1027-00002 · Pellegrino Capital Group · Analysis & Advice

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CALDERWOOD & HARKNESS LLP 200 South Biscayne Boulevard, Suite 4100 Miami, Florida 33131

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

This memorandum is a confidential and privileged communication protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressee and authorized recipients listed herein. Any dissemination, distribution, or copying of this communication by any person other than the addressee or authorized recipients is strictly prohibited.

INTERNAL MEMORANDUM

Date: January 3, 2026

To: Nicholas Stern, Partner, Funds & Asset Management, Calderwood & Harkness LLP

From: Owen Fischer, Lead Associate, Funds & Asset Management Stephen Adler, Working Associate, Funds & Asset Management

Cc: Adriana Voss, Vice President & General Counsel, Pellegrino Capital Group LLC

Re: Federal and State Income Tax Analysis — Pellegrino Capital Group LLC Co-Investment in Ridgeline-Clarion Co-Invest, L.P.

Matter No.: 1027-00002

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I. Executive Summary and Purpose

The purpose of this memorandum is to analyze the material federal and state income tax implications of Pellegrino Capital Group LLC's ("Pellegrino" or "PCG") proposed $25,000,000 co-investment in Ridgeline-Clarion Co-Invest, L.P. (the "Co-Invest Vehicle" or "Co-Invest LP"), a Delaware limited partnership, alongside Ridgeline Equity Partners Fund IV, L.P. ("Fund IV"), in connection with the acquisition of 100% of the equity of Clarion Hospitality Holdings, Inc. ("Clarion" or the "Target") through Clarion Holdings Acquisition Corp. ("AcquisitionCo"). This memorandum addresses the federal income tax classification of the entities involved, the applicability (or inapplicability) of the unrelated business taxable income ("UBTI") rules, the Foreign Investment in Real Property Tax Act ("FIRPTA"), partnership allocation requirements under Internal Revenue Code ("IRC" or "Code") Sections 704(b) and 704(c), the carried interest recharacterization rules under IRC Section 1061, and relevant state and local tax considerations in Delaware, Florida, Tennessee, New York, and other jurisdictions in which Clarion conducts operations.

This memorandum has been prepared in coordination with, and should be read in conjunction with, the tax structuring memorandum dated December 20, 2025, prepared by Whitfield Greer & Associates LLP (Robert K. Anand, CPA, Engagement Partner), Pellegrino's external accounting and tax advisory firm. Where appropriate, we have identified areas of alignment with Whitfield Greer's analysis as well as open items that require further coordination between our respective firms.

Based on our review of the draft limited partnership agreement of the Co-Invest Vehicle (received November 25, 2025, as marked up by Calderwood & Harkness on December 6, 2025), the Whitfield Greer memorandum, publicly available information regarding Clarion, and representations made by Pellegrino and its advisors, we summarize our key conclusions as follows:

1. Partnership Classification. The Co-Invest Vehicle will be treated as a partnership for federal income tax purposes under IRC § 761(a) and the applicable Treasury Regulations. No entity-level federal income tax will be imposed on the Co-Invest Vehicle. All items of income, gain, loss, deduction, and credit will pass through to the partners, including Pellegrino, in accordance with the terms of the limited partnership agreement and applicable tax law.

2. UBTI. The unrelated business taxable income rules under IRC §§ 511–514 are not a concern for Pellegrino because Pellegrino is a private, for-profit family office and is not a tax-exempt organization under any subsection of IRC § 501. Accordingly, the UBTI rules have no application to Pellegrino's investment in the Co-Invest Vehicle.

3. FIRPTA. FIRPTA risk is limited given that Clarion's primary business is hotel management services and proprietary revenue management technology, rather than direct ownership of U.S. real property interests ("USRPIs"). Preliminary analysis suggests that AcquisitionCo is unlikely to be classified as a U.S. real property holding corporation ("USRPHC"), although certain assets of Clarion and its subsidiaries require further factual diligence to confirm this conclusion. As a domestic entity, Pellegrino is not itself subject to FIRPTA withholding, but the USRPHC analysis is relevant for potential future foreign investor participation and secondary market transactions.

4. Section 704(b) and 704(c) Allocations. The allocation provisions of the Co-Invest Vehicle's limited partnership agreement ("LPA") appear, based on our review of the current draft, to satisfy the substantial economic effect safe harbor under Treasury Regulation § 1.704-1(b)(2)(ii). Because all partners are contributing cash (rather than appreciated or depreciated property) to the Co-Invest Vehicle, Section 704(c) considerations are not implicated at the Co-Invest Vehicle level. Final confirmation is subject to review of the execution version of the LPA.

5. Carried Interest — Section 1061. The 10% carried interest payable to the general partner of the Co-Invest Vehicle constitutes an "applicable partnership interest" under IRC § 1061 and is subject to the three-year holding period requirement for long-term capital gain treatment. This provision does not apply to Pellegrino's limited partnership interest, which was acquired in exchange for a capital contribution and not in connection with the performance of services.

6. State and Local Taxes. Multi-state tax filing obligations may arise for Pellegrino in Delaware, Florida, Tennessee, and New York, as well as potentially in other states where Clarion-managed hotel properties are located. A preliminary analysis of each relevant jurisdiction is set forth in Section VIII below. We recommend obtaining a state-by-state breakdown of Clarion's managed properties and revenue sources to complete this analysis.

Each of these conclusions is discussed in detail in the sections that follow.

II. Transaction Overview

A. The Target — Clarion Hospitality Holdings, Inc.

Clarion Hospitality Holdings, Inc. is a Delaware corporation headquartered at 200 International Drive, Suite 1500, Nashville, Tennessee 37214. Clarion is an integrated hospitality asset management platform that manages approximately 14,200 hotel rooms across 62 properties, with a primary focus on select-service and extended-stay hotel segments. Clarion's business model encompasses third-party hotel management services, as well as proprietary revenue management technology that the company has developed internally and licenses to hotel owners in conjunction with its management contracts. The company is led by Chief Executive Officer Theodore "Ted" J. Barrington and Chief Financial Officer Lisa M. Kwon.

For the twelve-month period ended September 30, 2025 (the "LTM Period"), Clarion reported revenue of approximately $387 million and Adjusted EBITDA of approximately $74 million. Based on the agreed-upon enterprise value of $555,000,000, the implied EV/Adjusted EBITDA multiple is approximately 7.5x.

B. The Seller

The seller in the transaction is Brindoval Growth Capital Fund II, L.P., which holds approximately 82% of the outstanding equity of Clarion. The remaining approximately 18% is held by management rollover shareholders, principally Mr. Barrington and Ms. Kwon, who are rolling over a portion of their existing equity into the post-acquisition capital structure.

C. Acquisition Structure

The acquisition will be effected through Clarion Holdings Acquisition Corp. ("AcquisitionCo"), a newly formed Delaware corporation (EIN 93-4820119), which will acquire 100% of the outstanding equity of Clarion from Brindoval and the management sellers.

The capitalization of AcquisitionCo is as follows:

In addition to the $250,000,000 of new equity, the acquisition will be financed with net debt of approximately $305,000,000, funded through a senior secured Term Loan B provided by Pinnacle National Bank, N.A. An additional $40,000,000 revolving credit facility from Pinnacle National Bank, N.A. will be available to AcquisitionCo but is expected to be undrawn at closing. The management rollover of approximately $30,000,000 by Mr. Barrington and Ms. Kwon is being structured separately from the new equity contributions and is not part of the $250,000,000 aggregate new equity.

The total enterprise value of $555,000,000 is thus composed of approximately $250,000,000 of new equity, $305,000,000 of net debt (Term Loan B), and additional consideration flowing to rollover shareholders through the separate rollover structure.

D. Pellegrino's Investment

Pellegrino Capital Group LLC proposes to invest $25,000,000 in the Co-Invest Vehicle, representing 33.33% of the $75,000,000 aggregate co-investment commitments in the Co-Invest Vehicle. Through its 33.33% interest in the Co-Invest Vehicle, which in turn holds a 30% interest in AcquisitionCo, Pellegrino's indirect ownership of AcquisitionCo will be 10.0% (calculated as 33.33% multiplied by 30%). One hundred percent (100%) of Pellegrino's committed capital will be called at closing. The target closing date for the transaction is January 30, 2026.

E. Co-Invest Vehicle Details

The Co-Invest Vehicle, formally known as Ridgeline-Clarion Co-Invest, L.P. (EIN 93-4817265), is a Delaware limited partnership formed for the purpose of co-investing alongside Fund IV in the acquisition of Clarion. The general partner of the Co-Invest Vehicle is Ridgeline-Clarion Co-Invest GP LLC (EIN 93-4817302), a Delaware limited liability company that is wholly owned by Ridgeline Equity Management LLC, the sponsor's management company.

The key economic terms of the Co-Invest Vehicle, as set forth in the draft LPA, are summarized as follows:

• Carried Interest: 10% of net profits above an 8% preferred return (compounded quarterly), payable to the general partner.

• Management Fee: 0% (no management fee is charged to the Co-Invest Vehicle).

• Organizational Expenses: Capped at $150,000, to be borne by the Co-Invest Vehicle.

• Term: 10 years from the initial closing, with two one-year extensions at the discretion of the general partner. The term is co-terminous with Fund IV.

• Registered Agent: Capitol Registered Agents, Inc., 850 New Burton Road, Suite 201, Dover, Delaware 19904.

The Co-Invest Vehicle's sole purpose is to invest alongside Fund IV in AcquisitionCo. The Co-Invest Vehicle will not make any other investments and will not conduct any independent business activities beyond holding its equity interest in AcquisitionCo and distributing proceeds to its partners.

III. Entity Classification and Check-the-box Analysis

A threshold question in any partnership investment structure is the federal income tax classification of each entity in the chain. The following analysis addresses the classification of the Co-Invest Vehicle, its general partner, AcquisitionCo, and Pellegrino under the entity classification rules of the Code and Treasury Regulations.

A. Co-Invest Vehicle — Ridgeline-Clarion Co-Invest, L.P.

The Co-Invest Vehicle is organized as a limited partnership under the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101 et seq. Under the entity classification rules set forth in Treasury Regulation § 301.7701-3, a domestic eligible entity with two or more members is classified as a partnership for federal income tax purposes by default, unless it affirmatively elects to be classified as an association taxable as a corporation by filing IRS Form 8832, Entity Classification Election, with the Internal Revenue Service.

An "eligible entity" is any entity that is not classified as a corporation per se under Treasury Regulation § 301.7701-2(b). The list of per se corporations in § 301.7701-2(b)(1) through (b)(8) includes certain specified domestic entities (such as entities incorporated under a state corporation statute) and certain specified foreign entities. A domestic limited partnership formed under state limited partnership law is not a per se corporation and is therefore an eligible entity for purposes of the check-the-box regulations.

The Co-Invest Vehicle has two or more members: Ridgeline-Clarion Co-Invest GP LLC serves as the general partner, and multiple limited partners, including Pellegrino, will hold limited partnership interests. Because the Co-Invest Vehicle is an eligible entity with two or more members, it is classified as a partnership by default under Treasury Regulation § 301.7701-3(b)(1)(i).

No check-the-box election to classify the Co-Invest Vehicle as an association taxable as a corporation is contemplated, and we have confirmed with counsel for the sponsor, Douglas W. Cheng of Hartwell Velmoran & Pratt LLP, that no Form 8832 election will be filed. Accordingly, the Co-Invest Vehicle will be treated as a partnership for federal income tax purposes under IRC § 761(a).

Result: The Co-Invest Vehicle is not subject to entity-level federal income tax. Items of income, gain, loss, deduction, and credit earned or incurred by the Co-Invest Vehicle will pass through to the partners under IRC §§ 701 and 702, and each partner, including Pellegrino, will include its distributive share of such items on its own federal income tax return. The Co-Invest Vehicle will file an annual informational return on IRS Form 1065, U.S. Return of Partnership Income, and will issue a Schedule K-1 to each partner reflecting the partner's distributive share of partnership items for the taxable year.

B. Ridgeline-Clarion Co-Invest GP LLC

Ridgeline-Clarion Co-Invest GP LLC (EIN 93-4817302) is a Delaware limited liability company that serves as the general partner of the Co-Invest Vehicle. It is wholly owned by Ridgeline Equity Management LLC, the sponsor's management entity. Because the GP LLC has only a single member (Ridgeline Equity Management LLC), it is a single-member LLC for purposes of the check-the-box regulations.

Under Treasury Regulation § 301.7701-3(b)(1)(ii), a domestic eligible entity with a single owner is disregarded as an entity separate from its owner for federal income tax purposes by default, unless it affirmatively elects to be classified as an association taxable as a corporation on Form 8832. No such election is anticipated. Accordingly, the GP LLC will be treated as a disregarded entity for federal income tax purposes, and its activities as general partner of the Co-Invest Vehicle will be treated as the activities of its sole owner, Ridgeline Equity Management LLC, for income tax purposes.

This classification does not affect the analysis of the Co-Invest Vehicle's partnership status. Treasury Regulation § 301.7701-2(c)(2)(i) provides that a disregarded entity is treated as an entity separate from its owner for purposes of employment tax and certain other specified purposes, but for income tax purposes, the GP LLC's existence is disregarded and its owner is treated as the general partner of the Co-Invest Vehicle.

C. AcquisitionCo — Clarion Holdings Acquisition Corp.

Clarion Holdings Acquisition Corp. (EIN 93-4820119) is a corporation organized under the Delaware General Corporation Law, 8 Del. C. §§ 101 et seq. Under Treasury Regulation § 301.7701-2(b)(1), a business entity organized under a state statute that refers to the entity as "incorporated" or as a "corporation" is classified as a corporation per se for federal income tax purposes. Because AcquisitionCo is incorporated under the Delaware General Corporation Law, it is a per se corporation and is not an eligible entity for purposes of the check-the-box regulations.

AcquisitionCo is subject to corporate-level federal income tax under Subchapter C of the Internal Revenue Code. As a C corporation, AcquisitionCo will compute its own taxable income, pay federal corporate income tax thereon at the applicable rate (currently 21% under IRC § 11(b)), and will not pass through items of income, gain, loss, deduction, or credit to its shareholders.

Distributions made by AcquisitionCo to its shareholders, including the Co-Invest Vehicle (which holds a 30% equity interest in AcquisitionCo), will be subject to dividend treatment under IRC §§ 301 and 316 to the extent of AcquisitionCo's current and accumulated earnings and profits. Distributions in excess of earnings and profits will be treated as a return of capital (reducing the shareholder's basis in its AcquisitionCo stock) under IRC § 301(c)(2), and any amounts in excess of basis will be treated as capital gain under IRC § 301(c)(3). This two-tier tax structure (corporate-level tax on AcquisitionCo's income, followed by shareholder-level tax on distributions) is a standard feature of C corporation investments and should be taken into account in Pellegrino's overall return modeling.

D. Pellegrino Capital Group LLC

Pellegrino Capital Group LLC is a limited liability company organized under the laws of the State of Delaware and foreign-qualified to do business in the State of Florida. Its Employer Identification Number is 84-3291047.

As a domestic LLC, Pellegrino is an eligible entity for purposes of the check-the-box regulations. Its default classification depends on the number of its members:

• If Pellegrino has two or more members, it is classified as a partnership by default under Treasury Regulation § 301.7701-3(b)(1)(i).

• If Pellegrino has a single member (e.g., if it is wholly owned by Marco A. Pellegrino), it is classified as a disregarded entity by default under Treasury Regulation § 301.7701-3(b)(1)(ii).

The distinction between partnership and disregarded entity classification is significant because it determines whether Pellegrino itself files a federal income tax return (Form 1065, in the case of partnership classification) or whether all items of income, gain, loss, deduction, and credit flow directly through to Marco A. Pellegrino's individual return (Form 1040, in the case of disregarded entity classification). In either case, there is no entity-level federal income tax imposed on Pellegrino, but the filing and reporting obligations differ.

We note that Pellegrino could also have elected to be classified as an association taxable as a corporation by filing Form 8832, although we understand that no such election has been made. We cross-reference to the Whitfield Greer & Associates LLP memorandum dated December 20, 2025, for confirmation of Pellegrino's current check-the-box status, including whether any Form 8832 election has been filed at any time since the entity's formation. We recommend that this point be confirmed with Whitfield Greer as a priority open item prior to closing.

IV. UBTI Analysis

A. Applicability to Pellegrino

The unrelated business taxable income rules, codified in IRC §§ 511 through 514, impose a tax on the unrelated business taxable income of organizations that are otherwise exempt from federal income tax under IRC § 501(a). The UBTI regime applies to entities described in, among other provisions, IRC § 501(c)(3) (charitable organizations), § 401(a) (qualified pension, profit-sharing, and stock bonus plans), and § 408(e) (individual retirement accounts). The purpose of the UBTI rules is to prevent tax-exempt organizations from gaining an unfair competitive advantage over taxable enterprises by operating businesses that are unrelated to their exempt purposes.

Pellegrino Capital Group LLC is a private, for-profit family office that manages and invests capital on behalf of the Pellegrino family. Pellegrino is not a tax-exempt organization under any subsection of IRC § 501, nor is it a qualified plan under IRC § 401(a) or an individual retirement account under IRC § 408. Pellegrino is organized and operated for the purpose of generating investment returns for its owner or owners, and it pays (or passes through) federal and applicable state income taxes on all of its income in the ordinary course.

Because the UBTI rules apply only to organizations that are exempt from tax under IRC § 501(a) (or that are subject to the UBTI rules by specific statutory cross-reference, such as qualified plans and IRAs), and Pellegrino does not fall within any of these categories, the UBTI rules have no application to Pellegrino's investment in the Co-Invest Vehicle.

Result: No UBTI concern arises for Pellegrino from its $25,000,000 investment in the Co-Invest Vehicle. Pellegrino's distributive share of income from the Co-Invest Vehicle will be included in Pellegrino's (or its owner's) taxable income in the ordinary course, without any UBTI overlay.

B. Relevance to Other Co-Investors

Although the UBTI rules do not apply to Pellegrino, we note for completeness that if any other limited partners in the Co-Invest Vehicle are tax-exempt entities (such as endowments, foundations, pension funds, or other organizations described in IRC § 501), those entities may face UBTI concerns arising from this investment. Two categories of UBTI risk are potentially relevant:

First, income from "debt-financed property" under IRC § 514 may generate UBTI for tax-exempt investors. The $305 million Term Loan B at the AcquisitionCo level constitutes leveraged financing in connection with the acquisition of Clarion. While the debt sits at the AcquisitionCo level (a C corporation), and AcquisitionCo's status as a taxable corporation generally blocks the application of § 514 at the partner level (because the Co-Invest Vehicle holds stock in a C corporation, not a direct interest in debt-financed property), the analysis depends on the specific structure and whether any blocker corporation or other intermediary entity is utilized. Tax-exempt co-investors should consult their own tax advisors on this point.

Second, if the Co-Invest Vehicle were treated as engaged in an unrelated trade or business under IRC § 512 (for example, if the investment were characterized as something other than a passive investment in corporate stock), tax-exempt co-investors could face UBTI exposure. However, the Co-Invest Vehicle's sole activity is holding stock in AcquisitionCo, a C corporation, and dividend and capital gain income from such stock is generally excluded from UBTI under IRC § 512(b).

This analysis is limited to Pellegrino's tax position and does not constitute advice to, or an analysis of the tax position of, any other co-investor in the Co-Invest Vehicle.

C. Coordination with Whitfield Greer

The Whitfield Greer & Associates LLP tax structuring memorandum dated December 20, 2025 (Robert K. Anand, CPA, Engagement Partner) independently confirms Pellegrino's non-exempt status for federal income tax purposes and concurs that the UBTI rules are inapplicable to Pellegrino. We are in alignment with Whitfield Greer on this point and do not identify any area of disagreement or open issues with respect to the UBTI analysis as applied to Pellegrino.

V. FIRPTA Analysis

A. Overview of FIRPTA

The Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"), codified principally in IRC § 897, imposes a federal income tax on foreign persons' gains from the disposition of U.S. real property interests ("USRPIs"). Section 897(a) provides that any gain or loss of a nonresident alien individual or foreign corporation from the disposition of a USRPI is treated as income or loss effectively connected with the conduct of a trade or business within the United States, thereby subjecting such gain to U.S. federal income tax regardless of whether the foreign person is otherwise engaged in a U.S. trade or business.

A "USRPI" is defined in IRC § 897(c)(1) to include (i) an interest in real property located in the United States or the U.S. Virgin Islands and (ii) any interest (other than an interest solely as a creditor) in a domestic corporation that is a "U.S. real property holding corporation" ("USRPHC"). Under IRC § 897(c)(2), a corporation is a USRPHC if the fair market value of its U.S. real property interests equals or exceeds 50% of the aggregate fair market value of the sum of (A) its USRPIs, (B) its interests in real property located outside the United States, and (C) its other assets used or held for use in a trade or business (the "asset ratio test").

Section 1445 of the Code imposes a withholding obligation on the transferee of a USRPI acquired from a foreign person. The transferee must withhold 15% (or, in certain cases, 10%) of the amount realized on the disposition and remit the withheld amount to the IRS. Failure to withhold gives rise to penalties and potential liability for the tax that should have been withheld.

B. Applicability to Pellegrino

Pellegrino Capital Group LLC is a domestic entity organized under the laws of Delaware. FIRPTA, by its terms, applies only to "foreign persons" — specifically, nonresident alien individuals, foreign corporations, foreign partnerships, foreign trusts, and foreign estates, as defined in IRC §§ 897 and 1445 and the regulations thereunder. Because Pellegrino is a U.S. person (a domestic LLC), FIRPTA withholding under § 1445 does not apply to Pellegrino upon any disposition of its interest in the Co-Invest Vehicle or upon any disposition of AcquisitionCo stock by the Co-Invest Vehicle.

Notwithstanding the inapplicability of FIRPTA to Pellegrino directly, the FIRPTA analysis remains relevant for two reasons. First, if any other limited partners in the Co-Invest Vehicle are foreign persons, the structure of the investment and the USRPHC status of AcquisitionCo (and, by look-through, Clarion) would give rise to FIRPTA considerations that could affect the timing and mechanics of a future exit. Second, it is prudent as a matter of due diligence to understand Clarion's USRPI profile for purposes of evaluating AcquisitionCo's potential classification as a USRPHC, particularly in the event that Pellegrino or the Co-Invest Vehicle seeks to admit foreign investors or to effect a secondary sale of interests to a foreign buyer in the future.

C. Clarion's Asset Profile

The central question in the USRPHC analysis is whether the fair market value of USRPIs held by AcquisitionCo (through its ownership of Clarion and Clarion's subsidiaries) equals or exceeds 50% of the aggregate fair market value of all of AcquisitionCo's assets, as described above.

Hotel Management Services (Non-USRPI). Clarion's core business consists of third-party hotel management services and the licensing of its proprietary revenue management technology platform. Management contracts, service agreements, intellectual property (including software, trade secrets, trademarks, and proprietary algorithms), and fee-based revenue streams are generally not USRPIs under IRC § 897(c)(1). These intangible assets and contractual rights are the primary drivers of Clarion's enterprise value, as reflected in the 7.5x EV/EBITDA multiple and the company's positioning as an "asset-light" hospitality management platform.

Hotel Properties. Clarion manages approximately 62 properties comprising approximately 14,200 hotel rooms. The key question for purposes of the USRPHC analysis is whether Clarion owns any of these hotel properties directly, or whether the properties are owned by third-party hotel owners for whom Clarion acts solely as a fee-based manager. Real property interests — including fee simple interests in land and buildings, leasehold interests (to the extent of significant duration or value), and equity interests in joint ventures or other entities that own real property — are USRPIs.

Based on our preliminary due diligence, including our review of the representations and warranties in the draft acquisition agreement and discussions with Ridgeline's counsel at Hartwell Velmoran & Pratt LLP, Clarion operates primarily as a fee-based management platform and does not appear to own the underlying real property in the vast majority of its managed portfolio. The typical structure involves a third-party property owner (such as a REIT, private equity-backed owner, or individual investor) owning the hotel real property and engaging Clarion under a long-term management contract to operate the hotel on the owner's behalf, in exchange for a base management fee and an incentive management fee.

However, we have not yet obtained a definitive schedule of all real property interests owned, directly or indirectly, by Clarion or any of its subsidiaries. It is possible that Clarion or one or more of its subsidiaries holds direct or indirect ownership interests in real property in certain cases, including but not limited to the following scenarios:

• Owned hotels or hotel parcels held on the balance sheet of Clarion or a subsidiary;

• Ground leases (which, if of sufficient duration, may constitute USRPIs);

• Equity interests in property-owning joint ventures or co-investment arrangements; and

• Interests in land or development sites associated with pipeline properties.

If any such real property interests exist, their fair market value must be included in the numerator of the USRPHC asset ratio test. If Clarion's USRPIs constitute less than 50% of total assets (which we believe is likely given the company's asset-light model), AcquisitionCo would not be classified as a USRPHC.

Recommendation: We recommend requesting confirmation from Ridgeline (through Douglas W. Cheng of Hartwell Velmoran & Pratt LLP) and from Clarion management (Mr. Barrington and Ms. Kwon) regarding any real property interests owned directly or indirectly by Clarion or any of its subsidiaries. This information should include a schedule of any owned or ground-leased properties, equity interests in property-owning joint ventures, and any other interests that could constitute USRPIs. We further recommend coordinating with Whitfield Greer & Associates LLP to complete the quantitative asset ratio analysis once the necessary factual data is obtained.

D. Conclusion

FIRPTA withholding under IRC § 1445 is not applicable to Pellegrino as a domestic entity. Pellegrino will not be subject to FIRPTA tax on any gain recognized from its direct or indirect interest in the Clarion investment.

Clarion's primary business as a fee-based hotel management and technology platform — rather than a hotel property owner — strongly suggests that AcquisitionCo is unlikely to be classified as a USRPHC under the 50% asset ratio test of IRC § 897(c)(2). However, this conclusion is preliminary and is subject to further factual diligence regarding Clarion's owned or leased real property interests. We will update this analysis upon receipt of the requested real property schedule from Ridgeline and Clarion management.

VI. Allocation Methodology — IRC Sections 704(b) and 704(c)

A. Section 704(b) — Economic Effect

Under IRC § 704(a), a partner's distributive share of income, gain, loss, deduction, or credit is determined by the partnership agreement. However, under IRC § 704(b), if the allocation under the partnership agreement does not have "substantial economic effect," the partner's distributive share is determined in accordance with the partner's interest in the partnership, taking into account all facts and circumstances.

The Treasury Regulations under § 704(b) provide a two-part test for determining whether an allocation has "substantial economic effect." First, the allocation must have "economic effect," meaning that the allocation is consistent with the underlying economic arrangement of the partners. Second, the economic effect must be "substantial," meaning that there is a reasonable possibility that the allocation will affect substantially the dollar amounts to be received by the partners independent of tax consequences.

The safe harbor for economic effect under Treasury Regulation § 1.704-1(b)(2)(ii) requires that the partnership agreement satisfy three conditions: (1) the partnership must maintain capital accounts in accordance with the rules of § 1.704-1(b)(2)(iv); (2) liquidating distributions must be made in accordance with positive capital account balances; and (3) the partnership agreement must contain either a deficit restoration obligation (requiring partners with deficit capital account balances to restore those deficits upon liquidation) or a "qualified income offset" provision (requiring the partnership to allocate income to a partner whose capital account unexpectedly becomes negative so as to eliminate the deficit as quickly as possible).

Based on our review of the draft LPA of the Co-Invest Vehicle (as marked up by Calderwood & Harkness on December 6, 2025), we note the following:

• Capital Account Maintenance. Section 5.1 of the draft LPA provides that the general partner shall maintain capital accounts for each partner in accordance with the principles of Treasury Regulation § 1.704-1(b)(2)(iv), including appropriate adjustments for contributions, distributions, allocations of income and loss, and revaluations of partnership property.

• Liquidating Distributions. Section 7.2 of the draft LPA provides that upon dissolution and winding up of the Co-Invest Vehicle, distributions shall be made to the partners in accordance with their positive capital account balances, after payment of partnership debts and liabilities and establishment of appropriate reserves.

• Qualified Income Offset. Section 5.3 of the draft LPA includes a qualified income offset provision substantially in the form contemplated by Treasury Regulation § 1.704-1(b)(2)(ii)(d), providing that if a limited partner unexpectedly receives an adjustment, allocation, or distribution that causes or increases a deficit balance in its capital account, items of partnership income and gain shall be specially allocated to such partner in an amount sufficient to eliminate the deficit as quickly as possible.

The distribution waterfall set forth in Section 7.1 of the draft LPA provides for the following priority of distributions:

(i) First, 100% to the limited partners, pro rata in accordance with their capital contributions, until each limited partner has received a return of its aggregate capital contributions;

(ii) Second, 100% to the limited partners, pro rata in accordance with their capital contributions, until each limited partner has received a cumulative preferred return on its unreturned capital contributions equal to 8% per annum, compounded quarterly;

(iii) Third, 100% to the general partner until the general partner has received an amount equal to 11.11% of the amounts distributed to the limited partners under clauses (ii) and (iii) (the "GP Catch-Up"), which is intended to cause the general partner to receive 10% of the aggregate net profits of the partnership above the preferred return threshold;

(iv) Fourth, 90% to the limited partners, pro rata in accordance with their capital contributions, and 10% to the general partner (as carried interest).

The allocation provisions of the LPA generally track the distribution waterfall and appear to be designed to satisfy the substantial economic effect safe harbor. Based on our review, and subject to our final review of the execution version of the LPA (which is expected to be agreed upon by January 24, 2026), the allocation provisions appear to comply with the requirements of Treasury Regulation § 1.704-1(b)(2)(ii).

B. Section 704(c) — Contributed Property

IRC § 704(c)(1)(A) provides that income, gain, loss, and deduction with respect to property contributed to a partnership by a partner shall be shared among the partners so as to take into account the variation between the adjusted tax basis of such property to the partnership and its fair market value at the time of contribution. The purpose of § 704(c) is to prevent the shifting of tax consequences among partners with respect to precontribution gain or loss inherent in contributed property.

In the present transaction, all partners of the Co-Invest Vehicle — including Pellegrino, the other limited partners, and the general partner — are contributing cash to the Co-Invest Vehicle. Cash contributions do not give rise to § 704(c) issues because there is no built-in gain or loss inherent in cash. The Co-Invest Vehicle will then use the contributed cash to make a cash equity contribution to AcquisitionCo in exchange for shares of AcquisitionCo common stock. Because the Co-Invest Vehicle is receiving newly issued stock in exchange for cash at its fair market value, there is no difference between the fair market value and the tax basis of the contributed property at the partnership level.

Accordingly, § 704(c) should not present an immediate concern at the Co-Invest Vehicle level. There is no "reverse § 704(c)" issue either, because no revaluation event is occurring at the time of the initial formation and capitalization of the Co-Invest Vehicle.

We note two additional points regarding § 704(c) in the broader transaction context:

First, if AcquisitionCo makes a § 338(h)(10) election with respect to the acquisition of Clarion (treating the stock acquisition as a deemed asset purchase for federal income tax purposes), or if the acquisition is otherwise structured as an asset purchase, AcquisitionCo would obtain a stepped-up basis in Clarion's assets equal to the purchase price allocated among those assets under IRC § 1060. This stepped-up basis would generate increased depreciation and amortization deductions at the AcquisitionCo level, which would flow through AcquisitionCo's corporate income tax return. However, because AcquisitionCo is a C corporation, these deductions do not flow through to the Co-Invest Vehicle's partners; they affect only AcquisitionCo's corporate-level tax liability and, indirectly, the after-tax cash available for distribution to shareholders.

Second, the management rollover of approximately $30 million by Mr. Barrington and Ms. Kwon involves the contribution of existing Clarion equity (which may have a basis different from fair market value) into the post-acquisition capital structure. To the extent this rollover is structured through a partnership-like entity or involves the exchange of low-basis stock for interests in AcquisitionCo or a holding vehicle, § 704(c) principles may apply at the level of the rollover structure. However, the management rollover is structured separately from the Co-Invest Vehicle, and any § 704(c) issues arising from the rollover do not directly affect Pellegrino's position as a limited partner in the Co-Invest Vehicle.

C. Targeted Allocations and Special Allocations

We recommend that the final execution version of the LPA be reviewed for any special allocation provisions beyond those discussed above. In particular, the LPA should be reviewed for "regulatory allocations" required by the Treasury Regulations to satisfy the substantial economic effect safe harbor, including:

• Minimum Gain Chargeback (Treas. Reg. § 1.704-2(f)): An allocation of income to partners to the extent of their shares of partnership minimum gain, triggered if partnership minimum gain decreases during a taxable year.

• Partner Minimum Gain Chargeback (Treas. Reg. § 1.704-2(i)(4)): An allocation of income to a partner to the extent of that partner's share of partner nonrecourse debt minimum gain, triggered if there is a net decrease in partner nonrecourse debt minimum gain.

• Nonrecourse Deduction Allocations (Treas. Reg. § 1.704-2(e)): Deductions attributable to increases in partnership minimum gain that must be reasonably consistently allocated.

We note, however, that because the $305 million Term Loan B and the $40 million revolving credit facility sit at the AcquisitionCo level — a C corporation — rather than at the Co-Invest Vehicle level, the Co-Invest Vehicle itself should not have any partnership-level nonrecourse liabilities. The debt is an obligation of AcquisitionCo and is not recourse (or nonrecourse) to the Co-Invest Vehicle or its partners. Accordingly, the nonrecourse debt allocation rules under Treasury Regulation § 1.752-3 should not be implicated at the Co-Invest Vehicle level, and the minimum gain chargeback and related regulatory allocation provisions should be largely academic in this context. Nevertheless, it is appropriate for these provisions to appear in the LPA as a matter of best practice and to preserve compliance with the safe harbor in the event that the Co-Invest Vehicle incurs any liabilities in the future (e.g., organizational expenses or indemnification obligations).

VII. Carried Interest — IRC Section 1061

A. Overview

IRC § 1061, enacted as part of the Tax Cuts and Jobs Act of 2017 (P.L. 115-97) and effective for taxable years beginning after December 31, 2017, modifies the treatment of certain long-term capital gains recognized by taxpayers holding "applicable partnership interests" ("APIs"). An API is defined under § 1061(c)(1) as any interest in a partnership that, directly or indirectly, is transferred to (or held by) a taxpayer in connection with the performance of substantial services by the taxpayer (or any other related person) in any "applicable trade or business."

An "applicable trade or business" is defined under § 1061(c)(2) as any activity conducted on a regular, continuous, and substantial basis that, regardless of whether such activity is conducted in or outside the United States, consists, in whole or in part, of (A) raising or returning capital, and (B) either (i) investing in (or disposing of) specified assets or (ii) developing specified assets.

Under § 1061(a), if a taxpayer holds an API, the taxpayer's net long-term capital gain with respect to such interest for the taxable year is treated as short-term capital gain (taxed at ordinary income rates, currently up to 37% for individuals) to the extent that such gain exceeds the amount of net long-term capital gain that would have been recognized if a three-year holding period (rather than the standard one-year holding period under IRC § 1222) were applied to the partnership's assets. In effect, § 1061 requires that the underlying capital assets be held for more than three years in order for gains allocated to an API holder to qualify for long-term capital gain treatment.

B. Application to the GP's Carried Interest

The 10% carried interest payable to Ridgeline-Clarion Co-Invest GP LLC (and, by look-through to the disregarded entity analysis discussed in Section III.B above, to the principals of Ridgeline Equity Management LLC) constitutes an "applicable partnership interest" within the meaning of § 1061(c)(1). The carried interest is transferred to the GP in connection with the performance of substantial services — specifically, the sponsor's investment management, deal sourcing, due diligence, portfolio monitoring, and value creation services — in an "applicable trade or business" (the business of raising capital and investing in specified assets, including securities and equity interests in operating companies).

Under § 1061(a), any net long-term capital gain allocable to the GP's carried interest from the sale or other disposition of the Co-Invest Vehicle's interest in AcquisitionCo (or any successor or replacement asset) will be recharacterized as short-term capital gain — and thus taxed at ordinary income rates rather than the preferential long-term capital gains rate — unless the relevant capital asset giving rise to the gain has been held by the Co-Invest Vehicle for more than three years as of the date of disposition.

Given the Co-Invest Vehicle's 10-year term (with two one-year GP extensions), it is reasonable to expect that the Clarion investment will be held for more than three years from the date of acquisition. If the Clarion investment is held for more than three years (i.e., the AcquisitionCo stock is held for more than three years), the GP's carried interest distributions attributable to gain on the disposition of the Clarion investment would be eligible for long-term capital gain treatment under § 1222, and § 1061 would not require recharacterization. However, if the investment is exited within three years (for example, through an early strategic sale or IPO), the GP's carried interest gains would be recharacterized as short-term capital gain under § 1061.

We note that § 1061(b) provides an exception for capital interests (as opposed to profits interests or carried interests) in the partnership, so that gain attributable to a partnership interest that is not an API — for example, any capital investment made by the GP alongside the limited partners — is not subject to the three-year holding period requirement. The LPA should be reviewed to determine whether the GP has any capital interest in the Co-Invest Vehicle in addition to its carried interest.

C. Application to Pellegrino as LP

Section 1061 applies only to "applicable partnership interests" — that is, partnership interests received in connection with the performance of substantial services in an applicable trade or business. Pellegrino's limited partnership interest in the Co-Invest Vehicle was acquired in exchange for Pellegrino's $25,000,000 capital contribution. Pellegrino is not performing any services in connection with the management, operation, or investment activities of the Co-Invest Vehicle, Fund IV, or Ridgeline Equity Management LLC. Pellegrino is a passive, limited partner investor.

Accordingly, Pellegrino's limited partnership interest is not an "applicable partnership interest" under § 1061(c)(1), and § 1061 does not apply to recharacterize any long-term capital gain recognized by Pellegrino on its LP interest. Pellegrino's share of any capital gain from the eventual disposition of the Clarion investment will be eligible for long-term capital gain treatment under IRC § 1222 to the extent the underlying assets have been held for more than one year — the standard holding period for long-term capital gain treatment. If the individual behind Pellegrino (whether Marco A. Pellegrino or other members) qualifies for the preferential long-term capital gains rate (currently 20% for individuals in the highest income bracket, plus the 3.8% net investment income tax under IRC § 1411), that rate would apply to Pellegrino's share of long-term capital gains from the Clarion investment, without any § 1061 recharacterization.

D. Section 1061 Reporting

Under IRC § 1061(d) and the regulations thereunder, the Co-Invest Vehicle will be required to furnish certain information to the IRS and to its partners regarding § 1061 amounts. Specifically, the Co-Invest Vehicle's Schedule K-1 (Form 1065) issued to each partner will include information identifying the amount of any net long-term capital gain that is subject to recharacterization under § 1061 (i.e., gain allocable to applicable partnership interests with respect to assets held for three years or less) and the amount of any net long-term capital gain that is exempt from § 1061 recharacterization (i.e., gain attributable to capital interests or assets held for more than three years).

No additional reporting burden is imposed on Pellegrino beyond the receipt and inclusion of the Schedule K-1 information on Pellegrino's (or its owner's) federal income tax return. Whitfield Greer will incorporate the K-1 information into Pellegrino's annual tax returns as part of its standard compliance engagement.

VIII. State and Local Tax Considerations

The following discussion addresses the principal state and local tax considerations arising from Pellegrino's investment in the Co-Invest Vehicle. This analysis is preliminary and should be supplemented with a comprehensive multi-state review once a state-by-state breakdown of Clarion's managed properties and revenue sources has been obtained.

A. Delaware

Co-Invest Vehicle (Limited Partnership). The State of Delaware does not impose an income tax on limited partnerships or their partners with respect to income earned through a Delaware limited partnership. The Co-Invest Vehicle will, however, be subject to the Delaware annual tax for limited partnerships in the amount of $300 per year, due on or before June 1 of each year, as provided under 6 Del. C. § 17-1109.

Co-Invest GP (LLC). Ridgeline-Clarion Co-Invest GP LLC, as a Delaware LLC, will be subject to the Delaware annual LLC tax of $300 per year, due on or before June 1 of each year, as provided under 6 Del. C. § 18-1107. No Delaware income tax is imposed on the LLC itself or on its sole member with respect to income flowing through the LLC, to the extent the LLC's sole member is not a Delaware resident.

AcquisitionCo (Corporation). AcquisitionCo, as a Delaware corporation, will be subject to the Delaware franchise tax. The franchise tax is calculated based on either the authorized shares method or the assumed par value capital method, whichever results in a lower tax. Given AcquisitionCo's expected capitalization and authorized share structure, the franchise tax methodology should be reviewed by AcquisitionCo's tax advisors to minimize the Delaware franchise tax liability. We understand that this matter is being handled by Ridgeline's counsel at Hartwell Velmoran & Pratt LLP and AcquisitionCo's corporate tax team.

Pellegrino (LLC). Pellegrino, as a Delaware LLC, is subject to the Delaware annual LLC tax of $300. Importantly, Delaware does not impose an income tax on non-resident individuals or entities receiving income from a Delaware limited partnership in which they are a limited partner, provided that the non-resident does not conduct business in Delaware beyond the limited partnership interest. Because Pellegrino is a Florida-based entity and its involvement with the Co-Invest Vehicle is limited to its role as a passive limited partner, no Delaware income tax should apply to Pellegrino's distributive share of Co-Invest Vehicle income.

B. Florida

Pellegrino is headquartered in Miami, Florida, and is foreign-qualified to do business in Florida. The State of Florida does not impose a personal income tax on individuals. Accordingly, if Pellegrino is classified as a disregarded entity for federal income tax purposes (with its income flowing directly to Marco A. Pellegrino as an individual Florida resident), no Florida income tax would apply.

Florida does impose a corporate income tax at a rate of 5.5% on the Florida-source taxable income of C corporations. However, Pellegrino is organized as an LLC and is classified for federal income tax purposes either as a partnership (if it has multiple members) or as a disregarded entity (if it has a single member). In either case, Pellegrino is not a C corporation and should not be subject to Florida's corporate income tax. Florida generally follows federal entity classification for purposes of its corporate income tax, so entities that are classified as partnerships or disregarded entities for federal purposes are similarly treated for Florida purposes.

We recommend confirming with Whitfield Greer whether any Florida filing obligations arise from Pellegrino's receipt of distributive share income from the Co-Invest Vehicle, including whether any Florida informational return is required to be filed. As a general matter, partnerships and disregarded entities doing business in Florida or having Florida-resident members may have certain informational reporting obligations, but no entity-level income tax should apply.

C. Tennessee

Clarion Hospitality Holdings, Inc. is headquartered in Nashville, Tennessee, and conducts substantial business operations in the state. Tennessee imposes both a franchise tax and an excise tax on entities doing business in Tennessee.

The Tennessee franchise tax is imposed at a rate of 0.25% of the greater of a taxpayer's net worth or the book value of its real and tangible personal property owned or used in Tennessee. The Tennessee excise tax is imposed at a rate of 6.5% on the net earnings of a taxpayer attributable to Tennessee. Both AcquisitionCo (as the indirect corporate parent of Clarion) and Clarion itself will be subject to the Tennessee franchise and excise taxes with respect to their Tennessee-source income and Tennessee-situated assets.

The question for Pellegrino is whether Pellegrino's limited partnership interest in the Co-Invest Vehicle — which in turn holds stock in AcquisitionCo, which owns Clarion, a Tennessee-based operating company — creates Tennessee tax nexus for Pellegrino. Tennessee generally does not impose its franchise and excise tax on out-of-state limited partners who have no nexus with Tennessee other than their limited partnership interest in a partnership that, in turn, holds a corporate investment generating Tennessee-source income. The corporate "Blocker" (AcquisitionCo, a C corporation) should generally insulate Pellegrino from direct Tennessee nexus, because Pellegrino's income from the Co-Invest Vehicle will consist of its distributive share of the Co-Invest Vehicle's items (principally dividends and capital gains from AcquisitionCo stock), which are corporate-level items rather than flow-through operating income from Clarion's Tennessee operations.

We note that Tennessee's Hall Income Tax, which historically imposed a tax on certain interest and dividend income received by Tennessee residents, was fully repealed effective January 1, 2021 (Tenn. Code Ann. § 67-2-102, repealed). Accordingly, the Hall Tax does not apply to this investment.

Notwithstanding the foregoing, this position should be monitored in light of recent state tax trends regarding economic nexus and factor-presence standards. Several states have expanded their nexus concepts beyond physical presence to encompass economic nexus based on income derived from sources within the state, and Tennessee has not been immune to this trend. Additionally, for purposes of Schedule K-1 reporting, the Co-Invest Vehicle (or AcquisitionCo, as applicable) may issue Tennessee-source income information if Clarion generates apportionable income that is attributed to Tennessee. Such information could trigger a Tennessee filing obligation for Pellegrino, even if the ultimate tax liability is minimal or zero.

Recommendation: We recommend that Pellegrino's Tennessee nexus position be monitored on an annual basis. Whitfield Greer should review any K-1 information received from the Co-Invest Vehicle that reports Tennessee-source income and determine whether any Tennessee franchise and excise tax return or informational filing is required.

D. New York

Ridgeline Equity Management LLC, Ridgeline-Clarion Co-Invest GP LLC, and Ridgeline Equity Partners Fund IV, L.P. are all headquartered at 399 Park Avenue, 28th Floor, New York, New York 10022. The general partner of the Co-Invest Vehicle is based in New York and conducts its management and investment advisory activities from New York.

New York imposes income tax on partners of partnerships doing business in New York to the extent of their New York-source income. Under New York Tax Law § 631(b)(1)(A), a non-resident individual's New York-source income includes the non-resident's distributive share of partnership income, gain, loss, and deduction derived from or connected with New York sources. The question is whether any of Pellegrino's distributive share of income from the Co-Invest Vehicle is "derived from or connected with New York sources."

The Co-Invest Vehicle's general partner is based in New York, and the sponsor's management and investment advisory activities are conducted from New York. This raises the question of whether the Co-Invest Vehicle is "doing business" in New York by virtue of the GP's activities, which could result in a portion of the Co-Invest Vehicle's income being treated as New York-source income.

However, Pellegrino is a limited partner with no management role in the Co-Invest Vehicle. Under New York Tax Law § 631 and related administrative guidance, a non-resident limited partner's distributive share of partnership income is generally not treated as New York-source income unless the income is derived from sources within New York — for example, income from New York real property or income from a trade or business conducted in New York. The fact that the GP is located in New York does not, in and of itself, cause all of the Co-Invest Vehicle's income to be New York-source income for purposes of a non-resident limited partner's tax computation.

Additionally, Clarion's operations are headquartered in Nashville, Tennessee, and its managed hotel portfolio is spread across 62 properties nationwide. To the extent any Clarion-managed properties are located in New York State (or New York City), a portion of Clarion's income may be apportioned to New York under New York's corporate income tax apportionment rules. If AcquisitionCo (or Clarion) apportions a portion of its income to New York, and that New York-apportioned income flows through to the Co-Invest Vehicle, Pellegrino could have a New York-source income component in its distributive share.

Furthermore, the sponsor's management and investment advisory activities in New York may create a question as to whether the Co-Invest Vehicle is "doing business" in New York within the meaning of New York Tax Law. However, the New York regulations provide an "investment partnership exemption" under 20 NYCRR § 132.23, which excludes from New York-source income the distributive share of partnership income allocable to a non-resident limited partner of an "eligible investment partnership." An eligible investment partnership is generally a partnership that derives substantially all of its income from investments in securities, commodities, and certain other specified assets, and that does not conduct a trade or business in New York other than trading or investing in such assets. The Co-Invest Vehicle may qualify as an eligible investment partnership because its sole activity is holding stock in AcquisitionCo (a security), and it does not conduct any operating business in New York.

Recommendation: We recommend a detailed analysis of whether the Co-Invest Vehicle qualifies for the New York eligible investment partnership exemption under 20 NYCRR § 132.23. We further recommend determining whether any Clarion-managed properties are located in New York State or New York City, which could generate New York-source income allocable to Pellegrino through the Co-Invest Vehicle. This analysis should be coordinated with Whitfield Greer as part of Pellegrino's annual New York filing determination.

E. Other States

Clarion manages hotel properties across approximately 62 locations in multiple states. To the extent Clarion manages hotels in states other than Delaware, Florida, Tennessee, and New York, those states may assert nexus over AcquisitionCo and Clarion for purposes of their respective state corporate income taxes. While the C corporation structure of AcquisitionCo should generally insulate Pellegrino from direct nexus in those states (because Pellegrino's income from the Co-Invest Vehicle is derived from its partnership interest, not from direct operations in those states), certain states impose composite filing or withholding requirements on partnerships with non-resident partners, including with respect to income sourced to the state.

If the Co-Invest Vehicle or any intermediate entity is required to file composite returns or withhold tax in any state on behalf of its non-resident partners (including Pellegrino), those filings and withholdings would affect Pellegrino's overall state tax burden. A full multi-state analysis of Clarion's property portfolio by state should be obtained from Clarion management or Ridgeline to assess the potential scope of filing and withholding obligations across all relevant jurisdictions.

Recommendation: We recommend requesting a state-by-state breakdown of Clarion's managed properties and revenue apportionment from Ridgeline. This data will be essential for completing the multi-state tax analysis and for determining whether any composite return or withholding obligations apply to the Co-Invest Vehicle on behalf of Pellegrino and the other li

CALDERWOOD & HARKNESS LLP 200 South Biscayne Boulevard, Suite 4100 Miami, Florida 33131
PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
This memorandum is a confidential and privileged communication protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressee and authorized recipients listed herein. Any dissemination, distribution, or copying of this communication by any person other than the addressee or authorized recipients is strictly prohibited.
INTERNAL MEMORANDUM
Date: January 3, 2026
To: Nicholas Stern, Partner, Funds & Asset Management, Calderwood & Harkness LLP
From: Owen Fischer, Lead Associate, Funds & Asset Management Stephen Adler, Working Associate, Funds & Asset Management
Cc: Adriana Voss, Vice President & General Counsel, Pellegrino Capital Group LLC
Re: Federal and State Income Tax Analysis — Pellegrino Capital Group LLC Co-Investment in Ridgeline-Clarion Co-Invest, L.P.
Matter No.: 1027-00002
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I. Executive Summary and Purpose
The purpose of this memorandum is to analyze the material federal and state income tax implications of Pellegrino Capital Group LLC's ("Pellegrino" or "PCG") proposed $25,000,000 co-investment in Ridgeline-Clarion Co-Invest, L.P. (the "Co-Invest Vehicle" or "Co-Invest LP"), a Delaware limited partnership, alongside Ridgeline Equity Partners Fund IV, L.P. ("Fund IV"), in connection with the acquisition of 100% of the equity of Clarion Hospitality Holdings, Inc. ("Clarion" or the "Target") through Clarion Holdings Acquisition Corp. ("AcquisitionCo"). This memorandum addresses the federal income tax classification of the entities involved, the applicability (or inapplicability) of the unrelated business taxable income ("UBTI") rules, the Foreign Investment in Real Property Tax Act ("FIRPTA"), partnership allocation requirements under Internal Revenue Code ("IRC" or "Code") Sections 704(b) and 704(c), the carried interest recharacterization rules under IRC Section 1061, and relevant state and local tax considerations in Delaware, Florida, Tennessee, New York, and other jurisdictions in which Clarion conducts operations.
This memorandum has been prepared in coordination with, and should be read in conjunction with, the tax structuring memorandum dated December 20, 2025, prepared by Whitfield Greer & Associates LLP (Robert K. Anand, CPA, Engagement Partner), Pellegrino's external accounting and tax advisory firm. Where appropriate, we have identified areas of alignment with Whitfield Greer's analysis as well as open items that require further coordination between our respective firms.
Based on our review of the draft limited partnership agreement of the Co-Invest Vehicle (received November 25, 2025, as marked up by Calderwood & Harkness on December 6, 2025), the Whitfield Greer memorandum, publicly available information regarding Clarion, and representations made by Pellegrino and its advisors, we summarize our key conclusions as follows:
1.  Partnership Classification. The Co-Invest Vehicle will be treated as a partnership for federal income tax purposes under IRC § 761(a) and the applicable Treasury Regulations. No entity-level federal income tax will be imposed on the Co-Invest Vehicle. All items of income, gain, loss, deduction, and credit will pass through to the partners, including Pellegrino, in accordance with the terms of the limited partnership agreement and applicable tax law.
2.  UBTI. The unrelated business taxable income rules under IRC §§ 511–514 are not a concern for Pellegrino because Pellegrino is a private, for-profit family office and is not a tax-exempt organization under any subsection of IRC § 501. Accordingly, the UBTI rules have no application to Pellegrino's investment in the Co-Invest Vehicle.
3.  FIRPTA. FIRPTA risk is limited given that Clarion's primary business is hotel management services and proprietary revenue management technology, rather than direct ownership of U.S. real property interests ("USRPIs"). Preliminary analysis suggests that AcquisitionCo is unlikely to be classified as a U.S. real property holding corporation ("USRPHC"), although certain assets of Clarion and its subsidiaries require further factual diligence to confirm this conclusion. As a domestic entity, Pellegrino is not itself subject to FIRPTA withholding, but the USRPHC analysis is relevant for potential future foreign investor participation and secondary market transactions.
4.  Section 704(b) and 704(c) Allocations. The allocation provisions of the Co-Invest Vehicle's limited partnership agreement ("LPA") appear, based on our review of the current draft, to satisfy the substantial economic effect safe harbor under Treasury Regulation § 1.704-1(b)(2)(ii). Because all partners are contributing cash (rather than appreciated or depreciated property) to the Co-Invest Vehicle, Section 704(c) considerations are not implicated at the Co-Invest Vehicle level. Final confirmation is subject to review of the execution version of the LPA.
5.  Carried Interest — Section 1061. The 10% carried interest payable to the general partner of the Co-Invest Vehicle constitutes an "applicable partnership interest" under IRC § 1061 and is subject to the three-year holding period requirement for long-term capital gain treatment. This provision does not apply to Pellegrino's limited partnership interest, which was acquired in exchange for a capital contribution and not in connection with the performance of services.
6.  State and Local Taxes. Multi-state tax filing obligations may arise for Pellegrino in Delaware, Florida, Tennessee, and New York, as well as potentially in other states where Clarion-managed hotel properties are located. A preliminary analysis of each relevant jurisdiction is set forth in Section VIII below. We recommend obtaining a state-by-state breakdown of Clarion's managed properties and revenue sources to complete this analysis.
Each of these conclusions is discussed in detail in the sections that follow.
II. Transaction Overview
A. The Target — Clarion Hospitality Holdings, Inc.
Clarion Hospitality Holdings, Inc. is a Delaware corporation headquartered at 200 International Drive, Suite 1500, Nashville, Tennessee 37214. Clarion is an integrated hospitality asset management platform that manages approximately 14,200 hotel rooms across 62 properties, with a primary focus on select-service and extended-stay hotel segments. Clarion's business model encompasses third-party hotel management services, as well as proprietary revenue management technology that the company has developed internally and licenses to hotel owners in conjunction with its management contracts. The company is led by Chief Executive Officer Theodore "Ted" J. Barrington and Chief Financial Officer Lisa M. Kwon.
For the twelve-month period ended September 30, 2025 (the "LTM Period"), Clarion reported revenue of approximately $387 million and Adjusted EBITDA of approximately $74 million. Based on the agreed-upon enterprise value of $555,000,000, the implied EV/Adjusted EBITDA multiple is approximately 7.5x.
B. The Seller
The seller in the transaction is Brindoval Growth Capital Fund II, L.P., which holds approximately 82% of the outstanding equity of Clarion. The remaining approximately 18% is held by management rollover shareholders, principally Mr. Barrington and Ms. Kwon, who are rolling over a portion of their existing equity into the post-acquisition capital structure.
C. Acquisition Structure
The acquisition will be effected through Clarion Holdings Acquisition Corp. ("AcquisitionCo"), a newly formed Delaware corporation (EIN 93-4820119), which will acquire 100% of the outstanding equity of Clarion from Brindoval and the management sellers.
The capitalization of AcquisitionCo is as follows:
In addition to the $250,000,000 of new equity, the acquisition will be financed with net debt of approximately $305,000,000, funded through a senior secured Term Loan B provided by Pinnacle National Bank, N.A. An additional $40,000,000 revolving credit facility from Pinnacle National Bank, N.A. will be available to AcquisitionCo but is expected to be undrawn at closing. The management rollover of approximately $30,000,000 by Mr. Barrington and Ms. Kwon is being structured separately from the new equity contributions and is not part of the $250,000,000 aggregate new equity.
The total enterprise value of $555,000,000 is thus composed of approximately $250,000,000 of new equity, $305,000,000 of net debt (Term Loan B), and additional consideration flowing to rollover shareholders through the separate rollover structure.
D. Pellegrino's Investment
Pellegrino Capital Group LLC proposes to invest $25,000,000 in the Co-Invest Vehicle, representing 33.33% of the $75,000,000 aggregate co-investment commitments in the Co-Invest Vehicle. Through its 33.33% interest in the Co-Invest Vehicle, which in turn holds a 30% interest in AcquisitionCo, Pellegrino's indirect ownership of AcquisitionCo will be 10.0% (calculated as 33.33% multiplied by 30%). One hundred percent (100%) of Pellegrino's committed capital will be called at closing. The target closing date for the transaction is January 30, 2026.
E. Co-Invest Vehicle Details
The Co-Invest Vehicle, formally known as Ridgeline-Clarion Co-Invest, L.P. (EIN 93-4817265), is a Delaware limited partnership formed for the purpose of co-investing alongside Fund IV in the acquisition of Clarion. The general partner of the Co-Invest Vehicle is Ridgeline-Clarion Co-Invest GP LLC (EIN 93-4817302), a Delaware limited liability company that is wholly owned by Ridgeline Equity Management LLC, the sponsor's management company.
The key economic terms of the Co-Invest Vehicle, as set forth in the draft LPA, are summarized as follows:
•  Carried Interest: 10% of net profits above an 8% preferred return (compounded quarterly), payable to the general partner.
•  Management Fee: 0% (no management fee is charged to the Co-Invest Vehicle).
•  Organizational Expenses: Capped at $150,000, to be borne by the Co-Invest Vehicle.
•  Term: 10 years from the initial closing, with two one-year extensions at the discretion of the general partner. The term is co-terminous with Fund IV.
•  Registered Agent: Capitol Registered Agents, Inc., 850 New Burton Road, Suite 201, Dover, Delaware 19904.
The Co-Invest Vehicle's sole purpose is to invest alongside Fund IV in AcquisitionCo. The Co-Invest Vehicle will not make any other investments and will not conduct any independent business activities beyond holding its equity interest in AcquisitionCo and distributing proceeds to its partners.
III. Entity Classification and Check-the-box Analysis
A threshold question in any partnership investment structure is the federal income tax classification of each entity in the chain. The following analysis addresses the classification of the Co-Invest Vehicle, its general partner, AcquisitionCo, and Pellegrino under the entity classification rules of the Code and Treasury Regulations.
A. Co-Invest Vehicle — Ridgeline-Clarion Co-Invest, L.P.
The Co-Invest Vehicle is organized as a limited partnership under the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101 et seq. Under the entity classification rules set forth in Treasury Regulation § 301.7701-3, a domestic eligible entity with two or more members is classified as a partnership for federal income tax purposes by default, unless it affirmatively elects to be classified as an association taxable as a corporation by filing IRS Form 8832, Entity Classification Election, with the Internal Revenue Service.
An "eligible entity" is any entity that is not classified as a corporation per se under Treasury Regulation § 301.7701-2(b). The list of per se corporations in § 301.7701-2(b)(1) through (b)(8) includes certain specified domestic entities (such as entities incorporated under a state corporation statute) and certain specified foreign entities. A domestic limited partnership formed under state limited partnership law is not a per se corporation and is therefore an eligible entity for purposes of the check-the-box regulations.
The Co-Invest Vehicle has two or more members: Ridgeline-Clarion Co-Invest GP LLC serves as the general partner, and multiple limited partners, including Pellegrino, will hold limited partnership interests. Because the Co-Invest Vehicle is an eligible entity with two or more members, it is classified as a partnership by default under Treasury Regulation § 301.7701-3(b)(1)(i).
No check-the-box election to classify the Co-Invest Vehicle as an association taxable as a corporation is contemplated, and we have confirmed with counsel for the sponsor, Douglas W. Cheng of Hartwell Velmoran & Pratt LLP, that no Form 8832 election will be filed. Accordingly, the Co-Invest Vehicle will be treated as a partnership for federal income tax purposes under IRC § 761(a).
Result: The Co-Invest Vehicle is not subject to entity-level federal income tax. Items of income, gain, loss, deduction, and credit earned or incurred by the Co-Invest Vehicle will pass through to the partners under IRC §§ 701 and 702, and each partner, including Pellegrino, will include its distributive share of such items on its own federal income tax return. The Co-Invest Vehicle will file an annual informational return on IRS Form 1065, U.S. Return of Partnership Income, and will issue a Schedule K-1 to each partner reflecting the partner's distributive share of partnership items for the taxable year.
B. Ridgeline-Clarion Co-Invest GP LLC
Ridgeline-Clarion Co-Invest GP LLC (EIN 93-4817302) is a Delaware limited liability company that serves as the general partner of the Co-Invest Vehicle. It is wholly owned by Ridgeline Equity Management LLC, the sponsor's management entity. Because the GP LLC has only a single member (Ridgeline Equity Management LLC), it is a single-member LLC for purposes of the check-the-box regulations.
Under Treasury Regulation § 301.7701-3(b)(1)(ii), a domestic eligible entity with a single owner is disregarded as an entity separate from its owner for federal income tax purposes by default, unless it affirmatively elects to be classified as an association taxable as a corporation on Form 8832. No such election is anticipated. Accordingly, the GP LLC will be treated as a disregarded entity for federal income tax purposes, and its activities as general partner of the Co-Invest Vehicle will be treated as the activities of its sole owner, Ridgeline Equity Management LLC, for income tax purposes.
This classification does not affect the analysis of the Co-Invest Vehicle's partnership status. Treasury Regulation § 301.7701-2(c)(2)(i) provides that a disregarded entity is treated as an entity separate from its owner for purposes of employment tax and certain other specified purposes, but for income tax purposes, the GP LLC's existence is disregarded and its owner is treated as the general partner of the Co-Invest Vehicle.
C. AcquisitionCo — Clarion Holdings Acquisition Corp.
Clarion Holdings Acquisition Corp. (EIN 93-4820119) is a corporation organized under the Delaware General Corporation Law, 8 Del. C. §§ 101 et seq. Under Treasury Regulation § 301.7701-2(b)(1), a business entity organized under a state statute that refers to the entity as "incorporated" or as a "corporation" is classified as a corporation per se for federal income tax purposes. Because AcquisitionCo is incorporated under the Delaware General Corporation Law, it is a per se corporation and is not an eligible entity for purposes of the check-the-box regulations.
AcquisitionCo is subject to corporate-level federal income tax under Subchapter C of the Internal Revenue Code. As a C corporation, AcquisitionCo will compute its own taxable income, pay federal corporate income tax thereon at the applicable rate (currently 21% under IRC § 11(b)), and will not pass through items of income, gain, loss, deduction, or credit to its shareholders.
Distributions made by AcquisitionCo to its shareholders, including the Co-Invest Vehicle (which holds a 30% equity interest in AcquisitionCo), will be subject to dividend treatment under IRC §§ 301 and 316 to the extent of AcquisitionCo's current and accumulated earnings and profits. Distributions in excess of earnings and profits will be treated as a return of capital (reducing the shareholder's basis in its AcquisitionCo stock) under IRC § 301(c)(2), and any amounts in excess of basis will be treated as capital gain under IRC § 301(c)(3). This two-tier tax structure (corporate-level tax on AcquisitionCo's income, followed by shareholder-level tax on distributions) is a standard feature of C corporation investments and should be taken into account in Pellegrino's overall return modeling.
D. Pellegrino Capital Group LLC
Pellegrino Capital Group LLC is a limited liability company organized under the laws of the State of Delaware and foreign-qualified to do business in the State of Florida. Its Employer Identification Number is 84-3291047.
As a domestic LLC, Pellegrino is an eligible entity for purposes of the check-the-box regulations. Its default classification depends on the number of its members:
•  If Pellegrino has two or more members, it is classified as a partnership by default under Treasury Regulation § 301.7701-3(b)(1)(i).
•  If Pellegrino has a single member (e.g., if it is wholly owned by Marco A. Pellegrino), it is classified as a disregarded entity by default under Treasury Regulation § 301.7701-3(b)(1)(ii).
The distinction between partnership and disregarded entity classification is significant because it determines whether Pellegrino itself files a federal income tax return (Form 1065, in the case of partnership classification) or whether all items of income, gain, loss, deduction, and credit flow directly through to Marco A. Pellegrino's individual return (Form 1040, in the case of disregarded entity classification). In either case, there is no entity-level federal income tax imposed on Pellegrino, but the filing and reporting obligations differ.
We note that Pellegrino could also have elected to be classified as an association taxable as a corporation by filing Form 8832, although we understand that no such election has been made. We cross-reference to the Whitfield Greer & Associates LLP memorandum dated December 20, 2025, for confirmation of Pellegrino's current check-the-box status, including whether any Form 8832 election has been filed at any time since the entity's formation. We recommend that this point be confirmed with Whitfield Greer as a priority open item prior to closing.
IV. UBTI Analysis
A. Applicability to Pellegrino
The unrelated business taxable income rules, codified in IRC §§ 511 through 514, impose a tax on the unrelated business taxable income of organizations that are otherwise exempt from federal income tax under IRC § 501(a). The UBTI regime applies to entities described in, among other provisions, IRC § 501(c)(3) (charitable organizations), § 401(a) (qualified pension, profit-sharing, and stock bonus plans), and § 408(e) (individual retirement accounts). The purpose of the UBTI rules is to prevent tax-exempt organizations from gaining an unfair competitive advantage over taxable enterprises by operating businesses that are unrelated to their exempt purposes.
Pellegrino Capital Group LLC is a private, for-profit family office that manages and invests capital on behalf of the Pellegrino family. Pellegrino is not a tax-exempt organization under any subsection of IRC § 501, nor is it a qualified plan under IRC § 401(a) or an individual retirement account under IRC § 408. Pellegrino is organized and operated for the purpose of generating investment returns for its owner or owners, and it pays (or passes through) federal and applicable state income taxes on all of its income in the ordinary course.
Because the UBTI rules apply only to organizations that are exempt from tax under IRC § 501(a) (or that are subject to the UBTI rules by specific statutory cross-reference, such as qualified plans and IRAs), and Pellegrino does not fall within any of these categories, the UBTI rules have no application to Pellegrino's investment in the Co-Invest Vehicle.
Result: No UBTI concern arises for Pellegrino from its $25,000,000 investment in the Co-Invest Vehicle. Pellegrino's distributive share of income from the Co-Invest Vehicle will be included in Pellegrino's (or its owner's) taxable income in the ordinary course, without any UBTI overlay.
B. Relevance to Other Co-Investors
Although the UBTI rules do not apply to Pellegrino, we note for completeness that if any other limited partners in the Co-Invest Vehicle are tax-exempt entities (such as endowments, foundations, pension funds, or other organizations described in IRC § 501), those entities may face UBTI concerns arising from this investment. Two categories of UBTI risk are potentially relevant:
First, income from "debt-financed property" under IRC § 514 may generate UBTI for tax-exempt investors. The $305 million Term Loan B at the AcquisitionCo level constitutes leveraged financing in connection with the acquisition of Clarion. While the debt sits at the AcquisitionCo level (a C corporation), and AcquisitionCo's status as a taxable corporation generally blocks the application of § 514 at the partner level (because the Co-Invest Vehicle holds stock in a C corporation, not a direct interest in debt-financed property), the analysis depends on the specific structure and whether any blocker corporation or other intermediary entity is utilized. Tax-exempt co-investors should consult their own tax advisors on this point.
Second, if the Co-Invest Vehicle were treated as engaged in an unrelated trade or business under IRC § 512 (for example, if the investment were characterized as something other than a passive investment in corporate stock), tax-exempt co-investors could face UBTI exposure. However, the Co-Invest Vehicle's sole activity is holding stock in AcquisitionCo, a C corporation, and dividend and capital gain income from such stock is generally excluded from UBTI under IRC § 512(b).
This analysis is limited to Pellegrino's tax position and does not constitute advice to, or an analysis of the tax position of, any other co-investor in the Co-Invest Vehicle.
C. Coordination with Whitfield Greer
The Whitfield Greer & Associates LLP tax structuring memorandum dated December 20, 2025 (Robert K. Anand, CPA, Engagement Partner) independently confirms Pellegrino's non-exempt status for federal income tax purposes and concurs that the UBTI rules are inapplicable to Pellegrino. We are in alignment with Whitfield Greer on this point and do not identify any area of disagreement or open issues with respect to the UBTI analysis as applied to Pellegrino.
V. FIRPTA Analysis
A. Overview of FIRPTA
The Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"), codified principally in IRC § 897, imposes a federal income tax on foreign persons' gains from the disposition of U.S. real property interests ("USRPIs"). Section 897(a) provides that any gain or loss of a nonresident alien individual or foreign corporation from the disposition of a USRPI is treated as income or loss effectively connected with the conduct of a trade or business within the United States, thereby subjecting such gain to U.S. federal income tax regardless of whether the foreign person is otherwise engaged in a U.S. trade or business.
A "USRPI" is defined in IRC § 897(c)(1) to include (i) an interest in real property located in the United States or the U.S. Virgin Islands and (ii) any interest (other than an interest solely as a creditor) in a domestic corporation that is a "U.S. real property holding corporation" ("USRPHC"). Under IRC § 897(c)(2), a corporation is a USRPHC if the fair market value of its U.S. real property interests equals or exceeds 50% of the aggregate fair market value of the sum of (A) its USRPIs, (B) its interests in real property located outside the United States, and (C) its other assets used or held for use in a trade or business (the "asset ratio test").
Section 1445 of the Code imposes a withholding obligation on the transferee of a USRPI acquired from a foreign person. The transferee must withhold 15% (or, in certain cases, 10%) of the amount realized on the disposition and remit the withheld amount to the IRS. Failure to withhold gives rise to penalties and potential liability for the tax that should have been withheld.
B. Applicability to Pellegrino
Pellegrino Capital Group LLC is a domestic entity organized under the laws of Delaware. FIRPTA, by its terms, applies only to "foreign persons" — specifically, nonresident alien individuals, foreign corporations, foreign partnerships, foreign trusts, and foreign estates, as defined in IRC §§ 897 and 1445 and the regulations thereunder. Because Pellegrino is a U.S. person (a domestic LLC), FIRPTA withholding under § 1445 does not apply to Pellegrino upon any disposition of its interest in the Co-Invest Vehicle or upon any disposition of AcquisitionCo stock by the Co-Invest Vehicle.
Notwithstanding the inapplicability of FIRPTA to Pellegrino directly, the FIRPTA analysis remains relevant for two reasons. First, if any other limited partners in the Co-Invest Vehicle are foreign persons, the structure of the investment and the USRPHC status of AcquisitionCo (and, by look-through, Clarion) would give rise to FIRPTA considerations that could affect the timing and mechanics of a future exit. Second, it is prudent as a matter of due diligence to understand Clarion's USRPI profile for purposes of evaluating AcquisitionCo's potential classification as a USRPHC, particularly in the event that Pellegrino or the Co-Invest Vehicle seeks to admit foreign investors or to effect a secondary sale of interests to a foreign buyer in the future.
C. Clarion's Asset Profile
The central question in the USRPHC analysis is whether the fair market value of USRPIs held by AcquisitionCo (through its ownership of Clarion and Clarion's subsidiaries) equals or exceeds 50% of the aggregate fair market value of all of AcquisitionCo's assets, as described above.
Hotel Management Services (Non-USRPI). Clarion's core business consists of third-party hotel management services and the licensing of its proprietary revenue management technology platform. Management contracts, service agreements, intellectual property (including software, trade secrets, trademarks, and proprietary algorithms), and fee-based revenue streams are generally not USRPIs under IRC § 897(c)(1). These intangible assets and contractual rights are the primary drivers of Clarion's enterprise value, as reflected in the 7.5x EV/EBITDA multiple and the company's positioning as an "asset-light" hospitality management platform.
Hotel Properties. Clarion manages approximately 62 properties comprising approximately 14,200 hotel rooms. The key question for purposes of the USRPHC analysis is whether Clarion owns any of these hotel properties directly, or whether the properties are owned by third-party hotel owners for whom Clarion acts solely as a fee-based manager. Real property interests — including fee simple interests in land and buildings, leasehold interests (to the extent of significant duration or value), and equity interests in joint ventures or other entities that own real property — are USRPIs.
Based on our preliminary due diligence, including our review of the representations and warranties in the draft acquisition agreement and discussions with Ridgeline's counsel at Hartwell Velmoran & Pratt LLP, Clarion operates primarily as a fee-based management platform and does not appear to own the underlying real property in the vast majority of its managed portfolio. The typical structure involves a third-party property owner (such as a REIT, private equity-backed owner, or individual investor) owning the hotel real property and engaging Clarion under a long-term management contract to operate the hotel on the owner's behalf, in exchange for a base management fee and an incentive management fee.
However, we have not yet obtained a definitive schedule of all real property interests owned, directly or indirectly, by Clarion or any of its subsidiaries. It is possible that Clarion or one or more of its subsidiaries holds direct or indirect ownership interests in real property in certain cases, including but not limited to the following scenarios:
•  Owned hotels or hotel parcels held on the balance sheet of Clarion or a subsidiary;
•  Ground leases (which, if of sufficient duration, may constitute USRPIs);
•  Equity interests in property-owning joint ventures or co-investment arrangements; and
•  Interests in land or development sites associated with pipeline properties.
If any such real property interests exist, their fair market value must be included in the numerator of the USRPHC asset ratio test. If Clarion's USRPIs constitute less than 50% of total assets (which we believe is likely given the company's asset-light model), AcquisitionCo would not be classified as a USRPHC.
Recommendation: We recommend requesting confirmation from Ridgeline (through Douglas W. Cheng of Hartwell Velmoran & Pratt LLP) and from Clarion management (Mr. Barrington and Ms. Kwon) regarding any real property interests owned directly or indirectly by Clarion or any of its subsidiaries. This information should include a schedule of any owned or ground-leased properties, equity interests in property-owning joint ventures, and any other interests that could constitute USRPIs. We further recommend coordinating with Whitfield Greer & Associates LLP to complete the quantitative asset ratio analysis once the necessary factual data is obtained.
D. Conclusion
FIRPTA withholding under IRC § 1445 is not applicable to Pellegrino as a domestic entity. Pellegrino will not be subject to FIRPTA tax on any gain recognized from its direct or indirect interest in the Clarion investment.
Clarion's primary business as a fee-based hotel management and technology platform — rather than a hotel property owner — strongly suggests that AcquisitionCo is unlikely to be classified as a USRPHC under the 50% asset ratio test of IRC § 897(c)(2). However, this conclusion is preliminary and is subject to further factual diligence regarding Clarion's owned or leased real property interests. We will update this analysis upon receipt of the requested real property schedule from Ridgeline and Clarion management.
VI. Allocation Methodology — IRC Sections 704(b) and 704(c)
A. Section 704(b) — Economic Effect
Under IRC § 704(a), a partner's distributive share of income, gain, loss, deduction, or credit is determined by the partnership agreement. However, under IRC § 704(b), if the allocation under the partnership agreement does not have "substantial economic effect," the partner's distributive share is determined in accordance with the partner's interest in the partnership, taking into account all facts and circumstances.
The Treasury Regulations under § 704(b) provide a two-part test for determining whether an allocation has "substantial economic effect." First, the allocation must have "economic effect," meaning that the allocation is consistent with the underlying economic arrangement of the partners. Second, the economic effect must be "substantial," meaning that there is a reasonable possibility that the allocation will affect substantially the dollar amounts to be received by the partners independent of tax consequences.
The safe harbor for economic effect under Treasury Regulation § 1.704-1(b)(2)(ii) requires that the partnership agreement satisfy three conditions: (1) the partnership must maintain capital accounts in accordance with the rules of § 1.704-1(b)(2)(iv); (2) liquidating distributions must be made in accordance with positive capital account balances; and (3) the partnership agreement must contain either a deficit restoration obligation (requiring partners with deficit capital account balances to restore those deficits upon liquidation) or a "qualified income offset" provision (requiring the partnership to allocate income to a partner whose capital account unexpectedly becomes negative so as to eliminate the deficit as quickly as possible).
Based on our review of the draft LPA of the Co-Invest Vehicle (as marked up by Calderwood & Harkness on December 6, 2025), we note the following:
•  Capital Account Maintenance. Section 5.1 of the draft LPA provides that the general partner shall maintain capital accounts for each partner in accordance with the principles of Treasury Regulation § 1.704-1(b)(2)(iv), including appropriate adjustments for contributions, distributions, allocations of income and loss, and revaluations of partnership property.
•  Liquidating Distributions. Section 7.2 of the draft LPA provides that upon dissolution and winding up of the Co-Invest Vehicle, distributions shall be made to the partners in accordance with their positive capital account balances, after payment of partnership debts and liabilities and establishment of appropriate reserves.
•  Qualified Income Offset. Section 5.3 of the draft LPA includes a qualified income offset provision substantially in the form contemplated by Treasury Regulation § 1.704-1(b)(2)(ii)(d), providing that if a limited partner unexpectedly receives an adjustment, allocation, or distribution that causes or increases a deficit balance in its capital account, items of partnership income and gain shall be specially allocated to such partner in an amount sufficient to eliminate the deficit as quickly as possible.
The distribution waterfall set forth in Section 7.1 of the draft LPA provides for the following priority of distributions:
(i) First, 100% to the limited partners, pro rata in accordance with their capital contributions, until each limited partner has received a return of its aggregate capital contributions;
(ii) Second, 100% to the limited partners, pro rata in accordance with their capital contributions, until each limited partner has received a cumulative preferred return on its unreturned capital contributions equal to 8% per annum, compounded quarterly;
(iii) Third, 100% to the general partner until the general partner has received an amount equal to 11.11% of the amounts distributed to the limited partners under clauses (ii) and (iii) (the "GP Catch-Up"), which is intended to cause the general partner to receive 10% of the aggregate net profits of the partnership above the preferred return threshold;
(iv) Fourth, 90% to the limited partners, pro rata in accordance with their capital contributions, and 10% to the general partner (as carried interest).
The allocation provisions of the LPA generally track the distribution waterfall and appear to be designed to satisfy the substantial economic effect safe harbor. Based on our review, and subject to our final review of the execution version of the LPA (which is expected to be agreed upon by January 24, 2026), the allocation provisions appear to comply with the requirements of Treasury Regulation § 1.704-1(b)(2)(ii).
B. Section 704(c) — Contributed Property
IRC § 704(c)(1)(A) provides that income, gain, loss, and deduction with respect to property contributed to a partnership by a partner shall be shared among the partners so as to take into account the variation between the adjusted tax basis of such property to the partnership and its fair market value at the time of contribution. The purpose of § 704(c) is to prevent the shifting of tax consequences among partners with respect to precontribution gain or loss inherent in contributed property.
In the present transaction, all partners of the Co-Invest Vehicle — including Pellegrino, the other limited partners, and the general partner — are contributing cash to the Co-Invest Vehicle. Cash contributions do not give rise to § 704(c) issues because there is no built-in gain or loss inherent in cash. The Co-Invest Vehicle will then use the contributed cash to make a cash equity contribution to AcquisitionCo in exchange for shares of AcquisitionCo common stock. Because the Co-Invest Vehicle is receiving newly issued stock in exchange for cash at its fair market value, there is no difference between the fair market value and the tax basis of the contributed property at the partnership level.
Accordingly, § 704(c) should not present an immediate concern at the Co-Invest Vehicle level. There is no "reverse § 704(c)" issue either, because no revaluation event is occurring at the time of the initial formation and capitalization of the Co-Invest Vehicle.
We note two additional points regarding § 704(c) in the broader transaction context:
First, if AcquisitionCo makes a § 338(h)(10) election with respect to the acquisition of Clarion (treating the stock acquisition as a deemed asset purchase for federal income tax purposes), or if the acquisition is otherwise structured as an asset purchase, AcquisitionCo would obtain a stepped-up basis in Clarion's assets equal to the purchase price allocated among those assets under IRC § 1060. This stepped-up basis would generate increased depreciation and amortization deductions at the AcquisitionCo level, which would flow through AcquisitionCo's corporate income tax return. However, because AcquisitionCo is a C corporation, these deductions do not flow through to the Co-Invest Vehicle's partners; they affect only AcquisitionCo's corporate-level tax liability and, indirectly, the after-tax cash available for distribution to shareholders.
Second, the management rollover of approximately $30 million by Mr. Barrington and Ms. Kwon involves the contribution of existing Clarion equity (which may have a basis different from fair market value) into the post-acquisition capital structure. To the extent this rollover is structured through a partnership-like entity or involves the exchange of low-basis stock for interests in AcquisitionCo or a holding vehicle, § 704(c) principles may apply at the level of the rollover structure. However, the management rollover is structured separately from the Co-Invest Vehicle, and any § 704(c) issues arising from the rollover do not directly affect Pellegrino's position as a limited partner in the Co-Invest Vehicle.
C. Targeted Allocations and Special Allocations
We recommend that the final execution version of the LPA be reviewed for any special allocation provisions beyond those discussed above. In particular, the LPA should be reviewed for "regulatory allocations" required by the Treasury Regulations to satisfy the substantial economic effect safe harbor, including:
•  Minimum Gain Chargeback (Treas. Reg. § 1.704-2(f)): An allocation of income to partners to the extent of their shares of partnership minimum gain, triggered if partnership minimum gain decreases during a taxable year.
•  Partner Minimum Gain Chargeback (Treas. Reg. § 1.704-2(i)(4)): An allocation of income to a partner to the extent of that partner's share of partner nonrecourse debt minimum gain, triggered if there is a net decrease in partner nonrecourse debt minimum gain.
•  Nonrecourse Deduction Allocations (Treas. Reg. § 1.704-2(e)): Deductions attributable to increases in partnership minimum gain that must be reasonably consistently allocated.
We note, however, that because the $305 million Term Loan B and the $40 million revolving credit facility sit at the AcquisitionCo level — a C corporation — rather than at the Co-Invest Vehicle level, the Co-Invest Vehicle itself should not have any partnership-level nonrecourse liabilities. The debt is an obligation of AcquisitionCo and is not recourse (or nonrecourse) to the Co-Invest Vehicle or its partners. Accordingly, the nonrecourse debt allocation rules under Treasury Regulation § 1.752-3 should not be implicated at the Co-Invest Vehicle level, and the minimum gain chargeback and related regulatory allocation provisions should be largely academic in this context. Nevertheless, it is appropriate for these provisions to appear in the LPA as a matter of best practice and to preserve compliance with the safe harbor in the event that the Co-Invest Vehicle incurs any liabilities in the future (e.g., organizational expenses or indemnification obligations).
VII. Carried Interest — IRC Section 1061
A. Overview
IRC § 1061, enacted as part of the Tax Cuts and Jobs Act of 2017 (P.L. 115-97) and effective for taxable years beginning after December 31, 2017, modifies the treatment of certain long-term capital gains recognized by taxpayers holding "applicable partnership interests" ("APIs"). An API is defined under § 1061(c)(1) as any interest in a partnership that, directly or indirectly, is transferred to (or held by) a taxpayer in connection with the performance of substantial services by the taxpayer (or any other related person) in any "applicable trade or business."
An "applicable trade or business" is defined under § 1061(c)(2) as any activity conducted on a regular, continuous, and substantial basis that, regardless of whether such activity is conducted in or outside the United States, consists, in whole or in part, of (A) raising or returning capital, and (B) either (i) investing in (or disposing of) specified assets or (ii) developing specified assets.
Under § 1061(a), if a taxpayer holds an API, the taxpayer's net long-term capital gain with respect to such interest for the taxable year is treated as short-term capital gain (taxed at ordinary income rates, currently up to 37% for individuals) to the extent that such gain exceeds the amount of net long-term capital gain that would have been recognized if a three-year holding period (rather than the standard one-year holding period under IRC § 1222) were applied to the partnership's assets. In effect, § 1061 requires that the underlying capital assets be held for more than three years in order for gains allocated to an API holder to qualify for long-term capital gain treatment.
B. Application to the GP's Carried Interest
The 10% carried interest payable to Ridgeline-Clarion Co-Invest GP LLC (and, by look-through to the disregarded entity analysis discussed in Section III.B above, to the principals of Ridgeline Equity Management LLC) constitutes an "applicable partnership interest" within the meaning of § 1061(c)(1). The carried interest is transferred to the GP in connection with the performance of substantial services — specifically, the sponsor's investment management, deal sourcing, due diligence, portfolio monitoring, and value creation services — in an "applicable trade or business" (the business of raising capital and investing in specified assets, including securities and equity interests in operating companies).
Under § 1061(a), any net long-term capital gain allocable to the GP's carried interest from the sale or other disposition of the Co-Invest Vehicle's interest in AcquisitionCo (or any successor or replacement asset) will be recharacterized as short-term capital gain — and thus taxed at ordinary income rates rather than the preferential long-term capital gains rate — unless the relevant capital asset giving rise to the gain has been held by the Co-Invest Vehicle for more than three years as of the date of disposition.
Given the Co-Invest Vehicle's 10-year term (with two one-year GP extensions), it is reasonable to expect that the Clarion investment will be held for more than three years from the date of acquisition. If the Clarion investment is held for more than three years (i.e., the AcquisitionCo stock is held for more than three years), the GP's carried interest distributions attributable to gain on the disposition of the Clarion investment would be eligible for long-term capital gain treatment under § 1222, and § 1061 would not require recharacterization. However, if the investment is exited within three years (for example, through an early strategic sale or IPO), the GP's carried interest gains would be recharacterized as short-term capital gain under § 1061.
We note that § 1061(b) provides an exception for capital interests (as opposed to profits interests or carried interests) in the partnership, so that gain attributable to a partnership interest that is not an API — for example, any capital investment made by the GP alongside the limited partners — is not subject to the three-year holding period requirement. The LPA should be reviewed to determine whether the GP has any capital interest in the Co-Invest Vehicle in addition to its carried interest.
C. Application to Pellegrino as LP
Section 1061 applies only to "applicable partnership interests" — that is, partnership interests received in connection with the performance of substantial services in an applicable trade or business. Pellegrino's limited partnership interest in the Co-Invest Vehicle was acquired in exchange for Pellegrino's $25,000,000 capital contribution. Pellegrino is not performing any services in connection with the management, operation, or investment activities of the Co-Invest Vehicle, Fund IV, or Ridgeline Equity Management LLC. Pellegrino is a passive, limited partner investor.
Accordingly, Pellegrino's limited partnership interest is not an "applicable partnership interest" under § 1061(c)(1), and § 1061 does not apply to recharacterize any long-term capital gain recognized by Pellegrino on its LP interest. Pellegrino's share of any capital gain from the eventual disposition of the Clarion investment will be eligible for long-term capital gain treatment under IRC § 1222 to the extent the underlying assets have been held for more than one year — the standard holding period for long-term capital gain treatment. If the individual behind Pellegrino (whether Marco A. Pellegrino or other members) qualifies for the preferential long-term capital gains rate (currently 20% for individuals in the highest income bracket, plus the 3.8% net investment income tax under IRC § 1411), that rate would apply to Pellegrino's share of long-term capital gains from the Clarion investment, without any § 1061 recharacterization.
D. Section 1061 Reporting
Under IRC § 1061(d) and the regulations thereunder, the Co-Invest Vehicle will be required to furnish certain information to the IRS and to its partners regarding § 1061 amounts. Specifically, the Co-Invest Vehicle's Schedule K-1 (Form 1065) issued to each partner will include information identifying the amount of any net long-term capital gain that is subject to recharacterization under § 1061 (i.e., gain allocable to applicable partnership interests with respect to assets held for three years or less) and the amount of any net long-term capital gain that is exempt from § 1061 recharacterization (i.e., gain attributable to capital interests or assets held for more than three years).
No additional reporting burden is imposed on Pellegrino beyond the receipt and inclusion of the Schedule K-1 information on Pellegrino's (or its owner's) federal income tax return. Whitfield Greer will incorporate the K-1 information into Pellegrino's annual tax returns as part of its standard compliance engagement.
VIII. State and Local Tax Considerations
The following discussion addresses the principal state and local tax considerations arising from Pellegrino's investment in the Co-Invest Vehicle. This analysis is preliminary and should be supplemented with a comprehensive multi-state review once a state-by-state breakdown of Clarion's managed properties and revenue sources has been obtained.
A. Delaware
Co-Invest Vehicle (Limited Partnership). The State of Delaware does not impose an income tax on limited partnerships or their partners with respect to income earned through a Delaware limited partnership. The Co-Invest Vehicle will, however, be subject to the Delaware annual tax for limited partnerships in the amount of $300 per year, due on or before June 1 of each year, as provided under 6 Del. C. § 17-1109.
Co-Invest GP (LLC). Ridgeline-Clarion Co-Invest GP LLC, as a Delaware LLC, will be subject to the Delaware annual LLC tax of $300 per year, due on or before June 1 of each year, as provided under 6 Del. C. § 18-1107. No Delaware income tax is imposed on the LLC itself or on its sole member with respect to income flowing through the LLC, to the extent the LLC's sole member is not a Delaware resident.
AcquisitionCo (Corporation). AcquisitionCo, as a Delaware corporation, will be subject to the Delaware franchise tax. The franchise tax is calculated based on either the authorized shares method or the assumed par value capital method, whichever results in a lower tax. Given AcquisitionCo's expected capitalization and authorized share structure, the franchise tax methodology should be reviewed by AcquisitionCo's tax advisors to minimize the Delaware franchise tax liability. We understand that this matter is being handled by Ridgeline's counsel at Hartwell Velmoran & Pratt LLP and AcquisitionCo's corporate tax team.
Pellegrino (LLC). Pellegrino, as a Delaware LLC, is subject to the Delaware annual LLC tax of $300. Importantly, Delaware does not impose an income tax on non-resident individuals or entities receiving income from a Delaware limited partnership in which they are a limited partner, provided that the non-resident does not conduct business in Delaware beyond the limited partnership interest. Because Pellegrino is a Florida-based entity and its involvement with the Co-Invest Vehicle is limited to its role as a passive limited partner, no Delaware income tax should apply to Pellegrino's distributive share of Co-Invest Vehicle income.
B. Florida
Pellegrino is headquartered in Miami, Florida, and is foreign-qualified to do business in Florida. The State of Florida does not impose a personal income tax on individuals. Accordingly, if Pellegrino is classified as a disregarded entity for federal income tax purposes (with its income flowing directly to Marco A. Pellegrino as an individual Florida resident), no Florida income tax would apply.
Florida does impose a corporate income tax at a rate of 5.5% on the Florida-source taxable income of C corporations. However, Pellegrino is organized as an LLC and is classified for federal income tax purposes either as a partnership (if it has multiple members) or as a disregarded entity (if it has a single member). In either case, Pellegrino is not a C corporation and should not be subject to Florida's corporate income tax. Florida generally follows federal entity classification for purposes of its corporate income tax, so entities that are classified as partnerships or disregarded entities for federal purposes are similarly treated for Florida purposes.
We recommend confirming with Whitfield Greer whether any Florida filing obligations arise from Pellegrino's receipt of distributive share income from the Co-Invest Vehicle, including whether any Florida informational return is required to be filed. As a general matter, partnerships and disregarded entities doing business in Florida or having Florida-resident members may have certain informational reporting obligations, but no entity-level income tax should apply.
C. Tennessee
Clarion Hospitality Holdings, Inc. is headquartered in Nashville, Tennessee, and conducts substantial business operations in the state. Tennessee imposes both a franchise tax and an excise tax on entities doing business in Tennessee.
The Tennessee franchise tax is imposed at a rate of 0.25% of the greater of a taxpayer's net worth or the book value of its real and tangible personal property owned or used in Tennessee. The Tennessee excise tax is imposed at a rate of 6.5% on the net earnings of a taxpayer attributable to Tennessee. Both AcquisitionCo (as the indirect corporate parent of Clarion) and Clarion itself will be subject to the Tennessee franchise and excise taxes with respect to their Tennessee-source income and Tennessee-situated assets.
The question for Pellegrino is whether Pellegrino's limited partnership interest in the Co-Invest Vehicle — which in turn holds stock in AcquisitionCo, which owns Clarion, a Tennessee-based operating company — creates Tennessee tax nexus for Pellegrino. Tennessee generally does not impose its franchise and excise tax on out-of-state limited partners who have no nexus with Tennessee other than their limited partnership interest in a partnership that, in turn, holds a corporate investment generating Tennessee-source income. The corporate "Blocker" (AcquisitionCo, a C corporation) should generally insulate Pellegrino from direct Tennessee nexus, because Pellegrino's income from the Co-Invest Vehicle will consist of its distributive share of the Co-Invest Vehicle's items (principally dividends and capital gains from AcquisitionCo stock), which are corporate-level items rather than flow-through operating income from Clarion's Tennessee operations.
We note that Tennessee's Hall Income Tax, which historically imposed a tax on certain interest and dividend income received by Tennessee residents, was fully repealed effective January 1, 2021 (Tenn. Code Ann. § 67-2-102, repealed). Accordingly, the Hall Tax does not apply to this investment.
Notwithstanding the foregoing, this position should be monitored in light of recent state tax trends regarding economic nexus and factor-presence standards. Several states have expanded their nexus concepts beyond physical presence to encompass economic nexus based on income derived from sources within the state, and Tennessee has not been immune to this trend. Additionally, for purposes of Schedule K-1 reporting, the Co-Invest Vehicle (or AcquisitionCo, as applicable) may issue Tennessee-source income information if Clarion generates apportionable income that is attributed to Tennessee. Such information could trigger a Tennessee filing obligation for Pellegrino, even if the ultimate tax liability is minimal or zero.
Recommendation: We recommend that Pellegrino's Tennessee nexus position be monitored on an annual basis. Whitfield Greer should review any K-1 information received from the Co-Invest Vehicle that reports Tennessee-source income and determine whether any Tennessee franchise and excise tax return or informational filing is required.
D. New York
Ridgeline Equity Management LLC, Ridgeline-Clarion Co-Invest GP LLC, and Ridgeline Equity Partners Fund IV, L.P. are all headquartered at 399 Park Avenue, 28th Floor, New York, New York 10022. The general partner of the Co-Invest Vehicle is based in New York and conducts its management and investment advisory activities from New York.
New York imposes income tax on partners of partnerships doing business in New York to the extent of their New York-source income. Under New York Tax Law § 631(b)(1)(A), a non-resident individual's New York-source income includes the non-resident's distributive share of partnership income, gain, loss, and deduction derived from or connected with New York sources. The question is whether any of Pellegrino's distributive share of income from the Co-Invest Vehicle is "derived from or connected with New York sources."
The Co-Invest Vehicle's general partner is based in New York, and the sponsor's management and investment advisory activities are conducted from New York. This raises the question of whether the Co-Invest Vehicle is "doing business" in New York by virtue of the GP's activities, which could result in a portion of the Co-Invest Vehicle's income being treated as New York-source income.
However, Pellegrino is a limited partner with no management role in the Co-Invest Vehicle. Under New York Tax Law § 631 and related administrative guidance, a non-resident limited partner's distributive share of partnership income is generally not treated as New York-source income unless the income is derived from sources within New York — for example, income from New York real property or income from a trade or business conducted in New York. The fact that the GP is located in New York does not, in and of itself, cause all of the Co-Invest Vehicle's income to be New York-source income for purposes of a non-resident limited partner's tax computation.
Additionally, Clarion's operations are headquartered in Nashville, Tennessee, and its managed hotel portfolio is spread across 62 properties nationwide. To the extent any Clarion-managed properties are located in New York State (or New York City), a portion of Clarion's income may be apportioned to New York under New York's corporate income tax apportionment rules. If AcquisitionCo (or Clarion) apportions a portion of its income to New York, and that New York-apportioned income flows through to the Co-Invest Vehicle, Pellegrino could have a New York-source income component in its distributive share.
Furthermore, the sponsor's management and investment advisory activities in New York may create a question as to whether the Co-Invest Vehicle is "doing business" in New York within the meaning of New York Tax Law. However, the New York regulations provide an "investment partnership exemption" under 20 NYCRR § 132.23, which excludes from New York-source income the distributive share of partnership income allocable to a non-resident limited partner of an "eligible investment partnership." An eligible investment partnership is generally a partnership that derives substantially all of its income from investments in securities, commodities, and certain other specified assets, and that does not conduct a trade or business in New York other than trading or investing in such assets. The Co-Invest Vehicle may qualify as an eligible investment partnership because its sole activity is holding stock in AcquisitionCo (a security), and it does not conduct any operating business in New York.
Recommendation: We recommend a detailed analysis of whether the Co-Invest Vehicle qualifies for the New York eligible investment partnership exemption under 20 NYCRR § 132.23. We further recommend determining whether any Clarion-managed properties are located in New York State or New York City, which could generate New York-source income allocable to Pellegrino through the Co-Invest Vehicle. This analysis should be coordinated with Whitfield Greer as part of Pellegrino's annual New York filing determination.
E. Other States
Clarion manages hotel properties across approximately 62 locations in multiple states. To the extent Clarion manages hotels in states other than Delaware, Florida, Tennessee, and New York, those states may assert nexus over AcquisitionCo and Clarion for purposes of their respective state corporate income taxes. While the C corporation structure of AcquisitionCo should generally insulate Pellegrino from direct nexus in those states (because Pellegrino's income from the Co-Invest Vehicle is derived from its partnership interest, not from direct operations in those states), certain states impose composite filing or withholding requirements on partnerships with non-resident partners, including with respect to income sourced to the state.
If the Co-Invest Vehicle or any intermediate entity is required to file composite returns or withhold tax in any state on behalf of its non-resident partners (including Pellegrino), those filings and withholdings would affect Pellegrino's overall state tax burden. A full multi-state analysis of Clarion's property portfolio by state should be obtained from Clarion management or Ridgeline to assess the potential scope of filing and withholding obligations across all relevant jurisdictions.
Recommendation: We recommend requesting a state-by-state breakdown of Clarion's managed properties and revenue apportionment from Ridgeline. This data will be essential for completing the multi-state tax analysis and for determining whether any composite return or withholding obligations apply to the Co-Invest Vehicle on behalf of Pellegrino and the other li

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