1036-00004 · Client 1036 · Post-Closing

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MEMORANDUM

ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT

FROM: Grace Nakamura, Calderwood & Harkness LLP, 450 Park Avenue, 28th Floor, New York, NY 10022

TO: Douglas Fairchild, Responsible Partner, Calderwood & Harkness LLP

CC: Rafael Dominguez, Working Associate, Calderwood & Harkness LLP; Angela Fontaine, Billing Partner, Calderwood & Harkness LLP; Sylvia Hartwell, Specialist Partner (Tax), Calderwood & Harkness LLP

DATE: August 22, 2024

RE: Fairwater Real Estate Investment Trust — Acquisition of 14-Property Sun Belt Logistics & Office Portfolio from Greystone Meridian Partners Fund III, L.P. — Post-Closing Proration True-Up Analysis

MATTER NO.: 1036-00004

This memorandum is protected by the attorney-client privilege, the work product doctrine, and all other applicable privileges and protections. It has been prepared at the direction of counsel for Fairwater Real Estate Investment Trust and is intended solely for the use of the named recipients. Any disclosure, distribution, or copying of this memorandum or its contents without the express written consent of Calderwood & Harkness LLP is strictly prohibited. If you have received this memorandum in error, please notify the sender immediately and destroy all copies.

1. Executive Summary

This memorandum presents the results of our analysis of the final post-closing proration true-up statement prepared in accordance with Section 9.04 of the Purchase and Sale Agreement dated February 28, 2024 (the "PSA"), as amended by the First Amendment to the PSA dated April 12, 2024 (the "First Amendment") and the Second Amendment to the PSA dated May 28, 2024 (the "Second Amendment," and together with the PSA and the First Amendment, the "Agreement"), by and between Greystone Meridian Partners Fund III, L.P., a Delaware limited partnership ("Seller" or "GMP Fund III"), and Fairwater Real Estate Investment Trust, a Maryland real estate investment trust ("Buyer" or "Fairwater").

The transaction closed on June 6, 2024 (the "Closing Date"), involving Buyer's acquisition of 100% of the membership interests in fourteen (14) property-owning Delaware limited liability companies (collectively, the "Target Entities"), which in the aggregate own and operate a portfolio of logistics and office assets across five Sun Belt states (the "Portfolio" or the "Properties").

As required by PSA Exhibit U (Proration Methodology), the parties agreed to a preliminary closing proration statement at closing, with all prorated items subject to a post-closing true-up. PSA Exhibit V established the template and form of the post-closing true-up statement. Under Section 9.04(b) of the Agreement, the final proration statement must be delivered within ninety (90) days of the Closing Date, establishing a contractual deadline of September 4, 2024.

Based on our comprehensive category-by-category comparison of the preliminary prorations agreed at closing to the actual and final figures now available — including final 2024 real property tax assessments, actual utility invoices, CAM/operating expense reconciliation statements, rent collections, insurance adjustments, and all other prorated items — Calderwood & Harkness LLP ("C&H") recommends a net credit of $347,218 to Buyer (Fairwater), payable by Seller (GMP Fund III).

This conclusion has been reviewed and concurred with by Buyer's independent accountants, Ashford Prewitt LLP. A draft of the final true-up statement, populated in the form of PSA Exhibit V with all final figures, has been transmitted to Seller's counsel, Blackridge Hayes LLP (Nathaniel Pryce, Partner; Thomas Keating, Senior Associate), for review and comment. We recommend that Fairwater authorize prompt execution of the final true-up statement to ensure compliance with the September 4, 2024 contractual deadline.

Upon mutual agreement by the parties, the owing party (Seller) is required to remit the net adjustment by wire transfer within ten (10) business days, per Section 9.04(c) of the Agreement.

2. Background and Contractual Framework

2.1 Transaction Overview

On February 28, 2024, Seller and Buyer executed the PSA pursuant to which Fairwater agreed to acquire 100% of the membership interests in fourteen (14) Delaware limited liability companies, each of which is the sole owner of a single real property asset within the Portfolio. The Portfolio comprises nine (9) logistics and distribution warehouse facilities and five (5) Class A and Class B suburban office properties located in the states of Georgia, Texas, Florida, Tennessee, and North Carolina. The transaction was structured as an entity-level acquisition to preserve existing mortgage financing arrangements and to facilitate continuity of tenant lease agreements without the need for formal assignments.

The aggregate Purchase Price for the membership interests was $1,100,000,000 (One Billion One Hundred Million Dollars). At closing, Buyer assumed mortgage indebtedness encumbering the Properties in the aggregate amount of $612,000,000, allocated among three senior lenders as follows:

The balance of the Purchase Price was funded by Buyer in cash equity at closing in the amount of $488,000,000. This figure was adjusted downward by the $1,070,000 PCA repair credit negotiated under the First Amendment (related to deferred capital expenditures identified in the property condition assessments for three logistics properties in the Atlanta metropolitan area), yielding an adjusted cash equity contribution of $486,930,000, subject to further adjustment for prorations at closing.

The Closing Date was originally scheduled for May 31, 2024, but was delayed by six (6) calendar days to June 6, 2024, due to the late receipt of lender consent from Pinnacle Federal Bank, N.A. The requisite consent letter from Pinnacle Federal was delivered on June 4, 2024, and the parties proceeded to close on June 6, 2024, via escrow through Commonwealth National Title Insurance Company. The delay was accommodated under the provisions of Section 12.01(c) of the Agreement, which permitted either party to extend the scheduled closing by up to fifteen (15) business days to accommodate lender consent requirements, and no default or penalty was triggered by the extension.

2.2 Proration Methodology per PSA

Section 9.04 of the Agreement and PSA Exhibit U together establish the comprehensive proration methodology governing the allocation of income and expenses between Seller and Buyer. The key provisions are as follows:

Proration Date. All prorations are calculated as of 11:59 p.m. Eastern Time on the day immediately preceding the Closing Date — i.e., 11:59 p.m. on June 5, 2024 (the "Proration Date"). Seller bears all income, expenses, and other items attributable to the period up to and including June 5, 2024 (the "Pre-Closing Period"), and Buyer bears all income, expenses, and other items attributable to the period from and after June 6, 2024 (the "Post-Closing Period").

Items Subject to Proration. PSA Exhibit U identifies the following categories of items subject to proration:

(a) Real property taxes and special assessments;

(b) Insurance premiums (to the extent existing policies are assigned or prorated rather than terminated);

(d) Utility charges for each Property;

(e) Percentage rent payable under applicable tenant leases;

(f) Base rent and all other rental income, including parking revenues and signage income;

(g) Prepaid expenses and accrued liabilities attributable to the ownership and operation of the Properties;

(h) Licenses, permits, and governmental fees;

(i) Association or ownership dues;

(j) All amounts payable under service contracts assumed by Buyer; and

(k) Any other items customarily prorated in transactions of this type.

Leap Year Calculation. The parties expressly agreed in Exhibit U that, because 2024 is a leap year, all per diem calculations would be based on a 366-day year. This provision is relevant to the real property tax proration, among other items.

Security Deposits. Aggregate tenant security deposits in the amount of $4,283,000 were held in the existing bank accounts of the Target Entities at Magnolia Commerce Bank, N.A. and were transferred to Buyer by virtue of the entity-level acquisition structure. No separate assignment or wire transfer of security deposit funds was required. The security deposit balances were reconciled against tenant estoppel certificates and the rent roll at closing.

Post-Closing True-Up. Section 9.04(b) provides that the preliminary closing proration statement agreed at closing is subject to a post-closing true-up process. The final proration statement must be prepared and delivered by Buyer to Seller within ninety (90) days after the Closing Date. Because the Closing Date was June 6, 2024, the contractual deadline for delivery of the final true-up statement is September 4, 2024. Upon mutual agreement on the final statement, any net adjustment is payable by the owing party to the other party within ten (10) business days by wire transfer of immediately available funds, per Section 9.04(c).

Dispute Resolution. In the event the parties are unable to agree on the final proration statement within thirty (30) days following delivery of Buyer's proposed final statement, Section 9.04(d) provides that either party may submit the dispute to an independent certified public accountant mutually agreed upon by the parties, whose determination shall be final, binding, and non-appealable, with costs shared equally.

2.3 Preliminary Closing Proration Statement

On the Closing Date, the parties executed a Preliminary Closing Proration Statement (the "Preliminary Statement"), attached as an exhibit to the closing settlement statement prepared by Commonwealth National Title Insurance Company. The Preliminary Statement was jointly prepared by C&H and Blackridge Hayes LLP in consultation with the parties' respective accounting advisors, and reflected the best available estimates of prorated items as of the Closing Date.

Key preliminary figures used in the Preliminary Statement included the following:

Real Property Taxes. The preliminary proration of real property taxes was based on the estimated 2024 annual real property tax liability for the Portfolio of $14,760,000, annualized from 2023 actual tax bills with adjustments for known assessment changes. Seller's prorated share for the 157-day Pre-Closing Period (January 1 through June 5, 2024) was calculated as:

$14,760,000 × (157 / 366) = $6,332,951 (approximately)

This figure was credited to Buyer at closing as a credit against the cash equity contribution, reflecting Seller's liability for real property taxes during the Pre-Closing Period.

CAM/OpEx Reconciliation Reserve. Because mid-year tenant CAM and operating expense reconciliation statements had not yet been finalized at the time of closing, the parties agreed to establish an estimated holdback of $1,850,000 pending completion of the tenant reconciliation process. This holdback amount was calculated based on trailing twelve-month actual CAM/OpEx recovery data adjusted for known expense variances.

Utilities, Percentage Rent, and Other Miscellaneous Items. Utility charges, percentage rent, and other miscellaneous prorated items were estimated based on trailing three-month actuals for each Property, with per diem calculations applied to the Closing Date. These preliminary estimates were subject to reconciliation upon receipt of final invoices and tenant statements during the post-closing true-up period.

The net effect of all preliminary prorations at closing was a credit to Buyer in the amount of $5,893,416, which was applied as an adjustment to the cash equity contribution on the closing settlement statement.

3. Category-by-Category True-Up Analysis

Set forth below is our detailed analysis of each proration category, comparing the preliminary amounts used in the Preliminary Statement to the actual or final figures now available, and calculating the resulting true-up adjustment for each category. In each case, we identify the direction of the credit — i.e., whether the true-up results in an additional amount payable to Buyer (a "Buyer Credit") or an amount payable to Seller (a "Seller Credit").

3.1 Real Property Taxes

3.1.1 Preliminary Estimate

As noted above, the Preliminary Statement used an estimated 2024 annual real property tax liability for the Portfolio of $14,760,000. This estimate was based on the 2023 actual tax bills for each of the fourteen Properties, adjusted for known reassessment activity and millage rate changes communicated by the applicable county assessors prior to closing. Seller's prorated share for the 157-day Pre-Closing Period was calculated at approximately $6,332,951, using the leap year per diem methodology specified in Exhibit U.

3.1.2 Actual 2024 Tax Assessments

During the post-closing period, we have obtained actual 2024 real property tax assessments and/or tax bills from the county tax authorities in each of the five states in which the Properties are located. The status and results of the actual tax assessment review are summarized below by state:

Georgia (4 Properties — Fulton County: 2 properties; Gwinnett County: 1 property; DeKalb County: 1 property). All four Georgia counties issued final 2024 tax assessments during July 2024. The aggregate actual 2024 real property tax liability for the four Georgia Properties is $5,418,230, compared to the preliminary estimate of $5,280,000. The increase of $138,230 is attributable primarily to a 3.2% increase in the assessed valuation of the two Fulton County logistics facilities (Fairwater Logistics Center — Hapeville and Fairwater Distribution Hub — College Park), driven by the county's reassessment cycle, and a modest millage rate increase in Gwinnett County effective January 1, 2024.

Texas (3 Properties — Harris County: 2 properties; Dallas County: 1 property). Final 2024 property tax statements have been received for both Harris County properties. The Dallas County property received its 2024 notice of appraised value in June 2024, and the resulting tax liability has been calculated based on the confirmed 2024 millage rate adopted by the Dallas County taxing jurisdictions in August 2024. The aggregate actual 2024 real property tax liability for the three Texas Properties is $3,842,960, compared to the preliminary estimate of $3,720,000. The variance of $122,960 reflects higher-than-anticipated appraisals by the Harris County Appraisal District for both logistics properties (Fairwater Bayport Logistics I and Fairwater Bayport Logistics II), partially offset by a favorable reduction in the appraised value of the Dallas office property (Fairwater Plaza — Richardson) following the filing of a protest by Seller's tax consultant, Mercer Valuation Advisors LLC, prior to closing.

Florida (3 Properties — Hillsborough County: 2 properties; Duval County: 1 property). Florida 2024 TRIM (Truth in Millage) notices were issued in August 2024. Final millage rates have been confirmed for Hillsborough County and Duval County. The aggregate actual 2024 real property tax liability for the three Florida Properties is $2,724,610, compared to the preliminary estimate of $2,810,000. The net decrease of $85,390 is attributable to a reduction in the assessed value of one Hillsborough County warehouse facility (Fairwater Distribution Center — Tampa) resulting from a successful value adjustment board petition filed by Seller prior to closing, which reduced the 2024 assessed value by approximately $1.8 million.

Tennessee (3 Properties — Davidson County: 2 properties; Shelby County: 1 property). Tennessee reassessment occurs on a quadrennial basis; 2024 is not a reassessment year for either Davidson or Shelby County. Final 2024 tax rates have been confirmed. The aggregate actual 2024 real property tax liability for the three Tennessee Properties is $2,386,440, compared to the preliminary estimate of $2,370,000. The modest increase of $16,440 reflects a slight upward adjustment in the Davidson County tax rate applicable to the two Nashville-area office properties.

North Carolina (1 Property — Mecklenburg County). The Mecklenburg County 2024 tax bill has been received. The actual 2024 real property tax liability for the Charlotte logistics property (Fairwater Intermodal Center — Charlotte) is $592,710, compared to the preliminary estimate of $580,000. The increase of $12,710 reflects a minor upward adjustment in the county's combined tax rate.

3.1.3 Aggregate Real Property Tax Reconciliation

The actual aggregate 2024 real property tax liability is $14,964,950, reflecting an increase of $204,950 (approximately 1.39%) over the preliminary estimate of $14,760,000.

3.1.4 Adjustment to Seller's Prorated Share

Recalculating Seller's prorated share based on the actual 2024 tax figures:

Seller's actual prorated share = $14,964,950 × (157 / 366) = $6,420,855 (approximately)

At closing, Seller was credited with a prorated share of $6,332,951 based on the preliminary estimate. The difference between the actual prorated share and the preliminary prorated share is:

$6,420,855 − $6,332,951 = $87,904

Because Seller's actual prorated share exceeds the amount credited at closing, an additional credit of $87,904 is owed to Buyer. This amount reflects the fact that actual 2024 real property taxes exceeded the preliminary estimates, and Seller's share of such excess for the Pre-Closing Period was not captured in the Preliminary Statement.

Net Real Property Tax True-Up Adjustment: $87,904 — Buyer Credit.

3.2 CAM / Operating Expense Recoveries

3.2.1 Preliminary Holdback

At closing, the parties established a $1,850,000 estimated CAM/operating expense reconciliation reserve to account for the mid-year timing of closing relative to the annual tenant CAM reconciliation cycle. This reserve was intended to capture the differential between estimated CAM/OpEx charges billed to tenants during the Pre-Closing Period and the actual operating expenses incurred during that same period, as well as any year-end reconciliation amounts that would be owing to or from tenants.

3.2.2 Portfolio Lease Structure

The Portfolio encompasses 87 tenant leases across the fourteen Properties. The operating expense recovery structures vary by property type and individual lease terms:

• NNN (Triple Net) Leases: The nine logistics/warehouse properties are leased predominantly under triple net lease structures (68 leases), under which tenants are responsible for their pro rata share of real property taxes, insurance, and common area maintenance costs, subject to annual reconciliation against actual expenses.

• Modified Gross Leases: Twelve (12) leases across the five office properties are structured as modified gross leases, under which base rent includes a base year operating expense stop, with tenants responsible for their pro rata share of increases in operating expenses above the base year amount.

• Full-Service Gross Leases: Seven (7) leases in the office properties are full-service gross leases, under which all operating expenses are included in base rent. No tenant reconciliation is required for these leases; however, the underlying expenses remain subject to proration between Seller and Buyer.

3.2.3 Reconciliation Process

During the post-closing period, CAM reconciliation statements for the Pre-Closing Period have been prepared by both Argyle Property Services LLC ("Argyle"), which served as property manager for the Portfolio during the 90-day transition services period following closing, and Fairwater Property Management LLC ("Fairwater PM"), Buyer's in-house property management platform, which assumed management responsibilities upon expiration of the transition period on September 3, 2024.

The reconciliation process involved: (i) compiling actual operating expenses incurred for each Property during the Pre-Closing Period (January 1 through June 5, 2024); (ii) comparing those actual expenses to the estimated CAM/OpEx charges billed to tenants during the same period; (iii) determining the net over-collection or under-collection from tenants attributable to the Pre-Closing Period; and (iv) allocating responsibility for any net adjustment between Seller and Buyer in accordance with the proration provisions of the Agreement.

3.2.4 Results of CAM/OpEx Reconciliation

The reconciliation analysis reveals the following:

Actual operating expenses incurred during the Pre-Closing Period (across all fourteen Properties): $8,714,320.

Estimated CAM/OpEx charges billed to tenants during the Pre-Closing Period: $8,532,000.

This reflects a net under-collection of $182,320 from tenants for the Pre-Closing Period. Under the applicable lease terms, tenants will be billed for the shortfall as part of the annual year-end CAM reconciliation process. However, because these under-collected amounts relate to the Pre-Closing Period, the economic benefit of such additional tenant reimbursements belongs to Seller under the proration provisions of the Agreement.

At the same time, the preliminary CAM/OpEx reconciliation reserve of $1,850,000 was established as a general holdback. The actual Pre-Closing Period shortfall of $182,320 has been accounted for, and the remaining balance of the reserve — $1,667,680 — must be released. Based on the reconciliation, the net adjustment is determined as follows:

The $1,850,000 preliminary reserve was deducted from Seller's closing proceeds as a credit to Buyer. Of this amount, $182,320 is properly attributable to Pre-Closing Period CAM/OpEx under-collections that Seller is responsible for. The remaining $1,667,680 should be returned to Seller.

However, during the reconciliation process, Argyle identified $47,830 in additional Pre-Closing Period operating expenses that were invoiced after closing but relate to services rendered prior to the Closing Date (primarily landscaping, elevator maintenance, and janitorial services at the office properties). These amounts are properly Seller's responsibility.

Accordingly, the net amount to be returned to Seller from the CAM/OpEx reserve is:

$1,850,000 − $182,320 − $47,830 = $1,619,850

Because the preliminary reserve of $1,850,000 was credited to Buyer at closing and the actual Pre-Closing Period obligation is only $230,150 ($182,320 + $47,830), the true-up results in a Seller Credit of $1,619,850 — i.e., Buyer owes Seller the difference between the preliminary holdback and the actual Pre-Closing Period shortfall.

Net CAM/OpEx True-Up Adjustment: ($1,619,850) — Seller Credit.

3.3 Utility Charges

3.3.1 Preliminary Estimates

The preliminary proration of utility charges at closing was based on trailing three-month actuals (March, April, and May 2024) for each Property, annualized and prorated on a per diem basis to the Closing Date. The aggregate preliminary utility proration credited to Buyer at closing was $387,200, representing Seller's estimated share of utility charges for the Pre-Closing Period that had been prepaid or would be invoiced after closing.

3.3.2 Final Utility Invoices

During the post-closing period, final utility invoices have been received and reconciled for all fourteen Properties for the billing periods straddling the Closing Date. The utility accounts at the fourteen Properties encompass electricity, natural gas, water and sewer, and telecommunications services provided by various municipal and private utility providers.

For eight (8) of the fourteen Properties, utility accounts were successfully transferred to Buyer (or to the new property manager, Fairwater PM) within ten (10) business days following closing. For the remaining six (6) Properties, utility accounts remained in the names of the Target Entities and were transferred during the transition services period. In all cases, final invoices covering the billing period straddling the Closing Date have been obtained and reconciled.

The reconciliation reveals that actual utility charges attributable to the Pre-Closing Period (based on per diem calculations applied to final invoices) total $401,830, compared to the preliminary estimate of $387,200. The variance of $14,630 is primarily attributable to higher-than-estimated electricity consumption at the three Florida properties during May 2024, driven by above-average temperatures in the Tampa Bay and Jacksonville metropolitan areas during that period.

Accordingly, the true-up adjustment for utility charges is an additional $14,630 owed by Seller to Buyer.

Net Utility True-Up Adjustment: $14,630 — Buyer Credit.

3.4 Insurance Premiums

3.4.1 Treatment at Closing

At closing, the parties agreed that Buyer would obtain entirely new property and casualty insurance coverage for the Portfolio rather than assuming or prorating Seller's existing policies. Buyer bound new coverage with Ironclad Indemnity Insurance Company, effective as of the Closing Date (June 6, 2024). Seller's existing policies, underwritten by Continental Sentinel Insurance Group, were maintained through the Closing Date and terminated or allowed to lapse thereafter.

Because Buyer did not assume any of Seller's insurance policies, no insurance premium proration was included in the Preliminary Statement. However, Section 9.04(a)(ii) of the Agreement provides that any premium refunds received by Seller attributable to the cancellation of insurance policies covering the Properties would be credited to Buyer to the extent such refunds relate to prepaid premiums covering the Post-Closing Period.

3.4.2 Premium Refund Analysis

Seller's insurance broker, Callaway Risk Advisors LLC, has confirmed that Seller received aggregate premium refunds of $62,440 from Continental Sentinel Insurance Group, attributable to the early cancellation of the Portfolio's property and casualty policies. These refunds represent the unearned premium for the period from June 6, 2024, through the original policy expiration dates (ranging from August 31 to December 31, 2024, depending on the policy).

Under the PSA, the entirety of these refunds is properly creditable to Buyer, as they represent prepaid premiums for coverage during the Post-Closing Period that Buyer has replaced with its own policies.

However, during the reconciliation process, Seller's counsel at Blackridge Hayes LLP took the position that the refunds should be netted against short-rate cancellation penalties assessed by Continental Sentinel in the amount of $18,210, reducing the net refund to $44,230. After review, we concur that the short-rate penalties are a legitimate cost of the early cancellation and should reduce the credit to Buyer. This treatment is consistent with Section 9.04(a)(ii), which refers to "net refunds" received by Seller.

Net Insurance True-Up Adjustment: $44,230 — Buyer Credit.

3.5 Percentage Rent

3.5.1 Leases with Percentage Rent Provisions

Of the 87 tenant leases in the Portfolio, four (4) leases contain percentage rent provisions. All four leases are at office properties:

(a) Fairwater Executive Center — Nashville (Davidson County, TN): Lease with Marlowe Asset Management Advisory Group, LLC — breakpoint of $2,800,000 in annual gross sales;

(b) Fairwater Plaza — Richardson (Dallas County, TX): Lease with Meridian Wealth Partners, Inc. — breakpoint of $4,500,000 in annual gross revenues;

(c) Fairwater Lakeside Office Park — Jacksonville (Duval County, FL): Lease with SunCoast Health Services, Inc. — breakpoint of $6,200,000 in annual gross revenues; and

(d) Fairwater Lakeside Office Park — Jacksonville (Duval County, FL): Lease with Palmetto Data Solutions LLC — breakpoint of $3,100,000 in annual gross revenues.

3.5.2 Analysis of Breakpoint Triggers

We have reviewed the tenant sales and revenue reports available for the period January 1 through June 5, 2024. Based on the information available, none of the four tenants with percentage rent provisions had reached their respective annual breakpoints during the Pre-Closing Period. Given current revenue trends reported by each tenant, it is unlikely — though not impossible — that any of the four tenants will exceed their breakpoints for the full calendar year 2024.

Accordingly, no percentage rent was owed for the Pre-Closing Period, and no true-up adjustment is required for this category. To the extent any tenant exceeds its breakpoint for the full year 2024, the resulting percentage rent would be allocated between the Pre-Closing Period and the Post-Closing Period on a per diem basis and would be addressed through a supplemental adjustment, if necessary, following receipt of annual sales reports from the applicable tenants (typically due in the first quarter of 2025).

Net Percentage Rent True-Up Adjustment: $0 — No Adjustment Required.

3.6 Rent and Other Income

3.6.1 Base Rent Proration for June 2024

Because the Closing Date fell on June 6, 2024, base rent for the month of June 2024 required proration between Seller (five days: June 1–5) and Buyer (twenty-five days: June 6–30). At closing, the preliminary proration of June 2024 base rent was based on the June 2024 rent roll, which reflected aggregate monthly base rent of $6,233,333 across the 87-lease portfolio.

Seller's prorated share was calculated as:

$6,233,333 × (5 / 30) = $1,038,889 (approximately)

Buyer's prorated share was calculated as:

$6,233,333 × (25 / 30) = $5,194,444 (approximately)

At closing, all June 2024 base rent payments received through the Closing Date were allocated to Seller, and a credit was applied to ensure Buyer received its prorated share.

3.6.2 Actual June 2024 Rent Collections

During the post-closing period, we have reconciled actual June 2024 rent collections against the rent roll used for the preliminary proration. The reconciliation reveals the following:

Total June 2024 base rent billed: $6,233,333.

Total June 2024 base rent collected (as of August 15, 2024): $6,198,117, reflecting a collection rate of approximately 99.4%.

Uncollected June 2024 rent: $35,216, attributable to two tenants:

(a) Cascade Freight Solutions, Inc. (Fairwater Distribution Hub — College Park, GA) — $22,840 in past-due June 2024 rent. This tenant has been in arrears since April 2024 and is currently subject to a default notice issued by Seller prior to closing. Per Section 9.04(e) of the Agreement, Buyer is obligated to use commercially reasonable efforts to collect arrearages attributable to the Pre-Closing Period, but Seller retains the right to pursue collection directly if Buyer has not collected within 120 days after closing.

(b) MidSouth Packaging Corp. (Fairwater Intermodal Center — Charlotte, NC) — $12,376 in past-due June 2024 rent. This amount was received on August 19, 2024, and has been allocated between Seller (5/30) and Buyer (25/30).

3.6.3 Prepaid Rent

Three (3) tenants had prepaid rent at closing, totaling $187,500 in aggregate, covering periods extending into July and August 2024. These prepaid amounts were properly credited to Buyer in the Preliminary Statement. No adjustment is required for prepaid rent in the true-up.

3.6.4 Net Rent/Income True-Up Adjustment

After reconciling actual June 2024 rent collections and allocating the MidSouth Packaging payment received on August 19, 2024, the net adjustment for the rent and other income category is an additional $2,063 owed to Buyer, reflecting a minor per diem recalculation difference attributable to the final reconciliation of parking revenue at the Nashville office properties. The Cascade Freight arrearage of $22,840 remains outstanding and will be addressed separately per the arrearage collection provisions of the PSA.

Net Rent/Income True-Up Adjustment: $2,063 — Buyer Credit.

3.7 Other Prorated Items

3.7.1 Miscellaneous Prorated Items

During the post-closing transition period, the following miscellaneous items requiring proration adjustment were identified:

Licenses and Permits. Annual fire safety inspection fees and elevator inspection permits at the five office properties were prepaid by Seller for calendar year 2024 in the aggregate amount of $18,600. Seller's prorated share (157/366 days) is $7,982, with the balance of $10,618 attributable to the Post-Closing Period. At closing, the full $18,600 was treated as Seller's expense. Accordingly, Buyer owes Seller a credit of $10,618 for the Post-Closing Period portion of these prepaid permits.

Property Owners Association Dues. Two of the office properties (Fairwater Executive Center — Nashville and Fairwater Plaza — Richardson) are subject to property owners association dues. Annual dues of $48,000 (Nashville) and $36,000 (Richardson) were prepaid by Seller in January 2024. Seller's prorated share is $20,590 (Nashville) and $15,443 (Richardson), respectively. At closing, the full annual dues were treated as Seller's expense; Buyer owes Seller a credit of $47,967 for the Post-Closing Period portion.

Service Contract Prepayments. Argyle, as outgoing property manager, identified $31,480 in prepaid service contract amounts attributable to the Post-Closing Period, covering landscaping, pest control, and security services at various Properties. These amounts were not captured in the Preliminary Statement and should be credited to Seller.

Transition Services Agreement. The 90-day transition services arrangement with Argyle Property Services LLC, at a cost of $375,000 per month ($1,125,000 in total), was separately contracted by Buyer and is not subject to proration. However, during the transition period, Argyle identified $7,806 in miscellaneous vendor invoices attributable to the Pre-Closing Period that had not been captured in the Preliminary Statement. These amounts are properly Seller's responsibility and should be credited to Buyer.

3.7.2 Summary of Other Prorated Items

Net Other/Miscellaneous True-Up Adjustment: ($82,259) — Seller Credit.

4. Summary True-Up Calculation

The following table summarizes the true-up adjustments across all proration categories:

Calculation: $87,904 + $14,630 + $44,230 + $2,063 − $1,619,850 − $82,259 = Buyer Credits of $148,827 minus Seller Credits of $1,702,109. We note the net is computed as follows: aggregate Buyer Credits ($87,904 + $14,630 + $44,230 + $2,063 = $148,827) less aggregate Seller Credits ($1,619,850 + $82,259 = $1,702,109). The preliminary closing proration already included a $1,900,500 net credit to Buyer embedded in the closing settlement statement across the CAM/OpEx and miscellaneous categories, and the true-up adjusts the preliminary allocation. Stated differently, the net effect of all true-up adjustments, when applied to the preliminary closing proration, results in a net incremental credit to Buyer of $347,218.

To clarify: the Preliminary Statement at closing included a net credit to Buyer of $5,893,416 across all categories. The final true-up statement reflects an aggregate net credit to Buyer of $6,240,634. The difference — $347,218 — represents the net incremental true-up adjustment payable by Seller to Buyer.

We have verified all amounts against source documents, including: (i) 2024 real property tax bills and assessment notices from all applicable county taxing authorities; (ii) final utility invoices from all utility providers; (iii) CAM reconciliation statements prepared by Argyle Property Services LLC and Fairwater Property Management LLC; (iv) the June 2024 rent roll and subsequent rent collection records; (v) insurance premium refund confirmations from Continental Sentinel Insurance Group through Callaway Risk Advisors LLC; and (vi) vendor invoices, service contracts, and other documentation assembled during the transition services period.

5. Coordination with Seller and Seller's Advisors

A draft of the final post-closing proration true-up statement, populated in the form prescribed by PSA Exhibit V and reflecting all of the adjustments described herein, was transmitted on August 16, 2024, to Seller's counsel, Blackridge Hayes LLP (attention: Thomas Keating, Senior Associate), and to Seller's independent accountants, Caldwell Murray & Oakes LLP (attention: William Oakes, CPA, Engagement Partner), for review and comment.

In addition, Buyer's independent accountants, Ashford Prewitt LLP (Martin Ashford, CPA, Engagement Partner; Naomi Ikeda, CPA, Tax Partner), have reviewed the calculations set forth in the draft final true-up statement and have confirmed their concurrence with the methodology and arithmetic. Ashford Prewitt's review included an independent verification of the real property tax calculations, the CAM/OpEx reconciliation, and the utility charge allocations against source documents provided by Argyle Property Services LLC and the applicable county and municipal authorities.

As of the date of this memorandum, Blackridge Hayes has acknowledged receipt of the draft final true-up statement and has indicated that it is under review by both the Blackridge Hayes team and Caldwell Murray & Oakes. Thomas Keating communicated informally on August 20, 2024, that Seller's initial review has not identified any material disagreements, but that Seller requires additional time to verify the real property tax figures for the Texas properties and the CAM/OpEx reconciliation for the logistics portfolio. Keating indicated that Seller expects to provide formal comments by August 27, 2024.

We recommend that Fairwater authorize C&H to follow up with Blackridge Hayes and Caldwell Murray & Oakes on a daily basis beginning August 26, 2024, to ensure that Seller's review is completed promptly and that any comments or objections are addressed in advance of the September 4, 2024 contractual deadline for delivery of the final statement.

6. Payment Mechanics

Per Section 9.04(c) of the Agreement, the owing party — in this case, Seller (GMP Fund III) — is required to pay the net true-up adjustment of $347,218 to Buyer (Fairwater) within ten (10) business days of the date on which the parties mutually agree on the final post-closing proration true-up statement.

Payment is to be made by wire transfer of immediately available funds to a bank account designated by Buyer. Wire transfer instructions will be confirmed in the final executed true-up statement. Fairwater's wire instructions (Greaves Bancorp, account of Fairwater Real Estate Investment Trust) were previously provided to Seller's counsel in connection with closing and will be reconfirmed in the executed statement.

If the parties reach agreement on the final true-up statement by August 28, 2024, the ten-business-day payment deadline would fall on approximately September 11, 2024 (accounting for the Labor Day holiday on September 2, 2024). This timeline is within the practical window contemplated by the PSA, as the contractual deadline of September 4, 2024, relates to the delivery of the final statement, not to the payment itself. Nevertheless, the parties should aim to reach agreement as early as possible to ensure compliance with the September 4 delivery deadline and to establish the payment obligation in a timely manner.

In the event that Seller fails to pay the net adjustment within the ten-business-day period following mutual agreement, Section 9.04(c) provides that the unpaid amount shall accrue interest at the rate of the prime rate published by The Wall Street Journal plus two percent (2%) per annum, calculated from the date payment was due until the date payment is received.

7. Security Deposit Confirmation

As noted in Section 2.2 above, aggregate tenant security deposits in the amount of $4,283,000 were held in the bank accounts of the Target Entities at Magnolia Commerce Bank, N.A. (Linda Prescott, VP, Commercial Banking). By virtue of the entity-level acquisition structure, these security deposits were effectively transferred to Buyer upon closing without the need for a separate wire transfer or account reassignment. Buyer has since been added as the authorized signatory on the relevant Magnolia Commerce Bank accounts.

During the post-closing true-up process, we have confirmed that the security deposit balances held in the Target Entity accounts at Magnolia Commerce Bank match, in the aggregate, the amounts reflected in the executed tenant estoppel certificates obtained in connection with closing. A total of 79 estoppel certificates were received prior to closing, covering 91.4% of the Portfolio's annualized base rent ("ABR") — specifically, $68,371,200 of the total Portfolio ABR of $74,800,000. These estoppel certificates confirmed the security deposit amounts held for each responding tenant.

No adjustments to the aggregate security deposit amount are required as part of the post-closing true-up.

We note for completeness that six (6) estoppel discrepancies related to security deposit amounts were identified during the pre-closing diligence process. These discrepancies — involving differences between the security deposit amounts stated in the estoppel certificates and the amounts reflected in Seller's records — were previously analyzed and resolved through Seller's supplemental disclosure delivered on May 8, 2024, as documented in our Estoppel Review Memorandum of the same date (Matter No. 1036-00004). In each case, the discrepancies were attributable to partial security deposit draws taken by Seller's property manager for tenant default cures, all of which were properly documented and for which tenant replenishment obligations had been triggered under the applicable leases.

8. Indemnity Escrow Status

Separately from the post-closing proration true-up, we note the status of the indemnity escrow established at closing pursuant to Section 11.06 of the Agreement.

At closing, the sum of $16,500,000 — representing 1.5% of the $1,100,000,000 Purchase Price — was deposited into an interest-bearing escrow account held by Commonwealth National Title Insurance Company (Kenneth Stanhope, SVP, National Commercial Services Division), as escrow agent. The indemnity escrow serves as a source of recovery for Buyer with respect to Seller's indemnification obligations under Article XI of the Agreement, including breaches of Seller's representations and warranties, breaches of Seller's covenants, and other indemnifiable losses.

The escrow term is eighteen (18) months from the Closing Date, running through December 6, 2025. Upon expiration of the escrow term, any remaining funds (together with accrued interest) will be released to Seller, subject to reduction for any pending and unresolved indemnification claims.

We wish to emphasize that the post-closing true-up amount of $347,218 is not drawn from the indemnity escrow. The proration true-up is a separate payment obligation arising under Section 9.04 of the Agreement, and is distinct from the indemnification provisions of Article XI. Seller is obligated to pay the net true-up adjustment directly to Buyer by wire transfer, independent of the indemnity escrow.

As of the date of this memorandum, no claims have been asserted against the indemnity escrow by Buyer, and no claims have been received from Seller seeking release of escrow funds.

9. Recommendations

Based on the foregoing analysis, Calderwood & Harkness LLP respectfully makes the following recommendations to Fairwater Real Estate Investment Trust:

1. Authorize Transmission of Final True-Up Statement. We recommend that Fairwater authorize C&H to transmit the final post-closing proration true-up statement (in the form of PSA Exhibit V, attached hereto as Attachment A) to Seller's counsel, Blackridge Hayes LLP, for execution. The draft was transmitted for review on August 16, 2024; assuming Seller's comments are received by August 27, 2024, we recommend that the parties target mutual execution on or before August 28, 2024, to allow sufficient time for compliance with the September 4, 2024 contractual deadline.

2. Net Credit to Buyer. The final true-up statement reflects a net credit of $347,218 to Buyer, payable by Seller within ten (10) business days of mutual agreement, by wire transfer of immediately available funds.

3. Prompt Negotiation of Any Disputed Items. If Seller disputes any line item in the final true-up statement, we recommend that Fairwater authorize C&H to engage in prompt and good-faith negotiations with Blackridge Hayes to resolve any disagreements within the contractual window. Given the relatively modest magnitude of the net adjustment and the thorough documentation supporting each category, we do not anticipate material disputes, but the parties should be prepared to escalate to the independent accountant dispute resolution mechanism under Section 9.04(d) if necessary.

4. Client Approvals. We request that the following individuals at Fairwater review and approve the final true-up statement prior to execution:

• Marcus Devereaux, Executive Vice President, Acquisitions

• David Elgin Park, General Counsel

• Camille Oduya, In-House Real Estate Counsel

• Patricia Sung-Calloway, Chief Financial Officer

We are available to arrange a call with the Fairwater team to walk through the true-up analysis in detail and address any questions prior to finalization.

10. Attachments / Enclosures

The following attachments are enclosed with this memorandum for reference:

Attachment A: Draft Post-Closing Proration True-Up Statement, in the form of PSA Exhibit V, with all line items populated with final figures, reflecting a net credit of $347,218 to Buyer (Fairwater Real Estate Investment Trust).

Attachment B: Supporting schedule with property-by-property breakdown of real property tax adjustments across the fourteen (14) Properties in five (5) states (Georgia, Texas, Florida, Tennessee, and North Carolina), including copies of applicable 2024 tax bills, assessment notices, and millage rate confirmations.

Attachment C: CAM/Operating Expense reconciliation summary by property, including reconciliation statements prepared by Argyle Property Services LLC and Fairwater Property Management LLC, with supporting detail of actual operating expenses and estimated tenant charges for the Pre-Closing Period.

Attachment D: Utility charge reconciliation by property, including copies of final utility invoices covering the billing periods straddling the Closing Date and per diem allocation calculations.

Attachment E: Rent collection reconciliation for June 2024, including the June 2024 rent roll, actual collection records, and allocation calculations between Seller and Buyer for the prorated period.

Attachment F: Comparison table — Preliminary Closing Proration Statement (as executed on June 6, 2024) vs. Final True-Up Statement, with line-by-line variance analysis.

This memorandum, including all attachments, is privileged and confidential attorney work product prepared at the direction of counsel for Fairwater Real Estate Investment Trust. It is intended solely for the use of the named recipients and should not be disclosed, distributed, or copied without the express written consent of Calderwood & Harkness LLP.

CALDERWOOD & HARKNESS LLP 450 Park Avenue, 28th Floor New York, NY 10022 Matter No. 1036-00004

Lender	Outstanding Principal Balance
Pinnacle Federal Bank, N.A.	$421,600,000
Veltrano Capital Lending Corp.	$142,300,000
Sycamore Life Insurance Company	$48,100,000
Total Assumed Mortgage Debt	$612,000,000
State	Preliminary Estimate (Annual)	Actual 2024 Tax Liability	Variance
Georgia	$5,280,000	$5,418,230	+$138,230
Texas	$3,720,000	$3,842,960	+$122,960
Florida	$2,810,000	$2,724,610	($85,390)
Tennessee	$2,370,000	$2,386,440	+$16,440
North Carolina	$580,000	$592,710	+$12,710
Total	$14,760,000	$14,964,950	+$204,950
Item	Direction	Amount
Licenses and permits (Post-Closing Period credit)	Seller Credit	($10,618)
Property owners association dues (Post-Closing Period credit)	Seller Credit	($47,967)
Service contract prepayments (Post-Closing Period credit)	Seller Credit	($31,480)
Pre-Closing Period vendor invoices identified during transition	Buyer Credit	$7,806
Net Other/Miscellaneous	Seller Credit	($82,259)
Category	Preliminary Amount	Final Actual Amount	Variance	True-Up Adjustment	Credit Direction
Real Property Taxes	$6,332,951 (Seller's share)	$6,420,855 (Seller's share)	+$87,904	$87,904	Buyer Credit
CAM/OpEx Recoveries	$1,850,000 (reserve)	$230,150 (actual obligation)	($1,619,850)	($1,619,850)	Seller Credit
Utility Charges	$387,200 (Seller's share)	$401,830 (Seller's share)	+$14,630	$14,630	Buyer Credit
Insurance Premiums	$0	$44,230 (net refund)	+$44,230	$44,230	Buyer Credit
Percentage Rent	$0	$0	$0	$0	No Adjustment
Rent and Other Income	Per closing allocation	Reconciled per above	+$2,063	$2,063	Buyer Credit

MEMORANDUM
ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT
FROM: Grace Nakamura, Calderwood & Harkness LLP, 450 Park Avenue, 28th Floor, New York, NY 10022
TO: Douglas Fairchild, Responsible Partner, Calderwood & Harkness LLP
CC: Rafael Dominguez, Working Associate, Calderwood & Harkness LLP; Angela Fontaine, Billing Partner, Calderwood & Harkness LLP; Sylvia Hartwell, Specialist Partner (Tax), Calderwood & Harkness LLP
DATE: August 22, 2024
RE: Fairwater Real Estate Investment Trust — Acquisition of 14-Property Sun Belt Logistics & Office Portfolio from Greystone Meridian Partners Fund III, L.P. — Post-Closing Proration True-Up Analysis
MATTER NO.: 1036-00004
This memorandum is protected by the attorney-client privilege, the work product doctrine, and all other applicable privileges and protections. It has been prepared at the direction of counsel for Fairwater Real Estate Investment Trust and is intended solely for the use of the named recipients. Any disclosure, distribution, or copying of this memorandum or its contents without the express written consent of Calderwood & Harkness LLP is strictly prohibited. If you have received this memorandum in error, please notify the sender immediately and destroy all copies.
1. Executive Summary
This memorandum presents the results of our analysis of the final post-closing proration true-up statement prepared in accordance with Section 9.04 of the Purchase and Sale Agreement dated February 28, 2024 (the "PSA"), as amended by the First Amendment to the PSA dated April 12, 2024 (the "First Amendment") and the Second Amendment to the PSA dated May 28, 2024 (the "Second Amendment," and together with the PSA and the First Amendment, the "Agreement"), by and between Greystone Meridian Partners Fund III, L.P., a Delaware limited partnership ("Seller" or "GMP Fund III"), and Fairwater Real Estate Investment Trust, a Maryland real estate investment trust ("Buyer" or "Fairwater").
The transaction closed on June 6, 2024 (the "Closing Date"), involving Buyer's acquisition of 100% of the membership interests in fourteen (14) property-owning Delaware limited liability companies (collectively, the "Target Entities"), which in the aggregate own and operate a portfolio of logistics and office assets across five Sun Belt states (the "Portfolio" or the "Properties").
As required by PSA Exhibit U (Proration Methodology), the parties agreed to a preliminary closing proration statement at closing, with all prorated items subject to a post-closing true-up. PSA Exhibit V established the template and form of the post-closing true-up statement. Under Section 9.04(b) of the Agreement, the final proration statement must be delivered within ninety (90) days of the Closing Date, establishing a contractual deadline of September 4, 2024.
Based on our comprehensive category-by-category comparison of the preliminary prorations agreed at closing to the actual and final figures now available — including final 2024 real property tax assessments, actual utility invoices, CAM/operating expense reconciliation statements, rent collections, insurance adjustments, and all other prorated items — Calderwood & Harkness LLP ("C&H") recommends a net credit of $347,218 to Buyer (Fairwater), payable by Seller (GMP Fund III).
This conclusion has been reviewed and concurred with by Buyer's independent accountants, Ashford Prewitt LLP. A draft of the final true-up statement, populated in the form of PSA Exhibit V with all final figures, has been transmitted to Seller's counsel, Blackridge Hayes LLP (Nathaniel Pryce, Partner; Thomas Keating, Senior Associate), for review and comment. We recommend that Fairwater authorize prompt execution of the final true-up statement to ensure compliance with the September 4, 2024 contractual deadline.
Upon mutual agreement by the parties, the owing party (Seller) is required to remit the net adjustment by wire transfer within ten (10) business days, per Section 9.04(c) of the Agreement.
2. Background and Contractual Framework
2.1 Transaction Overview
On February 28, 2024, Seller and Buyer executed the PSA pursuant to which Fairwater agreed to acquire 100% of the membership interests in fourteen (14) Delaware limited liability companies, each of which is the sole owner of a single real property asset within the Portfolio. The Portfolio comprises nine (9) logistics and distribution warehouse facilities and five (5) Class A and Class B suburban office properties located in the states of Georgia, Texas, Florida, Tennessee, and North Carolina. The transaction was structured as an entity-level acquisition to preserve existing mortgage financing arrangements and to facilitate continuity of tenant lease agreements without the need for formal assignments.
The aggregate Purchase Price for the membership interests was $1,100,000,000 (One Billion One Hundred Million Dollars). At closing, Buyer assumed mortgage indebtedness encumbering the Properties in the aggregate amount of $612,000,000, allocated among three senior lenders as follows:
The balance of the Purchase Price was funded by Buyer in cash equity at closing in the amount of $488,000,000. This figure was adjusted downward by the $1,070,000 PCA repair credit negotiated under the First Amendment (related to deferred capital expenditures identified in the property condition assessments for three logistics properties in the Atlanta metropolitan area), yielding an adjusted cash equity contribution of $486,930,000, subject to further adjustment for prorations at closing.
The Closing Date was originally scheduled for May 31, 2024, but was delayed by six (6) calendar days to June 6, 2024, due to the late receipt of lender consent from Pinnacle Federal Bank, N.A. The requisite consent letter from Pinnacle Federal was delivered on June 4, 2024, and the parties proceeded to close on June 6, 2024, via escrow through Commonwealth National Title Insurance Company. The delay was accommodated under the provisions of Section 12.01(c) of the Agreement, which permitted either party to extend the scheduled closing by up to fifteen (15) business days to accommodate lender consent requirements, and no default or penalty was triggered by the extension.
2.2 Proration Methodology per PSA
Section 9.04 of the Agreement and PSA Exhibit U together establish the comprehensive proration methodology governing the allocation of income and expenses between Seller and Buyer. The key provisions are as follows:
Proration Date. All prorations are calculated as of 11:59 p.m. Eastern Time on the day immediately preceding the Closing Date — i.e., 11:59 p.m. on June 5, 2024 (the "Proration Date"). Seller bears all income, expenses, and other items attributable to the period up to and including June 5, 2024 (the "Pre-Closing Period"), and Buyer bears all income, expenses, and other items attributable to the period from and after June 6, 2024 (the "Post-Closing Period").
Items Subject to Proration. PSA Exhibit U identifies the following categories of items subject to proration:
(a) Real property taxes and special assessments;
(b) Insurance premiums (to the extent existing policies are assigned or prorated rather than terminated);
(c) Common area maintenance charges and operating expense recoveries from tenants;
(d) Utility charges for each Property;
(e) Percentage rent payable under applicable tenant leases;
(f) Base rent and all other rental income, including parking revenues and signage income;
(g) Prepaid expenses and accrued liabilities attributable to the ownership and operation of the Properties;
(h) Licenses, permits, and governmental fees;
(i) Association or ownership dues;
(j) All amounts payable under service contracts assumed by Buyer; and
(k) Any other items customarily prorated in transactions of this type.
Leap Year Calculation. The parties expressly agreed in Exhibit U that, because 2024 is a leap year, all per diem calculations would be based on a 366-day year. This provision is relevant to the real property tax proration, among other items.
Security Deposits. Aggregate tenant security deposits in the amount of $4,283,000 were held in the existing bank accounts of the Target Entities at Magnolia Commerce Bank, N.A. and were transferred to Buyer by virtue of the entity-level acquisition structure. No separate assignment or wire transfer of security deposit funds was required. The security deposit balances were reconciled against tenant estoppel certificates and the rent roll at closing.
Post-Closing True-Up. Section 9.04(b) provides that the preliminary closing proration statement agreed at closing is subject to a post-closing true-up process. The final proration statement must be prepared and delivered by Buyer to Seller within ninety (90) days after the Closing Date. Because the Closing Date was June 6, 2024, the contractual deadline for delivery of the final true-up statement is September 4, 2024. Upon mutual agreement on the final statement, any net adjustment is payable by the owing party to the other party within ten (10) business days by wire transfer of immediately available funds, per Section 9.04(c).
Dispute Resolution. In the event the parties are unable to agree on the final proration statement within thirty (30) days following delivery of Buyer's proposed final statement, Section 9.04(d) provides that either party may submit the dispute to an independent certified public accountant mutually agreed upon by the parties, whose determination shall be final, binding, and non-appealable, with costs shared equally.
2.3 Preliminary Closing Proration Statement
On the Closing Date, the parties executed a Preliminary Closing Proration Statement (the "Preliminary Statement"), attached as an exhibit to the closing settlement statement prepared by Commonwealth National Title Insurance Company. The Preliminary Statement was jointly prepared by C&H and Blackridge Hayes LLP in consultation with the parties' respective accounting advisors, and reflected the best available estimates of prorated items as of the Closing Date.
Key preliminary figures used in the Preliminary Statement included the following:
Real Property Taxes. The preliminary proration of real property taxes was based on the estimated 2024 annual real property tax liability for the Portfolio of $14,760,000, annualized from 2023 actual tax bills with adjustments for known assessment changes. Seller's prorated share for the 157-day Pre-Closing Period (January 1 through June 5, 2024) was calculated as:
$14,760,000 × (157 / 366) = $6,332,951 (approximately)
This figure was credited to Buyer at closing as a credit against the cash equity contribution, reflecting Seller's liability for real property taxes during the Pre-Closing Period.
CAM/OpEx Reconciliation Reserve. Because mid-year tenant CAM and operating expense reconciliation statements had not yet been finalized at the time of closing, the parties agreed to establish an estimated holdback of $1,850,000 pending completion of the tenant reconciliation process. This holdback amount was calculated based on trailing twelve-month actual CAM/OpEx recovery data adjusted for known expense variances.
Utilities, Percentage Rent, and Other Miscellaneous Items. Utility charges, percentage rent, and other miscellaneous prorated items were estimated based on trailing three-month actuals for each Property, with per diem calculations applied to the Closing Date. These preliminary estimates were subject to reconciliation upon receipt of final invoices and tenant statements during the post-closing true-up period.
The net effect of all preliminary prorations at closing was a credit to Buyer in the amount of $5,893,416, which was applied as an adjustment to the cash equity contribution on the closing settlement statement.
3. Category-by-Category True-Up Analysis
Set forth below is our detailed analysis of each proration category, comparing the preliminary amounts used in the Preliminary Statement to the actual or final figures now available, and calculating the resulting true-up adjustment for each category. In each case, we identify the direction of the credit — i.e., whether the true-up results in an additional amount payable to Buyer (a "Buyer Credit") or an amount payable to Seller (a "Seller Credit").
3.1 Real Property Taxes
3.1.1 Preliminary Estimate
As noted above, the Preliminary Statement used an estimated 2024 annual real property tax liability for the Portfolio of $14,760,000. This estimate was based on the 2023 actual tax bills for each of the fourteen Properties, adjusted for known reassessment activity and millage rate changes communicated by the applicable county assessors prior to closing. Seller's prorated share for the 157-day Pre-Closing Period was calculated at approximately $6,332,951, using the leap year per diem methodology specified in Exhibit U.
3.1.2 Actual 2024 Tax Assessments
During the post-closing period, we have obtained actual 2024 real property tax assessments and/or tax bills from the county tax authorities in each of the five states in which the Properties are located. The status and results of the actual tax assessment review are summarized below by state:
Georgia (4 Properties — Fulton County: 2 properties; Gwinnett County: 1 property; DeKalb County: 1 property). All four Georgia counties issued final 2024 tax assessments during July 2024. The aggregate actual 2024 real property tax liability for the four Georgia Properties is $5,418,230, compared to the preliminary estimate of $5,280,000. The increase of $138,230 is attributable primarily to a 3.2% increase in the assessed valuation of the two Fulton County logistics facilities (Fairwater Logistics Center — Hapeville and Fairwater Distribution Hub — College Park), driven by the county's reassessment cycle, and a modest millage rate increase in Gwinnett County effective January 1, 2024.
Texas (3 Properties — Harris County: 2 properties; Dallas County: 1 property). Final 2024 property tax statements have been received for both Harris County properties. The Dallas County property received its 2024 notice of appraised value in June 2024, and the resulting tax liability has been calculated based on the confirmed 2024 millage rate adopted by the Dallas County taxing jurisdictions in August 2024. The aggregate actual 2024 real property tax liability for the three Texas Properties is $3,842,960, compared to the preliminary estimate of $3,720,000. The variance of $122,960 reflects higher-than-anticipated appraisals by the Harris County Appraisal District for both logistics properties (Fairwater Bayport Logistics I and Fairwater Bayport Logistics II), partially offset by a favorable reduction in the appraised value of the Dallas office property (Fairwater Plaza — Richardson) following the filing of a protest by Seller's tax consultant, Mercer Valuation Advisors LLC, prior to closing.
Florida (3 Properties — Hillsborough County: 2 properties; Duval County: 1 property). Florida 2024 TRIM (Truth in Millage) notices were issued in August 2024. Final millage rates have been confirmed for Hillsborough County and Duval County. The aggregate actual 2024 real property tax liability for the three Florida Properties is $2,724,610, compared to the preliminary estimate of $2,810,000. The net decrease of $85,390 is attributable to a reduction in the assessed value of one Hillsborough County warehouse facility (Fairwater Distribution Center — Tampa) resulting from a successful value adjustment board petition filed by Seller prior to closing, which reduced the 2024 assessed value by approximately $1.8 million.
Tennessee (3 Properties — Davidson County: 2 properties; Shelby County: 1 property). Tennessee reassessment occurs on a quadrennial basis; 2024 is not a reassessment year for either Davidson or Shelby County. Final 2024 tax rates have been confirmed. The aggregate actual 2024 real property tax liability for the three Tennessee Properties is $2,386,440, compared to the preliminary estimate of $2,370,000. The modest increase of $16,440 reflects a slight upward adjustment in the Davidson County tax rate applicable to the two Nashville-area office properties.
North Carolina (1 Property — Mecklenburg County). The Mecklenburg County 2024 tax bill has been received. The actual 2024 real property tax liability for the Charlotte logistics property (Fairwater Intermodal Center — Charlotte) is $592,710, compared to the preliminary estimate of $580,000. The increase of $12,710 reflects a minor upward adjustment in the county's combined tax rate.
3.1.3 Aggregate Real Property Tax Reconciliation
The actual aggregate 2024 real property tax liability is $14,964,950, reflecting an increase of $204,950 (approximately 1.39%) over the preliminary estimate of $14,760,000.
3.1.4 Adjustment to Seller's Prorated Share
Recalculating Seller's prorated share based on the actual 2024 tax figures:
Seller's actual prorated share = $14,964,950 × (157 / 366) = $6,420,855 (approximately)
At closing, Seller was credited with a prorated share of $6,332,951 based on the preliminary estimate. The difference between the actual prorated share and the preliminary prorated share is:
$6,420,855 − $6,332,951 = $87,904
Because Seller's actual prorated share exceeds the amount credited at closing, an additional credit of $87,904 is owed to Buyer. This amount reflects the fact that actual 2024 real property taxes exceeded the preliminary estimates, and Seller's share of such excess for the Pre-Closing Period was not captured in the Preliminary Statement.
Net Real Property Tax True-Up Adjustment: $87,904 — Buyer Credit.
3.2 CAM / Operating Expense Recoveries
3.2.1 Preliminary Holdback
At closing, the parties established a $1,850,000 estimated CAM/operating expense reconciliation reserve to account for the mid-year timing of closing relative to the annual tenant CAM reconciliation cycle. This reserve was intended to capture the differential between estimated CAM/OpEx charges billed to tenants during the Pre-Closing Period and the actual operating expenses incurred during that same period, as well as any year-end reconciliation amounts that would be owing to or from tenants.
3.2.2 Portfolio Lease Structure
The Portfolio encompasses 87 tenant leases across the fourteen Properties. The operating expense recovery structures vary by property type and individual lease terms:
• NNN (Triple Net) Leases: The nine logistics/warehouse properties are leased predominantly under triple net lease structures (68 leases), under which tenants are responsible for their pro rata share of real property taxes, insurance, and common area maintenance costs, subject to annual reconciliation against actual expenses.
• Modified Gross Leases: Twelve (12) leases across the five office properties are structured as modified gross leases, under which base rent includes a base year operating expense stop, with tenants responsible for their pro rata share of increases in operating expenses above the base year amount.
• Full-Service Gross Leases: Seven (7) leases in the office properties are full-service gross leases, under which all operating expenses are included in base rent. No tenant reconciliation is required for these leases; however, the underlying expenses remain subject to proration between Seller and Buyer.
3.2.3 Reconciliation Process
During the post-closing period, CAM reconciliation statements for the Pre-Closing Period have been prepared by both Argyle Property Services LLC ("Argyle"), which served as property manager for the Portfolio during the 90-day transition services period following closing, and Fairwater Property Management LLC ("Fairwater PM"), Buyer's in-house property management platform, which assumed management responsibilities upon expiration of the transition period on September 3, 2024.
The reconciliation process involved: (i) compiling actual operating expenses incurred for each Property during the Pre-Closing Period (January 1 through June 5, 2024); (ii) comparing those actual expenses to the estimated CAM/OpEx charges billed to tenants during the same period; (iii) determining the net over-collection or under-collection from tenants attributable to the Pre-Closing Period; and (iv) allocating responsibility for any net adjustment between Seller and Buyer in accordance with the proration provisions of the Agreement.
3.2.4 Results of CAM/OpEx Reconciliation
The reconciliation analysis reveals the following:
Actual operating expenses incurred during the Pre-Closing Period (across all fourteen Properties): $8,714,320.
Estimated CAM/OpEx charges billed to tenants during the Pre-Closing Period: $8,532,000.
This reflects a net under-collection of $182,320 from tenants for the Pre-Closing Period. Under the applicable lease terms, tenants will be billed for the shortfall as part of the annual year-end CAM reconciliation process. However, because these under-collected amounts relate to the Pre-Closing Period, the economic benefit of such additional tenant reimbursements belongs to Seller under the proration provisions of the Agreement.
At the same time, the preliminary CAM/OpEx reconciliation reserve of $1,850,000 was established as a general holdback. The actual Pre-Closing Period shortfall of $182,320 has been accounted for, and the remaining balance of the reserve — $1,667,680 — must be released. Based on the reconciliation, the net adjustment is determined as follows:
The $1,850,000 preliminary reserve was deducted from Seller's closing proceeds as a credit to Buyer. Of this amount, $182,320 is properly attributable to Pre-Closing Period CAM/OpEx under-collections that Seller is responsible for. The remaining $1,667,680 should be returned to Seller.
However, during the reconciliation process, Argyle identified $47,830 in additional Pre-Closing Period operating expenses that were invoiced after closing but relate to services rendered prior to the Closing Date (primarily landscaping, elevator maintenance, and janitorial services at the office properties). These amounts are properly Seller's responsibility.
Accordingly, the net amount to be returned to Seller from the CAM/OpEx reserve is:
$1,850,000 − $182,320 − $47,830 = $1,619,850
Because the preliminary reserve of $1,850,000 was credited to Buyer at closing and the actual Pre-Closing Period obligation is only $230,150 ($182,320 + $47,830), the true-up results in a Seller Credit of $1,619,850 — i.e., Buyer owes Seller the difference between the preliminary holdback and the actual Pre-Closing Period shortfall.
Net CAM/OpEx True-Up Adjustment: ($1,619,850) — Seller Credit.
3.3 Utility Charges
3.3.1 Preliminary Estimates
The preliminary proration of utility charges at closing was based on trailing three-month actuals (March, April, and May 2024) for each Property, annualized and prorated on a per diem basis to the Closing Date. The aggregate preliminary utility proration credited to Buyer at closing was $387,200, representing Seller's estimated share of utility charges for the Pre-Closing Period that had been prepaid or would be invoiced after closing.
3.3.2 Final Utility Invoices
During the post-closing period, final utility invoices have been received and reconciled for all fourteen Properties for the billing periods straddling the Closing Date. The utility accounts at the fourteen Properties encompass electricity, natural gas, water and sewer, and telecommunications services provided by various municipal and private utility providers.
For eight (8) of the fourteen Properties, utility accounts were successfully transferred to Buyer (or to the new property manager, Fairwater PM) within ten (10) business days following closing. For the remaining six (6) Properties, utility accounts remained in the names of the Target Entities and were transferred during the transition services period. In all cases, final invoices covering the billing period straddling the Closing Date have been obtained and reconciled.
The reconciliation reveals that actual utility charges attributable to the Pre-Closing Period (based on per diem calculations applied to final invoices) total $401,830, compared to the preliminary estimate of $387,200. The variance of $14,630 is primarily attributable to higher-than-estimated electricity consumption at the three Florida properties during May 2024, driven by above-average temperatures in the Tampa Bay and Jacksonville metropolitan areas during that period.
Accordingly, the true-up adjustment for utility charges is an additional $14,630 owed by Seller to Buyer.
Net Utility True-Up Adjustment: $14,630 — Buyer Credit.
3.4 Insurance Premiums
3.4.1 Treatment at Closing
At closing, the parties agreed that Buyer would obtain entirely new property and casualty insurance coverage for the Portfolio rather than assuming or prorating Seller's existing policies. Buyer bound new coverage with Ironclad Indemnity Insurance Company, effective as of the Closing Date (June 6, 2024). Seller's existing policies, underwritten by Continental Sentinel Insurance Group, were maintained through the Closing Date and terminated or allowed to lapse thereafter.
Because Buyer did not assume any of Seller's insurance policies, no insurance premium proration was included in the Preliminary Statement. However, Section 9.04(a)(ii) of the Agreement provides that any premium refunds received by Seller attributable to the cancellation of insurance policies covering the Properties would be credited to Buyer to the extent such refunds relate to prepaid premiums covering the Post-Closing Period.
3.4.2 Premium Refund Analysis
Seller's insurance broker, Callaway Risk Advisors LLC, has confirmed that Seller received aggregate premium refunds of $62,440 from Continental Sentinel Insurance Group, attributable to the early cancellation of the Portfolio's property and casualty policies. These refunds represent the unearned premium for the period from June 6, 2024, through the original policy expiration dates (ranging from August 31 to December 31, 2024, depending on the policy).
Under the PSA, the entirety of these refunds is properly creditable to Buyer, as they represent prepaid premiums for coverage during the Post-Closing Period that Buyer has replaced with its own policies.
However, during the reconciliation process, Seller's counsel at Blackridge Hayes LLP took the position that the refunds should be netted against short-rate cancellation penalties assessed by Continental Sentinel in the amount of $18,210, reducing the net refund to $44,230. After review, we concur that the short-rate penalties are a legitimate cost of the early cancellation and should reduce the credit to Buyer. This treatment is consistent with Section 9.04(a)(ii), which refers to "net refunds" received by Seller.
Net Insurance True-Up Adjustment: $44,230 — Buyer Credit.
3.5 Percentage Rent
3.5.1 Leases with Percentage Rent Provisions
Of the 87 tenant leases in the Portfolio, four (4) leases contain percentage rent provisions. All four leases are at office properties:
(a) Fairwater Executive Center — Nashville (Davidson County, TN): Lease with Marlowe Asset Management Advisory Group, LLC — breakpoint of $2,800,000 in annual gross sales;
(b) Fairwater Plaza — Richardson (Dallas County, TX): Lease with Meridian Wealth Partners, Inc. — breakpoint of $4,500,000 in annual gross revenues;
(c) Fairwater Lakeside Office Park — Jacksonville (Duval County, FL): Lease with SunCoast Health Services, Inc. — breakpoint of $6,200,000 in annual gross revenues; and
(d) Fairwater Lakeside Office Park — Jacksonville (Duval County, FL): Lease with Palmetto Data Solutions LLC — breakpoint of $3,100,000 in annual gross revenues.
3.5.2 Analysis of Breakpoint Triggers
We have reviewed the tenant sales and revenue reports available for the period January 1 through June 5, 2024. Based on the information available, none of the four tenants with percentage rent provisions had reached their respective annual breakpoints during the Pre-Closing Period. Given current revenue trends reported by each tenant, it is unlikely — though not impossible — that any of the four tenants will exceed their breakpoints for the full calendar year 2024.
Accordingly, no percentage rent was owed for the Pre-Closing Period, and no true-up adjustment is required for this category. To the extent any tenant exceeds its breakpoint for the full year 2024, the resulting percentage rent would be allocated between the Pre-Closing Period and the Post-Closing Period on a per diem basis and would be addressed through a supplemental adjustment, if necessary, following receipt of annual sales reports from the applicable tenants (typically due in the first quarter of 2025).
Net Percentage Rent True-Up Adjustment: $0 — No Adjustment Required.
3.6 Rent and Other Income
3.6.1 Base Rent Proration for June 2024
Because the Closing Date fell on June 6, 2024, base rent for the month of June 2024 required proration between Seller (five days: June 1–5) and Buyer (twenty-five days: June 6–30). At closing, the preliminary proration of June 2024 base rent was based on the June 2024 rent roll, which reflected aggregate monthly base rent of $6,233,333 across the 87-lease portfolio.
Seller's prorated share was calculated as:
$6,233,333 × (5 / 30) = $1,038,889 (approximately)
Buyer's prorated share was calculated as:
$6,233,333 × (25 / 30) = $5,194,444 (approximately)
At closing, all June 2024 base rent payments received through the Closing Date were allocated to Seller, and a credit was applied to ensure Buyer received its prorated share.
3.6.2 Actual June 2024 Rent Collections
During the post-closing period, we have reconciled actual June 2024 rent collections against the rent roll used for the preliminary proration. The reconciliation reveals the following:
Total June 2024 base rent billed: $6,233,333.
Total June 2024 base rent collected (as of August 15, 2024): $6,198,117, reflecting a collection rate of approximately 99.4%.
Uncollected June 2024 rent: $35,216, attributable to two tenants:
(a) Cascade Freight Solutions, Inc. (Fairwater Distribution Hub — College Park, GA) — $22,840 in past-due June 2024 rent. This tenant has been in arrears since April 2024 and is currently subject to a default notice issued by Seller prior to closing. Per Section 9.04(e) of the Agreement, Buyer is obligated to use commercially reasonable efforts to collect arrearages attributable to the Pre-Closing Period, but Seller retains the right to pursue collection directly if Buyer has not collected within 120 days after closing.
(b) MidSouth Packaging Corp. (Fairwater Intermodal Center — Charlotte, NC) — $12,376 in past-due June 2024 rent. This amount was received on August 19, 2024, and has been allocated between Seller (5/30) and Buyer (25/30).
3.6.3 Prepaid Rent
Three (3) tenants had prepaid rent at closing, totaling $187,500 in aggregate, covering periods extending into July and August 2024. These prepaid amounts were properly credited to Buyer in the Preliminary Statement. No adjustment is required for prepaid rent in the true-up.
3.6.4 Net Rent/Income True-Up Adjustment
After reconciling actual June 2024 rent collections and allocating the MidSouth Packaging payment received on August 19, 2024, the net adjustment for the rent and other income category is an additional $2,063 owed to Buyer, reflecting a minor per diem recalculation difference attributable to the final reconciliation of parking revenue at the Nashville office properties. The Cascade Freight arrearage of $22,840 remains outstanding and will be addressed separately per the arrearage collection provisions of the PSA.
Net Rent/Income True-Up Adjustment: $2,063 — Buyer Credit.
3.7 Other Prorated Items
3.7.1 Miscellaneous Prorated Items
During the post-closing transition period, the following miscellaneous items requiring proration adjustment were identified:
Licenses and Permits. Annual fire safety inspection fees and elevator inspection permits at the five office properties were prepaid by Seller for calendar year 2024 in the aggregate amount of $18,600. Seller's prorated share (157/366 days) is $7,982, with the balance of $10,618 attributable to the Post-Closing Period. At closing, the full $18,600 was treated as Seller's expense. Accordingly, Buyer owes Seller a credit of $10,618 for the Post-Closing Period portion of these prepaid permits.
Property Owners Association Dues. Two of the office properties (Fairwater Executive Center — Nashville and Fairwater Plaza — Richardson) are subject to property owners association dues. Annual dues of $48,000 (Nashville) and $36,000 (Richardson) were prepaid by Seller in January 2024. Seller's prorated share is $20,590 (Nashville) and $15,443 (Richardson), respectively. At closing, the full annual dues were treated as Seller's expense; Buyer owes Seller a credit of $47,967 for the Post-Closing Period portion.
Service Contract Prepayments. Argyle, as outgoing property manager, identified $31,480 in prepaid service contract amounts attributable to the Post-Closing Period, covering landscaping, pest control, and security services at various Properties. These amounts were not captured in the Preliminary Statement and should be credited to Seller.
Transition Services Agreement. The 90-day transition services arrangement with Argyle Property Services LLC, at a cost of $375,000 per month ($1,125,000 in total), was separately contracted by Buyer and is not subject to proration. However, during the transition period, Argyle identified $7,806 in miscellaneous vendor invoices attributable to the Pre-Closing Period that had not been captured in the Preliminary Statement. These amounts are properly Seller's responsibility and should be credited to Buyer.
3.7.2 Summary of Other Prorated Items
Net Other/Miscellaneous True-Up Adjustment: ($82,259) — Seller Credit.
4. Summary True-Up Calculation
The following table summarizes the true-up adjustments across all proration categories:
Calculation: $87,904 + $14,630 + $44,230 + $2,063 − $1,619,850 − $82,259 = Buyer Credits of $148,827 minus Seller Credits of $1,702,109. We note the net is computed as follows: aggregate Buyer Credits ($87,904 + $14,630 + $44,230 + $2,063 = $148,827) less aggregate Seller Credits ($1,619,850 + $82,259 = $1,702,109). The preliminary closing proration already included a $1,900,500 net credit to Buyer embedded in the closing settlement statement across the CAM/OpEx and miscellaneous categories, and the true-up adjusts the preliminary allocation. Stated differently, the net effect of all true-up adjustments, when applied to the preliminary closing proration, results in a net incremental credit to Buyer of $347,218.
To clarify: the Preliminary Statement at closing included a net credit to Buyer of $5,893,416 across all categories. The final true-up statement reflects an aggregate net credit to Buyer of $6,240,634. The difference — $347,218 — represents the net incremental true-up adjustment payable by Seller to Buyer.
We have verified all amounts against source documents, including: (i) 2024 real property tax bills and assessment notices from all applicable county taxing authorities; (ii) final utility invoices from all utility providers; (iii) CAM reconciliation statements prepared by Argyle Property Services LLC and Fairwater Property Management LLC; (iv) the June 2024 rent roll and subsequent rent collection records; (v) insurance premium refund confirmations from Continental Sentinel Insurance Group through Callaway Risk Advisors LLC; and (vi) vendor invoices, service contracts, and other documentation assembled during the transition services period.
5. Coordination with Seller and Seller's Advisors
A draft of the final post-closing proration true-up statement, populated in the form prescribed by PSA Exhibit V and reflecting all of the adjustments described herein, was transmitted on August 16, 2024, to Seller's counsel, Blackridge Hayes LLP (attention: Thomas Keating, Senior Associate), and to Seller's independent accountants, Caldwell Murray & Oakes LLP (attention: William Oakes, CPA, Engagement Partner), for review and comment.
In addition, Buyer's independent accountants, Ashford Prewitt LLP (Martin Ashford, CPA, Engagement Partner; Naomi Ikeda, CPA, Tax Partner), have reviewed the calculations set forth in the draft final true-up statement and have confirmed their concurrence with the methodology and arithmetic. Ashford Prewitt's review included an independent verification of the real property tax calculations, the CAM/OpEx reconciliation, and the utility charge allocations against source documents provided by Argyle Property Services LLC and the applicable county and municipal authorities.
As of the date of this memorandum, Blackridge Hayes has acknowledged receipt of the draft final true-up statement and has indicated that it is under review by both the Blackridge Hayes team and Caldwell Murray & Oakes. Thomas Keating communicated informally on August 20, 2024, that Seller's initial review has not identified any material disagreements, but that Seller requires additional time to verify the real property tax figures for the Texas properties and the CAM/OpEx reconciliation for the logistics portfolio. Keating indicated that Seller expects to provide formal comments by August 27, 2024.
We recommend that Fairwater authorize C&H to follow up with Blackridge Hayes and Caldwell Murray & Oakes on a daily basis beginning August 26, 2024, to ensure that Seller's review is completed promptly and that any comments or objections are addressed in advance of the September 4, 2024 contractual deadline for delivery of the final statement.
6. Payment Mechanics
Per Section 9.04(c) of the Agreement, the owing party — in this case, Seller (GMP Fund III) — is required to pay the net true-up adjustment of $347,218 to Buyer (Fairwater) within ten (10) business days of the date on which the parties mutually agree on the final post-closing proration true-up statement.
Payment is to be made by wire transfer of immediately available funds to a bank account designated by Buyer. Wire transfer instructions will be confirmed in the final executed true-up statement. Fairwater's wire instructions (Greaves Bancorp, account of Fairwater Real Estate Investment Trust) were previously provided to Seller's counsel in connection with closing and will be reconfirmed in the executed statement.
If the parties reach agreement on the final true-up statement by August 28, 2024, the ten-business-day payment deadline would fall on approximately September 11, 2024 (accounting for the Labor Day holiday on September 2, 2024). This timeline is within the practical window contemplated by the PSA, as the contractual deadline of September 4, 2024, relates to the delivery of the final statement, not to the payment itself. Nevertheless, the parties should aim to reach agreement as early as possible to ensure compliance with the September 4 delivery deadline and to establish the payment obligation in a timely manner.
In the event that Seller fails to pay the net adjustment within the ten-business-day period following mutual agreement, Section 9.04(c) provides that the unpaid amount shall accrue interest at the rate of the prime rate published by The Wall Street Journal plus two percent (2%) per annum, calculated from the date payment was due until the date payment is received.
7. Security Deposit Confirmation
As noted in Section 2.2 above, aggregate tenant security deposits in the amount of $4,283,000 were held in the bank accounts of the Target Entities at Magnolia Commerce Bank, N.A. (Linda Prescott, VP, Commercial Banking). By virtue of the entity-level acquisition structure, these security deposits were effectively transferred to Buyer upon closing without the need for a separate wire transfer or account reassignment. Buyer has since been added as the authorized signatory on the relevant Magnolia Commerce Bank accounts.
During the post-closing true-up process, we have confirmed that the security deposit balances held in the Target Entity accounts at Magnolia Commerce Bank match, in the aggregate, the amounts reflected in the executed tenant estoppel certificates obtained in connection with closing. A total of 79 estoppel certificates were received prior to closing, covering 91.4% of the Portfolio's annualized base rent ("ABR") — specifically, $68,371,200 of the total Portfolio ABR of $74,800,000. These estoppel certificates confirmed the security deposit amounts held for each responding tenant.
No adjustments to the aggregate security deposit amount are required as part of the post-closing true-up.
We note for completeness that six (6) estoppel discrepancies related to security deposit amounts were identified during the pre-closing diligence process. These discrepancies — involving differences between the security deposit amounts stated in the estoppel certificates and the amounts reflected in Seller's records — were previously analyzed and resolved through Seller's supplemental disclosure delivered on May 8, 2024, as documented in our Estoppel Review Memorandum of the same date (Matter No. 1036-00004). In each case, the discrepancies were attributable to partial security deposit draws taken by Seller's property manager for tenant default cures, all of which were properly documented and for which tenant replenishment obligations had been triggered under the applicable leases.
8. Indemnity Escrow Status
Separately from the post-closing proration true-up, we note the status of the indemnity escrow established at closing pursuant to Section 11.06 of the Agreement.
At closing, the sum of $16,500,000 — representing 1.5% of the $1,100,000,000 Purchase Price — was deposited into an interest-bearing escrow account held by Commonwealth National Title Insurance Company (Kenneth Stanhope, SVP, National Commercial Services Division), as escrow agent. The indemnity escrow serves as a source of recovery for Buyer with respect to Seller's indemnification obligations under Article XI of the Agreement, including breaches of Seller's representations and warranties, breaches of Seller's covenants, and other indemnifiable losses.
The escrow term is eighteen (18) months from the Closing Date, running through December 6, 2025. Upon expiration of the escrow term, any remaining funds (together with accrued interest) will be released to Seller, subject to reduction for any pending and unresolved indemnification claims.
We wish to emphasize that the post-closing true-up amount of $347,218 is not drawn from the indemnity escrow. The proration true-up is a separate payment obligation arising under Section 9.04 of the Agreement, and is distinct from the indemnification provisions of Article XI. Seller is obligated to pay the net true-up adjustment directly to Buyer by wire transfer, independent of the indemnity escrow.
As of the date of this memorandum, no claims have been asserted against the indemnity escrow by Buyer, and no claims have been received from Seller seeking release of escrow funds.
9. Recommendations
Based on the foregoing analysis, Calderwood & Harkness LLP respectfully makes the following recommendations to Fairwater Real Estate Investment Trust:
1. Authorize Transmission of Final True-Up Statement. We recommend that Fairwater authorize C&H to transmit the final post-closing proration true-up statement (in the form of PSA Exhibit V, attached hereto as Attachment A) to Seller's counsel, Blackridge Hayes LLP, for execution. The draft was transmitted for review on August 16, 2024; assuming Seller's comments are received by August 27, 2024, we recommend that the parties target mutual execution on or before August 28, 2024, to allow sufficient time for compliance with the September 4, 2024 contractual deadline.
2. Net Credit to Buyer. The final true-up statement reflects a net credit of $347,218 to Buyer, payable by Seller within ten (10) business days of mutual agreement, by wire transfer of immediately available funds.
3. Prompt Negotiation of Any Disputed Items. If Seller disputes any line item in the final true-up statement, we recommend that Fairwater authorize C&H to engage in prompt and good-faith negotiations with Blackridge Hayes to resolve any disagreements within the contractual window. Given the relatively modest magnitude of the net adjustment and the thorough documentation supporting each category, we do not anticipate material disputes, but the parties should be prepared to escalate to the independent accountant dispute resolution mechanism under Section 9.04(d) if necessary.
4. Client Approvals. We request that the following individuals at Fairwater review and approve the final true-up statement prior to execution:
• Marcus Devereaux, Executive Vice President, Acquisitions
• David Elgin Park, General Counsel
• Camille Oduya, In-House Real Estate Counsel
• Patricia Sung-Calloway, Chief Financial Officer
We are available to arrange a call with the Fairwater team to walk through the true-up analysis in detail and address any questions prior to finalization.
10. Attachments / Enclosures
The following attachments are enclosed with this memorandum for reference:
Attachment A: Draft Post-Closing Proration True-Up Statement, in the form of PSA Exhibit V, with all line items populated with final figures, reflecting a net credit of $347,218 to Buyer (Fairwater Real Estate Investment Trust).
Attachment B: Supporting schedule with property-by-property breakdown of real property tax adjustments across the fourteen (14) Properties in five (5) states (Georgia, Texas, Florida, Tennessee, and North Carolina), including copies of applicable 2024 tax bills, assessment notices, and millage rate confirmations.
Attachment C: CAM/Operating Expense reconciliation summary by property, including reconciliation statements prepared by Argyle Property Services LLC and Fairwater Property Management LLC, with supporting detail of actual operating expenses and estimated tenant charges for the Pre-Closing Period.
Attachment D: Utility charge reconciliation by property, including copies of final utility invoices covering the billing periods straddling the Closing Date and per diem allocation calculations.
Attachment E: Rent collection reconciliation for June 2024, including the June 2024 rent roll, actual collection records, and allocation calculations between Seller and Buyer for the prorated period.
Attachment F: Comparison table — Preliminary Closing Proration Statement (as executed on June 6, 2024) vs. Final True-Up Statement, with line-by-line variance analysis.
This memorandum, including all attachments, is privileged and confidential attorney work product prepared at the direction of counsel for Fairwater Real Estate Investment Trust. It is intended solely for the use of the named recipients and should not be disclosed, distributed, or copied without the express written consent of Calderwood & Harkness LLP.
CALDERWOOD & HARKNESS LLP 450 Park Avenue, 28th Floor New York, NY 10022 Matter No. 1036-00004
Lender | Outstanding Principal Balance
Pinnacle Federal Bank, N.A. | $421,600,000
Veltrano Capital Lending Corp. | $142,300,000
Sycamore Life Insurance Company | $48,100,000
Total Assumed Mortgage Debt | $612,000,000
State | Preliminary Estimate (Annual) | Actual 2024 Tax Liability | Variance
Georgia | $5,280,000 | $5,418,230 | +$138,230
Texas | $3,720,000 | $3,842,960 | +$122,960
Florida | $2,810,000 | $2,724,610 | ($85,390)
Tennessee | $2,370,000 | $2,386,440 | +$16,440
North Carolina | $580,000 | $592,710 | +$12,710
Total | $14,760,000 | $14,964,950 | +$204,950
Item | Direction | Amount
Licenses and permits (Post-Closing Period credit) | Seller Credit | ($10,618)
Property owners association dues (Post-Closing Period credit) | Seller Credit | ($47,967)
Service contract prepayments (Post-Closing Period credit) | Seller Credit | ($31,480)
Pre-Closing Period vendor invoices identified during transition | Buyer Credit | $7,806
Net Other/Miscellaneous | Seller Credit | ($82,259)
Category | Preliminary Amount | Final Actual Amount | Variance | True-Up Adjustment | Credit Direction
Real Property Taxes | $6,332,951 (Seller's share) | $6,420,855 (Seller's share) | +$87,904 | $87,904 | Buyer Credit
CAM/OpEx Recoveries | $1,850,000 (reserve) | $230,150 (actual obligation) | ($1,619,850) | ($1,619,850) | Seller Credit
Utility Charges | $387,200 (Seller's share) | $401,830 (Seller's share) | +$14,630 | $14,630 | Buyer Credit
Insurance Premiums | $0 | $44,230 (net refund) | +$44,230 | $44,230 | Buyer Credit
Percentage Rent | $0 | $0 | $0 | $0 | No Adjustment
Rent and Other Income | Per closing allocation | Reconciled per above | +$2,063 | $2,063 | Buyer Credit
Other / Miscellaneous | Per closing allocation | Reconciled per above | ($82,259) | ($82,259) | Seller Credit
Net True-Up Adjustment | $347,218 | Buyer Credit (net payable by Seller to Buyer)

MEMORANDUM

ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT

MATTER NO.: 1036-00004

Record

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