CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP Attorneys at Law
1700 K Street NW, Suite 900 Washington, DC 20006 Telephone: (202) 555-7100 Facsimile: (202) 555-7199
450 Park Avenue, 28th Floor New York, NY 10022 Telephone: (212) 555-4800 Facsimile: (212) 555-4899
www.calderwoodharkness.com
Matter Number: 1036-00004
MEMORANDUM
WIRE TRANSFER CONFIRMATION REPRESENTATIONS AND WARRANTIES INSURANCE PREMIUM PAYMENT
I. Purpose and Summary
This memorandum confirms the successful transmission and receipt of the wire transfer for the representations and warranties insurance ("R&W Insurance") premium payment in connection with Fairwater Real Estate Investment Trust's ("Fairwater REIT" or "Buyer") acquisition of one hundred percent (100%) of the membership interests in the fourteen (14) property-owning single-purpose Delaware limited liability companies (each, a "Property Owner LLC" and collectively, the "Property Owner LLCs") from Greystone Meridian Partners Fund III, L.P. ("GMP Fund III" or "Seller") (the "Transaction").
The Transaction was consummated pursuant to the terms of that certain Purchase and Sale Agreement dated February 28, 2024 (as amended, restated, supplemented, or otherwise modified from time to time, the "PSA"), by and between Fairwater REIT, as Buyer, and GMP Fund III, as Seller. The aggregate purchase price for the Transaction is One Billion One Hundred Million Dollars ($1,100,000,000) (the "Purchase Price"). Closing occurred on June 6, 2024 (the "Closing Date").
Pursuant to Section 8.05(b) of the PSA, the Buyer is solely responsible for procuring and paying all premiums associated with the R&W Insurance policy. The PSA expressly provides that the R&W Insurance premium constitutes a Buyer closing cost and is payable at or prior to the Closing. In accordance with this obligation, on the Closing Date, Fairwater REIT initiated a wire transfer in the amount of One Million Four Hundred Two Thousand Five Hundred Dollars ($1,402,500.00) to Sentinel Specialty Insurance Company ("Sentinel Specialty" or the "Carrier"), representing the full premium due for the buyer-side R&W Insurance policy obtained in connection with the Transaction.
This memorandum sets forth the details of the wire transfer, the R&W Insurance policy parameters, confirmation of receipt by the Carrier, reconciliation of the premium payment within the broader closing-day funds flow, and the supporting documentation maintained in the transaction closing binder.
II. R&W Insurance Policy Summary
Set forth below is a summary of the material terms of the buyer-side representations and warranties insurance policy obtained by Fairwater REIT in connection with the Transaction. The policy was placed through Hartwick Gunderson & Associates, Inc. ("Hartwick Gunderson"), acting as insurance broker on behalf of Buyer, and was bound concurrently with the Closing on June 6, 2024.
Carrier: Sentinel Specialty Insurance Company, a Bermuda-domiciled specialty insurance company admitted as a United States surplus lines carrier. Sentinel Specialty maintains an A.M. Best rating of "A" (Excellent), Financial Size Category XIV, and is approved as a surplus lines insurer in all fifty (50) states and the District of Columbia.
Policy Type: Buyer-side representations and warranties insurance policy (the "R&W Policy"). The R&W Policy insures Buyer against losses arising from breaches of the Seller's representations and warranties set forth in Article V of the PSA, subject to the terms, conditions, limitations, and exclusions set forth in the R&W Policy.
Policy Limit: Fifty-Five Million Dollars ($55,000,000), representing five percent (5%) of the aggregate Purchase Price:
$1,100,000,000 × 0.05 = $55,000,000
The policy limit represents the maximum aggregate liability of the Carrier under the R&W Policy for all claims made during the policy period.
Retention (Self-Insured Retention): Eleven Million Dollars ($11,000,000), representing one percent (1%) of the aggregate Purchase Price:
$1,100,000,000 × 0.01 = $11,000,000
The retention functions as the Buyer's self-insured amount, meaning that the Carrier's obligation to indemnify Buyer under the R&W Policy does not attach until Buyer's aggregate losses arising from breaches of the insured representations and warranties exceed the retention amount. The retention is structured as follows:
• Initial Period (Closing through 12 months post-Closing): The full retention of $11,000,000 applies to all claims submitted during this period.
• Step-Down at 12 Months Post-Closing: Effective as of June 6, 2025 (the first anniversary of the Closing Date), fifty percent (50%) of the retention drops away, reducing the applicable retention from $11,000,000 to $5,500,000 for all claims submitted on or after such date, subject to the further terms and conditions of the R&W Policy.
Premium: One Million Four Hundred Two Thousand Five Hundred Dollars ($1,402,500.00), calculated as follows:
Rate on Policy Limit: 2.55% $55,000,000 × 0.0255 = $1,402,500.00
The premium represents a one-time, fully earned payment due at the Closing. The premium is non-refundable and is not subject to adjustment, proration, or return, regardless of whether any claims are made under the R&W Policy during the policy period. The quoted rate of 2.55% of the policy limit reflects the final negotiated rate achieved through the competitive marketing process conducted by Hartwick Gunderson on behalf of Buyer, and is inclusive of all applicable surplus lines taxes, stamping fees, and broker commissions.
Insurance Broker: Hartwick Gunderson & Associates, Inc., a nationally recognized insurance brokerage firm specializing in transactional risk insurance products:
Hartwick Gunderson & Associates, Inc. 100 North Charles Street, Suite 1200 Baltimore, Maryland 21201 Telephone: (410) 555-2300 Account Executive: Peter Langford
Email: plangford@hartwickgunderson.com
Policy Bound: June 6, 2024, concurrent with the Closing of the Transaction. The R&W Policy became effective as of 12:01 a.m. Eastern Time on June 6, 2024.
Obligation to Pay Premium: Buyer's sole responsibility pursuant to Section 8.05(b) of the PSA. The premium was required to be paid at or prior to Closing as a condition to the binding of the R&W Policy and as a Buyer closing cost reflected on the Closing Settlement Statement.
III. Wire Transfer Details
The wire transfer for the R&W Insurance premium was initiated and completed on the Closing Date in accordance with the wire instructions provided by Hartwick Gunderson & Associates, Inc. on behalf of Sentinel Specialty Insurance Company. Set forth below are the material details of the wire transfer:
Source of Funds. The wire transfer in the amount of $1,402,500.00 was funded from Fairwater REIT's $750,000,000 unsecured revolving credit facility with Aldgate National Bank, N.A., as administrative agent and lead arranger (the "Revolving Credit Facility"). The Revolving Credit Facility is governed by that certain Credit Agreement dated August 14, 2022, among Fairwater Real Estate Investment Trust, as borrower, Aldgate National Bank, N.A., as administrative agent, and the lenders party thereto from time to time (as amended by the First Amendment dated March 15, 2023 and the Second Amendment dated November 8, 2023). The draw on the Revolving Credit Facility for the R&W Insurance premium payment was part of the aggregate closing-day draw made by Fairwater REIT to fund its portion of the Transaction closing costs and equity contribution.
Wire Instruction Verification. Prior to initiation of the wire transfer, Calderwood & Harkness LLP confirmed the accuracy of the wire instructions through a telephone callback to Peter Langford at Hartwick Gunderson & Associates, Inc. at (410) 555-2300, and independently verified the beneficiary account information against the written wire instruction letter received from Hartwick Gunderson on June 4, 2024. The callback was completed by Rafael Dominguez at approximately 9:15 a.m. Eastern Time on June 6, 2024, and the wire was authorized for transmission following such verification.
IV. Confirmation of Receipt
Carrier Confirmation. Confirmation has been received from Sentinel Specialty Insurance Company (through its designated premium collection agent, JPFirst Trust Company, N.A.) that the wire transfer in the amount of One Million Four Hundred Two Thousand Five Hundred Dollars ($1,402,500.00) was received and credited to the Sentinel Specialty premium collection account on June 6, 2024. The written acknowledgment of premium receipt was transmitted by Sentinel Specialty to Hartwick Gunderson & Associates, Inc. at 11:22 a.m. Eastern Time on June 6, 2024, and a copy of such acknowledgment was forwarded to Calderwood & Harkness LLP at 11:38 a.m. Eastern Time on the same date.
Broker Confirmation. Confirmation has been received from Hartwick Gunderson & Associates, Inc. (Peter Langford, Account Executive) that the premium payment has been acknowledged by the Carrier and that the R&W Policy (Policy No. SSI-RW-2024-06178) is in full force and effect as of the Closing Date. Mr. Langford confirmed via email to Grace Nakamura and Rafael Dominguez at 11:45 a.m. Eastern Time on June 6, 2024 that (i) the premium has been received in full by Sentinel Specialty, (ii) no additional premium installments, fees, or charges are due from Buyer, (iii) the R&W Policy has been bound effective as of 12:01 a.m. Eastern Time on June 6, 2024, and (iv) a fully executed copy of the bound R&W Policy will be delivered within five (5) business days of the Closing Date.
No-Claims Declaration. Concurrently with the premium payment and Closing, Fairwater REIT executed and delivered to Sentinel Specialty Insurance Company the No-Claims Declaration required as a condition to binding of the R&W Policy (the "No-Claims Declaration"). The No-Claims Declaration, executed by David Elgin Park, General Counsel of Fairwater REIT, confirms that, as of the Closing Date and to the actual knowledge of Fairwater REIT's designated knowledge parties (as defined in the R&W Policy), (i) no claims, demands, suits, actions, or proceedings have been asserted, threatened, or commenced against any of the Property Owner LLCs or the properties comprising the portfolio that would give rise to a claim under the R&W Policy, and (ii) Fairwater REIT is not aware of any facts, circumstances, or conditions that would reasonably be expected to give rise to a claim under the R&W Policy. The executed No-Claims Declaration has been filed in the closing binder and a copy has been provided to Sentinel Specialty and Hartwick Gunderson.
V. Reconciliation with Funds Flow
The R&W Insurance premium wire transfer in the amount of $1,402,500.00 is one component of the comprehensive closing-day funds flow for the Transaction, as detailed in the Funds Flow Memorandum prepared by Calderwood & Harkness LLP and circulated to all parties on June 5, 2024, and as finalized on the Closing Date (the "Funds Flow Memorandum"). The premium payment is reflected as a Buyer closing cost on the Closing Settlement Statement (Buyer), which was executed by Fairwater REIT and delivered at Closing.
For reference and reconciliation purposes, set forth below is a summary of the principal closing-day wire transfers, including the R&W Insurance premium, as reflected in the Funds Flow Memorandum:
Notes on Funds Flow Reconciliation:
(a) Net Cash Equity Payment to Seller. The net cash equity payment to GMP Fund III of $486,930,000.00 reflects the aggregate Purchase Price of $1,100,000,000.00, less: (i) assumption of existing mortgage indebtedness encumbering the portfolio properties in the aggregate principal amount of approximately $558,000,000.00, (ii) the PCA credit of $1,070,000.00 applied against the Purchase Price pursuant to Section 3.03(c) of the PSA in connection with identified physical condition items, and (iii) the release of the $55,000,000.00 in aggregate earnest money deposits previously held in escrow by Commonwealth National Title Insurance Company, which deposits were applied against the Purchase Price at Closing, subject in each case to the net proration adjustments reflected on the Closing Settlement Statement.
(b) Lender Consent Fees. The aggregate lender consent fees totaled $1,825,625.00 across three (3) existing mortgage lenders (Pinnacle Capital Corp.: $1,054,000.00; Veltrano Mortgage Trust: $711,500.00; Sycamore Credit Partners, LLC: $60,125.00). Pursuant to Section 8.04 of the PSA, lender consent fees are shared equally (50/50) between Buyer and Seller, resulting in a Buyer's share of $912,812.50 and a Seller's share of $912,812.50.
(c) Transfer Taxes. Estimated total transfer taxes of $3,850,000.00 are shared equally (50/50) between Buyer and Seller pursuant to Section 8.06 of the PSA, resulting in a Buyer's share of $1,925,000.00.
(d) Title Insurance Premiums. Owner's title insurance premiums of $2,420,000.00, payable to Commonwealth National Title Insurance Company for the issuance of owner's title insurance policies covering each of the fourteen (14) portfolio properties, constitute a Buyer closing cost.
All wire transfers identified in the Funds Flow Memorandum were confirmed as sent and received on June 6, 2024. A final reconciliation of all closing-day wires will be completed by Calderwood & Harkness LLP and circulated to the parties within ten (10) business days of the Closing Date.
VI. Supporting Documentation
The following documents have been obtained and are maintained on file by Calderwood & Harkness LLP in connection with the R&W Insurance premium wire transfer and the binding of the R&W Policy:
1. Wire Transfer Instruction Letter from Hartwick Gunderson & Associates, Inc. — Written letter dated June 4, 2024, from Peter Langford (Hartwick Gunderson) to Grace Nakamura (Calderwood & Harkness LLP), specifying the wire transfer instructions and account coordinates for Sentinel Specialty Insurance Company's designated premium collection account, including the beneficiary bank name, ABA routing number, account number, and reference line information.
2. Copy of Wire Transfer Order Submitted to Aldgate National Bank, N.A. — Copy of the wire transfer order initiated by Fairwater REIT through Aldgate National Bank, N.A. on June 6, 2024, in the amount of $1,402,500.00, payable to Sentinel Specialty Insurance Company, bearing the reference line "R&W Insurance Premium — Fairwater REIT / GMP Fund III Portfolio Acquisition — Policy No. SSI-RW-2024-06178."
3. Wire Confirmation Receipt from Aldgate National Bank, N.A. — Confirmation of wire transfer completion issued by Aldgate National Bank, N.A., reflecting Federal Reference Number FRN 20240606ANBA0094782351, confirming that the wire in the amount of $1,402,500.00 was transmitted to the beneficiary account on June 6, 2024.
4. Written Acknowledgment of Premium Receipt from Sentinel Specialty Insurance Company — Written confirmation from Sentinel Specialty Insurance Company (through JPFirst Trust Company, N.A., as premium collection agent), dated June 6, 2024, acknowledging receipt of the premium payment of $1,402,500.00 and confirming credit to the premium collection account.
5. Confirmation Email from Peter Langford (Hartwick Gunderson & Associates, Inc.) — Email from Peter Langford to Grace Nakamura and Rafael Dominguez, dated June 6, 2024, at 11:45 a.m. Eastern Time, confirming that the premium payment has been received by the Carrier, that no additional amounts are due, and that the R&W Policy is bound and in full force and effect as of the Closing Date.
6. R&W Insurance Policy — Sentinel Specialty (Bound) — Buyer-side representations and warranties insurance policy (Policy No. SSI-RW-2024-06178) issued by Sentinel Specialty Insurance Company, effective June 6, 2024, with a policy limit of $55,000,000 and a retention of $11,000,000 (stepping down to $5,500,000 at twelve months post-Closing). The fully executed bound policy is expected to be delivered within five (5) business days of Closing; the binder of coverage is on file.
7. R&W Insurance — No-Claims Declaration (Closing) — No-Claims Declaration executed by Fairwater Real Estate Investment Trust (by David Elgin Park, General Counsel), dated June 6, 2024, delivered to Sentinel Specialty Insurance Company concurrently with the premium payment and Closing, confirming no known claims or circumstances as of the Closing Date.
All of the foregoing documents have been obtained in original or electronic copy form and are maintained in the Calderwood & Harkness LLP transaction file for Matter No. 1036-00004.
VII. Filing and Record-Keeping
The original wire confirmation receipt from Aldgate National Bank, N.A., together with all supporting documentation enumerated in Section VI above, shall be maintained in the closing binder for the Transaction under Tab 14 — R&W Insurance. The closing binder is being assembled by Calderwood & Harkness LLP and will be distributed to the parties in accordance with the closing binder distribution protocol previously circulated.
Copies of this memorandum and the supporting documentation referenced herein shall be distributed to the following parties:
• Fairwater Real Estate Investment Trust — David Elgin Park, General Counsel, and Patricia Sung-Calloway, Chief Financial Officer, at Fairwater REIT's principal office at 7200 Chesapeake Parkway, Suite 1100, Columbia, Maryland 21044. A complete electronic copy of this memorandum and all attachments will be provided via the secure file transfer portal maintained by Calderwood & Harkness LLP.
• Hartwick Gunderson & Associates, Inc. — Peter Langford, Account Executive, at 100 North Charles Street, Suite 1200, Baltimore, Maryland 21201. An electronic copy of this memorandum (excluding internal Calderwood & Harkness LLP notations) will be provided to Mr. Langford for Hartwick Gunderson's records and for coordination with Sentinel Specialty Insurance Company.
• Calderwood & Harkness LLP Deal File — The original of this memorandum and all attachments will be maintained in the Calderwood & Harkness LLP deal file for Matter No. 1036-00004 in both hard copy and electronic format, in accordance with the firm's document retention policies.
•
Prepared by:
________________________________________
Grace Nakamura Lead Associate Calderwood & Harkness LLP 1700 K Street NW, Suite 900 Washington, DC 20006 Telephone: (202) 555-7142
Email: gnakamura@calderwoodharkness.com
Reviewed by:
________________________________________
Rafael Dominguez Working Associate Calderwood & Harkness LLP 1700 K Street NW, Suite 900 Washington, DC 20006 Telephone: (202) 555-7156
Email: rdominguez@calderwoodharkness.com
Approved by:
________________________________________
Douglas Fairchild Responsible Partner Calderwood & Harkness LLP 1700 K Street NW, Suite 900 Washington, DC 20006 Telephone: (202) 555-7110
Email: dfairchild@calderwoodharkness.com
ATTACHMENT A
Copy of Wire Transfer Confirmation from Aldgate National Bank, N.A. (Federal Reference Number: FRN 20240606ANBA0094782351)
The wire transfer confirmation receipt from Aldgate National Bank, N.A., reflecting the wire transfer in the amount of $1,402,500.00 initiated on June 6, 2024 at 9:47 a.m. Eastern Time, payable to Sentinel Specialty Insurance Company, bearing Federal Reference Number FRN 20240606ANBA0094782351, is attached hereto and incorporated herein by reference. The original confirmation receipt is maintained in the Calderwood & Harkness LLP transaction file for Matter No. 1036-00004.
[Wire Transfer Confirmation Receipt Attached Behind This Page]
ATTACHMENT B
Acknowledgment of Premium Receipt from Sentinel Specialty Insurance Company (Policy No. SSI-RW-2024-06178)
The written acknowledgment of premium receipt from Sentinel Specialty Insurance Company (issued through JPFirst Trust Company, N.A., as designated premium collection agent), dated June 6, 2024, confirming receipt and credit of the premium payment in the amount of $1,402,500.00 for the buyer-side representations and warranties insurance policy (Policy No. SSI-RW-2024-06178) issued in connection with the Fairwater Real Estate Investment Trust / Greystone Meridian Partners Fund III, L.P. portfolio acquisition, is attached hereto and incorporated herein by reference. The original acknowledgment is maintained in the Calderwood & Harkness LLP transaction file for Matter No. 1036-00004.
[Acknowledgment of Premium Receipt Attached Behind This Page]
| Date: | June 6, 2024 |
| To: | Douglas Fairchild, Responsible Partner, Calderwood & Harkness LLP |
Angela Fontaine, Billing Partner, Calderwood & Harkness LLP
Cc:
Patricia Sung-Calloway, Chief Financial Officer, Fairwater Real Estate Investment Trust
David Elgin Park, General Counsel, Fairwater Real Estate Investment Trust
Camille Oduya, In-House Real Estate Counsel, Fairwater Real Estate Investment Trust
Peter Langford, Account Executive, Hartwick Gunderson & Associates, Inc.
From:
Rafael Dominguez, Working Associate, Calderwood & Harkness LLP
| Re: | Confirmation of Wire Transfer — R&W Insurance Premium to Sentinel Specialty Insurance Company — Fairwater Real Estate Investment Trust Acquisition of Greystone Meridian Partners Fund III, L.P. Portfolio | |||
| Detail | Information | |||
| Wire Originator: | Fairwater Real Estate Investment Trust (EIN: 52-2198437) | |||
| Originator Address: | 7200 Chesapeake Parkway, Suite 1100, Columbia, Maryland 21044 | |||
| Originating Bank: | Aldgate National Bank, N.A. | |||
| Originating Bank Address: | 383 Madison Avenue, New York, New York 10179 | |||
| Originating Bank ABA/Routing No.: | 021-000-089 | |||
| Originating Account: | Fairwater REIT Operating Account No. XXXXX8214 | |||
| Wire Amount: | $1,402,500.00 | |||
| Beneficiary: | Sentinel Specialty Insurance Company | |||
| Beneficiary Address: | c/o Sentinel Specialty Premium Trust, One Bermudiana Road, Hamilton HM 08, Bermuda (U.S. Correspondent: Premium Collection Account, JPFirst Trust Company, N.A., New York, NY) | |||
| Date of Wire Initiation: | June 6, 2024 | |||
| Time of Wire Initiation: | 9:47 a.m. Eastern Time | |||
| Federal Reference Number / Wire Confirmation Number: | FRN 20240606ANBA0094782351 | |||
| Purpose / Reference Line: | "R&W Insurance Premium — Fairwater REIT / GMP Fund III Portfolio Acquisition — Policy No. SSI-RW-2024-06178" | |||
| Wire No. | Description | Amount | Payor | Payee |
| 1 | Net cash equity payment to Seller (GMP Fund III) | $486,930,000.00 | Fairwater REIT | GMP Fund III |
| 2 | Release of aggregate earnest money deposits from escrow | $55,000,000.00 | Commonwealth National Title Insurance Company | GMP Fund III |
| 3 | Indemnity Escrow funding | $16,500,000.00 | Fairwater REIT | Commonwealth National Title Insurance Company (as Escrow Agent) |
| 4 | R&W Insurance Premium — Sentinel Specialty | $1,402,500.00 | Fairwater REIT | Sentinel Specialty Insurance Company |
| 5 | Lender consent fees — Pinnacle Capital | $1,054,000.00 | Split: Buyer $527,000 / Seller $527,000 | Pinnacle Capital Corp. |
| 6 | Lender consent fees — Veltrano Mortgage Trust | $711,500.00 | Split: Buyer $355,750 / Seller $355,750 | Veltrano Mortgage Trust |
| 7 | Lender consent fees — Sycamore Credit Partners | $60,125.00 | Split: Buyer $30,062.50 / Seller $30,062.50 | Sycamore Credit Partners, LLC |
| 8 | Transfer taxes (estimated) — Buyer's share | $1,925,000.00 | Fairwater REIT | Various state/local taxing authorities |
| 9 | Title insurance premiums | $2,420,000.00 | Fairwater REIT | Commonwealth National Title Insurance Company |