Contract analysis

I. Executive Summary This memorandum analyzes the three principal tax issues raised in the private letter ruling request submitted on behalf of Fairwater Real Estate Investment Trust ("Fairwater" or the "Company") to the Internal Revenue Service National Office, Office of Associate Chief Counsel (Financial Institutions & Products), under Revenue Procedure 2025-1. The ruling request was filed in connection with Fairwa

II. Background and Statement of Facts A. Fairwater Real Estate Investment Trust Fairwater Real Estate Investment Trust is a Maryland real estate investment trust organized under the laws of the State of Maryland. Fairwater's principal executive offices are located at 2400 Harbor Promenade, Suite 1100, Baltimore, Maryland 21202. Fairwater's registered agent for service of process in Maryland is Capitol Registered Agen

1. Food-and-Beverage Operations. The Southgate Portfolio includes food-and-beverage operations consisting of three full-service restaurants, a food hall, and multiple quick-service retail food outlets, concentrated primarily at Buckhead Terrace in Atlanta. These operations are currently managed by Thornfield through a subsidiary. Projected annual gross revenue from food-and-beverage operations is approximately $17.2

2. Parking Management. The Portfolio includes three multi-level structured parking garages with an aggregate capacity of approximately 4,800 spaces, concentrated primarily at Triangle Gateway in Raleigh. Parking management includes daily transient parking, monthly permit parking, and event-based parking. Projected annual gross revenue from parking management operations is approximately $12.8 million.

3. Co-Working-Space Operations. Ashford Place in Charlotte includes a 54,000-square-foot co-working facility branded as "WorkHub," offering furnished office suites, hot-desk memberships, dedicated desks, conference room rentals, and ancillary services (printing, reception, mail handling). Projected annual gross revenue from co-working-space operations is approximately $8.4 million. These three categories of ancillary

III. Issue One: Whether Rents Received by Fairwater from Southgate TRS Under Intercompany Leases Constitute "Rents from Real Property" Under IRC § 856(d) A. Statement of the Issue The first issue presented is whether rents paid by Fairwater Southgate TRS, Inc. to Fairwater Real Estate Investment Trust under the proposed Intercompany Leases for the use of real property portions of the Southgate Portfolio will constitu

IV. Issue Two: Whether the Formation and Capitalization of Southgate TRS Will Cause Fairwater to Fail the Asset Tests Under IRC § 856(c)(4) A. Statement of the Issue The second issue presented is whether the formation and capitalization of Fairwater Southgate TRS, Inc. with a projected asset value of $147 million will cause Fairwater to fail any of the following asset tests under IRC § 856(c)(4): (i) the 20% TRS asse

1. The 20% TRS Asset Test — IRC § 856(c)(4)(B)(ii). The 20% TRS asset test limits the aggregate value of securities of one or more TRS entities to not more than 20% of the value of the REIT's total assets. The relevant calculations for Fairwater following the proposed transaction are as follows: • Projected TRS Asset Value: $147,000,000 (the projected fair market value of Southgate TRS's assets following the post-acq

2. The 75% Asset Test — IRC § 856(c)(4)(A). The 75% real estate asset test requires that at least 75% of the value of Fairwater's total assets consist of qualifying real estate assets, cash and cash items, and government securities. The relevant calculations are as follows: • Projected Qualifying Real Estate Assets: $6,580,000,000. This figure includes (a) Fairwater's existing portfolio of qualifying real estate asse

3. The 25%/5%/10% Securities Tests — IRC § 856(c)(4)(B). The 25% Test. The 25% securities test limits non-qualifying securities (other than real estate assets, cash, and government securities) to not more than 25% of the value of the REIT's total assets. The relevant calculations are as follows: • Projected Non-Qualifying Securities: Approximately $1,450,000,000. This includes (a) the $147 million in Southgate TRS se