10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission file number 333-209128 (1933 Act)

COLE OFFICE & INDUSTRIAL REIT (CCIT III), INC.

(Exact name of registrant as specified in its charter)

Maryland	47-0983661
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
2325 East Camelback Road, 10th Floor Phoenix, Arizona 85016	(602) 778-8700
(Address of principal executive offices; zip code)	(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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  x    No  o

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  x    No  o

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	o	Accelerated filer	o	Non-accelerated filer	x
Smaller reporting company	o	Emerging growth company	x

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. x

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

As of November 7, 2018, there were approximately 2.4 million shares of Class A common stock and 744,000 shares of Class T common stock, par value per share of $0.01 each, of Cole Office & Industrial REIT (CCIT III), Inc. outstanding.

COLE OFFICE & INDUSTRIAL REIT (CCIT III), INC.

INDEX

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	3
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017	4
Condensed Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2018	5
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017	6
Notes to Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosures About Market Risk	26
Item 4. Controls and Procedures	26
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	27
Item 1A. Risk Factors	27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3. Defaults Upon Senior Securities	29
Item 4. Mine Safety Disclosures	29
Item 5. Other Information	29
Item 6. Exhibits	30
Signature	31

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

COLE OFFICE & INDUSTRIAL REIT (CCIT III), INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2018			December 31, 2017
ASSETS
Real estate assets:
Land	$	3,245,003		$	3,245,003
Buildings and improvements	41,258,770			41,258,770
Intangible lease asset	5,101,432			5,101,432
Total real estate assets, at cost	49,605,205			49,605,205
Less: accumulated depreciation and amortization	(3,345,223		)	(1,911,033		)
Total real estate assets, net	46,259,982			47,694,172
Cash and cash equivalents	198,087			351,461
Rents and tenant receivables	781,182			1,018,825
Prepaid expenses	119,808			116,796
Deferred costs, net	543,264			950,978
Total assets	$	47,902,323		$	50,132,232
LIABILITIES AND STOCKHOLDERS’ EQUITY
Credit facility	$	25,175,000		$	31,975,000
Subordinate promissory note	—			1,600,000
Accrued expenses and accounts payable	486,007			853,388
Due to affiliates	202,530			278,394
Distributions payable	142,415			100,241
Deferred rental income	—			208,716
Total liabilities	26,005,952			35,015,739
Commitments and contingencies
Redeemable common stock	112,006			87,337
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, none issued and outstanding	—			—
Class A common stock, $0.01 par value per share; 245,000,000 shares authorized, 2,277,352 and 1,436,855 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively	22,774			14,369
Class T common stock, $0.01 par value per share; 245,000,000 shares authorized, 732,807 and 631,346 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively	7,328			6,313
Capital in excess of par value	26,695,445			18,284,253
Accumulated distributions in excess of earnings	(4,941,182		)	(3,275,779		)
Total stockholders’ equity	21,784,365			15,029,156
Total liabilities, redeemable common stock, and stockholders’ equity	$	47,902,323		$	50,132,232

The accompanying notes are an integral part of these condensed consolidated financial statements.

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COLE OFFICE & INDUSTRIAL REIT (CCIT III), INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Revenues:
Rental income	$	972,002		$	674,566		$	2,916,007		$	2,023,699
Tenant reimbursement income	129,664			906,724			389,020			1,041,844
Total revenues	1,101,666			1,581,290			3,305,027			3,065,543
Operating expenses:
General and administrative	247,961			103,507			678,758			410,359
Property operating	3,212			2,756			9,913			9,165
Real estate tax	126,625			903,968			379,875			1,032,894
Advisory fees and expenses	—			—			—			60,565
Depreciation and amortization	478,063			358,286			1,434,190			1,074,858
Total operating expenses	855,861			1,368,517			2,502,736			2,587,841
Operating income	245,805			212,773			802,291			477,702
Other expense:
Interest expense and other, net	(429,149		)	(347,889		)	(1,384,477		)	(1,168,619		)
Net loss	$	(183,344	)	$	(135,116	)	$	(582,186	)	$	(690,917	)
Class A Common Stock:
Net loss	$	(127,009	)	$	(106,288	)	$	(390,726	)	$	(600,648	)
Basic and diluted weighted average number of common shares outstanding	2,226,550			1,197,224			1,844,223			859,523
Basic and diluted net loss per common share	$	(0.06	)	$	(0.09	)	$	(0.21	)	$	(0.70	)
Distributions declared per common share	$	0.15		$	0.15		$	0.45		$	0.45
Class T Common Stock:
Net loss	$	(56,335	)	$	(28,828	)	$	(191,460	)	$	(90,269	)
Basic and diluted weighted average number of common shares outstanding	721,678			257,529			685,064			117,531
Basic and diluted net loss per common share	$	(0.08	)	$	(0.11	)	$	(0.28	)	$	(0.77	)
Distributions declared per common share	$	0.15		$	0.15		$	0.45		$	0.45

The accompanying notes are an integral part of these condensed consolidated financial statements.

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COLE OFFICE & INDUSTRIAL REIT (CCIT III), INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Class A Common Stock					Class T Common Stock			Capital in Excess of Par Value			Accumulated Distributions in Excess of Earnings			Total Stockholders’ Equity
	Number of Shares		Par Value			Number of Shares	Par Value
Balance, January 1, 2018	1,436,855		$	14,369		631,346	$	6,313	$	18,284,253		$	(3,275,779	)	$	15,029,156
Issuance of common stock	845,832		8,458			101,461	1,015		9,256,626			—			9,266,099
Distributions declared	—		—			—	—		—			(1,083,217		)	(1,083,217		)
Commissions on stock sales and related dealer manager fees	—		—			—	—		(646,448		)	—			(646,448		)
Other offering costs	—		—			—	—		(93,982		)	—			(93,982		)
Distribution and stockholder servicing fees	—		—			—	—		(32,373		)	—			(32,373		)
Redemptions of common stock	(5,335	)	(53		)	—	—		(47,962		)	—			(48,015		)
Changes in redeemable common stock	—		—			—	—		(24,669		)	—			(24,669		)
Net loss	—		—			—	—		—			(582,186		)	(582,186		)
Balance, September 30, 2018	2,277,352		$	22,774		732,807	$	7,328	$	26,695,445		$	(4,941,182	)	$	21,784,365

The accompanying notes are an integral part of these condensed consolidated financial statements.

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COLE OFFICE & INDUSTRIAL REIT (CCIT III), INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2018			2017
Cash flows from operating activities:
Net loss	$	(582,186	)	$	(690,917	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization, net	1,434,190			1,074,858
Amortization of deferred financing costs	421,000			370,396
Straight-line rental income	(114,970		)	(161,622		)
Changes in assets and liabilities:
Rents and tenant receivables	352,613			(793,476		)
Prepaid expenses and other assets	(3,012		)	(60,060		)
Accrued expenses and accounts payable	(367,381		)	317,426
Deferred rental income	(208,716		)	4,092
Due to affiliates	(60,302		)	(74,293		)
Net cash provided by (used in) operating activities	871,236			(13,596		)
Cash flows from investing activities:
Net cash used in investing activities	—			—
Cash flows from financing activities:
Proceeds from issuance of common stock	8,878,331			13,637,650
Redemptions of common stock	(48,015		)	—
Offering costs on issuance of common stock	(740,430		)	(1,077,033		)
Distribution and stockholder servicing fees paid	(47,935		)	(8,344		)
Distributions to stockholders	(653,275		)	(275,207		)
Repayments of credit facility	(6,800,000		)	(1,725,000		)
Proceeds from subordinate promissory note	2,200,000			488,631
Repayment of subordinate promissory note	(3,800,000		)	(10,788,631		)
Deferred financing costs paid	(13,286		)	—
Net cash (used in) provided by financing activities	(1,024,610		)	252,066
Net (decrease) increase in cash and cash equivalents	(153,374		)	238,470
Cash and cash equivalents, beginning of period	351,461			605,049
Cash and cash equivalents, end of period	$	198,087		$	843,519
Supplemental disclosures of non-cash investing and financing activities:
Distributions declared and unpaid	$	142,415		$	79,064
Change in accrued distribution and stockholder servicing fees due to affiliate	$	32,373		$	160,183
Common stock issued through distribution reinvestment plan	$	387,768		$	92,227
Supplemental Cash Flow Disclosures:
Interest paid	$	980,687		$	800,966

The accompanying notes are an integral part of these condensed consolidated financial statements.

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COLE OFFICE & INDUSTRIAL REIT (CCIT III), INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018 (Unaudited)

NOTE 1 — ORGANIZATION AND BUSINESS

Cole Office & Industrial REIT (CCIT III), Inc. (the “Company”) is a Maryland corporation that was incorporated on May 22, 2014, that elected to be taxed, and currently qualifies, as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2017. The Company is the sole general partner of, and owns, directly or indirectly, 100% of the partnership interests in Cole Corporate Income Operating Partnership III, LP, a Delaware limited partnership.

On November 13, 2017, VEREIT Operating Partnership, L.P. (“VEREIT OP”), a former affiliated entity of the Company’s sponsor, CCO Group (as defined below), entered into a Purchase and Sale Agreement with CCA Acquisition, LLC (“CCA”), a newly-formed affiliate of CIM Group, LLC (“CIM”), pursuant to which CCA agreed to acquire all of the issued and outstanding shares of common stock of Cole Capital Advisors, Inc., the direct or indirect owner of Cole Corporate Income Advisors III, LLC (“CCI III Advisors”), Cole Capital Corporation and CREI Advisors, LLC (“CREI Advisors”), the Company’s external advisor, dealer manager and property manager, respectively (the “Transaction”).

On February 1, 2018, the Transaction was completed. Immediately following the completion of the Transaction, Cole Capital Advisors, Inc. and the Company’s dealer manager were each converted into Delaware limited liability companies, Cole Capital Advisors, Inc.’s name was changed to CCO Group, LLC, and the dealer manager’s name was changed to CCO Capital, LLC (“CCO Capital”). As a result of the Transaction, CIM owns and/or controls CCO Group, LLC and its subsidiaries (collectively, “CCO Group”), and CCO Group, LLC owns and controls CCI III Advisors, CCO Capital and CREI Advisors, the Company’s external advisor, dealer manager for the Offering (as defined below) and property manager, respectively.

In addition, as part of the Transaction, VEREIT OP and CCO Group, LLC entered into a services agreement (the “Services Agreement”) pursuant to which VEREIT OP is obligated to provide certain services to CCO Group and to the Company, Cole Credit Property Trust IV, Inc. (“CCPT IV”), Cole Credit Property Trust V, Inc. (“CCPT V”), Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”) and Cole Real Estate Income Strategy (Daily NAV), Inc. (“Cole Income NAV Strategy”) (CCPT IV, CCPT V, CCIT III, Cole Income NAV Strategy and the Company, collectively, the “Cole REITs^®”), including operational real estate support. VEREIT OP is obligated to provide such services through March 31, 2019 (or, if later, the date of the last government filing other than a tax filing made by any of the Cole REITs with respect to its 2018 fiscal year) (the “Initial Services Term”) and is obligated to provide consulting and research services through December 31, 2023 as requested by CCO Group, LLC.

Despite the indirect change of ownership and control of the Company’s advisor, dealer manager, property manager and sponsor, the Company expects that, during the Initial Services Term of the Services Agreement, the advisory, dealer manager and property management services the Company receives will continue without any material changes in personnel (except as supplemented by the management oversight of CIM personnel) or material change in service procedures. CCO Group, LLC is evaluating and intends to effectuate during the Initial Services Term of the Services Agreement an appropriate transition of VEREIT OP’s services under the Services Agreement to other CIM affiliates or third parties with the goal of ensuring continuity and minimizing disruption.

Pursuant to a Registration Statement on Form S-11 (Registration No. 333-209128) (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”), and declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on September 22, 2016, the Company commenced its initial public offering on a “best efforts” basis, offering up to a maximum of $3.5 billion in shares of common stock (the “Offering”). Pursuant to the Offering, the Company is offering up to $2.5 billion in shares of its common stock pursuant to the primary offering, consisting of two classes of shares: Class A common stock (“Class A Shares”) at a price of $10.00 per share (up to $1.25 billion in shares) and Class T common stock (“Class T Shares”) at a price of $9.57 per share (up to $1.25 billion in shares). Pursuant to the Offering, the Company is also offering up to $1.0 billion in shares of its common stock pursuant to the distribution reinvestment plan (the “DRIP”) at a purchase price during the Offering equal to the per share primary offering prices net of selling commissions and dealer manager fees, or $9.10 per share for both Class A Shares and Class T Shares, assuming a $10.00 per Class A Share primary offering price and a $9.57 per Class T Share primary offering price.

On August 9, 2018, the Company’s board of directors approved the extension of the Offering until September 22, 2019, unless the Company’s board of directors terminates the Offering at an earlier date or all shares being offered have been sold, in which case the Offering will be terminated. In no event will the Offering be extended beyond 180 days after September 22, 2019.

7

COLE OFFICE & INDUSTRIAL REIT (CCIT III), INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018 (Unaudited) – (Continued)

As of September 30, 2018, the Company had issued approximately 3.0 millionshares of common stock in the Offering, including62,000shares issued pursuant to the DRIP, for gross proceeds of$29.1 million ($22.1 million in Class A Shares and $7.0 million in Class T Shares) before organization and offering costs, selling commissions and dealer manager fees of $2.1 million. In addition, the Company has paid distribution and stockholder servicing fees for Class T Shares sold in the primary portion of the Offering of $70,000 and accrued an estimated liability for future distribution and stockholder servicing fees payable of $202,000. The Company intends to use substantially all of the net proceeds from the Offering to acquire and operate a diversified portfolio of commercial real estate assets primarily consisting of single-tenant, income-producing necessity office and industrial properties, which are leased to creditworthy tenants under long-term leases, including distribution facilities, warehouses, manufacturing plants and corporate or regional headquarters in strategic locations. The Company expects that most of its properties will be subject to “net” leases, whereby the tenant will be primarily responsible for the property’s cost of repairs, maintenance, property taxes, utilities, insurance and other operating costs. As of September 30, 2018, the Company owned two office and industrial properties, comprising 391,000 rentable square feet of commercial space located in two states. As of September 30, 2018, the rentable square feet at these properties was 100% leased.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of significant accounting policies presented below is designed to assist in understanding the Company’s condensed consolidated financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying condensed consolidated financial statements.

Principles of Consolidation and Basis of Presentation

The condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the SEC regarding interim financial reporting, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the statements for the interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of full year results. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2017, and related notes thereto, set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The condensed consolidated financial statements should also be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Certain amounts in the Company’s prior period condensed consolidated financial statements have been reclassified to conform to the current period presentation. The Company has chosen to break out distribution and stockholder servicing fees paid of $8,000 from offering costs on issuance of common stock of $1.08 million, which was previously reported in total as $1.09 million in the Company’s condensed consolidated statements of cash flows for the nine months endedSeptember 30, 2017. This reclassification had no effect on previously reported totals or subtotals.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Real Estate Assets

Real estate assets are stated at cost, less accumulated depreciation and amortization. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life. The estimated useful lives of the Company’s real estate assets by class are generally as follows:

8

COLE OFFICE & INDUSTRIAL REIT (CCIT III), INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018 (Unaudited) – (Continued)

Buildings	40 years
Site improvements	15 years
Tenant improvements	Lesser of useful life or lease term
Intangible lease assets	Lease term

Recoverability of Real Estate Assets

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to: bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, rental concessions and other factors; a significant decrease in a property’s revenues due to lease terminations; vacancies; co-tenancy clauses; reduced lease rates; changes in anticipated holding periods; or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate assets to their respective fair values and recognize an impairment loss. Generally, fair value will be determined using a discounted cash flow analysis and recent comparable sales transactions. No impairment indicators were identified and no impairment losses were recorded during the nine months endedSeptember 30, 2018 or 2017.

Assets Held for Sale

When a real estate asset is identified by the Company as held for sale, the Company will cease recording depreciation and amortization of the assets related to the property and estimate its fair value, net of selling costs. If, in management’s opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount is then recorded to reflect the estimated fair value of the property, net of selling costs. There were no assets identified as held for sale as of September 30, 2018 or December 31, 2017.

Allocation of Purchase Price of Real Estate Assets

Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and to identified intangible assets and liabilities, consisting of the value of above- and below-market leases and the value of in-place leases and other intangibles, based in each case on their respective fair values. The Company utilizes independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and buildings). The information in the appraisal, along with any additional information available to the Company’s management, is used in estimating the amount of the purchase price that is allocated to land. Other information in the appraisal, such as building value and market rents, may be used by the Company’s management in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. The appraisal firm has no involvement in management’s allocation decisions other than providing this market information.

The determination of the fair values of the real estate assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of the Company’s purchase price, which could materially impact the Company’s results of operations.

In April 2017, the Company elected to early adopt Accounting Standards Update (“ASU”) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Beginning in April 2017, all real estate acquisitions qualified as asset acquisitions, and as such, acquisition-related fees and certain acquisition-related expenses related to these asset acquisitions were capitalized and allocated to tangible and intangible assets and liabilities, as described above. Prior to the adoption of ASU 2017-01 in April 2017, all of the Company’s real estate acquisitions were accounted for as business combinations and, as such, acquisition-related expenses related to these business combination acquisitions were expensed as incurred. Prior to April 2017, acquisition-related expenses in the Company’s condensed consolidated statements of operations primarily consisted of legal, deed transfer and other costs related to real estate purchase transactions, including costs incurred for deals that were not consummated. The Company expects its future acquisitions to qualify as asset acquisitions and, as such, the Company will allocate the purchase price to acquired tangible assets and identified intangible assets and liabilities on a relative fair value basis.

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COLE OFFICE & INDUSTRIAL REIT (CCIT III), INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018 (Unaudited) – (Continued)

Revenue Recognition

Certain properties have leases where the minimum rental payment increases during the term of the lease. The Company records rental income for the full term of each lease on a straight-line basis when earned and collectability is reasonably assured. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of this calculation. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Expected reimbursements from tenants for recoverable real estate taxes and operating expenses are included in tenant reimbursement income in the period when such costs are incurred. Effective January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in Revenue Recognition, Accounting Standards Codification (“ASC”) Topic 605 and requires an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company records revenue for real estate taxes and insurance reimbursed by its tenants on the leased properties, with offsetting expenses in real estate taxes and property operating expenses, respectively, within the condensed consolidated statements of operations as the Company has concluded it is the primary obligor. The Company has identified its revenue streams as rental income from leasing arrangements and tenant reimbursement income, which are outside of the scope of Topic 606. The Company adopted ASU 2014-09 using the modified retrospective approach and determined it did not have a material impact on the Company’s condensed consolidated financial statements.

The Company continually reviews receivables related to rent, including any straight-line rent, and current and future operating expense reimbursements from tenants, and determines their collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is uncertain, the Company will record an increase in the allowance for uncollectible accounts. As of September 30, 2018 and December 31, 2017, theCompany did not have an allowance for uncollectible accounts.

Net Loss and Distributions Per Share

The Company has two classes of common stock. Accordingly, the Company utilizes the two-class method to determine its earnings per share, which can result in different earnings per share for each of the classes. Under the two-class method, earnings per share of each class of common stock are computed by dividing the sum of the distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares for each class of common stock for the respective period. The distributed earnings to Class T Share common stockholders represents distributions declared less the distribution and stockholder servicing fees paid with respect to Class T Shares sold in the primary portion of the Offering. Diluted income per share, when applicable, considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of thethree and nine months endedSeptember 30, 2018or2017. Distributions per share are calculated based on the authorized daily distribution rate.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by various standard setting bodies that may have an impact on the Company’s accounting and reporting. Except as otherwise stated below, the Company is currently evaluating the effect that certain new accounting requirements may have on the Company’s accounting and related reporting and disclosures in the Company’s condensed consolidated financial statements.

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The amendments in this update require that most lease obligations be recognized as a right of use asset with a corresponding liability on the balance sheet. The guidance also requires additional qualitative and quantitative disclosures to assess the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 and subsequent amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The guidance, including optional practical expedients, should be implemented for the earliest period presented using a modified retrospective approach. The Company is currently in the process of finalizing its assessment of its inventory of leases that will be impacted by adoption of the new guidance. The Company does not expect the adoption to have a material impact on the accounting treatment of the Company’s net leases, which are the primary source of the Company’s revenues.

In August 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This ASU amends and removes several disclosure requirements including the valuation processes for Level 3 fair value measurements. ASU 2018-13 also modifies some disclosure requirements and requires additional disclosures for changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018 (Unaudited) – (Continued)

and requires the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The provisions of ASU 2018-13 are effective January 1, 2020 using a prospective transition method for amendments effecting changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair value measurements and narrative description on uncertainty of measurements. The remaining provisions of the ASU are to be applied retrospectively, and early adoption is permitted. The Company is evaluating the impact of this ASU's adoption, and does not believe this ASU will have a material impact on its condensed consolidated financial statements.

NOTE 3 — FAIR VALUE MEASUREMENTS

GAAP defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements. GAAP emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows:

Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs).

Level 3 — Unobservable inputs, which are only used to the extent that observable inputs are not available, reflect the Company’s assumptions about the pricing of an asset or liability.

The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities:

Credit facility and subordinate promissory note — The fair value is estimated by discounting the expected cash flows based on estimated borrowing rates available to the Company as of the measurement date. These financial instruments are valued using Level 2 inputs. As of September 30, 2018, the estimated fair value of the Company’s debt was $25.3 million, compared to a carrying value of $25.2 million. As of December 31, 2017, the estimated fair value of the Company’s debt was $33.8 million, compared to a carrying value of $33.6 million. The carrying and fair values exclude net deferred financing costs.

Other financial instruments — The Company considers the carrying values of its cash and cash equivalents, tenant receivables, accrued expenses and accounts payable, other liabilities, due to affiliates and distributions payable to approximate their fair values because of the short period of time between their origination and their expected realization as well as their highly-liquid nature. Due to the short-term maturities of these instruments, Level 1 inputs are utilized to estimate the fair value of these financial instruments.

Considerable judgment is necessary to develop estimated fair values of financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize, or be liable for, on disposition of the financial assets and liabilities. As of September 30, 2018 and December 31, 2017, there have beenno transfers of financial assets or liabilities between fair value hierarchy levels.

NOTE 4 — REAL ESTATE ASSETS

During the nine months ended September 30, 2018 and 2017, the Company did not acquire any properties.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018 (Unaudited) – (Continued)

NOTE 5 — INTANGIBLE LEASE ASSETS

The Company’s intangible lease assets consisted of the following as of September 30, 2018 and December 31, 2017:

	September 30, 2018		December 31, 2017
In-place leases, net of accumulated amortization of $827,776 and $480,483, respectively
(with a weighted average life remaining of 10.0 years and 10.8 years, respectively)	$	4,273,656	$	4,620,949

Amortization expense for the in-place leases is included in depreciation and amortization in the accompanying condensed consolidated statements of operations. The following table summarizes the amortization expense related to the in-place lease assets for the three and nine months endedSeptember 30, 2018 and 2017:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
In-place lease amortization	$	115,764	$	90,558	$	347,293	$	271,672

As of September 30, 2018, the estimated amortization expense relating to the intangible lease assets is as follows:

	Amortization Expense
	In-Place Lease
Remainder of 2018	$	115,765
2019	$	463,058
2020	$	463,058
2021	$	463,058
2022	$	463,058

NOTE 6 — CREDIT FACILITY AND SUBORDINATE PROMISSORY NOTE

As of September 30, 2018, the Company had $25.2 million of debt outstanding, with a weighted average interest rate of 4.4% and weighted average years to maturity of 1.0 years. The following table summarizes the debt balances as of September 30, 2018 and December 31, 2017, respectively, and the debt activity for the nine months ended September 30, 2018:

			During the Nine Months Ended September 30, 2018
	Balance as of December 31, 2017		Debt Issuance		Repayments			Balance as of September 30, 2018
Credit facility	$	31,975,000	$	—	$	(6,800,000	)	$	25,175,000
Subordinate promissory note	1,600,000		2,200,000		(3,800,000		)	—
Total debt	$	33,575,000	$	2,200,000	$	(10,600,000	)	$	25,175,000

As of September 30, 2018, the Company had $25.2 million of debt outstanding under its secured credit facility (the “Credit Facility”) with JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), as administrative agent, and the lenders under the credit agreement (as amended, the “Credit Agreement”), that provides for borrowings of up to $100.0 million in revolving loans (the “Revolving Loans”). The Revolving Loans mature on September 23, 2019; however, the Company may elect to extend the maturity date of such loans for up to two successive 12-month periods, subject to satisfying certain conditions contained in the Credit Agreement. These conditions include providing notice of the election and paying an extension fee of 0.2% of the maximum amount of the Revolving Loans.

Depending upon the type of loan specified and overall leverage ratio, the Credit Facility bears interest at (i) the one-month, two-month, three-month or six-month London Interbank Offered Rate (“LIBOR”) multiplied by the statutory reserve rate (the “Eurodollar Rate”) plus an interest rate spread ranging from 2.20% to 2.45%; or (ii) a base rate ranging from 1.20% to 1.45%, plus the greater of: (a) JPMorgan Chase’s Prime Rate (as defined in the Credit Agreement); (b) the Federal Funds Effective Rate (as defined in the Credit Agreement) plus 0.50%; or (c) the one-month LIBOR multiplied by the statutory reserve rate plus 1.0%. As of September 30, 2018, the Revolving Loans outstanding totaled $25.2 million at a weighted average interest rate of 4.4%. The Company had $74.8 million in unused capacity, subject to borrowing availability, as of September 30, 2018.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018 (Unaudited) – (Continued)

The Credit Agreement contains provisions with respect to covenants, events of default and remedies customary for facilities of this nature. In particular, the Credit Agreement requires the Company to maintain a minimum consolidated net worth greater than or equal to 75% of the equity issued from the date of the Credit Agreement, a leverage ratio no greater than 60%, and a fixed charge coverage ratio equal to or greater than 1.50. The Company believes it was in compliance with the financial covenants of the Credit Agreement as ofSeptember 30, 2018.

On September 23, 2016, the Company entered into a $30.0 million subordinate, unsecured, revolving line of credit with VEREIT OP (the “Subordinate Promissory Note”). The Subordinate Promissory Note bore interest at a rate per annum equal to the sum of (a) one-month LIBOR, (b) the Credit Facility Margin (as defined in the Subordinate Promissory Note) and (c) 1.75%, with accrued interest payable monthly in arrears and principal due upon maturity. No amounts were outstanding under the Subordinate Promissory Note, which matured and expired on September 30, 2018. No financing coordination fees were paid to our advisor or its affiliates in connection with the Subordinate Promissory Note.

Liquidity and Financial Condition — The Company’s condensed consolidated financial statements as of September 30, 2018 and December 31, 2017, have been prepared assuming that the Company will continue its operations as a going concern. The Company believes cash on hand, net cash provided by operations and proceeds from the Offering will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued. However, this evaluation assumes continued positive cash flows and the ability to extend the maturity of or refinance the Revolving Loans maturing September 23, 2019. The Company expects to extend the maturity date of the Revolving Loans through September 23, 2020, subject to lender approval and payment of an extension fee of 0.2% of the maximum amount of the Revolving Loans. The Company is in its start-up phase and dependent on raising capital to meet its capital requirements, including property acquisitions, stockholder distributions and repayment of maturing debt.

Maturities

The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt as of September 30, 2018:

	Principal Repayments
Remainder of 2018	$	—
2019	25,175,000
2020	—
2021	—
2022	—
Thereafter	—
Total	$	25,175,000

NOTE 7 — COMMITMENTS AND CONTINGENCIES

Litigation

In the ordinary course of business, the Company may become subject to litigation and claims. The Company is not aware of any material pending legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which the Company is a party or of which the Company’s properties are the subject.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. In addition, the Company may own or acquire certain properties that are subject to environmental remediation. Generally, the seller of the property, the tenant of the property and/or another third party is responsible for environmental remediation costs related to a property. Additionally, in connection with the purchase of certain properties, the respective sellers and/or tenants may agree to indemnify the Company against future remediation costs. The Company also carries environmental liability insurance on its properties that provides limited coverage for any remediation liability and/or pollution liability for third-party bodily injury and/or property damage claims for which the Company may be liable. The Company is not aware of any environmental matters which it believes are reasonably likely to have a material effect on its results of operations, financial condition or liquidity.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018 (Unaudited) – (Continued)

NOTE 8 — RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS

The Company has incurred, and will continue to incur, commissions, fees and expenses payable to CCI III Advisors and certain of its affiliates in connection with the Offering and the acquisition, management and disposition of its assets.

Selling commissions and dealer manager fees

In connection with the Offering, CCO Capital, the Company’s dealer manager, which is affiliated with CCI III Advisors, receives selling commissions of up to 7.0% and 3.0% of gross offering proceeds from the primary portion of the Offering for Class A Shares and Class T Shares, respectively. CCO Capital reallows 100% of selling commissions earned to participating broker-dealers. In addition, CCO Capital receives 2.0% of gross offering proceeds from the primary portion of the Offering for both Class A Shares and Class T Shares as a dealer manager fee. CCO Capital, in its sole discretion, may reallow all or a portion of its dealer manager fee to participating broker-dealers. No selling commissions or dealer manager fees are paid to CCO Capital or other participating broker-dealers with respect to shares sold pursuant to the DRIP.

Organization and offering expenses

All other organization and offering expenses associated with the sale of the Company’s common stock (excluding selling commissions, dealer manager fees and distribution and stockholder servicing fees) are paid by CCI III Advisors or its affiliates and are reimbursed by the Company up to 1.0% of aggregate gross offering proceeds, including proceeds from sales of shares under the DRIP. A portion of the other organization and offering expenses may be considered to be underwriting compensation. As of September 30, 2018, CCI III Advisors had paid organization and offering expenses in excess of the 1.0% of aggregate gross offering proceeds in connection with the Offering. These excess amounts were not included in the condensed consolidated financial statements of the Company because such amounts were not a liability of the Company as they exceeded 1.0% of gross proceeds from the Offering. As the Company raises additional proceeds from the Offering, these amounts may become payable.

Distribution and stockholder servicing fees

The Company pays CCO Capital a distribution and stockholder servicing fee for Class T Shares that is calculated on a daily basis in an amount equal to 1/365th of 1.0% of the purchase price per share (or, once reported, the amount of the Company’s estimated per share net asset value) of the Class T Shares sold in the primary portion of the Offering. The distribution and stockholder servicing fee is paid monthly in arrears from cash flow from operations or, if the Company’s cash flow from operations is not sufficient to pay the distribution and stockholder servicing fee, from borrowings in anticipation of future cash flow. An estimated liability for future distribution and stockholder servicing fees payable to CCO Capital is recognized at the time each Class T Share is sold and included in due to affiliates in the condensed consolidated balance sheets with a corresponding decrease to capital in excess of par value. The Company will cease paying the distribution and stockholder servicing fee with respect to Class T Shares at the earliest of (i) the end of the month in which the total distribution and stockholder servicing fees paid by a stockholder within his or her individual account would be equal to 4.0% of the stockholder’s total gross investment amount at the time of the purchase of the primary Class T Shares held in such account, or a lower limit agreed upon between the Company’s dealer manager and the participating broker-dealer at the time such Class T Shares were sold; (ii) the date on which the aggregate underwriting compensation from all sources equals 10.0% of the gross proceeds from the aggregate sale of the Class A Shares and Class T Shares in the Offering, excluding proceeds from sales pursuant to the DRIP; (iii) the fourth anniversary of the last day of the month in which the Offering (excluding the offering of shares pursuant to the DRIP) terminates; (iv) the date such Class T Share is no longer outstanding; and (v) the date the Company effects a liquidity event. CCO Capital may, in its discretion, reallow to participating broker-dealers all or a portion of the distribution and stockholder servicing fee for services that such participating broker-dealers perform in connection with the distribution of Class T Shares. At the time the Company ceases paying the distribution and stockholder servicing fee with respect to an outstanding Class T Share pursuant to the provisions above, such Class T Share will convert into a number of Class A Shares (including any fractional shares) with an equivalent net asset value as such Class T Share. The Company cannot predict when this will occur.No distribution and stockholder servicing fees are paid to CCO Capital or other participating broker-dealers with respect to shares sold pursuant to the DRIP.

Acquisition-related fees and expenses

The Company pays CCI III Advisors or its affiliates acquisition fees of up to 2.0% of: (i) the contract purchase price of each property or asset the Company acquires; (ii) the amount paid in respect of the development, construction or improvement of each asset the Company acquires; (iii) the purchase price of any loan the Company acquires; and (iv) the principal amount of any loan the Company originates. In addition, the Company reimburses CCI III Advisors or its affiliates for acquisition-related expenses incurred in the process of acquiring a property or the origination or acquisition of a loan, so long as the total

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COLE OFFICE & INDUSTRIAL REIT (CCIT III), INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018 (Unaudited) – (Continued)

acquisition fees and expenses relating to the transaction do not exceed 6.0% of the contract purchase price, unless otherwise approved by a majority of the Company’s board of directors, including a majority of the independent directors, as commercially competitive, fair and reasonable to the Company. During the three and nine months endedSeptember 30, 2018 and 2017, noacquisition fees or expenses were incurred for any such services provided by CCI III Advisors or its affiliates.

Advisory fees and expenses

Pursuant to the advisory agreement, the Company pays CCI III Advisors a monthly advisory fee based upon the Company’s monthly average asset value, which is equal to the following amounts: (i) an annualized rate of 0.75% paid on the Company’s average asset value that is between $0 and $2.0 billion; (ii) an annualized rate of 0.70% paid on the Company’s average asset value that is between $2.0 billion and $4.0 billion; and (iii) an annualized rate of 0.65% paid on the Company’s average asset value that is over $4.0 billion. During the three and nine months endedSeptember 30, 2018, these advisory fees exceeded the expense limit of the greater of 2.0% of the average invested assets or 25.0% of net income (see operating expenses below) and were not recognized in the condensed consolidated financial statements of the Company because such amounts were not contractually payable by the Company. As of September 30, 2018, $482,000 of advisory fees exceeded such expense limit. As the Company raises additional proceeds from the Offering and acquires additional properties, these amounts may become payable if future operating expenses are below the expense limits.

Operating expenses

The Company reimburses CCI III Advisors or its affiliates for the operating expenses they paid or incurred in connection with advisory and administrative services provided to the Company, subject to the limitation that the Company will not reimburse CCI III Advisors or its affiliates for any amount by which the operating expenses (including the advisory fee) at the end of the four preceding fiscal quarters exceed the greater of (i) 2.0% of average invested assets, or (ii) 25.0% of net income, excluding any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of assets for that period. The Company will not reimburse CCI III Advisors or its affiliates for compensation paid to the Company’s executive officers or employees of CCI III Advisors in connection with the services for which CCI III Advisors or its affiliates receive an acquisition fee, financing coordination fee or disposition fee. During the three and nine months endedSeptember 30, 2018 and 2017, nooperating expenseswere reimbursed by the Company.During the three and nine months ended September 30, 2018 and 2017, CCI III Advisors paid or reimbursed the Company for operating expenses in excess of the greater of 2.0% of average invested assets or 25.0% of net income, which were not recognized in the condensed consolidated financial statements of the Company because such amounts were not contractually payable by the Company. As of September 30, 2018, $1.4 million of operating expenses exceeded such expense limit. As the Company raises additional proceeds from the Offering and acquires additional properties, these amounts may become payable.

Financing coordination fees

If CCI III Advisors provides services in connection with the origination, assumption or refinancing of any debt to acquire properties or to make other permitted investments, the Company will pay CCI III Advisors a financing coordination fee equal to 1.0% of the amount available and/or outstanding under such financing. However, CCI III Advisors will not be entitled to a financing coordination fee on any debt where CCI III Advisors previously received a fee unless (i) the maturity date of the refinanced debt was scheduled to occur less than one year after the date of the refinancing and the new loan has a term of at least five years or (ii) the new loan is approved by a majority of the independent directors; and provided, further, that no financing coordination fee will be paid in connection with loans advanced by an affiliate of CCI III Advisors. During the three and nine months endedSeptember 30, 2018 and 2017, nofinancing coordination fees were incurred for any such services provided by CCI III Advisors or its affiliates.

Disposition fees

If CCI III Advisors or its affiliates provide a substantial amount of services (as determined by a majority of the Company’s independent directors) in connection with the sale of one or more properties (or the Company’s entire portfolio), the Company will pay CCI III Advisors or its affiliates a disposition fee in an amount equal to up to one-half of the real estate or brokerage commission paid by the Company to third parties on the sale of such properties, not to exceed 1.0% of the contract price of the properties sold; provided, however, in no event may the total disposition fees paid to CCI III Advisors, its affiliates, and unaffiliated third parties, exceed the lesser of the customary competitive real estate commission or an amount equal to 6.0% of the contract sales price. In addition, if CCI III Advisors or its affiliates provides a substantial amount of services (as determined by a majority of the Company’s independent directors) in connection with the sale of one or more assets other than properties, the Company may separately compensate CCI III Advisors or its affiliates at such rates and in such amounts as the Company’s board of directors, including a majority of the independent directors, and CCI III Advisors agree upon, not to exceed an amount

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018 (Unaudited) – (Continued)

equal to 1.0% of the contract price of the assets sold. During the three and nine months endedSeptember 30, 2018 and 2017, nodisposition fees were incurred for any such services provided by CCI III Advisors or its affiliates.

Subordinated performance fees

The Company will pay a subordinated performance fee under one of the following alternative events: (1) if the Company’s shares are listed on a national securities exchange, CCI III Advisors, or its affiliates, will be entitled to a subordinated performance fee equal to 15.0% of the amount, if any, by which (i) the market value of the Company’s outstanding stock plus distributions paid by the Company prior to listing, exceeds (ii) the sum of the total amount of capital raised from stockholders and the amount of distributions necessary to generate a 6.0% annual cumulative, non-compounded return to stockholders; (2) if the Company is sold or its assets are liquidated, CCI III Advisors will be entitled to a subordinated performance fee equal to 15.0% of the net sale proceeds remaining after stockholders have received, from regular distributions plus special distributions paid from proceeds of such sale, a return of their net capital invested and a 6.0% annual cumulative, non-compounded return; or (3) upon termination of the advisory agreement, CCI III Advisors may be entitled to a subordinated performance fee similar to the fee to which it would have been entitled had the portfolio been liquidated (based on an independent appraised value of the portfolio) on the date of termination. During the three and nine months endedSeptember 30, 2018 and 2017,nosubordinated performance fees were incurred related to any such events.

The Company incurred commissions, fees and expense reimbursements as shown in the table below for services provided by CCI III Advisors and its affiliates related to the services described above during the periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Selling commissions	$	155,630	$	224,114	$	466,239	$	667,858
Dealer manager fees	$	73,795	$	106,715	$	180,209	$	270,510
Distribution and stockholder servicing fees(1)	$	16,914	$	6,162	$	47,935	$	8,344
Organization and offering costs	$	38,497	$	54,095	$	93,982	$	138,665
Advisory fees	$	—	$	—	$	—	$	60,565

______________________

(1) Amounts are calculated for the respective period in accordance with the dealer manager agreement and exclude the estimated liability for future distribution and stockholder servicing fees payable to CCO Capital of $202,000, which is included in due to affiliates in the condensed consolidated balance sheets with a corresponding decrease to capital in excess of par value.

Services Agreement

Pursuant to the Services Agreement, VEREIT OP, which is affiliated with one of the Company’s directors, is obligated to provide certain services to CCO Group and to the Company, including operational real estate support. The Company is not a party to the Services Agreement. See Note 9 — Economic Dependency for a discussion of the Services Agreement.

Due to/from Affiliates

As of September 30, 2018 and December 31, 2017, $203,000 and $278,000, respectively, was recorded for services and expenses incurred, but not yet reimbursed, to CCI III Advisors or its affiliates. The amounts are primarily for future distribution and stockholder servicing fees and for operating expenses. The Company incurred $53,000 and $262,000, respectively, of interest expense related to the Subordinate Promissory Note during the nine months endedSeptember 30, 2018 and the year ended December 31, 2017, of which $10,000 in interest had been incurred but not yet paid as of December 31, 2017. This amount was included in due to affiliates as of December 31, 2017 in the condensed consolidated balance sheet for such period.

As of December 31, 2017, $1,000 was due from CCI III Advisors or its affiliates related to amounts received by affiliates of the advisor which were due to the Company. No such amounts were due from CCI III Advisors or its affiliates as of September 30, 2018.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018 (Unaudited) – (Continued)

NOTE 9 — ECONOMIC DEPENDENCY

Under various agreements, the Company has engaged and may in the future engage CCI III Advisors or its affiliates to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, the sale of shares of the Company’s common stock available for issuance, as well as other administrative responsibilities for the Company including accounting services and stockholder relations. As a result of these relationships, the Company is dependent upon CCI III Advisors or its affiliates. In the event that these companies are unable to provide the Company with these services, the Company would be required to find alternative providers of these services.

Services Agreement

Pursuant to the Services Agreement, VEREIT OP is obligated to provide certain services to CCO Group and to the Company, including operational real estate support. VEREIT OP is obligated to provide such services through March 31, 2019 (or, if later, the date of the last government filing other than a tax filing made by any of the Cole REITs with respect to its 2018 fiscal year) and is obligated to provide consulting and research services through December 31, 2023 as requested by CCO Group, LLC.

Despite the indirect change of ownership and control of the Company’s advisor, dealer manager, property manager and sponsor, the Company expects that, during the Initial Services Term of the Services Agreement, the advisory, dealer manager and property management services the Company receives will continue without any material changes in personnel (except as supplemented by the management oversight of CIM personnel) or material change in service procedures. During the Initial Services Term of the Services Agreement, CCO Group, LLC intends to evaluate and effectuate an appropriate transition of VEREIT OP’s services under the Services Agreement to other CIM affiliates or third parties with the goal of ensuring continuity and minimizing disruption.

NOTE 10 — OPERATING LEASES

The Company’s real estate assets are leased to tenants under operating leases for which the terms and expirations vary. As of September 30, 2018, the leases had a remaining weighted-average lease term of 9.9 years. The leases include provisions to extend the lease term, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other negotiated terms and conditions. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to the tenants.

The future minimum rental income from the Company’s real estate assets under the non-cancelable operating leases, assuming no exercise of renewal options, as of September 30, 2018, was as follows:

	Future Minimum Rental Income
Remainder of 2018	$	1,083,691
2019	3,808,708
2020	3,878,462
2021	3,756,969
2022	3,829,450
Thereafter	22,784,446
Total	$	39,141,726

NOTE 11 — SUBSEQUENT EVENTS

The Company evaluated events subsequent to September 30, 2018, and concluded that no subsequent events have occurred that would require recognition or disclosure in the condensed consolidated unaudited financial statements.

17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. We make statements in this section that are forward-looking statements within the meaning of the federal securities laws. Certain risks may cause our actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a complete discussion of such risk factors, see Item 1A — Risk Factors of this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Capitalized terms used herein, but not otherwise defined, shall have the meaning ascribed to those terms in “Part I — Financial Information” of this Quarterly Report on Form 10-Q, including the notes to the condensed consolidated financial statements contained therein, and the terms “we,” “us,” “our” and the “Company” refer to Cole Office & Industrial REIT (CCIT III), Inc.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” (within the meaning of the federal securities laws, Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that reflect our expectations and projections about our future results, performance, prospects and opportunities. We have attempted to identify these forward-looking statements by the use of words such as “may,” “will,” “seek,” “expects,” “anticipates,” “believes,” “targets,” “intends,” “should,” “estimates,” “could,” “continue,” “assume,” “projects,” “plans” or similar expressions. These forward-looking statements are based on information currently available to us and are subject to a number of known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among other things, those discussed below. We intend for all 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, as applicable by law. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of changes in underlying assumptions or new information, future events or otherwise, except as may be required to satisfy our obligations under federal securities law. The forward-looking statements should be read in light of the risk factors identified in Item 1A — Risk Factors of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2017.

The following are some, but not all, of the assumptions, risks, uncertainties and other factors that could cause our actual results to differ materially from those presented in our forward-looking statements:

• We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all.

• We are subject to risks associated with tenant, geographic and industry concentrations with respect to our properties.

• Our properties, intangible assets and other assets may be subject to impairment charges.

• We could be subject to unexpected costs or unexpected liabilities that may arise from potential dispositions of properties.

• We are subject to competition in the acquisition and disposition of properties and in the leasing of our properties and we may be unable to acquire, dispose of, or lease properties on advantageous terms.

• We could be subject to risks associated with bankruptcies or insolvencies of tenants or from tenant defaults generally.

• We have substantial indebtedness, which may affect our ability to pay distributions, and expose us to interest rate fluctuation risk and the risk of default under our debt obligations.

• We may be affected by the incurrence of additional secured or unsecured debt.

• We may not be able to achieve profitability.

• We may not generate cash flows sufficient to pay our distributions to stockholders or meet our debt service obligations.

• We may be affected by risks resulting from losses in excess of insured limits.

• We may fail to remain qualified as a REIT for U.S. federal income tax purposes.

• Our sponsor may be unable to fully reestablish the financial network which previously supported real estate investment trusts sponsored by our sponsor, and/or regain the prior level of transaction and capital raising volume achieved by such real estate investment trusts.

• We are subject to risks that may affect capital raising volume as a result of increased regulatory changes.

• Our advisor has the right to terminate the advisory agreement upon 60 days’ written notice without cause or penalty.

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Definitions

We use certain defined terms throughout this Quarterly Report on Form 10-Q that have the following meanings:

The phrase “annualized rental income” refers to the straight-line rental revenue under our leases on operating properties owned as of the respective reporting date, which includes the effect of rent escalations and any tenant concessions, such as free rent, and excludes any bad debt allowances and any contingent rent, such as percentage rent. Management uses annualized rental income as a basis for tenant, industry and geographic concentrations and other metrics within the portfolio. Annualized rental income is not indicative of future performance.

Under a “net lease,” the tenant occupying the leased property (usually as a single tenant) does so in much the same manner as if the tenant were the owner of the property. The tenant generally agrees that it will either have no ability or only limited ability to terminate the lease or abate rent prior to the expiration of the term of the lease as a result of real estate driven events such as casualty, condemnation or failure by the landlord to fulfill its obligations under the lease. There are various forms of net leases, most typically classified as either triple-net or double-net. Triple-net leases typically require the tenant to pay all expenses associated with the property (e.g., real estate taxes, insurance, maintenance and repairs, including roof, structure and parking lot). Double-net leases typically hold the landlord responsible for the capital expenditures for the roof and structure, while the tenant is responsible for all lease payments and remaining operating expenses associated with the property (e.g., real estate taxes, insurance and maintenance).

Overview

We were formed on May 22, 2014, and we elected to be taxed, and currently qualify, as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2017. We commenced our principal operations on September 22, 2016 when we satisfied the conditions of the escrow agreement regarding the minimum offering requirement and issued approximately 275,000 shares of common stock in the Offering. We have no paid employees and are externally advised and managed by CCI III Advisors. On February 1, 2018, the Transaction, as discussed in Note 1 — Organization and Business to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q, was completed. As a result of the Transaction, CIM indirectly owns and/or controls CCI III Advisors; our dealer manager, CCO Capital; our property manager, CREI Advisors; and CCO Group.

As part of the Transaction, pursuant to the Services Agreement, VEREIT OP is obligated to provide certain services to CCO Group and to us, including operational real estate support. VEREIT OP is obligated to provide such services through March 31, 2019 (or, if later, the date of the last government filing other than a tax filing made by any of the Cole REITs with respect to its 2018 fiscal year) and is obligated to provide consulting and research services through December 31, 2023 as requested by CCO Group, LLC.

Despite the indirect change of ownership and control of our advisor, dealer manager, property manager and sponsor, we expect that, during the Initial Services Term of the Services Agreement, the advisory, dealer manager and property management services we receive will continue without any material changes in personnel (except as supplemented by the management oversight of CIM personnel) or material change in service procedures. During the Initial Services Term of the Services Agreement, CCO Group, LLC intends to evaluate and effectuate an appropriate transition of VEREIT OP’s services under the Services Agreement to other CIM affiliates or third parties with the goal of ensuring continuity and minimizing disruption.

As we acquire additional commercial real estate, we will be subject to changes in real estate prices and changes in interest rates on any current variable rate debt, refinancings or new indebtedness used to acquire the properties. We may manage our risk of changes in real estate prices on future property acquisitions, when applicable, by entering into purchase agreements and loan commitments simultaneously, or through loan assumptions, so that our operating yield is determinable at the time we enter into a purchase agreement, by contracting with developers for future delivery of properties, or by entering into sale-leaseback transactions. We manage our interest rate risk by monitoring the interest rate environment in connection with our future property acquisitions, when applicable, or upcoming debt maturities to determine the appropriate financing or refinancing terms, which may include fixed rate loans, variable rate loans or interest rate hedges. If we are unable to acquire suitable properties or obtain suitable financing terms for future acquisitions or refinancing, our results of operations may be adversely affected.

Our operating results and cash flows are primarily influenced by rental income from our commercial properties, interest expense on our indebtedness, and acquisition and operating expenses. Rental income accounted for 88% of total revenue for both the three and nine months endedSeptember 30, 2018, and 43% and 66% of total revenue for the three and nine months endedSeptember 30, 2017, respectively. As 100% of our rentable square feet was under lease as of September 30, 2018, with a weighted average remaining lease term of 9.9 years, we believe our exposure to changes in commercial rental rates on our portfolio is substantially mitigated, except for vacancies caused by tenant bankruptcies or other factors. Our advisor regularly

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monitors the creditworthiness of each of our tenants by reviewing each tenant’s financial results, any available credit rating agency reports on the tenant or guarantor, the operating history of the property with such tenant, the tenant’s market share and track record within its industry segment, the general health and outlook of the tenant’s industry segment, and other information for changes and possible trends. If our advisor identifies significant changes or trends that may adversely affect the creditworthiness of a tenant, it will gather a more in-depth knowledge of the tenant’s financial condition and, if necessary, attempt to mitigate the tenant credit risk by evaluating the possible sale of the property, or identifying a possible replacement tenant should the current tenant fail to perform on the lease.

Portfolio Information

As of September 30, 2018, we owned two properties comprising approximately 391,000 rentable square feet of income-producing necessity corporate office and industrial space located in two states, which were 100% leased and had a weighted average remaining lease term of 9.9 years. As we have only acquired two properties, a discussion of same store sales is not considered meaningful and as such is not included in the results of operations.

Results of Operations

Our results of operations are influenced by the timing of our acquisitions and the operating performance of our real estate assets. The following table provides summary information about our results of operations for the three and nine months ended September 30, 2018 and 2017:

	Three Months Ended September 30,						2018 vs 2017 Increase (Decrease)			Nine Months Ended September 30,						2018 vs 2017 Increase (Decrease)
	2018			2017						2018			2017
Total revenues	$	1,101,666		$	1,581,290		$	(479,624	)	$	3,305,027		$	3,065,543		$	239,484
General and administrative expenses	$	247,961		$	103,507		$	144,454		$	678,758		$	410,359		$	268,399
Property operating expenses	$	3,212		$	2,756		$	456		$	9,913		$	9,165		$	748
Real estate tax expenses	$	126,625		$	903,968		$	(777,343	)	$	379,875		$	1,032,894		$	(653,019	)
Advisory fees and expenses	$	—		$	—		$	—		$	—		$	60,565		$	(60,565	)
Depreciation and amortization	$	478,063		$	358,286		$	119,777		$	1,434,190		$	1,074,858		$	359,332
Operating income	$	245,805		$	212,773		$	33,032		$	802,291		$	477,702		$	324,589
Interest expense and other, net	$	429,149		$	347,889		$	81,260		$	1,384,477		$	1,168,619		$	215,858
Net loss	$	(183,344	)	$	(135,116	)	$	48,228		$	(582,186	)	$	(690,917	)	$	(108,731	)

Revenues

Our revenue consists primarily of rental and other property income from net leased commercial properties. We also incur certain operating expenses that are subject to reimbursement by our tenants, which results in tenant reimbursement income.

The decrease in revenue of $480,000 during the three months endedSeptember 30, 2018, as compared to the same period in 2017, was primarily due to a decrease in certain operating expenses subject to reimbursement by our tenants, resulting in $130,000 and $907,000 in tenant reimbursement income during the three months endedSeptember 30, 2018 and 2017, respectively. This decrease was partially offset by an increase in rental income due to the acquisition of one additional rental income-producing property acquired subsequent to September 30, 2017. Rental and other property income from net leased commercial properties accounted for 88% and 43% of total revenue for the three months endedSeptember 30, 2018 and 2017, respectively.

The increase in revenue of $239,000 during the nine months endedSeptember 30, 2018, as compared to the same period in 2017, was primarily due to the acquisition of one additional rental income-producing property acquired subsequent to September 30, 2017. Rental and other property income from net leased commercial properties accounted for 88% and 66% of our total revenues for the nine months endedSeptember 30, 2018 and 2017, respectively. This increase in rental income was partially offset by a decrease in certain operating expenses subject to reimbursement by our tenants resulting in $389,000 in tenant reimbursement income during the nine months endedSeptember 30, 2018, compared to $1.0 million during the same period in 2017.

General and Administrative Expenses

The primary general and administrative expense items are unused fees on the Credit Facility, board of directors costs, accounting and legal fees and professional fees.

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The increase in general and administrative expenses of $144,000 and $268,000 during the three and nine months endedSeptember 30, 2018, respectively, as compared to the same periods in 2017, was primarily due to an increase in advisor operating expense reimbursements, coupled with increases in bank fees and board of directors costs.

Property Operating Expenses

Property operating expenses such as property repairs, maintenance and property-related insurance include both reimbursable and non-reimbursable property expenses. We are reimbursed by tenants for certain property operating expenses in accordance with the respective lease agreements.

Property operating expenses remained consistent for the three and nine months endedSeptember 30, 2018 compared to the same periods in 2017.

Real Estate Tax Expenses

The decrease in real estate tax expenses of $777,000 and $653,000 during the three and nine months endedSeptember 30, 2018, respectively, as compared to the same periods in 2017, was primarily due to decreased tax assessments on one propertyduring the three and nine months endedSeptember 30, 2018.

Advisory Fees and Expenses

Pursuant to the advisory agreement with CCI III Advisors and based upon the amount of our current invested assets, we are required to pay to CCI III Advisors a monthly advisory fee equal to one-twelfth of 0.75% of the average asset value up to $2.0 billion, one-twelfth of 0.70% of the average asset value over $2.0 billion up to $4.0 billion and one-twelfth of 0.65% of the average asset value over $4.0 billion. Additionally, we may be required to reimburse certain expenses incurred by CCI III Advisors in providing such advisory services, subject to limitations as set forth in the advisory agreement.

The decrease in advisory fees and expenses of $61,000 during the nine months endedSeptember 30, 2018, as compared to the same period in 2017, was primarily due to our expenses exceeding the greater of 2.0% of our average invested assets or 25.0% of net income and therefore such excess amount was not recognized and payable; see Note 8 — Related-Party Transactions and Arrangements to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

There were no advisory fees and expenses paid for the three months endedSeptember 30, 2018 and 2017 as our expenses exceeded the greater of 2.0% of our average invested assets or 25.0% of net income and therefore such excess amount was not recognized and payable; see Note 8 — Related-Party Transactions and Arrangements to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Depreciation and Amortization

The increase in depreciation and amortization expenses of $120,000 and $360,000 during the three and nine months endedSeptember 30, 2018, respectively, as compared to the same periods in 2017, was primarily due to the acquisition of one additional rental income-producing property subsequent toSeptember 30, 2017.

Interest Expense and Other, Net

The increase in interest expense and other, net of $81,000 and $216,000 during the three and nine months endedSeptember 30, 2018, respectively, as compared to the same periods in 2017, was primarily due to an increase in the weighted average interest rate to4.4%as ofSeptember 30, 2018, from 3.7% as of September 30, 2017, coupled with an increase in the average aggregate amount of debt outstanding to$25.7 millionand$29.7 millionduringthe three and nine months endedSeptember 30, 2018, respectively, compared to an average outstanding debt balance of $22.0 million and $26.3 million for the three and nine months endedSeptember 30, 2017, respectively.

Distributions

Our board of directors authorized a daily distribution, based on 365 days in the calendar year, of $0.001643836 per Class A Share for stockholders of record of such class of shares as of the close of business on each day of the period commencing on January 1, 2018 and ending on March 31, 2019. Our board of directors authorized a daily distribution on Class T Shares for stockholders of record of such class of shares as of the close of business on each day of the period commencing on January 1, 2018 and ending on March 31, 2019 equal to $0.001643836 per Class T Share, less the per share distribution and stockholder servicing fees that are payable with respect to the Class T Shares (as calculated on a daily basis). As of September 30, 2018, the Company had distributions payable of $142,000.

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The following table presents distributions and sources of distributions for the periods indicated below:

	Nine Months Ended September 30,
	2018				2017
	Amount		Percent		Amount		Percent
Distributions paid in cash	$	653,275	63	%	$	275,207	75	%
Distributions reinvested	387,768		37	%	92,227		25	%
Total distributions	$	1,041,043	100	%	$	367,434	100	%
Sources of distributions:
Net cash provided by operating activities (1)	$	871,236	84	%	$	—	—	%
Proceeds from issuance of common stock (2)	169,807		16	%	367,434		100	%
	$	1,041,043	100	%	$	367,434	100	%

____________________________________

(1) Net cash provided by operating activities for the nine months ended September 30, 2018 was $871,236 and net cash used in operating activities for the nine months ended September 30, 2017 was $13,596.

(2) Prior to the adoption of ASU 2017-01 in April 2017, we treated our real estate acquisition-related fees and expenses as funded by proceeds from the Initial Offering, including proceeds from the DRIP. Therefore, for consistency, proceeds from the issuance of common stock used as a source of distributions for the nine months ended September 30, 2018 and 2017 includes the amount by which real estate acquisition-related fees and expenses have reduced net cash flows from operating activities in prior periods.

Share Redemptions

Our share redemption program permits our stockholders to sell their shares back to us after they have held them for at least one year, subject to certain conditions and limitations. We may waive the one-year holding period requirement upon request due to a stockholder’s death or bankruptcy or other exigent circumstances as determined by our advisor. In addition, our board of directors may choose to amend the terms of, suspend or terminate our share redemption program at any time upon 30 days’ notice. Funding for the redemption of shares will generally be limited to the net proceeds we receive from the sale of shares under the DRIP, net of shares redeemed to date. We will not redeem in excess of 5.0% of the weighted average number of shares outstanding during the trailing 12 months prior to the end of the fiscal quarter for which the redemptions are being paid. In addition, we will generally limit quarterly redemptions to approximately 1.25% of the weighted average number of shares outstanding during the trailing 12-month period ending on the last day of the fiscal quarter for which the redemptions are being paid, and to the net proceeds we receive from the sale of shares in the respective quarter under the DRIP. In addition, our board of directors may choose to amend the terms of, suspend or terminate our share redemption program at any time upon 30 days’ notice. We will not redeem in excess of 5.0% of the weighted average number of shares outstanding during the trailing 12 months prior to the end of the fiscal quarter for which the redemptions are being paid. Any of the foregoing limits might prevent us from accommodating all redemption requests made in any fiscal quarter or in any 12-month period. During the nine months endedSeptember 30, 2018, we received valid redemption requests under our share redemption program totaling approximately 5,300 shares, all of which we redeemed as of September 30, 2018 for $48,000 at a redemption price of $9.00 per share. A valid redemption request is one that complies with the applicable requirements and guidelines of our share redemption program then in effect.

Liquidity and Capital Resources

General

We expect to utilize funds from the Offering and future proceeds from secured or unsecured financing to complete future property acquisitions and for general corporate uses. Our operating cash flows will primarily be provided by the rental income received from leased properties. As of September 30, 2018, we had raised $29.1 million of gross proceeds from the Offering before organization and offering costs, selling commissions and dealer manager fees of $2.1 million.

Our Credit Facility provides for aggregate borrowings of up to $100.0 million. As of September 30, 2018, we had $74.8 million in unused capacity, subject to borrowing availability. As of September 30, 2018, we also had cash and cash equivalents of $198,000.

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Short-term Liquidity and Capital Resources

We expect our operating cash flows to increase as we continue to acquire properties. On a short-term basis, our principal demands for funds will be for the acquisition of real estate assets and the payment of acquisition-related fees and expenses, operating expenses, distributions to stockholders and interest and principal on current and any future debt financings, including principal repayments of $25.2 million due September 23, 2019. We expect to meet our short-term liquidity requirements through net cash flows provided by operations and proceeds from the Offering, as well as secured or unsecured borrowings from banks and other lenders to finance our future acquisitions. We expect to extend the maturity date of the Revolving Loans through September 23, 2020, subject to lender approval and payment of an extension fee of 0.2% of the maximum amount of the Revolving Loans. We believe our cash on hand, net cash provided by operations and proceeds from the Offering will be sufficient to meet our obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued. However, this evaluation assumes continued positive cash flows and the ability to extend the maturity of or refinance the Revolving Loans maturing September 23, 2019, and sufficient proceeds from the Offering. We are in our start-up phase and are dependent on raising capital to meet our capital requirements, including for property acquisitions, stockholder distributions and repayment of maturing debt.

Long-term Liquidity and Capital Resources

On a long-term basis, our principal demands for funds will be for the acquisition of real estate and real estate-related assets and the payment of tenant improvements, acquisition-related fees and expenses, operating expenses, distributions and redemptions to stockholders and interest and principal on any current and future indebtedness. Generally, we expect to meet our long-term liquidity requirements through proceeds from net cash flows provided by operations, the sale of our common stock and secured or unsecured borrowings from banks and other lenders.

We expect that substantially all net cash flows from operations will be used to pay distributions to our stockholders after certain capital expenditures, including tenant improvements and leasing commissions, are paid; however, we may use other sources to fund distributions, as necessary, including proceeds from the Offering, borrowings on our Credit Facility and/or future borrowings on unencumbered assets. To the extent that cash flows from operations are lower due to fewer properties being acquired or lower than expected returns on the properties, distributions paid to our stockholders may be lower. We expect that substantially all net cash flows from the Offering or debt financings will be used to fund acquisitions, certain capital expenditures, repayments of outstanding debt or distributions to our stockholders.

Contractual Obligations

As of September 30, 2018, we had $25.2 million of debt outstanding, with a weighted average interest rate of 4.4%. See Note 6 — Credit Facility and Subordinate Promissory Note to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for certain terms of our debt outstanding.

Our contractual obligations as of September 30, 2018 were as follows:

	Payments due by period (1)
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Principal payments – Credit Facility	$	25,175,000	$	25,175,000	$	—	$	—	$	—
Interest payments – Credit Facility (2)	1,083,422		1,083,422		—		—		—
Total	$	26,258,422	$	26,258,422	$	—	$	—	$	—

______________________

(1) The table does not include amounts due to CCI III Advisors or its affiliates pursuant to our advisory agreement because such amounts are not fixed and determinable.

(2) Payment obligations for the Revolving Loans are based on a weighted interest rate of 4.4% as of September 30, 2018.

We expect to incur additional borrowings in the future to acquire additional properties and other real estate-related assets. There is no limitation on the amount we may borrow against any single improved property. Our borrowings will not exceed 75% of the cost of our gross assets (or 300% of net assets) as of the date of any borrowing, which is the maximum level of indebtedness permitted under the North American Securities Administrators Association Statement of Policy Regarding Real Estate Investment Trusts; however, we may exceed that limit if approved by a majority of our independent directors and disclosed to our stockholders in the next quarterly report along with justification for such excess borrowing. As of

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September 30, 2018, our ratio of debt to the cost (before deducting depreciation or other non-cash reserves) of our gross real assets was 50.8%.

Our management reviews net debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage, and we therefore believe that the presentation of net debt provides useful information to stockholders. Net debt is a non-GAAP measure used to show our outstanding principal debt balance, excluding certain GAAP adjustments, such as premiums or discounts, less all cash and cash equivalents. As of September 30, 2018, our net debt leverage ratio, which is the ratio of net debt to total gross real estate assets net of gross intangible lease liabilities, if applicable, was 50.4%.

The following table provides a reconciliation of the Credit Facility and Subordinate Promissory Note balance, as reported on our condensed consolidated balance sheet, to net debt as of September 30, 2018:

	Balance as of September 30, 2018
Credit facility and subordinate promissory note	$	25,175,000
Less: Cash and cash equivalents	(198,087		)
Net debt	$	24,976,913
Gross real estate assets	$	49,605,205
Net debt leverage ratio	50.4		%

Cash Flow Analysis

Operating Activities. Net cash provided by operating activities increased by $885,000 for the nine months endedSeptember 30, 2018, compared to the same period in 2017. The increase was primarily due to the acquisition of one additional rental income-producing property subsequent to September 30, 2017,resulting in increases in net income before non-cash adjustments for depreciation, amortization of intangibles, amortization of deferred financing costs, as well as a decrease in straight-line rental income and a net increase in the changes in working capital. See “ — Results of Operations” for a more complete discussion of the factors impacting our operating performance.

Financing Activities. Net cash used in financing activities was $1.0 million for thenine months endedSeptember 30, 2018, compared to net cash provided by financing activities of $252,000 for the nine months endedSeptember 30, 2017. The change was primarily due to a decrease in our net proceeds from issuance of common stock and increases in distributions to stockholders and deferred financing costs paid, offset by a decrease in net repayments on the Subordinate Promissory Note and Credit Facility.

Election as a REIT

We elected to be taxed, and currently qualify, as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2017. To maintain our qualification as a REIT, we must continue to meet certain requirements relating to our organization, sources of income, nature of assets, distributions of income to our stockholders and recordkeeping. As a REIT, we generally are not subject to federal income tax on taxable income that we distribute to our stockholders so long as we distribute at least 90% of our annual taxable income (computed without regard to the dividends paid deduction and excluding certain non-cash items and net capital gains).

If we fail to maintain our qualification as a REIT for any reason in a taxable year and applicable relief provisions do not apply, we will be subject to tax on our taxable income at regular corporate rates. We will not be able to deduct distributions paid to our stockholders in any year in which we fail to maintain our qualification as a REIT. We also will be disqualified for the four taxable years following the year during which qualification was lost, unless we are entitled to relief under specific statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we believe that we are organized and operate in such a manner as to maintain our qualification as a REIT for federal income tax purposes. No provision for federal income taxes has been made in our accompanying condensed consolidated financial statements. We are subject to certain state and local taxes related to the operations of properties in certain locations, which have been provided for in our accompanying condensed consolidated financial statements.

Critical Accounting Policies and Estimates

Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes that we have made these estimates and assumptions in an appropriate manner and in a way that

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accurately reflects our financial condition. We continually test and evaluate these estimates and assumptions using our historical knowledge of the business, as well as other factors, to ensure that they are reasonable for reporting purposes. However, actual results may differ from these estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to the various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses. We believe the following critical accounting policies govern the significant judgments and estimates used in the preparation of our financial statements, which should be read in conjunction with the more complete discussion of our accounting policies and procedures included in Note 2 — Summary of Significant Accounting Policies. We consider our critical accounting policies to be the following:

• Allocation of Purchase Price of Real Estate Assets; and

• Recoverability of Real Estate Assets.

A complete description of such policies and our considerations is contained in our Annual Report on Form 10-K for the year ended December 31, 2017. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2017 and related notes thereto.

Related-Party Transactions and Agreements

We have entered into agreements with CCI III Advisors and its affiliates, whereby we agree to pay certain fees to, or reimburse certain expenses of, CCI III Advisors or its affiliates, such as acquisition and advisory fees and expenses, organization and offering costs, selling commissions, dealer manager fees and expenses, distribution and stockholder servicing fees, leasing fees and reimbursement of certain operating costs. In addition, pursuant to the Services Agreement, VEREIT OP, which is affiliated with one of our directors, is obligated to provide certain services to CCO Group and to us, including operational real estate support. We are not a party to the Services Agreement. See Note 8 — Related-Party Transactions and Arrangements to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for a discussion of the various related-party transactions, agreements and fees.

Conflicts of Interest

Richard S. Ressler, our chief executive officer, president and the chairman of our board of directors, who is a founder and principal of CIM, as well as a director of CCPT IV and Cole Income NAV Strategy, and Nathan D. DeBacker, our chief financial officer and treasurer, act as executive officers and/or a director of one or more other programs sponsored by CCO Group. One of our directors, W. Brian Kretzmer, also serves as a director of CCPT IV and Cole Income NAV Strategy. Similarly, Glenn J. Rufrano, one of our directors, serves as a director of CCPT V, CCIT II and Cole Income NAV Strategy, as well as chief executive officer and a director of VEREIT, Inc., the parent company of VEREIT OP, who provides certain services to us and our advisor through the Services Agreement. In addition, certain affiliates of CCI III Advisors act as advisors to CCPT IV, CCPT V, CCIT II, Cole Income NAV Strategy and/or other real estate offerings in registration, all of which are or intend to be public, non-listed REITs offered, distributed and/or sponsored by affiliates of CCI III Advisors. As such, there may be conflicts of interest where CCI III Advisors or its affiliates, while serving in the capacity as sponsor, general partner, officer, director, key personnel and/or advisor for VEREIT or another real estate program sponsored by CCO Group, including other real estate offerings in registration, may be in conflict with us in connection with providing services to other real estate-related programs related to property acquisitions, property dispositions, and property management among others. The compensation arrangements between affiliates of CCI III Advisors and these other real estate programs sponsored or operated by CCO Group could influence the advice provided to us. See Part I, Item 1. Business — Conflicts of Interest in our Annual Report on Form 10-K for the year ended December 31, 2017.

Off-Balance Sheet Arrangements

As of September 30, 2018 and December 31, 2017, we had no material off-balance sheet arrangements that had or are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity or capital resources.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our market risk arises primarily from interest rate risk relating to variable rate borrowings. To meet our short and long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to manage our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We do not intend to hold or issue these derivative contracts for trading or speculative purposes. As of September 30, 2018, we had no interest rate hedge contracts. We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.

Interest Rate Risk

In connection with the acquisition of our properties, we have obtained variable rate debt financing and are therefore exposed to changes in LIBOR. As of September 30, 2018, we had an aggregate of $25.2 million of variable rate debt outstanding under the Credit Facility, and a change of 50 basis points in interest rates would result in a change in interest expense of $126,000 per annum. In the future, we may obtain additional variable rate debt financing to fund certain property acquisitions and may be further exposed to interest rate changes. Our objectives in managing interest rate risks will be to limit the impact of interest rate changes on operations and cash flows and to lower overall borrowing costs. To achieve these objectives, we expect to borrow primarily at interest rates with the lowest margins available and, in some cases, with the ability to convert variable rates to fixed rates.

Credit Risk

Concentrations of credit risk arise when a number of tenants are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to us, to be similarly affected by changes in economic conditions. We are subject to tenant, geographic and industry concentrations. Any downturn of the economic conditions in one or more of these future tenants, states or industries could result in a material reduction of our cash flows or material losses to us.

The factors considered in determining the credit risk of our tenants include, but are not limited to: payment history; credit status and change in status (credit ratings for public companies are used as a primary metric); change in tenant space needs (i.e., expansion/downsize); tenant financial performance; economic conditions in a specific geographic region; and industry specific credit considerations. We believe that the credit risk of our portfolio is reduced by the high quality of our existing tenants, reviews of prospective tenants’ risk profiles prior to lease execution and consistent monitoring of our portfolio to identify potential problem tenants and mitigation options.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that no controls and procedures, no matter how well designed and operated, can provide absolute assurance of achieving the desired control objectives.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of September 30, 2018 was conducted under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures, as of September 30, 2018, were effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

No change occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months endedSeptember 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

26

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we may become subject to litigation or claims. We are not aware of any material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party or to which our properties are the subject.

Item 1A. Risk Factors

Except as set forth below, there have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2017.

We have paid, and may continue to pay, some or all of our distributions from sources other than cash flows from operations, including borrowings, proceeds from asset sales or the sale of our securities, which may reduce the amount of capital we ultimately deploy in our real estate operations and may negatively impact the value of our common stock.

To the extent that cash flows from operations has been or is insufficient to fully cover our distributions to our stockholders, we have paid, and may in the future pay, some or all of our distributions from sources other than cash flows from operations. Such sources may include borrowings, proceeds from asset sales or the sale of our securities. We have no limits on the amounts we may use to pay distributions from sources other than cash flow from operations. The payment of distributions from sources other than cash provided by operating activities may reduce the amount of proceeds available for acquisitions and operations or cause us to incur additional interest expense as a result of borrowed funds, and may cause subsequent holders of our common stock to experience dilution. This may negatively impact the value of our common stock.

The following table presents distributions and sources of distributions for the periods indicated below:

	Nine Months Ended				Year Ended
	September 30, 2018				December 31, 2017
	Amount		Percent		Amount		Percent
Distributions paid in cash	$	653,275	63	%	$	448,362	71	%
Distributions reinvested	387,768		37	%	179,564		29	%
Total distributions	$	1,041,043	100	%	$	627,926	100	%
Sources of distributions:
Net cash provided by operating activities (1)	$	871,236	84	%	$	533,676	85	%
Proceeds from issuance of common stock (2)	169,807		16	%	94,250		15	%
	$	1,041,043	100	%	$	627,926	100	%

____________________________________

(1) Net cash provided by operating activities for the nine months ended September 30, 2018 and for the year ended December 31, 2017 was $871,236 and $533,676, respectively.

(2) Prior to the adoption of ASU 2017-01 in April 2017, we treated our real estate acquisition-related fees and expenses as funded by proceeds from the Offering, including proceeds from the DRIP. Therefore, for consistency, proceeds from the issuance of common stock used as a source of distributions for the nine months ended September 30, 2018 and for the year ended December 31, 2017 includes the amount by which real estate acquisition-related fees and expenses have reduced net cash flows from operating activities in prior periods.

The proposed SEC standard of conduct for investment professionals could impact our ability to raise capital.

On April 18, 2018, the SEC proposed “Regulation Best Interest,” a new standard of conduct for broker-dealers under the Exchange Act that includes: (i) the requirement that broker-dealers refrain from putting the financial or other interests of the broker-dealer ahead of the retail customer, (ii) a new disclosure document, the consumer or client relationship summary, or Form CRS, which would require both investment advisers and broker-dealers to provide disclosure highlighting details about their services and fee structures and (iii) proposed interpretative guidance that would establish a federal fiduciary standard for investment advisers. The public comment period on Regulation Best Interest ended on August 7, 2018.

Proposed Regulation Best Interest is complex and may be subject to revision or withdrawal. Plan fiduciaries and the beneficial owners of IRAs are urged to consult with their own advisors regarding the impact that proposed Regulation Best Interest may have on purchasing and holding interests in our company. Proposed Regulation Best Interest or any other

27

legislation or regulations that may be introduced or become law in the future could have negative implications on our ability to raise capital from potential investors, including those investing through IRAs.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On September 22, 2016, our Registration Statement on Form S-11 (Registration No. 333-209128) for the offering of up to $2.5 billion in shares of common stock in the primary portion of the Offering, consisting of two classes of shares, Class A Shares at a price of $10.00 per share (up to $1.25 billion in shares) and Class T Shares at a price of $9.57 per share (up to $1.25 billion in shares), subject to reduction in certain circumstances, was declared effective under the Securities Act. The Registration Statement also covers the offering of up to $1.0 billion in shares of common stock pursuant to our DRIP, under which stockholders may elect to have distributions reinvested in additional shares at a price of $9.10 per share for both Class A Shares and Class T Shares, assuming a $10.00 per Class A Share primary offering price and a $9.57 per Class T Share primary offering price. Additionally, as of September 30, 2018, we were authorized to issue 10.0 million shares of preferred stock, but had none issued or outstanding.

As of September 30, 2018, we had issued approximately 3.0 million shares of common stock in the Offering for gross offering proceeds of $29.1 million ($22.1 million in Class A Shares and $7.0 million in Class T Shares) before organization and offering costs, selling commissions and dealer manager fees of $2.1 million, out of which we paid $1.8 million in selling commissions and dealer manager fees and $296,000 in organization and offering costs to CCI III Advisors or its affiliates. In addition, we pay CCO Capital a distribution and stockholder servicing fee for Class T Shares sold in the primary portion of the Offering. Pursuant to the dealer manager agreement, the distribution and stockholder servicing fee is calculated on a daily basis in an amount equal to 1/365th of 1.0% of the purchase price per share (or, once reported, the amount of the Company’s estimated per share net asset value) of the Class T Shares sold in the primary portion of the Offering. The aggregate distribution and stockholder servicing fee for Class T Shares will not exceed an amount equal to 4.0% of the total gross offering proceeds of Class T Shares sold in the primary portion of the Offering, or a lower limit agreed upon between the Company’s dealer manager and the participating broker-dealer at the time such Class T Shares were sold. We pay the distribution and stockholder servicing fee from cash flow from operations or, if our cash flow from operations is not sufficient to pay the distribution and stockholder servicing fee, from borrowings in anticipation of future cash flow. With the net offering proceeds and indebtedness, we acquired $49.6 million in real estate and related assets and incurred acquisition costs of $1.2 million, including costs of $995,000 in acquisition fees and expense reimbursements to CCI III Advisors. As of November 7, 2018, we have sold 2.3 million Class A Shares and 744,000 Class T Shares in the Offering for gross offering proceeds of $30.0 million ($22.9 million in Class A Shares and $7.1 million in Class T Shares).

Our board of directors has adopted a share redemption program that permits our stockholders to sell their shares back to us after they have held them for at least one year, subject to the significant conditions and limitations described in the Registration Statement. We may waive the one-year holding period upon request due to a stockholder’s death, bankruptcy or other exigent circumstances as determined by our advisor. In addition, our board of directors may choose to amend the terms of, suspend or terminate our share redemption program at any time upon 30 days’ notice. Funding for the redemption of shares will generally be limited to the cumulative net proceeds we receive from the sale of shares under the DRIP, net of shares redeemed to date. Under our share redemption program, we will not redeem in excess of 5.0% of the weighted average number of shares outstanding during the trailing 12 months prior to the end of the fiscal quarter for which the redemptions are being paid. In addition, we will generally limit quarterly redemptions to approximately 1.25% of the weighted average number of shares outstanding during the trailing 12-month period ending on the last day of the fiscal quarter for which the redemptions are being paid, and to the net proceeds we receive from the sale of shares in the respective quarter under the DRIP. Any of the foregoing limits might prevent us from accommodating all redemption requests made in any fiscal quarter or in any 12-month period.

28

In general, we redeem shares on a quarterly basis. During the three months ended September 30, 2018, we redeemed shares, including those redeemable due to death, as follows:

Period		Total Number of Shares Redeemed	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2018 – July 31, 2018
	Class A Shares	—	$	—	—	(1)
	Class T Shares	—	$	—	—	(1)
August 1, 2018 – August 31, 2018
	Class A Shares	5,335	$	9.00	5,335	(1)
	Class T Shares	—	$	—	—	(1)
September 1, 2018 – September 30, 2018
	Class A Shares	—	$	—	—	(1)
	Class T Shares	—	$	—	—	(1)
Total		5,335			5,335	(1)

______________________

(1) A description of the maximum number of shares that may be purchased under our share redemption program is included in the narrative preceding this table.

Unregistered Sales of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

29

Item 6. Exhibits

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 (and are numbered in accordance with Item 601 of Regulation S-K).

Exhibit No.	Description
3.1	Articles of Amendment and Restatement of Cole Office & Industrial REIT (CCIT III), Inc. dated July 15, 2016 (Incorporated by reference to Exhibit 3.1 to Pre-effective Amendment No. 2 to the Company’s Form S-11 (File No. 333-209128), filed on July 18, 2016).
3.2	Articles of Amendment to the Articles of Amendment and Restatement of Cole Office & Industrial REIT (CCIT III), Inc. dated June 22, 2017 (Incorporated by reference to Exhibit 3.3 to Post-effective Amendment No. 3 to the Company’s Form S-11 (File No. 333-209128), filed on June 29, 2017).
3.3	Bylaws of Cole Office & Industrial REIT (CCIT III), Inc. (Incorporated by reference to Exhibit 3.3 to the Company’s Form S-11 (File No. 333-209128), filed on January 26, 2016).
4.1	Form of Initial Subscription Agreement (Incorporated by reference to Exhibit 4.1 to Post-effective Amendment No. 7 to the Company’s Form S-11 (File No. 333-209128), filed on September 21, 2018).
4.2	Form of Additional Subscription Agreement (Incorporated by reference to Exhibit 4.2 to Post-effective Amendment No. 7 to the Company’s Form S-11 (File No. 333-209128), filed on September 21, 2018).
4.3	Distribution Reinvestment Plan (Incorporated by reference to Exhibit 10.3 to Post-effective Amendment No. 7 to the Company’s Form S-11 (File No. 333-209128), filed on September 21, 2018).
10.1	Cole Office & Industrial REIT (CCIT III), Inc. 2018 Equity Incentive Plan (Incorporated by reference to Exhibit 10.17 to Post-effective Amendment No. 7 to the Company’s Form S-11 (File No. 333-209128), filed on September 21, 2018).
31.1*	Certifications of the Principal Executive Officer of the Company pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certifications of the Principal Financial Officer of the Company pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certifications of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

______________________

*

Filed herewith.

**

In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

30

SIGNATURE

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

	Cole Office & Industrial REIT (CCIT III), Inc.
	(Registrant)
By:	/s/ Nathan D. DeBacker
Name:	Nathan D. DeBacker
Title:	Chief Financial Officer and Treasurer
	(Principal Financial Officer)

Date: November 13, 2018

31

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard S. Ressler, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cole Office & Industrial REIT (CCIT III), Inc.;

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(s) 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(s) 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.

Date:	November 13, 2018	/s/ Richard S. Ressler
		Name:	Richard S. Ressler
		Title:	Chief Executive Officer and President (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Nathan D. DeBacker, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cole Office & Industrial REIT (CCIT III), Inc.;

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(s) 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(s) 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.

Date:	November 13, 2018	/s/ Nathan D. DeBacker
		Name:	Nathan D. DeBacker
		Title:	Chief Financial Officer and Treasurer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. § 1350)

Each of the undersigned officers of Cole Office & Industrial REIT (CCIT III), Inc. (the “Company”) hereby certifies, for purposes of Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

		/s/ Richard S. Ressler
		Name:	Richard S. Ressler
		Title:	Chief Executive Officer and President (Principal Executive Officer)
		/s/ Nathan D. DeBacker
		Name:	Nathan D. DeBacker
Date:	November 13, 2018	Title:	Chief Financial Officer and Treasurer (Principal Financial Officer)

The foregoing certification is being furnished with the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2018 pursuant to 18 U.S.C. § 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except to the extent the Company specifically incorporates this certification by reference.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares shares in Thousands	9 Months Ended
	Sep. 30, 2018	Nov. 07, 2018
Entity Information [Line Items]
Entity Registrant Name	Cole Office & Industrial REIT (CCIT III), Inc.
Entity Central Index Key	0001614976
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Amendment Flag	false
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	true
Entity Small Business	false
Entity Ex Transition Period	true
Class A Common Stock
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		2,400
Class T Common Stock
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		744

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Real estate assets:
Land	$ 3,245,003	$ 3,245,003
Buildings and improvements	41,258,770	41,258,770
Intangible lease asset	5,101,432	5,101,432
Total real estate assets, at cost	49,605,205	49,605,205
Less: accumulated depreciation and amortization	(3,345,223)	(1,911,033)
Total real estate assets, net	46,259,982	47,694,172
Cash and cash equivalents	198,087	351,461
Rents and tenant receivables	781,182	1,018,825
Prepaid expenses	119,808	116,796
Deferred costs, net	543,264	950,978
Total assets	47,902,323	50,132,232
LIABILITIES AND STOCKHOLDERS’ EQUITY
Credit facility	25,175,000	31,975,000
Subordinate promissory note	0	1,600,000
Accrued expenses and accounts payable	486,007	853,388
Due to affiliates	202,530	278,394
Distributions payable	142,415	100,241
Deferred rental income	0	208,716
Total liabilities	26,005,952	35,015,739
Commitments and contingencies
Redeemable common stock	112,006	87,337
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, none issued and outstanding	0	0
Capital in excess of par value	26,695,445	18,284,253
Accumulated distributions in excess of earnings	(4,941,182)	(3,275,779)
Total stockholders’ equity	21,784,365	15,029,156
Total liabilities, redeemable common stock, and stockholders’ equity	47,902,323	50,132,232
Class A Common Stock
STOCKHOLDERS’ EQUITY
Common stock	22,774	14,369
Class T Common Stock
STOCKHOLDERS’ EQUITY
Common stock	$ 7,328	$ 6,313

XML

Condensed Consolidated Unaudited Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2018	Dec. 31, 2017
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Class A Common Stock
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	245,000,000	245,000,000
Common stock, shares issued (in shares)	2,277,352	1,436,855
Common stock, shares outstanding (in shares)	2,277,352	1,436,855
Class T Common Stock
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	245,000,000	245,000,000
Common stock, shares issued (in shares)	732,807	631,346
Common stock, shares outstanding (in shares)	732,807	631,346

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenues:
Total revenues	$ 1,101,666	$ 1,581,290	$ 3,305,027	$ 3,065,543
Operating expenses:
General and administrative	247,961	103,507	678,758	410,359
Property operating	3,212	2,756	9,913	9,165
Real estate tax	126,625	903,968	379,875	1,032,894
Advisory fees and expenses	0	0	0	60,565
Depreciation and amortization	478,063	358,286	1,434,190	1,074,858
Total operating expenses	855,861	1,368,517	2,502,736	2,587,841
Operating income	245,805	212,773	802,291	477,702
Other expense:
Interest expense and other, net	(429,149)	(347,889)	(1,384,477)	(1,168,619)
Net loss	(183,344)	(135,116)	(582,186)	(690,917)
Class A Common Stock
Other expense:
Net loss	$ (127,009)	$ (106,288)	$ (390,726)	$ (600,648)
Basic and diluted weighted average number of shares outstanding (in shares)	2,226,550	1,197,224	1,844,223	859,523
Basic and diluted net loss per common share (in dollars per share)	$ (0.06)	$ (0.09)	$ (0.21)	$ (0.70)
Distributions declared per common share (in dollars per share)	$ 0.15	$ 0.15	$ 0.45	$ 0.45
Class T Common Stock
Other expense:
Net loss	$ (56,335)	$ (28,828)	$ (191,460)	$ (90,269)
Basic and diluted weighted average number of shares outstanding (in shares)	721,678	257,529	685,064	117,531
Basic and diluted net loss per common share (in dollars per share)	$ (0.08)	$ (0.11)	$ (0.28)	$ (0.77)
Distributions declared per common share (in dollars per share)	$ 0.15	$ 0.15	$ 0.45	$ 0.45
Rental income
Revenues:
Rental income	$ 972,002	$ 674,566	$ 2,916,007	$ 2,023,699
Tenant reimbursement income
Revenues:
Rental income	$ 129,664	$ 906,724	$ 389,020	$ 1,041,844

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Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2018 - USD ($)	Total	Class A Common Stock	Class T Common Stock	Common Stock Class A Common Stock	Common Stock Class T Common Stock	Capital in Excess of Par Value	Accumulated Distributions in Excess of Earnings
Balance (in shares) at Dec. 31, 2017		1,436,855	631,346	1,436,855	631,346
Balance at Dec. 31, 2017	$ 15,029,156			$ 14,369	$ 6,313	$ 18,284,253	$ (3,275,779)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock (in shares)				845,832	101,461
Issuance of common stock	9,266,099			$ 8,458	$ 1,015	9,256,626
Distributions declared	(1,083,217)						(1,083,217)
Commissions on stock sales and related dealer manager fees	(646,448)					(646,448)
Other offering costs	(93,982)					(93,982)
Distribution and stockholder servicing fees	(32,373)					(32,373)
Redemptions of common stock (in shares)				(5,335)
Redemptions of common stock	(48,015)			$ (53)		(47,962)
Changes in redeemable common stock	(24,669)					(24,669)
Net loss	(582,186)	$ (390,726)	$ (191,460)				(582,186)
Balance (in shares) at Sep. 30, 2018		2,277,352	732,807	2,277,352	732,807
Balance at Sep. 30, 2018	$ 21,784,365			$ 22,774	$ 7,328	$ 26,695,445	$ (4,941,182)

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash flows from operating activities:
Net loss	$ (582,186)	$ (690,917)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization, net	1,434,190	1,074,858
Amortization of deferred financing costs	421,000	370,396
Straight-line rental income	(114,970)	(161,622)
Changes in assets and liabilities:
Rents and tenant receivables	352,613	(793,476)
Prepaid expenses and other assets	(3,012)	(60,060)
Accrued expenses and accounts payable	(367,381)	317,426
Deferred rental income	(208,716)	4,092
Due to affiliates	(60,302)	(74,293)
Net cash provided by (used in) operating activities	871,236	(13,596)
Cash flows from investing activities:
Net cash used in investing activities	0	0
Cash flows from financing activities:
Proceeds from issuance of common stock	8,878,331	13,637,650
Redemptions of common stock	(48,015)	0
Offering costs on issuance of common stock	(740,430)	(1,077,033)
Distribution and stockholder servicing fees paid	(47,935)	(8,344)
Distributions to stockholders	(653,275)	(275,207)
Repayments of credit facility	(6,800,000)	(1,725,000)
Proceeds from subordinate promissory note	2,200,000	488,631
Repayment of subordinate promissory note	(3,800,000)	(10,788,631)
Deferred financing costs paid	(13,286)	0
Net cash (used in) provided by financing activities	(1,024,610)	252,066
Net (decrease) increase in cash and cash equivalents	(153,374)	238,470
Cash and cash equivalents, beginning of period	351,461	605,049
Cash and cash equivalents, end of period	198,087	843,519
Supplemental disclosures of non-cash investing and financing activities:
Distributions declared and unpaid	142,415	79,064
Change in accrued distribution and stockholder servicing fees due to affiliate	32,373	160,183
Common stock issued through distribution reinvestment plan	387,768	92,227
Supplemental Cash Flow Disclosures:
Interest paid	$ 980,687	$ 800,966

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Organization and Business

9 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION AND BUSINESS

ORGANIZATION AND BUSINESS

Cole Office & Industrial REIT (CCIT III), Inc. (the “Company”) is a Maryland corporation that was incorporated on May 22, 2014, that elected to be taxed, and currently qualifies, as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2017. The Company is the sole general partner of, and owns, directly or indirectly, 100% of the partnership interests in Cole Corporate Income Operating Partnership III, LP, a Delaware limited partnership.

On November 13, 2017, VEREIT Operating Partnership, L.P. (“VEREIT OP”), a former affiliated entity of the Company’s sponsor, CCO Group (as defined below), entered into a Purchase and Sale Agreement with CCA Acquisition, LLC (“CCA”), a newly-formed affiliate of CIM Group, LLC (“CIM”), pursuant to which CCA agreed to acquire all of the issued and outstanding shares of common stock of Cole Capital Advisors, Inc., the direct or indirect owner of Cole Corporate Income Advisors III, LLC (“CCI III Advisors”), Cole Capital Corporation and CREI Advisors, LLC (“CREI Advisors”), the Company’s external advisor, dealer manager and property manager, respectively (the “Transaction”).

On February 1, 2018, the Transaction was completed. Immediately following the completion of the Transaction, Cole Capital Advisors, Inc. and the Company’s dealer manager were each converted into Delaware limited liability companies, Cole Capital Advisors, Inc.’s name was changed to CCO Group, LLC, and the dealer manager’s name was changed to CCO Capital, LLC (“CCO Capital”). As a result of the Transaction, CIM owns and/or controls CCO Group, LLC and its subsidiaries (collectively, “CCO Group”), and CCO Group, LLC owns and controls CCI III Advisors, CCO Capital and CREI Advisors, the Company’s external advisor, dealer manager for the Offering (as defined below) and property manager, respectively.

In addition, as part of the Transaction, VEREIT OP and CCO Group, LLC entered into a services agreement (the “Services Agreement”) pursuant to which VEREIT OP is obligated to provide certain services to CCO Group and to the Company, Cole Credit Property Trust IV, Inc. (“CCPT IV”), Cole Credit Property Trust V, Inc. (“CCPT V”), Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”) and Cole Real Estate Income Strategy (Daily NAV), Inc. (“Cole Income NAV Strategy”) (CCPT IV, CCPT V, CCIT III, Cole Income NAV Strategy and the Company, collectively, the “Cole REITs^®”), including operational real estate support. VEREIT OP is obligated to provide such services through March 31, 2019 (or, if later, the date of the last government filing other than a tax filing made by any of the Cole REITs with respect to its 2018 fiscal year) (the “Initial Services Term”) and is obligated to provide consulting and research services through December 31, 2023 as requested by CCO Group, LLC.

Despite the indirect change of ownership and control of the Company’s advisor, dealer manager, property manager and sponsor, the Company expects that, during the Initial Services Term of the Services Agreement, the advisory, dealer manager and property management services the Company receives will continue without any material changes in personnel (except as supplemented by the management oversight of CIM personnel) or material change in service procedures. CCO Group, LLC is evaluating and intends to effectuate during the Initial Services Term of the Services Agreement an appropriate transition of VEREIT OP’s services under the Services Agreement to other CIM affiliates or third parties with the goal of ensuring continuity and minimizing disruption.

Pursuant to a Registration Statement on Form S-11 (Registration No. 333-209128) (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”), and declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on September 22, 2016, the Company commenced its initial public offering on a “best efforts” basis, offering up to a maximum of $3.5 billion in shares of common stock (the “Offering”). Pursuant to the Offering, the Company is offering up to $2.5 billion in shares of its common stock pursuant to the primary offering, consisting of two classes of shares: Class A common stock (“Class A Shares”) at a price of $10.00 per share (up to $1.25 billion in shares) and Class T common stock (“Class T Shares”) at a price of $9.57 per share (up to $1.25 billion in shares). Pursuant to the Offering, the Company is also offering up to $1.0 billion in shares of its common stock pursuant to the distribution reinvestment plan (the “DRIP”) at a purchase price during the Offering equal to the per share primary offering prices net of selling commissions and dealer manager fees, or $9.10 per share for both Class A Shares and Class T Shares, assuming a $10.00 per Class A Share primary offering price and a $9.57 per Class T Share primary offering price.

On August 9, 2018, the Company’s board of directors approved the extension of the Offering until September 22, 2019, unless the Company’s board of directors terminates the Offering at an earlier date or all shares being offered have been sold, in which case the Offering will be terminated. In no event will the Offering be extended beyond 180 days after September 22, 2019.

As of September 30, 2018, the Company had issued approximately 3.0 millionshares of common stock in the Offering, including62,000shares issued pursuant to the DRIP, for gross proceeds of$29.1 million ($22.1 million in Class A Shares and $7.0 million in Class T Shares) before organization and offering costs, selling commissions and dealer manager fees of $2.1 million. In addition, the Company has paid distribution and stockholder servicing fees for Class T Shares sold in the primary portion of the Offering of $70,000 and accrued an estimated liability for future distribution and stockholder servicing fees payable of $202,000. The Company intends to use substantially all of the net proceeds from the Offering to acquire and operate a diversified portfolio of commercial real estate assets primarily consisting of single-tenant, income-producing necessity office and industrial properties, which are leased to creditworthy tenants under long-term leases, including distribution facilities, warehouses, manufacturing plants and corporate or regional headquarters in strategic locations. The Company expects that most of its properties will be subject to “net” leases, whereby the tenant will be primarily responsible for the property’s cost of repairs, maintenance, property taxes, utilities, insurance and other operating costs. As of September 30, 2018, the Company owned two office and industrial properties, comprising 391,000 rentable square feet of commercial space located in two states. As of September 30, 2018, the rentable square feet at these properties was 100% leased.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of significant accounting policies presented below is designed to assist in understanding the Company’s condensed consolidated financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying condensed consolidated financial statements.

Principles of Consolidation and Basis of Presentation

The condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the SEC regarding interim financial reporting, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the statements for the interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of full year results. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2017, and related notes thereto, set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The condensed consolidated financial statements should also be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Certain amounts in the Company’s prior period condensed consolidated financial statements have been reclassified to conform to the current period presentation. The Company has chosen to break out distribution and stockholder servicing fees paid of $8,000 from offering costs on issuance of common stock of $1.08 million, which was previously reported in total as $1.09 million in the Company’s condensed consolidated statements of cash flows for the nine months endedSeptember 30, 2017. This reclassification had no effect on previously reported totals or subtotals.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Real Estate Assets

Real estate assets are stated at cost, less accumulated depreciation and amortization. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life. The estimated useful lives of the Company’s real estate assets by class are generally as follows:

Buildings	40 years
Site improvements	15 years
Tenant improvements	Lesser of useful life or lease term
Intangible lease assets	Lease term

Recoverability of Real Estate Assets

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to: bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, rental concessions and other factors; a significant decrease in a property’s revenues due to lease terminations; vacancies; co-tenancy clauses; reduced lease rates; changes in anticipated holding periods; or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate assets to their respective fair values and recognize an impairment loss. Generally, fair value will be determined using a discounted cash flow analysis and recent comparable sales transactions. No impairment indicators were identified and no impairment losses were recorded during the nine months endedSeptember 30, 2018 or 2017.

Assets Held for Sale

When a real estate asset is identified by the Company as held for sale, the Company will cease recording depreciation and amortization of the assets related to the property and estimate its fair value, net of selling costs. If, in management’s opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount is then recorded to reflect the estimated fair value of the property, net of selling costs. There were no assets identified as held for sale as of September 30, 2018 or December 31, 2017.

Allocation of Purchase Price of Real Estate Assets

Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and to identified intangible assets and liabilities, consisting of the value of above- and below-market leases and the value of in-place leases and other intangibles, based in each case on their respective fair values. The Company utilizes independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and buildings). The information in the appraisal, along with any additional information available to the Company’s management, is used in estimating the amount of the purchase price that is allocated to land. Other information in the appraisal, such as building value and market rents, may be used by the Company’s management in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. The appraisal firm has no involvement in management’s allocation decisions other than providing this market information.

The determination of the fair values of the real estate assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of the Company’s purchase price, which could materially impact the Company’s results of operations.

In April 2017, the Company elected to early adopt Accounting Standards Update (“ASU”) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Beginning in April 2017, all real estate acquisitions qualified as asset acquisitions, and as such, acquisition-related fees and certain acquisition-related expenses related to these asset acquisitions were capitalized and allocated to tangible and intangible assets and liabilities, as described above. Prior to the adoption of ASU 2017-01 in April 2017, all of the Company’s real estate acquisitions were accounted for as business combinations and, as such, acquisition-related expenses related to these business combination acquisitions were expensed as incurred. Prior to April 2017, acquisition-related expenses in the Company’s condensed consolidated statements of operations primarily consisted of legal, deed transfer and other costs related to real estate purchase transactions, including costs incurred for deals that were not consummated. The Company expects its future acquisitions to qualify as asset acquisitions and, as such, the Company will allocate the purchase price to acquired tangible assets and identified intangible assets and liabilities on a relative fair value basis.

Revenue Recognition

Certain properties have leases where the minimum rental payment increases during the term of the lease. The Company records rental income for the full term of each lease on a straight-line basis when earned and collectability is reasonably assured. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of this calculation. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Expected reimbursements from tenants for recoverable real estate taxes and operating expenses are included in tenant reimbursement income in the period when such costs are incurred. Effective January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in Revenue Recognition, Accounting Standards Codification (“ASC”) Topic 605 and requires an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company records revenue for real estate taxes and insurance reimbursed by its tenants on the leased properties, with offsetting expenses in real estate taxes and property operating expenses, respectively, within the condensed consolidated statements of operations as the Company has concluded it is the primary obligor. The Company has identified its revenue streams as rental income from leasing arrangements and tenant reimbursement income, which are outside of the scope of Topic 606. The Company adopted ASU 2014-09 using the modified retrospective approach and determined it did not have a material impact on the Company’s condensed consolidated financial statements.

The Company continually reviews receivables related to rent, including any straight-line rent, and current and future operating expense reimbursements from tenants, and determines their collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is uncertain, the Company will record an increase in the allowance for uncollectible accounts. As of September 30, 2018 and December 31, 2017, theCompany did not have an allowance for uncollectible accounts.

Net Loss and Distributions Per Share

The Company has two classes of common stock. Accordingly, the Company utilizes the two-class method to determine its earnings per share, which can result in different earnings per share for each of the classes. Under the two-class method, earnings per share of each class of common stock are computed by dividing the sum of the distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares for each class of common stock for the respective period. The distributed earnings to Class T Share common stockholders represents distributions declared less the distribution and stockholder servicing fees paid with respect to Class T Shares sold in the primary portion of the Offering. Diluted income per share, when applicable, considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of thethree and nine months endedSeptember 30, 2018or2017. Distributions per share are calculated based on the authorized daily distribution rate.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by various standard setting bodies that may have an impact on the Company’s accounting and reporting. Except as otherwise stated below, the Company is currently evaluating the effect that certain new accounting requirements may have on the Company’s accounting and related reporting and disclosures in the Company’s condensed consolidated financial statements.

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The amendments in this update require that most lease obligations be recognized as a right of use asset with a corresponding liability on the balance sheet. The guidance also requires additional qualitative and quantitative disclosures to assess the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 and subsequent amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The guidance, including optional practical expedients, should be implemented for the earliest period presented using a modified retrospective approach. The Company is currently in the process of finalizing its assessment of its inventory of leases that will be impacted by adoption of the new guidance. The Company does not expect the adoption to have a material impact on the accounting treatment of the Company’s net leases, which are the primary source of the Company’s revenues.

In August 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This ASU amends and removes several disclosure requirements including the valuation processes for Level 3 fair value measurements. ASU 2018-13 also modifies some disclosure requirements and requires additional disclosures for changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and requires the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The provisions of ASU 2018-13 are effective January 1, 2020 using a prospective transition method for amendments effecting changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair value measurements and narrative description on uncertainty of measurements. The remaining provisions of the ASU are to be applied retrospectively, and early adoption is permitted. The Company is evaluating the impact of this ASU's adoption, and does not believe this ASU will have a material impact on its condensed consolidated financial statements.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

GAAP defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements. GAAP emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows:

Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs).

Level 3 — Unobservable inputs, which are only used to the extent that observable inputs are not available, reflect the Company’s assumptions about the pricing of an asset or liability.

The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities:

Credit facility and subordinate promissory note — The fair value is estimated by discounting the expected cash flows based on estimated borrowing rates available to the Company as of the measurement date. These financial instruments are valued using Level 2 inputs. As of September 30, 2018, the estimated fair value of the Company’s debt was $25.3 million, compared to a carrying value of $25.2 million. As of December 31, 2017, the estimated fair value of the Company’s debt was $33.8 million, compared to a carrying value of $33.6 million. The carrying and fair values exclude net deferred financing costs.

Other financial instruments — The Company considers the carrying values of its cash and cash equivalents, tenant receivables, accrued expenses and accounts payable, other liabilities, due to affiliates and distributions payable to approximate their fair values because of the short period of time between their origination and their expected realization as well as their highly-liquid nature. Due to the short-term maturities of these instruments, Level 1 inputs are utilized to estimate the fair value of these financial instruments.

Considerable judgment is necessary to develop estimated fair values of financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize, or be liable for, on disposition of the financial assets and liabilities. As of September 30, 2018 and December 31, 2017, there have beenno transfers of financial assets or liabilities between fair value hierarchy levels.

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Real Estate Assets

9 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

REAL ESTATE ASSETS

REAL ESTATE ASSETS

During the nine months ended September 30, 2018 and 2017, the Company did not acquire any properties.

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Intangible Lease Assets

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE LEASE ASSETS

INTANGIBLE LEASE ASSETS

The Company’s intangible lease assets consisted of the following as of September 30, 2018 and December 31, 2017:

	September 30, 2018		December 31, 2017
In-place leases, net of accumulated amortization of $827,776 and $480,483, respectively
(with a weighted average life remaining of 10.0 years and 10.8 years, respectively)	$	4,273,656	$	4,620,949

Amortization expense for the in-place leases is included in depreciation and amortization in the accompanying condensed consolidated statements of operations. The following table summarizes the amortization expense related to the in-place lease assets for the three and nine months endedSeptember 30, 2018 and 2017:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
In-place lease amortization	$	115,764	$	90,558	$	347,293	$	271,672

As of September 30, 2018, the estimated amortization expense relating to the intangible lease assets is as follows:

	Amortization Expense
	In-Place Lease
Remainder of 2018	$	115,765
2019	$	463,058
2020	$	463,058
2021	$	463,058
2022	$	463,058

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Credit Facility and Subordinate Promissory Note

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

CREDIT FACILITY AND SUBORDINATE PROMISSORY NOTE

CREDIT FACILITY AND SUBORDINATE PROMISSORY NOTE

As of September 30, 2018, the Company had $25.2 million of debt outstanding, with a weighted average interest rate of 4.4% and weighted average years to maturity of 1.0 years. The following table summarizes the debt balances as of September 30, 2018 and December 31, 2017, respectively, and the debt activity for the nine months ended September 30, 2018:

			During the Nine Months Ended September 30, 2018
	Balance as of December 31, 2017		Debt Issuance		Repayments			Balance as of September 30, 2018
Credit facility	$	31,975,000	$	—	$	(6,800,000	)	$	25,175,000
Subordinate promissory note	1,600,000		2,200,000		(3,800,000		)	—
Total debt	$	33,575,000	$	2,200,000	$	(10,600,000	)	$	25,175,000

As of September 30, 2018, the Company had $25.2 million of debt outstanding under its secured credit facility (the “Credit Facility”) with JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), as administrative agent, and the lenders under the credit agreement (as amended, the “Credit Agreement”), that provides for borrowings of up to $100.0 million in revolving loans (the “Revolving Loans”). The Revolving Loans mature on September 23, 2019; however, the Company may elect to extend the maturity date of such loans for up to two successive 12-month periods, subject to satisfying certain conditions contained in the Credit Agreement. These conditions include providing notice of the election and paying an extension fee of 0.2% of the maximum amount of the Revolving Loans.

Depending upon the type of loan specified and overall leverage ratio, the Credit Facility bears interest at (i) the one-month, two-month, three-month or six-month London Interbank Offered Rate (“LIBOR”) multiplied by the statutory reserve rate (the “Eurodollar Rate”) plus an interest rate spread ranging from 2.20% to 2.45%; or (ii) a base rate ranging from 1.20% to 1.45%, plus the greater of: (a) JPMorgan Chase’s Prime Rate (as defined in the Credit Agreement); (b) the Federal Funds Effective Rate (as defined in the Credit Agreement) plus 0.50%; or (c) the one-month LIBOR multiplied by the statutory reserve rate plus 1.0%. As of September 30, 2018, the Revolving Loans outstanding totaled $25.2 million at a weighted average interest rate of 4.4%. The Company had $74.8 million in unused capacity, subject to borrowing availability, as of September 30, 2018.

The Credit Agreement contains provisions with respect to covenants, events of default and remedies customary for facilities of this nature. In particular, the Credit Agreement requires the Company to maintain a minimum consolidated net worth greater than or equal to 75% of the equity issued from the date of the Credit Agreement, a leverage ratio no greater than 60%, and a fixed charge coverage ratio equal to or greater than 1.50. The Company believes it was in compliance with the financial covenants of the Credit Agreement as ofSeptember 30, 2018.

On September 23, 2016, the Company entered into a $30.0 million subordinate, unsecured, revolving line of credit with VEREIT OP (the “Subordinate Promissory Note”). The Subordinate Promissory Note bore interest at a rate per annum equal to the sum of (a) one-month LIBOR, (b) the Credit Facility Margin (as defined in the Subordinate Promissory Note) and (c) 1.75%, with accrued interest payable monthly in arrears and principal due upon maturity. No amounts were outstanding under the Subordinate Promissory Note, which matured and expired on September 30, 2018. No financing coordination fees were paid to our advisor or its affiliates in connection with the Subordinate Promissory Note.

Liquidity and Financial Condition — The Company’s condensed consolidated financial statements as of September 30, 2018 and December 31, 2017, have been prepared assuming that the Company will continue its operations as a going concern. The Company believes cash on hand, net cash provided by operations and proceeds from the Offering will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued. However, this evaluation assumes continued positive cash flows. With respect to the Revolving Loans maturing September 23, 2019, the Company expects to extend the maturity date through September 23, 2020, subject to lender approval, byproviding notice of the election and paying an extension fee of 0.2% of the maximum amount of the Revolving Loans. The Company is in its start-up phase and dependent on raising capital to meet its capital requirements, including property acquisitions, stockholder distributions and repayment of maturing debt.

Maturities

The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt as of September 30, 2018:

	Principal Repayments
Remainder of 2018	$	—
2019	25,175,000
2020	—
2021	—
2022	—
Thereafter	—
Total	$	25,175,000

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Litigation

In the ordinary course of business, the Company may become subject to litigation and claims. The Company is not aware of any material pending legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which the Company is a party or of which the Company’s properties are the subject.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. In addition, the Company may own or acquire certain properties that are subject to environmental remediation. Generally, the seller of the property, the tenant of the property and/or another third party is responsible for environmental remediation costs related to a property. Additionally, in connection with the purchase of certain properties, the respective sellers and/or tenants may agree to indemnify the Company against future remediation costs. The Company also carries environmental liability insurance on its properties that provides limited coverage for any remediation liability and/or pollution liability for third-party bodily injury and/or property damage claims for which the Company may be liable. The Company is not aware of any environmental matters which it believes are reasonably likely to have a material effect on its results of operations, financial condition or liquidity.

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Related-Party Transactions and Arrangements

9 Months Ended

Sep. 30, 2018

Related Party Transactions [Abstract]

RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS

RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS

The Company has incurred, and will continue to incur, commissions, fees and expenses payable to CCI III Advisors and certain of its affiliates in connection with the Offering and the acquisition, management and disposition of its assets.

Selling commissions and dealer manager fees

In connection with the Offering, CCO Capital, the Company’s dealer manager, which is affiliated with CCI III Advisors, receives selling commissions of up to 7.0% and 3.0% of gross offering proceeds from the primary portion of the Offering for Class A Shares and Class T Shares, respectively. CCO Capital reallows 100% of selling commissions earned to participating broker-dealers. In addition, CCO Capital receives 2.0% of gross offering proceeds from the primary portion of the Offering for both Class A Shares and Class T Shares as a dealer manager fee. CCO Capital, in its sole discretion, may reallow all or a portion of its dealer manager fee to participating broker-dealers. No selling commissions or dealer manager fees are paid to CCO Capital or other participating broker-dealers with respect to shares sold pursuant to the DRIP.

Organization and offering expenses

All other organization and offering expenses associated with the sale of the Company’s common stock (excluding selling commissions, dealer manager fees and distribution and stockholder servicing fees) are paid by CCI III Advisors or its affiliates and are reimbursed by the Company up to 1.0% of aggregate gross offering proceeds, including proceeds from sales of shares under the DRIP. A portion of the other organization and offering expenses may be considered to be underwriting compensation. As of September 30, 2018, CCI III Advisors had paid organization and offering expenses in excess of the 1.0% of aggregate gross offering proceeds in connection with the Offering. These excess amounts were not included in the condensed consolidated financial statements of the Company because such amounts were not a liability of the Company as they exceeded 1.0% of gross proceeds from the Offering. As the Company raises additional proceeds from the Offering, these amounts may become payable.

Distribution and stockholder servicing fees

The Company pays CCO Capital a distribution and stockholder servicing fee for Class T Shares that is calculated on a daily basis in an amount equal to 1/365th of 1.0% of the purchase price per share (or, once reported, the amount of the Company’s estimated per share net asset value) of the Class T Shares sold in the primary portion of the Offering. The distribution and stockholder servicing fee is paid monthly in arrears from cash flow from operations or, if the Company’s cash flow from operations is not sufficient to pay the distribution and stockholder servicing fee, from borrowings in anticipation of future cash flow. An estimated liability for future distribution and stockholder servicing fees payable to CCO Capital is recognized at the time each Class T Share is sold and included in due to affiliates in the condensed consolidated balance sheets with a corresponding decrease to capital in excess of par value. The Company will cease paying the distribution and stockholder servicing fee with respect to Class T Shares at the earliest of (i) the end of the month in which the total distribution and stockholder servicing fees paid by a stockholder within his or her individual account would be equal to 4.0% of the stockholder’s total gross investment amount at the time of the purchase of the primary Class T Shares held in such account, or a lower limit agreed upon between the Company’s dealer manager and the participating broker-dealer at the time such Class T Shares were sold; (ii) the date on which the aggregate underwriting compensation from all sources equals 10.0% of the gross proceeds from the aggregate sale of the Class A Shares and Class T Shares in the Offering, excluding proceeds from sales pursuant to the DRIP; (iii) the fourth anniversary of the last day of the month in which the Offering (excluding the offering of shares pursuant to the DRIP) terminates; (iv) the date such Class T Share is no longer outstanding; and (v) the date the Company effects a liquidity event. CCO Capital may, in its discretion, reallow to participating broker-dealers all or a portion of the distribution and stockholder servicing fee for services that such participating broker-dealers perform in connection with the distribution of Class T Shares. At the time the Company ceases paying the distribution and stockholder servicing fee with respect to an outstanding Class T Share pursuant to the provisions above, such Class T Share will convert into a number of Class A Shares (including any fractional shares) with an equivalent net asset value as such Class T Share. The Company cannot predict when this will occur.No distribution and stockholder servicing fees are paid to CCO Capital or other participating broker-dealers with respect to shares sold pursuant to the DRIP.

Acquisition-related fees and expenses

The Company pays CCI III Advisors or its affiliates acquisition fees of up to 2.0% of: (i) the contract purchase price of each property or asset the Company acquires; (ii) the amount paid in respect of the development, construction or improvement of each asset the Company acquires; (iii) the purchase price of any loan the Company acquires; and (iv) the principal amount of any loan the Company originates. In addition, the Company reimburses CCI III Advisors or its affiliates for acquisition-related expenses incurred in the process of acquiring a property or the origination or acquisition of a loan, so long as the total acquisition fees and expenses relating to the transaction do not exceed 6.0% of the contract purchase price, unless otherwise approved by a majority of the Company’s board of directors, including a majority of the independent directors, as commercially competitive, fair and reasonable to the Company. During the three and nine months endedSeptember 30, 2018 and 2017, noacquisition fees or expenses were incurred for any such services provided by CCI III Advisors or its affiliates.

Advisory fees and expenses

Pursuant to the advisory agreement, the Company pays CCI III Advisors a monthly advisory fee based upon the Company’s monthly average asset value, which is equal to the following amounts: (i) an annualized rate of 0.75% paid on the Company’s average asset value that is between $0 and $2.0 billion; (ii) an annualized rate of 0.70% paid on the Company’s average asset value that is between $2.0 billion and $4.0 billion; and (iii) an annualized rate of 0.65% paid on the Company’s average asset value that is over $4.0 billion. During the three and nine months endedSeptember 30, 2018, these advisory fees exceeded the expense limit of the greater of 2.0% of the average invested assets or 25.0% of net income (see operating expenses below) and were not recognized in the condensed consolidated financial statements of the Company because such amounts were not contractually payable by the Company. As of September 30, 2018, $482,000 of advisory fees exceeded such expense limit. As the Company raises additional proceeds from the Offering and acquires additional properties, these amounts may become payable if future operating expenses are below the expense limits.

Operating expenses

The Company reimburses CCI III Advisors or its affiliates for the operating expenses they paid or incurred in connection with advisory and administrative services provided to the Company, subject to the limitation that the Company will not reimburse CCI III Advisors or its affiliates for any amount by which the operating expenses (including the advisory fee) at the end of the four preceding fiscal quarters exceed the greater of (i) 2.0% of average invested assets, or (ii) 25.0% of net income, excluding any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of assets for that period. The Company will not reimburse CCI III Advisors or its affiliates for compensation paid to the Company’s executive officers or employees of CCI III Advisors in connection with the services for which CCI III Advisors or its affiliates receive an acquisition fee, financing coordination fee or disposition fee. During the three and nine months endedSeptember 30, 2018 and 2017, nooperating expenseswere reimbursed by the Company.During the three and nine months ended September 30, 2018 and 2017, CCI III Advisors paid or reimbursed the Company for operating expenses in excess of the greater of 2.0% of average invested assets or 25.0% of net income, which were not recognized in the condensed consolidated financial statements of the Company because such amounts were not contractually payable by the Company. As of September 30, 2018, $1.4 million of operating expenses exceeded such expense limit. As the Company raises additional proceeds from the Offering and acquires additional properties, these amounts may become payable.

Financing coordination fees

If CCI III Advisors provides services in connection with the origination, assumption or refinancing of any debt to acquire properties or to make other permitted investments, the Company will pay CCI III Advisors a financing coordination fee equal to 1.0% of the amount available and/or outstanding under such financing. However, CCI III Advisors will not be entitled to a financing coordination fee on any debt where CCI III Advisors previously received a fee unless (i) the maturity date of the refinanced debt was scheduled to occur less than one year after the date of the refinancing and the new loan has a term of at least five years or (ii) the new loan is approved by a majority of the independent directors; and provided, further, that no financing coordination fee will be paid in connection with loans advanced by an affiliate of CCI III Advisors. During the three and nine months endedSeptember 30, 2018 and 2017, nofinancing coordination fees were incurred for any such services provided by CCI III Advisors or its affiliates.

Disposition fees

If CCI III Advisors or its affiliates provide a substantial amount of services (as determined by a majority of the Company’s independent directors) in connection with the sale of one or more properties (or the Company’s entire portfolio), the Company will pay CCI III Advisors or its affiliates a disposition fee in an amount equal to up to one-half of the real estate or brokerage commission paid by the Company to third parties on the sale of such properties, not to exceed 1.0% of the contract price of the properties sold; provided, however, in no event may the total disposition fees paid to CCI III Advisors, its affiliates, and unaffiliated third parties, exceed the lesser of the customary competitive real estate commission or an amount equal to 6.0% of the contract sales price. In addition, if CCI III Advisors or its affiliates provides a substantial amount of services (as determined by a majority of the Company’s independent directors) in connection with the sale of one or more assets other than properties, the Company may separately compensate CCI III Advisors or its affiliates at such rates and in such amounts as the Company’s board of directors, including a majority of the independent directors, and CCI III Advisors agree upon, not to exceed an amount equal to 1.0% of the contract price of the assets sold. During the three and nine months endedSeptember 30, 2018 and 2017, nodisposition fees were incurred for any such services provided by CCI III Advisors or its affiliates.

Subordinated performance fees

The Company will pay a subordinated performance fee under one of the following alternative events: (1) if the Company’s shares are listed on a national securities exchange, CCI III Advisors, or its affiliates, will be entitled to a subordinated performance fee equal to 15.0% of the amount, if any, by which (i) the market value of the Company’s outstanding stock plus distributions paid by the Company prior to listing, exceeds (ii) the sum of the total amount of capital raised from stockholders and the amount of distributions necessary to generate a 6.0% annual cumulative, non-compounded return to stockholders; (2) if the Company is sold or its assets are liquidated, CCI III Advisors will be entitled to a subordinated performance fee equal to 15.0% of the net sale proceeds remaining after stockholders have received, from regular distributions plus special distributions paid from proceeds of such sale, a return of their net capital invested and a 6.0% annual cumulative, non-compounded return; or (3) upon termination of the advisory agreement, CCI III Advisors may be entitled to a subordinated performance fee similar to the fee to which it would have been entitled had the portfolio been liquidated (based on an independent appraised value of the portfolio) on the date of termination. During the three and nine months endedSeptember 30, 2018 and 2017,nosubordinated performance fees were incurred related to any such events.

The Company incurred commissions, fees and expense reimbursements as shown in the table below for services provided by CCI III Advisors and its affiliates related to the services described above during the periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Selling commissions	$	155,630	$	224,114	$	466,239	$	667,858
Dealer manager fees	$	73,795	$	106,715	$	180,209	$	270,510
Distribution and stockholder servicing fees(1)	$	16,914	$	6,162	$	47,935	$	8,344
Organization and offering costs	$	38,497	$	54,095	$	93,982	$	138,665
Advisory fees	$	—	$	—	$	—	$	60,565

______________________

(1) Amounts are calculated for the respective period in accordance with the dealer manager agreement and exclude the estimated liability for future distribution and stockholder servicing fees payable to CCO Capital of $202,000, which is included in due to affiliates in the condensed consolidated balance sheets with a corresponding decrease to capital in excess of par value.

Services Agreement

Pursuant to the Services Agreement, VEREIT OP, which is affiliated with one of the Company’s directors, is obligated to provide certain services to CCO Group and to the Company, including operational real estate support. The Company is not a party to the Services Agreement. See Note 9 — Economic Dependency for a discussion of the Services Agreement.

Due to/from Affiliates

As of September 30, 2018 and December 31, 2017, $203,000 and $278,000, respectively, was recorded for services and expenses incurred, but not yet reimbursed, to CCI III Advisors or its affiliates. The amounts are primarily for future distribution and stockholder servicing fees and for operating expenses. The Company incurred $53,000 and $262,000, respectively, of interest expense related to the Subordinate Promissory Note during the nine months endedSeptember 30, 2018 and the year ended December 31, 2017, of which $10,000 in interest had been incurred but not yet paid as of December 31, 2017. This amount was included in due to affiliates as of December 31, 2017 in the condensed consolidated balance sheet for such period.

As of December 31, 2017, $1,000 was due from CCI III Advisors or its affiliates related to amounts received by affiliates of the advisor which were due to the Company. No such amounts were due from CCI III Advisors or its affiliates as of September 30, 2018.

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Economic Dependency

9 Months Ended

Sep. 30, 2018

Economic Dependency [Abstract]

ECONOMIC DEPENDENCY

ECONOMIC DEPENDENCY

Under various agreements, the Company has engaged and may in the future engage CCI III Advisors or its affiliates to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, the sale of shares of the Company’s common stock available for issuance, as well as other administrative responsibilities for the Company including accounting services and stockholder relations. As a result of these relationships, the Company is dependent upon CCI III Advisors or its affiliates. In the event that these companies are unable to provide the Company with these services, the Company would be required to find alternative providers of these services.

Services Agreement

Pursuant to the Services Agreement, VEREIT OP is obligated to provide certain services to CCO Group and to the Company, including operational real estate support. VEREIT OP is obligated to provide such services through March 31, 2019 (or, if later, the date of the last government filing other than a tax filing made by any of the Cole REITs with respect to its 2018 fiscal year) and is obligated to provide consulting and research services through December 31, 2023 as requested by CCO Group, LLC.

Despite the indirect change of ownership and control of the Company’s advisor, dealer manager, property manager and sponsor, the Company expects that, during the Initial Services Term of the Services Agreement, the advisory, dealer manager and property management services the Company receives will continue without any material changes in personnel (except as supplemented by the management oversight of CIM personnel) or material change in service procedures. During the Initial Services Term of the Services Agreement, CCO Group, LLC intends to evaluate and effectuate an appropriate transition of VEREIT OP’s services under the Services Agreement to other CIM affiliates or third parties with the goal of ensuring continuity and minimizing disruption.

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Operating Leases

9 Months Ended

Sep. 30, 2018

Leases [Abstract]

OPERATING LEASES

OPERATING LEASES

The Company’s real estate assets are leased to tenants under operating leases for which the terms and expirations vary. As of September 30, 2018, the leases had a remaining weighted-average lease term of 9.9 years. The leases include provisions to extend the lease term, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other negotiated terms and conditions. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to the tenants.

The future minimum rental income from the Company’s real estate assets under the non-cancelable operating leases, assuming no exercise of renewal options, as of September 30, 2018, was as follows:

	Future Minimum Rental Income
Remainder of 2018	$	1,083,691
2019	3,808,708
2020	3,878,462
2021	3,756,969
2022	3,829,450
Thereafter	22,784,446
Total	$	39,141,726

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Subsequent Events

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

The Company evaluated events subsequent to September 30, 2018, and concluded that no subsequent events have occurred that would require recognition or disclosure in the condensed consolidated unaudited financial statements.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation

The condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the SEC regarding interim financial reporting, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the statements for the interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of full year results. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2017, and related notes thereto, set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The condensed consolidated financial statements should also be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Certain amounts in the Company’s prior period condensed consolidated financial statements have been reclassified to conform to the current period presentation. The Company has chosen to break out distribution and stockholder servicing fees paid of $8,000 from offering costs on issuance of common stock of $1.08 million, which was previously reported in total as $1.09 million in the Company’s condensed consolidated statements of cash flows for the nine months endedSeptember 30, 2017. This reclassification had no effect on previously reported totals or subtotals.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Real Estate Assets and Recoverability Of Real Estate Assets

Real estate assets are stated at cost, less accumulated depreciation and amortization. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life. The estimated useful lives of the Company’s real estate assets by class are generally as follows:

Buildings	40 years
Site improvements	15 years
Tenant improvements	Lesser of useful life or lease term
Intangible lease assets	Lease term

Recoverability of Real Estate Assets

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to: bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, rental concessions and other factors; a significant decrease in a property’s revenues due to lease terminations; vacancies; co-tenancy clauses; reduced lease rates; changes in anticipated holding periods; or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate assets to their respective fair values and recognize an impairment loss. Generally, fair value will be determined using a discounted cash flow analysis and recent comparable sales transactions.

Assets Held for Sale

When a real estate asset is identified by the Company as held for sale, the Company will cease recording depreciation and amortization of the assets related to the property and estimate its fair value, net of selling costs. If, in management’s opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount is then recorded to reflect the estimated fair value of the property, net of selling costs. There were no assets identified as held for sale as of September 30, 2018 or December 31, 2017.

Allocation of Purchase Price of Real Estate Assets

Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and to identified intangible assets and liabilities, consisting of the value of above- and below-market leases and the value of in-place leases and other intangibles, based in each case on their respective fair values. The Company utilizes independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and buildings). The information in the appraisal, along with any additional information available to the Company’s management, is used in estimating the amount of the purchase price that is allocated to land. Other information in the appraisal, such as building value and market rents, may be used by the Company’s management in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. The appraisal firm has no involvement in management’s allocation decisions other than providing this market information.

The determination of the fair values of the real estate assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of the Company’s purchase price, which could materially impact the Company’s results of operations.

In April 2017, the Company elected to early adopt Accounting Standards Update (“ASU”) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Beginning in April 2017, all real estate acquisitions qualified as asset acquisitions, and as such, acquisition-related fees and certain acquisition-related expenses related to these asset acquisitions were capitalized and allocated to tangible and intangible assets and liabilities, as described above. Prior to the adoption of ASU 2017-01 in April 2017, all of the Company’s real estate acquisitions were accounted for as business combinations and, as such, acquisition-related expenses related to these business combination acquisitions were expensed as incurred. Prior to April 2017, acquisition-related expenses in the Company’s condensed consolidated statements of operations primarily consisted of legal, deed transfer and other costs related to real estate purchase transactions, including costs incurred for deals that were not consummated. The Company expects its future acquisitions to qualify as asset acquisitions and, as such, the Company will allocate the purchase price to acquired tangible assets and identified intangible assets and liabilities on a relative fair value basis.

Revenue Recognition

Certain properties have leases where the minimum rental payment increases during the term of the lease. The Company records rental income for the full term of each lease on a straight-line basis when earned and collectability is reasonably assured. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of this calculation. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Expected reimbursements from tenants for recoverable real estate taxes and operating expenses are included in tenant reimbursement income in the period when such costs are incurred. Effective January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in Revenue Recognition, Accounting Standards Codification (“ASC”) Topic 605 and requires an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company records revenue for real estate taxes and insurance reimbursed by its tenants on the leased properties, with offsetting expenses in real estate taxes and property operating expenses, respectively, within the condensed consolidated statements of operations as the Company has concluded it is the primary obligor. The Company has identified its revenue streams as rental income from leasing arrangements and tenant reimbursement income, which are outside of the scope of Topic 606. The Company adopted ASU 2014-09 using the modified retrospective approach and determined it did not have a material impact on the Company’s condensed consolidated financial statements.

The Company continually reviews receivables related to rent, including any straight-line rent, and current and future operating expense reimbursements from tenants, and determines their collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is uncertain, the Company will record an increase in the allowance for uncollectible accounts.

Net Loss and Distributions Per Share

The Company has two classes of common stock. Accordingly, the Company utilizes the two-class method to determine its earnings per share, which can result in different earnings per share for each of the classes. Under the two-class method, earnings per share of each class of common stock are computed by dividing the sum of the distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares for each class of common stock for the respective period. The distributed earnings to Class T Share common stockholders represents distributions declared less the distribution and stockholder servicing fees paid with respect to Class T Shares sold in the primary portion of the Offering. Diluted income per share, when applicable, considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of thethree and nine months endedSeptember 30, 2018or2017. Distributions per share are calculated based on the authorized daily distribution rate.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by various standard setting bodies that may have an impact on the Company’s accounting and reporting. Except as otherwise stated below, the Company is currently evaluating the effect that certain new accounting requirements may have on the Company’s accounting and related reporting and disclosures in the Company’s condensed consolidated financial statements.

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The amendments in this update require that most lease obligations be recognized as a right of use asset with a corresponding liability on the balance sheet. The guidance also requires additional qualitative and quantitative disclosures to assess the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 and subsequent amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The guidance, including optional practical expedients, should be implemented for the earliest period presented using a modified retrospective approach. The Company is currently in the process of finalizing its assessment of its inventory of leases that will be impacted by adoption of the new guidance. The Company does not expect the adoption to have a material impact on the accounting treatment of the Company’s net leases, which are the primary source of the Company’s revenues.

In August 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This ASU amends and removes several disclosure requirements including the valuation processes for Level 3 fair value measurements. ASU 2018-13 also modifies some disclosure requirements and requires additional disclosures for changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and requires the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The provisions of ASU 2018-13 are effective January 1, 2020 using a prospective transition method for amendments effecting changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair value measurements and narrative description on uncertainty of measurements. The remaining provisions of the ASU are to be applied retrospectively, and early adoption is permitted. The Company is evaluating the impact of this ASU's adoption, and does not believe this ASU will have a material impact on its condensed consolidated financial statements.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows:

Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs).

Level 3 — Unobservable inputs, which are only used to the extent that observable inputs are not available, reflect the Company’s assumptions about the pricing of an asset or liability.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Investment in and valuation of real estate and related assets

The estimated useful lives of the Company’s real estate assets by class are generally as follows:

Buildings	40 years
Site improvements	15 years
Tenant improvements	Lesser of useful life or lease term
Intangible lease assets	Lease term

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Intangible Lease Assets (Tables)

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of finite-lived intangible assets

The Company’s intangible lease assets consisted of the following as of September 30, 2018 and December 31, 2017:

	September 30, 2018		December 31, 2017
In-place leases, net of accumulated amortization of $827,776 and $480,483, respectively
(with a weighted average life remaining of 10.0 years and 10.8 years, respectively)	$	4,273,656	$	4,620,949

Schedule of finite-lived intangible assets amortization expense

The following table summarizes the amortization expense related to the in-place lease assets for the three and nine months endedSeptember 30, 2018 and 2017:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
In-place lease amortization	$	115,764	$	90,558	$	347,293	$	271,672

Schedule of finite-lived intangible assets, future amortization expense

As of September 30, 2018, the estimated amortization expense relating to the intangible lease assets is as follows:

	Amortization Expense
	In-Place Lease
Remainder of 2018	$	115,765
2019	$	463,058
2020	$	463,058
2021	$	463,058
2022	$	463,058

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Credit Facility and Subordinated Promissory Note (Tables)

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Schedule of debt

The following table summarizes the debt balances as of September 30, 2018 and December 31, 2017, respectively, and the debt activity for the nine months ended September 30, 2018:

			During the Nine Months Ended September 30, 2018
	Balance as of December 31, 2017		Debt Issuance		Repayments			Balance as of September 30, 2018
Credit facility	$	31,975,000	$	—	$	(6,800,000	)	$	25,175,000
Subordinate promissory note	1,600,000		2,200,000		(3,800,000		)	—
Total debt	$	33,575,000	$	2,200,000	$	(10,600,000	)	$	25,175,000

Schedule of Maturities of Long-term Debt

The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt as of September 30, 2018:

	Principal Repayments
Remainder of 2018	$	—
2019	25,175,000
2020	—
2021	—
2022	—
Thereafter	—
Total	$	25,175,000

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Related-Party Transactions and Arrangements (Tables)

9 Months Ended

Sep. 30, 2018

Related Party Transactions [Abstract]

Schedule of related party transactions

The Company incurred commissions, fees and expense reimbursements as shown in the table below for services provided by CCI III Advisors and its affiliates related to the services described above during the periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Selling commissions	$	155,630	$	224,114	$	466,239	$	667,858
Dealer manager fees	$	73,795	$	106,715	$	180,209	$	270,510
Distribution and stockholder servicing fees(1)	$	16,914	$	6,162	$	47,935	$	8,344
Organization and offering costs	$	38,497	$	54,095	$	93,982	$	138,665
Advisory fees	$	—	$	—	$	—	$	60,565

______________________

(1) Amounts are calculated for the respective period in accordance with the dealer manager agreement and exclude the estimated liability for future distribution and stockholder servicing fees payable to CCO Capital of $202,000, which is included in due to affiliates in the condensed consolidated balance sheets with a corresponding decrease to capital in excess of par value.

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Operating Leases (Tables)

9 Months Ended

Sep. 30, 2018

Leases [Abstract]

Schedule of future minimum rental payments for operating leases

The future minimum rental income from the Company’s real estate assets under the non-cancelable operating leases, assuming no exercise of renewal options, as of September 30, 2018, was as follows:

	Future Minimum Rental Income
Remainder of 2018	$	1,083,691
2019	3,808,708
2020	3,878,462
2021	3,756,969
2022	3,829,450
Thereafter	22,784,446
Total	$	39,141,726

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Organization and Business (Details) $ / shares in Units, ft² in Thousands		9 Months Ended
	Aug. 09, 2018	Sep. 30, 2018 USD ($) ft² property states class_of_stock shares	Sep. 30, 2017 USD ($)	Dec. 31, 2017 shares	Sep. 22, 2016 USD ($) class_of_stock $ / shares
Class of Stock [Line Items]
Classes of common stock | class_of_stock		2
Gross offering proceeds		$ 8,878,331	$ 13,637,650
Number of days offering can be extended, maximum	180 days
Distribution and stockholder fees payable		$ 202,000
Number of real estate properties | property		2
Net rentable area (in square feet) | ft²		391
Number of states in which real estate properties are owned | states		2
Percentage of rentable space leased		100.00%
Class A Common Stock
Class of Stock [Line Items]
Shares issued to date (in shares) | shares		2,277,352		1,436,855
Class T Common Stock
Class of Stock [Line Items]
Shares issued to date (in shares) | shares		732,807		631,346
IPO
Class of Stock [Line Items]
Common stock, shares authorized, value (up to)					$ 3,500,000,000.0
Gross offering proceeds		$ 29,100,000
Shares issued to date (in shares) | shares		3,000,000
Organization and offering costs, selling commissions and dealer manager fees		$ 2,100,000
IPO | Class A Common Stock
Class of Stock [Line Items]
Gross offering proceeds		22,100,000
IPO | Class T Common Stock
Class of Stock [Line Items]
Gross offering proceeds		7,000,000
Related party transaction, expenses from transactions with related party		70,000
Distribution and stockholder fees payable		$ 202,000
Multi-Class Offering, Primary Offering
Class of Stock [Line Items]
Common stock, shares authorized, value (up to)					$ 2,500,000,000.0
Classes of common stock | class_of_stock					2
Multi-Class Offering, Primary Offering | Class A Common Stock
Class of Stock [Line Items]
Common stock, shares authorized, value (up to)					$ 1,250,000,000.00
Share price (in dollars per share) | $ / shares					$ 10.00
Multi-Class Offering, Primary Offering | Class T Common Stock
Class of Stock [Line Items]
Common stock, shares authorized, value (up to)					$ 1,250,000,000.00
Share price (in dollars per share) | $ / shares					$ 9.57
Distribution Reinvestment Plan
Class of Stock [Line Items]
Common stock, shares authorized, value (up to)					$ 1,000,000,000.00
Shares issued to date (in shares) | shares		62,000
Distribution Reinvestment Plan | Class A Common Stock
Class of Stock [Line Items]
Share price (in dollars per share) | $ / shares					$ 9.10
Distribution Reinvestment Plan | Class T Common Stock
Class of Stock [Line Items]
Share price (in dollars per share) | $ / shares					$ 9.10
CCC III OP
Class of Stock [Line Items]
General partner partnership interest percentage		100.00%

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Summary of Significant Accounting Policies (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($) class_of_stock shares	Sep. 30, 2017 shares	Sep. 30, 2018 USD ($) class_of_stock shares	Sep. 30, 2017 USD ($) shares	Dec. 31, 2017 USD ($)
Class of Stock [Line Items]
Distribution and stockholder servicing fees paid			$ 47,935	$ 8,344
Offering costs on issuance of common stock			740,430	1,077,033
Impairment			0	$ 0
Asset held for sale	$ 0		0		$ 0
Allowance for doubtful accounts	$ 0		$ 0		$ 0
Classes of common stock | class_of_stock	2		2
Weighted average number diluted shares outstanding adjustment (in shares) | shares	0	0	0	0
Building
Class of Stock [Line Items]
Acquired real estate asset, useful life (in years)			40 years
Site Improvements
Class of Stock [Line Items]
Acquired real estate asset, useful life (in years)			15 years
As previously reported
Class of Stock [Line Items]
Offering costs on issuance of common stock				$ 1,090,000

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Fair Value Measurements (Details) - Significant Other Observable Inputs (Level 2) - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Estimate of fair value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	$ 25.3	$ 33.8
Carrying (reported) amount, fair value disclosure
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	$ 25.2	$ 33.6

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Real Estate Assets (Details) - property	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Acquisitions 2018
Business Acquisition [Line Items]
Number of properties acquired	0
Acquisitions 2017
Business Acquisition [Line Items]
Number of properties acquired		0

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Intangible Lease Assets (Details) - Acquired in-place lease - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Finite-Lived Intangible Assets [Line Items]
Intangible leased asset	$ 4,273,656	$ 4,620,949
Accumulated amortization	$ 827,776	$ 480,483
Useful life	10 years	10 years 9 months 18 days

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Intangible Lease Assets (Schedule of finite-lived intangible assets amortization expense) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Acquired in-place lease
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 115,764	$ 90,558	$ 347,293	$ 271,672

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Intangible Lease Assets (Estimated Amortization of Intangible lease assets) (Details) - Acquired in-place lease	Sep. 30, 2018 USD ($)
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Remainder of 2018	$ 115,765
2019	463,058
2020	463,058
2021	463,058
2022	$ 463,058

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Credit Facility and Subordinate Promissory Note (Credit Facility) (Details)	9 Months Ended
	Sep. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
Debt Instrument [Line Items]
Debt outstanding	$ 25,175,000	$ 33,575,000
Debt, weighted average interest rate (percentage)	4.40%
Debt instrument, weighted average years to maturity (in years)	11 months 22 days
Line of credit outstanding	$ 25,175,000	31,975,000
Line of credit
Debt Instrument [Line Items]
Debt outstanding	$ 25,175,000	$ 31,975,000
J. P. Morgan Chase Bank, N.A. | Line of credit | Revolving credit facility
Debt Instrument [Line Items]
Debt, weighted average interest rate (percentage)	4.40%
Line of credit outstanding	$ 25,200,000
Line of credit facility, borrowing capacity (up to)	$ 100,000,000
Extension fee as a percentage of revolving loans	0.20%
Line of credit facility, remaining borrowing capacity	$ 74,800,000
Line of credit facility, covenant, minimum consolidated net worth (percentage)	75.00%
J. P. Morgan Chase Bank, N.A. | Line of credit | Revolving credit facility | Minimum
Debt Instrument [Line Items]
Interest rate (percent)	1.20%
Debt instrument, covenant, fixed charge coverage ratio	1.50
J. P. Morgan Chase Bank, N.A. | Line of credit | Revolving credit facility | Maximum
Debt Instrument [Line Items]
Interest rate (percent)	1.45%
Line of credit facility, covenant, leverage ratio (less than or equal to) (percentage)	60.00%
J. P. Morgan Chase Bank, N.A. | Line of credit | Revolving credit facility | Statutory Reserve Rate | Minimum
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate (percentage)	2.20%
J. P. Morgan Chase Bank, N.A. | Line of credit | Revolving credit facility | Statutory Reserve Rate | Maximum
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate (percentage)	2.45%
J. P. Morgan Chase Bank, N.A. | Line of credit | Revolving credit facility | Federal Funds Effective Rate
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate (percentage)	0.50%
J. P. Morgan Chase Bank, N.A. | Line of credit | Revolving credit facility | LIBOR
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate (percentage)	1.00%

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Credit Facility and Subordinate Promissory Note (Schedule of Debt) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Debt [Roll Forward]
Debt outstanding	$ 25,175	$ 33,575
Debt Issuance	2,200
Repayments	(10,600)
Debt outstanding, ending balance	25,175
Credit facility
Debt [Roll Forward]
Debt outstanding	25,175	31,975
Debt Issuance	0
Repayments	(6,800)
Debt outstanding, ending balance	25,175
Subordinate promissory note
Debt [Roll Forward]
Debt outstanding	0	$ 1,600
Debt Issuance	2,200
Repayments	(3,800)
Debt outstanding, ending balance	$ 0

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Credit Facility and Subordinate Promissory Note (Subordinate Promissory Note) (Details) - USD ($)	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017	Sep. 23, 2016
Line of Credit Facility [Line Items]
Line of credit outstanding	$ 25,175,000	$ 31,975,000
Affiliated entity | Line of credit | Subordinate promissory note with affiliate
Line of Credit Facility [Line Items]
Line of credit facility, borrowing capacity (up to)			$ 30,000,000
Interest rate (percent)	1.75%
Line of credit outstanding	$ 0
Financing coordination fees paid	$ 0

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Credit Facility and Subordinate Promissory Note (Schedule Of Aggregate Principal Repayments) (Details) $ in Thousands	Sep. 30, 2018 USD ($)
Debt Disclosure [Abstract]
Remainder of 2018	$ 0
2019	25,175
2020	0
2021	0
2022	0
Thereafter	0
Total	$ 25,175

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Related-Party Transactions and Arrangements (Selling commissions and dealer manager fees) (Details) - Dealer manager	Sep. 30, 2018
Selling commissions
Related Party Transaction [Line Items]
Expense reallowed (percent)	100.00%
Class A Common Stock | Dealer manager fees
Related Party Transaction [Line Items]
Commissions percentage on stock sales and related dealer manager fees	2.00%
Class A Common Stock | Maximum | Selling commissions
Related Party Transaction [Line Items]
Commissions percentage on stock sales and related dealer manager fees	7.00%
Class T Common Stock | Dealer manager fees
Related Party Transaction [Line Items]
Commissions percentage on stock sales and related dealer manager fees	2.00%
Class T Common Stock | Maximum | Selling commissions
Related Party Transaction [Line Items]
Commissions percentage on stock sales and related dealer manager fees	3.00%

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Related-Party Transactions and Arrangements (Organization and offering expenses) (Details)	Sep. 30, 2018
Advisors | Organization and offering costs
Related Party Transaction [Line Items]
Related party transaction, expense from transactions with related party, percentage of gross offering proceeds	1.00%

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Related-Party Transactions and Arrangements (Distribution and stockholder servicing fees) (Details) - Advisors	9 Months Ended
	Sep. 30, 2018
Distribution and stockholder servicing fees
Related Party Transaction [Line Items]
Distribution and servicing fee, termination of payments threshold, percentage of total gross investment	4.00%
Distribution and servicing fee, termination of payments threshold, percentage gross proceeds from shares in offering	10.00%
Class T Common Stock
Related Party Transaction [Line Items]
Distribution and servicing fee, percentage of NAV per share	0.00274%

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Related-Party Transactions and Arrangements (Acquisition-related fees and expenses) (Details) - Advisors - Acquisition Fees and Expenses - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Related Party Transaction [Line Items]
Related party transaction, expenses from transactions with related party	$ 0	$ 0	$ 0	$ 0
Maximum
Related Party Transaction [Line Items]
Acquisition and advisory fee (percentage)	2.00%		2.00%
Expense reimbursement, percent	6.00%		6.00%

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Related-Party Transactions and Arrangements (Advisory fees) (Details)	9 Months Ended
	Sep. 30, 2018 USD ($)
Advisors | Advisory fees
Related Party Transaction [Line Items]
Reimbursement threshold, percent of average asset	2.00%
Reimbursement threshold, percent of net income	25.00%
Expenses exceeding the average asset value percent threshold	$ 482,000
Average invested assets between $0 to $2 billion | Advisors | Advisory fees
Related Party Transaction [Line Items]
Annualized rate percentage paid on average invested asset	0.75%
Average invested assets between $2 billion to $4 billion | Advisors | Advisory fees
Related Party Transaction [Line Items]
Annualized rate percentage paid on average invested asset	0.70%
Average invested assets over $4 bilion | Advisors | Advisory fees
Related Party Transaction [Line Items]
Annualized rate percentage paid on average invested asset	0.65%
Minimum | Average invested assets between $0 to $2 billion
Related Party Transaction [Line Items]
Average invested assets	$ 0
Minimum | Average invested assets between $2 billion to $4 billion
Related Party Transaction [Line Items]
Average invested assets	2,000,000,000.0
Minimum | Average invested assets over $4 bilion
Related Party Transaction [Line Items]
Average invested assets	4,000,000,000.0
Maximum | Average invested assets between $0 to $2 billion
Related Party Transaction [Line Items]
Average invested assets	2,000,000,000.0
Maximum | Average invested assets between $2 billion to $4 billion
Related Party Transaction [Line Items]
Average invested assets	$ 4,000,000,000.0

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Related-Party Transactions and Arrangements (Operating expenses) (Details) - Advisors - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Minimum
Related Party Transaction [Line Items]
Operating expense reimbursement percentage of average invested assets	2.00%	2.00%	2.00%	2.00%
Operating expense reimbursement percentage of net income	25.00%	25.00%	25.00%	25.00%
Operating expenses | Minimum
Related Party Transaction [Line Items]
Expenses exceeding the average asset value percent threshold	$ 1,400,000		$ 1,400,000
Operating expense reimbursement
Related Party Transaction [Line Items]
Related party transaction, expenses from transactions with related party	$ 0	$ 0	$ 0	$ 0

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Related-Party Transactions and Arrangements (Financing coordination fees) (Details) - Advisors - Financing coordination fee - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Related Party Transaction [Line Items]
Financing coordination fee (percent)	1.00%		1.00%
Related party transaction, expenses from transactions with related party	$ 0	$ 0	$ 0	$ 0

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Related-Party Transactions and Arrangements (Dispositions fees) (Details) - Advisors - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Property sales commission
Related Party Transaction [Line Items]
Commissions performance and other fees percent	1.00%		1.00%
Related party transaction, expenses from transactions with related party	$ 0	$ 0	$ 0	$ 0
Maximum | Brokerage Commission Fee
Related Party Transaction [Line Items]
Commissions performance and other fees percent	50.00%		50.00%
Maximum | Property portfolio
Related Party Transaction [Line Items]
Commissions performance and other fees percent	6.00%		6.00%

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Related-Party Transactions and Arrangements (Subordinated Performance Fees) (Details) - Advisors - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Related Party Transaction [Line Items]
Cumulative noncompounded annual return	6.00%		6.00%
Subordinate performance fee on event of sale of company
Related Party Transaction [Line Items]
Commissions performance and other fees percent	15.00%		15.00%
Subordinate performance fees for listing
Related Party Transaction [Line Items]
Commissions performance and other fees percent	15.00%		15.00%
Performance fee
Related Party Transaction [Line Items]
Related party transaction, expenses from transactions with related party	$ 0	$ 0	$ 0	$ 0

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Related-Party Transactions and Arrangements (Schedule of Related Party Transaction) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Related Party Transaction [Line Items]
Distribution and stockholder fees payable	$ 202,000		$ 202,000
Advisors | Selling commissions
Related Party Transaction [Line Items]
Related party transaction, expenses from transactions with related party	155,630	$ 224,114	466,239	$ 667,858
Advisors | Dealer manager fees
Related Party Transaction [Line Items]
Related party transaction, expenses from transactions with related party	73,795	106,715	180,209	270,510
Advisors | Distribution and stockholder servicing fees
Related Party Transaction [Line Items]
Related party transaction, expenses from transactions with related party	16,914	6,162	47,935	8,344
Advisors | Organization and offering costs
Related Party Transaction [Line Items]
Related party transaction, expenses from transactions with related party	38,497	54,095	93,982	138,665
Advisors | Advisory fees
Related Party Transaction [Line Items]
Related party transaction, expenses from transactions with related party	$ 0	$ 0	$ 0	$ 60,565

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Related-Party Transactions and Arrangements (Due to/from Affiliates) (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Affiliated entity
Related Party Transaction [Line Items]
Due to related parties	$ 203,000	$ 278,000
Advisors
Related Party Transaction [Line Items]
Due from affiliates	0	1,000
Line of credit | Revolving credit facility | Series C, Llc
Related Party Transaction [Line Items]
Due to related parties		10,000
Related party, interest expense	$ 53,000	$ 262,000

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Operating Leases (Details)	Sep. 30, 2018 USD ($)
Leases [Abstract]
Operating lease, weighted average remaining lease term	9 years 11 months 8 days
Operating Leases, Future Minimum Payments Receivable [Abstract]
Remainder of 2018	$ 1,083,691
2019	3,808,708
2020	3,878,462
2021	3,756,969
2022	3,829,450
Thereafter	22,784,446
Total	$ 39,141,726