Contract analysis

From: Grace Nakamura <gnakamura@calderwoodharkness.com> To: Sandra Whitfield <swhitfield@whitfieldarcher.com> Cc: Douglas Fairchild <dfairchild@calderwoodharkness.com> Date: Fri, 05 Apr 2024 03:42:00 -0000 Subject: RE: Fairwater / GMP Fund III — Pinnacle Replacement Guaranty — Response to Lender Comments

Thank you for circulating Pinnacle Federal Bank's comments on the Replacement Carve-Out Guaranty form (PSA Exhibit S), which we received on Tuesday. We have reviewed the comments thoroughly with Fairwater REIT and with Douglas, and I am responding below with our positions on each item. Attached please find (1) a revised redline of the Replacement Carve-Out Guaranty marked against the form attached as Exhibit S to the

By way of brief recap, Fairwater Real Estate Investment Trust is replacing Greystone Meridian Partners Fund III, L.P. as carve-out guarantor under the Pinnacle Master Loan Agreement dated September 15, 2020, covering Loans 1-A through 1-H. As of February 28, 2024, the aggregate outstanding principal balance across the eight loans is $421,600,000, secured by eight logistics properties (listed below for reference). Cal

We address each of Pinnacle's comments in turn:

**1. Financial Covenants — Accepted with Clarifications**

Pinnacle requested that the replacement guaranty include a minimum tangible net worth covenant of $500,000,000 and a minimum liquid assets covenant of $50,000,000. Fairwater accepts both thresholds, which are consistent with the form guaranty in PSA Exhibit S and with the financial covenant requirements under Fairwater's existing guaranty obligations in the Veltrano Capital and Sycamore Life Insurance loan facilities

For context, Fairwater's equity market capitalization was approximately $4.8 billion as of Q4 2023, and it maintains a $750,000,000 unsecured revolving credit facility with Aldgate National Bank, N.A. (dated August 14, 2022, bearing interest at SOFR + 130 bps), demonstrating ample financial capacity to support these guaranty obligations.

**2. Scope of Carve-Out Guaranty — Accepted**

Pinnacle's comment that the replacement guaranty cover the standard non-recourse carve-out events — including fraud, intentional misrepresentation, voluntary bankruptcy filing, misapplication of rents, waste, and environmental indemnity obligations — is consistent with the scope of the existing carve-out guaranty provided by GMP Fund III. Fairwater accepts this formulation without change, and the redline reflects no

**3. Reporting Requirements — Accepted with Modification**

Pinnacle requested quarterly financial reporting directly from the guarantor. We would note that Fairwater is a publicly traded REIT listed on the NYSE (ticker: FREIT) and is subject to the periodic reporting requirements of the Securities Exchange Act of 1934. Fairwater's quarterly reports on Form 10-Q and annual reports on Form 10-K are publicly available through the SEC's EDGAR system and contain audited (annual)

Accordingly, we propose that the guaranty include a covenant requiring Fairwater to maintain its SEC reporting obligations for so long as the guaranty remains outstanding, coupled with an acknowledgment that Pinnacle may access Fairwater's publicly filed financial statements in lieu of separate direct delivery. We believe this approach is both market-standard for public REIT guarantors and administratively efficient

That said, if Pinnacle requires direct delivery, Fairwater is willing to agree to provide (a) annual audited financial statements and (b) quarterly unaudited financial statements, in each case within the same timeframes applicable to its SEC filing obligations. We have reflected our preferred formulation in the redline but are prepared to discuss the fallback if needed.

**4. Change of Guarantor Restrictions — Pushback**

Pinnacle's markup would prohibit any assignment or transfer of the guaranty obligations without Pinnacle's prior written consent, including in connection with a merger, consolidation, or corporate reorganization of Fairwater. We respectfully push back on this formulation as overly restrictive and inconsistent with market practice.

We propose instead that the guaranty be freely assignable to any successor entity in connection with a merger, consolidation, or sale of all or substantially all of Fairwater's assets, provided that (i) the successor entity satisfies the minimum tangible net worth covenant ($500,000,000) and minimum liquid assets covenant ($50,000,000) at the time of such transaction and (ii) the successor entity assumes the guaranty

**5. Fixed Interest Rate and Maturity Confirmation**

For the record, the eight Pinnacle loans carry a fixed interest rate of 4.22% per annum with a maturity date of July 1, 2028. No change to the loan economics is sought in connection with the change of control consent or the guarantor replacement.

Pinnacle requested that the guaranty name Pinnacle Federal Bank, N.A. as the guaranteed party, without extending to successors and assigns of the lender absent guarantor consent. Fairwater accepts this formulation, which is reflected in the redline without modification.

The eight logistics properties securing Loans 1-A through 1-H under the Pinnacle Master Loan Agreement are as follows:

- Fairfield Logistics Center I — 4200 Fairfield Industrial Blvd, Fairburn, GA (Borrower: GMP Fairfield I LLC; Loan 1-A) - Fairfield Logistics Center II — 4300 Fairfield Industrial Blvd, Fairburn, GA (Borrower: GMP Fairfield II LLC; Loan 1-B) - Westlake Distribution Hub — 11500 Westlake Parkway, Houston, TX (Borrower: GMP Westlake LLC; Loan 1-C) - Katy Freeway Logistics Park — 22600 Katy Freeway, Katy, TX (Borrower: G

As you know, the lender consent deadline under the PSA is May 24, 2024, with a scheduled closing date of May 31, 2024. To keep us on track, we would appreciate it if Pinnacle and Whitfield & Archer could turn comments on the attached revised redline by no later than April 15, 2024. That should give the parties sufficient time to finalize the guaranty form and move toward execution of the consent letter well ahead of

For your information, the Veltrano Capital and Sycamore Life Insurance consent processes are proceeding in parallel with their respective counsel (Cranford McCabe LLP and Partridge Wynn & Slater LLP), and we do not anticipate issues on those fronts. We also want to note that Bradley Carston at Pinnacle has been very responsive throughout this process, and we appreciate the collaborative dialogue.

I am available to discuss any of the foregoing by phone early next week if you or your team has questions. Please confirm receipt of this email and the attached documents, and feel free to circulate to Bradley as appropriate.

Grace Nakamura Calderwood & Harkness LLP 450 Park Avenue, 28th Floor New York, NY 10022 Direct: (212) 554-7318 gnakamura@calderwoodharkness.com Matter No. 1036-00004

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