Related Party Transactions and Arrangements

Cole Capital

Cole Capital is contractually responsible for managing the Cole REITs’ affairs on a day-to-day basis, identifying and making acquisitions and investments on the Cole REITs’ behalf, and recommending to the respective board of directors of each of the Cole REITs an approach for providing investors with liquidity. In addition, the Company distributes the shares of common stock for certain Cole REITs and advises them regarding offerings, manages relationships with participating broker-dealers and financial advisors and provides assistance in connection with compliance matters relating to the offerings. The Company receives compensation and reimbursement for services relating to the Cole REITs’ offerings and the investment, management and disposition of their respective assets, as applicable.

Offering-Related Revenue

The Company generally receives a selling commission, dealer manager fee and/or a distribution and stockholder servicing fee based on the gross offering proceeds related to the sale of shares of the Cole REITs’ common stock in their primary offerings. The Company has reallowed 100% of selling commissions earned to participating broker-dealers. The Company, in its sole discretion, may reallow all or a portion of its dealer manager fee to such participating broker-dealers as a marketing and due diligence expense reimbursement, based on factors such as the volume of shares issued by such participating broker-dealers and the amount of marketing support provided by such participating broker-dealers. No selling commissions or dealer manager fees are paid to the Company or other broker-dealers with respect to shares issued under the respective Cole REIT’s distribution reinvestment plan, under which the stockholders may elect to have distributions reinvested in additional shares.

All other organization and offering expenses associated with the sale of the Cole REITs’ common stock are paid for in advance by the Company and subject to reimbursement by the Cole REITs, up to certain limits in accordance with their respective advisory agreements and charters. As these costs are incurred, they are recorded as reimbursement revenue, up to the respective limit, and are included in offering-related revenues in the financial results for Cole Capital. Expenses paid on behalf of the Cole REITs in excess of these limits that are expected to be collected based on future estimated offering proceeds are recorded as program development costs, which are included in rent and tenant receivables and other assets, net in the accompanying consolidated balance sheets. The Company assesses the collectability of the program development costs, considering the offering period and historical and forecasted sales of shares under the Cole REITs’ respective offerings and reserves for any balances considered not collectible. Additional reserves are generally recorded if actual proceeds raised from the offerings and corresponding program development costs incurred differ from management’s assumptions. As of September 30, 2016 and December 31, 2015, the Company had organization and offering costs recorded as program development costs, included in rent and tenant receivables and other assets, net in the consolidated balance sheets, of $12.3 million and $12.9 million, respectively, which were net of reserves of $18.8 million and $34.8 million, respectively.

The following table shows the offering fee summary information for the Cole REITs as of September 30, 2016:



Program	Selling Commissions ⁽¹⁾	Dealer Manager Fees ⁽²⁾		Annual Distribution and Stockholder Servicing Fee ⁽²⁾
Open Programs ⁽³⁾
CCPT V
Class A Shares	7%	2%		—%
Class T Shares ⁽⁴⁾	3%	2%		0.8%	^{(5) (6)}

INAV ⁽⁷⁾
Wrap Class Shares	—%	0.55%	⁽⁶⁾	—%
Advisor Class Shares	up to 3.75%	0.55%	⁽⁶⁾	0.5%	⁽⁶⁾
Institutional Class Shares	—%	0.25%	⁽⁶⁾	—%

CCIT III ⁽⁸⁾
Class A Shares	7%	2%		—%
Class T Shares	3%	2%		1%	⁽⁶⁾

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(1)	The Company reallowed 100% of selling commissions earned to participating broker-dealers during the three and nine months ended September 30, 2016 and 2015.


(2)	The Company may reallow all or a portion of its dealer manager fee and/or a distribution and stockholder servicing fee to participating broker-dealers as a marketing and due diligence expense reimbursement.


(3)	CCIT II closed its offering during the three months ended September 30, 2016. The program’s fee structure was similar to that of CCPT V.


(4)	Commencing on April 29, 2016, CCPT V began offering Class T shares of common stock in addition to the class of shares of common stock previously offered (now referred to as Class A shares).


(5)	Subsequent to September 30, 2016, the distribution and stockholder servicing fee was amended to be 1.0%.


(6)	Fees are accrued daily in the amount of 1/365^th of a percentage of the estimated per share NAV and payable monthly in arrears. The maximum amount of the distribution and stockholder servicing fee with respect to sales of Class T shares is 4.0% of the gross offering proceeds for CCPT V and CCIT III.


(7)	In connection with the INAV offering, the Company receives selling commissions, an asset-based dealer manager fee and/or an asset-based distribution and stockholder servicing fee, all based on the net asset value for each class of common stock.


(8)	On September 22, 2016, the registration statement for the initial public offering of CCIT III was declared effective by the SEC, consisting of Class A shares of common stock and Class T shares of common stock.

Transaction Service Revenue

The Company earns acquisition fees related to the acquisition, development or construction of properties on behalf of certain of the Cole REITs. In addition, the Company is reimbursed for acquisition expenses incurred in the process of acquiring properties up to certain limits per the respective advisory agreement. The Company is not reimbursed for personnel costs in connection with services for which it receives acquisition fees or real estate commissions. In addition, the Company may earn disposition fees related to the sale of one or more properties, including those held indirectly through joint ventures, on behalf of a Cole REIT and other affiliates.

The following table shows the transaction-related fees for the Cole REITs and other real estate programs as of September 30, 2016:



Program	Acquisition Fees ⁽¹⁾	Disposition Fees	Performance Fees ⁽²⁾	Financing Coordination Fee ⁽³⁾
Open Programs
CCPT V	2%	1%	15%	—
INAV	—	—	—	—
CCIT III	2%	1%	15%	1%

Closed Programs
CCIT II	2%	1%	15%	—
CCPT IV	2%	1%	15%	—
Other Programs	Various	Various	Various	—

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(1)	Percent taken on gross purchase price.

(2)

Performance fee paid only under the following circumstances: (i) if shares are listed on a national securities exchange; (ii) if the respective Cole REIT is sold or the assets are liquidated; or (iii) upon termination of the advisory agreement. In connection with such events, the performance fee will only be earned upon the return to investors of their net capital invested and a 6% annual cumulative, non-compounded return (8% in the case of CCIT II and CCPT IV).


(3)	Financing coordination fee payable for services in connection with the origination, assumption, or refinancing for any debt (other than loans advanced by the Company) to acquire properties or make other permitted investments.

Management Service Revenue

The Company earns advisory and asset and property management fees from certain Cole REITs and other real estate programs. The Company may also be reimbursed for expenses incurred in providing advisory and asset and property management services, subject to certain limitations. In addition, the Company earns a performance fee relating to INAV for any year in which the total return on stockholders’ capital exceeds 6% per annum on a calendar year basis.

The following table shows the management fees for the Cole REITs as of September 30, 2016:



Program	Asset Management / Advisory Fees ⁽¹⁾	Performance Fees ⁽²⁾
Open Programs
CCPT V	0.65% - 0.75%	—
INAV	0.90%	25%
CCIT III	0.65% - 0.75%	—

Closed Programs
CCIT II	0.65% - 0.75%	—
CCPT IV	0.65% - 0.75%	—
Other Programs	Various	—

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(1) Annualized fee based on the average monthly invested assets or net asset value, if available.

(2) The performance fee is limited to 10% of the aggregate total return, for each class, for any individual year.

The table below reflects the revenue earned from the Cole REITs (including closed programs, as applicable) and joint ventures for the three and nine months ended September 30, 2016 and 2015 (in thousands).



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Offering-related fees and reimbursements
Selling commissions ⁽¹⁾	$	5,008	$	3,328	$	18,112	$	8,345
Dealer manager and distribution fees ⁽²⁾	2,237		1,258		7,292		3,143
Reimbursement revenue	2,300		1,264		7,446		2,995
Offering-related fees and reimbursements	9,545		5,850		32,850		14,483

Transaction service fees and reimbursements
Acquisition fees	2,813		6,233		8,273		14,913
Disposition fees ⁽³⁾	—		—		—		4,350
Reimbursement revenues	686		403		2,024		1,594
Transaction service fees and reimbursements	3,499		6,636		10,297		20,857

Management fees and reimbursements
Asset and property management fees and leasing fees	53		108		159		332
Advisory and performance fee revenue	13,011		10,998		37,621		32,674
Reimbursement revenues	4,430		2,882		12,803		8,503
Management fees and reimbursements	17,494		13,988		50,583		41,509

Interest income on Affiliate Lines of Credit	—		306		308		967

Total related party revenues⁽⁴⁾	$	30,538	$	26,780	$	94,038	$	77,816

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(1)	The Company reallowed 100% of selling commissions earned to participating broker-dealers during the three and nine months ended September 30, 2016 and 2015.

(2)

During the three and nine months ended September 30, 2016, the Company reallowed $0.9 million and $2.8 million, respectively, of dealer manager fees and/or distribution and stockholder servicing fees to participating broker dealers as a marketing and due diligence expense reimbursement. During the three and nine months ended September 30, 2015, the Company reallowed $0.6 million and $1.3 million, respectively, of such fees.


(3)	The Company earned a disposition fee of $4.4 million on behalf of CCIT when CCIT merged with Select Income REIT on January 29, 2015.


(4)	Total related party revenues excludes fees earned from 1031 real estate programs of $0.5 million and $1.1 million for the three and nine months ended September 30, 2016, respectively and fees earned from 1031 real estate programs of $1.1 million and $4.7 million for the three and nine months ended September 30, 2015, respectively.

Investment in the Cole REITs

As of September 30, 2016 and December 31, 2015, the Company owned aggregate equity investments of $6.1 million and $4.1 million, respectively, in the Cole REITs and other affiliated offerings. The Company accounts for these investments using the equity method of accounting which requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the respective Cole REIT’s earnings and distributions. The Company records its proportionate share of net income from the Cole REITs in equity in income and gain on disposition of unconsolidated entities in the consolidated statements of operations. During the three and nine months ended September 30, 2016, the Company recognized $1,000 and $128,000 of net loss, respectively, from the Cole REITs. During the three and nine months ended September 30, 2015, the Company recognized $27,000 of net loss and $63,000 of net income, respectively, from the Cole REITs.

The table below presents certain information related to the Company’s investments in the Cole REITs as of September 30, 2016 (carrying amount in thousands):



	September 30, 2016
Cole REIT	% of Outstanding Shares Owned	Carrying Amount of Investment
CCPT V	1.00%	$	1,448
INAV	0.09%	143
CCIT II	0.44%	1,299
CCIT III	100%	2,697
CCPT IV	0.01%	115
Funds not yet in offering	N/A	400
		$	6,102

Due to Affiliates

Due to affiliates, as reported in the accompanying consolidated balance sheets, was $0.2 million as of December 31, 2015, related to amounts due to the Cole REITs for expense reimbursements. As of September 30, 2016, there was no such balance due to affiliates.

Due from Affiliates

As of each of September 30, 2016 and December 31, 2015, $10.6 million was expected to be collected from affiliates, excluding balances from the Cole REITs’ lines of credit, discussed below, related to services provided by the Company and expenses subject to reimbursement by the Cole REITs in accordance with their respective advisory and property management agreements.

On September 23, 2016, the Company entered into a $30.0 million revolving line of credit (the “Subordinate Promissory Note”) with Cole Corporate Income Operating Partnership III, LP (“CCI III OP”), the operating partnership of CCIT III (the “Subordinate Promissory Note Agreement”) . The Subordinate Promissory Note bears variable interest rates of one-month LIBOR plus the Credit Facility Margin (as defined in the Subordinate Promissory Note Agreement), which ranges from 2.20% to 2.75%, plus 1.75% and matures on September 22, 2017. As of September 30, 2016, the Subordinate Promissory Note had an interest rate of 5.05% and $10.3 million was outstanding.

As of December 31, 2015, the Company had revolving line of credit agreements in place with CCIT II and CCPT V (the “Affiliate Lines of Credit”) that provided for maximum borrowings of $60.0 million to each of CCIT II and CCPT V and bore variable interest rates of one-month LIBOR plus 2.20%. As of December 31, 2015, there was $50.0 million outstanding on the Affiliate Lines of Credit. During the nine months ended September 30, 2016, the Affiliate Lines of Credit had matured and no amounts were outstanding as of September 30, 2016.