PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
March 25, 2024
MEMORANDUM
FROM: Grace Nakamura, Calderwood & Harkness LLP
TO: Douglas Fairchild, Calderwood & Harkness LLP
CC: Angela Fontaine, Rafael Dominguez, Camille Oduya — Fairwater REIT In-House Real Estate Counsel
RE: Title Review Memorandum — 14-Property Sun Belt Portfolio Acquisition
MATTER: Fairwater Real Estate Investment Trust — Acquisition of Greystone Meridian Partners Fund III, L.P. Portfolio
MATTER NUMBER: 1036-00004
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I. EXECUTIVE SUMMARY
This memorandum summarizes the review and analysis conducted by Calderwood & Harkness LLP ("C&H" or the "Firm") of title insurance commitments issued by Commonwealth National Title Insurance Company ("Commonwealth Title") for all fourteen (14) properties (each, a "Property," and collectively, the "Portfolio") being acquired by Fairwater Real Estate Investment Trust ("Fairwater REIT" or "Buyer") from Greystone Meridian Partners Fund III, L.P. ("GMP Fund III" or "Seller"). The title commitments were issued under the direction of Kenneth Stanhope, Senior Vice President and title officer, with underwriting oversight provided by Virginia Moorehead, Assistant Vice President and national counsel at Commonwealth Title.
Transaction Structure. The transaction is structured as an entity-level acquisition in which Fairwater REIT will acquire one hundred percent (100%) of the membership interests in fourteen (14) single-purpose Delaware limited liability companies (each, a "Target Entity"), each of which holds fee simple title to one Property within the Portfolio. Because this is an entity-level transfer rather than a deed transfer, title to each Property will remain vested in the respective Target Entity LLC following the closing. Notwithstanding the absence of recorded conveyances, title insurance is required to insure Fairwater REIT's indirect ownership of each Property and to satisfy lender requirements under the assumed mortgage debt facilities described below.
Purchase Price and Capital Structure. The aggregate purchase price for the Portfolio is One Billion One Hundred Million Dollars ($1,100,000,000) (the "Purchase Price"). The capital structure of the acquisition consists of assumed mortgage indebtedness in the aggregate amount of Six Hundred Twelve Million Dollars ($612,000,000) across three lenders, with the balance of Four Hundred Eighty-Eight Million Dollars ($488,000,000) payable in cash equity at closing.
Portfolio Composition. Title commitments have been received and reviewed for all fourteen Properties spanning five states: Georgia (four properties), Texas (three properties), Florida (three properties), Tennessee (three properties), and North Carolina (one property). The Portfolio is composed principally of logistics and distribution facilities, together with four office properties located in major Sun Belt metropolitan markets.
Title Policy Form and Insured Amounts. Each Property will be insured under an ALTA Owner's Policy (2021 form). The aggregate insured amount across the Portfolio is One Billion One Hundred Million Dollars ($1,100,000,000), allocated among the individual Properties on a basis consistent with the Purchase Price Allocation Schedule set forth in Exhibit K to the Purchase and Sale Agreement dated February 28, 2024, between Buyer and Seller (the "PSA"). The allocation is based on appraised values determined by Stonebridge Valuation Advisors, LLC.
Key PSA Deadlines. Under Section 5.3 of the PSA, Buyer's title objection deadline is March 29, 2024 — thirty (30) days from the execution date of the PSA on February 28, 2024. Upon timely delivery of a title objection notice, Seller has a cure period of fifteen (15) business days from receipt of the objection notice within which to cure or commit to cure the objected-to matters. The PSA designates certain categories of title matters as "Mandatory Cure Items" that Seller is unconditionally obligated to cure as a condition to closing, including: (a) monetary liens and encumbrances (other than the assumed mortgage debt); (b) mechanic's liens; (c) delinquent real property taxes, assessments, and governmental charges; (d) judgments against any Target Entity; and (e) any matters arising by, through, or under Seller after the effective date of the applicable title commitment.
Overall Conclusion. Based on our review, we have identified a total of twenty-three (23) title objection items across the Portfolio. Of these, eight (8) are classified as Mandatory Cure Items under the PSA, and fifteen (15) are non-mandatory items for which we recommend seeking either affirmative title insurance endorsements, corrective instruments, or confirmations from third parties. The majority of the identified objection items are curable or subject to endorsement, and no Property revealed title defects that would be fatal to closing. All fourteen Properties have insurable fee simple title vested in the respective Target Entity LLC.
C&H recommends that a formal title objection letter be transmitted to Blackridge Hayes LLP ("Seller's Counsel," attention: Nathaniel Pryce, Esq. and Thomas Keating, Esq.) no later than March 27, 2024 — two (2) days in advance of the contractual deadline — to provide Seller adequate notice and to preserve Buyer's rights under the PSA.
II. SCOPE AND METHODOLOGY
A. Documents Reviewed
In connection with this title review, C&H reviewed the following categories of documents and materials:
1. Title Commitments. Fourteen (14) ALTA title insurance commitments issued by Commonwealth National Title Insurance Company, one for each Property in the Portfolio, together with all supporting exception documents referenced therein.
2. Schedule B-I Requirements. All requirements set forth in Schedule B-I (Requirements) of each title commitment, including conditions to the issuance of each title policy, were reviewed and catalogued. These requirements include, among others, payment of applicable premiums, delivery of owner's affidavits, tax clearance certificates, evidence of entity authorization, confirmation that no liens or judgments exist against the respective Target Entities, and, where applicable, recording of loan modification documents.
3. Schedule B-II Exception Documents. All exception documents referenced in Schedule B-II (Exceptions from Coverage) of each title commitment were obtained, reviewed, and analyzed. These include recorded instruments such as deeds, easements, restrictive covenants, declarations of covenants, conditions and restrictions ("CC&Rs"), plat maps, mortgage instruments, UCC financing statements, and other matters of record. Each exception document was reviewed for its potential impact on the current and anticipated use of the applicable Property.
4. Existing Owner's Title Policies. Where available in the Seller's virtual data room, existing owner's title insurance policies issued to each Target Entity at the time of the original acquisition of the applicable Property were reviewed and compared against the current commitments to identify any new or changed exceptions.
5. ALTA/NSPS Surveys. ALTA/NSPS Land Title Surveys prepared by Meridian Land Surveying, Inc. (Daniel Caulfield, PLS, PE, Project Manager) were obtained for all fourteen Properties. Each survey was cross-referenced with the title exceptions listed in the applicable commitment to identify any discrepancies, encroachments, or survey-related matters that could give rise to title objections. A detailed analysis of survey matters is set forth in our separate Survey Review Memorandum dated March 22, 2024.
6. Existing Mortgage Loan Documents. The existing loan documents for the three assumed mortgage debt facilities were reviewed in connection with the title analysis. These facilities include: (a) the Master Loan Agreement dated September 15, 2020 (as amended), between the applicable Target Entities and Pinnacle Federal Bank, N.A. ("Pinnacle"); (b) the Loan Agreement dated February 1, 2021 (as amended), between the applicable Target Entities and Veltrano Capital Lending Corp. ("Veltrano Capital"); and (c) the Note Purchase Agreement dated November 22, 2019 (as amended), between the applicable Target Entities and Sycamore Life Insurance Company ("Sycamore Life"). The security instruments and UCC financing statements filed in connection with each facility were confirmed against the title records.
7. UCC Search Results. Uniform Commercial Code search results were obtained for each Target Entity from the Delaware Secretary of State (the state of formation for all Target Entities) and from the applicable county filing offices in each jurisdiction where a Property is located. The results were reviewed for any unexpected or anomalous filings.
8. Judgment and Lien Search Results. Judgment, lien, and litigation search reports were obtained for each Target Entity and for GMP Fund III from state and county courts in all five states. These searches encompassed state court judgments, federal court judgments, federal and state tax liens, and pending litigation.
9. Tax Lien Search Results. Real property tax searches were conducted in each county where a Property is located to confirm the current status of real property taxes, special assessments, and other governmental charges.
10. Local Counsel Input. State-specific guidance was obtained from local counsel retained in each jurisdiction, as further described in Section II.B below.
B. Coordination with Local Counsel
C&H retained and coordinated with experienced local real estate counsel in each of the five states in which Properties are located. The local counsel firms and lead attorneys are as follows:
• Texas: Breckenridge Osgood LLP (James Breckenridge, Esq.)
• Georgia: Talmadge Beaumont LLP (Catherine Beaumont, Esq.)
• North Carolina: Haversham Cole PLLC (Marshall Haversham, Esq.)
• Tennessee: Ellsworth Ridley LLP (Diane Ellsworth, Esq.)
• Florida: Palmetto Strauss PA (Roberto Strauss, Esq.)
Each local counsel firm reviewed the title commitment(s) for the Properties located in its jurisdiction and provided state-specific guidance on the following matters: (i) recording requirements and practices; (ii) controlling-interest transfer tax implications arising from the entity-level transfer structure; (iii) state-specific title insurance endorsement availability; (iv) local title customs and practices relevant to the interpretation of Schedule B-II exceptions; and (v) state-specific statutory requirements for the cure or resolution of identified title objection items.
Local counsel confirmed that the entity-level transfer structure does not require the recording of deeds or other conveyance instruments in any jurisdiction, as title to each Property will remain vested in the applicable Target Entity LLC. However, local counsel further confirmed that controlling-interest transfer tax filings are required in four of the five states in which Properties are located:
• Georgia: Georgia imposes a real estate transfer tax on the transfer of a controlling interest in an entity owning real property. The applicable rate and filing requirements are addressed in our separate Transfer Tax Analysis Memorandum.
• Florida: Florida imposes documentary stamp taxes on transfers of controlling interests in entities holding Florida real property, subject to certain exemptions. Filing requirements and applicable rates are addressed in our separate Transfer Tax Analysis Memorandum.
• Tennessee: Tennessee imposes a controlling-interest transfer tax on transfers of a controlling interest in an entity owning real property in the state. Filing and payment requirements are addressed in our separate Transfer Tax Analysis Memorandum.
• North Carolina: North Carolina imposes an excise tax on transfers of controlling interests in entities owning real property. Filing requirements and rates are addressed in our separate Transfer Tax Analysis Memorandum.
• Texas: Texas does not impose a state-level real estate transfer tax or controlling-interest transfer tax. No filings are required in connection with the entity-level transfer of the Texas Properties.
C. Title Policy Structure
Because the acquisition is structured as an entity-level transfer, title to each Property will remain vested in the respective Target Entity LLC following the closing. The ALTA Owner's Policies (2021 form) to be issued by Commonwealth Title will name each Target Entity LLC as the insured, with Fairwater REIT shown as the holder of one hundred percent (100%) of the direct or indirect membership interests in each Target Entity. The policies will insure the continued vesting of fee simple title in each Target Entity, subject only to the permitted exceptions set forth in Schedule B-II of each commitment (as modified to reflect the deletion of standard printed exceptions and the resolution of title objection items).
Pro forma owner's policies for each Property were reviewed and approved by C&H in coordination with local counsel. An Endorsement Request Letter was submitted to Commonwealth Title on March 18, 2024, requesting the issuance of the following endorsements to each owner's policy, subject to state-by-state availability:
• Owner's Comprehensive Endorsement (ALTA 9.10)
• Access Endorsement (ALTA 17 or state equivalent)
• Survey Endorsement (ALTA 25 or state equivalent)
• Zoning Endorsement (ALTA 3.1 with parking)
• Contiguity Endorsement (ALTA 19 — where applicable for adjacent parcels)
• Same-as-Survey Endorsement
• Non-Imputation Endorsement (ALTA 15)
• Mezzanine Financing Endorsement (ALTA 16)
• Fairway Endorsement (where applicable)
The specific endorsements requested for each Property vary based on state availability and the particular characteristics of each Property, as further detailed in Section IX of this memorandum.
III. PROPERTY-BY-PROPERTY TITLE ANALYSIS
The following sections set forth our property-by-property analysis of the title commitment for each of the fourteen Properties in the Portfolio. For each Property, we have identified: (a) the Target Entity in which title is vested; (b) the applicable loan and lender; (c) the Schedule B-I requirements and their status; (d) the Schedule B-II exceptions and their classification as permitted or objectionable; and (e) any title objection items, together with our recommended course of action.
A. Property 1 — Fairfield Logistics Center I
Address: 4200 Fairfield Industrial Blvd, Fairburn, GA 30213
Target Entity: GMP Fairfield I LLC (EIN: 84-2310561)
State: Georgia
Local Counsel: Talmadge Beaumont LLP (Catherine Beaumont)
Property Type: Logistics / Distribution — 412,000 rentable square feet; built 2020
Allocated Purchase Price: Per PSA Exhibit K
Loan: Loan 1-A under the Pinnacle Federal Bank, N.A. Master Loan Agreement
Vesting. Fee simple title is vested in GMP Fairfield I LLC pursuant to a Limited Warranty Deed recorded in the Official Records of Fulton County, Georgia. Vesting has been confirmed against the title commitment and the recorded deed in the chain of title. The entity is a Delaware limited liability company in good standing, and its authority to hold real property in Georgia has been confirmed by local counsel.
Schedule B-I Requirements. The title commitment sets forth standard requirements for the issuance of the owner's policy, including: (i) payment of the applicable title insurance premium; (ii) delivery of an owner's title affidavit in the form customarily required by Commonwealth Title for Georgia properties; (iii) delivery of a tax clearance certificate or evidence that all real property taxes and assessments are current; (iv) confirmation that existing loan documents for Loan 1-A have been recorded (confirmed — the deed to secure debt in favor of Pinnacle is of record); (v) confirmation that no liens, judgments, or other encumbrances exist against GMP Fairfield I LLC that are not shown in Schedule B-II; and (vi) delivery of evidence of entity authorization, to be satisfied by a Secretary's Certificate executed by an authorized representative of Greystone Meridian Capital LLC, in its capacity as general partner of GMP Fund III, L.P., the sole member of GMP Fairfield I LLC.
All Schedule B-I requirements are expected to be satisfied in the ordinary course at or prior to closing.
Schedule B-II Exceptions. The title commitment lists the following exceptions from coverage:
1. Standard Printed Exceptions. The commitment includes the standard printed exceptions to coverage (including rights of parties in possession, survey matters, mechanic's liens, taxes, and assessments). These standard printed exceptions will be deleted from the final policy upon delivery of the ALTA/NSPS survey and the owner's title affidavit, in accordance with customary Georgia title practice and Commonwealth Title's underwriting guidelines.
2. Real Property Taxes for 2024. The commitment excepts real property taxes for the year 2024 that are not yet due and payable. This is a permitted exception under PSA Exhibit P (Permitted Exceptions) and under customary title practice.
3. Utility Easement — Fulton County Water Authority. An easement granted to the Fulton County Water Authority for the installation, maintenance, and repair of water and sewer lines, located along the western boundary of the Property. This easement is reflected on the ALTA/NSPS survey prepared by Meridian Land Surveying and does not encumber the building footprint, truck courts, or primary parking areas. The easement is classified as a permitted exception and does not materially affect the current or anticipated use of the Property.
4. Storm Drainage Easement. A storm drainage easement benefiting the county drainage system, also located along the western and southwestern boundaries of the Property. This easement is depicted on the survey and does not encumber any improvements. It is classified as a permitted exception.
5. Pinnacle Federal Bank, N.A. — Deed to Secure Debt (Loan 1-A). The deed to secure debt granted by GMP Fairfield I LLC in favor of Pinnacle Federal Bank, N.A., securing obligations under Loan 1-A of the Master Loan Agreement, is shown as an exception. This security instrument will remain in place following the closing as part of the assumed mortgage debt. It constitutes a permitted exception under the PSA.
6. Covenants, Conditions, and Restrictions — Fairfield Industrial Park. The CC&Rs governing the Fairfield Industrial Park development, as recorded in the Official Records of Fulton County, are shown as an exception. These covenants impose standard industrial park restrictions relating to permitted uses, building materials, signage, landscaping, and maintenance obligations. The covenants were reviewed in detail by C&H and Talmadge Beaumont LLP and confirmed to be consistent with the current use of the Property as a logistics and distribution facility. The CC&Rs are classified as a permitted exception.
Title Objection Items. No title objection items have been identified for this Property. The title commitment reveals no monetary liens, mechanic's liens, judgments, or other adverse matters beyond the permitted exceptions described above.
Status: Clear — no objections required.
B. Property 2 — Fairfield Logistics Center II
Address: 4300 Fairfield Industrial Blvd, Fairburn, GA 30213
Target Entity: GMP Fairfield II LLC (EIN: 84-2310578)
State: Georgia
Local Counsel: Talmadge Beaumont LLP (Catherine Beaumont)
Property Type: Logistics / Distribution — 387,000 rentable square feet; built 2020
Allocated Purchase Price: Per PSA Exhibit K
Loan: Loan 1-B under the Pinnacle Federal Bank, N.A. Master Loan Agreement
Vesting. Fee simple title is vested in GMP Fairfield II LLC pursuant to a Limited Warranty Deed recorded in the Official Records of Fulton County, Georgia. Vesting has been confirmed. The entity is a Delaware limited liability company in good standing.
Schedule B-I Requirements. The Schedule B-I requirements for this Property are substantially identical to those for Property 1 (Fairfield Logistics Center I), including payment of premium, delivery of owner's affidavit, tax clearance, evidence of entity authorization, and confirmation that no liens or judgments exist against GMP Fairfield II LLC not shown in Schedule B-II. All requirements are expected to be satisfied in the ordinary course.
Schedule B-II Exceptions. The title commitment lists the following exceptions:
1. Real Property Taxes for 2024. Not yet due and payable. Permitted exception.
2. Covenants, Conditions, and Restrictions — Fairfield Industrial Park. Same CC&Rs as for Property 1. Permitted exception. These properties are adjacent parcels within the same industrial park development, and the CC&Rs apply uniformly to both.
3. Utility Easements. Easements for electric, water, and sewer utilities located along the eastern boundary of the Property. The easements are reflected on the ALTA/NSPS survey and do not affect the building footprint or primary operational areas. Permitted exception.
4. Pinnacle Federal Bank, N.A. — Deed to Secure Debt (Loan 1-B). The deed to secure debt securing Loan 1-B, which will remain in place following the closing as part of the assumed mortgage debt. Permitted exception.
5. UCC Financing Statement — Argyle Property Services LLC. Objection Item #1. A UCC-1 financing statement filed by Argyle Property Services LLC (EIN: 83-2905441) against GMP Fairfield II LLC appears in the Delaware Secretary of State records and in the Fulton County records. The financing statement covers personal property, fixtures, and equipment located at the Property. Based on our investigation, this filing appears to relate to a prior equipment lease arrangement between GMP Fairfield II LLC and Argyle Property Services LLC for warehouse racking and material handling equipment. The underlying lease appears to have been terminated, but the UCC-1 financing statement was never released by the filing of a UCC-3 termination statement.
This filing constitutes a security interest in the personal property and fixtures at the Property that is not a permitted exception under the PSA and was not disclosed by Seller in its pre-closing title representations. Under Section 5.4(a) of the PSA, monetary liens and security interests arising by, through, or under Seller are classified as Mandatory Cure Items that Seller is unconditionally obligated to cure prior to or at closing. Accordingly, C&H recommends that Buyer's title objection letter demand that Seller cause Argyle Property Services LLC to file a UCC-3 termination statement with the Delaware Secretary of State and, if applicable, in Fulton County, prior to the expiration of the Seller cure period.
Title Objection Items: One (1) — UCC fixture filing by Argyle Property Services LLC.
Status: Objection to be raised. This is a Mandatory Cure Item (security interest arising by, through, or under Seller). Seller must cause the filing of a UCC-3 termination statement prior to or at closing.
C. Property 3 — Westlake Distribution Hub
Address: 11500 Westlake Parkway, Houston, TX 77082
Target Entity: GMP Westlake LLC (EIN: 84-2415693)
State: Texas
Local Counsel: Breckenridge Osgood LLP (James Breckenridge)
Property Type: Logistics / Distribution — 624,000 rentable square feet; built 2019
Allocated Purchase Price: Per PSA Exhibit K
Loan: Loan 1-C under the Pinnacle Federal Bank, N.A. Master Loan Agreement
Vesting. Fee simple title is vested in GMP Westlake LLC pursuant to a Special Warranty Deed recorded in the Official Public Records of Harris County, Texas. Vesting has been confirmed against the title commitment, the recorded deed, and the chain of title. GMP Westlake LLC is a Delaware limited liability company registered to do business in Texas and in good standing.
Schedule B-I Requirements. The title commitment sets forth standard Texas requirements, including: (i) payment of the applicable title insurance premium in accordance with the promulgated rates of the Texas Department of Insurance; (ii) delivery of tax certificates from Harris County confirming the status of all real property taxes and assessments; (iii) evidence of payment of current year taxes as they become due; (iv) delivery of an owner's title affidavit (Form T-47, Affidavit of No Change); (v) evidence of entity authorization; and (vi) satisfaction of all Schedule B-II objection items. All requirements are expected to be satisfied in the ordinary course.
Schedule B-II Exceptions. The title commitment lists the following exceptions:
1. Real Property Taxes for 2024. Not yet due and payable. Permitted exception.
2. Pinnacle Federal Bank, N.A. — Deed of Trust (Loan 1-C). The deed of trust lien granted by GMP Westlake LLC in favor of Pinnacle Federal Bank, N.A., securing obligations under Loan 1-C. This lien will remain in place as part of the assumed mortgage debt. Permitted exception.
3. Pipeline Easement — 24-Foot Width. A pipeline easement (24 feet in width) along the southern property boundary, granted to a utility company for the installation, maintenance, and operation of underground pipelines. The easement is depicted on the ALTA/NSPS survey and does not cross or encumber any building improvements, truck courts, or parking areas. Breckenridge Osgood LLP has reviewed the easement instrument and confirmed that the terms are standard and do not impose unusual obligations on the surface owner. Permitted exception.
4. Harris County Flood Plain Note. The title commitment includes a note that a portion of the Property is located within a FEMA-designated flood hazard area. Specifically, the survey confirms that portions of the Property's undeveloped detention areas are located in Zone X (minimal flood hazard / shaded), but no portion of the building improvements or truck courts is located within Zone AE (special flood hazard area). This matter is consistent with the flood insurance certificates reviewed in our environmental due diligence and does not affect the insurability or operations of the Property. Permitted exception.
5. Expired Deed of Trust — Prior Lender. Objection Item #2. The title commitment discloses a deed of trust lien recorded against the Property in favor of a prior lender (pre-dating GMP Westlake LLC's acquisition of the Property in 2019). The abstract of title and our review of the chain of title indicate that the underlying loan secured by this deed of trust was paid in full at the time of GMP Westlake LLC's acquisition in 2019, and a payoff statement was presumably provided to the prior lender's counsel. However, a formal release or release of lien was never recorded in the Official Public Records of Harris County. This unreleased deed of trust, while clearly satisfied, constitutes a cloud on title.
Breckenridge Osgood LLP advises that under Texas Property Code Section 12.017, a release of lien should be recorded within sixty (60) days of payoff, and the failure to do so may give rise to a claim for damages. As a practical matter, the cure for this item is the recording of a release executed by the prior lender or its successor. In the alternative, Commonwealth Title may be willing to provide affirmative insurance over this exception upon receipt of sufficient evidence of payoff (e.g., a payoff letter, wire confirmation, or settlement statement from the 2019 acquisition). C&H recommends raising this as a title objection and requiring Seller to obtain a release or, failing that, to cooperate in obtaining affirmative insurance.
While this item does not fall squarely within the PSA's definition of Mandatory Cure Items (as it is not a "monetary lien" — the underlying obligation having been satisfied), it is a matter arising by, through, or under Seller's chain of title that should have been addressed at the time of Seller's original acquisition. Accordingly, we recommend treating it as a title objection that Seller should be obligated to cure or provide satisfactory evidence to support affirmative insurance.
6. Mechanic's Lien Affidavit — Subcontractor. Objection Item #3. The title commitment discloses a mechanic's lien affidavit filed by a subcontractor in connection with tenant improvement work performed at the Property in 2022. The lien affidavit claims an unpaid balance of approximately Eighty-Seven Thousand Dollars ($87,000) for work allegedly performed on behalf of a general contractor retained by GMP Westlake LLC in connection with the build-out of a tenant suite.
Under Section 5.4(a)(ii) of the PSA, mechanic's liens are classified as Mandatory Cure Items that Seller is unconditionally obligated to cure prior to or at closing. Breckenridge Osgood LLP advises that under Texas Property Code Chapter 53, a properly perfected mechanic's lien is enforceable and must be released or bonded before Commonwealth Title will issue its policy without exception. Accordingly, C&H recommends that Buyer's title objection letter demand that Seller cause this mechanic's lien to be released of record or bonded in accordance with Texas law prior to the expiration of the Seller cure period. If the underlying claim is disputed, Seller should be required to post a bond or indemnity in the amount of the lien claim plus statutory interest and costs.
Title Objection Items: Two (2).
Status: Objections to be raised. Item #3 is a Mandatory Cure Item (mechanic's lien). Item #2 is a non-mandatory objection but should be cured to clear title.
D. Property 4 — Katy Freeway Logistics Park
Address: 22600 Katy Freeway, Katy, TX 77449
Target Entity: GMP Katy LLC (EIN: 84-2415710)
State: Texas
Local Counsel: Breckenridge Osgood LLP (James Breckenridge)
Property Type: Logistics / Distribution — 538,000 rentable square feet; built 2021
Allocated Purchase Price: Per PSA Exhibit K
Loan: Loan 1-D under the Pinnacle Federal Bank, N.A. Master Loan Agreement
Vesting. Fee simple title is vested in GMP Katy LLC pursuant to a Special Warranty Deed recorded in the Official Public Records of Harris County, Texas. Vesting has been confirmed. GMP Katy LLC is a Delaware limited liability company in good standing and registered to do business in Texas.
Schedule B-I Requirements. Standard Texas requirements apply, consistent with those described for Property 3. All requirements are expected to be satisfied in the ordinary course.
Schedule B-II Exceptions. The title commitment lists the following exceptions:
1. Real Property Taxes for 2024. Not yet due and payable. Permitted exception.
2. Pinnacle Federal Bank, N.A. — Deed of Trust (Loan 1-D). The deed of trust lien securing Loan 1-D. Permitted exception (assumed debt).
3. Municipal Utility District (MUD) Assessment Lien. The Property is located within a Municipal Utility District, as is common for properties in the Katy, Texas area. The MUD levies assessments for the provision of water, sewer, drainage, and other utility services. The assessment lien is standard and current — no delinquencies have been identified. Breckenridge Osgood LLP has confirmed that the MUD assessments are current and that the assessment lien is a standard feature of properties within MUD boundaries. Permitted exception.
4. Reciprocal Access Easement and Shared Driveway. A reciprocal access easement benefiting the Property and an adjacent industrial property, providing shared access to a driveway connecting both properties to Katy Freeway. The easement was created as part of the original plat and recorded in the Official Public Records. It has been reviewed and does not materially affect the operations of the Property; rather, it provides beneficial access. The cost-sharing provisions for maintenance of the shared driveway have been reviewed and are commercially reasonable. Permitted exception.
5. Restrictive Covenant with Reverter Clause. Objection Item #4. A restrictive covenant filed by the original developer of the property imposes certain restrictions on signage and exterior building materials for properties within the development. Of significant concern, the covenant contains a reverter clause providing that the fee simple title to the Property shall revert to the declarant (or its successors and assigns) in the event of a material violation of the covenant that is not cured within ninety (90) days after written notice.
Breckenridge Osgood LLP has reviewed the covenant in detail and advises that, under Texas law, forfeiture and reverter clauses in restrictive covenants are disfavored and are generally held to be unenforceable as an unreasonable restraint on the alienation and use of property. See, e.g., Shields v. Bain, 959 S.W.2d 16 (Tex. App.—Tyler 1996, pet. denied); Flag-Redfern Oil Co. v. Humble Exploration Co., 744 S.W.2d 6 (Tex. 1987). Nevertheless, the presence of the reverter clause on the public record creates a potential cloud on title that could affect the marketability and insurability of the Property.
C&H recommends raising this as a title objection and requesting one or more of the following remedies: (a) an affirmative title insurance endorsement from Commonwealth Title insuring against loss arising from the enforcement of the reverter clause; (b) a written release or modification of the covenant by the declarant (or its successor) deleting the reverter clause; or (c) written confirmation from the declarant that no violations exist and that the declarant waives the reverter right. Local counsel has indicated that Commonwealth Title's Texas underwriters are generally willing to provide an endorsement insuring over unenforceable reverter clauses, but this should be confirmed with Kenneth Stanhope.
Title Objection Items: One (1).
Status: Objection to be raised. Non-mandatory, but C&H recommends seeking an affirmative endorsement or a release from the declarant.
E. Property 5 — Alliance Commerce Center
Address: 2800 Alliance Gateway Blvd, Fort Worth, TX 76177
Target Entity: GMP Alliance LLC (EIN: 84-2415728)
State: Texas
Local Counsel: Breckenridge Osgood LLP (James Breckenridge)
Property Type: Logistics / Distribution — 485,000 rentable square feet; built 2020
Allocated Purchase Price: Per PSA Exhibit K
Loan: Loan 1-E under the Pinnacle Federal Bank, N.A. Master Loan Agreement
Vesting. Fee simple title is vested in GMP Alliance LLC pursuant to a Special Warranty Deed recorded in the Official Public Records of Tarrant County, Texas. Vesting has been confirmed. GMP Alliance LLC is a Delaware limited liability company in good standing and registered to do business in Texas.
Schedule B-I Requirements. Standard Texas requirements apply, consistent with those described for Properties 3 and 4. All requirements are expected to be satisfied in the ordinary course.
Schedule B-II Exceptions. The title commitment lists the following exceptions:
1. Real Property Taxes for 2024. Not yet due and payable. Permitted exception.
2. Pinnacle Federal Bank, N.A. — Deed of Trust (Loan 1-E). The deed of trust lien securing Loan 1-E. Permitted exception (assumed debt).
3. Alliance Development Area CC&Rs. The Property is located within the AllianceTexas master-planned development, one of the largest and most established industrial and logistics corridors in the Dallas-Fort Worth metropolitan area. The CC&Rs governing the Alliance development area impose standard restrictions relating to permitted uses, building design, signage, landscaping, and maintenance. The CC&Rs have been reviewed and are consistent with the current use of the Property. These covenants are customary for properties within the AllianceTexas development and are commercially reasonable. Permitted exception.
4. TxDOT Right-of-Way Reservation. The Texas Department of Transportation ("TxDOT") has reserved a right-of-way along the northern boundary of the Property for potential future road widening or infrastructure improvements. The right-of-way reservation is depicted on the ALTA/NSPS survey and does not affect any building improvements, truck courts, or parking areas. Breckenridge Osgood LLP has reviewed the reservation instrument and confirmed that it does not impose any current obligations on the property owner beyond maintaining the reserved area free of permanent structures, which is already the case. Permitted exception.
5. Drainage and Utility Easements per Plat. Standard drainage and utility easements created as part of the original platting of the Property, as shown on the recorded plat map. These easements are reflected on the survey and are located along the perimeter of the Property, consistent with customary industrial subdivision platting. Permitted exception.
Title Objection Items: None.
Status: Clear — no objections required. The title commitment for this Property presents a clean title profile with no matters requiring objection or further investigation.
F. Property 6 — Lakeland Crossings Industrial
Address: 7100 Drane Field Road, Lakeland, FL 33811
Target Entity: GMP Lakeland LLC (EIN: 84-2527834)
State: Florida
Local Counsel: Palmetto Strauss PA (Roberto Strauss)
Property Type: Logistics / Distribution — 372,000 rentable square feet; built 2019
Allocated Purchase Price: Per PSA Exhibit K
Loan: Loan 1-F under the Pinnacle Federal Bank, N.A. Master Loan Agreement
Note: This Property is one of two (2) Properties in the Portfolio for which the Phase I Environmental Site Assessment prepared by Trident Environmental Group LLC (Rachel Kwan, Principal) identified de minimis recognized environmental conditions ("RECs"). The environmental findings are addressed in detail in our separate Environmental Due Diligence Summary Memorandum. Additionally, this Property is one of four (4) Properties in the Portfolio for which the Property Condition Assessment prepared by Rampart Building Sciences (Alan Westbrook, PE, Project Director) identified immediate repair costs. The estimated immediate repair costs for this Property are Three Hundred Eighty Thousand Dollars ($380,000), as detailed in our separate PCA Summary Memorandum.
Vesting. Fee simple title is vested in GMP Lakeland LLC pursuant to a Special Warranty Deed recorded in the Official Records of Polk County, Florida. Vesting has been confirmed. GMP Lakeland LLC is a Delaware limited liability company in good standing and qualified to do business in Florida.
Schedule B-I Requirements. Standard Florida requirements apply, including payment of premium, delivery of owner's affidavit, tax clearance, and evidence of entity authorization. All requirements are expected to be satisfied in the ordinary course.
Schedule B-II Exceptions. The title commitment lists the following exceptions:
1. Real Property Taxes for 2024. Not yet due and payable. Permitted exception.
2. Pinnacle Federal Bank, N.A. — Mortgage (Loan 1-F). The mortgage lien securing Loan 1-F. Permitted exception (assumed debt). Florida uses a mortgage/satisfaction instrument structure rather than the deed of trust structure used in Texas, Tennessee, and (in effect) Georgia.
3. Fenmore Industries Easement. An easement granted to Vireo Group along the eastern property line for the installation, maintenance, and operation of overhead and underground electric facilities. The easement is reflected on the survey and does not encumber the building footprint or primary operational areas. Permitted exception.
4. County Drainage Easement. A drainage easement benefiting the Polk County stormwater management system, located along the southern and southeastern portions of the Property. The easement is reflected on the survey. As discussed below in connection with Objection Item #5, a minor encroachment into this easement has been identified. The easement itself, however, is classified as a permitted exception.
5. Concrete Truck Apron Encroachment. Objection Item #5. The ALTA/NSPS survey prepared by Meridian Land Surveying reveals that a concrete truck apron associated with the Property's loading dock area encroaches approximately three (3) feet into the adjacent county drainage easement along the southeastern boundary of the Property. Commonwealth Title has flagged this encroachment as a survey exception in Schedule B-II.
The encroachment appears to have been present since the original construction of the improvements in 2019, and there is no indication that Polk County has objected to or taken enforcement action with respect to the encroachment. Palmetto Strauss PA advises that, under Florida law, the county drainage authority generally has the right to require removal of encroaching structures within the easement area, although enforcement is discretionary and unlikely absent a need to access or modify the drainage infrastructure. Nevertheless, the encroachment creates a title risk that should be addressed.
C&H recommends requesting one or both of the following: (a) an affirmative title insurance endorsement from Commonwealth Title insuring against loss arising from the encroachment into the drainage easement; or (b) a letter or confirmation from the Polk County Engineering Division confirming that the county does not object to the encroachment and does not intend to require its removal. If an endorsement is obtainable, it may be the more efficient and reliable resolution, as county letters of no objection can be time-consuming to obtain and may be equivocal.
6. Judgment Lien — Possible Name Match. Objection Item #6. The judgment and lien search conducted in Polk County, Florida revealed a judgment lien in the amount of Twelve Thousand Four Hundred Dollars ($12,400) filed against "GMP Lakeland" in the Polk County records. The judgment creditor is a commercial cleaning services company. Based on our preliminary investigation, this judgment appears to have been entered against a different entity with a similar name — specifically, a Florida limited liability company doing business under a similar trade name that is unrelated to GMP Lakeland LLC (the Target Entity, a Delaware LLC). However, because the names are sufficiently similar to create a potential cloud on title, Commonwealth Title has listed this judgment as a requirement to be addressed prior to the issuance of the policy.
Under Section 5.4(a)(iv) of the PSA, judgments against any Target Entity are classified as Mandatory Cure Items. If this judgment is confirmed to be against the Target Entity (GMP Lakeland LLC), Seller must satisfy the judgment and provide evidence of release. However, based on our preliminary analysis, we believe this is a name-match issue that can be resolved by means of an affidavit of non-identity executed by an authorized officer of GMP Lakeland LLC, confirming that the Target Entity is not the judgment debtor. C&H recommends raising this as a title objection and requiring Seller to provide such an affidavit, together with supporting documentation (such as the Target Entity's certificate of formation and EIN confirmation) to satisfy Commonwealth Title's underwriting requirements.
Title Objection Items: Two (2).
Status: Objections to be raised. Item #6 is a Mandatory Cure Item if the judgment is confirmed as being against the Target Entity. If resolved by affidavit of non-identity, it will be reclassified as a satisfied requirement.
G. Property 7 — Southport Logistics Park
Address: 3200 Southport Connector Road, Jacksonville, FL 32218
Target Entity: GMP Southport LLC (EIN: 84-2527849)
State: Florida
Local Counsel: Palmetto Strauss PA (Roberto Strauss)
Property Type: Logistics / Distribution — 410,000 rentable square feet; built 2021
Allocated Purchase Price: Per PSA Exhibit K
Loan: Loan 1-G under the Pinnacle Federal Bank, N.A. Master Loan Agreement
Vesting. Fee simple title is vested in GMP Southport LLC pursuant to a Special Warranty Deed recorded in the Official Records of Duval County, Florida. Vesting has been confirmed. GMP Southport LLC is a Delaware limited liability company in good standing and qualified to do business in Florida.
Schedule B-I Requirements. Standard Florida requirements apply, consistent with those described for Property 6. All requirements are expected to be satisfied in the ordinary course.
Schedule B-II Exceptions. The title commitment lists the following exceptions:
1. Real Property Taxes for 2024. Not yet due and payable. Permitted exception.
2. Pinnacle Federal Bank, N.A. — Mortgage (Loan 1-G). The mortgage lien securing Loan 1-G. Permitted exception (assumed debt).
3. JEA (Jacksonville Electric Authority) Easement. An easement granted to JEA for the installation and maintenance of electric, water, and wastewater facilities. The easement is reflected on the survey and is located in standard utility easement areas along the perimeter of the Property. Permitted exception.
4. Access Easement — Port of Jacksonville Connector Road. An access easement created as part of the original plat of the industrial park, providing the Property with access to the Port of Jacksonville connector road system. This easement is beneficial to the Property, providing critical transportation connectivity to the port facilities. The terms of the easement are non-exclusive and impose standard maintenance cost-sharing obligations among the benefited parcels. Permitted exception.
5. Plat Restrictions. Restrictions imposed as part of the recorded plat for the industrial park in which the Property is located, governing permitted uses, building setbacks, signage, and site design. These restrictions are standard industrial park development restrictions and have been reviewed and confirmed to be consistent with the current use of the Property as a logistics and distribution facility. Permitted exception.
Title Objection Items: None.