Marcus,
I am writing to update you on the status of the change of control consent from Pinnacle Federal Bank, N.A., which as of this evening remains the sole outstanding lender consent under the Purchase and Sale Agreement. Today, May 24, is the lender consent deadline under the PSA, and Pinnacle's consent has not been received. I want to walk you through where things stand across all three lender consents, explain the nature of the Pinnacle delay, and recommend a course of action to address the timing issue while keeping this transaction on track.
**Status of Lender Consents**
As you know, the transfer of membership interests in the 14 Target Entities constitutes a "change of control" under each of the three existing mortgage loan agreements, requiring lender consent as a condition to closing. Here is where we stand on each:
*Veltrano Capital Lending Corp.* — Consent executed and received on May 17, 2024, covering Loans 2-A through 2-D ($142,300,000 aggregate outstanding principal balance, secured by the four office properties). The consent fee of $711,500 (0.50% of OPB) has been paid, and the replacement guaranty and assumption agreement are fully executed. This consent is in hand and fully resolved.
*Sycamore Life Insurance Company* — Consent executed and received on May 22, 2024, covering Loans 3-A and 3-B ($48,100,000 aggregate OPB, secured by Peachtree Corners Logistics Center and Mount Juliet Commerce Park). The consent fee of $60,125 (0.125% of OPB) has been paid, and the replacement guaranty and assumption agreement are fully executed. This consent is likewise complete.
*Pinnacle Federal Bank, N.A.* — Consent has NOT been received. This is the largest tranche of assumed debt — Loans 1-A through 1-H ($421,600,000 aggregate OPB) under the Master Loan Agreement dated September 15, 2020, secured by the eight logistics properties (Fairfield I & II, Westlake, Katy Freeway, Alliance Commerce, Lakeland Crossings, Southport, and Murfreesboro). The consent fee of $1,054,000 (0.25% of OPB) is calculated and ready to wire upon receipt of consent.
**The Pinnacle Delay**
We submitted the formal consent request to Sandra Whitfield at Whitfield & Archer LLP, Pinnacle's outside counsel, on March 8, 2024 — the same date consent requests were sent to all three lenders. Pinnacle's internal credit committee has been reviewing the replacement guarantor financial package in the ordinary course. Fairwater's financial statements, net worth certification (addressing the $500,000,000 minimum tangible net worth covenant and $50,000,000 minimum liquid assets covenant), and the form of replacement carve-out guaranty were all provided in full with the original submission.
Whitfield & Archer provided comments on the replacement guaranty form in late March. Grace and I responded on April 5 and resolved substantially all comments. A revised guaranty was re-submitted in mid-April, and there have been no further substantive issues raised.
I spoke today with both Sandra Whitfield and Bradley Carston (SVP, Pinnacle) to get a clear picture of where things stand. The delay is attributable to Pinnacle's internal credit approval process — not to any substantive issues with Fairwater's credit profile or the guaranty terms. Sandra indicated that the credit committee met earlier this week and that she expects formal execution of the consent within the next 7 to 10 business days, which would place delivery at approximately June 4–7, 2024.
My assessment: there is no indication of any substantive impediment to Pinnacle granting this consent. The delay appears to be procedural and bureaucratic in nature.
**Impact on Closing**
The scheduled closing date under the PSA is May 31, 2024. Without Pinnacle's consent, the change of control condition precedent cannot be satisfied, and closing cannot proceed on that date. The PSA does not include an automatic extension right for lender consent delay, so an amendment to the agreement is required to extend the outside closing date.
**Recommended Course of Action**
I recommend that Fairwater request a PSA amendment to extend the closing date from May 31, 2024, to June 7, 2024, providing approximately one additional week to accommodate the Pinnacle timeline.
We have already been in preliminary discussions with Nathaniel Pryce and Thomas Keating at Blackridge Hayes LLP, Seller's counsel, regarding this possibility. Blackridge Hayes has indicated that GMP Fund III is amenable to a short extension, recognizing the procedural nature of the Pinnacle delay and the fact that the Veltrano and Sycamore consents are already in hand. Their preliminary indication is that no additional deposit or other consideration for the extension would be required by Seller.
The amendment itself would be straightforward — a one-page Second Amendment modifying the defined "Closing Date" and "Outside Date" to June 7, 2024.
I want to emphasize that all other closing conditions are on track and in good shape:
- **Estoppels:** 91.4% of in-place ABR received as of today ($68,371,200 of $74,800,000), well above the 80% threshold ($59,840,000). - **SNDAs:** 34 of 38 required Major Tenant SNDAs executed; the remaining 4 are subject to the post-closing carve-out side letter currently being finalized with Blackridge Hayes ($200,000 holdback from Seller proceeds). - **Title:** Final ALTA Owner's Policies (2021 form) in pro forma from Commonwealth National Title Insurance Company for all 14 properties; all title objections have been resolved; gap coverage confirmed. - **Surveys:** Final certified ALTA/NSPS surveys received and approved for all 14 properties. - **R&W Insurance:** Sentinel Specialty Insurance Company policy ($55,000,000 limit, $11,000,000 retention) ready to bind at closing; premium of $1,402,500 confirmed. - **Transfer Taxes:** Returns prepared for Georgia, Florida, Tennessee, and North Carolina (estimated $3,850,000 total). - **Closing Documents:** Substantially complete and in agreed form.
**Financial Summary for Reference**
For context, the key financial parameters remain as follows:
- Total assumed debt: $612,000,000 (Pinnacle $421,600,000 + Veltrano $142,300,000 + Sycamore $48,100,000) - Cash equity at closing: $488,000,000, to be funded from Fairwater's $750,000,000 revolver with Aldgate National Bank, N.A. - PCA credit of $1,070,000 (50% of $2,140,000 in identified repairs) will reduce net cash to Seller to $486,930,000, subject to prorations - Total consent fees: $1,825,625, split 50/50 (Buyer's share: $912,812.50)
**Next Steps**
1. If you are in agreement with the approach described above, we will circulate a draft Second Amendment to Blackridge Hayes on Monday, May 27, for execution by both parties before the current May 31 closing date. 2. We will continue to press Whitfield & Archer and Pinnacle directly for expedited processing of the consent. 3. Grace will coordinate with the closing team and Kenneth Stanhope at Commonwealth National Title to adjust the closing agenda and funds flow for a June target. 4. I would ask that you confirm Fairwater's authorization to proceed with the amendment approach and flag any concerns from the business side. 5. I will keep you, David, and Camille updated daily until the Pinnacle consent is received.
Marcus, I am confident this will resolve in the near term. The transaction fundamentals are strong, Fairwater's credit profile is not in question, and every other workstream is in order. This is simply a matter of navigating Pinnacle's internal process to the finish line.
I am available by phone over the weekend if you would like to discuss any of this further. Please don't hesitate to reach out.
*This communication is protected by the attorney-client privilege and is intended solely for the use of the addressees. If you have received this message in error, please notify the sender immediately and delete the message.*
Best regards,
Douglas Fairchild Partner, Real Estate Calderwood & Harkness LLP 450 Park Avenue, 28th Floor New York, NY 10022 T: (212) 554-7100
Matter No. 1036-00004