PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the attorney work product doctrine. It is prepared for the sole use of Fairwater Real Estate Investment Trust and its authorized representatives. Unauthorized disclosure, copying, or distribution is strictly prohibited.
MEMORANDUM
TO: Douglas Fairchild, Responsible Partner, Calderwood & Harkness LLP
FROM: Grace Nakamura, Lead Associate, Calderwood & Harkness LLP Rafael Dominguez, Working Associate, Calderwood & Harkness LLP
DATE: April 10, 2024
RE: Environmental Due Diligence Summary — Fairwater Real Estate Investment Trust Acquisition of 14-Property Sun Belt Logistics and Office Portfolio from Greystone Meridian Partners Fund III, L.P.
MATTER NO.: 1036-00004
Right-click to update Table of Contents
I. Executive Summary
The purpose of this memorandum is to summarize the environmental due diligence findings for the proposed acquisition by Fairwater Real Estate Investment Trust ("Fairwater" or "FREIT") of one hundred percent (100%) of the membership interests in fourteen (14) single-purpose Delaware limited liability companies (collectively, the "Target Entities") from Greystone Meridian Partners Fund III, L.P. ("GMP Fund III" or "Seller"). The aggregate purchase price for the transaction is $1,100,000,000 (as adjusted, and subject to certain credits discussed herein), representing a portfolio of logistics and office properties located across the Sun Belt region of the United States.
The transaction is structured as an entity-level purchase of membership interests in each of the fourteen Target Entities, each of which holds fee simple title to a single real property asset. Because the Target Entities hold fee simple title to the properties, environmental liabilities associated with the properties travel with the entities and are not severed by the membership interest transfer. This structural feature underscores the importance of thorough environmental due diligence: Fairwater, as the indirect successor owner, will inherit any environmental liabilities that currently attach to the properties or the Target Entities, whether arising from current operations, historical uses, or third-party contamination.
Calderwood & Harkness LLP ("C&H") engaged Trident Environmental Group LLC ("Trident"), located at 5500 Wayzata Boulevard, Suite 600, Minneapolis, Minnesota 55416, on behalf of Fairwater to conduct environmental site assessments across the entire portfolio. Rachel Kwan, Senior Environmental Scientist, served as Trident's project manager for all fourteen Phase I Environmental Site Assessments ("Phase I ESAs"). Trident's assessments were conducted in accordance with ASTM Standard E1527-21, the current prevailing standard for Phase I ESAs, and were designed to satisfy the "All Appropriate Inquiries" ("AAI") rule under 40 C.F.R. Part 312, thereby establishing the predicate for Fairwater to assert CERCLA liability protections, including the bona fide prospective purchaser defense, upon closing.
The scope of Trident's engagement encompassed Phase I ESAs for all fourteen (14) properties in the portfolio. The Phase I ESAs were delivered between January 2024 and March 2024, and all reports have been reviewed by C&H prior to the expiration of the Due Diligence Period on April 15, 2024.
Overall Conclusion. Based on our review of the fourteen Phase I ESAs and all supporting documentation, our findings are as follows:
•  Twelve (12) of the fourteen (14) properties received clean Phase I ESAs with no recognized environmental conditions ("RECs"), no controlled recognized environmental conditions ("CRECs"), no historical recognized environmental conditions ("HRECs"), and no de minimis conditions.
•  Two (2) properties — the Westlake Distribution Hub located at 11500 Westlake Parkway, Houston, Texas 77082 (Property #3), and Lakeland Crossings Industrial located at 7100 Drane Field Road, Lakeland, Florida 33811 (Property #6) — were identified as having de minimis RECs. In both instances, the conditions are fully controlled and do not present material environmental risk to Fairwater. The de minimis condition at Westlake relates to a historical petroleum hydrocarbon release from a former aboveground storage tank, which was remediated and received regulatory closure from the Texas Commission on Environmental Quality ("TCEQ") in the form of a No Further Action letter. The de minimis condition at Lakeland relates to low-level pesticide residue in shallow soil consistent with historical agricultural use (citrus grove operations), with concentrations below applicable Florida cleanup target levels for the property's current commercial/industrial use classification.
•  No Phase II Environmental Site Assessments are required or recommended for any property in the portfolio.
•  No material environmental impediments to closing have been identified.
Recommendation. We recommend that Fairwater proceed with the acquisition. No purchase price adjustment is warranted for environmental matters. The standard environmental representations and warranties set forth in the Purchase and Sale Agreement (the "PSA"), dated February 28, 2024, provide adequate contractual protection, with general representations surviving for eighteen (18) months following closing and tax representations surviving for thirty-six (36) months following closing. These contractual protections are supplemented by a buyer-side representations and warranties insurance policy from Sentinel Specialty Insurance Company with a $55,000,000 policy limit. We discuss the risk allocation framework, including the indemnification provisions and R&W insurance policy, in greater detail in Section VI below.
II. Scope and Methodology
A. Engagement of Trident Environmental Group LLC
Trident Environmental Group LLC was retained by Calderwood & Harkness LLP on behalf of Fairwater Real Estate Investment Trust pursuant to an engagement letter dated November 14, 2023. The engagement letter specified that Trident would perform Phase I Environmental Site Assessments for each of the fourteen (14) properties in the portfolio in accordance with ASTM Standard E1527-21 and the AAI rule. The engagement further provided that the Phase I ESAs would be addressed to Fairwater Real Estate Investment Trust, with reliance extended to its successors, assigns, and lenders.
Rachel Kwan, Senior Environmental Scientist, served as the project manager for all fourteen Phase I ESAs. Ms. Kwan personally conducted or supervised the site reconnaissance for each property and oversaw the records review, historical research, and report preparation for the entire portfolio. Trident's team also included field investigators who accompanied Ms. Kwan during site visits and performed interviews with property managers and local government officials.
The fourteen Phase I ESA reports were delivered on a rolling basis between January 2024 and March 2024. All reports have been reviewed by Grace Nakamura, Lead Associate, and Rafael Dominguez, Working Associate, at Calderwood & Harkness LLP. The review was completed and all environmental issues identified prior to the expiration of the Due Diligence Period under the PSA, which is April 15, 2024.
B. Phase I ESA Standards and Scope
All fourteen Phase I ESAs were performed in accordance with ASTM Standard Practice E1527-21, entitled Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process. ASTM E1527-21 is the current edition of the prevailing standard for conducting Phase I ESAs in the United States and supersedes the prior edition, ASTM E1527-13. The assessments are designed to identify recognized environmental conditions, controlled recognized environmental conditions, historical recognized environmental conditions, and de minimis conditions, as those terms are defined by the ASTM standard.
The Phase I ESAs satisfy the "All Appropriate Inquiries" rule promulgated by the United States Environmental Protection Agency ("EPA") under 40 C.F.R. Part 312, which implements the requirements of Section 101(35)(B) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9601(35)(B). Compliance with the AAI rule is a prerequisite for a purchaser of real property to assert certain CERCLA liability protections, including the innocent landowner defense under CERCLA § 101(35)(A), the contiguous property owner defense under CERCLA § 107(q), and the bona fide prospective purchaser ("BFPP") defense under CERCLA § 107(r). The BFPP defense is of primary relevance to this transaction.
Each Phase I ESA included the following components, as required by ASTM E1527-21:
(i) Records Review. A comprehensive review of federal, state, tribal, and local environmental databases, including EPA databases (such as the CERCLIS, NPL, RCRA, and ERNS databases), state environmental agency databases, tribal databases where applicable, and other reasonably ascertainable databases. The records review was performed by Penrose Solutions ("EDR"), a standard environmental database vendor, as a subcontractor to Trident.
(ii) Historical Use Review. Research into the historical uses of each property and surrounding areas through a review of aerial photographs (dating back to the earliest available coverage for each property location), Trelwick fire insurance maps (where available), city and cross-reference directories, building department records and permits, and historical topographic maps published by the United States Geological Survey.
(iii) Site Reconnaissance and Visual Inspection. An on-site visit to each property, conducted by Rachel Kwan and Trident field investigators, to visually inspect the property and surrounding areas for evidence of recognized environmental conditions, including but not limited to the presence of hazardous substances or petroleum products, underground or aboveground storage tanks, stained soil or pavement, stressed vegetation, improperly stored waste materials, drums or containers, and other indicators of potential contamination.
(iv) Interviews. Interviews with current owners, occupants, property managers, and local government officials, including fire department officials and building department personnel, regarding current and historical uses of the properties, any known environmental conditions or concerns, and any pending or threatened environmental investigations or enforcement actions.
(v) Evaluation of Adjoining and Nearby Properties. An assessment of the environmental conditions of properties adjacent to and in the vicinity of each subject property, including a review of regulatory database listings for nearby facilities that could present a potential source of contamination migrating onto the subject properties.
In addition to the standard Phase I ESA components, Trident performed a vapor encroachment screening for each property in accordance with ASTM Standard E2600-15, Standard Guide for Vapor Encroachment Screening on Property Involved in Real Estate Transactions. The vapor encroachment screening is designed to assess whether there is a condition indicative of a potential vapor encroachment condition from releases of volatile chemicals on or near the subject properties.
C. Properties Assessed
The following table identifies all fourteen (14) properties included in the environmental due diligence scope:
The portfolio comprises a total of approximately 5,224,000 rentable square feet ("RSF") across five (5) states: Georgia (4 properties), Texas (3 properties), Florida (3 properties), Tennessee (3 properties), and North Carolina (1 property). Of the fourteen properties, ten (10) are logistics/industrial properties comprising approximately 4,373,000 RSF (83.7% of total portfolio RSF), and four (4) are office properties comprising approximately 851,000 RSF (16.3% of total portfolio RSF).
D. Additional Data Reviewed
In addition to Trident's fourteen Phase I ESA reports, C&H reviewed the following documents and materials as part of the environmental due diligence:
•  PSA Environmental Representations and Warranties. The environmental representations and warranties made by the Seller in Article V, Section 5.15 of the Purchase and Sale Agreement dated February 28, 2024, including the scope of those representations, the knowledge qualifiers applicable thereto, and the survival periods specified in Article X, Section 10.1.
•  PSA Disclosure Schedules. Schedule 1 (General Disclosure Schedule) and property-specific Schedules 2-1 through 2-14, which contain the Seller's disclosures against the environmental representations and warranties for each of the fourteen Target Entities. In particular, Schedules 2-3 (GMP Westlake LLC) and 2-6 (GMP Lakeland LLC) contain disclosures regarding the de minimis conditions discussed in Section IV of this memorandum.
•  PSA Exhibit N: Environmental Reports List. An index of all environmental reports provided by Seller to Buyer in the Data Room, including prior Phase I ESAs conducted at the time of GMP Fund III's acquisition of the properties between 2019 and 2021.
•  Data Room Documents. Approximately 340 environmental-related documents made available in the Data Room, including prior Phase I ESAs, environmental compliance records, underground storage tank registration and closure documentation, asbestos and lead-based paint surveys, regulatory correspondence between the Target Entities (or their property managers) and federal, state, and local environmental agencies, and hazardous materials business plans and emergency response plans.
•  Zoning Confirmation Letters. Zoning confirmation letters obtained for all fourteen (14) properties from the applicable local zoning authorities, confirming that the current uses of the properties (logistics/industrial and office) are conforming uses under the applicable zoning ordinances.
III. Summary of Findings
A. Overview Results Table
The following table summarizes the Phase I ESA findings for all fourteen (14) properties in the portfolio:
The results may be summarized as follows:
•  12 of 14 properties: No RECs, no CRECs, no HRECs, and no de minimis conditions. These properties received clean Phase I ESAs with no environmental findings of any kind.
•  2 of 14 properties: De minimis RECs identified. The affected properties are the Westlake Distribution Hub (Property #3) and Lakeland Crossings Industrial (Property #6). In both cases, the conditions are controlled and do not present material environmental risk. These conditions are discussed in detail in Section IV below.
•  Phase II ESA required: None. Trident did not recommend Phase II Environmental Site Assessments (i.e., subsurface investigations involving sampling and analysis of soil, groundwater, or soil gas) for any property in the portfolio, and C&H concurs with this assessment.
B. Clean Properties — Summary (12 Properties)
Properties 1, 2, 4, 5, 7, 8, 9, 10, 11, 12, 13, and 14 each received clean Phase I ESAs with no recognized environmental conditions of any type. The following general observations apply to these twelve properties:
Construction and Historical Use. All twelve properties were constructed between 2016 and 2021 on sites that were either previously undeveloped or used for agricultural purposes (greenfield development) or on sites with limited prior use that did not involve the manufacture, storage, disposal, or release of hazardous substances or petroleum products. The relatively recent construction dates and the absence of significant prior industrial use are favorable factors in the environmental risk profile of the portfolio.
Underground Storage Tanks. No underground storage tanks ("USTs") were identified at any of the twelve clean properties during the records review, historical research, site reconnaissance, or interviews conducted by Trident. None of the twelve properties are registered in any state UST database, and no evidence of former USTs (such as vent pipes, fill ports, or dispensers) was observed during site visits.
Releases of Hazardous Substances. No evidence of current or historical releases of hazardous substances, petroleum products, or other regulated materials was identified at any of the twelve clean properties. No spills, staining, stressed vegetation, odors, or other visual or olfactory indicators of contamination were observed during Trident's site reconnaissance visits.
Adjoining and Nearby Properties. No adjoining or nearby properties with documented releases were identified that could reasonably be expected to impact the subject properties through migration of contaminants in soil, groundwater, or vapor. While certain properties in the portfolio are located in areas with other industrial or commercial uses nearby, the regulatory database review did not reveal any listed facilities within the applicable search radii that present a concern for potential off-site migration onto any of the subject properties.
Vapor Encroachment Screening. A vapor encroachment screening was completed for all fourteen properties in accordance with ASTM Standard E2600-15. No vapor encroachment conditions were identified at any of the twelve clean properties. There are no known or suspected sources of volatile organic compounds ("VOCs") in the vicinity of these properties that would present a concern for vapor intrusion into occupied building spaces.
Asbestos-Containing Materials. Given the construction dates of the twelve clean properties (2016 through 2021), asbestos-containing materials ("ACM") are not expected or identified. The EPA banned the use of certain asbestos-containing products, and modern construction practices and materials generally do not incorporate asbestos. No ACM was identified during Trident's site reconnaissance, and pre-demolition or pre-renovation asbestos surveys are not required for these properties at this time.
Lead-Based Paint. All fourteen properties in the portfolio, including the twelve clean properties, were constructed after 1978, the year in which the Consumer Product Safety Commission banned the sale of residential lead-based paint. Lead-based paint ("LBP") is not a concern at any property in the portfolio.
Wetlands. No jurisdictional wetlands were identified on any of the twelve clean properties based on a review of the National Wetlands Inventory maps maintained by the U.S. Fish and Wildlife Service and on-site observations during Trident's site reconnaissance. No delineated wetlands, streams, or other waters of the United States were observed on or immediately adjacent to any of the twelve clean properties.
Enforcement Actions, Liens, and AULs. No open enforcement actions, environmental liens, or activity and use limitations ("AULs") have been recorded against any of the twelve clean properties. A review of federal and state regulatory databases, court records, and lien search results confirmed the absence of any such encumbrances.
IV. Properties with De Minimis Recognized Environmental Conditions
Two of the fourteen properties in the portfolio — the Westlake Distribution Hub (Property #3) and Lakeland Crossings Industrial (Property #6) — were identified by Trident as having de minimis recognized environmental conditions. Under ASTM E1527-21, a "de minimis condition" is a condition that generally does not present a threat to human health or the environment and that generally would not be the subject of an enforcement action if brought to the attention of appropriate governmental agencies. A de minimis condition is not classified as a recognized environmental condition (REC). We address each of these properties below.
A. Westlake Distribution Hub (Property #3)
Property Address: 11500 Westlake Parkway, Houston, Texas 77082
Target Entity: GMP Westlake LLC (EIN: 84-2415693)
Rentable square Feet: 624,000 RSF. The Westlake Distribution Hub is the largest property in the portfolio by square footage.
Year Built: 2019
Primary Tenant: Cascade Supply Chain Solutions Inc. occupies the entirety of the property (624,000 RSF) pursuant to a triple-net lease. Cascade's annual base rent ("ABR") is $8,736,000, making it the largest tenant by ABR in the portfolio, representing approximately 11.7% of total portfolio ABR.
Phase I ESA Date: January 18, 2024 (Trident Report No. TEG-2024-0103)
Finding: De Minimis Recognized Environmental Condition — Historical Petroleum Hydrocarbon Release.
During its historical use review and records review, Trident identified a former aboveground storage tank ("AST") that had been associated with a prior agricultural operation and fueling facility located on the eastern portion of the current site. The AST was used for the storage of diesel fuel to support agricultural equipment and was in operation during the period when the site was used for cattle ranching and crop cultivation. The AST was removed prior to the commencement of construction of the current improvements.
During site construction activities in 2018 and 2019, limited petroleum-impacted soil was encountered in the area of the former AST. The impacted soil was associated with a historical release of petroleum hydrocarbons (primarily diesel-range organics) from the former AST. The presence of the petroleum-impacted soil was reported to the Texas Commission on Environmental Quality ("TCEQ"), and the property owner at that time (GMP Westlake LLC, shortly after acquisition by GMP Fund III) elected to conduct a voluntary cleanup of the affected area under TCEQ oversight.
The voluntary cleanup involved the excavation and off-site disposal of approximately 180 cubic yards of petroleum-impacted soil. Post-excavation confirmation samples were collected from the sidewalls and base of the excavation. Following completion of the cleanup, TCEQ reviewed the confirmation sampling results and determined that remaining concentrations of petroleum hydrocarbons in soil were below applicable Texas Risk Reduction Standard ("TRRS") residential protective concentration levels ("PCLs"). Because concentrations met the residential standard — the most stringent standard available — a municipal setting designation ("MSD") or other institutional control was not required.
On March 14, 2019, TCEQ issued a "No Further Action" ("NFA") letter confirming that the voluntary cleanup was satisfactorily completed, that remaining concentrations were below applicable regulatory standards, and that no further investigation or remediation was required. The NFA letter is on file with TCEQ and a copy has been provided to C&H by Seller in the Data Room. A copy is attached hereto as Appendix B.
Current Status. The condition is controlled. The NFA letter provides regulatory closure from TCEQ. There are no monitoring wells on the property, no ongoing groundwater monitoring or sampling obligations, no periodic reporting requirements, and no activity and use limitations ("AULs") or institutional controls of any type recorded against the property. During its records review, Trident confirmed that there is no residual groundwater impact associated with the historical release; the affected soil was removed to below applicable standards, and no evidence of petroleum migration to groundwater was identified.
Trident Assessment. Trident classified this condition as a de minimis condition in its Phase I ESA report. Trident concluded that the release has been fully remediated and regulatory closure has been obtained from TCEQ through the NFA letter. Because the condition has been addressed to the satisfaction of the applicable regulatory authority and remaining concentrations meet applicable standards without the need for institutional controls, the condition does not rise to the level of a REC, CREC, or HREC under the definitions set forth in ASTM E1527-21. No further investigation or Phase II ESA was recommended by Trident.
C&H Assessment. Based on our review of the Phase I ESA, the TCEQ NFA letter, the Seller's disclosure schedules, and the relevant Data Room documents, we concur with Trident's classification of this condition as de minimis. The NFA letter provides definitive regulatory closure and eliminates ongoing regulatory risk. The condition has no impact on the property's insurability, title, or current operations. Seller has properly disclosed this condition in PSA Schedule 2-3, and the Seller's environmental representations in the PSA cover pre-existing environmental conditions with appropriate knowledge qualifiers. We recommend that Fairwater retain a copy of the NFA letter in its permanent property files for this asset. No purchase price adjustment is warranted for this condition. No Phase II ESA is recommended.
B. Lakeland Crossings Industrial (Property #6)
Property Address: 7100 Drane Field Road, Lakeland, Florida 33811
Target Entity: GMP Lakeland LLC (EIN: 84-2527834)
Rentable square Feet: 372,000 RSF
Year Built: 2019
Phase I ESA Date: February 8, 2024 (Trident Report No. TEG-2024-0208)
Finding: De Minimis Recognized Environmental Condition — Historical Pesticide Residue from Prior Agricultural (Citrus Grove) Operations.
Trident's historical use review confirmed that the property site was occupied by an active citrus grove (primarily Valencia and Hamlin orange varieties) from at least the 1950s through approximately 2016, when the grove was cleared to prepare the site for commercial/industrial development. Citrus cultivation in Polk County, Florida, is historically associated with the application of organochlorine pesticides, including DDT, DDE (a DDT metabolite), chlordane, dieldrin, and related compounds. These pesticides were widely used in Florida's citrus industry during the mid-twentieth century and, due to their chemical persistence, residual concentrations are commonly detected in shallow soils throughout former citrus-growing areas of central Florida.
During pre-construction geotechnical investigations conducted in 2018, soil samples were collected from multiple locations across the site. Laboratory analysis detected low-level concentrations of organochlorine pesticides, including residual DDT metabolites (DDD and DDE) and chlordane, in shallow soil samples (0 to 2 feet below ground surface). The detected concentrations were below the Florida Department of Environmental Protection ("FDEP") Soil Cleanup Target Levels ("SCTLs") for commercial/industrial use for all analytes. Concentrations were also below FDEP residential SCTLs for all analytes except DDE, which was detected at one sampling location at a concentration marginally above the FDEP residential SCTL but well below the commercial/industrial SCTL. No groundwater contamination was detected in the samples collected during the geotechnical investigation.
Current Status. The condition is controlled. No regulatory action was required or initiated by FDEP in connection with the pesticide detections. The property is currently in commercial/industrial use as a logistics and distribution facility, which is the appropriate land use classification under FDEP's risk-based cleanup framework. The detected concentrations are consistent with widespread background conditions in former citrus-growing areas of Polk County, Florida, and are not indicative of a point-source release or spill. No activity and use limitations ("AULs") or institutional controls have been recorded against the property, and no restrictive covenant or environmental easement is required under current regulatory standards given the property's commercial/industrial use classification.
We note that this property was also the subject of a Property Condition Assessment ("PCA") conducted by Rampart Building Sciences, Inc., which identified $380,000 in estimated immediate repair costs. However, the PCA findings relate to deferred maintenance items (specifically, roof membrane repairs and HVAC system component replacements) and are not environmentally related. The PCA findings are addressed in Section VII.A of this memorandum.
Trident Assessment. Trident classified this condition as a de minimis condition in its Phase I ESA report. Trident noted that the detected pesticide concentrations are consistent with typical agricultural background conditions in the region and do not constitute a REC under ASTM E1527-21. The concentrations are well below commercial/industrial SCTLs, which is the appropriate standard for the property's current use. No further investigation or Phase II ESA was recommended by Trident.
C&H Assessment. Based on our review of the Phase I ESA, the geotechnical sampling data, and the Seller's disclosure schedules, we concur with Trident's classification of this condition as de minimis. The property is appropriately zoned and used for commercial/industrial purposes, and the detected concentrations are well within the bounds permitted under the applicable FDEP regulatory framework for that land use classification. The condition has no impact on the property's current operations, lease obligations, insurability, or title.
We note, however, that if Fairwater were to contemplate a future change in land use from commercial/industrial to residential at this property, additional assessment or soil management could be required, because the DDE concentration at one sampling location exceeded the residential SCTL. While such a land use change is not contemplated under Fairwater's current business plan and is unlikely given the property's location within an established industrial corridor in Lakeland, we recommend that Fairwater Property Management LLC maintain awareness of this consideration for long-term portfolio planning purposes. Seller has properly disclosed this condition in PSA Schedule 2-6. No purchase price adjustment is warranted for this condition. No Phase II ESA is recommended.
V. Property-by-Property Phase I ESA Summaries
This section provides individual summaries for each of the fourteen properties assessed. For the two properties with de minimis conditions (Westlake Distribution Hub, Property #3, and Lakeland Crossings Industrial, Property #6), this section cross-references the detailed discussions set forth in Section IV above.
A. Property 1 — Fairfield Logistics Center I
Address: 4200 Fairfield Industrial Blvd, Fairburn, Georgia 30213
Target Entity: GMP Fairfield I LLC (EIN: 84-2310561)
Size and Type: 412,000 RSF; logistics/distribution facility; built 2020
Tenant: Thornton-Whitaker Pharmaceuticals Corp. occupies the entirety of the property (412,000 RSF) pursuant to a triple-net lease with annual base rent of $6,180,000, representing approximately 8.3% of total portfolio ABR.
Phase I ESA Date: January 22, 2024 (Trident Report No. TEG-2024-0122)
Phase I ESA Result: No RECs, CRECs, HRECs, or de minimis conditions were identified. The property received a clean Phase I ESA.
Historical Use: The site was used as undeveloped agricultural and timber land prior to its development as a logistics facility in 2020. Historical aerial photographs dating from the 1960s through the present show the property as either wooded or under low-intensity agricultural cultivation. No prior industrial use of the site was identified through any component of the Phase I ESA. No Trelwick fire insurance maps were available for this location, which is consistent with the property's rural character prior to recent development.
Regulatory Database Review: The subject property was not listed on any federal or state environmental databases reviewed by EDR. No adjoining or nearby properties with documented releases of concern were identified within the applicable ASTM search radii.
Site Reconnaissance: Trident conducted a site reconnaissance visit on January 15, 2024. No evidence of spills, staining, stressed vegetation, waste disposal, or other indicators of environmental concern was observed. The building and surrounding paved areas were in good condition with no visible signs of hazardous substance use or storage beyond standard janitorial and maintenance products stored in labeled containers in a designated maintenance closet.
Vapor Encroachment Screening: No vapor encroachment conditions were identified. There are no known or suspected sources of volatile organic compounds in the vicinity of the property.
Underground Storage Tanks: No USTs were identified on the subject property or at adjoining properties.
Additional Observations: No ACM, LBP, or wetlands concerns. No open enforcement actions, liens, or AULs. No material environmental findings of any kind.
B. Property 2 — Fairfield Logistics Center II
Address: 4300 Fairfield Industrial Blvd, Fairburn, Georgia 30213
Target Entity: GMP Fairfield II LLC (EIN: 84-2310578)
Size and Type: 387,000 RSF; logistics/distribution facility; built 2020
Phase I ESA Date: January 22, 2024 (Trident Report No. TEG-2024-0123)
Phase I ESA Result: No RECs, CRECs, HRECs, or de minimis conditions were identified. The property received a clean Phase I ESA.
Summary: Fairfield Logistics Center II is situated immediately adjacent to Fairfield Logistics Center I on Fairfield Industrial Boulevard. The two properties share a similar historical use profile — undeveloped agricultural and timber land — and were developed contemporaneously as part of the same logistics park in 2020. The environmental profile of Property 2 mirrors that of Property 1 in all material respects. No USTs, releases, or regulatory database listings were identified. Site reconnaissance revealed no environmental concerns. Vapor encroachment screening returned no conditions of concern. No material environmental findings.
C. Property 3 — Westlake Distribution Hub
Address: 11500 Westlake Parkway, Houston, Texas 77082
Target Entity: GMP Westlake LLC (EIN: 84-2415693)
Size and Type: 624,000 RSF; logistics/distribution facility; built 2019
Phase I ESA Date: January 18, 2024 (Trident Report No. TEG-2024-0103)
Phase I ESA Result: De minimis REC — historical petroleum hydrocarbon release from a former aboveground storage tank, remediated under TCEQ oversight. TCEQ No Further Action letter issued March 14, 2019.
This property is addressed in detail in Section IV.A above. No Phase II ESA is recommended. No purchase price adjustment is warranted. The condition is controlled and does not present material environmental risk.
D. Property 4 — Katy Freeway Logistics Park
Address: 22600 Katy Freeway, Katy, Texas 77449
Target Entity: GMP Katy LLC (EIN: 84-2415710)
Size and Type: 538,000 RSF; logistics/distribution facility; built 2021
Tenant: Zynvaro Distribution Holdings LLC occupies the entirety of the property (538,000 RSF) pursuant to a triple-net lease with annual base rent of $7,532,000, representing approximately 10.1% of total portfolio ABR.
Phase I ESA Date: February 5, 2024 (Trident Report No. TEG-2024-0205)
Phase I ESA Result: No RECs, CRECs, HRECs, or de minimis conditions were identified. The property received a clean Phase I ESA.
Historical Use: The site was previously used for agricultural purposes (rice cultivation) prior to development. Historical aerial photographs and agricultural records confirm the property's use as rice paddy land from at least the 1970s through 2019. No prior industrial use was identified. Rice cultivation does not typically involve the use of hazardous substances or persistent pesticides at levels of environmental concern, and no such residual contamination was identified.
Regulatory Database Review: No listings on federal or state databases for the subject property. No adjoining properties with documented releases of concern.
Site Reconnaissance: No evidence of spills, staining, hazardous substance use or storage, or other environmental concerns. The property is a modern, well-maintained logistics facility.
Vapor Encroachment Screening: No concern.
Underground Storage Tanks: None identified.
Additional Observations: No material environmental findings of any kind.
E. Property 5 — Alliance Commerce Center
Address: 2800 Alliance Gateway Blvd, Fort Worth, Texas 76177
Target Entity: GMP Alliance LLC (EIN: 84-2415728)
Size and Type: 485,000 RSF; logistics/distribution facility; built 2020
Phase I ESA Date: February 12, 2024 (Trident Report No. TEG-2024-0212)
Phase I ESA Result: No RECs, CRECs, HRECs, or de minimis conditions were identified. The property received a clean Phase I ESA.
Summary: Alliance Commerce Center is located within the Alliance Texas master-planned development in Fort Worth, a major logistics and distribution hub in the Dallas-Fort Worth metropolitan area. The Alliance Texas development has a well-documented environmental history, and properties within the development benefit from comprehensive environmental planning and oversight conducted during the master development process. The property was developed on previously undeveloped ranchland. No USTs, releases, or regulatory database listings were identified. No material environmental findings.
F. Property 6 — Lakeland Crossings Industrial
Address: 7100 Drane Field Road, Lakeland, Florida 33811
Target Entity: GMP Lakeland LLC (EIN: 84-2527834)
Size and Type: 372,000 RSF; logistics/distribution facility; built 2019
Phase I ESA Date: February 8, 2024 (Trident Report No. TEG-2024-0208)
Phase I ESA Result: De minimis REC — historical pesticide residue from prior citrus grove operations, below commercial/industrial Soil Cleanup Target Levels.
This property is addressed in detail in Section IV.B above. No Phase II ESA is recommended. No purchase price adjustment is warranted for environmental matters. The condition is controlled and does not present material environmental risk at the property's current commercial/industrial land use classification.
G. Property 7 — Southport Logistics Park
Address: 3200 Southport Connector Road, Jacksonville, Florida 32218
Target Entity: GMP Southport LLC (EIN: 84-2527849)
Size and Type: 410,000 RSF; logistics/distribution facility; built 2021
Tenant: Atlas Freight Logistics Corp. occupies the entirety of the property (410,000 RSF) pursuant to a triple-net lease with annual base rent of $5,330,000, representing approximately 7.1% of total portfolio ABR.
Phase I ESA Date: February 15, 2024 (Trident Report No. TEG-2024-0215)
Phase I ESA Result: No RECs, CRECs, HRECs, or de minimis conditions were identified. The property received a clean Phase I ESA.
Historical Use: The site was previously undeveloped timberland. Historical aerial photographs show the property as forested land from the earliest available coverage through approximately 2019, when site clearing commenced for construction. No prior industrial use was identified.
Regulatory Database Review: No listings on federal or state databases for the subject property. No adjoining properties with documented releases of concern.
Site Reconnaissance: No evidence of environmental concerns. The property is a recently constructed logistics facility in good condition.
Vapor Encroachment Screening: No concern.
Underground Storage Tanks: None identified.
Additional Observations: No material environmental findings of any kind.
H. Property 8 — Murfreesboro Distribution Center
Address: 1600 Joe B. Jackson Parkway, Murfreesboro, Tennessee 37127
Target Entity: GMP Murfreesboro LLC (EIN: 84-2527856)
Size and Type: 502,000 RSF; logistics/distribution facility; built 2020
Phase I ESA Date: January 29, 2024 (Trident Report No. TEG-2024-0129)
Phase I ESA Result: No RECs, CRECs, HRECs, or de minimis conditions were identified. The property received a clean Phase I ESA.
Summary: The Murfreesboro Distribution Center is located along Joe B. Jackson Parkway in an established industrial and logistics corridor in Rutherford County, Tennessee. The site was previously used as undeveloped pastureland. The property was constructed in 2020 as a modern distribution facility. No USTs, releases, or regulatory database listings were identified. No adjoining or nearby properties with documented releases of concern were identified. Trident's site reconnaissance revealed no environmental concerns. Vapor encroachment screening returned no conditions of concern. No material environmental findings.
I. Property 9 — Buckhead Place Office Tower
Address: 3380 Peachtree Road NE, Atlanta, Georgia 30326
Target Entity: GMP Buckhead LLC (EIN: 84-2639901)
Size and Type: 285,000 RSF; Class A office building; built 2018
Phase I ESA Date: January 25, 2024 (Trident Report No. TEG-2024-0125)
Phase I ESA Result: No RECs, CRECs, HRECs, or de minimis conditions were identified. The property received a clean Phase I ESA.
Summary: Buckhead Place Office Tower is a Class A office building located in the Buckhead submarket of Atlanta, Georgia. The site was previously occupied by a low-rise commercial building (retail use) that was demolished in 2016 prior to construction of the current improvements. Historical research did not identify any industrial use or hazardous substance operations at the site. No USTs, releases, or regulatory database listings were identified. Trident's site reconnaissance revealed no environmental concerns.
Note Regarding PCA. A separate Property Condition Assessment conducted by Rampart Building Sciences, Inc. identified $890,000 in estimated immediate repair costs at this property. These costs relate to non-environmental building condition items, including building envelope waterproofing, elevator modernization, and deferred HVAC maintenance. These PCA findings are discussed in Section VII.A of this memorandum.
No environmental material findings were identified.
J. Property 10 — SouthPark Corporate Center
Address: 6200 Fairview Road, Charlotte, North Carolina 28210
Target Entity: GMP SouthPark LLC (EIN: 84-2639918)
Size and Type: 218,000 RSF; Class A office building; built 2017
Tenant: Birchwood Technology Group Inc. occupies the entirety of the property (218,000 RSF) pursuant to a triple-net lease with annual base rent of $5,668,000, representing approximately 7.6% of total portfolio ABR.
Phase I ESA Date: February 19, 2024 (Trident Report No. TEG-2024-0219)
Phase I ESA Result: No RECs, CRECs, HRECs, or de minimis conditions were identified. The property received a clean Phase I ESA.
Summary: SouthPark Corporate Center is a Class A office building located in the SouthPark submarket of Charlotte, North Carolina. The site was previously undeveloped land adjacent to the SouthPark commercial corridor. No prior industrial use was identified. No USTs, releases, or regulatory database listings were identified. Trident's site reconnaissance revealed no environmental concerns. Vapor encroachment screening returned no conditions of concern.
Note Regarding PCA. Rampart Building Sciences, Inc. identified $250,000 in estimated immediate repair costs at this property. These costs relate to non-environmental building condition items, including parking deck sealant application and minor roof repairs. These PCA findings are discussed in Section VII.A of this memorandum.
No environmental material findings were identified.
K. Property 11 — Cool Springs Office Park
Address: 5000 Virginia Way, Brentwood, Tennessee 37027
Target Entity: GMP Cool Springs LLC (EIN: 84-2639925)
Size and Type: 196,000 RSF; Class A office complex; built 2016
Phase I ESA Date: January 29, 2024 (Trident Report No. TEG-2024-0130)
Phase I ESA Result: No RECs, CRECs, HRECs, or de minimis conditions were identified. The property received a clean Phase I ESA.
Summary: Cool Springs Office Park is a multi-building office complex located in the Cool Springs submarket of Brentwood, Tennessee (Williamson County), a well-established suburban office market south of Nashville. The property was constructed in 2016 on land that was previously used as undeveloped pastureland. No prior industrial use was identified. No USTs, releases, or regulatory database listings were identified. Trident's site reconnaissance revealed no environmental concerns.
Note Regarding PCA. Rampart Building Sciences, Inc. identified $620,000 in estimated immediate repair costs at this property. These costs relate to non-environmental building condition items, including HVAC rooftop unit replacements, parking lot resurfacing, and stormwater management system repairs. These PCA findings are discussed in Section VII.A of this memorandum. Cool Springs Office Park is the oldest property in the portfolio (built 2016), which is consistent with a higher level of deferred maintenance relative to newer properties.
No environmental material findings were identified.
L. Property 12 — Brickell Bay Office Building
Address: 1450 Brickell Avenue, Miami, Florida 33131
Target Entity: GMP Brickell LLC (EIN: 84-2639932)
Size and Type: 152,000 RSF; Class A office building; built 2019
Phase I ESA Date: February 22, 2024 (Trident Report No. TEG-2024-0222)
Phase I ESA Result: No RECs, CRECs, HRECs, or de minimis conditions were identified. The property received a clean Phase I ESA.
Summary: Brickell Bay Office Building is a Class A office building located in the Brickell financial district of Miami, Florida. The site was previously occupied by a surface parking lot and a small commercial building (retail/restaurant use) that was demolished in 2017 prior to construction of the current improvements. Historical research did not identify any industrial use, hazardous substance operations, or USTs at the site. The Brickell submarket is a dense urban environment, and Trident's review of surrounding properties did not reveal any regulatory database listings for nearby facilities that could present an off-site contamination migration concern. No environmental concerns were identified during site reconnaissance. No material environmental findings.
M. Property 13 — Peachtree Corners Logistics Center
Address: 5900 Peachtree Industrial Blvd, Peachtree Corners, Georgia 30071
Target Entity: GMP Peachtree LLC (EIN: 84-2741063)
Size and Type: 345,000 RSF; logistics/distribution facility; built 2020
Phase I ESA Date: March 4, 2024 (Trident Report No. TEG-2024-0304)
Phase I ESA Result: No RECs, CRECs, HRECs, or de minimis conditions were identified. The property received a clean Phase I ESA.
Summary: Peachtree Corners Logistics Center is located along Peachtree Industrial Boulevard in the Peachtree Corners area of Gwinnett County, Georgia, a well-established commercial and industrial corridor in the northern suburbs of metropolitan Atlanta. The property was developed in 2020 on a previously undeveloped wooded parcel. Despite its location in an area with a mix of commercial and light industrial uses, the regulatory database review did not identify any nearby facilities with documented releases that could impact the subject property. No USTs, releases, or environmental concerns were identified during Trident's assessment. No material environmental findings.
N. Property 14 — Mount Juliet Commerce Park
Address: 400 South Mount Juliet Road, Mount Juliet, Tennessee 37122
Target Entity: GMP Mount Juliet LLC (EIN: 84-2741070)
Size and Type: 298,000 RSF; logistics/distribution facility; built 2021
Phase I ESA Date: March 7, 2024 (Trident Report No. TEG-2024-0307)
Phase I ESA Result: No RECs, CRECs, HRECs, or de minimis conditions were identified. The property received a clean Phase I ESA.
Summary: Mount Juliet Commerce Park is located in the city of Mount Juliet, Tennessee (Wilson County), an eastern suburb of Nashville and a growing distribution and logistics hub. The property was constructed in 2021 on previously undeveloped agricultural land. The site has no history of industrial use. No USTs, releases, or regulatory database listings were identified. Trident's site reconnaissance revealed no environmental concerns. Vapor encroachment screening returned no conditions of concern. No material environmental findings.
VI. Risk Allocation and Contractual Protections
A. PSA Environmental Representations and Warranties
The Purchase and Sale Agreement dated February 28, 2024, between GMP Fund III (as Seller) and Fairwater REIT (as Buyer) includes environmental representations and warranties set forth in Article V, Section 5.15 of the PSA. The Seller makes the following environmental representations, each subject to the Seller's knowledge qualifier:
(i) The Target Entities and the properties are in compliance in all material respects with all applicable Environmental Laws (as defined in the PSA).
(ii) No hazardous substances are present at, on, under, or migrating from the properties, except as disclosed in the PSA disclosure schedules and except for de minimis quantities of hazardous substances customarily used in the ordinary course of property management and maintenance operations (such as cleaning products, office supplies, and landscaping materials) that are used, stored, and disposed of in compliance with applicable Environmental Laws.
(iii) There are no pending or, to Seller's knowledge, threatened environmental claims, actions, suits, proceedings, or investigations by any governmental authority or third party relating to any of the properties or the Target Entities.
(iv) No underground storage tanks are currently located on any of the properties.
(v) Seller has delivered or made available to Buyer copies of all environmental reports, studies, assessments, and correspondence in Seller's possession or control relating to the environmental condition of the properties.
The "knowledge" individuals designated by Seller for purposes of the environmental representations are Victor Lansdell (Managing Director, Greystone Meridian Partners), Elise Rathborne (Vice President of Asset Management, Greystone Meridian Partners), and Sean Kilpatrick (Director of Acquisitions, Greystone Meridian Partners). The knowledge qualifier is defined in the PSA as the actual knowledge of the designated individuals, after reasonable inquiry of the property managers and relevant personnel.
Seller has properly disclosed the de minimis conditions at the Westlake Distribution Hub and Lakeland Crossings Industrial in the PSA disclosure schedules. Specifically, Schedule 1 (General Disclosure Schedule) references the conditions, and property-specific Schedules 2-3 (GMP Westlake LLC) and 2-6 (GMP Lakeland LLC) provide detailed descriptions of the conditions, including references to the TCEQ NFA letter (Westlake) and the geotechnical sampling data (Lakeland). These disclosures are consistent with the findings in Trident's Phase I ESA reports.
Survival Periods. The general representations and warranties in the PSA, including the environmental representations, survive for eighteen (18) months from the closing date. Based on the anticipated closing date of June 6, 2024, the general representation survival period would expire on December 6, 2025. Tax representations survive for thirty-six (36) months from the closing date, expiring on June 6, 2027.
B. Indemnification Framework
The PSA contains a comprehensive indemnification framework in Article XI. The key parameters applicable to environmental matters are as follows:
•  General Representation Cap: $55,000,000, representing 5% of the $1,100,000,000 purchase price. Losses arising from breaches of general representations, including the environmental representations, are subject to this cap.
•  Fundamental Representation Cap: $110,000,000, representing 10% of the purchase price. Losses arising from breaches of fundamental representations (which include representations regarding organization and authority, title, capitalization, and taxes, but do not include the environmental representations) are subject to this higher cap.
•  Basket (Tipping): $5,500,000, representing 0.5% of the purchase price. Losses must exceed the basket amount before the Buyer is entitled to indemnification, and once the basket is exceeded, the Seller is liable for all losses from the first dollar (tipping basket, not deductible).
•  De Minimis Threshold: $275,000 per individual claim. Individual claims below this threshold are disregarded for purposes of determining whether the basket has been exceeded.
•  Seller Indemnity Escrow: $16,500,000, representing 1.5% of the purchase price, to be held in escrow with Commonwealth National Title Insurance Company for eighteen (18) months following closing. The escrow provides a readily accessible source of recovery for the Buyer in the event of indemnification claims under the PSA during the survival period.
C. Representations and Warranties Insurance
Fairwater has procured a buyer-side representations and warranties insurance policy from Sentinel Specialty Insurance Company. The policy was brokered by Hartwick Gunderson & Associates, Inc. (broker of record: Peter Langford). The key terms of the R&W insurance policy are as follows:
•  Policy Limit: $55,000,000, representing 5% of the purchase price. The policy limit is equal to the general representation cap under the PSA, providing a layer of insurance coverage that supplements the Seller's direct indemnification obligations.
•  Retention: $11,000,000, representing 1% of the purchase price. The retention is the amount of losses that the Buyer must bear before the insurance coverage attaches. The retention drops to $5,500,000 (0.5% of the purchase price) at twelve (12) months following the closing date.
•  Premium: $1,402,500, representing 2.55% of the policy limit ($55,000,000). The premium is payable by Buyer at closing.
•  Coverage for Environmental Matters: Environmental matters are covered under the policy, subject to standard exclusions for known conditions disclosed in the course of due diligence. The de minimis conditions at the Westlake Distribution Hub and Lakeland Crossings Industrial will be scheduled as known matters on the policy and excluded from coverage. This is standard market practice for R&W insurance policies, and the exclusion of these known de minimis conditions does not diminish the overall environmental risk protection available to Fairwater in any material respect.
D. CERCLA Liability Protections
The Phase I ESAs conducted by Trident satisfy the All Appropriate Inquiries requirements under 40 C.F.R. Part 312, supporting Fairwater's ability to assert the bona fide prospective purchaser ("BFPP") defense under CERCLA § 107(r), 42 U.S.C. § 9607(r). The BFPP defense protects a purchaser of contaminated property from CERCLA liability for pre-existing contamination, provided that the purchaser (among other requirements) conducted AAI prior to acquisition, did not cause or contribute to the contamination, and complies with ongoing obligations including the exercise of "appropriate care" with respect to hazardous substances found at the property.
We note that the entity-level structure of this transaction — in which Fairwater is acquiring membership interests in the Target Entities rather than acquiring direct title to the properties — requires careful consideration of the CERCLA "purchaser" analysis. Because the Target Entities will continue to hold fee simple title to the properties following the closing, there is no change in the identity of the "owner" of the properties for purposes of CERCLA § 107(a)(1). However, the change of control in the Target Entities effectively constitutes an acquisition by Fairwater of the entities that are the current "owners" of the properties, and the BFPP defense analysis should be evaluated in that context.
To address this structural issue, Trident's Phase I ESAs are addressed to Fairwater Real Estate Investment Trust and its successors and assigns. Trident has also issued reliance letters that expressly cover the entity-level transaction structure, confirming that the Phase I ESAs may be relied upon by Fairwater in connection with its acquisition of the membership interests in the Target Entities. We are satisfied that the Phase I ESAs, together with the reliance letters, provide adequate support for Fairwater's assertion of the BFPP defense.
We recommend that Fairwater continue to meet its ongoing AAI obligations following closing, including the exercise of "all appropriate care" and "reasonable steps" obligations with respect to any hazardous substances found at the properties. This includes maintaining copies of the Phase I ESAs, promptly reporting any newly discovered environmental conditions to the appropriate regulatory authorities as required by law, and cooperating with any governmental requests for information or access.
VII. Coordination with Other Due Diligence Workstreams
A. Property Condition Assessments
Rampart Building Sciences, Inc. ("Rampart"), under the supervision of Alan Westbrook, PE, conducted Property Condition Assessments for all fourteen (14) properties in the portfolio. The PCAs were performed in accordance with ASTM Standard E2018-15, Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process.
The aggregate estimated immediate repair costs identified by Rampart across the fourteen-property portfolio total $2,140,000, allocated to four (4) properties as follows:
These PCA findings are non-environmental in nature and relate to building envelope and structural maintenance items, HVAC system component replacements and repairs, roofing membrane repairs and replacements, parking lot and parking deck resurfacing and sealant application, elevator modernization, and stormwater management system repairs. None of the identified immediate repair items involve hazardous substances, contamination, or environmental regulatory compliance issues.
As a result of the PCA findings, Fairwater successfully negotiated a PCA credit of $1,070,000 (representing 50% of the $2,140,000 aggregate estimated immediate repair costs) to be credited to Buyer as a purchase price reduction at closing. This results in an adjusted purchase price of $1,098,930,000 and net cash to Seller of $486,930,000 (after accounting for the assumed debt of $612,000,000 discussed in Section VII.D below). The PCA credit is a non-environmental adjustment and does not relate to or offset any environmental condition.
B. Title and Insurance
Commonwealth National Title Insurance Company (title officer: Kenneth Stanhope) conducted title examinations for all fourteen (14) properties in the portfolio. No environmental liens or activity and use limitations ("AULs") were identified in the title searches for any of the fourteen properties. The absence of environmental liens and AULs is consistent with the Phase I ESA findings summarized in this memorandum.
No environmental exclusions are required in the ALTA Owner's Policies of Title Insurance (2021 form) to be issued at closing for each of the fourteen properties. The title commitment review did not reveal any environmental-related encumbrances that would affect Fairwater's title to the properties.
Fairwater's replacement property and casualty insurance program has been placed with Ironclad Indemnity Insurance Company. The environmental liability coverage included within the property and casualty insurance program has been reviewed and confirmed adequate by Hartwick Gunderson & Associates, Inc. (the same broker handling the R&W insurance policy). The environmental liability coverage provides protection against third-party claims arising from pre-existing unknown contamination conditions, subject to policy terms, conditions, and exclusions. No supplemental Pollution Legal Liability ("PLL") policy is recommended at this time, given the clean Phase I ESA results and the controlled nature of the de minimis conditions.
C. Zoning.  Zoning confirmation letters have been obtained for all fourteen (14) properties from the applicable local zoning authorities in each jurisdiction. The current uses of the properties — logistics/industrial for the ten logistics properties and office for the four office properties — are confirmed as conforming uses under the applicable zoning ordinances in each jurisdiction. No special use permits, conditional use approvals, or variances are required for the continuation of the current uses.
Importantly, no environmental overlay zones, spe