DEF 14A 1 v475773_def14a.htm DEF 14A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

SCHEDULE 14A

 

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

Filed by the Registrant x

Filed by a Party other than the Registrant ¨

 

Check the appropriate box:

 

¨Preliminary Proxy Statement

 

¨Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

xDefinitive Proxy Statement

 

¨Definitive Additional Materials

 

¨Soliciting Material Pursuant to § 240.14a-12

 

RW HOLDINGS NNN REIT, INC.

(Name of Registrant as Specified in its Charter)

 

Payment of Filing Fee (Check the appropriate box):

 

xNo fee required.

 

¨Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)Title of each class of securities to which transaction applies:

 

(2)Aggregate number of securities to which transaction applies:

 

(3)Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

(4)Proposed maximum aggregate value of transaction:

 

(5)Total fee paid:

 

¨Fee paid previously with preliminary materials.

 

¨Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)Amount Previously Paid:

 

(2)Form, Schedule or Registration Statement No.:

 

(3)Filing Party:

 

(4)Date Filed:

  

 

 

 

 

 

 

3080 Bristol Street, Suite 550

Costa Mesa, California 92626

www.RichUncles.com

 

Notice of 2017 Annual Meeting of Stockholders

To Be Held NOVEMBER 10, 2017

 

Dear Stockholder:

 

On Friday, November 10, 2017, RW Holdings NNN REIT, Inc. (dba Rich Uncles NNN REIT, Inc.), a Maryland corporation (the “Company”), will hold its 2017 annual meeting of stockholders (“Annual Meeting”) at the offices of the Company located at 3090 Bristol Street, Suite 550, Costa Mesa, California 92626. The meeting will begin at 10:00 a.m. Pacific daylight time. Directions to the meeting can be obtained by calling (855) 742-4862.

 

We are holding this meeting for the following purposes:

        

1.To consider and vote upon the election of the seven director nominees named in the accompanying proxy statement to serve until our 2018 annual meeting of stockholders and until their respective successors are elected and qualified.

 

The Board of Directors recommends a vote FOR all of the director nominees.

 

2.To consider and vote upon the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2017.

 

The Board of Directors recommends a vote FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2017.

 

3.To transact such other business as may properly come before the meeting and any postponement or adjournment thereof.

 

The Board of Directors has fixed the close of business on September 15, 2017 as the record date for determining stockholders entitled to notice of and to vote at the meeting.

 

Whether you plan to attend the Annual Meeting and vote in person or not, we urge you to authorize a proxy to vote your shares as early as possible. Stockholders may authorize a proxy to vote their shares: (1) via the Internet; or (2) by mail, using the proxy card accompanying your proxy materials if you received a printed copy of the proxy materials by mail.

 

YOUR VOTE IS VERY IMPORTANT! Your immediate response will help avoid potential delays and may save us significant additional expenses associated with soliciting stockholder votes.

 

 

  By Order of the Board of Directors
   
  /s/ Jean Ho
  Chief Financial Officer and Secretary

 

Costa Mesa, California

September 26, 2017

 

 

 

 

 

RW HOLDINGS NNN REIT, INC.

3080 Bristol Street, Suite 550

Costa Mesa, California 92626

 

Proxy Statement

For the 2017 Annual Meeting of Stockholders

to be Held on November 10, 2017

 

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board of Directors” or the “Board”) of RW Holdings NNN REIT, Inc., a Maryland corporation, for use at the 2017 annual meeting of stockholders to be held at our offices located at 3090 Bristol Street, Suite 550, Costa Mesa, California 92626, at 10:00 a.m. Pacific daylight time, on Friday, November 10, 2017 (the “Annual Meeting”). On or about September 26, 2017, proxy materials for the Annual Meeting, including this Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “2016 Annual Report”), are being made available to stockholders entitled to vote at the Annual Meeting.

 

When used in this Proxy Statement, the terms “we,” “us,” “our,” “RW Holdings NNN REIT,” or the “Company” refer to RW Holdings NNN REIT, Inc. and its subsidiaries unless the context requires otherwise. In this proxy statement we refer to our Class C common stock and our Class S common stock collectively as our “common stock”

 

IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS: This Proxy Statement and the 2016 Annual Report are available on the Internet at https://news.richuncles.com/nnnreitproxy. The information contained on our website is not part of, or incorporated by reference in, this proxy statement.

 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

  

Q: Why am I receiving materials in connection with the Annual Meeting?

 

A:

As permitted by the Securities and Exchange Commission (“SEC”), we are furnishing to stockholders our Notice of 2017 Annual Meeting of Stockholders, Proxy Statement and 2016 Annual Report primarily over the Internet. These materials are being made available to you because the Board of Directors is soliciting your proxy to vote your shares of our common stock at the Annual Meeting. The Proxy Statement includes information that we are required to provide to you under SEC rules and is designed to assist you in voting.

 

Stockholders who previously consented to electronic delivery of our proxy materials have received an e-mail containing links to our proxy materials and instructions for submitting a proxy via the Internet to authorize the voting of their shares at the Annual Meeting. For all other stockholders, we mailed a Notice of Internet Availability containing instructions on how to access and review the proxy materials via the Internet and how to submit a proxy electronically using the Internet. The Notice of Internet Availability also contains instructions on how to receive, free of charge, paper copies of the proxy materials. If you received the Notice of Internet Availability or a copy of our proxy materials via e-mail, you will not receive a paper copy of the proxy materials unless you request one. We believe the delivery options we have chosen will allow us to provide our stockholders with the proxy materials they need, while lowering the cost of delivery of the materials and reducing the environmental impact of printing and mailing printed copies.

  

Q: What is a proxy?

 

A: A proxy is a person who votes the shares of stock of another person who could not attend a meeting. The term “proxy” also refers to the proxy card or other method of appointing a proxy. When you authorize your proxy, you are appointing Howard Makler and Jean Ho, each of whom is one of our officers, as your proxies, and you are authorizing each of them to vote your shares of common stock at the Annual Meeting. The appointed proxies will vote your shares of common stock as you instruct, unless you submit your proxy without instructions. If you authorize your proxy without instructions, they will vote your shares (i) FOR all of the director nominees, and (ii) FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2017. With respect to any other proposals to be voted upon, they will vote in accordance with the recommendation of the Board of Directors or, in the absence of such a recommendation, in their discretion. It is important for you to authorize your proxy via the Internet (or by mail if you requested and received a printed copy of the proxy materials) as soon as possible whether or not you plan on attending the Annual Meeting.

 

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Q: When is the Annual Meeting and where will it be held?

 

A: The Annual Meeting will be held on Friday, November 10, 2017, at 10:00 a.m. Pacific daylight time at our offices located at 3090 Bristol Street, Suite 550, Costa Mesa, California 92626.

 

Q: Who is entitled to attend and vote at the Annual Meeting?

 

A: Anyone who is a stockholder of record of our common stock at the close of business on September 15, 2017, the record date, or holds a valid proxy for the Annual Meeting, is entitled to attend and vote at the Annual Meeting and at any postponement or adjournment thereof.  Each stockholder may be asked to present a valid government-issued photo identification, such as a driver’s license or passport, before being admitted. Any holder of a proxy from a stockholder must also present the proxy, properly executed, and a valid government-issued photo identification.  If you are not a stockholder of record but hold shares through an individual retirement account (IRA) or 401(k) plan, you may attend the Annual Meeting but should provide proof of beneficial ownership as of the record date, such as an account statement reflecting your stock ownership as of the record date, a copy of the proxy or voting instruction card provided for your IRA or 401(k) account, or other similar evidence of ownership.   

   

Q: Will my vote make a difference?

 

A: Yes. Your vote could affect the proposals described in this Proxy Statement. Moreover, your vote is needed to ensure that the proposals described herein can be acted upon. YOUR VOTE IS VERY IMPORTANT! Your immediate response will help avoid potential delays and may save us significant additional expenses associated with soliciting stockholder votes.
Q: How many shares of common stock are entitled to vote at the Annual Meeting?

 

A: As of September 15, 2017, there were 7,331,750 shares of our common stock outstanding and entitled to vote at the Annual Meeting, including 7,328,750 shares of our Class C common stock and 3,000 shares of our Class S common stock.  The shares of our Class C common stock and Class S common stock vote together as a single class on all matters to be voted on by our stockholders at the Annual Meeting and at any postponement or adjournment thereof as described in this Proxy Statement.

  

Q: What constitutes a quorum?

 

A: A quorum consists of the presence in person or by proxy of holders of our Class C and Class S common stock entitled to cast a majority of all the votes entitled to be cast at the Annual Meeting. There must be a quorum present in order for the Annual Meeting to be a duly held meeting at which business can be conducted. Abstentions and broker non-votes, if any, will be counted as present for the purpose of establishing a quorum; however, abstentions and broker non-votes, if any, will not be counted as votes cast.   

  

Q: How many votes do I have?

 

A: You are entitled to one vote for each share of Class C common stock or Class S common stock you held as of the close of business on the record date.

 

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Q: What may I vote on?

 

A: You may vote on:

 

  (1) the election of the seven director nominees named in this Proxy Statement to serve until our 2018 annual meeting of stockholders and until their respective successors are elected and qualified;

 

  (2) the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2017; and

 

  (3) such other business as may properly come before the Annual Meeting and any postponement or adjournment thereof.

  

Q: How does the Board of Directors recommend I vote on the proposals?

 

A: The Board of Directors recommends that you vote:

 

  (1) FOR all of the nominees for election to the Board of Directors who are named in this Proxy Statement; and

 

  (2) FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2017.

 

Q:

How can I vote in person at the Annual Meeting?

 

A:

If you are a stockholder of record, you have the right to vote in person at the Annual Meeting. If you choose to do so, you can vote using the ballot that will be provided at the Annual Meeting, or, if you received a printed copy of the proxy materials by mail, you can complete, sign and date the proxy card enclosed with the proxy materials you received and submit it at the Annual Meeting. If you hold a valid proxy to vote a stockholder’s shares at the Annual Meeting, you must present a copy of your proxy prior to voting at the Annual Meeting.

 

Please note that if you hold shares of our common stock in an IRA or 401(k) plan account, those shares cannot be voted in person at the Annual Meeting. See “How can I vote my shares held in an IRA or 401(k) plan account?below.

 

Q:

How can I vote my shares without attending the Annual Meeting?

 

A: You can have your shares voted without attending the Annual Meeting by authorizing a proxy in advance of the Annual Meeting to vote your shares at the Annual Meeting. Stockholders have the following options for authorizing a proxy to vote their shares:

 

    via the Internet, (1) by following the instructions included in the e-mail you received if you consented to and received your proxy materials electronically or (2) by accessing the website and following the instructions indicated on the Notice of Internet Availability or proxy card, if any, received by mail; or

 

    by mail, by completing, signing, dating and returning the proxy card accompanying the proxy materials, if you received a printed copy of the proxy materials by mail;
       
 

We encourage you to authorize a proxy to vote your shares via the Internet, since it is quick, convenient and provides a cost savings to us. When you authorize a proxy to vote your shares via the Internet prior to the date of the Annual Meeting, your vote is recorded immediately and there is no risk that postal delays will cause your vote to arrive late and, therefore, not be counted. The granting of proxies electronically is permitted by Section 2-507(c)(3) of the Maryland General Corporation Law.

 

If you are a stockholder of record as of the record date, submitting your proxy via Internet or by mail will not affect your right to vote in person should you decide to attend the Annual Meeting.

 

Q:

How can I vote my shares held in an IRA or 401(k) plan account?  

 

A: If your shares are held in an IRA or 401(k) plan account, you will receive a request for voting instructions with respect to the shares allocated to each of your plan accounts.  You are entitled to direct the custodian or plan trustee of your account on how to vote your shares at the Annual Meeting.  If you do not submit voting instructions to the custodian or trustee of your account, your shares may not be voted at the Annual Meeting.    

 

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Q:

What is the deadline for voting my shares?

 

A: If you are a stockholder of record and authorize your proxy by Internet or mail, your proxy must be received by 11:59 p.m. Pacific time on November 9, 2017 in order for your shares to be voted at the Annual Meeting.  If you hold shares in an IRA or 401(k) plan account, to allow sufficient time for voting by the custodian or plan trustee, your voting instructions must be received by 11:59 p.m. Pacific time on November 7, 2017.    

  

  (1) delivering a written revocation to Jean Ho, our Secretary, before the Annual Meeting;

 

  (2) attending the Annual Meeting and voting in person as described above under “How can I vote in person at the Annual Meeting?”  Attendance at the Annual Meeting will not by itself constitute revocation of a proxy; or

 

  (3) authorizing another proxy by Internet or mail on a later date prior to the deadlines specified above under “What is the deadline for voting my shares?”

 

Only the most recent proxy vote will be counted and all others will be discarded regardless of the method of voting.

  

Q: What are the voting requirements to elect the Board of Directors?

 

A: With regard to the election of directors, you may vote “FOR” or “AGAINST” each director nominee or you may “ABSTAIN” from voting on any of the director nominees.  Under our charter, the affirmative vote of the holders of a majority of the shares of Class C common stock and Class S common stock present in person or by proxy at a meeting of stockholders at which a quorum is present is required for the election of the directors. Because of this majority vote requirement, abstentions and broker non-votes, if any, will have the effect of a vote against each nominee for director. If an incumbent director nominee fails to receive the required number of votes for re-election, then under Maryland law, he or she will continue to serve as a “holdover” director until his successor is elected and qualified.  If you submit a proxy card with no further instructions, your shares will be voted in accordance with the recommendation of the Board of Directors.

  

Q: What are the voting requirements for the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2017?

 

A: With regard to the proposal relating to the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2017, you may vote “FOR” or “AGAINST” the proposal, or you may “ABSTAIN” from voting on the proposal. Under our bylaws, a majority of the shares of Class C common stock and Class S common stock entitled to vote on, and voted for or against, the matter at an annual meeting at which a quorum is present is required for the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2017. Abstentions will not count as a vote for or against the matter and will have no effect on the determination of this proposal. Broker non-votes, if any, will not affect the outcome of this proposal. The ratification of the appointment of Ernst & Young LLP as our independent auditors is considered a “routine” matter for which brokerage firms may vote shares for which they did not receive instructions from beneficial owners.  If you submit a proxy card with no further instructions, your shares will be voted in accordance with the recommendation of the Board of Directors.

 

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Q: How will voting on any other business be conducted?

 

A: Although we do not know of any business to be considered at the Annual Meeting other than the election of directors and the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2017, if any other business is properly presented at the annual meeting, your submitted proxy gives authority to Howard Makler and Jean Ho, and each of them, to vote on such matters in accordance with the recommendation of the Board of Directors or, in the absence of such a recommendation, in their discretion.

   

Q: How are proxies being solicited?

 

A: In addition to mailing proxy solicitation material, our directors and employees of our advisor or its affiliates may also solicit proxies in person, via the Internet, by telephone or by any other electronic means of communication we deem appropriate.

 

  We will pay all of the costs of soliciting these proxies. We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to our stockholders.

 

Q: What should I do if I receive more than one set of proxy materials for the Annual Meeting?

 

A: You may receive more than one set of proxy materials for the Annual Meeting, including more than one Notice of Internet Availability.  For example, if you consented to electronic delivery of our proxy materials, you may receive multiple e-mails containing our proxy materials if your shares are registered in more than one name or held in more than one account (such as a 401(k) or IRA account), unless your shares are registered with us through a single e-mail address.  Even if you received only one e-mail containing our proxy materials, you will be asked to vote your shares separately for each name and account through which you hold your shares of our common stock.  If you did not consent to electronic delivery of our proxy materials, you may receive more than one Notice of Internet Availability if your shares of our common stock are registered in more than one name or held in more than one account.  Please respond as soon as possible to each and every request for a proxy or voting instructions you receive to ensure all of your shares of common stock are voted at the Annual Meeting.

  

Q: Where can I find more information?

 

A: We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information we file with the SEC on the website maintained by the SEC at http://www.sec.gov. Our SEC filings are also available to the public at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, DC 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information regarding the public reference facilities.

 

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CERTAIN INFORMATION ABOUT MANAGEMENT

The Board of Directors

 

We operate under the direction of the Board of Directors. The Board of Directors oversees our operations and makes all major decisions concerning our business. We currently have seven directors, three of whom are affiliates of our sponsor, Raymond E. Wirta, Harold C. Hofer and John Wang, and four of whom are independent. All seven of our directors have been nominated for re-election at the Annual Meeting. For biographical information regarding our directors, see “—Executive Officers and Directors” below.

 

During 2016, the Board of Directors held two meetings, and acted by unanimous consent on ten occasions. There are two committees of the Board of Directors, each of which is composed entirely of independent directors: the audit committee and the conflicts committee. Information regarding each of these committees is set forth below. During 2016, each of our directors attended at least 75% of the aggregate meetings of the Board and the committees of the Board on which he served during 2016.

 

Board Leadership Structure

 

The composition of the Board of Directors and the corporate governance provisions in our charter ensure strong oversight by independent directors. As noted above, the audit committee and conflicts committee are each composed entirely of independent directors. Our company’s management is led by Mr. Hofer, our chief executive officer, and the chairman of our board is Mr. Wirta, and each has held those positions since our inception in 2015. As chairman of the board, Mr. Wirta is responsible for leading board meetings and meetings of stockholders, generally setting the agendas for board meetings in consultation with Mr. Hofer and subject to the requests of other directors. Mr. Hofer is responsible for providing information to the other directors in advance of meetings and between meetings. The direct involvement of Messrs. Wirta and Hofer in the Company’s operations makes them best positioned to lead strategic planning sessions and determine the time allocated to each agenda item in discussions of our short- and long-term objectives. We do not currently have a policy requiring the appointment of a lead independent director as all of our independent directors are actively involved in Board and committee meetings.

 

The Role of the Board of Directors in our Risk Oversight Process

 

Our executive officers and our advisor are responsible for the day-to-day management of risks faced by the Company, while the Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management. The audit committee oversees risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements. The conflicts committee manages risks associated with the independence of the independent directors and potential conflicts of interest involving our advisor, sponsor and their affiliates. Although each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed through committee reports about such risks as well as through regular reports directly from the executive officers responsible for oversight of particular risks within our company.

 

Director Independence

 

Our charter requires that a majority of our directors be “Independent Directors” (as defined in our charter), except at a time when there is a vacancy on the Board of Directors. A copy of our charter is available in the NNN REIT Corporate Governance section of our website at www.richuncles.com. For purposes of our charter, an Independent Director is any director who is not associated and has not been associated within the last two years, directly or indirectly, with our sponsor or advisor. A director is deemed to be associated with our sponsor or advisor if he or she: (i) owns an interest in the sponsor, advisor or any of their affiliates; (ii) is employed by the sponsor, advisor or any of their affiliates; (iii) is an officer or director of the sponsor, advisor or any of their affiliates; (iv) performs services, other than as a director, for the Company; (v) is a director for more than three REITs organized by our sponsor or advised by our advisor; or (vi) has any material business or professional relationship with our sponsor, advisor or any of their affiliates. For purposes of determining whether or not the business or professional relationship is material, the gross revenue derived by the director from our sponsor and advisor and affiliates shall be deemed material per set if it exceed 5% of the director’s annual gross revenue (derived from all sources) during either of the last two years or net worth (on a fair market value basis). A director is also deemed to be associated with our sponsor or advisor if the director’s spouse, parents, children, siblings, mothers- or fathers-in-law, sons- or daughters-in-law, or brothers- or sisters-in-law is or has been associated with our sponsor, advisor, any of their affiliates or the Company.

 

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In addition, although our shares are not listed for trading on any national securities exchange, a majority of the directors, and all of the members of the audit committee and conflicts committee, are “independent” as defined by the New York Stock Exchange. The New York Stock Exchange standards provide that to qualify as an independent director, in addition to satisfying certain bright-line criteria, the Board of Directors must affirmatively determine that a director has no material relationship with us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us).

 

The Board of Directors has determined that Vipe Desai, David Feinleib, Jonathan Platt and Jeffrey Randolph each qualify as an “Independent Director” as defined in our charter and satisfies the New York Stock Exchange independence standards. Messrs. Desai, Feinleib, Platt and Randolph also serve as independent members on the Board of Trust Managers of Rich Uncles Real Estate Investment Trust I.

 

The Audit Committee

 

General

 

Our newly formed audit committee’s function is to assist the Board of Directors in fulfilling its responsibilities by overseeing (i) our accounting and financial reporting processes, (ii) the integrity of our financial statements, (iii) our compliance with legal and regulatory requirements, and (iv) our independent auditors’ qualifications, performance and independence. The audit committee fulfills these responsibilities primarily by carrying out the activities enumerated in the audit committee charter. The audit committee charter is available in the NNN REIT Corporate Governance section of our website at www.richuncles.com.

 

The members of the audit committee are Jeffrey Randolph (Chairman), Vipe Desai, David Feinleib and Jonathan Platt. All of the members of the audit committee are “Independent Directors” as defined by our charter and are “independent” as defined by the New York Stock Exchange and applicable rules of the SEC. All members of the audit committee are financially literate, and the Board of Directors has determined that Mr. Randolph satisfies the SEC’s requirements for an “audit committee financial expert.”

 

The audit committee was formed in May 2017; therefore, during 2016, the audit committee held no meetings and no report of the audit committee for 2016 is included in this proxy statement. Because there was no audit committee in 2016, the audit committee functions were performed by our independent directors. See “Report of the Independent Directors” below. In performing these audit committee functions during 2016, the independent directors participated in two joint meetings with the entire Board of Directors.

 

Independent Registered Public Accounting Firm

 

For the year ended December 31, 2016, Ernst & Young LLP served as our independent registered public accounting firm and provided certain tax and other services. Ernst & Young LLP has served as our independent registered public accounting firm since June 10, 2016 when it replaced our prior firm, Anton & Chia. We expect that Ernst & Young representatives will be present at the Annual Meeting and they will have the opportunity to make a statement if they desire to do so. In addition, we expect that the Ernst & Young representatives will be available to respond to appropriate questions posed by stockholders. The audit committee has engaged Ernst & Young LLP as our independent auditors to audit our financial statements for the year ending December 31, 2017. The audit committee may, however, select new auditors at any time in the future in its discretion if it deems such decision to be in our best interests. Any such decision would be disclosed to our stockholders in accordance with applicable securities laws.

 

Change in Independent Registered Public Accounting Firm

 

The Board of Directors completed a competitive process to determine the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2016. As a result of this process, the Board approved the engagement of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2016. The Company informed Anton & Chia that it has been dismissed as the Company’s independent registered public accounting firm.

 

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The reports of Anton & Chia on the Company’s consolidated financial statements for its first fiscal year ended December 31, 2015 did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles generally accepted in the United States (“GAAP”).

 

During the Company’s first fiscal year ended December 31, 2015, and during the subsequent interim reporting period prior to the engagement of Ernst & Young LLP, there were (1) no disagreements with Anton & Chia on any matter of GAAP or practices, financial statement disclosures, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Anton & Chia would have caused Anton & Chia to make reference to the subject matter of the disagreements in connection with its reports, and (2) no events of the type listed in paragraphs (A) through (D) of Item 304(a)(1)(v) of Regulation S-K.

 

The Company provided Anton & Chia with a copy of the foregoing disclosures in connection with the filing of a Current Report on Form 8-K filed with the SEC on August 4, 2016 with respect to the foregoing change in the Company’s independent registered public accounting firm and requested that Anton & Chia furnish the Company with a letter addressed to the SEC stating whether or not Anton & Chia agrees with the above statements. The letter from Anton & Chia was filed as Exhibit 16.1 with the Company’s Current Report on Form 8-K filed with the SEC.

 

As set forth above, concurrent with the decision to dismiss Anton & Chia as the Company’s independent registered public accounting firm, the Board approved the engagement of Ernst & Young LLP as the Company’s new independent registered public accounting firm and the Company formally engaged Ernst & Young as its independent registered public accounting firm.

 

During the Company’s first fiscal year ended December 31, 2015, and during the subsequent interim period through the engagement of Ernst & Young LLP, neither the Company nor anyone on its behalf consulted Ernst & Young LLP with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither a written report was provided to the Company nor oral advice was provided to the Company that Ernst & Young LLP concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).

 

Pre-Approval Policies

 

In order to ensure that the provision of services by the Company’s independent registered public accounting firm does not impair the auditors’ independence, the audit committee (and the independent directors of our Board of Directors prior to the establishment of the audit committee in May 2017) pre-approves all auditing services performed for us by our independent auditors, as well as all permitted non-audit services. In determining whether or not to pre-approve services, the audit committee considers (and, prior to the establishment of the audit committee in May 2017, the independent directors of our Board of Directors considered) whether the service is a permissible service under the rules and regulations promulgated by the SEC. The audit committee may, in its discretion, delegate to one or more of its members the authority to pre-approve any audit or non-audit services to be performed by our independent auditors, provided any such approval is presented to and approved by the full audit committee at its next scheduled meeting.

 

For the years ended December 31, 2016 and 2015, all services rendered by Ernst & Young or Anton & Chia, as applicable, were pre-approved in accordance with the policies and procedures described above.

 

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Principal Independent Registered Public Accounting Firm Fees

 

The independent directors of our Board of Directors reviewed the audit and non-audit services performed by Ernst & Young during the fiscal year ended December 31, 2016, as well as the fees charged by Ernst & Young for such services. The respective aggregate fees billed to us for professional accounting services by Ernst & Young LLP and Anton & Chia, including the audit of our annual financial statements for the years ended December 31, 2016 and December 31, 2015, are set forth in the table below.

 

       2016       2015 
Audit fees          
   Ernst & Young LLP  $389,710   $- 
   Anton & Chia   -    10,500 
Audit-related fees          
   Ernst & Young LLP   -    - 
   Anton & Chia   -    - 
Tax fees          
   Ernst & Young LLP   9,383    - 
   Anton & Chia   -    - 
All other fees          
   Ernst & Young LLP   -    - 
   Anton & Chia   22,612    7,158 
           
Total  $421,705   $17,658 

 

For purposes of the preceding table, the professional fees are classified as follows:

 

    Audit fees – These are fees for professional services performed for the audit of our annual financial statements and the required review of quarterly financial statements and other procedures performed by our independent auditors in order for them to be able to form an opinion on our consolidated financial statements. These fees also cover services that are normally provided by independent auditors in connection with statutory and regulatory filings or engagements.

 

    Audit-related fees – These are fees for assurance and related services that traditionally are performed by independent auditors that are reasonably related to the performance of the audit or review of our financial statements, such as due diligence related to acquisitions and dispositions, attestation services that are not required by statute or regulation, internal control reviews and consultation concerning financial accounting and reporting standards.

 

    Tax fees – These are fees for all professional services performed by professional staff in our independent auditor’s tax division, except those services related to the audit of our financial statements. These include fees for tax compliance, tax planning and tax advice, including federal, state and local issues. Services may also include assistance with tax audits and appeals before the IRS and similar state and local agencies, as well as federal, state and local tax issues related to due diligence.

 

    All other fees – These are fees for any services not included in the above-described categories.

 

Report of the Independent Directors

 

During 2016, the functions of the audit committee were performed by the independent directors of the Board. In connection with performing these functions, the independent directors were responsible for overseeing the Company’s accounting and financial reporting process. Management is responsible for the preparation, presentation and integrity of the Company’s financial statements; for the appropriateness of the accounting principles and reporting policies that are used by the Company; and for establishing and maintaining internal control over financial reporting as required by applicable SEC rules. Ernst & Young LLP, the Company’s independent registered public accounting firm, is responsible for auditing the Company’s financial statements and for reviewing the Company’s unaudited interim financial statements. The independent directors’ responsibility was to monitor and oversee these processes. The independent directors of the Board are not professionally engaged in the practice of accounting or auditing and thus their oversight does not provide an independent basis to determine that management has applied U.S. generally accepted accounting principles appropriately or maintained appropriate internal controls and disclosure controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations.

 

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In this context, the independent directors of the Board reviewed and discussed the Company’s audited financial statements for the year ended December 31, 2016, including a discussion of the quality and acceptability of our financial reporting, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The independent directors discussed with Ernst & Young LLP, which is responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting principles, the matters required to be discussed by Auditing Standard 1301, “Communications with Audit Committees,” as adopted by the Public Company Accounting Oversight Board. The independent directors of the Board received from Ernst & Young LLP the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding Ernst & Young LLP’s communications concerning its independence, and discussed with Ernst & Young LLP its independence from us. In addition, the independent directors of the Board considered whether Ernst & Young’s provision of non-audit services is compatible with Ernst & Young’s independence.

 

Based on these reviews and discussions, the independent directors of the Board recommended to the Board of Directors that the 2016 audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2016 for filing with the SEC.

 

The Independent Directors of the Board of Directors

 

Jeffrey Randolph, Vipe Desai, David Feinleib and Jonathan Platt 

 

The foregoing Report of the Independent Directors shall not be deemed to be “soliciting material” or incorporated by reference by any general statement incorporated by reference this Proxy Statement into any filing under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under the Exchange Act.

 

The Conflicts Committee

 

General

 

In order to reduce or eliminate certain potential conflicts of interest, the Board of Directors has appointed a conflicts committee of the Board, which is composed of all of our independent directors. The members of the conflicts committee are Messrs. Randolph (Chairman), Desai, Feinleib and Platt. All of the members of the audit committee are “Independent Directors” as defined by our charter and are “independent” as defined by the New York Stock Exchange.

 

The responsibilities of our conflicts committee are to (i) approve transactions, and resolve other conflicts of interest, between the Company and its subsidiaries, on the one hand, and our sponsor, advisor, any director or their respective affiliates, on the other hand, (ii) recommend director candidates for membership on the Board, (iii) make decisions regarding the compensation of officers and directors, and (iv) perform such other responsibilities as are set forth in the written charter of the conflicts committee. As part of these responsibilities, the conflicts committee is also responsible for overseeing compliance with, and enforcing the provisions of the advisory agreement we have entered into with our advisor and sponsor and to at least annually review and approve the compensation that we pay to our advisor and its affiliates pursuant to the agreement. The conflicts committee charter is available in the NNN REIT Corporate Governance section of our website at www.richuncles.com.

 

During 2016, the conflicts committee held two meetings and participated in two joint meetings with the entire Board of Directors.

 

 

Oversight of Executive Compensation

 

As noted above, the conflicts committee discharges the Board of Directors’ responsibilities relating to the compensation of our executives. However, our executive officers do not receive any compensation directly from us. Our executive officers are officers and/or employees of, or hold an indirect ownership interest in, our advisor, sponsor and/or its affiliates and our executive officers are compensated by these entities, in part, for their services to us or our subsidiaries. See “– Report of the Conflicts Committee – Certain Transactions with Related Persons” for a discussion of the fees paid to our advisor, sponsor and their affiliates.

 

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Report of the Conflicts Committee

 

Review of Our Policies

 

The conflicts committee has reviewed our policies and determined that they are in our best interests and in the best interests of our stockholders. Set forth below is a discussion of the basis for that determination.

 

Offering Policy. On July 15, 2015, we filed a registration statement on Form S-11 with the SEC to register an initial public offering to offer a maximum of 90 million in shares of common stock for sale to the public (the “Primary Offering”). We also registered a maximum of 10,000,000 shares of common stock pursuant to our distribution reinvestment plan (the “Registered DRP Offering” and together with the Primary Offering, the “Registered Offering”). The SEC declared our registration effective on June 1, 2016 and we commenced the sale of our shares to the public on July 20, 2016 at an initial offering price of $10.00 per share. On August 11, 2017, our Board of Directors approved amendments to our charter to rename and redesignate our common stock as “Class C” common stock to be offered and sold in the Registered Offering. We also began selling our shares of Class C common stock in the Registered Offering only to U.S. Persons as defined under Rule 903 promulgated under the Securities Act of 1933, as amended (the “Securities Act”). We do not sell shares of our Class C common stock through any registered broker-dealer or investment advisor who is paid commissions by our advisor.

 

Also on August 11, 2017, we reclassified and designated 100,000,000 shares of our Class C common stock as “Class S” common stock. This reclassification facilitated our offering of up to 100,000,000 shares of Class S common stock exclusively to non-U.S. Persons as defined under Rule 903 promulgated under the Securities Act pursuant to an exemption from the registration requirements of the Securities Act under and in accordance with Regulation S of the Securities Act (the “Class S Offering” and, together with the Registered Offering, the “Offerings”). We commenced the Class S Offering on August 30, 2017. The Class S common stock has similar features and rights as the Class C common stock, including with respect to voting, except that the Class S common stock offered in the Class S Offering may be sold through brokers or other persons who may be paid upfront and deferred selling commissions and fees.

 

We believe continuation of the Offerings is in our best interests and the best interests of our stockholders as we are attempting to raise sufficient funds to acquire a diverse portfolio of real estate investments to meet our stated investment objectives. We also plan to continue to offer shares under both our Registered DRP Offering and our dividend reinvestment plan available to Class S stockholders (collectively, the “DRPs”). We may terminate either DRP at any time. The Company will reimburse our sponsor for organizational and offering expenses up to 3.0% of the gross proceeds raised from the Offerings, including dividend reinvestment proceeds for the Offerings but excluding upfront commissions and fees on the sale of Class S shares.

 

For the year ended December 31, 2016, the costs of raising capital in our Primary Offering and our Registered DRP Offering represented approximately 3% of the capital raised. For the year ended December 31, 2016, there were no costs associated with the Class S Offering or Class S DRP.

 

Acquisition and Investment Policies. We have invested substantially all of the net proceeds of the Offerings in a diverse portfolio of real estate investments and we continue to seek to make additional real estate investments.

 

We primarily invest, directly or indirectly through investments in non-affiliated entities, in single-tenant income-producing corporate properties, which are leased to creditworthy tenants under long-term net leases. While our focus is on single tenant net leased properties, we plan to diversify our portfolio by geography, investment size and investment risk with the goal of acquiring a portfolio of income-producing real estate investments that provides attractive and stable returns to our stockholders through a relatively predictable and stable current stream of income from properties with the potential for long-term capital appreciation in the value. We may make our investments through the acquisition of individual assets or by acquiring portfolios of assets, or shares of or interests in other REITs or real estate companies. We make acquisitions of our real estate investments directly through our Operating Partnership or indirectly through limited liability companies or limited partnerships, or through investments in joint ventures, partnerships, tenants-in-common, co-tenancies or other co-ownership arrangements with other owners of properties, affiliates of our advisor or other persons.

 

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Borrowing Policies. We may incur indebtedness in the form of bank borrowings, purchase money obligations to the sellers of properties, and publicly or privately placed debt instruments or financing from institutional investors or other lenders. We may obtain a credit facility or separate loans for each acquisition. Our indebtedness may be unsecured or may be secured by mortgages or other interests in our properties. We may use borrowing proceeds to finance acquisitions of new properties, to pay for capital improvements, repairs or buildouts, to refinance existing indebtedness, to fund repurchases of our shares or to provide working capital. To the extent we borrow on a short-term basis, we may refinance such short-term debt into long-term, amortizing mortgages once a critical mass of properties has been acquired and to the extent such debt is available at terms that are favorable to the then in-place debt.

 

There is no limitation on the amount we can borrow for the purchase of any individual property. Our aggregate borrowings, secured and unsecured, must be reasonable in relation to our net assets, and we intend to utilize up to 50% leverage in connection with our acquisition strategy. Our charter limits our borrowings to 50% of our net assets (where “net assets” is equal to our total assets (other than intangibles) at cost before deducting depreciation or other non-cash reserves less total liabilities), unless any excess borrowing is approved by a majority of the Independent Directors and is disclosed to our stockholders in our next quarterly report, along with the justification for such excess. When calculating our use of leverage, we will not include borrowings outstanding under a revolving credit facility (or similar agreement) in connection with the initial acquisition of properties. For the year ended December 31, 2016, our leverage borrowings, excluding borrowings outstanding under our revolving credit facility in connection with the initial acquisition of properties, were approximately 18% of our net assets.

 

We may borrow amounts from our advisor or its affiliates only if such loan is approved by a majority of our directors, including a majority of the Independent Directors, not otherwise interested in the transaction, as being fair, competitive, commercially reasonable and no less favorable to us than comparable loans between unaffiliated parties under the circumstances.

 

Except as set forth in our charter regarding debt limits, we may re-evaluate and change our debt strategy and policies in the future without a stockholder vote. Factors that we could consider when re-evaluating or changing our debt strategy and policies include then-current economic and market conditions, the relative cost of debt and equity capital, any acquisition opportunities, the ability of our properties to generate sufficient cash flow to cover debt service requirements and other similar factors. Further, we may increase or decrease our ratio of debt to equity in connection with any change of our borrowing policies.

  

Creditworthiness of Tenants Policies. In the course of making a real estate investment decision, we assess the creditworthiness of the tenant which leases the property we intend to purchase. Tenant creditworthiness is an important investment criterion, as it provides a barometer of relative risk of tenant default. Tenant creditworthiness analysis is just one element of due diligence which we intend to perform when considering a property purchase; and the weight we intend to ascribe to tenant creditworthiness is a function of the results of other elements of due diligence.

 

Some of the properties we intend to acquire will be leased to public companies. Many public companies have their creditworthiness analyzed by bond rating firms such as Standard & Poor’s and Moody’s. These firms issue credit rating reports which segregate public companies into what are commonly called “investment grade” companies and “non-investment grade” companies. We expect that our portfolio of properties will contain a mix of properties that are leased to investment grade public companies, non-investment grade public companies, and non-public companies (or individuals). 

 

The creditworthiness of investment grade public companies is generally regarded as very high. As to prospective property acquisitions leased to other than investment grade tenants, we intend to analyze publicly available information and/or information regarding tenant creditworthiness provided by the sellers of such properties and then make a determination in each instance as to whether we believe the subject tenant has the financial fortitude to honor its lease obligations.

 

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We do not intend to systematically analyze tenant creditworthiness on an ongoing basis, post-acquisition. Many leases will limit our ability as landlord to demand on recurring bases non-public tenant financial information. It will be our policy and practice, however, to monitor public announcements regarding our tenants, as applicable, and tenant payment histories.

 

Leasing Policies. We expect, in most instances, to acquire single tenant properties with existing net leases. “Net” leases means leases that typically require tenants to pay all or a majority of the operating expenses, including real estate taxes, special assessments and sales and use taxes, utilities, insurance, common area maintenance charges, and building repairs related to the property, in addition to the lease payments. There are various forms of net leases, typically classified as triple-net or double-net. Under most commercial leases, tenants are obligated to pay a predetermined annual base rent. Most of the leases also will contain provisions that increase the amount of base rent payable at points during the lease term. Triple-net leases typically require the tenant to pay common area maintenance, insurance, and taxes associated with a property in addition to the base rent and percentage rent, if any. Double-net leases typically require the landlord to be responsible for structural and capital elements of the leased property. We anticipate that most of our acquisitions will have lease terms of five to 15 years at the time of the property acquisition. We may acquire properties under which the lease term has partially expired. We also may acquire properties with shorter lease terms if the property is located in a desirable location, is difficult to replace, or has other significant favorable real estate attributes. Generally, the leases require each tenant to procure, at its own expense, commercial general liability insurance, as well as property insurance covering the building for the full replacement value and naming the ownership entity and the lender, if applicable, as the additional insured on the policy. We may elect to obtain, to the extent commercially available, contingent liability and property insurance, flood insurance, environmental contamination insurance, as well as loss of rent insurance that covers one or more years of annual rent in the event of a rental loss. However, the coverage and amounts of our insurance policies may not be sufficient to cover our entire risk.

  

Tenants will be required to provide proof of insurance by furnishing a certificate of insurance to our advisor on an annual basis. The insurance certificates will be tracked and reviewed for compliance.

 

Disposition Policies. We generally intend to hold each property we acquire for an extended period. However, we may sell a property at any time if, in our judgment, the sale of the property is in the best interests of our stockholders. The determination of whether a particular property should be sold or otherwise disposed of will generally be made after consideration of relevant factors, including prevailing economic conditions, other investment opportunities and considerations specific to the condition, value and financial performance of the property. In connection with our sales of properties, we may lend the purchaser all or a portion of the purchase price. In these instances, our taxable income may exceed the cash received in the sale.

 

We may sell assets to third parties or to affiliates of our advisor. All transactions between us and our advisor and its affiliates must be approved by a majority of this conflicts committee.

 

We did not sell any real estate investments during the year ended December 31, 2016.

 

Policy Regarding Transactions with Related Persons. The conflicts committee is required to review and approve all transactions between us and our advisor, any of our officers or directors or any of their affiliates. Prior to entering into a transaction with a related party, a majority of the conflicts committee must conclude that the transaction is fair and reasonable to us and on terms and conditions not less favorable to us than those available from unaffiliated third parties. In addition, our Code of Business Conduct and Ethics requires our employees and directors to be scrupulous in avoiding any action or interest that conflicts with, or gives the appearance of a conflict with, the Company’s interests. Our employees and directors are required to report potential and actual conflicts to the Compliance Officer, currently our chief financial officer, or directly to the conflicts committee, as appropriate.

 

 Certain Transactions with Related Persons

 

The conflicts committee has reviewed the material transactions between our affiliates and us since the beginning of 2016 as well as any such currently proposed material transactions. Set forth below is a description of such transactions and the conflict committee’s report on their fairness.

 

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Since January 1, 2016, we have entered into the following agreements with our advisor and sponsor:

 

·In January 2017, we entered into an Amended and Restated Advisory Agreement in which (i) our advisor agreed to pay 50% of the pro rata portion of its asset management fee and its subordinated participation fee attributable to “Large Investors” who purchase 100,000 or more shares ($1,000,000) in our Registered Offering; and (ii) revisions were made to provide greater specificity as to the reimbursable items payable to our sponsor and organization and offering expenses in the Registered Offering.

 

·On February 8, 2017, we entered into a Non-Solicitation Agreement with our advisor and sponsor in which we agreed not to solicit the employment of any employee of our advisor or sponsor during the 12 month period following any termination of or failure to annually renew the Amended and Restated Advisory Agreement.

 

·Effective August 11, 2017, we entered into a Second Amended and Restated Advisory Agreement to reflect the following amendments: (i) updates to the duties of our advisor, (ii) an expansion of the definition of “Large Investors” to encompass investors with aggregate subscriptions or purchases for at least $1,000,000 in one or more securities offerings sponsored by our sponsor and to allow us to include as Large Investors clients of one or more financial advisors whose clients collectively meet the foregoing requirement, and (iii) revisions to the terms of compensation payable to the advisor, including reducing to one-third the rebate paid by the advisor to Large Investors with respect to the pro rata portion of its subordinated participation fee, and a reduction in the applicable percentage used to calculated the subordinated participation fee from 40% to 30%.

 

During 2016, the Company had invested $3,643,518 for 364,352 shares in Rich Uncles Real Estate Investment Trust I, an affiliated entity.

 

The conflicts committee believes that these arrangements with our advisor and sponsor are fair.

 

Relationship with our Sponsor and Advisor. Our sponsor pays for all of the organization and offering expenses we incur in connection with our Offerings. We reimburse our sponsor for those expenses they have paid out of the proceeds of the Offerings but not in excess of 3% of the gross offering proceeds that we receive from the sale of Class S and Class C shares, including dividend reinvestment proceeds for the Class C shares and the Class S shares but excluding upfront commissions and fees on the sale of Class S shares.

 

Our advisor provides day-to-day management of our business. Among the services provided by our advisor under the terms of the advisory agreement are the following:

 

  finding, presenting and recommending to us real estate investment opportunities consistent with our investment policies and objectives;

 

  structuring the terms and conditions of our investments, sales and co-ownerships;

 

  acquiring real estate investments on our behalf in compliance with our investment objectives and policies;

 

  arranging for financing and refinancing of our real estate investments;

 

  entering into leases and service contracts for our properties;

  

  reviewing and analyzing the Company’s operating and capital budgets;

 

  assisting us in obtaining insurance;

 

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  generating an annual budget for us;

 

  reviewing and analyzing financial information for each of our assets and our overall portfolio;

 

  formulating and overseeing the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of our real estate investments;

 

  performing investor-relations services;

 

  maintaining our accounting and other records and assisting us in filing all reports required to be filed with the SEC, the IRS and other regulatory agencies;

 

  engaging in and supervising the performance of our agents, including our registrar and transfer agent;

 

 

performing administrative and operational duties reasonably requested by us; and

 

  performing any other services reasonably requested by us.

 

Our advisor is subject to the supervision of the Board of Directors and only has such authority as we may delegate to it as our agent. We initially entered our advisory agreement with our advisor in connection with our Registered Offering and the agreement has been amended and restated at various times thereafter, most recently effective as of August 11, 2017. The advisory agreement has a one-year term, subject to an unlimited number of successive one-year renewals upon the mutual consent of the parties.

 

Pursuant to the advisory agreement, we are obligated to reimburse our advisor, sponsor and their affiliates for organization and offering costs they incurred on our behalf, subject to a maximum reimbursement of 3% of the gross proceeds we receive in the Offerings. For the year ended December 31, 2016, our sponsor had incurred approximately $1,881,958 of organization and offering expenses on our behalf, and the maximum reimbursable to our sponsor was $731,315, of which we have paid $651,670 as of December 31, 2016.

 

We incur acquisition fees payable to our advisor equal to 3.0% of the cost of each investment acquired by us. Acquisition fees relate to services provided in connection with the selection and acquisition of real estate investments. Acquisition fees for the year ended December 31, 2016 were $979,729, of which $274,200 was payable as of December 31, 2016.

 

For asset management services, we pay our advisor a monthly fee. With respect to investments in real property, the asset management fee is a monthly fee equal to 0.1% of the total of the aggregate book value, for any period, of all of our assets, including assets invested, directly or indirectly, in properties, before reserves for depreciation or bad debts or other similar non-cash reserves; provided, however, that our advisor shall pay a portion of its asset management fee as a rebate to investors who have aggregate subscriptions for at least $1,000,000, excluding upfront selling commissions, in any offering sponsored by our sponsor, including this offering (the “Large Investors”). This rebate shall be paid monthly to the Large Investors in an amount equal to one-half of the monthly asset management fee percentage (0.1%) multiplied by such Large Investor’s investment in the Company. The Large Investors include, in the sole discretion of the Company, clients of financial advisors whose clients collectively satisfy the minimum stock purchase amount of $1,000,000, excluding upfront selling commissions, in any offering sponsored by our sponsor, including this offering. Asset management fees for the year ended December 31, 2016 were approximately $116,952, of which $27,501 was waived. As of December 31, 2016, $29,577 was payable to our advisor.

 

Other than with respect to any mortgage or other financing related to a property concurrent with its acquisition, if our advisor provides services in connection with the post-acquisition financing or refinancing of any debt that we obtain relative to the properties or the REIT, we will pay the advisor or its assignees a financing coordination fee equal to 1.0% of the amount of such financing. No financing fees for the year ended December 31, 2016 were paid nor incurred.

 

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Our real estate properties are intended to be triple-net single tenant properties with limited, if any, property management responsibilities. However, if our advisor or its affiliates provides property management services for our properties, we will pay fees equal to 1.5% of gross revenues from the properties managed. We also will reimburse our advisor or its affiliates for property-level expenses that it pays or incurs on our behalf, including salaries, bonuses and benefits of persons employed by our advisor or affiliates except for the salaries, bonuses and benefits of persons who also serve as one of our executive officers. Our advisor or its affiliates may subcontract the performance of its property management duties to third parties and pay all or a portion of its property management fee to the third parties with whom it contracts for these services. No property management fees for the year ended December 31, 2016 were paid nor incurred.

 

We reimburse the expenses incurred by our advisor and its affiliates in connection with its provision of services to us, including our allocable share of our advisor’s overhead, such as rent, employee costs (including salaries and benefits), utilities and IT costs. We do not reimburse our advisor or its affiliates for employee costs in connection with services for which our advisor earns acquisition fees or disposition fees (other than reimbursement of travel, due diligence and other costs associated with potential investments, including investments that we do not purchase, and communication expenses) or for the salaries and benefits our advisor or its affiliates may pay to our executive officers. Unless our directors make a finding, based on nonrecurring and unusual factors which they deem sufficient, that a higher level of expenses is justified for a period, we will not reimburse our advisor and its affiliates for any amount by which our operating expenses (including the asset management fee) at the end of the four preceding fiscal quarters exceeds the greater of (i) 2% of average invested assets or (ii) 25% of net income other than any additions to reserves for depreciation, bad debt or other similar noncash reserves and excluding any gain from the sale of assets for that period. No operating expense reimbursements for the year ended December 31, 2016 were paid nor incurred and we waived the reimbursement obligation of our advisor for excess operating expenses incurred by the Company during the third and fourth quarters of 2016 on the grounds that the waivers were fair and reasonable under the circumstances as to why the excess was incurred and how it was required to be calculated.

 

The conflicts committee considers our relationship with our advisor and our sponsor during 2016 to be fair. This conflicts committee believes that the amounts payable to our advisor under the advisory agreement is necessary in order for our advisor to provide the desired level of services to us and our stockholders.

 

The Conflicts Committee of the Board of Directors

David Feinleib, Vipe Desai, Jonathan Platt and Jeffrey Randolph

 

 

Nomination of Directors

 

General

 

We do not have a standing nominating committee. Unless otherwise provided by Maryland law, the Board of Directors is responsible for selecting its own nominees and recommending them for election by our stockholders, provided that the conflicts committee is responsible for identifying and nominating replacements for vacancies among our independent director positions. Any vacancy on the Board of Directors for any cause will be filled by a vote of a majority of the remaining directors, even if such majority vote is less than a quorum. The Board of Directors believes that the primary reason for creating a standing nominating committee is to ensure that candidates for independent director positions can be identified and their qualifications assessed under a process free from conflicts of interest with us. Because nominations for vacancies in independent director positions are handled exclusively by a committee composed only of independent directors, the Board of Directors has determined that the creation of a standing nominating committee is not necessary. We do not have a charter that governs the director nomination process.

 

Board Membership Criteria

 

With respect to filling vacancies for independent director positions, the conflicts committee reviews the appropriate experience, skills and characteristics required of directors in the context of the then-current membership of the Board of Directors. The full Board of Directors annually conducts a similar review with respect to all director nominations. This assessment includes, in the context of the perceived needs of the Board of Directors at that time, issues of knowledge, experience, judgment and skills, such as an understanding of the real estate and real estate finance industries or accounting or financial management expertise. The Board of Directors seeks to nominate directors with diverse backgrounds, experiences and skill sets that complement each other so as to maximize the collective knowledge, experience, judgment and skills of the entire Board of Directors. The Board of Directors assesses its effectiveness in achieving this goal annually, in part, by reviewing the diversity of the skill sets of the directors and determining whether there are any deficiencies in the Board of Directors’ collective skill set that should be addressed in the nominating process. The Board of Directors made such an assessment in connection with director nominations for the 2017 annual meeting of stockholders and determined that the composition of the current board of directors satisfies its diversity objectives.

 

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Other considerations in director nominations include the candidate’s independence from conflict with us and the ability of the candidate to attend Board meetings regularly and to devote an appropriate amount of time in preparation for those meetings. It also is expected that independent directors nominated by the conflicts committee will be individuals who possess a reputation and hold positions or affiliations befitting a director of a large publicly held company and who are actively engaged in their occupations or professions or are otherwise regularly involved in the business, professional or academic community. Moreover, as required by our charter, at least one of our independent directors must have at least three years of relevant real estate experience, and each director must have at least three years of relevant experience demonstrating the knowledge and experience required to successfully acquire and manage the types of assets we acquire and manage.

 

Selection of Directors. The Board of Directors is primarily responsible for selecting its own nominees and recommending them for election by our stockholders, provided that the conflicts committee must nominate replacements for any vacancies among the independent director positions. All director nominees stand for election by our stockholders annually.

 

In nominating candidates for the Board of Directors, the Board of Directors (or the conflicts committee, as appropriate) solicits candidate recommendations from its own members and the management of our advisor. The Board of Directors and the conflicts committee may also engage the services of a search firm to assist in identifying potential director nominees.

  

The Board of Directors and the conflicts committee will consider recommendations made by stockholders for director nominees who meet the established director criteria set forth above. In order to be considered for nomination, recommendations made by stockholders must be submitted within the timeframe required to request a proposal to be included in the proxy materials. In evaluating the persons recommended as potential directors, the Board of Directors (or the conflicts committee, as appropriate) will consider each candidate without regard to the source of the recommendation and take into account those factors that they determine are relevant. Stockholders may directly nominate potential directors (without the recommendation of the Board of Directors or conflicts committee) by satisfying the procedural requirements for such nomination as provided in Article II, Section 2.9 of our bylaws. Any stockholder may request a copy of our bylaws free of charge by calling (855) 742-4862 or may view the bylaws in the NNN REIT Corporate Governance section of our website at www.richuncles.com.

 

Stockholder Communications with the Board of Directors

 

We have established a procedure for stockholders to communicate comments and concerns to the Board of Directors. Stockholders may contact the Board of Directors at the following address:

 

Board of Directors of RW Holdings NNN REIT, Inc.

3080 Bristol Street, Suite 550

Costa Mesa, CA 92626

(855) 742-4862

 

Stockholders should report any complaints or concerns regarding (1) suspected violations or concerns as to compliance with laws, regulations, our Code of Business Conduct and Ethics or other suspected wrongdoings affecting us or our properties or assets, or (2) any complaints or concerns regarding our accounting, internal accounting controls, auditing matters, or any concerns regarding any questionable accounting or auditing matters affecting us. Stockholders should report any such suspected violations or other complaints or concerns by any of the following means:

   

  By calling the toll free at (855) 742-4862; or
     
  By mailing a description of the suspected violation or concern to:

 

Conflicts Committee

c/o RW Holdings NNN REIT, Inc.

3080 Bristol Street Suite 550

Costa Mesa, CA 92626

  

Reports will be made known to our Compliance Officer and the conflicts committee chair, provided that no person named in the report will receive the report directly.

 

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 Executive Officers and Directors

 

We have provided below certain information about our executive officers and directors. All of our current directors are being nominated for re-election to serve until the 2018 annual meeting and until his or her successor is elected and qualified.

 

Name (1)   Age (2)   Positions Year of First
Becoming a
Director
Harold C. Hofer   61   Chief Executive Officer and Director 2015
Raymond E. Wirta   73   Chairman of the Board and Director 2015
Howard Makler   50   President and Chief Marketing Officer N/A
Jean Ho   49   Chief Financial Officer and Secretary N/A
Vipe Desai   50   Independent Director (3) 2015
David Feinleib   43   Independent Director (3) 2015
Jonathan Platt   32   Independent Director (3) 2015
Jeffrey Randolph   61   Independent Director (3) 2015
John Wang   54   Director 2016

 

(1) The address of each executive officer and director listed is 3080 Bristol Street, Suite 550, Costa Mesa, California 92626.
(2) As of September 15, 2017.
(3) Member of our conflicts committee and audit committee.

  

Mr. Harold Hofer. Our Board of Directors has concluded that Harold Hofer is qualified to serve as a director and as our Chief Executive Officer by reason of his extensive industry and leadership experience. Mr. Hofer is a sponsor of our REIT. Together with Mr. Wirta, he indirectly owns and controls our advisor and our sponsor. Mr. Hofer has been a lawyer since 1980 and is an inactive member of the California State Bar. He was formerly owner of Hofer Realty Advisors, a boutique real estate firm that acted as a principal and advised clients in various real estate transactions focused on investments in retail shopping centers. Mr. Hofer is a principal in a private investment fund known as REIT Opportunity Capital Advisors, or “ROCA”, which invests in the listed stocks of public REITs. He has participated in real estate transactions, as a principal and as a broker, valued in excess of $2 billion in his 30-year real estate career. Mr. Hofer has extensive underwriting, acquisition and management experience, and has asset managed multi-million dollar portfolios of owned properties. As our Chief Executive Officer and a principal of our external advisor, Mr. Hofer is best-positioned to provide our Board of Directors with insights and perspectives on the execution of our business strategy, our operations and other internal matters. Further, as a principal of our sponsor, Mr. Hofer brings to our Board of Directors demonstrated management and leadership ability. Mr. Hofer has been employed by our sponsor, which was formerly known as Nexregen, LLC, since it was founded in 2007, during which time he has also been engaged independently as a real estate investment sponsor and investor in California, Texas and elsewhere.

  

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Mr. Raymond Wirta. Our Board of Directors has concluded that Raymond Wirta is qualified to serve as one of our directors by reason of his expertise with real estate-related investments. Mr. Wirta is a sponsor of our REIT. Together with Mr. Hofer, he indirectly owns and controls our advisor and our sponsor. Mr. Wirta has been Chairman of the Board of CBRE Group (NYSE:CBG), a global real estate services firm, since 2014 and a Director since 1997 and served as the Chief Executive Officer of its predecessor company, CBRE Services, from 1999 to 2001. From 2009 through the present, he has been Chief Executive Officer of the Koll Company, a West Coast-based real estate investment and development company. He previously served as Chief Executive Officer for Koll Management Services and Bolsa Chica Company during time frames when both were publicly traded real estate companies. Based on these experiences, Mr. Wirta offers insights and perspective with respect to our real estate portfolio. From 2010 through the present, he has been president of Irvine Company, a privately held California based real estate development company with ownership of 115 million square feet of apartments, office, retail and resorts in California. As one of our executive officers and a principal of our advisor and our sponsor, Mr. Wirta is also able to direct our Board of Directors to the critical issues facing our company.

 

Mr. Howard Makler. Mr. Makler is our president and chief marketing officer, having joined our sponsor in 2013. He also currently serves as chief executive officer of Howie’s Game Shack, which he founded in 2005. Howie’s Game Shack operates the largest interactive centers in North America, allowing approximately 1,000 gamers to simultaneously play PCs and XBOXs competitively. From 1992 through 2005, Mr. Makler was co-founder, chairman and chief operating officer of Excess Space Retail Services, which specialized in real estate disposition and lease renegotiation for retail chains. He has served as professor at the International Council of Shopping Centers’ School of Leasing at the Wharton School of the University of Pennsylvania from 2004 through the present. In 2003, Mr. Makler received the “Rising Stars 40 under 40 Award” by Chain Store Age. He has been featured on ABC, Fox News, CNN and the Wall Street Journal. He has served on the Board of Directors for The Skyhook Foundation, a charity founded by Kareem Abdul-Jabbar, and as Vice Chair for Athletics & Entertainers for Kids.

 

Ms. Jean Ho. Ms. Ho is our Chief Financial Officer, having joined our sponsor in January 2016. Ms. Ho is also an adjunct professor of taxation at California State University, Fullerton's Graduate School of Accounting. From 2010 through 2015, Ms. Ho served as the Chief Operating Officer and Chief Financial Officer of Soteira Capital, LLC, a southern California-based, registered investment adviser with approximately $250 million under management that serves investment companies, pooled investment vehicles, pension and profit sharing plans, high net worth individuals, private foundations, and charitable organizations. Prior to her service at Soteira Capital, LLC, Ms. Ho served as the Chief Financial Officer of MKA Capital Advisors, LLC, a sponsor and manager of an approximately $750 million private real estate investment fund, and, prior to that, as a Director at BridgeWest, LLC, a $500 million family office. Prior to entering private practice, she was employed by KPMG, specializing in real estate, financial services, and personal financial planning. Ms. Ho has also been a member of the California State Bar since 1996 and a licensed Certified Public Accountant in California since 1992.

 

Mr. Vipe Desai. Our Board of Directors has concluded that Vipe Desai is qualified to serve as an independent director for reasons including his extensive knowledge and understanding of marketing and branding. Mr. Desai has spent the majority of his professional career in the action sports industries. From 1993 to 1998, Mr. Desai owned and operated H2O Surf and Snowboard Shop in Orange County, CA. This professional experience exposed Mr. Desai to action sports industries and provided him with valuable knowledge regarding marketing and brand awareness vis-à-vis action sports enthusiasts. In 2000, Mr. Desai founded Propaganda HQ (“PHQ”), which he continues to manage. PHQ is a youth brand consulting agency which assists its clients in developing brand strategies, event production, social media marketing and digital marketing. PHQ’s clients have included Red Bull, Monster Energy, DaimlerChrysler, Surfrider Foundation, Billabong, DaKine, Electric Eyewear, Nixon Watches, O’Neill, Reef, HBO, and Ball Park Franks. From 2009 to 2010, Mr. Desai also held senior marketing positions with Monster Energy and TransWorld Media. While at Monster Energy, Mr. Desai was responsible for sponsored athlete relations, events and brand partnerships worldwide. Mr. Desai is the founder and director project BLUE (www.betruetoblue.com), a consortium of leading surf apparel companies which produce complementary lines of premium “project BLUE” products, with a portion of the sales proceeds being directed to the Surfrider Foundation and the SIMA Environmental Fund. Mr. Desai is a current or past Board member of various charitable organizations, including project BLUE, the SIMA Humanitarian Fund, the Rob Dyrdek Foundation, the Surfrider Foundation and Life Rolls On. Mr. Desai brings a unique perspective on the “branding” of our REIT’s investment products, including web site design, public relations and marketing. He is a graduate of Point Loma Nazarene University.

 

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Mr. David Feinleib. Our Board of Directors has concluded that David Feinleib is qualified to serve as an independent director by reason of his expertise in management and data analytics. From 2011 through the present, Mr. Feinleib has served as the Managing Director of The Big Data Group and from 2013 through the present as Founder and CEO of Content Analytics, Inc. The Big Data Group provides strategy consulting to leading technology buyers and vendors to unlock the value of their data assets. Content Analytics, a leader in E-Commerce analytics, helps major brands and retailers optimize the Findability and Shopability of their products online. Mr. Feinleib’s Big Data Landscape has been viewed more than 200,000 times and is used as a reference by Intel, Dell, VMWare, and the US Government, among others. His book Big Data Bootcamp is available from Apress in the United States. Mr. Feinleib has been quoted by Business Insider and CNET, and his writing has appeared on Forbes.com and in Harvard Business Review China. From 2006 to 2011, Mr. Feinleib was a general partner at Mohr Davidow Ventures, where he led investments in Software as Service (SaaS) companies, including Infusion Software, which completed a $55M Series D round of funding led by Bain Capital Ventures, Goldman Sachs, and others in 2014. From 2001 to 2003, Mr. Feinleib co-founded Consera Software and worked as Vice President of Products, which was acquired by HP, and from 2004 to 2012, co-founded Likewise Software and served as Director, which was acquired by EMC. A lifelong entrepreneur, Mr. Feinleib taught himself how to program and joined Microsoft at age 16. Mr. Feinleib holds a BA from Cornell University and an MBA from the Graduate School of Business at Stanford University. He is an avid violinist and a four-time Ironman distance finisher.

 

Mr. Jonathan Platt. Our Board of Directors has concluded that Jonathan Platt is qualified to serve as an independent director by reason of his experience as a real estate lawyer, investor and manager. Mr. Platt has more than three years’ relevant experience in the real estate business. Mr. Platt is a principal in Kingstone Properties, founded in 2011, serving as both counsel and its chief financial officer. Kingstone Properties is a full service commercial real estate firm, specializing in investments and property management. Mr. Platt is also a partner in Platt Law Group, LLP, a real estate law firm founded in 2011. Prior to joining Kingstone Properties, Mr. Platt briefly served as a financial analyst at LSA, working on transactions including municipal securities stripping, HUD multi-family refinancings, real estate loan syndication and special situations. Mr. Platt received his J.D. from the Benjamin N. Cardozo School of Law, where he served as an editor on the Cardozo Public Law, Policy & Ethics Journal, and he is an active member of the State Bar of California (admitted 2010). He received his bachelor’s degree in finance, graduating cum laude, from Sy Syms School of Business at Yeshiva University. He is also a licensed real estate broker in California.

 

Mr. Jeffrey Randolph. Our Board of Directors has concluded that Jeffrey Randolph is qualified to serve as an independent director by reason of his extensive experience in investment management. From 2002 through 2007 and then again from 2010 through March 2017 (now retired), Mr. Randolph was a Principal and served as Chief Financial Officer and Chief Compliance Officer for Affinity Investment Advisors, LLC, a firm specializing in U.S. stock exchange investments. In 2007, Affinity was purchased by Morgan Stanley Investment Management. From 2007 through 2010, Mr. Randolph served as Managing Director for Morgan Stanley and its wholly owned subsidiary Van Kampen Investments. His role included supporting the firm’s domestic and international investment clients. Toward the end of 2010, Mr. Randolph was part of the decision to re-launch Affinity as an independent entity to capitalize on the increasing investor interest in boutique management firms. Mr. Randolph brings 25 years of investment experience to our REIT. His previous work experience includes Principal at Avalon Financial Group Inc., Chief Financial Officer for Bonutto-Hofer Investments and Vice President at Security Pacific National Bank. Mr. Randolph received his bachelor degree in Business Finance from California State University, Long Beach in 1978.  

 

Mr. John Wang. Our Board of Directors has concluded that John Wang is qualified to serve as a director by reason of his extensive real estate experience. Mr. Wang is the president and founding member of Pacific Coast Realty Services, Inc., and chairman of VenQuest Hotel Group, which owns and manages a portfolio of hotels and commercial properties throughout the U. S. for the past 25 years. He has been instrumental in the formation, development and direct investment of over thirty companies since 1988. Mr. Wang is a former board member of General Bank, a Los Angeles based financial institution with over $3 billion in assets. He was actively involved in the strategic planning and growth of the bank and was instrumental in the bank’s formation of GBC Venture Capital in 1998. He was a member of the executive loan committee and community reinvestment committee. He was the principal strategist in the merger of General Bancorp with Cathay Bank in 2003. Mr. Wang is also one of the owners of our sponsor and, accordingly, is not considered to be an independent director. For the past five years, Mr. Wang has acted as a private investor.

 

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In 2001, Mr. Wang was appointed by the former president of Taiwan to serve as a member of the Taiwan Parliament from 2001 to 2004. As member of the Senate Foreign Relations Committee, he participated and led several delegations on diplomatic and trade missions around the world for Taiwan. He is currently a member of the advisory board for the Taiwan Parliament.

  

Code of Business Conduct and Ethics

 

On March 10, 2017, our Board of Directors approved and adopted our Code of Business Conduct and Ethics (the “Code”) which was filed as an Exhibit to our Annual Report on Form 10-K for the year ended December 31, 2016. The Code is also posted in the NNN REIT Corporate Governance section of our website at www.richuncles.com.

 

Compensation of Executive Officers

 

Our executive officers do not receive compensation directly from us for services rendered to us. Our executive officers are officers and/or employees of, or hold an indirect ownership interest in, our advisor, and/or its affiliates, and our executive officers are compensated by these entities, in part, for their services to us. See Report of the Conflicts Committee—Certain Transactions with Related Persons” for a discussion of the fees paid to our advisor and its affiliates.

 

Compensation of Independent and Non-Officer Directors

 

If a director is also one of our executive officers, we do not pay any compensation to that person for services rendered as a director. We pay each of our independent directors and our non-independent non-officer director John Wang for attending meetings as follows: (i) 500 shares of Class C common stock for each Board meeting attended; (ii) 500 shares of Class C common stock for each committee meeting attended; and (iii) 100 shares of Class C common stock for each acquisition vote outside of votes in the course of a Board meeting. All directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at meetings of our Board of Directors.

 

For the year ended December 31, 2016, we paid our directors as follows:

 

Name    Shares Issued  
David Feinleib     2,200  
Vipe Desai     2,100  
Jonathan Platt     2,100  
Jeffrey Randolph     1,300  
John Wang     2,100  

 

STOCK OWNERSHIP

 

As of September 15, 2017, there is no person who is known by us to be the beneficial owner of more than 5% of the outstanding shares of our Class C or Class S common stock. The following table shows, as of September 15, 2017, the amount of our Class C common stock beneficially owned (unless otherwise indicated) by (1) each of our directors and executive officers; and (2) all of our directors and executive officers as a group. None of our directors or executive officers beneficially owns any shares of our Class S common stock. Mr. Makler and two of our directors, Messrs. Hofer and Wirta, also act as our executive officers through their roles with our advisor.

 

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Name (1)  Class C Shares
Beneficially
Owned
   Percent of
Class C
Shares (2)
    Class S Shares
Beneficially
Owned
   Percent of
Common Stock (3)
Harold C. Hofer  2,369.94 shares   *       *
Raymond E. Wirta  3,346.19 shares   *       *
Howard Makler  1,706.54 shares   *       *
Jean Ho  73.39 shares   *       *
Vipe Desai  1,947.38 shares   *       *
David Feinleib  4,940.92 shares   *       *
Jonathan Platt  2,216.58 shares   *       *
Jeffrey Randolph  4,146.46 shares   *       *
John Wang  5,703.28 shares   *       *
All directors and executive officers as a group  41,809.68 shares   *       *

 

*Less than 1% of the outstanding Class C or Class S common stock (as applicable) and none of the shares is pledged as security.
(1)The address of each named beneficial owner is 3080 Bristol Street, Suite 550, Costa Mesa, CA 92626.
(2)Based on 7,328,750 shares of Class C common stock outstanding on September 15, 2017.
(3)Based on 7,331,750 shares of common stock (Class C and Class S) outstanding on September 15, 2017.

  

Section 16(a) Beneficial Ownership Reporting Compliance

 

Under U.S. securities laws, once our shares of common stock are registered pursuant to Section 12 of the Exchange Act, directors, executive officers and any persons beneficially owning more than 10% of our common stock are required to report their initial ownership of the common stock and most changes in that ownership to the SEC. During 2016, our shares of common stock were not registered under the Exchange Act and thus no reports were required to be filed by the persons described above in 2016.  

 

 

PROPOSAL 1. ELECTION OF DIRECTORS

 

At the Annual Meeting, you and the other stockholders will consider and vote upon the election of seven persons to the Board of Directors. Those persons elected will serve as directors until the 2018 annual meeting and until their successors are elected and qualified. The Board of Directors has nominated the individuals listed in the table below, who are each currently serving as a director of the Company, for re-election as directors:

 

Harold C. Hofer
Raymond E. Wirta
Vipe Desai
David Feinleib
Jonathan Platt
Jeffrey Randolph
John Wang

 

Each of the director nominees has consented to be named in this Proxy Statement and to serve as a director if elected. Detailed information about each of our director nominees, including biographical summaries of their experience and qualifications, can be found in this Proxy Statement under “Certain Information About Management—Executive Officers and Directors” and “Stock Ownership” above.

 

Vote Required

 

Under our charter, the affirmative vote of the holders of a majority of the shares of Class C common stock and Class S common stock present in person or by proxy at a meeting of stockholders at which a quorum is present is required for the election of the directors. Because of this majority vote requirement, abstentions and broker non-votes, if any, will have the effect of a vote against each nominee for director. If an incumbent director nominee fails to receive the required number of votes for re-election, then under Maryland law, he or she will continue to serve as a “holdover” director until his successor is elected and qualified.

 

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The appointed proxies will vote your shares of common stock as you instruct. If you submit a proxy card with no further instructions, the appointed proxies will vote your shares FOR all of the director nominees listed above. If any nominee becomes unable or unwilling for good cause to serve as a director at the time of the Annual Meeting, the Board may reduce its size or designate a substitute. If a substitute is designated, proxies voting on the original nominee will be cast for the substituted nominee. Our Board of Directors has no reason to believe that any of its director nominees for election at the Annual Meeting will be unable or unwilling to serve if elected as a director.

 

Whether you plan to attend the Annual Meeting and vote in person or not, we urge you to have your vote recorded. Stockholders may authorize a proxy to vote their shares: (1) via the Internet; or (2) by mail, using the proxy card accompanying your proxy materials if you received a printed copy of the proxy materials by mail. YOUR VOTE IS VERY IMPORTANT! Your immediate response will help avoid potential delays and may save us significant additional expenses associated with soliciting stockholder votes.

 

Recommendation

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” ALL

NOMINEES LISTED FOR RE-ELECTION AS DIRECTORS.

 

 

PROPOSAL 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

At the Annual Meeting, you and the other stockholders will consider and vote upon the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2017.

 

The audit committee has appointed Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2017. Ernst & Young LLP has served as our independent registered public accounting firm since June 2016 and audited our financial statements for the year ended December 31, 2016. We expect that Ernst & Young LLP representatives will be present at the Annual Meeting and they will have the opportunity to make a statement if they desire to do so. In addition, we expect that the Ernst & Young LLP representatives will be available to respond to appropriate questions posed by stockholders.

 

Additional information about Ernst & Young LLP, including the fees we have paid to Ernst & Young LLP, can be found in this Proxy Statement under “Certain Information About Management—The Audit Committee.” The “Report of the Independent Directors” section included in this Proxy Statement also contains information about the role of Ernst & Young LLP with respect to the audit of the Company’s annual financial statements.

 

Stockholder ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm is not required. However, the Board is submitting the appointment of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate governance. Notwithstanding its appointment of Ernst & Young LLP and even if Ernst & Young’s appointment is ratified by stockholders, the audit committee may select new auditors at any time in the future in its discretion if it deems such decision to be in our best interests. If the appointment of Ernst & Young LLP is not ratified by our stockholders, the audit committee may consider whether it should appoint another independent registered public accounting firm.

 

Vote Required

 

Under our bylaws, assuming a quorum is present at the Annual Meeting, a majority of the shares of common stock entitled to vote on, and voted for or against, this proposal is required for the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2017. Abstentions will not count as votes for or against this proposal and will have no effect on the determination of this proposal.

 

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The appointed proxies will vote your shares of common stock as you instruct. If you submit a proxy card with no further instructions, the appointed proxies will vote your shares FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2017.

 

Whether you plan to attend the Annual Meeting and vote in person or not, we urge you to have your vote recorded. Stockholders may authorize a proxy to vote their shares: (1) via the Internet; or (2) by mail, using the proxy card accompanying your proxy materials if you received a printed copy of the proxy materials by mail. YOUR VOTE IS VERY IMPORTANT! Your immediate response will help avoid potential delays and may save us significant additional expenses associated with soliciting stockholder votes.

 

Recommendation

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE

“FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP

AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING

DECEMBER 31, 2017.

 

 

STOCKHOLDER PROPOSALS

 

Stockholder Proposals and Nomination of Director Candidates Not Intended for Inclusion in Proxy Materials. A stockholder seeking to present a proposal of business or nominate a director for election to our Board at the 2018 annual meeting of stockholders but not intending for such proposal or nomination to be included in the proxy statement for the meeting must comply with the advance notice requirements set forth in our bylaws. Our bylaws require a stockholder desiring to present a proposal or nominate a director for the 2018 annual meeting of stockholders to provide written notice to the Company’s Secretary at the Company’s principal executive offices (i) not earlier than August 12, 2018, 90 days prior to the anniversary of the Annual Meeting, and not later than September 1, 2018, 70 days prior to such anniversary, or (ii) if the date of the 2018 annual meeting of stockholders is more than 30 days before or more than 60 days after the one-year anniversary of the Annual Meeting, not earlier than the 90th day, or later than the 70th day prior to such annual meeting of stockholders. Other specifics regarding the notice procedures, including the required content of the notice, can be found in Section 2.9 of our bylaws.

 

Proposals for Inclusion in Proxy Materials. A stockholder seeking to have a proposal included in the proxy statement for our 2018 annual meeting of stockholders must comply with Rule 14a-8 under the Exchange Act, which sets forth the requirements for including stockholder proposals in Company-sponsored proxy materials. In accordance with Rule 14a-8, any such proposal must be received by the Company’s Secretary at the Company’s principal executive offices by May 29, 2018, which is 120 days prior to the one-year anniversary of the date this Proxy Statement was first released to our stockholders. However, if the date of the 2018 annual meeting of stockholders changes by more than 30 days from the one-year anniversary of the date of the Annual Meeting, then such proposals must be received a reasonable time before we begin to print and send our proxy materials for the 2018 annual meeting of stockholders.

 

OTHER MATTERS

 

As of the date of this Proxy Statement, we know of no business that will be presented for consideration at the Annual Meeting other than the items referred to above. If any other matter is properly brought before the Annual Meeting for action by stockholders, proxies in the enclosed form returned to us will be voted in accordance with the recommendation of the Board of Directors or, in the absence of such a recommendation, in accordance with the discretion of the proxy holder.

 

 

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RW Holdings NNN REIT, Inc.

3080 Bristol Street, Suite 550

Costa Mesa, CA 92626

www.RichUncles.com

VOTE BY INTERNET - http://nnnreitproxymailvote.richuncles.com

Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Pacific Time the day before the meeting date. Please visit https://news.richuncles.com/nnnreitproxy to review proxy materials then visit http://nnnreitproxymailvote.richuncles.com to create an electronic voting instruction form. If you vote by Internet you do not have to return your proxy card.

 

ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS

If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.

 

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Rich Uncles, 3080 Bristol Street, Suite 550, Costa Mesa, CA 92626.

 

 

YOUR CONTROL NUMBER IS:     12345678  

 

 

 

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:

 

KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY

 

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

 

RW HOLDINGS NNN REIT, INC. 

The Board of Directors recommends that you
vote FOR the following director nominees:

                 
    For Against Abstain     For Against Abstain  
1. 

Election of Directors

                 
  01 - Harold C. Hofera  ¨  ¨  ¨   05 - Jonathan Platt  ¨  ¨  ¨  
                     
  02 - Raymond E. Wirta  ¨  ¨  ¨   06 - Jeffrey Randolph  ¨  ¨  ¨  
                     
  03 - Vipe Desai  ¨  ¨  ¨   07- John Wang  ¨  ¨  ¨  
                     
  04 - David Feinleib  ¨  ¨  ¨            

 

    For Against Abstain  
           
2. 

Ratification of the appointment of Ernst & Young LLP as RW Holdings NNN REIT, Inc.’s independent registered public accounting firm for the fiscal year ending December 31, 2017

 ¨  ¨  ¨    

 

Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.

 

 

 

         
Signature [PLEASE SIGN WITHIN BOX]           Date   Signature [PLEASE SIGN WITHIN BOX]           Date  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

The Notice and Proxy Statement and 2016 Annual Report are available at https://news.richuncles.com/nnnreitproxy.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RW Holdings NNN REIT, Inc. Annual Meeting of Stockholders

November 10, 2017 at 10:00 A.M. Pacific Time

This proxy is solicited by the Board of Directors

 

 

The undersigned stockholder(s), hereby revoking any proxy previously given, hereby appoint(s) Howard Mackler and Jean Ho, or either of them, as proxies, each with the power to appoint his or her substitute, and hereby authorize(s) each of them to represent and to vote, as designated on the reverse side of this proxy, all of the shares of common stock of RW Holdings NNN REIT, Inc. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held November 10, 2017, at Rich Uncles’ offices located at 3090 Bristol Street, Suite 550, Costa Mesa, California 92626, and any adjournments or postponements thereof. The proposals referred to on the reverse side hereof are described in the Proxy Statement that is being delivered in connection with the Annual Meeting of Stockholders.

 

This proxy, when properly executed and returned, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations included on the reverse side thereof. Whether or not direction is made, each of the named proxies is authorized to vote this proxy in his or her discretion on such other business as may properly come before the Annual Meeting of Stockholders or any postponement or adjournment thereof.

 

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. IF YOU CHOOSE TO VOTE THESE SHARES BY INTERNET, YOU DO NOT NEED TO RETURN THIS PROXY.

 

 

Continued and to be signed on reverse side