1027-00003 · Calderwood & Harkness LLP · Mediation & Settlement

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CONFIDENTIAL — FOR MEDIATOR'S EYES ONLY — NOT TO BE DISCLOSED TO OPPOSING PARTY WITHOUT CONSENT

JAMS MEDIATION

Reference No. 1440032871

CONFIDENTIAL MEDIATION POSITION STATEMENT OF RESPONDENT PELLEGRINO CAPITAL GROUP LLC

Submitted to:

Raymond Alcazar Certified Florida Supreme Court Mediator Alcazar Dispute Resolution LLC 333 SE 2nd Avenue, Suite 2100 Miami, FL 33131

In Advance of the Mediation Session Scheduled for February 12, 2024

Submitted by:

CALDERWOOD & HARKNESS LLP 801 Brickell Avenue, Suite 2800 Miami, FL 33131

Francesca Morano, Responsible Partner Samuel Eklund, Billing Partner Simone Laroche, Lead Associate Jeffrey Park, Working Associate

On Behalf of Respondent Pellegrino Capital Group LLC 1900 Bayshore Boulevard, Suite 1400 Tampa, FL 33606

Matter No. 1027-00003

Date: February 5, 2024

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I. INTRODUCTION AND PURPOSE

Respondent Pellegrino Capital Group LLC ("PCG") respectfully submits this Confidential Mediation Position Statement to Mediator Raymond Alcazar in advance of the mediation session scheduled for February 12, 2024. This statement is provided solely for Mr. Alcazar's use in facilitating settlement discussions and is not to be disclosed to the opposing party, Meridian Shores Hospitality LLC ("MSH"), or its counsel, Hargrove, Dunlap & Castillo LLP, without PCG's prior written consent. All statements contained herein are made for settlement purposes only and are inadmissible in the pending arbitration or any other proceeding.

This dispute arises from a valuation disagreement following PCG's exercise of its contractual call option under Section 12.4 of the Amended and Restated Operating Agreement of Palmetto Grand Ventures LLC ("PGV" or the "Joint Venture"), dated June 15, 2017 (the "Operating Agreement" or "OA"), to purchase the thirty-five percent (35%) membership interest held by MSH. PCG exercised the call option in strict compliance with the Operating Agreement's terms and procedures, relying upon an independent, professionally prepared MAI appraisal conducted by Gerald K. Whitfield, MAI, of Whitfield Realty Advisors LLC. MSH rejected the tendered buyout price and initiated arbitration proceedings, demanding a total payment of $70.0 million — a figure that is inflated and unsupported by the contractual framework, the property's actual fair market value, or any reasonable reading of the Operating Agreement's provisions.

MSH's demand of $70.0 million includes a baseless "bad-faith penalty" of $16,975,000 under OA Section 12.7, which has no contractual or legal foundation. The bad-faith penalty claim rests on the demonstrably false premise that PCG intended to materially understate the fair market value of the Joint Venture's assets. In reality, PCG retained a highly qualified, independent appraiser who employed standard, recognized appraisal methodologies — precisely as the Operating Agreement contemplates. That two independent appraisers reached different conclusions is neither surprising in the luxury hospitality real estate context nor indicative of bad faith; indeed, the Operating Agreement itself anticipates such divergence through its third-appraiser mechanism.

PCG enters this mediation in good faith and with a genuine desire to resolve this dispute on commercially reasonable terms. PCG acknowledges that its tendered price of $41.3 million reflects the lower boundary of the reasonable range and is willing to negotiate meaningfully above that figure. At the same time, MSH's demand of $70.0 million — built upon an aggressive appraisal, an unfounded deferred-maintenance claim, and a meritless bad-faith penalty — cannot serve as a realistic basis for resolution.

PCG's objective in this mediation is straightforward: to achieve a commercially reasonable redemption of MSH's membership interest at a price that reflects the true fair market value of the Joint Venture's assets, as corroborated by the neutral appraiser's preliminary findings, and to conclude this dispute expeditiously so that both parties may move forward. PCG respectfully requests Mr. Alcazar's assistance in facilitating a constructive dialogue toward that end.

II. BACKGROUND AND PARTIES

A. The Parties

Pellegrino Capital Group LLC. PCG is a Florida limited liability company with its principal office at 1900 Bayshore Boulevard, Suite 1400, Tampa, Florida 33606. PCG is a family office controlled by its Managing Member, Dominic R. Pellegrino, and manages approximately $1.2 billion in assets under management across a diversified portfolio of hospitality, multifamily residential, and alternative-asset investment strategies. Mr. Pellegrino founded PCG in 2003 and has been active in the Florida hospitality sector for over two decades, developing a well-established track record of responsible ownership, successful property operations, and value creation for all stakeholders.

Day-to-day oversight of PCG's hospitality portfolio, including the Palmetto Grand investment, is managed by Adriana Pellegrino-Voss, Senior Vice President of Investments. Ms. Pellegrino-Voss has been with PCG since 2010 and brings extensive experience in hospitality asset management, capital improvement programs, and franchise relations. Financial oversight and reporting for PCG's investments are handled by Marcus Thiel, Chief Financial Officer, who has served in that capacity since 2015 and previously held senior finance roles at a national hospitality REIT.

PCG holds a sixty-five percent (65%) membership interest in PGV and serves as the sole Manager of the Joint Venture under the Operating Agreement. As Manager, PCG has been responsible for all aspects of the Joint Venture's operations, including property management oversight, capital improvement planning, franchise compliance, and financial reporting to MSH as the minority member.

Meridian Shores Hospitality LLC. MSH is a Delaware limited liability company with its principal office at 220 Royal Palm Way, Suite 300, Palm Beach, Florida 33480. MSH is managed by Nathaniel "Nate" Cordero, who also serves as MSH's principal investment decision-maker. Elena Cordero holds a forty percent (40%) equity interest in MSH. MSH holds a thirty-five percent (35%) membership interest in PGV as a non-managing member.

MSH is represented in the underlying arbitration and in this mediation by Victoria Castillo, Partner, and Ryan Matsuda, Senior Associate, of Hargrove, Dunlap & Castillo LLP, with offices in West Palm Beach, Florida.

B. The Joint Venture

Palmetto Grand Ventures LLC is a Florida limited liability company formed on June 15, 2017 (Florida Division of Corporations Filing No. L17000124583; EIN 82-5063921). PGV was formed for the specific purpose of acquiring, renovating, and operating The Palmetto Grand Resort & Spa (the "Property" or the "Hotel"), a 312-room luxury beachfront resort hotel located at 650 Mandalay Avenue, Clearwater Beach, Florida 33767.

The Joint Venture's ownership structure is straightforward: PCG holds 65% of the membership interests and MSH holds 35% of the membership interests. Under the Operating Agreement, PCG serves as the sole Manager with authority over all operational and capital decisions, subject to certain major-decision approval rights held by MSH as set forth in OA Section 7.2.

The Property is operated under a franchise agreement with Aurelian Hotels & Resorts Inc., a nationally recognized luxury hotel brand. The franchise agreement was executed on July 15, 2017, carries a twenty-year term expiring July 14, 2037, and requires payment of franchise fees equal to five percent (5%) of gross room revenue plus a two percent (2%) marketing fund contribution. The Aurelian affiliation has been a significant driver of the Property's revenue performance, providing access to the Aurelian global reservation system, loyalty program, and brand standards that command a premium rate position in the Clearwater Beach market.

The Palmetto Grand is a full-service luxury resort featuring 312 guest rooms and suites, including 42 premium suites, two signature dining restaurants, a rooftop bar and lounge with panoramic Gulf views, an 18,000-square-foot full-service spa, 22,000 square feet of flexible meeting and event space, and a premium beachfront cabana service. The Property occupies a prime beachfront location that is among the most desirable on Florida's Gulf Coast and benefits from significant barriers to entry for competing new development.

C. Acquisition and Capital Structure

PGV completed the acquisition of The Palmetto Grand Resort & Spa on August 1, 2017, at a total purchase price of $87,500,000. The acquisition was financed through a combination of senior debt and member equity contributions, structured as follows:

Senior Debt. Gulf Atlantic National Bank ("GANB") provided a $61,250,000 first-mortgage loan secured by the Property (Loan No. CRE-2017-06284). The loan represented a 70% loan-to-value ratio at acquisition, bears interest at SOFR plus 2.25% (with a SOFR floor), and has a maturity date of August 1, 2027. As of December 31, 2022 — the appraisal valuation date used in this dispute — the outstanding principal balance on the GANB loan was $48,600,000, reflecting scheduled amortization payments made from operating cash flow.

Equity Contributions at Acquisition. Total equity required at closing, inclusive of $2,307,700 in closing costs (transfer taxes, title insurance, lender fees, legal costs, and initial franchise fees), was $28,557,700. In accordance with OA Section 4.1, the members made the following initial capital contributions:

• PCG: $18,562,500 (representing 65% of the acquisition equity)

• MSH: $10,000,000 (agreed basis per OA Section 4.1, reflecting a negotiated allocation)

The parties agreed that MSH's initial contribution of $10,000,000, while nominally less than a strict 35% pro rata share of the total equity, was offset by certain pre-formation services and development-stage costs incurred by Mr. Cordero in identifying and securing the acquisition opportunity. This arrangement was memorialized in OA Section 4.1 and is not in dispute.

Renovation Capital. Following the acquisition, PGV undertook a comprehensive renovation and repositioning of the Property between 2017 and 2019. The total renovation capital expenditure was $24,300,000, which was funded by additional capital contributions from the members in accordance with their respective ownership percentages:

• PCG: $15,795,000 (65%)

• MSH: $8,505,000 (35%)

The renovation program included a complete guest-room refresh, expansion and redesign of the spa facility, renovation of the food and beverage outlets, modernization of the meeting and event spaces, enhancement of the beachfront amenities, and upgrades to building systems including HVAC, elevator modernization, and energy-efficiency improvements. The renovation was completed on time and within budget, and was a critical factor in the Property's subsequent strong operating performance under the Aurelian brand.

In total, MSH has made capital contributions to PGV of $18,505,000, comprised of the $10,000,000 initial contribution and $8,505,000 in renovation capital.

D. Hotel Performance

The Palmetto Grand has delivered strong operating performance since the completion of the renovation program in 2019, notwithstanding the temporary disruption caused by the COVID-19 pandemic in 2020–2021. By calendar year 2022 — the valuation date at issue in this dispute — the Property had achieved the following key performance metrics:

These results represent top-tier performance among luxury beachfront hotels in the Clearwater Beach and broader Tampa Bay / Pinellas County market. The Property's RevPAR of $289 and EBITDA of $19.7 million reflect the successful execution of the renovation program, disciplined asset management by PCG, effective franchise operations under the Aurelian brand, and the Property's irreplaceable beachfront location. These metrics are also a direct rebuttal to MSH's suggestion that the Property suffers from deferred maintenance, as discussed further in Section VI below.

III. PROCEDURAL HISTORY

The following timeline summarizes the key events leading to this mediation:

June 15, 2022: The fifth anniversary of the Operating Agreement, marking the date on which the call option set forth in OA Section 12.4 first became exercisable by PCG as Manager. Under Section 12.4(a), the Manager has the right, exercisable at any time on or after the fifth anniversary, to purchase all (but not less than all) of the non-managing member's membership interest at a price determined by the fair market value appraisal process set forth in Section 12.4.

January 9, 2023: PCG delivered a written notice to MSH exercising the call option under OA Section 12.4 (the "Exercise Notice"). The Exercise Notice was delivered in accordance with OA Section 16.1 (notices provision) via certified mail and overnight courier to MSH's principal office and to Mr. Cordero personally. The Exercise Notice stated PCG's intention to purchase MSH's 35% membership interest and confirmed that PCG would obtain an independent appraisal as required by Section 12.4(b).

February 10, 2023: Gerald K. Whitfield, MAI, of Whitfield Realty Advisors LLC, Fort Lauderdale, Florida, completed his appraisal of the Property and operating assets of PGV (the "Whitfield Appraisal"). The Whitfield Appraisal concluded that the fair market value of 100% of PGV's assets as of December 31, 2022 was $118,000,000. A detailed discussion of the Whitfield Appraisal's methodology and conclusions is set forth in Section IV.A below.

March 1, 2023: PCG tendered $41,300,000 to MSH as the buyout price for MSH's 35% membership interest, calculated in accordance with the OA's buyout mechanics as applied to the Whitfield Appraisal's value conclusion. The derivation of this figure is set forth in Section IV.B below. The tender was accompanied by a proposed Membership Interest Purchase Agreement and supporting documentation, including the Whitfield Appraisal.

March 10, 2023: MSH rejected the tendered price, contending that the Whitfield Appraisal materially understated the Property's fair market value. MSH stated its intention to obtain its own appraisal as provided under OA Section 12.4(b).

March 20, 2023: MSH filed a Demand for Arbitration with JAMS (Reference No. 1440032871), asserting claims for (i) a declaratory judgment that the fair market value of PGV's assets exceeds the Whitfield Appraisal's conclusion; (ii) a determination of the correct buyout price under OA Section 12.4; and (iii) a bad-faith penalty under OA Section 12.7 in the amount of $16,975,000. MSH's total demand is $70,000,000.

April 5, 2023: PCG filed its Response and Counterclaim, denying MSH's allegations, challenging the bad-faith penalty claim as meritless, and seeking declaratory relief confirming that PCG exercised the call option in good faith and that the buyout price should be determined in accordance with the OA's appraisal process.

April 14, 2023: Dr. Priya Ramanathan, CFA, ASA, of Beacon Valuation Group Inc., Miami, Florida, completed her appraisal of PGV's assets on behalf of MSH (the "Beacon Appraisal"). The Beacon Appraisal concluded that the fair market value of 100% of PGV's assets as of December 31, 2022 was $151,500,000. PCG's critique of the Beacon Appraisal is set forth in Section IV.C below.

April 28, 2023: The Honorable Margaret Liu Chen (Ret.) was appointed as the sole arbitrator in this matter pursuant to the JAMS Comprehensive Arbitration Rules. Judge Chen is a retired Florida Circuit Court judge with significant experience in complex commercial disputes and real estate matters.

May 15, 2023: Preliminary arbitration conference held before Arbitrator Chen. The parties discussed the scope of discovery, the procedural calendar, and the anticipated engagement of a neutral third appraiser under OA Section 12.4(c). A discovery schedule was established, and the parties were ordered to confer in good faith regarding the selection and retention of a neutral appraiser.

June 1, 2023: Given that the divergence between the Whitfield Appraisal ($118.0 million) and the Beacon Appraisal ($151.5 million) was approximately 28.4% — well in excess of the 10% threshold specified in OA Section 12.4(c) — the parties jointly retained Linden Park Advisory LLC to serve as the neutral third appraiser. The engagement was led by Thomas Carraway, MAI, FRICS, a highly respected hotel valuation specialist with extensive experience valuing luxury resort properties throughout the southeastern United States.

July 14, 2023: Linden Park Advisory LLC delivered a preliminary indication of value for 100% of PGV's assets as of December 31, 2022, in the range of $130,000,000 to $138,000,000. Mr. Carraway indicated that a final report would be completed following additional market analysis and an updated physical inspection of the Property. The significance of the Linden Park preliminary indication to the ultimate resolution of this dispute is discussed in Section IV.D below.

August 22, 2023: Deadline for completion of document production. Both parties produced substantial volumes of documents, including operating statements, capital expenditure records, franchise-related correspondence, internal communications regarding the call option exercise, and board and investment-committee materials.

September 18, 2023: Expert depositions were conducted of Gerald K. Whitfield (PCG's appraiser) and Dr. Priya Ramanathan (MSH's appraiser). The depositions highlighted significant methodological differences between the two appraisals, as discussed further in Sections IV.A and IV.C below.

October 10, 2023: Party depositions were conducted of Dominic R. Pellegrino, Managing Member of PCG, and Nathaniel Cordero, Manager of MSH. Both depositions were substantive and explored the parties' respective understanding of the Operating Agreement's buyout provisions, the history of the Joint Venture relationship, and the circumstances surrounding PCG's exercise of the call option.

November 6, 2023: MSH filed a motion to compel production of PCG's internal investment-committee memoranda related to the call option exercise and the Whitfield Appraisal engagement. MSH contended that these documents were relevant to its bad-faith penalty claim under OA Section 12.7.

November 30, 2023: Arbitrator Chen partially granted MSH's motion to compel. PCG was ordered to produce certain investment-committee memoranda directly relating to the decision to exercise the call option and the engagement of the Whitfield firm, while other internal strategic communications were deemed protected under the deliberative process and work-product doctrines. The produced documents confirmed what PCG has maintained throughout: that the decision to exercise the call option was made in good faith after careful deliberation, and that the Whitfield firm was engaged on an independent basis without any direction or instruction regarding a target valuation.

January 15, 2024: Following further discussions between counsel and with the encouragement of Arbitrator Chen, the parties agreed to submit to mediation with Raymond Alcazar, Certified Florida Supreme Court Mediator, before proceeding to a merits hearing.

February 12, 2024: Scheduled first mediation session — the instant proceeding.

IV. SUMMARY OF PCG'S POSITION ON FAIR MARKET VALUE

The central question in this dispute is the fair market value of PGV's assets as of December 31, 2022, for purposes of determining the buyout price for MSH's 35% membership interest under OA Section 12.4. Three appraisals have been or are being prepared: the Whitfield Appraisal commissioned by PCG ($118.0 million), the Beacon Appraisal commissioned by MSH ($151.5 million), and the Linden Park preliminary indication from the jointly retained neutral appraiser ($130.0–$138.0 million). PCG submits that the weight of the evidence strongly supports a fair market value significantly below MSH's claimed $151.5 million and within a range more consistent with the Whitfield Appraisal, as corroborated by the Linden Park preliminary indication.

A. The Whitfield Appraisal ($118.0 Million)

The Whitfield Appraisal was completed on February 10, 2023, by Gerald K. Whitfield, MAI, of Whitfield Realty Advisors LLC, Fort Lauderdale, Florida. Mr. Whitfield is a highly qualified hotel valuation professional with over twenty-five years of experience appraising luxury and full-service hotel properties throughout Florida and the southeastern United States. He holds the MAI designation from the Appraisal Institute, the most widely recognized and respected professional credential in commercial real estate appraisal, and has completed well over 300 hotel valuations during his career.

The Whitfield Appraisal employed both of the two principal methodologies recognized as applicable and appropriate for hotel real property appraisals: the income capitalization approach and the sales comparison approach. Specifically:

Income Capitalization Approach. Mr. Whitfield utilized a blended analysis incorporating both a direct capitalization methodology and a discounted cash flow ("DCF") analysis. The direct capitalization rate applied was 9.5%, derived from an analysis of recent comparable Gulf Coast luxury hotel transactions, published capitalization rate surveys, and investor expectations for stabilized luxury resort properties in Florida's Gulf Coast market. The DCF analysis employed a discount rate of 10.75%, reflecting the appropriate risk-adjusted return expectation for a luxury beachfront resort property with a strong franchise affiliation and stable cash flow profile. Both the capitalization rate and the discount rate fall comfortably within the market-standard ranges for properties of this type and quality, as confirmed by Calderwood & Harkness's independent cap rate and discount rate market survey conducted in July 2023, which surveyed published data from CBRE Hotels, Thackeray Consulting Group, Aldermere Partners LLC, and Cushman & Wakefield Hospitality, as well as transactional data from comparable recent sales.

Sales Comparison Approach. Mr. Whitfield conducted a thorough analysis of comparable luxury hotel transactions along Florida's Gulf Coast and in adjacent southeastern U.S. coastal markets, identifying and analyzing six comparable transactions completed between 2020 and 2022. After applying appropriate adjustments for differences in property size, quality, location, franchise affiliation, and market conditions, the sales comparison approach yielded a value conclusion consistent with the income approach.

In reaching his final conclusion of $118,000,000, Mr. Whitfield applied a weighting of 40% to the income capitalization approach and 60% to the sales comparison approach. This weighting reflects the generally accepted practice in hotel appraisal of according significant weight to the sales comparison approach when active, reliable comparable transaction data is available — as it is in the Florida Gulf Coast luxury hotel market. The availability of multiple relevant comparable sales provides a strong market-based check on the income-derived value and increases the reliability of the overall conclusion.

PCG submits that the Whitfield Appraisal represents a well-supported, methodologically sound, and professionally prepared analysis of the Property's fair market value. While PCG acknowledges that the Whitfield conclusion may represent the lower end of a reasonable valuation range — a point addressed further in PCG's settlement posture discussion below — the appraisal's methodology, assumptions, and data sources are all within the bounds of accepted professional practice.

B. PCG's Buyout Price Derivation

PCG's tendered buyout price of $41,300,000 was derived as follows, in strict accordance with the buyout mechanics set forth in OA Section 12.4:

The preferred return figure of $17,010,000 represents MSH's accrued but unpaid preferred return at an eight percent (8%) per annum compounding rate on MSH's total capital contributions of $18,505,000, calculated from the dates of each respective contribution through December 31, 2022. This figure was subsequently stipulated by both parties during the arbitration proceedings and is not in dispute.

The calculation is straightforward and follows the express mechanics of OA Section 12.4(d), which provides that the buyout price shall equal the non-managing member's pro rata share of the Joint Venture's net equity (determined as the fair market value of all JV assets less all JV liabilities) plus any accrued and unpaid preferred return. PCG's tender faithfully applied these mechanics using the Whitfield Appraisal as the basis for fair market value.

C. Critique of the Beacon Appraisal ($151.5 Million)

The Beacon Appraisal was completed on April 14, 2023, by Dr. Priya Ramanathan, CFA, ASA, of Beacon Valuation Group Inc., Miami, Florida. While Dr. Ramanathan is a credentialed valuation professional, PCG has identified fundamental methodological concerns with the Beacon Appraisal that render its $151.5 million conclusion unreliable and significantly overstated. These concerns were explored in detail during Dr. Ramanathan's deposition on September 18, 2023, and are summarized below.

1. Reliance on Income-Only Approach. The Beacon Appraisal relied exclusively on a discounted cash flow analysis, without any consideration of the sales comparison approach. This singular reliance on the income approach is a significant methodological deficiency in the context of a luxury hotel appraisal where active comparable transaction data is readily available. The Appraisal Institute's Uniform Standards of Professional Appraisal Practice (USPAP) and the leading hotel valuation treatises consistently emphasize the importance of considering multiple approaches to value — particularly the sales comparison approach, which is widely regarded as the most reliable methodology for hotel properties in active transaction markets. By ignoring the sales comparison approach entirely, the Beacon Appraisal deprived its analysis of the most important market-based check on the reasonableness of its DCF-derived value conclusion.

During her deposition, Dr. Ramanathan stated that she considered but ultimately rejected the sales comparison approach because she deemed the available comparable transactions to be insufficiently comparable to the Property. PCG respectfully submits that this rationale is unpersuasive. Mr. Whitfield identified six comparable Gulf Coast luxury hotel transactions in his analysis, and the Florida Gulf Coast luxury hotel market has been one of the most active hotel transaction markets in the United States in recent years. The decision to exclude the sales comparison approach entirely appears to have been driven by the fact that comparable transaction data would have yielded a value conclusion materially below the Beacon Appraisal's DCF-derived figure.

2. Below-Market discount Rate. The Beacon Appraisal employed an 8.5% discount rate in its DCF analysis — a rate that is significantly below the market range for luxury full-service beachfront resorts on Florida's Gulf Coast. Published discount rate surveys from CBRE Hotels, Thackeray Consulting Group, and other authoritative sources consistently report discount rates in the range of 9.5% to 11.0% for properties of this type and quality. The Whitfield Appraisal's 10.75% discount rate falls squarely within this range. The Beacon Appraisal's 8.5% rate is 100 to 250 basis points below the market-accepted range, and this single assumption alone accounts for a substantial portion of the $33.5 million divergence between the two appraisals.

During her deposition, Dr. Ramanathan justified the lower discount rate by reference to the Property's "institutional quality" and "superior franchise affiliation." While PCG does not dispute that the Palmetto Grand is a high-quality property, these factors are already reflected in the Property's cash flow projections and do not warrant a discount rate below the established market range for luxury Gulf Coast hotels. The purpose of a discount rate is to reflect the risk inherent in future cash flow projections, and luxury beachfront resort properties — while desirable — are subject to meaningful risks including weather events, tourism cyclicality, franchise-renewal uncertainty, and capital expenditure requirements that justify discount rates within the published market range.

3. Below-Market Terminal Capitalization Rate. The Beacon Appraisal applied a terminal capitalization rate of 7.75%, which is similarly aggressive and unsupported by recent comparable sales evidence. Terminal capitalization rates for luxury Gulf Coast hotel transactions have generally ranged from 8.5% to 10.0% in recent years, reflecting the inherent risk of projecting value at the end of a multi-year holding period. A terminal capitalization rate of 7.75% implies an expectation of continued cap rate compression and strong value appreciation over the projection period — an assumption that is speculative at best, particularly given the interest-rate environment and the maturation of the current hotel-cycle recovery.

4. Unfounded Deferred Maintenance Adjustment. The Beacon Appraisal includes an upward value adjustment of $8,200,000 for alleged "deferred maintenance" items. This adjustment is both factually baseless and analytically improper, as discussed in detail in Section VI below. In brief, the Property underwent a comprehensive $24.3 million renovation in 2017–2019 and has been continuously maintained through PGV's operating budget since the renovation's completion. The $8.2 million figure represents speculative future capital expenditure items, not true deferred maintenance, and has no place in an appraisal of the Property's fair market value as of December 31, 2022.

5. Franchise Agreement Intangible Value. The Beacon Appraisal assigned additional value to the Aurelian franchise agreement as an intangible asset, on the theory that the franchise agreement was executed at "below-market" terms and therefore contributes incremental value above what the Property's cash flows would otherwise support. This adjustment is not standard practice in hotel real property appraisals. The Operating Agreement's Section 12.4 defines "Fair Market Value" as the value of the Joint Venture's real property and operating assets — it does not contemplate the separate valuation and addition of franchise agreement intangible value. Moreover, the franchise agreement's value is already captured in the Property's revenue and cash flow projections, which reflect the property operating under the Aurelian brand. To add a separate intangible-value premium on top of cash flows that already reflect the franchise affiliation is to double-count the franchise's benefit.

MSH's Demand Derivation. Based on the Beacon Appraisal's inflated value conclusion, MSH has derived a total demand of $70,000,000 as follows:

As discussed in Section V below, the bad-faith penalty component of $16,975,000 is entirely without merit.

D. The Linden Park Preliminary Indication

The jointly retained neutral appraiser, Thomas Carraway, MAI, FRICS, of Linden Park Advisory LLC, Miami, Florida, delivered a preliminary indication of value on July 14, 2023. Mr. Carraway concluded, based on his preliminary analysis, that the fair market value of 100% of PGV's assets as of December 31, 2022 falls within a range of $130,000,000 to $138,000,000, with a midpoint of approximately $134,000,000.

The Linden Park preliminary indication is highly significant for several reasons. First, the range is substantially closer to the Whitfield Appraisal ($118.0 million) than to the Beacon Appraisal ($151.5 million), corroborating PCG's position that the Beacon Appraisal is inflated. The Linden Park range begins at $130.0 million — only $12.0 million above the Whitfield figure, but $21.5 million below the Beacon figure. Even at the high end of the Linden Park range ($138.0 million), the distance to the Whitfield conclusion ($20.0 million) is closer than the distance from the Beacon conclusion at the low end of the range.

Second, the Linden Park preliminary indication has important implications for the application of OA Section 12.4(c). Under that provision, the final fair market value is determined by averaging the two appraisals that are closest in value among the three appraisals (the Whitfield Appraisal, the Beacon Appraisal, and the Linden Park final appraisal). The operative question is therefore which of the three appraisals the Linden Park final value will be closest to. This analysis proceeds as follows:

• At a Linden Park final value of $130.0 million: The distance to Whitfield ($118.0M) is $12.0 million; the distance to Beacon ($151.5M) is $21.5 million. Whitfield and Linden Park are the two closest appraisals, yielding an average FMV of $124.0 million.

• At a Linden Park final value of $134.0 million (midpoint): The distance to Whitfield is $16.0 million; the distance to Beacon is $17.5 million. Whitfield and Linden Park remain the two closest, yielding an average FMV of $126.0 million.

• At a Linden Park final value of $134.75 million (crossover point): The distance to Whitfield ($16.75M) equals the distance to Beacon ($16.75M). This is the point at which the pairing switches from Whitfield/Linden Park to Linden Park/Beacon.

• At a Linden Park final value of $138.0 million: The distance to Whitfield is $20.0 million; the distance to Beacon is $13.5 million. Linden Park and Beacon are now the two closest appraisals, yielding an average FMV of $144.75 million.

Thus, the operative FMV under OA Section 12.4(c) is uncertain within the Linden Park preliminary range, but falls somewhere between approximately $124.0 million (if Linden Park finalizes at $130.0 million) and approximately $144.75 million (if Linden Park finalizes at $138.0 million). This uncertainty creates meaningful litigation risk for both sides, as discussed further in Section VII below. PCG notes, however, that the midpoint of the Linden Park range ($134.0 million) falls below the crossover point ($134.75 million), meaning that if Mr. Carraway's final value falls at or near the midpoint of his preliminary range, the operative FMV would be the average of Whitfield and Linden Park — a figure in the range of $124.0 to $126.0 million — not the Whitfield/Beacon average, and certainly not the Beacon figure standing alone.

PCG submits that the Linden Park preliminary indication provides the most reliable, independent benchmark for a negotiated resolution. The neutral appraiser, retained by both parties, has no incentive to favor either side and has conducted his analysis without the adversarial dynamic that inevitably influences party-retained appraisals.

E. Implied Equity and Buyout Values at Various Asset Valuations

The following table presents the implied buyout price for MSH's 35% membership interest at various fair market value assumptions, calculated using the OA's buyout mechanics (net equity multiplied by 35%, plus the stipulated preferred return of $17,010,000):

As the table demonstrates, even under the most favorable assumptions for MSH (the Beacon Appraisal standing alone, without any bad-faith penalty), the buyout price would be $53,025,000 — still $16,975,000 less than MSH's total demand of $70,000,000. MSH's demand can only be reached by accepting the Beacon Appraisal at face value and imposing a bad-faith penalty — an outcome that is neither supported by the evidence nor likely on the merits.

V. PCG'S POSITION ON THE BAD-FAITH PENALTY CLAIM (OA SECTION 12.7)

A. The Contractual Standard

OA Section 12.7 provides, in relevant part:

"If the Arbitrator determines that the Manager exercised the Call Option in bad faith or with the intent to materially understate Fair Market Value, the Purchase Price shall include a penalty of up to twenty-five percent (25%) of the determined Fair Market Value of the Redeemed Interest, in addition to the Purchase Price otherwise determined under Section 12.4."

This provision was negotiated by the parties as a protective mechanism to ensure that the Manager would not abuse its position by deliberately understating value in connection with a call-option exercise. The provision is, by its express terms, a penalty that requires proof of "bad faith" or "intent to materially understate Fair Market Value." These are demanding standards that require proof of subjective dishonest purpose, not mere disagreement over valuation methodology or conclusions.

Under Florida law, "bad faith" in the contractual context requires more than negligence, error, or honest disagreement — it requires proof of a dishonest purpose, moral obliquity, or conscious wrongdoing. See, e.g., Ernie Haire Ford, Inc. v. Ford Motor Co., 260 F.3d 1285, 1291 (11th Cir. 2001) (applying Florida law); Ins. Concepts & Design, Inc. v. Healthplan Servs., Inc., 785 So. 2d 1232, 1234 (Fla. 4th DCA 2001). The intent standard is equally demanding: MSH must show that PCG intended to materially understate value — that is, that PCG directed or influenced the Whitfield Appraisal to produce a value it knew to be materially below the Property's true worth. Mere disagreement between two professionally prepared appraisals — a routine occurrence in complex real estate valuation — does not remotely satisfy this standard.

B. MSH's Claim Is Without Merit

MSH's bad-faith penalty claim fails on every element. The undisputed facts demonstrate the opposite of bad faith:

PCG retained an independent, MAI-certified appraiser. The Operating Agreement contemplates that each party will retain its own appraiser to prepare an independent valuation. PCG did exactly that. Gerald K. Whitfield, MAI, is a highly experienced, independent hotel valuation professional with no prior relationship with PCG or any financial interest in the outcome of the appraisal. Mr. Whitfield was retained on an independent basis and was given no direction, instruction, or target valuation by PCG or its counsel. These facts were confirmed in Mr. Whitfield's deposition testimony and are corroborated by the investment-committee memoranda produced under Arbitrator Chen's November 30 order.

The Whitfield Appraisal employed standard, recognized methodologies. Far from reflecting a results-oriented analysis, the Whitfield Appraisal employed both the income capitalization approach and the sales comparison approach — the two methodologies most commonly used and widely accepted for hotel valuations. The capitalization rates, discount rates, and comparable transaction adjustments used in the Whitfield Appraisal are all within the market-standard ranges published by authoritative industry sources. A reasonable, good-faith appraiser applying accepted methodologies to the available data could readily arrive at a value conclusion of $118.0 million for this Property.

Appraisal divergence does not establish bad faith. That the Whitfield Appraisal ($118.0 million) diverges from the Beacon Appraisal ($151.5 million) by approximately 28.4% does not, standing alone, establish bad faith or intent to understate. To the contrary, the Operating Agreement expressly anticipates the possibility of significant appraisal divergence and addresses it through the third-appraiser mechanism in Section 12.4(c), which is triggered when the two party-retained appraisals diverge by more than 10%. The drafters of the Operating Agreement understood that reasonable appraisers can and will reach different conclusions when valuing complex real estate assets, and they designed the OA's procedures to resolve such disagreements through an orderly averaging mechanism — not through accusations of bad faith.

A 28.4% divergence, while exceeding the 10% threshold, is not at all unusual in luxury hospitality real estate, where differences in methodology (income-only versus blended approaches), assumptions (Discount rates, cap rates, growth rates), and judgment calls (comparable selection, adjustment factors) can produce wide ranges of value. This is particularly true for unique, high-value beachfront resort properties like the Palmetto Grand, where there is inherently limited transactional data and where small differences in key assumptions can produce large differences in value conclusions.

PCG had no motive to understate value. MSH's bad-faith theory is further undermined by the absence of any rational economic motive for PCG to understate the Property's value. PCG holds a 65% interest in PGV. A lower valuation of PGV's assets means a lower implied value for PCG's own 65% interest. While a lower valuation would reduce the buyout price PCG must pay for MSH's 35%, it would simultaneously reduce the implied value of PCG's retained 65% interest by an even greater absolute amount. PCG's interest is in an accurate valuation — one that reflects the true fair market value of the assets it will continue to own after the buyout.

The produced documents confirm good faith. The investment-committee memoranda produced under Arbitrator Chen's November 30 order confirm that PCG's decision to exercise the call option was made after careful deliberation by PCG's investment committee, including analysis of the strategic merits of sole ownership, the market environment, and the anticipated valuation process. The documents contain no evidence of any instruction to the Whitfield firm regarding a target valuation, any attempt to influence the appraisal methodology, or any other conduct remotely suggestive of bad faith.

C. MSH's Penalty Calculation Is Independently Flawed

Even setting aside the fundamental lack of merit of the bad-faith claim, MSH's penalty calculation is independently flawed on its own terms. MSH demands $16,975,000 as a bad-faith penalty, which it derives as follows: MSH's gross claim (35% of Beacon-based equity of $102.9 million = $36,015,000 plus preferred return of $17,010,000 = $53,025,000) multiplied by approximately 32% = $16,975,000. This 32% factor exceeds the contractual cap.

OA Section 12.7 expressly caps any bad-faith penalty at "up to twenty-five percent (25%) of the determined Fair Market Value of the Redeemed Interest." Regardless of how one calculates the "determined Fair Market Value of the Redeemed Interest," MSH's claimed 32% exceeds the contractual maximum of 25%. MSH has provided no explanation or justification for this overreach. Even if the arbitrator were to find bad faith — which PCG firmly denies would be warranted — any penalty would be capped at 25% of the redeemed interest's fair market value as finally determined, and it would be within the arbitrator's discretion to award a penalty at any amount up to that cap (including zero).

The bad-faith penalty claim is, in PCG's view, a litigation tactic designed to inflate the settlement value of MSH's position. It has no factual or legal basis and should be given no weight in the mediation analysis.

VI. PCG'S POSITION ON THE DEFERRED MAINTENANCE CLAIM

MSH contends, through the Beacon Appraisal and in its arbitration filings, that PCG as Manager of PGV breached OA Section 8.3 by failing to fund approximately $8,200,000 in deferred maintenance items at the Property. MSH further asserts that this alleged deferred maintenance should be added as an upward adjustment to the Property's appraised value (on the theory that the value suppression caused by deferred maintenance should be reversed to determine the Property's "true" fair market value). PCG rejects both the factual basis and the analytical framework of this claim.

The Property underwent a comprehensive $24.3 million renovation in 2017–2019. The Joint Venture invested $24,300,000 in capital improvements to the Property within the first two years of ownership. This renovation program touched virtually every aspect of the Property, including a complete guest-room renovation, expansion and redesign of the spa, renovation of the food and beverage outlets, modernization of the meeting and event spaces, enhancement of beachfront amenities, and upgrades to building systems. The renovation was designed to bring the Property to full compliance with Aurelian Hotels & Resorts brand standards and to position the Property as a market-leading luxury resort on Clearwater Beach. By any objective measure, the renovation achieved both goals.

Ongoing maintenance has been funded through PGV's operating budget. Since the completion of the renovation program, PCG as Manager has funded ongoing property maintenance and replacement reserves through PGV's operating budget, in accordance with the annual budgets approved by the members and the requirements of the Aurelian franchise agreement. PGV's capital expenditure history since 2019 reflects consistent, responsible investment in the Property's physical condition, including routine replacement of FF&E, ongoing building-systems maintenance, and periodic upgrades to guest-facing amenities. There is no factual basis for the claim that maintenance has been deferred.

The $8.2 million figure includes speculative future capital expenditures, not true deferred maintenance. A careful review of the Beacon Appraisal's deferred-maintenance schedule reveals that the $8,200,000 figure is not composed of items that have been neglected or deferred in any meaningful sense. Rather, the schedule includes speculative future capital expenditure items — such as a projected future HVAC replacement, a hypothetical room-renovation refresh that would not be due for several additional years under industry lifecycle standards, and an anticipated exterior facade remediation for which no current deficiency has been identified. These are prospective capital needs that may or may not materialize, not deferred maintenance items reflecting current physical deficiencies.

The Property's operating performance confirms proper maintenance. The Palmetto Grand achieved a RevPAR of $289 and hotel-level EBITDA of $19,700,000 in 2022. These metrics are consistent with top-tier performance for luxury beachfront resort hotels in the Florida Gulf Coast market and would not be achievable at a property suffering from $8.2 million in deferred maintenance. Guests, group clients, and the Aurelian Hotels & Resorts brand quality-assurance program would not tolerate — and the Property could not sustain its premium rate position in the presence of — the level of physical deterioration implied by MSH's deferred-maintenance allegations.

OA Section 8.3 requires "first-class condition" — a standard that the Property meets. The Operating Agreement requires the Manager to "maintain the property in first-class condition consistent with the standards of comparable luxury resort hotels in the market area." The Property's revenue performance, guest satisfaction scores, and Aurelian brand-compliance reports all confirm that the Property meets this standard. The burden of proving a breach of OA Section 8.3 rests with MSH, and MSH has produced no evidence — other than the Beacon Appraisal's speculative schedule — to support a finding that the Property is not maintained in first-class condition.

An appraisal adjustment for deferred maintenance is analytically improper. Even if there were legitimate deferred-maintenance items at the Property (which PCG denies), incorporating such items as an upward adjustment to fair market value in the appraisal context is analytically improper. Fair market value, as defined in the Operating Agreement and under generally accepted appraisal standards, is the price at which the property would change hands between a willing buyer and a willing seller, each having reasonable knowledge of all relevant facts. A willing buyer would observe the property's current physical condition and adjust its offer accordingly; it would not add a deferred-maintenance premium on top of a stabilized-income valuation. If MSH believes that PCG as Manager breached OA Section 8.3, the appropriate remedy would be a separate claim for breach of the Operating Agreement, with damages measured by MSH's actual losses — not a $8.2 million adjustment to the appraised fair market value used to determine the buyout price.

VII. SETTLEMENT ANALYSIS AND PCG'S NEGOTIATING POSITION

A. Risks and Costs of Continued Arbitration

The arbitration is proceeding before the Honorable Margaret Liu Chen (Ret.) at JAMS in Jacksonville, Florida. If the parties are unable to resolve this matter through mediation, the dispute will proceed to a merits hearing at which the arbitrator will be required to (i) determine the final fair market value of PGV's assets under OA Section 12.4(c) and (ii) adjudicate MSH's bad-faith penalty claim under OA Section 12.7.

The Section 12.4(c) outcome is uncertain. As discussed in Section IV.D above, the operative fair market value under the OA's three-appraiser mechanism depends on where the Linden Park final appraisal falls relative to the Whitfield and Beacon Appraisals. The Linden Park preliminary range of $130.0 to $138.0 million spans the critical crossover point of approximately $134.75 million, creating genuine outcome uncertainty. If Linden Park finalizes below $134.75 million, the operative FMV is the average of Whitfield and Linden Park (yielding an FMV in the range of $124.0 to $126.4 million and a buyout price of approximately $43.4 to $44.2 million). If Linden Park finalizes above $134.75 million, the operative FMV is the average of Linden Park and Beacon (yielding an FMV in the range of $136.4 to $144.75 million and a buyout price of approximately $47.7 to $50.7 million). This is a wide range of potential outcomes, and neither party can predict with certainty where the Linden Park final figure will land.

The bad-faith penalty introduces binary risk. Although PCG firmly believes the bad-faith penalty claim lacks merit, the claim introduces an element of binary outcome risk into the arbitration. If the arbitrator were to find bad faith — even at a low probability — the penalty could add up to 25% of MSH's redeemed interest value to the buyout price. Conversely, if the arbitrator rejects the bad-faith claim (as PCG expects), MSH loses the entire $16.975 million component of its demand. Both parties therefore face meaningful risk from the disposition of this claim.

Costs of continued proceedings are substantial. PCG's legal and expert fees in this matter to date have been significant, and the costs of proceeding through a merits hearing — including preparation and examination of expert witnesses, briefing on the Section 12.4(c) and Section 12.7 issues, and the hearing itself — would add materially to both parties' expenditures. PCG understands that MSH's costs are similarly substantial. These costs reduce the net recovery for MSH and the net expenditure savings for PCG available through a negotiated resolution, making settlement economically rational for both parties.

B. PCG's Settlement Posture

PCG approaches this mediation with a genuine willingness to negotiate a fair resolution. PCG acknowledges that the Whitfield Appraisal may represent the lower end of a reasonable valuation range and that the tendered price of $41.3 million may not fully reflect the Property's fair market value. Accordingly, PCG is prepared to negotiate meaningfully above the tendered price.

PCG's view of a reasonable resolution is anchored around the equity analysis derived from the midpoint of the Linden Park Advisory preliminary indication of value. The neutral appraiser's midpoint of $134.0 million represents the most reliable, unbiased estimate of the Property's fair market value available to the parties. Using this figure as a reference point:

• Gross Asset Value (Linden Park midpoint): $134,000,000

• Less Outstanding GANB Debt: ($48,600,000)

• Joint Venture Net Equity: $85,400,000

• MSH's 35% Share: $29,890,000

• Plus Stipulated Preferred Return: $17,010,000

• Implied Buyout Price at Linden Park Midpoint: $46,900,000

PCG is prepared to negotiate a modest premium above $46,900,000 to reflect the value of litigation-risk avoidance, the benefit of prompt closing certainty, and a recognition that the Linden Park final value could conceivably fall above the crossover point. The precise amount of any such premium is a subject for negotiation in the mediation, but PCG is approaching the mediation constructively and is prepared to engage in good faith on the specific dollar figure.

PCG's settlement posture is, however, subject to the following firm parameters:

No bad-faith penalty or concession. PCG will not entertain any settlement that incorporates a bad-faith penalty payment, characterizes any portion of the settlement as a bad-faith penalty, or includes any acknowledgment or concession by PCG that it acted in bad faith in exercising the call option or engaging the Whitfield firm. This is a non-negotiable point. PCG exercised its contractual rights in good faith and will not agree to any settlement that suggests otherwise.

Mutual release. Any settlement must include a comprehensive mutual release of all claims, counterclaims, and potential claims arising out of or relating to the Joint Venture, the Operating Agreement, the call option exercise, and the arbitration proceedings, including but not limited to MSH's bad-faith penalty claim, MSH's deferred-maintenance allegations, and PCG's counterclaim for declaratory relief.

Dismissal with prejudice. The settlement must provide for the dismissal with prejudice of JAMS Reference No. 1440032871 and all claims and counterclaims asserted therein.

Each party bears its own costs. Each party shall bear its own attorneys' fees, expert fees, and costs incurred in connection with the arbitration and this mediation.

C. Benefits of Resolution

A negotiated resolution at this mediation session would produce significant benefits for both parties:

Avoidance of prolonged proceedings and additional costs. A settlement would eliminate the substantial additional legal, expert, and arbitration costs that both parties would incur in proceeding through a merits hearing, post-hearing briefing, and potential award-confirmation proceedings. These savings are substantial and accrue to both sides.

Prompt closing certainty. A settlement would allow the parties to proceed promptly to closing the buyout transaction, providing MSH with a certain, substantial cash payment and providing PCG with sole ownership of PGV and full control over the asset. Under the current arbitration schedule, a final award is unlikely before mid-to-late 2024, and post-award proceedings could further delay closing.

Removal of business uncertainty. The pendency of this dispute creates operational uncertainty for PGV, including uncertainty affecting the Aurelian franchise relationship, capital planning, refinancing discussions with GANB (the existing loan matures in August 2027), and PCG's ability to implement its long-term strategic plan for the Property. A prompt resolution would remove this uncertainty and allow PCG to operate the Property on a fully stabilized basis going forward.

Certain, substantial payment for MSH. A settlement in the range discussed above would provide MSH with a total payment well in excess of its initial capital contributions of $18,505,000, reflecting both a return of capital and a substantial return on capital. The payment would also include the full stipulated preferred return of $17,010,000. MSH would receive this payment with certainty, without the risk that the Linden Park final figure falls below $134.75 million and yields an operative FMV averaging only approximately $124.0 to $126.0 million, and without the risk of an adverse ruling on the bad-faith penalty claim that would eliminate MSH's largest single demand component.

Full ownership for PCG. PCG would obtain 100% ownership of PGV and complete operational and strategic control over The Palmetto Grand Resort & Spa, enabling PCG to pursue refinancing, capital improvements, portfolio optimization, and other value-creation strategies without the constraints of the Joint Venture structure.

PCG has the financial capacity to fund a reasonable settlement. PCG is prepared to fund a settlement through a combination of existing corporate liquidity and available draws under PGV's revolving credit facility with GANB. PCG's ability to close promptly following agreement on terms is not in question.

VIII. CONFIDENTIALITY

This Confidential Mediation Position Statement is submitted solely for the purpose of facilitating the mediation session scheduled for February 12, 2024, before Mediator Raymond Alcazar. This statement is confidential and is intended exclusively for Mr. Alcazar's review and use in connection with the mediation.

This statement is not to be disclosed to Meridian Shores Hospitality LLC, its principals, or its counsel, Hargrove, Dunlap & Castillo LLP, without the prior written consent of Pellegrino Capital Group LLC.

All statements, representations, positions, and analyses contained herein are made for settlement purposes only and are inadmissible in the pending JAMS arbitration (Reference No. 1440032871), any related judicial proceeding, or any other proceeding, pursuant to Florida Statutes § 44.405 (mediation confidentiality and privilege), JAMS Mediation Rules, and any applicable rules of evidence regarding the inadmissibility of settlement communications. Nothing contained in this statement shall be construed as an admission of fact, an admission of liability, a waiver of any claim or defense, or a concession on any issue of law or fact.

PCG expressly reserves all rights, claims, counterclaims, defenses, and positions in the pending arbitration and in any other proceeding.

IX. CONCLUSION

Pellegrino Capital Group LLC is committed to resolving this dispute through mediation on fair and reasonable terms that reflect the true value of the Joint Venture's assets and the Operating Agreement's express buyout mechanics.

PCG exercised the call option in good faith, in strict compliance with the Operating Agreement, and based upon an independent, professionally prepared MAI appraisal. PCG is willing to negotiate a buyout price meaningfully above its tendered figure of $41.3 million and to anchor those negotiations around the neutral appraiser's preliminary findings — the most reliable and unbiased indication of value available to the parties.

MSH's demand of $70,000,000 is not a realistic starting point for resolution. It is built upon three inflated components: (i) the Beacon Appraisal's aggressive $151.5 million valuation, which is methodologically flawed and inflated by an unfounded $8.2 million deferred-maintenance adjustment and an improper franchise-agreement intangible premium; (ii) a baseless bad-faith penalty of $16,975,000 that has no factual or legal foundation and exceeds the OA's contractual cap; and (iii) an analytical framework that ignores the neutral appraiser's preliminary indication of value, which strongly favors a result much closer to the Whitfield Appraisal than to the Beacon Appraisal.

A resolution anchored around the Linden Park midpoint analysis — with a reasonable premium for litigation-risk avoidance and closing certainty — would fairly compensate MSH for the value of its 35% membership interest, including its full accrued preferred return, while ending this dispute promptly and conclusively. Such a resolution serves the legitimate interests of both parties.

PCG respectfully requests Mr. Alcazar's assistance in facilitating a constructive dialogue toward a commercially reasonable resolution at the February 12 session.

RESPECTFULLY SUBMITTED

CALDERWOOD & HARKNESS LLP

By: ________

Francesca Morano, Partner

Samuel Eklund, Partner

Simone Laroche, Associate

Jeffrey Park, Associate

801 Brickell Avenue, Suite 2800 Miami, FL 33131 Telephone: (305) 555-7200 Facsimile: (305) 555-7201 fmorano@calderwoodharkness.com seklund@calderwoodharkness.com slaroche@

CONFIDENTIAL — FOR MEDIATOR'S EYES ONLY — NOT TO BE DISCLOSED TO OPPOSING PARTY WITHOUT CONSENT
JAMS MEDIATION
Reference No. 1440032871
CONFIDENTIAL MEDIATION POSITION STATEMENT OF RESPONDENT PELLEGRINO CAPITAL GROUP LLC
Submitted to:
Raymond Alcazar Certified Florida Supreme Court Mediator Alcazar Dispute Resolution LLC 333 SE 2nd Avenue, Suite 2100 Miami, FL 33131
In Advance of the Mediation Session Scheduled for February 12, 2024
Submitted by:
CALDERWOOD & HARKNESS LLP 801 Brickell Avenue, Suite 2800 Miami, FL 33131
Francesca Morano, Responsible Partner Samuel Eklund, Billing Partner Simone Laroche, Lead Associate Jeffrey Park, Working Associate
On Behalf of Respondent Pellegrino Capital Group LLC 1900 Bayshore Boulevard, Suite 1400 Tampa, FL 33606
Matter No. 1027-00003
Date: February 5, 2024
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I. INTRODUCTION AND PURPOSE
Respondent Pellegrino Capital Group LLC ("PCG") respectfully submits this Confidential Mediation Position Statement to Mediator Raymond Alcazar in advance of the mediation session scheduled for February 12, 2024. This statement is provided solely for Mr. Alcazar's use in facilitating settlement discussions and is not to be disclosed to the opposing party, Meridian Shores Hospitality LLC ("MSH"), or its counsel, Hargrove, Dunlap & Castillo LLP, without PCG's prior written consent. All statements contained herein are made for settlement purposes only and are inadmissible in the pending arbitration or any other proceeding.
This dispute arises from a valuation disagreement following PCG's exercise of its contractual call option under Section 12.4 of the Amended and Restated Operating Agreement of Palmetto Grand Ventures LLC ("PGV" or the "Joint Venture"), dated June 15, 2017 (the "Operating Agreement" or "OA"), to purchase the thirty-five percent (35%) membership interest held by MSH. PCG exercised the call option in strict compliance with the Operating Agreement's terms and procedures, relying upon an independent, professionally prepared MAI appraisal conducted by Gerald K. Whitfield, MAI, of Whitfield Realty Advisors LLC. MSH rejected the tendered buyout price and initiated arbitration proceedings, demanding a total payment of $70.0 million — a figure that is inflated and unsupported by the contractual framework, the property's actual fair market value, or any reasonable reading of the Operating Agreement's provisions.
MSH's demand of $70.0 million includes a baseless "bad-faith penalty" of $16,975,000 under OA Section 12.7, which has no contractual or legal foundation. The bad-faith penalty claim rests on the demonstrably false premise that PCG intended to materially understate the fair market value of the Joint Venture's assets. In reality, PCG retained a highly qualified, independent appraiser who employed standard, recognized appraisal methodologies — precisely as the Operating Agreement contemplates. That two independent appraisers reached different conclusions is neither surprising in the luxury hospitality real estate context nor indicative of bad faith; indeed, the Operating Agreement itself anticipates such divergence through its third-appraiser mechanism.
PCG enters this mediation in good faith and with a genuine desire to resolve this dispute on commercially reasonable terms. PCG acknowledges that its tendered price of $41.3 million reflects the lower boundary of the reasonable range and is willing to negotiate meaningfully above that figure. At the same time, MSH's demand of $70.0 million — built upon an aggressive appraisal, an unfounded deferred-maintenance claim, and a meritless bad-faith penalty — cannot serve as a realistic basis for resolution.
PCG's objective in this mediation is straightforward: to achieve a commercially reasonable redemption of MSH's membership interest at a price that reflects the true fair market value of the Joint Venture's assets, as corroborated by the neutral appraiser's preliminary findings, and to conclude this dispute expeditiously so that both parties may move forward. PCG respectfully requests Mr. Alcazar's assistance in facilitating a constructive dialogue toward that end.
II. BACKGROUND AND PARTIES
A. The Parties
Pellegrino Capital Group LLC. PCG is a Florida limited liability company with its principal office at 1900 Bayshore Boulevard, Suite 1400, Tampa, Florida 33606. PCG is a family office controlled by its Managing Member, Dominic R. Pellegrino, and manages approximately $1.2 billion in assets under management across a diversified portfolio of hospitality, multifamily residential, and alternative-asset investment strategies. Mr. Pellegrino founded PCG in 2003 and has been active in the Florida hospitality sector for over two decades, developing a well-established track record of responsible ownership, successful property operations, and value creation for all stakeholders.
Day-to-day oversight of PCG's hospitality portfolio, including the Palmetto Grand investment, is managed by Adriana Pellegrino-Voss, Senior Vice President of Investments. Ms. Pellegrino-Voss has been with PCG since 2010 and brings extensive experience in hospitality asset management, capital improvement programs, and franchise relations. Financial oversight and reporting for PCG's investments are handled by Marcus Thiel, Chief Financial Officer, who has served in that capacity since 2015 and previously held senior finance roles at a national hospitality REIT.
PCG holds a sixty-five percent (65%) membership interest in PGV and serves as the sole Manager of the Joint Venture under the Operating Agreement. As Manager, PCG has been responsible for all aspects of the Joint Venture's operations, including property management oversight, capital improvement planning, franchise compliance, and financial reporting to MSH as the minority member.
Meridian Shores Hospitality LLC. MSH is a Delaware limited liability company with its principal office at 220 Royal Palm Way, Suite 300, Palm Beach, Florida 33480. MSH is managed by Nathaniel "Nate" Cordero, who also serves as MSH's principal investment decision-maker. Elena Cordero holds a forty percent (40%) equity interest in MSH. MSH holds a thirty-five percent (35%) membership interest in PGV as a non-managing member.
MSH is represented in the underlying arbitration and in this mediation by Victoria Castillo, Partner, and Ryan Matsuda, Senior Associate, of Hargrove, Dunlap & Castillo LLP, with offices in West Palm Beach, Florida.
B. The Joint Venture
Palmetto Grand Ventures LLC is a Florida limited liability company formed on June 15, 2017 (Florida Division of Corporations Filing No. L17000124583; EIN 82-5063921). PGV was formed for the specific purpose of acquiring, renovating, and operating The Palmetto Grand Resort & Spa (the "Property" or the "Hotel"), a 312-room luxury beachfront resort hotel located at 650 Mandalay Avenue, Clearwater Beach, Florida 33767.
The Joint Venture's ownership structure is straightforward: PCG holds 65% of the membership interests and MSH holds 35% of the membership interests. Under the Operating Agreement, PCG serves as the sole Manager with authority over all operational and capital decisions, subject to certain major-decision approval rights held by MSH as set forth in OA Section 7.2.
The Property is operated under a franchise agreement with Aurelian Hotels & Resorts Inc., a nationally recognized luxury hotel brand. The franchise agreement was executed on July 15, 2017, carries a twenty-year term expiring July 14, 2037, and requires payment of franchise fees equal to five percent (5%) of gross room revenue plus a two percent (2%) marketing fund contribution. The Aurelian affiliation has been a significant driver of the Property's revenue performance, providing access to the Aurelian global reservation system, loyalty program, and brand standards that command a premium rate position in the Clearwater Beach market.
The Palmetto Grand is a full-service luxury resort featuring 312 guest rooms and suites, including 42 premium suites, two signature dining restaurants, a rooftop bar and lounge with panoramic Gulf views, an 18,000-square-foot full-service spa, 22,000 square feet of flexible meeting and event space, and a premium beachfront cabana service. The Property occupies a prime beachfront location that is among the most desirable on Florida's Gulf Coast and benefits from significant barriers to entry for competing new development.
C. Acquisition and Capital Structure
PGV completed the acquisition of The Palmetto Grand Resort & Spa on August 1, 2017, at a total purchase price of $87,500,000. The acquisition was financed through a combination of senior debt and member equity contributions, structured as follows:
Senior Debt. Gulf Atlantic National Bank ("GANB") provided a $61,250,000 first-mortgage loan secured by the Property (Loan No. CRE-2017-06284). The loan represented a 70% loan-to-value ratio at acquisition, bears interest at SOFR plus 2.25% (with a SOFR floor), and has a maturity date of August 1, 2027. As of December 31, 2022 — the appraisal valuation date used in this dispute — the outstanding principal balance on the GANB loan was $48,600,000, reflecting scheduled amortization payments made from operating cash flow.
Equity Contributions at Acquisition. Total equity required at closing, inclusive of $2,307,700 in closing costs (transfer taxes, title insurance, lender fees, legal costs, and initial franchise fees), was $28,557,700. In accordance with OA Section 4.1, the members made the following initial capital contributions:
•  PCG: $18,562,500 (representing 65% of the acquisition equity)
•  MSH: $10,000,000 (agreed basis per OA Section 4.1, reflecting a negotiated allocation)
The parties agreed that MSH's initial contribution of $10,000,000, while nominally less than a strict 35% pro rata share of the total equity, was offset by certain pre-formation services and development-stage costs incurred by Mr. Cordero in identifying and securing the acquisition opportunity. This arrangement was memorialized in OA Section 4.1 and is not in dispute.
Renovation Capital. Following the acquisition, PGV undertook a comprehensive renovation and repositioning of the Property between 2017 and 2019. The total renovation capital expenditure was $24,300,000, which was funded by additional capital contributions from the members in accordance with their respective ownership percentages:
•  PCG: $15,795,000 (65%)
•  MSH: $8,505,000 (35%)
The renovation program included a complete guest-room refresh, expansion and redesign of the spa facility, renovation of the food and beverage outlets, modernization of the meeting and event spaces, enhancement of the beachfront amenities, and upgrades to building systems including HVAC, elevator modernization, and energy-efficiency improvements. The renovation was completed on time and within budget, and was a critical factor in the Property's subsequent strong operating performance under the Aurelian brand.
In total, MSH has made capital contributions to PGV of $18,505,000, comprised of the $10,000,000 initial contribution and $8,505,000 in renovation capital.
D. Hotel Performance
The Palmetto Grand has delivered strong operating performance since the completion of the renovation program in 2019, notwithstanding the temporary disruption caused by the COVID-19 pandemic in 2020–2021. By calendar year 2022 — the valuation date at issue in this dispute — the Property had achieved the following key performance metrics:
These results represent top-tier performance among luxury beachfront hotels in the Clearwater Beach and broader Tampa Bay / Pinellas County market. The Property's RevPAR of $289 and EBITDA of $19.7 million reflect the successful execution of the renovation program, disciplined asset management by PCG, effective franchise operations under the Aurelian brand, and the Property's irreplaceable beachfront location. These metrics are also a direct rebuttal to MSH's suggestion that the Property suffers from deferred maintenance, as discussed further in Section VI below.
III. PROCEDURAL HISTORY
The following timeline summarizes the key events leading to this mediation:
June 15, 2022: The fifth anniversary of the Operating Agreement, marking the date on which the call option set forth in OA Section 12.4 first became exercisable by PCG as Manager. Under Section 12.4(a), the Manager has the right, exercisable at any time on or after the fifth anniversary, to purchase all (but not less than all) of the non-managing member's membership interest at a price determined by the fair market value appraisal process set forth in Section 12.4.
January 9, 2023: PCG delivered a written notice to MSH exercising the call option under OA Section 12.4 (the "Exercise Notice"). The Exercise Notice was delivered in accordance with OA Section 16.1 (notices provision) via certified mail and overnight courier to MSH's principal office and to Mr. Cordero personally. The Exercise Notice stated PCG's intention to purchase MSH's 35% membership interest and confirmed that PCG would obtain an independent appraisal as required by Section 12.4(b).
February 10, 2023: Gerald K. Whitfield, MAI, of Whitfield Realty Advisors LLC, Fort Lauderdale, Florida, completed his appraisal of the Property and operating assets of PGV (the "Whitfield Appraisal"). The Whitfield Appraisal concluded that the fair market value of 100% of PGV's assets as of December 31, 2022 was $118,000,000. A detailed discussion of the Whitfield Appraisal's methodology and conclusions is set forth in Section IV.A below.
March 1, 2023: PCG tendered $41,300,000 to MSH as the buyout price for MSH's 35% membership interest, calculated in accordance with the OA's buyout mechanics as applied to the Whitfield Appraisal's value conclusion. The derivation of this figure is set forth in Section IV.B below. The tender was accompanied by a proposed Membership Interest Purchase Agreement and supporting documentation, including the Whitfield Appraisal.
March 10, 2023: MSH rejected the tendered price, contending that the Whitfield Appraisal materially understated the Property's fair market value. MSH stated its intention to obtain its own appraisal as provided under OA Section 12.4(b).
March 20, 2023: MSH filed a Demand for Arbitration with JAMS (Reference No. 1440032871), asserting claims for (i) a declaratory judgment that the fair market value of PGV's assets exceeds the Whitfield Appraisal's conclusion; (ii) a determination of the correct buyout price under OA Section 12.4; and (iii) a bad-faith penalty under OA Section 12.7 in the amount of $16,975,000. MSH's total demand is $70,000,000.
April 5, 2023: PCG filed its Response and Counterclaim, denying MSH's allegations, challenging the bad-faith penalty claim as meritless, and seeking declaratory relief confirming that PCG exercised the call option in good faith and that the buyout price should be determined in accordance with the OA's appraisal process.
April 14, 2023: Dr. Priya Ramanathan, CFA, ASA, of Beacon Valuation Group Inc., Miami, Florida, completed her appraisal of PGV's assets on behalf of MSH (the "Beacon Appraisal"). The Beacon Appraisal concluded that the fair market value of 100% of PGV's assets as of December 31, 2022 was $151,500,000. PCG's critique of the Beacon Appraisal is set forth in Section IV.C below.
April 28, 2023: The Honorable Margaret Liu Chen (Ret.) was appointed as the sole arbitrator in this matter pursuant to the JAMS Comprehensive Arbitration Rules. Judge Chen is a retired Florida Circuit Court judge with significant experience in complex commercial disputes and real estate matters.
May 15, 2023: Preliminary arbitration conference held before Arbitrator Chen. The parties discussed the scope of discovery, the procedural calendar, and the anticipated engagement of a neutral third appraiser under OA Section 12.4(c). A discovery schedule was established, and the parties were ordered to confer in good faith regarding the selection and retention of a neutral appraiser.
June 1, 2023: Given that the divergence between the Whitfield Appraisal ($118.0 million) and the Beacon Appraisal ($151.5 million) was approximately 28.4% — well in excess of the 10% threshold specified in OA Section 12.4(c) — the parties jointly retained Linden Park Advisory LLC to serve as the neutral third appraiser. The engagement was led by Thomas Carraway, MAI, FRICS, a highly respected hotel valuation specialist with extensive experience valuing luxury resort properties throughout the southeastern United States.
July 14, 2023: Linden Park Advisory LLC delivered a preliminary indication of value for 100% of PGV's assets as of December 31, 2022, in the range of $130,000,000 to $138,000,000. Mr. Carraway indicated that a final report would be completed following additional market analysis and an updated physical inspection of the Property. The significance of the Linden Park preliminary indication to the ultimate resolution of this dispute is discussed in Section IV.D below.
August 22, 2023: Deadline for completion of document production. Both parties produced substantial volumes of documents, including operating statements, capital expenditure records, franchise-related correspondence, internal communications regarding the call option exercise, and board and investment-committee materials.
September 18, 2023: Expert depositions were conducted of Gerald K. Whitfield (PCG's appraiser) and Dr. Priya Ramanathan (MSH's appraiser). The depositions highlighted significant methodological differences between the two appraisals, as discussed further in Sections IV.A and IV.C below.
October 10, 2023: Party depositions were conducted of Dominic R. Pellegrino, Managing Member of PCG, and Nathaniel Cordero, Manager of MSH. Both depositions were substantive and explored the parties' respective understanding of the Operating Agreement's buyout provisions, the history of the Joint Venture relationship, and the circumstances surrounding PCG's exercise of the call option.
November 6, 2023: MSH filed a motion to compel production of PCG's internal investment-committee memoranda related to the call option exercise and the Whitfield Appraisal engagement. MSH contended that these documents were relevant to its bad-faith penalty claim under OA Section 12.7.
November 30, 2023: Arbitrator Chen partially granted MSH's motion to compel. PCG was ordered to produce certain investment-committee memoranda directly relating to the decision to exercise the call option and the engagement of the Whitfield firm, while other internal strategic communications were deemed protected under the deliberative process and work-product doctrines. The produced documents confirmed what PCG has maintained throughout: that the decision to exercise the call option was made in good faith after careful deliberation, and that the Whitfield firm was engaged on an independent basis without any direction or instruction regarding a target valuation.
January 15, 2024: Following further discussions between counsel and with the encouragement of Arbitrator Chen, the parties agreed to submit to mediation with Raymond Alcazar, Certified Florida Supreme Court Mediator, before proceeding to a merits hearing.
February 12, 2024: Scheduled first mediation session — the instant proceeding.
IV. SUMMARY OF PCG'S POSITION ON FAIR MARKET VALUE
The central question in this dispute is the fair market value of PGV's assets as of December 31, 2022, for purposes of determining the buyout price for MSH's 35% membership interest under OA Section 12.4. Three appraisals have been or are being prepared: the Whitfield Appraisal commissioned by PCG ($118.0 million), the Beacon Appraisal commissioned by MSH ($151.5 million), and the Linden Park preliminary indication from the jointly retained neutral appraiser ($130.0–$138.0 million). PCG submits that the weight of the evidence strongly supports a fair market value significantly below MSH's claimed $151.5 million and within a range more consistent with the Whitfield Appraisal, as corroborated by the Linden Park preliminary indication.
A. The Whitfield Appraisal ($118.0 Million)
The Whitfield Appraisal was completed on February 10, 2023, by Gerald K. Whitfield, MAI, of Whitfield Realty Advisors LLC, Fort Lauderdale, Florida. Mr. Whitfield is a highly qualified hotel valuation professional with over twenty-five years of experience appraising luxury and full-service hotel properties throughout Florida and the southeastern United States. He holds the MAI designation from the Appraisal Institute, the most widely recognized and respected professional credential in commercial real estate appraisal, and has completed well over 300 hotel valuations during his career.
The Whitfield Appraisal employed both of the two principal methodologies recognized as applicable and appropriate for hotel real property appraisals: the income capitalization approach and the sales comparison approach. Specifically:
Income Capitalization Approach. Mr. Whitfield utilized a blended analysis incorporating both a direct capitalization methodology and a discounted cash flow ("DCF") analysis. The direct capitalization rate applied was 9.5%, derived from an analysis of recent comparable Gulf Coast luxury hotel transactions, published capitalization rate surveys, and investor expectations for stabilized luxury resort properties in Florida's Gulf Coast market. The DCF analysis employed a discount rate of 10.75%, reflecting the appropriate risk-adjusted return expectation for a luxury beachfront resort property with a strong franchise affiliation and stable cash flow profile. Both the capitalization rate and the discount rate fall comfortably within the market-standard ranges for properties of this type and quality, as confirmed by Calderwood & Harkness's independent cap rate and discount rate market survey conducted in July 2023, which surveyed published data from CBRE Hotels, Thackeray Consulting Group, Aldermere Partners LLC, and Cushman & Wakefield Hospitality, as well as transactional data from comparable recent sales.
Sales Comparison Approach. Mr. Whitfield conducted a thorough analysis of comparable luxury hotel transactions along Florida's Gulf Coast and in adjacent southeastern U.S. coastal markets, identifying and analyzing six comparable transactions completed between 2020 and 2022. After applying appropriate adjustments for differences in property size, quality, location, franchise affiliation, and market conditions, the sales comparison approach yielded a value conclusion consistent with the income approach.
In reaching his final conclusion of $118,000,000, Mr. Whitfield applied a weighting of 40% to the income capitalization approach and 60% to the sales comparison approach. This weighting reflects the generally accepted practice in hotel appraisal of according significant weight to the sales comparison approach when active, reliable comparable transaction data is available — as it is in the Florida Gulf Coast luxury hotel market. The availability of multiple relevant comparable sales provides a strong market-based check on the income-derived value and increases the reliability of the overall conclusion.
PCG submits that the Whitfield Appraisal represents a well-supported, methodologically sound, and professionally prepared analysis of the Property's fair market value. While PCG acknowledges that the Whitfield conclusion may represent the lower end of a reasonable valuation range — a point addressed further in PCG's settlement posture discussion below — the appraisal's methodology, assumptions, and data sources are all within the bounds of accepted professional practice.
B. PCG's Buyout Price Derivation
PCG's tendered buyout price of $41,300,000 was derived as follows, in strict accordance with the buyout mechanics set forth in OA Section 12.4:
The preferred return figure of $17,010,000 represents MSH's accrued but unpaid preferred return at an eight percent (8%) per annum compounding rate on MSH's total capital contributions of $18,505,000, calculated from the dates of each respective contribution through December 31, 2022. This figure was subsequently stipulated by both parties during the arbitration proceedings and is not in dispute.
The calculation is straightforward and follows the express mechanics of OA Section 12.4(d), which provides that the buyout price shall equal the non-managing member's pro rata share of the Joint Venture's net equity (determined as the fair market value of all JV assets less all JV liabilities) plus any accrued and unpaid preferred return. PCG's tender faithfully applied these mechanics using the Whitfield Appraisal as the basis for fair market value.
C. Critique of the Beacon Appraisal ($151.5 Million)
The Beacon Appraisal was completed on April 14, 2023, by Dr. Priya Ramanathan, CFA, ASA, of Beacon Valuation Group Inc., Miami, Florida. While Dr. Ramanathan is a credentialed valuation professional, PCG has identified fundamental methodological concerns with the Beacon Appraisal that render its $151.5 million conclusion unreliable and significantly overstated. These concerns were explored in detail during Dr. Ramanathan's deposition on September 18, 2023, and are summarized below.
1. Reliance on Income-Only Approach. The Beacon Appraisal relied exclusively on a discounted cash flow analysis, without any consideration of the sales comparison approach. This singular reliance on the income approach is a significant methodological deficiency in the context of a luxury hotel appraisal where active comparable transaction data is readily available. The Appraisal Institute's Uniform Standards of Professional Appraisal Practice (USPAP) and the leading hotel valuation treatises consistently emphasize the importance of considering multiple approaches to value — particularly the sales comparison approach, which is widely regarded as the most reliable methodology for hotel properties in active transaction markets. By ignoring the sales comparison approach entirely, the Beacon Appraisal deprived its analysis of the most important market-based check on the reasonableness of its DCF-derived value conclusion.
During her deposition, Dr. Ramanathan stated that she considered but ultimately rejected the sales comparison approach because she deemed the available comparable transactions to be insufficiently comparable to the Property. PCG respectfully submits that this rationale is unpersuasive. Mr. Whitfield identified six comparable Gulf Coast luxury hotel transactions in his analysis, and the Florida Gulf Coast luxury hotel market has been one of the most active hotel transaction markets in the United States in recent years. The decision to exclude the sales comparison approach entirely appears to have been driven by the fact that comparable transaction data would have yielded a value conclusion materially below the Beacon Appraisal's DCF-derived figure.
2. Below-Market discount Rate. The Beacon Appraisal employed an 8.5% discount rate in its DCF analysis — a rate that is significantly below the market range for luxury full-service beachfront resorts on Florida's Gulf Coast. Published discount rate surveys from CBRE Hotels, Thackeray Consulting Group, and other authoritative sources consistently report discount rates in the range of 9.5% to 11.0% for properties of this type and quality. The Whitfield Appraisal's 10.75% discount rate falls squarely within this range. The Beacon Appraisal's 8.5% rate is 100 to 250 basis points below the market-accepted range, and this single assumption alone accounts for a substantial portion of the $33.5 million divergence between the two appraisals.
During her deposition, Dr. Ramanathan justified the lower discount rate by reference to the Property's "institutional quality" and "superior franchise affiliation." While PCG does not dispute that the Palmetto Grand is a high-quality property, these factors are already reflected in the Property's cash flow projections and do not warrant a discount rate below the established market range for luxury Gulf Coast hotels. The purpose of a discount rate is to reflect the risk inherent in future cash flow projections, and luxury beachfront resort properties — while desirable — are subject to meaningful risks including weather events, tourism cyclicality, franchise-renewal uncertainty, and capital expenditure requirements that justify discount rates within the published market range.
3. Below-Market Terminal Capitalization Rate. The Beacon Appraisal applied a terminal capitalization rate of 7.75%, which is similarly aggressive and unsupported by recent comparable sales evidence. Terminal capitalization rates for luxury Gulf Coast hotel transactions have generally ranged from 8.5% to 10.0% in recent years, reflecting the inherent risk of projecting value at the end of a multi-year holding period. A terminal capitalization rate of 7.75% implies an expectation of continued cap rate compression and strong value appreciation over the projection period — an assumption that is speculative at best, particularly given the interest-rate environment and the maturation of the current hotel-cycle recovery.
4. Unfounded Deferred Maintenance Adjustment. The Beacon Appraisal includes an upward value adjustment of $8,200,000 for alleged "deferred maintenance" items. This adjustment is both factually baseless and analytically improper, as discussed in detail in Section VI below. In brief, the Property underwent a comprehensive $24.3 million renovation in 2017–2019 and has been continuously maintained through PGV's operating budget since the renovation's completion. The $8.2 million figure represents speculative future capital expenditure items, not true deferred maintenance, and has no place in an appraisal of the Property's fair market value as of December 31, 2022.
5. Franchise Agreement Intangible Value. The Beacon Appraisal assigned additional value to the Aurelian franchise agreement as an intangible asset, on the theory that the franchise agreement was executed at "below-market" terms and therefore contributes incremental value above what the Property's cash flows would otherwise support. This adjustment is not standard practice in hotel real property appraisals. The Operating Agreement's Section 12.4 defines "Fair Market Value" as the value of the Joint Venture's real property and operating assets — it does not contemplate the separate valuation and addition of franchise agreement intangible value. Moreover, the franchise agreement's value is already captured in the Property's revenue and cash flow projections, which reflect the property operating under the Aurelian brand. To add a separate intangible-value premium on top of cash flows that already reflect the franchise affiliation is to double-count the franchise's benefit.
MSH's Demand Derivation. Based on the Beacon Appraisal's inflated value conclusion, MSH has derived a total demand of $70,000,000 as follows:
As discussed in Section V below, the bad-faith penalty component of $16,975,000 is entirely without merit.
D. The Linden Park Preliminary Indication
The jointly retained neutral appraiser, Thomas Carraway, MAI, FRICS, of Linden Park Advisory LLC, Miami, Florida, delivered a preliminary indication of value on July 14, 2023. Mr. Carraway concluded, based on his preliminary analysis, that the fair market value of 100% of PGV's assets as of December 31, 2022 falls within a range of $130,000,000 to $138,000,000, with a midpoint of approximately $134,000,000.
The Linden Park preliminary indication is highly significant for several reasons. First, the range is substantially closer to the Whitfield Appraisal ($118.0 million) than to the Beacon Appraisal ($151.5 million), corroborating PCG's position that the Beacon Appraisal is inflated. The Linden Park range begins at $130.0 million — only $12.0 million above the Whitfield figure, but $21.5 million below the Beacon figure. Even at the high end of the Linden Park range ($138.0 million), the distance to the Whitfield conclusion ($20.0 million) is closer than the distance from the Beacon conclusion at the low end of the range.
Second, the Linden Park preliminary indication has important implications for the application of OA Section 12.4(c). Under that provision, the final fair market value is determined by averaging the two appraisals that are closest in value among the three appraisals (the Whitfield Appraisal, the Beacon Appraisal, and the Linden Park final appraisal). The operative question is therefore which of the three appraisals the Linden Park final value will be closest to. This analysis proceeds as follows:
•  At a Linden Park final value of $130.0 million: The distance to Whitfield ($118.0M) is $12.0 million; the distance to Beacon ($151.5M) is $21.5 million. Whitfield and Linden Park are the two closest appraisals, yielding an average FMV of $124.0 million.
•  At a Linden Park final value of $134.0 million (midpoint): The distance to Whitfield is $16.0 million; the distance to Beacon is $17.5 million. Whitfield and Linden Park remain the two closest, yielding an average FMV of $126.0 million.
•  At a Linden Park final value of $134.75 million (crossover point): The distance to Whitfield ($16.75M) equals the distance to Beacon ($16.75M). This is the point at which the pairing switches from Whitfield/Linden Park to Linden Park/Beacon.
•  At a Linden Park final value of $138.0 million: The distance to Whitfield is $20.0 million; the distance to Beacon is $13.5 million. Linden Park and Beacon are now the two closest appraisals, yielding an average FMV of $144.75 million.
Thus, the operative FMV under OA Section 12.4(c) is uncertain within the Linden Park preliminary range, but falls somewhere between approximately $124.0 million (if Linden Park finalizes at $130.0 million) and approximately $144.75 million (if Linden Park finalizes at $138.0 million). This uncertainty creates meaningful litigation risk for both sides, as discussed further in Section VII below. PCG notes, however, that the midpoint of the Linden Park range ($134.0 million) falls below the crossover point ($134.75 million), meaning that if Mr. Carraway's final value falls at or near the midpoint of his preliminary range, the operative FMV would be the average of Whitfield and Linden Park — a figure in the range of $124.0 to $126.0 million — not the Whitfield/Beacon average, and certainly not the Beacon figure standing alone.
PCG submits that the Linden Park preliminary indication provides the most reliable, independent benchmark for a negotiated resolution. The neutral appraiser, retained by both parties, has no incentive to favor either side and has conducted his analysis without the adversarial dynamic that inevitably influences party-retained appraisals.
E. Implied Equity and Buyout Values at Various Asset Valuations
The following table presents the implied buyout price for MSH's 35% membership interest at various fair market value assumptions, calculated using the OA's buyout mechanics (net equity multiplied by 35%, plus the stipulated preferred return of $17,010,000):
As the table demonstrates, even under the most favorable assumptions for MSH (the Beacon Appraisal standing alone, without any bad-faith penalty), the buyout price would be $53,025,000 — still $16,975,000 less than MSH's total demand of $70,000,000. MSH's demand can only be reached by accepting the Beacon Appraisal at face value and imposing a bad-faith penalty — an outcome that is neither supported by the evidence nor likely on the merits.
V. PCG'S POSITION ON THE BAD-FAITH PENALTY CLAIM (OA SECTION 12.7)
A. The Contractual Standard
OA Section 12.7 provides, in relevant part:
"If the Arbitrator determines that the Manager exercised the Call Option in bad faith or with the intent to materially understate Fair Market Value, the Purchase Price shall include a penalty of up to twenty-five percent (25%) of the determined Fair Market Value of the Redeemed Interest, in addition to the Purchase Price otherwise determined under Section 12.4."
This provision was negotiated by the parties as a protective mechanism to ensure that the Manager would not abuse its position by deliberately understating value in connection with a call-option exercise. The provision is, by its express terms, a penalty that requires proof of "bad faith" or "intent to materially understate Fair Market Value." These are demanding standards that require proof of subjective dishonest purpose, not mere disagreement over valuation methodology or conclusions.
Under Florida law, "bad faith" in the contractual context requires more than negligence, error, or honest disagreement — it requires proof of a dishonest purpose, moral obliquity, or conscious wrongdoing. See, e.g., Ernie Haire Ford, Inc. v. Ford Motor Co., 260 F.3d 1285, 1291 (11th Cir. 2001) (applying Florida law); Ins. Concepts & Design, Inc. v. Healthplan Servs., Inc., 785 So. 2d 1232, 1234 (Fla. 4th DCA 2001). The intent standard is equally demanding: MSH must show that PCG intended to materially understate value — that is, that PCG directed or influenced the Whitfield Appraisal to produce a value it knew to be materially below the Property's true worth. Mere disagreement between two professionally prepared appraisals — a routine occurrence in complex real estate valuation — does not remotely satisfy this standard.
B. MSH's Claim Is Without Merit
MSH's bad-faith penalty claim fails on every element. The undisputed facts demonstrate the opposite of bad faith:
PCG retained an independent, MAI-certified appraiser. The Operating Agreement contemplates that each party will retain its own appraiser to prepare an independent valuation. PCG did exactly that. Gerald K. Whitfield, MAI, is a highly experienced, independent hotel valuation professional with no prior relationship with PCG or any financial interest in the outcome of the appraisal. Mr. Whitfield was retained on an independent basis and was given no direction, instruction, or target valuation by PCG or its counsel. These facts were confirmed in Mr. Whitfield's deposition testimony and are corroborated by the investment-committee memoranda produced under Arbitrator Chen's November 30 order.
The Whitfield Appraisal employed standard, recognized methodologies. Far from reflecting a results-oriented analysis, the Whitfield Appraisal employed both the income capitalization approach and the sales comparison approach — the two methodologies most commonly used and widely accepted for hotel valuations. The capitalization rates, discount rates, and comparable transaction adjustments used in the Whitfield Appraisal are all within the market-standard ranges published by authoritative industry sources. A reasonable, good-faith appraiser applying accepted methodologies to the available data could readily arrive at a value conclusion of $118.0 million for this Property.
Appraisal divergence does not establish bad faith. That the Whitfield Appraisal ($118.0 million) diverges from the Beacon Appraisal ($151.5 million) by approximately 28.4% does not, standing alone, establish bad faith or intent to understate. To the contrary, the Operating Agreement expressly anticipates the possibility of significant appraisal divergence and addresses it through the third-appraiser mechanism in Section 12.4(c), which is triggered when the two party-retained appraisals diverge by more than 10%. The drafters of the Operating Agreement understood that reasonable appraisers can and will reach different conclusions when valuing complex real estate assets, and they designed the OA's procedures to resolve such disagreements through an orderly averaging mechanism — not through accusations of bad faith.
A 28.4% divergence, while exceeding the 10% threshold, is not at all unusual in luxury hospitality real estate, where differences in methodology (income-only versus blended approaches), assumptions (Discount rates, cap rates, growth rates), and judgment calls (comparable selection, adjustment factors) can produce wide ranges of value. This is particularly true for unique, high-value beachfront resort properties like the Palmetto Grand, where there is inherently limited transactional data and where small differences in key assumptions can produce large differences in value conclusions.
PCG had no motive to understate value. MSH's bad-faith theory is further undermined by the absence of any rational economic motive for PCG to understate the Property's value. PCG holds a 65% interest in PGV. A lower valuation of PGV's assets means a lower implied value for PCG's own 65% interest. While a lower valuation would reduce the buyout price PCG must pay for MSH's 35%, it would simultaneously reduce the implied value of PCG's retained 65% interest by an even greater absolute amount. PCG's interest is in an accurate valuation — one that reflects the true fair market value of the assets it will continue to own after the buyout.
The produced documents confirm good faith. The investment-committee memoranda produced under Arbitrator Chen's November 30 order confirm that PCG's decision to exercise the call option was made after careful deliberation by PCG's investment committee, including analysis of the strategic merits of sole ownership, the market environment, and the anticipated valuation process. The documents contain no evidence of any instruction to the Whitfield firm regarding a target valuation, any attempt to influence the appraisal methodology, or any other conduct remotely suggestive of bad faith.
C. MSH's Penalty Calculation Is Independently Flawed
Even setting aside the fundamental lack of merit of the bad-faith claim, MSH's penalty calculation is independently flawed on its own terms. MSH demands $16,975,000 as a bad-faith penalty, which it derives as follows: MSH's gross claim (35% of Beacon-based equity of $102.9 million = $36,015,000 plus preferred return of $17,010,000 = $53,025,000) multiplied by approximately 32% = $16,975,000. This 32% factor exceeds the contractual cap.
OA Section 12.7 expressly caps any bad-faith penalty at "up to twenty-five percent (25%) of the determined Fair Market Value of the Redeemed Interest." Regardless of how one calculates the "determined Fair Market Value of the Redeemed Interest," MSH's claimed 32% exceeds the contractual maximum of 25%. MSH has provided no explanation or justification for this overreach. Even if the arbitrator were to find bad faith — which PCG firmly denies would be warranted — any penalty would be capped at 25% of the redeemed interest's fair market value as finally determined, and it would be within the arbitrator's discretion to award a penalty at any amount up to that cap (including zero).
The bad-faith penalty claim is, in PCG's view, a litigation tactic designed to inflate the settlement value of MSH's position. It has no factual or legal basis and should be given no weight in the mediation analysis.
VI. PCG'S POSITION ON THE DEFERRED MAINTENANCE CLAIM
MSH contends, through the Beacon Appraisal and in its arbitration filings, that PCG as Manager of PGV breached OA Section 8.3 by failing to fund approximately $8,200,000 in deferred maintenance items at the Property. MSH further asserts that this alleged deferred maintenance should be added as an upward adjustment to the Property's appraised value (on the theory that the value suppression caused by deferred maintenance should be reversed to determine the Property's "true" fair market value). PCG rejects both the factual basis and the analytical framework of this claim.
The Property underwent a comprehensive $24.3 million renovation in 2017–2019. The Joint Venture invested $24,300,000 in capital improvements to the Property within the first two years of ownership. This renovation program touched virtually every aspect of the Property, including a complete guest-room renovation, expansion and redesign of the spa, renovation of the food and beverage outlets, modernization of the meeting and event spaces, enhancement of beachfront amenities, and upgrades to building systems. The renovation was designed to bring the Property to full compliance with Aurelian Hotels & Resorts brand standards and to position the Property as a market-leading luxury resort on Clearwater Beach. By any objective measure, the renovation achieved both goals.
Ongoing maintenance has been funded through PGV's operating budget. Since the completion of the renovation program, PCG as Manager has funded ongoing property maintenance and replacement reserves through PGV's operating budget, in accordance with the annual budgets approved by the members and the requirements of the Aurelian franchise agreement. PGV's capital expenditure history since 2019 reflects consistent, responsible investment in the Property's physical condition, including routine replacement of FF&E, ongoing building-systems maintenance, and periodic upgrades to guest-facing amenities. There is no factual basis for the claim that maintenance has been deferred.
The $8.2 million figure includes speculative future capital expenditures, not true deferred maintenance. A careful review of the Beacon Appraisal's deferred-maintenance schedule reveals that the $8,200,000 figure is not composed of items that have been neglected or deferred in any meaningful sense. Rather, the schedule includes speculative future capital expenditure items — such as a projected future HVAC replacement, a hypothetical room-renovation refresh that would not be due for several additional years under industry lifecycle standards, and an anticipated exterior facade remediation for which no current deficiency has been identified. These are prospective capital needs that may or may not materialize, not deferred maintenance items reflecting current physical deficiencies.
The Property's operating performance confirms proper maintenance. The Palmetto Grand achieved a RevPAR of $289 and hotel-level EBITDA of $19,700,000 in 2022. These metrics are consistent with top-tier performance for luxury beachfront resort hotels in the Florida Gulf Coast market and would not be achievable at a property suffering from $8.2 million in deferred maintenance. Guests, group clients, and the Aurelian Hotels & Resorts brand quality-assurance program would not tolerate — and the Property could not sustain its premium rate position in the presence of — the level of physical deterioration implied by MSH's deferred-maintenance allegations.
OA Section 8.3 requires "first-class condition" — a standard that the Property meets. The Operating Agreement requires the Manager to "maintain the property in first-class condition consistent with the standards of comparable luxury resort hotels in the market area." The Property's revenue performance, guest satisfaction scores, and Aurelian brand-compliance reports all confirm that the Property meets this standard. The burden of proving a breach of OA Section 8.3 rests with MSH, and MSH has produced no evidence — other than the Beacon Appraisal's speculative schedule — to support a finding that the Property is not maintained in first-class condition.
An appraisal adjustment for deferred maintenance is analytically improper. Even if there were legitimate deferred-maintenance items at the Property (which PCG denies), incorporating such items as an upward adjustment to fair market value in the appraisal context is analytically improper. Fair market value, as defined in the Operating Agreement and under generally accepted appraisal standards, is the price at which the property would change hands between a willing buyer and a willing seller, each having reasonable knowledge of all relevant facts. A willing buyer would observe the property's current physical condition and adjust its offer accordingly; it would not add a deferred-maintenance premium on top of a stabilized-income valuation. If MSH believes that PCG as Manager breached OA Section 8.3, the appropriate remedy would be a separate claim for breach of the Operating Agreement, with damages measured by MSH's actual losses — not a $8.2 million adjustment to the appraised fair market value used to determine the buyout price.
VII. SETTLEMENT ANALYSIS AND PCG'S NEGOTIATING POSITION
A. Risks and Costs of Continued Arbitration
The arbitration is proceeding before the Honorable Margaret Liu Chen (Ret.) at JAMS in Jacksonville, Florida. If the parties are unable to resolve this matter through mediation, the dispute will proceed to a merits hearing at which the arbitrator will be required to (i) determine the final fair market value of PGV's assets under OA Section 12.4(c) and (ii) adjudicate MSH's bad-faith penalty claim under OA Section 12.7.
The Section 12.4(c) outcome is uncertain. As discussed in Section IV.D above, the operative fair market value under the OA's three-appraiser mechanism depends on where the Linden Park final appraisal falls relative to the Whitfield and Beacon Appraisals. The Linden Park preliminary range of $130.0 to $138.0 million spans the critical crossover point of approximately $134.75 million, creating genuine outcome uncertainty. If Linden Park finalizes below $134.75 million, the operative FMV is the average of Whitfield and Linden Park (yielding an FMV in the range of $124.0 to $126.4 million and a buyout price of approximately $43.4 to $44.2 million). If Linden Park finalizes above $134.75 million, the operative FMV is the average of Linden Park and Beacon (yielding an FMV in the range of $136.4 to $144.75 million and a buyout price of approximately $47.7 to $50.7 million). This is a wide range of potential outcomes, and neither party can predict with certainty where the Linden Park final figure will land.
The bad-faith penalty introduces binary risk. Although PCG firmly believes the bad-faith penalty claim lacks merit, the claim introduces an element of binary outcome risk into the arbitration. If the arbitrator were to find bad faith — even at a low probability — the penalty could add up to 25% of MSH's redeemed interest value to the buyout price. Conversely, if the arbitrator rejects the bad-faith claim (as PCG expects), MSH loses the entire $16.975 million component of its demand. Both parties therefore face meaningful risk from the disposition of this claim.
Costs of continued proceedings are substantial. PCG's legal and expert fees in this matter to date have been significant, and the costs of proceeding through a merits hearing — including preparation and examination of expert witnesses, briefing on the Section 12.4(c) and Section 12.7 issues, and the hearing itself — would add materially to both parties' expenditures. PCG understands that MSH's costs are similarly substantial. These costs reduce the net recovery for MSH and the net expenditure savings for PCG available through a negotiated resolution, making settlement economically rational for both parties.
B. PCG's Settlement Posture
PCG approaches this mediation with a genuine willingness to negotiate a fair resolution. PCG acknowledges that the Whitfield Appraisal may represent the lower end of a reasonable valuation range and that the tendered price of $41.3 million may not fully reflect the Property's fair market value. Accordingly, PCG is prepared to negotiate meaningfully above the tendered price.
PCG's view of a reasonable resolution is anchored around the equity analysis derived from the midpoint of the Linden Park Advisory preliminary indication of value. The neutral appraiser's midpoint of $134.0 million represents the most reliable, unbiased estimate of the Property's fair market value available to the parties. Using this figure as a reference point:
•  Gross Asset Value (Linden Park midpoint): $134,000,000
•  Less Outstanding GANB Debt: ($48,600,000)
•  Joint Venture Net Equity: $85,400,000
•  MSH's 35% Share: $29,890,000
•  Plus Stipulated Preferred Return: $17,010,000
•  Implied Buyout Price at Linden Park Midpoint: $46,900,000
PCG is prepared to negotiate a modest premium above $46,900,000 to reflect the value of litigation-risk avoidance, the benefit of prompt closing certainty, and a recognition that the Linden Park final value could conceivably fall above the crossover point. The precise amount of any such premium is a subject for negotiation in the mediation, but PCG is approaching the mediation constructively and is prepared to engage in good faith on the specific dollar figure.
PCG's settlement posture is, however, subject to the following firm parameters:
No bad-faith penalty or concession. PCG will not entertain any settlement that incorporates a bad-faith penalty payment, characterizes any portion of the settlement as a bad-faith penalty, or includes any acknowledgment or concession by PCG that it acted in bad faith in exercising the call option or engaging the Whitfield firm. This is a non-negotiable point. PCG exercised its contractual rights in good faith and will not agree to any settlement that suggests otherwise.
Mutual release. Any settlement must include a comprehensive mutual release of all claims, counterclaims, and potential claims arising out of or relating to the Joint Venture, the Operating Agreement, the call option exercise, and the arbitration proceedings, including but not limited to MSH's bad-faith penalty claim, MSH's deferred-maintenance allegations, and PCG's counterclaim for declaratory relief.
Dismissal with prejudice. The settlement must provide for the dismissal with prejudice of JAMS Reference No. 1440032871 and all claims and counterclaims asserted therein.
Each party bears its own costs. Each party shall bear its own attorneys' fees, expert fees, and costs incurred in connection with the arbitration and this mediation.
C. Benefits of Resolution
A negotiated resolution at this mediation session would produce significant benefits for both parties:
Avoidance of prolonged proceedings and additional costs. A settlement would eliminate the substantial additional legal, expert, and arbitration costs that both parties would incur in proceeding through a merits hearing, post-hearing briefing, and potential award-confirmation proceedings. These savings are substantial and accrue to both sides.
Prompt closing certainty. A settlement would allow the parties to proceed promptly to closing the buyout transaction, providing MSH with a certain, substantial cash payment and providing PCG with sole ownership of PGV and full control over the asset. Under the current arbitration schedule, a final award is unlikely before mid-to-late 2024, and post-award proceedings could further delay closing.
Removal of business uncertainty. The pendency of this dispute creates operational uncertainty for PGV, including uncertainty affecting the Aurelian franchise relationship, capital planning, refinancing discussions with GANB (the existing loan matures in August 2027), and PCG's ability to implement its long-term strategic plan for the Property. A prompt resolution would remove this uncertainty and allow PCG to operate the Property on a fully stabilized basis going forward.
Certain, substantial payment for MSH. A settlement in the range discussed above would provide MSH with a total payment well in excess of its initial capital contributions of $18,505,000, reflecting both a return of capital and a substantial return on capital. The payment would also include the full stipulated preferred return of $17,010,000. MSH would receive this payment with certainty, without the risk that the Linden Park final figure falls below $134.75 million and yields an operative FMV averaging only approximately $124.0 to $126.0 million, and without the risk of an adverse ruling on the bad-faith penalty claim that would eliminate MSH's largest single demand component.
Full ownership for PCG. PCG would obtain 100% ownership of PGV and complete operational and strategic control over The Palmetto Grand Resort & Spa, enabling PCG to pursue refinancing, capital improvements, portfolio optimization, and other value-creation strategies without the constraints of the Joint Venture structure.
PCG has the financial capacity to fund a reasonable settlement. PCG is prepared to fund a settlement through a combination of existing corporate liquidity and available draws under PGV's revolving credit facility with GANB. PCG's ability to close promptly following agreement on terms is not in question.
VIII. CONFIDENTIALITY
This Confidential Mediation Position Statement is submitted solely for the purpose of facilitating the mediation session scheduled for February 12, 2024, before Mediator Raymond Alcazar. This statement is confidential and is intended exclusively for Mr. Alcazar's review and use in connection with the mediation.
This statement is not to be disclosed to Meridian Shores Hospitality LLC, its principals, or its counsel, Hargrove, Dunlap & Castillo LLP, without the prior written consent of Pellegrino Capital Group LLC.
All statements, representations, positions, and analyses contained herein are made for settlement purposes only and are inadmissible in the pending JAMS arbitration (Reference No. 1440032871), any related judicial proceeding, or any other proceeding, pursuant to Florida Statutes § 44.405 (mediation confidentiality and privilege), JAMS Mediation Rules, and any applicable rules of evidence regarding the inadmissibility of settlement communications. Nothing contained in this statement shall be construed as an admission of fact, an admission of liability, a waiver of any claim or defense, or a concession on any issue of law or fact.
PCG expressly reserves all rights, claims, counterclaims, defenses, and positions in the pending arbitration and in any other proceeding.
IX. CONCLUSION
Pellegrino Capital Group LLC is committed to resolving this dispute through mediation on fair and reasonable terms that reflect the true value of the Joint Venture's assets and the Operating Agreement's express buyout mechanics.
PCG exercised the call option in good faith, in strict compliance with the Operating Agreement, and based upon an independent, professionally prepared MAI appraisal. PCG is willing to negotiate a buyout price meaningfully above its tendered figure of $41.3 million and to anchor those negotiations around the neutral appraiser's preliminary findings — the most reliable and unbiased indication of value available to the parties.
MSH's demand of $70,000,000 is not a realistic starting point for resolution. It is built upon three inflated components: (i) the Beacon Appraisal's aggressive $151.5 million valuation, which is methodologically flawed and inflated by an unfounded $8.2 million deferred-maintenance adjustment and an improper franchise-agreement intangible premium; (ii) a baseless bad-faith penalty of $16,975,000 that has no factual or legal foundation and exceeds the OA's contractual cap; and (iii) an analytical framework that ignores the neutral appraiser's preliminary indication of value, which strongly favors a result much closer to the Whitfield Appraisal than to the Beacon Appraisal.
A resolution anchored around the Linden Park midpoint analysis — with a reasonable premium for litigation-risk avoidance and closing certainty — would fairly compensate MSH for the value of its 35% membership interest, including its full accrued preferred return, while ending this dispute promptly and conclusively. Such a resolution serves the legitimate interests of both parties.
PCG respectfully requests Mr. Alcazar's assistance in facilitating a constructive dialogue toward a commercially reasonable resolution at the February 12 session.
RESPECTFULLY SUBMITTED
CALDERWOOD & HARKNESS LLP
By: ________
Francesca Morano, Partner
Samuel Eklund, Partner
Simone Laroche, Associate
Jeffrey Park, Associate
801 Brickell Avenue, Suite 2800 Miami, FL 33131 Telephone: (305) 555-7200 Facsimile: (305) 555-7201 fmorano@calderwoodharkness.com seklund@calderwoodharkness.com slaroche@