CALDERWOOD & HARKNESS LLP Attorneys at Law
1750 K Street NW, Suite 900 Washington, DC 20006
Telephone: (202) 944-7200 Facsimile: (202) 944-7201 www.calderwoodharkness.com
September 22, 2025
Associate Chief Counsel (Income Tax & Accounting) Internal Revenue Service, National Office 1111 Constitution Avenue NW Washington, DC 20224
Attention: CC:ITA (Branch 2 — Financial Institutions & Products)
Re: Private Letter Ruling Request — Fairwater Real Estate Investment Trust (EIN: 52-4718263); User Fee Submission Under Rev. Proc. 2025-1 Matter No.: 1036-00006
Dear Sir or Madam:
This firm, Calderwood & Harkness LLP, serves as tax counsel to Fairwater Real Estate Investment Trust ("Fairwater" or the "Trust"), a Maryland real estate investment trust (Employer Identification Number: 52-4718263), publicly traded on the New York Stock Exchange under the ticker symbol FREIT, with its principal office located at 2400 Harbor Promenade, Suite 1100, Baltimore, Maryland 21202. This letter accompanies the enclosed private letter ruling request (the "Ruling Request") submitted on behalf of Fairwater pursuant to Revenue Procedure 2025-1, 2025-1 I.R.B. 1, and the applicable procedures set forth therein for requesting a private letter ruling from the Internal Revenue Service (the "Service" or "IRS") National Office. We respectfully request that this transmittal letter and the enclosed materials be referred to the Associate Chief Counsel (Income Tax & Accounting), Branch 2 — Financial Institutions & Products, for processing and substantive review.
User Fee Transmittal
Enclosed herewith is a check in the amount of Thirty-Eight Thousand Dollars ($38,000.00), representing the applicable user fee for the Ruling Request as required by Section 15 of Revenue Procedure 2025-1 and the user fee schedule set forth in Appendix A thereto. The user fee corresponds to Category 2 (Specific Issues) under Revenue Procedure 2025-1, Appendix A, which governs letter ruling requests involving specific questions arising from a particular transaction or set of transactions that are the subject of a ruling request raising one or more issues within the jurisdiction of the Associate Chief Counsel (Income Tax & Accounting).
The details of the enclosed user fee payment are as follows:
Check Number: 00471826
Drawn on: Ridgeline National Bank, N.A., 227 West Trade Street, Charlotte, North Carolina 28202
Payable to the order of: United States Treasury
Amount: $38,000.00
We confirm that the check is properly executed and bears a current date. If any additional user fee is determined to be applicable based on the Service's review of the Ruling Request, or if the fee schedule is revised prior to completion of the ruling process, we will promptly submit any supplemental payment upon notification from the Service.
Description of the Ruling Request
The Ruling Request seeks written confirmation from the Service that certain aspects of Fairwater's proposed acquisition of a portfolio of eleven (11) mixed-use properties (collectively, the "Southgate Portfolio") from Thornfield Development Group, LLC (EIN: 83-2956104), a Delaware limited liability company ("Thornfield"), for an aggregate purchase price of approximately Eight Hundred Twelve Million Dollars ($812,000,000), and the associated formation and capitalization of a new taxable REIT subsidiary, Fairwater Southgate TRS, Inc., a Maryland corporation to be formed (the "TRS" or "Fairwater Southgate TRS"), will not adversely affect Fairwater's continued qualification as a real estate investment trust under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). The proposed transaction is expected to close during the first quarter of 2026, subject to customary conditions and regulatory approvals.
The Ruling Request seeks the following three specific rulings from the Service:
Ruling 1: That rents received by Fairwater from Fairwater Southgate TRS, Inc. under proposed intercompany leases (as more fully described in the Ruling Request and the enclosed proposed form of intercompany lease) will constitute "rents from real property" within the meaning of Section 856(d) of the Code, provided that such rents are established at arm's-length rates as required by Section 856(d)(7)(B) of the Code, and that the intercompany lease arrangements otherwise satisfy the requirements for treatment as qualified REIT subsidiary lease income. The arm's-length character of the proposed rents is supported by an independent appraisal prepared by Caldwell Valuation Group, LLC, dated August 30, 2025, a summary of which is enclosed herewith.
Ruling 2: That the formation and capitalization of Fairwater Southgate TRS, Inc. — including the initial equity contribution anticipated to be made by Fairwater to the TRS — will not cause Fairwater to fail the twenty percent (20%) taxable REIT subsidiary asset test set forth in Section 856(c)(4)(B)(ii) of the Code or the seventy-five percent (75%) and twenty-five percent (25%) asset tests set forth in Section 856(c)(4) of the Code, based on the projected post-acquisition asset composition of Fairwater as described in the REIT qualification metrics schedule enclosed with the Ruling Request.
Ruling 3: That certain tenant improvement allowances to be funded by Fairwater for the benefit of third-party retail tenants occupying commercial space within the Southgate Portfolio properties will not be treated as "impermissible tenant service income" within the meaning of Section 856(d)(7)(C)(i) of the Code, and that such allowances will not result in the disqualification of any portion of the rents received by Fairwater from the relevant tenants as "rents from real property" under Section 856(d) of the Code.
The factual and legal bases for each requested ruling are set forth in detail in the Ruling Request, together with supporting exhibits, schedules, and legal authorities.
Enclosed Documents
The following items are enclosed with this transmittal letter and are being submitted to the Service as a complete ruling-request package via Severin Partners LLC overnight delivery:
1. Private Letter Ruling Request, dated September 22, 2025, together with all exhibits thereto, including the penalties-of-perjury declaration required by Section 7.01(16) of Revenue Procedure 2025-1, executed by Jonathan M. Hirota, Vice President, Tax, on behalf of Fairwater Real Estate Investment Trust;
2. IRS Form 2848 (Power of Attorney and Declaration of Representative), dated September 22, 2025, designating Sylvia Hartwell (PTIN: P01882447) and Garrett Simmons (PTIN: P02094518), each of Calderwood & Harkness LLP, as authorized representatives of Fairwater in connection with this Ruling Request;
3. User fee check — Ridgeline National Bank, N.A., check no. 00471826, in the amount of $38,000.00, payable to "United States Treasury";
4. Copy of Fairwater's Articles of Trust, as amended and restated through August 15, 2023, filed with the State Department of Assessments and Taxation of Maryland;
5. Organizational chart depicting the current corporate and entity structure of Fairwater and its subsidiaries, together with the proposed subsidiary structure following the formation of Fairwater Southgate TRS, Inc. and the consummation of the Southgate Portfolio acquisition;
6. Summary of Southgate Portfolio properties, consisting of eleven (11) mixed-use properties located across the Commonwealth of Virginia, the State of North Carolina, and the State of Georgia, comprising approximately 3.1 million rentable square feet of commercial, retail, and residential space;
7. Summary of arm's-length rent appraisal prepared by Caldwell Valuation Group, LLC, an independent real estate valuation firm, dated August 30, 2025, supporting the arm's-length character of the proposed intercompany lease rents between Fairwater and Fairwater Southgate TRS, Inc.;
8. Proposed form of intercompany lease (Fairwater, as Landlord, to Fairwater Southgate TRS, Inc., as Tenant), in substantially final form, subject to such modifications as may be necessary in connection with final structuring of the Southgate Portfolio acquisition; and
9. REIT qualification metrics schedule, setting forth Fairwater's projected post-acquisition asset composition, gross income composition, and distribution requirements, demonstrating anticipated compliance with the asset, income, and distribution tests applicable to real estate investment trusts under Sections 856 through 860 of the Code.
Shipment Details
The complete ruling-request package, including this transmittal letter and all of the enclosures described above, is being sent to the Service via Severin Partners LLC overnight delivery, addressed to the Associate Chief Counsel (Income Tax & Accounting) at the address set forth above. The applicable shipment details are as follows:
Severin Partners LLC Tracking Number: 7749-2281-3364
Shipment Date: September 22, 2025
Expected Delivery Date: September 23, 2025
We respectfully request that receipt of this package be confirmed by the Service at its earliest convenience, including by correspondence directed to the undersigned at the address and contact information provided below.
Authorized Representatives and Contact Information
As set forth in the enclosed IRS Form 2848, the authorized representatives for Fairwater Real Estate Investment Trust in connection with this Ruling Request are:
Sylvia Hartwell Partner, Tax Practice Group Calderwood & Harkness LLP PTIN: P01882447 Telephone: (202) 944-7218
Email: shartwell@calderwoodharkness.com
Garrett Simmons Associate, Tax Practice Group Calderwood & Harkness LLP PTIN: P02094518 Telephone: (202) 944-7245
Email: gsimmons@calderwoodharkness.com
All correspondence from the Service in connection with this Ruling Request — including, without limitation, the initial acknowledgment letter, any request for additional information, any conference scheduling letter, and the final ruling letter — should be directed to:
Sylvia Hartwell Calderwood & Harkness LLP 1750 K Street NW, Suite 900 Washington, DC 20006 Telephone: (202) 944-7218 Facsimile: (202) 944-7201
Email: shartwell@calderwoodharkness.com
Ms. Hartwell and Mr. Simmons are each authorized to receive and inspect confidential tax information of Fairwater, to perform any and all acts with respect to this Ruling Request, and to represent Fairwater before the Service in connection with all matters relating to the Ruling Request, including attendance at any conferences that may be scheduled by the examining branch.
Request for Acknowledgment and Expedited Consideration
We respectfully request that the Service acknowledge receipt of the Ruling Request and the enclosed user fee at its earliest convenience. Fairwater anticipates a processing timeline of approximately ninety (90) to one hundred eighty (180) days from the date of acknowledgment of receipt, consistent with the Service's published guidelines for processing private letter ruling requests under Revenue Procedure 2025-1.
In this regard, we respectfully request that the Service give expedited consideration to this Ruling Request, to the extent consistent with the Service's processing schedule and available resources. The basis for this request is that Fairwater's proposed acquisition of the Southgate Portfolio from Thornfield Development Group, LLC is subject to a definitive purchase and sale agreement that contemplates a closing during the first quarter of 2026. Timely receipt of the requested rulings is a material consideration for Fairwater in connection with the structuring and consummation of the acquisition, and any significant delay in the ruling process could adversely affect Fairwater's ability to complete the transaction within the anticipated timeframe. We understand that the Service exercises its discretion in determining whether to grant expedited treatment, and we are prepared to provide any additional information or documentation that may be helpful to the Service in evaluating this request.
Closing
We appreciate the Service's attention to this matter and are prepared to provide any additional information, supplemental submissions, or clarifications that may be required by the Service in connection with the processing and review of the enclosed Ruling Request. Should the assigned branch attorney or reviewer have any questions regarding the Ruling Request, the enclosed materials, or any aspect of this transmittal, we encourage the Service to contact the undersigned directly at the telephone number or email address provided above.
We look forward to receiving the Service's acknowledgment of receipt and to working cooperatively with the assigned branch in connection with the review and disposition of this Ruling Request.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Sylvia Hartwell Partner, Tax Practice Group Calderwood & Harkness LLP 1750 K Street NW, Suite 900 Washington, DC 20006 Telephone: (202) 944-7218
Email: shartwell@calderwoodharkness.com
Enclosures (9):
1. Private Letter Ruling Request (with all exhibits and penalties-of-perjury declaration)
2. IRS Form 2848 (Power of Attorney and Declaration of Representative)
3. User fee check — Ridgeline National Bank, N.A., check no. 00471826 ($38,000.00)
4. Copy of Fairwater's Articles of Trust
5. Organizational chart (current and proposed subsidiary structure)
6. Summary of Southgate Portfolio properties
7. Summary of Caldwell Valuation Group, LLC arm's-length rent appraisal (August 30, 2025)
8. Proposed form of intercompany lease (Fairwater to Fairwater Southgate TRS, Inc.)
9. REIT qualification metrics schedule
cc:
Jonathan M. Hirota, Vice President, Tax, Fairwater Real Estate Investment Trust Anita Bashar Reeves, General Counsel, Fairwater Real Estate Investment Trust Garrett Simmons, Calderwood & Harkness LLP Leila Nazari, Calderwood & Harkness LLP Leonard Cross, Calderwood & Harkness LLP