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CALDERWOOD & HARKNESS LLP Attorneys at Law
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www.calderwoodharkness.com
MEMORANDUM
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1. Executive Summary and Purpose of Memorandum
The purpose of this memorandum is to confirm that Commonwealth National Title Insurance Company ("Commonwealth National Title" or the "Title Insurer") has issued final ALTA Owner's Policies of Title Insurance (2021 form) (collectively, the "Owner's Policies" and each, an "Owner's Policy") for all fourteen (14) properties (collectively, the "Properties" and each, a "Property") acquired by Fairwater Real Estate Investment Trust, a Maryland real estate investment trust ("Fairwater REIT" or the "Buyer"), in connection with the entity-level acquisition of one hundred percent (100%) of the membership interests in fourteen (14) single-purpose Delaware limited liability companies (collectively, the "Target Entities" and each, a "Target Entity") from Greystone Meridian Partners Fund III, L.P., a Delaware limited partnership ("GMP Fund III" or the "Seller"), controlled by Greystone Meridian Capital LLC, a Delaware limited liability company ("Greystone Meridian Capital"), as its sole general partner.
The transaction (the "Transaction") closed on June 6, 2024, pursuant to the terms of that certain Purchase and Sale Agreement dated as of February 28, 2024, by and between Seller and Buyer (as amended, the "PSA"). The aggregate purchase price for the Transaction was One Billion One Hundred Million Dollars ($1,100,000,000) (the "Purchase Price").
The aggregate insured amount across all fourteen (14) Owner's Policies is One Billion One Hundred Million Dollars ($1,100,000,000), allocated among the Properties per the Purchase Price Allocation Schedule attached as Exhibit K to the PSA (the "Allocation Schedule"), based on appraised values prepared by Stonebridge Valuation Advisors, LLC ("Stonebridge"), by Maureen Alcott, MAI.
All fourteen (14) Owner's Policies have been reviewed by Calderwood & Harkness LLP ("C&H") and confirmed to conform in all material respects to the pro forma title insurance policies approved by Buyer and Buyer's counsel prior to closing. In particular, we have confirmed that (a) all Schedule B-I requirements set forth in the underlying title commitments have been satisfied as conditions to the issuance of the final Owner's Policies, (b) all negotiated Permitted Exceptions (as defined in the PSA) are properly reflected on Schedule B-II of each Owner's Policy, and (c) all endorsements requested in C&H's endorsement request letter to Commonwealth National Title have been attached to each issued Owner's Policy as applicable.
The title officer responsible for the Transaction at Commonwealth National Title is Kenneth Stanhope, Senior Vice President, located at 191 Peachtree Street NE, Suite 800, Atlanta, Georgia 30303. National counsel coordination was managed by Virginia Moorehead, Assistant Vice President, Commonwealth National Title Insurance Company.
This memorandum provides a comprehensive summary of the title insurance issuance process, confirms completion of all open requirements, and addresses document retention protocols for the final policies.
2. Background and Transaction Summary
2.1 The Parties
Fairwater Real Estate Investment Trust is a Maryland real estate investment trust, publicly listed on the New York Stock Exchange under the ticker symbol FREIT, with its principal offices located at 7200 Chesapeake Parkway, Suite 1100, Columbia, Maryland 21044. Fairwater REIT is an internally managed diversified REIT focused on logistics, industrial, and select office properties in Sun Belt and gateway markets throughout the United States.
Greystone Meridian Partners Fund III, L.P. is a Delaware limited partnership controlled by its sole general partner, Greystone Meridian Capital LLC, a Delaware limited liability company. GMP Fund III is a closed-end private equity real estate fund that assembled the subject portfolio between 2018 and 2021.
2.2 The Portfolio
The Transaction involved the acquisition by Fairwater REIT of a fourteen (14)-property Sun Belt logistics and office portfolio (the "Portfolio") spanning five (5) states: Georgia, Texas, Florida, Tennessee, and North Carolina. The Portfolio comprises approximately 5,224,000 rentable square feet ("RSF"), consisting of ten (10) logistics and industrial properties (approximately 4,373,000 RSF, representing approximately 83.7% of the Portfolio by area) and four (4) office properties (approximately 851,000 RSF, representing approximately 16.3% of the Portfolio by area). The Portfolio was substantially leased at the time of closing, with a weighted average occupancy rate of approximately 94.2%.
2.3 Transaction Structure
The Transaction was structured as an entity-level purchase in which Fairwater REIT acquired one hundred percent (100%) of the membership interests in each of the fourteen (14) Target Entities. Each Target Entity is a single-purpose Delaware limited liability company that holds fee simple title to one of the Properties. This structure was selected for, among other reasons, (a) the ability to assume existing mortgage indebtedness without triggering due-on-sale provisions (subject to lender consent), (b) the transfer tax efficiencies available in certain jurisdictions for entity-level transfers as compared to direct conveyances of real property, and (c) the preservation of existing property-level organizational structures and tenant lease assignments.
2.4 Purchase Price and Financing
The aggregate Purchase Price for the Transaction was One Billion One Hundred Million Dollars ($1,100,000,000). The financing structure at closing was as follows:
(a) Assumed Mortgage Debt: Six Hundred Twelve Million Dollars ($612,000,000) in aggregate, consisting of:
(i) Pinnacle Federal Bank, N.A. ("Pinnacle"): $421,600,000 in aggregate principal;
(ii) Veltrano Capital Lending Corp. ("Veltrano"): $142,300,000 in aggregate principal; and
(iii) Sycamore Life Insurance Company ("Sycamore"): $48,100,000 in aggregate principal.
(b) Cash Equity at Closing: Four Hundred Eighty-Eight Million Dollars ($488,000,000), subject to a property condition assessment credit of One Million Seventy Thousand Dollars ($1,070,000) (the "PCA Credit"), thereby reducing net cash at closing to Four Hundred Eighty-Six Million Nine Hundred Thirty Thousand Dollars ($486,930,000).
2.5 Key Transaction Dates
• PSA Execution Date: February 28, 2024
• Title Commitment Effective Dates: Various dates between March 5 and March 12, 2024
• C&H Title Objection Letter: March 27, 2024
• Seller's Cure Response: April 8, 2024
• Buyer's Acceptance/Counter: April 11, 2024
• Survey Certification Completion: May 3, 2024
• Lender Consents Received: May 17, 2024 (Veltrano); May 22, 2024 (Sycamore); June 4, 2024 (Pinnacle)
• Closing Date: June 6, 2024
• Final Policies Issued: Various dates between June 20 and July 8, 2024
• Final Policies Received by C&H: July 10, 2024
2.6 Counsel
Calderwood & Harkness LLP served as buyer's counsel throughout the Transaction, including with respect to all title and survey review matters, endorsement negotiation, and coordination of local counsel in each jurisdiction. Blackridge Hayes LLP ("Blackridge Hayes") served as seller's counsel throughout the Transaction.
2.7 Title Insurer and Escrow Agent
Commonwealth National Title Insurance Company served as the title insurer for both the Owner's Policies and the corresponding loan title policies, as well as the escrow agent for the closing of the Transaction. The escrow closing was coordinated through Commonwealth National Title's National Commercial Services division under the direction of Kenneth Stanhope, SVP, and Virginia Moorehead, AVP.
3. Policy Form and Standard
3.1 Policy Form
Each of the fourteen (14) Owner's Policies was issued on the American Land Title Association ("ALTA") Owner's Policy of Title Insurance (2021 form), as adopted by ALTA and in use by Commonwealth National Title in its standard commercial transactions. The 2021 form represents the most current iteration of the ALTA owner's policy and includes, among other updates from prior forms, enhanced covered risk provisions and updated exclusion language. C&H specifically requested that the 2021 form be utilized for all policies in connection with this Transaction, and Commonwealth National Title confirmed its use at the commitment stage.
3.2 Survey Standard
Each Owner's Policy is supported by an ALTA/NSPS Land Title Survey prepared in accordance with the 2021 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys, as jointly adopted by the American Land Title Association and the National Society of Professional Surveyors. The following Table A optional items were included in each survey:
• Item 1 — Monuments placed (or a statement explaining why not)
• Item 2 — Address(es) of the surveyed property
• Item 3 — Flood zone classification (with community and panel numbers)
• Item 4 — Gross land area (and, if applicable, net land area after deletions)
• Item 6(a) — Evidence of utilities (observed)
• Item 6(b) — Evidence of utilities (from plans obtained from utility companies)
• Item 7(a) — Evidence of changes in street right-of-way lines
• Item 7(b)(1) — Set-back, building, or use restriction lines (from zoning)
• Item 7(c) — Proposed changes in street right-of-way (if determinable)
• Item 8 — Substantial features observed in the process of conducting the survey (not otherwise addressed)
• Item 9 — Striping and signage for parking areas
• Item 10 — Determination of the relationship of the surveyed property to governmental wetlands boundaries
• Item 11(a) — Location of exterior walls and overhangs
• Item 11(b) — Measured square footage of principal buildings
• Item 13 — Names of adjoining owners from current public records
• Item 14 — Determination of whether the surveyed property is within a natural hazard area
• Item 16 — Evidence of encroachments, protrusions, and overhangs
• Item 17 — Location of above-ground improvements within two feet of boundary lines
• Item 18 — Observed evidence of site grading or changes in ground elevation
• Item 19 — Observed evidence of dumping, storage, or environmental concerns
3.3 Survey Preparation and Certification
All fourteen (14) surveys were prepared by Meridian Land Surveying, Inc., under the supervision and professional seal of Daniel Caulfield, PLS, PE. Each survey was certified to Fairwater Real Estate Investment Trust, Commonwealth National Title Insurance Company, and each applicable mortgage lender (Pinnacle Federal Bank, N.A., Veltrano Capital Lending Corp., and/or Sycamore Life Insurance Company, as applicable to the respective Property). Survey certification completion was confirmed on May 3, 2024, for all fourteen (14) Properties, and the certified surveys were delivered to Commonwealth National Title and reflected in the pro forma policies prior to closing.
3.4 Insured Interest
Each Owner's Policy insures Fairwater Real Estate Investment Trust, as the named insured, as the indirect owner of the fee simple interest in each Property through its ownership of one hundred percent (100%) of the membership interests in the applicable Target Entity LLC. Because the Transaction was structured as an entity-level acquisition of membership interests rather than a direct conveyance of real property, the policies were specifically endorsed to reflect this indirect ownership structure and to confirm that the coverage extends to Fairwater REIT as the acquiring entity and sole member of each Target Entity.
3.5 Gap Coverage
Gap indemnity and bring-down coverage was confirmed by Commonwealth National Title from the effective date of each title commitment through the date of recording and/or closing, pursuant to a gap indemnity letter delivered by Commonwealth National Title at closing. This gap coverage ensures that no liens, encumbrances, or adverse matters arising during the gap period between the commitment effective date and the closing date would impair Fairwater REIT's insured interest under the Owner's Policies.
4. Endorsements Obtained
4.1 General Overview
In connection with the issuance of the Owner's Policies, C&H submitted a detailed endorsement request letter to Commonwealth National Title on March 15, 2024, specifying the endorsements required for each Property based on the applicable jurisdiction, property type, and transaction structure. Commonwealth National Title confirmed endorsement availability through Virginia Moorehead, AVP, and the final endorsed policies were issued in conformity with the pre-closing pro forma policies.
4.2 Standard Endorsements
The following endorsements were requested and confirmed as attached to each of the fourteen (14) issued Owner's Policies, to the extent available in the applicable jurisdiction:
(a) Owner's Comprehensive Endorsement — Providing expanded coverage for specified matters beyond the standard ALTA owner's policy coverage, including coverage against loss arising from certain restrictive covenant violations, encroachment matters, and other specified title risks.
(b) Access Endorsement — Confirming that the insured land abuts and has both actual vehicular and pedestrian access to a physically open public street or road, as identified in each Owner's Policy. This endorsement was obtained for all fourteen (14) Properties.
(c) Survey Endorsement — Modifying the survey exception on Schedule B-II to provide affirmative survey coverage based on the certified ALTA/NSPS surveys prepared by Meridian Land Surveying, Inc. The standard printed survey exception was deleted in each policy and replaced with specific survey-related exceptions to the extent shown on the applicable survey.
(d) Zoning Endorsement — Providing coverage related to the current zoning classification of each Property and, where applicable, confirming that the improvements located on each Property are a permitted use under the applicable zoning ordinance. Zoning confirmation letters from the applicable municipal authority were obtained for all fourteen (14) of fourteen (14) Properties to support the issuance of this endorsement.
(e) Contiguity Endorsement — Confirming contiguity of adjacent parcels for Properties comprised of multiple tax parcels or legal descriptions. This endorsement was obtained for the multi-parcel Properties within the Portfolio, specifically where the Property consists of two or more contiguous parcels that together constitute a single operational site.
(f) Tax Parcel Endorsement — Confirming the tax parcel identification number(s) applicable to each Property, to guard against loss arising from the assessed parcel number not corresponding to the insured land.
(g) Restrictions, Encroachments, Minerals Endorsement — Providing affirmative coverage against loss arising from (i) violations of existing covenants, conditions, and restrictions, (ii) encroachments of improvements onto adjoining land or easements, and (iii) the exercise of certain subsurface mineral rights. This endorsement was tailored for each Property based on the specific restrictions and mineral reservation language appearing in the applicable chain of title.
4.3 State-Specific and Property-Specific Endorsements
In addition to the standard endorsements enumerated above, certain state-specific and property-specific endorsements were obtained as applicable. Endorsement availability varies by jurisdiction, and the precise endorsement package for each Property was coordinated with local counsel in each of the five (5) states (Georgia, Texas, Florida, Tennessee, and North Carolina). Examples of state-specific endorsements obtained include, without limitation, the Texas Owner's Policy of Title Insurance — Supplemental Coverage endorsements required under Texas Department of Insurance promulgated forms, the Florida Form 9 endorsement, and the Tennessee non-imputation endorsement applicable to entity-level transactions. A complete listing of all endorsements attached to each individual Owner's Policy is set forth in the policies themselves, copies of which are transmitted under separate cover as described in Section 12 of this memorandum.
4.4 Local Counsel Coordination on Endorsements
As noted, endorsement availability varies by jurisdiction, and C&H coordinated with local counsel in each of the five states to confirm state-specific endorsement availability, form requirements, and regulatory limitations. This coordination is described in further detail in Section 11 of this memorandum.
5. Policy Schedule — All 14 Properties
5.1 Summary Table
Set forth below is a summary schedule of all fourteen (14) Owner's Policies issued by Commonwealth National Title, including the Property name, address, applicable Target Entity, policy number, insured amount (as allocated per the Allocation Schedule), and effective date:
5.2 Portfolio Composition
The Portfolio is comprised of the following property types and geographic distribution:
By Property Type:
• Logistics / Industrial Properties: 10 properties, approximately 4,373,000 RSF, representing approximately 83.7% of total Portfolio RSF (Properties 1, 2, 3, 4, 5, 6, 7, 8, 13, and 14).
• Office Properties: 4 properties, approximately 851,000 RSF, representing approximately 16.3% of total Portfolio RSF (Properties 9, 10, 11, and 12).
By State:
• Georgia: 4 properties (Fairfield Logistics Center I, Fairfield Logistics Center II, Buckhead Place Office Tower, and Peachtree Corners Logistics Center) — aggregate insured amount: $361,300,000.
• Texas: 3 properties (Westlake Distribution Hub, Katy Freeway Logistics Park, and Alliance Commerce Center) — aggregate insured amount: $283,700,000.
• Florida: 3 properties (Lakeland Crossings Industrial, Southport Logistics Park, and Brickell Bay Office Building) — aggregate insured amount: $218,000,000.
• Tennessee: 3 properties (Murfreesboro Distribution Center, Cool Springs Office Park, and Mount Juliet Commerce Park) — aggregate insured amount: $173,200,000.
• North Carolina: 1 property (SouthPark Corporate Center) — aggregate insured amount: $63,800,000.
5.3 Aggregate Insured Amount
The aggregate insured amount across all fourteen (14) Owner's Policies is One Billion One Hundred Million Dollars ($1,100,000,000). The total Portfolio RSF is approximately 5,224,000 square feet. The insured amounts for each Property are allocated per the agreed Purchase Price Allocation Schedule (PSA Exhibit K), based on appraised values from Stonebridge Valuation Advisors, LLC (Maureen Alcott, MAI). C&H has confirmed that the individual insured amounts set forth in each issued Owner's Policy correspond to the allocations set forth in the Allocation Schedule.
6. Named Insured
6.1 Identification of Named Insured
The named insured on each of the fourteen (14) Owner's Policies is:
Fairwater Real Estate Investment Trust, a Maryland real estate investment trust
7200 Chesapeake Parkway, Suite 1100 Columbia, Maryland 21044
6.2 Insured Ownership Structure
Each Owner's Policy insures Fairwater REIT as the sole member of the applicable Target Entity LLC, which in turn holds fee simple title to the respective Property. Fairwater REIT acquired one hundred percent (100%) of the membership interests in each Target Entity at the closing of the Transaction and is therefore the indirect owner of the fee simple interest in each Property.
6.3 Note on Entity-Level Transfer Structure
Because the Transaction was structured as an acquisition of membership interests in the Target Entities rather than as a direct conveyance of real property by deed, the Owner's Policies were issued to Fairwater REIT as the acquiring entity, with appropriate endorsements reflecting the indirect ownership structure. Specifically, each Owner's Policy includes endorsement language confirming that the insurance coverage extends to Fairwater REIT as the entity that acquired one hundred percent (100%) of the ownership interests in the applicable Target Entity, notwithstanding that fee simple title to the underlying real property remains vested in the name of the Target Entity on the applicable county land records. This approach is consistent with standard ALTA practice for insuring entity-level acquisitions and was specifically negotiated with Commonwealth National Title at the commitment stage.
C&H notes that because no deeds were recorded in connection with the Transaction (title to the real property remaining in the name of each Target Entity), the policies include non-imputation endorsements or equivalent protections to ensure that any title defects or knowledge attributable to the prior ownership (i.e., Seller and its affiliates) are not imputed to Fairwater REIT as the successor owner of the Target Entities.
7. Schedule B-I Requirements — Satisfaction Confirmation
7.1 General Confirmation
All Schedule B-I (Requirements) items across all fourteen (14) title commitments issued by Commonwealth National Title have been satisfied in full as conditions to the issuance of the final Owner's Policies. C&H has reviewed the Schedule B-I requirements for each title commitment and confirmed that all required actions, deliverables, and conditions were completed at or prior to closing on June 6, 2024. Set forth below is a summary of the material Schedule B-I requirements and the manner in which each was satisfied.
7.2 Specific Requirements Satisfied
(a) Payment of Title Insurance Premiums. All title insurance premiums for the Owner's Policies and loan title policies were paid by Buyer at closing in the estimated aggregate amount of Two Million Four Hundred Twenty Thousand Dollars ($2,420,000) (representing the combined cost of the owner's and loan title policies across all fourteen Properties). Premiums were disbursed to Commonwealth National Title through the closing settlement statement prepared by Commonwealth National Title as escrow agent. Pursuant to Section 8.04(b) of the PSA, all title insurance premiums for the Owner's Policies were the obligation of Buyer.
(b) Delivery of Seller's Title Affidavits. Owner's title affidavits were executed by an authorized officer of Greystone Meridian Capital LLC, in its capacity as sole general partner of GMP Fund III, on behalf of each Target Entity, in the form attached as Exhibit T to the PSA. These affidavits addressed, among other things, the absence of unrecorded liens, mechanic's lien claims, parties in possession other than tenants under recorded leases, and other matters customarily addressed in owner's affidavits to support the deletion of standard exceptions from the Owner's Policies.
(c) Evidence of Due Authorization — Seller. A secretary's certificate of Greystone Meridian Capital LLC was delivered at closing, attaching resolutions of the sole general partner authorizing the Transaction and confirming the incumbency and authority of the officers executing documents on behalf of Seller and each Target Entity.
(d) Evidence of Due Authorization — Buyer. A secretary's certificate of Fairwater Real Estate Investment Trust was delivered at closing, attaching resolutions of the board of trustees of Fairwater REIT authorizing the Transaction and confirming the incumbency and authority of the officers executing documents on behalf of Buyer.
(e) Satisfaction or Release of Monetary Liens. All monetary liens, including mechanic's liens, delinquent taxes, and judgments against the Target Entities, identified as mandatory cure items under Section 5.03(a) of the PSA, were satisfied or released at or prior to closing. Payoff letters and lien release instruments were obtained and confirmed by Commonwealth National Title prior to the issuance of the final Owner's Policies. Specifically, a mechanic's lien filed against Property 6 (Lakeland Crossings Industrial) by Cornerstone Paving & Concrete, Inc. in the amount of $312,400 was released of record through payment at closing, and a lis pendens filed against Property 3 (Westlake Distribution Hub) was discharged by court order dated May 28, 2024.
(f) Execution and Delivery of Assignments of Membership Interests. Assignments of one hundred percent (100%) of the membership interests in each of the fourteen (14) Target Entities were executed and delivered at closing by Seller in favor of Buyer, together with updated operating agreements reflecting Fairwater REIT as the sole member of each Target Entity.
(g) Receipt of Lender Consents. Lender consents were obtained from all three (3) mortgage lenders, each confirming that the change of control resulting from the Transaction does not constitute a default or event of default under the applicable loan documents and that the assumption of the existing mortgage indebtedness by Buyer (through its ownership of the Target Entities) is permitted. The lender consents were received on the following dates:
(i) Veltrano Capital Lending Corp.: May 17, 2024
(ii) Sycamore Life Insurance Company: May 22, 2024
(iii) Pinnacle Federal Bank, N.A.: June 4, 2024
(h) Payment of Real Property Taxes. All real property taxes then due and payable with respect to each Property were confirmed as paid current at closing. Proration of real property taxes was calculated as of the closing date in accordance with Section 8.02 of the PSA, with a post-closing true-up to occur following receipt of final tax bills.
(i) UCC Search Clearance. Uniform Commercial Code lien searches were conducted for each Target Entity in Delaware (the state of formation) and in the state in which the applicable Property is located. All identified UCC financing statements were either (i) confirmed as relating to the existing mortgage indebtedness being assumed (and therefore permitted under the loan documents) or (ii) terminated at or prior to closing. UCC-3 termination statements were filed as necessary to clear any non-permitted UCC liens.
7.3 Commonwealth National Title Confirmation
Commonwealth National Title has issued a confirmation letter, dated July 8, 2024, addressed to C&H and Fairwater REIT, confirming the satisfaction of all Schedule B-I requirements across all fourteen (14) title commitments and the issuance of the final Owner's Policies. A copy of this confirmation letter is included as Attachment D to this memorandum.
8. Schedule B-II Exceptions — Permitted Exceptions Confirmation
8.1 Conformity to Permitted Exceptions
Each Owner's Policy's Schedule B-II (Exceptions from Coverage) reflects only the negotiated Permitted Exceptions set forth in Exhibit P to the PSA (the "Permitted Exceptions"). C&H conducted a line-by-line comparison of the Schedule B-II exceptions in each issued Owner's Policy against (a) the Permitted Exceptions schedule, (b) the marked-up title commitments approved prior to closing, and (c) the pro forma policies circulated by Commonwealth National Title for Buyer's review. This comparison confirmed that the final policies conform in all material respects to the approved pro forma policies and that no additional or unexpected exceptions appear on Schedule B-II of any Owner's Policy.
8.2 Title Objection and Cure Process
C&H issued a comprehensive title objection letter to Seller's counsel, Blackridge Hayes LLP, on March 27, 2024 (the "Title Objection Letter"), identifying twenty-three (23) title objection items across the fourteen (14) Properties. These objection items included, among other things, outstanding monetary liens, mechanic's lien claims, expired or defective easements, ambiguous restrictive covenant provisions, encroachments identified on the surveys, and various recording defects. The resolution of these objection items proceeded as follows:
(a) Seller's Cure Response (April 8, 2024). Seller, through Blackridge Hayes, delivered a written response to the Title Objection Letter on April 8, 2024, addressing each of the twenty-three (23) objection items. Seller agreed to cure certain items as mandatory cure obligations under Section 5.03(a) of the PSA (including all monetary liens and delinquent taxes) and proposed the acceptance of certain other items as Permitted Exceptions.
(b) Buyer's Acceptance/Counter (April 11, 2024). C&H, on behalf of Buyer, delivered a written response to Seller's cure response on April 11, 2024, accepting certain proposed Permitted Exceptions, counter-proposing endorsement solutions for other items, and confirming Seller's cure obligations with respect to the remaining items.
(c) Final Resolution. Through the negotiation process, all twenty-three (23) title objection items were resolved as follows:
(i) Cured by Seller: Eleven (11) items were cured by Seller at or prior to closing, including satisfaction of monetary liens, discharge of lis pendens, correction of recording defects, and release of expired easements.
(ii) Removed by Endorsement: Five (5) items were addressed through the issuance of affirmative endorsements by Commonwealth National Title, providing insured coverage over the identified title matters without requiring Seller to cure the underlying condition.
(iii) Accepted as Permitted Exceptions: Seven (7) items were accepted by Buyer as Permitted Exceptions and are reflected on Schedule B-II of the applicable Owner's Policies. These items consist of standard utility easements, common reciprocal easement agreements, and restrictive covenants that do not materially impair the use or value of the applicable Properties for their intended purposes.
8.3 Deletion of Standard Exceptions
The standard printed exceptions appearing in the ALTA Owner's Policy (2021 form) were properly deleted or modified in each Owner's Policy based on the following closing deliverables and supporting documentation:
(a) The survey exception was deleted and replaced with specific survey-related exceptions based on the certified ALTA/NSPS surveys, as described in Section 3 above.
(b) The mechanic's lien exception was deleted or modified based on the seller's title affidavits delivered at closing.
(c) The parties-in-possession exception was deleted or modified based on the seller's title affidavits and the tenant estoppel certificates delivered at closing.
(d) The tax exception was modified to except only taxes not yet due and payable as of the closing date.
(e) The rights of parties in possession exception was deleted based on the seller's affidavits confirming no parties in possession other than tenants under the applicable leases.
9. Title Insurance Premium Allocation
9.1 Total Premiums
The total title insurance premiums paid in connection with the Transaction are estimated at Two Million Four Hundred Twenty Thousand Dollars ($2,420,000), which amount represents the combined premiums for the fourteen (14) Owner's Policies and the fourteen (14) loan title policies issued in favor of the three mortgage lenders described in Section 10 below. C&H has prepared a separate Title Insurance Premium Allocation Schedule (the "Premium Allocation Schedule") setting forth the premium attributable to each Property, which schedule is cross-referenced herein and included as Attachment B to this memorandum.
9.2 Allocation Methodology
Premiums were allocated across the fourteen (14) Properties proportionally based on the insured amounts set forth in the Allocation Schedule (PSA Exhibit K). Premium rates were determined by Commonwealth National Title based on the applicable rate schedules in each jurisdiction, taking into account any available reissue credits, simultaneous issuance discounts, and bulk transaction pricing. Certain states, including Texas and Florida, have regulated premium rates, and the premiums for Properties in those states were calculated in accordance with the applicable state-regulated rate schedules filed with the respective state departments of insurance.
9.3 Responsibility for Payment
All title insurance premiums for the Owner's Policies were the obligation of Buyer pursuant to Section 8.04(b) of the PSA. Premiums for the loan title policies were allocated between Buyer and Seller as set forth in Section 8.04(c) of the PSA, with Buyer bearing the cost of the loan title policies as a condition to the assumption of the existing mortgage indebtedness.
9.4 Payment at Closing
All title insurance premiums were paid at closing on June 6, 2024, and were reflected on the closing settlement statement prepared by Commonwealth National Title as escrow agent, in accordance with the funds flow memorandum prepared by C&H and distributed to all parties on June 5, 2024.
10. Coordination with Lender Policies
10.1 Loan Title Policies Issued
In addition to the fourteen (14) Owner's Policies, Commonwealth National Title also issued loan title policies (ALTA Loan Policies, 2021 form) in favor of the three mortgage lenders in connection with the assumed mortgage indebtedness. The loan title policies were issued to provide continued lender title protection following the change of control resulting from the Transaction. The loan policies are summarized as follows:
(a) Pinnacle Federal Bank, N.A. — Eight (8) loan title policies (designated Loans 1-A through 1-H), securing an aggregate principal amount of Four Hundred Twenty-One Million Six Hundred Thousand Dollars ($421,600,000) under the Master Loan Agreement dated September 15, 2020. The Pinnacle loans bear a fixed interest rate of 4.22% per annum and mature on July 1, 2028. The eight loan policies correspond to eight of the fourteen Properties, as identified in the Pinnacle loan documents.
(b) Veltrano Capital Lending Corp. — Four (4) loan title policies (designated Loans 2-A through 2-D), securing an aggregate principal amount of One Hundred Forty-Two Million Three Hundred Thousand Dollars ($142,300,000) under the Loan Agreement dated February 1, 2021. The Veltrano loans bear a fixed interest rate of 4.68% per annum and mature on March 1, 2029. The four loan policies correspond to four of the fourteen Properties, as identified in the Veltrano loan documents.
(c) Sycamore Life Insurance Company — Two (2) loan title policies (designated Loans 3-A and 3-B), securing an aggregate principal amount of Forty-Eight Million One Hundred Thousand Dollars ($48,100,000) under the Note Purchase Agreement dated November 22, 2019. The Sycamore loans bear a fixed interest rate of 3.95% per annum and mature on December 1, 2030. The two loan policies correspond to two of the fourteen Properties, as identified in the Sycamore loan documents.
10.2 Consistency of Owner's and Loan Policies
C&H has reviewed the loan title policies to confirm that the owner's and loan policies for each Property are consistent and do not contain conflicting exceptions. Specifically, we confirmed that (a) the Schedule B-II exceptions in each loan title policy are consistent with the corresponding exceptions in the Owner's Policy for the same Property, (b) the legal descriptions in the owner's and loan policies are identical, and (c) the endorsements attached to the loan policies do not create any inconsistencies with the endorsements attached to the Owner's Policies.
10.3 Lender Consents
As noted in Section 7.2(g) above, lender consents were obtained from each of the three mortgage lenders confirming that the change of control resulting from the Transaction is permitted under the applicable loan documents. The lender consents were received on the following dates:
• Veltrano Capital Lending Corp.: May 17, 2024
• Sycamore Life Insurance Company: May 22, 2024
• Pinnacle Federal Bank, N.A.: June 4, 2024
Each lender consent letter confirmed that (i) no default or event of default exists or will arise under the applicable loan documents as a result of the Transaction, (ii) the change in ownership of the membership interests in the applicable Target Entities is permitted, and (iii) the mortgage lien and related security interests remain in full force and effect following the closing of the Transaction.
11. Local Counsel Coordination
11.1 Overview
Because the fourteen (14) Properties are located across five (5) states, C&H engaged local counsel in each jurisdiction to assist with state-specific title endorsement coordination, review of state-specific recording requirements, and confirmation of the proper filing of any required recordable documents, transfer tax returns, and related filings. Each local counsel firm provided a written confirmation to C&H upon completion of its respective scope of work.
11.2 Local Counsel by Jurisdiction
The local counsel retained for each jurisdiction, and the Properties for which each was responsible, are as follows:
(a) Texas — Breckenridge Osgood LLP
Contact: James Breckenridge, Partner
Properties: GMP Westlake LLC (Westlake Distribution Hub, Houston), GMP Katy LLC (Katy Freeway Logistics Park, Katy), and GMP Alliance LLC (Alliance Commerce Center, Fort Worth)
Breckenridge Osgood LLP confirmed the availability and proper form of all Texas-specific endorsements, reviewed the Texas promulgated endorsement forms used by Commonwealth National Title, and confirmed the filing of all required transfer tax and filing documents with the applicable county clerk's offices in Harris County, Fort Worth (Tarrant County), and the Texas Comptroller of Public Accounts.
(b) Georgia — Talmadge Beaumont LLP
Contact: Catherine Beaumont, Partner
Properties: GMP Fairfield I LLC (Fairfield Logistics Center I, Fairburn), GMP Fairfield II LLC (Fairfield Logistics Center II, Fairburn), GMP Buckhead LLC (Buckhead Place Office Tower, Atlanta), and GMP Peachtree LLC (Peachtree Corners Logistics Center, Peachtree Corners)
Talmadge Beaumont LLP confirmed the availability of Georgia-specific endorsements, reviewed the intangible recording tax implications of the entity-level transfer structure (confirming that no additional intangible recording tax was triggered by the membership interest transfer as no new security instruments were recorded), and confirmed the filing of all required documents with the applicable county superior court clerks in Fulton County and Gwinnett County.
(c) North Carolina — Haversham Cole PLLC
Contact: Marshall Haversham, Partner
Properties: GMP SouthPark LLC (SouthPark Corporate Center, Charlotte)
Haversham Cole PLLC confirmed the availability of North Carolina-specific endorsements, reviewed the North Carolina excise tax implications of the entity-level transfer, and confirmed the filing of all required documents with the Mecklenburg County Register of Deeds.
(d) Tennessee — Ellsworth Ridley LLP
Contact: Diane Ellsworth, Partner
Properties: GMP Murfreesboro LLC (Murfreesboro Distribution Center, Murfreesboro), GMP Cool Springs LLC (Cool Springs Office Park, Brentwood), and GMP Mount Juliet LLC (Mount Juliet Commerce Park, Mount Juliet)
Ellsworth Ridley LLP confirmed the availability of Tennessee-specific endorsements, including the non-imputation endorsement applicable to entity-level transactions, reviewed the Tennessee transfer tax and recordation tax implications, and confirmed the filing of all required documents with the applicable county registers of deeds in Rutherford County, Williamson County, and Wilson County.
(e) Florida — Palmetto Strauss PA
Contact: Roberto Strauss, Shareholder
Properties: GMP Lakeland LLC (Lakeland Crossings Industrial, Lakeland), GMP Southport LLC (Southport Logistics Park, Jacksonville), and GMP Brickell LLC (Brickell Bay Office Building, Miami)
Palmetto Strauss PA confirmed the availability of Florida-specific endorsements (including the Florida Form 9 endorsement), reviewed the Florida documentary stamp tax and intangible tax implications of the entity-level transfer structure, and confirmed the filing of all required documents with the applicable county clerks of court in Polk County, Duval County, and Miami-Dade County.