Contract analysis

From: Francesca Morano <fmorano@calderwoodharkness.com> To: "Denise M. Whitford" <dwhitford@fairwaterreit.com> Cc: Samuel Eklund <seklund@calderwoodharkness.com> Date: Mon, 11 Apr 2022 03:47:00 -0000 Subject: Ridgemark v. Fairwater REIT (Case No. 2021-CA-002748-18-W) — Court Enters Agreed Order Placing Case in Inactive Status; Recommended Next Steps

Attachment: Agreed Order Placing Case in Inactive Status (entered April 8, 2022) [PDF]

I am writing to advise you that on Friday, April 8, 2022, the Honorable Eleanor V. Cassin of the Circuit Court of the Eighteenth Judicial Circuit in and for Seminole County, Florida entered the Agreed Order Placing Case in Inactive Status in *Ridgemark Development Partners LLC v. Fairwater Real Estate Investment Trust*, Case No. 2021-CA-002748-18-W. A copy of the signed Agreed Order is attached for Fairwater's record

This is a favorable development for Fairwater. Below I have summarized the background leading to the order, its key terms, the practical implications for Fairwater, and our recommended next steps.

**1. Summary of the March 22, 2022 Status Conference**

On March 22, 2022, Judge Cassin convened a three-way status conference attended by counsel for all parties: our firm, Calderwood & Harkness LLP, together with Hargrove & Liddell, P.A. (Brenda Hargrove, Florida local counsel) for Fairwater; Castellon Foley & Ruiz LLP (Marco D. Castellon) for Ridgemark Development Partners LLC; and Whitmore Dane LLP (Carolyn F. Dubrow) for intervenor Pinnacle Shores Bank, N.A.

Several significant disclosures emerged at the conference:

- **Pinnacle Shores Bank.** Counsel for Pinnacle Shores disclosed that the bank has suspended further draws on its $14.6 million construction-to-permanent loan commitment to Ridgemark, pending resolution of the easement and access issues at the heart of this litigation. Approximately $1.9 million had been drawn prior to the suspension, allocated to site work and architectural/engineering costs for the planned Ridgema

- **Ridgemark.** Ridgemark's counsel indicated that without access to further construction-loan proceeds, Ridgemark is unable to fund continued litigation or advance the planned development of Ridgemark Commerce Village — a 96-unit light-industrial flex-space park on the adjacent 16.3-acre southern parcel.

- **Fairwater.** Through our firm, Fairwater consented to placing the case in inactive status, as the current dormancy preserves the status quo — namely, no easement access across the Fairwater Sanford Logistics Center at 4250 Commerce Park Boulevard, Sanford, FL 32771.

All parties ultimately agreed to the proposed inactive status, and the stipulated order was submitted to Judge Cassin for entry.

The Agreed Order entered on April 8, 2022 provides as follows:

- The case is placed in inactive status on the court's docket, effective immediately. - Any party may reactivate the case at any time by filing a Notice of Activation together with a proposed scheduling order. - No deadlines are currently running. All discovery and motion practice is stayed during the inactive period.

The status quo strongly favors Fairwater's position for several reasons:

- The Cross-Parcel Easement (originally recorded June 22, 1998, in OR Book 4517, Page 1283, Seminole County Official Records) remains contested but is not being exercised by Ridgemark. Fairwater's 42.7-acre, 614,000-square-foot Class-A cross-dock distribution facility at the Sanford Logistics Center continues to operate unencumbered.

- Condor Supply Chain Solutions, Inc. — the sole tenant under its 12-year NNN lease (running through September 2028, with annual base rent of approximately $2,386,460) — retains exclusive control over truck-court ingress and egress, which would be operationally disrupted by any shared-access arrangement. As you know, Nathan H. Brierly, Condor's VP of Real Estate, has previously communicated written opposition to any

- Dormancy also significantly reduces Fairwater's ongoing legal costs. Through the dormancy date, Calderwood & Harkness has billed approximately $137,400 in fees and $8,260 in costs, and Hargrove & Liddell, P.A. has billed approximately $22,500. No further significant fees should accrue while the case remains inactive, apart from the modest quarterly monitoring described below.

While the dormancy is favorable, I want to flag certain risks that warrant continued attention:

- **Reactivation risk.** Ridgemark or Pinnacle Shores could reactivate the case at any time without advance notice to Fairwater. Possible triggers include: (a) Ridgemark secures alternative funding or resolves the draw suspension with Pinnacle Shores; (b) Pinnacle Shores elects to foreclose on the southern parcel (Parcel ID 25-20-30-500-0030-0000) and a successor owner — or the bank itself — seeks to pursue the easem

- **Recommended quarterly monitoring.** We propose that Calderwood & Harkness conduct a brief quarterly check of the court docket and Seminole County public records to confirm that no Notice of Activation has been filed and to track any transfer, lis pendens, or foreclosure activity involving the Ridgemark parcel. This should entail minimal cost — likely no more than one to two hours of associate time per quarter — a

**5. Title Insurance — Meridian Title Underwriters**

I also want to take this opportunity to update you on the outstanding title insurance tender and recommend a next step.

As you will recall, Fairwater tendered the defense of this action to Meridian Title Underwriters, Inc. on August 6, 2021, under Fairwater's owner's title insurance policy (Policy No. MTU-2016-FL-089312, policy limit $47,300,000), issued in connection with Fairwater's October 2016 acquisition of the Sanford Logistics Center. Meridian acknowledged receipt on August 19, 2021 and issued a Reservation of Rights letter on

As of today, Meridian has not issued a final coverage determination, and no defense costs have been assumed or reimbursed by Meridian.

We recommend that we send a follow-up letter to Owen R. Hatch, Meridian's Senior Claims Counsel, advising of the dormancy and reiterating Fairwater's position that the Exclusion 3(a) reservation is inapplicable. As we have previously argued, Fairwater neither created, suffered, assumed, nor agreed to the Cross-Parcel Easement, which was recorded in 1998 — nearly two decades before Fairwater's acquisition — and Fairwa

Preserving the tender is important. If the case is reactivated and proceeds to an adverse determination, the $47.3 million policy limit would cover the full acquisition price, and Meridian may be obligated to reimburse defense costs incurred to date, including those billed by both Calderwood & Harkness and Hargrove & Liddell.

**6. Kensington Capital Markets Notification**

On a related matter, Fairwater may wish to consider whether the Kensington Capital Markets, LLC term loan (original principal $28.4 million, estimated outstanding balance approximately $26.1 million, maturing October 2026, secured by the first-priority mortgage recorded at OR Book 6312, Page 0988, Seminole County Official Records) contains any reporting covenant that would require notice of the dormancy order. I woul

In summary, we propose the following action items:

1. **Fairwater** to file and retain a copy of the attached Agreed Order for its records. 2. **Calderwood & Harkness** to implement quarterly docket and public-records monitoring, commencing in July 2022. 3. **Calderwood & Harkness** to prepare and send a follow-up letter to Meridian Title Underwriters regarding the dormancy and reiterating the demand for a full coverage determination under Policy No. MTU-2016-FL-0893

Please let me know if you would like us to proceed with items 2 and 3 above, and I will put them in motion promptly.

Overall, I remain confident in Fairwater's litigation position. We have strong arguments on extinguishment of the easement via the 2014 replat (Plat Book 78, Pages 44–46, Seminole County Official Records) and on the merger defense, given the common Thurmond family ownership of both the northern and southern parcels during the 2012–2014 period. That said, I want to be candid that some ambiguity in the replat's vacatio

I am available to discuss any of the foregoing by phone or videoconference at your convenience. Gerald, please do not hesitate to reach out directly if you have any operational concerns regarding the Sanford property or Condor's tenancy that we should be aware of.

**Francesca Morano** Partner Calderwood & Harkness LLP 1725 K Street NW, Suite 1100 Washington, DC 20006 Tel: (202) 555-4180 Email: fmorano@calderwoodharkness.com

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