Contract analysis

I. EXECUTIVE SUMMARY A. Purpose of Memorandum This memorandum analyzes the federal and state income tax consequences of the proposed cash dividend distribution of approximately $335,000,000 (the "Distribution") from Nexford Industrial Holdings Inc., a Delaware corporation ("Nexford" or the "Borrower"), to its direct parent and sole shareholder, Granite Peak NIH Holdings, LLC, a Delaware limited liability company ("Ho

1. Characterization of the Distribution from Nexford to Holdings. The Distribution from Nexford (a C corporation) to Holdings (its sole shareholder) will be characterized in accordance with the three-tier framework of Internal Revenue Code ("IRC" or "Code") Section 301(c): first, as a dividend to the extent of Nexford's accumulated and current earnings and profits ("E&P"); second, as a tax-free return of capital redu

2. Pass-Through Treatment at the Holdings Level. Holdings is classified as a partnership for federal income tax purposes under the default classification rules of Treasury Regulation § 301.7701-3. As a pass-through entity, Holdings does not itself pay federal income tax on the Distribution. Rather, the tax consequences of the Distribution — whether characterized as dividend income, return of capital, or gain — flow t

3. State and Local Tax Implications. State and local tax consequences are relevant primarily in Illinois, where Nexford is headquartered and maintains its principal state tax domicile, and in Delaware, where multiple entities in the organizational chain are formed. The Distribution itself does not create a direct state tax liability at the Nexford level (because dividends paid are not deductible by the distributing c

4. No Material Withholding Tax Obligation. No federal withholding tax is expected at the Nexford-to-Holdings level, provided that Holdings furnishes a valid IRS Form W-9 reflecting its taxpayer identification number (EIN 85-3291047). The Foreign Account Tax Compliance Act ("FATCA") provisions of IRC §§ 1471–1474 do not impose withholding obligations on distributions between domestic entities.

5. Planning Considerations and Recommended Diligence. This memorandum identifies several critical factual assumptions that must be confirmed before the analysis can be finalized, including Nexford's accumulated and current E&P, Holdings' adjusted tax basis in its Nexford stock, the absence of any entity classification election (Form 8832) for Holdings, the structure of the January 2019 acquisition (and in particular

II. TRANSACTION STRUCTURE AND PARTIES A. Overview of the Distribution Chain The Distribution will occur through a multi-step chain, flowing from Nexford through Holdings to the fund-level entities, as described below. Step 1: Distribution from Nexford to Holdings. Nexford Industrial Holdings Inc. (a Delaware corporation, EIN 36-4178552, headquartered at 1400 Industrial Parkway, Schaumburg, Illinois 60173) will declar

III. FEDERAL INCOME TAX ANALYSIS A. Characterization of the Distribution from Nexford to Holdings

1. General Framework under IRC Section 301 Nexford is a C corporation for federal income tax purposes, and the Distribution is a distribution of cash (property within the meaning of IRC § 317(a)) by Nexford to its sole shareholder, Holdings. Accordingly, the Distribution is governed by the provisions of IRC § 301, which provides the general framework for the tax treatment of distributions by corporations to sharehold

2. Earnings and Profits Analysis Importance of the E&P Determination. The E&P analysis is the single most important factual determination for purposes of characterizing the Distribution. If Nexford's combined accumulated and current E&P equals or exceeds $335,000,000 at the time of the Distribution, the entire Distribution will be characterized as a taxable dividend. If E&P is less than $335,000,000, the shortfall wi

3. Dividend Treatment Consequences To the extent the Distribution (or any portion thereof) is characterized as a dividend under IRC § 316, the following tax consequences result: At the Holdings Level. The dividend income is includable in Holdings' gross income. However, because Holdings is classified as a partnership for federal income tax purposes, it is not itself subject to federal income tax. Rather, the dividend

4. Return of Capital Treatment To the extent the Distribution exceeds Nexford's accumulated and current E&P (if E&P is insufficient to cover the entire $335,000,000 Distribution), the excess is applied against and reduces Holdings' adjusted tax basis in its Nexford stock under IRC § 301(c)(2). This portion of the Distribution is not included in Holdings' gross income and is not subject to federal income tax. It is, i

5. Gain Recognition To the extent the Distribution exceeds both Nexford's E&P and Holdings' adjusted tax basis in its Nexford stock, the excess is treated as gain from the sale or exchange of property — specifically, as gain from the deemed sale of Holdings' Nexford stock — under IRC § 301(c)(3). Because Holdings has held Nexford stock continuously since January 2019 (more than one year), any gain recognized under th

1. Pass-Through Treatment As noted above, Granite Peak NIH Holdings, LLC is classified as a partnership for federal income tax purposes. As such, Holdings is not subject to entity-level federal income tax. Rather, all items of income, gain, loss, deduction, and credit flow through to Holdings' members — Fund IV and the Co-Invest Vehicle — in accordance with the allocation provisions of the Holdings LLC Agreement and

2. Adjustments to Members' Capital Accounts and Outside Basis The cash distribution from Holdings to its members (Fund IV and the Co-Invest Vehicle) will reduce each member's capital account and "outside" basis in its Holdings interest. Under IRC § 733, a partner's basis in its partnership interest is reduced (but not below zero) by the amount of money distributed to the partner. If the cash distribution to a member

IV. STATE AND LOCAL TAX ANALYSIS A. Illinois Nexford's state of tax residence is Illinois, where it maintains its corporate headquarters at 1400 Industrial Parkway, Schaumburg, Illinois 60173, and files its state income tax returns. Nexford's fiscal year ends on December 31. The state tax implications of the Distribution are analyzed below. Illinois Corporate Income Tax at the Nexford Level. Nexford is subject to the