Nate,
I hope the new year is off to a good start. I am writing on behalf of our client, Fairwater Real Estate Investment Trust (the "Buyer"), in connection with the proposed acquisition of 100% of the membership interests in the fourteen property-owning single-purpose Delaware limited liability companies (the "Target Entities") from Greystone Meridian Partners Fund III, L.P. (the "Seller"). Please find attached, for your and Thomas's review and comment on behalf of the Seller, the initial draft of the Purchase and Sale Agreement (the "PSA") prepared by Calderwood & Harkness LLP (C&H Matter No. 1036-00004).
As you know, the parties executed a Letter of Intent on October 18, 2023, and subsequently extended the exclusivity period through January 31, 2024. The enclosed draft reflects the principal terms set forth in the LOI and incorporates additional provisions that we believe are consistent with transactions of this nature and size.
**Summary of Key Terms**
For ease of reference, I have summarized the key terms and structural provisions of the draft PSA below:
*Transaction Structure.* Entity-level acquisition — the Buyer will acquire 100% of the membership interests in each of the 14 Target Entity LLCs, each of which is a single-purpose Delaware LLC. The 14 Target Entities are: GMP Fairfield I LLC, GMP Fairfield II LLC, GMP Westlake LLC, GMP Katy LLC, GMP Alliance LLC, GMP Lakeland LLC, GMP Southport LLC, GMP Murfreesboro LLC, GMP Buckhead LLC, GMP SouthPark LLC, GMP Cool Springs LLC, GMP Brickell LLC, GMP Peachtree LLC, and GMP Mount Juliet LLC.
*Portfolio.* The Target Entities collectively own 14 properties across five states (Georgia, Texas, Florida, Tennessee, and North Carolina), totaling approximately 5,224,000 rentable square feet (10 logistics and 4 office). As of December 31, 2023, the portfolio comprises 87 leases, with weighted-average occupancy of 93.2% and annual in-place base rent of approximately $74,800,000 (reflecting a 6.80% in-place cap rate).
*Purchase Price.* $1,100,000,000.
*Consideration Breakdown:*
- Assumption of approximately $612,000,000 in existing mortgage indebtedness across three lenders: - Pinnacle Federal Bank, N.A. — approximately $421,600,000 (Master Loan Agreement dated September 15, 2020) - Veltrano Capital Lending Corp. — approximately $142,300,000 (Loan Agreement dated February 1, 2021) - Sycamore Life Insurance Company — approximately $48,100,000 (Note Purchase Agreement dated November 22, 2019) - Cash equity at closing of approximately $488,000,000
*Earnest Money Deposit.* $27,500,000 (2.5% of Purchase Price), to be deposited with Commonwealth National Title Insurance Company, as escrow agent, within two (2) business days of PSA execution. An additional hard deposit of $27,500,000 is due upon expiration of the Due Diligence Period, bringing total deposits to $55,000,000.
*Due Diligence Period.* 46 days from execution.
*Change of Control Consents.* The draft includes, as a condition to closing, the receipt of lender consents from all three existing mortgage lenders, as the transfer of membership interests constitutes a change of control event under each loan agreement. Lender consent fees are to be borne 50/50 by Buyer and Seller.
*Replacement Guarantor.* Fairwater REIT to replace GMP Fund III as the carve-out guarantor under each loan, subject to guarantor financial covenants of $500,000,000 minimum tangible net worth and $50,000,000 minimum liquid assets.
*Estoppel Delivery Requirement.* Seller to deliver tenant estoppel certificates from tenants representing at least 80% of in-place base rent ($59,840,000 of $74,800,000 annual in-place base rent) and from every tenant occupying 25,000+ RSF (each, a "Major Tenant"), in form reasonably acceptable to Buyer and Buyer's lenders.
*SNDA Requirement.* Buyer to deliver subordination, non-disturbance, and attornment agreements to all Major Tenants (tenants with annual base rent ≥ $1,500,000).
*Prorations and Working-Capital True-Up.* The draft includes a detailed proration and working-capital adjustment mechanism covering real property taxes, CAM/OpEx reconciliation, insurance premiums, utility charges, percentage rent, security deposits ($4,283,000 in the aggregate), and other customary items, with a 90-day post-closing true-up.
*Title.* ALTA Owner's Policy (2021 form) to be issued by Commonwealth National Title Insurance Company for each property. Title objection deadline is 30 days from execution, with a Seller cure period of 15 business days. Mandatory cure items are specified and include monetary liens, mechanic's liens, delinquent taxes, judgments, and post-effective-date matters.
*Surveys.* ALTA/NSPS Land Title Surveys (2021 Minimum Standard Detail Requirements) with specified Table A items.
*Indemnification:*
- General Representation Cap: $55,000,000 (5% of Purchase Price) - Fundamental Representation Cap: $110,000,000 (10% of Purchase Price) - Basket (tipping): $5,500,000 (0.5% of Purchase Price) - De minimis threshold: $275,000 per individual claim - Indemnity Escrow: $16,500,000 (1.5% of Purchase Price), to be held for 18 months with Commonwealth National Title Insurance Company
*Representation Survival.* General representations survive for 18 months post-closing; tax representations survive for 36 months post-closing.
*Knowledge Individuals.* Seller: Victor Lansdell, Elise Rathborne, and Sean Kilpatrick. Buyer: Marcus Devereaux, Leah Torrance, and David Elgin Park.
*Transfer Taxes.* Split 50/50 between Buyer and Seller.
*Transition Services.* The draft includes a 90-day transition services period for property management transition from Argyle Property Services LLC to Fairwater Property Management LLC.
*Purchase Price Adjustment.* The draft provides for purchase price adjustment to reflect PCA repair credits and other agreed adjustments.
*Governing Law.* State of New York.
**Exhibits and Schedules**
The draft includes 22 exhibits (Exhibits A through V) and contemplates 14 property-specific disclosure schedules plus general disclosure schedules. The key exhibits are attached in draft form (or as placeholders, as noted):
- **Exhibit A:** Legal Descriptions (14 properties — *placeholder; we request that the Seller provide final metes-and-bounds descriptions*) - **Exhibit B:** Form of Assignment and Assumption of Membership Interests - **Exhibit C:** Form of Seller's Closing Certificate - **Exhibit D:** Form of Buyer's Closing Certificate - **Exhibit E:** Form of Tenant Estoppel Certificate - **Exhibit F:** Form of SNDA - **Exhibit G:** Form of Escrow Agreement - **Exhibit H:** Rent Roll (*placeholder — request Seller provide updated rent roll as of most recent month-end*) - **Exhibit I:** List of Service Contracts (*placeholder — request Seller provide*) - **Exhibit J:** List of Pending Litigation (*placeholder — request Seller provide*) - **Exhibit K:** Purchase Price Allocation Schedule (*to be agreed based on appraised values from Stonebridge Valuation Advisors, LLC*) - **Exhibit L:** Form of Transition Services Agreement - **Exhibit M:** Insurance Requirements - **Exhibit N:** Environmental Reports List (*placeholder*) - **Exhibit O:** Form of FIRPTA Certificate - **Exhibit P:** Permitted Exceptions (*to be populated following title review*) - **Exhibit Q:** Assumed Loan Documents List (*placeholder — request Seller provide complete list*) - **Exhibit R:** Form of Lender Consent Letter - **Exhibit S:** Form of Replacement Guaranty - **Exhibit T:** Form of Title Affidavit (Seller) - **Exhibit U:** Proration and Working-Capital Methodology - **Exhibit V:** Form of Post-Closing Proration True-Up Statement
With respect to the Disclosure Schedules, we would ask that the Seller populate Schedule 1 (general) and Schedules 2-1 through 2-14 (property-specific) in connection with the Seller's first round of comments.
**Seller-Provided Information Requests**
In addition to the placeholder items noted above, we respectfully request that Seller's counsel circulate the following with your initial comments:
1. Final legal descriptions for all 14 properties 2. Updated rent roll (as of most recent month-end) 3. Complete assumed loan documents list for all three lender facilities 4. List of all service contracts, together with copies 5. List of pending or threatened litigation 6. Environmental reports inventory 7. Completed disclosure schedules (Schedules 1 and 2-1 through 2-14) 8. Organizational documents for each Target Entity and for GMP Fund III
**Timing and Next Steps**
As noted, the LOI exclusivity period expires on January 31, 2024, and the parties are targeting PSA execution by late February. In light of that timeline, we would appreciate it if Blackridge Hayes could provide comments and markups within approximately two weeks — by January 22, 2024, if practicable — to allow sufficient time for negotiation rounds ahead of the exclusivity deadline and the targeted signing date.
We are happy to schedule a call with you and Thomas (and with Doug Fairchild and the client team, as appropriate) to discuss any significant business or structural issues before your team begins its markup. Please let us know if that would be useful and we will coordinate availability.
Finally, our tax colleague Sylvia Hartwell is available to engage directly with Ingrid Solberg on tax-related provisions, including the purchase price allocation methodology under Section 1060, FIRPTA matters, and transfer tax treatment. We can facilitate that introduction at your convenience.
**Attachments**
1. Purchase and Sale Agreement — Initial Draft (Word format) 2. Exhibits A through V (drafts and placeholders, compiled)
Please do not hesitate to reach out with any questions. We look forward to receiving your comments.
Best regards,
Grace Nakamura Calderwood & Harkness LLP 450 Park Avenue, 28th Floor New York, NY 10022 T: (212) 554-7183 gnakamura@calderwoodharkness.com
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