Related Party Transactions and Arrangements

Cole Capital

Through February 1, 2018, the Company was 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 was responsible for raising capital for certain Cole REITs, advised them regarding offerings, managed relationships with participating broker-dealers and financial advisors, and provided assistance in connection with compliance matters relating to the offerings. The Company received compensation and reimbursement for services relating to the Cole REITs’ offerings and the investment, management and disposition of their respective assets, as applicable.

As discussed in Note 4 —Discontinued Operations, on February 1, 2018, the Company completed the sale of Cole Capital. The assets and liabilities transferred pursuant to the Cole Capital Purchase and Sale Agreement and related financial results are reflected in the consolidated balance sheets and consolidated statements of operations as discontinued operations for all periods presented. As a result of the sale of Cole Capital, the Cole REITs are no longer affiliated with the Company.

The table below reflects the revenue earned from the Cole REITs (including closed programs, as applicable) and joint ventures for the three months ended March 31, 2018 and 2017 (in thousands).



	Three Months Ended March 31,
	2018 ⁽¹⁾		2017
Offering-related fees and reimbursements
Selling commissions ⁽²⁾	$	407	$	2,177
Dealer manager and distribution fees ⁽³⁾	431		1,253
Reimbursement revenue	189		886
Offering-related fees and reimbursements	1,027		4,316

Transaction service fees and reimbursements
Acquisition fees	119		3,272
Reimbursement revenues	215		734
Transaction service fees and reimbursements	334		4,006

Management fees and reimbursements
Asset and property management fees and leasing fees	52		53
Advisory and performance fee revenue	5,023		13,624
Reimbursement revenues	1,429		4,767
Management fees and reimbursements	6,504		18,444

Interest income on Affiliate Lines of Credit	28		124

Total related party revenues	$	7,893	$	26,890

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(1)	Represents the revenue earned during the period from January 1, 2018 through January 31, 2018.


(2)	The Company reallowed 100% of selling commissions to participating broker-dealers from January 1, 2018 through January 31, 2018 and during the three months ended March 31, 2017.


(3)	During the three months ended March 31, 2018 and 2017, the Company reallowed $0.2 million and $0.5 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.

Investment in the Cole REITs

During the three months ended March 31, 2018, the Company sold certain of its equity investments, recognizing a gain of $0.6 million, which is included in other income, net in the accompanying consolidated statement of operations for the three months ended March 31, 2018, to the Cole Purchaser, retaining interests in CCIT II, CCIT III and CCPT V. As of March 31, 2018 and December 31, 2017, the Company owned aggregate equity investments of $7.8 million and $3.3 million, respectively, in the Cole REITs. As discussed in Note 2 – Summary of Significant Accounting Policies, subsequent to the sale of Cole Capital and the adoption of ASU 2016-01, the Company carries these investments at fair value, as the Company does not exert significant influence over CCIT II, CCIT III or CCPT V, in rent and tenant receivables and other assets, net in the accompanying consolidated balance sheet as of March 31, 2018 and changes in the fair value are recognized in other income, net in the accompanying consolidated statement of operations for the three months ended March 31, 2018. During the three months ended March 31, 2018, the Company recognized a gain of $5.1 million related to the change in fair value from the carrying value at December 31, 2017, which is included in other income, net in the accompanying consolidated statement of operations. Prior to the sale of Cole Capital, the Company accounted 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 recorded its proportionate share of net income or loss from the Cole REITs in equity in income (loss) and gain on disposition of unconsolidated entities in the consolidated statement of operations for the three months ended March 31, 2017. During the three months ended March 31, 2017, the Company recognized a net loss of $0.4 million from the Cole REITs.

Due to Cole REITs

As of March 31, 2018, $0.1 million was due to the Cole REITs, which is included in accounts payable and accrued expenses in the accompanying consolidated balance sheet. As of December 31, 2017, due to affiliates was $0.1 million, related to amounts due to the Cole REITs, which is included in due to affiliates, net in the accompanying consolidated balance sheet.

Due from Cole REITs

As of March 31, 2018, $5.0 million was expected to be collected from the Cole REITs, excluding any outstanding balances from a line of credit with one of the Cole REITs, discussed below. As of December 31, 2017, $4.4 million was expected to be collected from affiliates, excluding any outstanding balances from a line of credit with one of the Cole REITs, 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 was originally scheduled to mature on September 22, 2017. On March 28, 2017, CCI III OP entered into a modification agreement in order to extend the maturity date of the Subordinate Promissory Note from September 22, 2017 to September 30, 2018. As of March 31, 2018, the Subordinate Promissory Note had an interest rate of 5.6% and $3.2 million was outstanding, which is included in rent and tenant receivables and other assets, net in the accompanying consolidated balance sheet. As of December 31, 2017, $1.6 million was outstanding, which is included in due from affiliates, net in the accompanying consolidated balance sheet.