PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 1750 K Street, N.W., Suite 800 Washington, D.C. 20006
INTERNAL MEMORANDUM
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I. EXECUTIVE SUMMARY
The purpose of this memorandum is to analyze whether Fairwater Real Estate Investment Trust ("Fairwater" or "FREIT"), a Maryland real estate investment trust listed on the New York Stock Exchange (ticker: FRWT), qualifies as a well-known seasoned issuer ("WKSI") under Rule 405 of the Securities Act of 1933, as amended (the "Securities Act"), and to summarize the mechanics, benefits, and procedural steps associated with filing a new automatic shelf registration statement on Form S-3 to replace Fairwater's expiring shelf registration statement (File No. 333-265410). This memorandum also addresses the transition of Fairwater's existing at-the-market ("ATM") equity offering program from the expiring shelf to the new shelf, including the contemplated increase of the ATM program size to $500,000,000.
Based on the analysis set forth below, it is my conclusion that Fairwater qualifies as a WKSI under Rule 405 of the Securities Act. Fairwater's worldwide public common equity float is approximately $3.82 billion, which significantly exceeds the $700 million threshold required under the public float test of Rule 405 — exceeding the threshold by more than five times. In addition, Fairwater maintains a timely and complete filing history with the Securities and Exchange Commission (the "SEC" or the "Commission") under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and there are no disqualifying events or conditions that would render Fairwater an "ineligible issuer" within the meaning of Rule 405.
As a consequence of Fairwater's WKSI status, the new Form S-3 will be filed as an automatic shelf registration statement pursuant to Rule 462(e) of the Securities Act. The registration statement will become effective immediately upon filing with the SEC on the target filing date of July 18, 2025 — a date that provides a 14-day buffer in advance of the August 1, 2025 expiration of the prior shelf registration statement. No SEC staff review or comment period is required prior to effectiveness.
The key benefits of WKSI status and automatic shelf registration for Fairwater include:
• Immediate effectiveness — The registration statement becomes effective upon filing, eliminating any gap in shelf availability and any risk of SEC delay.
• Indeterminate amounts and classes of securities — The WKSI may register an indeterminate amount and indeterminate classes of securities, providing maximum flexibility for future capital markets activity.
• Pay-as-you-go filing fee treatment — Under Rules 456(b) and 457(r) of the Securities Act, Fairwater may defer payment of SEC registration fees until the time of each takedown offering, eliminating the need to pay a large filing fee at the time the registration statement is filed.
• Flexibility for future offerings — The broad scope of the automatic shelf permits Fairwater to respond quickly to favorable market conditions by launching offerings of various types of securities on short notice, without additional registration requirements.
The new shelf registration statement will register up to $2,000,000,000 in aggregate offering amount of securities, consisting of common shares of beneficial interest, preferred shares of beneficial interest, senior debt securities, subordinated debt securities, depositary shares, warrants, and units. Although WKSI rules would technically permit registration without specifying any dollar amount, Fairwater has elected to include a stated aggregate offering amount to provide transparency and market clarity, particularly for purposes of the ATM program and communications with institutional investors and research analysts.
In connection with the new shelf, the existing ATM equity offering program will be transitioned from the expiring shelf to the new registration statement. The program size will be increased from $400,000,000 under the prior program to $500,000,000 under the new program, implemented through an Amended and Restated Equity Distribution Agreement with Fairwater's existing agents — Pemberton Zanthor & Co., Clarendon Securities LLC, and Veltrano Capital Partners LLC. Approximately $200,000,000 of sales were completed under the prior ATM program, and the remaining unused capacity under the prior program will not carry over; the new program provides $500,000,000 of entirely fresh capacity.
This memorandum is organized as follows: Section II provides background information regarding Fairwater, its capitalization, and its shelf registration and ATM program history. Section III sets forth the detailed WKSI eligibility analysis under Rule 405. Section IV discusses the mechanics of automatic shelf registration under Rule 462(e). Section V addresses pay-as-you-go filing fee mechanics under Rules 456(b) and 457(r). Section VI reviews the three-year shelf life under Rule 415(a)(5). Section VII outlines the procedural steps for filing the new shelf and transitioning the ATM program. Section VIII discusses ongoing compliance and bring-down requirements. Section IX provides the key contacts for coordination, and Section X sets forth our conclusions and recommendations.
II. BACKGROUND
A. Fairwater REIT — Overview
Fairwater Real Estate Investment Trust is a Maryland real estate investment trust organized in 2003 under Title 8 of the Maryland REIT Law. Fairwater's common shares of beneficial interest are listed on the New York Stock Exchange under the ticker symbol "FRWT." The SEC Commission File Number (CIK) for Fairwater is 0001387204, and its Standard Industrial Classification (SIC) code is 6798 (Real Estate Investment Trusts). Fairwater's fiscal year ends on December 31 of each calendar year. Its federal employer identification number (EIN) is 52-2384761.
Fairwater's principal executive offices are located at 7200 Chesapeake Centre Drive, Suite 400, Annapolis, Maryland 21401. The company is led by Margaret Chen-Whitfield, who serves as Chief Executive Officer and Chairperson of the Board of Trustees, Priya Ranganathan, who serves as Chief Financial Officer, and Jonathan Delacroix, who serves as Executive Vice President, General Counsel, and Secretary.
Fairwater's core business consists of the ownership, operation, acquisition, and development of Class A multifamily residential communities across the Mid-Atlantic and Southeastern United States. As of March 31, 2025, Fairwater's portfolio comprises 47 multifamily communities totaling approximately 14,800 apartment units located across Maryland, Virginia, North Carolina, Georgia, and Florida. Fairwater has a long track record of steady portfolio growth through both ground-up development and strategic acquisitions, with a focus on high-barrier suburban and urban-infill locations with favorable employment and demographic trends.
Consistent with the organizational structure typical of publicly traded REITs, Fairwater conducts substantially all of its business operations through Fairwater Operating Partnership, L.P. ("Fairwater OP"), a Maryland limited partnership with EIN 52-2384805. Fairwater REIT serves as the sole general partner of Fairwater OP. As of March 31, 2025, Fairwater REIT owns approximately 96.29% of the outstanding common units of partnership interest in Fairwater OP, consisting of 134,270,000 REIT-owned common units out of a total of 139,450,000 common units of partnership interest outstanding. The remaining 5,180,000 common units (approximately 3.71%) are held by third-party limited partners. Each common unit of Fairwater OP is redeemable, at the election of the holder, for cash or, at the election of Fairwater REIT, for one common share of beneficial interest of Fairwater REIT.
This UPREIT (Umbrella Partnership Real Estate Investment Trust) structure is relevant to the shelf registration analysis because Fairwater OP will be a co-registrant on the new Form S-3 for purposes of registering debt securities issued by the OP, as discussed further in Section IV.D below.
B. Capitalization Summary (as of March 31, 2025)
The following summarizes Fairwater's consolidated capitalization as of March 31, 2025, supplemented with the most recent available market pricing data:
Equity Securities:
• Common shares of beneficial interest outstanding: 134,270,000 shares ($0.01 par value per share)
• Common share closing price (June 13, 2025): $28.45 per share
• Equity market capitalization: 134,270,000 × $28.45 = $3,819,981,500 (approximately $3.82 billion)
• Preferred shares of beneficial interest outstanding: 4,000,000 shares of 6.50% Series A Cumulative Redeemable Preferred Shares ($0.01 par value per share; $25.00 liquidation preference per share; aggregate liquidation preference of $100,000,000). The Series A Preferred Shares were issued in June 2024 as a takedown from the expiring shelf, as discussed in Section II.C below.
Debt Securities:
Fairwater OP has the following senior unsecured notes outstanding, totaling $750,000,000 in aggregate principal amount across three series:
The senior unsecured notes are issued by Fairwater OP and fully and unconditionally guaranteed by Fairwater REIT. The notes carry the following credit ratings from the two nationally recognized statistical rating organizations that currently rate Fairwater OP's senior unsecured obligations:
• Brindoval Advisory Group: BBB (stable outlook)
• Pinnacle Rating Services: Baa2 (stable outlook)
These investment-grade credit ratings are consistent with Fairwater's conservative leverage profile and provide the company with favorable access to the unsecured debt capital markets. The ratings also satisfy the investment-grade requirement under General Instruction I.B.2 of Form S-3 for primary offerings of non-convertible securities, providing additional registration flexibility, although this instruction is most relevant for non-WKSI issuers.
Credit Facility:
Fairwater OP maintains an unsecured revolving credit facility with a total commitment of $600,000,000, of which $175,000,000 was drawn and $425,000,000 was undrawn as of March 31, 2025. The revolving credit facility matures on a date that, based on publicly available disclosure, is expected to be in 2027, subject to extension options.
Secured Mortgage Debt:
Fairwater's portfolio is encumbered by approximately $480,000,000 of secured mortgage debt as of March 31, 2025. This secured debt is non-recourse to Fairwater REIT and Fairwater OP (except to the extent of standard carve-out guarantees for fraud, willful misconduct, and environmental matters).
Total Consolidated Debt:
The total consolidated debt of Fairwater and its subsidiaries as of March 31, 2025 is approximately $1,405,000,000, calculated as the sum of $750,000,000 in senior unsecured notes, $175,000,000 drawn on the revolving credit facility, and $480,000,000 in secured mortgage debt.
Cash and Cash Equivalents:
Fairwater held approximately $42,000,000 in unrestricted cash and cash equivalents as of March 31, 2025.
Total Enterprise Value:
Based on the foregoing data, Fairwater's approximate total enterprise value as of the reference dates is:
$3,819,981,500 (common equity market capitalization) + $100,000,000 (preferred shares at liquidation preference) + $1,405,000,000 (total consolidated debt) – $42,000,000 (cash and cash equivalents) = approximately $5,282,981,500 (approximately $5.28 billion).
Fairwater's total enterprise value of approximately $5.28 billion positions it as a mid-cap REIT with substantial access to both equity and debt capital markets. Its investment-grade credit ratings and diversified capital structure provide the financial foundation for the proposed $2,000,000,000 universal shelf.
C. Prior Shelf Registration Statement and Issuance History
Fairwater's currently effective (but soon to expire) shelf registration statement was filed on Form S-3 (File No. 333-265410) and was declared effective by the SEC on August 1, 2022. The registration statement was filed as an automatic shelf registration statement under Rule 462(e), reflecting Fairwater's WKSI status at the time of filing. Pursuant to Rule 415(a)(5) of the Securities Act, the prior shelf will expire on August 1, 2025, three years after its initial effective date.
During the three-year life of the prior shelf, Fairwater completed the following offerings, issuing securities with an aggregate offering price of approximately $475,000,000:
1. ATM Common Share Sales (Ongoing, 2022–2025):
Fairwater sold approximately $200,000,000 in common shares through its ATM program under the Equity Distribution Agreement described in Section II.D below. These sales consisted of approximately 7,520,000 common shares sold at a weighted average price of approximately $26.60 per share, reflecting a range of market prices over the program period. The ATM program served as a low-cost, flexible source of equity capital to fund acquisitions and development activities without the pricing discount and underwriting fees associated with traditional underwritten offerings.
2. Underwritten Follow-On Common Share Offering (October 2023):
In October 2023, Fairwater completed an underwritten public offering of 6,481,481 common shares of beneficial interest at an offering price of $27.00 per share (before underwriting discount), generating aggregate gross offering proceeds of approximately $175,000,000. The offering was conducted on a fully marketed basis pursuant to a prospectus supplement filed under Rule 424(b)(5).
3. Series A Preferred Share Offering (June 2024):
In June 2024, Fairwater completed a public offering of 4,000,000 shares of its 6.50% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest at an offering price of $25.00 per share (equal to the liquidation preference), generating aggregate gross offering proceeds of $100,000,000.
Because Fairwater held WKSI status at the time of the prior shelf filing and registered an indeterminate amount of securities, the concept of "remaining capacity" under the prior shelf is not strictly applicable. However, for purposes of understanding the prior shelf's utilization, the approximately $475,000,000 in total issuances provides relevant context for sizing the new shelf at $2,000,000,000.
D. Existing ATM Program
Fairwater's ATM equity offering program has been in operation since November 2019 and has been maintained continuously through amendments to the original governing agreement. The key details of the existing program are as follows:
Governing Agreement:
The ATM program is governed by an Equity Distribution Agreement (the "Equity Distribution Agreement") originally dated November 15, 2019, between Fairwater REIT, Fairwater OP, and Pemberton Zanthor & Co., as sole agent at inception. The Equity Distribution Agreement was originally established under Fairwater's predecessor shelf registration statement (File No. 333-234987), which has since expired.
The Equity Distribution Agreement has been amended twice:
• First Amendment (August 5, 2022): Transferred the ATM program from the predecessor shelf (File No. 333-234987) to the current expiring shelf (File No. 333-265410), and added Clarendon Securities LLC as a co-agent.
• Second Amendment (March 12, 2023): Added Veltrano Capital Partners LLC as an additional co-agent.
Agents:
The ATM program currently utilizes three agents:
Program Size and Sales History:
The prior ATM program had a total program size of $400,000,000. Of this amount, approximately $200,000,000 in common shares has been sold, leaving approximately $200,000,000 in remaining program capacity. This remaining capacity will not carry over to the new program; instead, the Amended and Restated Equity Distribution Agreement will establish a new program with $500,000,000 of fresh capacity.
Sales under the existing program have been allocated among the three agents approximately as follows:
Commission Structure:
The commission structure under the existing Equity Distribution Agreement, which is expected to remain substantially unchanged under the Amended and Restated Equity Distribution Agreement, is as follows:
• At-the-market sales: Commission of 2.0% of gross sales proceeds
• Forward sales: Commission of 2.25% of gross sales proceeds (including a 0.25% forward premium reflecting the incremental costs and risks associated with forward sale transactions)
• Forward sale maturity: Up to 12 months from trade date
Agent Allocation:
For allocation of selling capacity under the program, the agents operate pursuant to the following capacity allocations: Pemberton Zanthor & Co. — 50%; Clarendon Securities LLC — 30%; Veltrano Capital Partners LLC — 20%. These allocations are subject to adjustment by Fairwater in its discretion and are expected to be carried forward into the Amended and Restated Equity Distribution Agreement.
Governing Law:
The Equity Distribution Agreement and all amendments thereto are governed by the laws of the State of New York.
III. WKSI ELIGIBILITY ANALYSIS
A. Rule 405 Definition — Elements of WKSI Status
Rule 405 under the Securities Act defines a "well-known seasoned issuer" as an issuer that, as of the most recent determination date, satisfies the following conditions:
(1) Size Test (Alternative): The issuer meets one of the following two alternative size criteria:
(a) Public Float Test: The issuer has a worldwide market value of outstanding voting and non-voting common equity held by non-affiliates (i.e., public float) of $700 million or more; or
(b) Non-Convertible Securities Issuance Test: The issuer has issued at least $1 billion aggregate principal amount of non-convertible securities, other than common equity, in primary offerings for cash (not exchange), registered under the Securities Act, in the preceding three years.
(2) Form Eligibility: The issuer meets the registrant requirements of Form S-3 (for domestic issuers) or Form F-3 (for foreign private issuers).
(3) Not an Ineligible Issuer: The issuer is not an "ineligible issuer" as defined in Rule 405.
Fairwater will rely on the public float test under prong (1)(a) above, as its public float substantially exceeds the $700 million threshold. The non-convertible securities issuance test under prong (1)(b) is an alternative basis for qualification and need not be separately satisfied, although we note that Fairwater OP's senior unsecured note issuances may independently contribute toward this threshold.
Each of the three elements of WKSI eligibility is analyzed in detail below.
B. Public Float Test — $700 Million Threshold
Calculation Methodology:
Under Rule 405, public float is calculated as the aggregate market value of the issuer's outstanding voting and non-voting common equity held by non-affiliates. This is the same calculation methodology employed in General Instruction I.B.1 of Form S-3, which uses the term "aggregate market value of the voting and non-voting common equity held by non-affiliates."
Per SEC guidance and longstanding practice, the calculation is based on (i) the number of common shares outstanding as of a recent date (typically the most recent periodic report) and (ii) the most recent closing price on the issuer's principal trading market, as of a date within 60 days of the anticipated filing date. For purposes of this analysis, we have used the following reference data:
• Common shares outstanding: 134,270,000 shares (as of March 31, 2025, per Fairwater's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025)
• Closing price: $28.45 per share (NYSE closing price on June 13, 2025)
Gross Equity Market Capitalization:
134,270,000 shares × $28.45 per share = $3,819,981,500 (approximately $3.82 billion)
Affiliate Holdings Adjustment:
The public float calculation requires the exclusion of shares held by "affiliates" of the issuer. Under Rule 405 and the SEC's longstanding interpretive guidance, "affiliate" is defined as a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the issuer. For purposes of this calculation, the executive officers and trustees of Fairwater are presumed to be affiliates.
We are in the process of confirming with the client the exact share ownership of Fairwater's executive officers and trustees as of the most recent practicable date. However, based on publicly available proxy statement disclosure and prior representations from Fairwater's management, we understand that aggregate insider holdings are modest in relation to the total outstanding shares. Even applying a conservative assumption that affiliates hold up to 5% of the outstanding common shares (i.e., approximately 6,713,500 shares), the public float calculation would be as follows:
(134,270,000 – 6,713,500) × $28.45 = 127,556,500 × $28.45 = $3,628,982,425 (approximately $3.63 billion)
This conservative estimate of public float of approximately $3.63 billion remains well in excess of the $700 million threshold by a factor of more than five. Even under more aggressive assumptions regarding affiliate holdings, Fairwater's public float would far exceed the required minimum.
We note that the precise affiliate ownership figure will be updated and confirmed prior to the filing of the new registration statement, and the cover page of the Form S-3 will include a representation of the aggregate market value of voting and non-voting common equity held by non-affiliates, calculated as of a date within 60 days of filing. Given the substantial margin by which Fairwater exceeds the threshold, there is no meaningful risk that the final calculation will differ in a way that would affect WKSI eligibility.
Conclusion: Fairwater's public float significantly exceeds the $700 million threshold required under Rule 405. The public float test is satisfied by a substantial margin.
C. Form S-3 Registrant Eligibility Requirements
In addition to the size test, WKSI eligibility under Rule 405 requires that the issuer meet the registrant requirements for Form S-3 (or Form F-3 for foreign private issuers). The General Instructions to Form S-3 set forth the following registrant requirements, each of which is analyzed below as applied to Fairwater:
1. Organization and Domicile:
The registrant must be organized under the laws of the United States, any State thereof, or the District of Columbia, and must have its principal business operations in the United States or its territories. Fairwater is organized and existing as a real estate investment trust under the laws of the State of Maryland and has its principal executive offices in Annapolis, Maryland. All of its operations are conducted within the United States. This requirement is satisfied.
2. Twelve Calendar Months of Exchange Act Reporting:
The registrant must have been subject to the requirements of Section 12 or Section 15(d) of the Exchange Act and have filed all required reports for a period of at least twelve calendar months immediately preceding the filing of the registration statement. Fairwater has been an SEC reporting company since its initial public offering, which was completed well over twelve years ago. Fairwater files annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, as required under the Exchange Act. This requirement is satisfied.
3. Timely Filing of Exchange Act Reports:
The registrant must have timely filed all reports required to be filed under Sections 13, 14, or 15(d) of the Exchange Act during the twelve calendar months (and any portion of a month) immediately preceding the filing date. We have reviewed Fairwater's filing history on the SEC's EDGAR system and confirmed that Fairwater has timely filed all required reports — including its Annual Report on Form 10-K for the fiscal year ended December 31, 2024, its Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, its annual proxy statement on Schedule 14A, and all current reports on Form 8-K — within the prescribed deadlines. There are no late filings, delinquent filings, or NT (notification of late filing) forms. This requirement is satisfied.
4. No Default on Indebtedness:
The registrant must not have failed to pay any dividend or sinking fund installment on preferred stock, or defaulted on any installment of indebtedness for borrowed money or on any rental on a long-term lease, since the end of the last fiscal year. Based on information provided by Fairwater's management and publicly available disclosures, Fairwater has not failed to pay any dividend on its Series A Preferred Shares, nor has it defaulted on any installment of indebtedness or rental obligation. All interest payments on the senior unsecured notes and all debt service payments on secured mortgage obligations have been made when due. This requirement is satisfied.
5. General Instruction I.A — Primary Offering Eligibility:
For primary offerings, Form S-3 General Instruction I.B.1 requires that the aggregate market value of voting and non-voting common equity held by non-affiliates be at least $75 million, or, alternatively under General Instruction I.B.2, that the registrant has issued at least $1 billion in non-convertible securities in the preceding three years. As established in Section III.B above, Fairwater's public float of approximately $3.63–$3.82 billion vastly exceeds the $75 million threshold. This requirement is satisfied.
Conclusion: Fairwater meets all registrant eligibility requirements for Form S-3 under the General Instructions thereto. This element of WKSI eligibility is satisfied.
D. "Ineligible Issuer" Analysis
The final element of WKSI eligibility requires that the issuer not be an "ineligible issuer" as defined in Rule 405 of the Securities Act. Rule 405 defines "ineligible issuer" to include, among others, any issuer that falls within any of the following categories at the time of the relevant determination date. We have reviewed each of the disqualifying categories and applied them to Fairwater as set forth below:
(i) Delinquent Exchange Act Filings. An issuer that has not filed all reports and materials required to be filed under Sections 13, 14, or 15(d) of the Exchange Act during the preceding twelve months (or shorter period that the issuer was required to file such reports and materials) is an ineligible issuer. As discussed in Section III.C above, Fairwater has timely filed all required Exchange Act reports. Fairwater is not delinquent in any filing obligations. This disqualifying factor does not apply.
(ii) Blank Check Companies. An issuer that is a blank check company as defined in Rule 419 under the Securities Act is an ineligible issuer. Fairwater is a fully operating real estate investment trust with an established portfolio of 47 multifamily communities and approximately $5.28 billion in total enterprise value. Fairwater is not, and has never been, a blank check company. This disqualifying factor does not apply.
(iii) Shell Companies. An issuer that is, or has been at any time during the preceding three years, a shell company as defined in Rule 405 (other than a business combination-related shell company) is an ineligible issuer. Fairwater is an operating company with substantial assets and revenues and has never been a shell company. This disqualifying factor does not apply.
(iv) Bankruptcy. An issuer that has filed, or has been the subject of, a petition under the Federal Bankruptcy Code or any state insolvency law within the past three years (or, for involuntary petitions, that has been the subject of a decree or order for relief within the past three years) is an ineligible issuer. Fairwater has not filed for bankruptcy protection and has not been the subject of any involuntary bankruptcy petition at any time, including within the past three years. This disqualifying factor does not apply.
(v) Felony and Misdemeanor Convictions. An issuer that has been convicted of a felony or misdemeanor described in Sections 15(b)(4)(B) of the Exchange Act within the past three years is an ineligible issuer. Fairwater has not been convicted of any felony or misdemeanor, and there are no pending criminal proceedings against Fairwater. This disqualifying factor does not apply.
(vi) SEC Orders and Decrees. An issuer that has been made the subject of any judicial or administrative decree or order arising out of a governmental action that (a) prohibits certain conduct or activities regarding, including future violations of, the anti-fraud provisions of the federal securities laws, (b) requires the issuer to cease and desist from violating the anti-fraud provisions of the federal securities laws, or (c) determines that the issuer violated the anti-fraud provisions of the federal securities laws, in each case within the past three years, is an ineligible issuer. Fairwater has not been the subject of any such decree or order. This disqualifying factor does not apply.
(vii) Section 12(j) Revocation. An issuer that has had its registration under Section 12 of the Exchange Act revoked or suspended pursuant to Section 12(j) of the Exchange Act within the past three years is an ineligible issuer. Fairwater's Exchange Act registration has not been revoked or suspended. This disqualifying factor does not apply.
(viii) Limited Partnership Offering Non-Convertible Securities. A limited partnership that offers and sells non-convertible securities other than through a firm commitment underwriting is an ineligible issuer. This category is inapplicable — Fairwater REIT, the primary registrant, is a Maryland real estate investment trust, not a limited partnership. While Fairwater OP, a Maryland limited partnership, will be a co-registrant for debt securities purposes, the debt securities issued by Fairwater OP have historically been offered through firm commitment underwritings, and in any event this disqualifying factor is directed at limited partnerships as the primary registrant. This disqualifying factor does not apply.
Conclusion: Fairwater is not an "ineligible issuer" within the meaning of Rule 405 of the Securities Act. There are no disqualifying events or conditions.
E. Overall WKSI Eligibility Determination
Based on the analysis set forth in Sections III.B through III.D above, Fairwater satisfies all three elements required for WKSI status under Rule 405 of the Securities Act:
1. Public Float Test: Fairwater's public float of approximately $3.63–$3.82 billion exceeds the $700 million threshold by more than five times.
2. Form S-3 Registrant Requirements: Fairwater satisfies all registrant eligibility requirements under the General Instructions to Form S-3, including the twelve-month reporting requirement, timely filing requirement, and no-default requirement.
3. Not an Ineligible Issuer: Fairwater has no disqualifying events or conditions under any of the categories enumerated in the "ineligible issuer" definition of Rule 405.
Fairwater qualifies as a well-known seasoned issuer (WKSI) under Rule 405 of the Securities Act as of the anticipated filing date of July 18, 2025.
We note that WKSI eligibility is assessed as of the filing date of the automatic shelf registration statement. Accordingly, the WKSI eligibility analysis should be reconfirmed immediately prior to filing on July 18, 2025 to ensure that no intervening events (e.g., a significant decline in the common share price that could reduce public float below $700 million, a delinquent filing, or a disqualifying event) have occurred. Given the substantial margin by which Fairwater exceeds the public float threshold, the risk of an adverse change in WKSI eligibility before the filing date is remote.
IV. AUTOMATIC SHELF REGISTRATION UNDER RULE 462(e)
A. Overview of Automatic Shelf Registration
Rule 462(e) under the Securities Act provides that a registration statement filed by a WKSI on Form S-3 (or Form F-3 for a foreign private issuer) that is designated by the registrant as an "automatic shelf registration statement" will become effective immediately upon filing with the SEC. This is a departure from the standard registration process, under which a registration statement becomes effective only after SEC staff review and, in most cases, after the passage of a waiting period or the issuance of a notice of effectiveness.
To qualify for automatic effectiveness under Rule 462(e), the registration statement must:
(a) Be filed by an issuer that qualifies as a WKSI at the time of filing;
(b) Be filed on Form S-3 or Form F-3;
(c) Be designated on its cover page as an "automatic shelf registration statement" filed pursuant to Rule 462(e); and
(d) Include the appropriate cover page legend required by the General Instructions to Form S-3.
No prior SEC staff review, comment period, or acceleration request is required. The registration statement is effective at the moment of filing on the EDGAR system, and the registrant may commence offerings of registered securities immediately thereafter (subject to compliance with prospectus supplement requirements and other applicable regulations).
The SEC staff retains the authority to review automatic shelf registration statements after filing and effectiveness, and may issue post-effective comments. If the staff issues comments, the registrant is expected to respond and, if necessary, file post-effective amendments. However, the registration statement remains effective and operative during the review process, and the registrant may continue to conduct offerings absent an SEC stop order.
B. Practical Implications for Fairwater
The automatic shelf registration mechanism under Rule 462(e) has several critically important practical implications for Fairwater's shelf renewal:
Filing Date Equals Effective Date:
If Fairwater files the new Form S-3 on July 18, 2025, the registration statement will become effective on July 18, 2025 — the same day. There is no waiting period, no SEC review period, and no risk of delay. This is the single most significant advantage of WKSI status and automatic shelf registration.
Elimination of Gap Risk:
The prior shelf registration statement (File No. 333-265410) expires on August 1, 2025. If Fairwater were not a WKSI and were required to file a standard Form S-3 and wait for SEC review and declaration of effectiveness, there would be a significant risk that the new shelf would not be effective before the prior shelf expires, creating a "gap" during which Fairwater would have no effective shelf and would be unable to sell securities under its ATM program or conduct other offerings. Automatic effectiveness under Rule 462(e) eliminates this risk entirely.
14-Day Buffer:
The July 18, 2025 target filing date provides a 14-day buffer before the August 1, 2025 expiration of the prior shelf. This buffer is deliberately designed to allow sufficient time for:
• Execution and delivery of the Amended and Restated Equity Distribution Agreement
• Filing of the ATM prospectus supplement under Rule 424(b)(5)
• Delivery of initial closing deliverables (officers' certificates, legal opinions, negative assurance letters, comfort letter)
• Coordination with agents and their counsel regarding operational readiness
• Notification to Meridian Trust Company (transfer agent) regarding the new registration statement
While automatic effectiveness removes the risk of SEC-review delay, the 14-day buffer is nevertheless advisable to ensure that all transaction documents and deliverables are in order before the first ATM sale is executed under the new shelf.
Continued Shelf Availability:
From July 18, 2025 through August 1, 2025, both the prior shelf and the new shelf will be effective simultaneously. During this overlap period, Fairwater should direct all new ATM sales and any other new offerings to the new shelf and the new prospectus supplement to begin establishing the new shelf's operating track record. No new sales should be initiated under the prior shelf after the new shelf becomes effective, except to the extent any open orders are in the process of settlement.
C. Indeterminate Amount of Securities
One of the most significant benefits of WKSI status is the ability to register an indeterminate amount and indeterminate classes of securities on the automatic shelf registration statement. This flexibility is conferred by Rule 457(r), which provides that a WKSI filing an automatic shelf need not specify the amount of securities being registered or pay a registration fee at the time of filing.
While this flexibility is available, Fairwater has elected to state an aggregate offering amount of $2,000,000,000 on the cover page of the base prospectus and in the fee table. This decision was made for the following reasons:
• Market Clarity: Stating an aggregate amount provides transparency to investors, analysts, and rating agencies regarding the scope of Fairwater's capital markets plans.
• ATM Program Sizing: The ATM prospectus supplement will reference the base prospectus and the overall shelf capacity, and a stated amount provides context for the $500,000,000 ATM program.
• Consistency with Prior Practice: Fairwater's prior shelf also stated an aggregate amount (as is common market practice among REIT issuers, even those with WKSI status).
The securities classes to be registered under the new shelf include:
• Common shares of beneficial interest ($0.01 par value per share)
• Preferred shares of beneficial interest ($0.01 par value per share), in one or more series
• Senior debt securities (to be issued by Fairwater OP, guaranteed by Fairwater REIT)
• Subordinated debt securities (to be issued by Fairwater OP, guaranteed by Fairwater REIT)
• Depositary shares (each representing a fractional interest in a share of preferred stock)
• Warrants
• Units (consisting of combinations of the foregoing securities)
Each class of securities will be registered in an indeterminate individual amount, with the aggregate dollar amount of all securities offered and sold under the shelf not to exceed $2,000,000,000 (or such greater amount as may be available under WKSI rules).
D. Co-Registrant Considerations — Fairwater Operating Partnership, L.P.
Consistent with Fairwater's UPREIT organizational structure, Fairwater Operating Partnership, L.P. (EIN: 52-2384805) will be a co-registrant on the new Form S-3 for purposes of registering debt securities to be issued by Fairwater OP, with Fairwater REIT serving as guarantor. This arrangement reflects the standard practice among publicly traded UPREIT structures, where the operating partnership is the borrowing entity and the parent REIT guarantees the obligations.
Fairwater OP's principal office is located at 7200 Chesapeake Centre Drive, Suite 400, Annapolis, Maryland 21401 — the same address as Fairwater REIT's principal executive offices, as Fairwater REIT, in its capacity as sole general partner of Fairwater OP, manages all of the OP's affairs.
The registration statement signature page will include:
• Signatures of Fairwater REIT's principal executive officer (Margaret Chen-Whitfield), principal financial officer (Priya Ranganathan), principal accounting officer, and a majority of the members of the Board of Trustees, each in their capacity as officers and/or trustees of Fairwater REIT
• Signatures on behalf of Fairwater OP, signed by Fairwater REIT in its capacity as sole general partner of Fairwater OP (by Margaret Chen-Whitfield and Priya Ranganathan in their capacities as officers of Fairwater REIT, the sole general partner)
Because Fairwater REIT controls Fairwater OP as its sole general partner, and because the REIT is itself a WKSI, the automatic shelf registration and immediate effectiveness provisions of Rule 462(e) apply to the registration statement in its entirety, including the registration of debt securities to be issued by the OP.
V. PAY-AS-YOU-GO FILING FEE MECHANICS — RULES 456(b) AND 457(r)
A. Rule 456(b) — Deferred Payment of Filing Fees
One of the most significant practical advantages of WKSI status is the ability to defer payment of SEC registration fees. Under Rule 456(b) of the Securities Act, a WKSI that files an automatic shelf registration statement is permitted to defer payment of the registration fee that would otherwise be required under Section 6(b) of the Securities Act until the time of each takedown offering from the shelf.
This means that no filing fee is required at the time of filing the registration statement itself. For a $2,000,000,000 shelf registration statement, the potential up-front filing fee savings are substantial. Based on the current SEC fee rate (which is adjusted annually effective October 1 of each fiscal year), the fee for a $2,000,000,000 registration would be in the range of approximately $220,800–$294,800, depending on the applicable rate at the time. Under the pay-as-you-go approach, this aggregate amount will instead be paid incrementally as offerings are conducted over the three-year life of the shelf.
The deferral of filing fees is not merely a timing benefit — it also eliminates the need to calculate the fee for the full aggregate offering amount at the outset, which can be complex when multiple classes of securities are being registered and the precise offering amounts are not yet determined. This is particularly advantageous for universal shelf registration statements covering a broad range of security types.
B. Rule 457(r) — Calculation at Time of Takedown
Rule 457(r) of the Securities Act governs the calculation of the registration fee for WKSI automatic shelf registration statements. Under Rule 457(r), the registration fee for each offering from the shelf is calculated based on the aggregate offering price of the securities being offered at the time of such offering.
The mechanics of fee payment under Rule 457(r) vary depending on the type of offering:
• For underwritten and other discrete offerings: The filing fee is typically calculated at the time the prospectus supplement for the offering is filed under Rule 424(b) and is paid by wire transfer or ACH in connection with the EDGAR filing.
• For ATM program sales: Filing fees are computed and paid periodically based on actual gross sales proceeds realized under the program. The standard market practice is to calculate and pay fees on a quarterly or semi-annual basis, coinciding with the filing of prospectus supplements reporting ATM sales activity.
The SEC fee rate applicable to each fee payment is the rate in effect at the time of the offering. The SEC adjusts the fee rate annually, effective October 1 of each fiscal year, based on a formula set forth in Section 6(b) of the Securities Act and published in an SEC release. Fairwater and Calderwood & Harkness should monitor annual fee rate adjustments and update internal calculations accordingly.
C. Practical Notes
To ensure compliance with the pay-as-you-go filing fee regime, the following coordination steps are recommended:
• Calderwood & Harkness and Sandra Ellerby (Fairwater's SVP, Capital Markets & Treasurer) should coordinate to ensure timely and accurate calculation and payment of filing fees in connection with each takedown offering and each ATM sales period.
• EDGAR Filing Agent: The EDGAR filing procedures for fee payment under Rules 456(b) and 457(r) should be confirmed with Fairwater's EDGAR filing agent prior to the initial filing. The fee table in the registration statement should include the appropriate disclosure indicating that fees are being deferred pursuant to Rule 456(b) and will be paid at the time of each offering pursuant to Rule 457(r).
• Record-Keeping: Fairwater and Calderwood & Harkness should maintain a running ledger of filing fees paid in connection with each offering from the shelf, including the date, amount, fee rate, and aggregate offering price of the securities offered, to ensure accurate tracking and compliance.
• Fee Payment Deadlines: Under SEC rules, the filing fee must be paid at the time the prospectus supplement is filed. Late payment of filing fees can result in the SEC refusing to accept the filing or taking other administrative action. Accordingly, timely fee payment is essential.