PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT / ATTORNEY-CLIENT COMMUNICATION
CALDERWOOD & HARKNESS LLP 599 Lexington Avenue, 38th Floor New York, NY 10022
MEMORANDUM
This memorandum is protected by the attorney-client privilege and the attorney work product doctrine. It is intended solely for the use of the addressees identified above and other authorized representatives of Cascade Retail Holdings Inc. in connection with the proposed acquisition of NovaMart Global Inc. This memorandum should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
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I. EXECUTIVE SUMMARY
This memorandum summarizes the findings of our real property due diligence review conducted in connection with Cascade Retail Holdings Inc.'s ("Cascade" or the "Buyer") proposed acquisition of 100% of the outstanding capital stock of NovaMart Global Inc. ("NovaMart" or the "Company"), a Delaware corporation headquartered at 1100 Congress Avenue, Suite 800, Austin, Texas 78701, for an aggregate purchase price of $1,200,000,000 (the "Acquisition"). The Acquisition is to be effected pursuant to a Stock Purchase Agreement (the "SPA") between Cascade, the Selling Stockholders, and the Stockholders' Representative.
Scope of Review. Our review encompassed the entirety of NovaMart's real property portfolio, including: (a) the corporate headquarters located at 1100 Congress Avenue, Suite 800, Austin, Texas; (b) fourteen (14) fulfillment centers comprising the "NovaShip" proprietary logistics network, which are located across nine (9) states; and (c) any other ancillary properties identified in the virtual data room maintained by NovaMart's counsel. Our review was conducted in coordination with the broader due diligence effort, and we have cross-referenced our findings with the Material Contracts Due Diligence Memorandum, the Environmental Due Diligence Memorandum, the Tax Due Diligence Memorandum prepared by Sylvia Hartwell, and the Insurance Due Diligence Memorandum.
Portfolio Summary. NovaMart's real property portfolio is entirely leased. The Company does not own any real property. The portfolio consists of fifteen (15) leases in total: one (1) corporate headquarters lease and fourteen (14) fulfillment center leases. The fulfillment centers are distributed across the following states: California (3 facilities), New Jersey (2 facilities), Georgia (2 facilities), Ohio (1 facility), Illinois (1 facility), Pennsylvania (1 facility), Tennessee (1 facility), Florida (2 facilities), and Washington (1 facility). Including the Austin, Texas headquarters, the portfolio spans ten (10) states. The aggregate leased square footage across all locations is approximately 3,847,000 square feet, with an estimated aggregate annual base rent obligation of approximately $49.3 million.
Key Findings and Risk Items. We have identified the following key risk items requiring attention and, in certain cases, remediation prior to or at closing:
(a) Change of Control Provisions. Eleven (11) of the fifteen (15) leases in the portfolio contain change of control provisions that are triggered upon a change in majority ownership or control of the tenant entity. Because the Acquisition involves the purchase of 100% of NovaMart's capital stock, these provisions will be triggered at closing. Of the eleven leases containing such provisions, nine (9) require landlord consent (of which seven (7) are subject to a "not to be unreasonably withheld, conditioned, or delayed" standard and two (2) are subject to a sole discretion standard), and two (2) require notice only. These leases are reflected on the master Change of Control Consent Tracker, which currently tracks approximately thirty-four (34) NovaMart contracts requiring consent or notice upon change of control.
(b) Lease Expirations. Two (2) fulfillment center leases expire within twenty-four (24) months of the anticipated closing date of October 15, 2025, and one (1) additional lease expires within thirty (30) months thereof. Early renewal negotiations should be considered for these facilities to ensure business continuity of the NovaShip logistics network.
(c) Missing SNDA Agreements. We were unable to locate subordination, non-disturbance, and attornment ("SNDA") agreements for four (4) of the fourteen (14) fulfillment center leases, which presents a risk to NovaMart's leasehold interests in the event of a foreclosure by the applicable landlord's lender.
(d) Zoning Documentation Gaps. Certificates of occupancy were not provided in the data room for three (3) fulfillment center locations, and we have placed supplemental requests with NovaMart's counsel for these items.
(e) Title Insurance. Because NovaMart does not own any real property, traditional owner's title insurance policies are not required. However, we are coordinating with Ridgecrest Title Group Inc. (a subsidiary of Harborline Mutual Insurance), underwriter contact Janet Morales, regarding the advisability of leasehold title insurance policies for certain high-value fulfillment center locations.
(f) Real Property Tax Abatements. NovaMart benefits from property tax abatement agreements at two (2) fulfillment center locations (Georgia Facility #1 and Tennessee Facility). We are coordinating with Sylvia Hartwell of our Tax practice group to determine whether these abatements are subject to clawback upon a change of control of the Company.
(g) Environmental Items. Phase I environmental site assessments were reviewed for twelve (12) of the fourteen (14) fulfillment centers. Two (2) assessments are outstanding. One (1) recognized environmental condition ("REC") was identified at New Jersey Facility #1, as further described in Section V.C.1 below and in the separate Environmental Due Diligence Memorandum.
Stock Purchase Structure. It is important to note that because the Acquisition is structured as a stock purchase, NovaMart will remain the tenant of record under all of its leases following the closing. No formal assignment of any lease will occur. Accordingly, assignment and subletting restrictions contained in the leases are not directly implicated. However, many commercial leases define "change of control" broadly to include a transfer of majority ownership or control of the tenant entity, and such provisions are functionally equivalent to assignment restrictions in this context. We have reviewed each lease to determine whether and how its change of control provision is triggered by the Acquisition.
Coordination with Transaction Documents. We have confirmed that the SPA includes customary representations and warranties from the Selling Stockholders regarding NovaMart's real property interests, including representations as to the validity and enforceability of all material leases, compliance with lease terms, the absence of material defaults, and the accuracy of the Seller Disclosure Schedules with respect to real property matters. We recommend confirming that the representations and warranties insurance policy issued by Meridian Specialty Insurance Company (Policy No. MSI-RWI-2025-07832, with a $216,000,000 aggregate limit) provides coverage for real property-related representations, including any loss arising from undisclosed change of control triggers or lease defaults.
II. METHODOLOGY AND SOURCES
A. Diligence Process
Our real property due diligence was conducted as part of the comprehensive due diligence effort commenced on February 18, 2025, following the execution of the letter of intent between Cascade and the Selling Stockholders' Representative. We reviewed documents posted to the NovaMart virtual data room (the "Data Room"), which is hosted on the Thackeray Solutions platform and managed by Calloway, Brandt & Loewe LLP, counsel to NovaMart and the Selling Stockholders, under the supervision of Richard Calloway (lead partner) and Simone Adesanya (associate lead).
Our review was guided by the comprehensive due diligence request list dated February 17, 2025, which was prepared by Derek Okonkwo and Tiffany Rosenthal of Calderwood & Harkness LLP and served on NovaMart and Calloway, Brandt & Loewe LLP. The real property section of the request list (Section VII) contained forty-three (43) individual document requests and information items.
B. Categories of Documents Reviewed
We reviewed the following categories of documents and information in connection with this memorandum:
1. All lease agreements for the corporate headquarters and each of the fourteen (14) fulfillment center locations, including all amendments, modifications, supplements, extension agreements, and side letters thereto;
2. Estoppel certificates, where available, provided by landlords or requested by NovaMart;
3. Title reports and surveys for any owned real property (none identified; NovaMart does not own real property);
4. Real property tax records, including current tax bills and receipts, for all leased locations to the extent available in the Data Room;
5. Zoning compliance letters, zoning certificates, and certificates of occupancy for each property location, to the extent available;
6. Phase I environmental site assessment reports for fulfillment center locations (cross-referenced to the Environmental Due Diligence Memorandum for detailed analysis of findings);
7. Subordination, non-disturbance, and attornment ("SNDA") agreements between NovaMart, landlords, and landlords' lenders;
8. Insurance certificates for property and casualty coverage, commercial general liability coverage, and other insurance maintained by NovaMart with respect to its real property interests;
9. Landlord correspondence regarding defaults, notices of default, cure notices, lease violation notices, or any other pending disputes or claims;
10. Property management agreements and any third-party service contracts related to real property maintenance and operations at each facility;
11. Tax abatement, incentive, or economic development agreements at fulfillment center locations; and
12. Floor plans, site plans, and as-built drawings, to the extent available.
C. Documentation Gaps
As of the date of this memorandum, the following items remain outstanding or were not located in the Data Room:
1. Certificates of occupancy for three (3) fulfillment center locations: California Facility #3, Ohio Facility, and Florida Facility #2;
2. Phase I environmental site assessment reports for two (2) fulfillment center locations: Illinois Facility and Washington Facility;
3. SNDA agreements for four (4) fulfillment center locations: California Facility #2, Georgia Facility #2, Pennsylvania Facility, and Florida Facility #1;
4. Current property tax receipts for the most recently completed tax year for two (2) fulfillment center locations: Tennessee Facility and New Jersey Facility #2; and
5. Complete copies of certain landlord correspondence files referenced in NovaMart management's responses to supplemental diligence questions.
We have transmitted supplemental document requests to Simone Adesanya at Calloway, Brandt & Loewe LLP with respect to each of the foregoing items and expect responses within the next ten (10) to fourteen (14) business days. This memorandum will be updated as additional information is received.
III. PORTFOLIO OVERVIEW
A. Summary Table of All NovaMart Real Property
The following table sets forth a summary of all real property in NovaMart's portfolio:
B. Aggregate Portfolio Statistics
The following aggregate statistics describe NovaMart's real property portfolio:
• Total Number of Properties: 15 (1 corporate headquarters + 14 fulfillment centers)
• Total Leased square Footage: Approximately 4,047,000 square feet (including 52,000 square feet of office space at the headquarters and approximately 3,995,000 square feet of warehouse and fulfillment center space)
• Owned vs. Leased Breakdown: 100% leased; NovaMart does not own any real property
• States Covered: 10 states — Texas (HQ), California (3 fulfillment centers), New Jersey (2 fulfillment centers), Georgia (2 fulfillment centers), Ohio (1 fulfillment center), Illinois (1 fulfillment center), Pennsylvania (1 fulfillment center), Tennessee (1 fulfillment center), Florida (2 fulfillment centers), and Washington (1 fulfillment center)
• Estimated Aggregate Annual Base Rent: Approximately $49,320,000 across all 15 leases (based on current-year base rent, excluding operating expense pass-throughs, common area maintenance charges, and real property tax reimbursements)
• Weighted Average Remaining Lease Term: Approximately 4.6 years from the anticipated closing date of October 15, 2025
• Employee Count: Approximately 2,400 NovaMart employees are distributed across the 15 locations, with approximately 350 employees at the corporate headquarters and approximately 2,050 employees across the 14 fulfillment centers
• Leases with Change of Control Provisions: 11 of 15 (73%)
• Leases Expiring Within 24 Months of Anticipated Closing: 2 (PA Facility — July 31, 2027; NJ Facility #1 — December 31, 2027)
• Leases Expiring Within 12 Months of Anticipated Closing: 1 (FL Facility #2 — February 28, 2026)
IV. CORPORATE HEADQUARTERS — 1100 CONGRESS AVENUE, SUITE 800, AUSTIN, TEXAS 78701
A. Lease Terms
NovaMart's corporate headquarters is located in the Congress Tower office building at 1100 Congress Avenue, Suite 800, Austin, Texas 78701. The following is a summary of the material terms of the headquarters lease:
Landlord: Congress Tower Partners LP, a Texas limited partnership. Based on publicly available records and the information provided in the Data Room, Congress Tower Partners LP is an affiliate of Greystone Property Group, a Texas-based commercial real estate investment and management firm.
Tenant: NovaMart Global Inc., a Delaware corporation.
Premises: Suite 800, comprising the entire eighth (8th) floor of Congress Tower, consisting of approximately 52,000 rentable square feet.
Lease Execution Date: September 14, 2018.
Commencement Date: February 1, 2019.
Original Lease Term: Approximately twelve (12) years and eleven (11) months, expiring December 31, 2031.
Renewal Options: Two (2) consecutive renewal options of five (5) years each, exercisable upon not less than twelve (12) months' prior written notice to Landlord, subject to NovaMart not being in default under the Lease at the time of exercise. If both renewal options are exercised, the final lease expiration would be December 31, 2041.
Current Annual Base Rent: $2,340,000 ($45.00 per rentable square foot per annum), payable in equal monthly installments of $195,000. The lease provides for annual base rent escalations of 2.75% per annum, compounding, on each anniversary of the commencement date. For the current lease year (February 1, 2025 through January 31, 2026), the annual base rent is approximately $2,740,806 ($52.71 per rentable square foot per annum), reflecting six (6) compounded escalations from the initial base rent.
Operating Expense and Tax Pass-Throughs: NovaMart is responsible for its proportionate share (approximately 19.4%) of building operating expenses and real property taxes in excess of a base year amount established in the initial lease year. NovaMart's estimated annual pass-through obligation for the current lease year is approximately $468,000.
Security Deposit: NovaMart deposited a security deposit of $585,000 (equivalent to three (3) months of initial base rent) with the Landlord. The lease provides for a reduction of the security deposit by one-third upon each of the fifth (5th) and seventh (7th) anniversaries of the commencement date, provided NovaMart is not in default. Based on our review, the current security deposit amount should be approximately $195,000.
Permitted Use: General office, administrative, technology development and operations, data center (limited), and any other lawful purpose consistent with the use of a first-class office building, subject to compliance with applicable zoning and building codes.
Tenant Improvement Allowance: The Landlord provided a tenant improvement allowance of $65.00 per rentable square foot ($3,380,000 in aggregate) for the initial buildout of the premises. This allowance has been fully drawn and expended. The lease contains a clawback provision requiring NovaMart to reimburse the unamortized portion of the tenant improvement allowance (calculated on a straight-line basis over the initial lease term) in the event NovaMart defaults under the lease or the lease is terminated prior to the expiration of the initial term. As of the date hereof, the estimated unamortized balance of the tenant improvement allowance is approximately $1,782,000.
Parking: NovaMart is entitled to 130 unreserved parking spaces in the building's parking garage at the prevailing building rate, currently $175 per space per month.
B. Change of Control Provision
The headquarters lease contains a change of control provision in Section 12.04, which defines a "Change of Control" as:
"any transaction or series of related transactions (whether by merger, consolidation, sale of equity interests, recapitalization, or otherwise) pursuant to which any person or group of related persons acquires, directly or indirectly, fifty percent (50%) or more of the issued and outstanding equity interests in Tenant, or the power to direct or cause the direction of the management or policies of Tenant, whether through the ownership of voting securities, by contract, or otherwise."
The acquisition of 100% of NovaMart's outstanding capital stock by Cascade clearly falls within this definition. Accordingly, the change of control provision will be triggered at closing.
Consent Requirement. Section 12.04 further provides that NovaMart shall not permit a Change of Control to occur without the prior written consent of the Landlord, which consent "shall not be unreasonably withheld, conditioned, or delayed." The lease specifies that it shall be reasonable for the Landlord to consider, among other things, the financial condition and creditworthiness of the acquiring entity, the reputation of the acquiring entity, and the proposed use of the premises following the Change of Control.
Consequences of Failure to Obtain Consent. Section 12.04(c) provides that a Change of Control occurring without the prior written consent of the Landlord shall constitute an "Event of Default" under the lease, entitling the Landlord to exercise any and all remedies available under the lease, including termination of the lease and acceleration of rent for the remaining lease term. In addition, the Landlord would be entitled to recover the unamortized balance of the tenant improvement allowance.
Status. This lease has been included on the master Change of Control Consent Tracker. A form consent solicitation letter has been prepared by Calderwood & Harkness LLP and is pending review by Cascade's corporate development team before transmission to Congress Tower Partners LP. Given the reasonableness standard applicable to the Landlord's consent and Cascade's strong financial profile, we assess the risk of the Landlord withholding consent as low. However, it is possible that the Landlord may seek to negotiate certain modifications to the lease terms as a condition of granting consent, including an increase in the security deposit, a guaranty from Cascade, or an adjustment to the base rent.
C. Assignment and Subletting
Section 12.01 of the headquarters lease contains a standard prohibition on assignment and subletting without the Landlord's prior written consent, which consent is subject to the same "not to be unreasonably withheld, conditioned, or delayed" standard. The lease includes a recapture right in favor of the Landlord in the event NovaMart seeks to assign the lease or sublet more than fifty percent (50%) of the premises. Because the Acquisition is structured as a stock purchase, NovaMart will remain the tenant of record and no formal assignment of the lease will occur. The assignment and subletting restrictions are therefore not directly triggered. However, as discussed above, the change of control provision in Section 12.04 effectively addresses this scenario.
D. Title / Survey / Zoning
As a leased premises, title and survey matters are the responsibility of the Landlord. We note the following with respect to zoning compliance:
• The premises are located in the Downtown Mixed Use ("DMU") zoning district under the City of Austin Land Development Code, which permits general office use.
• A certificate of occupancy for the eighth (8th) floor of Congress Tower was provided in the Data Room, issued by the City of Austin Development Services Department, confirming the premises may be occupied for general office and administrative purposes.
• We identified no pending zoning changes, variance applications, or condemnation proceedings affecting the property.
E. Other Notable Provisions
Casualty and Condemnation. The lease provides that in the event of a casualty rendering the premises untenantable, the Landlord shall have the obligation to restore the premises (excluding NovaMart's personal property, fixtures, and improvements in excess of the original tenant improvement allowance) within two hundred seventy (270) days. If restoration is not completed within such period, NovaMart has the right to terminate the lease upon thirty (30) days' written notice. In the event of a total or substantial taking by eminent domain, either party may terminate the lease.
Landlord's Lien. Under Texas law, a landlord has a statutory lien on certain property of the tenant. Section 14.02 of the lease contains a waiver of the Landlord's statutory lien with respect to NovaMart's trade fixtures, equipment, inventory, and personal property, which is a favorable provision.
Co-Tenancy / Exclusivity. The lease does not contain any co-tenancy or exclusivity provisions. This is expected for a single-tenant floor in a Class A office building.
Outstanding Disputes or Default Notices. Based on our review of the Data Room materials and representations made by NovaMart management during the management presentation held on March 10, 2025, there are no outstanding disputes, default notices, or pending claims between NovaMart and Congress Tower Partners LP.
SNDA Agreement. An SNDA agreement dated March 22, 2019, was executed among NovaMart, Congress Tower Partners LP, and Camberwell Capital Markets (as the Landlord's mortgagee). The SNDA provides that NovaMart's leasehold interest shall not be disturbed in the event of a foreclosure by the lender, provided NovaMart is not in default under the lease. The SNDA was recorded in the Official Public Records of Travis County, Texas.
V. FULFILLMENT CENTER PROPERTIES (NOVASHIP NETWORK)
A. Overview of the NovaShip Logistics Network
NovaMart operates a proprietary logistics and fulfillment network branded "NovaShip," which consists of fourteen (14) fulfillment centers located across nine (9) states. These facilities form the backbone of NovaMart's marketplace operations, supporting the receipt, storage, processing, and shipment of goods sold through NovaMart's platform. As of NovaMart's fiscal year ended December 31, 2024, the NovaShip network supported approximately 62,400 active sellers and served approximately 9.1 million registered buyers, facilitating a gross merchandise volume ("GMV") of approximately $6.2 billion. The network is strategically positioned to provide two-day ground shipping coverage to approximately 97% of the continental United States population.
All fourteen (14) fulfillment centers are leased. The facilities range in size from approximately 155,000 square feet to approximately 420,000 square feet. Collectively, the fulfillment centers encompass approximately 3,995,000 square feet of warehouse and distribution space. Approximately 2,050 NovaMart employees work across the fourteen fulfillment center locations, with staffing levels at each facility varying based on facility size, volume, and seasonal demand.
The following sections provide a detailed summary of the lease terms, change of control provisions, and other notable items for each fulfillment center, organized by state.
B. California Facilities (3)
1. California Facility #1 — 14500 Distribution Way, Ontario, CA 91761
Landlord: Inland Logistics Properties LLC, a California limited liability company.
Tenant: NovaMart Global Inc.
Premises: A single-story industrial warehouse building located at 14500 Distribution Way, Ontario, California 91761, comprising approximately 385,000 rentable square feet, including approximately 12,000 square feet of ancillary office space.
Lease Execution Date: April 2, 2020.
Commencement Date: July 1, 2020.
Lease Term: Nine (9) years, expiring June 30, 2029.
Renewal Options: One (1) renewal option of five (5) years, exercisable upon not less than nine (9) months' prior written notice to Landlord.
Current Annual Base Rent: Approximately $4,466,000 ($11.60 per square foot per annum), with annual escalations of 3.0% per annum. Monthly base rent installments are approximately $372,167.
Security Deposit: $1,116,500 (held as cash).
Permitted Use: Warehouse, distribution, fulfillment, light assembly, and related office and administrative purposes.
Change of Control Provision: Yes. The lease defines "Change of Control" as a transfer of more than fifty percent (50%) of the ownership interests in the tenant or a change in the person or entity that controls the tenant. Landlord consent is required, subject to a "not to be unreasonably withheld, conditioned, or delayed" standard. Status: Included on the Change of Control Consent Tracker. Consent solicitation to be initiated.
Zoning: The property is located in the Industrial ("I") zoning district under the Ontario Development Code. Current use is confirmed as compliant. A certificate of occupancy issued by the City of Ontario Building Department was provided in the Data Room.
Environmental: Phase I environmental site assessment dated November 15, 2024, prepared by Bravo Environmental Consulting Inc., was reviewed. No recognized environmental conditions were identified. Cross-reference to the Environmental Due Diligence Memorandum for additional detail.
SNDA: An SNDA agreement dated August 12, 2020, is in place among NovaMart, Inland Logistics Properties LLC, and Ostrander Financial
Notable Issues: The lease requires NovaMart to maintain the premises in compliance with all applicable seismic retrofit requirements under the California Building Code. NovaMart management has represented that all required seismic upgrades have been completed. We recommend confirming this representation through review of applicable permits and inspection certificates. Additionally, the facility is located within the South Coast Air Quality Management District ("SCAQMD"), and operations involving diesel-powered equipment may be subject to SCAQMD regulations regarding warehouse indirect source rules.
2. California Facility #2 — 2800 Automation Parkway, Stockton, CA 95206
Landlord: Golden State Industrial Realty Corp., a California corporation.
Tenant: NovaMart Global Inc.
Premises: A single-story industrial warehouse building located at 2800 Automation Parkway, Stockton, California 95206, comprising approximately 310,000 rentable square feet, including approximately 8,500 square feet of ancillary office space.
Lease Execution Date: January 18, 2021.
Commencement Date: April 1, 2021.
Lease Term: Seven (7) years and six (6) months, expiring September 30, 2028.
Renewal Options: One (1) renewal option of five (5) years, exercisable upon not less than twelve (12) months' prior written notice to Landlord.
Current Annual Base Rent: Approximately $3,286,000 ($10.60 per square foot per annum), with annual escalations of 3.0% per annum. Monthly base rent installments are approximately $273,833.
Security Deposit: $821,500 (held as cash).
Permitted Use: Warehouse, distribution, fulfillment, light assembly, and related office and administrative purposes.
Change of Control Provision: Yes. The lease defines "Change of Control" broadly to include any transaction resulting in a change in the identity of the person or entity that "directly or indirectly controls" the tenant. Landlord consent is required, subject to a "not to be unreasonably withheld" standard. Status: Included on the Change of Control Consent Tracker. Consent solicitation to be initiated.
Zoning: The property is located in the Industrial Limited ("IL") zoning district under the Stockton Municipal Code. Current use is confirmed as compliant. Certificate of occupancy on file in the Data Room.
Environmental: Phase I environmental site assessment dated October 3, 2024, prepared by Bravo Environmental Consulting Inc. No recognized environmental conditions identified.
SNDA: No SNDA agreement was located in the Data Room. This has been flagged as an outstanding diligence item and a supplemental request has been submitted to Calloway, Brandt & Loewe LLP.
Notable Issues: The lease expires on September 30, 2028, which is approximately three (3) years after the anticipated closing date. The renewal option must be exercised no later than September 30, 2027. We recommend that Cascade monitor this deadline and make a determination regarding renewal within a reasonable period following closing. No other notable issues were identified.
3. California Facility #3 — 7700 Commerce Center Drive, Riverside, CA 92507
Landlord: Pacific Rim Warehouse Partners LP, a California limited partnership.
Tenant: NovaMart Global Inc.
Premises: A single-story industrial warehouse building located at 7700 Commerce Center Drive, Riverside, California 92507, comprising approximately 275,000 rentable square feet, including approximately 7,000 square feet of ancillary office space.
Lease Execution Date: August 30, 2021.
Commencement Date: December 1, 2021.
Lease Term: Eight (8) years and four (4) months, expiring March 31, 2030.
Renewal Options: Two (2) consecutive renewal options of three (3) years each, exercisable upon not less than nine (9) months' prior written notice.
Current Annual Base Rent: Approximately $3,052,500 ($11.10 per square foot per annum), with annual escalations of 2.5% per annum. Monthly base rent installments are approximately $254,375.
Security Deposit: $763,125 (held as letter of credit issued by Harborview Savings Bank, now a division of Pemberton Enterprises).
Permitted Use: Warehouse, distribution, fulfillment, and related office purposes.
Change of Control Provision: No. The lease does not contain a specific change of control provision. The assignment and subletting clause (Section 10) prohibits assignment without landlord consent but does not define a change of control of the tenant entity as an assignment or as a separately restricted event. This is a favorable outcome for the Acquisition.
Zoning: The property is located in the Business/Manufacturing Park ("BMP") zone under the Riverside Municipal Code. Current use is confirmed as compliant. However, a certificate of occupancy was not located in the Data Room. A supplemental request has been submitted.
Environmental: Phase I environmental site assessment dated September 20, 2024, prepared by Bravo Environmental Consulting Inc. No recognized environmental conditions identified.
SNDA: An SNDA agreement dated February 10, 2022, is in place among NovaMart, Pacific Rim Warehouse Partners LP, and Adriatic Savings Bank
Notable Issues: The security deposit is held in the form of a letter of credit originally issued by Harborview Savings Bank. Following the FDIC-facilitated acquisition of Harborview Savings Bank by Pemberton Enterprises in March 2023, the letter of credit was transferred. We recommend confirming with the Landlord that the letter of credit remains in full force and effect and is acceptable to the Landlord in its current form.
C. New Jersey Facilities (2)
1. New Jersey Facility #1 — 500 Turnpike Industrial Boulevard, Cranbury, NJ 08512
Landlord: Eastgate Industrial Realty Corp., a New Jersey corporation.
Tenant: NovaMart Global Inc.
Premises: A single-story industrial warehouse building located at 500 Turnpike Industrial Boulevard, Cranbury, New Jersey 08512, comprising approximately 420,000 rentable square feet, including approximately 15,000 square feet of office space. This is the largest individual facility in the NovaShip network.
Lease Execution Date: March 5, 2019.
Commencement Date: June 1, 2019.
Lease Term: Eight (8) years and seven (7) months, expiring December 31, 2027.
Renewal Options: Two (2) consecutive renewal options of five (5) years each, exercisable upon not less than twelve (12) months' prior written notice.
Current Annual Base Rent: Approximately $5,040,000 ($12.00 per square foot per annum), with annual escalations of 2.5% per annum. Monthly base rent installments are approximately $420,000.
Security Deposit: $1,260,000 (held as cash).
Permitted Use: Warehouse, distribution, fulfillment, light manufacturing, and related office purposes.
Change of Control Provision: Yes. The lease defines "Change of Control" as any direct or indirect transfer of more than fifty percent (50%) of the beneficial ownership interests in the tenant entity. Landlord consent is required, and notably, this lease provides that such consent may be withheld in the Landlord's sole and absolute discretion. This is one of two (2) leases in the portfolio with a sole discretion consent standard and represents a heightened risk item.
Status: Included on the Change of Control Consent Tracker as a priority item. Given the sole discretion standard, the Landlord is under no obligation to act reasonably in evaluating the consent request, and may condition consent on lease modifications, financial concessions, or other terms. We recommend that the consent solicitation for this lease be initiated early, and that Cascade be prepared to negotiate with the Landlord. If consent is not obtainable on acceptable terms, the parties should assess whether failure to obtain this consent could constitute a Material Adverse Effect under the SPA.
Zoning: The property is located in the Light Industrial ("LI") zoning district under the Cranbury Township Zoning Ordinance. Current use is confirmed as compliant. Certificate of occupancy on file.
Environmental: Phase I environmental site assessment dated August 28, 2024, prepared by EnviroTech Assessment Group LLC. One recognized environmental condition ("REC") was identified. The assessment noted the presence of a former underground storage tank ("UST") on an adjacent parcel (not on the leased premises) that may have resulted in subsurface contamination migrating onto the leased property. The assessment recommended a Phase II investigation, including soil and groundwater sampling. This finding is discussed in detail in the Environmental Due Diligence Memorandum. We recommend that this item be addressed through the following actions: (i) requesting additional information from NovaMart and the Landlord regarding the status of the adjacent UST, any remediation activities, and any applicable New Jersey Department of Environmental Protection involvement; (ii) evaluating whether a Phase II investigation should be conducted prior to closing; and (iii) confirming that the REC is appropriately disclosed on the Seller Disclosure Schedules and that the R&W insurance policy provides coverage for environmental liabilities arising therefrom.
SNDA: An SNDA agreement dated September 15, 2019, is in place among NovaMart, Eastgate Industrial Realty Corp., and Greaves Bancorp
Notable Issues: In addition to the sole discretion consent standard and the environmental REC, this lease expires on December 31, 2027, which is approximately twenty-six (26) months after the anticipated closing date. Given the strategic importance of this facility as the largest in the NovaShip network and its proximity to major Northeast corridor logistics hubs and the Port of New York and New Jersey, we recommend that Cascade prioritize renewal negotiations for this lease following closing. The first renewal option must be exercised by December 31, 2026.
2. New Jersey Facility #2 — 1250 Port Commerce Drive, Elizabeth, NJ 07201
Landlord: Harbor Point Capital Properties LLC, a Delaware limited liability company.
Tenant: NovaMart Global Inc.
Premises: A single-story industrial warehouse building located at 1250 Port Commerce Drive, Elizabeth, New Jersey 07201, comprising approximately 285,000 rentable square feet, including approximately 10,000 square feet of office space.
Lease Execution Date: November 12, 2021.
Commencement Date: March 1, 2022.
Lease Term: Eight (8) years and six (6) months, expiring August 31, 2030.
Renewal Options: One (1) renewal option of five (5) years, exercisable upon not less than twelve (12) months' prior written notice.
Current Annual Base Rent: Approximately $3,990,000 ($14.00 per square foot per annum), with annual escalations of 3.0% per annum. Monthly base rent installments are approximately $332,500.
Security Deposit: $997,500 (held as cash).
Permitted Use: Warehouse, distribution, fulfillment, and related office purposes.
Change of Control Provision: Yes. The lease defines "Change of Control" as a transfer of a controlling interest in the tenant, with "controlling interest" defined as fifty percent (50%) or more of the voting equity of the tenant. Landlord consent is required, subject to a "not to be unreasonably withheld, conditioned, or delayed" standard. Status: Included on the Change of Control Consent Tracker.
Zoning: The property is located in the Heavy Industrial ("HI") zoning district under the Elizabeth Municipal Code. Current use is confirmed as compliant. Certificate of occupancy on file.
Environmental: Phase I environmental site assessment dated September 5, 2024, prepared by EnviroTech Assessment Group LLC. No recognized environmental conditions identified. The property is located within the New Jersey Industrial Site Recovery Act ("ISRA") regulatory framework, and any future transfer or cessation of operations may trigger ISRA compliance obligations. However, because the Acquisition is structured as a stock purchase and NovaMart will remain the tenant, ISRA is not expected to be directly triggered at closing. Cross-reference to the Environmental Due Diligence Memorandum for ISRA analysis.
SNDA: An SNDA agreement dated May 20, 2022, is in place among NovaMart, Harbor Point Capital Properties LLC, and Greaves Enterprises
Notable Issues: Current property tax receipts for the most recently completed tax year were not located in the Data Room. A supplemental request has been submitted. No other notable issues identified.
D. Georgia Facilities (2)
1. Georgia Facility #1 — 3200 Fulton Industrial Blvd., SW, Atlanta, GA 30336
Landlord: Sunbelt Warehouse Partners LP, a Georgia limited partnership.
Tenant: NovaMart Global Inc.
Premises: Approximately 340,000 rentable square feet of industrial warehouse space, including approximately 11,000 square feet of office space, located at 3200 Fulton Industrial Boulevard, SW, Atlanta, Georgia 30336.
Lease Execution Date: October 8, 2019.
Commencement Date: January 1, 2020.
Lease Term: Eleven (11) years and six (6) months, expiring June 30, 2031.
Renewal Options: Two (2) consecutive renewal options of five (5) years each.
Current Annual Base Rent: Approximately $2,856,000 ($8.40 per square foot per annum), with annual escalations of 2.5% per annum.
Security Deposit: $714,000 (held as cash).
Change of Control Provision: Yes. Landlord consent required, subject to a "not to be unreasonably withheld" standard. Status: Included on the Change of Control Consent Tracker.
Zoning: Industrial ("I-2") zoning under the City of Atlanta Zoning Ordinance. Confirmed compliant. Certificate of occupancy on file.
Environmental: Phase I ESA reviewed. No RECs identified.
SNDA: In place, dated April 15, 2020, with Tidewater Bancorp as lender.
Tax Abatement: This facility is subject to a property tax abatement agreement with Fulton County, Georgia and the Development Authority of Fulton County, dated December 12, 2019. The abatement provides for a partial exemption from ad valorem property taxes for a period of ten (10) years (expiring December 31, 2029), contingent upon NovaMart's maintenance of certain employment and capital investment thresholds at the facility. We are coordinating with Sylvia Hartwell to determine whether a change of control of NovaMart triggers a clawback or termination of the abatement. The estimated value of the remaining abatement through the expiration date is approximately $1,850,000.