SCHEDULE A — FUNDED PROPERTY
Attached to and forming part of the Caldwell 2023 Realty GRAT Trust Agreement dated May 1, 2023
This Schedule A is incorporated by reference into the Trust Agreement of the Caldwell 2023 Realty GRAT (the "Trust"), executed as of May 1, 2023, by Jonathan R. Caldwell, as Grantor and Trustee. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Trust Agreement. This Schedule A describes the property contributed by the Grantor to the Trust as of the date of execution and sets forth the valuation of such property for federal gift tax purposes.
Section 1: Description of Contributed Property
Nature of Property. The property contributed to the Trust consists of a membership interest in a New York limited liability company, as more particularly described below.
Entity Details. The entity in which the contributed membership interest is held is described as follows:
Full Legal Name: Stonecrest Realty Holdings LLC
Entity Type: Limited Liability Company, organized and existing under the laws of the State of New York, formed pursuant to the New York Limited Liability Company Law
Principal Office Address: 330 Madison Avenue, Suite 2401, New York, New York 10017
Chief Operating Officer: Robert M. Sinclair
EIN: [On file with the Trustee]
Stonecrest Realty Holdings LLC (hereinafter "Stonecrest" or the "Company") is a real estate holding company that owns and operates a diversified portfolio of eleven (11) commercial, residential, and mixed-use real properties located in the States of New York, New Jersey, and Connecticut, as more particularly described in Section 3 of this Schedule A.
Interest Contributed. As of the date of contribution, the Grantor has contributed to the Trust an approximate fifty-nine and seven-tenths percent (59.7%) membership interest in Stonecrest Realty Holdings LLC (the "Contributed Interest"). Immediately prior to the contribution described herein, the Grantor, Jonathan R. Caldwell, held a one hundred percent (100%) membership interest in Stonecrest Realty Holdings LLC, constituting the sole membership interest in the Company. Following the contribution of the Contributed Interest to the Trust, the ownership of the Company is as follows:
(a) The Grantor, Jonathan R. Caldwell, individually retains an approximate forty and three-tenths percent (40.3%) membership interest in Stonecrest Realty Holdings LLC; and
(b) The Trust, the Caldwell 2023 Realty GRAT, holds the remaining approximate fifty-nine and seven-tenths percent (59.7%) membership interest in Stonecrest Realty Holdings LLC.
The foregoing percentages are approximate and are subject to final adjustment based upon the conclusions of the qualified independent appraisal described in Section 2 below.
Date of Contribution. The Contributed Interest was transferred to the Trust effective as of May 1, 2023.
Manner of Transfer. The transfer of the Contributed Interest was accomplished by means of an Assignment of Membership Interest, specifically the Assignment of Stonecrest Realty Holdings LLC Membership Interest to GRAT B, dated May 1, 2023 (the "Assignment"), executed by Jonathan R. Caldwell as assignor and Jonathan R. Caldwell, as Trustee of the Caldwell 2023 Realty GRAT, as assignee. A copy of the Assignment is maintained in the records of the Trust and in the books and records of Stonecrest Realty Holdings LLC. The Assignment reflects the admission of the Trust as a member of the Company and the corresponding amendment to the Company's operating agreement to reflect the revised membership interests.
Section 2: Valuation of Contributed Interest
2.1 Total Entity Value
The aggregate fair market value of all assets held by Stonecrest Realty Holdings LLC, as of the date of contribution (May 1, 2023), is estimated at One Hundred Thirty-Four Million Dollars ($134,000,000), based upon the appraised fair market values of the eleven (11) underlying real properties set forth in Section 3 below. This aggregate valuation reflects the sum of the individual property-level appraisals and takes into account all entity-level assets and liabilities, including cash on hand, receivables, and non-recourse mortgage indebtedness encumbering certain of the underlying properties.
The valuation of the Company and its underlying real property assets is supported by independent appraisal reports prepared by Ashford Valuation Group LLC, a nationally recognized real estate and business valuation firm. The lead appraiser and signatory on the reports is Dr. Leonard K. Whitfield, ASA, Managing Partner, whose professional credentials include designation as an Accredited Senior Appraiser by the American Society of Appraisers. The business address of Ashford Valuation Group LLC is 1120 Avenue of the Americas, Suite 3500, New York, New York 10036. The appraisals were prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP) and satisfy the requirements for a qualified appraisal under Section 170(f)(11)(E) of the Internal Revenue Code and Treasury Regulations § 1.170A-17.
2.2 Pre-discount Fair Market Value of Contributed Interest
The pre-discount fair market value of the Contributed Interest is calculated as the product of the Grantor's contributed percentage membership interest and the total entity value, as follows:
59.7% × $134,000,000 = approximately Eighty Million Dollars ($80,000,000) (the "Pre-discount FMV")
The Pre-discount FMV represents the proportionate share of the Company's aggregate net asset value attributable to the 59.7% membership interest contributed to the Trust, without regard to any valuation adjustments for lack of marketability or lack of control.
2.3 Valuation discounts Applied
Based upon the analysis and conclusions set forth in the independent appraisal report prepared by Ashford Valuation Group LLC, a combined discount of twenty-five percent (25%) has been applied to the Contributed Interest to account for the following factors:
(a) discount for Lack of Marketability. The membership interest in Stonecrest Realty Holdings LLC is not publicly traded, and there is no established secondary market for interests in the Company. The operating agreement of the Company contains restrictions on transfer, including rights of first refusal and limitations on assignability, which further reduce the marketability of the Contributed Interest.
(b) discount for Lack of Control. Although the Contributed Interest constitutes a majority membership interest in the Company, the appraiser has determined that certain operational and governance restrictions contained in the operating agreement of the Company, together with the bifurcation of ownership between the Grantor (individually) and the Trust, reduce the degree of effective control associated with the Contributed Interest relative to a 100% ownership position. The appraiser considered empirical data from restricted stock studies, pre-IPO studies, and comparable transaction analyses in arriving at the combined discount.
The combined discount of 25% has been applied to the Pre-discount FMV of the Contributed Interest to arrive at the post-discount fair market value for federal gift tax purposes, calculated as follows:
Post-discount Fair Market Value (for gift tax purposes):
$80,000,000 × (1 – 25%) = Sixty Million Dollars ($60,000,000)
The Post-discount Fair Market Value of $60,000,000 represents the value of the Contributed Interest for purposes of determining the taxable gift, if any, arising from the funding of the Trust and the calculation of the annuity payments required under the Trust Agreement.
2.4 Section 7520 Rate and Annuity Calculation
The applicable rate under Section 7520 of the Internal Revenue Code for the month of funding (April 2023, as elected by the Grantor in accordance with Treasury Regulations § 25.7520-2(b)) is five percent (5.0%).
Based on the Pre-discount FMV of the Contributed Interest of $80,000,000, the annuity payment amount required under the Trust Agreement has been calculated to produce a zeroed-out gift under Section 2702 of the Internal Revenue Code. The annuity payment is a fixed amount of Twenty-Nine Million Three Hundred Seventy-Five Thousand Eight Hundred Fifty-Nine Dollars ($29,375,859) per year, payable for a term of three (3) years commencing on the date of funding. The aggregate annuity payments over the three-year term, discounted at the applicable § 7520 rate, are intended to equal the full Pre-discount FMV of the Contributed Interest, such that the remainder interest passing to the remainder beneficiary upon expiration of the annuity term has a present value of zero (a "zeroed-out" GRAT) for federal gift tax purposes.
The annuity payments shall be made in accordance with the terms and conditions set forth in the Trust Agreement, including without limitation the provisions governing the timing, source, and form of annuity payments and the substitution of assets of equivalent value.
Section 3: Schedule of Underlying Properties Held by Stonecrest Realty Holdings LLC
The following table sets forth the eleven (11) properties held by Stonecrest Realty Holdings LLC as of the date of contribution (May 1, 2023), together with the property type, location, and estimated fair market value of each property as determined by the independent appraisals prepared by Ashford Valuation Group LLC. The aggregate estimated fair market value of all properties held by the Company is One Hundred Thirty-Four Million Dollars ($134,000,000).
The properties are located across three states — New York, New Jersey, and Connecticut — and encompass a diversified mix of commercial, residential, mixed-use, industrial, and undeveloped real property. All mortgages on the properties held by Stonecrest Realty Holdings LLC are held at the entity level and are non-recourse to the Grantor in his individual capacity. The foregoing estimated fair market values are as of the date of contribution and are based upon the individual property appraisals included in the comprehensive valuation report prepared by Ashford Valuation Group LLC.
Section 4: Summary of Contributed Interest
The following table provides a summary recapitulation of the key terms and values associated with the Contributed Interest described in this Schedule A:
The Grantor acknowledges that the remainder beneficiary of the Trust, upon expiration of the three-year annuity term (or upon the earlier termination of the Trust in accordance with its terms), is the Caldwell Family Dynasty Trust, as designated in the Trust Agreement. The Grantor further acknowledges that the zeroed-out structure of the annuity is intended to eliminate, or reduce to the greatest extent practicable, the taxable gift arising from the creation and funding of the Trust.
Section 5: Representations and Acknowledgments
The Grantor, Jonathan R. Caldwell, hereby makes the following representations and acknowledgments with respect to the Contributed Interest described in this Schedule A, each of which is true, correct, and complete as of the date of contribution:
1. Sole Ownership. The Grantor represents and warrants that, as of the date of contribution, he is the sole member and one hundred percent (100%) owner of Stonecrest Realty Holdings LLC. No other person or entity holds, or has any right to acquire, any membership interest, economic interest, or other equity interest in the Company, except for the interest transferred to the Trust as described herein.
2. Free and Clear Title. The Contributed Interest, constituting an approximate 59.7% membership interest in Stonecrest Realty Holdings LLC, is free and clear of all liens, pledges, encumbrances, security interests, options, charges, claims, and restrictions of any kind or nature whatsoever, other than entity-level non-recourse mortgage indebtedness on the underlying properties held by the Company and the transfer restrictions contained in the Company's operating agreement. No creditor of the Grantor holds any lien or security interest in the Contributed Interest, and no judgment, order, or decree of any court or governmental authority restricts the Grantor's ability to transfer the Contributed Interest to the Trust.
3. Due Authorization. The Grantor represents and warrants that the transfer of the Contributed Interest to the Trust has been duly authorized under the operating agreement of Stonecrest Realty Holdings LLC. Because the Grantor is the sole member of the Company as of the date immediately prior to the contribution, no consent of any other member or third party is required to effect the transfer. The Grantor, acting in his capacity as the sole member, has duly adopted all resolutions and taken all actions necessary to authorize and approve the transfer and to amend the Company's operating agreement to reflect the admission of the Trust as a member.
4. Qualified Appraisal. The valuation of the Contributed Interest set forth in Section 2 of this Schedule A is based upon appraisal reports prepared by Ashford Valuation Group LLC, a qualified independent appraiser within the meaning of Section 170(f)(11)(E)(ii) of the Internal Revenue Code and Treasury Regulations § 1.170A-17(b). The appraisals were performed by Dr. Leonard K. Whitfield, ASA, Managing Partner, and were prepared in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP) and all applicable IRS requirements for qualified appraisals. The Grantor has received and reviewed the appraisal reports and believes the valuations set forth therein to be reasonable and well-supported.
5. No Undisclosed Liabilities. To the best of the Grantor's knowledge, Stonecrest Realty Holdings LLC has no material liabilities, whether actual or contingent, other than (a) the entity-level non-recourse mortgage indebtedness encumbering certain of the underlying properties, (b) ordinary course trade payables and operating expenses, and (c) any liabilities disclosed in the financial statements and records of the Company made available to the appraiser.
6. Tax Reporting. The Grantor acknowledges his obligation to report the transfer of the Contributed Interest on a timely filed federal gift tax return (IRS Form 709) for the 2023 calendar year, and to attach thereto a copy of the qualified appraisal summary (IRS Form 8283 or as otherwise required) and such other documentation as may be required by the Internal Revenue Service.
Signature block
IN WITNESS WHEREOF, the undersigned has executed this Schedule A as of the date first set forth above.
GRANTOR:
________________________________________
Jonathan R. Caldwell
Date: May 1, 2023
TRUSTEE:
________________________________________
Jonathan R. Caldwell, as Trustee of the Caldwell 2023 Realty GRAT
Date: May 1, 2023
This Schedule A constitutes an integral part of the Caldwell 2023 Realty GRAT Trust Agreement dated May 1, 2023. In the event of any conflict between the provisions of this Schedule A and the Trust Agreement, the Trust Agreement shall control.
| No. | Property Name / Address | Property Type | Location | Estimated FMV |
| 1 | 440 West Broadway | Mixed-use retail/residential | New York, NY 10012 | $28,000,000 |
| 2 | 15–21 Harrison Street | Luxury residential condominium (6 units) | New York, NY 10013 | $19,500,000 |
| 3 | Stonecrest Office Park I | Class A office | Paramus, NJ 07652 | $22,000,000 |
| 4 | Stonecrest Office Park II | Class A office | Paramus, NJ 07652 | $18,500,000 |
| 5 | The Ridgeline at Stamford | Multi-family residential (120 units) | Stamford, CT 06901 | $16,000,000 |
| 6 | 88 Mercer Street | Retail | New York, NY 10012 | $11,500,000 |
| 7 | 200 West 14th Street | Office/loft conversion | New York, NY 10011 | $8,500,000 |
| 8 | 765 Morris Avenue | Industrial warehouse | Elizabeth, NJ 07208 | $4,200,000 |
| 9 | 12 Elm Court | Single-family (investment property) | Rye, NY 10580 | $2,800,000 |
| 10 | 44 Prospect Lane | Single-family (investment property) | Westport, CT 06880 | $1,800,000 |
| 11 | 9 Birch Hill Road | Vacant land (approximately 3.2 acres) | Bedford, NY 10506 | $1,200,000 |
| TOTAL | $134,000,000 | |||
| Item | Value | |||
| Entity | Stonecrest Realty Holdings LLC (New York LLC) | |||
| Membership Interest Contributed | Approximately 59.7% | |||
| Total Entity Value (11 properties) | $134,000,000 | |||
| Pre-discount FMV of Contributed Interest | $80,000,000 | |||
| Combined discount (lack of marketability / lack of control) | 25% | |||
| Post-discount FMV (gift tax purposes) | $60,000,000 | |||
| Date of Contribution | May 1, 2023 | |||
| Appraiser | Ashford Valuation Group LLC | |||
| § 7520 Rate (April 2023) | 5.0% | |||
| Annuity Payment | $29,375,859/year for 3 years | |||
| Remainder Beneficiary | Caldwell Family Dynasty Trust |