Naomi,
I hope this note finds you well. I am writing in connection with Fairwater Real Estate Investment Trust's acquisition of the 14-property portfolio from Greystone Meridian Partners Fund III, L.P. (C&H Matter No. 1036-00004) to coordinate the preparation and filing of controlling-interest transfer tax returns and declarations in each applicable jurisdiction.
As you know, closing is currently anticipated for May 31, 2024, though there remains the possibility of a short extension pending receipt of final lender consent from Pinnacle Federal Bank. We want to be sure the transfer tax workstreams are well in hand regardless of how the closing date lands.
**Transaction Structure — Brief Summary**
By way of context for the transfer tax analysis, Fairwater is acquiring 100% of the membership interests in 14 single-purpose Delaware LLCs, each of which holds a single real property asset. Because the transfer of membership interests constitutes a controlling-interest transfer in each entity, transfer tax obligations are triggered in those jurisdictions that impose taxes on such transfers.
The aggregate purchase price is $1,100,000,000, subject to a $1,070,000 PCA repair credit, yielding an adjusted purchase price of $1,098,930,000. The allocation of the purchase price among the 14 properties follows the agreed allocation schedule set forth in PSA Exhibit K, which is based on appraised values prepared by Stonebridge Valuation Advisors, LLC. This property-level allocation drives the transfer tax calculations in each jurisdiction.
The estimates below are consistent with the C&H Transfer Tax Analysis memorandum (covering all five states) that we circulated to the team previously.
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**JURISDICTION-BY-JURISDICTION BREAKDOWN**
**1. Georgia — 4 Properties**
| Property
Georgia imposes a real estate transfer tax on controlling-interest transfers. Our estimated aggregate Georgia transfer tax is approximately **$1,250,000**.
As you may recall, we have engaged Talmadge Beaumont LLP (Catherine Beaumont) as Georgia local counsel. Rafael Dominguez on our team is coordinating directly with Catherine on the Georgia declarations. C&H will prepare the returns with input from Ashford Prewitt on the allocation figures; Talmadge Beaumont will review and handle the local filings.
**2. Texas — 3 Properties**
| Property
Texas does not impose a state transfer tax on controlling-interest transfers. Estimated transfer tax exposure is **$0** (de minimis filing/recording fees only). No transfer tax returns are required. Breckenridge Osgood LLP (James Breckenridge) is serving as Texas local counsel and will handle any nominal filings associated with recording.
**3. Florida — 3 Properties**
| Property
Florida imposes documentary stamp tax on the deemed consideration attributable to controlling-interest transfers. This represents our largest single-state exposure, with an estimated aggregate Florida documentary stamp tax of approximately **$1,680,000**.
Palmetto Strauss PA (Roberto Strauss) is Florida local counsel. C&H is preparing the computations; Palmetto Strauss will review, handle the filings, and confirm payment and acceptance.
**4. Tennessee — 3 Properties**
| Property
Tennessee imposes a controlling-interest transfer tax. Our estimated aggregate Tennessee transfer tax is approximately **$740,000**.
Ellsworth Ridley LLP (Diane Ellsworth) is Tennessee local counsel. As with the other jurisdictions, C&H will prepare the returns, and Ellsworth Ridley will review and file.
**5. North Carolina — 1 Property**
| Property
North Carolina imposes an excise tax on controlling-interest transfers. The estimated North Carolina excise tax is approximately **$180,000**.
Haversham Cole PLLC (Marshall Haversham) is North Carolina local counsel and will review and file following C&H's preparation of the returns.
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**AGGREGATE ESTIMATED TRANSFER TAXES**
| Jurisdiction
Pursuant to the PSA, transfer taxes are allocated 50% to Buyer and 50% to Seller, resulting in a Buyer's share of **$1,925,000** and a Seller's share of **$1,925,000**. These amounts will be reflected on the closing settlement statements.
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**ACTION ITEMS / REQUESTS**
To ensure we are fully aligned ahead of closing, I would appreciate your assistance with the following:
1. **Allocation Confirmation.** Please confirm the purchase price allocation figures from PSA Exhibit K that Ashford Prewitt has on file. We want to ensure complete consistency between the figures used in the transfer tax returns and those Ashford Prewitt will use for IRS Form 8594 preparation.
2. **Review of Estimated Amounts.** We would be grateful if your team could review the estimated amounts set forth above and flag any discrepancies with your own calculations.
3. **Appraisal Reports.** Please let us know whether Ashford Prewitt needs any of the underlying appraisal reports from Stonebridge Valuation Advisors, LLC to support the allocation. We are happy to arrange access.
4. **Timing.** Our plan is to have draft returns ready approximately one week before the anticipated closing date so that they can be finalized and executed at closing. We will circulate the draft returns as attachments in a follow-up email once they are prepared.
5. **Funds Flow / Withholding.** Please confirm that the transfer tax payments will be wired at closing per the funds flow memorandum that C&H is currently preparing. We would also appreciate Ashford Prewitt's input on any withholding or estimated payment considerations that should be reflected in the funds flow.
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**NEXT STEPS**
Could you please confirm receipt of this email and provide any comments or questions by end of week — **Friday, May 24, 2024**? If Martin or the broader team would find it helpful, I am happy to schedule a call to walk through the calculations in detail. Please just let me know what works, and Grace can coordinate scheduling.
Thank you, Naomi. We look forward to working with you and Martin on bringing this to a smooth closing.
Best regards,
**Sylvia Hartwell** Specialist Partner, Tax Calderwood & Harkness LLP 1700 K Street NW, Suite 900 Washington, DC 20006 Tel: (202) 555-4100 shartwell@calderwoodharkness.com
*C&H Matter No. 1036-00004*
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