Hypothetical Illustration of How REITs Work

A non-traded REIT is a type of investment structure that offers the benefits of professionally managed real estate to individual investors. Investors purchase shares in non-traded REITs, which use the funds to acquire real estate and, to a lesser extent, invest in real estate-related assets. The REIT’s intention is for its real estate holdings to generate revenue in the form of rental income from tenants, interest payments or property operating income. The REIT passes the taxable income back to its investors through regular distributions. Please note that initial distributions will not be fully covered by cash flows from operating activities and will be paid from expense waivers, borrowings and offering proceeds. To maintain REIT tax status, at least 90 percent of the REIT's income must be distributed to its investors.



There is no assurance the stated objectives will be met.
CNL Healthcare Properties II intends to qualify and elect REIT tax status beginning with the first year in which it commences material operations, the taxable year ending Dec. 31, 2017, although there is no assurance the REIT tax status will occur within the stated time frame. If the company fails to meet the REIT qualification standards now or in the future, the company will be subject to increased taxes, which will decrease investors' returns. 
There is no guarantee of future distributions or that distributions will be paid at all. For the six months ended June 30, 2017, approximately 13 percent of cash distributions were covered by operating cash flow and 87 percent were funded by offering proceeds. For the year ended Dec. 31, 2016, distributions were not covered by operating cash flow and were 100 percent funded by offering proceeds. Distributions paid from sources other than operating cash flow, now and in the future, are not sustainable and can reduce investors’ overall return.