Common use of REIT Covenants Clause in Contracts

REIT Covenants. The Company agrees that in the event that any Preferred Member is a REIT Entity Preferred Member is then notwithstanding anything to the contrary set forth in this Agreement, the Company acknowledges and agrees that: (a) the business of the Company and any Subsidiaries shall be conducted so as to cause or allow the Company’s direct or indirect income and assets to meet the requirements of Sections 856(c)(2), 856(c)(3), and 856(c)(4) of the Code, as in effect from time to time (as if the Company were a REIT); provided, however, that there shall be no breach of this covenant if the Company’s direct or indirect income and assets fail to meet such requirements solely by virtue of the inclusion of the income and assets of the Initial Investments (when viewed together with all other income and assets of the Company) if the Company has used commercially reasonable efforts to prevent the Initial Investments from causing such failure; (b) notwithstanding anything to the contrary contained in this Agreement, without the prior written consent of each of REIT Entity Preferred Member, the Company shall not (and it shall cause its Subsidiaries to not) engage in any transaction that could reasonably be characterized as a “prohibited transaction” subject to tax under Section 857(b)(6) of the Code; (c) the Company will not (nor will it cause or allow the Advisor or any of their respective subsidiaries or Affiliates, including, without limitation, any Subsidiary) take any other action, or fail to take any other action, with respect to which it is advised in writing by any REIT Entity Preferred Member, making such notice in good faith and upon the recommendation of counsel, (prior to taking or failing to take such other actions) that there is more than an insubstantial risk that the taking of such action, or failure to take such action, reasonably could be expected to result in or contribute to the related REIT Entity failing to qualify as a REIT; (d) the Company shall provide each REIT Entity Preferred Member with any information with respect to the Company and the Property reasonably requested in writing by such REIT Entity Preferred Member for the purposes of verifying whether the Company’s income and asset are treated as qualifying for purposes of the income and asset tests applicable to REITs in Section 856(c) of the Code, including, without limitation, the completion of questionnaires and REIT compliance checklists. In furtherance of the foregoing, not later than thirty (30) days following the close of each calendar quarter during which any Preferred Member is a REIT Entity Preferred Member, the Company shall supply each REIT Entity Preferred Member with a schedule showing the Company’s assets and gross income. The Company shall provide such information and documents to each REIT Entity Preferred Member, even if the REIT Entity Preferred Member no longer holds an interest in the Company, provided that such information and documents relate to any period during which the REIT Entity Preferred Member, held an interest in the Company; (e) the Company and any Company Subsidiary shall properly identify as a hedging transaction for federal income tax purposes any swap or other derivative transaction entered into by the Company to hedge interest rate risk on indebtedness incurred to acquire or carry real estate assets in compliance with the requirements of Treasury Regulations section 1.1221-2 (which generally requires that the swap or other derivate transaction is identified as a hedge for tax purposes prior to the close of the date on which the transaction is entered into and that the hedged item is identified within 35-days of when the hedging transaction is entered into); (f) if “foreclosure property” (as defined in Section 856(e)(1) of the Code) is acquired, the Company shall provide each the REIT Entity Preferred Member with any information reasonably requested by each the REIT Entity Preferred Member in writing to allow each the REIT Entity Preferred Member to make foreclosure property elections with respect to such foreclosure property as provided in Section 856(e)(5) of the Code and Treasury Regulations section 1.856-6; and (g) the Company shall use commercially reasonable efforts to have included in any operating, limited liability company, or partnership agreement applicable to any joint venture or preferred equity investment the Company acquires restrictions similar to those in Exhibit E with respect to the entity in which the Company acquires joint venture equity or preferred equity. For the avoidance of doubt, all the parties hereto acknowledge and agree that the Members shall have no liability for a breach of any of the REIT Covenants, and that the Company shall be solely liable for any breach of the REIT Covenants and any damages suffered by the Members as a result thereof.