Contract analysis

I. Executive Summary This memorandum sets forth a comprehensive tax due diligence analysis prepared in connection with Fairwater Real Estate Investment Trust's ("Fairwater" or "FREIT") proposed acquisition (the "Transaction") of 100% of the membership interests in fourteen (14) single-purpose Delaware limited liability companies (each a "Target Entity" and collectively, the "Target Entities") from Greystone Meridian

1. REIT Qualification Impact: Analysis of whether the Transaction adversely affects Fairwater's qualification as a real estate investment trust under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), including the 75% gross income test, the 75% asset test, the 95% gross income test, distribution requirements, and prohibited transaction considerations.

2. Controlling-Interest Transfer Tax Exposure: Identification and quantification of transfer taxes potentially imposed by the five states in which Portfolio properties are located in connection with the transfer of controlling interests in entities owning real property, with particular attention to Georgia, Florida, Tennessee, and North Carolina (Texas does not impose a state-level transfer tax).

3. Depreciation Recapture and Step-Up Analysis: Evaluation of the federal income tax consequences of the entity-purchase structure on the tax basis of the underlying real property assets, including the absence of an automatic basis step-up, carryover depreciation implications, and the inapplicability of Section 754, Section 338(h)(10), and Section 336(e) elections to disregarded entity structures.

4. Section 1031 Exchange Implications: Assessment of whether the Transaction implicates like-kind exchange provisions under Section 1031 for either Buyer or Seller.

5. State Income and Franchise Tax Filing Obligations: Identification of Fairwater's post-acquisition state income and franchise tax filing obligations in each of the five states where Portfolio properties are situated.

6. FIRPTA Analysis: Determination of whether the Foreign Investment in Real Property Tax Act ("FIRPTA") imposes any withholding obligations on Fairwater in connection with the acquisition.

7. Purchase Price Allocation Under Section 1060: Review of the agreed purchase price allocation methodology and its implications for Fairwater's depreciable basis in the acquired assets. In conducting this analysis, we have coordinated extensively with Ashford Prewitt LLP, Fairwater's accounting and tax advisors, and specifically with Martin Ashford, CPA, Engagement Partner, and Naomi Ikeda, CPA, Tax Partner. We have

II. Transaction Overview A. Parties Buyer. Fairwater Real Estate Investment Trust ("Fairwater" or "FREIT") is a Maryland real estate investment trust listed on the New York Stock Exchange under the ticker symbol "FREIT." As of the fourth quarter of 2023, Fairwater had an approximate market capitalization of $4.8 billion. Fairwater is headquartered at 7200 Chesapeake Parkway, Suite 1100, Columbia, Maryland 21044. Its

III. REIT Qualification Analysis A. Overview of Fairwater's REIT Status Fairwater elected REIT status under Sections 856 through 860 of the Code effective for its initial taxable year ending December 31, 2011. Since that time, Fairwater has continuously qualified and operated as a REIT for federal income tax purposes. A REIT is generally not subject to federal corporate income tax on the portion of its taxable income

Section 856(c)(2) of the Code requires that at least 75% of a REIT's gross income for each taxable year be derived from certain specified sources, including, among other items, "rents from real property" as defined in Section 856(d), gain from the sale of real property not held primarily for sale, interest on obligations secured by real property or interests in real property, and certain other qualifying categories.

Section 856(c)(4) of the Code requires that at the close of each quarter of the taxable year, at least 75% of the value of a REIT's total assets consist of real estate assets, cash and cash items (including receivables), and government securities. "Real estate assets" include real property (or interests in real property), interests in mortgages on real property, and shares in other qualifying REITs. Pre-Acquisition A

Section 856(c)(3) of the Code imposes a second gross income test requiring that at least 95% of a REIT's gross income consist of income that satisfies the 75% gross income test plus certain additional categories of passive income, including dividends, interest (not described in Section 856(c)(2)), and gain from the sale of securities. The acquisition of the Portfolio does not generate any non-qualifying income under

Section 857(b)(6) of the Code imposes a 100% excise tax on net income derived from "prohibited transactions," which are defined as sales or other dispositions of property held primarily for sale to customers in the ordinary course of a trade or business (i.e., "dealer" property). This provision is designed to prevent REITs from engaging in active real estate development and sales activities that are more characterist

IV. Transfer Tax Analysis — Five States A. Overview One of the most significant tax considerations in an entity-level real estate transaction is the potential application of "controlling-interest transfer taxes" in jurisdictions where the target entities own real property. Many states have enacted statutes that treat the transfer of a controlling interest (typically 50% or more) in an entity that owns real property a

V. Depreciation Recapture and Step-Up Analysis A. Entity-Level Purchase — Tax Basis Implications The single most significant tax consequence of the entity-purchase structure selected for this Transaction is that the tax basis in the underlying real property assets held by the Target Entities does not automatically step up to fair market value for federal income tax purposes upon the transfer of the membership interes

Section 754 of the Code permits a partnership, upon the sale or exchange of a partnership interest, to elect to adjust the basis of partnership property to reflect the difference between the transferee partner's outside basis (i.e., the purchase price paid for the partnership interest) and the transferee partner's share of the partnership's inside basis (i.e., the partnership's basis in its underlying assets). This e

Section 338(h)(10) of the Code permits a buyer and seller in a "qualified stock purchase" of a corporate target to jointly elect to treat the stock purchase as a hypothetical asset purchase for federal income tax purposes, thereby permitting the buyer to obtain a stepped-up basis in the target's assets. Similarly, Section 336(e) permits certain dispositions of stock of a subsidiary corporation to be treated as asset

Section 1250 of the Code provides for the recapture of depreciation on the disposition of depreciable real property. To the extent of prior depreciation deductions taken on the Portfolio properties, the Seller's gain will be subject to the 25% "unrecaptured Section 1250 gain" rate (rather than the preferential long-term capital gains rate). Because GMP Fund III is a partnership, the unrecaptured Section 1250 gain wil

VI. Section 1031 Exchange Implications A. Applicability to Buyer (Fairwater) Fairwater is not utilizing a Section 1031 like-kind exchange structure in connection with the acquisition of the Portfolio. The cash equity component of the Transaction ($488,000,000) is being funded from Fairwater's revolving credit facility with Aldgate National Bank, N.A., and no "relinquished property" has been identified or exchanged in