CNSREIT-AR-2024 Final - Flipbook - Page 73
The existence of the Special Limited Partner9s 10% performance participation interest in our Operating Partnership,
which is based on our total distributions plus the change in NAV per share (i.e., the Operating Partnership9s total return
over the calendar year), may create an incentive for the Advisor to make riskier or more speculative investments on our
behalf or cause us to use more leverage than we would in the absence of such performance-based compensation. In
addition, the change in NAV per share will be based on the value of our investments on the applicable measurement dates
and not on realized gains or losses. As a result, the performance participation interest may receive distributions based on
unrealized gains in certain assets at the time of such distributions and such gains may not be realized when those assets are
eventually disposed of. Further, the Special Limited Partner may be entitled to receive compensation under the
performance participation for a given year even if some of our stockholders who purchased shares during such year
experienced a decline in NAV per share. Similarly, stockholders whose shares are repurchased during a given year may
have their shares repurchased at a lower NAV per share as a result of an accrual for the estimated performance participation
at such time, even if no performance participation allocation for such year is ultimately payable to the Special Limited
Partner at the end of such calendar year.
Because the management fee and performance participation are based on our NAV, the Advisor may also be motivated
to accelerate acquisitions in order to increase NAV or, similarly, delay or curtail repurchases to maintain a higher NAV,
and the Dealer Manager may also be incentivized to sell more shares of our common stock in offerings of our shares to
increase aggregate NAV, which would, in each case, increase amounts payable to the Advisor and the Special Limited
Partner, but may make it more difficult for us to efficiently deploy new capital.
Cohen & Steers personnel will work on other projects and conflicts may arise in the allocation of personnel between us
and other projects.
The Advisor and its affiliates will devote such time as they determine to be necessary to conduct our business affairs in
an appropriate manner. However, Cohen & Steers personnel, including members of the Investment Committee, work on
other projects, serve on other committees (including boards of directors) and source potential investments for and otherwise
assist the investment programs of Other Cohen & Steers Accounts, including other investment programs to be developed in
the future. Time spent on these other initiatives diverts attention from our activities, which could negatively impact us.
Furthermore, Cohen & Steers and Cohen & Steers personnel derive financial benefit from these other activities, including
fees and performance-based compensation. Our Sponsor9s personnel share in the fees and performance-based
compensation generated by Other Cohen & Steers Accounts. These and other factors create conflicts of interest in the
allocation of time by such personnel.
Cohen & Steers is subject to a number of conflicts of interest, regulatory oversight and legal and contractual restrictions
due to its multiple business lines, which may reduce the synergies that we expect to draw on or otherwise reduce the
opportunities available to us.
Cohen & Steers has multiple business lines, which Cohen & Steers, Other Cohen & Steers Accounts and third parties
will in certain circumstances engage to provide brokerage, investment advisory or other services. As a result of these
activities, Cohen & Steers is subject to a number of actual and potential conflicts of interest, greater regulatory oversight
and more legal and contractual restrictions than if it had one line of business. For example, Cohen & Steers may come into
possession of information that limits our ability to engage in potential transactions. Similarly, other Cohen & Steers
businesses and their personnel may be prohibited by law or contract from sharing information with the Advisor or its
affiliates that would be relevant to monitoring our investments and other activities. Additionally, Cohen & Steers or Other
Cohen & Steers Accounts can be expected to enter into covenants that restrict or otherwise limit our ability to make
investments in, or otherwise engage in, certain businesses or activities. For example, Other Cohen & Steers Accounts could
have granted exclusivity to a joint venture partner that limits us and Other Cohen & Steers Accounts from owning assets
within a certain distance of any of the joint venture9s assets, or Cohen & Steers or an Other Cohen & Steers Account could
have entered into a non-compete in connection with a sale or other transaction. These types of restrictions may negatively
impact our ability to implement our investment program. Finally, certain personnel who are members of the investment
team or Investment Committee may be excluded from participating in certain investment decisions due to conflicts
involving other businesses or for other reasons, including other business activities, in which case we will not benefit from
their experience. Our stockholders will not receive a benefit from any fees earned by Cohen & Steers or its personnel from
these other businesses.
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