LOAN AGREEMENT
$240,000,000 Fixed Rate Mortgage Loan
among
FAIRWATER SUN BELT I LLC, FAIRWATER SUN BELT II LLC, FAIRWATER SUN BELT III LLC, FAIRWATER SUN BELT IV LLC, FAIRWATER SUN BELT V LLC, FAIRWATER SUN BELT VI LLC, FAIRWATER SUN BELT VII LLC, FAIRWATER SUN BELT VIII LLC, FAIRWATER SUN BELT IX LLC, FAIRWATER SUN BELT X LLC, FAIRWATER SUN BELT XI LLC, FAIRWATER SUN BELT XII LLC, FAIRWATER SUN BELT XIII LLC, and FAIRWATER SUN BELT XIV LLC,
each a Delaware limited liability company,
collectively, as Co-Borrowers,
and
CLARENDON METROPOLITAN INSURANCE COMPANY,
a New York domiciled insurance company,
as Lender
Dated as of __, 2025
Prepared by Lisa Morrow Calderwood & Harkness LLP 425 Park Avenue New York, NY 10022 Matter No. 1036-00001
TABLE OF CONTENTS
Right-click to update Table of Contents
LOAN AGREEMENT
This LOAN AGREEMENT (this "Agreement") is made and entered into as of __, 2025 (the "Closing Date"), by and among:
FAIRWATER SUN BELT I LLC, a Delaware limited liability company ("Co-Borrower I");
FAIRWATER SUN BELT II LLC, a Delaware limited liability company ("Co-Borrower II");
FAIRWATER SUN BELT III LLC, a Delaware limited liability company ("Co-Borrower III");
FAIRWATER SUN BELT IV LLC, a Delaware limited liability company ("Co-Borrower IV");
FAIRWATER SUN BELT V LLC, a Delaware limited liability company ("Co-Borrower V");
FAIRWATER SUN BELT VI LLC, a Delaware limited liability company ("Co-Borrower VI");
FAIRWATER SUN BELT VII LLC, a Delaware limited liability company ("Co-Borrower VII");
FAIRWATER SUN BELT VIII LLC, a Delaware limited liability company ("Co-Borrower VIII");
FAIRWATER SUN BELT IX LLC, a Delaware limited liability company ("Co-Borrower IX");
FAIRWATER SUN BELT X LLC, a Delaware limited liability company ("Co-Borrower X");
FAIRWATER SUN BELT XI LLC, a Delaware limited liability company ("Co-Borrower XI");
FAIRWATER SUN BELT XII LLC, a Delaware limited liability company ("Co-Borrower XII");
FAIRWATER SUN BELT XIII LLC, a Delaware limited liability company ("Co-Borrower XIII"); and
FAIRWATER SUN BELT XIV LLC, a Delaware limited liability company ("Co-Borrower XIV" and, together with Co-Borrower I through Co-Borrower XIII, collectively, the "Co-Borrowers" and each individually a "Co-Borrower");
and
CLARENDON METROPOLITAN INSURANCE COMPANY, a New York domiciled insurance company ("Lender").
RECITALS
WHEREAS, each of Co-Borrower I, Co-Borrower II, Co-Borrower III, Co-Borrower IV, Co-Borrower V, Co-Borrower VI, Co-Borrower VII, Co-Borrower VIII, Co-Borrower IX, Co-Borrower X, Co-Borrower XI, Co-Borrower XII, Co-Borrower XIII, and Co-Borrower XIV is a limited liability company duly organized and validly existing under the laws of the State of Delaware, and each Co-Borrower was formed and is maintained as a single-purpose entity in accordance with the covenants and requirements set forth herein;
WHEREAS, each Co-Borrower is the fee owner of one of the multifamily residential properties located in the States of Texas, Georgia, Florida, North Carolina, and Tennessee (collectively, the "Sun Belt Portfolio"), as more particularly described in Schedule 1.1(b) attached hereto and incorporated herein by reference;
WHEREAS, each Co-Borrower is a direct, wholly owned subsidiary of Fairwater Operating Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"), which serves as the sole member of each Co-Borrower;
WHEREAS, Fairwater Real Estate Investment Trust, a Maryland real estate investment trust (the "Guarantor" or the "REIT Guarantor"), is the general partner of the Operating Partnership and holds a ninety-nine and two-tenths percent (99.2%) partnership interest therein, with the remaining eight-tenths percent (0.8%) aggregate limited partnership interest held by various OP unit holders of the Operating Partnership;
WHEREAS, Guarantor is a publicly traded real estate investment trust, the shares of beneficial interest of which are listed and traded on the New York Stock Exchange under the ticker symbol "FWTR," and Guarantor has elected and maintained its status as a real estate investment trust ("REIT") for federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), and is required to distribute at least ninety percent (90%) of its taxable income to its shareholders to maintain such qualification;
WHEREAS, Guarantor's principal executive offices are located at 8400 Chesapeake Center Drive, Suite 1200, Columbia, Maryland 21044;
WHEREAS, the Sun Belt Portfolio consisting of the Individual Properties comprising approximately multifamily residential units was acquired by the Co-Borrowers on June 30, 2025, from Meridian Sunstone Holdings LLC, a Delaware limited liability company, for an aggregate purchase price of Three Hundred Eighty-Five Million and No/100 Dollars ($385,000,000.00);
WHEREAS, the acquisition of the Sun Belt Portfolio was partially financed by a Two Hundred Forty Million and No/100 Dollar ($240,000,000.00) senior secured bridge credit facility (the "Bridge Facility") dated June 30, 2025, among Fairwater Operating Partnership, L.P. as borrower, Fairwater Real Estate Investment Trust as guarantor, and Kensington National Bank, N.A. as administrative agent, with syndicate lenders including Kensington National Bank, N.A. ($96,000,000 / 40%), Pinnacle Trust Company ($60,000,000 / 25%), Greystone Commerce Bank ($48,000,000 / 20%), and Redfield Capital Markets, LLC ($36,000,000 / 15%), with the balance of the purchase price funded by cash equity of One Hundred Forty-Five Million and No/100 Dollars ($145,000,000.00) from Fairwater's balance sheet and the issuance of OP units of the Operating Partnership;
WHEREAS, the Co-Borrowers desire to obtain a Two Hundred Forty Million and No/100 Dollar ($240,000,000.00) fixed-rate mortgage loan from Lender to refinance and repay in full the Bridge Facility, and Lender has agreed to make such loan to the Co-Borrowers, on the terms and conditions set forth in this Agreement;
WHEREAS, contemporaneously with the execution and delivery of this Agreement, (a) Guarantor is executing and delivering to Lender that certain Non-Recourse Carve-Out Guaranty Agreement of even date herewith (the "Guaranty"), (b) Guarantor is executing and delivering to Lender that certain Environmental Indemnity Agreement of even date herewith (the "Environmental Indemnity"), (c) each Co-Borrower is executing and delivering to Lender a Mortgage, Deed of Trust, Deed to Secure Debt, or similar security instrument with respect to its Individual Property (each, a "Mortgage" and collectively, the "Mortgages"), (d) each Co-Borrower is executing and delivering to Lender an Assignment of Leases and Rents with respect to its Individual Property, and (e) the parties are executing and delivering such other documents, instruments, and agreements as are required hereunder;
NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations, and warranties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.1 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below:
"Allocated Loan Amount" means, with respect to each Individual Property, the portion of the Loan allocated to such Individual Property, as set forth on Schedule 1.1(a) attached hereto. The Allocated Loan Amount for each Individual Property has been determined based on the ratio of such Individual Property's Appraised Value to the aggregate Appraised Value of all Individual Properties, multiplied by the original principal amount of the Loan ($240,000,000). The Allocated Loan Amounts are as follows:
"Appraised Value" means the aggregate appraised value of all Individual Properties as determined by the Approved Appraiser in accordance with appraisals delivered to Lender as a condition precedent to the closing of the Loan. As of the Closing Date, the aggregate Appraised Value of all Individual Properties is Three Hundred Eighty-Five Million and No/100 Dollars ($385,000,000.00).
"Approved Annual Budget" means the annual operating budget for the Portfolio and each Individual Property approved by Lender (or deemed approved) in accordance with Section 5.5(a), as the same may be updated from time to time. The initial Approved Annual Budget is attached hereto as Exhibit G.
"Approved Appraiser" means Thornfield Appraisal Group LLC, having an office at 3100 Cumberland Boulevard, Suite 600, Atlanta, Georgia 30339, or any other MAI-certified appraiser approved by Lender in its reasonable discretion.
"Assignment of Leases and Rents" means, with respect to each Individual Property, the Assignment of Leases and Rents executed by the applicable Co-Borrower in favor of Lender, of even date herewith, assigning to Lender all of such Co-Borrower's right, title, and interest in and to the Leases and Rents relating to such Individual Property.
"Borrower" or "Co-Borrowers" means, collectively, Fairwater Sun Belt I LLC, Fairwater Sun Belt II LLC, Fairwater Sun Belt III LLC, Fairwater Sun Belt IV LLC, Fairwater Sun Belt V LLC, Fairwater Sun Belt VI LLC, Fairwater Sun Belt VII LLC, Fairwater Sun Belt VIII LLC, Fairwater Sun Belt IX LLC, Fairwater Sun Belt X LLC, Fairwater Sun Belt XI LLC, Fairwater Sun Belt XII LLC, Fairwater Sun Belt XIII LLC, and Fairwater Sun Belt XIV LLC, and each individually a "Co-Borrower."
"Bridge Facility" means the senior secured bridge credit facility dated June 30, 2025, in the original principal amount of Two Hundred Forty Million and No/100 Dollars ($240,000,000.00), among Fairwater Operating Partnership, L.P., as borrower, Fairwater Real Estate Investment Trust, as guarantor, and Kensington National Bank, N.A., as administrative agent, together with the syndicate lenders thereunder, including Kensington National Bank, N.A. ($96,000,000 / 40%), Pinnacle Trust Company ($60,000,000 / 25%), Greystone Commerce Bank ($48,000,000 / 20%), and Redfield Capital Markets, LLC ($36,000,000 / 15%), as such credit facility may have been amended, restated, supplemented, or otherwise modified from time to time prior to its repayment in full on the Closing Date.
"Business Day" means any day other than a Saturday, a Sunday, or a day on which commercial banks in the City of New York, New York, are authorized or required by law, regulation, or executive order to close.
"Cash Management Agreement" means that certain Cash Management Agreement of even date herewith among the Co-Borrowers, Lender, and the Cash Management Bank, governing the establishment, maintenance, and operation of the lockbox accounts and the application of funds deposited therein, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Cash Management Bank" means the financial institution designated by Lender and approved by Co-Borrowers (such approval not to be unreasonably withheld, conditioned, or delayed) as the depository institution maintaining the lockbox accounts established pursuant to the Cash Management Agreement.
"Cash Management Period" means any period commencing upon the occurrence of a Cash Management Trigger Event and continuing until the applicable cure or termination condition set forth in Section 2.6(c) has been satisfied.
"Cash Management Trigger Event" has the meaning set forth in Section 2.6(c).
"Change of Control" has the meaning set forth in Section 5.2(c).
"Closing Date" means the date of execution and delivery of this Agreement and the funding of the Loan to or for the account of the Co-Borrowers.
"CMBS Trust" means any securitization trust, real estate mortgage investment conduit, or other special purpose vehicle into which the Loan or any interest therein may be transferred by Lender or its successors and assigns in connection with a Securitization, indicatively CLRN 2025-C14 (subject to final pooling and structuring determinations).
"Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute, together with the rules and regulations promulgated thereunder.
"Collateral" means, collectively, all Individual Properties, the Leases, the Rents, all Personal Property located at or used in connection with the Individual Properties, all reserves and reserve accounts established under this Agreement, all insurance proceeds and condemnation awards, and all other collateral described in the Loan Documents.
"Debt Service" means the aggregate monthly payments of principal and interest due and payable under the Note in accordance with Section 2.3, which monthly Debt Service payments are approximately One Million Four Hundred Seventy-Seven Thousand Eight Hundred Forty-Six and No/100 Dollars ($1,477,846.00) per month, or approximately Seventeen Million Seven Hundred Thirty-Four Thousand One Hundred Fifty-Two and No/100 Dollars ($17,734,152.00) per annum.
"Debt Service Coverage Ratio" or "DSCR" means the ratio of (a) Net Operating Income for the applicable measurement period to (b) Debt Service for the same period, calculated on an annualized basis. As of the Closing Date, the initial DSCR for the Portfolio is approximately 1.476x ($26,180,000 ÷ $17,734,152).
"Default Rate" means a per annum interest rate equal to the Interest Rate plus five hundred (500) basis points, or 11.25% per annum.
"Defeasance Collateral" means direct, non-callable obligations of the United States of America or other obligations that are "government securities" within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, the principal of and interest on which, when due and without reinvestment, shall be sufficient to generate cash flows matching, in timing and amount, all remaining scheduled payments of principal and interest on the Note (or the defeased portion thereof) from the date of defeasance through the earlier of the Maturity Date or the first date on which prepayment without premium is permitted.
"Environmental Indemnity" means the Environmental Indemnity Agreement of even date herewith, executed by the Co-Borrowers and Guarantor in favor of Lender, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Environmental Laws" means all federal, state, and local laws, statutes, ordinances, rules, regulations, and orders relating to the protection of human health and the environment, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. §§ 6901 et seq.), the Clean Water Act (33 U.S.C. §§ 1251 et seq.), the Clean Air Act (42 U.S.C. §§ 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601 et seq.), and all analogous state and local statutes, and all regulations and rules promulgated thereunder, each as amended from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute, together with the rules and regulations promulgated thereunder.
"Event of Default" has the meaning set forth in Section 8.1.
"FEMA" means the Federal Emergency Management Agency of the United States Department of Homeland Security, or any successor agency.
"GAAP" means generally accepted accounting principles as in effect in the United States of America from time to time, consistently applied.
"Guarantor" means Fairwater Real Estate Investment Trust, a Maryland real estate investment trust, and its successors and permitted assigns.
"Guaranty" means the Non-Recourse Carve-Out Guaranty Agreement of even date herewith, executed by Guarantor in favor of Lender, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Hazardous Substances" means any hazardous or toxic substance, material, or waste that is regulated by, or forms the basis of liability under, any Environmental Law, including petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, radon, mold, lead, and per- and polyfluoroalkyl substances (PFAS).
"Independent Director" means a natural person who satisfies the independence requirements set forth in Section 5.1(e) of this Agreement.
"Individual Property" means each of the multifamily residential properties identified on Schedule 1.1(b) attached hereto, including, with respect to each such property, the underlying land, all improvements and structures located thereon, all fixtures, all appurtenances, and all easements and rights benefiting such property, as more particularly described in the applicable legal descriptions set forth in Exhibit H hereto.
"Insurance Requirements" means the insurance requirements set forth on Exhibit E attached hereto.
"Interest Rate" means six and one-quarter percent (6.25%) per annum, fixed, as more particularly described in Section 2.2.
"Leases" means all leases, subleases, licenses, concessions, and other occupancy agreements (whether written or oral, now existing or hereafter entered into) that grant a possessory interest in and to, or the right to use, any portion of any Individual Property, including all amendments, modifications, renewals, extensions, and guarantees thereof.
"Lender" means Clarendon Metropolitan Insurance Company, a New York domiciled insurance company (NAIC Number 38921), having an office at 1 MetroTech Center, Brooklyn, New York 11201, and its successors and assigns, including any CMBS Trust to which the Loan is transferred.
"Loan" means the mortgage loan in the original principal amount of Two Hundred Forty Million and No/100 Dollars ($240,000,000.00), evidenced by the Note and made pursuant to this Agreement.
"Loan Documents" means, collectively, this Agreement, the Note, the Guaranty, the Environmental Indemnity, each Mortgage, each Assignment of Leases and Rents, the Cash Management Agreement, the UCC Financing Statements, and all other documents, instruments, and agreements executed and delivered by or on behalf of any Co-Borrower, Guarantor, or any other party in connection with the Loan, as any of the foregoing may be amended, restated, supplemented, or otherwise modified from time to time.
"Loan-to-Value Ratio" or "LTV" means the ratio of the outstanding principal balance of the Loan to the Appraised Value. As of the Closing Date, the initial LTV is approximately 62.34% ($240,000,000 ÷ $385,000,000).
"Lockout Period" means the period commencing on the Closing Date and ending on the date that is months after the Closing Date (anticipated to be approximately ).
"Maturity Date" means the date that is one hundred twenty (120) months (ten (10) years) after the Closing Date (anticipated to be approximately November 2035), or such earlier date on which the entire outstanding principal balance of the Loan becomes due and payable, whether by acceleration or otherwise.
"Monthly Payment Date" means the first (1st) day of each calendar month during the term of the Loan, or if such day is not a Business Day, the immediately succeeding Business Day.
"Mortgage" means, with respect to each Individual Property, the mortgage, deed of trust, deed to secure debt, or similar security instrument executed by the applicable Co-Borrower in favor of Lender (or a trustee for the benefit of Lender, as applicable under the law of the state in which the Individual Property is located) with respect to such Individual Property, of even date herewith, granting Lender a first-priority lien on and security interest in such Individual Property, as the same may be amended, restated, supplemented, or otherwise modified from time to time. There are fourteen (14) Mortgages in total, encumbering properties in the States of Texas, Georgia, Florida, North Carolina, and Tennessee.
"Net Operating Income" or "NOI" means, with respect to any Individual Property or the Portfolio, for any measurement period, the gross revenue derived from such Individual Property or the Portfolio during such period, less operating expenses for such period, each calculated in accordance with the methodology set forth on Exhibit C attached hereto. As of the Closing Date, the trailing-twelve-month NOI for the Portfolio is Twenty-Six Million One Hundred Eighty Thousand and No/100 Dollars ($26,180,000.00).
"Non-Recourse Carve-Out Events" means those events giving rise to personal recourse liability of Guarantor as described in the Guaranty, as summarized in Section 2.7(b).
"Note" means the Promissory Note of even date herewith, in the original principal amount of Two Hundred Forty Million and No/100 Dollars ($240,000,000.00), executed by the Co-Borrowers and payable to the order of Lender, substantially in the form attached hereto as Exhibit A, as the same may be amended, restated, supplemented, or otherwise modified from time to time, or any replacement note issued in connection with a transfer or assignment.
"Occupancy Rate" means, with respect to any Individual Property, the ratio (expressed as a percentage) of (a) the number of residential units at such Individual Property that are leased and occupied by tenants paying rent to (b) the total number of residential units at such Individual Property. As of the acquisition date, the weighted average Occupancy Rate across the Portfolio was 93.7%.
"OFAC" means the Office of Foreign Assets Control of the United States Department of the Treasury.
"Operating Partnership" means Fairwater Operating Partnership, L.P., a Delaware limited partnership (EIN 52-2847201), of which Guarantor is the sole general partner.
"Permitted Encumbrances" means those liens, encumbrances, easements, restrictions, conditions, covenants, and other matters affecting title to the Individual Properties that are set forth on Exhibit D attached hereto, as approved by Lender based on title commitments issued by the Title Insurer.
"Permitted Transfers" means those transfers of direct or indirect interests in the Co-Borrowers or Individual Properties that are permitted without Lender's prior written consent pursuant to Section 5.2(b).
"Personal Property" means all furniture, furnishings, fixtures, equipment, machinery, appliances, building materials, and other tangible personal property now or hereafter located at, or used in connection with, any Individual Property.
"Portfolio" means, collectively, all Individual Properties comprising the Sun Belt Portfolio.
"Prepayment Premium" has the meaning set forth in Section 2.4(d).
"Prohibited Person" means any person or entity that is (a) listed on the Specially Designated Nationals and blocked Persons List maintained by OFAC, (b) listed on the Consolidated List of Persons, Groups, and Entities Subject to European Union Financial Sanctions, (c) a person or entity with whom a citizen of the United States is prohibited from engaging in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or executive order of the President of the United States, or (d) an "enemy" or "ally of the enemy" within the meaning of Section 2 of the Trading with the Enemy Act.
"Property Management Agreement" means, with respect to each Individual Property, the property management agreement dated as of July 1, 2025, between the applicable Co-Borrower and the Property Manager relating to the management and operation of such Individual Property, as the same may be amended, restated, supplemented, or otherwise modified from time to time with Lender's prior written consent.
"Property Manager" means Fairwater Residential Management LLC, a Delaware limited liability company (EIN 52-2953810), an affiliate of Guarantor, or any replacement property manager approved by Lender in accordance with Section 5.8.
"Qualified Substitute" has the meaning set forth in Section 2.5(b).
"REIT" means a real estate investment trust as defined under Sections 856 through 860 of the Code.
"REMIC" means a "real estate mortgage investment conduit" within the meaning of Section 860D of the Code.
"Rents" means all rents, revenues, income, profits, proceeds, and other payments and benefits derived from or arising out of the ownership, operation, use, or occupancy of any Individual Property, including all rental payments, parking revenue, laundry revenue, utility reimbursements, pet fees, late charges, lease termination payments, and any other amounts payable under or in connection with the Leases.
"Reserves" means, collectively, the Tax Reserve, the Insurance Reserve, the Capital Expenditure Reserve, and any other reserve account established pursuant to Article VI.
"SEC" means the United States Securities and Exchange Commission.
"Securitization" means any transaction or series of transactions involving the sale, transfer, or assignment (whether in whole or in part) of the Loan or any interest therein by Lender or its successors and assigns to a CMBS Trust or other securitization vehicle, including the issuance of securities (whether rated or unrated) that are collateralized by or represent interests in the Loan or a pool of mortgage loans that includes the Loan.
"Special Flood Hazard Area" or "SFHA" means an area designated by FEMA as having a special flood, mudflow, or flood-related erosion hazard and shown on the applicable Flood Insurance Rate Map as Zone A, AE, A1-A30, AH, AO, AR, A99, V, VE, or V1-V30.
"SPE Covenants" means the single-purpose entity covenants set forth in Section 5.1 of this Agreement.
"Title Insurer" means Marlowe Asset Management Title Insurance Group, Inc., having an office at 901 Main Street, Suite 1100, Dallas, Texas 75202.
"Total Portfolio Units" means the total number of multifamily residential units across all Individual Properties, which is approximately units.
"Transfer" has the meaning set forth in Section 5.2(a).
"UCC" means the Uniform Commercial Code as enacted in the applicable jurisdiction.
"UCC Financing Statements" means the UCC-1 financing statements and fixture filings executed and filed in connection with the Loan.
Section 1.2 — Rules of Interpretation
(a) All references in this Agreement to "Articles," "Sections," "Exhibits," and "Schedules" shall be to Articles, Sections, Exhibits, and Schedules of or to this Agreement unless otherwise specified. All Exhibits and Schedules attached hereto are incorporated herein by this reference and made a part of this Agreement.
(b) The use of the singular shall include the plural, and the use of the plural shall include the singular, as the context may require. The use of any gender shall include all genders. The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation." The words "herein," "hereof," "hereunder," "hereto," and words of similar import shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The word "or" is not exclusive. The word "extent" in the phrase "to the extent" means the degree to which a subject or other thing extends, and does not simply mean "if."
(c) If any payment or action required to be made or taken hereunder is required to be made or taken on a day that is not a Business Day, such payment or action shall be made or taken on the immediately succeeding Business Day, and in the case of a payment, interest shall continue to accrue thereon for each additional day at the applicable rate.
(d) All interest calculations hereunder shall be made on the basis of a three hundred sixty (360) day year consisting of twelve (12) months of thirty (30) days each (30/360 day count convention).
(e) Unless otherwise expressly provided herein, all financial statements, calculations, and determinations shall be prepared and made in accordance with GAAP consistently applied.
(f) Any reference to any law, statute, regulation, or rule shall include any amendment, modification, supplement, or replacement thereof and any successor statute, regulation, or rule. Any reference to any agreement, document, or instrument shall include any amendment, modification, supplement, restatement, or replacement thereof.
(g) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, as more particularly provided in Section 11.1.
Section 1.3 — Exhibits and Schedules
The following Exhibits and Schedules are attached hereto and incorporated herein by this reference:
Schedules:
• Schedule 1.1(a): Allocated Loan Amounts — setting forth for each of the fourteen (14) Individual Properties the name of the applicable Co-Borrower, the property name, the city and state, the Appraised Value, and the Allocated Loan Amount.
• Schedule 1.1(b): Property Descriptions — setting forth for each of the fourteen (14) Individual Properties the name of the applicable Co-Borrower, the property name, the city and state, the number of residential units, and the year built.
Exhibits:
• Exhibit A: Form of Promissory Note
• Exhibit B: Form of Non-Recourse Carve-Out Guaranty Agreement
• Exhibit C: NOI Calculation Methodology
• Exhibit D: Permitted Encumbrances
• Exhibit E: Insurance Requirements
• Exhibit F: Form of Officer's Certificate
• Exhibit G: Approved Annual Budget (Initial Budget)
• Exhibit H: Legal Descriptions of Individual Properties (Exhibit H-1 through Exhibit )
ARTICLE II — LOAN TERMS
Section 2.1 — Loan; Note; Disbursement
(a) The Loan. Subject to and upon the terms and conditions set forth in this Agreement, Lender agrees to lend to the Co-Borrowers, and the Co-Borrowers, jointly and severally, agree to borrow from Lender, the principal sum of Two Hundred Forty Million and No/100 Dollars ($240,000,000.00) (the "Loan").
(b) The Note. The Loan shall be evidenced by the Note, which shall be executed by all Co-Borrowers and delivered to Lender on the Closing Date, substantially in the form attached hereto as Exhibit A. Each Co-Borrower shall be jointly and severally liable for the full amount of the Loan as evidenced by the Note, subject in all cases to the non-recourse provisions of Section 2.7.
(c) Disbursement. The Loan shall be disbursed in a single advance on the Closing Date by wire transfer of immediately available funds to the account or accounts specified in the Funds Flow Memorandum prepared by Calderwood & Harkness LLP and approved by Lender and Lender's counsel, Ashworth McPhail LLP, on or prior to the Closing Date. The Co-Borrowers acknowledge and agree that the proceeds of the Loan shall be applied on the Closing Date to (i) repay in full the outstanding principal balance of the Bridge Facility, together with all accrued and unpaid interest thereon (calculated at the Bridge Facility's floating rate of SOFR plus 500 basis points, resulting in an all-in rate of approximately 9.33% per annum as of August 11, 2025), and all fees, expenses, and other amounts due and payable thereunder, (ii) pay the origination fee and all closing costs and expenses described in clause (d) below, and (iii) fund initial Reserve deposits required under Article VI, with any remaining proceeds released to the Co-Borrowers.
(d) Origination Fee. An origination fee in the amount of One Million Eight Hundred Thousand and No/100 Dollars ($1,800,000.00), equal to seventy-five hundredths of one percent (0.75%) of the original principal amount of the Loan, shall be payable by the Co-Borrowers to Lender on the Closing Date. Such origination fee shall be deemed fully earned upon the Closing Date and shall be non-refundable. At the election of the Co-Borrowers, the origination fee may be netted from the Loan proceeds disbursed on the Closing Date.
(e) Rate Lock Deposit. The Co-Borrowers acknowledge that a rate lock deposit in the amount of Two Million Four Hundred Thousand and No/100 Dollars ($2,400,000.00) was previously delivered to Lender by the Co-Borrowers pursuant to the Rate Lock Deposit Side Letter (reference CL-CMBS-2025-09-0347) dated September 15, 2025. Such rate lock deposit shall be credited against closing costs payable by the Co-Borrowers on the Closing Date or, to the extent not so applied, returned to the Co-Borrowers in accordance with the terms of the Rate Lock Deposit Side Letter.
Section 2.2 — Interest Rate
The Loan shall bear interest on the outstanding principal balance thereof at a fixed rate of six and one-quarter percent (6.25%) per annum (the "Interest Rate"). Interest shall be calculated on the basis of a three hundred sixty (360) day year consisting of twelve (12) months of thirty (30) days each (the "30/360 day count basis"). Interest on the Loan shall accrue from and including the Closing Date. The Interest Rate shall remain fixed throughout the entire term of the Loan and shall not be subject to any adjustment, reset, or conversion to a floating-rate or variable-rate component. In no event shall the Interest Rate be less than 6.25% per annum.
Section 2.3 — Payments of Principal and Interest
Section 2.3(a) — Monthly Debt Service Payments. Commencing on the first Monthly Payment Date following the Closing Date and continuing on each Monthly Payment Date thereafter through and including the Monthly Payment Date immediately preceding the Maturity Date, the Co-Borrowers shall pay to Lender monthly installments of principal and interest (each, a "Monthly Debt Service Payment"), based on a thirty (30) year amortization schedule, in the amount of approximately One Million Four Hundred Seventy-Seven Thousand Eight Hundred Forty-Six and No/100 Dollars ($1,477,846.00) per month, resulting in an aggregate annual Debt Service of approximately Seventeen Million Seven Hundred Thirty-Four Thousand One Hundred Fifty-Two and No/100 Dollars ($17,734,152.00) per annum. Each Monthly Debt Service Payment shall be applied first to accrued and unpaid interest on the outstanding principal balance of the Loan at the Interest Rate, and then to reduction of the outstanding principal balance of the Loan. All Monthly Debt Service Payments shall be made by wire transfer of immediately available funds to an account designated by Lender from time to time by written notice to the Co-Borrowers.
Section 2.3(b) — Maturity Date Payment. On the Maturity Date, the entire outstanding principal balance of the Loan, together with all accrued and unpaid interest thereon and all other amounts then due and payable under the Note and the other Loan Documents, shall be due and payable in full (the "Balloon Payment"). The Co-Borrowers acknowledge that the Loan is not fully amortizing and that a substantial Balloon Payment will be due on the Maturity Date.
Section 2.3(c) — Late Payment Charge. If any Monthly Debt Service Payment or any other amount payable under this Agreement or the Note is not received by Lender within days after the date on which such payment is due (without regard to any notice or cure period), the Co-Borrowers shall pay to Lender, in addition to such overdue amount, a late charge equal to five percent (5%) of the amount of such overdue payment (the "Late Charge"). The Co-Borrowers acknowledge that the Late Charge is not intended as a penalty but represents a reasonable estimate of the additional administrative costs and expenses incurred by Lender as a result of the Co-Borrowers' failure to make timely payment. The Late Charge shall be immediately due and payable and shall be secured by the Collateral.
Section 2.3(d) — Default Interest. Upon the occurrence and during the continuance of an Event of Default, the outstanding principal balance of the Loan shall bear interest at the Default Rate (i.e., the Interest Rate plus five hundred (500) basis points, or 11.25% per annum). Default interest shall accrue without notice from the date of the Event of Default and shall be payable on demand by Lender. The imposition of default interest shall be in addition to, and not in lieu of, any Late Charge or other remedy available to Lender.
Section 2.3(e) — Application of Payments. Except as otherwise provided herein or in the Note, all payments received by Lender under the Loan Documents shall be applied in the following order of priority: first, to accrued and unpaid interest on the outstanding principal balance of the Loan; second, to reduction of the outstanding principal balance of the Loan; and third, to any other amounts due and payable under the Loan Documents, in such order as Lender may determine. Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default, Lender may apply payments received in any order and to any amounts due under the Loan Documents as Lender, in its sole and absolute discretion, may determine.
Section 2.4 — Prepayment
Section 2.4(a) — Lockout Period. No voluntary prepayment of the outstanding principal balance of the Loan, in whole or in part, shall be permitted during the Lockout Period (i.e., the month period commencing on the Closing Date and ending on the date that is months after the Closing Date, anticipated to be approximately ). Any voluntary prepayment of principal made or attempted during the Lockout Period shall constitute a breach of this Agreement and shall obligate the Co-Borrowers to pay to Lender the Prepayment Premium set forth in Section 2.4(d) in addition to the amount of any such prepayment.
Section 2.4(b) — Defeasance. After the expiration of the Lockout Period and until the date that is ninety (90) days prior to the Maturity Date, the Co-Borrowers may obtain a release of any or all of the Individual Properties from the liens of the Mortgages and the other Loan Documents by defeasing the Loan, in whole or in part, in accordance with the procedures set forth in Section 2.5. Defeasance shall be the sole method of obtaining a release of any Individual Property from the liens of the Loan Documents during such period (other than pursuant to Section 7.3 relating to casualty or condemnation). A defeasance of the Loan, whether in whole or in part, shall be subject to the satisfaction of each of the following conditions:
(i) No Event of Default shall have occurred and be continuing at the time of the defeasance;
(ii) The Co-Borrowers shall deliver to Lender Defeasance Collateral consisting of direct, non-callable obligations of the United States of America (or other qualifying government securities), the principal of and interest on which, when due and without reinvestment, shall be sufficient to generate cash flows matching, in timing and amount, all remaining scheduled payments of principal and interest on the Note (or, in the case of a partial defeasance, the applicable portion thereof allocable to the Individual Property or Properties being released) through the Maturity Date;
(iii) The Co-Borrowers shall deliver to Lender an opinion or certification from a nationally recognized independent accounting firm (or other qualified firm acceptable to Lender) confirming the sufficiency of the Defeasance Collateral to satisfy all remaining scheduled payments of principal and interest;
(iv) The Co-Borrowers shall deliver to Lender an opinion of counsel (from nationally recognized tax counsel reasonably acceptable to Lender) confirming that the defeasance will not result in any adverse REMIC tax consequences to the CMBS Trust (if applicable) or any holder of securities issued by the CMBS Trust;
(v) The Co-Borrowers shall deliver to Lender a non-consolidation opinion from nationally recognized counsel reasonably acceptable to Lender with respect to the successor borrower entity; and
(vi) The Co-Borrowers shall pay all costs and expenses associated with the defeasance, including the fees and expenses of Lender's counsel, any rating agency fees (if applicable), recording fees, title endorsement fees, and all other out-of-pocket costs.
Upon the completion of a defeasance in accordance with this Section 2.4(b) and Section 2.5, Lender shall release the applicable Mortgage(s) and the Defeasance Collateral shall be held by a successor borrower entity (a Qualified Substitute) in accordance with the terms of Section 2.5(b).
Section 2.4(c) — Open Period Prepayment. During the ninety (90) day period immediately preceding the Maturity Date (the "Open Period"), the Co-Borrowers may prepay the Loan in whole, but not in part, without the payment of any Prepayment Premium or the requirement to defease the Loan, upon not less than thirty (30) days' prior written notice to Lender specifying the intended prepayment date. Any such prepayment during the Open Period shall include all accrued and unpaid interest through the date of prepayment and all other amounts then due and payable under the Loan Documents.
Section 2.4(d) — Prepayment Premium. If any prepayment of the outstanding principal balance of the Loan (or any portion thereof) is made in violation of the Lockout Period set forth in Section 2.4(a), whether voluntary or involuntary (including as a result of acceleration following an Event of Default, casualty, or condemnation), the Co-Borrowers shall pay to Lender, in addition to the amount of such prepayment, a premium (the "Prepayment Premium") equal to the greater of:
(i) one percent (1%) of the principal amount prepaid; and
(ii) a yield maintenance amount equal to the excess, if any, of (A) the present value of the remaining scheduled interest payments that would have been due on the amount prepaid from the date of prepayment through the end of the Lockout Period, discounted at a rate equal to the yield on the United States Treasury security having a maturity closest to the end of the Lockout Period (as reported in the Federal Reserve Statistical Release H.15 or any successor publication on the second Business Day preceding the date of prepayment), over (B) zero.
The Prepayment Premium shall be immediately due and payable and shall constitute additional interest under the Loan. The Co-Borrowers acknowledge and agree that the Prepayment Premium represents a reasonable estimate of Lender's damages resulting from prepayment during the Lockout Period and does not constitute a penalty.
Section 2.4(e) — Involuntary Prepayment. Any prepayment of the outstanding principal balance of the Loan resulting from the application of casualty insurance proceeds or condemnation awards to reduce the outstanding principal balance (rather than to restore the affected Individual Property), or resulting from acceleration of the Loan following an Event of Default, shall be subject to the Prepayment Premium if such prepayment occurs during the Lockout Period. After the expiration of the Lockout Period, no Prepayment Premium shall be due in connection with the application of casualty insurance proceeds or condemnation awards to reduce the outstanding principal balance of the Loan.
Section 2.5 — Defeasance Procedures
Section 2.5(a) — Notice and Documentation. The Co-Borrowers shall provide to Lender not less than thirty (30) days' prior written notice of the Co-Borrowers' intention to defease the Loan (or any portion thereof). Such notice shall specify (i) the Individual Property or Properties to be released from the liens of the Loan Documents, (ii) the proposed defeasance date, and (iii) the anticipated amount of Defeasance Collateral required to effect such defeasance, together with a preliminary calculation of the required cash flows. The Co-Borrowers shall deliver all documentation required under Section 2.4(b) not later than five (5) Business Days prior to the proposed defeasance date, unless a shorter period is agreed to by Lender.
Section 2.5(b) — Successor Borrower. In connection with any defeasance (whether in whole or in part), the Co-Borrowers shall cause a newly formed single-purpose Delaware limited liability company (a "Qualified Substitute") to assume the obligations of the applicable Co-Borrower(s) with respect to the defeased portion of the Loan and to hold the Defeasance Collateral for the benefit of Lender (or the CMBS Trust, if applicable). The Qualified Substitute shall satisfy all of the SPE Covenants set forth in Section 5.1, shall have at least one Independent Director, and shall execute such assumption agreements and other documents as Lender may reasonably require. Upon the assumption of the defeased portion of the Loan by the Qualified Substitute, the applicable Co-Borrower(s) shall be released from their obligations under the Loan Documents to the extent attributable to the defeased portion of the Loan and the released Individual Property or Properties.
Section 2.5(c) — Costs. All costs and expenses incurred in connection with any defeasance shall be borne solely by the Co-Borrowers, including, without limitation: (i) fees and expenses of Lender's counsel (Ashworth McPhail LLP or successor counsel); (ii) fees of the independent accounting firm or other qualified firm providing the sufficiency certification; (iii) rating agency fees, ; (iv) recording fees and title endorsement fees; (v) costs of forming and maintaining the Qualified Substitute; and (vi) all other out-of-pocket costs and expenses reasonably incurred by Lender in connection with the defeasance.
Section 2.6 — Cash Management
Section 2.6(a) — Lockbox Accounts. On or prior to the Closing Date, the Co-Borrowers shall establish and maintain lockbox accounts (the "Lockbox Accounts") at a Cash Management Bank approved by Lender, in accordance with the Cash Management Agreement. All Rents and other revenues derived from the fourteen (14) Individual Properties shall be deposited into the Lockbox Accounts. The Co-Borrowers shall direct all tenants at each Individual Property to make all rental payments directly to the applicable Lockbox Account by check payable to such Lockbox Account or by direct deposit, automated clearing house transfer, or wire transfer to such Lockbox Account.
Section 2.6(b) — Springing Cash Management.
Section 2.6(c) — Cash Management Trigger Events. A "Cash Management Trigger Event" shall be deemed to have occurred upon the occurrence of any of the following:
(i) An Event of Default under any Loan Document;
(ii) The DSCR for the Portfolio falling below calendar , as determined based on trailing-twelve-month Net Operating Income; or
(iii) The occurrence of a bankruptcy, insolvency, receivership, or dissolution of the Property Manager or the Guarantor, or the termination or non-renewal of the Property Management Agreement with respect to any Individual Property that is not replaced within sixty (60) days with a Property Manager approved by Lender.
A Cash Management Period shall continue until the earliest of the following (each, a "Cash Management Cure Event"):
(A) With respect to a Cash Management Trigger Event described in clause (i) above, the cure of all Events of Default to the reasonable satisfaction of Lender;
(B) With respect to a Cash Management Trigger Event described in clause (ii) above, the DSCR for the Portfolio equaling or exceeding calendar , as determined based on trailing-twelve-month Net Operating Income; or
(C) With respect to a Cash Management Trigger Event described in clause (iii) above, the appointment of a replacement Property Manager approved by Lender and the execution of a new Property Management Agreement in form and substance reasonably satisfactory to Lender.
Section 2.6(d) — Application of Funds During Cash Management Period. During any Cash Management Period, all funds deposited in the Lockbox Accounts shall be applied by Lender (or the Cash Management Bank at Lender's direction) in the following order of priority (the "Waterfall"):
1. First, to the payment of the Monthly Debt Service Payment due under the Note;
2. Second, to the funding of deposits into the Tax Reserve in accordance with Section 6.1;
3. Third, to the funding of deposits into the Insurance Reserve in accordance with Section 6.2;
4. Fourth, to the funding of deposits into the Capital Expenditure Reserve in accordance with Section 6.3;
5. Fifth, to the payment of approved operating expenses for each Individual Property in accordance with the Approved Annual Budget then in effect; and
6. Sixth, any remaining amounts shall be held by Lender (or the Cash Management Bank at Lender's direction) in a segregated account as additional collateral for the Loan (the "Excess Cash Reserve"), pending the termination of the Cash Management Period.
Section 2.6(e) — Release of Excess Cash. During periods when no Cash Management Period is in effect, excess cash (i.e., amounts remaining in the Lockbox Accounts after payment of Monthly Debt Service, Reserve deposits, and approved operating expenses) shall be released to the Co-Borrowers on a basis. The Co-Borrowers acknowledge that such excess cash may be distributed by the Co-Borrowers to the Operating Partnership, and by the Operating Partnership to the Guarantor, to the extent necessary for the Guarantor to satisfy the REIT Distribution Requirements, in accordance with Section 5.1(j). Upon the termination of a Cash Management Period, any amounts held in the Excess Cash Reserve shall be released to the Co-Borrowers within five (5) Business Days, provided no other Cash Management Trigger Event is then in existence.
Section 2.7 — Non-Recourse; Carve-Outs
Section 2.7(a) — Non-Recourse Loan. Notwithstanding anything to the contrary contained in this Agreement, the Note, or any other Loan Document, Lender shall look solely to the Collateral (including the Individual Properties, the Rents, the Reserves, and all other collateral pledged under the Loan Documents) for the repayment of the Loan and the satisfaction of all obligations of the Co-Borrowers under the Loan Documents. Neither any Co-Borrower (other than to the extent of the Collateral) nor the Guarantor shall have any personal liability for the repayment of the principal of or interest on the Loan or for the payment of any other amount due under the Loan Documents, except as expressly provided in the Guaranty with respect to Non-Recourse Carve-Out Events. Upon the occurrence of an Event of Default, the sole remedy of Lender with respect to the repayment of the Loan shall be the exercise of its rights and remedies with respect to the Collateral in accordance with this Agreement, the Mortgages, and the other Loan Documents, subject to the Guarantor's liability under the Guaranty for Non-Recourse Carve-Out Events.
Section 2.7(b) — Carve-Out Liability. The Guarantor has executed and delivered to Lender the Guaranty, dated as of the Closing Date, pursuant to which the Guarantor has guaranteed certain obligations of the Co-Borrowers arising in connection with Non-Recourse Carve-Out Events. The personal liability of the Guarantor under the Guaranty is limited to actual losses, damages, costs, and expenses (including reasonable attorneys' fees and expenses) sustained by Lender as a result of the occurrence of any of the following Non-Recourse Carve-Out Events:
(i) Fraud or intentional misrepresentation by any Co-Borrower or Guarantor in connection with the Loan;
(ii) Misapplication or misappropriation by any Co-Borrower of Rents, insurance proceeds, or condemnation awards received with respect to any Individual Property following an Event of Default;
(iii) any Individual Property by or at the direction of any Co-Borrower;