1026-00001 · Briarwood Family Office LLC · LPA & PPM Review

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PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED

MEMORANDUM

February 2, 2024

TO: Sandra M. Whitfield, General Counsel, Briarwood Family Office LLC Derek T. Calloway, Director of External Investments, Briarwood Family Office LLC

FROM: Theresa Kim, Lead Associate, Calderwood & Harkness LLP Owen Fischer, Working Associate, Calderwood & Harkness LLP

SUPERVISED BY: Pamela Cross, Partner, Funds & Asset Management, Calderwood & Harkness LLP

RE: Review and Analysis of Limited Partnership Agreement — Meridian Peak Capital Partners Fund IV, L.P.

MATTER NO.: 1026-00001

Calderwood & Harkness LLP 425 Lexington Avenue New York, NY 10017

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I. Executive Summary

The purpose of this memorandum is to provide Briarwood Family Office LLC ("BFO") with a comprehensive review and legal analysis of the Amended and Restated Agreement of Limited Partnership of Meridian Peak Capital Partners Fund IV, L.P. (the "Fund" or "Fund IV"), dated December 20, 2023 (the "LPA"), in connection with BFO's evaluation of a proposed limited partnership commitment of Seventy-Five Million Dollars ($75,000,000) to Fund IV. This memorandum has been prepared at the request of BFO's General Counsel, Sandra M. Whitfield, and is intended to assist BFO's investment committee in its evaluation and approval process.

Fund IV is organized as a Delaware limited partnership, filed with the Delaware Secretary of State under Certificate Number LP-2023-08841. The Fund is managed by its general partner, Meridian Peak Capital Partners GP IV LLC (the "GP" or the "General Partner"), a Delaware limited liability company whose sole member is Meridian Peak Capital Advisors LLC ("MPCA"). The LPA is governed by the laws of the State of Delaware, and the Delaware Revised Uniform Limited Partnership Act ("DRULPA") applies to the extent not expressly modified by the LPA.

Fund IV's stated investment strategy is to pursue value-add and opportunistic investments in North American commercial real estate, real estate operating companies, and asset management platforms. The Fund has established a target fund size of $1,500,000,000 and a hard cap of $1,750,000,000. The Fund anticipates holding its first close on or about April 30, 2024, with a final close deadline of October 31, 2024. BFO's proposed commitment of $75,000,000 would represent approximately 5.0% of the target fund size and approximately 4.29% of the hard cap, positioning BFO as a meaningful but not anchor-level investor in the Fund.

MPCA was founded in 2011 by Conrad J. Ellsworth and Priya Narayan, who continue to serve as the firm's Co-Founders and Managing Partners. Mr. Ellsworth serves as Chief Executive Officer and Ms. Narayan serves as Chief Investment Officer. Since its founding, MPCA has raised three prior funds — Meridian Peak Capital Partners Fund I, L.P., Meridian Peak Capital Partners Fund II, L.P., and Meridian Peak Capital Partners Fund III, L.P. (collectively, "Funds I–III") — aggregating approximately $3.2 billion in committed capital. Fund IV represents a meaningful step-up in target fund size relative to the prior fund vintages, and the GP's ability to deploy capital effectively at this increased scale is a consideration that BFO should evaluate as part of its broader investment diligence, which is addressed separately in our concurrent PPM Summary & Risk Assessment Memorandum.

Overall Assessment. Following a thorough review of the LPA, it is our view that the agreement is broadly consistent with prevailing market terms for a mid-market real estate private equity fund of this size and strategy. The economic terms — including a 1.75% management fee on committed capital during the Investment Period, a 20% carried interest above an 8% preferred return, and a European (whole-fund) waterfall — are within the range we observe across comparable funds in the current market environment. However, several provisions in the LPA warrant attention and, in our recommendation, should be the subject of negotiation through a side letter to the LPA. These provisions relate primarily to (i) the absence of excuse and exclusion rights in the base LPA, (ii) the management fee structure, (iii) co-investment rights, (iv) most favored nation protections, (v) enhanced reporting obligations, (vi) key person provisions, (vii) transfer rights, and (viii) confidentiality carve-outs. Our detailed recommendations on each of these points are summarized at Section XV of this memorandum and discussed in the relevant sections throughout.

This memorandum should be read in conjunction with the separate PPM Summary & Risk Assessment Memorandum prepared by Calderwood & Harkness and delivered concurrently to BFO, which addresses the investment risk factors, market positioning, and track record analysis for Fund IV based on the Private Placement Memorandum dated December 15, 2023.

II. Defined Terms and Interpretive Provisions

Throughout this memorandum, we use capitalized terms as defined in the LPA unless otherwise noted. For the convenience of BFO's review, we highlight below the key defined terms in the LPA that are most relevant to BFO's evaluation of the proposed commitment and that recur throughout this memorandum:

• "Capital Commitment" means the total amount that a Limited Partner has committed to contribute to the Fund as set forth in such Limited Partner's Subscription Agreement. BFO's proposed Capital Commitment is $75,000,000.

• "Capital Account" means, with respect to each Partner, such Partner's capital account as maintained by the Fund in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv) and the applicable provisions of the LPA.

• "Carried Interest" means the performance-based allocation payable to the General Partner equal to 20% of the Fund's net profits in excess of the Preferred Return, as more fully described in Section V.C below.

• "Commitment Period" (synonymous with "Investment Period") means the period beginning on the date of the Final Close and ending on the fourth anniversary thereof, during which the General Partner may make new Investments on behalf of the Fund. The Commitment Period is subject to early termination upon a Key Person Event as described in Section VIII.

• "Fund Expenses" means the operating expenses of the Fund as described in Section 5.4 of the LPA, including audit fees, legal fees, administration fees, valuation expenses, insurance premiums, taxes, regulatory filing costs, broken-deal costs, and other customary expenses of the Fund. Fund Expenses are discussed in detail in Section V.D of this memorandum.

• "Investment" means any investment made by the Fund in a Portfolio Company or other asset in furtherance of the Fund's investment strategy, including equity investments, debt investments, mezzanine investments, and joint venture interests.

• "Net Asset Value" or "NAV" means the fair market value of the Fund's assets less the Fund's liabilities, as determined by the General Partner in accordance with the valuation provisions of the LPA (Section 9.3 of the LPA).

• "Organizational Expenses" means the costs and expenses incurred in connection with the formation and organization of the Fund, including legal fees, regulatory filing fees, and printing costs, which are borne by the Fund subject to the cap described in Section V.D of this memorandum.

• "Preferred Return" means the annual compounded preferred return of 8% per annum on contributed capital, as described in the waterfall provisions of the LPA.

• "Subscription Agreement" means the subscription agreement entered into between the Fund and each Limited Partner in connection with such Limited Partner's admission to the Fund.

The LPA specifies that it is governed by, and to be construed in accordance with, the laws of the State of Delaware without regard to conflicts of law principles. The Delaware Revised Uniform Limited Partnership Act ("DRULPA"), 6 Del. C. §§ 17-101 et seq., governs the Fund to the extent not expressly modified by the LPA. The LPA contains extensive interpretation clauses stating that, where the provisions of the LPA expressly address a subject also addressed by DRULPA, the LPA provisions are intended to supersede the default DRULPA provisions. This is standard practice in Delaware limited partnership agreements and permits the parties to contract around certain default provisions of DRULPA (as DRULPA expressly permits), including provisions governing distributions, voting, and dissolution.

The LPA makes reference to the Private Placement Memorandum dated December 15, 2023, which sets forth the Fund's offering terms, risk factors, and investment strategy in greater detail. Additionally, we note that the GP filed a Form D with the U.S. Securities and Exchange Commission on January 2, 2024, reflecting the Fund's reliance on the private placement exemption under Regulation D of the Securities Act of 1933, as amended. The PPM and Form D are addressed in our separate PPM Summary & Risk Assessment Memorandum.

III. Formation, Term, and Fund Structure

A. Formation and Structure

Fund IV was formed as a Delaware limited partnership pursuant to a Certificate of Limited Partnership filed with the Secretary of State of the State of Delaware under Certificate Number LP-2023-08841. The Fund's organizational structure is consistent with the standard structure employed by institutional real estate private equity funds and provides for a single general partner entity and multiple limited partners admitted through a private placement process.

The General Partner of the Fund is Meridian Peak Capital Partners GP IV LLC, a Delaware limited liability company formed for the sole purpose of serving as the general partner of Fund IV. The sole member of the GP is Meridian Peak Capital Advisors LLC ("MPCA"), the MPCA management company entity through which Messrs. Ellsworth and Narayan and the broader MPCA investment team operate. This single-layer GP structure — in which the GP is a direct subsidiary of the management company — is standard for funds of this type and does not raise any structural concerns from BFO's perspective. We note, however, that because the GP is a limited liability company with a single member, BFO should be aware that any change in control of MPCA (whether through admission of new members, transfer of membership interests, or otherwise) would effectively constitute a change of control of the GP. The LPA does not contain an express change-of-control provision with respect to MPCA, though the Key Person provisions (discussed in Section VIII below) provide some protection against departure of the principal investment professionals.

The Fund's registered agent in the State of Delaware is Beacon Statutory Services LLC, located at 1013 Centre Road, Wilmington, Delaware 19805. The General Partner's registered agent is also Beacon Statutory Services LLC at the same address. This is a standard commercial registered agent arrangement.

The GP maintains its principal office at 200 Clarendon Street, 42nd Floor, Boston, Massachusetts 02116, which is the primary business address of MPCA and the location from which Fund IV's investment activities are expected to be conducted.

The LPA identifies the following key service providers to the Fund:

• Fund Administrator: Granite Ledger Fund Services LLC, located at 100 Summer Street, Suite 2700, Boston, Massachusetts 02110. The client relationship manager for Fund IV at Granite Ledger is Catherine J. Halloran. The fund administrator will be responsible for maintaining the Fund's books and records, processing capital calls and distributions, preparing quarterly financial statements, and coordinating with the Fund's auditor on annual audited financial statements. Granite Ledger is a well-established fund services provider with a significant presence in the real estate fund administration space.

• Fund Auditor: Brockton Marsh & Associates LLP, located at 500 Boylston Street, 30th Floor, Boston, Massachusetts 02116. The engagement partner for Fund IV at Brockton Marsh is Neil A. Strickland. Brockton Marsh will be responsible for conducting the annual audit of the Fund's financial statements. While Brockton Marsh is a reputable regional audit firm, it is not among the Big Four accounting firms. BFO should assess whether the audit quality and market reputation of Brockton Marsh are consistent with BFO's expectations for a fund of this size, though we do not consider this to be a material concern from a legal perspective.

• Placement Agent: Pinnacle Capital Markets LLC, located at 399 Park Avenue, 18th Floor, New York, New York 10022. The managing director responsible for the Fund IV placement is Roland S. Abernathy. Pinnacle was engaged by the GP pursuant to a placement agent engagement letter dated November 1, 2023. The placement agent's compensation and the offset provisions applicable to BFO are discussed in Section V.B of this memorandum.

• GP Counsel: Ashford Crane & Hewitt LLP, located at 1 Federal Street, Suite 3600, Boston, Massachusetts 02110. Ashford Crane serves as outside legal counsel to the General Partner and MPCA in connection with the formation, offering, and operation of Fund IV. We have been in communication with Harrison K. Drummond and Elaine C. Woodbury of Ashford Crane in connection with BFO's diligence process, and we anticipate that any side-letter negotiations will be conducted with Ashford Crane on behalf of the GP.

B. Fund Term

The LPA establishes a Fund term of ten (10) years commencing on the date of the Final Close. Assuming the Final Close occurs on October 31, 2024 (the stated deadline), the initial term of the Fund would expire on October 31, 2034.

The LPA further provides for two (2) one-year extension periods, each at the sole discretion of the General Partner, which would extend the Fund term to a maximum of twelve (12) years from the Final Close (i.e., potentially through October 31, 2036). Critically, the LPA does not require Limited Partner consent, LPAC approval, or any form of investor vote for either extension period. The GP may exercise each extension unilaterally by providing written notice to the Limited Partners at least 90 days prior to the expiration of the then-current term.

We note that the absence of any LP consent requirement for the extension periods is a less favorable term from BFO's perspective. While the first one-year extension at GP discretion is consistent with common market practice, there is an increasing trend in the institutional private equity market to require some form of investor consent for the second extension year — typically either (i) approval by the Limited Partner Advisory Committee ("LPAC"), or (ii) a vote of a majority or super-majority of Limited Partners. The rationale for such a requirement is that a second extension indicates potential difficulty in realizing the Fund's remaining portfolio, and LPs should have a voice in determining whether continued management by the GP is in the best interests of the Fund.

Recommendation: We recommend that BFO negotiate a side-letter provision requiring LPAC consent or, alternatively, the affirmative vote of Limited Partners holding a super-majority (66⅔% or 75%) of the aggregate Capital Commitments for the exercise of the second one-year extension. If LPAC consent is the mechanism employed, BFO should ensure it has adequate representation on or access to the LPAC, which is discussed further in Section XI.A below.

C. Closings. The LPA contemplates multiple closings for the admission of Limited Partners. The anticipated first close is April 30, 2024. The final close deadline is October 31, 2024, which is six (6) months following the anticipated first close. This six-month window between first and final close is standard for a fund of this size and provides the GP with adequate time to complete its fundraising activities.

Between the first close and the final close, the GP may hold one or more subsequent closings at its discretion to admit additional Limited Partners or to accept increased Capital Commitments from existing Limited Partners. The timing and number of subsequent closings are entirely within the GP's discretion, and no minimum or maximum number of closings is specified in the LPA.

The LPA includes an interest equalization mechanism for Limited Partners admitted at subsequent closings after the first close. Under this mechanism, subsequent-close LPs are required to contribute their pro rata share of all capital that has previously been called from first-close LPs, together with interest thereon at a rate equal to the Prime Rate plus 2.0% per annum, calculated from the date of each prior capital call through the date of the subsequent-close LP's admission. This interest equalization payment is intended to put subsequent-close LPs in the same economic position as if they had been admitted at the first close. The interest equalization payments are distributed to first-close LPs (and any previously-admitted subsequent-close LPs) in proportion to their respective shares of the prior capital calls. This is a standard provision and does not raise any concerns. Given that BFO is likely to be admitted at or near the first close, we do not anticipate significant interest equalization payments by BFO, though this should be confirmed during the subscription process.

IV. Capital Commitments and Capital Calls

A. Commitment Mechanics

BFO's proposed Capital Commitment to Fund IV is $75,000,000. The minimum Capital Commitment established in the LPA is $10,000,000, subject to the GP's right to waive such minimum in its sole discretion. BFO's proposed commitment is well in excess of the minimum and, as noted above, represents approximately 5.0% of the target fund size and 4.29% of the hard cap.

Capital calls are issued by the General Partner by written notice delivered to each Limited Partner. The LPA requires that capital call notices be delivered no less than ten (10) business days prior to the funding date. Each capital call notice must specify (i) the aggregate amount being called from all Limited Partners, (ii) the individual Limited Partner's pro rata share of the capital call, (iii) the purpose of the capital call (i.e., whether for new investments, follow-on investments, Fund Expenses, or reserves), (iv) the funding date, and (v) wire transfer instructions for remittance. We note that the ten-business-day notice period is standard for institutional real estate funds and provides BFO with adequate time to process funding requests internally.

During the Investment Period, the GP may issue capital calls for any purpose related to the Fund's operations, including (i) the acquisition of new investments, (ii) follow-on investments in existing portfolio companies or assets, (iii) payment of Fund Expenses, (iv) establishment of reserves as determined by the GP, and (v) repayment of borrowings under any subscription credit facility.

Following the expiration or termination of the Investment Period, the GP's authority to issue capital calls is more limited. Post-Investment Period capital calls may be made only for the following purposes: (i) follow-on investments in existing portfolio companies or assets (subject to the 18-month limitation discussed in Section VI.A below), (ii) payment of Fund Expenses, (iii) establishment or maintenance of reserves, and (iv) repayment of borrowings under credit facilities. No capital may be called post-Investment Period for the purpose of making new investments.

The General Partner is required to fund its own GP Capital Commitment on a pari passu basis with the Limited Partners — that is, the GP must fund its pro rata share of each capital call at the same time and in the same proportion as the Limited Partners. The GP's Capital Commitment is established in the LPA at 1.0% of aggregate Capital Commitments. At the target fund size of $1,500,000,000, the GP's anticipated commitment would be $15,000,000. This 1.0% GP commitment is standard for the market, though we note that some institutional investors prefer a GP commitment in the range of 1.5%–3.0% to ensure stronger alignment of interest between the GP and the LPs. BFO may wish to consider this point in its broader investment evaluation, though we do not recommend it as a side-letter negotiation item as it is unlikely to be modified for a single investor.

B. Overcall and Recycling Provisions

Recycling. The LPA permits the GP to recycle investment proceeds — that is, to recall and reinvest capital that has been returned to Limited Partners from realized investments. Recycling is subject to two conditions: (i) the proceeds to be recycled must be derived from investments that were realized within twenty-four (24) months of their initial acquisition, and (ii) the aggregate amount of capital called from Limited Partners (inclusive of recycled capital) may not exceed 125% of total Capital Commitments. This 125% recycling cap means that, in addition to the initial $75,000,000 Capital Commitment, BFO could potentially be required to fund up to an additional $18,750,000 in recycled capital calls over the life of the Fund (i.e., $75,000,000 × 125% = $93,750,000 total, less $75,000,000 initial commitment = $18,750,000 maximum additional recycled calls). We note that the 125% recycling cap is on the higher end of the market range (which typically falls between 110% and 125%) and reflects the GP's desire for flexibility in reinvesting early-realization proceeds. While recycling can be beneficial to LPs by increasing the Fund's invested capital base and potentially enhancing returns, it also extends the period during which LPs' capital is subject to call and increases the overall cash outflows from an LP's perspective.

Overcall. The LPA also contains an overcall provision that permits the GP to call additional capital from non-defaulting Limited Partners in the event that another Limited Partner defaults on a capital call obligation. Under the overcall provision, the GP may call up to 125% of a given non-defaulting LP's pro rata share of any capital call to cover a defaulting LP's shortfall. This provision creates potential overcall exposure for BFO — in a default scenario, BFO could be required to fund up to 25% more than its pro rata share of a capital call. The overcall provision is standard in form, though the 125% overcall limit (rather than a lower threshold, such as 110%) is somewhat aggressive.

Recommendation: We recommend that BFO monitor both the recycling cap and the overcall provisions carefully. BFO should consider negotiating a side-letter limitation on overcall exposure, potentially capping BFO's aggregate overcall obligation at a lower threshold (e.g., 110% of BFO's pro rata share of any given capital call, or establishing an absolute dollar cap on aggregate overcall funding over the life of the Fund). We recognize that the GP may resist modifications to the overcall provision, as it serves a structural purpose in protecting the Fund against LP defaults, but the exposure should be flagged for BFO's investment committee.

V. Fund Economics

A. Management Fee

The management fee structure under the LPA is divided into two tiers based on the Investment Period:

During the Investment Period (Years 1–4): The management fee is 1.75% per annum, calculated on the aggregate Capital Commitments of all Limited Partners. For BFO, based on a Capital Commitment of $75,000,000, the annual management fee during the Investment Period would be:

$75,000,000 × 1.75% = $1,312,500 per year

Over the four-year Investment Period, BFO's cumulative management fee burden (absent any negotiated reduction) would be:

$1,312,500 × 4 years = $5,250,000

We note that the management fee during the Investment Period is calculated on committed capital (i.e., the full $75,000,000), not on called or invested capital. This is standard practice for a fund of this size, but it means that BFO will be paying management fees on the full amount of its commitment from the outset, even though a significant portion of that commitment will remain uncalled during the early years of the Fund's life. This represents a real economic cost to BFO, as management fees on uncalled capital effectively reduce the net return on invested capital.

Post-Investment Period (Years 5–10+): Following the expiration of the Investment Period, the management fee steps down to 1.50% per annum, calculated on net invested capital (defined as the aggregate cost basis of unrealized investments, less any write-downs approved by the Fund's auditor). This post-Investment Period fee structure is favorable to LPs relative to a structure that continues to charge fees on committed capital, as the fee base will decline over time as investments are realized and capital is returned to LPs. The precise amount of the post-Investment Period management fee will vary depending on the pace of portfolio realizations and the extent of any write-downs, and therefore cannot be calculated with certainty at this time.

Management fees are payable quarterly in advance. The GP issues management fee invoices to the Fund (not directly to individual LPs), and management fees are funded through capital calls or, alternatively, through the use of a subscription credit facility, with such fees being allocated among the Limited Partners in proportion to their respective Capital Commitments.

Proposed Side-Letter Negotiation on Management Fee. We recommend that BFO negotiate a reduction in the management fee through a side letter, as follows:

• Investment Period fee: Reduce from 1.75% to 1.50% per annum on committed capital (a 25 basis point reduction)

• Post-Investment Period fee: Reduce from 1.50% to 1.25% per annum on net invested capital (a 25 basis point reduction)

The economic impact of the proposed reduction during the Investment Period would be as follows:

• Negotiated annual fee: $75,000,000 × 1.50% = $1,125,000 per year

• Annual savings: $1,312,500 − $1,125,000 = $187,500 per year

• Cumulative savings over the four-year Investment Period: $187,500 × 4 = $750,000

The post-Investment Period savings would be variable and dependent on the level of net invested capital, but would represent a consistent 25 basis point benefit to BFO throughout the remaining life of the Fund.

We believe a 25 basis point reduction is a reasonable and achievable negotiating objective for a commitment of BFO's size. At $75,000,000, BFO is a meaningful investor representing 5.0% of the target fund size, and fee reductions of this magnitude are commonly granted to investors at or above this commitment level in the current market environment. We anticipate that the GP may counter at a smaller reduction, such as 15 basis points (resulting in rates of 1.60% during the Investment Period and 1.35% post-Investment Period), and we would recommend that BFO be prepared to accept such a counter if it is the GP's final position on this point.

B. Placement Agent Fee Offset

Pinnacle Capital Markets LLC, the Fund's placement agent, is entitled to receive a placement fee equal to 1.0% of the Capital Commitment of each Limited Partner introduced to the Fund through Pinnacle's placement activities. Based on BFO's proposed Capital Commitment of $75,000,000, the placement fee attributable to BFO would be:

$75,000,000 × 1.0% = $750,000

The LPA provides that 100% of placement fees incurred with respect to a given Limited Partner are to be offset against the management fees otherwise payable by that Limited Partner. This means that the $750,000 placement fee attributable to BFO would be credited against BFO's management fee obligations, reducing BFO's net management fee burden by $750,000 over the offset period. We have confirmed that this 100% offset provision is contained in the base LPA itself (Section 5.2(d)) and is not limited to investors who have negotiated a specific side-letter provision.

We note, however, that the LPA does not specify the precise mechanics of the placement fee offset — for example, whether the offset is applied ratably over the Investment Period (i.e., $750,000 ÷ 4 years = $187,500 per year), applied in full against the first management fee payment, or applied in some other manner. This ambiguity should be clarified.

Recommendation: We recommend that BFO's side letter explicitly confirm the 100% offset and specify the timing and mechanics of the offset application. Our preference would be for the offset to be applied as a dollar-for-dollar reduction to the first management fee payments until the $750,000 offset is fully exhausted, as this would provide the maximum economic benefit to BFO through early recovery of the placement fee amount.

C. Carried Interest / Performance Allocation

The General Partner is entitled to a carried interest (referred to in the LPA as the "Performance Allocation") equal to 20% of the Fund's net profits in excess of the Preferred Return. The carried interest is the primary performance-based compensation mechanism for the GP and its investment professionals.

The carried interest is calculated and distributed in accordance with a whole-fund European-style distribution waterfall, which operates as follows:

Step 1 — Return of Contributed Capital. All distributions are first applied to return to the Limited Partners the aggregate amount of capital contributed by such Limited Partners to the Fund, including capital attributable to recycled investments. This provision ensures that no carried interest is payable to the GP until LPs have received a full return of their invested capital across the entire Fund portfolio.

Step 2 — Preferred Return. After full return of contributed capital, distributions are next applied to pay the Limited Partners a preferred return equal to 8% per annum on contributed capital, compounded annually. The preferred return accrues from the date of each capital contribution and continues to accrue until paid in full. The 8% preferred return is the prevailing market rate for real estate PE funds and is consistent with Funds I–III.

Step 3 — GP Catch-Up. After full payment of the preferred return, the General Partner receives 100% of subsequent distributions until the GP has received an amount equal to 20% of the aggregate profits distributed in Steps 2 and 3 combined. This catch-up mechanism effectively brings the GP's cumulative profit share up to 20% of total profits once the preferred return has been satisfied.

Step 4 — 80/20 Split. After completion of the GP catch-up, all remaining distributions are split 80% to the Limited Partners and 20% to the General Partner.

The European (whole-fund) waterfall structure is favorable to BFO and the other Limited Partners relative to a deal-by-deal (American) waterfall structure. In a deal-by-deal waterfall, the GP would be entitled to receive carried interest on profitable investments without first accounting for losses on other investments in the portfolio, creating the risk that the GP receives carried interest on individual deals even if the Fund as a whole has not generated positive returns net of the preferred return. The European waterfall avoids this risk by requiring that carry is calculated and paid only after all contributed capital has been returned and the preferred return has been satisfied across the entire Fund portfolio. This is a meaningful protection for BFO and is consistent with market best practices for real estate PE funds.

We do not recommend any modification to the carried interest terms via side letter. The 20/80 split with an 8% preferred return and European waterfall structure are market-standard, and the GP is unlikely to agree to modifications to these fundamental economic terms for any single LP.

GP Clawback Obligation. The LPA includes a GP clawback provision (Section 7.6 of the LPA), which requires the General Partner to return to the Fund, upon liquidation, any carried interest distributions that, in the aggregate, exceed the amount to which the GP would have been entitled based on the final cumulative performance of the Fund. The clawback obligation is secured by an escrow arrangement pursuant to which 25% of all carried interest distributions received by the GP are deposited into a third-party escrow account and held until the earlier of (i) the final liquidation of the Fund or (ii) the date on which the GP can demonstrate that no clawback obligation remains outstanding. The escrow account is maintained by a third-party escrow agent designated by the GP, and the LPA specifies that the escrow funds may be invested in U.S. Treasury obligations or money market funds pending release.

We note that the GP clawback obligation is subject to an after-tax adjustment — that is, the GP is only required to return the net after-tax amount of any excess carried interest, taking into account the taxes paid or payable by the GP (and its members) on such carried interest distributions. This after-tax clawback adjustment is common in the market but is less favorable to LPs than a gross clawback (which would require the GP to return the full pre-tax amount of excess carry). The practical effect is that LPs bear a portion of the tax cost associated with the GP's receipt and subsequent return of excess carry. While we note this point for BFO's awareness, we do not recommend attempting to negotiate a gross clawback, as it is unlikely to be accepted by the GP and the after-tax adjustment is the prevailing market standard.

Additionally, the 25% escrow rate is at the lower end of the market range (which typically falls between 25% and 50%). A higher escrow rate would provide greater security for the clawback obligation. BFO may wish to raise the escrow percentage as a negotiating point, though we consider this a lower priority relative to the other items identified in Section XV.

D. Organizational Expenses and Fund Expenses

Organizational Expenses. The LPA provides that organizational expenses incurred in connection with the formation and structuring of the Fund are borne by the Fund, subject to a cap of $2,500,000. To the extent that organizational expenses exceed this cap, the excess is borne by the GP and not allocated to the Fund or its Limited Partners. Organizational expenses typically include legal fees incurred in preparing the LPA, PPM, and subscription documents, regulatory filing fees (including SEC and state blue sky filings), accounting fees for initial tax structuring, and printing and distribution costs. The $2,500,000 cap is within the range we observe for funds of this size (typically $1,500,000–$3,000,000) and is acceptable.

Fund Expenses. The LPA provides for a broad category of ongoing Fund Expenses that are borne by the Fund (and therefore allocated among the Limited Partners in proportion to their respective Capital Commitments or, after the Investment Period, their respective shares of net invested capital). Fund Expenses include, without limitation:

(a) Audit fees payable to Brockton Marsh & Associates LLP in connection with the annual audit of the Fund's financial statements;

(b) Legal fees and expenses incurred by the Fund in connection with its operations, investments, and regulatory compliance (excluding fees incurred by the GP for its own benefit);

(c) Administration fees payable to Granite Ledger Fund Services LLC for fund administration, accounting, and reporting services;

(d) Valuation expenses incurred in connection with the appraisal and valuation of the Fund's investments, including fees payable to independent appraisers;

(e) Insurance premiums, including directors' and officers' liability insurance, general liability insurance, and errors and omissions coverage;

(f) Taxes, including any entity-level taxes imposed on the Fund (which are generally not expected given the Fund's partnership structure for U.S. federal income tax purposes, but which may include state and local taxes in certain jurisdictions);

(g) Regulatory filing costs, including costs of maintaining the Fund's qualification and filings under applicable state and federal securities laws;

(h) Broken-deal costs (also referred to as "abort costs"), including expenses incurred by the Fund in connection with potential investments that are not consummated, such as due diligence expenses, legal fees, travel costs, environmental assessments, appraisal fees, and any deposit forfeiture amounts; and

(i) Other customary expenses of the Fund, including travel, custody, and other operational costs.

We draw BFO's particular attention to the broken-deal costs provision. The LPA allocates broken-deal costs to the Fund without any cap or limitation. In an active investment environment where the GP is pursuing multiple opportunities simultaneously, broken-deal costs can be substantial — it is not uncommon for a single failed acquisition to generate $500,000 or more in abort costs (including legal fees, environmental reports, engineering studies, and appraisal fees). Over the life of the Fund, aggregate broken-deal costs could be significant, particularly given Fund IV's strategy of pursuing value-add and opportunistic investments in commercial real estate, which often involves competitive auction processes with high due diligence expenses.

Recommendation: We recommend that BFO consider requesting a side-letter provision either (i) capping BFO's share of broken-deal costs at a specified dollar amount or percentage of BFO's Capital Commitment, or (ii) requiring enhanced disclosure of broken-deal costs in the Fund's quarterly reporting packages. Of these two approaches, enhanced disclosure is more likely to be accepted by the GP, as an individualized cap on broken-deal costs for a single LP would be difficult to administer. At a minimum, BFO should ensure that the quarterly financial statements provide a line-item breakdown of broken-deal costs incurred during the period, including a brief description of the transactions to which such costs relate.

VI. Investment Period and Investment Restrictions

A. Investment Period

The Investment Period (referred to in the LPA as the "Commitment Period") commences on the date of the Final Close and continues for a period of four (4) years. Assuming the Final Close occurs on October 31, 2024, the Investment Period would expire on October 31, 2028. During the Investment Period, the GP has broad authority to deploy the Fund's capital in new investments in accordance with the Fund's investment strategy and subject to the investment restrictions described below.

Upon expiration of the Investment Period, the GP may not make new investments on behalf of the Fund. However, the LPA permits the GP to make follow-on investments in existing portfolio companies or assets for a period of eighteen (18) months following the expiration of the Investment Period (i.e., through April 30, 2030, assuming an Investment Period expiration of October 31, 2028). Follow-on investments are investments in existing portfolio assets that are made for the purpose of preserving or enhancing the value of an existing investment, such as additional equity contributions to fund capital improvements, tenant improvement allowances, or debt service shortfalls. The 18-month follow-on period is consistent with market practice for real estate PE funds.

As discussed in Section VIII below, the Investment Period is subject to early termination upon the occurrence of a Key Person Event that is not cured within the applicable cure period.

B. Investment Strategy and Restrictions

The LPA defines the Fund's investment strategy as the pursuit of value-add and opportunistic investments in North American commercial real estate, real estate operating companies, and asset management platforms. This is a broad investment mandate that encompasses a wide range of real estate asset types, including office, multifamily, industrial, retail, hospitality, and specialty asset classes, as well as investments in operating platforms that manage or develop real estate assets.

The geographic focus of the Fund is limited to the United States and Canada (collectively, "North America"). The LPA does not permit investments outside of North America, which limits the Fund's exposure to cross-border and emerging market risks. This geographic limitation is appropriate given MPCA's track record and investment expertise, which has been predominantly focused on the U.S. market.

The LPA establishes the following concentration limits on the Fund's investment activities:

(a) Single Investment Concentration: No single investment may exceed 20% of the Fund's aggregate Capital Commitments. At the target fund size of $1,500,000,000, this equates to a maximum single investment of approximately $300,000,000. This concentration limit is standard for a diversified real estate fund and provides reasonable protection against single-asset risk.

(b) Geographic Concentration: No more than 30% of the Fund's aggregate Capital Commitments may be invested in any single market or metropolitan statistical area ("MSA"). At the target fund size, this equates to a maximum geographic concentration of approximately $450,000,000 in any single MSA. This limit provides some geographic diversification, though the 30% threshold permits significant concentration in a single market.

(c) Asset Management Platform Concentration: No more than 25% of the Fund's aggregate Capital Commitments may be invested in asset management platform acquisitions. At the target fund size, this equates to a maximum of approximately $375,000,000 in platform investments. This limit is appropriate given that platform investments carry different risk characteristics than direct real estate investments, including operational risk, key person dependency, and valuation complexity.

Leverage Restrictions. The LPA establishes leverage limits at both the fund and investment level. Fund-level borrowing (exclusive of subscription credit facilities) is limited to a maximum loan-to-value ("LTV") ratio of 65% on any individual investment. This is within the standard range for value-add and opportunistic real estate strategies, though it permits a meaningful level of leverage that amplifies both potential returns and potential losses. BFO should be aware that the 65% LTV limit applies on an investment-by-investment basis, not at the fund portfolio level, meaning that the Fund's aggregate leverage ratio could exceed 65% if certain investments are leveraged at or near the maximum while others are held with lower or no leverage.

The LPA also permits the GP to enter into subscription credit facilities (also known as capital call facilities or subscription lines of credit) secured by the unfunded Capital Commitments of the Limited Partners. The subscription facility is capped at 25% of aggregate unfunded Capital Commitments, with a maximum outstanding term of 180 days (approximately six months). Subscription facilities are commonly used to bridge the timing gap between investment execution and capital call funding, and they can also be used to fund management fees, organizational expenses, and other Fund Expenses. While subscription facilities provide operational flexibility, BFO should be aware that the use of such facilities can have the effect of enhancing reported IRR by delaying capital calls (thereby reducing the period over which LP capital is deemed invested), even though the total dollar return to LPs is unchanged. BFO should consider requesting additional disclosure regarding the Fund's use of subscription facilities in its quarterly reporting.

Investment Restrictions — Notable Gaps. We have identified several categories of investments that are not expressly restricted or addressed in the LPA:

(a) Cannabis-Related Assets. The LPA does not contain any restriction on investments in real estate assets that are leased to or used in connection with cannabis cultivation, processing, or distribution operations. While cannabis operations are legal under the laws of certain U.S. states, they remain illegal under federal law (the Controlled Substances Act), and investments in cannabis-related real estate present significant legal, regulatory, reputational, and banking risks.

(b) Gaming/Casino Properties. The LPA does not contain any restriction on investments in gaming or casino properties. Such investments may require licensing and regulatory approvals in certain jurisdictions and may present reputational considerations for BFO.

(c) Sanctioned Jurisdictions. While the LPA contains standard OFAC compliance representations, it does not expressly restrict investments in jurisdictions subject to U.S. sanctions or involving parties on the OFAC Specially Designated Nationals List. Given that the Fund's geographic mandate is limited to North America, this is a lower risk, but not zero risk.

(d) ERISA Plan Assets. The LPA does not contain an express restriction on investments that would cause the Fund (or a subsidiary thereof) to hold "plan assets" within the meaning of ERISA Section 3(42) and the Department of Labor's plan asset regulations at 29 C.F.R. § 2510.3-101. While the Fund-level ERISA structure is addressed separately (see Section XIV.B below), the absence of an investment-level ERISA restriction is notable.

The absence of express restrictions in these categories is significant because the base LPA also does not include a general excuse or exclusion mechanism that would permit BFO to opt out of specific investments (see Section VII below).

Recommendation: BFO should negotiate side-letter excuse and exclusion rights covering each of the categories identified above. This is discussed in detail in Section VII below and is identified as a high-priority negotiation item in Section XV.

VII. Excuse and Exclusion Rights

A. LPA Baseline

The base LPA does not include a general excuse or exclusion right for Limited Partners. This is a significant gap in the LPA from BFO's perspective. In the absence of an excuse right, BFO would be obligated to fund its pro rata share of every capital call issued by the GP during the Investment Period, regardless of the nature of the underlying investment and regardless of any legal, regulatory, or reputational concerns that BFO may have with respect to such investment.

The LPA provides only a narrow regulatory excuse mechanism in Section 4.5, which states that a Limited Partner may be excused from participation in a specific investment if, in the General Partner's reasonable determination, such participation would cause the Limited Partner to violate any applicable law or governmental regulation. This provision places the determination of whether a legal or regulatory conflict exists in the hands of the GP, not the affected LP. There is no investor-initiated excuse mechanism, and the GP retains sole discretion over whether to grant an excuse under this narrow provision.

Furthermore, the LPA does not contain any cap on the aggregate amount of investments from which an LP may be excused, because the general excuse right does not exist in the base document. The narrow regulatory excuse in Section 4.5 is treated as an exception to the mandatory capital call provisions rather than as an affirmative LP right.

The absence of a general excuse right is below market standard for institutional real estate PE funds of this size. In our experience, the majority of fund LPAs in the current market environment include some form of excuse or exclusion mechanism, even if it is limited to specified categories of investments and subject to a cap on the aggregate amount of excused investments.

B. Side-Letter Recommendation

We strongly recommend that BFO negotiate an affirmative excuse right through its side letter. The proposed excuse right should be structured as follows:

Trigger and Notice Mechanism. Upon receipt of a capital call notice from the GP identifying a proposed investment, BFO would have the right to provide written notice to the GP within fifteen (15) business days exercising its excuse right with respect to such investment. BFO would be required to specify the category of excuse being invoked (from the categories listed below) and to provide a brief description of the basis for BFO's determination that the investment falls within the applicable category. The GP would be obligated to honor BFO's excuse election without further inquiry, provided that the investment falls within one of the specified categories.

Categories for Excuse. We recommend that BFO seek excuse rights with respect to the following categories of investments:

(a) Cannabis-Related Assets. Any investment in real property that is leased to, or primarily used in connection with, the cultivation, processing, distribution, or sale of cannabis or cannabis-derived products, including hemp products, regardless of the legality of such activities under applicable state law.

(b) Gaming/Casino Properties. Any investment in real property that is used primarily as a casino, gaming facility, or racino, or that is otherwise dependent upon gaming operations for a material portion of its revenue.

(c) Sanctioned Jurisdictions. Any investment involving real property located in, or a counterparty domiciled or organized in, any jurisdiction that is subject to comprehensive U.S. sanctions administered by the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury, or any investment involving a counterparty that is included on the OFAC Specially Designated Nationals and blocked Persons List.

(d) ERISA Plan Assets. Any investment that would cause BFO to be treated as holding "plan assets" within the meaning of ERISA Section 3(42) and the Department of Labor's plan asset regulations at 29 C.F.R. § 2510.3-101, as modified by Section 3(42) of ERISA, or that would otherwise subject BFO to the fiduciary responsibility provisions of Title I of ERISA or the prohibited transaction provisions of Section 4975 of the Internal Revenue Code.

Economic Treatment of Excused Investments. If BFO exercises its excuse right with respect to a particular investment, BFO's unfunded Capital Commitment should be reduced dollar-for-dollar by the amount of the excused capital call (i.e., BFO would not be required to fund its pro rata share of that investment, and its aggregate unfunded commitment would be reduced accordingly). BFO would not participate in any distributions or profits attributable to the excused investment. This is the standard mechanism for excuse rights and ensures that the excused LP is neither burdened by nor benefits from the excused investment.

Cap on Excused Investments. We anticipate that the GP will seek to impose a cap on the aggregate amount of investments from which BFO may be excused, expressed as a percentage of BFO's Capital Commitment. This is standard market practice, as the GP has a legitimate interest in ensuring that each LP funds a meaningful share of the Fund's investment portfolio and cannot use the excuse mechanism to effectively reduce its commitment below a minimum threshold.

The typical market range for excuse caps is 10%–25% of an LP's Capital Commitment. We recommend that BFO propose a cap of 25%, which would permit BFO to exercise excuse rights with respect to investments aggregating up to $18,750,000 ($75,000,000 × 25%). We anticipate that the GP may counter at a lower cap of 15%, which would limit excused investments to $11,250,000 ($75,000,000 × 15%). We consider a 15% cap to be acceptable as a fallback position, given the relatively low likelihood that the Fund would make a significant number of investments in the specified categories given its North American commercial real estate focus.

We have prepared a separate Excuse Rights Analysis Memorandum providing a detailed legal analysis of the enforceability and structure of excuse provisions under Delaware law and current market practice, which we will deliver to BFO upon completion.

VIII. Key Person Provisions

A. LPA Baseline Key Person Clause

The LPA identifies two individuals as "Key Persons" for purposes of the Fund's key person provisions: (i) Conrad J. Ellsworth, Co-Founder, Managing Partner, and Chief Executive Officer of MPCA; and (ii) Priya Narayan, Co-Founder, Managing Partner, and Chief Investment Officer of MPCA. Messrs. Ellsworth and Narayan are the founders of MPCA and have been the principal decision-makers for all prior MPCA funds (Funds I–III). Their continued involvement is a critical element of BFO's investment thesis for Fund IV.

A "Key Person Event" is triggered under the LPA if either Ellsworth or Narayan ceases to devote "substantially all" of his or her business time and attention to the affairs of MPCA and Fund IV. The LPA defines "substantially all" as devoting at least 75% of such person's business time to Fund IV-related activities, inclusive of MPCA management activities that benefit Fund IV. The 75% threshold is standard and provides reasonable latitude for the Key Persons to engage in limited outside activities (such as industry board memberships, speaking engagements, and charitable activities) without triggering a Key Person Event.

We note that the Key Person provision is structured as a disjunctive trigger — that is, the departure or reduced involvement of either Ellsworth or Narayan (not both) would trigger a Key Person Event. This is favorable to BFO, as it provides protection against the loss of either founder, rather than requiring the departure of both before the key person protections are activated.

Consequences of a Key Person Event. Upon the occurrence of a Key Person Event, the following consequences ensue:

(a) The Investment Period is automatically suspended for a period of 180 calendar days (the "Key Person Suspension Period"). During the Suspension Period, the GP may not make any new investments on behalf of the Fund, though it may continue to fund previously committed investments and Fund Expenses.

(b) During the Key Person Suspension Period, the GP may propose one or more replacement key persons for approval by the LPAC. The GP must provide the LPAC with a written proposal identifying the proposed replacement, including a description of the proposed replacement's qualifications, experience, and intended role. The LPAC may approve or reject the proposed replacement in its sole discretion.

(c) If the LPAC approves a replacement key person within the 180-day Suspension Period, the Investment Period resumes and continues for its remaining duration as if no Key Person Event had occurred.

(d) If no replacement key person is approved by the LPAC within the 180-day Suspension Period, the Investment Period terminates permanently, and the GP may not make any further new investments on behalf of the Fund.

We note that the LPA does not provide individual Limited Partners with any right to cease capital calls during the Key Person Suspension Period. The suspension operates at the Fund level only — the GP is prohibited from making new investments, but capital calls for Fund Expenses, follow-on investments, and reserves may continue. Individual LPs cannot unilaterally elect to cease funding capital calls during the suspension.

B. Side-Letter Recommendation

We recommend that BFO negotiate an enhanced key person provision through its side letter. Specifically, we propose the following:

(a) Upon the occurrence of a Key Person Event with respect to either Ellsworth or Narayan, the Investment Period would be subject to a suspension of 90 calendar days (rather than the LPA's 180-day suspension) during which BFO may evaluate the situation and the GP's proposed remediation.

(b) During the 90-day suspension period, BFO would have the unilateral right to elect, by written notice to the GP, to cease participating in future capital calls for new investments. If BFO elects to exercise this right, BFO's unfunded Capital Commitment would be reduced to zero (or, alternatively, BFO's commitment to fund future capital calls would be limited to previously committed investments and Fund Expenses only).

(c) This individualized suspension right would operate independently of the LPAC process described in the base LPA. That is, even if the LPAC approves a replacement key person and the Fund-level Investment Period resumes, BFO would retain the right to have elected not to participate in future new investments.

This enhanced key person provision is a stronger right than the LPA baseline, which only provides for a Fund-level suspension and requires LPAC action. The individualized suspension right gives BFO direct control over its commitment in the event of a Key Person Event, without requiring BFO to rely on the LPAC (on which BFO may not have a seat, as discussed in Section XI.A below).

We anticipate that the GP may push back on the concept of an individualized suspension right, as it could create disparate treatment among LPs and potentially reduce the Fund's available capital during a critical transitional period. We recommend discussing fallback positions with BFO during the strategy call scheduled for February 5, 2024. Potential fallback positions include: (i) accepting the 180-day suspension period (rather than 90 days) but retaining BFO's unilateral election right; (ii) limiting BFO's election to a right to reduce (rather than eliminate) its future commitment; or (iii) conditioning BFO's election on the GP's failure to secure LPAC approval of a replacement key person within the 180-day period.

IX. Default Remedies

A. LP Default Provisions

The LPA contains a detailed set of provisions governing the consequences of a Limited Partner's failure to fund a capital call (an "LP Default"). Understanding these provisions is important for BFO's operational planning and cash management, as the consequences of a default are severe.

Triggering Event. An LP Default is triggered if a Limited Partner fails to fund its pro rata share of a capital call within ten (10) business days of the funding date specified in the capital call notice. This is a hard deadline — the LPA does not provide for any grace period beyond the 10-business-day notice period already built into the capital call mechanics. However, the LPA does provide for a separate cure period after a default has been triggered.

Cure Period. If an LP fails to fund by the funding date, the GP is required to deliver a written notice of default to the affected LP within five (5) business days following the missed funding date. Upon receipt of the notice of default, the defaulting LP has an additional five (5) business days to cure the default by funding the full amount of the missed capital call, together with any default interest that has accrued from the original funding date through the date of the cure payment.

Consequences of an Uncured Default. If the LP fails to cure the default within the five-business-day cure period, the GP may, in its sole discretion, impose any or all of the following remedies:

(a) Capital Account Forfeiture. The defaulting LP's interest in the Fund is subject to forfeiture of up to 50% of its capital account balance. This is a punitive measure designed to deter defaults and compensate non-defaulting LPs and the Fund for the disruption caused by the default. The 50% forfeiture rate is at the high end of the market range, which typically falls between 25% and 50%. We note that a 50% forfeiture on BFO's $75,000,000 commitment could represent a forfeiture of up to $37,500,000 of capital account value (assuming BFO's full commitment has been called and funded at the time of the default), which would constitute a catastrophic loss.

(b) Default Interest. The GP may charge interest on the unfunded capital call amount at a rate equal to the lesser of (i) 18% per annum, or (ii) the maximum rate permitted by applicable law. Default interest accrues from the original funding date specified in the capital call notice through the date on which the defaulting LP cures the default or the GP exercises its other remedies. The 18% p

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED
MEMORANDUM
February 2, 2024
TO: Sandra M. Whitfield, General Counsel, Briarwood Family Office LLC Derek T. Calloway, Director of External Investments, Briarwood Family Office LLC
FROM: Theresa Kim, Lead Associate, Calderwood & Harkness LLP Owen Fischer, Working Associate, Calderwood & Harkness LLP
SUPERVISED BY: Pamela Cross, Partner, Funds & Asset Management, Calderwood & Harkness LLP
RE: Review and Analysis of Limited Partnership Agreement — Meridian Peak Capital Partners Fund IV, L.P.
MATTER NO.: 1026-00001
Calderwood & Harkness LLP 425 Lexington Avenue New York, NY 10017
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I. Executive Summary
The purpose of this memorandum is to provide Briarwood Family Office LLC ("BFO") with a comprehensive review and legal analysis of the Amended and Restated Agreement of Limited Partnership of Meridian Peak Capital Partners Fund IV, L.P. (the "Fund" or "Fund IV"), dated December 20, 2023 (the "LPA"), in connection with BFO's evaluation of a proposed limited partnership commitment of Seventy-Five Million Dollars ($75,000,000) to Fund IV. This memorandum has been prepared at the request of BFO's General Counsel, Sandra M. Whitfield, and is intended to assist BFO's investment committee in its evaluation and approval process.
Fund IV is organized as a Delaware limited partnership, filed with the Delaware Secretary of State under Certificate Number LP-2023-08841. The Fund is managed by its general partner, Meridian Peak Capital Partners GP IV LLC (the "GP" or the "General Partner"), a Delaware limited liability company whose sole member is Meridian Peak Capital Advisors LLC ("MPCA"). The LPA is governed by the laws of the State of Delaware, and the Delaware Revised Uniform Limited Partnership Act ("DRULPA") applies to the extent not expressly modified by the LPA.
Fund IV's stated investment strategy is to pursue value-add and opportunistic investments in North American commercial real estate, real estate operating companies, and asset management platforms. The Fund has established a target fund size of $1,500,000,000 and a hard cap of $1,750,000,000. The Fund anticipates holding its first close on or about April 30, 2024, with a final close deadline of October 31, 2024. BFO's proposed commitment of $75,000,000 would represent approximately 5.0% of the target fund size and approximately 4.29% of the hard cap, positioning BFO as a meaningful but not anchor-level investor in the Fund.
MPCA was founded in 2011 by Conrad J. Ellsworth and Priya Narayan, who continue to serve as the firm's Co-Founders and Managing Partners. Mr. Ellsworth serves as Chief Executive Officer and Ms. Narayan serves as Chief Investment Officer. Since its founding, MPCA has raised three prior funds — Meridian Peak Capital Partners Fund I, L.P., Meridian Peak Capital Partners Fund II, L.P., and Meridian Peak Capital Partners Fund III, L.P. (collectively, "Funds I–III") — aggregating approximately $3.2 billion in committed capital. Fund IV represents a meaningful step-up in target fund size relative to the prior fund vintages, and the GP's ability to deploy capital effectively at this increased scale is a consideration that BFO should evaluate as part of its broader investment diligence, which is addressed separately in our concurrent PPM Summary & Risk Assessment Memorandum.
Overall Assessment. Following a thorough review of the LPA, it is our view that the agreement is broadly consistent with prevailing market terms for a mid-market real estate private equity fund of this size and strategy. The economic terms — including a 1.75% management fee on committed capital during the Investment Period, a 20% carried interest above an 8% preferred return, and a European (whole-fund) waterfall — are within the range we observe across comparable funds in the current market environment. However, several provisions in the LPA warrant attention and, in our recommendation, should be the subject of negotiation through a side letter to the LPA. These provisions relate primarily to (i) the absence of excuse and exclusion rights in the base LPA, (ii) the management fee structure, (iii) co-investment rights, (iv) most favored nation protections, (v) enhanced reporting obligations, (vi) key person provisions, (vii) transfer rights, and (viii) confidentiality carve-outs. Our detailed recommendations on each of these points are summarized at Section XV of this memorandum and discussed in the relevant sections throughout.
This memorandum should be read in conjunction with the separate PPM Summary & Risk Assessment Memorandum prepared by Calderwood & Harkness and delivered concurrently to BFO, which addresses the investment risk factors, market positioning, and track record analysis for Fund IV based on the Private Placement Memorandum dated December 15, 2023.
II. Defined Terms and Interpretive Provisions
Throughout this memorandum, we use capitalized terms as defined in the LPA unless otherwise noted. For the convenience of BFO's review, we highlight below the key defined terms in the LPA that are most relevant to BFO's evaluation of the proposed commitment and that recur throughout this memorandum:
• "Capital Commitment" means the total amount that a Limited Partner has committed to contribute to the Fund as set forth in such Limited Partner's Subscription Agreement. BFO's proposed Capital Commitment is $75,000,000.
• "Capital Account" means, with respect to each Partner, such Partner's capital account as maintained by the Fund in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv) and the applicable provisions of the LPA.
• "Carried Interest" means the performance-based allocation payable to the General Partner equal to 20% of the Fund's net profits in excess of the Preferred Return, as more fully described in Section V.C below.
• "Commitment Period" (synonymous with "Investment Period") means the period beginning on the date of the Final Close and ending on the fourth anniversary thereof, during which the General Partner may make new Investments on behalf of the Fund. The Commitment Period is subject to early termination upon a Key Person Event as described in Section VIII.
• "Fund Expenses" means the operating expenses of the Fund as described in Section 5.4 of the LPA, including audit fees, legal fees, administration fees, valuation expenses, insurance premiums, taxes, regulatory filing costs, broken-deal costs, and other customary expenses of the Fund. Fund Expenses are discussed in detail in Section V.D of this memorandum.
• "Investment" means any investment made by the Fund in a Portfolio Company or other asset in furtherance of the Fund's investment strategy, including equity investments, debt investments, mezzanine investments, and joint venture interests.
• "Net Asset Value" or "NAV" means the fair market value of the Fund's assets less the Fund's liabilities, as determined by the General Partner in accordance with the valuation provisions of the LPA (Section 9.3 of the LPA).
• "Organizational Expenses" means the costs and expenses incurred in connection with the formation and organization of the Fund, including legal fees, regulatory filing fees, and printing costs, which are borne by the Fund subject to the cap described in Section V.D of this memorandum.
• "Preferred Return" means the annual compounded preferred return of 8% per annum on contributed capital, as described in the waterfall provisions of the LPA.
• "Subscription Agreement" means the subscription agreement entered into between the Fund and each Limited Partner in connection with such Limited Partner's admission to the Fund.
The LPA specifies that it is governed by, and to be construed in accordance with, the laws of the State of Delaware without regard to conflicts of law principles. The Delaware Revised Uniform Limited Partnership Act ("DRULPA"), 6 Del. C. §§ 17-101 et seq., governs the Fund to the extent not expressly modified by the LPA. The LPA contains extensive interpretation clauses stating that, where the provisions of the LPA expressly address a subject also addressed by DRULPA, the LPA provisions are intended to supersede the default DRULPA provisions. This is standard practice in Delaware limited partnership agreements and permits the parties to contract around certain default provisions of DRULPA (as DRULPA expressly permits), including provisions governing distributions, voting, and dissolution.
The LPA makes reference to the Private Placement Memorandum dated December 15, 2023, which sets forth the Fund's offering terms, risk factors, and investment strategy in greater detail. Additionally, we note that the GP filed a Form D with the U.S. Securities and Exchange Commission on January 2, 2024, reflecting the Fund's reliance on the private placement exemption under Regulation D of the Securities Act of 1933, as amended. The PPM and Form D are addressed in our separate PPM Summary & Risk Assessment Memorandum.
III. Formation, Term, and Fund Structure
A. Formation and Structure
Fund IV was formed as a Delaware limited partnership pursuant to a Certificate of Limited Partnership filed with the Secretary of State of the State of Delaware under Certificate Number LP-2023-08841. The Fund's organizational structure is consistent with the standard structure employed by institutional real estate private equity funds and provides for a single general partner entity and multiple limited partners admitted through a private placement process.
The General Partner of the Fund is Meridian Peak Capital Partners GP IV LLC, a Delaware limited liability company formed for the sole purpose of serving as the general partner of Fund IV. The sole member of the GP is Meridian Peak Capital Advisors LLC ("MPCA"), the MPCA management company entity through which Messrs. Ellsworth and Narayan and the broader MPCA investment team operate. This single-layer GP structure — in which the GP is a direct subsidiary of the management company — is standard for funds of this type and does not raise any structural concerns from BFO's perspective. We note, however, that because the GP is a limited liability company with a single member, BFO should be aware that any change in control of MPCA (whether through admission of new members, transfer of membership interests, or otherwise) would effectively constitute a change of control of the GP. The LPA does not contain an express change-of-control provision with respect to MPCA, though the Key Person provisions (discussed in Section VIII below) provide some protection against departure of the principal investment professionals.
The Fund's registered agent in the State of Delaware is Beacon Statutory Services LLC, located at 1013 Centre Road, Wilmington, Delaware 19805. The General Partner's registered agent is also Beacon Statutory Services LLC at the same address. This is a standard commercial registered agent arrangement.
The GP maintains its principal office at 200 Clarendon Street, 42nd Floor, Boston, Massachusetts 02116, which is the primary business address of MPCA and the location from which Fund IV's investment activities are expected to be conducted.
The LPA identifies the following key service providers to the Fund:
• Fund Administrator: Granite Ledger Fund Services LLC, located at 100 Summer Street, Suite 2700, Boston, Massachusetts 02110. The client relationship manager for Fund IV at Granite Ledger is Catherine J. Halloran. The fund administrator will be responsible for maintaining the Fund's books and records, processing capital calls and distributions, preparing quarterly financial statements, and coordinating with the Fund's auditor on annual audited financial statements. Granite Ledger is a well-established fund services provider with a significant presence in the real estate fund administration space.
• Fund Auditor: Brockton Marsh & Associates LLP, located at 500 Boylston Street, 30th Floor, Boston, Massachusetts 02116. The engagement partner for Fund IV at Brockton Marsh is Neil A. Strickland. Brockton Marsh will be responsible for conducting the annual audit of the Fund's financial statements. While Brockton Marsh is a reputable regional audit firm, it is not among the Big Four accounting firms. BFO should assess whether the audit quality and market reputation of Brockton Marsh are consistent with BFO's expectations for a fund of this size, though we do not consider this to be a material concern from a legal perspective.
• Placement Agent: Pinnacle Capital Markets LLC, located at 399 Park Avenue, 18th Floor, New York, New York 10022. The managing director responsible for the Fund IV placement is Roland S. Abernathy. Pinnacle was engaged by the GP pursuant to a placement agent engagement letter dated November 1, 2023. The placement agent's compensation and the offset provisions applicable to BFO are discussed in Section V.B of this memorandum.
• GP Counsel: Ashford Crane & Hewitt LLP, located at 1 Federal Street, Suite 3600, Boston, Massachusetts 02110. Ashford Crane serves as outside legal counsel to the General Partner and MPCA in connection with the formation, offering, and operation of Fund IV. We have been in communication with Harrison K. Drummond and Elaine C. Woodbury of Ashford Crane in connection with BFO's diligence process, and we anticipate that any side-letter negotiations will be conducted with Ashford Crane on behalf of the GP.
B. Fund Term
The LPA establishes a Fund term of ten (10) years commencing on the date of the Final Close. Assuming the Final Close occurs on October 31, 2024 (the stated deadline), the initial term of the Fund would expire on October 31, 2034.
The LPA further provides for two (2) one-year extension periods, each at the sole discretion of the General Partner, which would extend the Fund term to a maximum of twelve (12) years from the Final Close (i.e., potentially through October 31, 2036). Critically, the LPA does not require Limited Partner consent, LPAC approval, or any form of investor vote for either extension period. The GP may exercise each extension unilaterally by providing written notice to the Limited Partners at least 90 days prior to the expiration of the then-current term.
We note that the absence of any LP consent requirement for the extension periods is a less favorable term from BFO's perspective. While the first one-year extension at GP discretion is consistent with common market practice, there is an increasing trend in the institutional private equity market to require some form of investor consent for the second extension year — typically either (i) approval by the Limited Partner Advisory Committee ("LPAC"), or (ii) a vote of a majority or super-majority of Limited Partners. The rationale for such a requirement is that a second extension indicates potential difficulty in realizing the Fund's remaining portfolio, and LPs should have a voice in determining whether continued management by the GP is in the best interests of the Fund.
Recommendation: We recommend that BFO negotiate a side-letter provision requiring LPAC consent or, alternatively, the affirmative vote of Limited Partners holding a super-majority (66⅔% or 75%) of the aggregate Capital Commitments for the exercise of the second one-year extension. If LPAC consent is the mechanism employed, BFO should ensure it has adequate representation on or access to the LPAC, which is discussed further in Section XI.A below.
C. Closings. The LPA contemplates multiple closings for the admission of Limited Partners. The anticipated first close is April 30, 2024. The final close deadline is October 31, 2024, which is six (6) months following the anticipated first close. This six-month window between first and final close is standard for a fund of this size and provides the GP with adequate time to complete its fundraising activities.
Between the first close and the final close, the GP may hold one or more subsequent closings at its discretion to admit additional Limited Partners or to accept increased Capital Commitments from existing Limited Partners. The timing and number of subsequent closings are entirely within the GP's discretion, and no minimum or maximum number of closings is specified in the LPA.
The LPA includes an interest equalization mechanism for Limited Partners admitted at subsequent closings after the first close. Under this mechanism, subsequent-close LPs are required to contribute their pro rata share of all capital that has previously been called from first-close LPs, together with interest thereon at a rate equal to the Prime Rate plus 2.0% per annum, calculated from the date of each prior capital call through the date of the subsequent-close LP's admission. This interest equalization payment is intended to put subsequent-close LPs in the same economic position as if they had been admitted at the first close. The interest equalization payments are distributed to first-close LPs (and any previously-admitted subsequent-close LPs) in proportion to their respective shares of the prior capital calls. This is a standard provision and does not raise any concerns. Given that BFO is likely to be admitted at or near the first close, we do not anticipate significant interest equalization payments by BFO, though this should be confirmed during the subscription process.
IV. Capital Commitments and Capital Calls
A. Commitment Mechanics
BFO's proposed Capital Commitment to Fund IV is $75,000,000. The minimum Capital Commitment established in the LPA is $10,000,000, subject to the GP's right to waive such minimum in its sole discretion. BFO's proposed commitment is well in excess of the minimum and, as noted above, represents approximately 5.0% of the target fund size and 4.29% of the hard cap.
Capital calls are issued by the General Partner by written notice delivered to each Limited Partner. The LPA requires that capital call notices be delivered no less than ten (10) business days prior to the funding date. Each capital call notice must specify (i) the aggregate amount being called from all Limited Partners, (ii) the individual Limited Partner's pro rata share of the capital call, (iii) the purpose of the capital call (i.e., whether for new investments, follow-on investments, Fund Expenses, or reserves), (iv) the funding date, and (v) wire transfer instructions for remittance. We note that the ten-business-day notice period is standard for institutional real estate funds and provides BFO with adequate time to process funding requests internally.
During the Investment Period, the GP may issue capital calls for any purpose related to the Fund's operations, including (i) the acquisition of new investments, (ii) follow-on investments in existing portfolio companies or assets, (iii) payment of Fund Expenses, (iv) establishment of reserves as determined by the GP, and (v) repayment of borrowings under any subscription credit facility.
Following the expiration or termination of the Investment Period, the GP's authority to issue capital calls is more limited. Post-Investment Period capital calls may be made only for the following purposes: (i) follow-on investments in existing portfolio companies or assets (subject to the 18-month limitation discussed in Section VI.A below), (ii) payment of Fund Expenses, (iii) establishment or maintenance of reserves, and (iv) repayment of borrowings under credit facilities. No capital may be called post-Investment Period for the purpose of making new investments.
The General Partner is required to fund its own GP Capital Commitment on a pari passu basis with the Limited Partners — that is, the GP must fund its pro rata share of each capital call at the same time and in the same proportion as the Limited Partners. The GP's Capital Commitment is established in the LPA at 1.0% of aggregate Capital Commitments. At the target fund size of $1,500,000,000, the GP's anticipated commitment would be $15,000,000. This 1.0% GP commitment is standard for the market, though we note that some institutional investors prefer a GP commitment in the range of 1.5%–3.0% to ensure stronger alignment of interest between the GP and the LPs. BFO may wish to consider this point in its broader investment evaluation, though we do not recommend it as a side-letter negotiation item as it is unlikely to be modified for a single investor.
B. Overcall and Recycling Provisions
Recycling. The LPA permits the GP to recycle investment proceeds — that is, to recall and reinvest capital that has been returned to Limited Partners from realized investments. Recycling is subject to two conditions: (i) the proceeds to be recycled must be derived from investments that were realized within twenty-four (24) months of their initial acquisition, and (ii) the aggregate amount of capital called from Limited Partners (inclusive of recycled capital) may not exceed 125% of total Capital Commitments. This 125% recycling cap means that, in addition to the initial $75,000,000 Capital Commitment, BFO could potentially be required to fund up to an additional $18,750,000 in recycled capital calls over the life of the Fund (i.e., $75,000,000 × 125% = $93,750,000 total, less $75,000,000 initial commitment = $18,750,000 maximum additional recycled calls). We note that the 125% recycling cap is on the higher end of the market range (which typically falls between 110% and 125%) and reflects the GP's desire for flexibility in reinvesting early-realization proceeds. While recycling can be beneficial to LPs by increasing the Fund's invested capital base and potentially enhancing returns, it also extends the period during which LPs' capital is subject to call and increases the overall cash outflows from an LP's perspective.
Overcall. The LPA also contains an overcall provision that permits the GP to call additional capital from non-defaulting Limited Partners in the event that another Limited Partner defaults on a capital call obligation. Under the overcall provision, the GP may call up to 125% of a given non-defaulting LP's pro rata share of any capital call to cover a defaulting LP's shortfall. This provision creates potential overcall exposure for BFO — in a default scenario, BFO could be required to fund up to 25% more than its pro rata share of a capital call. The overcall provision is standard in form, though the 125% overcall limit (rather than a lower threshold, such as 110%) is somewhat aggressive.
Recommendation: We recommend that BFO monitor both the recycling cap and the overcall provisions carefully. BFO should consider negotiating a side-letter limitation on overcall exposure, potentially capping BFO's aggregate overcall obligation at a lower threshold (e.g., 110% of BFO's pro rata share of any given capital call, or establishing an absolute dollar cap on aggregate overcall funding over the life of the Fund). We recognize that the GP may resist modifications to the overcall provision, as it serves a structural purpose in protecting the Fund against LP defaults, but the exposure should be flagged for BFO's investment committee.
V. Fund Economics
A. Management Fee
The management fee structure under the LPA is divided into two tiers based on the Investment Period:
During the Investment Period (Years 1–4): The management fee is 1.75% per annum, calculated on the aggregate Capital Commitments of all Limited Partners. For BFO, based on a Capital Commitment of $75,000,000, the annual management fee during the Investment Period would be:
$75,000,000 × 1.75% = $1,312,500 per year
Over the four-year Investment Period, BFO's cumulative management fee burden (absent any negotiated reduction) would be:
$1,312,500 × 4 years = $5,250,000
We note that the management fee during the Investment Period is calculated on committed capital (i.e., the full $75,000,000), not on called or invested capital. This is standard practice for a fund of this size, but it means that BFO will be paying management fees on the full amount of its commitment from the outset, even though a significant portion of that commitment will remain uncalled during the early years of the Fund's life. This represents a real economic cost to BFO, as management fees on uncalled capital effectively reduce the net return on invested capital.
Post-Investment Period (Years 5–10+): Following the expiration of the Investment Period, the management fee steps down to 1.50% per annum, calculated on net invested capital (defined as the aggregate cost basis of unrealized investments, less any write-downs approved by the Fund's auditor). This post-Investment Period fee structure is favorable to LPs relative to a structure that continues to charge fees on committed capital, as the fee base will decline over time as investments are realized and capital is returned to LPs. The precise amount of the post-Investment Period management fee will vary depending on the pace of portfolio realizations and the extent of any write-downs, and therefore cannot be calculated with certainty at this time.
Management fees are payable quarterly in advance. The GP issues management fee invoices to the Fund (not directly to individual LPs), and management fees are funded through capital calls or, alternatively, through the use of a subscription credit facility, with such fees being allocated among the Limited Partners in proportion to their respective Capital Commitments.
Proposed Side-Letter Negotiation on Management Fee. We recommend that BFO negotiate a reduction in the management fee through a side letter, as follows:
• Investment Period fee: Reduce from 1.75% to 1.50% per annum on committed capital (a 25 basis point reduction)
• Post-Investment Period fee: Reduce from 1.50% to 1.25% per annum on net invested capital (a 25 basis point reduction)
The economic impact of the proposed reduction during the Investment Period would be as follows:
• Negotiated annual fee: $75,000,000 × 1.50% = $1,125,000 per year
• Annual savings: $1,312,500 − $1,125,000 = $187,500 per year
• Cumulative savings over the four-year Investment Period: $187,500 × 4 = $750,000
The post-Investment Period savings would be variable and dependent on the level of net invested capital, but would represent a consistent 25 basis point benefit to BFO throughout the remaining life of the Fund.
We believe a 25 basis point reduction is a reasonable and achievable negotiating objective for a commitment of BFO's size. At $75,000,000, BFO is a meaningful investor representing 5.0% of the target fund size, and fee reductions of this magnitude are commonly granted to investors at or above this commitment level in the current market environment. We anticipate that the GP may counter at a smaller reduction, such as 15 basis points (resulting in rates of 1.60% during the Investment Period and 1.35% post-Investment Period), and we would recommend that BFO be prepared to accept such a counter if it is the GP's final position on this point.
B. Placement Agent Fee Offset
Pinnacle Capital Markets LLC, the Fund's placement agent, is entitled to receive a placement fee equal to 1.0% of the Capital Commitment of each Limited Partner introduced to the Fund through Pinnacle's placement activities. Based on BFO's proposed Capital Commitment of $75,000,000, the placement fee attributable to BFO would be:
$75,000,000 × 1.0% = $750,000
The LPA provides that 100% of placement fees incurred with respect to a given Limited Partner are to be offset against the management fees otherwise payable by that Limited Partner. This means that the $750,000 placement fee attributable to BFO would be credited against BFO's management fee obligations, reducing BFO's net management fee burden by $750,000 over the offset period. We have confirmed that this 100% offset provision is contained in the base LPA itself (Section 5.2(d)) and is not limited to investors who have negotiated a specific side-letter provision.
We note, however, that the LPA does not specify the precise mechanics of the placement fee offset — for example, whether the offset is applied ratably over the Investment Period (i.e., $750,000 ÷ 4 years = $187,500 per year), applied in full against the first management fee payment, or applied in some other manner. This ambiguity should be clarified.
Recommendation: We recommend that BFO's side letter explicitly confirm the 100% offset and specify the timing and mechanics of the offset application. Our preference would be for the offset to be applied as a dollar-for-dollar reduction to the first management fee payments until the $750,000 offset is fully exhausted, as this would provide the maximum economic benefit to BFO through early recovery of the placement fee amount.
C. Carried Interest / Performance Allocation
The General Partner is entitled to a carried interest (referred to in the LPA as the "Performance Allocation") equal to 20% of the Fund's net profits in excess of the Preferred Return. The carried interest is the primary performance-based compensation mechanism for the GP and its investment professionals.
The carried interest is calculated and distributed in accordance with a whole-fund European-style distribution waterfall, which operates as follows:
Step 1 — Return of Contributed Capital. All distributions are first applied to return to the Limited Partners the aggregate amount of capital contributed by such Limited Partners to the Fund, including capital attributable to recycled investments. This provision ensures that no carried interest is payable to the GP until LPs have received a full return of their invested capital across the entire Fund portfolio.
Step 2 — Preferred Return. After full return of contributed capital, distributions are next applied to pay the Limited Partners a preferred return equal to 8% per annum on contributed capital, compounded annually. The preferred return accrues from the date of each capital contribution and continues to accrue until paid in full. The 8% preferred return is the prevailing market rate for real estate PE funds and is consistent with Funds I–III.
Step 3 — GP Catch-Up. After full payment of the preferred return, the General Partner receives 100% of subsequent distributions until the GP has received an amount equal to 20% of the aggregate profits distributed in Steps 2 and 3 combined. This catch-up mechanism effectively brings the GP's cumulative profit share up to 20% of total profits once the preferred return has been satisfied.
Step 4 — 80/20 Split. After completion of the GP catch-up, all remaining distributions are split 80% to the Limited Partners and 20% to the General Partner.
The European (whole-fund) waterfall structure is favorable to BFO and the other Limited Partners relative to a deal-by-deal (American) waterfall structure. In a deal-by-deal waterfall, the GP would be entitled to receive carried interest on profitable investments without first accounting for losses on other investments in the portfolio, creating the risk that the GP receives carried interest on individual deals even if the Fund as a whole has not generated positive returns net of the preferred return. The European waterfall avoids this risk by requiring that carry is calculated and paid only after all contributed capital has been returned and the preferred return has been satisfied across the entire Fund portfolio. This is a meaningful protection for BFO and is consistent with market best practices for real estate PE funds.
We do not recommend any modification to the carried interest terms via side letter. The 20/80 split with an 8% preferred return and European waterfall structure are market-standard, and the GP is unlikely to agree to modifications to these fundamental economic terms for any single LP.
GP Clawback Obligation. The LPA includes a GP clawback provision (Section 7.6 of the LPA), which requires the General Partner to return to the Fund, upon liquidation, any carried interest distributions that, in the aggregate, exceed the amount to which the GP would have been entitled based on the final cumulative performance of the Fund. The clawback obligation is secured by an escrow arrangement pursuant to which 25% of all carried interest distributions received by the GP are deposited into a third-party escrow account and held until the earlier of (i) the final liquidation of the Fund or (ii) the date on which the GP can demonstrate that no clawback obligation remains outstanding. The escrow account is maintained by a third-party escrow agent designated by the GP, and the LPA specifies that the escrow funds may be invested in U.S. Treasury obligations or money market funds pending release.
We note that the GP clawback obligation is subject to an after-tax adjustment — that is, the GP is only required to return the net after-tax amount of any excess carried interest, taking into account the taxes paid or payable by the GP (and its members) on such carried interest distributions. This after-tax clawback adjustment is common in the market but is less favorable to LPs than a gross clawback (which would require the GP to return the full pre-tax amount of excess carry). The practical effect is that LPs bear a portion of the tax cost associated with the GP's receipt and subsequent return of excess carry. While we note this point for BFO's awareness, we do not recommend attempting to negotiate a gross clawback, as it is unlikely to be accepted by the GP and the after-tax adjustment is the prevailing market standard.
Additionally, the 25% escrow rate is at the lower end of the market range (which typically falls between 25% and 50%). A higher escrow rate would provide greater security for the clawback obligation. BFO may wish to raise the escrow percentage as a negotiating point, though we consider this a lower priority relative to the other items identified in Section XV.
D. Organizational Expenses and Fund Expenses
Organizational Expenses. The LPA provides that organizational expenses incurred in connection with the formation and structuring of the Fund are borne by the Fund, subject to a cap of $2,500,000. To the extent that organizational expenses exceed this cap, the excess is borne by the GP and not allocated to the Fund or its Limited Partners. Organizational expenses typically include legal fees incurred in preparing the LPA, PPM, and subscription documents, regulatory filing fees (including SEC and state blue sky filings), accounting fees for initial tax structuring, and printing and distribution costs. The $2,500,000 cap is within the range we observe for funds of this size (typically $1,500,000–$3,000,000) and is acceptable.
Fund Expenses. The LPA provides for a broad category of ongoing Fund Expenses that are borne by the Fund (and therefore allocated among the Limited Partners in proportion to their respective Capital Commitments or, after the Investment Period, their respective shares of net invested capital). Fund Expenses include, without limitation:
(a) Audit fees payable to Brockton Marsh & Associates LLP in connection with the annual audit of the Fund's financial statements;
(b) Legal fees and expenses incurred by the Fund in connection with its operations, investments, and regulatory compliance (excluding fees incurred by the GP for its own benefit);
(c) Administration fees payable to Granite Ledger Fund Services LLC for fund administration, accounting, and reporting services;
(d) Valuation expenses incurred in connection with the appraisal and valuation of the Fund's investments, including fees payable to independent appraisers;
(e) Insurance premiums, including directors' and officers' liability insurance, general liability insurance, and errors and omissions coverage;
(f) Taxes, including any entity-level taxes imposed on the Fund (which are generally not expected given the Fund's partnership structure for U.S. federal income tax purposes, but which may include state and local taxes in certain jurisdictions);
(g) Regulatory filing costs, including costs of maintaining the Fund's qualification and filings under applicable state and federal securities laws;
(h) Broken-deal costs (also referred to as "abort costs"), including expenses incurred by the Fund in connection with potential investments that are not consummated, such as due diligence expenses, legal fees, travel costs, environmental assessments, appraisal fees, and any deposit forfeiture amounts; and
(i) Other customary expenses of the Fund, including travel, custody, and other operational costs.
We draw BFO's particular attention to the broken-deal costs provision. The LPA allocates broken-deal costs to the Fund without any cap or limitation. In an active investment environment where the GP is pursuing multiple opportunities simultaneously, broken-deal costs can be substantial — it is not uncommon for a single failed acquisition to generate $500,000 or more in abort costs (including legal fees, environmental reports, engineering studies, and appraisal fees). Over the life of the Fund, aggregate broken-deal costs could be significant, particularly given Fund IV's strategy of pursuing value-add and opportunistic investments in commercial real estate, which often involves competitive auction processes with high due diligence expenses.
Recommendation: We recommend that BFO consider requesting a side-letter provision either (i) capping BFO's share of broken-deal costs at a specified dollar amount or percentage of BFO's Capital Commitment, or (ii) requiring enhanced disclosure of broken-deal costs in the Fund's quarterly reporting packages. Of these two approaches, enhanced disclosure is more likely to be accepted by the GP, as an individualized cap on broken-deal costs for a single LP would be difficult to administer. At a minimum, BFO should ensure that the quarterly financial statements provide a line-item breakdown of broken-deal costs incurred during the period, including a brief description of the transactions to which such costs relate.
VI. Investment Period and Investment Restrictions
A. Investment Period
The Investment Period (referred to in the LPA as the "Commitment Period") commences on the date of the Final Close and continues for a period of four (4) years. Assuming the Final Close occurs on October 31, 2024, the Investment Period would expire on October 31, 2028. During the Investment Period, the GP has broad authority to deploy the Fund's capital in new investments in accordance with the Fund's investment strategy and subject to the investment restrictions described below.
Upon expiration of the Investment Period, the GP may not make new investments on behalf of the Fund. However, the LPA permits the GP to make follow-on investments in existing portfolio companies or assets for a period of eighteen (18) months following the expiration of the Investment Period (i.e., through April 30, 2030, assuming an Investment Period expiration of October 31, 2028). Follow-on investments are investments in existing portfolio assets that are made for the purpose of preserving or enhancing the value of an existing investment, such as additional equity contributions to fund capital improvements, tenant improvement allowances, or debt service shortfalls. The 18-month follow-on period is consistent with market practice for real estate PE funds.
As discussed in Section VIII below, the Investment Period is subject to early termination upon the occurrence of a Key Person Event that is not cured within the applicable cure period.
B. Investment Strategy and Restrictions
The LPA defines the Fund's investment strategy as the pursuit of value-add and opportunistic investments in North American commercial real estate, real estate operating companies, and asset management platforms. This is a broad investment mandate that encompasses a wide range of real estate asset types, including office, multifamily, industrial, retail, hospitality, and specialty asset classes, as well as investments in operating platforms that manage or develop real estate assets.
The geographic focus of the Fund is limited to the United States and Canada (collectively, "North America"). The LPA does not permit investments outside of North America, which limits the Fund's exposure to cross-border and emerging market risks. This geographic limitation is appropriate given MPCA's track record and investment expertise, which has been predominantly focused on the U.S. market.
The LPA establishes the following concentration limits on the Fund's investment activities:
(a) Single Investment Concentration: No single investment may exceed 20% of the Fund's aggregate Capital Commitments. At the target fund size of $1,500,000,000, this equates to a maximum single investment of approximately $300,000,000. This concentration limit is standard for a diversified real estate fund and provides reasonable protection against single-asset risk.
(b) Geographic Concentration: No more than 30% of the Fund's aggregate Capital Commitments may be invested in any single market or metropolitan statistical area ("MSA"). At the target fund size, this equates to a maximum geographic concentration of approximately $450,000,000 in any single MSA. This limit provides some geographic diversification, though the 30% threshold permits significant concentration in a single market.
(c) Asset Management Platform Concentration: No more than 25% of the Fund's aggregate Capital Commitments may be invested in asset management platform acquisitions. At the target fund size, this equates to a maximum of approximately $375,000,000 in platform investments. This limit is appropriate given that platform investments carry different risk characteristics than direct real estate investments, including operational risk, key person dependency, and valuation complexity.
Leverage Restrictions. The LPA establishes leverage limits at both the fund and investment level. Fund-level borrowing (exclusive of subscription credit facilities) is limited to a maximum loan-to-value ("LTV") ratio of 65% on any individual investment. This is within the standard range for value-add and opportunistic real estate strategies, though it permits a meaningful level of leverage that amplifies both potential returns and potential losses. BFO should be aware that the 65% LTV limit applies on an investment-by-investment basis, not at the fund portfolio level, meaning that the Fund's aggregate leverage ratio could exceed 65% if certain investments are leveraged at or near the maximum while others are held with lower or no leverage.
The LPA also permits the GP to enter into subscription credit facilities (also known as capital call facilities or subscription lines of credit) secured by the unfunded Capital Commitments of the Limited Partners. The subscription facility is capped at 25% of aggregate unfunded Capital Commitments, with a maximum outstanding term of 180 days (approximately six months). Subscription facilities are commonly used to bridge the timing gap between investment execution and capital call funding, and they can also be used to fund management fees, organizational expenses, and other Fund Expenses. While subscription facilities provide operational flexibility, BFO should be aware that the use of such facilities can have the effect of enhancing reported IRR by delaying capital calls (thereby reducing the period over which LP capital is deemed invested), even though the total dollar return to LPs is unchanged. BFO should consider requesting additional disclosure regarding the Fund's use of subscription facilities in its quarterly reporting.
Investment Restrictions — Notable Gaps. We have identified several categories of investments that are not expressly restricted or addressed in the LPA:
(a) Cannabis-Related Assets. The LPA does not contain any restriction on investments in real estate assets that are leased to or used in connection with cannabis cultivation, processing, or distribution operations. While cannabis operations are legal under the laws of certain U.S. states, they remain illegal under federal law (the Controlled Substances Act), and investments in cannabis-related real estate present significant legal, regulatory, reputational, and banking risks.
(b) Gaming/Casino Properties. The LPA does not contain any restriction on investments in gaming or casino properties. Such investments may require licensing and regulatory approvals in certain jurisdictions and may present reputational considerations for BFO.
(c) Sanctioned Jurisdictions. While the LPA contains standard OFAC compliance representations, it does not expressly restrict investments in jurisdictions subject to U.S. sanctions or involving parties on the OFAC Specially Designated Nationals List. Given that the Fund's geographic mandate is limited to North America, this is a lower risk, but not zero risk.
(d) ERISA Plan Assets. The LPA does not contain an express restriction on investments that would cause the Fund (or a subsidiary thereof) to hold "plan assets" within the meaning of ERISA Section 3(42) and the Department of Labor's plan asset regulations at 29 C.F.R. § 2510.3-101. While the Fund-level ERISA structure is addressed separately (see Section XIV.B below), the absence of an investment-level ERISA restriction is notable.
The absence of express restrictions in these categories is significant because the base LPA also does not include a general excuse or exclusion mechanism that would permit BFO to opt out of specific investments (see Section VII below).
Recommendation: BFO should negotiate side-letter excuse and exclusion rights covering each of the categories identified above. This is discussed in detail in Section VII below and is identified as a high-priority negotiation item in Section XV.
VII. Excuse and Exclusion Rights
A. LPA Baseline
The base LPA does not include a general excuse or exclusion right for Limited Partners. This is a significant gap in the LPA from BFO's perspective. In the absence of an excuse right, BFO would be obligated to fund its pro rata share of every capital call issued by the GP during the Investment Period, regardless of the nature of the underlying investment and regardless of any legal, regulatory, or reputational concerns that BFO may have with respect to such investment.
The LPA provides only a narrow regulatory excuse mechanism in Section 4.5, which states that a Limited Partner may be excused from participation in a specific investment if, in the General Partner's reasonable determination, such participation would cause the Limited Partner to violate any applicable law or governmental regulation. This provision places the determination of whether a legal or regulatory conflict exists in the hands of the GP, not the affected LP. There is no investor-initiated excuse mechanism, and the GP retains sole discretion over whether to grant an excuse under this narrow provision.
Furthermore, the LPA does not contain any cap on the aggregate amount of investments from which an LP may be excused, because the general excuse right does not exist in the base document. The narrow regulatory excuse in Section 4.5 is treated as an exception to the mandatory capital call provisions rather than as an affirmative LP right.
The absence of a general excuse right is below market standard for institutional real estate PE funds of this size. In our experience, the majority of fund LPAs in the current market environment include some form of excuse or exclusion mechanism, even if it is limited to specified categories of investments and subject to a cap on the aggregate amount of excused investments.
B. Side-Letter Recommendation
We strongly recommend that BFO negotiate an affirmative excuse right through its side letter. The proposed excuse right should be structured as follows:
Trigger and Notice Mechanism. Upon receipt of a capital call notice from the GP identifying a proposed investment, BFO would have the right to provide written notice to the GP within fifteen (15) business days exercising its excuse right with respect to such investment. BFO would be required to specify the category of excuse being invoked (from the categories listed below) and to provide a brief description of the basis for BFO's determination that the investment falls within the applicable category. The GP would be obligated to honor BFO's excuse election without further inquiry, provided that the investment falls within one of the specified categories.
Categories for Excuse. We recommend that BFO seek excuse rights with respect to the following categories of investments:
(a) Cannabis-Related Assets. Any investment in real property that is leased to, or primarily used in connection with, the cultivation, processing, distribution, or sale of cannabis or cannabis-derived products, including hemp products, regardless of the legality of such activities under applicable state law.
(b) Gaming/Casino Properties. Any investment in real property that is used primarily as a casino, gaming facility, or racino, or that is otherwise dependent upon gaming operations for a material portion of its revenue.
(c) Sanctioned Jurisdictions. Any investment involving real property located in, or a counterparty domiciled or organized in, any jurisdiction that is subject to comprehensive U.S. sanctions administered by the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury, or any investment involving a counterparty that is included on the OFAC Specially Designated Nationals and blocked Persons List.
(d) ERISA Plan Assets. Any investment that would cause BFO to be treated as holding "plan assets" within the meaning of ERISA Section 3(42) and the Department of Labor's plan asset regulations at 29 C.F.R. § 2510.3-101, as modified by Section 3(42) of ERISA, or that would otherwise subject BFO to the fiduciary responsibility provisions of Title I of ERISA or the prohibited transaction provisions of Section 4975 of the Internal Revenue Code.
Economic Treatment of Excused Investments. If BFO exercises its excuse right with respect to a particular investment, BFO's unfunded Capital Commitment should be reduced dollar-for-dollar by the amount of the excused capital call (i.e., BFO would not be required to fund its pro rata share of that investment, and its aggregate unfunded commitment would be reduced accordingly). BFO would not participate in any distributions or profits attributable to the excused investment. This is the standard mechanism for excuse rights and ensures that the excused LP is neither burdened by nor benefits from the excused investment.
Cap on Excused Investments. We anticipate that the GP will seek to impose a cap on the aggregate amount of investments from which BFO may be excused, expressed as a percentage of BFO's Capital Commitment. This is standard market practice, as the GP has a legitimate interest in ensuring that each LP funds a meaningful share of the Fund's investment portfolio and cannot use the excuse mechanism to effectively reduce its commitment below a minimum threshold.
The typical market range for excuse caps is 10%–25% of an LP's Capital Commitment. We recommend that BFO propose a cap of 25%, which would permit BFO to exercise excuse rights with respect to investments aggregating up to $18,750,000 ($75,000,000 × 25%). We anticipate that the GP may counter at a lower cap of 15%, which would limit excused investments to $11,250,000 ($75,000,000 × 15%). We consider a 15% cap to be acceptable as a fallback position, given the relatively low likelihood that the Fund would make a significant number of investments in the specified categories given its North American commercial real estate focus.
We have prepared a separate Excuse Rights Analysis Memorandum providing a detailed legal analysis of the enforceability and structure of excuse provisions under Delaware law and current market practice, which we will deliver to BFO upon completion.
VIII. Key Person Provisions
A. LPA Baseline Key Person Clause
The LPA identifies two individuals as "Key Persons" for purposes of the Fund's key person provisions: (i) Conrad J. Ellsworth, Co-Founder, Managing Partner, and Chief Executive Officer of MPCA; and (ii) Priya Narayan, Co-Founder, Managing Partner, and Chief Investment Officer of MPCA. Messrs. Ellsworth and Narayan are the founders of MPCA and have been the principal decision-makers for all prior MPCA funds (Funds I–III). Their continued involvement is a critical element of BFO's investment thesis for Fund IV.
A "Key Person Event" is triggered under the LPA if either Ellsworth or Narayan ceases to devote "substantially all" of his or her business time and attention to the affairs of MPCA and Fund IV. The LPA defines "substantially all" as devoting at least 75% of such person's business time to Fund IV-related activities, inclusive of MPCA management activities that benefit Fund IV. The 75% threshold is standard and provides reasonable latitude for the Key Persons to engage in limited outside activities (such as industry board memberships, speaking engagements, and charitable activities) without triggering a Key Person Event.
We note that the Key Person provision is structured as a disjunctive trigger — that is, the departure or reduced involvement of either Ellsworth or Narayan (not both) would trigger a Key Person Event. This is favorable to BFO, as it provides protection against the loss of either founder, rather than requiring the departure of both before the key person protections are activated.
Consequences of a Key Person Event. Upon the occurrence of a Key Person Event, the following consequences ensue:
(a) The Investment Period is automatically suspended for a period of 180 calendar days (the "Key Person Suspension Period"). During the Suspension Period, the GP may not make any new investments on behalf of the Fund, though it may continue to fund previously committed investments and Fund Expenses.
(b) During the Key Person Suspension Period, the GP may propose one or more replacement key persons for approval by the LPAC. The GP must provide the LPAC with a written proposal identifying the proposed replacement, including a description of the proposed replacement's qualifications, experience, and intended role. The LPAC may approve or reject the proposed replacement in its sole discretion.
(c) If the LPAC approves a replacement key person within the 180-day Suspension Period, the Investment Period resumes and continues for its remaining duration as if no Key Person Event had occurred.
(d) If no replacement key person is approved by the LPAC within the 180-day Suspension Period, the Investment Period terminates permanently, and the GP may not make any further new investments on behalf of the Fund.
We note that the LPA does not provide individual Limited Partners with any right to cease capital calls during the Key Person Suspension Period. The suspension operates at the Fund level only — the GP is prohibited from making new investments, but capital calls for Fund Expenses, follow-on investments, and reserves may continue. Individual LPs cannot unilaterally elect to cease funding capital calls during the suspension.
B. Side-Letter Recommendation
We recommend that BFO negotiate an enhanced key person provision through its side letter. Specifically, we propose the following:
(a) Upon the occurrence of a Key Person Event with respect to either Ellsworth or Narayan, the Investment Period would be subject to a suspension of 90 calendar days (rather than the LPA's 180-day suspension) during which BFO may evaluate the situation and the GP's proposed remediation.
(b) During the 90-day suspension period, BFO would have the unilateral right to elect, by written notice to the GP, to cease participating in future capital calls for new investments. If BFO elects to exercise this right, BFO's unfunded Capital Commitment would be reduced to zero (or, alternatively, BFO's commitment to fund future capital calls would be limited to previously committed investments and Fund Expenses only).
(c) This individualized suspension right would operate independently of the LPAC process described in the base LPA. That is, even if the LPAC approves a replacement key person and the Fund-level Investment Period resumes, BFO would retain the right to have elected not to participate in future new investments.
This enhanced key person provision is a stronger right than the LPA baseline, which only provides for a Fund-level suspension and requires LPAC action. The individualized suspension right gives BFO direct control over its commitment in the event of a Key Person Event, without requiring BFO to rely on the LPAC (on which BFO may not have a seat, as discussed in Section XI.A below).
We anticipate that the GP may push back on the concept of an individualized suspension right, as it could create disparate treatment among LPs and potentially reduce the Fund's available capital during a critical transitional period. We recommend discussing fallback positions with BFO during the strategy call scheduled for February 5, 2024. Potential fallback positions include: (i) accepting the 180-day suspension period (rather than 90 days) but retaining BFO's unilateral election right; (ii) limiting BFO's election to a right to reduce (rather than eliminate) its future commitment; or (iii) conditioning BFO's election on the GP's failure to secure LPAC approval of a replacement key person within the 180-day period.
IX. Default Remedies
A. LP Default Provisions
The LPA contains a detailed set of provisions governing the consequences of a Limited Partner's failure to fund a capital call (an "LP Default"). Understanding these provisions is important for BFO's operational planning and cash management, as the consequences of a default are severe.
Triggering Event. An LP Default is triggered if a Limited Partner fails to fund its pro rata share of a capital call within ten (10) business days of the funding date specified in the capital call notice. This is a hard deadline — the LPA does not provide for any grace period beyond the 10-business-day notice period already built into the capital call mechanics. However, the LPA does provide for a separate cure period after a default has been triggered.
Cure Period. If an LP fails to fund by the funding date, the GP is required to deliver a written notice of default to the affected LP within five (5) business days following the missed funding date. Upon receipt of the notice of default, the defaulting LP has an additional five (5) business days to cure the default by funding the full amount of the missed capital call, together with any default interest that has accrued from the original funding date through the date of the cure payment.
Consequences of an Uncured Default. If the LP fails to cure the default within the five-business-day cure period, the GP may, in its sole discretion, impose any or all of the following remedies:
(a) Capital Account Forfeiture. The defaulting LP's interest in the Fund is subject to forfeiture of up to 50% of its capital account balance. This is a punitive measure designed to deter defaults and compensate non-defaulting LPs and the Fund for the disruption caused by the default. The 50% forfeiture rate is at the high end of the market range, which typically falls between 25% and 50%. We note that a 50% forfeiture on BFO's $75,000,000 commitment could represent a forfeiture of up to $37,500,000 of capital account value (assuming BFO's full commitment has been called and funded at the time of the default), which would constitute a catastrophic loss.
(b) Default Interest. The GP may charge interest on the unfunded capital call amount at a rate equal to the lesser of (i) 18% per annum, or (ii) the maximum rate permitted by applicable law. Default interest accrues from the original funding date specified in the capital call notice through the date on which the defaulting LP cures the default or the GP exercises its other remedies. The 18% p

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