, successor or legal representative) shall amend or cancel any Certificate(s) and liquidate the Partnership’s assets and apply and distribute the proceeds thereof in accordance with Section 5.6.  Notwithstanding the foregoing, the liquidating General Partner may either (i) defer liquidation of, or withhold from distribution for a reasonable time, any assets of the Partnership (including those necessary to satisfy the Partnership’s debts and obligations), or (ii) distribute the assets to the Partners in kind.

2.5Filing of Certificate and Perfection of Limited Partnership.  The General Partner shall execute, acknowledge, record and file at the expense of the Partnership, any and all amendments to the Certificate(s) and all requisite fictitious name statements and notices in such

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places and jurisdictions as may be necessary to cause the Partnership to be treated as a limited partnership under, and otherwise to comply with, the laws of each state or other jurisdiction in which the Partnership conducts business.

2.6Certificates Describing Partnership Units, Special Partnership Units and Profit Interests.  At the request of a Limited Partner, the General Partner, at its option, may issue (but in no way is obligated to issue) a certificate summarizing the terms of such Limited Partner’s interest in the Partnership, including the number and Class or Series of Partnership Units, Special Partnership Units or Profit Interests owned and the Percentage Interest and Special Percentage Interest represented by any such Partnership Units or Special Partnership Units as of the date of such certificate.  Any such certificate (i) shall be in form and substance as approved by the General Partner, (ii) shall not be negotiable and (iii) shall bear a legend to the following effect:

This certificate is not negotiable.  The Partnership Units, Special Partnership Units and Profit Interests represented by this certificate are governed by and transferable only in accordance with the provisions of the Limited Partnership Agreement of AREIT Operating Partnership LP, as amended from time to time.  

Article 3

BUSINESS OF THE PARTNERSHIP

The purpose and nature of the business to be conducted by the Partnership is (i) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act, provided, however, that such business shall be limited to and conducted in such a manner as to permit the General Partner at all times to qualify as a REIT, unless the General Partner otherwise ceases to qualify as a REIT, and in a manner such that the General Partner will not be subject to any taxes under Section 857 or 4981 of the Code, (ii) to enter into any partnership, joint venture or other similar arrangement to engage in any of the foregoing or the ownership of interests in any entity engaged in any of the foregoing and (iii) to do anything necessary or incidental to the foregoing.  In connection with the foregoing, and without limiting the General Partner’s right in its sole and absolute discretion to qualify or cease qualifying as a REIT, the Partners acknowledge that the General Partner intends to qualify as a REIT for federal income tax purposes and upon such qualification the avoidance of income and excise taxes on the General Partner inures to the benefit of all the Partners and not solely to the General Partner.  Notwithstanding the foregoing, the Limited Partners agree that the General Partner may terminate its status as a REIT under the Code at any time to the full extent permitted under the Articles of Incorporation.  The General Partner on behalf of the Partnership shall also be empowered to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Code.

Article 4

CAPITAL CONTRIBUTIONS AND ACCOUNTS

4.1Capital Contributions.  The General Partner and the Limited Partners have made capital contributions to the Partnership in exchange for the Partnership Interests set forth opposite

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their names on Exhibit A, as such Exhibit may be amended from time to time.  The Partners shall own Partnership Units, Special Partnership Units and Profit Interests of the Class or Series and in the amounts set forth in Exhibit A and shall have a Percentage Interest in the Partnership as set forth in Exhibit A. Notwithstanding the foregoing, the General Partner may keep Exhibit A current through separate revisions to the books and records of the Partnership that reflect periodic changes to the capital contributions made by the Partners and redemptions and other purchases of Partnership Units by the Partnership, and corresponding changes to the Partnership Interests of the Partners, without preparing a formal amendment to this Agreement, provided that such amendment shall be prepared upon the written request of any Limited Partner.

4.2Classes and Series of Partnership Units.  The General Partner is hereby authorized to cause the Partnership to issue Partnership Units designated as Class E Units (which may be designated by the General Partner upon issuance as Series 1 Class E Units or Series 2 Class E Units; provided, that all Class E Units issued to the General Partner shall be Series 1 Class E Units, and all other Class E Units issued prior to March 2, 2016 shall be Series 1 Class E Units), Class T Units (which may be designated by the General Partner upon issuance as Series 1 Class T Units or  Series 2 Class T Units; provided, that all Class T Units issued to the General Partner shall be Series 1 Class T Units), Class S Units (which may be designated by the General Partner upon issuance as Series 1 Class S Units or  Series 2 Class S Units; provided, that all Class S Units issued to the General Partner shall be Series 1 Class S Units), Class I Units and Class D Units.  Each such Class shall have the rights and obligations attributed to that Class under this Agreement.

Immediately following the time (if any) that the aggregate Investor Servicing Fees paid with respect to Resulting Series 2 Class T Units related to a single purchase of Interests in a Private Placement equals or exceeds such percentage as set forth in any applicable agreement between the Dealer Manager and a participating broker-dealer, provided that the Dealer Manager advises the General Partner’s transfer agent of the such percentage in writing) of the Total Equity Amount, all such Resulting Series 2 Class T Units (or fraction thereof) shall automatically convert to a number of Class I Units equal to the product of (a) the number of such Resulting Series 2 Class T Units and (b) the Value of Class T Units divided by the Value of Class I Units.

The General Partner is hereby authorized to designate and cause the Partnership to issue Profit Interests in multiple Series via award letters with the rights and obligations of such Profit Interests set forth in such award letters or an exhibit thereto.

4.3Additional Capital Contributions and Issuances of Additional Partnership Interests.  Except as provided in this Section 4.3 or in Section 4.4, the Partners shall have no right or obligation to make any additional Capital Contributions or loans to the Partnership.  The General Partner may contribute additional capital to the Partnership, from time to time, and receive additional Partnership Interests in respect thereof, in the manner contemplated in this Section 4.3.

(a)Issuances of Additional Partnership Interests.

(i)General.  The General Partner is hereby authorized to cause  the Partnership to issue such additional Partnership Interests in the form of Partnership Units for any Partnership purpose at any time or from time to time, including but not limited to Partnership Units issued in connection with acquisitions of properties,

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to the Partners (including the General Partner) or to other Persons for such consideration and on such terms and conditions as shall be established by the General Partner in its sole and absolute discretion, all without the approval of any Limited Partners.  Any additional Partnership Interests issued thereby may be issued in one or more Classes (including the Classes specified in this Agreement or any other Classes), or one or more Series (including the Series specified in this Agreement or any other Series) of any of such Classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to Limited Partnership Interests, all as shall be determined by the General Partner in its sole and absolute discretion and without the approval of any Limited Partner, subject to Delaware law, including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such Class or Series of Partnership Interests; (ii) the right of each such Class or Series of Partnership Interests to share in Partnership distributions; and (iii) the rights of each such Class or Series of Partnership Interests upon dissolution and liquidation of the Partnership; provided, however, that no additional Partnership Interests shall be issued to the General Partner unless:

(1)(A) the additional Partnership Interests are issued in connection with an issuance of REIT Shares of or other interests in the General Partner, which shares or interests have designations, preferences and other rights, all such that the economic interests are substantially similar to the designations, preferences and other rights of the additional Partnership Interests issued to the General Partner by the Partnership in accordance with this Section 4.3 (without limiting the foregoing, for example, the Partnership shall issue Class D Units to the General Partner in connection with the issuance of Class D REIT Shares) and (B) the General Partner shall make a Capital Contribution to the Partnership in an amount equal to the proceeds raised in connection with the issuance of such shares of stock of or other interests in the General Partner;

(2)the additional Partnership Interests are issued in exchange for property owned by the General Partner with a fair market value, as determined by the General Partner, in good faith, equal to the value of the Partnership Interests; or

(3)the additional Partnership Interests are issued to all Partners holding Partnership Units in proportion to their respective Percentage Interests.  

Without limiting the foregoing, the General Partner is expressly authorized to cause the Partnership to issue Partnership Units for less than fair market value, so long as the General Partner concludes in good faith that such issuance is in the best interests of the General Partner and the Partnership.  

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(ii)Upon Issuance of Additional Securities.  The General Partner shall not issue any Additional Securities other than to all holders of REIT Shares, unless (A) the General Partner shall cause the Partnership to issue to the General Partner, as the General Partner may designate, Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights, all such that the economic interests are substantially similar to those of the Additional Securities, and (B) the General Partner contributes the proceeds from the issuance of such Additional Securities and from any exercise of rights contained in such Additional Securities, directly and through the General Partner, to the Partnership (without limiting the foregoing, for example, if the General Partner issues Class D REIT Shares, then the General Partner shall contribute the proceeds of the issuance of the Class D REIT Shares to the Partnership and shall cause the Partnership to issue Class D Units to the General Partner); provided, however, that the General Partner is allowed to issue Additional Securities in connection with an acquisition of a property to be held directly by the General Partner, but if and only if, such direct acquisition and issuance of Additional Securities have been approved and determined to be in the best interests of the General Partner and the Partnership. Without limiting the foregoing, the General Partner is expressly authorized to issue Additional Securities for less than fair market value, and to cause the Partnership to issue to the General Partner corresponding Partnership Interests, so long as (x) the General Partner concludes in good faith that such issuance is in the best interests of the General Partner and the Partnership, including without limitation, the issuance of REIT Shares and corresponding Partnership Units pursuant to an employee share purchase plan providing for employee purchases of REIT Shares at a discount from fair market value or employee stock options that have an exercise price that is less than the fair market value of the REIT Shares, either at the time of issuance or at the time of exercise, and (y) the General Partner contributes all proceeds from such issuance to the Partnership.  For example, in the event the General Partner issues Class D REIT Shares for a cash purchase price and contributes all of the proceeds of such issuance to the Partnership as required hereunder, the General Partner shall be issued a number of additional Class D Units equal to the product of (A) the number of such Class D REIT Shares issued by the General Partner, the proceeds of which were so contributed, multiplied by (B) a fraction, the numerator of which is 100%, and the denominator of which is the Conversion Factor for Class D Units in effect on the date of such contribution.

(b)Certain Deemed Contributions of Proceeds of Issuance of REIT Shares.  In connection with any and all issuances of REIT Shares, the General Partner shall make Capital Contributions to the Partnership of the proceeds therefrom, provided that if the proceeds actually received and contributed by the General Partner are less than the gross proceeds of such issuance as a result of any underwriter’s discount or other expenses paid or incurred in connection with such issuance, then the General Partner shall be deemed to have made Capital Contributions to the Partnership in the aggregate amount of the gross proceeds of such issuance and the Partnership shall be deemed simultaneously to have paid such offering expenses in accordance with Section 6.5 and in connection with the required

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issuance of additional Partnership Units to the General Partner for such Capital Contributions pursuant to Section 4.3(a).

(c)Minimum Limited Partnership Interest.  In the event that either a redemption pursuant to Section 8.5 or additional Capital Contributions by the General Partner would result in the Limited Partners, in the aggregate, owning less than the Minimum Limited Partnership Interest, the General Partner and the Limited Partners shall form another partnership and contribute sufficient Limited Partnership Interests together with such other Limited Partners so that the limited partners of such partnership own at least the Minimum Limited Partnership Interest.

4.4Additional Funding.  If the General Partner determines that it is in the best interests of the Partnership to provide for additional Partnership funds (“Additional Funds”) for any Partnership purpose, the General Partner may (i) cause the Partnership to obtain such funds from outside borrowings, or (ii) elect to have the General Partner or any of its Affiliates provide such Additional Funds to the Partnership through loans or otherwise.

4.5Capital Accounts.  A separate capital account (a “Capital Account”) shall be established and maintained for each Partner in accordance with Regulations Section 1.704-1(b)(2)(iv).  If (i) a new or existing Partner acquires an additional Partnership Interest in exchange for more than a de minimis Capital Contribution, (ii) the Partnership distributes to a Partner more than a de minimis amount of Partnership property or money as consideration for a Partnership Interest, (iii) the Partnership is liquidated within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g), or (iv) the Partnership grants a Partnership Interest (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Partnership, the General Partner shall revalue the property of the Partnership to its fair market value (as determined by the General Partner, in its sole and absolute discretion, and taking into account Section 7701(g) of the Code) in accordance with Regulations Section 1.704-1(b)(2)(iv)(f).  When the Partnership’s property is revalued by the General Partner, the Capital Accounts of the Partners shall be adjusted in accordance with Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital Accounts to be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property (that has not been reflected in the Capital Accounts previously) would be allocated among the Partners pursuant to Section 5.1 if there were a taxable disposition of such property for its fair market value (as determined by the General Partner, in its sole and absolute discretion, and taking into account Section 7701(g) of the Code) on the date of the revaluation.

4.6Percentage Interests.  If the number of outstanding Partnership Units increases or decreases during a taxable year, each Partner’s Percentage Interest shall be adjusted by the General Partner effective as of the effective date of each such increase or decrease to a percentage equal to the number of Partnership Units held by such Partner divided by the aggregate number of Partnership Units outstanding after giving effect to such increase or decrease.  If the Partners’ Percentage Interests are adjusted pursuant to this Section 4.6, the Profits and Losses for the taxable year in which the adjustment occurs shall be allocated between the part of the year ending on the day when the Partnership’s property is revalued by the General Partner and the part of the year beginning on the following day either (i) as if the taxable year had ended on the date of the adjustment or (ii) based on the number of days in each part.  The General Partner, in its sole and

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absolute discretion, shall determine which method shall be used to allocate Profits and Losses for the taxable year in which the adjustment occurs.  The allocation of Profits and Losses for the earlier part of the year shall be based on the Percentage Interests before adjustment, and the allocation of Profits and Losses for the later part shall be based on the adjusted Percentage Interests.  

4.7No Interest On Contributions.  No Partner shall be entitled to interest on its Capital Contribution.

4.8Return Of Capital Contributions.  No Partner shall be entitled to withdraw any part of its Capital Contribution or its Capital Account or to receive any distribution from the Partnership, except as specifically provided in this Agreement.  Except as otherwise provided herein, there shall be no obligation to return to any Partner or withdrawn Partner any part of such Partner’s Capital Contribution for so long as the Partnership continues in existence.

4.9No Third Party Beneficiary.  No creditor or other third party having dealings with the Partnership shall have the right to enforce the right or obligation of any Partner to make Capital Contributions or loans or to pursue any other right or remedy hereunder or at law or in equity, it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the parties hereto and their respective successors and assigns.  None of the rights or obligations of the Partners herein set forth to make Capital Contributions or loans to the Partnership shall be deemed an asset of the Partnership for any purpose by any creditor or other third party, nor may such rights or obligations be sold, transferred or assigned by the Partnership or pledged or encumbered by the Partnership to secure any debt or other obligation of the Partnership or of any of the Partners.  In addition, it is the intent of the parties hereto that no distribution to any Limited Partner shall be deemed a return of money or other property in violation of the Act.  However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Limited Partner is obligated to return such money or property, such obligation shall be the obligation of such Limited Partner and not of the General Partner.  Without limiting the generality of the foregoing, a deficit Capital Account of a Partner shall not be deemed to be a liability of such Partner nor an asset or property of the Partnership.  

Article 5

PROFITS AND LOSSES; DISTRIBUTIONS

5.1Allocation of Profit and Loss.  

(a)General Partner Gross Income Allocation.  There shall be specially allocated to the General Partner an amount of (i) first, items of Partnership income and (ii) second, items of Partnership gain during each fiscal year or other applicable period, before any other allocations are made hereunder, in an amount equal to the excess, if any, of the cumulative distributions made to the General Partner under Section 6.5(b) over the cumulative allocations of Partnership income and gain to the General Partner under this Section 5.1(a).

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(b)General Allocations.  The items of Profit and Loss of the Partnership for each fiscal year or other applicable period, other than any items allocated under Section 5.1(a), shall be allocated among the Partners in a manner that will, as nearly as possible (after giving effect to the allocations under Section 5.1(a), 5.1(c), 5.1(d), 5.1(e), 5.1(h)  and 5.1(i)) cause the Capital Account balance of each Partner at the end of such fiscal year or other applicable period to equal (i) the amount of the hypothetical distribution that such Partner would receive if the Partnership were liquidated on the last day of such period and all assets of the Partnership, including cash, were sold for cash equal to their Carrying Values, taking into account any adjustments thereto for such period, all liabilities of the Partnership were satisfied in full in cash according to their terms (limited with respect to each nonrecourse liability to the Carrying Value of the assets securing such liability) and the remaining cash proceeds (after satisfaction of such liabilities) were distributed in full pursuant to Section 5.6, minus (ii) the sum of such Partner’s share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain and the amount, if any and without duplication, that the Partner would be obligated to contribute to the capital of the Partnership, all computed as of the date of the hypothetical sale of assets.  

(c)Nonrecourse Deductions; Minimum Gain Chargeback.  Notwithstanding any provision to the contrary, (i) any expense of the Partnership that is a “nonrecourse deduction” within the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in accordance with the Partners’ respective Percentage Interests, (ii) any expense of the Partnership that is a “partner nonrecourse deduction” within the meaning of Regulations Section 1.704-2(i)(2) shall be allocated to the Partner or Partners that bear the “economic risk of loss” with respect to the liability to which such deductions are attributable in accordance with Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in Partnership Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1) for any Partnership taxable year, then, subject to the exceptions set forth in Regulations Section 1.704-2(f)(2),(3), (4) and (5), items of gain and income shall be allocated among the Partners in accordance with Regulations Section 1.704-2(f) and the ordering rules contained in Regulations Section 1.704-2(j), and (iv) if there is a net decrease in Partner Nonrecourse Debt Minimum Gain within the meaning of Regulations Section 1.704-2(i)(4) for any Partnership taxable year, then, subject to the exceptions set forth in Regulations Section 1.704-(2)(g), items of gain and income shall be allocated among the Partners in accordance with Regulations Section 1.704-2(i)(4) and the ordering rules contained in Regulations Section 1.704-2(j).  A Partner’s “interest in partnership profits” for purposes of determining its share of the excess nonrecourse liabilities of the Partnership within the meaning of Regulations Section 1.752-3(a)(3) shall be such Partner’s Percentage Interest.

(d)Qualified Income Offset.  If a Partner unexpectedly receives in any taxable year an adjustment, allocation, or distribution described in subparagraphs (4), (5), or (6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a deficit balance in such Partner’s Capital Account that exceeds the sum of such Partner’s shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), such Partner shall be allocated specially for such taxable year (and, if necessary, later taxable years) items of

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income and gain in an amount and manner sufficient to eliminate such excess deficit Capital Account balance as quickly as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d).  This Section 5.1(d) is intended to constitute a “qualified income offset” under Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith.  After the occurrence of an allocation of income or gain to a Partner in accordance with this Section 5.1(d), to the extent permitted by Regulations Section 1.704-1(b), items of expense or loss shall be allocated to such Partner in an amount necessary to offset the income or gain previously allocated to such Partner under this Section 5.1(d).

(e)Capital Account Deficits.  Loss (or items of expense or loss) shall not be allocated to a Limited Partner to the extent that such allocation would cause or increase a deficit in such Partner’s Capital Account at the end of any fiscal year (after reduction to reflect the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Partner’s shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5).  Any Loss or item of expense or loss in excess of that limitation shall be allocated to the General Partner.  After an allocation to the General Partner under the immediately preceding sentence, to the extent permitted by Regulations Section 1.704-1(b), Profit or items of income or gain shall be allocated to the General Partner in an amount necessary to offset the items allocated to the General Partner under the immediately preceding sentence.

(f)Allocations Between Transferor and Transferee.  If a Partner transfers any part or all of its Partnership Interest, the distributive shares of the various items of Profit and Loss allocable among the Partners during such fiscal year of the Partnership shall be allocated between the transferor and the transferee Partner either (i) as if the Partnership’s fiscal year had ended on the date of the transfer, or (ii) based on the number of days of such fiscal year that each was a Partner without regard to the results of Partnership activities in the respective portions of such fiscal year in which the transferor and the transferee were Partners.  The General Partner, in its sole and absolute discretion, shall determine which method shall be used to allocate the distributive shares of the various items of Profit and Loss between the transferor and the transferee Partner.  

(g)Definition of Profit and Loss.  “Profit” and “Loss” and any items of income, gain, expense, or loss referred to in this Agreement shall be determined in accordance with federal income tax accounting principles, as modified by Regulations Section 1.704-1(b)(2)(iv), except that Profit and Loss shall not include items of income, gain and expense that are specially allocated pursuant to Section 5.1(a), 5.1(c), 5.1(d), 5.1(e), or 5.1(h).  All allocations of  Profit and Loss (and all items contained therein) for federal income tax purposes shall be identical to all allocations of such items set forth in this Section 5.1, except as otherwise required by Section 704(c) of the Code and Regulations Section 1.704-1(b)(4).  The General Partner shall have the authority to elect the method to be used by the Partnership for allocating items of income, gain, and expense as required by Section 704(c) of the Code including a method that may result in a Partner receiving a disproportionately larger share of the Partnership tax depreciation deductions, and such election shall be binding on all Partners.

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(h)Special Allocations of Class-Specific Items. To the extent that any items of income, gain, loss or deduction of the General Partner are allocable to a specific Class or Classes of REIT Shares pursuant to the Multiple Class Plan, such items, or an amount equal thereto, may be specially allocated to Classes or Series of Partnership Units pursuant to the Multiple Class Plan.

(i)Curative Allocations.  The allocations set forth in Section 5.1(c), (d) and (e) of this Agreement (the “Regulatory Allocations”) are intended to comply with certain requirements of the Regulations.  The General Partner is authorized to offset all Regulatory Allocations either with other Regulatory Allocations or with special allocations of other items of Partnership income, gain, loss or deduction pursuant to this Section 5.1(i).  Therefore, notwithstanding any other provision of this Section 5.1 (other than the Regulatory Allocations), the General Partner shall make such offsetting special allocations of Partnership income, gain, loss or deduction in whatever manner it deems appropriate so that, after such offsetting allocations are made, each Partner’s Capital Account is, to the extent possible, equal to the Capital Account balance such Partner would have had if the Regulatory Allocations were not part of this Agreement and all Partnership items were allocated pursuant to Sections 5.1(a), (b), (f) and (h).

5.2Distribution of Cash.  

(a)The Partnership shall distribute cash on a quarterly (or, at the election of the General Partner, more frequent) basis, in an amount determined by the General Partner in its sole and absolute discretion, to the Partners who are Partners on the Partnership Record Date with respect to such quarter (or other distribution period) in accordance with Section 5.2(b); provided, however, that if a new or existing Partner acquires an additional Partnership Interest in exchange for a Capital Contribution on any date other than a Partnership Record Date, the cash distribution attributable to such additional Partnership Interest relating to the Partnership Record Date next following the issuance of such additional Partnership Interest shall be reduced in the proportion equal to one minus (i) the number of days that such additional Partnership Interest is held by such Partner bears to (ii) the number of days between such Partnership Record Date and the immediately preceding Partnership Record Date.

(b)Except for distributions pursuant to Section 5.6 in connection with the dissolution and liquidation of the Partnership and subject to the provisions of Sections 5.2(c), 5.2(d), 5.2(e), 5.3 and 5.5, all distributions of cash shall be made to the Partners in accordance with their respective Percentage Interests on the Partnership Record Date, except that the amount distributed per Partnership Unit of any Class or Series may differ from the amount per Partnership Unit of another Class or Series on account of differences with respect to Distribution Fees. Any such differences shall correspond to differences in the amount of Distribution Fees and distributions per REIT Share for REIT Shares of different Classes, as described in the Multiple Class Plan, with the same adjustments being made to the amount of distributions per Partnership Unit for Partnership Units of a particular Class as are made to the distributions per REIT Share by the General Partner with respect to REIT Shares having the same Class designation; provided, however, that distributions with respect to Series 2 Class S Units shall be adjusted in the same manner

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but correspond to their specific Distribution Fee, which is equal to 0.35% per annum of the aggregate Net Asset Value Per Unit of the outstanding Series 2 Class S Units.

(c)Notwithstanding the foregoing, so long as the Advisory Agreement has not been terminated (including by means of non-renewal), the Special OP Unitholders shall be entitled to a distribution (the “Performance Allocation”), promptly following the end of each year (which shall accrue on a monthly basis) in an amount equal to:

(i)the lesser of (A) the amount equal to 12.5% of (1) the Annual Total Return Amount less (2) the Loss Carryforward Amount, and (B) the amount equal to (x) the Annual Total Return Amount, less (y) the Loss Carryforward Amount, less (z) the Hurdle Amount;

multiplied by:

(ii)the weighted-average number of Partnership Units outstanding during the applicable year, calculated in accordance with GAAP as applied on a consistent basis;

(iii) provided, that the Performance Allocation shall at no time be less than zero.

Except as described in the definition of Loss Carryforward Amount in this Agreement, any amount by which the Annual Total Return Amount falls below the Hurdle Amount will not be carried forward to subsequent periods. If the Performance Allocation is distributable pursuant to this Section 5.2(c), the Special OP Unitholders shall be entitled to such distribution even in the event that the total percentage return to OP Unitholders over any longer or shorter period, or the total percentage return to any particular OP Unitholder over the same, longer or shorter period, has been less than the Annual Total Return Amount used to calculate the Hurdle Amount. The Special OP Unitholders shall not be obligated to return any portion of any Performance Allocation paid based on the General Partner’s or the Partnership’s subsequent performance.

The Performance Allocation with respect to any calendar year is generally distributable after the completion of the NAV Calculations for December of such year. The Performance Allocation shall be distributable for each calendar year in which the Advisory Agreement is in effect, even if the Advisory Agreement is in effect for a partial calendar year. If the Performance Allocation is distributable with respect to any partial calendar year, the Performance Allocation shall be calculated based on the annualized total return amount determined using the total return achieved for the period of such partial calendar year. In the event the Advisory Agreement is terminated or its term expires without renewal, the partial period Performance Allocation shall be calculated and due and distributable upon the date of such termination or non-renewal. In such event, for purposes of determining the Annual Total Return Amount, the change in VPU shall be determined based on a good faith estimate of what the NAV Calculations would be as of that date. Notwithstanding anything to the contrary in this paragraph, upon the triggering of a Pro-Rata Period as defined in the General Partner’s Second Amended and Restated Share Redemption Program, effective as of December 10, 2018 (as it may be amended from time to time, the “SRP”), distribution of the Performance Allocation shall be deferred until all REIT Share redemption requests under the SRP are satisfied.

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In the event the Partnership commences a liquidation of its Assets during any calendar year, the Special OP Unitholders shall be distributed the Performance Allocation from the proceeds of the liquidation and the Performance Allocation shall be calculated at the end of the liquidation period prior to the distribution of the liquidation proceeds to the OP Unitholders. The calculation of the Performance Allocation for any partial year shall be calculated consistent with the applicable provisions of this Section 5.2(c).

At the election of the Special OP Unitholders, with respect to each calendar year, all or a portion of the Performance Allocation shall be paid instead to the Advisor as a fee as set forth in the Advisory Agreement. If the Special OP Unitholders do not elect on or before the first day of a calendar year to have all or a portion of the Performance Allocation paid as a fee to the Advisor, then the Performance Allocation with respect to such calendar year shall be distributable to the Special OP Unitholders as set forth in this Section 5.2(c); provided, however, that the Performance Component shall be paid to the Advisor as a fee as set forth in the Advisory Agreement with respect to the calendar year 2018.

The Performance Allocation may be payable in cash or as a distribution of Class I Units or any combination thereof at the election of the Special OP Unitholders. If the Special OP Unitholders elect to receive such distributions in Class I Units, the Special OP Unitholders will receive the number of Class I Units that results from dividing an amount equal to the value of the Performance Allocation by the NAV per Class I Unit at the time of such distribution. If the Special OP Unitholders elect to receive such distributions in Class I Units, the Special OP Unitholders may request the Partnership to redeem such Class I Units from the Special OP Unitholders at any time thereafter pursuant to Section 8.5.

The measurement of the change in VPU for the purpose of calculating the Annual Total Return Amount is subject to adjustment by the Board of Directors of the General Partner to account for any dividend, split, recapitalization or any other similar change in the Partnership’s capital structure or any distributions that the Board of Directors of the General Partner deems to be a return of capital if such changes are not already reflected in the Partnership’s net assets.

If as of the end of the last month of the applicable period the NAV of a Series 1 Class E Unit is less than $10.00 per unit, the Special OP Unitholders will waive that portion of the Performance Allocation otherwise distributable to them in an amount equal to the product of (a) the Performance Allocation for the applicable period, and (b) the weighted-average number of Series 1 Class E Units outstanding over the applicable period divided by the weighted-average number of Partnership Units outstanding over the same period. In this manner, the holders of each class of Partnership Units will benefit from this waiver pro rata in accordance with their particular class’s portion of Partnership NAV.

(d)Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines to be necessary or appropriate to cause the Partnership to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code.  To the extent that the Partnership is

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required to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Partner or assignee (including by reason of Section 1446 of the Code), either (i) if the actual amount to be distributed to the Partner equals or exceeds the amount required to be withheld by the Partnership, the amount withheld shall be treated as a distribution of cash in the amount of such withholding to such Partner, or (ii) if the actual amount to be distributed to the Partner is less than the amount required to be withheld by the Partnership, the actual amount to be distributed shall be treated as a distribution of cash in the amount of such withholding and the additional amount required to be withheld shall be treated as a loan (a “Partnership Loan”) from the Partnership to the Partner on the day the Partnership pays over such amount to a taxing authority.  A Partnership Loan shall be repaid through withholding by the Partnership with respect to subsequent distributions to the applicable Partner or assignee.  In the event that a Limited Partner (a “Defaulting Limited Partner”) fails to pay any amount owed to the Partnership with respect to the Partnership Loan within fifteen (15) days after demand for payment thereof is made by the Partnership on the Limited Partner, the General Partner, in its sole and absolute discretion, may elect to make the payment to the Partnership on behalf of such Defaulting Limited Partner.  In such event, on the date of payment, the General Partner shall be deemed to have extended a loan (a “General Partner Loan”) to the Defaulting Limited Partner in the amount of the payment made by the General Partner and shall succeed to all rights and remedies of the Partnership against the Defaulting Limited Partner as to that amount.  Without limitation, the General Partner shall have the right to receive any distributions that otherwise would be made by the Partnership to the Defaulting Limited Partner until such time as the General Partner Loan has been paid in full, and any such distributions so received by the General Partner shall be treated as having been received by the Defaulting Limited Partner and immediately paid to the General Partner.

Any amounts treated as a Partnership Loan or a General Partner Loan pursuant to this Section 5.2(c) shall bear interest at the lesser of (i) the base rate on corporate loans at large United States money center commercial banks, as published from time to time in The Wall Street Journal, or (ii) the maximum lawful rate of interest on such obligation, such interest to accrue from the date the Partnership or the General Partner, as applicable, is deemed to extend the loan until such loan is repaid in full.

(e)In no event may a Partner receive a distribution of cash with respect to a Partnership Unit if such Partner is entitled to receive a cash distribution as the holder of record of a REIT Share for which all or part of such Partnership Unit has been or will be exchanged.

5.3REIT Distribution Requirements.  The General Partner shall use its commercially reasonable efforts to cause the Partnership to distribute amounts sufficient to enable the General Partner to make shareholder distributions that will allow the General Partner to (i) meet its distribution requirement for qualification as a REIT as set forth in Section 857 of the Code and (ii) avoid any federal income or excise tax liability imposed by the Code.  

5.4No Right to Distributions in Kind.  No Partner shall be entitled to demand property other than cash in connection with any distributions by the Partnership.

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5.5Limitations on Return of Capital Contributions.  Notwithstanding any of the provisions of this Article 5, no Partner shall have the right to receive and the General Partner shall not have the right to make, a distribution that includes a return of all or part of a Partner’s Capital Contributions, unless after giving effect to the return of a Capital Contribution, the sum of all Partnership liabilities, other than the liabilities to a Partner for the return of his Capital Contribution, does not exceed the fair market value of the Partnership’s assets.

5.6Distributions Upon Liquidation.  Upon liquidation of the Partnership, after payment of, or adequate provision for, debts and obligations of the Partnership, including any Partner loans, and after making the distribution to the Special OP Unitholders (or payment to the Advisor, as applicable) called for by Section 5.2(c) in connection with a liquidation of the Partnership (which shall be deemed the liquidating distribution for the Special OP Unitholders) any remaining assets of the Partnership shall be distributed to all Partners such that the holder of each Partnership Unit receives an amount equal to the Net Asset Value Per Unit for each Partnership Unit held.  If, however, the remaining assets of the Partnership are not sufficient to pay in full the Net Asset Value Per Unit for each Partnership Unit, then the holders of Partnership Units of each Class or Series shall be distributed an amount equal to the product of (i) the remaining assets of the Partnership that are legally available for distribution to the Partners and (ii) the quotient obtained by dividing (A) the net asset value of the Partnership allocable to such Class or Series of Partnership Units by (B) the aggregate net asset value of the Partnership, all as calculated as described in the Valuation Procedures.  Amounts to be distributed to the holders of each Class or Series of Partnership Units shall be distributed among those holders in proportion to the number of Units of that Class or Series held by each holder.  After application of the foregoing, any remaining assets available for distribution to the Partners shall be distributed to the Partners in accordance with their Percentage Interests.

Notwithstanding any other provision of this Agreement, the amount by which the value, as determined in good faith by the General Partner, of any property other than cash to be distributed in kind to the Partners exceeds or is less than the Carrying Value of such property shall, to the extent not otherwise recognized by the Partnership, be taken into account in computing Profit and Loss of the Partnership for purposes of crediting or charging the Capital Accounts of, and distributing proceeds to, the Partners, pursuant to this Agreement.  To the extent deemed advisable by the General Partner, appropriate arrangements (including the use of a liquidating trust) may be made to assure that adequate funds are available to pay any contingent debts or obligations.

5.7Substantial Economic Effect.  It is the intent of the Partners that the allocations of Profit and Loss under this Agreement have substantial economic effect (or be consistent with the Partners’ interests in the Partnership in the case of the allocation of losses attributable to nonrecourse debt) within the meaning of Section 704(b) of the Code as interpreted by the Regulations promulgated pursuant thereto.  Article 5 and other relevant provisions of this Agreement shall be interpreted in a manner consistent with such intent.

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Article 6

RIGHTS, OBLIGATIONS AND
POWERS OF THE GENERAL PARTNER

6.1Management of the Partnership.

(a)Except as otherwise expressly provided in this Agreement, the General Partner shall have full, complete and exclusive discretion to manage and control the business of the Partnership for the purposes herein stated, and shall make all decisions affecting the business and assets of the Partnership.  Subject to the restrictions specifically contained in this Agreement, the powers of the General Partner shall include, without limitation, the authority to take the following actions on behalf of the Partnership:

(i)to acquire, purchase, own, operate, lease and dispose of any real property and any other property or assets including, but not limited to notes and mortgages and other Real Estate Securities, that the General Partner determines are necessary or appropriate or in the best interests of the business of the Partnership;

(ii)to construct buildings and make other improvements on the properties owned or leased by the Partnership;

(iii)to authorize, issue, sell, redeem or otherwise purchase any Partnership Interests or any securities (including secured and unsecured debt obligations of the Partnership, debt obligations of the Partnership convertible into any Class or Series of Partnership Interests, or options, rights, warrants or appreciation rights relating to any Partnership Interests) of the Partnership;

(iv)to borrow or lend money for the Partnership, issue or receive evidences of indebtedness in connection therewith, refinance, increase the amount of, modify, amend or change the terms of, or extend the time for the payment of, any such indebtedness, and secure such indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership’s assets;

(v)to pay, either directly or by reimbursement, for all operating costs and general administrative expenses of the Partnership to third parties or to the General Partner or its Affiliates as set forth in this Agreement;

(vi)to guarantee or become a co-maker of indebtedness of the General Partner or any Subsidiary thereof, refinance, increase the amount of, modify, amend or change the terms of, or extend the time for the payment of, any such guarantee or indebtedness, and secure such guarantee or indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership’s assets;

(vii)to use assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with this Agreement, including, without limitation, payment, either directly or by reimbursement, of all operating costs and general administrative expenses of the General Partner, the Partnership or any

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Subsidiary of either, to third parties or to the General Partner as set forth in this Agreement;

(viii)to lease all or any portion of any of the Partnership’s assets, whether or not the terms of such leases extend beyond the termination date of the Partnership and whether or not any portion of the Partnership’s assets so leased are to be occupied by the lessee, or, in turn, subleased in whole or in part to others, for such consideration and on such terms as the General Partner may determine;

(ix)to prosecute, defend, arbitrate, or compromise any and all claims or liabilities in favor of or against the Partnership, on such terms and in such manner as the General Partner may reasonably determine, and similarly to prosecute, settle or defend litigation with respect to the Partners, the Partnership, or the Partnership’s assets;

(x)to file applications, communicate, and otherwise deal with any and all governmental agencies having jurisdiction over, or in any way affecting, the Partnership’s assets or any other aspect of the Partnership business;

(xi)to make or revoke any election permitted or required of the Partnership by any taxing authority;

(xii)to maintain such insurance coverage for public liability, fire and casualty, and any and all other insurance for the protection of the Partnership, for the conservation of Partnership assets, or for any other purpose convenient or beneficial to the Partnership, in such amounts and such types, as it shall determine from time to time;

(xiii)to determine whether or not to apply any insurance proceeds for any property to the restoration of such property or to distribute the same;

(xiv)to establish one or more divisions of the Partnership, to hire and dismiss employees of the Partnership or any division of the Partnership, and to retain legal counsel, accountants, consultants, real estate brokers, and such other persons, as the General Partner may deem necessary or appropriate in connection with the Partnership business and to pay therefor such remuneration as the General Partner may deem reasonable and proper;

(xv)to retain other services of any kind or nature in connection with the Partnership business, and to pay therefor such remuneration as the General Partner may deem reasonable and proper;

(xvi)to negotiate and conclude agreements on behalf of the Partnership with respect to any of the rights, powers and authority conferred upon the General Partner;

(xvii)to maintain accurate accounting records and to file promptly all federal, state and local income tax returns on behalf of the Partnership;

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(xviii)to distribute Partnership cash or other Partnership assets in accordance with this Agreement;

(xix)to form or acquire an interest in, and contribute property to, any further limited or general partnerships, joint ventures or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property to, its Subsidiaries and any other Person in which it has an equity interest from time to time);

(xx)to establish Partnership reserves for working capital, capital expenditures, contingent liabilities, or any other valid Partnership purpose;

(xxi)to merge, consolidate or combine the Partnership with or into another Person;

(xxii)to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Code; and

(xxiii)to take such other action, execute, acknowledge, swear to or deliver such other documents and instruments, and perform any and all other acts that the General Partner deems necessary or appropriate for the formation, continuation and conduct of the business and affairs of the Partnership (including, without limitation, all actions consistent with allowing the General Partner at all times to qualify as a REIT unless the General Partner voluntarily terminates its REIT status) and to possess and enjoy all of the rights and powers of a general partner as provided by the Act.

(b)Except as otherwise provided herein, to the extent the duties of the General Partner require expenditures of funds to be paid to third parties, the General Partner shall not have any obligations hereunder except to the extent that partnership funds are reasonably available to it for the performance of such duties, and nothing herein contained shall be deemed to authorize or require the General Partner, in its capacity as such, to expend its individual funds for payment to third parties or to undertake any individual liability or obligation on behalf of the Partnership.

6.2Delegation of Authority.  The General Partner may delegate any or all of its powers, rights and obligations hereunder, and may appoint, employ, contract or otherwise deal with any Person for the transaction of the business of the Partnership, which Person may, under supervision of the General Partner, perform any acts or services for the Partnership as the General Partner may approve.

6.3Indemnification and Exculpation of Indemnitees.

(a)The Partnership shall indemnify an Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including reasonable legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and

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all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership as set forth in this Agreement in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless it is established that:  (i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty; (ii) the Indemnitee actually received an improper personal benefit in money, property or services; or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful.  Any indemnification pursuant to this Section 6.3 shall be made only out of the assets of the Partnership.

(b)The Partnership shall reimburse an Indemnitee for reasonable expenses incurred by an Indemnitee who is a party to a proceeding in advance of the final disposition of the proceeding upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in this Section 6.3 has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.

(c)The indemnification provided by this Section 6.3 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity.

(d)The Partnership may purchase and maintain insurance, on behalf of the Indemnitees and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership’s activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.

(e)For purposes of this Section 6.3, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of this Section 6.3; and actions taken or omitted by the Indemnitee with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Partnership.

(f)In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.

(g)An Indemnitee shall not be denied indemnification in whole or in part under this Section 6.3 because the Indemnitee had an interest in the transaction with respect to

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which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

(h)The provisions of this Section 6.3 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.

6.4Liability of the General Partner.  

(a)Notwithstanding anything to the contrary set forth in this Agreement, the General Partner shall not be liable for monetary damages to the Partnership or any Partners for losses sustained or liabilities incurred as a result of errors in judgment or of any act or omission if the General Partner acted in good faith.  The General Partner shall not be in breach of any duty that the General Partner may owe to the Limited Partners or the Partnership or any other Persons under this Agreement or of any duty stated or implied by law or equity provided the General Partner, acting in good faith, abides by the terms of this Agreement.

(b)The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, itself and its shareholders 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 shareholders 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 shareholders 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 shareholders or the Limited Partner shall be resolved in favor of the shareholders.  The General Partner shall not be liable for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Limited Partners in connection with such decisions, provided that the General Partner has acted in good faith.  

(c)Subject to its obligations and duties as General Partner set forth in Section 6.1 hereof, the General Partner may exercise any of the powers granted to it under this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents.  The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith.

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(d)Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of the General Partner to continue to qualify as a REIT or (ii) to prevent the General Partner from incurring any taxes under Section 857, Section 4981, or any other provision of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.

(e)Any amendment, modification or repeal of this Section 6.4 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the General Partner’s liability to the Partnership and the Limited Partners under this Section 6.4 as in effect immediately prior to such amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when claims relating to such matters may arise or be asserted.

6.5Reimbursement of General Partner.  

(a)Except as provided in this Section 6.5 and elsewhere in this Agreement (including the provisions of Articles 5 and 6 regarding distributions, payments, and allocations to which it may be entitled), the General Partner shall not be compensated for its services as general partner of the Partnership.

(b)The General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all Administrative Expenses incurred by the General Partner.

6.6Outside Activities.  Subject to Section 6.8 hereof, the Articles of Incorporation and any agreements entered into by the General Partner or its Affiliates with the Partnership or a Subsidiary, any officer, director, employee, agent, trustee, Affiliate or shareholder 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.  None of the Limited Partners nor any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any such business ventures, interests or activities, and the General Partner shall have no obligation pursuant to this Agreement to offer any interest in any such business ventures, interests and activities to the Partnership or any Limited Partner, even if such opportunity is of a character which, if presented to the Partnership or any Limited Partner, could be taken by such Person.  

6.7Employment or Retention of Affiliates.

(a)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

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receive from the Partnership any compensation, price, or other payment therefor which the General Partner determines to be fair and reasonable.

(b)The Partnership may lend or contribute to its Subsidiaries or other Persons in which it has an equity investment, and such Persons may borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner.  The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person.

(c)The Partnership may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such  terms and subject to such conditions as the General Partner deems are consistent with this Agreement, applicable law and the REIT status of the General Partner.

(d)Except as expressly permitted by this Agreement, neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, except pursuant to transactions that are, in the General Partner’s sole discretion, on terms that are fair and reasonable to the Partnership.

6.8General Partner Participation.  The General Partner agrees that all business activities of the General Partner, including activities pertaining to the acquisition, development or ownership of any office, retail, multifamily industrial, or other Real Property, Real Estate Securities or other property shall be conducted through the Partnership or one or more Subsidiary Partnerships; provided, however, that the General Partner is allowed to make a direct acquisition, but if and only if, such acquisition is made in connection with the issuance of Additional Securities, which direct acquisition and issuance have been approved and determined to be in the best interests of the General Partner and the Partnership.

6.9Title to Partnership Assets.  Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof.  Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, including Affiliates of the General Partner.  The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its best efforts to cause beneficial and record title to such assets to be vested in the Partnership as soon as reasonably practicable.  All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.

6.10Redemptions of REIT Shares. If the General Partner redeems any REIT Shares, then the General Partner shall cause the Partnership to purchase from the General Partner a number of Partnership Units having the same Class designation as the redeemed REIT Shares (and always Series 1 of such Class of Partnership Units, if there are multiple Series) as determined based on

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the application of the Conversion Factor for that Class and Series of Partnership Units on the same terms that the General Partner redeemed such REIT Shares.  Moreover, if the General Partner makes a cash tender offer or other offer to acquire REIT Shares, then the General Partner shall cause the Partnership to make a corresponding offer to the General Partner to acquire an equal number of Partnership Units held by the General Partner that have the same Class designation as the REIT Shares (and always Series 1 of such Class of Partnership Units, if there are multiple Series) that are the subject of the offer.  If any REIT Shares are redeemed by the General Partner pursuant to such offer, the Partnership shall redeem an equivalent number of the General Partner’s Partnership Units having the same Class designation as the redeemed REIT Shares (and always Series 1 of such Class of Partnership Units, if there are multiple Series) for an equivalent purchase price based on the application of the Conversion Factor for that Class and Series of Partnership Units.

6.11No Duplication of Fees or Expenses.  The Partnership may not incur or be responsible for any fee or expense (in connection with an Offering or otherwise) that would be duplicative of fees and expenses paid by the General Partner.

Article 7

CHANGES IN GENERAL PARTNER

7.1Transfer of the General Partner’s Partnership Interest.

(a)The General Partner shall not transfer all or any portion of its General Partnership Interest or withdraw as General Partner except as provided in, or in connection with a transaction contemplated by, Section 7.1(c), (d) or (e).

(b)The General Partner agrees that its Percentage Interest will at all times be in the aggregate, at least 0.1%.  

(c)Except as otherwise provided in Section 6.4(b) or Section 7.1(d) or (e) hereof, the General Partner shall not engage in any merger, consolidation or other combination with or into another Person or sale of all or substantially all of its assets, (other than in connection with a change in the General Partner’s state of incorporation or organizational form) in each case which results in a change of control of the General Partner (a “Transaction”), unless:

(i)the consent of Limited Partners holding more than 50% of the Percentage Interests of the Limited Partners is obtained;

(ii)as a result of such Transaction all Limited Partners will receive for each Partnership Unit of each Class or Series an amount of cash, securities, or other property equal to the product of the Conversion Factor for that Class or Series of Partnership Unit and the greatest amount of cash, securities or other property paid in the Transaction to a holder of one REIT Share having the same Class designation as that Partnership Unit in consideration of such REIT Share; provided that if, in connection with the Transaction, a purchase, tender or exchange offer (“Offer”)

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shall have been made to and accepted by the holders of more than 50% of the outstanding REIT Shares, each holder of Partnership Units shall be given the option to exchange its Partnership Units for the greatest amount of cash, securities, or other property which a Limited Partner holding such Class or Series of Partnership Units would have received had it (1) exercised its Redemption Right and (2) sold, tendered or exchanged pursuant to the Offer the REIT Shares received upon exercise of the Redemption Right immediately prior to the expiration of the Offer; or

(iii)the General Partner is the surviving entity in the Transaction and either (A) the holders of REIT Shares do not receive cash, securities, or other property in the Transaction or (B) all Limited Partners (other than the General Partner or any Subsidiary) receive in exchange for their Partnership Units of each Class or Series, an amount of cash, securities, or other property (expressed as an amount per REIT Share) that is no less than the product of the Conversion Factor for that Class or Series of Partnership Unit and the greatest amount of cash, securities, or other property (expressed as an amount per REIT Share) received in the Transaction by any holder of REIT Shares having the same Class designation as the Partnership Units being exchanged.

(d)Notwithstanding Section 7.1(c), the General Partner may merge with or into or consolidate with another entity if immediately after such merger or consolidation (i)  substantially all of the assets of the successor or surviving entity (the “Survivor”), other than Partnership Units held by the General Partner, are contributed, directly or indirectly, to the Partnership as a Capital Contribution in exchange for Partnership Units with a fair market value equal to the value of the assets so contributed as determined by the Survivor in good faith and (ii) the Survivor expressly agrees to assume all obligations of the General Partner, as appropriate, hereunder.  Upon such contribution and assumption, the Survivor shall have the right and duty to amend this Agreement as set forth in this Section 7.1(d).  The Survivor shall in good faith arrive at a new method for the calculation of the Cash Amount, the REIT Shares Amount and Conversion Factor for a Partnership Unit of each Class or Series after any such merger or consolidation so as to approximate the existing method for such calculation as closely as reasonably possible.  Such calculation shall take into account, among other things, the kind and amount of securities, cash and other property that was receivable upon such merger or consolidation by a holder of REIT Shares of each Class or options, warrants or other rights relating thereto, and which a holder of Partnership Units of any Class or Series could have acquired had such Partnership Units been exchanged immediately prior to such merger or consolidation.  Such amendment to this Agreement shall provide for adjustment to such method of calculation, which shall be as nearly equivalent as may be practicable to the adjustments provided for with respect to the Conversion Factor for each Class or Series of Partnership Units.  The Survivor also shall in good faith modify the definition of REIT Shares and make such amendments to Section 8.5 so as to approximate the existing rights and obligations set forth in Section 8.5 as closely as reasonably possible.  The above provisions of this Section 7.1(d) shall similarly apply to successive mergers or consolidations permitted hereunder.

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In respect of any transaction described in the preceding paragraph, the General Partner is required to use its commercially reasonable efforts to structure such transaction to avoid causing the Limited Partners to recognize a gain for federal income tax purposes by virtue of the occurrence of or their participation in such transaction, provided such efforts are consistent with the exercise of the Board of Directors’ fiduciary duties to the shareholders of the General Partner under applicable law.  

(e)Notwithstanding Section 7.1(c),

(i)a General Partner may transfer all or any portion of its General Partnership Interest to (A) a wholly-owned Subsidiary of such General Partner or (B) the owner of all of the ownership interests of such General Partner, and following a transfer of all of its General Partnership Interest, may withdraw as General Partner; and

(ii)the General Partner may engage in a transaction not required by law or by the rules of any national securities exchange on which the REIT Shares of one or more Classes are listed to be submitted to the vote of the holders of the REIT Shares of one or more Classes.

7.2Admission of a Substitute or Additional General Partner.  A Person shall be admitted as a substitute or additional General Partner of the Partnership only if the following terms and conditions are satisfied:

(a)the Person to be admitted as a substitute or additional General Partner shall have accepted and agreed to be bound by all the terms and provisions of this Agreement by executing a counterpart thereof and such other documents or instruments as may be required or appropriate in order to effect the admission of such Person as a General Partner, and a certificate evidencing the admission of such Person as a General Partner shall have been filed for recordation and all other actions required by Section 2.5 in connection with such admission shall have been performed;

(b)if the Person to be admitted as a substitute or additional General Partner is a corporation or a partnership it shall have provided the Partnership with evidence satisfactory to counsel for the Partnership of such Person’s authority to become a General Partner and to be bound by the terms and provisions of this Agreement; and

(c)counsel for the Partnership shall have rendered an opinion (relying on such opinions from other counsel and the state or any other jurisdiction as may be necessary) that (x) the admission of the person to be admitted as a substitute or additional General Partner is in conformity with the Act and (y) none of the actions taken in connection with the admission of such Person as a substitute or additional General Partner will cause (i) the Partnership to be classified other than as a partnership for federal tax purposes, or (ii) the loss of any Limited Partner’s limited liability.

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7.3Effect of Bankruptcy, Withdrawal, Death or Dissolution of the sole remaining General Partner.  

(a)Upon the occurrence of an Event of Bankruptcy as to the sole remaining General Partner (and its removal pursuant to Section 7.4(a)) or the death, withdrawal, removal or dissolution of the sole remaining General Partner (except that, if the sole remaining General Partner is on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such partnership shall be deemed not to be a dissolution of such General Partner if the business of such General Partner is continued by the remaining partner or partners), the Partnership shall be dissolved and terminated unless the Partnership is continued pursuant to Section 7.3(b).  The merger of the General Partner with or into any entity that is admitted as a substitute or successor General Partner pursuant to Section 7.2 shall not be deemed to be the withdrawal, dissolution or removal of the General Partner.  

(b)Following the occurrence of an Event of Bankruptcy as to the sole remaining General Partner (and its removal pursuant to Section 7.4(a) hereof) or the death, withdrawal, removal or dissolution of the sole remaining General Partner (except that, if the sole remaining General Partner is, on the date of such occurrence, a partnership, the withdrawal of, death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such partnership shall be deemed not to be a dissolution of such General Partner if the business of such General Partner is continued by the remaining partner or partners), the Limited Partners, within ninety (90) days after such occurrence, may elect to continue the business of the Partnership for the balance of the term specified in Section 2.4 by selecting, subject to Section 7.2 and any other provisions of this Agreement, a substitute General Partner by consent of the Limited Partners holding a majority of the Percentage Interests of all Limited Partners.  If the Limited Partners elect to continue the business of the Partnership and admit a substitute General Partner, the relationship with the Partners and of any Person who has acquired an interest of a Partner in the Partnership shall be governed by this Agreement.

7.4Removal of a General Partner.  

(a)Upon the occurrence of an Event of Bankruptcy as to, or the dissolution of, a General Partner, such General Partner shall be deemed to be removed automatically; provided, however, that if a General Partner is on the date of such occurrence a partnership, the withdrawal, death or dissolution of, Event of Bankruptcy as to, or removal of, a partner in, such partnership shall be deemed not to be a dissolution of the General Partner if the business of such General Partner is continued by the remaining partner or partners.  The Limited Partners may not remove the General Partner, with or without cause.

(b)If a General Partner has been removed pursuant to this Section 7.4 and the Partnership is continued pursuant to Section 7.3, such General Partner shall promptly transfer and assign its General Partnership Interest in the Partnership to the substitute General Partner approved by the Limited Partners in accordance with Section 7.3(b) and otherwise admitted to the Partnership in accordance with Section 7.2.  At the time of assignment, the removed General Partner shall be entitled to receive from the substitute

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General Partner the fair market value of the General Partnership Interest of such removed General Partner as reduced by any damages caused to the Partnership by such General Partner.  Such fair market value shall be determined by an appraiser mutually agreed upon by the General Partner and the Limited Partners holding a majority of the Percentage Interests of all Limited Partners within ten (10) days following the removal of the General Partner.  If the parties are unable to agree upon an appraiser, the removed General Partner and the Limited Partners holding a majority of the Percentage Interests of all Limited Partners each shall select an appraiser.  Each such appraiser shall complete an appraisal of the fair market value of the removed General Partner’s General Partnership Interest within thirty (30) days of the General Partner’s removal, and the fair market value of the removed General Partner’s General Partnership Interest shall be the average of the two appraisals; provided, however, that if the higher appraisal exceeds the lower appraisal by more than 20% of the amount of the lower appraisal, the two appraisers, no later than forty (40) days after the removal of the General Partner, shall select a third appraiser who shall complete an appraisal of the fair market value of the removed General Partner’s General Partnership Interest no later than sixty (60) days after the removal of the General Partner.  In such case, the fair market value of the removed General Partner’s General Partnership Interest shall be the average of the two appraisals closest in value.

(c)The General Partnership Interest of a removed General Partner, during the time after default until transfer under Section 7.4(b), shall be converted to that of a special Limited Partner; provided, however, such removed General Partner shall not have any rights to participate in the management and affairs of the Partnership, and shall not be entitled to any portion of the income, expense, profit, gain or loss allocations or cash distributions allocable or payable, as the case may be, to the Limited Partners.  Instead, such removed General Partner shall receive and be entitled only to retain distributions or allocations of such items that it would have been entitled to receive in its capacity as General Partner, until the transfer is effective pursuant to Section 7.4(b).

(d)All Partners shall have given and hereby do give such consents, shall take such actions and shall execute such documents as shall be legally necessary, desirable and sufficient to effect all the foregoing provisions of this Section.  

Article 8

RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS

8.1Management of the Partnership.  The Limited Partners shall not participate in the management or control of Partnership business nor shall they transact any business for the Partnership, nor shall they have the power to sign for or bind the Partnership, such powers being vested solely and exclusively in the General Partner.

8.2Power of Attorney.  Each Limited Partner hereby irrevocably appoints the General Partner its true and lawful attorney-in-fact, who may act for each Limited Partner and in its name, place and stead, and for its use and benefit, to sign, acknowledge, swear to, deliver, file or record, at the appropriate public offices, any and all documents, certificates, and instruments as may be deemed necessary or desirable by the General Partner to carry out fully the provisions of this

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Agreement and the Act in accordance with their terms, which power of attorney is coupled with an interest and shall survive the death, dissolution or legal incapacity of the Limited Partner, or the transfer by the Limited Partner of any part or all of its Partnership Interest.

8.3Limitation on Liability of Limited Partners.  No Limited Partner shall be liable for any debts, liabilities, contracts or obligations of the Partnership.  A Limited Partner shall be liable to the Partnership only to make payments of its Capital Contribution, if any, as and when due hereunder.  After its Capital Contribution is fully paid, no Limited Partner shall, except as otherwise required by the Act, be required to make any further Capital Contributions or other payments or lend any funds to the Partnership.  

8.4Ownership by Limited Partner of Corporate General Partner or Affiliate.  No Limited Partner shall at any time, either directly or indirectly, own any stock or other interest in the General Partner or in any Affiliate thereof, if such ownership by itself or in conjunction with other stock or other interests owned by other Limited Partners would, in the opinion of counsel for the Partnership, jeopardize the classification of the Partnership as a partnership for federal tax purposes.  The General Partner shall be entitled to make such reasonable inquiry of the Limited Partners as is required to establish compliance by the Limited Partners with the provisions of this Section.

8.5Redemption Right.

(a)Subject to Sections 8.5(b), 8.5(c), 8.5(d), 8.5(e) and 8.5(f) and the provisions of any agreements between the Partnership and one or more Limited Partners with respect to Partnership Units held by them, each Limited Partner other than the General Partner, after holding any Class or Series of Partnership Units for at least one year (such Partnership Units, “Eligible Units”), shall have the right (subject to the terms and conditions set forth herein) to require the Partnership to redeem (a “Redemption”) all or a portion of the Eligible Units held by such Limited Partner in exchange (a “Redemption Right”) for Class E REIT Shares (with respect to Eligible Units that are Series 1 Class E Units), Class S REIT Shares (with respect to Eligible Units that are Class S Units), Class T REIT Shares (with respect to Eligible Units that are Class T Units), Class D REIT Shares (with respect to Eligible Units that are Class D Units) or Class I REIT Shares (with respect to Eligible Units that are Series 2 Class E Units or Class I Units) issuable on, or the Cash Amount payable on, the Specified Redemption Date, as determined by the General Partner in its sole discretion, provided that such Eligible Units (the “Tendered Units”) shall have been outstanding for at least one year. Any Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the Partnership (with a copy to the General Partner) by the Limited Partner exercising the Redemption Right (the “Tendering Party”). Within 30 days of receipt of a Notice of Redemption, the Partnership will send to the Limited Partner submitting the Notice of Redemption a response stating whether the General Partner has determined the applicable Eligible Units will be redeemed for REIT Shares or the Cash Amount. Within 30 days of the Partnership’s delivery of its response, the Limited Partner must affirm to the Partnership that such Limited Partner wishes to proceed with the Redemption, or the request for Redemption will be cancelled (the date such affirmation is received by the Partnership is the “Affirmation Date”). Following such affirmation, the Limited Partner shall still be entitled to withdraw the Notice of Redemption if (i) it provides

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notice to the Partnership that it wishes to withdraw the request and (ii) the Partnership receives the notice no less than two business days prior to the Specified Redemption Date.

Notwithstanding the foregoing, the Special OP Unitholders, the Advisor and any Person to whom the Special OP Unitholders or the Advisor transfers Partnership Units or Special Partnership Units (collectively with the Special OP Unitholders and the Advisor, the “Sponsor Parties”) shall have the right to require the Partnership to redeem all or a portion of their Partnership Units pursuant to this Section 8.5 at any time irrespective of the period the Partnership Units have been held by such Limited Partner; provided, however, that in the event the Sponsor Parties hold Partnership Units paid or distributed with respect to the Performance Allocation or Performance Component (as defined in the Advisory Agreement) from any prior calendar year (which, for the avoidance of doubt, does not include any Partnership Units awarded in the then-current year for the prior year’s performance, if any) and requests the Partnership to redeem all or a portion of such Partnership Units (the “Partnership Unit Balance”) the Partnership will be required to redeem such Partnership Unit Balance only if the General Partner, based on reasonable projections, (i) has determined that, after redeeming such Partnership Unit Balance, the General Partner expects to have liquidity (from any available source, but taking into account current and future funding commitments, as well as leverage considerations) equal to or in excess of the NAV of the maximum amount of REIT Shares which can be redeemed under the then-current SRP for at least the next ninety days (the “Minimum Liquidity Requirement”) and (ii) at the time of the redemption request, 100% of all properly submitted redemption requests in the SRP as of the most recent quarter end and the most recent month end (the “Redemption Period”) have been honored (collectively, with the Minimum Liquidity Requirement, the “Redemption Requirements”). In the event that the General Partner deems that the Redemption Requirements have not been met, then the Sponsor Parties may only redeem their respective Partnership Unit Balances up to the lesser of (A) a percentage of their respective Partnership Unit Balances equal to the lowest of the pro rata percentages of REIT Shares redeemed under the SRP within the Redemption Period, or (B) an amount that causes the Minimum Liquidity Requirement to still be met. If the General Partner deems that the Redemption Requirements have not been met and there was no pro rata redemption under the SRP during the Redemption Period, the Sponsor Parties may only redeem an amount that causes the Minimum Liquidity Requirement to still be met. The above Partnership Unit redemption restriction shall not apply in the event that the General Partner terminates the Advisory Agreement. The Partnership shall redeem any Partnership Units of the Sponsor Parties for the Cash Amount unless the board of directors of the General Partner determines that any such redemption for cash would be prohibited by applicable law or this Agreement, in which case such Partnership Units will be redeemed for an amount of REIT Shares having the same Class designation as the Tendered Units with an aggregate NAV equivalent to the aggregate NAV of such Partnership Units.  Redemption requests from multiple Sponsor Parties, if applicable, will be honored on a pro rata basis, if redemptions are limited pursuant to the foregoing.

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No Limited Partner, other than the Sponsor Parties, may deliver more than two Notices of Redemption during each calendar year. A Limited Partner, other than the Sponsor Parties, may not exercise the Redemption Right for less than 1,000 Partnership Units or, if such Limited Partner holds less than 1,000 Partnership Units, all of the Partnership Units held by such Partner. The Tendering Party shall have no right, with respect to any Partnership Units so redeemed, to receive any distribution paid with respect to such Partnership Units if the record date for such distribution is on or after the Specified Redemption Date.

(b)If the General Partner elects to redeem Tendered Units for REIT Shares rather than cash, then (I) Tendered Units that are Series 1 Class E Units shall be redeemed for Class E REIT Shares, Tendered Units that are Series 2 Class E Units or Class I Units shall be redeemed for Class I REIT Shares, Tendered Units that are Class S Units shall be redeemed for Class S REIT Shares, Tendered Units that are Class T Units shall be redeemed for Class T REIT Shares and Tendered Units that are Class D Units or shall be redeemed for Class D REIT Shares and (II) the Partnership shall direct the General Partner to issue and deliver such REIT Shares to the Tendering Party pursuant to the terms set forth in this Section 8.5(b), in which case, (i) the General Partner, acting as a distinct legal entity, shall assume directly the obligation with respect thereto and shall satisfy the Tendering Party’s exercise of its Redemption Right, and (ii) such transaction shall be treated, for federal income tax purposes, as a transfer by the Tendering Party of such Tendered Units to the General Partner in exchange for REIT Shares. The percentage of the Tendered Units tendered for Redemption by the Tendering Party for which the General Partner elects to issue REIT Shares (rather than cash) is referred to as the “Applicable Percentage.” In making such election to acquire Tendered Units, the Partnership shall act in a fair, equitable and reasonable manner that neither prefers one group or class of Limited Partners over another nor discriminates against a group or class of Limited Partners. If the Partnership elects to redeem any number of Tendered Units for REIT Shares rather than cash, on the Specified Redemption Date, the Tendering Party shall sell such number of the Tendered Units to the General Partner in exchange for a number of REIT Shares equal to the product of (A) the REIT Shares Amount, (B) the Applicable Percentage and (C) solely with respect to Redemption of Series 2 Class E Units, a number, expressed as a percentage, determined by dividing the Value of Class E REIT Shares by the Value of Class I REIT Shares, such values determined in each case as of the end of the Specified Redemption Date. Such number of REIT Shares shall be delivered by the General Partner as duly authorized, validly issued, fully paid and accessible REIT Shares free of any pledge, lien, encumbrance or restriction, other than the Aggregate Share Ownership Limit (as calculated in accordance with the Articles of Incorporation) and other restrictions provided in the Article of Incorporation, the bylaws of the General Partner, the Securities Act and relevant state securities or “blue sky” laws. Notwithstanding the provisions of Section 8.5(a) and this Section 8.5(b), the Tendering Parties shall have no rights under this Agreement that would otherwise be prohibited under the Articles of Incorporation.

(c)In connection with an exercise of Redemption Rights pursuant to this Section 8.5, the Tendering Party shall submit the following to the General Partner, in addition to the Notice of Redemption:

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(1)A written affidavit, dated the same date as the Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of REIT Shares by (i) such Tendering Party and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the Tendering Party nor any Related Party will own REIT Shares in excess of the Aggregate Share Ownership Limit (or, if applicable the Excepted Holder Limit);

(2)A written representation that neither the Tendering Party nor any Related Party has any intention to acquire any additional REIT Shares prior to the closing of the Redemption on the Specified Redemption Date; and

(3)An undertaking to certify, at and as a condition to the closing of the Redemption on the Specified Redemption Date, that either (a) the actual and constructive ownership of REIT Shares by the Tendering Party and any Related Party remain unchanged from that disclosed in the affidavit required by Section 8.5(c)(1) or (b) after giving effect to the Redemption, neither the Tendering Party nor any Related Party shall own REIT Shares in violation of the Aggregate Share Ownership Limit (or, if applicable, the Excepted Holder Limit).

(4)Any other documents as the General Partner may reasonably require.

(d)Any Cash Amount to be paid to a Tendering Party pursuant to this Section 8.5 shall be paid on the Specified Redemption Date; provided, however, that the General Partner may elect to cause the Specified Redemption Date to be delayed for up to an additional 180 days to the extent required for the General Partner to cause additional REIT Shares to be issued to provide financing to be used to make such payment of the Cash Amount.  Notwithstanding the foregoing, the General Partner agrees to use its best efforts to cause the closing of the acquisition of Tendered Units hereunder to occur as quickly as reasonably possible.

(e)Notwithstanding any other provision of this Agreement, the General Partner shall place appropriate restrictions on the ability of the Limited Partners to exercise their Redemption Rights to prevent, among other things, (a) any person from owning shares in excess of the Common Share Ownership Limit, the Aggregate Share Ownership Limit and the Excepted Holder Limit, (b) the General Partner’s common stock from being owned by less than 100 persons, the General Partner from being  “closely held” within the meaning of section 856(h) of the Code, and as and if deemed necessary to ensure that the Partnership does not constitute a “publicly traded partnership” under section 7704 of the Code.  If and when the General Partner determines that imposing such restrictions is necessary, the General Partner shall give prompt written notice thereof (a “Restriction Notice”) to each of the Limited Partners holding Partnership Units, which notice shall be accompanied by a copy of an opinion of counsel to the Partnership which states that, in the opinion of such

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counsel, restrictions are necessary in order to avoid having the Partnership be treated as a “publicly traded partnership” under section 7704 of the Code.

(f)A redemption fee may be charged (other than to the Sponsor Parties and their respective affiliates) in connection with an exercise of Redemption Rights pursuant to this Section 8.5. Without limiting the generality of the foregoing, unless a waiver of such fee has been granted or a higher or lower fee was set forth in the applicable offering documents for the Partnership Units (or offering documents for a security or interest that was exchanged or converted for Partnership Units at the option of the Partnership or pursuant the terms of this Agreement), a redemption fee of 1.0% of the Cash Amount or REIT Shares otherwise payable to a Limited Partner (i) upon redemption of Series 1 Class E Units (other than Series 1 Class E Units issued to the General Partner) pursuant to this Section 8.5 shall be paid by such Limited Partner to Dividend Capital Exchange Facilitators LLC, and (ii) upon redemption of any other Partnership Units (other than from the Sponsor Parties and their respective affiliates) pursuant to this Section 8.5 shall be paid by such Limited Partner to BC Exchange Advisor Group LLC; the Operating Partnership shall deduct such amount from the Cash Amount or REIT Shares otherwise payable to such Limited Partner and pay it to Dividend Capital Exchange Facilitators LLC or BC Exchange Advisor Group LLC, as applicable, on behalf of the Limited Partner.  To the extent that a transaction (a “Unit Transaction”) occurs in which any Partnership Units which are subject to a redemption fee under this Section 8.5(f) are acquired (for cash or securities), transferred, merged, converted, tendered, or disposed of in any other similar transaction, then unless the beneficiaries of such redemption fees identified herein otherwise agree in their reasonable discretion (which may include requiring that any applicable counterparty execute an agreement agreeing to continue to collect and remit such redemption fees following the Unit Transaction), the Operating Partnership will be obligated to collect the redemption fees in connection with the closing of such Unit Transaction and remit the same to the applicable beneficiaries.

8.6Registration.  Subject to the terms of any agreement between the General Partner and one or more Limited Partners with respect to Partnership Units held by them:

(a)Registration of the Common Stock.  The General Partner agrees to file with the Commission a registration statement covering the resale of the REIT Shares that may be issued upon redemption of such Partnership Units pursuant to Section 8.5 (“Redemption Shares”) if a Limited Partner or Limited Partners who together hold Redemption Shares of a single Class that have an aggregate value of at least $10 million (based on the then current price) request that the General Partner register for resale such Redemption Shares. Such requests shall be made in writing and shall state the number of Redemption Shares to be disposed of. Within 30 days after receipt of a request for registration, whatever the amount of the Redemption Shares requested to be registered, the General Partner shall give written notice of such request to all other Limited Partners holding Partnership Units; provided however, that the General Partner shall be obligated to give such notice no more than one time in any six-month period. Further, the General Partner shall include in a registration statement all such Redemption Shares with respect to which the General Partner has received written requests for inclusion therein (whether or not such Redemption Shares have been issued) within 15 days after the receipt of the

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General Partner’s notice. The General Partner further agrees to use its commercially reasonable efforts to file the registration statement within 90 days of its receipt of the written request described above, and to maintain the effectiveness of such registration statement for a period of no more than two years.  

(b)Listing on Securities Exchange.  If the General Partner shall list or maintain the listing of Class of REIT Shares on any securities exchange or national market system, it will at its expense and as necessary to permit the registration and sale of the Redemption Shares of such listed Class or Classes hereunder, list thereon, maintain and, when necessary, increase such listing to include such Redemption Shares.  

(c)Registration Not Required.  Notwithstanding the foregoing, the General Partner shall not be required to file or maintain the effectiveness of a registration statement covering the resale of Redemption Shares if, in the opinion of counsel to the General Partner, such Redemption Shares could be sold by the holders thereof pursuant to Rule 144 under the Securities Act, or any successor rule thereto.

8.7Distribution Reinvestment Plan.  OP Unitholders may have the opportunity to join the General Partner’s distribution reinvestment plan by completing an enrollment form which is available upon request.  A copy of the General Partner’s distribution reinvestment plan is also available upon request.  The shares of the General Partner’s common stock which may be issued under the General Partner’s distribution reinvestment plan are offered only by a prospectus.

Article 9

TRANSFERS OF LIMITED PARTNERSHIP INTERESTS

9.1Purchase for Investment.  

(a)Each Limited Partner hereby represents and warrants to the General Partner and to the Partnership that the acquisition of his Partnership Interest is made as a principal for his account for investment purposes only and not with a view to the resale or distribution of such Partnership Interest.  

(b)Each Limited Partner agrees that he will not sell, assign or otherwise transfer his Partnership Interest or any fraction thereof, whether voluntarily or by operation of law or at judicial sale or otherwise, to any Person who does not make the representations and warranties to the General Partner set forth in Section 9.1(a) above and similarly agree not to sell, assign or transfer such Partnership Interest or fraction thereof to any Person who does not similarly represent, warrant and agree.

9.2Restrictions on Transfer of Limited Partnership Interests.  

(a)Subject to the provisions of 9.2(b) and (c), no Limited Partner may offer, sell, assign, hypothecate, pledge or otherwise transfer all or any portion of his Limited Partnership Interest, or any of such Limited Partner’s economic rights as a Limited Partner, whether voluntarily or by operation of law or at judicial sale or otherwise (collectively, a “Transfer”) without the consent of the General Partner, which consent may be granted or

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withheld in its sole and absolute discretion; provided that each Sponsor Party may transfer all or any portion of its respective Partnership Interest, or any of its economic rights as a Limited Partner, to any of its Affiliates or any trust, limited liability company, partnership, or other entity established by or at the direction of such Sponsor Party or any of its Affiliates without the consent of the General Partner.  Any such purported transfer undertaken without such consent shall be considered to be null and void ab initio and shall not be given effect.  The General Partner may require, as a condition of any Transfer to which it consents, that the transferor assume all costs incurred by the Partnership in connection therewith.

(b)No Limited Partner may withdraw from the Partnership other than as a result of a permitted Transfer (i.e., a Transfer effected as contemplated by clause (a) above or clause (c) below or a Transfer pursuant to Section 9.5 below) of all of its Partnership Interest pursuant to this Article 9 or pursuant to a redemption of all of its Partnership Units pursuant to Section 8.5.  Upon the permitted Transfer or redemption of all of a Limited Partner’s Partnership Interest, such Limited Partner shall cease to be a Limited Partner.

(c)Notwithstanding Section 9.2(a) and subject to Sections 9.2(d), (e) and (f) below, a Limited Partner may Transfer, without the consent of the General Partner, all or a portion of its Partnership Interest to (i) a parent or parent’s spouse, natural or adopted descendant or descendants, spouse of such descendant, or brother or sister, or a trust created by such Limited Partner for the benefit of such Limited Partner and/or any such person(s), of which trust such Limited Partner or any such person(s) is a trustee, (ii) a corporation controlled by a Person or Persons named in (i) above, or (iii) if the Limited Partner is an entity, its beneficial owners.

(d)No Limited Partner may effect a Transfer of its Limited Partnership Interest, in whole or in part, if, in the opinion of legal counsel for the Partnership, such proposed Transfer would require the registration of the Limited Partnership Interest under the Securities Act or would otherwise violate any applicable federal or state securities or blue sky law (including investment suitability standards).

(e)No Transfer by a Limited Partner of its Partnership Interest, in whole or in part, may be made to any Person if (i) in the opinion of legal counsel for the Partnership, the transfer would result in the Partnership’s being treated as an association taxable as a corporation (other than a qualified REIT subsidiary within the meaning of Section 856(i) of the Code), (ii) in the opinion of legal counsel for the Partnership, it would adversely affect the ability of the General Partner to continue to qualify as a REIT or subject the General Partner to any additional taxes under Section 857 or Section 4981 of the Code, or (iii) such transfer is effectuated through an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code.  

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(f)No transfer by a Limited Partner of any Partnership Interest may be made to a lender to the Partnership or any Person who is related (within the meaning of Regulations Section 1.752-4(b)) to any lender to the Partnership whose loan constitutes a nonrecourse liability (within the meaning of Regulations Section 1.752-1(a)(2)), without the consent of the General Partner, which may be withheld in its sole and absolute discretion, provided that as a condition to such consent the lender will be required to enter into an arrangement with the Partnership and the General Partner to exchange or redeem for the Cash Amount any Partnership Units in which a security interest is held simultaneously with the time at which such lender would be deemed to be a Partner in the Partnership for purposes of allocating liabilities to such lender under Section 752 of the Code.

(g)Any Transfer in contravention of any of the provisions of this Article 9 shall be void and ineffectual and shall not be binding upon, or recognized by, the Partnership.

(h)Prior to the consummation of any Transfer under this Article 9, the transferor and/or the transferee shall deliver to the General Partner such opinions, certificates and other documents as the General Partner shall request in connection with such Transfer.

9.3Admission of Substitute Limited Partner.  

(a)Subject to the other provisions of this Article 9, an assignee of the Limited Partnership Interest of a Limited Partner (which shall be understood to include any purchaser, transferee, donee, or other recipient of any disposition of such Limited Partnership Interest) shall be deemed admitted as a Limited Partner of the Partnership only with the consent of the General Partner and upon the satisfactory completion of the following:

(i)The assignee shall have accepted and agreed to be bound by the terms and provisions of this Agreement by executing a counterpart or an amendment thereof, including a revised Exhibit A, and such other documents or instruments as the General Partner may require in order to effect the admission of such Person as a Limited Partner.

(ii)To the extent required, an amended Certificate evidencing the admission of such Person as a Limited Partner shall have been signed, acknowledged and filed for record in accordance with the Act.

(iii)The assignee shall have delivered a letter containing the representation set forth in Section 9.1(a) hereof and the agreement set forth in Section 9.1(b) hereof.

(iv)If the assignee is a corporation, partnership or trust, the assignee shall have provided the General Partner with evidence satisfactory to counsel for the Partnership of the assignee’s authority to become a Limited Partner under the terms and provisions of this Agreement.

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(v)The assignee shall have executed a power of attorney containing the terms and provisions set forth in Section 8.2 hereof.

(vi)The assignee shall have paid all legal fees and other expenses of the Partnership and the General Partner and filing and publication costs in connection with its substitution as a Limited Partner.

(vii)The assignee has obtained the prior written consent of the General Partner to its admission as a Substitute Limited Partner, which consent may be given or denied in the exercise of the General Partner’s sole and absolute discretion.

(b)For the purpose of allocating Profits and Losses and distributing cash received by the Partnership, a Substitute Limited Partner shall be treated as having become, and appearing in the records of the Partnership as, a Partner upon the filing of the Certificate described in Section 9.3(a)(ii) hereof or, if no such filing is required, the later of the date specified in the transfer documents or the date on which the General Partner has received all necessary instruments of transfer and substitution.

(c)The General Partner shall cooperate with the Person seeking to become a Substitute Limited Partner by preparing the documentation required by this Section and making all official filings and publications.  The Partnership shall take all such action as promptly as practicable after the satisfaction of the conditions in this Article 9 to the admission of such Person as a Limited Partner of the Partnership.

9.4Rights of Assignees of Partnership Interests.  

(a)Subject to the provisions of Sections 9.1 and 9.2 hereof, except as required by operation of law, the Partnership shall not be obligated for any purposes whatsoever to recognize the assignment by any Limited Partner of its Partnership Interest until the Partnership has received notice thereof.  

(b)Any Person who is the assignee of all or any portion of a Limited Partner’s Limited Partnership Interest, but does not become a Substitute Limited Partner and desires to make a further assignment of such Limited Partnership Interest, shall be subject to all the provisions of this Article 9 to the same extent and in the same manner as any Limited Partner desiring to make an assignment of its Limited Partnership Interest.

9.5Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner.  The occurrence of an Event of Bankruptcy as to a Limited Partner, the death of a Limited Partner or a final adjudication that a Limited Partner is incompetent (which term shall include, but not be limited to, insanity) shall not cause the termination or dissolution of the Partnership, and the business of the Partnership shall continue if an order for relief in a bankruptcy proceeding is entered against a Limited Partner, the trustee or receiver of his estate or, if he dies, his executor, administrator or trustee, or, if he is finally adjudicated incompetent, his committee, guardian or conservator, shall have the rights of such Limited Partner for the purpose of settling or managing his estate property and such power as the bankrupt, deceased or incompetent Limited Partner

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possessed to assign all or any part of his Partnership Interest and to join with the assignee in satisfying conditions precedent to the admission of the assignee as a Substitute Limited Partner.  

9.6Joint Ownership of Interests.  A Partnership Interest may be acquired by two individuals as joint tenants with right of survivorship, provided that such individuals either are married or are related and share the same home as tenants in common.  The written consent or vote of both owners of any such jointly held Partnership Interest shall be required to constitute the action of the owners of such Partnership Interest; provided, however, that the written consent of only one joint owner will be required if the Partnership has been provided with evidence satisfactory to the counsel for the Partnership that the actions of a single joint owner can bind both owners under the applicable laws of the state of residence of such joint owners.  Upon the death of one owner of a Partnership Interest held in a joint tenancy with a right of survivorship, the Partnership Interest shall become owned solely by the survivor as a Limited Partner and not as an assignee.  The Partnership need not recognize the death of one of the owners of a jointly-held Partnership Interest until it shall have received notice of such death.  Upon notice to the General Partner from either owner, the General Partner shall cause the Partnership Interest to be divided into two equal Partnership Interests, which shall thereafter be owned separately by each of the former owners.  

Article 10

BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS

10.1Books and Records.  At all times during the continuance of the Partnership, the Partners shall keep or cause to be kept at the Partnership’s specified office true and complete books of account in accordance with generally accepted accounting principles, including:  (a) a current list of the full name and last known business address of each Partner, (b) a copy of the Certificate of Limited Partnership and all Certificates of amendment thereto, (c) copies of the Partnership’s federal, state and local income tax returns and reports, (d) copies of this Agreement and amendments thereto and any financial statements of the Partnership for the three most recent years and (e) all documents and information required under the Act.  Any Partner or its duly authorized representative, upon paying the costs of collection, duplication and mailing, shall be entitled to inspect or copy such records during ordinary business hours.

10.2Custody of Partnership Funds; Bank Accounts.  

(a)All funds of the Partnership not otherwise invested shall be deposited in one or more accounts maintained in such banking or brokerage institutions as the General Partner shall determine, and withdrawals shall be made only on such signature or signatures as the General Partner may, from time to time, determine.

(b)All deposits and other funds not needed in the operation of the business of the Partnership may be invested by the General Partner in investment grade instruments (or investment companies whose portfolio consists primarily thereof), government obligations, certificates of deposit, bankers’ acceptances and municipal notes and bonds.  The funds of the Partnership shall not be commingled with the funds of any other Person

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except for such commingling as may necessarily result from an investment in those investment companies permitted by this Section 10.2(b).

10.3Fiscal and Taxable Year.  The fiscal and taxable year of the Partnership shall be the calendar year.

10.4Annual Tax Information and Report.  Within seventy-five (75) days after the end of each fiscal year of the Partnership, the General Partner shall furnish to each person who was a Limited Partner at any time during such year the tax information necessary to file such Limited Partner’s individual tax returns as shall be reasonably required by law.

10.5Tax Matters Partner; Tax Elections; Special Basis Adjustments.  

(a)The General Partner shall be the Tax Matters Partner of the Partnership within the meaning of Section 6231(a)(7) of the Code.  As Tax Matters Partner, the General Partner shall have the right and obligation to take all actions authorized and required, respectively, by the Code for the Tax Matters Partner.  The General Partner shall have the right to retain professional assistance in respect of any audit of the Partnership by the Service and all out-of-pocket expenses and fees incurred by the General Partner on behalf of the Partnership as Tax Matters Partner shall constitute Partnership expenses.  In the event the General Partner receives notice of a final Partnership adjustment under Section 6223(a)(2) of the Code, the General Partner shall either (i) file a court petition for judicial review of such final adjustment within the period provided under Section 6226(a) of the Code, a copy of which petition shall be mailed to all Limited Partners on the date such petition is filed, or (ii) mail a written notice to all Limited Partners, within such period, that describes the General Partner’s reasons for determining not to file such a petition.

(b)All elections required or permitted to be made by the Partnership under the Code or any applicable state or local tax law shall be made by the General Partner in its sole and absolute discretion.

(c)In the event of a transfer of all or any part of the Partnership Interest of any Partner, the Partnership, at the option of the General Partner, may elect pursuant to Section 754 of the Code to adjust the basis of the Partnership’s assets.  Notwithstanding anything contained in Article 5, any adjustments made pursuant to Section 754 of the Code shall affect only the successor in interest to the transferring Partner and in no event shall be taken into account in establishing, maintaining or computing Capital Accounts for the other Partners for any purpose under this Agreement.  Each Partner will furnish the Partnership with all information necessary to give effect to such election.

(d)The Partners shall cause the Partnership to appoint the Tax Matters Partner or an affiliate thereof as the “partnership representative” to act on its behalf with respect to any audit, controversy, refund action, or other matter. Such “partnership representative” shall have the rights, power and authority to act as, and perform the duties and obligations of, the “partnership representative” (as such term is used in Section 6223 of the Code), as and when the role of a “partnership representative” becomes effective under Section 6223 of the Code, provided that, to the maximum extent permitted by applicable law, the

51

“partnership representative” shall have the same obligations, be subject to the same restrictions and limitations, and granted the rights and protections, in each case, as imposed on or granted to, the Tax Matters Partner under this Section 10.5.  It is the intent of the Partners and the Partnership that, to the maximum extent permitted under applicable law, no income tax, interest, penalties or additions to tax shall ever be assessed against the Partnership pursuant to Sections 6221 or 6225 of the Code, and the Partnership, each of the Partners and any representative thereof shall take all actions (including but not limited to executing any election or consent) necessary to implement such intent.  Notwithstanding anything to the contrary contained in this Agreement, upon the request of all Partners with a Percentage Interest of fifty percent (50%) or more, the Partnership and the “partnership representative” shall (i) cause the Partnership to elect out of the application of Section 6221 of the Code by making an election, where permissible, under Section 6221(b) of the Code or (ii) in the event of a “partnership adjustment” within the meaning of Section 6225 of the Code, cause the Partnership to make an election, where permissible under Section 6226 of the Code, to treat such “partnership adjustment” as an adjustment to be taken into account by each Partner (or former Partner) in accordance with Section 6226(b) of the Code.  In the event the Partnership is liable for any imputed underpayment with respect to items of Partnership income, gain, loss, deduction or credit that should have been allocated to a Partner for the applicable year, such Partner shall promptly reimburse the Partnership for such amount and such reimbursement shall not be considered a Capital Contribution to the Partnership by such Partner.  The foregoing shall apply even if the applicable Partner is no longer a Partner of the Partnership at the time the Partnership becomes liable for such imputed underpayment.  All references to Code sections in this Section 10.5(d) refer to such sections of the Code as in effect following the effective date of their amendment by Section 1101 of the Bipartisan Budget Act of 2015 (P.L. 114).

10.6Reports to Limited Partners.  

(a)As soon as practicable after the close of each fiscal quarter (other than the last quarter of the fiscal year), the General Partner shall cause to be mailed to each Limited Partner a quarterly report containing financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the General Partner, for such fiscal quarter, presented in accordance with generally accepted accounting principles.  As soon as practicable after the close of each fiscal year, the General Partner shall cause to be mailed to each Limited Partner an annual report containing financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the General Partner, for such fiscal year, presented in accordance with generally accepted accounting principles.  The annual financial statements shall be audited by accountants selected by the General Partner.

(b)Any Partner shall further have the right to a private audit of the books and records of the Partnership at the expense of such Partner, provided such audit is made for Partnership purposes and is made during normal business hours.

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10.7Safe Harbor Election. The Partners agree that, in the event the Safe Harbor Regulation is finalized, the Partnership shall be authorized and directed to make the Safe Harbor Election and the Partnership and each Partner (including any person to whom an interest in the Partnership is transferred in connection with the performance of services) agrees to comply with all requirements of the Safe Harbor with respect to all interests in the Partnership transferred in connection with the performance of services while the Safe Harbor Election remains effective. The Tax Matters Partner shall be authorized to (and shall) prepare, execute, and file the Safe Harbor Election.

Article 11

AMENDMENT OF AGREEMENT; MERGER

The General Partner’s consent shall be required for any amendment to this Agreement.  The General Partner, without the consent of the Limited Partners, may amend this Agreement in any respect or merge or consolidate the Partnership with or into any other partnership or business entity (as defined in Section 17-211 of the Act) in a transaction pursuant to Section 7.1(c), (d) or (e) hereof; provided, however, that (1) the following amendments described in Section 11(a), 11(b), 11(c) and 11(d),  and any other merger or consolidation of the Partnership, shall require the consent of Limited Partners holding more than 50% of the Percentage Interests of the Limited Partners and (2) the following amendments described in Section 11(e) shall require the consent of Special OP Unitholders holding more than 50% of the Percentage Interests of the Special OP Unitholders:  

(a)any amendment affecting the operation of the Conversion Factor or the Redemption Right (except as provided in Section  8.5(d) or 7.1(d)) in a manner adverse to the Limited Partners;

(b)any amendment that would adversely affect the rights of the Limited Partners to receive the distributions payable to them hereunder, other than with respect to the issuance of additional Partnership Units pursuant to Section 4.3;

(c)any amendment that would alter the Partnership’s allocations of Profit and Loss to the Limited Partners, other than with respect to the issuance of additional Partnership Units pursuant to Section 4.3;

(d)any amendment that would impose on the Limited Partners any obligation to make additional Capital Contributions to the Partnership; or

(e)any amendment that would adversely affect the rights of the Special OP Unitholders under this Agreement.

Article 12

GENERAL PROVISIONS

12.1Notices.  All communications required or permitted under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or upon deposit in

53

the United States mail, registered, postage prepaid return receipt requested, to the Partners at the addresses set forth in Exhibit A; provided, however, that any Partner may specify a different address by notifying the General Partner in writing of such different address.  Notices to the Partnership shall be delivered at or mailed to its specified office.

12.2Survival of Rights.  Subject to the provisions hereof limiting transfers, this Agreement shall be binding upon and inure to the benefit of the Partners and the Partnership and their respective legal representatives, successors, transferees and assigns.

12.3Additional Documents.  Each Partner agrees to perform all further acts and execute, swear to, acknowledge and deliver all further documents which may be reasonable, necessary, appropriate or desirable to carry out the provisions of this Agreement or the Act.

12.4Severability.  If any provision of this Agreement shall be declared illegal, invalid, or unenforceable in any jurisdiction, then such provision shall be deemed to be severable from this Agreement (to the extent permitted by law) and in any event such illegality, invalidity or unenforceability shall not affect the remainder hereof.

12.5Entire Agreement.  This Agreement and exhibits attached hereto constitute the entire Agreement of the Partners and supersede all prior written agreements (including the Prior Agreement) and prior and contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof.

12.6Pronouns and Plurals.  When the context in which words are used in the Agreement indicates that such is the intent, words in the singular number shall include the plural and the masculine gender shall include the neuter or female gender as the context may require.

12.7Headings.  The Article headings or sections in this Agreement are for convenience only and shall not be used in construing the scope of this Agreement or any particular Article.

12.8Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original copy and all of which together shall constitute one and the same instrument binding on all parties hereto, notwithstanding that all parties shall not have signed the same counterpart.

12.9Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware; provided, however, that any cause of action for violation of federal or state securities laws shall not be governed by this Section 12.9.

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IN WITNESS WHEREOF, the parties hereto have hereunder affixed their signatures to this Twelfth Amended and Restated Limited Partnership Agreement, all as of the date first set forth above.

, a Maryland corporation

/s/ Lainie P. Minnick​ ​

GENERAL PARTNER:

ARES REAL ESTATE INCOME TRUST INC., a Maryland corporation

By:/s/ Lainie P. Minnick​ ​

Name: Lainie P. Minnick

Title: Chief Financial Officer

LIMITED PARTNERS:

ARES REAL ESTATE INCOME TRUST INC., a Maryland corporation, attorney-in-fact for all Limited Partners other than the Special OP Unitholder

By:/s/ Lainie P. Minnick​ ​

Name: Lainie P. Minnick

Title: Chief Financial Officer

AREIT INCENTIVE FEE LP, a Delaware limited liability company, as sole Special OP Unitholder

By: AREIT INCENTIVE FEE GP LLC, its General Partner

By: ARES COMMERCIAL REAL ESTATE MANAGEMENT LLC, its sole member

By:/s/ Anton Feingold​ ​

Name: Anton Feingold

Title: Authorized Signatory

EXHIBIT A

A-1

EXHIBIT B

B-1

EX-10.3

Exhibit 10.3

[ ], 202[_]

Timberline Holdco LLC

c/o Timberline Real Estate Ventures, LLC

2 School Street

Rye, NY 10580

Attn: Andrew N. Stark

RE: AREIT Operating Partnership LP Profit Interest Letter Agreement

Dear [__]:  

AREIT Operating Partnership LP (“AREIT OP”) is pleased to provide Timberline Holdco LLC (the “JV Profit Interest Partner”), with this letter agreement (the “Letter Agreement”) to admit the JV Profit Interest Partner as a limited partner in AREIT OP and grant a performance participation interest in [tranche name] more particularly described on Exhibit A (the “[Tranche Name] Profit Interest”) to JV Profit Interest Partner, under the terms set forth in Exhibit A, in consideration of services rendered and to be rendered by the JV Profit Interest Partner.  

1.Admission of JV Profit Interest Partner and Power of Attorney: Upon execution of this Letter Agreement, JV Profit Interest Partner shall become a limited partner of AREIT OP pursuant to the Twelfth Amended and Restated Limited Partnership Agreement of AREIT OP, dated as of [__], 2023 (the “Partnership Agreement”, attached hereto as Exhibit B).   JV Profit Interest Partner agrees to be bound by the terms of the Partnership Agreement, and in furtherance thereof, JV Profit Interest Partner shall agree that by its execution of this Letter Agreement, JV Profit Interest Partner hereby grants to Ares Real Estate Income Trust, Inc., the general partner of AREIT OP (the “General Partner”), a special power of attorney, making, constituting and appointing the General Partner as JV Profit Interest Partner’s true and lawful representative and attorney in fact, with power and authority to act in JV Profit Interest Partner’s name, place and stead to execute and sign future amendments or supplements to the Partnership Agreement on behalf of JV Profit Interest Partner (the “Power of Attorney”).  This Power of Attorney is coupled with an interest and shall (i) survive and not be affected by JV Profit Interest Partner’s subsequent bankruptcy or the transfer or forfeiture of all or any portion of the [Tranche Name] Profit Interest, and (ii) extend to JV Profit Interest Partner’s successors, assigns and legal representatives.  This Power of Attorney is not intended to, and does not, revoke any prior powers of attorney.  

2.Issuance of [Tranche Name] Profit Interest.  Upon execution of this Letter Agreement, AREIT OP hereby issues to the JV Profit Interest Partner the [Tranche  Name] Profit Interest as defined in Exhibit A hereto and JV Profit Interest Partner is admitted as a limited partner to AREIT OP.  The [Tranche Name] Profit Interest shall be subject to all of the provisions and restrictions set forth in the Partnership Agreement.  

3.Profit Interest.  The [Tranche Name] Profit Interest is intended to constitute a “profits interest” within the meaning of Revenue Procedure 93-27, 1993-2 C.B. 343, as clarified by Revenue Procedure 2001-43, 2001-2 C.B. 191 (or the corresponding requirements of any subsequent guidance promulgated by the Internal Revenue Service), and JV Profit Interest Partner and AREIT OP shall be required to file all tax returns consistent with such characterization.  In accordance with Rev. Proc. 2001-43, AREIT OP will treat JV Profit Interest Partner as the owner of the [Tranche Name] Profit Interest from the date of issuance, and will treat JV Profit Interest Partner as a partner of AREIT OP for U.S. federal and state income tax purposes.  

4.Severability.  Any term or provision of this Letter Agreement that is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms or provisions of this Letter Agreement or affecting the validity or enforceability of any of the terms or provisions of this Letter Agreement in any other jurisdiction.

5.Administration and Governing Law.  In the event of any conflict between the terms of the Partnership Agreement and this Letter Agreement, this Letter Agreement shall control. This Letter Agreement shall be construed and enforced in accordance with the laws of the jurisdiction indicated in the Partnership Agreement, without regard to the principles of conflicts of law, and all claims relating to or arising out of this Letter Agreement, or the breach thereof, shall likewise be governed by the laws of such jurisdiction, excluding that jurisdiction’s conflicts of law principles.

AREIT OPERATING PARTNERSHIP LP

By: Ares Real Estate Income Trust, Inc., its General Partner

By: ​ ​​ ​
Name: [ ]
Title: [ ]

TIMBERLINE HOLDCO LLC

By: [ ]

By: ​ ​
Name: [ ]
Title: [ ]

2

Exhibit A

Exhibit B

EX-10.4

Exhibit 10.4

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN REDACTED PURSUANT TO ITEM 601(B)(10) OF REGULATION S-K BECAUSE THE INFORMATION IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL AND, WHERE APPLICABLE, HAVE BEEN MARKED WITH “[REDACTED]” TO INDICATE WHERE REDACTIONS HAVE BEEN MADE.

FORM OF PROPERTY

MANAGEMENT AGREEMENT

[_____________________]

THIS AGREEMENT, dated as of the [___] day of [__________], 20__ (the “Effective Date”) is made and entered into by and between [___________________], [_______________________] (“Owner”) and B.Hom Student Living LLC, a Delaware limited liability company (“Manager”).

WITNESSETH:

WHEREAS, Owner owns that certain real property commonly referred to as “[__________]”, containing a [____] unit, [______] bed student housing community, as further identified and described in Schedule A, attached hereto(the “Property”);

WHEREAS, Manager is in the business of managing and operating properties similar to the Property and Manager shall manage, coordinate, and supervise the ordinary and usual business and affairs pertaining to the operation, maintenance, leasing, licensing, and management of the Property in accordance with the terms of this Agreement; and

WHEREAS, Owner desires to engage Manager as an independent contractor to manage and operate the Property as contemplated under the LLC Agreement (as hereinafter defined) and Manager desires to accept such appointment upon the terms, covenants, conditions and provisions of this Agreement.  

NOW, THEREFORE, in consideration of the mutual covenants herein contained, Owner and Manager mutually agree as follows:

ARTICLE 1

APPOINTMENT OF MANAGER

1.01 Appointment of Manager.  Owner appoints Manager to be the sole and exclusive property manager for the Property upon the terms and conditions set forth in this Agreement. Manager accepts such appointment on the terms and conditions set forth herein.

1.02 Independent Contractor Status.  Manager is not the general agent of Owner, but, is instead engaged in the business of managing properties as an independent contractor, and in that capacity, is serving as the property manager for the Property. No provision hereof shall be construed to constitute Manager or any of its officers or employees as an employee or employees of Owner, nor shall any provision of this Agreement be construed as creating a partnership or joint venture between Manager and Owner. Neither Owner nor Manager shall have the power to bind the other party except pursuant to the terms of this Agreement. This Agreement is not intended to provide or create any agency relationship between Owner and Manager, and Manager shall have no right or authority, express or implied, to commit or otherwise obligate Owner in any manner whatsoever, except as expressly provided herein, and Manager agrees that it shall not hold itself out as having authority to act on behalf of Owner in any manner, except as expressly provided herein. Notwithstanding the foregoing, but subject to Section 5.05 below, Manager shall not be liable for any monetary obligation or expenditure incurred on behalf of the Property or Owner within the scope of Manager’s authority pursuant to this Agreement.

1.03 Restrictions on Manager’s Authority.  

a. Manager and Owner agree that under any circumstances where any action, expenditure, decision, commitment, agreement or consent would, under (i) this Agreement require approval of Owner and (ii) that certain Limited Liability Company Operating Agreement (the “LLC Agreement”) of [_________________________], a [__________________] (the “JV”), dated as of the date of this Agreement, [between][among] [_________________], a [__________________________________] (“Sponsor”)[, ​ ​​ ​ (“T-Holdco”)] and [_________________], a [__________________________________] (“Ares”), require the approval of Ares [or all of the members of the JV, as applicable], Manager shall not have the authority under this Agreement to take such action, make such expenditure, decision, commitment or agreement or grant such consent without the written approval of Ares [or all of the members of JV, as applicable]. Manager acknowledges that it has received the LLC Agreement.  In the event the LLC Agreement is amended, restated or otherwise modified, Owner shall provide Manager with a copy of such amended, restated or modified LLC Agreement within five (5) Business Days.  

2

Manager acknowledges that this Agreement is an “[​ ​​ ​] Affiliate Agreement” within the meaning of the LLC Agreement, and Ares [and ​ ​​ ​] ha[s][ve] certain rights with respect to the Property and this Agreement as specified therein, including, without limitation, the right to terminate this Agreement pursuant to [Section 6.12] of the LLC Agreement. [Manager further acknowledges that ​ ​​ ​ intends to qualify as a “real estate operating company” within the meaning of the Plan Asset Regulation (as defined in the LLC Agreement), has additional rights with respect to the Property as provided in [Section 1.10] of the LLC Agreement, and agrees that Manager shall not take any action that undermines or abrogates Ares’ or [​ ​​ ​]’s rights under this Agreement or the LLC Agreement.]

ARTICLE 2

TERM OF AGREEMENT

2.01 Term of Agreement.  This Agreement shall commence upon the Effective Date and shall continue until the last day of the calendar month following the two-year anniversary of the Effective Date, unless sooner terminated pursuant to the terms of this Agreement. Upon expiration of the original term, this Agreement will automatically renew on a month-to-month basis until terminated as provided in Article 7.

ARTICLE 3

MANAGER’S DUTIES AND RESPONSIBILITIES

3.01 General Scope.  Subject to the provisions of this Agreement and at the direction of Owner, Manager shall manage, coordinate, and supervise the ordinary and usual business and affairs pertaining to the operation, maintenance, repair, leasing, licensing, and management of the Property in a diligent and professional manner in accordance with recognized standards of the property management industry and consistent with those customarily performed by professional property managers of properties of similar size, type and quality in the market where the Property is located and taking into account the type of tenants at the Property and, in all cases, subject to and in accordance with: (a) the budgets, policies and limitations imposed by Owner; and (b) applicable law and rulings and orders of governmental authorities having jurisdiction over the Property (the “Performance Standard”). Unless otherwise specifically provided in this Agreement, all services and actions that Manager is required or permitted to perform or take, or cause to be performed or taken, under this Agreement in connection with management of the Property shall be performed or taken, as the case may be, on behalf of Owner and, except as specifically otherwise provided for herein, at Owner’s sole cost, expense, and risk.

3.02 Proposed Management Plans.  Owner hereby approves the management plan and operating budget for the promotion, operation, and repair and maintenance of the Property for Owner’s current calendar year and the student occupancy year attached hereto as Schedule C as the initial Approved Management Plan and initial Approved Operating Budget (each as hereinafter defined). Subsequent proposed management plans and operating budgets for the immediately succeeding calendar year and the student occupancy year shall be submitted to Owner at least sixty (60) days prior to the beginning of the next student occupancy year. Each proposed management plan and operating budget shall include: (i) the proposed leasing parameters for the Property for the ensuing calendar year and the student occupancy year as well as a copy of the standard form of the lease to be used at the Property; and (ii) an amount to be added to, or expended from, separate Reserves (as defined in the LLC Agreement) for (A) payment of real estate taxes, (B) insurance, (C) capital improvements, and (D) other Reserves (including those required pursuant to the terms of any Financing Documents (as defined in the LLC Agreement)), in an amount with respect to each such Reserve equal to the greater of: (1) the amount required to be added to such Reserve during such year by any Lender (as defined in the LLC Agreement), and (2) the amount that Owner approves under the circumstances.  In addition, no such proposal shall be inconsistent with the Approved Budget and Business Plan (as defined in the LLC Agreement) that was approved by Ares pursuant to [Section 6.2] of the LLC Agreement. Within thirty (30) days after a proposed management plan and operating budget is submitted to Owner, Owner shall notify Manager in writing: (y) that it approves the proposed management plan and operating budget; or (z) of the revisions Owner believes should be made to such proposed management plan and operating budget for such fiscal year. Manager shall revise the proposed management plan and operating budget to reflect all revisions proposed by Owner. If Owner fails to respond within such thirty (30) day period, Owner shall be deemed to NOT have approved the proposed management plan and operating budget. The proposed management plan and operating budget once revised by Manager (if applicable) and approved by Owner shall be referred to herein as the “Approved Management Plan” and the “Approved Operating Budget.” If the proposed management plan and operating budget for any calendar year and student occupancy year shall not be approved by Owner, Manager shall operate the Property

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pursuant to the proposed management plan and operating budget for such year with respect to those portions approved by Owner and, with respect to those portions not approved by Owner, in accordance with the prior year’s Approved Management Plan and Approved Operating Budget (except for any expenditures that are not Necessary Expenditures (as defined in the LLC Agreement), which non-Necessary Expenditures shall be deemed removed from such prior year’s Approved Management Plan and Approved Operating Budget) and the salary and benefit expense reflected in the prior year’s Approved Management Plan and Approved Operating Budget shall be increased by the lesser of (I) 3.0% and (II) the most recent Cost of Living Adjustment published by the Social Security Administration.  

3.03 Approved Marketing Plan.  Manager shall establish leasing plans, rental rates and implement marketing strategies, in each case, with the prior approval of Owner. Manager shall supervise the preparation of all advertising layouts, brochures, campaigns, and, to the extent applicable, model student living units, and submit campaign concepts and advertising templates to Owner for its prior approval. Advertising and promotional materials shall be prepared in full compliance with federal, state, and municipal fair housing laws.

3.04 Leasing.  Manager shall exercise efforts in accordance with the Performance Standard to obtain and keep residents who are students at the [___________________] or other colleges or universities in the vicinity of the Property (“Resident”, “Student”, and “Tenant” used interchangeably throughout) and other qualified residents. Manager shall, using efforts in accordance with the Performance Standard, ensure that the tenants receive the services required to be provided by Owner under their leases, to duly and punctually observe and perform on behalf of Owner all of Owner’s obligations under the leases, and to enforce, preserve and keep unimpaired the rights of Owner and the obligations of the tenants under the leases. Manager is authorized, subject to and in accordance with the Approved Operating Budget and Approved Management Plan, to negotiate, prepare, and execute all residential leases on a substantially similar form of residential lease as approved by Owner, as agent for Owner; provided, however, without the consent of Owner, Manager: (i) except in accordance with the Approved Operating Budget and Approved Management Plan, if applicable, shall not modify, or in any way alter the provisions of any lease in a manner which would reduce the rent thereunder below the applicable rental rate tier set forth in the leasing parameters in the then Approved Operating Budget and Approved Management Plan, shorten the term thereof, impose additional obligations on the landlord thereunder, alter any material, financial or economic term of the lease or reduce the obligations of the tenant thereunder; (ii) shall not consent to any subletting of any part of the Property, to any assignment of any lease by any tenant thereunder, or to any assignment or further subletting of any sublease; and (iii) shall not permit any person to occupy any space in the Property without: (y) a written lease approved by Owner or entered into in accordance with the Approved Operating Budget and Approved Management Plan; and (z) Manager’s receipt on behalf of Owner of any security deposit required under the terms of such lease, a current certificate of insurance (if applicable), and payment of rent required thereunder to be paid prior to the tenant’s taking occupancy.

3.05 Security Deposits.  Manager shall collect and refund security deposits in accordance with the terms of each lease and as may be required by applicable law. If required by statute, Manager will deposit security deposits into a separate interest-bearing account at CIBC or at such other bank as Manager shall propose and Owner shall approve and pay tenants the interest earned on such deposit; otherwise, Manager will deposit security deposits into the Operating Account (as hereinafter defined). To the extent permitted by a tenant’s lease and applicable law, when Manager deems reasonably appropriate, Manager may offset tenant charges with forfeited security deposit amounts and disburse any surplus security deposits from the Operating Account.

3.06 Collection of Rents and Enforcement of Leases.  Manager shall exercise efforts in accordance with the Performance Standard to promptly collect all rents and other charges for services provided in connection with the use of the Property. When reasonably necessary, but in all events subject to the approval rights of Owner in Section 3.04 above, Manager is authorized to institute the following actions, acting in accordance with the Performance Standard: (a) sign and serve such notices to residential tenants as are deemed necessary or reasonably appropriate by Manager to ensure a residential tenant’s performance of its obligations under its lease; (b) institute and prosecute actions and evict tenants of residential leases; (c) recover rents and other sums due by legal proceedings; and (d) execute agreements or official documents in the name of Owner to settle, compromise, and release such actions or suits, or re-institute such tenancies; provided, however, Manager shall not commence, defend or settle any actions or proceedings involving in excess of $50,000 without Owner’s prior written consent. Attorney’s fees, filing fees, court costs, and other necessary expenses incurred in connection with such actions and not recovered from residents shall be paid out of the Operating Account to the extent set forth in the Approved Operating Budget. Manager may select the attorney of its choice to handle such actions,

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proceedings and litigation. Manager shall not collect any rents for more than one month in advance (plus security deposits) without the prior consent of Owner and Owner’s mortgage lender.

3.07 Approved Operating Expenditures.  Notwithstanding anything to the contrary contained herein, Manager shall not, without the prior written approval of Owner, make any expenditure, whether from the Operating Account or otherwise, or incur any obligation on behalf of Owner, except for: (i) expenditures or obligations approved by Owner; (ii) expenditures made and obligations incurred directly pursuant to the then-current Approved Operating Budget (as the same may be adjusted by the Permitted Variance (as defined below)); and (iii) expenditures that are immediately necessary in the reasonable judgment of Manager to avoid any imminent or existing danger, or threat of imminent danger, of material injury to person or material harm to property (including the Property) and such immediacy makes it impracticable to obtain prior Approval from Owner (“Emergency Expenditures”). Manager will promptly notify Owner, but in no event later than twenty-four (24) hours from the time Manager learns of such emergency, of any such emergency or Emergency Expenditure. Except for Emergency Expenditures, Manager shall ensure that the actual costs of maintaining and operating the Property do not exceed the Approved Operating Budget and any year-to-date budget variances will be explained to Owner each month as part of the monthly reports set forth on Schedule D. “Permitted Variance” means, with respect to any line item in any Approved Operating Budget, an increase not to exceed the lesser of: (a) three percent (3%) of the amount shown in such line item (unless such variance in excess of 3% is equal to or less than $1,000, in which case approval shall not be required); and (b) $10,000 of the amount shown in such line item, and such increase, when aggregated with all prior and any then-anticipated increases in such year, does not exceed $50,000 of the total expenses set forth in the Approved Operating Budget.

3.08 Approved Capital Expenditures.  Notwithstanding anything to the contrary contained herein, any capital expenditure over $15,000 shall be awarded on the basis of competitive bidding, solicited in the following manner: (a) a minimum of two (2) written bids shall be obtained for each purchase where possible and practical to obtain such bids; (b) each bid will be solicited in a form so that uniformity will exist in the bid quotes; (c) Manager shall provide Owner with all bid responses accompanied by manager’s recommendations as to the most acceptable bid; and (d) Owner shall be free to accept or reject any and all bids. Owner shall communicate to Manager its acceptance or rejection of bids in writing. Owner shall be responsible for capital expenses and may pay same from its own resources or may authorize payment by Manager out of available funds in the Operating Account.

3.09 Start-Up Expenditures. It is understood and agreed that certain initial start-up expenses and costs will be incurred to evaluate the Property and its submarket; to recruit, interview, hire and train staff; to create and print brochures and marketing materials; and to equip and furnish the leasing office and other areas of the Property. Provided that the foregoing is expressly contemplated by the Approved Operating Budget, Manager may incur such reasonable start-up expenses and costs on behalf of the Property.

3.10 Intentionally Omitted.

3.11 Public Utility and Service Contracts.  Manager shall negotiate and, with Owner’s prior approval, execute, in its capacity as Owner’s agent, contracts for water, electricity, gas, telephone, trash removal, vermin or pest extermination, and any other services which are necessary to properly maintain the Property as contemplated by the Approved Management Plan and Approved Operating Budget. All required utility deposits or surety bonds will be the responsibility of the Owner and each such contract shall be in the name and expense of, and executed by, the Owner. Without the consent of Owner or as otherwise permitted in this Section 3.11, Manager: (a) other than as expressly provided in this Section 3.11, shall not enter into any contract or modify, in any material respect, the provisions of any contract; and (b) shall not take any action, or omit to take any action or give any notice, the taking, omission or giving of which would (where the following would have an adverse effect on Owner and/or the Property): (x) result in the reduction, release or discharge of any other party to any contract from its obligations thereunder; (y) consent to any other party to any contract to assign or otherwise transfer its rights or obligations thereunder; or (z) result in an expenditure in excess of the budgeted amount therefor. Manager will observe, enforce, and inspect the performance under all contracts and agreements affecting the Property, including without limitation, the inspection and observation of all servicing, cleaning, decorating or routine maintenance work at the Property during the progress thereof and will approve or disapprove (as appropriate) all bills submitted for payment therefor. In connection with the foregoing, Manager shall obtain all necessary receipts, releases, waivers, discharges and assurances and shall use efforts in accordance with the Performance Standard to keep the Property free from mechanics’ and materialmen’s liens and other claims, all of which documentation shall be in such format as is required by Owner.  Manager may not contract with any Affiliate of Manager for the performance of services

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for the Property without the prior approval of Owner, which approval may be granted or withheld in Owner’s sole discretion; provided, however, Owner hereby consents to Manager contracting with its affiliate BH Management Services, LLC, at no additional fee, cost or expense to Owner; (i) to fulfill, or assist in the fulfillment of, certain obligations of Manager hereunder; and (ii) if Owner engages Manager in writing to provide construction supervision services, to fulfill, or assist in the fulfillment of such construction supervision services as detailed in such writing. Notwithstanding the foregoing, Manager shall be permitted to negotiate and execute, in its capacity as Owner’s agent, contracts or agreements which have: (A) a term of one year or less; or (B) are terminable by Owner without cause, and without termination fee or penalty, on no more than thirty (30) days’ notice, and, in the case of (A) or (B), shall be included in the then-current Approved Operating Budget and Approved Management Plan; provided, however, Manager shall not, without the prior approval of Owner, enter into any contract on behalf of Owner for the provision of materials or services that provides for an aggregate annual payment in excess of $15,000.

3.12 Manager’s On-Site Employees.  As the employer of all Property personnel, Manager has responsibility to and shall comply with all applicable labor and employment laws, including hiring, pay practices, disciplinary actions, and terminations. Manager has developed company-wide employment policies and practices that will be applied to all its employees in the administration of this duty. All on-site personnel shall be employees of Manager (or Manager’s agent) and Owner has no right to supervise or control the operations of employees or agents; provided, however, (a) Ares shall have the right to interview candidates for the positions of property manager, head of leasing/marketing and maintenance manager/superintendent for the Property and advise Manager of any candidate that Ares does not approve for hire into such position and, unless Manager reasonably determines such advice is based on factors which may impose liability on Manager for improper employment decisions, Manager shall decline to hire such candidate, (b) if Ares determines that any contractor, subcontractor or other person or entity under contract with Manager has engaged in actions detrimental to the Property or tenants of the Property, Manager shall remove such person or entity from the Property and shall not assign such person or entity to any other property owned by Owner or any of its affiliates without the prior written consent of Ares and (c) if Ares desires to have any employee of Manager removed from the Property, Ares shall notify Manager and request Manager investigate, if appropriate, and take such disciplinary action as Manager deems appropriate in its reasonable discretion; it being agreed, however, if Ares, after consultation with Manager, determines that any employee of Manager should be terminated or removed for cause, Manager shall remove such person from the Property and shall not assign such person or entity to any other property owned by Owner or any of its affiliates without the prior written consent of Ares. Owner acknowledges all wages will be paid by Manager and agrees not to pay any additional wages to any Manager employee outside of Manager’s payroll system.Manager will take Owner’s requests, opinions and preferences into account when making personnel decisions. The parties agree to work in good faith to resolve any disputes regarding personnel. Manager shall screen, test, investigate, interview, hire, supervise, discharge, and pay all personnel necessary to maintain and operate the Property, subject to this Agreement and the Approved Operating Budget. Subject to Ares’ approval rights under this Section 3.12, Manager may fill open positions at the Property with its temporary floating employee team while recruiting for a permanent replacement(s). Cost to the Property will include an allocation of salary and benefit load for any such employees while at the Property and any associated incurred travel costs that are approved by Ares. Manager will be timely reimbursed by the Property for all costs related to personnel who are necessary to operate and maintain the Property to the extent expressly permitted pursuant to this Agreement and/or the Approved Operating Budget. All other labor/Human Resource costs associated to onsite employees are an expense of the Property, including, but not limited to: HRIS monthly fees, Taleo, Salary Surveys, recruiting and advertising tools, and background/drug screening.

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3.13 Debt Service and Tax Payments.  If requested by Owner, and sufficient funds are available in the Operating Account to satisfy the same, Manager will apply any such operating funds to pay the debt service and taxes due pursuant to any federal, state, county, or municipal authority, or other similar body having appropriate jurisdiction.  Manager shall not take any action under this Section 3.13 so long as Owner is contesting, or has notified Manager of its intention to contest, any such order or requirement. Owner will supply all information necessary for Manager to comply promptly with these requirements.  Manager shall also require all tenants of the Property to pay any applicable federal, state and local taxes, including any sales, excise or use taxes, assessed on any goods or services purchased, rented, leased or otherwise utilized by the tenants at such rates as may be determined by federal, state or local authorities from time to time. Manager, on behalf of Owner, shall collect and remit such taxes to the relevant authority pursuant to federal, state and local taxation laws. Owner shall provide such information, as needed, to register Manager with any federal, state or local authority for purposes of collecting and remitting applicable sales, excise and use taxes on behalf of Owner.

3.14 Compliance with Building Regulations and other Requirements.  Subject to the terms of this Agreement, Manager does not assume and is given no responsibility for compliance of any building on the Property, or any equipment therein, with the requirements of any building codes or with any statute, ordinance, law, or regulation of any governmental body or of any public authority or official thereof having jurisdiction, (collectively, the “Building Codes”), except to notify Owner promptly or forward to Owner promptly any complaints, warnings, notices or summonses received by it relating to such matters. Notwithstanding the foregoing, Manager will, using efforts in accordance with the Performance Standard, ensure Building Codes, regulations, licensing, and inspections required by law are followed when overseeing repairs and maintenance and otherwise performing its duties and obligations hereunder. In addition, Manager shall perform its obligations hereunder in a manner which shall comply with and shall use efforts in accordance with the Performance Standard to cause the Property or any portion of the Property to comply in all respects with and shall abide by all applicable statutes, laws, rules, regulations, requirements, orders, notices, determinations, and ordinances of any federal, state, or local government and appropriate departments, commissions, or boards with jurisdiction over the Property, as well as with the requirements of any insurance companies covering any of the risks against which the Property is insured and with the rules, regulations and requirements of the applicable board of fire underwriters or other similar insurance body, and further with the requirements of any Financing Documents, that may now or hereafter cover all or any part of the Property or any interest of Owner therein (collectively, “Requirements”).  In complying with any Financing Document, Manager will take all appropriate steps including, but not limited to, preparation of draw requests, preparation of compliance reports required by lender(s), and preparation of financial statements.

3.15 Environmental Risk Management.  Notwithstanding anything to the contrary contained herein, but subject to the further provisions of this Section 3.15, Owner acknowledges and understands that Manager is not responsible to: (1) evaluate the presence or absence of hazardous or toxic substances, mold, waste, materials, electromagnetic field, radon, or radioactive materials upon, within, above, or beneath the Property; (2) maintain or evaluate compliance with environmental, hazardous or solid materials or waste laws, rules and regulations; or (3) conduct or ensure clean-up or remediation of hazardous materials spills or contamination.

a. Accordingly, Manager’s obligations to Owner with respect to the presence of hazardous or toxic substances, mold, waste (including solid waste), gas, liquid, materials, electromagnetic fields, radon, lead, asbestos, radioactive materials, or other environmental concerns upon, within, above, or beneath the Property (hereinafter collectively “Hazardous Materials”), and/or with the compliance and enforcement of federal, state, and local laws, rules, regulations, directives, ordinances, and requirements relating to Hazardous Materials (hereinafter collectively “Hazardous Materials Laws”) shall be subject to, conditioned upon, and limited by the following:

i. To the extent desired by Owner, Manager shall, at Owner’s sole discretion and expense, obtain from an independent environmental consultant retained by Owner, an environmental assessment report on the Property, and shall have such assessment report periodically updated by such environmental consultant based upon the consultant’s inspections of the Property, including tenant spaces.

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ii. In no event will Manager make an independent determination as to the presence or absence of Hazardous Materials, or whether the Property or any particular tenant space is in violation or compliance with any Hazardous Materials Laws; provided, however, in the event Manager observes or otherwise becomes aware of any tenants, or any other persons, using, dumping, releasing, or discharging Hazardous Materials at the Property, Manager shall promptly notify Owner. Manager may seek, on Owner’s behalf and at Owner’s expense, to enforce a tenant’s compliance with any Hazardous Materials Laws in accordance with the environmental consultant’s recommendations contained in the environmental assessment report. Manager shall not, and shall have no obligation to, determine whether or not Owner, any tenants, the Property, or any proportion thereof is in compliance with Hazardous Materials Laws.

iii. Manager shall be responsible for any Hazardous Materials which it or its employees and/or agents use or introduce to the Property, including storage, containment, removal, or remediation as required by applicable law.  To the extent Hazardous Materials (such as cleaning supplies or fuel) are required by Manager in the discharge of its duties under this Agreement, Manager shall use and store quantities of such Hazardous Materials as are permitted under applicable law and any Financing Documents, and shall store, use and dispose of such Hazardous Materials in accordance with applicable laws and any Financing Documents.

iv. Manager shall have absolutely no responsibility or obligation with respect to the abatement, clean-up or remediation of any spill of or contamination from any Hazardous Materials upon, beneath, or within all, or any portion, of the Property (other than Hazardous Materials introduced, used or stored by Manager or its employees and/or agents), and the entire responsibility for such clean-up, abatement, or remediation shall lie with Owner and Owner’s environmental consultant. However, Manager shall cooperate with Owner in coordinating and supervising any abatement, clean-up, monitoring or remedial action on the Property site. Owner agrees that, with respect to any abatement, clean-up, or remedial action, Owner shall employ a licensed environmental clean-up company to undertake such clean-up and remediation, and Owner’s or it’s Lender’s environmental consultant, as the case may be, shall oversee the entire abatement, clean-up and remediation process and the obtaining of any required governmental approvals. If the clean-up or remediation is the responsibility of any tenant of the Property and/or Owner’s environmental consultant, Manager shall, on Owner’s behalf, require the tenant to utilize qualified and licensed environmental clean-up companies and that the clean-up and remediation is conducted to Owner’s satisfaction and in accordance with all Hazardous Materials Laws, governmental laws and approvals of which Manager is aware.

b. Owner has provided Manager a copy of its most current Phase I survey covering the Property (which was conducted within the prior three (3) year period) and has implemented or will implement within thirty (30) days of the Effective Date an operations and maintenance program consistent with market standards.

3.16 Disclaimer of Certain Liabilities.  So long as Manager is performing its duties and obligations hereunder in accordance with the terms of this Agreement and the Performance Standard, and subject to the provisions of Section 6.06(b) below, Manager assumes no liability for (a) any acts or omissions of Owner, or any previous owners or managers of the Property, or any previous agents of any of these, (b) any failure of, or default by, any tenant in the payment of any rent or other charges due Owner or in the performance of any obligations owed by any tenant to Owner pursuant to any lease, student housing or student services, or otherwise, (c) misconduct, negligence, acts or omissions of any consultant or independent contractor retained by Manager with respect to the Property, (d) the provision of security services or devices, (e) violations of environmental regulations or other building regulations by anyone other than Manager or its affiliates, (f) vendor or tenant claims for acts or omissions of Manager within the scope of its agency and (g) subject to the termination right set forth in Section 7.01(p) below, the financial performance of the Property.

3.17 No Requirement to Advance Funds.  In no event shall Manager be required to advance any monies on behalf of Owner, lend its credit to the Property, or incur any liability in Manager’s own name.  

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3.18 Representations.  Owner represents that, as of the Effective Date, it is the owner of the Property and legally entitled to designate and engage Manager in accordance with this Agreement. Manager represents and warrants that it has full power and authority to enter this Agreement and that it is fully qualified and licensed, to the extent required by law, to manage real estate and perform all obligations assumed by Manager hereunder. Manager agrees to comply with all such laws now or hereafter in effect. Manager also represents and warrants that it does not hold “plan assets” within the meaning of the Plan Asset Regulation (as defined in the LLC Agreement).

3.19 Complaints.  Manager shall handle all complaints and requests from tenants, concessionaires, licensees or other third parties and shall record each in a systematic fashion in order to show the action taken.

3.20 Accidents and Claims.  Manager shall notify Owner promptly after Manager receives notice or knowledge of any personal injury or property damage occurring at the Property; and forward to Owner any summons, subpoena, or other legal document served upon Manager relating to actual or alleged potential liability of Owner. Manager shall promptly after any such occurrence investigate and shall make a full, written report to Owner as to (a) all accidents or claims for damages for injury to person or property occurring at the Property or arising out of the ownership, operation and maintenance of the Property, and (b) all damage to or destruction of the Property, including the estimated costs of repair, and Manager shall prepare for approval by Owner all reports required by any insurance company in connection with any such accident, claim, damage or destruction. Manager shall cooperate with Owner with respect to any claim that may arise under any insurance policy.  Manager shall take no action (such as admission of liability) that might operate to bar Owner from obtaining any protection afforded by any policy, or that might prejudice Owner and its or their defense to any claim based on such loss, damage or injury.

3.21 Legal Notices.  Manager shall furnish to Owner within three (3) days after receipt by Manager, any and all legal, violation, issuance and other notices received by Manager affecting or in connection with the Property, whether from a tenant, governmental agency, insurance body or other third party, and all notices from any lender claiming any default in any Financing Document and any other notice from a lender not of a routine nature.

3.22Normal Maintenance.  Manager shall, at the expense of Owner in accordance with the Approved Operating Budget and Approved Management Plan, maintain or cause the Property to be maintained in good order, repair, and condition to the end that the Property shall be maintained in a condition similar to Class A student housing properties within the [​ ​​ ​] campus. Without limiting the generality of the foregoing, such maintenance shall include exterior grounds and landscaping services, routine repairs to improvements, cleaning and janitorial services to the extent required by a tenant lease, maintenance of mechanical systems and equipment and such other normal maintenance and minor alteration and repair work as may be advisable or necessary. In the event the Approved Operating Budget and Approved Management Plan do not provide sufficient funds to maintain the Property as required by this Section 3.22 and if Owner disapproves or fails to approve a written request by Manager for additional funds necessary for such compliance, then Manager will be deemed in compliance with this Section 3.22 so long as it uses efforts in accordance with the Performance Standard to perform the required tasks within the Approved Operating Budget and Approved Management Plan.

3.23 Inspections.  Manager shall provide regular and systematic inspections of the Property, including, without limitation, the grounds, and parking areas in order to comply with all Requirements and assure proper maintenance of the Property.  Manager shall promptly notify Owner in writing of the violation and shall obtain Owner’s prior written approval before authorizing any expenditure to correct a violation of any Requirement.  Owner shall have the right to contest any alleged violation of any Requirement.

3.24. Permits and Authorizations.  Manager shall obtain and keep in full force and effect all licenses, permits, consents and authorizations that may be necessary for the maintenance, operation, management, promotion, repair, servicing, occupancy or leasing of the Property or for the proper performance by Manager of its duties and obligations under this Agreement (including, without limitation, a real estate broker’s license, if required by applicable law, regulation or statute to fulfill Manager’s obligations hereunder) or as may be required under any lease covering any portion of the Property.  The cost of keeping in full force and effect all necessary licenses, permits, consents and authorizations for the benefit of the Property shall be at Owner’s expense, except that the cost of obtaining and keeping in full force and effect those licenses necessary for the proper performance by Manager and its employees of its duties or their duties under this Agreement shall be at Manager’s expense and Manager shall be solely responsible for late fees or other charges resulting from Manager’s failure to timely comply with its obligations hereunder. All licenses, permits, consents and authorizations shall be in the name of Owner, or its designee if required by Owner (except that the licenses which are

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Manager’s expense, pursuant to the foregoing, shall be in Manager’s name).  Manager shall obtain any other licenses, permits, consents or authorizations as, if and when the same may be requested to be obtained by Owner, at Owner’s cost and expense.

ARTICLE 4

BANKING AND FINANCIAL RECORDS

4.01 Account Agency Agreement and Operating Account.  Concurrent with the commencement of this Agreement, Owner and Manager shall enter into the Account Agency Agreement, attached as Schedule B. Manager is responsible for providing effective internal controls and efficiencies, and to accomplish this Manager has developed certain cash and online banking policies and procedures with its platform bank, CIBC Bank USA. Owner will maintain a separate operating account at the Manager’s platform bank and will name it in the Account Agency Agreement. Manager shall not change platform banks without the prior written approval of Owner.It is understood that the bank account contemplated and authorized by the Account Agency Agreement shall be a non–interest-bearing checking account. Owner shall not allow Operating Account to have a balance under $25,000 (the “Minimum Balance”) at any time during the term of this Agreement.

4.02 Financial Recordkeeping.  Manager shall maintain, at Manager’s premises, in a manner customary and consistent with generally accepted accounting principles, complete and accurate accounting records based on the Owner’s fiscal year-end, including, without limitation, books and journals and orderly files, containing rental records, insurance policies, copies of all leases, contracts and other agreements, correspondence, receipts, bills and vouchers, records of all monies received and disbursed in connection with the management of the Property and all other documents and papers pertaining directly to the Property or its operation.

4.03 Financial Reports.  Manager shall furnish as listed on Schedule D monthly and/or quarterly reports of collections, disbursements, and other accounting matters, and any other reports reasonably requested from time to time by Owner. These reports will be delivered to Owner[ and ​ ​​ ​] in electronic pdf format, as well as excel format, not later than the 15^th of the following month. To support the monthly financial reports, Manager shall maintain at Manager’s premises copies of the following: (a) bank statements, bank deposit slips, and canceled checks; (b) comprehensive bank reconciliations; (c) detailed cash receipts records; (d) summaries of adjusting journal entries; and (e) supporting documentation for payroll, payroll taxes, and employee benefits.

4.04Owner’s Right to Audit.  Owner[ and ​ ​​ ​] reserve[s] the right to conduct examination of the books and records maintained by Manager for Owner, and to perform any and all audit tests relating to Manager’s activities, either at the Property, or at the office of Manager; provided such examination and tests are related to those activities performed by Manager for Owner and are conducted during normal business hours. Such audits shall exclude the pricing or contracting information relating to third party vendors utilized by Manager. Owner[ or ​ ​​ ​, as applicable,] shall give Manager not less than two (2) Business Days’ (as defined in the LLC Agreement) written notice of any such audit or examination. Any and all such audits conducted [either] by Owner’s[ or ​ ​​ ​‘s] employees or appointees will be at the sole expense of Owner[ or ​ ​​ ​, as applicable], unless an error of greater than three percent (3%) of total Gross Income (if understated) or total expenses (if overstated) for the year in question is discovered, in which case Manager shall pay the costs of the audit.  Manager shall also arrange for Owner[ or ​ ​​ ​] (or [its][their] representatives) to enter any part of the Property during normal business hours and upon reasonable advance notice, subject to the terms of any applicable lease, for the purpose of examining or inspecting the Property or for any other purpose.

4.05 Disbursement of Deposits.  If requested by Owner, Manager shall remit to Owner with the monthly financial report all unexpended operating funds except for a reserve for contingencies, as provided in Section 5.01 below, which shall remain in the Operating Account.

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ARTICLE 5

OWNER’S DUTIES AND RESPONSIBILITIES

5.01 Initial Deposit and Contingency Reserves.  Immediately upon commencement of this Agreement, Owner shall remit to Manager the sum of $2,000 to be deposited in the Operating Account as an initial deposit representing the estimated disbursements to be made in the first month following the commencement of this Agreement, including all estimated payroll and related costs. Furthermore, Owner authorizes Manager to maintain a contingency reserve of $5,000 (the “Contingency Reserve”) at all times in the Operating Account to enable Manager to pay obligations of Owner under this Agreement as they become due.  The $5,000 reserve will be part of the Minimum Balance referred to in Section 4.01.

5.02 Insufficient Operating Funds.  If, as a result of Owner approved Management Plans, a cash flow deficit is reasonably anticipated in the next budgeted month of operations, Owner agrees to deposit into the Operating Account, prior to the commencement of the next budgeted month, sufficient funds to cover the anticipated deficiency and fully fund the Contingency Reserve. In the event that funds in the Operating Account become insufficient to cover all Operating Expenditures and the Contingency Reserve, Owner agrees to, within twelve (12) Business Days of written notice from Manager describing the items for which payment is due, deposit into the Operating Agreement sufficient funds to cover the deficiency and the Contingency Reserve.

5.03 Manager’s Compensation.  Owner agrees to pay Manager, as compensation for services rendered by Manager in accordance with the terms of this Agreement, the compensation specified in the attached Schedule E. Manager, on behalf of Owner, may pay such compensation to itself at the end of each calendar month from the Operating Account, provided that the amount of each such withdrawal is verified in Manager’s monthly reports to Owner.

5.04 Manager’s Costs to be Reimbursed.  Owner agrees to reimburse Manager for all reasonable out-of-pocket costs incurred in managing and leasing the Property (other than Manager’s Expenses), to the extent the same are expressly permitted to be incurred in accordance with the terms of this Agreement, including but not limited to those as specified in the attached Schedule F. Manager, on behalf of Owner, may pay such reimbursement to itself at the end of each calendar month as expenses are incurred, from the Operating Account, provided that the amount of each such withdrawal is verified in Manager’s monthly reports to Owner.  

5.05 Manager’s Expenses. Manager shall be responsible for, and Owner shall not pay or be required to reimburse Manager for any of the following (collectively, “Manager’s Expenses”) unless approved in writing by Owner:

a. Manager’s home office general and administrative expenses, including, but not limited to

i. Salaries and compensation of supervisory personnel other than onsite supervisory personnel, including the Community Manager and other supervisors employed to provide services to the Property.

ii. Salaries and compensation of Manager’s personnel required to substitute for on-site personnel while the on-site employees are on scheduled paid time off not exceeding two weeks.

iii. Home office routine costs such as telephone, postage, overnight mail, and office supplies.

iv. To the extent not set forth in the Approved Operating Budget, costs to set up any on-site management office, if applicable (these costs include, but are not limited to:  fax machines, copiers, telephone system, filing systems furniture, computer, etc.).

v. To the extent not set forth in the Approved Operating Budget, costs of Manager’s accounting personnel and accounting related costs, including the initial cost of accounting software but not including annual software fees attributable to the Property.

vi. Cost of Manager’s insurance pursuant to Article 6 above.

vii. Travel, meals, and entertainment costs of Manager’s employees.

viii. Cost of on-site employees’ dues and membership fees to professional organizations.

b. The cost of worker’s compensation insurance and employer’s liability insurance for Manager’s home office employees.

c. Cost of resident rent bills, vendor checks, envelopes and other materials supplied by the Manager as required for operation of the Property.

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d. Direct expenses of the Manager such as photocopying and long-distance phone charges properly logged; provided, that this provision shall not prohibit employees of Manager from incurring expenses related to photocopying directly attributable to Property business.  

5.06 Representations.  Owner represents and warrants that it has the requisite power and authority to enter this Agreement.

ARTICLE 6

INSURANCE AND INDEMNIFICATION

6.01 Owner Insurance Requirements.Ownershallobtain,atOwner’sexpense,insurance coverage described herein for the Property, and as required by any applicable Financing Documents. Without limiting the generality of the foregoing, Owner agrees that the insurance coverage described in this Section 6.01 shall be obtained. Manager shall cause all premium payments required in order to keep all the Owner required insurance coverage in effect to be paid in accordance with the Approved Management Plan and Approved Operating Budget or otherwise in accordance with the terms of the Financing Documents on a timely basis out of funds provided by Owner directly or out of the Operating Account. Owner agrees that the insurance coverage set forth in (a) and (b) below shall be maintained byOwner:

(a) Propertydamageinsurance,orbuilder’sriskinsurance,whereapplicable,to coverphysicallossordamagetothePropertyonan“allrisk”(aka)“Specialform”basis,including fire and extended coverage perils, and including vandalism and malicious mischief, on a replacement cost basis. Manager shall use commercially reasonable efforts to comply with all the warranties, terms, and conditions of such insurance of which it has been specifically advised. Manager shall promptly notify Owner and insurance brokers specified in writing to Manager by Owner within twenty-four (24) hours after Manager receives notice of any loss or damage to theProperty.

(b) The following additional insurance coverage shall also be obtained if applicable by Owner:

Type of Coverage	Amounts/Limits
Commercial General Liability Insurance (“CGL”) (Occurrence Form)	$1,000,000 per occurrence $2,000,000 aggregate subject to an overall master policy aggregate limit, including contractual liability coverage, bodily injury, property damage, personal injury, advertising injury, products and completed operations.
Umbrella Liability Insurance (above Employer’s Liability, CGL, and Automobile Insurance)	$10,000,000 per occurrence and aggregate
Business Interruption Insurance	Twelve (12) months of projected gross revenues from the Property, or such other amounts as may be required by the Financing Documents

All insurance required in clauses (i) and (ii) above shall be issued by insurers as deemed appropriate by Owner and be in force as of the Effective Date. All such policies shall be at Owner’s sole cost. The CGL and Umbrella Liability Insurance shall include Owner as Named Insured, Manager as an insured, however coverage will not extend to gross negligence, willful misconduct or acts outside the scope of Manager’s duties, and Lenders as Additional Insured, mortgagee or loss payees. In addition, all insurance required by (i) and (ii) above shall, to the extent permitted by law, include a waiver of subrogation in favor of Manager, while Manager is acting within the scope of duties and so long as Manager is not grossly negligent or Manager has not committed willful misconduct. In cases where Owner and Manager maintain insurance policies that duplicate coverage, Owner’s General Liability and Excess insurance policies shall be primary and non-contributory, except for claims of gross negligence, willful misconduct or acts taken in violation of this Agreement. Notwithstanding the foregoing, all insurance obtained by Owner shall be not less than the types of coverage and minimum standards required under the Financing Documents.

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6.02 Manager’s Insurance. Manager agrees that the minimum insurance coverage set forth below shall be maintained by Manager, without reimbursement from Owner except as set forth in the Approved Operating Budget:

(a) Commercial General Liability Insurance and Umbrella Liability insurance, written on an occurrence basis, including contractual liability coverage, with limits of not less than Twenty Million Dollars ($20,000,000) combined per occurrence and in the annual aggregate for bodily injury, property damage, advertising injury personal injury liability, with a completed operation and independent contractors’ endorsement. These policies will not contribute with insurance for defense or indemnity provided by the policy described above to the extent Manager is working within scope of his duties. Should any self-insured retention (SIR) or deductible be incorporated within the policy of insurance, the responsibility to fund such financial obligations shall rest entirely with Manager and such SIR/deductible shall be deemed covered in accordance with the Commercial General Liability form required; Manager’s policies are primary and non-contributory for any and all acts of gross negligence, willful misconduct or acts outside of Manager’s scope of duties. As respects Manager’s general liability, Manager will indemnify Owner for losses of gross negligence, willful misconduct and acts outside the scope of this Agreement with a combination of insurance with any self-insured retention or deductible applicable to such insurance to be the responsibility of Manager.

(b) Automobile Liability Insurance covering both owned and non-owned vehicles, with limits of not less than One Million Dollars ($1,000,000) combined single limit for bodily injury and property damage, including uninsured motorist coverage as required by statute and naming Owner as an additional insured (provided that any additional cost charged by the carrier to so name Owner shall be reimbursed to Manager in the Approved Operating Budget).

(c) Workers’ Compensation Insurance, as required by the jurisdiction in which the Property is located, covering all Manager’s employees and Employers Liability Insurance with limits of not less than One Million Dollars ($1,000,000) for bodily injury by accident; One Million Dollars ($1,000,000) for bodily injury by disease per employee; and One Million Dollars ($1,000,000) bodily injury by disease policy limit.

(d) Crime insurance including third party coverage in an amount of not less than Two Million Dollars ($2,000,000), and Social Engineering sub-limit of not less than Two Hundred Fifty Thousand ($250,000) Such insurance shall cover all employees that (in each case) have access to space at the Property or to receipts, books, rents or checking accounts connected with the Property, including, but not limited to, the on-premises personnel and any secretary or bookkeeper maintaining, handling or receiving financial records or receipts. Owner shall be a loss payee on this policy. This policy shall cover theft by Manager’s employees.

(e) Real estate errors and omission insurance in an amount equal to not less than One Million Dollars ($1,000,000) Such insurance shall be carried for the term of this Agreement and for two (2) years after the termination of this Agreement. Owner agrees to pay Manager at the time of the termination of this Agreement for the cost of this insurance for the two (2) year period after the termination of this Agreement.

(f) Employment Practices Liability insurance in an amount equal to not less than One Million Dollars ($1,000,000) each claim and, in the aggregate, covering both first and third party claims for employees and naming Owner as additional insured.  If the insurer is unable or unwilling to add Owner as an additional insured, a separate policy will be required for this Agreement naming the Owner and Manager as Co-Insureds.

(g) Cyber insurance in an amount not less than $1,000,000 per claim and annual aggregate, for Data Security and Privacy (including coverage for unauthorized access and use, failure of security, breach of confidential information, of privacy perils, as well as breach mitigation costs and regulatory coverage).

InsurancerequiredofManagershallbesecuredfrominsurancecompanieslicensedtodobusiness in the State of [​ ​] and having a minimum AM Best rating of A, VIII. Manager shall obtain certificates of insurance on or before the date of this Agreement. All such policies, with the exceptionoftheWorker’sCompensationInsurance,shallincludeManageras named insureds, and shall provide thatOwner withrespectto all such policiesare additional insureds with respect to liability arising out of acts or omissions of Manager. Upon request, Manager shall furnish Owner, a certificate of insurance, or other proof, evidencing the required insurance coverages provided for above, which certificates (to the extent permitted under such policies) shall evidence that the carrier will endeavor to give Owner at least thirty (30) days’ prior written notice of cancellation or material change incoverage (providedhoweveronlyten(10)days’noticewillbe

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requiredforcancellationduetonon-payment of premium). A copy of the additional insured endorsements shall be attached to the certificate of insurance.Inaddition,allrequiredinsuranceshall,totheextentpermittedbylaw,includeawaiver of subrogation, indemnity and hold harmless in favor of Owner and each of theLenders.

Manager must notify ownership of any structural additions or repairs to the Property, as an Owners Interest Policy (OIP) may be required to be added to the Owners’ policies. Failure to notice may have an adverse effect on ownership insurance policies.

6.03 Third Party Contractor Insurance. Manager shall require that each contractor and sub-contractor retained by Manager to perform work at the Property maintains insurance against risk of physical damage to personal property belonging to the contractor in amounts sufficient to replace such personal property in the event of loss, and insurance coverage in the following amounts:

Type of Coverage	Amounts/Limits
Workers’ Compensation	As required by law
Commercial General Liability (Occurrence Form)	$1,000,000 per occurrence and $2,000,000 aggregate per project Including broad form contractual liability coverage, independent contractors, bodily injury, property damage, personal injury, advertising injury, products and completed operations.
Comprehensive Auto Liability	$1,000,000 Combined Single Limit for bodily injury and property damage for any owned or non-owned autos
Uninsured Motorists	As required by statute
Umbrella Liability Insurance (above CGL, and Automobile Insurance)	$4,000,000 per occurrence and aggregate
Professional Liability	If the contractor or sub-contractor in question is providing professional services with respect to the Property, such contractor or sub-contractor shall maintain professional liability insurance in the amount of $1,000,000 per claim and annual aggregate, with an extended period of indemnity covering the exposures for the professional services rendered. Coverage shall be maintained in effect during the period of this agreement and for not less than two (2) years after termination of the contractual arrangement.
Contractors Pollution Liability	If contractors performing any pollution abatement at the Property, such contractor or sub-contractor shall maintain Contractors Pollution Liability with a limit no less than $1,000,000 per claim or occurrence and $2,000,000 annual aggregate.  If Contractor maintains higher limits than the minimums shown above, the Owner requires and shall be entitled to coverage for the higher limits maintained.

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Insurance required of contractors and sub-contractors shall be secured from insurance companies licensed to do business in the State of [​ ​] and having a minimum AM Best rating of A, VIII. Manager shall obtain certificates of insurance, prior to permitting any contractor and subcontractor to enter upon the Property, or any part thereof, to commence work at the Property and keep on file such certificates of insurance or other evidence of compliance with these requirements. All such policies, with the exception of the Worker’s Compensation Insurance, shallprovidethatManagerandOwner areadditionalinsuredswithrespecttoliabilityarisingoutoftheongoingandcompletedoperations ofthecontractor and sub-contractor.Acopyoftheadditionalinsuredendorsementsshallbeattachedtothecertificate of insurance. In addition, all required insurance shall, to the extent permitted by law, include a waiver of subrogation, in favor of Owner and Manager.

6.04 Waiver of Subrogation. Owner and Manager each release and waive any right of recovery against the other (and against the other’s respective officers, directors, shareholders, partners, members, employees, subsidiaries, agents, affiliates, trustees, beneficiaries, licensees, successors and assigns), for any bodily injury, property damage, or loss coveredbyanypolicyofinsurancerequiredbythisAgreement,orwhichwouldhavebeencovered hadthepartycarriedtheinsuranceitwasrequiredtocarrybythisAgreement,orwithinanySIRor deductible in such policy. No insurance policy required by this Agreement shall prohibit such release and waiver. In addition, the insurance policies required of Owner and Manager by this Agreement shall contain a waiver of claims against the other by the insurer, whether by subrogation or otherwise (and against the other’s respective officers, directors, shareholders, partners, members, employees, subsidiaries, agents, trustees, beneficiaries, licensees, successors, and assigns). If any insurance policy required by this Agreement provides that a waiver of subrogation may only be granted by endorsement, Owner or Manager, as the case may be, shall secure an endorsement providing the waiver ofsubrogation.

6.05 Resident Liability Insurance Program.  Manager will administer a Resident Legal Liability Insurance Program designed to protect the Property from certain losses caused by resident negligence in the event such resident does not provide proof of obtaining the minimum required insurance coverage as outlined within the resident’s respective lease.  For the duration of their respective leases, all residents will be required to maintain and provide the following minimum required insurance coverage through either the Manager’s program or a third-party insurance provider:

-$100,000 Limit of Liability for Renter’s legal liability for damage to the Property for no less than the following causes of loss: fire, smoke, explosion, water damage resulting from a backup of sewer or sump to the Property.

Manager shall use commercially reasonable efforts to determine if renters’ insurance policies lapse or are otherwise canceled by a resident; however, Manager shall not be liable in the event a resident provided proof of valid insurance coverage which later was canceled, expired or lapsed due to nonpayment or other reason. Residents who fail to submit proof of the above-outlined insurance coverage from a third-party insurance provider will be force-placed into the program administered by Manager; provided, however, that if the resident’s lease was executed prior to Manager assuming property management responsibilities hereunder, the lease may not permit Manager to force place the resident onto the resident liability insurance program, in which case Manager will not be able to implement the program until lease renewal. The program does not provide insurance coverage in the event of loss to the resident’s personal items nor any damages to third parties.

6.06   Indemnification.  

a. Owner shall indemnify, defend and hold harmless Manager, its agents, employees, members, directors, officers, stockholders and trustees from and against all claims, liabilities, losses, damages, and/or expenses incurred by or otherwise asserted against any of the foregoing arising out of Manager’s performance under this Agreement; provided, such indemnification shall not apply (i) if and to the extent Manager and the matter is fully indemnified by Owner’s insurance; (ii) to any matter for which Manager has agreed to indemnify Owner under this Agreement; or (iii) to the extent Manager shall have failed to maintain the insurance required to be maintained by Manager under this Agreement and such bond or insurance would have defended and paid for such matter. Owner, at its own cost and expense, shall defend any action or proceeding against Manager arising therefrom.

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b. Manager shall indemnify, defend and hold harmless Owner, the JV, Ares, Sponsor and their respective members, stockholders, directors, officers, trustees, employees, agents, successors and assigns from and against all claims, liabilities, losses, damages, and/or expenses incurred by or otherwise asserted against any of the foregoing arising out of any acts or omissions of Manager or its directors, officers, employees, contractors, subcontractors, affiliates and agents: (i) in violation of this Agreement that is related to the respective matter that is the subject of the indemnification; (ii) outside the scope of Manager’s authority hereunder; (iii) arising as a result of any claim or dispute between Manager and its employees or agents (other than any claim or dispute with an employee or employment candidate arising as a result of actions of Owner or Ares not consented to in writing by Manager, or action taken by Manager at the written direction of Owner or Ares), and/or (iv) constituting gross negligence, fraud, malfeasance, intentional breach of fiduciary duty or willful, reckless or criminal misconduct. Provided, such indemnification shall not apply (i) if and to the extent Owner and the matter is fully indemnified by Manager’s insurance; or (ii) to the extent Owner shall have failed to maintain the insurance required to be maintained by Owner under this Agreement and such insurance would have defended and paid for such matter. Manager, at its own cost and expense, shall defend any action or proceeding against Owner arising therefrom.

c. The obligations of the parties under Section 6.06 are subject to the following conditions: (i) the party to be indemnified shall deliver a notice to the indemnifying party with respect to the matter promptly after the party to be indemnified becomes actually (and not constructively) aware of the same; and (ii) the party to be indemnified shall not take any actions, including any admission of liability, which would bar the indemnifying party from enforcing any applicable coverage under policies of insurance or prejudice any defense and related legal proceedings or otherwise prevent such indemnifying party from defending itself with respect to the matter.

d. The terms of this Section 6.06 shall survive the expiration or earlier termination of this Agreement whether with or without cause.

ARTICLE 7

TERMINATION

7.01 Termination.  Notwithstanding the provisions of Article 2 above, this Agreement may also be terminated as follows:

a. automatically, in the event Owner sells or otherwise disposes of all or substantially all the Property; or

b. by Manager, in the event Owner defaults in the performance of any of its obligations under this Agreement and fails to cure such default within fifteen (15) days after its receipt from Manager of a notice of default (specifying in reasonable detail the nature of the default complained of); provided, however, that if such default cannot reasonably be cured within such fifteen (15) days, then such additional period as shall be reasonable, provided that (i) on or prior to the expiration of such fifteen (15) day period, Owner shall have delivered written notice to Manager setting forth, in reasonable detail, the steps Owner has taken to cure such default prior to the date of such written notice from Owner and the steps Owner intends to take in order to cure such default within the remaining time period within which to cure such default, and (ii) Owner has commenced to cure such default within such fifteen (15) day period and thereafter has proceeded to prosecute such cure with due diligence and such cure is completed within sixty (60) days after Owner’s receipt of the notice of default; or

c.by Owner, in the event Manager defaults in the performance of any of its obligations under this Agreement (other than defaults covered by the other applicable clauses of this Section 7.01) and fails to cure such default within fifteen (15) days after its receipt from Owner[ or ​ ​​ ​] of a notice of default (specifying in reasonable detail the nature of the default complained of); provided, however, that if such default cannot reasonably be cured within such fifteen (15) days, then such additional period as shall be reasonable, provided that (i) on or prior to the expiration of such fifteen (15) day period, Manager shall have delivered written notice to Owner setting forth, in reasonable detail, the steps Manager has taken to cure such default prior to the date of such written notice from Manager and the steps Manager intends to take in order to cure such default within the remaining time period within which to cure such default, and (ii) Manager has commenced to cure such default within such fifteen (15) day period and thereafter has proceeded to prosecute such cure with due diligence and such cure is completed within sixty (60) days after Manager’s receipt of the notice of default; or

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d. by either Owner or Manager, if a petition for bankruptcy, reorganization or arrangement is filed by the other party, or if any such petition shall be filed against the other party and is not dismissed within sixty (60) days of the date of such filing, or in the event the other party shall make an assignment for the benefit of creditors, or take advantage of any insolvency statute or similar law, in any such event, termination to become effective upon written notice to the other party; or

e. by either Owner or Manager, upon fifteen (15) days written notice, if all or substantially all the Property is destroyed by a casualty or taken by means of eminent domain or condemnation; or

f. by Owner, upon not less than thirty (30) days prior written notice to Manager;

g. by Manager, upon not less than thirty (30) days prior written notice to Owner;

h. by Owner, upon notice to Manager, if Manager or any of its Affiliates shall (i) intentionally fail or willfully refuse to perform any of its duties or obligations hereunder, (ii) misappropriate any funds of Owner in the possession or control of Manager, or (iii) commit willful misconduct, negligence or an act of fraud against Owner;

i. by Owner, upon notice to Manager, if Manager shall assign this Agreement or delegate its duties hereunder without the consent of Owner;

j. by Owner, if any material license or qualification held by Manager and necessary for the performance of its duties or services hereunder shall be terminated or suspended, and such termination or suspension, as the case may be, is not reversed within thirty (30) days following notice thereof by the applicable licensing authority or Owner;

k. by Owner, upon notice to Manager, if there shall be a dissolution or termination of the corporate existence of Manager by merger, consolidation or otherwise;

l. by Owner, upon notice to Manager, if Sponsor is in “Material Default” under the LLC Agreement and Ares elects to terminate this Agreement;

m. by Owner, upon notice to Manager if Sponsor is removed as [Administrative][Operating] Member pursuant to [Section 6.7] of the LLC Agreement and Ares elects to terminate this Agreement;

n. by Owner, upon notice to Manager, if Manager (or any of its Affiliates) defaults under any other agreement between Owner (or any of its Affiliates) and Manager (or any of its Affiliates), and such default continues beyond any applicable notice and cure period set forth in such other agreement;

o. by Owner, upon notice to Manager, if Sponsor defaults under Section 8.20 below; or

p. by Owner, upon notice to Manager, if Manager shall fail to maintain the Operating Threshold for any student occupancy year. For purposes hereof, the “Operating Threshold” means that (i) the Gross Income for any student occupancy year equals or exceeds ninety-five percent (95%) of the Approved Operating Budget for such year and (ii) the annual net operating income for any student occupancy year is within five percent (5%) of the Approved Operating Budget for such year, excluding any non-controllable expenses, acts of God, weather related events, governmental actions, union actions, major mechanical equipment failure, insurance claims or other incidents beyond the control of Manager. For purposes hereof, net operating income shall mean verifiable recurring rental and reimbursement income calculated on a trailing-12 month period from in-place leases (excluding leases with a tenant/guarantor in bankruptcy, retail tenants that are dark (which term is not meant to include tenants that are not in occupancy or not in full occupancy due to a public health situation or due to safety or health concerns or due to government regulations or recommendations), tenants in default beyond applicable notice and cure periods, or leases that expire within 6 months), and any other recurring income (excluding interest income) from the operation of the Property, and further adjusted to assume a vacancy factor equal to the greater of actual (to be calculated to include any leases excluded as per above) and 5.0%, less trailing-12 operating expenses, adjusted for projected increases, assuming base property management fees equal to the greater of actual and up to 2.5% of annual revenues.

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Notwithstanding anything herein to the contrary, if this Agreement is terminable by Owner pursuant to clauses (c), (d), or (h) through (p) above, then Ares, on behalf of Owner, shall have the right to terminate this Agreement by written notice to Manager and to exercise any and all other rights and remedies available under this Agreement and at law or in equity.

7.02 Termination Compensation.  If Owner terminates this Agreement before the first anniversary of the Effective Date for any reason other than pursuant to Sections 7.01(c), 7.01(d), 7.01(e) or 7.01(h) through 7.01(o) above, Owner shall be obligated to pay Manager as liquidated damages an amount equal to the management fee earned by Manager, as determined under Section 5.03 above, for the calendar month immediately preceding the month in which the notice of termination is given to Manager or Owner, multiplied by the number of months and/or portions thereof remaining from the termination date until the first anniversary of the Effective Date. Such damages, plus any amounts accruing to Manager prior to such termination, shall be due and payable upon termination of this Agreement, subject to the right of Ares to offset any Finally Determined Damages (as defined in the LLC Agreement) against any amounts owed to Manager hereunder. To the extent that funds are available, such sums shall be payable from the Operating Account. Any amount due in excess of the funds available from the Operating Account shall be paid by Owner to Manager within twelve (12) Business Days following demand.  Upon any termination of this Agreement pursuant to Sections 7.01(c), 7.01(d), 7.01(e) or 7.01(h) through 7.01(o) above, Owner shall pay to Manager within thirty (30) days of the date of termination all amounts due to Manager prior to the date on which the default giving rise to the termination occurred; provided, however, to the extent Manager has received any portion of the Management Fee which as of the date on which such default occurred was unearned by Manager, Manager shall reimburse Owner for the amount of such unearned Management Fee.

7.03 Owner Responsible for Payments.  Owner will be responsible for the direct handling and payment of invoices received after notice of termination, provided that to the extent of available operating funds in the Operating Account, Manager may continue to pay obligations incurred by the Property through the termination date subject to and in accordance with the terms of this Agreement. Upon notice of termination, Manager will submit to Owner an estimate of the additional funds required to pay all obligations incurred by the Property through the termination date. Manager will not be obligated to advance Manager’s funds for payment of obligations incurred on behalf of the Owner in accordance with the terms of this Agreement.

7.04 Close-out Management Fee.  If Owner requires Manager to perform any Close-Out Management Services after the termination of this Agreement, Manager will be paid a monthly close-out management fee equal to $[REDACTED] per month while Manager is performing such services. For purposes of this Section 7.04, “Close-Out Management Services” shall mean the following services: entering invoices and preparing checks, recording post-closing entries and preparing financial statements, reconciling bank accounts and consulting with tax preparers and auditors.

7.05 Final Accounting.  Within sixty (60) days after termination, Manager shall deliver to Owner: (a) a final accounting, reflecting the balance of income and expenses on the Property as of the date of termination; (b) all keys or access cards, records, contracts, leases, receipts, or deposits, unpaid bills, and other papers or documents which pertain to the Property, excluding data housed on Manager owned or licensed servers, including Manager’s emails, memoranda, correspondence and employee records; (c) all keys or access cards; and (d) all remaining funds held by Manager with respect to the Property and/or in any bank account (including, without limitation, the Operating Account) and any and all monies due Owner which are received by Manager after termination. Upon termination of this Agreement, Manager shall assign all licenses, permits and other agreements, if any, to Owner which Manager has entered into or obtained solely for the benefit of Owner or the Property, and Manager shall forthwith surrender and deliver to Owner any space in the Property occupied by Manager. In addition, Manager shall furnish all such information and take all such action as Owner shall reasonably require in order to effectuate an orderly and systematic termination of Manager’s duties and activities under this Agreement.  Manager hereby grants a power of attorney to Owner to endorse any checks payable to Manager but with respect to a receivable of the Property and hereby assigns to Owner effective upon the date of such termination any and all rights Manager may have in and to the Property records.

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7.06 Manager’s Retention of Copies.  Manager shall be entitled to retain copies of all documents referred to in Section 7.05(b).

7.07 Survival of Obligations.  All obligations of the parties hereunder, as to which performance is contemplated to occur after termination, shall survive termination of this Agreement. Without limiting the generality of the foregoing, all representations and warranties of the parties contained herein, and the indemnification obligations of Owner and Manager hereunder shall survive the termination of this Agreement.

ARTICLE 8

NOTICES, ETC.

8.01 Notices.  All notices, demands, requests, or other communications (collectively, “Notices”) provided for in this Agreement shall be in writing and delivered: (i) by email (provided the recipient(s) thereof confirms receipt by reply e-mail or, if there is no reply e-mail, with the original to be sent the same day by a nationally recognized overnight courier service for next Business Day delivery); or (ii) by a nationally recognized overnight courier service for next Business Day delivery, to Owner or Manager at the address set forth below following the signature blocks for this Agreement, or at such other address as they individually may specify thereafter in writing. Each Notice which shall be sent by nationally recognized overnight courier service in the manner described shall be deemed sufficiently given, served, sent, received, or delivered for all purposes on the day the Notice is delivered to the addressee (with the return receipt, the delivery receipt, or the affidavit of messenger being deemed conclusive (but not exclusive) evidence of such delivery), provided that such day is a Business Day (if such day is not a Business Day, such Notice shall be deemed given and received on the first Business Day following such day), or if delivery is refused, then on the day that delivery of the Notice is refused by the addressee upon presentation, provided that such day is a Business Day (if such day is not a Business Day, such Notice shall be deemed given and received on the first Business Day following such day).  Each Notice which shall be emailed in the manner described above shall be deemed sufficiently given, served, sent, received, or delivered for all purposes on the date of such email provided that (a) such email is transmitted (y) prior to 5:00 P.M. (New York time) on a Business Day (if such email is transmitted on a day that is not a Business Day or such email is received after 5:00 P.M. (New York time) on a Business Day, such Notice shall be deemed given and received on the first Business Day following such day) and (b) if required by this Section 8.01, a copy of such notice is sent by nationally recognized overnight courier service, as provided above.

8.02 Consents and Approvals.  All consents and approvals required hereunder shall be in writing, signed by the party charged with the obligation, right, or privilege of granting such consent, approval, or notice, provided that no prior written consent or approval of Owner or its representative shall be required for any Emergency Expenditures pursuant to Section 3.07.

8.03 Confidentiality.  Except as otherwise required by any law or court order, or as authorized or permitted by Owner and Manager, Owner and Manager shall not disclose or permit the disclosure of the terms and contents of this Agreement to anyone other than their respective directors, officers, employees, affiliates, partners, members, shareholders, brokers, agents or other representatives, including, without limitation, attorneys, accountants, contractors, consultants, engineers, lenders and financial advisors. The provisions of this Section 8.03 shall survive the expiration and termination of this Agreement for one (1) year.

8.04 No Assignment.  This Agreement may not be assigned by Manager or Owner without the prior written consent of the other party. Any purported assignment in violation of this Section 8.04 is void ab initio. A majority equity transfer in Owner or Manager shall constitute an assignment for purposes of this section. Subject to the provisions hereof, all the covenants, conditions, and obligations contained in this Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Owner and the Manager to the same extent as if each successor and assignee were in each case named as a party to this Agreement.  Notwithstanding anything to the contrary contained herein, Owner shall have the right to collaterally assign this Agreement to any lender providing financing for the Property and Manager shall cooperate with Owner in connection therewith.

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8.05 Pronouns.  All nouns and pronouns shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require.

8.06 Amendments.  Except as otherwise herein provided, any and all amendments, additions, or deletions to this Agreement shall be null and void unless approved by the parties in writing.

8.07 Complete Agreement.  This Agreement together with all schedules attached hereto and made part hereof, supersedes and takes the place of any and all previous agreements entered into between the parties relating to the property management of the Property.

8.08 Applicable Law.  This Agreement shall be construed and enforced in accordance with the laws of the State in which the Property is located.

8.09   Severability.  If any one or more of the provisions of this Agreement, or the applicability of any such provision to a specific situation is held invalid or unenforceable, such provision shall be modified to the minimum extent necessary to make it or its application valid or enforceable, and the validity and enforceability of all other provisions of this Agreement and all other applications of such provisions shall not be affected thereby.  

8.10 OFAC.  Owner and Manager each represent and warrant to the other (for themselves, only) that each is currently in compliance with, and shall at all times during the term of this Agreement (including any extension thereof) remain in compliance with, the regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) and any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental actions relating thereto.

8.11 Headings.  All headings and subheadings used in this Agreement and in the accompanying schedules are solely for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement.

8.12 Estoppel Certificates.  Each party hereto shall, from time to time, upon not less than fifteen (15) days’ notice from the other party, execute and deliver to the other party a certificate stating that this Agreement is unmodified and in full force and effect, or, if modified, that this Agreement is in full force and effect as modified, and stating the modifications and stating whether or not, to the best of the certifying party’s knowledge, the other party is in default in any respect under this Agreement, and, if in default, specifying the nature and character of such default.

8.13 No Waiver.  No waiver by either party of any default of any other party or of any event, circumstance or condition permitting a party to terminate this Agreement shall constitute a waiver of any other default of the other party or of any other event, circumstance or condition, permitting such termination, whether of the same or of any other nature or type and whether preceding, concurrent or succeeding; and no failure on the part of either party to exercise any right it may have by the terms hereof or by law upon the default of the other party and no delay in the exercise of such right shall prevent the exercise thereof by the non-defaulting party at any time when the other party may continue to be so in default, and no such failure or delay and no waiver of default shall operate as a waiver of any other default, or as a modification in any respect of the provisions of this Agreement.  The subsequent acceptance of any payment or performance pursuant to this Agreement shall not constitute a waiver of any preceding default by a defaulting party or of any preceding event, circumstance or condition permitting termination hereunder, other than default in the payment of the particular payment or the performance of the particular matter so accepted, regardless of the non-defaulting party’s knowledge of the preceding default or the preceding event, circumstance or condition, at the time of accepting such payment or performance, nor shall the non-defaulting party’s acceptance of such payment or performance after termination constitute a reinstatement, extension or renewal of this Agreement or revocation of any notice or other act by the non-defaulting party.

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8.14 Attorneys’ Fees.  Should any action or proceeding be commenced between the parties hereto or their representatives concerning any provision of this Agreement or the rights and duties of any Person (as defined in the LLC Agreement) in relation thereto, the party or parties prevailing in such action or proceeding shall be entitled, in addition to such other relief as may be granted, to an award of all actual, reasonable attorneys’ fees and costs incurred in such action or proceeding, without regard to any schedule or rule of court purporting to restrict such an award, including, without limitation, actual, reasonable attorneys’ fees, costs and expenses incurred in connection with (a) enforcing, perfecting and executing such judgment, (b) post-judgment motions; (c) contempt proceedings; (d) garnishment, levee, and debtor and third-party examinations; (e) discovery; and (f) bankruptcy litigation.

8.15 Equitable Remedies.  Each party hereto shall, in addition to all other rights provided herein or as may be provided by law, and subject to the limitations set forth herein, be entitled to all equitable remedies including those of specific performance and injunction, to enforce such party’s rights hereunder.

8.16 Remedies Cumulative.  Each right, power, and remedy provided for herein or now or hereafter existing at law, in equity, by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for herein or now or hereafter existing at law, in equity, by statute or otherwise, and the exercise or beginning of the exercise or the forbearance of exercise by any party of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by such party of any or all of such other rights, powers or remedies.

8.17 Limitation of Liability.  Notwithstanding anything to the contrary, if Manager shall recover any judgment against Owner in connection with this Agreement, Manager shall look solely to Owner for the collection or enforcement of any such judgment, and no other assets of Owner shall be subject to levy, execution or other process for the satisfaction or enforcement of such judgment.

8.18 WAIVER OF JURY TRIAL.  THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LEGAL REQUIREMENTS, ANY RIGHT THAT EITHER PARTY OR THEIR HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS OR ASSIGNS MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH, OR IN RESPECT OF ANY COURSE OF CONDUCT, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY PARTY.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF THE PARTIES TO ENTER INTO THIS AGREEMENT.

8.19 Counterparts.  This Agreement may be executed in any number of counterparts, including counterparts transmitted by e-mail, any one of which shall constitute an original of this Agreement.  When counterparts or e-mail copies have been executed by all parties, they shall have the same effect as if the signatures to each counterpart or copy were upon the same documents and copies of such documents shall be deemed valid as originals. The parties agree that all such signatures may be transferred to a single document upon the request of any party. This Agreement shall not be binding unless and until it shall be fully executed and delivered by all parties hereto.

8.20 Non-Compete.  Manager hereby covenants and agrees that, for a period commencing on the Effective Date and ending upon the termination of this Agreement, Manager shall not, and shall cause all of its Affiliates (each, a “Covered Person”) not to, without first obtaining the prior written consent of Ares (in its sole discretion) on behalf of Owner, either (1) Compete, directly or indirectly, with the Property by engaging, in any capacity, in owning, operating or managing a retail property, retail development project, student housing property and/or student housing development project within the [________________________] submarket or (2) solicit any Property employees for employment or any tenant of the Property to rent space at another property owned, controlled, or managed by a Covered Person (provided nothing herein shall prevent a Covered Person from hiring any employee of the Property who responds to a Covered Person’s advertisement or other notice that is not specifically targeted at employees of the Property). For purposes of this provision, “Compete” means (i) to, directly or indirectly, conduct, facilitate, participate or engage in, or bid for or otherwise pursue a business, whether as a principal, sole proprietor, partner, stockholder, or agent of, or consultant to or manager for, any Person, or (ii) to, directly or indirectly, have any ownership interest in any Person or business which conducts, facilitates, participates or engages in, or bids for or otherwise pursues a business, whether as a principal, sole proprietor, partner, stockholder, or agent of, or consultant to or manager for, any such Person, in each case except as a passive investor with a non-controlling interest in such Person. The parties recognize and acknowledge that a breach of this Section 8.20 by Manager or any of its Affiliates will cause irreparable and material loss and damage to Owner and

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hereby consent to the granting by any court of competent jurisdiction of an injunction or other equitable relief, without the necessity of posting a bond, cash or otherwise, and without the necessity of actual monetary loss being proved or Owner’s establishing the inadequacy of any remedy at law, and order that the breach or threatened breach of such provisions may be effectively restrained. The provisions of this Section 8.20 shall expressly survive the expiration or earlier termination of this Agreement.  

SIGNATURE PAGE FOLLOWS

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IN WITNESS WHEREOF the parties have executed this Agreement on the day and year first above written.

OWNER:MANAGER:

[________________________],B.HOM STUDENT LIVING LLC

a  [________________________________]

By:​ ​_____________________________________ Name: _____________________________________	By:​ ​_____________________________________ Name: _____________________________________
Title: ______________________________________	Title: ______________________________________

OWNER’S ADDRESSMANAGER’S ADDRESS

[_______________]  400 Locust Street, Suite 790

[_________________]  Des Moines, Iowa 50309

[__________________]  Attn: Legal Department

Attn: [_______________]  Email: legal@bhmanagment.com

Email: [________________]

and:

[__________________]

[___________________]

[____________________]

Attn: [_________________]

Email: [_________________]  

With a copy to:

[__________________]

[___________________]

[____________________]

Attn: [_________________]

Email: [_________________]  

SCHEDULE A

SCHEDULE B

SCHEDULE C

SCHEDULE D

SCHEDULE E

SCHEDULE F

EX-10.5

Exhibit 10.5

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN REDACTED PURSUANT TO ITEM 601(B)(10) OF REGULATION S-K BECAUSE THE INFORMATION IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL AND, WHERE APPLICABLE, HAVE BEEN MARKED WITH “[REDACTED]” TO INDICATE WHERE REDACTIONS HAVE BEEN MADE.

FORM OF

MANAGEMENT SERVICES AGREEMENT

[_____________________]

THIS AGREEMENT, dated as of the [___] day of [__________], 20__ (the “Effective Date”) is made and entered into by and between [___________________], [_______________________] (“Owner”) and TREV OPCO LLC, a Delaware limited liability company(“Service Provider”).

WITNESSETH:

WHEREAS, Owner owns one hundred percent (100%) of the interests in [_____], a [______] (“PropCo”);

WHEREAS, PropCo owns that certain real property commonly referred to as “[__________]”, containing a [____] unit, [______] bed student housing community, as further identified and described in Schedule A, attached hereto(the “Property”);

WHEREAS, Service Provider is in the business of providing the Services (as defined below);

WHEREAS, Owner desires to engage Service Provider as an independent contractor to provide the Services with respect to Owner, PropCo and the Property, as applicable, and Service Provider desires to accept such appointment upon the terms, covenants, conditions and provisions of this Agreement; and

WHEREAS, Owner is governed by that certain [Limited Liability Company Agreement of Owner], dated as of the date hereof, by and among Service Provider [,][and] [_____] (“Ares”) [and [_____] (“T-Holdco”)] (as it may be amended, restated or supplemented from time to time, the “LLC Agreement”; capitalized terms used but not otherwise defined in this Agreement shall have the meanings given such terms in the LLC Agreement).  

NOW, THEREFORE, in consideration of the mutual covenants herein contained, Owner and Service Provider mutually agree as follows:

ARTICLE 1

APPOINTMENT OF SERVICE PROVIDER

1.01 Appointment of Service Provider.  Owner appoints Service Provider to provide the Services (as hereinafter defined) for Owner, PropCo and the Property, as applicable, upon the terms and conditions set forth in this Agreement. Service Provider accepts such appointment on the terms and conditions set forth herein.

1.02 Independent Contractor Status.  Service Provider is not the general agent of Owner or PropCo, but, is instead engaged in the business of providing the Services as an independent contractor, and in that capacity, is providing the Services for the Property. No provision hereof shall be construed to constitute Service Provider or any of its officers or employees as an employee or employees of Owner or PropCo, nor shall any provision of this Agreement be construed as creating a partnership or joint venture between Service Provider and Owner or PropCo. Neither Owner nor PropCo shall have the power to bind Service Provider, and Service Provider shall not have the power to bind Owner or PropCo, in each case, except pursuant to the terms of this Agreement. This Agreement is not intended to provide or create any agency relationship between Owner or PropCo, on the one hand, and Service Provider, on the other hand, and Service Provider shall have no right or authority, express or implied, to commit or otherwise obligate Owner or PropCo in any manner whatsoever, except as expressly provided herein, and Service Provider agrees that it shall not hold itself out as having authority to act on behalf of Owner or PropCo in any manner, except as expressly provided herein. Notwithstanding the foregoing, but subject to Section 4.02 below, Service Provider shall not be liable for any monetary obligation or expenditure incurred on behalf of the Property or Owner or PropCo within the scope of Service Provider’s authority pursuant to this Agreement.

1.03 Restrictions on Service Provider’s Authority.  

a. Service Provider and Owner agree that under any circumstances where any action, expenditure, decision, commitment, agreement or consent would, under (i) this Agreement require approval of Owner and (ii) the LLC Agreement, require the approval of Ares or all of the members of the Owner, Service Provider shall not have the authority under this

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Agreement to take such action, make such expenditure, decision, commitment or agreement or grant such consent without the written approval of Ares or all of the members of Owner, as applicable.

[Service Provider acknowledges that this Agreement is an “Administrative Member Affiliate Agreement” within the meaning of the LLC Agreement, and Ares and Investments Pooling (as defined therein) have certain rights with respect to the Property and this Agreement as specified therein, including, without limitation, the right to terminate this Agreement pursuant to [Section 6.12] of the LLC Agreement. Service Provider further acknowledges that Investments Pooling intends to qualify as a “real estate operating company” within the meaning of the Plan Asset Regulation (as defined in the LLC Agreement), has additional rights with respect to the Property as provided in [Section 1.10] of the LLC Agreement, and agrees that Service Provider shall not take any action that undermines or abrogates Ares’ or Investments Pooling’s rights under this Agreement or the LLC Agreement.]

ARTICLE 2

TERM OF AGREEMENT

2.01 Term of Agreement.  This Agreement shall commence upon the Effective Date and shall continue until terminated as provided in Article 6.

ARTICLE 3

SERVICE PROVIDER’S DUTIES AND RESPONSIBILITIES

3.01 Services.  Subject to the provisions of this Agreement and the LLC Agreement and at the direction of Owner, Service Provider shall perform the Services at all times in the best interest of Owner and shall act with the care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims notwithstanding any other duty existing at law or in equity and, in all cases, subject to and in accordance with: (a) the Approved Budget and Business Plan (as defined below); and (b) applicable law and rulings and orders of governmental authorities having jurisdiction over Owner, PropCo and the Property (the “Performance Standard”); provided, however, the Service Provider shall have no responsibility for any losses, claims or liabilities resulting from (i) any action or omission taken at the direction of or with the approval of Owner or Ares, or (ii) failing to take any action hereunder which such action requires the approval of Owner or Ares if Owner or Ares, as applicable, fail to timely grant such approval. Subject to the terms and provisions of this Agreement, Service Provider shall, with the Approval and direction of Owner and/or Ares (to the extent such Approval and/or direction is required under the LLC Agreement) (collectively, the “Services”):

(a)use efforts consistent with the Performance Standard, subject to the availability of Owner’s funds,  to do any and all acts and things necessary, proper, convenient or advisable to effectuate the purposes of Owner and to direct Owner in accordance with the terms of the LLC agreement and this Agreement;

(b)use efforts consistent with the Performance Standard to cause Owner to cause the PropCo to enter into any lease or other arrangement, the economic terms of which are consistent with or more favorable to Owner and PropCo than those contained in the Approved Budget and Business Plan;

(c)use efforts consistent with the Performance Standard, subject to the availability of Owner’s funds, to cause Owner to cause PropCo to perform all of its obligations under all leases affecting the Property;

(d)to the extent the Property Manager is an Affiliate of Service Provider, cause the Property Manager to perform all of its obligations under the Management Agreement, and to the extent the Property Manager is an unaffiliated third party, use efforts consistent with the Performance Standard, to cause the Property Manager to perform all of its obligations under the Management Agreement;

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(e)use efforts consistent with the Performance Standard to appropriately supervise third-party consultants, service providers, contractors and vendors (including, without limitation, any general contractor and any architect) engaged to assist with the management, maintenance, improvement and operation of the Property[, including, without limitation, the Renovation Consultant];

(f)subject to the availability of Owner’s funds, implement all decisions of and actions Approved by Ares and all Major Acts Approved by the Members in accordance with this Agreement and the LLC Agreement;

(g)subject to the prior Approval of Ares in each instance, and subject to the availability of Owner’s funds, cause Owner and/or PropCo to execute and deliver such documents, agreements and instruments, as Service Provider shall Approve as reasonable and necessary to accomplish the purposes of Owner, and Owner acknowledges that such execution by Service Provider shall be sufficient to bind, and shall be binding upon, Owner for all purposes and third parties shall be entitled to rely on the authority of Service Provider to take any such action on behalf of Owner;

(h)use efforts consistent with the Performance Standard, subject to the availability of Owner’s funds, perform the day-to-day investment and administrative operations of Owner, including the preparation, filing and distribution of all reports, budgets, business plans, certifications, materials necessary for Owner’s accountants to prepare tax returns, and other communications required by law, the LLC Agreement or any other agreement entered into by Owner or PropCo and such bookkeeping, recordkeeping and clerical services to Owner and PropCo as Owner may require in connection with the foregoing;

(i)prepare and submit the Proposed Budget and Business Plan for review and approval by Owner and Ares as further set forth in Section 3.[__] below[;][.]

[(j)use efforts consistent with the Performance Standard, subject to the availability of Owner’s funds, to cause (A) the General Contractor to perform all of its obligations under the Construction Contract, (B) Project Architect to perform all of its obligations under the Project Architect Agreement, and (C) all other contractors, service providers, consultants, and vendors to perform all of their obligations with respect to the Renovation Work; and

(k)use efforts consistent with the Performance Standard, subject to the availability of Owner’s funds, to perform those certain responsibilities with respect to the Renovation Work as set forth on [Schedule B] attached hereto.]

Unless otherwise specifically provided in this Agreement, all services and actions that Service Provider is required or permitted to perform or take, or cause to be performed or taken, under this Agreement shall be performed or taken, as the case may be, on behalf of Owner and, except as specifically otherwise provided for herein, at Owner’s sole cost, expense, and risk. For the avoidance of doubt, Service Provider shall not be required to advance its own funds on behalf of Owner to fulfill any obligation under this Agreement.

3.02 Annual Budget and Business Plan.  

(a)Service Provider shall prepare or cause to be prepared a proposed annual budget and business plan for the Property, PropCo and Owner relating to the operation, management, leasing, development, renovation and sale of the Property and the operation of Owner and PropCo for each Fiscal Year of Owner, PropCo and the Property (each such proposed budget and business plan being referred to herein as the “Proposed Budget and Business Plan”).  Each Proposed Budget and Business Plan shall include the proposed leasing parameters for the Property for the ensuing Fiscal Year as well as a copy of the standard form of the lease to be used at the Property.  Each Proposed Budget and Business Plan shall be delivered to Ares for its review and Approval not later than August 1 of the Fiscal Year preceding the Fiscal Year to which such Proposed Budget and Business Plan relates.  In addition to the proposed leasing parameters, each Proposed Budget and Business Plan shall contain an amount to be added to, or expended from, separate Reserves for (A) payment of real estate taxes, (B) insurance, (C) capital improvements, and (D) other Reserves (including those required pursuant to the terms of any Financing Documents), in an amount with respect to each such Reserve equal to the greater of (1) the amount required to be added to such Reserve during such year by any Lender, and (2) the amount that Ares Approves under the circumstances.  

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(b)Within thirty (30) days after a Proposed Budget and Business Plan is submitted to the Members, Ares shall notify Service Provider in writing (A) that it Approves the Proposed Budget and Business Plan or (B) of the revisions Ares believes should be made to such Proposed Budget and Business Plan for such Fiscal Year. Service Provider shall revise the Proposed Budget and Business Plan to reflect all revisions proposed by Ares.  If Ares fails to respond within such thirty (30) day period, Ares shall be deemed to NOT have Approved the Proposed Budget and Business Plan.  The Proposed Budget and Business Plan once revised by Service Provider (if applicable) and Approved by Ares and Approved by Owner shall be referred to herein as the “Approved Budget and Business Plan.”  If the Proposed Budget and Business Plan for any Fiscal Year shall not be Approved by Ares, Owner shall operate the Property pursuant to the Proposed Budget and Business Plan for such year with respect to those portions Approved by Ares and Owner and, with respect to those portions not Approved by Ares, in accordance with the prior year’s Approved Budget and Business Plan (except for any expenditures that are not Necessary Expenditures, which non-Necessary Expenditures shall be deemed removed from such prior year’s Approved Budget and Business Plan).

(c)Notwithstanding anything to the contrary contained herein, Service Provider shall not make any expenditure of Owner funds, or commit to make any such expenditure, except as expressly provided for and in accordance with [the Renovation Work Budget or] an Approved Budget and Business Plan.

3.03 Meetings.  Service Provider covenants to meet with Owner and Ares [(and, at Ares’ request, the Renovation Consultant)] every two (2) weeks (and otherwise, as reasonably requested by Ares) so as to review and consult with Ares [and/or the Renovation Consultant, as applicable,] with respect to any and all matters concerning Owner and the Property which Ares [and/or the Renovation Consultant, as applicable,] may reasonably desire to discuss (it being agreed that, at the request of Ares or Service Provider, such meeting will take place by phone or video conference).  Ares [and/or the Renovation Consultant] may request to schedule regular onsite visits to and inspections of the Property and to schedule and attend construction review meetings with Owner upon reasonable advance notice to Service Provider.

ARTICLE 4

OWNER’S DUTIES AND RESPONSIBILITIES

4.01 Service Provider’s Compensation.  Owner agrees to pay Service Provider, as compensation for services rendered by Service Provider in accordance with the terms of this Agreement, the compensation specified in the attached Schedule C (collectively, the “Fees”).

4.02 Service Provider’s Costs to be Reimbursed.  Subject to Owner’s obligation to pay the Fees in accordance with Section 4.01, Service Provider will assume and pay all of its own employee expenses (including compensation and employee benefits) and all of its own overhead expenses (including rent, utilities, insurance, accounting and management software, office supplies and office equipment) in connection with the services to be provided by it hereunder except for any expense line item contemplated to be reimbursed to Service Provider in accordance with an Approved Budget and Business Plan; provided, however, that Service Provider shall not be required to pay expenses constituting Owner or PropCo expenses and if Service Provider pays any expenses constituting Owner or PropCo expenses, then, to the extent Service Provider is not reimbursed therefor under the LLC Agreement, Owner or PropCo, as applicable, shall promptly reimburse Service Provider for any such payments.  For the avoidance of doubt, Service Provider shall have the right to retain a third party consultant or service provider approved by Owner to assist with any REIT compliance services delegated to Service Provider pursuant to Section 7.01 and to be reimbursed by Owner for the out-of-pocket costs for such third party consultant or service provider.

ARTICLE 5

INDEMNIFICATION

5.01   Indemnification.  

a. Owner shall indemnify, defend and hold harmless Service Provider, its agents, employees, members, directors, officers, stockholders and trustees from and against all claims, liabilities, losses, damages, and/or expenses (“Claims”) incurred by or otherwise asserted against any of the foregoing arising out of Service Provider’s performance under this Agreement; provided, such indemnification shall not apply

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(i) if and to the extent Service Provider and the matter is fully indemnified by Owner’s insurance maintained pursuant to the LLC Agreement; (ii) to any matter for which Service Provider has agreed to indemnify Owner under this Agreement; or (iii) to the extent Service Provider shall have failed to maintain the insurance required to be maintained by Service Provider under this Agreement and such bond or insurance would have defended and paid for such matter. Owner, at its own cost and expense, shall defend any action or proceeding against Service Provider arising therefrom.

b. Service Provider shall indemnify, defend and hold harmless Owner, PropCo, Ares, T-Holdco and their respective members, stockholders, directors, officers, trustees, employees, agents, successors and assigns (the “Indemnified Parties”) from and against all Claims incurred by or otherwise asserted against any of the foregoing arising out of: (i) any material breach, default or failure of performance of this Agreement by Service Provider or its directors, officers, employees, affiliates and agents that is related to the respective matter that is the subject of the indemnification; (ii) any acts of Service Provider or its directors, officers, employees, affiliates and agents outside the scope of Service Provider’s authority hereunder (and not otherwise consented by Owner); (iii) arising as a result of any claim or dispute between Service Provider and its employees or agents (other than any claim or dispute with an employee or employment candidate arising as a result of actions of Owner or Ares not consented to in writing by Service Provider, or action taken by Service Provider at the written direction of Owner or Ares), and/or (iv) constituting gross negligence, fraud, malfeasance, or willful, reckless or criminal misconduct. Provided, such indemnification shall not apply (i) if and to the extent Owner and the matter is fully indemnified by Service Provider’s insurance; or (ii) to the extent Owner shall have failed to maintain the insurance required to be maintained by Owner under the LLC Agreement and such insurance would have defended and paid for such matter. Service Provider, at its own cost and expense, shall defend any action or proceeding against Owner arising therefrom.

c. The obligations of the parties under Section 5.01 are subject to the following conditions: (i) the party to be indemnified shall deliver a notice to the indemnifying party with respect to the matter promptly after the party to be indemnified becomes actually (and not constructively) aware of the same; and (ii) the party to be indemnified shall not take any actions, including any admission of liability, which would bar the indemnifying party from enforcing any applicable coverage under policies of insurance or prejudice any defense and related legal proceedings or otherwise prevent such indemnifying party from defending itself with respect to the matter.

d. The terms of this Section 5.01 shall survive the expiration or earlier termination of this Agreement whether with or without cause.

5.02   Insurance.During the term of this Agreement or for such longer periods of times as may be required under this Section 5.02 or in Schedule D, Service Provider shall procure and maintain the minimum insurance requirements set forth on Schedule D attached hereto (with such insurance companies, in such form, and with such endorsements, waivers, and deductibles, in each case, as reasonably designated or approved by Owner) naming Owner, PropCo and the Members, as applicable, as additional insureds thereunder.  Such insurance shall be, except as otherwise provided on Schedule D attached hereto, at Service Provider’s sole cost and expense, including the payment of any deductible or self-insured retention payable in connection therewith, provided that any of the required insurance coverage set forth on Schedule D may be covered by a blanket insurance policy, at the Service Provider’s discretion.  Without limiting the generality of the foregoing, Owner shall have the right, in the exercise of its sole and absolute discretion, to cause any of the required insurance coverage set forth on Schedule D, to the extent such insurance coverage is to be obtained or maintained at the sole cost of Owner (or PropCo), to be effected under a blanket insurance policy maintained by any Affiliate of Ares. Notwithstanding anything to the contrary contained herein, Ares has approved the insurance coverage obtained and maintained by Service Provider as of the Effective Date with respect to this Section 5.02.

5.03   Wavier of Claims and Subrogation.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, EACH PARTY WAIVES ALL CLAIMS AGAINST THE OTHER PARTY, AND THE AFFILIATES, PARTNERS, MEMBERS, OFFICERS, EMPLOYEES, SHAREHOLDERS AND AGENTS OF SUCH OTHER PARTY, FOR ALL LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES INCLUDING ANY APPLICABLE DEDUCTIBLE OR RETENTION ON ACCOUNT OF FIRE, ACCIDENT OR OTHER CASUALTY, THE CAUSE OF WHICH IS INSURED AGAINST OR WHICH IS INSURABLE UNDER A STANDARD "ALL RISK" OR SPECIAL FORM PROPERTY

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INSURANCE POLICY AVAILABLE IN THE STATE IN WHICH THE PROJECT IS LOCATED, REGARDLESS OF CAUSE OR ORIGIN, INCLUDING THE NEGLIGENCE OF ANY OTHER PARTY HERETO, ITS AFFILIATES, PARTNERS, MEMBERS, OFFICERS, EMPLOYEES, SHAREHOLDERS AND AGENTS.  EACH PARTY SHALL REQUIRE THAT ITS PROPERTY INSURANCE POLICIES MAINTAINED WITH RESPECT TO THE PROJECT, OR PROPERTY USED IN CONNECTION WITH THE PROJECT, SHALL CONTAIN WAIVERS OF SUBROGATION RIGHTS AGAINST THE OTHER PARTY AND ITS AFFILIATES, PARTNERS, MEMBERS, OFFICERS, EMPLOYEES, SHAREHOLDERS AND AGENTS.

ARTICLE 6

TERMINATION

6.01 Termination.  Notwithstanding the provisions of Article 2 above, this Agreement may also be terminated as follows:

a. automatically, in the event Owner sells or otherwise disposes of all or substantially all the Property or its interests in PropCo; or

b. by Owner, from and after the delivery of a Removal Notice, regardless of whether Service Provider shall dispute (pursuant to the LLC Agreement) the existence of a Material Default and, notwithstanding anything to the contrary contained in this Agreement; or

c. by Owner, in the event Service Provider defaults in the performance of any of its material obligations under this Agreement (other than defaults covered by the other applicable clauses of this Section 6.01) and fails to cure such default within fifteen (15) Business Days after its receipt from Owner or Ares of a notice of default (specifying in reasonable detail the nature of the default complained of); provided, however, that if such default cannot reasonably be cured within such fifteen (15) Business Days, then such additional period as shall be reasonable, provided that (i) on or prior to the expiration of such fifteen (15) Business Day period, Service Provider shall have delivered written notice to Owner setting forth, in reasonable detail, the steps Service Provider has taken to cure such default prior to the date of such written notice from Service Provider and the steps Service Provider intends to take in order to cure such default within the remaining time period within which to cure such default, and (ii) Service Provider has commenced to cure such default within such fifteen (15) Business Day period and thereafter has proceeded to prosecute such cure with due diligence and such cure is completed within sixty (60) Business Days after Service Provider’s receipt of the notice of default.

Notwithstanding anything herein to the contrary, if this Agreement is terminable by Owner pursuant to clauses (b) or (c) above, then Ares, on behalf of Owner, shall have the right to terminate this Agreement by written notice to Service Provider and to exercise any and all other rights and remedies available under this Agreement and at law or in equity.

6.02 Termination Compensation.  Upon any termination of this Agreement pursuant to Section 6.02, Owner shall pay to Service Provider within thirty (30) days of the date of termination all amounts accrued and unpaid to Service Provider through the applicable date of termination; provided, however, to the extent Service Provider has received any portion of the Fees which as of the date on which such termination occurred was unearned by Service Provider, Service Provider shall reimburse Owner for the amount of such unearned Fees.

6.03 Delivery Upon Termination.  Upon termination of this Agreement for any reason, the Service Provider shall at Owner’s reasonable cost and expense (i) deliver to Owner or such Person as Owner shall specify, all monies, deposits and other assets of Owner and/or PropCo in the possession or control of Service Provider and all records, contracts, leases, receipts for deposits, unpaid bills and other papers or documents that pertain to the business of Owner and/or PropCo in the possession or control of Service Provider, all of which shall be delivered immediately upon such termination, and (ii) otherwise cooperate with Owner and its officers, directors, shareholders and agents to ensure a smooth transition of the Services to a successor service provider.

6.04 Survival of Obligations.  All obligations of the parties hereunder, which per their express terms survive termination of this Agreement, shall survive termination of this Agreement. Without limiting the generality of the foregoing, all representations and warranties of the parties contained herein shall survive the termination of this Agreement for a period of one (1) year after such termination date, and the indemnification obligations of Owner and Service Provider hereunder shall survive the termination of this Agreement.

7

ARTICLE 7

COMPLIANCE

7.01 REIT Compliance.

a. Owner shall have the right to delegate such additional services to Service Provider (the “REIT Services”) in furtherance of ensuring that the nature of the Property and gross revenues would permit Ares REIT, and the PropCo that has made a REIT Election, to qualify for and maintain its status as a REIT under the Code including, without limitation, through the satisfaction of the following requirements:  (i) at least seventy-five percent (75%) of the assets of the Owner and the PropCo at the close of any calendar quarter qualify as “real estate assets” for purposes of Section 856(c)(4)(A) of the Code, (ii) no more than twenty-five percent (25%) of the assets of the Owner and the PropCo at the close of any calendar quarter will consist of assets described in Section 856(c)(4)(B) of the Code, (iii) no asset of the Owner or the PropCo at the close of any calendar quarter will violate or exceed the limitations described in Section 856(c)(4)(B)(iv)(I), (II) or (III) of the Code (determined as if the Owner and the PropCo were a REIT), (iv) at least seventy-five percent (75%) of the gross income of the Owner and the PropCo in any calendar year will qualify as income described in Section 856(c)(3) of the Code and at least ninety-five percent (95%) of the gross income in any calendar year will qualify as income described in Section 856(c)(2) of the Code, (v) no portion of the gross revenues or net income of the Owner and the PropCo in any calendar year will constitute income from a “prohibited transaction” as defined in Section 857(b)(6)(B)(iii) of the Code, (vi) no amount of the Owner’s or the PropCo’s assets will be described in Section 1221(a)(1) of the Code (other than “foreclosure property” as defined in Section 856(e) of the Code), (vii) no more than twenty percent (20%) of the assets of the Owner shall consist of interests in any “taxable REIT subsidiary” of the Ares REIT (or the Owner or the PropCo if any of the foregoing is taxed as a REIT); and (viii) no more than twenty-five percent (25%) of the value of the assets of the Owner and the PropCo shall consist of “nonqualified publicly offered REIT debt instruments” within the meaning of Code Section 856(c)(4)(B)(iii). Owner shall describe such REIT Services in reasonable detail in writing for Service Provider to perform and Service Provider agrees to use efforts consistent with the Performance Standard to perform such REIT Services (or to cause a third party consultant or service provider approved by Owner in accordance with Section 4.02), as delegated and described by Owner.

b. Without limiting the generality of the foregoing, the Service Provider hereby agrees that the Owner and each of the future operations of the subsidiaries of the Owner (including the PropCo) shall be managed and conducted in compliance with the guidelines set forth on Exhibit D of the LLC Agreement and made a part hereof and any other REIT Services guidelines that may be provided by Ares to the Manager in writing from time to time and which in Ares's reasonable judgment are necessary or desirable to assure compliance with the foregoing provisions of this Section 7.01.

c. The Service Provider shall cooperate in all reasonable respects with respect to (i) structuring the acquisition and operation of the Property, (ii) changing the structure of the ownership or operation of the Property, in a manner that would allow the Owner if it made an election under Section 856 of the Code to qualify as a REIT and not incur any amount of tax pursuant to Section 857 or 4981 of the Code, (iii) in the discretion of and upon request by Ares, structuring the acquisition, operation or ownership of the Property in a manner that would allow Ares to invest in all or a part of the Property, through one or more taxable REIT subsidiaries (as defined in Section 856(l) of the Code), and (iv) solely at the election of the Ares (or its owners), conducting any permitted sale of the Owner and/or Property (A) as a sale of the membership interests in the Owner or (B) as a sale of all of the membership interests in the PropCo that has made the REIT Election for the taxable year prior to such sale, or earlier; provided, however, in all instances, any actions or matters so undertaken by the Owner or with respect to any of the Property shall be structured after giving consideration to the burden and/or tax consequences thereof to the other Members.  In all events, the buyer of Owner or the Propco that has made the REIT Election shall covenant in the applicable purchase and sale agreement to maintain the status of any acquired REIT as a REIT until at least the beginning of the tax year following the tax year that such sale closes.

8

d. The foregoing provisions are intended to ensure that the assets, income and operations of the Owner or the PropCo are such that they will satisfy the various provisions of the Code that restrict the assets, income and operations of REITs and thereby ensure that the REIT status of the Ares REIT will not be jeopardized by its direct and indirect ownership of an interest in the Owner.  In the event that any additional duties, obligations, requirements, limitations, or parameters with respect to the assets, income, or operations of REITs are (i) imposed by any new provisions of the Code or Treasury Regulations, any amendments to the Code or Treasury Regulations or by any judicial precedent or any notice, ruling or release of the Treasury Department or the Internal Revenue Service, or (ii) deemed necessary or desirable in the sole but reasonable discretion of Ares, Ares may unilaterally amend the provisions of this Section 7.01 to the extent required to ensure that the assets, income or operations of the Owner will not jeopardize the REIT status of the Ares REIT.  Ares shall pay the costs of incurred with respect to such amendment.

7.02 Anti-Corruption Policy. The Service Provider shall comply with, and shall cause its officers, directors, employees and agents to comply with (i) the Ares’s anti-corruption policy existing from time to time to the extent a copy of such policy is provided to Service Provider in writing (the “Anti-Corruption Policy”) and (ii) applicable anti-corruption laws, including commercial bribery laws, in connection with the performance of all duties and obligations related to the LLC Agreement.  Service Provider shall promptly notify the Owner in writing it becomes aware of facts or information which suggest a breach of the foregoing Anti-Corruption covenant, the Anti-Corruption Policy or applicable anti-corruption laws, including OFAC Laws and Regulations and commercial bribery laws.  

ARTICLE 8

NOTICES, ETC.

8.01 Notices.  All notices, demands, requests, or other communications (collectively, “Notices”) provided for in this Agreement shall be in writing and delivered: (i) by email (provided the recipient(s) thereof confirms receipt by reply e-mail or, if there is no reply e-mail, with the original to be sent the same day by a nationally recognized overnight courier service for next Business Day delivery); or (ii) by a nationally recognized overnight courier service for next Business Day delivery, to Owner or Service Provider at the address set forth below following the signature blocks for this Agreement, or at such other address as they individually may specify thereafter in writing. Each Notice which shall be sent by nationally recognized overnight courier service in the manner described shall be deemed sufficiently given, served, sent, received, or delivered for all purposes on the day the Notice is delivered to the addressee (with the return receipt, the delivery receipt, or the affidavit of messenger being deemed conclusive (but not exclusive) evidence of such delivery), provided that such day is a Business Day (if such day is not a Business Day, such Notice shall be deemed given and received on the first Business Day following such day), or if delivery is refused, then on the day that delivery of the Notice is refused by the addressee upon presentation, provided that such day is a Business Day (if such day is not a Business Day, such Notice shall be deemed given and received on the first Business Day following such day).  Each Notice which shall be emailed in the manner described above shall be deemed sufficiently given, served, sent, received, or delivered for all purposes on the date of such email provided that (a) such email is transmitted (y) prior to 5:00 P.M. (New York time) on a Business Day (if such email is transmitted on a day that is not a Business Day or such email is received after 5:00 P.M. (New York time) on a Business Day, such Notice shall be deemed given and received on the first Business Day following such day) and (b) if required by this Section 8.01, a copy of such notice is sent by nationally recognized overnight courier service, as provided above.

8.02 Consents and Approvals.  All consents and approvals required hereunder shall be in writing, signed by the party charged with the obligation, right, or privilege of granting such consent, approval, or notice.

8.03 Confidentiality.  Section 12.2 of the LLC Agreement is hereby incorporated by reference as if fully set forth herein, mutatis mutandis.

8.04 No Assignment.  This Agreement may not be assigned by Service Provider or Owner without the prior written consent of the other party. Any purported assignment in violation of this Section 8.04 is void ab initio. A majority equity transfer in Owner or Service Provider shall constitute an assignment for purposes of this section. Subject to the provisions hereof, all the covenants, conditions, and obligations contained in this Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Owner and the Service Provider to the same extent as if each successor and assignee were in each case named as a party to this Agreement.  Notwithstanding anything to the contrary

9

contained herein, Owner shall have the right to collaterally assign this Agreement to any lender providing financing for the Property and Service Provider shall cooperate with Owner in connection therewith.

8.05 Pronouns.  All nouns and pronouns shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require.

8.06 Amendments.  Except as otherwise herein provided, any and all amendments, additions, or deletions to this Agreement shall be null and void unless approved by the parties in writing.

8.07 Complete Agreement.  This Agreement together with all schedules attached hereto and made part hereof, supersedes and takes the place of any and all previous agreements entered into between the parties relating to the management of the Property.

8.08 Applicable Law.  This Agreement shall be construed and enforced in accordance with the laws of the State in which the Property is located.

8.09   Severability.  If any one or more of the provisions of this Agreement, or the applicability of any such provision to a specific situation is held invalid or unenforceable, such provision shall be modified to the minimum extent necessary to make it or its application valid or enforceable, and the validity and enforceability of all other provisions of this Agreement and all other applications of such provisions shall not be affected thereby.  

8.10 OFAC.  Owner and Service Provider each represent and warrant to the other (for themselves, only) that each is currently in compliance with, and shall at all times during the term of this Agreement (including any extension thereof) remain in compliance with, the regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) and any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental actions relating thereto.

8.11 Headings.  All headings and subheadings used in this Agreement and in the accompanying schedules are solely for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement.

8.12 Estoppel Certificates.  Each party hereto shall, from time to time, upon not less than fifteen (15) days’ notice from the other party, execute and deliver to the other party a certificate stating that this Agreement is unmodified and in full force and effect, or, if modified, that this Agreement is in full force and effect as modified, and stating the modifications and stating whether or not, to the best of the certifying party’s knowledge, the other party is in default in any respect under this Agreement, and, if in default, specifying the nature and character of such default.

8.13 No Waiver.  No waiver by either party of any default of any other party or of any event, circumstance or condition permitting a party to terminate this Agreement shall constitute a waiver of any other default of the other party or of any other event, circumstance or condition, permitting such termination, whether of the same or of any other nature or type and whether preceding, concurrent or succeeding; and no failure on the part of either party to exercise any right it may have by the terms hereof or by law upon the default of the other party and no delay in the exercise of such right shall prevent the exercise thereof by the non-defaulting party at any time when the other party may continue to be so in default, and no such failure or delay and no waiver of default shall operate as a waiver of any other default, or as a modification in any respect of the provisions of this Agreement.  The subsequent acceptance of any payment or performance pursuant to this Agreement shall not constitute a waiver of any preceding default by a defaulting party or of any preceding event, circumstance or condition permitting termination hereunder, other than default in the payment of the particular payment or the performance of the particular matter so accepted, regardless of the non-defaulting party’s knowledge of the preceding default or the preceding event, circumstance or condition, at the time of accepting such payment or performance, nor shall the non-defaulting party’s acceptance of such payment or performance after termination constitute a reinstatement, extension or renewal of this Agreement or revocation of any notice or other act by the non-defaulting party.

8.14 Attorneys’ Fees.  Should any action or proceeding be commenced between the parties hereto or their representatives concerning any provision of this Agreement or the rights and duties of any Person (as defined in the LLC Agreement)

10

in relation thereto, the party or parties prevailing in such action or proceeding shall be entitled, in addition to such other relief as may be granted, to an award of all actual, reasonable attorneys’ fees and costs incurred in such action or proceeding, without regard to any schedule or rule of court purporting to restrict such an award, including, without limitation, actual, reasonable attorneys’ fees, costs and expenses incurred in connection with (a) enforcing, perfecting and executing such judgment, (b) post-judgment motions; (c) contempt proceedings; (d) garnishment, levee, and debtor and third-party examinations; (e) discovery; and (f) bankruptcy litigation.

8.15 Equitable Remedies.  Each party hereto shall, in addition to all other rights provided herein or as may be provided by law, and subject to the limitations set forth herein, be entitled to all equitable remedies including those of specific performance and injunction, to enforce such party’s rights hereunder.

8.16 Remedies Cumulative.  Each right, power, and remedy provided for herein or now or hereafter existing at law, in equity, by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for herein or now or hereafter existing at law, in equity, by statute or otherwise, and the exercise or beginning of the exercise or the forbearance of exercise by any party of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by such party of any or all of such other rights, powers or remedies.

8.17 Limitation of Liability.  Notwithstanding anything to the contrary, if Service Provider shall recover any judgment against Owner in connection with this Agreement, Service Provider shall look solely to Owner for the collection or enforcement of any such judgment, and no other assets of Owner shall be subject to levy, execution or other process for the satisfaction or enforcement of such judgment. Notwithstanding anything to the contrary in this Agreement, Service Provider shall not be responsible and neither Owner nor Ares shall be entitled to make any claims against Service Provider for any punitive, special, incidental or consequential damages, including damages for loss of profits or revenue, cost of capital, loss of use, or diminution of value, regardless of whether a claim is based on contract, tort (including negligence), strict liability, or any other legal or equitable principle; provided, however, that the foregoing limitation of liability shall not be applicable to the extent any such consequential, speculative and punitive damages are required to be paid to a third party by a judgment or order of a court of competent jurisdiction.

8.18 WAIVER OF JURY TRIAL.  THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LEGAL REQUIREMENTS, ANY RIGHT THAT EITHER PARTY OR THEIR HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS OR ASSIGNS MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH, OR IN RESPECT OF ANY COURSE OF CONDUCT, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY PARTY.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF THE PARTIES TO ENTER INTO THIS AGREEMENT.

8.19 Counterparts.  This Agreement may be executed in any number of counterparts, including counterparts transmitted by e-mail, any one of which shall constitute an original of this Agreement.  When counterparts or e-mail copies have been executed by all parties, they shall have the same effect as if the signatures to each counterpart or copy were upon the same documents and copies of such documents shall be deemed valid as originals. The parties agree that all such signatures may be transferred to a single document upon the request of any party. This Agreement shall not be binding unless and until it shall be fully executed and delivered by all parties hereto.

[SIGNATURE PAGE FOLLOWS]

11

IN WITNESS WHEREOF the parties have executed this Agreement on the day and year first above written.

OWNER:SERVICE PROVIDER:

[________________________],TREV OPCO LLC

By:​ ​_____________________________________ Name: _____________________________________	By:​ ​_____________________________________ Name: _____________________________________
Title: ______________________________________	Title: ______________________________________

OWNER’S ADDRESSSERVICE PROVIDER’S ADDRESS

[_______________][_______________]

[_________________][_______________]

[__________________][_______________]

Attn: [_______________]  Attn: [_______________]

Email: [________________]Email: [_______________]

and:

[__________________]

[___________________]

[____________________]

Attn: [_________________]

Email: [_________________]  

With a copy to:

[__________________]

[___________________]

[____________________]

Attn: [_________________]

Email: [_________________]  

SCHEDULE A

SCHEDULE B

SCHEDULE C

SCHEDULE D

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey W. Taylor, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Ares Real Estate Income Trust Inc. (the “registrant”);

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 11, 2023	/s/ JEFFREY W. TAYLOR
	Jeffrey W. Taylor Partner, Co-President (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Lainie P. Minnick, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Ares Real Estate Income Trust Inc. (the “registrant”);

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

2
August 11, 2023	/s/ LAINIE P. MINNICK
	Lainie P. Minnick Managing Director, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Certification of Principal Executive Officer

In connection with the Quarterly Report on Form 10-Q of Ares Real Estate Income Trust Inc. (the “Company”) for the period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey W. Taylor, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 11, 2023	/s/ JEFFREY W. TAYLOR
	Jeffrey W. Taylor Partner, Co-President (Principal Executive Officer)

Certification of Principal Financial Officer

In connection with the Quarterly Report on Form 10-Q of Ares Real Estate Income Trust Inc. (the “Company”) for the period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lainie P. Minnick, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 11, 2023	/s/ LAINIE P. MINNICK
	Lainie P. Minnick Managing Director, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

EX-99.1

Exhibit 99.1

CONSENT OF INDEPENDENT VALUATION FIRM

We hereby consent to the reference to our name and the description of our role in the valuation process described in the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations—Net Asset Value” in Part I, Item 2 of the Quarterly Report on Form 10-Q for the period ended June 30, 2023 of Ares Real Estate Income Trust Inc., being incorporated by reference in (i) the Registration Statement on Form S-3 (No. 333-230311) of Ares Real Estate Income Trust Inc., and the related prospectus, and (ii) the Registration Statement on Form S-8 (No. 333-194237) of Ares Real Estate Income Trust Inc. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933.

/s/ Altus Group U.S. Inc.

Altus Group U.S. Inc.

August 11, 2023

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2023	Aug. 07, 2023
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2023
Document Transition Report	false
Entity File Number	000-52596
Entity Registrant Name	ARES REAL ESTATE INCOME TRUST INC.
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	30-0309068
Entity Address, Address Line One	One Tabor Center, 1200 Seventeenth Street, Suite 2900
Entity Address, City or Town	Denver
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80202
City Area Code	303
Local Phone Number	228-2200
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Central Index Key	0001327978
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Amendment Flag	false
Class T
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		28,865,771
Class S
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		49,176,013
Class D
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		7,065,763
Class I
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		67,113,185
Class E
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		49,914,011

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
ASSETS
Net investment in real estate properties	$ 3,595,617	$ 3,605,578
Investments in unconsolidated joint venture partnerships	124,075	120,372
Investments in real estate debt and securities (includes $85,198 and $14,896 at fair value as of June 30, 2023 and December 31, 2022, respectively)	353,879	275,335
Cash and cash equivalents	12,905	13,336
Restricted cash	4,265	3,850
DST Program Loans	103,314	81,897
Other assets	90,436	74,356
Total assets	4,284,491	4,174,724
Liabilities
Accounts payable and accrued expenses	63,773	58,097
Debt, net	1,664,611	1,616,475
Intangible lease liabilities, net	39,109	42,444
Financing obligations, net	1,232,793	1,130,810
Other liabilities	96,079	114,901
Total liabilities	3,096,365	2,962,727
Commitments and contingencies (Note 14)
Redeemable noncontrolling interest	17,282	18,130
Stockholders' equity:
Preferred stock, $0.01 par value-200,000 shares authorized, none issued and outstanding
Additional paid-in capital	1,727,632	1,744,022
Distributions in excess of earnings	(1,033,940)	(973,395)
Accumulated other comprehensive income	15,872	13,148
Total stockholders' equity	711,613	785,836
Noncontrolling interests	459,231	408,031
Total equity	1,170,844	1,193,867
Total liabilities and equity	4,284,491	4,174,724
Class T
Stockholders' equity:
Common stock	287	269
Class S
Stockholders' equity:
Common stock	498	492
Class D
Stockholders' equity:
Common stock	72	79
Class I
Stockholders' equity:
Common stock	681	691
Class E
Stockholders' equity:
Common stock	$ 511	$ 530

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Debt securities available for sale and held to maturity fair value	$ 85,198	$ 14,896
Preferred stock, par value (usd per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	200,000	200,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Class T
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	500,000	500,000
Common stock, shares issued (in shares)	28,741	26,884
Common stock, shares outstanding (in shares)	28,741	26,884
Class S
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	500,000	500,000
Common stock, shares issued (in shares)	49,750	49,237
Common stock, shares outstanding (in shares)	49,750	49,237
Class D
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	500,000	500,000
Common stock, shares issued (in shares)	7,227	7,871
Common stock, shares outstanding (in shares)	7,227	7,871
Class I
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	500,000	500,000
Common stock, shares issued (in shares)	68,105	69,142
Common stock, shares outstanding (in shares)	68,105	69,142
Class E
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	500,000	500,000
Common stock, shares issued (in shares)	51,047	52,974
Common stock, shares outstanding (in shares)	51,047	52,974

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Revenues:
Rental revenues	$ 77,204	$ 73,494	$ 155,164	$ 135,999
Debt-related income	7,189	846	12,950	4,314
Total revenues	84,393	74,340	168,114	140,313
Operating expenses:
Rental expenses	28,839	24,896	57,139	46,210
Real estate-related depreciation and amortization	33,858	36,903	67,055	64,354
General and administrative expenses	2,973	2,594	6,017	4,631
Advisory fees	9,623	8,227	19,161	15,370
Performance participation allocation	0	6,186	0	18,379
Acquisition costs and reimbursements	1,849	1,093	3,018	2,722
Impairment loss on debt-related investment held for sale	1,260	0	3,780	0
Total operating expenses	78,402	79,899	156,170	151,666
Other expenses (income):
Equity in loss (income) from unconsolidated joint venture partnerships	203	(1,718)	2,649	(708)
Interest expense	37,882	33,774	75,427	58,184
Gain on sale of real estate property	0	(29,643)	(36,884)	(83,524)
Loss on extinguishment of debt and financing commitments, net	0	0	700	0
Gain on derivative instruments	(192)	(982)	(89)	(2,532)
Provision for current expected credit losses	(1,632)	0	3,998	0
Other income	(1,016)	(423)	(2,032)	(1,000)
Total other expenses (income)	35,245	1,008	43,769	(29,580)
Net (loss) income	(29,254)	(6,567)	(31,825)	18,227
Net loss (income) attributable to redeemable noncontrolling interests	226	60	244	(186)
Net loss (income) attributable to noncontrolling interests	6,278	919	6,827	(2,618)
Net (loss) income attributable to common stockholders	$ (22,750)	$ (5,588)	$ (24,754)	$ 15,423
Weighted average number of common shares outstanding
Weighted-average shares outstanding-basic (in shares)	206,214	191,158	206,493	184,878
Weighted-average shares outstanding-diluted (in shares)	264,963	224,857	263,975	217,806
Net (loss) income attributable to common stockholders per common share - basic	$ (0.11)	$ (0.03)	$ (0.12)	$ 0.08
Net (loss) income attributable to common stockholders per common share - diluted	$ (0.11)	$ (0.03)	$ (0.12)	$ 0.08

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Statement of Comprehensive Income [Abstract]
Net (loss) income	$ (29,254)	$ (6,567)	$ (31,825)	$ 18,227
Change from cash flow hedging activities	10,108	1,819	3,052	13,813
Change from activities related to available-for-sale securities	(24)		53
Comprehensive (loss) income	(19,170)	(4,748)	(28,720)	32,040
Comprehensive loss (income) attributable to redeemable noncontrolling interests	148	43	221	(322)
Comprehensive loss (income) attributable to noncontrolling interests	4,247	680	6,469	(4,580)
Comprehensive (loss) income attributable to common stockholders	$ (14,775)	$ (4,025)	$ (22,030)	$ 27,138

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-in Capital	Distributions in Excess of Earnings	Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interests	Total
Beginning Balances at Dec. 31, 2021	$ 1,696	$ 1,457,296	$ (865,844)	$ (13,418)	$ 196,696	$ 776,426
Balance at beginning of period (in shares) at Dec. 31, 2021	169,665
Balance at end of period (in shares) at Jun. 30, 2022	195,101
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss) (excluding portion attributable to redeemable noncontrolling interest)			15,423		2,618	18,041
Change from securities and cash flow hedging activities (excluding attributable to redeemable noncontrolling interest)				11,715	1,962	13,677
Issuance of common stock	$ 289	244,237				244,526
Issuance of units (in shares)	28,844
Share-based compensation		100				100
Upfront offering costs, including selling commissions, dealer manager fees, and offering costs		(5,401)				(5,401)
Trailing distribution fees		(10,372)	2,289		(3,823)	(11,906)
Redemptions of common stock	$ (34)	(28,466)				$ (28,500)
Redemptions of common stock (in shares)	(3,408)					(3,408)
Issuances of OP Units for DST Interests					39,441	$ 39,441
Other noncontrolling interests net distributions					(23)	(23)
Distributions declared on common stock and noncontrolling interests (excludes attributable to redeemable noncontrolling interest)			(34,663)		(5,824)	(40,487)
Redemption value allocation adjustment to redeemable noncontrolling interest		(1,596)				(1,596)
Redemptions of noncontrolling interests		(503)			(2,862)	(3,365)
Ending Balances at Jun. 30, 2022	$ 1,951	1,655,295	(882,795)	(1,703)	228,185	1,000,933
Beginning Balances at Mar. 31, 2022	$ 1,820	1,551,814	(860,546)	(3,266)	232,692	922,514
Balance at beginning of period (in shares) at Mar. 31, 2022	182,042
Balance at end of period (in shares) at Jun. 30, 2022	195,101
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss) (excluding portion attributable to redeemable noncontrolling interest)			(5,588)		(919)	(6,507)
Change from securities and cash flow hedging activities (excluding attributable to redeemable noncontrolling interest)				1,563	239	1,802
Issuance of common stock	$ 147	127,869				128,016
Issuance of units (in shares)	14,679
Share-based compensation		50				50
Upfront offering costs, including selling commissions, dealer manager fees, and offering costs		(3,821)				(3,821)
Trailing distribution fees		(5,335)	1,259			(4,076)
Redemptions of common stock	$ (16)	(13,929)				(13,945)
Redemptions of common stock (in shares)	(1,620)
Other noncontrolling interests net distributions					(40)	(40)
Distributions declared on common stock and noncontrolling interests (excludes attributable to redeemable noncontrolling interest)			(17,920)		(2,966)	(20,886)
Redemption value allocation adjustment to redeemable noncontrolling interest		(1,114)				(1,114)
Redemptions of noncontrolling interests		(239)			(821)	(1,060)
Ending Balances at Jun. 30, 2022	$ 1,951	1,655,295	(882,795)	(1,703)	228,185	1,000,933
Beginning Balances at Dec. 31, 2022	$ 2,061	1,744,022	(973,395)	13,148	408,031	1,193,867
Balance at beginning of period (in shares) at Dec. 31, 2022	206,108
Balance at end of period (in shares) at Jun. 30, 2023	204,870
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss) (excluding portion attributable to redeemable noncontrolling interest)			(24,754)		(6,827)	(31,581)
Change from securities and cash flow hedging activities (excluding attributable to redeemable noncontrolling interest)				2,724	358	3,082
Issuance of common stock	$ 95	83,716				$ 83,811
Issuance of units (in shares)	9,488					9,500
Share-based compensation		150				$ 150
Upfront offering costs, including selling commissions, dealer manager fees, and offering costs		(2,637)				(2,637)
Trailing distribution fees		(1,296)	2,924		(3,970)	(2,342)
Redemptions of common stock	$ (107)	(93,212)				$ (93,319)
Redemptions of common stock (in shares)	(10,726)					(10,726)
Issuances of OP Units for DST Interests					84,725	$ 84,725
Other noncontrolling interests net distributions					(7)	(7)
Distributions declared on common stock and noncontrolling interests (excludes attributable to redeemable noncontrolling interest)			(38,715)		(10,397)	(49,112)
Redemption value allocation adjustment to redeemable noncontrolling interest		243				243
Redemptions of noncontrolling interests		(3,354)			(12,682)	(16,036)
Ending Balances at Jun. 30, 2023	$ 2,049	1,727,632	(1,033,940)	15,872	459,231	1,170,844
Beginning Balances at Mar. 31, 2023	$ 2,075	1,751,993	(993,320)	7,897	393,098	1,161,743
Balance at beginning of period (in shares) at Mar. 31, 2023	207,448
Balance at end of period (in shares) at Jun. 30, 2023	204,870
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss) (excluding portion attributable to redeemable noncontrolling interest)			(22,750)		(6,278)	(29,028)
Change from securities and cash flow hedging activities (excluding attributable to redeemable noncontrolling interest)				7,975	2,031	10,006
Issuance of common stock	$ 41	36,079				36,120
Issuance of units (in shares)	4,122
Share-based compensation		75				75
Upfront offering costs, including selling commissions, dealer manager fees, and offering costs		(1,200)				(1,200)
Trailing distribution fees		(503)	1,463		(5,102)	(4,142)
Redemptions of common stock	$ (67)	(57,797)				(57,864)
Redemptions of common stock (in shares)	(6,700)
Issuances of OP Units for DST Interests					84,725	84,725
Other noncontrolling interests net distributions					(3)	(3)
Distributions declared on common stock and noncontrolling interests (excludes attributable to redeemable noncontrolling interest)			(19,333)		(5,318)	(24,651)
Redemption value allocation adjustment to redeemable noncontrolling interest		169				169
Redemptions of noncontrolling interests		(1,184)			(3,922)	(5,106)
Ending Balances at Jun. 30, 2023	$ 2,049	$ 1,727,632	$ (1,033,940)	$ 15,872	$ 459,231	$ 1,170,844

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Statement of Stockholders' Equity [Abstract]
Net loss (income) attributable to redeemable noncontrolling interests	$ (226)	$ (60)	$ (244)	$ 186
Unrealized gain (loss) from derivative instruments allocated to redeemable noncontrolling interest	78	17	23	136
Distribution fees attributable to redeemable noncontrolling interest	$ 192	$ 191	$ 384	$ 351

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Operating activities:
Net (loss) income	$ (31,825)	$ 18,227
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Real estate-related depreciation and amortization	67,055	64,354
Straight-line rent and amortization of above- and below-market leases	(3,481)	(4,018)
Gain on sale of real estate property	(36,884)	(83,524)
Performance participation allocation	0	18,379
Impairment loss on debt-related investment held for sale	3,780	0
Equity in loss (income) of unconsolidated joint venture partnership	2,649	(708)
Loss on extinguishment of debt and financing commitments, net	700	0
Provision for current expected credit losses	3,998	0
Amortization of deferred financing costs	3,578	3,633
Financing obligation liability appreciation	4,784	12,531
Unrealized loss (gain) on derivative instruments not designated as cash flow hedges	2,325	(2,532)
Other	2,439	3,995
Changes in operating assets and liabilities
Other assets, accounts payable and accrued expenses and other liabilities	3,567	19,283
Cash settlement of accrued performance participation allocation	(23,747)	0
Net cash (used in) provided by operating activities	(1,062)	49,620
Investing activities:
Real estate acquisitions	(48,122)	(1,180,365)
Capital expenditures	(23,187)	(13,960)
Proceeds from disposition of real estate property	53,735	251,822
Investments in debt-related investments	(14,850)	(3,655)
Principal collections on debt-related investments	0	1,336
Investments in unconsolidated joint venture partnerships	(7,910)	(47,904)
Purchases of available-for-sale debt securities	(71,079)	0
Other	2,089	(48)
Net cash used in investing activities	(109,324)	(992,774)
Financing activities:
Repayments of mortgage notes	(71,141)	(1,157)
Net proceeds from (repayments of) line of credit	117,000	127,000
Proceeds from term loan	0	275,000
Redemptions of common stock	(93,319)	(28,500)
Distributions paid to common stockholders, redeemable noncontrolling interest holders and noncontrolling interest holders	(28,968)	(23,274)
Proceeds from issuance of common stock	67,832	230,603
Proceeds from financing obligations, net	159,095	393,330
Offering costs for issuance of common stock and private placements	(8,091)	(8,667)
Redemption of noncontrolling interests	(16,036)	(3,365)
Redemption of redeemable noncontrolling interests	0	(7,724)
Deferred financing costs paid	(956)	(6)
Interest rate cap premiums	(15,046)	0
Net cash provided by financing activities	110,370	953,240
Net (decrease) increase in cash, cash equivalents and restricted cash	(16)	10,086
Cash, cash equivalents and restricted cash, at beginning of period	17,186	14,352
Cash, cash equivalents and restricted cash, at end of period	$ 17,170	$ 24,438

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BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

1. BASIS OF PRESENTATION

Unless the context otherwise requires, the “Company,” “we,” “our” or “us” refers to Ares Real Estate Income Trust Inc. and its consolidated subsidiaries. We are externally managed by our advisor.

The accompanying unaudited condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain disclosures normally included in the annual audited financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been omitted. As such, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 20, 2023 (“2022 Form 10-K”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Global macroeconomic conditions, including heightened inflation, changes to fiscal and monetary policy, higher interest rates and challenges in the supply chain, coupled with the war in Ukraine, have the potential to negatively impact us. These current macroeconomic conditions may continue or aggravate and could cause the United States to experience an economic slowdown or recession. We anticipate our business and operations could be materially adversely affected by a prolonged recession in the United States.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments and eliminations, consisting only of normal recurring adjustments necessary for a fair presentation in conformity with GAAP.

As used herein, the term “commercial” refers to our office, retail and industrial properties or customers, as applicable.

Reclassifications

Certain items in our condensed consolidated balance sheets as of December 31, 2022 and our condensed consolidated statements of operations and condensed consolidated statements of cash flows for the three and six months ended June 30, 2022 have been reclassified to conform to the 2023 presentation.

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INVESTMENTS IN REAL ESTATE PROPERTIES

6 Months Ended

Jun. 30, 2023

Real Estate [Abstract]

INVESTMENTS IN REAL ESTATE PROPERTIES

2. INVESTMENTS IN REAL ESTATE PROPERTIES

The following table summarizes our consolidated investments in real estate properties.

	As of
(in thousands)	June 30, 2023		December 31, 2022
Land	$	693,097	$	694,998
Buildings and improvements		3,203,625		3,152,553
Intangible lease assets		316,588		317,141
Right of use asset		13,637		13,637
Investment in real estate properties		4,226,947		4,178,329
Accumulated depreciation and amortization		(631,330)		(572,751)
Net investment in real estate properties	$	3,595,617	$	3,605,578

Acquisitions

During the six months ended June 30, 2023, we acquired 100% of the following properties through asset acquisitions:

($ in thousands)	Property Type	Acquisition Date	Total Purchase Price (1)
2023 Acquisitions:
VM8 Logistics Center	Industrial	1/19/2023	$	17,511
Moreno Valley Distribution Center	Industrial	5/2/2023		33,421
Total 2023 acquisitions			$	50,932

(1) Total purchase price is equal to the total consideration paid plus any debt assumed at fair value. There was no debt assumed in connection with the 2023 acquisitions.

During the six months ended June 30, 2023, we allocated the purchase price of our acquisitions to land, building and improvements and intangible lease assets as follows:

	For the Six Months Ended
($ in thousands)	June 30, 2023
Land	$	6,121
Building and improvements		41,547
Intangible lease assets		3,052
Above-market lease assets		212
Total purchase price (1)	$	50,932

(1) Total purchase price is equal to the total consideration paid plus any debt assumed at fair value. There was no debt assumed in connection with the 2023 acquisitions.

The weighted-average amortization period for the intangible lease assets acquired in connection with our acquisitions during the six months ended June 30, 2023, as of the respective date of each acquisition, was 4.8 years.

Dispositions

During the six months ended June 30, 2023, we sold one partial retail property for net proceeds of approximately $53.7 million. We recorded a net gain on sale of approximately $36.9 million.

During the six months ended June 30, 2022, we sold five retail properties, one office property and one retail land parcel for net proceeds of approximately $251.8 million. We recorded a net gain on sale of approximately $83.5 million.

Intangible Lease Assets and Liabilities

Intangible lease assets and liabilities as of June 30, 2023 and December 31, 2022 include the following:

	As of June 30, 2023						As of December 31, 2022
			Accumulated						Accumulated
(in thousands)	Gross		Amortization		Net		Gross		Amortization		Net
Intangible lease assets (1)	$	293,443	$	(223,894)	$	69,549	$	294,208	$	(214,201)	$	80,007
Above-market lease assets (1)		23,145		(20,106)		3,039		22,933		(19,707)		3,226
Below-market lease liabilities		(73,331)		34,222		(39,109)		(76,033)		33,589		(42,444)

(1) Included in net investment in real estate properties on the condensed consolidated balance sheets.

Rental Revenue Adjustments and Depreciation and Amortization Expense

The following table summarizes straight-line rent adjustments, amortization recognized as an increase (decrease) to rental revenues from above- and below-market lease assets and liabilities and real estate-related depreciation and amortization expense:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Increase (decrease) to rental revenue:
Straight-line rent adjustments	$	674	$	1,240	$	1,742	$	1,966
Above-market lease amortization		(213)		(185)		(399)		(354)
Below-market lease amortization		1,124		1,210		2,138		2,406
Real estate-related depreciation and amortization:
Depreciation expense	$	27,081	$	25,349	$	53,498	$	45,547
Intangible lease asset amortization		6,777		11,554		13,557		18,807

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INVESTMENTS IN UNCONSOLIDATED JOINT VENTURE PARTNERSHIPS

6 Months Ended

Jun. 30, 2023

Equity Method Investment And Joint Venture [Abstract]

INVESTMENTS IN UNCONSOLIDATED JOINT VENTURE PARTNERSHIPS

3. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURE PARTNERSHIPS

We have acquired interests in joint venture partnerships for purposes of investing in properties across the U.S. We record our investments in AREIT-McDowell Vue Parent LLC (“Vue 1400 JV”), Pathfinder Core AREIT JV NNN Holdings, LLC (“Net Lease JV I”), Pathfinder Core AREIT Net Lease Aggregator LLC (“Net Lease JV II”) and Pathfinder Core AREIT Net Lease TRS Aggregator LLC (“Net Lease JV III”) under the equity method on our condensed consolidated balance sheets as we have the ability to exercise significant influence in each partnership but do not have control of the entities. Other partners in Net Lease JV I, Net Lease JV II and Net Lease JV III are affiliates of our Advisor.

The following table summarizes our investments in unconsolidated joint venture partnerships as of June 30, 2023 and December 31, 2022:

		As of June 30, 2023		As of December 31, 2022		Investments in Unconsolidated
	Property	Ownership	Number of	Ownership	Number of	Joint Venture Partnerships as of
($ in thousands)	Type	Percentage	Properties	Percentage	Properties	As of June 30, 2023		As of December 31, 2022
Vue 1400 JV	Residential	85%	1	85%	1	$	25,179	$	25,984
Net Lease JV I	Net Lease	50%	15	50%	15		16,255		16,393
Net Lease JV II	Net Lease	50%	117	50%	117		65,296		65,763
Net Lease JV III	Net Lease	50%	28	50%	23		17,345		12,232
Total investments in unconsolidated joint venture partnerships			161		156	$	124,075	$	120,372

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INVESTMENTS IN REAL ESTATE DEBT AND SECURITIES

6 Months Ended

Jun. 30, 2023

INVESTMENTS IN REAL ESTATE DEBT AND SECURITIES.

INVESTMENTS IN REAL ESTATE DEBT AND SECURITIES

4. INVESTMENTS IN REAL ESTATE DEBT AND SECURITIES

Debt-Related Investments

The following table summarizes our debt-related investments as of June 30, 2023 and December 31, 2022:

					Weighted-Average			Weighted-Average
($ in thousands)	Carrying Amount (1)		Outstanding Principal (1)		Interest Rate			Remaining Life (Years)
As of June 30, 2023
Senior loans (2)	$	161,922	$	169,915		9.5	%		1.7
Mezzanine loans		106,759		108,500		11.2			1.4
Total debt-related investments (2)	$	268,681	$	278,415		10.3	%		1.5
As of December 31, 2022
Senior loans (2)	$	151,645	$	154,622		8.5	%		2.1
Mezzanine loans		108,794		108,500		10.4			1.9
Total debt-related investments (2)	$	260,439	$	263,122		9.5	%		2.0

(1) The difference between the carrying amount and the outstanding principal amount of the debt-related investments consists of unamortized purchase discount, deferred financing costs, loan origination costs, and any recorded credit loss reserves, if applicable.

(2) As of June 30, 2023 and December 31, 2022, carrying amounts include $37.8 million and $42.0 million, respectively, related to one senior loan debt-related investment that was in default and on non-accrual status. Outstanding principal includes $43.8 million related to this senior loan as of June 30, 2023 and December 31, 2022. During the three months ended June 30, 2023, we recorded an impairment loss of $1.3 million, and during the six months ended June 30, 2023, we recorded an impairment loss of $3.8 million related to this senior loan. The impairment loss is included in impairment loss on debt-related investment held for sale on the condensed consolidated statements of operations. This senior loan is held-for-sale and therefore the carrying amount has been reduced to its fair value as of both June 30, 2023 and December 31, 2022. Weighted-average interest rate and weighted-average remaining life excludes this senior loan from its calculations.

Current Expected Credit Losses

Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, requires us to reflect current expected credit losses (“CECL”) on both the outstanding balances and unfunded commitments on loans held for investment and requires consideration of a broad range of historical experience adjusted for current conditions and reasonable and supportable forecast information to inform credit loss estimates (the “CECL Reserve”). ASU No. 2016-13 was effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. ASU No. 2016-13 was adopted by us as of January 1, 2020. Increases and decreases to expected credit losses impact earnings and are recorded within the provision for current expected credit losses in our condensed consolidated statements of operations. The CECL Reserve related to outstanding balances on loans held for investment required under ASU No. 2016-13 is a valuation account that is deducted from the amortized cost basis of our loans held for investment in our condensed consolidated balance sheets. The CECL Reserve related to unfunded commitments on loans held for investment is recorded within other liabilities in our condensed consolidated balance sheets.

We estimate our CECL Reserve primarily using a probability-weighted model that considers the likelihood of default and expected loss given default for each individual loan. Calculation of the CECL Reserve requires loan specific data, which includes capital senior to us when we are the subordinate lender, changes in net operating income, debt service coverage ratio, loan-to-value, occupancy, property type and geographic location. Estimating the CECL Reserve also requires significant judgment with respect to various factors, including (i) the appropriate historical loan loss reference data, (ii) the expected timing of loan repayments, (iii) calibration of the likelihood of default to reflect the risk characteristics of our floating rate loan portfolio and (iv) our current and future view of the macroeconomic environment. We may consider loan-specific qualitative factors on certain loans to estimate our CECL Reserve. In order to estimate the future expected loan losses relevant to our portfolio, we utilize historical market loan loss data licensed from a third-party data service. For periods beyond the reasonable and supportable forecast period, we revert back to historical loss data.

Loan balances that are deemed to be uncollectible are written off as a realized loss and are deducted from our CECL Reserve. The write-offs are recorded in the period in which the loan balance is deemed uncollectible based on management’s judgment.

As of June 30, 2023, our CECL Reserve for our debt-related investment portfolio is $4.0 million or 1.1% of our debt- related investment commitment balance of $358.3 million, excluding debt-related investments held-for-sale. During the three months ended June 30, 2023, we recognized a decrease in provision for current expected credit losses of $1.6 million, and during the six months ended June 30, 2023, we recognized an increase in provision for current expected credit losses of $4.0 million. The debt-related investment commitment balance is comprised of $234.6 million of funded commitments and $123.7 million of unfunded commitments with associated CECL Reserves of $2.3 million and $1.7 million, respectively. The CECL Reserve for unfunded commitments is based on the unfunded portion of the loan commitment over the full contractual period over which we are exposed to credit risk through a current obligation to extend credit and is recorded as an other liability on the condensed consolidated balance sheets. The calculation of the CECL Reserve excludes one debt-related investment that is currently held for sale. There have been no write-offs or recoveries related to any of our existing debt-related investments. CECL Reserves were immaterial in prior periods.

Available-for-Sale Debt Securities

We acquire debt securities that are commercial real estate collateralized loan obligations (“CRE CLOs”) primarily for cash management and investment purposes. Additionally in the second quarter of 2023, we originated a preferred equity investment that is recognized as a debt security as it has a mandatory redemption feature and meets the definition of a security under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 320, Investments—Debt Securities. On the acquisition date, we designate investments in real estate debt securities as available-for-sale. Investments in debt securities that are classified as available-for-sale are carried at fair value. These assets are valued on a recurring basis and any unrealized holding gains and losses other than those associated with a credit loss are recorded each period in other comprehensive income. There were no credit losses associated with our available-for-sale debt securities as of and for the period ended June 30, 2023.

As of June 30, 2023 we had one preferred equity investment and one CRE CLO designated as available-for-sale debt securities. As of December 31, 2022, we had one CRE CLO designated as available-for-sale debt securities. As of June 30, 2023, the weighted-average remaining term of our CRE CLO, which is based on the estimated fully extended maturity dates of the underlying loans of the debt security, was approximately 3.6 years and the remaining term of our preferred equity investment was 3.6 years. The following table summarizes our investments in available-for-sale debt securities as of June 30, 2023 and December 31, 2022:

					Unamortized Discount
($ in thousands)	Face Amount		Amortized Cost		and Fees (1)		Unrealized Gain, Net (2)		Fair Value
As of June 30, 2023
CRE CLOs	$	14,979	$	14,881	$	98	$	79	$	14,960
Preferred equity		71,236		70,238		998		—		70,238
Total debt securities	$	86,215	$	85,119	$	1,096	$	79	$	85,198
As of December 31, 2022
CRE CLOs	$	14,979	$	14,870	$	109	$	26	$	14,896
Total debt securities	$	14,979	$	14,870	$	109	$	26	$	14,896

(1) Includes unamortized purchase discount and unamortized loan origination fees received on debt securities.

(2) Represents cumulative unrealized gain beginning from acquisition date.

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DEBT

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

DEBT

5. DEBT

A summary of our consolidated debt is as follows:

	Weighted-Average
	Effective Interest Rate as of					Balance as of
	June 30,		December 31,			June 30,		December 31,
($ in thousands)	2023		2022		Current Maturity Date	2023		2022
Line of credit (1)	5.17	%	5.72	%	November 2025	$	352,000	$	235,000
Term loan (2)	3.31		3.90		November 2026		400,000		400,000
Term loan (3)	4.26		4.56		January 2027		400,000		400,000
Fixed-rate mortgage notes	3.40		3.48		January 2027 - May 2031		309,875		380,316
Floating-rate mortgage notes (4)	4.59		4.52		October 2024 - October 2026		207,600		207,600
Total principal amount / weighted-average (5)	4.11	%	4.31	%		$	1,669,475	$	1,622,916
Less: unamortized debt issuance costs						$	(12,751)	$	(14,849)
Add: unamortized mark-to-market adjustment on assumed debt							7,887		8,408
Total debt, net						$	1,664,611	$	1,616,475
Gross book value of properties encumbered by debt						$	895,040	$	970,310

(1) The effective interest rate is calculated based on the Term Secured Overnight Financing Rate (”Term SOFR”) plus an 11.448 basis point adjustment (“Adjusted Term SOFR”), plus a margin ranging from 1.25% to 2.00% depending on our consolidated leverage ratio. As of June 30, 2023, the unused and available portions under the line of credit were approximately $548.0 million and $547.9 million, respectively. The weighted-average interest rate is the all-in interest rate, including the effects of interest rate cap agreements relating to $150.0 million in borrowings under this line of credit. The line of credit is available for general business purposes including, but not limited to, refinancing of existing indebtedness and financing the acquisition of permitted investments, including commercial properties.

(2) The effective interest rate is calculated based on Adjusted Term SOFR, plus a margin ranging from 1.20% to 1.90% depending on our consolidated leverage ratio. Total commitments for this term loan are $400.0 million. The weighted-average interest rate is the all-in interest rate, including the effects of interest rate swap agreements relating to $300.0 million in borrowings under this term loan and an interest rate cap agreement relating to $100.0 million in borrowings under this term loan.

(3) The effective interest rate is calculated based on Adjusted Term SOFR, plus a margin ranging from 1.20% to 1.90% depending on our consolidated leverage ratio. Total commitments for this term loan are $400.0 million. The weighted-average interest rate is the all-in interest rate, including the effects of interest rate swap agreements relating to $350.0 million in borrowings under this term loan and an interest rate cap agreement relating to $50.0 million in borrowings under this term loan.

(4) The effective interest rate is calculated based on either the London Interbank Offered Rate (“LIBOR”) or Adjusted Term SOFR plus a margin. As of both June 30, 2023 and December 31, 2022, our floating-rate mortgage notes were subject to interest rate spreads ranging from 1.55% to 2.50%. The weighted-average interest rate is the all-in interest rate, including the effects of interest rate cap agreements which capped the effective interest rates of our two floating-rate mortgage notes at 4.61% and 4.55%, respectively, as of June 30, 2023.

(5) The weighted-average remaining term of our consolidated borrowings was approximately 3.4 years as of June 30, 2023, excluding the impact of certain extension options.

For the three months ended June 30, 2023 and 2022, the amount of interest incurred related to our consolidated indebtedness, excluding amortization of debt issuance costs, was $20.6 million and $12.1 million, respectively. For the six months ended June 30, 2023 and 2022, the amount of interest incurred related to our consolidated indebtedness, excluding amortization of debt issuance costs, was $40.2 million and $21.8 million, respectively. See “Note 6” for the amount of interest incurred related to the DST Program (as defined below).

As of June 30, 2023, the principal payments due on our consolidated debt during each of the next five years and thereafter were as follows:

(in thousands)	Line of Credit (1)		Term Loans		Mortgage Notes (2)		Total
Remainder of 2023		—		—		996		996
2024		—		—		129,265		129,265
2025		352,000		—		2,360		354,360
2026		—		400,000		84,214		484,214
2027		—		400,000		175,787		575,787
Thereafter		—		—		124,853		124,853
Total principal payments	$	352,000	$	800,000	$	517,475	$	1,669,475

(1) The term of the line of credit may be extended pursuant to two six-month extension options, subject to certain conditions.

(2) A $127.0 million mortgage note matures in October 2024 and the term may be extended pursuant to a one-year extension option, subject to certain conditions. A $115.0 million mortgage note matures in January 2027 and may be extended pursuant to two one-year extension options, subject to certain conditions.

In July 2017, the Financial Conduct Authority (“FCA”) that regulates LIBOR announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee (“ARRC”), which identified the Secured Overnight Financing Rate as its preferred alternative rate for LIBOR in derivatives and other financial contracts. Any changes adopted by the FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.

LIBOR has been phased out and ceased publication after June 2023. As of June 30, 2023, one of our mortgage notes had an initial or extended maturity date beyond June 2023 with exposure to LIBOR. Effective July 1, 2023, we have converted the interest rate of this mortgage note to Term SOFR and our consolidated debt no longer has exposure to LIBOR.

Debt Covenants

Our line of credit, term loans and mortgage note agreements contain various property-level covenants, including customary affirmative and negative covenants. In addition, the line of credit and term loan agreements contain certain corporate-level financial covenants, including leverage ratio, fixed charge coverage ratio and tangible net worth thresholds. We were in compliance with our debt covenants as of June 30, 2023.

Derivative Instruments

To manage interest rate risk for certain of our variable-rate debt, we use interest rate derivative instruments as part of our risk management strategy. These derivatives are designed to mitigate the risk of future interest rate increases by either providing a fixed interest rate or capping the variable interest rate for a limited, pre-determined period of time. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the interest rate swap agreements without exchange of the underlying notional amount. Interest rate caps involve the receipt of variable amounts from a counterparty at the end of each period in which the interest rate exceeds the agreed fixed price. Certain of our variable-rate borrowings are not hedged, and therefore, to an extent, we have ongoing exposure to interest rate movements.

For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss is recorded as a component of accumulated other comprehensive income (loss) (“AOCI”) on the condensed consolidated balance sheets and is reclassified into earnings as interest expense for the same period that the hedged transaction affects earnings, which is when the interest expense is recognized on the related debt. During the next 12 months, we estimate that approximately $18.0 million will be reclassified as a decrease to interest expense related to active effective hedges of existing floating-rate debt.

As of June 30, 2023, we have two interest rate cap derivative instruments that are not designated as cash flow hedges and therefore, changes in fair value are recognized through income. As a result, in periods with high interest rate volatility, we may experience significant fluctuations in our net income (loss).

The following table summarizes the location and fair value of our consolidated derivative instruments on our condensed consolidated balance sheets:

	Number of			Fair Value
($ in thousands)	Contracts	Notional Amount			Other Assets	Other Liabilities
As of June 30, 2023
Interest rate swaps designated as cash flow hedges	12	$	650,000	$	20,689	$	—
Interest rate caps designated as cash flow hedges	3		300,000		16,208
Interest rate caps not designated as cash flow hedges	2		207,600		1,789		—
Total derivative instruments	17	$	1,157,600	$	38,686	$	—
As of December 31, 2022
Interest rate swaps designated as cash flow hedges	12	$	650,000	$	20,279	$	—
Interest rate caps not designated as cash flow hedges	2		207,600		4,169		—
Total derivative instruments	14	$	857,600	$	24,448	$	—

The following table presents the effect of our consolidated derivative instruments on our condensed consolidated financial statements:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(in thousands)	2023		2022		2023		2022
Derivative instruments designated as cash flow hedges:
Gain (loss) recognized in AOCI	$	14,146	$	787	$	10,146	$	10,862
Amount reclassified from AOCI (out of) into interest expense		(4,038)		1,032		(7,094)		2,951
Total interest expense presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded		37,882		33,774		75,427		58,184
Derivative instruments not designated as cash flow hedges:
Unrealized (loss) gain on derivative instruments recognized in other income (expenses) (1)	$	(1,101)	$	982	$	(2,325)	$	2,532
Realized gain on derivative instruments recognized in other income (expenses) (2)		1,293		—		2,414		—

(1) Unrealized (loss) gain on changes in fair value of derivative instruments relates to mark-to-market changes on our derivatives not designated as cash flow hedges.

(2) Realized gain on derivative instruments relates to interim cash settlements for our derivatives not designated as cash flow hedges.

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DST PROGRAM

6 Months Ended

Jun. 30, 2023

Delaware Statutory Trust Program [Abstract]

DST PROGRAM

6. DST PROGRAM

We have a program to raise capital through private placement offerings by selling beneficial interests (“DST Interests”) in specific Delaware statutory trusts holding real properties (the “DST Program”). Under the DST Program, each private placement offers interests in one or more real properties placed into one or more Delaware statutory trusts by AREIT Operating Partnership LP (the “Operating Partnership”) or its affiliates (“DST Properties”).

In order to facilitate additional capital raise through the DST Program, we have made and may continue to offer loans (“DST Program Loans”) to finance a portion of the sale of DST Interests in the trusts holding DST Properties to potential investors. As of June 30, 2023 and December 31, 2022, our DST Program Loans had a combined carrying value of $103.3 million and $81.9 million, respectively, a weighted-average interest rate of 4.86% and 4.47%, respectively, and a weighted-average maturity of 9.1 years and 9.2 years, respectively. We include our investments in DST Program Loans separately on our condensed consolidated balance sheets in the DST Program Loans line item and we include income earned from DST Program Loans in other income on our condensed consolidated statements of operations. Credit loss reserves associated with our DST Program Loans were immaterial as of and for the periods ended June 30, 2023 and 2022.

The following table presents our DST Program activity for the three and six months ended June 30, 2023 and 2022:

		For the Three Months Ended June 30,			For the Six Months Ended June 30,
(in thousands)		2023		2022	2023		2022
DST Interests sold	$	91,712	$	161,861	193,507	$	442,663
DST Interests financed by DST Program Loans		13,300		13,205	27,315		28,032
Income earned from DST Program Loans (1)		1,249		833	2,266		1,501
Financing obligation liability appreciation (2)		1,922		8,525	4,784		12,531
Rent obligation incurred under master lease agreements (2)		14,351		11,603	27,934		20,857

(1) Included in other income and expenses on the condensed consolidated statements of operations.

(2) Included in interest expense on the condensed consolidated statements of operations.

The Operating Partnership retains a fair market value purchase option giving it the right, but not the obligation, to acquire the interests in the Delaware statutory trusts from the investors at a later time in exchange for OP Units. We record DST Interests as financing obligation liabilities for accounting purposes. If we exercise our option to reacquire a DST property by issuing OP units in exchange for DST Interests, we extinguish the financing obligation liability and record the issuance of the OP units as an issuance of equity. During the six months ended June 30, 2023 and 2022, 9.8 million partnership units (“OP Units”) in the “Operating Partnership and 4.8 million OP Units, respectively, were issued in exchange for DST Interests, for a net investment of $84.7 million and $39.4 million, respectively, in accordance with our Umbrella Partnership Real Estate Investment Trust (“UPREIT”) structure.

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FAIR VALUE

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

FAIR VALUE

7. FAIR VALUE

We estimate the fair value of our financial instruments using available market information and valuation methodologies we believe to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of the amounts that we would realize upon disposition of our financial instruments.

Fair Value Measurements on a Recurring Basis

The following table presents our financial instruments measured at fair value on a recurring basis:

							Total
(in thousands)	Level 1		Level 2		Level 3		Fair Value
As of June 30, 2023
Assets:
Derivative instruments	$	—	$	38,686	$	—	$	38,686
Available-for-sale debt securities		—		14,960		70,238		85,198
Total assets measured at fair value	$	—	$	53,646	$	70,238	$	123,884
As of December 31, 2022
Assets:
Derivative instruments	$	—	$	24,448	$	—	$	24,448
Available-for-sale debt securities		—		14,896		—		14,896
Total assets measured at fair value	$	—	$	39,344	$	—	$	39,344

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Derivative Instruments. The derivative instruments are interest rate swaps and interest rate caps whose fair value is estimated using market-standard valuation models. Such models involve using market-based observable inputs, including interest rate curves. We incorporate credit valuation adjustments to appropriately reflect both our nonperformance risk and respective counterparty’s nonperformance risk in the fair value measurements, which we have concluded are not material to the valuation. Due to these derivative instruments being unique and not actively traded, the fair value is classified as Level 2. See “Note 5” above for further discussion of our derivative instruments.

Available-for-Sale Debt Securities. The available-for-sale debt securities are either preferred equity investments in real estate properties or CRE CLOs. The fair value for CRE CLOs are estimated using third-party broker quotes, which provide valuation estimates based upon contractual cash flows, observable inputs comprising credit spreads and market liquidity. We incorporate credit valuation adjustments to appropriately reflect both our nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements, which we have concluded are not material to the valuation. Due to these CRE CLOs being unique and not actively traded, the fair value is classified as Level 2. Our preferred equity investments are unlikely to have readily available market quotations. In such cases, we will generally determine the initial value based on the acquisition price of such investment if we acquire the investment or the par value of such investment if we originate the investment. Following the initial measurement, we will determine fair value by utilizing or reviewing certain inputs that are generally considered Level 3. As of June 30, 2023, we had one preferred equity investment without a readily available market quotation. The investment was originated in May 2023, and as such, the fair value of the security was determined to equal cost as of June 30, 2023.

Nonrecurring Fair Value Measurements

As of June 30, 2023 and December 31, 2022, the fair values of cash and cash equivalents, restricted cash, tenant receivables, accounts payable and accrued expenses and distributions payable approximate their carrying values because of the short-term nature of these instruments. The table below includes fair values for certain of our financial instruments for which it is practicable to estimate fair value. The carrying values and fair values of these financial instruments were as follows:

	As of June 30, 2023				As of December 31, 2022
	Carrying		Fair		Carrying		Fair
(in thousands)	Value (1)		Value		Value (1)		Value
Assets:
Debt-related investments	$	278,415	$	272,458	$	263,122	$	260,841
DST Program Loans		103,314		99,310		81,897		79,049
Liabilities:
Line of credit	$	352,000	$	352,000	$	235,000	$	235,000
Term loans		800,000		800,000		800,000		800,000
Mortgage notes		517,475		477,969		587,916		541,558

(1) The carrying value reflects the principal amount outstanding.

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EQUITY

6 Months Ended

Jun. 30, 2023

Equity [Abstract]

EQUITY

8. EQUITY

Public Offerings

We intend to conduct a continuous public offering that will not have a predetermined duration, subject to continued compliance with the rules and regulations of the SEC and applicable state laws. On May 3, 2022, the SEC declared our registration statement on Form S-11 with respect to our fourth public offering of up to $10.0 billion of shares of its common stock effective, and the fourth public offering commenced the same day. We ceased selling shares of our common stock under our third public offering of up to $3.0 billion of shares immediately upon the effectiveness of the registration statement for the fourth public offering. Under the fourth public offering, we are offering up to $8.5 billion of shares of our common stock in the primary offering and up to $1.5 billion of shares of our common stock pursuant to our distribution reinvestment plan, in any combination of Class T shares, Class D shares, Class S shares and Class I shares. We may reallocate amounts between the primary offering and distribution reinvestment plan.

Pursuant to our public offerings, we offered and continue to offer shares of our common stock at the “transaction price,” plus applicable upfront selling commissions and dealer manager fees. The “transaction price” generally is equal to the net asset value (“NAV”) per share of our common stock most recently disclosed. Our NAV per share is calculated as of the last calendar day of each month for each of our outstanding classes of stock, and will be available generally within 15 calendar days after the end of the applicable month. Shares issued pursuant to our distribution reinvestment plan are offered at the transaction price, as indicated above, in effect on the distribution date. We may update a previously disclosed transaction price in cases where we believe there has been a material change (positive or negative) to our NAV per share relative to the most recently disclosed monthly NAV per share.

During the six months ended June 30, 2023, we raised gross proceeds of approximately $83.8 million from the sale of approximately 9.5 million shares of our common stock in our ongoing public offerings, including proceeds from our distribution reinvestment plan of approximately $16.0 million.

Common Stock

The following table describes the changes in each class of common shares during the periods presented below:

	Class T	Class S	Class D	Class I	Class E	Total
(in thousands)	Shares	Shares	Shares	Shares	Shares	Shares
FOR THE THREE MONTHS ENDED JUNE 30, 2022
Balance as of March 31, 2022	19,007	40,489	7,662	59,433	55,451	182,042
Issuance of common stock:
Primary shares	2,634	5,663	388	5,165	—	13,850
Distribution reinvestment plan	100	200	38	305	186	829
Redemptions of common stock	(30)	(189)	(141)	(201)	(1,059)	(1,620)
Conversions	(39)	—	—	39	—	—
Balance as of June 30, 2022	21,672	46,163	7,947	64,741	54,578	195,101
FOR THE THREE MONTHS ENDED JUNE 30, 2023
Balance as of March 31, 2023	28,173	49,899	7,439	69,387	52,550	207,448
Issuance of common stock:
Primary shares	1,182	997	31	987	—	3,197
Distribution reinvestment plan	139	232	37	339	178	925
Redemptions of common stock	(735)	(1,378)	(189)	(2,717)	(1,681)	(6,700)
Conversions	(18)	—	(91)	109	—	—
Balance as of June 30, 2023	28,741	49,750	7,227	68,105	51,047	204,870
FOR THE SIX MONTHS ENDED JUNE 30, 2022
Balance as of December 31, 2021	16,425	35,757	6,749	54,406	56,328	169,665
Issuance of common stock:
Primary shares	5,189	10,324	1,493	10,183	—	27,189
Distribution reinvestment plan	192	393	75	607	388	1,655
Redemptions of common stock	(33)	(311)	(370)	(556)	(2,138)	(3,408)
Conversions	(101)	—	—	101	—	—
Balance as of June 30, 2022	21,672	46,163	7,947	64,741	54,578	195,101
FOR THE SIX MONTHS ENDED JUNE 30, 2023
Balance as of December 31, 2022	26,884	49,237	7,871	69,142	52,974	206,108
Issuance of common stock:
Primary shares	2,507	1,969	76	3,104	—	7,656
Distribution reinvestment plan	273	459	77	670	353	1,832
Redemptions of common stock	(804)	(1,939)	(429)	(5,274)	(2,280)	(10,726)
Conversions	(119)	24	(368)	463	—	—
Balance as of June 30, 2023	28,741	49,750	7,227	68,105	51,047	204,870

Distributions

The following table summarizes our distribution activity (including distributions to noncontrolling interests and distributions reinvested in shares of our common stock) for the periods below:

	Amount
			Common Stock
	Declared per		Distributions		Other Cash		Reinvested in		Distribution		Gross
(in thousands, except per share data)	Common Share (1)		Paid in Cash		Distributions (2)		Shares		Fees (3)		Distributions (4)
2023
March 31	$	0.09375	$	9,912	$	5,271	$	8,009	$	1,461	$	24,653
June 30		0.09375		9,896		5,510		7,974		1,463		24,843
Total	$	0.18750	$	19,808	$	10,781	$	15,983	$	2,924	$	49,496
2022
March 31	$	0.09375	$	8,837	$	3,018	$	6,876	$	1,030	$	19,761
June 30		0.09375		9,299		3,157		7,362		1,259		21,077
September 30		0.09375		9,684		3,972		7,732		1,399		22,787
December 31		0.09375		9,859		4,559		7,923		1,478		23,819
Total	$	0.37500	$	37,679	$	14,706	$	29,893	$	5,166	$	87,444

(1) Amount reflects the total gross quarterly distribution rate authorized by our board of directors per Class T share, per Class S share, per Class D share, per Class I share and per Class E share of common stock. Distributions were declared and paid as of monthly record dates. These monthly distributions have been aggregated and presented on a quarterly basis. The distributions on Class T shares, Class S shares and Class D shares of common stock are reduced by the respective distribution fees that are payable with respect to Class T shares, Class S shares and Class D shares.

(2) Consists of distribution fees paid to Ares Wealth Management Solutions, LLC (the “Dealer Manager”) with respect to OP Units and distributions paid to holders of OP Units and other noncontrolling interest holders.

(3) Distribution fees are paid monthly to the Dealer Manager, with respect to Class T shares, Class S shares and Class D shares issued in the primary portion of our public offerings only. All or a portion of these amounts will be retained by, or reallowed (paid) to, participating broker-dealers and servicing broker-dealers.

(4) Gross distributions are total distributions before the deduction of any distribution fees relating to Class T shares, Class S shares and Class D shares issued in the primary portion of our public offerings.

Redemptions and Repurchases

Below is a summary of redemptions and repurchases pursuant to our share redemption program for the six months ended June 30, 2023 and 2022. All eligible redemption requests were fulfilled for the periods presented. Eligible redemption requests are requests submitted in good order by the request submission deadline set forth in the share redemption program. Our board of directors may modify or suspend our current share redemption programs if it deems such action to be in the best interest of our stockholders.

	For the Six Months Ended June 30,
(in thousands, except for per share data)	2023		2022
Number of shares redeemed or repurchased		10,726		3,408
Aggregate dollar amount of shares redeemed or repurchased	$	93,319	$	28,500
Average redemption or repurchase price per share	$	8.70	$	8.37

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REDEEMABLE NONCONTROLLING INTERESTS

6 Months Ended

Jun. 30, 2023

Redeemable Noncontrolling Interest [Abstract]

REDEEMABLE NONCONTROLLING INTERESTS

9. REDEEMABLE NONCONTROLLING INTERESTS

The Operating Partnership’s net income and loss will generally be allocated to the general partner and the limited partners in accordance with the respective percentage interest in the OP Units issued by the Operating Partnership.

The Operating Partnership issued OP Units to the Advisor and Black Creek Diversified Property Advisors Group LLC (the “Former Sponsor”) as payment of the performance participation allocation (also referred to as the performance component of the advisory fee) pursuant to the advisory agreement. We have classified these OP Units as redeemable noncontrolling interests in mezzanine equity on the condensed consolidated balance sheets. The redeemable noncontrolling interests are recorded at the greater of the carrying amount, adjusted for its share of the allocation of income or loss and dividends, or the redemption value, which is equivalent to fair value, of such OP Units at the end of each measurement period. As of both June 30, 2023 and December 31, 2022, we had 2.0 million redeemable OP Units outstanding.

The following table summarizes the redeemable noncontrolling interests activity for the six months ended June 30, 2023 and 2022:

	For the Six Months Ended June 30,
($ in thousands)	2023		2022
Balance at beginning of the year	$	18,130	$	8,994
Settlement of prior year performance participation allocation (1)		—		15,327
Distributions to redeemable noncontrolling interests		(384)		(351)
Redemptions to redeemable noncontrolling interests (2)		—		(7,724)
Net (loss) income attributable to redeemable noncontrolling interests		(244)		186
Change from securities and cash flow hedging activities attributable to redeemable noncontrolling interests		23		136
Redemption value allocation adjustment to redeemable noncontrolling interests (3)		(243)		1,596
Ending balance	$	17,282	$	18,164

(1) There were no OP Units issued related to the 2022 performance participation allocation, as the $23.7 million payable as of December 31, 2022 was, at the election of the Advisor, settled in cash in January 2023. The 2021 performance participation allocation in the amount of $15.3 million became payable on December 31, 2021, and was issued as 1.9 million Class I OP Units in January 2022. At the direction of the Advisor and in light of our Former Sponsor having been the holder of a separate series of partnership interests in the Operating Partnership with special distribution rights (the “Special Units”) for the first six months of 2021, the holder of the Special Units designated 465,000 of these Class I OP Units to an entity owned indirectly by our Chairman at the time, Mr. Mulvihill, and 465,000 of these Class I OP Units to an entity owned indirectly by a member of our Former Sponsor. The holder of the Special Units transferred 945,000 Class I OP Units to the Advisor thereafter.

(2) At the request of the Advisor, the Operating Partnership redeemed all Class I OP Units issued to the Advisor in January 2022 for $7.7 million.

(3) Represents the adjustment recorded in order to mark to the redemption value, which is equivalent to fair value, at the end of the measurement period.

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NONCONTROLLING INTERESTS

6 Months Ended

Jun. 30, 2023

Noncontrolling Interest [Abstract]

NONCONTROLLING INTERESTS

10. NONCONTROLLING INTERESTS

OP Units

The following table summarizes the number of OP Units issued and outstanding to third-party investors (excludes interests held by redeemable noncontrolling interest holders):

	For the Six Months Ended June 30,
(in thousands)	2023		2022
Balance at beginning of period		55,079		27,180
Issuance of units		9,845		4,825
Redemption of units		(1,831)		(407)
Balance at end of period		63,093		31,598

Subject to certain restrictions and limitations, the holders of OP Units may redeem all or a portion of their OP Units for either: shares of the equivalent class of common stock, cash or a combination of both. If we elect to redeem OP Units for shares of our common stock, we will generally deliver one share of our common stock for each such OP Unit redeemed (subject to any redemption fees withheld), and such shares may, subsequently, only be redeemed for cash in accordance with the terms of our share redemption program. If we elect to redeem OP Units for cash, the cash delivered per unit will equal the then-current NAV per unit of the applicable class of OP Units (subject to any redemption fees withheld), which will equal the then-current NAV per share of our corresponding class of shares. During the three months ended June 30, 2023 and 2022, the aggregate amount of OP Units redeemed was $5.1 million and $1.1 million, respectively. During the six months ended June 30, 2023 and 2022, the aggregate amount of OP Units redeemed was $16.0 million and $3.4 million, respectively. The estimated maximum redemption value (unaudited) as of June 30, 2023 and December 31, 2022 was $533.2 million and $488.3 million, respectively.

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RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2023

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

11. RELATED PARTY TRANSACTIONS

Summary of Fees and Expenses

The table below summarizes the fees and expenses incurred by us for services provided by the Advisor and its affiliates, and by the Dealer Manager related to the services the Dealer Manager provided in connection with our public offerings and any related amounts payable:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,				Payable as of
(in thousands)	2023		2022		2023		2022		June 30, 2023		December 31, 2022
Selling commissions and dealer manager fees (1)	$	448	$	1,238	$	960	$	2,280	$	—	$	—
Ongoing distribution fees (1)(2)		2,190		1,576		4,344		2,874		759		748
Advisory fees—fixed component		9,623		8,227		19,161		15,370		2,890		2,868
Performance participation allocation (3)		—		6,186		—		18,379		—		23,747
Other expense reimbursements—Advisor (4)(5)		3,749		3,206		6,855		5,346		4,158		4,192
Other expense reimbursements—Dealer Manager		160		143		160		170		82		109
Property accounting fee (6)		481		303		970		303		481		478
DST Program selling commissions, dealer manager and distribution fees (1)		2,072		5,660		4,743		13,184		254		241
Other DST Program related costs—Advisor (5)		1,627		3,490		3,558		8,441		162		146
Total	$	20,350	$	30,029	$	40,751	$	66,347	$	8,786	$	32,529

(1) All or a portion of these amounts will be retained by, or reallowed (paid) to, participating broker-dealers and servicing broker-dealers.

(2) The distribution fees are payable monthly in arrears. Additionally, we accrue for future estimated amounts payable related to ongoing distribution fees. The future estimated amounts payable of approximately $63.3 million and $60.9 million as of June 30, 2023 and December 31, 2022, respectively, are included in other liabilities on the condensed consolidated balance sheets.

(3) The 2022 performance participation allocation in the amount of $23.7 million became payable on December 31, 2022, and the Advisor elected to settle the amounts owed in cash in January 2023.

(4) Other expense reimbursements include certain expenses incurred for organization and offering, acquisition and general administrative services provided to us under the advisory agreement, including, but not limited to, certain expenses described below after footnote 6, allocated rent paid to both third parties and affiliates of our Advisor, equipment, utilities, insurance, travel and entertainment.

(5) Includes costs reimbursed to the Advisor related to the DST Program.

(6) The cost of the property management fee, including the property accounting fee, is generally borne by the tenant or tenants at each real property, either via a direct reimbursement to us or, in the case of tenants subject to a gross lease, as part of the lease cost. In certain circumstances, we may pay for a portion of the property management fee, including the property accounting fee, without reimbursement from the tenant or tenants at a real property.

Certain of the expense reimbursements described in the table above include a portion of the compensation expenses of officers and employees of the Advisor or its affiliates related to activities for which the Advisor did not otherwise receive a separate fee. Amounts incurred related to these compensation expenses for the three months ended June 30, 2023, and 2022 were approximately $3.5 million and $2.9 million, respectively. Amounts incurred related to these compensation expenses for the six months ended June 30, 2023, and 2022 were approximately $6.3 million and $5.4 million, respectively. No reimbursement is made for compensation of our named executive officers unless the named executive officer is providing stockholder services, as outlined in the advisory agreement.

Advisory Agreement

Ares Real Estate Income Trust Inc., the Operating Partnership and the Advisor previously entered into that certain Amended and Restated Advisory Agreement (2022), effective as of May 1, 2022 (the “2022 Advisory Agreement”). The term of the 2022 Advisory Agreement continued through April 30, 2023, subject to an unlimited number of successive one-year renewals. Ares Real Estate Income Trust Inc., the Operating Partnership and the Advisor renewed the 2022 Advisory Agreement on substantially the same terms through April 30, 2024, by entering into the Amended and Restated Advisory Agreement (2023) (the “2023 Advisory Agreement”), effective as of April 30, 2023.

On June 3, 2023, Ares Real Estate Income Trust Inc., the Operating Partnership and the Advisor amended and restated the 2023 Advisory Agreement by entering into the Second Amended and Restated Advisory Agreement (2023) (the “Amended Advisory Agreement”). The Amended Advisory Agreement amends the 2023 Advisory Agreement to provide that if the Company engages affiliates of the Advisor (“Product Specialists”) to provide certain specialist services to the Company, the Operating Partnership or any of their subsidiaries pursuant to a separate agreement approved by the Company’s independent directors, the fees and expense reimbursements paid to the Product Specialist will not be subject to the provisions of the Advisory Agreement or affect the compensation and expense reimbursements paid to the Advisor and its affiliates for services provided pursuant to the Advisory Agreement. Other immaterial changes were also made in the Amended Advisory Agreement.

Limited Partnership Agreement

On June 3, 2023, Ares Real Estate Income Trust Inc. and AREIT Incentive Fee LP, an affiliate of our Advisor, replaced the then-current limited partnership agreement of the Operating Partnership by entering into a Twelfth Amended and Restated Limited Partnership Agreement (the “Amended OP Agreement”). The Amended OP Agreement authorizes Ares Real Estate Income Trust Inc., as general partner, to cause the Operating Partnership to issue profits interests in the Operating Partnership in multiple series via award letters with the rights and obligations of such profits interests set forth in such award letters or an exhibit thereto. Other immaterial changes were also made in the Amended OP Agreement.

Student Housing Investment Arrangement

The changes in the Amended Advisory Agreement and Amended OP Agreement were made in contemplation of a Project Specialist arrangement in student housing investments. Under this arrangement, affiliates of Timberline Real Estate Ventures (“Timberline”), a fully integrated, operationally focused privately held real estate operator and investment manager specializing in the development, acquisition and operation of student housing, multifamily, and mixed-use retail/residential communities, will enter into a joint venture with affiliates of the Advisor to create a Product Specialist (collectively, with its affiliated entities, the “Student Housing Product Specialist”). The Company will, through the Operating Partnership and their subsidiaries, enter into the agreements described in further detail below with the Student Housing Product Specialist in connection with student housing investments. More specifically, for each student housing investment by the Company made through the Student Housing Product Specialist, the Student Housing

Product Specialist will be retained under a management services agreement, engaged as property manager under a property management agreement and receive a profits interest through the Operating Partnership in such investment. The Advisor or its affiliates will have an economic interest in these agreements except the profits interests, with respect to which the Advisor and its affiliates will have no economic interest.

Each such student housing investment will be made through a subsidiary of the Company (each, an “AREIT TREV Vehicle”) that will be 100% owned, managed and controlled by the Company as the managing member of the operating company. The Company will have the sole authority to make and approve all decisions and take all actions with respect to and on behalf of each AREIT TREV Vehicle, subject to certain limited fundamental decisions which will require the consent of both the Company and the Student Housing Product Specialist. The Student Housing Product Specialist will be the non-economic administrative member of each AREIT TREV Vehicle, required to participate in and oversee the day-to-day business, affairs, management, operation and administration of the AREIT TREV Vehicle and be responsible for implementing the business plan and budget approved by the Company and otherwise implementing the Company’s decisions. If there is any material default or breach by the Student Housing Product Specialist of its obligations under the ARES TREV Vehicle’s operating agreement or the management services agreement (described below) that remains uncured (beyond any applicable notice and cure periods), the Company will have the right to remove the Student

Housing Product Specialist as the administrative member and terminate the management services agreement, the property management agreement and the profits interest.

Pursuant to a management services agreement, in consideration for the sourcing of student housing investments by the Student Housing Product Specialist, the Student Housing Product Specialist will be paid a reasonable market rate acquisition fee by the AREIT TREV Vehicle. In addition, in consideration of supervision of property management by the Student Housing Product Specialist, as well as management of the Company investment and certain accounting and tax reporting duties, the Student Housing Product Specialist will be paid a property management oversight fee by the AREIT TREV Vehicle based on reasonable market rates for such duties. To the extent that renovation work with respect to a Company investment is approved by the Company, the Student Housing Project Specialist will be paid a reasonable market rate construction management fee. If the Student Housing Product Specialist is removed as the administrative member of the applicable AREIT TREV Vehicle, or if there is an uncured breach under the management services agreement, the Company may terminate the management services agreement without penalty. Additionally, the management services agreement will terminate automatically on its terms (without penalty) upon the sale of the applicable property.

At the closing of each of our student housing investments, the AREIT TREV Vehicle will enter into a property management agreement with the Student Housing Project Specialist pursuant to which it will perform property management services in exchange for a property management fee consistent with the local market where our applicable investment is located as well as its size, scope and rental rates and otherwise consistent with an agreed fee schedule; provided that such fees will be payable on a percentage of revenue basis, considering local market rates, total number of beds and overall gross potential rent, subject to reasonable market rate minimum per investment. If (a) the Student Housing Project Specialist is removed as the administrative member of the applicable AREIT TREV Vehicle or (b) there is a bad act (e.g., gross negligence, willful misconduct) or an uncured breach by the Student Housing Project Specialist under the property management agreement, the Company may terminate the agreement without penalty. The Company may also terminate the property management agreement for convenience upon 30 days prior written notice to the Student Housing Project Specialist or if certain operating performance metrics of the property are not met, and the property management agreement automatically terminates on its terms upon the sale of the applicable property; however, if any of the foregoing terminations occurs prior to the one year anniversary of the effective date, property management fees through the first year anniversary will be due to the Student Housing Project Specialist.

With respect to each student housing investment made under this arrangement, an affiliate of the Student Housing Project Specialist will receive a profits interest through the Operating Partnership, with respect to which the Advisor and its affiliates will have no economic interest.

As of and for the periods ended June 30, 2023, there have been no student housing investments made through this arrangement nor have any fees been incurred with the Student Housing Product Specialist.

Performance Participation Allocation

As used below, “Fund Interests” means our outstanding shares of common stock, along with OP Units, which may be or were held directly or indirectly by the Advisor, the Former Sponsor, members or affiliates of the Former Sponsor, and third parties.

The performance participation allocation is a performance-based amount that will be paid to the Advisor. This amount is calculated on the basis of the overall investment return provided to holders of Fund Interests (i.e., our outstanding shares and OP Units held by third-party investors) in any calendar year such that the Advisor will receive the lesser of (1) 12.5% of (a) the annual total return amount less (b) any loss carryforward, and (2) the amount equal to (x) the annual total return amount, less (y) any loss carryforward, less (z) the amount needed to achieve an annual total return amount equal to 5% of the NAV per Fund Interest at the beginning of such year (the “Hurdle Amount”). The foregoing calculations are calculated on a per Fund Interest basis and multiplied by the weighted-average Fund Interests outstanding during the year. In no event will the performance participation allocation be less than zero. Accordingly, if the annual total return amount exceeds the Hurdle Amount plus the amount of any loss carryforward, then the Advisor will earn a performance participation allocation equal to 100% of such excess, but limited to 12.5% of the annual total return amount that is in excess of the loss carryforward. Additionally, the Advisor will provide us with a waiver of a portion of its fees generally equal to the amount of the performance component that would have been payable with respect to the Class E shares and the Series 1 Class E OP Units held by third parties until the NAV of such shares or units exceeds $10.00 a share or unit, the benefit of which will be shared among all holders of Fund Interests.

The allocation of the performance participation interest is ultimately determined at the end of each calendar year and will be paid in Class I OP units or cash, at the election of the Advisor. The performance hurdle was not achieved as of June 30, 2023, therefore no performance participation allocation expense was recognized in our condensed consolidated statements of operations for the six months ended June 30, 2023. As the performance hurdle was achieved as of June 30, 2022, we recognized approximately $6.2 million for the three months ended June 30, 2022 and $18.4 million for the six months ended June 30, 2022, respectively, of performance participation allocation expense in our condensed consolidated statements of operations.

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NET INCOME (LOSS) PER COMMON SHARE

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

NET INCOME (LOSS) PER COMMON SHARE

12. NET INCOME (LOSS) PER COMMON SHARE

The computation of our basic and diluted net income (loss) per share attributable to common stockholders is as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands, except per share data)	2023		2022		2023		2022
Net (loss) income attributable to common stockholders—basic	$	(22,750)	$	(5,588)	$	(24,754)	$	15,423
Net (loss) income attributable to redeemable noncontrolling interests		(226)		(60)		(244)		186
Net (loss) income attributable to noncontrolling interests		(6,278)		(919)		(6,827)		2,618
Net (loss) income attributable to common stockholders—diluted	$	(29,254)	$	(6,567)	$	(31,825)	$	18,227
Weighted-average shares outstanding—basic		206,214		191,158		206,493		184,878
Incremental weighted-average shares effect of conversion of noncontrolling interests		58,749		33,699		57,482		32,928
Weighted-average shares outstanding—diluted		264,963		224,857		263,975		217,806
Net (loss) income per share attributable to common stockholders:
Basic	$	(0.11)	$	(0.03)	$	(0.12)	$	0.08
Diluted	$	(0.11)	$	(0.03)	$	(0.12)	$	0.08

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SUPPLEMENTAL CASH FLOW INFORMATION

6 Months Ended

Jun. 30, 2023

Cash and Cash Equivalents [Abstract]

SUPPLEMENTAL CASH FLOW INFORMATION

13. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information and disclosure of non-cash investing and financing activities is as follows:

	For the Six Months Ended June 30,
(in thousands)	2023		2022
Supplemental disclosure of non-cash investing and financing activities:
Distributions reinvested in common stock	$	15,979	$	13,922
Increase in accrued future ongoing distribution fees		2,342		11,908
Increase in DST Program Loans receivable through DST Program capital raising		27,315		28,032
Redeemable noncontrolling interest issued as settlement of performance participation allocation		—		15,327
Issuances of OP Units for DST Interests		84,725		39,441

Restricted Cash

Restricted cash consists of lender and property-related escrow accounts. The following table presents the components of the beginning of period and end of period cash, cash equivalents and restricted cash reported within the condensed consolidated statements of cash flows:

	For the Six Months Ended June 30,
(in thousands)	2023		2022
Beginning of period:
Cash and cash equivalents	$	13,336	$	10,605
Restricted cash		3,850		3,747
Cash, cash equivalents and restricted cash	$	17,186	$	14,352
End of period:
Cash and cash equivalents	$	12,905	$	19,529
Restricted cash		4,265		4,909
Cash, cash equivalents and restricted cash	$	17,170	$	24,438

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

14. COMMITMENTS AND CONTINGENCIES

Litigation

We and the Operating Partnership are not presently involved in any material litigation nor, to our knowledge, is any material litigation threatened against us or our investments.

Environmental Matters

A majority of the properties we acquire have been or will be subject to environmental reviews either by us or the previous owners. In addition, we may incur environmental remediation costs associated with certain land parcels we may acquire in connection with the development of land. We have acquired or may in the future acquire certain properties in urban and industrial areas that may have been leased to or previously owned by commercial and industrial companies that discharged hazardous materials. We may purchase various environmental insurance policies to mitigate our exposure to environmental liabilities. We are not aware of any environmental liabilities that we believe would have a material adverse effect on our business, financial condition, or results of operations as of June 30, 2023.

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SEGMENT FINANCIAL INFORMATION

6 Months Ended

Jun. 30, 2023

Segment Reporting [Abstract]

SEGMENT FINANCIAL INFORMATION

15. SEGMENT FINANCIAL INFORMATION

Our five reportable segments are office properties, retail properties, residential properties, industrial properties, and investments in real estate debt and securities. We have determined that investments in real estate debt and securities is a reportable segment, and we expect that the segment will continue to be of significance. As such, we have broken out investments in real estate debt and securities as a reportable segment in the tables below for all current and prior periods presented. Factors used to determine our reportable segments include the physical and economic characteristics of our properties and/or investments and the related operating activities. Our chief operating decision makers rely on net operating income, among other factors, to make decisions about allocating resources and assessing segment performance. Net operating income is the key performance metric that captures the unique operating characteristics of each segment. Net investment in real estate properties, investments in real estate debt and securities, restricted cash, tenant receivables, straight-line rent receivables and other assets directly assignable to a property or investment are allocated to the segment groupings. Corporate items that are not directly assignable to a property, such as investments in unconsolidated joint venture partnerships and DST Program Loans, are not allocated to segment groupings, but are reflected as reconciling items.

The following table reflects our total consolidated assets by business segment as of June 30, 2023 and December 31, 2022:

	As of
(in thousands)	June 30, 2023		December 31, 2022
Assets:
Office properties	$	379,863	$	377,546
Retail properties		514,625		537,147
Residential properties		1,479,797		1,495,532
Industrial properties		1,273,746		1,248,255
Investments in real estate debt and securities		353,879		275,335
Corporate		282,581		240,909
Total assets	$	4,284,491	$	4,174,724

The following table is a reconciliation of our reported net income (loss) attributable to common stockholders to our net operating income for the three and six months ended June 30, 2023 and 2022:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(in thousands)	2023		2022		2023		2022
Net (loss) income attributable to common stockholders	$	(22,750)	$	(5,588)	$	(24,754)	$	15,423
Real estate-related depreciation and amortization		33,858		36,903		67,055		64,354
General and administrative expenses		2,973		2,594		6,017		4,631
Advisory fees		9,623		8,227		19,161		15,370
Performance participation allocation		—		6,186		—		18,379
Acquisition costs and reimbursements		1,849		1,093		3,018		2,722
Impairment loss on debt-related investment held for sale		1,260		—		3,780		—
Equity in loss (income) from unconsolidated joint venture partnerships		203		(1,718)		2,649		(708)
Interest expense		37,882		33,774		75,427		58,184
Gain on sale of real estate property		—		(29,643)		(36,884)		(83,524)
Loss on extinguishment of debt and financing commitments, net		—		—		700		—
Gain on derivative instruments		(192)		(982)		(89)		(2,532)
Provision for current expected credit losses		(1,632)		—		3,998		—
Other income		(1,016)		(423)		(2,032)		(1,000)
Net (loss) income attributable to redeemable noncontrolling interests		(226)		(60)		(244)		186
Net (loss) income attributable to noncontrolling interests		(6,278)		(919)		(6,827)		2,618
Net operating income	$	55,554	$	49,444	$	110,975	$	94,103

The following table sets forth consolidated financial results by segment for the three and six months ended June 30, 2023 and 2022:

									Debt and
(in thousands)	Office		Retail		Residential		Industrial		Securities		Consolidated
For the Three Months Ended June 30, 2023
Rental revenues	$	13,001	$	14,288	$	28,823	$	21,092	$	—	$	77,204
Debt-related income		—		—		—		—		7,189		7,189
Rental expenses		(6,442)		(3,775)		(14,070)		(4,552)		—		(28,839)
Net operating income	$	6,559	$	10,513	$	14,753	$	16,540	$	7,189	$	55,554
Real estate-related depreciation and amortization	$	4,203	$	4,043	$	9,950	$	15,662	$	—	$	33,858
For the Three Months Ended June 30, 2022
Rental revenues	$	13,148	$	16,509	$	25,824	$	18,013	$	—	$	73,494
Debt-related income		—		—		—		—		846		846
Rental expenses		(5,772)		(3,776)		(11,059)		(4,289)		—		(24,896)
Net operating income	$	7,376	$	12,733	$	14,765	$	13,724	$	846	$	49,444
Real estate-related depreciation and amortization	$	4,243	$	4,474	$	16,038	$	12,148	$	—	$	36,903
For the Six Months Ended June 30, 2023
Rental revenues	$	26,350	$	28,806	$	57,671	$	42,337	$	—	$	155,164
Debt-related income		—		—		—		—		12,950		12,950
Rental expenses		(13,072)		(7,359)		(27,260)		(9,448)		—		(57,139)
Net operating income	$	13,278	$	21,447	$	30,411	$	32,889	$	12,950	$	110,975
Real estate-related depreciation and amortization	$	8,166	$	8,078	$	19,439	$	31,372	$	—	$	67,055
For the Six Months Ended June 30, 2022
Rental revenues	$	26,780	$	33,576	$	42,178	$	33,465	$	—	$	135,999
Debt-related income		—		—		—		—		4,314		4,314
Rental expenses		(11,963)		(8,405)		(18,004)		(7,838)		—		(46,210)
Net operating income	$	14,817	$	25,171	$	24,174	$	25,627	$	4,314	$	94,103
Real estate-related depreciation and amortization	$	8,240	$	9,128	$	24,392	$	22,594	$	—	$	64,354

We consider net operating income to be an appropriate supplemental performance measure and believe net operating income provides useful information to our investors regarding our financial condition and results of operations because net operating income reflects the operating performance of our properties and excludes certain items that are not considered to be controllable in connection with the management of the properties, such as real estate-related depreciation and amortization, general and administrative expenses, advisory fees, impairment charges, interest expense, gains on sale of properties, other income and expense, gains and losses on the extinguishment of debt and noncontrolling interests. However, net operating income should not be viewed as an alternative measure of our financial performance since it excludes such items, which could materially impact our results of operations. Further, our net operating income may not be comparable to that of other real estate companies, as they may use different methodologies for calculating net operating income. Therefore, we believe net income, as defined by GAAP, to be the most appropriate measure to evaluate our overall financial performance.

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INVESTMENTS IN REAL ESTATE PROPERTIES (Tables)

6 Months Ended

Jun. 30, 2023

Real Estate [Abstract]

Schedule of Consolidated Investments in Real Estate Properties

The following table summarizes our consolidated investments in real estate properties.

	As of
(in thousands)	June 30, 2023		December 31, 2022
Land	$	693,097	$	694,998
Buildings and improvements		3,203,625		3,152,553
Intangible lease assets		316,588		317,141
Right of use asset		13,637		13,637
Investment in real estate properties		4,226,947		4,178,329
Accumulated depreciation and amortization		(631,330)		(572,751)
Net investment in real estate properties	$	3,595,617	$	3,605,578

Schedule of Asset Acquisitions

During the six months ended June 30, 2023, we acquired 100% of the following properties through asset acquisitions:

($ in thousands)	Property Type	Acquisition Date	Total Purchase Price (1)
2023 Acquisitions:
VM8 Logistics Center	Industrial	1/19/2023	$	17,511
Moreno Valley Distribution Center	Industrial	5/2/2023		33,421
Total 2023 acquisitions			$	50,932

(1) Total purchase price is equal to the total consideration paid plus any debt assumed at fair value. There was no debt assumed in connection with the 2023 acquisitions.

Allocation of Purchase Price Allocations

During the six months ended June 30, 2023, we allocated the purchase price of our acquisitions to land, building and improvements and intangible lease assets as follows:

	For the Six Months Ended
($ in thousands)	June 30, 2023
Land	$	6,121
Building and improvements		41,547
Intangible lease assets		3,052
Above-market lease assets		212
Total purchase price (1)	$	50,932

(1) Total purchase price is equal to the total consideration paid plus any debt assumed at fair value. There was no debt assumed in connection with the 2023 acquisitions.

Schedule of Intangible Lease Assets and Liabilities

Intangible lease assets and liabilities as of June 30, 2023 and December 31, 2022 include the following:

	As of June 30, 2023						As of December 31, 2022
			Accumulated						Accumulated
(in thousands)	Gross		Amortization		Net		Gross		Amortization		Net
Intangible lease assets (1)	$	293,443	$	(223,894)	$	69,549	$	294,208	$	(214,201)	$	80,007
Above-market lease assets (1)		23,145		(20,106)		3,039		22,933		(19,707)		3,226
Below-market lease liabilities		(73,331)		34,222		(39,109)		(76,033)		33,589		(42,444)

(1) Included in net investment in real estate properties on the condensed consolidated balance sheets.

Summary of Rental Revenue and Depreciation and Amortization Expense

The following table summarizes straight-line rent adjustments, amortization recognized as an increase (decrease) to rental revenues from above- and below-market lease assets and liabilities and real estate-related depreciation and amortization expense:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Increase (decrease) to rental revenue:
Straight-line rent adjustments	$	674	$	1,240	$	1,742	$	1,966
Above-market lease amortization		(213)		(185)		(399)		(354)
Below-market lease amortization		1,124		1,210		2,138		2,406
Real estate-related depreciation and amortization:
Depreciation expense	$	27,081	$	25,349	$	53,498	$	45,547
Intangible lease asset amortization		6,777		11,554		13,557		18,807

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INVESTMENTS IN UNCONSOLIDATED JOINT VENTURE PARTNERSHIPS (Tables)

6 Months Ended

Jun. 30, 2023

Equity Method Investment And Joint Venture [Abstract]

Equity Method Investments

The following table summarizes our investments in unconsolidated joint venture partnerships as of June 30, 2023 and December 31, 2022:

		As of June 30, 2023		As of December 31, 2022		Investments in Unconsolidated
	Property	Ownership	Number of	Ownership	Number of	Joint Venture Partnerships as of
($ in thousands)	Type	Percentage	Properties	Percentage	Properties	As of June 30, 2023		As of December 31, 2022
Vue 1400 JV	Residential	85%	1	85%	1	$	25,179	$	25,984
Net Lease JV I	Net Lease	50%	15	50%	15		16,255		16,393
Net Lease JV II	Net Lease	50%	117	50%	117		65,296		65,763
Net Lease JV III	Net Lease	50%	28	50%	23		17,345		12,232
Total investments in unconsolidated joint venture partnerships			161		156	$	124,075	$	120,372

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INVESTMENTS IN REAL ESTATE DEBT AND SECURITIES (Tables)

6 Months Ended

Jun. 30, 2023

INVESTMENTS IN REAL ESTATE DEBT AND SECURITIES.

Summary of Debt Related Investments

The following table summarizes our debt-related investments as of June 30, 2023 and December 31, 2022:

					Weighted-Average			Weighted-Average
($ in thousands)	Carrying Amount (1)		Outstanding Principal (1)		Interest Rate			Remaining Life (Years)
As of June 30, 2023
Senior loans (2)	$	161,922	$	169,915		9.5	%		1.7
Mezzanine loans		106,759		108,500		11.2			1.4
Total debt-related investments (2)	$	268,681	$	278,415		10.3	%		1.5
As of December 31, 2022
Senior loans (2)	$	151,645	$	154,622		8.5	%		2.1
Mezzanine loans		108,794		108,500		10.4			1.9
Total debt-related investments (2)	$	260,439	$	263,122		9.5	%		2.0

(1) The difference between the carrying amount and the outstanding principal amount of the debt-related investments consists of unamortized purchase discount, deferred financing costs, loan origination costs, and any recorded credit loss reserves, if applicable.

(2) As of June 30, 2023 and December 31, 2022, carrying amounts include $37.8 million and $42.0 million, respectively, related to one senior loan debt-related investment that was in default and on non-accrual status. Outstanding principal includes $43.8 million related to this senior loan as of June 30, 2023 and December 31, 2022. During the three months ended June 30, 2023, we recorded an impairment loss of $1.3 million, and during the six months ended June 30, 2023, we recorded an impairment loss of $3.8 million related to this senior loan. The impairment loss is included in impairment loss on debt-related investment held for sale on the condensed consolidated statements of operations. This senior loan is held-for-sale and therefore the carrying amount has been reduced to its fair value as of both June 30, 2023 and December 31, 2022. Weighted-average interest rate and weighted-average remaining life excludes this senior loan from its calculations.

Summary of Available-for-Sale Debt Securities

The following table summarizes our investments in available-for-sale debt securities as of June 30, 2023 and December 31, 2022:

					Unamortized Discount
($ in thousands)	Face Amount		Amortized Cost		and Fees (1)		Unrealized Gain, Net (2)		Fair Value
As of June 30, 2023
CRE CLOs	$	14,979	$	14,881	$	98	$	79	$	14,960
Preferred equity		71,236		70,238		998		—		70,238
Total debt securities	$	86,215	$	85,119	$	1,096	$	79	$	85,198
As of December 31, 2022
CRE CLOs	$	14,979	$	14,870	$	109	$	26	$	14,896
Total debt securities	$	14,979	$	14,870	$	109	$	26	$	14,896

(1) Includes unamortized purchase discount and unamortized loan origination fees received on debt securities.

(2) Represents cumulative unrealized gain beginning from acquisition date.

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DEBT (Tables)

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Schedule of Debt

A summary of our consolidated debt is as follows:

	Weighted-Average
	Effective Interest Rate as of					Balance as of
	June 30,		December 31,			June 30,		December 31,
($ in thousands)	2023		2022		Current Maturity Date	2023		2022
Line of credit (1)	5.17	%	5.72	%	November 2025	$	352,000	$	235,000
Term loan (2)	3.31		3.90		November 2026		400,000		400,000
Term loan (3)	4.26		4.56		January 2027		400,000		400,000
Fixed-rate mortgage notes	3.40		3.48		January 2027 - May 2031		309,875		380,316
Floating-rate mortgage notes (4)	4.59		4.52		October 2024 - October 2026		207,600		207,600
Total principal amount / weighted-average (5)	4.11	%	4.31	%		$	1,669,475	$	1,622,916
Less: unamortized debt issuance costs						$	(12,751)	$	(14,849)
Add: unamortized mark-to-market adjustment on assumed debt							7,887		8,408
Total debt, net						$	1,664,611	$	1,616,475
Gross book value of properties encumbered by debt						$	895,040	$	970,310

(1) The effective interest rate is calculated based on the Term Secured Overnight Financing Rate (”Term SOFR”) plus an 11.448 basis point adjustment (“Adjusted Term SOFR”), plus a margin ranging from 1.25% to 2.00% depending on our consolidated leverage ratio. As of June 30, 2023, the unused and available portions under the line of credit were approximately $548.0 million and $547.9 million, respectively. The weighted-average interest rate is the all-in interest rate, including the effects of interest rate cap agreements relating to $150.0 million in borrowings under this line of credit. The line of credit is available for general business purposes including, but not limited to, refinancing of existing indebtedness and financing the acquisition of permitted investments, including commercial properties.

(2) The effective interest rate is calculated based on Adjusted Term SOFR, plus a margin ranging from 1.20% to 1.90% depending on our consolidated leverage ratio. Total commitments for this term loan are $400.0 million. The weighted-average interest rate is the all-in interest rate, including the effects of interest rate swap agreements relating to $300.0 million in borrowings under this term loan and an interest rate cap agreement relating to $100.0 million in borrowings under this term loan.

(3) The effective interest rate is calculated based on Adjusted Term SOFR, plus a margin ranging from 1.20% to 1.90% depending on our consolidated leverage ratio. Total commitments for this term loan are $400.0 million. The weighted-average interest rate is the all-in interest rate, including the effects of interest rate swap agreements relating to $350.0 million in borrowings under this term loan and an interest rate cap agreement relating to $50.0 million in borrowings under this term loan.

(4) The effective interest rate is calculated based on either the London Interbank Offered Rate (“LIBOR”) or Adjusted Term SOFR plus a margin. As of both June 30, 2023 and December 31, 2022, our floating-rate mortgage notes were subject to interest rate spreads ranging from 1.55% to 2.50%. The weighted-average interest rate is the all-in interest rate, including the effects of interest rate cap agreements which capped the effective interest rates of our two floating-rate mortgage notes at 4.61% and 4.55%, respectively, as of June 30, 2023.

(5) The weighted-average remaining term of our consolidated borrowings was approximately 3.4 years as of June 30, 2023, excluding the impact of certain extension options.

Schedule of Maturities of Long-term Debt

As of June 30, 2023, the principal payments due on our consolidated debt during each of the next five years and thereafter were as follows:

(in thousands)	Line of Credit (1)		Term Loans		Mortgage Notes (2)		Total
Remainder of 2023		—		—		996		996
2024		—		—		129,265		129,265
2025		352,000		—		2,360		354,360
2026		—		400,000		84,214		484,214
2027		—		400,000		175,787		575,787
Thereafter		—		—		124,853		124,853
Total principal payments	$	352,000	$	800,000	$	517,475	$	1,669,475

(1) The term of the line of credit may be extended pursuant to two six-month extension options, subject to certain conditions.

(2) A $127.0 million mortgage note matures in October 2024 and the term may be extended pursuant to a one-year extension option, subject to certain conditions. A $115.0 million mortgage note matures in January 2027 and may be extended pursuant to two one-year extension options, subject to certain conditions.

Schedule of Derivative Instruments

The following table summarizes the location and fair value of our consolidated derivative instruments on our condensed consolidated balance sheets:

	Number of			Fair Value
($ in thousands)	Contracts	Notional Amount			Other Assets	Other Liabilities
As of June 30, 2023
Interest rate swaps designated as cash flow hedges	12	$	650,000	$	20,689	$	—
Interest rate caps designated as cash flow hedges	3		300,000		16,208
Interest rate caps not designated as cash flow hedges	2		207,600		1,789		—
Total derivative instruments	17	$	1,157,600	$	38,686	$	—
As of December 31, 2022
Interest rate swaps designated as cash flow hedges	12	$	650,000	$	20,279	$	—
Interest rate caps not designated as cash flow hedges	2		207,600		4,169		—
Total derivative instruments	14	$	857,600	$	24,448	$	—

Schedule of Derivative Instruments, Gain (Loss)

The following table presents the effect of our consolidated derivative instruments on our condensed consolidated financial statements:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(in thousands)	2023		2022		2023		2022
Derivative instruments designated as cash flow hedges:
Gain (loss) recognized in AOCI	$	14,146	$	787	$	10,146	$	10,862
Amount reclassified from AOCI (out of) into interest expense		(4,038)		1,032		(7,094)		2,951
Total interest expense presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded		37,882		33,774		75,427		58,184
Derivative instruments not designated as cash flow hedges:
Unrealized (loss) gain on derivative instruments recognized in other income (expenses) (1)	$	(1,101)	$	982	$	(2,325)	$	2,532
Realized gain on derivative instruments recognized in other income (expenses) (2)		1,293		—		2,414		—

(1) Unrealized (loss) gain on changes in fair value of derivative instruments relates to mark-to-market changes on our derivatives not designated as cash flow hedges.

(2) Realized gain on derivative instruments relates to interim cash settlements for our derivatives not designated as cash flow hedges.

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DST PROGRAM (Tables)

6 Months Ended

Jun. 30, 2023

Delaware Statutory Trust Program [Abstract]

Schedule of DST Program activity

The following table presents our DST Program activity for the three and six months ended June 30, 2023 and 2022:

		For the Three Months Ended June 30,			For the Six Months Ended June 30,
(in thousands)		2023		2022	2023		2022
DST Interests sold	$	91,712	$	161,861	193,507	$	442,663
DST Interests financed by DST Program Loans		13,300		13,205	27,315		28,032
Income earned from DST Program Loans (1)		1,249		833	2,266		1,501
Financing obligation liability appreciation (2)		1,922		8,525	4,784		12,531
Rent obligation incurred under master lease agreements (2)		14,351		11,603	27,934		20,857

(1) Included in other income and expenses on the condensed consolidated statements of operations.

(2) Included in interest expense on the condensed consolidated statements of operations.

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FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

Schedule of Financial Instruments Measured at Fair Value on a Recurring Basis

The following table presents our financial instruments measured at fair value on a recurring basis:

							Total
(in thousands)	Level 1		Level 2		Level 3		Fair Value
As of June 30, 2023
Assets:
Derivative instruments	$	—	$	38,686	$	—	$	38,686
Available-for-sale debt securities		—		14,960		70,238		85,198
Total assets measured at fair value	$	—	$	53,646	$	70,238	$	123,884
As of December 31, 2022
Assets:
Derivative instruments	$	—	$	24,448	$	—	$	24,448
Available-for-sale debt securities		—		14,896		—		14,896
Total assets measured at fair value	$	—	$	39,344	$	—	$	39,344

Schedule of Financial Instruments Measured at Fair Value on a Nonrecurring Basis

	As of June 30, 2023				As of December 31, 2022
	Carrying		Fair		Carrying		Fair
(in thousands)	Value (1)		Value		Value (1)		Value
Assets:
Debt-related investments	$	278,415	$	272,458	$	263,122	$	260,841
DST Program Loans		103,314		99,310		81,897		79,049
Liabilities:
Line of credit	$	352,000	$	352,000	$	235,000	$	235,000
Term loans		800,000		800,000		800,000		800,000
Mortgage notes		517,475		477,969		587,916		541,558

(1) The carrying value reflects the principal amount outstanding.

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EQUITY (Tables)

6 Months Ended

Jun. 30, 2023

Equity [Abstract]

Summary of Changes for Each Class of Common Stock

The following table describes the changes in each class of common shares during the periods presented below:

	Class T	Class S	Class D	Class I	Class E	Total
(in thousands)	Shares	Shares	Shares	Shares	Shares	Shares
FOR THE THREE MONTHS ENDED JUNE 30, 2022
Balance as of March 31, 2022	19,007	40,489	7,662	59,433	55,451	182,042
Issuance of common stock:
Primary shares	2,634	5,663	388	5,165	—	13,850
Distribution reinvestment plan	100	200	38	305	186	829
Redemptions of common stock	(30)	(189)	(141)	(201)	(1,059)	(1,620)
Conversions	(39)	—	—	39	—	—
Balance as of June 30, 2022	21,672	46,163	7,947	64,741	54,578	195,101
FOR THE THREE MONTHS ENDED JUNE 30, 2023
Balance as of March 31, 2023	28,173	49,899	7,439	69,387	52,550	207,448
Issuance of common stock:
Primary shares	1,182	997	31	987	—	3,197
Distribution reinvestment plan	139	232	37	339	178	925
Redemptions of common stock	(735)	(1,378)	(189)	(2,717)	(1,681)	(6,700)
Conversions	(18)	—	(91)	109	—	—
Balance as of June 30, 2023	28,741	49,750	7,227	68,105	51,047	204,870
FOR THE SIX MONTHS ENDED JUNE 30, 2022
Balance as of December 31, 2021	16,425	35,757	6,749	54,406	56,328	169,665
Issuance of common stock:
Primary shares	5,189	10,324	1,493	10,183	—	27,189
Distribution reinvestment plan	192	393	75	607	388	1,655
Redemptions of common stock	(33)	(311)	(370)	(556)	(2,138)	(3,408)
Conversions	(101)	—	—	101	—	—
Balance as of June 30, 2022	21,672	46,163	7,947	64,741	54,578	195,101
FOR THE SIX MONTHS ENDED JUNE 30, 2023
Balance as of December 31, 2022	26,884	49,237	7,871	69,142	52,974	206,108
Issuance of common stock:
Primary shares	2,507	1,969	76	3,104	—	7,656
Distribution reinvestment plan	273	459	77	670	353	1,832
Redemptions of common stock	(804)	(1,939)	(429)	(5,274)	(2,280)	(10,726)
Conversions	(119)	24	(368)	463	—	—
Balance as of June 30, 2023	28,741	49,750	7,227	68,105	51,047	204,870

Summary of Distribution Activity

The following table summarizes our distribution activity (including distributions to noncontrolling interests and distributions reinvested in shares of our common stock) for the periods below:

	Amount
			Common Stock
	Declared per		Distributions		Other Cash		Reinvested in		Distribution		Gross
(in thousands, except per share data)	Common Share (1)		Paid in Cash		Distributions (2)		Shares		Fees (3)		Distributions (4)
2023
March 31	$	0.09375	$	9,912	$	5,271	$	8,009	$	1,461	$	24,653
June 30		0.09375		9,896		5,510		7,974		1,463		24,843
Total	$	0.18750	$	19,808	$	10,781	$	15,983	$	2,924	$	49,496
2022
March 31	$	0.09375	$	8,837	$	3,018	$	6,876	$	1,030	$	19,761
June 30		0.09375		9,299		3,157		7,362		1,259		21,077
September 30		0.09375		9,684		3,972		7,732		1,399		22,787
December 31		0.09375		9,859		4,559		7,923		1,478		23,819
Total	$	0.37500	$	37,679	$	14,706	$	29,893	$	5,166	$	87,444

(1) Amount reflects the total gross quarterly distribution rate authorized by our board of directors per Class T share, per Class S share, per Class D share, per Class I share and per Class E share of common stock. Distributions were declared and paid as of monthly record dates. These monthly distributions have been aggregated and presented on a quarterly basis. The distributions on Class T shares, Class S shares and Class D shares of common stock are reduced by the respective distribution fees that are payable with respect to Class T shares, Class S shares and Class D shares.

(2) Consists of distribution fees paid to Ares Wealth Management Solutions, LLC (the “Dealer Manager”) with respect to OP Units and distributions paid to holders of OP Units and other noncontrolling interest holders.

(3) Distribution fees are paid monthly to the Dealer Manager, with respect to Class T shares, Class S shares and Class D shares issued in the primary portion of our public offerings only. All or a portion of these amounts will be retained by, or reallowed (paid) to, participating broker-dealers and servicing broker-dealers.

(4) Gross distributions are total distributions before the deduction of any distribution fees relating to Class T shares, Class S shares and Class D shares issued in the primary portion of our public offerings.

Redemptions and Repurchases Activity

Below is a summary of redemptions and repurchases pursuant to our share redemption program for the six months ended June 30, 2023 and 2022. All eligible redemption requests were fulfilled for the periods presented. Eligible redemption requests are requests submitted in good order by the request submission deadline set forth in the share redemption program. Our board of directors may modify or suspend our current share redemption programs if it deems such action to be in the best interest of our stockholders.

	For the Six Months Ended June 30,
(in thousands, except for per share data)	2023		2022
Number of shares redeemed or repurchased		10,726		3,408
Aggregate dollar amount of shares redeemed or repurchased	$	93,319	$	28,500
Average redemption or repurchase price per share	$	8.70	$	8.37

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REDEEMABLE NONCONTROLLING INTERESTS (Tables)

6 Months Ended

Jun. 30, 2023

Redeemable Noncontrolling Interest [Abstract]

Schedule of Redeemable Noncontrolling Interest Activity

The following table summarizes the redeemable noncontrolling interests activity for the six months ended June 30, 2023 and 2022:

	For the Six Months Ended June 30,
($ in thousands)	2023		2022
Balance at beginning of the year	$	18,130	$	8,994
Settlement of prior year performance participation allocation (1)		—		15,327
Distributions to redeemable noncontrolling interests		(384)		(351)
Redemptions to redeemable noncontrolling interests (2)		—		(7,724)
Net (loss) income attributable to redeemable noncontrolling interests		(244)		186
Change from securities and cash flow hedging activities attributable to redeemable noncontrolling interests		23		136
Redemption value allocation adjustment to redeemable noncontrolling interests (3)		(243)		1,596
Ending balance	$	17,282	$	18,164

(1) There were no OP Units issued related to the 2022 performance participation allocation, as the $23.7 million payable as of December 31, 2022 was, at the election of the Advisor, settled in cash in January 2023. The 2021 performance participation allocation in the amount of $15.3 million became payable on December 31, 2021, and was issued as 1.9 million Class I OP Units in January 2022. At the direction of the Advisor and in light of our Former Sponsor having been the holder of a separate series of partnership interests in the Operating Partnership with special distribution rights (the “Special Units”) for the first six months of 2021, the holder of the Special Units designated 465,000 of these Class I OP Units to an entity owned indirectly by our Chairman at the time, Mr. Mulvihill, and 465,000 of these Class I OP Units to an entity owned indirectly by a member of our Former Sponsor. The holder of the Special Units transferred 945,000 Class I OP Units to the Advisor thereafter.

(2) At the request of the Advisor, the Operating Partnership redeemed all Class I OP Units issued to the Advisor in January 2022 for $7.7 million.

(3) Represents the adjustment recorded in order to mark to the redemption value, which is equivalent to fair value, at the end of the measurement period.

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NONCONTROLLING INTERESTS (Tables)

6 Months Ended

Jun. 30, 2023

Noncontrolling Interest [Abstract]

Schedule of Noncontrolling Interest Balances

The following table summarizes the number of OP Units issued and outstanding to third-party investors (excludes interests held by redeemable noncontrolling interest holders):

	For the Six Months Ended June 30,
(in thousands)	2023		2022
Balance at beginning of period		55,079		27,180
Issuance of units		9,845		4,825
Redemption of units		(1,831)		(407)
Balance at end of period		63,093		31,598

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RELATED PARTY TRANSACTIONS (Tables)

6 Months Ended

Jun. 30, 2023

Related Party Transactions [Abstract]

Schedule Fees and Expenses to the Advisor and Its Affiliates

The table below summarizes the fees and expenses incurred by us for services provided by the Advisor and its affiliates, and by the Dealer Manager related to the services the Dealer Manager provided in connection with our public offerings and any related amounts payable:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,				Payable as of
(in thousands)	2023		2022		2023		2022		June 30, 2023		December 31, 2022
Selling commissions and dealer manager fees (1)	$	448	$	1,238	$	960	$	2,280	$	—	$	—
Ongoing distribution fees (1)(2)		2,190		1,576		4,344		2,874		759		748
Advisory fees—fixed component		9,623		8,227		19,161		15,370		2,890		2,868
Performance participation allocation (3)		—		6,186		—		18,379		—		23,747
Other expense reimbursements—Advisor (4)(5)		3,749		3,206		6,855		5,346		4,158		4,192
Other expense reimbursements—Dealer Manager		160		143		160		170		82		109
Property accounting fee (6)		481		303		970		303		481		478
DST Program selling commissions, dealer manager and distribution fees (1)		2,072		5,660		4,743		13,184		254		241
Other DST Program related costs—Advisor (5)		1,627		3,490		3,558		8,441		162		146
Total	$	20,350	$	30,029	$	40,751	$	66,347	$	8,786	$	32,529

(1) All or a portion of these amounts will be retained by, or reallowed (paid) to, participating broker-dealers and servicing broker-dealers.

(2) The distribution fees are payable monthly in arrears. Additionally, we accrue for future estimated amounts payable related to ongoing distribution fees. The future estimated amounts payable of approximately $63.3 million and $60.9 million as of June 30, 2023 and December 31, 2022, respectively, are included in other liabilities on the condensed consolidated balance sheets.

(3) The 2022 performance participation allocation in the amount of $23.7 million became payable on December 31, 2022, and the Advisor elected to settle the amounts owed in cash in January 2023.

(4) Other expense reimbursements include certain expenses incurred for organization and offering, acquisition and general administrative services provided to us under the advisory agreement, including, but not limited to, certain expenses described below after footnote 6, allocated rent paid to both third parties and affiliates of our Advisor, equipment, utilities, insurance, travel and entertainment.

(5) Includes costs reimbursed to the Advisor related to the DST Program.

(6) The cost of the property management fee, including the property accounting fee, is generally borne by the tenant or tenants at each real property, either via a direct reimbursement to us or, in the case of tenants subject to a gross lease, as part of the lease cost. In certain circumstances, we may pay for a portion of the property management fee, including the property accounting fee, without reimbursement from the tenant or tenants at a real property.

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NET INCOME (LOSS) PER COMMON SHARE (Tables)

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

Details of Numerator and Denominator Used to Calculate Basic and Diluted Net Income (Loss) Per Common Share

The computation of our basic and diluted net income (loss) per share attributable to common stockholders is as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands, except per share data)	2023		2022		2023		2022
Net (loss) income attributable to common stockholders—basic	$	(22,750)	$	(5,588)	$	(24,754)	$	15,423
Net (loss) income attributable to redeemable noncontrolling interests		(226)		(60)		(244)		186
Net (loss) income attributable to noncontrolling interests		(6,278)		(919)		(6,827)		2,618
Net (loss) income attributable to common stockholders—diluted	$	(29,254)	$	(6,567)	$	(31,825)	$	18,227
Weighted-average shares outstanding—basic		206,214		191,158		206,493		184,878
Incremental weighted-average shares effect of conversion of noncontrolling interests		58,749		33,699		57,482		32,928
Weighted-average shares outstanding—diluted		264,963		224,857		263,975		217,806
Net (loss) income per share attributable to common stockholders:
Basic	$	(0.11)	$	(0.03)	$	(0.12)	$	0.08
Diluted	$	(0.11)	$	(0.03)	$	(0.12)	$	0.08

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SUPPLEMENTAL CASH FLOW INFORMATION (Tables)

6 Months Ended

Jun. 30, 2023

Cash and Cash Equivalents [Abstract]

Supplemental Cash Flow Information and Disclosure Non-Cash Investing and Financing Activities

Supplemental cash flow information and disclosure of non-cash investing and financing activities is as follows:

	For the Six Months Ended June 30,
(in thousands)	2023		2022
Supplemental disclosure of non-cash investing and financing activities:
Distributions reinvested in common stock	$	15,979	$	13,922
Increase in accrued future ongoing distribution fees		2,342		11,908
Increase in DST Program Loans receivable through DST Program capital raising		27,315		28,032
Redeemable noncontrolling interest issued as settlement of performance participation allocation		—		15,327
Issuances of OP Units for DST Interests		84,725		39,441

Summary of Cash, Cash Equivalents and Restricted Cash

Restricted cash consists of lender and property-related escrow accounts. The following table presents the components of the beginning of period and end of period cash, cash equivalents and restricted cash reported within the condensed consolidated statements of cash flows:

	For the Six Months Ended June 30,
(in thousands)	2023		2022
Beginning of period:
Cash and cash equivalents	$	13,336	$	10,605
Restricted cash		3,850		3,747
Cash, cash equivalents and restricted cash	$	17,186	$	14,352
End of period:
Cash and cash equivalents	$	12,905	$	19,529
Restricted cash		4,265		4,909
Cash, cash equivalents and restricted cash	$	17,170	$	24,438

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SEGMENT FINANCIAL INFORMATION (Tables)

6 Months Ended

Jun. 30, 2023

Segment Reporting [Abstract]

Summary of Total Assets by Business Segment

The following table reflects our total consolidated assets by business segment as of June 30, 2023 and December 31, 2022:

	As of
(in thousands)	June 30, 2023		December 31, 2022
Assets:
Office properties	$	379,863	$	377,546
Retail properties		514,625		537,147
Residential properties		1,479,797		1,495,532
Industrial properties		1,273,746		1,248,255
Investments in real estate debt and securities		353,879		275,335
Corporate		282,581		240,909
Total assets	$	4,284,491	$	4,174,724

Reconciliation of Net Operating Income to Reported Net Income (Loss)

The following table is a reconciliation of our reported net income (loss) attributable to common stockholders to our net operating income for the three and six months ended June 30, 2023 and 2022:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
(in thousands)	2023		2022		2023		2022
Net (loss) income attributable to common stockholders	$	(22,750)	$	(5,588)	$	(24,754)	$	15,423
Real estate-related depreciation and amortization		33,858		36,903		67,055		64,354
General and administrative expenses		2,973		2,594		6,017		4,631
Advisory fees		9,623		8,227		19,161		15,370
Performance participation allocation		—		6,186		—		18,379
Acquisition costs and reimbursements		1,849		1,093		3,018		2,722
Impairment loss on debt-related investment held for sale		1,260		—		3,780		—
Equity in loss (income) from unconsolidated joint venture partnerships		203		(1,718)		2,649		(708)
Interest expense		37,882		33,774		75,427		58,184
Gain on sale of real estate property		—		(29,643)		(36,884)		(83,524)
Loss on extinguishment of debt and financing commitments, net		—		—		700		—
Gain on derivative instruments		(192)		(982)		(89)		(2,532)
Provision for current expected credit losses		(1,632)		—		3,998		—
Other income		(1,016)		(423)		(2,032)		(1,000)
Net (loss) income attributable to redeemable noncontrolling interests		(226)		(60)		(244)		186
Net (loss) income attributable to noncontrolling interests		(6,278)		(919)		(6,827)		2,618
Net operating income	$	55,554	$	49,444	$	110,975	$	94,103

Revenue and Components of Net Operating Income

The following table sets forth consolidated financial results by segment for the three and six months ended June 30, 2023 and 2022:

									Debt and
(in thousands)	Office		Retail		Residential		Industrial		Securities		Consolidated
For the Three Months Ended June 30, 2023
Rental revenues	$	13,001	$	14,288	$	28,823	$	21,092	$	—	$	77,204
Debt-related income		—		—		—		—		7,189		7,189
Rental expenses		(6,442)		(3,775)		(14,070)		(4,552)		—		(28,839)
Net operating income	$	6,559	$	10,513	$	14,753	$	16,540	$	7,189	$	55,554
Real estate-related depreciation and amortization	$	4,203	$	4,043	$	9,950	$	15,662	$	—	$	33,858
For the Three Months Ended June 30, 2022
Rental revenues	$	13,148	$	16,509	$	25,824	$	18,013	$	—	$	73,494
Debt-related income		—		—		—		—		846		846
Rental expenses		(5,772)		(3,776)		(11,059)		(4,289)		—		(24,896)
Net operating income	$	7,376	$	12,733	$	14,765	$	13,724	$	846	$	49,444
Real estate-related depreciation and amortization	$	4,243	$	4,474	$	16,038	$	12,148	$	—	$	36,903
For the Six Months Ended June 30, 2023
Rental revenues	$	26,350	$	28,806	$	57,671	$	42,337	$	—	$	155,164
Debt-related income		—		—		—		—		12,950		12,950
Rental expenses		(13,072)		(7,359)		(27,260)		(9,448)		—		(57,139)
Net operating income	$	13,278	$	21,447	$	30,411	$	32,889	$	12,950	$	110,975
Real estate-related depreciation and amortization	$	8,166	$	8,078	$	19,439	$	31,372	$	—	$	67,055
For the Six Months Ended June 30, 2022
Rental revenues	$	26,780	$	33,576	$	42,178	$	33,465	$	—	$	135,999
Debt-related income		—		—		—		—		4,314		4,314
Rental expenses		(11,963)		(8,405)		(18,004)		(7,838)		—		(46,210)
Net operating income	$	14,817	$	25,171	$	24,174	$	25,627	$	4,314	$	94,103
Real estate-related depreciation and amortization	$	8,240	$	9,128	$	24,392	$	22,594	$	—	$	64,354

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INVESTMENTS IN REAL ESTATE PROPERTIES (Narrative) (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023 USD ($) property	Jun. 30, 2022 USD ($) property Office	Jun. 30, 2023 USD ($) property	Jun. 30, 2022 USD ($) property Office
Real Estate Properties [Line Items]
Proceeds from disposition of real estate property | $			$ 53,735	$ 251,822
Gain on sale of real estate property | $	$ 0	$ 29,643	$ 36,884	$ 83,524
Intangible lease assets | Asset Acquisition
Real Estate Properties [Line Items]
Weighted-average amortization period of acquired finite-lived intangible assets			4 years 9 months 18 days
Disposed of by Sale | Office properties
Real Estate Properties [Line Items]
Number of real estate properties | Office		1		1
Disposed of by Sale | Retail properties
Real Estate Properties [Line Items]
Number of real estate properties | property	1	5	1	5
Disposed of by Sale | Retail land parcel
Real Estate Properties [Line Items]
Number of real estate properties | property		1		1

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INVESTMENTS IN REAL ESTATE PROPERTIES (Schedule of Consolidated Investments in Real Estate Properties) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Real Estate [Abstract]
Land	$ 693,097	$ 694,998
Buildings and improvements	3,203,625	3,152,553
Intangible lease assets	316,588	317,141
Right of use asset	$ 13,637	$ 13,637
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]	Net investment in real estate properties	Net investment in real estate properties
Investment in real estate properties	$ 4,226,947	$ 4,178,329
Accumulated depreciation and amortization	(631,330)	(572,751)
Net investment in real estate properties	$ 3,595,617	$ 3,605,578

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INVESTMENTS IN REAL ESTATE PROPERTIES (Schedule of Asset Acquisitions) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2023 USD ($)
Asset Acquisition [Line Items]
Percentage of assets acquired	100.00%
Asset Acquisition
Asset Acquisition [Line Items]
Total acquisitions	$ 50,932
Debt assumed at fair value	0
VM8 Logistics Center
Asset Acquisition [Line Items]
Total acquisitions	17,511
Moreno Valley Distribution Center
Asset Acquisition [Line Items]
Total acquisitions	$ 33,421

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INVESTMENTS IN REAL ESTATE PROPERTIES (Purchase Price Allocation) (Details) $ in Thousands	Jun. 30, 2023 USD ($)
Real Estate [Line Items]
Land	$ 6,121
Building and improvements	41,547
Intangible lease assets	3,052
Above-market lease assets	212
Total purchase price	50,932
Asset Acquisition
Real Estate [Line Items]
Debt assumed at fair value	$ 0

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INVESTMENTS IN REAL ESTATE PROPERTIES (Intangible Lease Assets and Liabilities) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]
Gross, Assets	$ 316,588	$ 317,141
Gross, Liabilities	(73,331)	(76,033)
Accumulated Amortization, Liabilities	34,222	33,589
Net, Liabilities	(39,109)	(42,444)
Intangible lease assets
Finite-Lived Intangible Assets [Line Items]
Gross, Assets	293,443	294,208
Accumulated Amortization, Assets	(223,894)	(214,201)
Net, Assets	69,549	80,007
Above-market lease assets
Finite-Lived Intangible Assets [Line Items]
Gross, Assets	23,145	22,933
Accumulated Amortization, Assets	(20,106)	(19,707)
Net, Assets	$ 3,039	$ 3,226

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INVESTMENTS IN REAL ESTATE PROPERTIES (Schedule of Adjustments to Rental Revenue Related to Amortization) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Finite-Lived Intangible Assets [Line Items]
Straight-line rent adjustments	$ 674	$ 1,240	$ 1,742	$ 1,966
Depreciation expense	27,081	25,349	53,498	45,547
Intangible lease asset amortization	6,777	11,554	13,557	18,807
Above-market lease assets
Finite-Lived Intangible Assets [Line Items]
Amortization of above and below Market Leases	(213)	(185)	(399)	(354)
Below-market lease
Finite-Lived Intangible Assets [Line Items]
Amortization of above and below Market Leases	$ 1,124	$ 1,210	$ 2,138	$ 2,406

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INVESTMENTS IN UNCONSOLIDATED JOINT VENTURE PARTNERSHIPS (Details) $ in Thousands	Jun. 30, 2023 USD ($) property	Dec. 31, 2022 USD ($) property
Schedule of Equity Method Investments [Line Items]
Investments in unconsolidated joint venture partnerships	$ 124,075	$ 120,372
Unconsolidated Joint Venture Partnerships
Schedule of Equity Method Investments [Line Items]
Number of real estate properties | property	161	156
Investments in unconsolidated joint venture partnerships	$ 124,075	$ 120,372
Vue 1400 JV
Schedule of Equity Method Investments [Line Items]
Ownership percentage	85.00%	85.00%
Number of real estate properties | property	1	1
Investments in unconsolidated joint venture partnerships	$ 25,179	$ 25,984
Net Lease JV I
Schedule of Equity Method Investments [Line Items]
Ownership percentage	50.00%	50.00%
Number of real estate properties | property	15	15
Investments in unconsolidated joint venture partnerships	$ 16,255	$ 16,393
Net Lease JV II
Schedule of Equity Method Investments [Line Items]
Ownership percentage	50.00%	50.00%
Number of real estate properties | property	117	117
Investments in unconsolidated joint venture partnerships	$ 65,296	$ 65,763
Net Lease JV III
Schedule of Equity Method Investments [Line Items]
Ownership percentage	50.00%	50.00%
Number of real estate properties | property	28	23
Investments in unconsolidated joint venture partnerships	$ 17,345	$ 12,232

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INVESTMENTS IN REAL ESTATE DEBT AND SECURITIES (Summarizes Debt Related Investments) (Details) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2023 USD ($) loan	Jun. 30, 2022 USD ($)	Dec. 31, 2022 USD ($) loan
Marketable Securities [Line Items]
Carrying Amount	$ 268,681		$ 268,681		$ 260,439
Outstanding Principal	$ 278,415		$ 278,415		$ 263,122
Weighted-Average Interest Rate	10.30%		10.30%		9.50%
Weighted-Average Remaining Life (Years)			1 year 6 months		2 years
Impairment loss on debt-related investment held for sale	$ 1,260	$ 0	$ 3,780	$ 0
Senior loans
Marketable Securities [Line Items]
Carrying Amount	161,922		161,922		$ 151,645
Outstanding Principal	$ 169,915		$ 169,915		$ 154,622
Weighted-Average Interest Rate	9.50%		9.50%		8.50%
Weighted-Average Remaining Life (Years)			1 year 8 months 12 days		2 years 1 month 6 days
Senior Loans In Default And On Non-Accrual Status [Member]
Marketable Securities [Line Items]
Carrying Amount	$ 37,800		$ 37,800		$ 42,000
Outstanding Principal	43,800		$ 43,800		$ 43,800
Number of contracts | loan			1		1
Impairment loss on debt-related investment held for sale	1,300		$ 3,800
Mezzanine loans
Marketable Securities [Line Items]
Carrying Amount	106,759		106,759		$ 108,794
Outstanding Principal	$ 108,500		$ 108,500		$ 108,500
Weighted-Average Interest Rate	11.20%		11.20%		10.40%
Weighted-Average Remaining Life (Years)			1 year 4 months 24 days		1 year 10 months 24 days

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INVESTMENTS IN REAL ESTATE DEBT AND SECURITIES (Current Expected Credit Losses) (Details) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2023 USD ($)	Jun. 30, 2023 USD ($)
INVESTMENTS IN REAL ESTATE DEBT AND SECURITIES.
Debt investments, Allowance for credit loss	$ 4.0	$ 4.0
Increase (decrease) in provision for current expected credit losses	$ (1.6)	$ 4.0
Percentage of CECL Reserve to debt related investment commitment	1.10%	1.10%
Number of debt related investments, held for sale	1	1
Held to Maturity debt related Investments	$ 358.3	$ 358.3
Funded Commitment Balance	234.6	234.6
Unfunded Commitment Balance	123.7	123.7
Funded Commitments Related to Allowance	2.3	2.3
Unfunded Commitments Related to Allowance	$ 1.7	1.7
Write Off of Debt related investments		0.0
Recoveries of Debt related investments		$ 0.0

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INVESTMENTS IN REAL ESTATE DEBT AND SECURITIES (Summary of Available for Sale Debt Securities) (Details) $ in Thousands	Jun. 30, 2023 USD ($) item	Dec. 31, 2022 USD ($) item
Debt Securities, Available-for-Sale [Line Items]
Face Amount	$ 86,215	$ 14,979
Amortized Cost	85,119	14,870
Unamortized Discount and Fees	1,096	109
Unrealized Gain, Net	79	26
Fair Value	85,198	14,896
Credit loss	0
Preferred equity
Debt Securities, Available-for-Sale [Line Items]
Face Amount	71,236
Amortized Cost	70,238
Unamortized Discount and Fees	998
Fair Value	$ 70,238
Number of available for sale debt securities | item	1
ECLO
Debt Securities, Available-for-Sale [Line Items]
Face Amount	$ 14,979	14,979
Amortized Cost	14,881	14,870
Unamortized Discount and Fees	98	109
Unrealized Gain, Net	79	26
Fair Value	$ 14,960	$ 14,896
Number of available for sale debt securities | item	1	1
Weighted Average | Preferred equity
Debt Securities, Available-for-Sale [Line Items]
Debt Securities, Available-for-Sale, Term	3 years 7 months 6 days
Weighted Average | ECLO
Debt Securities, Available-for-Sale [Line Items]
Debt Securities, Available-for-Sale, Term	3 years 7 months 6 days

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DEBT (Schedule of Debt) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Debt Instrument [Line Items]
Weighted-Average Effective Interest Rate as of	4.11%		4.11%		4.31%
Total borrowings	$ 1,669,475		$ 1,669,475		$ 1,622,916
Less: unamortized debt issuance costs	(12,751)		(12,751)		(14,849)
Add: unamortized mark-to-market adjustment on assumed debt	7,887		7,887		8,408
Total debt, net	1,664,611		1,664,611		1,616,475
Gross book value of properties encumbered by debt	895,040		895,040		$ 970,310
Interest expense	$ 20,600	$ 12,100	$ 40,200	$ 21,800
Weighted Average
Debt Instrument [Line Items]
Remaining debt term (in years)			3 years 4 months 24 days
Line of Credit
Debt Instrument [Line Items]
Weighted-Average Effective Interest Rate as of	5.17%		5.17%		5.72%
Total borrowings	$ 352,000		$ 352,000		$ 235,000
Current borrowing capacity	548,000		548,000
Available portions under the line of credit	547,900		$ 547,900
Line of Credit | SOFR
Debt Instrument [Line Items]
Borrowings spread rate adjustment			0.11448%		0.11448%
Line of Credit | SOFR | Minimum
Debt Instrument [Line Items]
Outstanding borrowings spread rate			1.25%		1.25%
Line of Credit | SOFR | Maximum
Debt Instrument [Line Items]
Outstanding borrowings spread rate			2.00%		2.00%
Line of Credit | Interest rate caps
Debt Instrument [Line Items]
Total borrowings	150,000		$ 150,000
Term Loan
Debt Instrument [Line Items]
Total borrowings	$ 800,000		$ 800,000
Term Loan (Maturity Date November 2026)
Debt Instrument [Line Items]
Weighted-Average Effective Interest Rate as of	3.31%		3.31%		3.90%
Total borrowings	$ 400,000		$ 400,000		$ 400,000
Maximum borrowing capacity	400,000		$ 400,000
Term Loan (Maturity Date November 2026) | SOFR | Minimum
Debt Instrument [Line Items]
Outstanding borrowings spread rate			1.20%		1.20%
Term Loan (Maturity Date November 2026) | SOFR | Maximum
Debt Instrument [Line Items]
Outstanding borrowings spread rate			1.90%		1.90%
Term Loan (Maturity Date November 2026) | Interest rate swaps
Debt Instrument [Line Items]
Total borrowings	300,000		$ 300,000
Term Loan (Maturity Date November 2026) | Interest rate caps
Debt Instrument [Line Items]
Total borrowings	$ 100,000		$ 100,000
Term Loan (Maturity Date January 2027)
Debt Instrument [Line Items]
Weighted-Average Effective Interest Rate as of	4.26%		4.26%		4.56%
Total borrowings	$ 400,000		$ 400,000		$ 400,000
Maximum borrowing capacity	400,000		$ 400,000
Term Loan (Maturity Date January 2027) | SOFR | Minimum
Debt Instrument [Line Items]
Outstanding borrowings spread rate			1.20%		1.20%
Term Loan (Maturity Date January 2027) | SOFR | Maximum
Debt Instrument [Line Items]
Outstanding borrowings spread rate			1.90%		1.90%
Term Loan (Maturity Date January 2027) | Interest rate swaps
Debt Instrument [Line Items]
Total borrowings	350,000		$ 350,000
Term Loan (Maturity Date January 2027) | Interest rate caps
Debt Instrument [Line Items]
Total borrowings	$ 50,000		$ 50,000
Fixed-Rate Mortgage Notes
Debt Instrument [Line Items]
Weighted-Average Effective Interest Rate as of	3.40%		3.40%		3.48%
Total borrowings	$ 309,875		$ 309,875		$ 380,316
Floating-Rate Mortgage Notes
Debt Instrument [Line Items]
Weighted-Average Effective Interest Rate as of	4.59%		4.59%		4.52%
Total borrowings	$ 207,600		$ 207,600		$ 207,600
Floating-Rate Mortgage Notes | London Interbank Offered Rate L I B O R Extension [Member] | Minimum
Debt Instrument [Line Items]
Outstanding borrowings spread rate			1.55%		1.55%
Floating-Rate Mortgage Notes | London Interbank Offered Rate L I B O R Extension [Member] | Maximum
Debt Instrument [Line Items]
Outstanding borrowings spread rate			2.50%		2.50%
Floating-Rate Mortgage Notes | Interest rate caps | London Interbank Offered Rate L I B O R Extension [Member] | Minimum
Debt Instrument [Line Items]
Floating rate	4.61%		4.61%
Floating-Rate Mortgage Notes | Interest rate caps | London Interbank Offered Rate L I B O R Extension [Member] | Maximum
Debt Instrument [Line Items]
Floating rate	4.55%		4.55%

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DEBT (Summary of Borrowings Reflects Contractual Debt Maturities) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2023 USD ($) item	Dec. 31, 2022 USD ($)
Debt Instrument [Line Items]
Remainder of 2023	$ 996
2024	129,265
2025	354,360
2026	484,214
2027	575,787
Thereafter	124,853
Total principal payments	$ 1,669,475	$ 1,622,916
Mortgage note exposure to london inter bank offered rate | item	1
Line of Credit
Debt Instrument [Line Items]
Remainder of 2023	$ 0
2024	0
2025	352,000
2026	0
2027	0
Thereafter	0
Total principal payments	$ 352,000	$ 235,000
Term of extension	6 months
Number of extension options | item	2
Term Loan
Debt Instrument [Line Items]
Remainder of 2023	$ 0
2024	0
2025	0
2026	400,000
2027	400,000
Thereafter	0
Total principal payments	800,000
Mortgage Notes
Debt Instrument [Line Items]
Remainder of 2023	996
2024	129,265
2025	2,360
2026	84,214
2027	175,787
Thereafter	124,853
Total principal payments	517,475
Mortgage Notes | Mortgage Note Maturing in October 2024
Debt Instrument [Line Items]
Total principal payments	$ 127,000
Debt Instrument, Extension Option Period	1 year
Mortgage Notes | Mortgage Note Maturing in January 2027
Debt Instrument [Line Items]
Total principal payments	$ 115,000
Debt Instrument, Extension Option Period	1 year
Debt Instrument Number Of Extension Of Term Options | item	2

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DEBT (Summary of Location and Fair Value of Derivative Instruments) (Details) $ in Thousands	Jun. 30, 2023 USD ($) contract	Dec. 31, 2022 USD ($) contract
Derivatives, Fair Value [Line Items]
Number of derivative contracts | contract	17	14
Total notional amount	$ 1,157,600	$ 857,600
Derivative assets	$ 38,686	$ 24,448
Derivative Asset, Statement of Financial Position [Extensible Enumeration]	Other Assets.	Other Assets.
Derivative liabilities	$ 0	$ 0
Derivative Liability, Statement of Financial Position [Extensible Enumeration]	Other Liabilities.	Other Liabilities.
Interest rate swaps
Derivatives, Fair Value [Line Items]
Estimated change to interest expense related to active effective hedges of floating rate debt	$ 18,000
Interest rate swaps | Designated Hedges
Derivatives, Fair Value [Line Items]
Number of derivative contracts | contract	12	12
Total notional amount	$ 650,000	$ 650,000
Derivative assets	$ 20,689	$ 20,279
Derivative Asset, Statement of Financial Position [Extensible Enumeration]	Other Assets.	Other Assets.
Derivative liabilities	$ 0	$ 0
Derivative Liability, Statement of Financial Position [Extensible Enumeration]	Other Liabilities.	Other Liabilities.
Interest rate caps | Designated Hedges
Derivatives, Fair Value [Line Items]
Number of derivative contracts | contract	3
Total notional amount	$ 300,000
Derivative assets	$ 16,208
Derivative Asset, Statement of Financial Position [Extensible Enumeration]	Other Assets.	Other Assets.
Derivative Liability, Statement of Financial Position [Extensible Enumeration]	Other Liabilities.	Other Liabilities.
Interest rate caps | Not Designated as Hedging Instrument
Derivatives, Fair Value [Line Items]
Number of derivative contracts | contract	2	2
Total notional amount	$ 207,600	$ 207,600
Derivative assets	$ 1,789	$ 4,169
Derivative Asset, Statement of Financial Position [Extensible Enumeration]	Other Assets.	Other Assets.
Derivative liabilities	$ 0	$ 0
Derivative Liability, Statement of Financial Position [Extensible Enumeration]	Other Liabilities.	Other Liabilities.

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DEBT (Effect of Derivative Financial Instruments on Financial Statements) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Derivative Instruments, Gain (Loss) [Line Items]
Total interest expense presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded	$ 37,882	$ 33,774	$ 75,427	$ 58,184
Unrealized (loss) gain on derivative instruments recognized in other income (expenses)			(2,325)	2,532
Designated Hedges
Derivative Instruments, Gain (Loss) [Line Items]
Total interest expense presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded	37,882	33,774	75,427	58,184
Not Designated as Hedging Instrument
Derivative Instruments, Gain (Loss) [Line Items]
Unrealized (loss) gain on derivative instruments recognized in other income (expenses)	(1,101)	$ 982	(2,325)	$ 2,532
Realized gain on derivative instruments recognized in other income (expenses)	$ 1,293		$ 2,414
Derivative, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration]	Other Nonoperating Income (Expense)	Other Nonoperating Income (Expense)	Other Nonoperating Income (Expense)	Other Nonoperating Income (Expense)
Cash Flow Hedging | Designated Hedges
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) recognized in AOCI	$ 14,146	$ 787	$ 10,146	$ 10,862
Amount reclassified from AOCI (out of) into interest expense	$ (4,038)	$ 1,032	$ (7,094)	$ 2,951

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DST Program (Details) - USD ($) $ in Thousands, shares in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Delaware Statutory Trust Programs [Line Items]
Financing obligation liability appreciation (2)			$ 4,784	$ 12,531
Issuances of OP Units for DST Interests	$ 84,725		84,725	39,441
DST Program Loans	103,314		103,314		$ 81,897
DST Program
Delaware Statutory Trust Programs [Line Items]
DST Interests sold	91,712	$ 161,861	193,507	442,663
DST Interests financed by DST Program Loans	13,300	13,205	27,315	28,032
Income earned from DST Program Loans (1)	1,249	833	2,266	1,501
Financing obligation liability appreciation (2)	1,922	8,525	4,784	12,531
Rent obligation incurred under master lease agreements (2)	14,351	$ 11,603	27,934	20,857
Issuances of OP Units for DST Interests			84,700	$ 39,400
DST Program Loans	$ 103,300		$ 103,300		$ 81,900
Debt, Weighted Average Interest Rate	4.86%		4.86%		4.47%
Debt Instrument, Weighted Average Maturity Term			9 years 1 month 6 days		9 years 2 months 12 days
DST Program | OP Units
Delaware Statutory Trust Programs [Line Items]
Issuance of OP Units (in shares)			9.8	4.8

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FAIR VALUE (Measured on Recurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Assets:
Derivative instruments	$ 38,686	$ 24,448
Available-for-sale debt securities	85,198	14,896
Recurring
Assets:
Derivative instruments	38,686	24,448
Available-for-sale debt securities	85,198	14,896
Total assets measured at fair value	123,884	39,344
Recurring | Level 1
Assets:
Derivative instruments	0	0
Available-for-sale debt securities	0	0
Total assets measured at fair value	0	0
Recurring | Level 2
Assets:
Derivative instruments	38,686	24,448
Available-for-sale debt securities	14,960	14,896
Total assets measured at fair value	53,646	39,344
Recurring | Level 3
Assets:
Derivative instruments	0	0
Available-for-sale debt securities	70,238	0
Total assets measured at fair value	$ 70,238	$ 0

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FAIR VALUE - Available-for-Sale Debt Securities (Details)	Jun. 30, 2023 item
Preferred equity
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of available for sale debt securities	1

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FAIR VALUE (Measured on Nonrecurring Basis) (Details) - Level 3 - Nonrecurring - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Carrying Value
Fair Value Assets And Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Debt-related investments	$ 278,415	$ 263,122
DST Program Loans	103,314	81,897
Line of credit	352,000	235,000
Term loans	800,000	800,000
Mortgage notes	517,475	587,916
Fair Value
Fair Value Assets And Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Debt-related investments	272,458	260,841
DST Program Loans	99,310	79,049
Line of credit	352,000	235,000
Term loans	800,000	800,000
Mortgage notes	$ 477,969	$ 541,558

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EQUITY (Narrative) (Details) - USD ($) $ in Thousands, shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	May 03, 2022	May 02, 2022
Subsidiary, Sale of Stock [Line Items]
Amount of registration statement offering					$ 10,000,000	$ 3,000,000
Issuance of common stock	$ 36,120	$ 128,016	$ 83,811	$ 244,526
Issuance of units (in shares)			9.5
Primary offering
Subsidiary, Sale of Stock [Line Items]
Amount of registration statement offering					8,500,000
DRIP Offering
Subsidiary, Sale of Stock [Line Items]
Amount of registration statement offering					$ 1,500,000
Issuance of common stock			$ 16,000

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EQUITY (Information of Share Transactions) (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Redemptions of common stock (in shares)			(10,726)	(3,408)
Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period (in shares)	207,448	182,042	206,108	169,665
Primary shares (in shares)	3,197	13,850	7,656	27,189
Distribution reinvestment plan (in shares)	925	829	1,832	1,655
Redemptions of common stock (in shares)	(6,700)	(1,620)	(10,726)	(3,408)
Conversions (in shares)	0	0	0	0
Balance at end of period (in shares)	204,870	195,101	204,870	195,101
Class T
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period (in shares)			26,884
Balance at end of period (in shares)	28,741		28,741
Class T | Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period (in shares)	28,173	19,007	26,884	16,425
Primary shares (in shares)	1,182	2,634	2,507	5,189
Distribution reinvestment plan (in shares)	139	100	273	192
Redemptions of common stock (in shares)	(735)	(30)	(804)	(33)
Conversions (in shares)	(18)	(39)	(119)	(101)
Balance at end of period (in shares)	28,741	21,672	28,741	21,672
Class S
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period (in shares)			49,237
Balance at end of period (in shares)	49,750		49,750
Class S | Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period (in shares)	49,899	40,489	49,237	35,757
Primary shares (in shares)	997	5,663	1,969	10,324
Distribution reinvestment plan (in shares)	232	200	459	393
Redemptions of common stock (in shares)	(1,378)	(189)	(1,939)	(311)
Conversions (in shares)	0	0	24	0
Balance at end of period (in shares)	49,750	46,163	49,750	46,163
Class D
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period (in shares)			7,871
Balance at end of period (in shares)	7,227		7,227
Class D | Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period (in shares)	7,439	7,662	7,871	6,749
Primary shares (in shares)	31	388	76	1,493
Distribution reinvestment plan (in shares)	37	38	77	75
Redemptions of common stock (in shares)	(189)	(141)	(429)	(370)
Conversions (in shares)	(91)	0	(368)	0
Balance at end of period (in shares)	7,227	7,947	7,227	7,947
Class I
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period (in shares)			69,142
Balance at end of period (in shares)	68,105		68,105
Class I | Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period (in shares)	69,387	59,433	69,142	54,406
Primary shares (in shares)	987	5,165	3,104	10,183
Distribution reinvestment plan (in shares)	339	305	670	607
Redemptions of common stock (in shares)	(2,717)	(201)	(5,274)	(556)
Conversions (in shares)	109		463
Conversions (in shares)		39		101
Balance at end of period (in shares)	68,105	64,741	68,105	64,741
Class E
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period (in shares)			52,974
Balance at end of period (in shares)	51,047		51,047
Class E | Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period (in shares)	52,550	55,451	52,974	56,328
Primary shares (in shares)	0	0	0	0
Distribution reinvestment plan (in shares)	178	186	353	388
Redemptions of common stock (in shares)	(1,681)	(1,059)	(2,280)	(2,138)
Conversions (in shares)	0	0	0	0
Balance at end of period (in shares)	51,047	54,578	51,047	54,578

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EQUITY (Total Distributions Declared and Portion of Each Contribution Paid in Cash and Reinvested) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						6 Months Ended	12 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Dec. 31, 2022
Equity [Abstract]
Declared per Common Share (usd per share)	$ 0.09375	$ 0.09375	$ 0.09375	$ 0.09375	$ 0.09375	$ 0.09375	$ 0.18750	$ 0.37500
Common Stock Distributions Paid in Cash	$ 9,896	$ 9,912	$ 9,859	$ 9,684	$ 9,299	$ 8,837	$ 19,808	$ 37,679
Other Cash Distributions	5,510	5,271	4,559	3,972	3,157	3,018	10,781	14,706
Reinvested in Shares	7,974	8,009	7,923	7,732	7,362	6,876	15,983	29,893
Distribution Fees	1,463	1,461	1,478	1,399	1,259	1,030	2,924	5,166
Total Distributions	$ 24,843	$ 24,653	$ 23,819	$ 22,787	$ 21,077	$ 19,761	$ 49,496	$ 87,444

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EQUITY (Redemptions and Repurchases Activity) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Equity [Abstract]
Number of shares redeemed or repurchased (in shares)			10,726	3,408
Aggregate dollar amount of shares redeemed or repurchased	$ 57,864	$ 13,945	$ 93,319	$ 28,500
Average redemption or repurchase price per share (usd per share)			$ 8.70	$ 8.37

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REDEEMABLE NONCONTROLLING INTERESTS (Schedule of redeemable noncontrolling interest activity) (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Jan. 31, 2022	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Dec. 31, 2021
Redeemable Noncontrolling Interest [Line Items]
Beginning balance	$ 8,994			$ 18,130	$ 8,994	$ 8,994
Settlement of prior year performance participation allocation					15,327
Distributions to redeemable noncontrolling interests		$ (192)	$ (191)	(384)	(351)
Redemptions to redeemable noncontrolling interests					(7,724)
Net loss (income) attributable to redeemable noncontrolling interests		(226)	(60)	(244)	186
Change from securities and cash flow hedging activities attributable to redeemable noncontrolling interests		78	17	23	136
Redemption value allocation adjustment to redeemable noncontrolling interests				(243)	1,596
Ending balance		17,282	$ 18,164	17,282	$ 18,164	18,130
Other liabilities		$ 96,079		$ 96,079		$ 114,901
OP Units
Redeemable Noncontrolling Interest [Line Items]
Redeemable OP units outstanding		2,000,000.0		2,000,000.0		2,000,000.0
Related Party [Member]
Redeemable Noncontrolling Interest [Line Items]
Other liabilities		$ 8,786		$ 8,786		$ 32,529
Related Party [Member] | Advisory Fee, Performance Component | Advisor | OP Units
Redeemable Noncontrolling Interest [Line Items]
Redemptions to redeemable noncontrolling interests	$ 7,700
Issuance of OP Units (in shares)	945,000
Related Party [Member] | Performance Participation Allocation | Black Creek Diversified Property Advisors, LLC | OP Units
Redeemable Noncontrolling Interest [Line Items]
Issuance of OP Units (in shares)	465,000
Related Party [Member] | Performance Participation Allocation | Advisor
Redeemable Noncontrolling Interest [Line Items]
Other liabilities						$ 23,747
Related Party [Member] | Performance Participation Allocation | Advisor | OP Units
Redeemable Noncontrolling Interest [Line Items]
Issuance of OP Units (in shares)	1,900,000					0
Performance participation allocation, Settled in cash						$ 23,700
Other liabilities							$ 15,300
Related Party [Member] | Performance Participation Allocation | Chairman | OP Units
Redeemable Noncontrolling Interest [Line Items]
Issuance of OP Units (in shares)	465,000

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NONCONTROLLING INTERESTS (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Noncontrolling Interest [Line Items]
Aggregate amount redeemed	$ 57,864	$ 13,945	$ 93,319	$ 28,500
OP Units
Noncontrolling Interest [Line Items]
Number of common stock issued per operating partnership unit			1
Aggregate amount redeemed	5,100	$ 1,100	$ 16,000	$ 3,400
OP Units | Maximum
Noncontrolling Interest [Line Items]
Estimated maximum redemption value (unaudited)	$ 533,200		$ 533,200		$ 488,300

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NONCONTROLLING INTERESTS (Summary of Balances) (Details) - shares shares in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Noncontrolling Interest [Line Items]
Issuance of units (in shares)	9,500
Redemptions of common stock (in shares)	(10,726)	(3,408)
OP Units
Noncontrolling Interest [Line Items]
Balance at beginning of period (in shares)	55,079	27,180
Issuance of units (in shares)	9,845	4,825
Redemptions of common stock (in shares)	(1,831)	(407)
Balance at end of period (in shares)	63,093	31,598

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RELATED PARTY TRANSACTIONS - (DST Program & Summary of Fees and Expenses Incurred by Company) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Dec. 31, 2021
Related Party Transaction [Line Items]
Other liabilities	$ 96,079		$ 96,079		$ 114,901
Related Party [Member]
Related Party Transaction [Line Items]
Related party transaction expense	20,350	$ 30,029	40,751	$ 66,347
Other liabilities	8,786		8,786		32,529
Related Party [Member] | Advisor
Related Party Transaction [Line Items]
Amount reimbursed for services	3,500	2,900	6,300	5,400
Related Party [Member] | Selling commissions and dealer manager fees | Advisor
Related Party Transaction [Line Items]
Related party transaction expense	448	1,238	960	2,280
Related Party [Member] | Ongoing Distribution Fees [Member] | Dealer Manager
Related Party Transaction [Line Items]
Related party transaction expense	2,190	1,576	4,344	2,874
Other liabilities	759		759		748
Related Party [Member] | Ongoing Distribution Fees [Member] | Dealer Manager | Other Liabilities
Related Party Transaction [Line Items]
Future Estimated Distribution Fees Payable	63,300		63,300		60,900
Related Party [Member] | Property accounting fee | Dealer Manager
Related Party Transaction [Line Items]
Related party transaction expense	481	303	970	303
Other liabilities	481		481		478
Related Party [Member] | Advisory Fees | Advisor
Related Party Transaction [Line Items]
Related party transaction expense	9,623	8,227	19,161	15,370
Other liabilities	2,890		2,890		2,868
Related Party [Member] | Performance Participation Allocation | Advisor
Related Party Transaction [Line Items]
Related party transaction expense		6,186	0	18,379
Other liabilities					23,747
Related Party [Member] | Performance Participation Allocation | Advisor | OP Units
Related Party Transaction [Line Items]
Other liabilities						$ 15,300
Related Party [Member] | Other Expense Reimbursements [Member] | Advisor
Related Party Transaction [Line Items]
Related party transaction expense	3,749	3,206	6,855	5,346
Other liabilities	4,158		4,158		4,192
Related Party [Member] | Other Expense Reimbursements [Member] | Dealer Manager
Related Party Transaction [Line Items]
Related party transaction expense	160	143	160	170
Other liabilities	82		82		109
Related Party [Member] | DST Program Manager Fees | Advisor
Related Party Transaction [Line Items]
Related party transaction expense	1,627	3,490	3,558	8,441
Other liabilities	162		162		146
Related Party [Member] | DST Program dealer manager fees | Dealer Manager
Related Party Transaction [Line Items]
Related party transaction expense	2,072	$ 5,660	4,743	$ 13,184
Other liabilities	$ 254		$ 254		$ 241

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RELATED PARTY TRANSACTIONS - (Advisory Fee and Operating Expense Reimbursement) (Details) - Related Party [Member]	1 Months Ended	3 Months Ended		6 Months Ended
	Apr. 30, 2023	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2023 USD ($) $ / shares	Jun. 30, 2022 USD ($)
Related Party Transaction [Line Items]
Related party transaction expense		$ 20,350,000	$ 30,029,000	$ 40,751,000	$ 66,347,000
Performance Participation Allocation | Advisor
Related Party Transaction [Line Items]
Threshold for performance component of advisory fee		12.50%		12.50%
Threshold of annual total return as % of NAV				5.00%
Performance component earned for excess return over the hurdle amount				100.00%
Maximum performance component limited to % of total annual return				12.50%
Class E Dealer Manager Fee Portion Waived Under NAV Per Share Threshold | $ / shares				$ 10.00
Related party transaction expense			6,186,000	$ 0	18,379,000
Advisory Fees | Advisor
Related Party Transaction [Line Items]
Advisory Agreement Renewal Term Period	1 year
Related party transaction expense		$ 9,623,000	$ 8,227,000	$ 19,161,000	$ 15,370,000
Student Housing Product Specialist | Advisor
Related Party Transaction [Line Items]
Number Of Investments		0		0
Property management agreement, termination, notice period				30 days
Property Management Agreement, Fee Due, Termination Period				1 year
Related party transaction expense				$ 0

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NET INCOME (LOSS) PER COMMON SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Earnings Per Share [Abstract]
Net (loss) income attributable to common stockholders-basic	$ (22,750)	$ (5,588)	$ (24,754)	$ 15,423
Net (loss) income attributable to redeemable noncontrolling interests	(226)	(60)	(244)	186
Net (loss) income attributable to noncontrolling interests	(6,278)	(919)	(6,827)	2,618
Net (loss) income attributable to common stockholders-diluted	$ (29,254)	$ (6,567)	$ (31,825)	$ 18,227
Weighted-average shares outstanding-basic (in shares)	206,214	191,158	206,493	184,878
Incremental weighted-average shares effect of conversion of noncontrolling interests	58,749	33,699	57,482	32,928
Weighted-average shares outstanding - diluted (in shares)	264,963	224,857	263,975	217,806
Basic	$ (0.11)	$ (0.03)	$ (0.12)	$ 0.08
Diluted	$ (0.11)	$ (0.03)	$ (0.12)	$ 0.08

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SUPPLEMENTAL CASH FLOW INFORMATION (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Dec. 31, 2021
Supplemental disclosure of non-cash investing and financing activities:
Distributions reinvested in common stock	$ 15,979	$ 13,922
Increase in accrued future ongoing distribution fees	2,342	11,908
Increase in DST Program Loans receivable through DST Program capital raising	27,315	28,032
Redeemable noncontrolling interest issued as settlement of performance participation allocation	0	15,327
Issuances of OP Units for DST Interests	84,725	39,441
Supplemental Cash Flow Information [Abstract]
Cash and cash equivalents	12,905	19,529	$ 13,336	$ 10,605
Restricted cash	4,265	4,909	3,850	3,747
Cash, cash equivalents and restricted cash	$ 17,170	$ 24,438	$ 17,186	$ 14,352

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SEGMENT FINANCIAL INFORMATION (Schedule of Total Assets by Business Segment) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2023 USD ($) segment	Dec. 31, 2022 USD ($)
Segment Reporting, Asset Reconciling Item [Line Items]
Number of reportable segments | segment	5
Total assets	$ 4,284,491	$ 4,174,724
Operating Segments | Office properties
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	379,863	377,546
Operating Segments | Retail properties
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	514,625	537,147
Operating Segments | Residential properties
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	1,479,797	1,495,532
Operating Segments | Industrial properties
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	1,273,746	1,248,255
Operating Segments | Investments in real estate debt and securities
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	353,879	275,335
Corporate
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	$ 282,581	$ 240,909

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SEGMENT FINANCIAL INFORMATION (Reconciliation of Net Operating Income to Reported Net Income) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Reconciliation of net operating income attributable to common shareholders
Net (loss) income attributable to common stockholders	$ (22,750)	$ (5,588)	$ (24,754)	$ 15,423
Real estate-related depreciation and amortization	33,858	36,903	67,055	64,354
General and administrative expenses	2,973	2,594	6,017	4,631
Advisory fees	9,623	8,227	19,161	15,370
Performance participation allocation	0	6,186	0	18,379
Acquisition costs and reimbursements	1,849	1,093	3,018	2,722
Impairment loss on debt-related investment held for sale	1,260	0	3,780	0
Equity in loss (income) from unconsolidated joint venture partnerships	203	(1,718)	2,649	(708)
Interest expense	37,882	33,774	75,427	58,184
Gain on sale of real estate property	0	(29,643)	(36,884)	(83,524)
Loss on extinguishment of debt and financing commitments, net	0	0	700	0
Gain on derivative instruments	(192)	(982)	(89)	(2,532)
Provision for current expected credit losses	(1,632)	0	3,998	0
Other income	(1,016)	(423)	(2,032)	(1,000)
Net (loss) income attributable to redeemable noncontrolling interests	(226)	(60)	(244)	186
Net (loss) income attributable to noncontrolling interests	(6,278)	(919)	(6,827)	2,618
Net operating income	$ 55,554	$ 49,444	$ 110,975	$ 94,103

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SEGMENT FINANCIAL INFORMATION (Revenue and Components of Net Operating Income) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Segment Reporting Information [Line Items]
Rental revenues	$ 77,204	$ 73,494	$ 155,164	$ 135,999
Debt-related income	7,189	846	12,950	4,314
Rental expenses	(28,839)	(24,896)	(57,139)	(46,210)
Net operating income	55,554	49,444	110,975	94,103
Real estate-related depreciation and amortization	33,858	36,903	67,055	64,354
Office
Segment Reporting Information [Line Items]
Rental revenues	13,001	13,148	26,350	26,780
Rental expenses	(6,442)	(5,772)	(13,072)	(11,963)
Net operating income	6,559	7,376	13,278	14,817
Real estate-related depreciation and amortization	4,203	4,243	8,166	8,240
Retail
Segment Reporting Information [Line Items]
Rental revenues	14,288	16,509	28,806	33,576
Rental expenses	(3,775)	(3,776)	(7,359)	(8,405)
Net operating income	10,513	12,733	21,447	25,171
Real estate-related depreciation and amortization	4,043	4,474	8,078	9,128
Residential
Segment Reporting Information [Line Items]
Rental revenues	28,823	25,824	57,671	42,178
Rental expenses	(14,070)	(11,059)	(27,260)	(18,004)
Net operating income	14,753	14,765	30,411	24,174
Real estate-related depreciation and amortization	9,950	16,038	19,439	24,392
Industrial
Segment Reporting Information [Line Items]
Rental revenues	21,092	18,013	42,337	33,465
Rental expenses	(4,552)	(4,289)	(9,448)	(7,838)
Net operating income	16,540	13,724	32,889	25,627
Real estate-related depreciation and amortization	15,662	12,148	31,372	22,594
Debt and Securities
Segment Reporting Information [Line Items]
Debt-related income	7,189	846	12,950	4,314
Net operating income	$ 7,189	$ 846	$ 12,950	$ 4,314

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Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Pay vs Performance Disclosure
Net Income (Loss)	$ (22,750)	$ (5,588)	$ (24,754)	$ 15,423

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Insider Trading Arrangements	3 Months Ended
	Jun. 30, 2023
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false