DEVELOPMENT MANAGEMENT AGREEMENT
by and between
HARBOR POINT DEVELOPMENT JV, LLC a Delaware limited liability company
("Owner" or the "JV")
and
FAIRWATER REAL ESTATE INVESTMENT TRUST a Maryland real estate investment trust
("Development Manager" or "Fairwater")
Dated as of January 12, 2026
Project: Harbor Point Towers 1500–1580 Wills Street, Baltimore, MD 21231 Block 7419, Lots 1–6, Baltimore City
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DEVELOPMENT MANAGEMENT AGREEMENT
This DEVELOPMENT MANAGEMENT AGREEMENT (this "Agreement") is entered into as of January 12, 2026 (the "Effective Date"), by and between HARBOR POINT DEVELOPMENT JV, LLC, a Delaware limited liability company ("Owner" or the "JV"), and FAIRWATER REAL ESTATE INVESTMENT TRUST, a Maryland real estate investment trust ("Development Manager" or "Fairwater"). Owner and Development Manager are each sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Owner is a Delaware limited liability company formed for the purpose of developing a Class A mixed-use project consisting of two twenty-eight (28)-story residential towers containing approximately six hundred ten (610) residential units and approximately forty-five thousand (45,000) square feet of ground-floor retail space on an approximately 8.2-acre waterfront site in Baltimore's Harbor Point district (the "Project" or "Harbor Point Towers");
WHEREAS, the Project site is located at 1500–1580 Wills Street, Baltimore, MD 21231 (Block 7419, Lots 1–6, Baltimore City) (the "Property");
WHEREAS, Owner is governed by that certain Amended and Restated Operating Agreement of Harbor Point Development JV, LLC, dated as of January 12, 2026 (the "Operating Agreement"), by and between Fairwater HP Manager, LLC, a Maryland limited liability company and wholly owned subsidiary of Fairwater ("Fairwater Manager"), as Managing Member (holding a thirty percent (30%) membership interest), and Prescott HP Investor, LLC, a Delaware limited liability company and wholly owned subsidiary of Prescott Capital Partners, LP ("Prescott Investor"), as non-managing member (holding a seventy percent (70%) membership interest);
WHEREAS, the total project cost is Five Hundred Seventy-Six Million Dollars ($576,000,000), consisting of Fifty-Four Million Dollars ($54,000,000) for land acquisition, Four Hundred Thirty-Two Million Dollars ($432,000,000) in hard costs (construction), and Ninety Million Dollars ($90,000,000) in soft costs, as more particularly set forth in the Approved Budget attached hereto as Exhibit A;
WHEREAS, Owner has entered into a construction loan facility with Meridian National Bank, N.A. in the principal amount of Three Hundred Thirty-Six Million Dollars ($336,000,000) (the "Construction Loan"), the terms and conditions of which are set forth in that certain Construction Loan Agreement dated as of February 15, 2026, by and between Owner, as borrower, and Meridian National Bank, N.A., as lead arranger and administrative agent;
WHEREAS, Owner has entered into a Guaranteed Maximum Price Contract with Pinnacle General Contractors, Inc. dated December 20, 2025 (the "GMP Contract") for the construction of the Project;
WHEREAS, the Property is fully entitled pursuant to Baltimore City Planned Unit Development Ordinance No. 24-0417, approved by the Baltimore City Council on June 14, 2024, and all conditions of approval associated therewith are in full force and effect;
WHEREAS, Fairwater has substantial experience in the development and management of mixed-use and multifamily properties across the Mid-Atlantic region, with a current portfolio of thirty-eight (38) properties and total assets under management of approximately Four Billion One Hundred Million Dollars ($4,100,000,000), and possesses the personnel, expertise, and institutional capacity necessary to serve as development manager for a project of the scale and complexity of Harbor Point Towers;
WHEREAS, Owner desires to engage Fairwater as the exclusive development manager for the Project, and Fairwater desires to accept such engagement, on the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Operating Agreement.
"Affiliate" shall mean, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such Person. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract, or otherwise. Without limitation, an entity in which a Person holds a majority of the equity interests, or over which a Person has the right to designate or elect a majority of the board of directors, managers, or other governing body, shall be deemed to be an Affiliate of such Person.
"Approved Budget" shall mean the Project development budget as approved by the members of Owner pursuant to the Operating Agreement, including all line items for land acquisition costs, hard costs, soft costs, contingencies, and reserves. The initial Approved Budget is attached hereto as Exhibit A and incorporated herein by reference. Any amendment to the Approved Budget that results in a variance exceeding five percent (5%) of any budgeted line item (the "Budget Variance Threshold") shall require the prior written consent of Prescott Investor in accordance with the Major Decision provisions of the Operating Agreement.
"Approved Schedule" shall mean the Project development schedule as approved by the members of Owner, setting forth milestone dates for all major Project activities from pre-construction through Substantial Completion and Stabilization. The initial Approved Schedule is attached hereto as Exhibit B and incorporated herein by reference.
"Budget Variance Threshold" shall mean five percent (5%) per line item of the Approved Budget, beyond which any proposed amendment or reallocation requires the prior written consent of Prescott Investor pursuant to the Major Decision provisions of the Operating Agreement.
"Capital Contribution Agreement" shall mean the Capital Contribution Agreement among the members of Owner, dated as of January 12, 2026, setting forth the terms and conditions under which the members shall fund their respective equity commitments to Owner.
"Change Order" shall mean any modification, addition, deletion, or other change to the scope of work, contract price, or schedule under the GMP Contract, whether proposed by the General Contractor, the Project architect, or Owner.
"Commencement Date" shall mean the date of this Agreement, January 12, 2026.
"Completion Guaranty" shall mean the Completion Guaranty delivered by Fairwater Real Estate Investment Trust in connection with the Construction Loan in favor of Lender, guaranteeing the lien-free completion of the Project in accordance with the plans and specifications and the Approved Budget.
"Construction Commencement" shall mean the date on which physical construction activities commence at the Property, targeted for March 1, 2026, as set forth in the Approved Schedule.
"Construction Loan" shall mean the construction loan facility in the principal amount of Three Hundred Thirty-Six Million Dollars ($336,000,000) from Meridian National Bank, N.A., as lead arranger and administrative agent, bearing interest at the rate of Term SOFR plus two hundred seventy-five (275) basis points, with an initial term of thirty-six (36) months and two (2) six (6)-month extension options, all as more particularly described in the Construction Loan Agreement.
"Construction Loan Agreement" shall mean the Construction Loan Agreement dated as of February 15, 2026, by and between Owner, as borrower, and Meridian National Bank, N.A., as lead arranger and administrative agent, together with all amendments, modifications, and supplements thereto.
"Development Management Fee" shall have the meaning set forth in Section 5.1 of this Agreement.
"Development Services" shall mean all of the services to be performed by Development Manager under this Agreement, as more particularly described in Article III.
"GMP Contract" shall mean that certain Guaranteed Maximum Price Contract dated December 20, 2025, by and between Owner and Pinnacle General Contractors, Inc. for the construction of the Project, together with all exhibits, schedules, Change Orders, and amendments thereto.
"General Contractor" shall mean Pinnacle General Contractors, Inc., a Maryland corporation, the chief executive officer of which is Raymond S. Muñoz.
"Hard Costs" shall mean all construction hard costs of the Project, including all amounts payable under the GMP Contract and any other direct construction costs, budgeted at Four Hundred Thirty-Two Million Dollars ($432,000,000) in the Approved Budget.
"Interest Reserve" shall mean the interest reserve in the amount of Twenty-Nine Million Four Hundred Thousand Dollars ($29,400,000), which is included in the soft costs line item of the Approved Budget and funded as part of the Construction Loan.
"Key Personnel" shall mean Marcus D. Okonkwo (Executive Vice President, Development, Fairwater Real Estate Investment Trust) and such other individuals as may from time to time be designated by Development Manager and approved by Owner in writing, as set forth in Exhibit C hereto.
"Lender" shall mean Meridian National Bank, N.A., in its capacity as lead arranger and administrative agent for the Construction Loan, and its successors and assigns.
"Major Decision" shall have the meaning ascribed to such term in the Operating Agreement, which includes, without limitation, any single expenditure exceeding Five Hundred Thousand Dollars ($500,000) that is not included as a line item in the Approved Budget, any amendment to the Approved Budget resulting in a variance exceeding the Budget Variance Threshold, any financing or refinancing, any sale or encumbrance of the Property, any litigation settlement exceeding Two Hundred Fifty Thousand Dollars ($250,000), and such other decisions as are designated in the Operating Agreement.
"Operating Agreement" shall mean the Amended and Restated Operating Agreement of Harbor Point Development JV, LLC, dated as of January 12, 2026, by and between Fairwater HP Manager, LLC, as Managing Member, and Prescott HP Investor, LLC, as non-managing member, together with all amendments, modifications, and supplements thereto.
"Person" shall mean any individual, corporation, partnership, limited liability company, trust, estate, real estate investment trust, unincorporated association, joint venture, governmental authority, or any other entity.
"Project" shall mean Harbor Point Towers, consisting of two (2) twenty-eight (28)-story residential towers containing approximately six hundred ten (610) residential units and approximately forty-five thousand (45,000) square feet of ground-floor retail space, together with all on-site and off-site improvements, amenities, parking facilities, landscaping, and infrastructure associated therewith, all as more particularly described in the plans and specifications approved as part of the GMP Contract and the PUD Ordinance.
"Property" shall mean the approximately 8.2-acre development site located at 1500–1580 Wills Street, Baltimore, MD 21231 (Block 7419, Lots 1–6, Baltimore City), together with all rights, easements, and appurtenances thereto.
"Property Management Agreement" shall mean the separate Property Management Agreement to be entered into between Owner and Fairwater (or an Affiliate of Fairwater) upon Stabilization of the Project, pursuant to which Fairwater will provide property management services for a fee of three percent (3.0%) of Effective Gross Revenue.
"PUD Ordinance" shall mean Baltimore City Planned Unit Development Ordinance No. 24-0417, approved by the Baltimore City Council on June 14, 2024, together with all conditions of approval associated therewith.
"Recourse Carve-Out Guaranty" shall mean the Recourse Carve-Out Guaranty delivered by Fairwater Real Estate Investment Trust in connection with the Construction Loan in favor of Lender.
"Soft Costs" shall mean all design, architectural, engineering, permitting, legal, interest carry, financing costs, development management fees, and other non-hard-cost Project costs, budgeted at Ninety Million Dollars ($90,000,000) in the Approved Budget.
"Stabilization" shall mean the achievement of ninety-three percent (93%) physical occupancy of the residential units within the Project, with executed leases in place and tenants in occupancy and paying rent, as calculated on a rolling thirty (30)-day basis.
"Substantial Completion" shall have the meaning ascribed to such term in the GMP Contract, which generally means the stage of completion at which the Project (or any designated phase thereof) is sufficiently complete in accordance with the construction documents so that Owner can occupy and use the improvements for their intended purpose; estimated to occur in September 2028 based on the Approved Schedule.
"Title Insurer" shall mean Tidewater Insurance Group, Inc.
"Transaction Documents" shall mean, collectively, this Agreement, the Operating Agreement, the Capital Contribution Agreement, the Construction Loan Agreement, the GMP Contract, the Completion Guaranty, the Recourse Carve-Out Guaranty, and all other agreements entered into by Owner or its members in connection with the Project.
ARTICLE II — APPOINTMENT AND TERM
Section 2.1 — Appointment
Owner hereby engages Fairwater as the exclusive development manager for the Project. Fairwater hereby accepts such engagement and agrees to perform the Development Services in accordance with the terms and conditions set forth in this Agreement. The engagement of Fairwater as Development Manager is exclusive, and Owner shall not, during the term of this Agreement, engage any other party to perform all or any material portion of the Development Services without the prior written consent of Fairwater, except to the extent that a successor development manager is appointed following termination of this Agreement in accordance with Article IX.
Section 2.2 — Term
The term of this Agreement (the "Term") shall commence on the Commencement Date and shall continue until the earliest to occur of the following: (a) the date of Substantial Completion of the Project (estimated September 2028), as certified in accordance with the GMP Contract; (b) the date of termination of this Agreement pursuant to Article IX; or (c) the date of dissolution or winding up of Owner in accordance with the Operating Agreement. Notwithstanding the foregoing, the Term may be extended by mutual written agreement of the Parties to encompass post-construction activities including, without limitation, punch list completion, lease-up support, coordination with governmental authorities for the issuance of certificates of occupancy, and transition of Project management responsibilities to property management operations under the separate Property Management Agreement to be entered into between Owner and Fairwater (or an Affiliate of Fairwater) for a management fee equal to three percent (3.0%) of Effective Gross Revenue. Any such extension shall be evidenced by a written amendment to this Agreement executed by both Parties.
Section 2.3 — Relationship to Operating Agreement
The Parties acknowledge and agree that this Agreement is entered into pursuant to, and is subject to, the Operating Agreement. The rights, obligations, and authority of Development Manager under this Agreement are in all respects subject to the terms and provisions of the Operating Agreement, including, without limitation, the Major Decision consent rights of Prescott Investor as set forth therein. In the event of any conflict or inconsistency between the terms and provisions of this Agreement and the terms and provisions of the Operating Agreement, the Operating Agreement shall govern and control. Nothing in this Agreement shall be construed to expand or modify the authority granted to Fairwater Manager as Managing Member under the Operating Agreement, nor to limit the consent rights of Prescott Investor as set forth therein.
ARTICLE III — SCOPE OF DEVELOPMENT SERVICES
Section 3.1 — General Scope
Development Manager shall provide comprehensive development management services for all phases of the Project, from pre-construction through Substantial Completion, as more particularly described in Sections 3.2 through 3.10 of this Article III (collectively, the "Development Services"). The Development Services shall include all services reasonably necessary and appropriate for the efficient and timely development of the Project in accordance with the Approved Budget, the Approved Schedule, and all applicable laws, regulations, and contractual obligations. Development Manager shall devote such time, attention, and resources as are reasonably necessary to perform the Development Services with the standard of care set forth in Article IV.
Section 3.2 — Pre-Construction Services
Development Manager shall perform the following pre-construction services:
(a) Coordination of the final design development and construction document phases with the Project architect, Whitfield + Sato Architecture, P.C., and all design consultants engaged for the Project, including review and approval of design submissions, value engineering analysis, and coordination of design revisions as necessary to maintain consistency with the Approved Budget and the PUD Ordinance;
(b) Preparation, submission, and prosecution of all building permit applications with the Baltimore City Department of Housing and Community Development, Division of Permits, and such other governmental authorities as may have jurisdiction, with the target of securing all necessary building permits during the first quarter of 2026;
(c) Monitoring and documentation of compliance with all conditions of approval under PUD Ordinance No. 24-0417, including but not limited to conditions relating to design review, affordable housing commitments, public amenities, environmental mitigation, and transportation improvements;
(d) Coordination with Calvert Surveying & Engineering, Inc. for all civil engineering services, including storm water management design, utility coordination, grading plans, and updates to the ALTA/NSPS land title survey as required for the Construction Loan closing and title insurance endorsements;
(e) Coordination with Bayline Environmental Consultants, LLC regarding any Phase II Environmental Site Assessment follow-up activities, remediation requirements, or environmental monitoring obligations applicable to the Property, including preparation and filing of any required Voluntary Cleanup Program ("VCP") documentation with the Maryland Department of the Environment;
(f) Coordination of the land closing (targeted for January 30, 2026) with the settlement agent, Tidewater Insurance Group, Inc. (as title insurer), Harbor East Land Holdings, LLC (the seller, contact: Vincent A. DeLuca), and all other parties to the acquisition, including review of title commitments, survey exceptions, closing documents, and post-closing recording matters; and
(g) Such other pre-construction activities as may be reasonably necessary or appropriate in connection with the Project, including coordination with utility providers, telecommunications infrastructure, and public agency pre-construction meetings.
Section 3.3 — Construction Oversight and Administration
Development Manager shall perform the following construction oversight and administration services throughout the construction period:
(a) Day-to-day oversight and management of Pinnacle General Contractors, Inc. under the GMP Contract, including regular communication with the General Contractor's project team, participation in weekly project meetings, and coordination of the activities of all trades and subcontractors;
(b) Regular site inspections and progress monitoring, including periodic walk-throughs of the construction site to assess the quality, progress, and safety of construction activities;
(c) Review and processing of all General Contractor pay applications and lien waivers in accordance with the GMP Contract, the Construction Loan documents, and applicable Maryland mechanic's lien laws, including verification that all work billed has been completed in accordance with the construction documents;
(d) Review, negotiation, and recommendation to Owner with respect to all Change Orders proposed under the GMP Contract, including analysis of the cost, schedule, and scope implications of each proposed Change Order. Development Manager shall present all Change Orders to Owner with a written recommendation, and shall not approve or execute any Change Order on behalf of Owner that constitutes a Major Decision (including any single unbudgeted expenditure exceeding Five Hundred Thousand Dollars ($500,000)) without the prior written consent of Prescott Investor;
(e) Implementation and maintenance of quality assurance and quality control procedures for all construction activities, including coordination with the Project architect and design consultants for field observation reports, materials testing, and shop drawing review;
(f) Coordination with Lender's construction inspector for all draw requests under the Construction Loan, including preparation of draw request packages, coordination of site inspections, and compilation of supporting documentation required by Lender;
(g) Monitoring of schedule compliance against the Approved Schedule, with a target Construction Commencement date of March 1, 2026, and an estimated Substantial Completion date of September 2028. Development Manager shall promptly identify and report any schedule deviations to Owner and shall work with the General Contractor to develop and implement recovery plans as necessary; and
(h) Such other construction administration activities as may be reasonably necessary, including coordination of building inspections, utility connections, and interface with adjacent property owners and public rights-of-way.
Section 3.4 — Budget Management
Development Manager shall perform the following budget management services:
(a) Preparation and ongoing maintenance of the Approved Budget, including monthly cost tracking, forecasting, and variance analysis across all budget categories;
(b) Monitoring of actual expenditures versus budgeted amounts across all line items, including land acquisition costs ($54,000,000), hard costs ($432,000,000), soft costs ($90,000,000), and total Project costs ($576,000,000), and maintenance of a detailed cost ledger with supporting documentation for all expenditures;
(c) Identification and timely reporting of budget variances. Any variance exceeding five percent (5%) of a budgeted line item shall be reported to Owner immediately upon identification, and Development Manager shall initiate the budget amendment and approval process as required under the Operating Agreement, including obtaining Prescott Investor consent for any such amendment;
(d) Management of contingency allocations within the Approved Budget, including tracking of contingency draws, maintaining a contingency balance report, and recommending contingency releases or reallocations as appropriate;
(e) Coordination with Alderman & Fields, CPAs, LLP (the JV's independent accounting firm, engagement partner Robert E. Alderman) for all JV-level cost accounting, including monthly reconciliation of Project expenditures, preparation of financial statements, and support for tax reporting; and
(f) Preparation of updated cost-to-complete projections on a monthly basis, incorporating actual expenditures, committed costs, and estimated remaining costs for all budget line items.
Section 3.5 — Contractor and Consultant Coordination
Development Manager shall perform the following contractor and consultant coordination services:
(a) Management and administration of all contracts with subcontractors, architects, engineers, environmental consultants, and other Project consultants, including monitoring performance, processing invoices, and enforcing contractual obligations;
(b) Procurement of additional contractors and consultants as may be necessary for the Project from time to time, subject to the Approved Budget and the Major Decision thresholds set forth in the Operating Agreement. Development Manager shall employ a competitive bidding or qualification-based selection process for all material procurements unless otherwise approved by Owner;
(c) Coordination with Pinnacle General Contractors, Inc. (contact: Raymond S. Muñoz, Chief Executive Officer) on all matters arising under the GMP Contract, including schedule management, Change Order negotiation and administration, insurance and bonding compliance, safety programs, and dispute resolution; and
(d) Coordination with the Project architect, structural engineer, mechanical/electrical/plumbing engineers, landscape architect, and other design professionals to ensure that construction activities conform to the approved plans, specifications, and design intent.
Section 3.6 — Permitting and Governmental Compliance
Development Manager shall perform the following permitting and governmental compliance services:
(a) Obtaining and maintaining all governmental permits, licenses, approvals, and authorizations required for the construction and development of the Project, including building permits, grading permits, sediment and erosion control permits, storm water management approvals, utility connection permits, and any other permits required by Baltimore City, the State of Maryland, or any other governmental authority having jurisdiction;
(b) Monitoring ongoing compliance with all Baltimore City zoning requirements, building codes, fire codes, environmental regulations, Americans with Disabilities Act requirements, and other applicable regulatory requirements throughout the construction period;
(c) Interface with Baltimore City agencies regarding PUD Ordinance conditions of approval, construction inspections, progress reviews, and applications for temporary and permanent certificates of occupancy; and
(d) Monitoring and responding to any governmental notices, citations, or enforcement actions relating to the Project, and keeping Owner promptly informed of any such matters.
Section 3.7 — Insurance Administration
Development Manager shall perform the following insurance administration services:
(a) Procurement and maintenance of all Project insurance required under this Agreement, the Operating Agreement, the Construction Loan documents, and the GMP Contract, including without limitation:
(i) Builder's risk insurance providing coverage for the full replacement cost of the Project during construction, to be placed with Greystone Mutual Insurance Company or another carrier acceptable to Owner and Lender;
(ii) Commercial general liability insurance with limits of not less than Ten Million Dollars ($10,000,000) per occurrence and Twenty Million Dollars ($20,000,000) in the aggregate;
(iii) Umbrella/excess liability insurance with limits of not less than Fifty Million Dollars ($50,000,000); and
(iv) Such other insurance coverages as may be required by applicable law, the Construction Loan documents, or prudent development practice;
(b) Monitoring of General Contractor and subcontractor insurance compliance, including review of certificates of insurance, verification of required coverage limits, and enforcement of insurance requirements under the GMP Contract and all subcontracts;
(c) Coordination with Tidewater Insurance Group, Inc. for title insurance endorsements, including the owner's title insurance policy in the amount of Fifty-Four Million Dollars ($54,000,000) at acquisition, with endorsements to increase coverage to the full Project cost upon completion; and
(d) Management of all insurance claims arising during the construction period, in coordination with Owner, Lender, and applicable insurance carriers.
The insurance requirements applicable to the Project are summarized in Exhibit E attached hereto.
Section 3.8 — Financing Coordination
Development Manager shall perform the following financing coordination services:
(a) Coordination with Meridian National Bank, N.A. (contact: Kevin P. Driscoll, Senior Vice President, Real Estate Finance) for all Construction Loan administration, including preparation and submission of monthly draw requests, compilation of required supporting documentation (including contractor pay applications, lien waivers, inspection reports, and budget updates), delivery of compliance certificates, and coordination of extension requests;
(b) Monitoring compliance with all financial and non-financial covenants under the Construction Loan documents, including debt service coverage ratios, loan-to-cost ratios, in-balance tests, and reporting requirements, and promptly notifying Owner of any actual or reasonably anticipated covenant violation;
(c) Supporting Owner's obligations under the Completion Guaranty and the Recourse Carve-Out Guaranty delivered by Fairwater Real Estate Investment Trust in connection with the Construction Loan, including maintaining construction progress records and cost-to-complete analyses in a manner that enables Fairwater to monitor its exposure under such guaranties;
(d) Coordination of equity capital calls pursuant to the Capital Contribution Agreement, including preparation and delivery of capital call notices to the members of Owner on a pro rata basis with not less than fifteen (15) business days' prior written notice, and monitoring of capital contribution receipts; and
(e) Such other financing coordination activities as may be reasonably necessary, including preparation of materials for Lender's quarterly reviews and annual inspections.
Section 3.9 — Pre-Leasing and Marketing Coordination
Development Manager shall perform the following pre-leasing and marketing coordination services:
(a) Development and implementation of a comprehensive leasing and marketing strategy for the residential units and ground-floor retail space, including market analysis, competitive positioning, pricing strategy, and targeted marketing campaigns;
(b) Engagement and oversight of leasing agents, marketing consultants, public relations firms, and digital marketing vendors, subject to the Approved Budget and the procurement procedures established by Owner;
(c) Coordination of model unit construction, marketing facilities, on-site leasing offices, and sales center operations in advance of initial residential occupancy; and
(d) Periodic reporting to Owner on pre-leasing activity, market conditions, and marketing expenditures.
Section 3.10 — Substantial Completion and Transition
Development Manager shall perform the following Substantial Completion and transition services:
(a) Oversight and management of punch list completion in coordination with the General Contractor, the Project architect, and Owner's designated representatives;
(b) Coordination of certificate of occupancy applications with the Baltimore City Department of Housing and Community Development, including scheduling of final inspections and compilation of required documentation;
(c) Transition of Project management responsibilities to property management operations under the separate Property Management Agreement upon Stabilization (estimated March 2029), including handover of building systems manuals, warranty documentation, as-built drawings, and all other records necessary for ongoing property operations; and
(d) Close-out of all construction contracts, consultant agreements, and vendor contracts, including final accounting, retainage release, warranty period coordination, and compilation of final Project cost reconciliation.
ARTICLE IV — STANDARD OF PERFORMANCE
Section 4.1 — Standard of Care
Development Manager shall perform the Development Services in a diligent, professional, and competent manner consistent with the standards of care, skill, and diligence customarily exercised by experienced development managers of comparable Class A mixed-use projects in the Baltimore metropolitan area. Development Manager shall use commercially reasonable efforts to complete the Project in accordance with the Approved Budget and the Approved Schedule, and shall exercise sound professional judgment in all aspects of Project development. Development Manager shall act at all times in the best interests of Owner and the Project, subject to the terms and conditions of this Agreement and the Operating Agreement.
Section 4.2 — Compliance with Laws
Development Manager shall perform all Development Services in compliance with all applicable federal, state, and local laws, regulations, ordinances, codes, rules, and orders, including without limitation Maryland real estate laws, Maryland environmental laws, Baltimore City building codes and zoning requirements, the Americans with Disabilities Act, the Fair Housing Act, OSHA requirements, the PUD Ordinance No. 24-0417, and all conditions of approval associated therewith. Development Manager shall promptly notify Owner of any change in applicable law that may materially affect the Project or the performance of the Development Services.
Section 4.3 — Key Personnel
Marcus D. Okonkwo, Executive Vice President, Development, Fairwater Real Estate Investment Trust, shall serve as the primary individual responsible for the day-to-day performance of the Development Services on behalf of Development Manager. The Key Personnel and their respective roles are set forth in Exhibit C attached hereto.
Development Manager shall not remove, reassign, or materially reduce the time commitment of any Key Personnel without providing at least thirty (30) days' prior written notice to Owner, together with a proposal for a qualified replacement individual for Owner's approval (such approval not to be unreasonably withheld, conditioned, or delayed). The Parties acknowledge that the departure of Key Personnel may trigger the key-person provisions of the Operating Agreement, which provide that the departure of both Harold K. Brennan (CEO and Chairman, Fairwater) and Marcus D. Okonkwo without Owner-approved replacements within ninety (90) days constitutes a key-person event that may give rise to removal rights and other remedies under the Operating Agreement.
Section 4.4 — No Conflicts
Development Manager shall not engage in any activity, accept any engagement, or maintain any interest that conflicts with its duties and obligations under this Agreement or the Operating Agreement. Without limiting the foregoing, Development Manager shall not, during the Term of this Agreement, directly or indirectly manage or develop any competing project within a two (2)-mile radius of the Property without the prior written consent of Owner, provided, however, that this restriction shall not apply to Fairwater's existing portfolio of properties in the Baltimore metropolitan area.
ARTICLE V — DEVELOPMENT MANAGEMENT FEE
Section 5.1 — Fee Amount
In consideration of the performance of the Development Services, Owner shall pay to Development Manager a development management fee (the "Development Management Fee") equal to three and one-half percent (3.5%) of Hard Costs. Based on the budgeted Hard Costs of Four Hundred Thirty-Two Million Dollars ($432,000,000) set forth in the Approved Budget, the total Development Management Fee is Fifteen Million One Hundred Twenty Thousand Dollars ($15,120,000). The Development Management Fee shall be inclusive of all internal overhead, general and administrative costs, office expenses, travel, and construction management oversight costs of Development Manager. No separate construction management oversight fee, administrative fee, or other additional compensation shall be charged by Development Manager in connection with the Development Services.
Section 5.2 — Payment Schedule
The Development Management Fee shall be earned and paid monthly in arrears, on a pro rata basis corresponding to the Hard Costs actually incurred during each calendar month. The monthly payment of the Development Management Fee shall be calculated as follows:
Monthly Fee Payment = Hard Costs Incurred in Calendar Month × 3.5%
Development Manager shall submit a written invoice to Owner, together with the monthly development report described in Section 6.1, setting forth in reasonable detail the Hard Costs incurred during the preceding calendar month and the corresponding Development Management Fee payable. Owner shall pay the invoiced amount within fifteen (15) days following its receipt of Development Manager's monthly report and invoice. Any disputed amounts may be withheld pending resolution, provided that Owner shall pay all undisputed portions within the prescribed period.
Section 5.3 — Adjustment for Budget Changes
In the event that the Approved Budget is amended to increase or decrease Hard Costs (subject to the Budget Variance Threshold and Prescott Investor consent requirements under the Operating Agreement), the Development Management Fee shall be automatically recalculated based on the revised Hard Costs at the rate of three and one-half percent (3.5%). Any adjustment shall be applied prospectively to all future monthly fee payments and, to the extent that prior monthly payments result in an aggregate overpayment or underpayment relative to the revised total Development Management Fee, a true-up payment or credit shall be made within thirty (30) days following the date of the budget amendment.
Section 5.4 — Source of Payment
The Development Management Fee is a Project cost and shall be included as a line item in the Approved Budget under the soft costs category. Payments of the Development Management Fee may be funded from Construction Loan draw proceeds (subject to Lender's approval and the terms of the Construction Loan documents) or from equity contributions made by the members of Owner pursuant to the Capital Contribution Agreement. Development Manager acknowledges that the availability of Construction Loan proceeds to fund the Development Management Fee is subject to the in-balance requirements, draw conditions, and other terms and conditions of the Construction Loan documents.
Section 5.5 — No Other Fees During Construction
During the Term of this Agreement, Development Manager shall not be entitled to any asset management fee, construction management oversight fee, acquisition fee, disposition fee, or other compensation from Owner or the JV with respect to the Project, other than the Development Management Fee as set forth in this Article V.
For the avoidance of doubt, the following fees and compensation arrangements are governed exclusively by the Operating Agreement and are separate from, and not duplicative of, the Development Management Fee:
(a) The disposition fee of one percent (1.0%) of the gross sale price of the Property or the Project, payable to Fairwater (or its designee) upon any sale, transfer, or other disposition, as provided in the Operating Agreement; and
(b) The promote/carried interest payable to Fairwater Manager under the distribution waterfall set forth in the Operating Agreement, including the nine percent (9.0%) preferred return, catch-up, and residual split tiers.
ARTICLE VI — REPORTING OBLIGATIONS
Section 6.1 — Monthly Reports
Development Manager shall prepare and deliver to Owner a written monthly development report (the "Monthly Report") within ten (10) business days after the end of each calendar month. Each Monthly Report shall include, at a minimum, the following:
(a) A narrative summary of construction progress during the preceding month, including a comparison of actual progress against the Approved Schedule and identification of any schedule deviations or critical path issues;
(b) A budget variance report presenting actual expenditures versus the Approved Budget, organized by line item, with explanations for any material variances;
(c) A summary of draw request status under the Construction Loan, including the amount drawn during the month, the cumulative amount drawn to date, and the remaining Construction Loan availability;
(d) A log of all Change Orders approved, pending, or under review during the month, including the cost, schedule, and scope implications of each;
(e) An insurance compliance status report, confirming that all required insurance coverages are in place and that the General Contractor and all subcontractors are in compliance with their insurance obligations;
(f) A permitting and governmental approval status update, including the status of all pending permit applications, inspection results, and any governmental notices or actions;
(g) An updated cost-to-complete projection for the Project, incorporating actual expenditures, committed costs, and estimated remaining costs across all budget categories; and
(h) Photographic documentation of construction progress, including representative photographs of major construction activities, building systems, and site conditions.
The form and content of the Monthly Report shall be substantially consistent with the template set forth in Exhibit D attached hereto.
Section 6.2 — Quarterly Reports
In addition to the Monthly Reports, Development Manager shall prepare and deliver to Owner a comprehensive quarterly development report (the "Quarterly Report") within twenty (20) business days after the end of each calendar quarter. Each Quarterly Report shall include, at a minimum, the following:
(a) Detailed financial reporting, prepared in coordination with Alderman & Fields, CPAs, LLP, including JV-level financial statements, capital account balances, and a reconciliation of Project expenditures;
(b) Updated pro forma projections for the Project, including projected income, operating expenses, net operating income, and return metrics based on current market conditions and leasing assumptions;
(c) A schedule analysis with a critical path assessment, including an updated construction schedule showing planned versus actual milestone dates and identification of any activities on or near the critical path; and
(d) An updated risk assessment and mitigation plan, identifying key project risks (including construction, market, regulatory, and financial risks) and the strategies being employed to mitigate such risks.
Section 6.3 — Ad Hoc Reporting
Development Manager shall promptly report to Owner (and, where applicable, to Lender) any material events or circumstances affecting the Project, including without limitation:
(a) Any casualty, fire, flood, structural failure, accident, or environmental incident occurring at or affecting the Property;
(b) Any threatened or actual litigation, arbitration, governmental investigation, or regulatory enforcement action related to the Project, Owner, or the Property. Development Manager acknowledges that any litigation settlement exceeding Two Hundred Fifty Thousand Dollars ($250,000) constitutes a Major Decision requiring the prior written consent of Prescott Investor under the Operating Agreement;
(c) Any material delay in construction activities or material deviation from the Approved Schedule, together with an analysis of the causes and proposed recovery measures;
(d) Any material cost overrun or budget variance, including any variance that has triggered or is reasonably expected to trigger the Budget Variance Threshold;
(e) Any default, event of default, or threatened default under the GMP Contract, any material subcontract, or any other material Project contract;
(f) Any actual or reasonably anticipated noncompliance with any covenant, condition, or requirement of the Construction Loan documents; and
(g) Any other event or circumstance that a prudent development manager would consider material to the Project or to Owner's interests.
Development Manager shall provide ad hoc reports in writing (which may include electronic mail) and shall use commercially reasonable efforts to deliver such reports within two (2) business days after becoming aware of the reportable event.
Section 6.4 — Access and Inspection
Owner and its members (including Prescott Investor and its representatives, agents, and advisors) shall have reasonable access to the Project site, the books and records of Development Manager relating to the Project, and all Project-related files, correspondence, and documentation maintained by Development Manager, upon reasonable prior notice and during normal business hours. Development Manager shall cooperate fully with any such access requests and shall make its personnel available to respond to questions and provide information. Lender shall have access to the Project site, books, records, and documentation as required under the Construction Loan documents.
ARTICLE VII — AUTHORITY AND LIMITATIONS
Section 7.1 — Delegated Authority
Subject to the limitations set forth in this Article VII and the Operating Agreement, Development Manager shall have the authority to act on behalf of Owner in the ordinary course of Project development, including without limitation the execution of contracts with contractors, consultants, and vendors; the engagement of professional service providers; the approval and payment of expenditures within the Approved Budget; the prosecution of permit applications; and such other actions as are reasonably necessary for the day-to-day management and oversight of the Development Services. Development Manager shall exercise such authority in a manner consistent with the Approved Budget, the Approved Schedule, the Operating Agreement, and this Agreement.
Section 7.2 — Major Decision Limitations
Notwithstanding anything in this Agreement to the contrary, Development Manager shall not take any action, or authorize or permit any action to be taken, that constitutes a Major Decision under the Operating Agreement without first obtaining the prior written consent of Prescott Investor. Without limiting the generality of the foregoing, the following actions require the prior written consent of Prescott Investor:
(a) Any single expenditure exceeding Five Hundred Thousand Dollars ($500,000) that is not included as a line item in the Approved Budget;
(b) Any amendment to the Approved Budget that results in a variance exceeding five percent (5%) of any budgeted line item;
(c) Any financing, refinancing, or material modification of the Construction Loan or any other indebtedness of Owner;