Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze whether the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"), codified at Sections 897 and 1445 of the Internal Revenue Code of 1986, as amended (the "Code"), imposes any withholding obligation on Fairwater Real Estate Investment Trust ("Fairwater" or "Buyer") in connection with its proposed acquisition of one hundred percent (100%) of th

II. Transaction Overview The following summarizes the material facts relevant to the FIRPTA analysis. This summary is based on our review of the PSA and related transaction documents, publicly available organizational filings, and information provided by both Buyer's and Seller's counsel. Buyer. Fairwater Real Estate Investment Trust ("Fairwater" or "Buyer") is a Maryland real estate investment trust that has elected

III. FIRPTA Statutory Framework FIRPTA was enacted as part of the Omnibus Reconciliation Act of 1980, Pub. L. No. 96-499, 94 Stat. 2682, to address a perceived inequity in the pre-1980 treatment of foreign investors who realized gain on dispositions of U.S. real property. Prior to FIRPTA, gains from the sale of U.S. real property by foreign persons were generally not subject to U.S. federal income tax unless the gain

Section 897(a) of the Code provides the foundational rule that gain or loss of a nonresident alien individual or a foreign corporation from the disposition of a United States real property interest shall be taken into account as if such gain or loss were effectively connected with the conduct of a trade or business within the United States. This provision overrides the general rule that capital gains of foreign perso

Section 897(c)(1) defines the term "United States real property interest" broadly. A USRPI includes: (i) an interest in real property (including interests in mines, wells, or other natural deposits) located in the United States or the United States Virgin Islands; and (ii) any interest (other than an interest solely as a creditor) in any domestic corporation that is, or was at any time during the shorter of the perio

Section 897(g) extends the FIRPTA regime to partnership interests. Specifically, under Section 897(g), under regulations prescribed by the Secretary, a nonresident alien individual or foreign corporation that disposes of an interest in a partnership, trust, or estate shall be treated under Section 897(a) to the extent that gain or loss attributable to the disposition is attributable to United States real property int

Section 1445 establishes the enforcement mechanism for FIRPTA by imposing a withholding obligation on the transferee (buyer) of a USRPI. This withholding obligation is designed to ensure that the IRS collects tax on the gain realized by a foreign person on the disposition of a USRPI, even where the foreign person might otherwise leave the United States without filing a return or paying tax.

Section 1445(a) provides the general rule: "Except as otherwise provided in this section, in the case of any disposition of a United States real property interest (as defined in section 897(c)) by a foreign person, the transferee shall be required to deduct and withhold a tax equal to 15 percent of the amount realized on the disposition." The "amount realized" generally means the total purchase price, including the f

IV. Analysis of Seller's Status A. GMP Fund III Is a Domestic Partnership The determinative question under Section 1445(a) is whether GMP Fund III, as the transferor of the membership interests in the Target Entities, is a "foreign person." For the reasons set forth below, the answer is no. GMP Fund III's full legal name is Greystone Meridian Partners Fund III, L.P. It is a limited partnership formed and existing und

Section 1446 Does Not Create a Buyer Withholding Obligation. Section 1446 of the Code imposes a withholding obligation on a partnership that has effectively connected taxable income ("ECTI") allocable to foreign partners. Specifically, Section 1446(a) provides that, if a partnership has ECTI for any taxable year and any portion of such income is allocable to a foreign partner, the partnership shall pay a withholding

V. FIRPTA Withholding Certificate — Not Required In certain transactions involving foreign transferors, a transferee may apply to the Internal Revenue Service for a "withholding certificate" under Section 1445(b)(4) and Treasury Regulation § 1.1445-3 to reduce the amount of withholding required under Section 1445(a). A withholding certificate may be issued by the IRS where, for example, the transferor's maximum tax l

VI. Belt-and-Suspenders: Non-Foreign Person Affidavit (FIRPTA Certificate) A. Rationale. Although our analysis confirms that FIRPTA withholding is not legally required in connection with this Transaction, we nevertheless strongly recommend, as a matter of best practice and risk management, that Seller deliver a non-foreign person affidavit (the "FIRPTA Certificate") at closing. This recommendation is grounded in seve

VII. State-Level FIRPTA-Like Provisions In addition to the federal FIRPTA regime, certain states impose their own withholding requirements on transfers of real property (or interests therein) by nonresident sellers. Because the fourteen (14) properties held by the Target Entities are located in five Sun Belt states — Georgia, Texas, Florida, Tennessee, and North Carolina — we have surveyed the applicable state-level

VIII. Coordination with Closing Deliverables The following summarizes the logistical steps for the delivery and retention of the FIRPTA Certificate at closing: Execution. The FIRPTA Certificate will be executed by Victor Lansdell, in his capacity as an authorized signatory of Greystone Meridian Capital LLC, as general partner of Greystone Meridian Partners Fund III, L.P. Victor Lansdell has been identified by Seller'

IX. Conclusion and Recommendations Based on the foregoing analysis, we offer the following conclusions and recommendations:

1. No FIRPTA withholding required. Greystone Meridian Partners Fund III, L.P. is a domestic limited partnership organized under the laws of the State of Delaware and is not a "foreign person" within the meaning of Section 1445(f)(3) of the Code. Fairwater Real Estate Investment Trust, as the transferee of the membership interests in the fourteen (14) Target Entities, has no obligation to deduct or withhold any portio

2. No IRS forms required. Because no FIRPTA withholding is required, Fairwater is not required to file IRS Form 8288 (U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests) or IRS Form 8288-A (Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests) in connection with the Transaction. Fairwater is likewise not required to apply for a withho

3. FIRPTA Certificate recommended. As a belt-and-suspenders measure, and to satisfy the Schedule B-I requirement of Commonwealth National Title Insurance Company in each of the fourteen (14) title commitments, Seller should deliver at closing an executed non-foreign person affidavit (the "FIRPTA Certificate") in the form of PSA Exhibit O. The FIRPTA Certificate must certify that Greystone Meridian Partners Fund III,

4. No state-level withholding triggered. No FIRPTA-analogous state withholding obligation is triggered in any of the five states in which the Target Entities' properties are located (Georgia, Texas, Florida, Tennessee, or North Carolina). This conclusion is based on the entity-level transfer structure of the Transaction and on GMP Fund III's status as a domestic partnership. State-level local counsel confirmations ha

5. PSA provisions adequate. The Purchase and Sale Agreement dated February 28, 2024 includes both a Seller representation of non-foreign person status and the delivery of the FIRPTA Certificate as a condition to Buyer's obligation to close. The form of FIRPTA Certificate is attached as Exhibit O to the PSA and has been approved by Seller's counsel without objection. No further documentation or contractual provisions