Exhibit 10.1
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT, effective
as of August 1, 2009, is between WELLS REAL ESTATE INVESTMENT
TRUST II, INC., a Maryland corporation (the “Company”),
and WELLS CAPITAL, INC., a Georgia corporation (the
“Advisor”).
W I T N E S S E T H
WHEREAS, the Company has filed with
the Securities and Exchange Commission a Registration Statement on
Form S-11 (no. 333-125643) (the “Registration
Statement”) covering the issuance of common stock;
WHEREAS, the Company qualifies as a
REIT (as defined below), and intends to invest its funds in
investments permitted by the terms of the Company’s Articles
of Incorporation and Sections 856 through 860 of the Code (as
defined below);
WHEREAS, the Company desires to
avail itself of the experience, sources of information, advice,
assistance and certain facilities available to 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;
and
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.
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 Advisory Agreement (the “Agreement”), the
following terms have the definitions hereinafter
indicated:
Acquisition Expenses
. Any and all expenses, excluding
the fee payable to the Advisor pursuant to Section 8(b),
incurred by the Company, the Advisor, or any Affiliate of either in
connection with the selection, acquisition or development of any
Property, 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, and title insurance
premiums.
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 or the Advisor) in connection with
purchase, development or construction of any Property. Included in
the computation of such fees or commissions shall be any real
estate commissions, acquisition fees, finder’s fees,
selection fees, Development Fees, Construction Fees, nonrecurring
management fees, loan fees, points, or any other fees or
commissions of a similar nature. Excluded shall be Development Fees
and Construction Fees paid to Persons not Affiliated with the
Advisor in connection with the actual development and construction
of a Property.
Adjusted Cost
. (A) As of any date of
determination and until such time as the Company completes an
Asset-based Valuation, the sum of: (a) the actual amount
invested on behalf of the Company in the Properties as of the date
of determination; plus (b) (1) with respect to Joint
Ventures, the actual amount invested on behalf of the Company in
the Joint Ventures as of the date of determination plus
(2) the Company’s allocable share of capital
improvements relating to building improvements and/or initial
leaseup of space in the building (such improvements to exclude any
expenditures of capital for normal building improvement,
maintenance and repair and tenant improvements relating to existing
leases or lease renewals) made by the Joint Venture from cash flows
generated by the Joint Venture; less (c) the amounts invested
in Properties or Joint Ventures relating to Vacant Properties plus
any additions to Adjusted Cost related to such Joint Ventures
pursuant clause (b)(2) above; less (d) any amounts recognized
on the Company’s consolidated financial statements on or
before such date of determination as impairments to the carrying
value of the Properties or Joint Venture investments in accordance
with Generally Accepted Accounting Principles, excluding any
temporary impairments or impairment charges related to Vacant
Properties for which the amount invested has been deducted from the
foregoing calculation. In all cases, “Adjusted Cost”
excludes the Lindbergh Adjusted Cost.
(B) On and after such time as the
Company completes an Asset-based Valuation, “Adjusted
Cost” means, as of any date of determination, the lesser of
(1) the amount determined in accordance with paragraph A above
or (2) the aggregate value of the Company’s interest in
the Properties and Joint Ventures as established in connection with
the most recent Asset-based Valuation. In all cases,
“Adjusted Cost” excludes the Lindbergh Adjusted
Cost.
Advisor . Wells Capital, Inc., a Georgia corporation,
any successor advisor to the Company, or any Person(s) to which
Wells Capital, Inc. or any successor advisor subcontracts
substantially all of its functions.
Affiliate or
Affiliated . An Affiliate
of another Person includes only the following: (i) any Person
directly or indirectly controlling, controlled by, or under common
control with such other Person; (ii) any Person directly or
indirectly owning, controlling, or holding with the power to vote
10% or more of the outstanding voting securities of such other
Person; (iii) any legal entity for which such Person acts as
an executive officer, director, trustee, or general partner;
(iv) any Person 10% or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held,
with power to vote, by such other Person; and (v) any
executive officer, director, trustee, or general partner of such
other Person. An entity shall not be deemed to control or be under
common control with an Advisor-sponsored program unless
(i) the entity owns 10% or more of the voting equity interests
of such program or (ii) a majority of the board (or equivalent
governing body) of such program is comprised of Affiliates of the
entity.
Appraised Value
. The “As Is” fair
market value according to an appraisal made by an Independent
Appraiser.
Articles of
Incorporation . The
Articles of Incorporation of the Company under Title 2 of the
Corporations and Associations Article of the Annotated Code of
Maryland, as amended from time to time.
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Asset-based Valuation
. An estimate of the value of a
share of the Company’s common stock approved by the Board of
Directors of the Company and based in part on an estimate of the
value of the Company’s assets (as opposed to an estimate
based solely on the most recent price paid for a share of the
Company’s common stock in an offering of such
shares).
Asset Management Fee
. The Asset Management Fee payable
to the Advisor as defined in Section 8(a).
Asset Management Fee Ceiling. The
ceiling on the Asset Management Fee as defined in
Section 8(a).
Asset Management Fee
Percentage . The Asset
Management Fee Percentage equals (1) 0.625% until the monthly
payment of the Asset Management Fee under this Agreement equals
$2,708,333.33; (2) thereafter, the Fixed Fee Percentage for so
long as the sum of Adjusted Cost plus the Lindbergh Adjusted Cost,
as of any date of determination, is less than $6,500,000,000; and
(3) 0.50% commencing when the sum of Adjusted Cost plus the
Lindbergh Adjusted Cost, as of any date of determination, is at
least $6,500,000,000.
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 Properties and
Loans secured by real estate before reserves for depreciation or
bad debts or other similar non-cash reserves, computed by taking
the average of such values at the end of each month during such
period.
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.
Bulk Liquidation
. A liquidation of all or
substantially all of the Company’s assets effected in a
transaction or series of transactions with three or fewer buyers or
their Affiliates that are closed in a period of 12 months or
less.
Bylaws . The bylaws of the Company, as the same are in
effect from time to time.
Capped O&O
Expenses . All
Organizational and Offering Expenses other than selling commissions
and the dealer manager fee as described under “Plan of
Distribution” in the Registration Statement.
Cash from Financings
. Net cash proceeds realized by the
Company from the financing of Property or from the refinancing of
any Company indebtedness.
Cash from Sales
. Net cash proceeds realized by the
Company from the sale, exchange or other disposition of any of its
assets after deduction of all expenses incurred in connection
therewith. Cash from Sales shall not include Cash from
Financings.
Cash from Sales and
Financings . The total
sum of Cash from Sales and Cash from Financings.
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Ceiling Excess
. The extent to which the sum of the
three previous monthly Asset Management Fee payments exceeds the
Asset Management Fee Ceiling , as defined in
Section 8(a).
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.
Company . Wells Real Estate Investment Trust II, Inc., a
corporation organized under the laws of the State of
Maryland.
Competitive Real Estate
Commission . A real
estate or brokerage commission for the purchase or sale of property
which is reasonable, customary, and competitive in light of the
size, type, and location of the property.
Conflicts Committee
. “Conflicts Committee”
shall have the meaning set forth in the Articles of
Incorporation.
Construction Fee
. A fee or other remuneration for
acting as general contractor and/or construction manager to
construct improvements, supervise and coordinate projects or to
provide major repairs or rehabilitation on a Property.
Contract Sales Price
. The total consideration received
by the Company for the sale of a Property.
Cumulative Return
. For the period for which the
calculation is being made, the percentage resulting from dividing
(A) the total Distributions paid on each Distribution date
during such period (excluding Distributions paid out of Cash from
Sales and Financings), by (B) the product of (i) the
weighted average Invested Capital for such period (calculated on a
daily basis) and (ii) the number of years (including fractions
thereof) which have elapsed during such period.
Development Fee
. A fee for the packaging of a
Property, including negotiating and approving plans, and
undertaking to assist in obtaining zoning and necessary variances
and necessary financing for the Property, either initially or at a
later date.
Director . A member of the Board of Directors of the
Company.
Disposition Fee
. The Disposition Fee as defined in
Paragraph 8(c).
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.
Fixed Fee Percentage
. The Fixed Fee Percentage equals
the quotient of (A) (x) $32,500,000 less (y) the
product of (1) 0.50% times (2) the Lindbergh Adjusted
Cost; divided by (B) the Adjusted Cost.
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Gross Proceeds
. The aggregate purchase price of
all Shares sold for the account of the Company through an Offering,
without deduction for Organization and Offering
Expenses.
Independent Appraiser
. A person or entity with no
material current or prior business or personal relationship with
the Advisor or the Directors, 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, and who is a qualified
appraiser of real estate as determined by the Board. Membership in
a nationally recognized appraisal society such as the American
Institute of Real Estate Appraisers (“M.A.I.”) or the
Society of Real Estate Appraisers (“S.R.E.A.”) shall be
conclusive evidence of such qualification.
Invested Capital
. The amount calculated by
multiplying the total number of Shares purchased by stockholders by
the issue price, reduced by the portion of any Distribution that is
attributable to Net Sales Proceeds and by any amounts paid by the
Company to repurchase Shares pursuant to the Company’s plan
for redemption of Shares.
Joint Venture
. Any joint venture, limited
liability company or other Affiliate of the Company that owns, in
whole or in part on behalf of the Company, any
Properties.
Lindbergh Adjusted
Cost . (A) As of any
date of determination and until such time as the Company completes
an Asset-based Valuation, the actual amount, if any, invested in
the two Properties commonly known as AT&T Lindbergh Center for
so long as such Properties are owned on behalf of the Company less
any amounts recognized on or before such date of determination as
impairments to the carrying value of AT&T Lindbergh Center in
accordance with Generally Accepted Accounting Principles. In all
cases, the Lindbergh Adjusted Cost shall be zero ($0.00) if
considered a Vacant Property, as defined herein.
(B) On or after such time as the
Company completes an Asset-based Valuation, “Lindbergh
Adjusted Cost” means, as of any date of determination, the
lesser of (1) the amount determined in accordance with
paragraph (A) above or (2) the value of the
Company’s interest in the AT&T Lindbergh Center as
established in connection with the Company’s most recent
Asset-based Valuation. In all cases, the Lindbergh Adjusted Cost
shall be zero ($0.00) if considered a Vacant Property, as defined
herein.
Listing . The listing of the Shares on a national
securities exchange or over-the-counter market.
NASAA Guidelines
. The NASAA Statement of Policy
Regarding Real Estate Investment Trusts as in effect on the date
hereof.
Net Asset Value
. The excess of (i) the
aggregate of the Adjusted Cost plus the Lindbergh Adjusted Cost
over (ii) the aggregate outstanding amount of debt of the
Company, the Partnership, and the Joint Ventures (as adjusted for
the Company’s interest in such Joint Ventures) and any
accrued interest thereon.
Net Income
. For any period, the total revenues
applicable to such period, less the total expenses applicable to
such period excluding additions to reserves for depreciation, bad
debts or other similar non-cash reserves; provided, however, Net
Income for purposes of calculating total
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allowable Operating Expenses (as defined herein)
shall exclude the gain from the sale of the Company’s
assets.
Net Sales Proceeds
. In the case of a transaction
described in clause (i) (A) of the definition of Sale,
the proceeds of any such transaction less the amount of all real
estate commissions and closing costs paid by the Company. In the
case of a transaction described in clause (i) (B) of such
definition, Net Sales Proceeds means the proceeds of any such
transaction less the amount of any legal and other selling expenses
incurred in connection with such transaction. In the case of a
transaction described in clause (i) (C) of such
definition, Net Sales Proceeds means the proceeds of any such
transaction actually distributed to the Company from the joint
venture. In the case of a transaction described in clause
(ii) of the definition of Sale, Net Sales Proceeds means the
proceeds of such transaction or series of transactions less all
amounts generated thereby and reinvested in one or more Properties
within 180 days thereafter and less the amount of any real estate
commissions, closing costs, and legal and other selling expenses
incurred by or allocated to the Company in connection with such
transaction or series of transactions. Net Sales Proceeds shall not
include any reserves established by the Company in its sole
discretion.
Offering . Any offering of Shares that is registered with
the SEC, excluding Shares offered under any employee benefit
plan.
Operating Expenses
. All costs and expenses incurred by
the Company, as determined under generally accepted accounting
principles, which in any way are related to the operation of the
Company or to Company business, including fees paid to the Advisor,
but excluding (i) the expenses of raising capital such as
Organization 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
of the Shares, (ii) interest payments, (iii) taxes,
(iv) non-cash expenditures such as depreciation, amortization
and bad loan reserves, (v) incentive fees paid in compliance
with Section IV.F. of the NASAA Guidelines and
(vi) Acquisition Fees, Acquisition Expenses, real estate
commissions on resale of property, and other expenses connected
with the acquisition, disposition, and ownership of real estate
interests, mortgage loans or other property (such as the costs of
foreclosure, insurance premiums, legal services, maintenance,
repair and improvement of property).
Organization and Offering
Expenses . All expenses
incurred by and to be paid from the assets of the Company in
connection with and in preparing the Company for registration of
and subsequently offering and distributing its Shares to the
public, which may include but are not limited to, total
underwriting and brokerage discounts and commissions (including
fees of the underwriters’ attorneys); expenses for printing,
engraving and mailing; salaries of employees while engaged in sales
activity; charges of transfer agents, registrars, trustees, escrow
holders, depositaries and experts; and expenses of qualification of
the sale of the securities under Federal and State laws, including
taxes and fees, accountants’ and attorneys’
fees.
Partnership
. Wells Operating Partnership II,
L.P., a Delaware limited partnership formed to own and operate
properties on behalf of the Company.
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Person . An individual, corporation, partnership,
estate, trust (including a trust qualified under
Section 401(a) or 501(c) (17) of the Code), a portion of
a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code, association,
private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity, or any government or any
agency or political subdivision thereof, and also includes a group
as that term is used for purposes of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended.
Property or Properties
. Any real property or properties
transferred or conveyed to the Company or the Partnership, either
directly or indirectly.
Property Manager
. Any entity that has been retained
to perform and carry out at one or more of the Properties property
management services, excluding persons, entities or independent
contractors retained or hired to perform facility management or
other services or tasks at a particular Property, the costs for
which are passed through to and ultimately paid by the tenant at
such Property.
REIT . A “real estate investment trust”
under Sections 856 through 860 of the Code.
Sale or Sales
. (i) Any transaction or series
of transactions whereby: (A) the Company or the Partnership
sells, grants, transfers, conveys, or relinquishes its ownership of
any Property or portion thereof, including the transfer of any
Property that is the subject of a ground lease, and including any
event with respect to any Property which gives rise to a
significant amount of insurance proceeds or condemnation awards;
(B) the Company or the Partnership sells, grants, transfers,
conveys, or relinquishes its ownership of all or substantially all
of the interest of the Company or the Partnership in any joint
venture in which it is a co-venturer or partner; or (C) any
joint venture in which the Company or the Partnership as a
co-venturer or partner sells, grants, transfers, conveys, or
relinquishes its ownership of any Property or portion thereof,
including any event with respect to any Property which gives rise
to insurance claims or condemnation awards, but (ii) not
including any transaction or series of transactions specified in
clause (i) (A), (i) (B), or (i) (C) above in
which the proceeds of such transaction or series of transactions
are reinvested in one or more Properties within 180 days
thereafter.
Shares . The Company’s shares of common stock,
par value $0.01 per share.
Stockholders
. The registered holders of the
Shares.
Stockholders’ 8%
Return . As of each date,
an aggregate amount equal to an 8% Cumulative Return.
Subordinated Incentive
Fee . The fee payable to
the Advisor under certain circumstances if the Shares are listed on
a national securities exchange or over-the-counter market as
defined in Paragraph 8(e).
Subordinated Performance Fee Due
Upon Termination .
Subordinated Performance Fee Due Upon Termination means a fee equal
to (1) 10% of the amount, if any, as of the Termination Date
by which (a) the sum of (i) the Appraised Value of the
Company’s Properties; plus, without duplication (ii) the
fair market value of the Company’s interests in Joint
Ventures; plus
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(iii) the fair market value of any other
tangible assets of the Company; less (iv) all liabilities of
the Company and the Partnership ; plus (v) total Distributions
through the Termination Date; exceeds (b) the sum of Invested
Capital, plus Distributions attributable to Net Sales Proceeds,
plus total Distributions required to be made to the stockholders in
order to pay the Stockholders’ 8% Return from inception
through the termination date; less (2) any prior payment to
the Advisor of a Subordinated Share of Net Sales Proceeds. For the
purpose of the foregoing calculations, all asset values and
liabilities shall be adjusted to exclude the portion of such
amounts allocable to minority interest holders not otherwise
considered in the calculation in the value of Joint
Ventures.
Subordinated Share of Net Sales
Proceeds . The
Subordinated Share of Net Sales Proceeds as defined in Paragraph
8(d).
Termination Date
. The date of termination of the
Agreement.
Vacant Property
. A Property that (i) for over
thirty percent (30%) of its leasable square feet does not have
third-party tenant leases in place; or (ii) has not collected
at least seventy percent (70%) of the Property’s total
potential rental revenue based upon full occupancy, except if not
attaining seventy percent is a result of tenant improvements,
concessions or similar leasing incentives contained in leases
approved by the Board for (i) the period from acquisition
until the applicable measurement date, if less than six months or
(ii) for the six months immediately preceding the date of
measurement.
2%/25% Guidelines
. The requirement pursuant to the
NASAA Guidelines that, in any 12-month period, 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.
2. Appointment . The
Company hereby appoints the Advisor to serve as its advisor and
asset manager on the terms and conditions set forth in this
Agreement, and the Advisor hereby accepts such
appointment.
3. Duties and Authority of the
Advisor . The Advisor undertakes to use its reasonable
efforts (1) to present to the Company potential investment
opportunities to provide a continuing and suitable investment
program consistent with (i) the investment objectives and
policies of the Company as determined and adopted from time to time
by the Board and (ii) the investment allocation method
described at Section 11(b) of this agreement and (2) to
manage, administer, promote, maintain, and improve the Properties
on an overall portfolio basis in a diligent manner. The services of
the Advisor are to be of scope and quality not less than those
generally performed by professional asset managers of other similar
property portfolios. The Advisor shall make available the full
benefit of the judgment, experience and advice of the members of
the Advisor’s organization and staff with respect to the
duties it will perform under this Agreement. The Advisor shall also
obtain Property Managers, which may include Affiliates of the
Advisor, to manage, promote, and lease the Properties. To
facilitate the Advisor’s performance of these undertakings,
but subject to the restrictions included in Paragraphs 4 and 7 and
to the continuing and exclusive authority of the Board over the
management of the Company and the Partnership,
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the Company hereby delegates to the Advisor the
authority to, and the Advisor hereby agrees to, either directly or
by engaging an Affiliate:
(a) serve as the Company’s
investment and financial advisor and provide research and economic
and statistical data in connection with the Company’s assets
and investment policies;
(b) provide the daily management of
the Company and perform and supervise the various administrative
functions reasonably necessary for the management of the
Company;
(c) maintain and preserve the books
and records of the Company, including a stock ledger reflecting a
record of the Stockholders and their ownership of the
Company’s Shares and acting as transfer agent for the
Company’s Shares and maintaining the accounting and other
record-keeping functions
