four springs capital trust due diligence questionnaire

Four Springs Capital Trust

Due Diligence Questionnaire

April 2019

FOUR SPRINGS CAPITAL TRUST

FOR DUE DILIGENCE USE ONLY

For Due Diligence Use Only Page | 1

Contents

Manager Information......................................................................................................................................2

Company ..................................................................................................................................................... 2

Compliance.................................................................................................................................................. 5

Legal Proceeding ......................................................................................................................................... 7

Manager Organization................................................................................................................................. 7

AUM Information..........................................................................................................................................13

AUM Overview .......................................................................................................................................... 13

Fees ........................................................................................................................................................... 14

Liquidity ..................................................................................................................................................... 14

Auditor ...................................................................................................................................................... 14

Directors of Portfolios ............................................................................................................................... 15

Data Overview ..............................................................................................................................................15

AUM .......................................................................................................................................................... 15

Capacity Management .............................................................................................................................. 15

Withdrawals .............................................................................................................................................. 16

Management Team’s Co-Investment ........................................................................................................ 16

Performance.............................................................................................................................................. 16

Drawdowns ............................................................................................................................................... 17

Manager Track Record .............................................................................................................................. 17

Strategy ........................................................................................................................................................17

Risk ...............................................................................................................................................................21

Leverage .................................................................................................................................................... 21

Hedging ..................................................................................................................................................... 21

Diversification............................................................................................................................................ 21

Risk Management...................................................................................................................................... 22

Valuation ................................................................................................................................................... 23

External Controls ....................................................................................................................................... 24

Investment Research.....................................................................................................................................24

Investor Service / Reporting..........................................................................................................................24

Infrastructures and Controls..........................................................................................................................25

Tax Issues......................................................................................................................................................27


Manager Information

Company

Please give a brief history of

the firm:

Four Springs Capital Trust is an internally managed real estate investment

trust focused on acquiring, owning and actively managing a portfolio of

single tenant, income producing retail, industrial, medical and other office

properties throughout the United States that are subject to long term net

leases. As of December 31, 2018, we wholly owned, or had an ownership

interest in, 87 properties located in 29 states that were 100% leased to 39

tenants operating in 29 different industries. Approximately 41% of our ABR

was from leases with tenants or lease guarantors that have an investment

grade credit rating from a major rating agency or have an obligation that has

been so rated. Additionally, based on ABR, approximately 85% of our leases

provide for fixed or CPI based contractual increases in future base rent. On a

portfolio wide basis, the average annual contractual base rent increase is

approximately 1.3% (excluding CPI based rent increases). As of December

31, 2018, our portfolio had a weighted average remaining lease term of 11

years (based on ABR).

We seek to acquire single tenant net lease properties throughout the United

States that are leased to high quality tenants and have remaining lease

terms in excess of 10 years with contractual rent increases. We believe these

properties offer benefits as compared to other types of commercial real

estate due to the relative stability of the cash flows from long term leases,

as well as reduced property level expenses and capital expenditures

resulting from the net lease structure. We generally target properties with

purchase prices ranging from $5 million to $25 million, as we believe there is

less competition from larger institutional investors that typically target

larger properties and portfolios. Our portfolio is diversified not only by

tenant, industry and geography, but also by property type, which we believe

differentiates us from certain other net lease REITs and further reduces risk

and enhances cash flow stability. We are an active asset manager and

regularly review each of our properties for changes in the credit of the

tenant, business performance at the property, industry trends and local real

estate market conditions. In addition, we have several differentiated

shareholder value creation strategies, including blend and extend leasing,

portfolio arbitrages, real estate syndications and build-to-suit developer

financings.

Our senior management team has extensive net lease real estate and public

and private REIT management experience. In November 2008, William P.

Dioguardi, our Chairman and Chief Executive Officer, founded Four Springs

Capital, LLC, a sponsor of single tenant net lease programs, and he has led

the acquisition and asset management of all of the properties in our

portfolio since our inception. Coby R. Johnson, our President, Secretary and

Chief Operating Officer, joined Four Springs Capital, LLC as a Managing

Director in October 2010 and co-founded the company with Mr. Dioguardi in

July 2012 to continue and expand the net lease investment activities of Four

Springs Capital, LLC. Other members of our senior management team


previously served in senior management roles at public net lease REITs.

Since our inception, our management team has also developed and

implemented internal processes, procedures and controls to establish a

scalable infrastructure that we believe will allow us to grow efficiently.

Our History

In November 2008, certain members of our management team formed Four

Springs Capital, LLC to sponsor net leased investment programs. From

November 2008 to April 2012, Four Springs Capital, LLC sponsored the

acquisition of eighteen net leased properties. Each of these properties was

acquired through a separate single purpose entity (SPE). Four Springs

Capital, LLC conducted a private offering of membership interests in each of

the SPEs to fund the acquisition of the properties held by each of the SPEs.

The Four Springs Capital, LLC sponsored SPEs made uninterrupted monthly

distributions to investors on a monthly basis from the time of acquisition

until the sale of the properties.

In November 2011, we sold one of the properties for a profit. In July 2012,

the company was formed, and on October 1, 2012, we acquired the

remaining seventeen properties held by the SPEs by offering an exchange of

our Series A Preferred Shares and warrants to the existing investors in the

SPEs. At the time of the closing, the seventeen properties had an estimated

fair market value of approximately $21.4 million in the aggregate, which

value was based solely on our historical information and was not verified by

independent appraisal.

At the time of the formation of the company in July 2012, we commenced

our Series A Preferred Share offering. The company completed its Series A

Preferred Share offering in April 2014, in which it raised approximately $32

million. If we include the shares issued in the acquisition of the seventeen

properties and the shares issued in exchange for the three other properties,

we issued approximately $57 million of Series A Preferred Shares and limited

partnership interests. In March 2014, the company commenced its Series B

Preferred Share offering in which it raised approximately $13 million prior to

completing the offering in November 2014. In November 2015, the

company commenced its Series C Preferred Share offering in which it raised

approximately $21 million prior to completing the offering in March 2017.

From January 2017 through March 2017, the company raised approximately

$3 million in connection with an offer to warrant holders which provided

warrant holders the ability to either exercise their warrants at a $0.25

discount per preferred share, agree to redeem warrants and receive one

Series A Preferred, Series B Preferred or Series C Preferred Share issuable

under such warrants for every multiple of twenty warrant, or continue to

retain their existing warrants. The warrant offer expired in March 2017.

Through December 31, 2017, the company issued approximately $94 million

of its Series A Preferred, Series B Preferred, Series C Preferred Shares and

limited partnership interests. We used the net proceeds from the Series A

Preferred, Series B Preferred and Series C Share offerings primarily to

acquire additional properties. In addition to the original 17 properties, we

have acquired 37 properties and sold 4 properties since our formation

through December 31, 2017.

In January 2018, we sold and issued Series E Preferred Shares to a group of

investors led by Guggenheim Partners for an aggregate face value purchase


price of $40 million and gross proceeds of $39.4 million.

In April 2018, FSCT commenced its Series D Preferred Share offering, in

which FSCT is seeking to raise $200 million. As of December 31, 2018, FSCT

has raised approximately $30.7 million. FSCT plans to use the net proceeds

from the offering for acquisitions and working capital and general corporate

purposes.

In 2018, FSCT acquired 38 properties totaling approximately 660 thousand

square feet for an aggregate purchase price of approximately $115 million.

Legal entity: Four Springs Capital Trust, a Maryland real estate investment trust

Financials:

! Equity/AUM Ratio Approximately 50% (See 2018 Audited Financials)

! Cash to meet operation

expenses/contingencies FSCT has sufficient funds to operate its business

! Debt/EBITDA ratio See 2018 Audited Financials previously provided.

Company rating:

Corporate credit rating of BBB- (Investment Grade) by Egan-Jones Rating

Company

Series D Preferred Share rating of BBB (Investment Grade) by Egan-Jones

Rating Company

See Egan-Jones Rating Company report previously provided.

Domicile: 1901 Main Street

Lake Como, New Jersey (United States)

Branch offices or other

locations, if any. What

functions are performed at

these branches and

locations?

N/A

Which regulatory authority is

the company

registered with?

N/A

! Type N/A

! Date and Place of

Registration N/A

! Are all the employees

regulated with the same

authority? N/A


Have the licenses of the

company or any of its

principals or managers ever

been

suspended/cancelled/revoked

by the regulatory

authorities? If so, why?

No

Has any disciplinary action ever

been taken

against the company or its

principals or

managers by any regulatory

authorities?

No

Has any disciplinary action ever

been taken

against the company or its

principals or

managers by any regulatory

authorities? No

Has any application for

authorization made to

any regulatory authority been

turned down?

No

List: a) total Assets under

Management for all

funds/portfolios

managed/advised by the

company, b) names and sizes of

the funds/portfolios

managed/advised, c) names of

entities for which portfolios are

being managed and the size of

each such portfolio:

FSCT consolidated assets are approximately $319.6 million as of December

31, 2018 (See 2018 Audited Financial Statements)

List the diversified asset and

client base by products and

geography

FSCT owns and acquires a diversified portfolio of single tenant net leased

properties in the United States. A complete list of the properties is available

in FSCT’s data room as well as on FSCT’s website at https://fsctrust.com/

What is the length of your track

record? FSCT was formed in July 2012

Has the complete track record

been audited? FSCT has audited financials from 2012 through 2018

Compliance

Please describe the firm’s

compliance regime. Does the

firm have a designated Chief

Compliance Officer (“CCO”)? If

so, please briefly describe the

background of the CCO, and

explain whether the CCO has

any responsibilities other than

those relating to compliance

matters.

N/A – FSCT invests in commercial real estate.


Is the firm or any of its affiliates

registered with any regulatory

authorities? If so, please

describe.

N/A

Does the firm maintain and

periodically review written

compliance policies and

procedures, including a code of

ethics? If not, please explain. Yes. FSCT maintains policies and procedures, including a code of ethics.

Does the firm have a written

policy on the handling and safe

guarding of any material, non-

public information in its

possession, including a process

to educate employees? If not,

how is material, non-public

information protected, and

how are these processes

communicated to employees?

In its employee manual and code of ethics, FSCT has a policy on the

disclosure of material, non-public information.

Does the firm maintain written

procedures on the provision

and receipt of gifts and

entertainment? If not, how is

such activity monitored, and

how are standards of conduct

communicated to employees?

FSCT maintains a code of ethics.

Does the firm maintain written

Anti-Money Laundering

(“AML”) procedures? Is there a

designated AML compliance

officer? If not, how are AML

checks conducted?

N/A – FSCT invests in commercial real estate. Note, however, that the

managing broker-dealer for the Series D Preferred Share offering maintains

AML policies and conducts AML checks are part of the investor intake

process.

Are there any material,

criminal, civil or

administrative proceedings

pending or

threatened against the firm or

any of its

principals, or have there ever

been any such

matters? If yes, please provide

full details:

No

Do any of the firm’s principals

have other business

involvement?

No

! If yes, describe and

quantify how much of

their professional time is

dedicated to each? N/A

! Describe how much of

the time is dedicated to

the business of the

manager/advisor? N/A


Legal Proceeding

In the past five years: (a) have

there been any criminal or

administrative proceedings or

investigations against the firm,

a principal or key employee of

the firm, or any affiliate of the

firm; or (b) have there been any

civil proceedings against the

firm, a principal or key

employee of the firm, or any

affiliate of the firm in each case

that resulted in an adverse

disposition? If so, please

describe.

No

Is the firm currently aware of

any pending criminal or

administrative proceedings

against the firm, a principal or

key employee of the firm, or

any affiliate of the firm? No

Have any adverse dispositions

materially impacted any of the

funds or accounts managed by

the firm? No

Manager Organization

How large is the firm in terms

of full time

individuals?

18

Describe the firm’s ownership

structure, name of its owners,

their percentage ownership,

and their role within the firm?

Preferred Shares (Series A, B, C, D and E) are owned by investors.

Common Shares are owned primarily by current employees.

Percentage ownership of firm

principals?

Common Shares currently represent approximately 23% of the outstanding

shares on an as-converted basis.

Short background of

portfolios/strategies principals

(education, career background,

etc.). Please, attach

information if necessary.

Executive Officers and Trustees

The following table sets forth certain information concerning our trustees,

our trustee nominee and our executive officers:

Name Age Position(s) William P. Dioguardi .....

61

Chairman of the Board of Trustees, Chief

Executive Officer

Coby R. Johnson............

48

Trustee, President, Chief Operating

Officer and Secretary

John E. Warch ............... 61 Chief Financial Officer and Treasurer

Jared W. Morgan ..........

47

Senior Vice President, Head of

Acquisitions

Cynthia M. Daly............. 49 Vice President, Underwriting

Spencer F. Segura ......... 66 Trustee


Stephen R. Petersen ..... 63 Independent Trustee

James S. Vaccaro........... 62 Independent Trustee

Peter S. Reinhart ........... 68 Independent Trustee

Michael S. Dana ............ 59 Independent Trustee

Greg Kranias.................. 41 Trustee

The board of trustees has determined that Stephen R. Petersen, James S.

Vaccaro, Peter S. Reinhart and Michael S. Dana are each an “independent

director” as such term is defined by the applicable rules and regulations of

the NYSE.

William P. Dioguardi, Chairman of Our Board of Trustees and Chief

Executive Officer

Mr. Dioguardi has served as the Chairman of our board of trustees and our

Chief Executive Officer since our formation in July 2012. Mr. Dioguardi was

the founding shareholder of Four Springs Capital, LLC, a real estate

investment management firm focused on net lease real estate, in November

2008, where he led the acquisition and asset management of net lease

properties through syndication to investors. Prior to Four Springs

Capital, LLC, Mr. Dioguardi was President of Spencer Trask Ventures, Inc., a

leading private equity firm based in New York City, at which Mr. Dioguardi

led a team that invested in technology companies. Mr. Dioguardi also

founded and built Vantage Securities, an investment banking firm that

participated in public and private offerings of securities. Prior to founding

Vantage, Mr. Dioguardi served in several senior roles of increasing

responsibility at Integrated Resources Equity Corp., at the time the largest

real estate syndication firm in the United States. Mr. Dioguardi received a

B.S. degree in Business Administration from Monmouth University. Active in

community affairs for many years in Avon-by-the-Sea, New Jersey,

Mr. Dioguardi served as Commissioner of Revenue and Finance from 1991 –

2003. In addition, from 2005 – 2015, he served as a member of the board of

trustees of Monmouth University and the University’s Investment

Committee, which he chaired for several years. Our board believes that

Mr. Dioguardi’s strategic vision, intimate understanding of our history and

operations and his extensive real estate and capital markets experience

make him well-suited to serve as a trustee.

Coby R. Johnson, Member of Our Board of Trustees, President, Chief

Operating Officer and Secretary

Mr. Johnson has served as our President since June 2014 and as our Chief

Operating Officer, Secretary and a trustee since our formation in July 2012.

From October 2010 until July 2012, Mr. Johnson was a Managing Director of

Four Springs Capital, LLC focusing on all aspects of net lease real estate

acquisition and investment. Prior to joining Four Springs Capital, LLC,

Mr. Johnson led the alternative investments group of a financial services

firm, served in business development, operational and advisory roles for

enterprises in industries including real estate, financial services and

technology, and practiced corporate and securities law at major firms in

Boston and Philadelphia. Mr. Johnson has participated in numerous real

estate and capital markets transactions, including public and private equity

and debt financings. Mr. Johnson received a B.A. in Economics from the

University of Illinois — Urbana and a J.D. from Emory University School of

Law. Our board believes that Mr. Johnson’s familiarity with our history and

operations, his experience as a participant in net lease financing and his


extensive real estate and capital markets experience make him well-suited

to serve as a trustee.

John E. Warch, Chief Financial Officer and Treasurer

Mr. Warch has served as our Chief Financial Officer since September 2013

and as our Treasurer since April 2015. From August 2012 until September

2013, Mr. Warch was a Senior Consultant at David Landau & Associates, LLC,

responsible for, among other things, Sarbanes-Oxley 404 compliance testing

of real estate clients. From November 2006 until March 2012, Mr. Warch

served as Senior Vice President and Chief Accounting Officer of

CapLease, Inc. (previously NYSE: LSE), where he was responsible for all

aspects of the financial infrastructure of a publicly-held real estate

investment trust, managed financial and SEC reporting and compliance,

oversaw Sarbanes-Oxley 404 compliance, and coordinated audits and

reviews with independent accountants. Mr. Warch, is a Certified Public

Accountant and earned a B.S. in Accounting and an M.B.A. in Finance from

St. John’s University.

Jared W. Morgan, Senior Vice President, Head of Acquisitions

Mr. Morgan has served as our Senior Vice President, Head of Acquisitions,

since August 2016. From May 2013 until July 2016, Mr. Morgan served as

Vice President of Acquisitions at Spirit Realty Capital, Inc. (NYSE: SRC),

responsible for sourcing new acquisitions in the marketplace. From August

2006 until July 2011, Mr. Morgan was the Vice President, Dispositions and

Acquisitions, of Sovereign Investment Company, where he bought and sold

over $2 billion of net lease assets. Mr. Morgan has served as Operating

Partner of Excess Space Retail Services, Inc. and was co-founder of an Apollo

Real Estate Advisors venture. Mr. Morgan earned a B.A. from Colby College.

Cynthia M. Daly, Vice President, Underwriting

Ms. Daly has served as our Vice President, Underwriting since December

2016. From November 2012 until December 2016, Ms. Daly served as our

Director of Acquisitions. Prior to joining the company, Ms. Daly was the

founder of Sand Dollar Investments LLC, a real estate consulting firm, from

March 2008 until November 2012. From January 2001 until November 2010,

Ms. Daly served as Executive Vice President and Director of Monmouth Real

Estate Investment Corporation (NYSE: MNR), a REIT focused on net lease

industrial properties. Ms. Daly earned a B.A. in English from Lafayette

College and an M.B.A. from Monmouth University.

Spencer F. Segura, Member of Our Board of Trustees

Mr. Segura has served as a trustee since our formation in July 2012.

Mr. Segura has been managing his family office for over five years.

Mr. Segura was formerly Senior Managing Director of Spencer Trask

Ventures, Inc., which he joined in 1995 and oversaw the development and

financing of numerous early-stage companies. He co-founded or provided

initial equity capital for several portfolio companies, including companies

such as Faroudja, Next Level Communications, Prospect Medical, and Arrive

Technologies. Prior to Spencer Trask, he held positions in the financial

services industry, including at Oppenheimer & Co. Mr. Segura earned a B.A.

in History from the University of California at Los Angeles and a J.D. from

Loyola Law School. Mr. Segura formerly served on the board of directors of


Imthera Medical Inc., a privately funded company that was acquired by

LivaNova (NASDAQ: LIVN) and has developed a neuro-stimulation medical

device for the treatment of Obstructive Sleep Apnea. Our board believes

that Mr. Segura’s extensive investment banking and capital markets

experience and his expertise in finance make him well-suited to serve as a

trustee.

Stephen R. Petersen, Member of Our Board of Trustees

Mr. Petersen has served as a trustee since March 2014. Mr. Petersen has

been a Managing Director at Seaward Management, an independent

investment management firm, since October 2013. Previously, Mr. Petersen

served as Senior Vice President, Investments at Fidelity Investments for

approximately 32 years. During his tenure at Fidelity, Mr. Petersen served as

a Portfolio Manager and Group Leader (Income-Growth Team with $4 billion

of AUM) of The Fidelity Management Trust Company and was responsible

for managing several equity income and balanced mutual funds (Fidelity

Equity Income Fund) (1993-2011), Fidelity Balanced Fund (1996-1997),

Fidelity VIP Equity-Income Fund (1997-2011), Fidelity Puritan Fund

(2000-2007), Fidelity Advisor Equity-Income Fund (2009-2011), and Fidelity

Equity-Income II (2009-2011). Mr. Petersen received a B.B.A. in Finance and

an M.S. in Finance from the University of Wisconsin-Madison. Mr. Petersen

serves on the Board of the University of Wisconsin Foundation and Chairs its

Traditional Asset Committee. Our board believes that Mr. Petersen’s

extensive investment management experience and his expertise in finance

make him well-suited to serve as a trustee.

James S. Vaccaro, Member of Our Board of Trustees

Mr. Vaccaro has served as a trustee since March 2014. Mr. Vaccaro has been

the President and CEO of Manasquan Savings Bank since August 2012.

Previously, Mr. Vaccaro served from January 2008 to March 2011 as

Chairman, President and CEO of Central Jersey Bancorp, parent company of

Allaire Community Bank and Monmouth Community Bank, which he helped

found. Mr. Vaccaro also served in various capacities at Central Jersey Bank

and Trust Company including executive vice president, treasurer, CFO and as

a member of its board of directors. Mr. Vaccaro received a B.S. in Economics

from Ursinus College. Mr. Vaccaro is a member of the board of trustees for

Saint Barnabas Corporation, Monmouth Medical Center, the New Jersey

Repertory Theater, and Monmouth University. Mr. Vaccaro also serves as

the chairman of the board of Visiting Nurses Association of Central New

Jersey, is on the advisory board of Interfaith Neighbors and is on the

leadership council of Prevention First. Mr. Vaccaro was recently elected as

the Second Vice Chair of board of directors of the New Jersey Bankers

Association. Our board believes that Mr. Vaccaro’s extensive knowledge and

experience in business and operational strategy across a wide range of

industry sectors make him well-suited to serve as a trustee.

Peter S. Reinhart, Member of Our Board of Trustees

Mr. Reinhart has served as a Trustee since October 2015. Since July 2011,

Mr. Reinhart has served as the Director of the Kislak Real Estate Institute

and Specialist Professor at Monmouth University. Previously, for thirty-three

years Mr. Reinhart served in senior management roles at Hovnanian

Enterprises, Inc. (NYSE: HOV), a large, national home builder. While at

Hovnanian Mr. Reinhart served as Senior Vice President and General


Counsel for 28 years and served on its board of directors for 18 years.

Mr. Reinhart is Vice Chair of the board of trustees of Hackensack Meridian

Health Corporation, and the current Chairman of New Jersey Future, the

leading land use policy organization in New Jersey. He is the past president

of the New Jersey Builders Association, previously served on the Council on

Affordable Housing for ten years and was a member of the Real Estate Task

Force of New Jersey Governor Whitman’s Economic Master Plan

Commission. He is a graduate of Franklin and Marshall College and Rutgers

Camden Law School. Our board believes that Mr. Reinhart’s experience

serving as a member of several boards and his extensive experience in real

estate and corporate governance make him well-suited to serve as a trustee.

Michael S. Dana, Member of our Board of Trustees

Mr. Dana has served as a Trustee since September 2017. Since January 2005,

Mr. Dana has served as President and Chief Executive Officer of Onex Real

Estate Partners, a division of Onex Corporation (TSX: ONEX), a publicly

traded private equity fund with approximately $25 billion of assets under

management. Mr. Dana oversees all real estate investment decisions as well

as the strategic direction of Onex Real Estate Partners. Mr. Dana has over

30 years of real estate and finance experience. Prior to forming Onex Real

Estate Partners, Mr. Dana accumulated over a decade of investment banking

experience that culminated at Credit Suisse First Boston, where he was the

North American Head of Real Estate Investment Banking and oversaw and

advised public and private companies on several billion dollars of

transactions including: entity acquisitions, mergers, corporate

recapitalizations, initial public offerings and other capital raising activities.

Prior to investment banking, Mr. Dana ran the capital markets division of

Equitable Real Estate. Mr. Dana earned a B.S. in Marketing from the

University of Maryland and an M.B.A. from the Wharton School at the

University of Pennsylvania. Mr. Dana is a member of the Board of Trustees

and Co-Chair of the Baltimore Incentive Program of the University of

Maryland. Our board believes that Mr. Dana’s extensive real estate

experience and his expertise in finance make him well-suited to serve as a

trustee.

Greg Kranias, Member of our Board of Trustees

Mr. Kranias has served as a trustee of Four Springs Capital Trust since

January 2018. Since 2016, Mr. Kranias has served as a Managing Director of

Guggenheim Partners, a global investment and advisory firm, where he

leads an investment strategy focused on preferred equity and junior debt

investments in companies. Prior to joining Guggenheim Partners, Mr.

Kranias served as Chief Investment Officer for DNS Capital, a multi-billion

dollar family investment office. Prior to DNS Capital, for 10 years Mr. Kranias

served as a senior professional at TPG Capital, a global private equity firm

where he lead investments across a variety of sectors, including real estate.

Prior to TPG Capital, Mr. Kranias was an analyst at Forstmann Little &

Company, a private equity firm that specialized in leveraged buyouts. Mr.

Kranias was a member of the M&A Group within the investment banking

division of Goldman, Sachs & Co. prior to Forstmann Little. Mr. Kranias

earned an A.B. from Harvard College where he graduated Phi Beta Kappa

and an M.B.A from Stanford Graduate School of Business. Our board

believes that Mr. Kranias’s extensive real estate experience and his expertise

in finance make him well-suited to serve as a trustee.


Family Relationships

There are no family relationships among any of our trustees or executive

officers.

How many investment

professionals (portfolios

managers, analysts, etc.) in the

firm?

Acquisitions – 3 employees

Underwriting/Asset Management – 3 employees

Finance and Accounting – 6 employees

Please provide the names of

senior managers in

charge of the following areas:

! Trading:

N/A

! Reporting, performance

analysis: John Warch, CFO

! Research and

development: N/A

! IT/Programming: N/A

! Administration: John Warch, CFO

! Marketing and business

development: N/A

! Others (please specify):

Finance and Accounting – John Warch, CFO

Acquisitions – Jared Morgan, SVP and Head of Acquisitions

Underwriting/Asset Management – Cindy Daly, VP and Head of

Underwriting

What has been the turnover

rate among the

firm’s personnel?

Only 2 employees have left since our inception in 2012.

Have any key personnel left

over the last three

years? If so, how has the

situation been

managed? Please also give the

reasons and

circumstances of departure.

We have had only one member of our senior management team depart

since our inception, our former Chief Investment Officer, Bob Micera. We

terminated Mr. Micera’s employment in 2016 because he was not a good fit

for our organization. We planned Mr. Micera’s exit to be minimally

disruptive to our organization, and hired his successor, Jared Morgan, our

head of acquisitions, prior to terminating Mr. Micera’s employment. Mr.

Micera’s employment was terminated on a Friday afternoon, and Mr.

Morgan started on the following Monday morning.

Where do the primary trading,

research, and

portfolio management

activities take place?

N/A – FSCT’s headquarters and only offices are in Lake Como, New Jersey.

Who audits the accounts? BDO audits FSCT’s financial statements.

Does the auditor have an

affiliation or any business

relationship with the firm or

any of its affiliates outside of

the audit relationship itself?

Has the firm or any of its

affiliates retained the auditor

or any of its affiliates for other

engagements, such as

consulting services, financial

statement preparation, or tax

services? If so, please describe.

No.

No.


Has the current auditor audited

the firm’s investment vehicles

in each of the last three years?

If not, please describe the

circumstances of any audit

engagement changes made.

Yes

Has an auditor ever requested

a material restatement of

financial statements or

performance results of any

investment vehicle managed by

the firm? If so, please describe.

No

Where are the accounts

maintained? Lake Como, New Jersey (USA)

Are outside representatives or

consultants used

for any activities? If so, give

details.

No

Does the firm outsource any

accounting or operational

functions to third parties? If so,

please describe. Does the firm

periodically review the

performance of any such

service providers? How is this

review conducted?

Our IT/Phone services are outsourced. We review annually to determine if

we remain satisfied with the quality of the services.

AUM Information AUM Overview

Please provide AUM

breakdown by strategy and

by vehicle:

All AUM are part of the same strategy of investing in single tenant net leased

real estate. Four Springs Capital Trust is an internally managed real estate

investment trust focused on acquiring, owning and actively managing a

portfolio of single tenant, income producing retail, industrial, medical and

other office properties throughout the United States that are subject to long

term net leases.


Fees

Management fee: FSCT is internally managed so it does not charge a management fee.

Administration fee: FSCT is internally managed so it does not charge an administration fee.

Incentive fee:

FSCT is internally managed so it does not charge an incentive fee. FSCT

employees own common shares, which serve as incentive compensation for

the employees.

Hurdle rate / High water mark: N/A

Subscription fee: N/A. Any commissions are paid by FSCT and are not borne by the investor.

Redemption fee:

Starting one year after investment, an investor may seek the redemption of

their shares. Redemption price starts at 90% of the liquidation value of the

Series D shares ($20/share) and increases to 92.5% , 95%, 97.5% and 100%

of the liquidation value each year thereafter. Redemption is subject to

limitations on number of shares that can be redeemed (1.25% quarterly/5%

annually of Series D shares issued).

Penalty fee for early

redemption? Please give

details See note above.

Auditor’s fee: N/A

Any other fees: None

What costs, if any, are

recharged? None

What is your level of portfolio

turnover?

What is the typical brokerage

fee to equity ratio?

FSCT sells assets in its portfolio periodically.

N/A

What are total fees and costs

(excluding

manager’s fees) as % of total

asset? FSCT’s General & Administrative Expenses (overhead), represents less than

2% of AUM.

How are fees calculated? N/A

Liquidity

Minimum initial investment: $25,000

Minimum subsequent

investment: Subject to FSCT’s discretion

Subscription frequency (when): Twice Monthly

Subscription notice period: N/A

Redemption frequency (when): Quarterly

Redemption notice period: Prior to redemption date

Redemption cash proceeds

time period: On redemption date

Do you have any lock-up period

or any other

liquidity constraints?

Upon an IPO of our common shares, we expect that there will be a standard

180-day lock-up on our shares.

Auditor

Details:

! Name: BDO


! Address:

622 Third Avenue

New York, NY 10017

! Telephone: (212) 885-8000

! Fax:

! Name of Contact: Stuart C. Eisenberg

! Telephone of Contact: (212) 885-8431

! E-mail of Contact: [email protected]

Duration of your professional

relationship? Since 2014. Audited 2013-2018 financials

Have the portfolios/strategies

ever been

qualified or have any other

material concerns

ever been raised by the

Auditors?

No

Directors of Portfolios

Please list the names of

portfolio managers: N/A

Duration of professional

relationship: N/A

Data Overview

AUM

Please list the size of assets by

strategy:

All AUM are part of the same strategy of investing in single tenant net leased

real estate. Four Springs Capital Trust is an internally managed real estate

investment trust focused on acquiring, owning and actively managing a

portfolio of single tenant, income producing retail, industrial, medical and

other office properties throughout the United States that are subject to long

term net leases.

List the total assets under

management, and their

respective changes over the

last 3 years (quarterly for the

last year), explain any

reduction in the AUM:

12/31/18: $319.6 million

12/31/17: $199.8 million

12/31/16: $199.1 million

Capacity Management

What is the maximum capacity

for all portfolios/strategies? N/A

What is the projected time

frame to reach

capacity?

N/A

Will new money be accepted

after capacity is

reached?

N/A


How will front / back-office

operations be

affected in the event of

significant increase in

assets under management, and

what measures

will be taken?

FSCT has 18 full-time employees. It expects that it may need to add only a

few employees to grow its portfolio to $1 Billion.

Withdrawals

What were the largest

withdrawals in your portfolios

since inception?

N/A

! Date: N/A

! % of equity: N/A

! Reasons: N/A

Please provide a complete list

of withdrawals to

date including date and size:

N/A

Management Team’s Co-Investment

What is the total amount

invested by the

principals / management in the

portfolios/strategies?

Most of the common shares were issued for nominal consideration when

the REIT was formed. Prior to the formation of the REIT, the team

terminated its management agreement on 17 properties that rolled into the

REIT at formation thereby terminating its management fee and carried

interest on those properties. The carried interest on those properties would

be worth in excess of $1MM based on current valuations of those

properties. In addition, the team funded the building of the platform from

2010-2012 (formation of the REIT) at a cost of approximately $3MM. Finally,

as the REIT is internally managed, no acquisition fees have been charged to

the investors (which are typically charged by externally managed vehicles).

The REIT has acquired over $300MM of assets, so the acquisition fees would

have been $6MM. There are approximately 1.8MM shares of common

issued and outstanding. Essentially, you could look at it as the team has

invested this capital (approximately $10MM) and fully subordinated it to the

investments made by the preferred shareholders. The management team

and board have invested over $2MM of additional capital in the preferred

share offerings.

Has the management reduced

its personal

investment?

No

Disclose conditions of

subscription/redemptions

of team and owners’ assets.

None. No redemption/repurchase rights.

How such subscriptions and

withdrawals been

notified to investors in a

prompt manner?

Investments made by management and board in the Series A, B and C

Preferred Shares were made on the same terms as other investors.

Performance

Historical monthly performance

since inception in table format: N/A

Please explain any major

factors affecting

performance and drawdowns

(i.e. a manager change, a N/A


change in strategy, etc.):

Is the performance audited? If

yes, how often? BDO audits FSCT’s annual financial statements

Drawdowns

List the 5 maximum

drawdowns, in percent of

equity for each strategy, the

recovery period, and explain

why they have happened:

N/A

Manager Track Record

Number of portfolios /

accounts managed by the

firm:

N/A

Number of funds managed /

advised by the firm: N/A

Names of these funds: N/A

Total assets managed / advised

by the firm: 12/31/18: $319.6 million

Oldest continuously active

account: N/A

Largest current account: N/A

Length of track record: N/A

Has the track record been

audited: N/A

Average annual commission

costs as a

percentage of total assets:

! Brokerage to equity

ratio

N/A

! Administrator/Custodian

fee to equity ratio N/A

! Auditors’ fee to equity

ratio N/A

Strategy How do you characterize your

basic trading

approach (in percentage):

! Discretionary

N/A

! Systematic N/A

! Other (please explain) N/A

How do you characterize your

main decision-

making input (in percentage)?

N/A

! Fundamental N/A

! Technical N/A


How do you characterize your

trading

methodology (in percentage)?

! Trend Following:

N/A

! Cyclical N/A

! Countertrend N/A


! Special Situation N/A

! Arbitrage N/A

! Market Neutral N/A


Characterize your investment

style in terms of:

! Strategy:

N/A

! Hedging: N/A

! Market exposure: N/A

! Geographical market

focus: United States

List the instrument types you

use by percentage:

Net Lease Real Estate: 100%

Describe your strategy (in as

much details as possible)

Our primary investment strategy is to acquire, own and actively manage a

diversified portfolio of single-tenant, income producing retail, industrial,

medical and other office properties throughout the United States that are

subject to long-term net leases. In order to reduce the risks associated with

adverse developments affecting a particular tenant, industry, geography or

property type, we have assembled, and will seek to maintain, a portfolio

that is diversified accordingly. We believe that the market knowledge,

systems and analysis that we employ in our underwriting process allow us to

efficiently analyze the risks associated with each property’s ability to

produce cash flow going forward. We blend real estate analysis with tenant

credit and lease analysis to make an assessment of expected cash flows to

be realized in future periods. For each property, our analysis primarily

focuses on evaluating the following:

o Real Estate. Within the context of the relevant market and submarket,

we evaluate the suitability of the property for the specific business

conducted there and the industry in which the tenant operates, the

prospect for re-tenanting or selling the property if it becomes vacant,

and whether or not the property has expansion potential. We also

evaluate alternative uses for each property, as well as other potential

users and estimated replacement rents.

o Tenant Credit. We evaluate the tenant’s credit profile by focusing on

data and information specific to the tenant’s financial status and the

industry in which it operates. For the tenant’s financial status, we

evaluate, to the extent available, the tenant’s current and historical

financial statements, capital sources, earnings expectations, operating

risks, and general business plan. For the tenant’s industry, we

evaluate, among other things, relevant industry trends and the

tenant’s competitive market position.

o Lease Structure. We evaluate the tenant and landlord obligations

contained within the existing or proposed lease, as well as the

remaining lease term, any contractual annual or periodic rent

escalations and the existence of any termination or assignment

provisions.

o Tenant Retention. We assess the tenant’s use of the property and the

degree to which the property is strategically important to the tenant’s

ongoing operations, the tenant’s potential cost to relocate, the

supply/demand dynamic in the relevant submarket and the availability


of suitable alternative properties. We believe tenant retention tends

to be greater for properties that are strategically important to the

tenant’s business and where the potential costs to relocate are high.

Describe the development of

your trading

methodology. Please include all

material

modifications made to the

methodology over the period

of the performance record

N/A. FSCT’s investment strategy has remained consistent since its inception.

If you operate different

programs, are they

managed by “Independent

account control” or

are positions aggregated for

Speculative Position

Limit purpose? Do all the

programs use the same trading

methodology? If not, please

explain.

N/A

What are the strengths and

weakness of your

company’s trading

methodology?

Strength: Diversification

Weakness: Additional time needed to review larger deal flow.

What makes your strategy

unique?

We have several differentiated shareholder value creation strategies,

including blend and extend leasing, portfolio arbitrages, real estate

syndications and build-to-suit developer financings, that we plan to execute

on in order to create additional value for our shareholders. With our blend

and extend leasing strategy, we plan to acquire properties with short

remaining lease terms at higher capitalization rates and negotiate lease

extensions with the tenants, possibly in consideration for rent reductions

and cash contributions for improvements to the properties. With the new,

extended lease in place, we plan to sell the properties for a profit or hold

the properties in our portfolio at a purchase price that is lower than the

price at which we could have acquired the same property with the extended

leased already in place. In our portfolio arbitrage strategy, we plan to buy

portfolios of properties and sell some or all of the properties individually or

in smaller portfolios for a profit. We may also hold some of the properties

that we acquire in portfolio acquisitions in our portfolio at an effective price

that is lower than the price at which we could have acquired the properties

individually. Since 2014, we have been active in syndicating ownership in

net lease properties through our Delaware Statutory Trust (DST) programs

for Section 1031 exchange investors. We plan to continue these

syndications as these activities generate revenue for the company in the

form of upfront acquisition fees and annual asset management fees, and

also provide us a pipeline of properties which the company has the right,

but not the obligation, to acquire. We have relationships with, and have

acquired a substantial number of our properties directly from, developers of

net lease properties. We plan to provide financing to net lease developers

that will provide us with attractive current cash flow and an opportunity

upon completion of the property to either acquire them at prices below


market or sell them and participate in the profits with the developer.

What makes your strategy

different from your

peers? See response above.

Why do you feel you will

generate absolute

returns? Track record of creating value at the asset level. See Duff & Phelps reports

previously provided.

What is your average holding

period for:

! All investments 3-10 years

! Profitable investments 3-10 years

! Losing investments

FSCT periodically evaluates assets in its portfolio and is an active asset

manager that will dispose of an asset if it believes there is a likelihood of its

value being impaired due to unfavorable local market conditions, or

concerns about the tenant’s credit or industry.

Does the strategy have a long

or short bias?

N/A

What investment criteria must

new markets

meet?

N/A

How do you invest new capital

into the market?

N/A

How do you deal with

redemptions?

FSCT has had very few redemptions. In the event of any future redemptions,

FSCT plans to use cash available in its bank accounts as well as availability on

its credit facility.

Have the strategy or trading

processes changed

over time due to capital flows?

N/A

Have you encountered position

limit problems? If yes, please

explain.

N/A


Please describe your three

worst performing

investments/strategies/trades,

the reasons for

the same and how you

managed the position in

light of the losses

Industrial Property (Lebanon, IN) – This property was originally leased to

Gander Mountain, a sporting good retailer. Gander filed for bankruptcy and

rejected the lease on this property in bankruptcy. FSCT was able to re-lease

the property within a year at rent that exceeded the rent paid by Gander.

FSCT still holds this asset, so the ultimate performance of this asset has not

been determined.

All other assets have remained 100% occupied since acquisition, and those

assets that have been sold generated a positive IRR.

Describe your cash

management policy?

We typically maintain lower cash balances in our accounts as we have the

ability to draw on our credit facility.

Do you outsource this

function? If so, please give

name of provider and method

used.

No

Risk

Leverage

Discuss your leverage exposure

policy and its

management over different

market cycles:

We generally maintain leverage at or below 60% LTV. We currently are

levered at approximately 50%. Our leverage has consistently been in this

range.

What are your portfolio

financing

constraints/limits?

Our credit facility led by Citizens Bank limits our senior leverage to 60%. The

terms of the Series E Preferred Shares also contain certain restrictions on

maximum leverage.

Discuss sensitivity (cost) to

LIBOR levels:

Our credit facility is LIBOR based, so fluctuations in LIBOR may impact our

borrowing costs. We have placed a hedge on $50 million of our credit facility

to essentially lock in our rate on $50 million.

Hedging

How is the portfolio hedged? We placed a swap on $50 million of our credit facility.

Are there particular

markets/investments where

you find it particularly difficult

to hedge? How do you manage

risk in these situations? (please

give examples)

No

How do you determine size and

limits for each

position/basket?

We seek to maintain diversification in our portfolio. We manage tenant

diversification based upon a $1 Billion portfolio and seek to maintain less

than 10% ($100 million) tenant concentration in the portfolio.

How often do you re-hedge? We plan to re-hedge when we refinance our credit facility.

Are short positions profit

centers?

N/A

Do you hedge currency

exposure? Under what

circumstances?

N/A

Are currency positions used

purely for hedging?

N/A

Diversification

Discuss the depth of

diversification:

We seek diversification by tenant, industry, geography and property type. As

of December 31, 2018, we wholly owned, or had an ownership interest in,

87 properties located in 29 states that were 100% leased to 39 tenants

operating in 29 different industries.


How do you calculate the

correlation between

each investment in the

portfolio?

N/A

How has performance been

distributed across

positions and time?

N/A

Please provide performance

breakdown by

strategy, market,

instrument/asset type, sector

and by any other internal

portfolio classification

used. Please discuss the same.

N/A

Risk Management

Describe the risk management

process:

We continuously review the assets in our portfolio. At least once per year,

we conduct a site visit on the property. For tenants that are private, we

review their financials once per year, and for public companies, we review

their financials quarterly to monitor any trends or changes. If we notice any

adverse changes in industries, specific tenants or local real estate markets,

we place the asset/tenant on a watch list and will consider selling a

property. Gander Mountain, which filed for bankruptcy, was on our watch

list prior to filing for bankruptcy. There are currently no tenants on our

watch list.

Discuss position and stop-loss

limits and their

management:

N/A

How are breaches addressed?

N/A

How often are these limits

applied? When were

their peaks observed?

N/A

How do you calculate/measure

risk?

N/A

How do you adjust your risk

capital allocation

when there is a significant

increase in equity due

to trading profits?

N/A

Do you have a risk manager? Our asset management and finance teams participate in the risk

management function of our organization.

Do you use an external risk

monitor? If so, who,

and why that particular one?

We use Moody’s RiskCalc in our underwriting process to provide us with a

shadow rating on tenants.

Please describe the operational

risk management policy:

(including exposure to data

entry, fraud, system failure,

valuation, risk measurement

models)

N/A


Is there a centralized position

record? How often is that

reconciled to external

reporting?

N/A

Is there an internal audit

function to provide

regular check on operational

procedures?

N/A

How do you measure minimum

liquidity of

positions:

N/A

How liquid is the portfolio i.e.

how many days

would it take to liquidate the

entire portfolio?

Net lease assets are fairly liquid. We believe we could liquidate assets within

a 6 month period.

How do you assess, measure

and monitor

counterparty risk?

See comment above concerning asset reviews.

In what kind of trades do you

encounter material

counterparty risk? Are there

any limits on such trades?

N/A

Please provide list of

counterparties used for

OTC/swap/derivative

transaction

Citizens Bank is the counterparty to our swap.

What system/software is used

in your middle

office?

Yardi – accounting software

Valuation

Please describe the process of

valuation of the

portfolios/strategies positions,

including valuation process for

positions that do not have a

market price. Please discuss in

particular the frequency of

valuation and whether any

third-party services are

employed in the valuation

process (and, if so, how these

third parties are monitored).

We have engaged Duff & Phelps to provide a valuation of each asset in our

portfolio once per year. See Duff & Phelps reports previously provided.

Has the portfolios/strategies

had a material restatement of

its financial statements or any

prior results since inception? If

so, please describe. Was the

restatement the result of an

audit by an external auditing

firm?

No


External Controls

Are any third parties involved in

verifying adherence to risk

limits, e.g. the

portfolios/strategies

administrator?

No

Investment Research What outside sources are

used?

We engaged Green Street Advisors to provide certain advisory services,

including research on the public REIT markets.

What proportion of research is

generated

internally?

FSCT team monitors industries and markets from multiple industry sources.

Describe your back testing of

investment ideas?

Other than the Gander Mountain asset, all of our assets have remained

100% occupied since inception. In addition, the value of our portfolio has

increased year-over-year based on the report from Duff & Phelps.

Have you published or

commissioned any

research/academic papers?

No

Investor Service / Reporting Who calculates the

performance?

What is the frequency of

calculation.

Duff & Phelps. Annually.

Can portfolios/strategies

performance be

transmitted to us electronically

on a regular

basis, and at what periodicity?

We can provide a copy of the report from Duff & Phelps on an annual basis.

In addition, we provide quarterly unaudited and annual audited financial

statements to our shareholders. We also provide quarterly update letters to

our shareholders.

List all reports and

correspondence usually sent

to clients, and please explain

the frequency and

the detail the manager reports

performance to

investors.

See response immediately above.

Can you provide copies of

historical reports?

We previously provided our audited financial statements and Duff & Phelps

reports.

Are investors informed when

minor / major

changes are made to the

trading, money

management, or risk control

methods?

We update shareholders on a quarterly basis.

What databases, publications,

or other available

sources does the manager

regularly report

performance figures to?

If none, explain why?

N/A


What portfolio data can you

provide

(electronically) in terms of:

! Position:

Our portfolio information is available on our website: https://fsctrust.com/

! Concentration: N/A

! Exposure: N/A

! Performance attributes: N/A

! Hedge: N/A

How frequently can this data

be provided?

Typically updated on a quarterly basis.

Can all trades be reported on a

daily basis to the

client?

N/A

Infrastructures and Controls Please indicate any material

facts about your

company that are not

mentioned in the offering

memorandum (domicile, legal

issues, political

situation, tax etc.)

None

Please describe the firm’s

current trading, portfolio

management, and post-trade

reconciliation and accounting

infrastructure, identifying any

significant deployments of

third-party software.

N/A

Please describe how trades are generally executed. What types

of controls are typically used to

help prevent unwanted

executions from occurring?

N/A. Transactions in our bank accounts require two signatures from CFO,

CAO, Controller and CEO.

How do you manage trade data

and keep track of open

positions? Please specify the

systems in

use:

N/A

Who is authorized to move

cash? What controls are in

places? What is the

authorization process?

Transactions in our bank accounts require two signatures from CFO, CAO,

Controller and CEO. Any checks over $25,000 require two signatures. Any

wire transfers or online transactions require authorizations from two

individuals.

How is performance of each

account calculated,

and how often?

N/A

What is the average frequency

of trading?

N/A

What type of portfolio reports

and analytics do you have?

What are their frequencies?

N/A

Which personnel are

authorized to place trades?

Who signs off on trades before

Investment committee consists of CEO, President, CFO, Head of Acquisitions

and Head of Underwriting. Unanimous approval required for all acquisitions.

N/A


they are sent to

the prime broker?

Please describe the typical

trade reconciliation process

and frequency. What

segregations of duty are

generally employed in the

process?

N/A

Please describe how cash or

other asset transfers can be

authorized, both for transfers

within a vehicle managed by

the firm, as well as to external

parties. What types of controls

are generally used to prevent

unwanted transfers from

occurring?

Transactions in our bank accounts require two signatures from CFO, CAO,

Controller and CEO. Any checks over $25,000 require two signatures. Any

wire transfers or online transactions require authorizations from two

individuals.

Is there an electronic feed to

brokers and

administrators, and how is it

used?

N/A

What trade information is

received from brokers

on a daily basis?

N/A

How are unsettled trades

monitored?

N/A

Are phone lines used for

trading taped?

N/A

How would you handle trade

and execution

errors?

N/A

What type of information is

maintained internally on each

account/portfolio/fund?

N/A

Do you subscribe to or have

access to any third-

party risk management

systems?

N/A

Does your management

program automate trade

allocations to investor’s

account?

N/A

If not, how are trade

allocations to investor

accounts executed?

N/A

Has this method been audited

by a regulatory

body?

N/A


What is the policy of allocating

orders across

funds/portfolios/accounts?

How are split price

fills allocated? How are partial

fills allocated?

N/A

What is the policy regarding

execution of personal trading

by investment manager,

investment advisor and

principals vis a vis execution of

orders for the

portfolios/strategies?

N/A

Have you/would you ever cross

trades between

customers and proprietary

accounts/personal

accounts of manager/advisor

and their

principals? If so, such trades

are made under

what circumstances and done

at what price (with reference to

market)?

N/A

Have you ever suspended or

forced redemptions? If so,

under what circumstances?

No

What contingency plans do you

have in terms of:

! Computer system fault? We maintain a backup of our server offsite.

! Power/Phone

breakdown We have a backup generator on site in the event there is a power outage.

! Incapacitated

investment decision

makers? N/A

! Technical failure at

Prime Broker’s location? N/A

Do you have an in-house

computer technician?

Please give details of IT

capabilities:

We outsource our IT to a third party.

Tax Issues What is the tax status w.r.t. tax

on

profits, income, gains and

appreciation. Any withholding

tax on dividend and capital

distributions? Any stamp duty,

estate or inheritance taxes?

FSCT is a U.S. Real Estate Investment Trust. Distributions are treated as a

return of capital and taxable income depending on FSCT’s taxable income.

We seek to conduct tax deferred 1031 exchanges to avoid capital gains on

sales of properties. Generally, there is no withholding for U.S. shareholders,

but while FSCT is a private REIT, there is withholding for non-U.S.

shareholders. The withholding rate is determined by the jurisdiction of the

investor.

Discuss risk of new/incremental

taxes and possible contingency

measures for potential adverse

taxation events

We do not anticipate any changes to US tax laws in the foreseeable future

that would adversely impact our shareholders.


Please state the name and title of the officer at your firm who has prepared and reviewed this questionnaire.

Name: Coby Johnson

Date: April 9, 2019

Position: President

This material may be distributed to prospective investors if it is preceded or accompanied by the Private Placement Memorandum for this offering (the “Memorandum”). This material is neither an offer to sell, nor a solicitation to buy a security which can be made only by the Memorandum that contains various and important risk disclosures related to the offering. This material does not purport to be complete and should be read in conjunction with the Memorandum. The information set forth in this material is qualified in its entirety by the Memorandum. All potential investors must read the Memorandum, and no person may invest without acknowledging that they have received, read and fully understand the Memorandum.

Securities offered through Third Seven Capital LLC. Member FINRA/SIPC.

Summary of Risk Factors

Following are some of the risks relating to an investment in our REIT:

• Our business depends on our tenants successfully operating their businesses on real estate we own, and their failure to do so could materially and adversely affect our business.

• We depend on tenants for revenue. Defaults by our tenants, as a result of bankruptcy or otherwise, could adversely affect us.• Our largest tenant, BioLife Plasma Services (“BioLife”), contributes approximately 14.9% of our ABR, or approximately 18.9% of our ABR excluding the portion

of base rent attributable to third parties with respect to our partially owned properties.• We have recorded net losses attributable to common shareholders of approximately $8.2 million and $7.0 million for the years ended December 31, 2017 and

2016, respectively, and we may continue to record net losses attributable to common shareholders in future periods.• The holders of our Series E Preferred Shares have certain approval rights for our operations, as well as the right to appoint a Series E Trustee to our board of

trustee. The Series E Trustee must give approval of certain actions that we may desire to undertake for the benefit of the Company and the shareholders. The holders of our Series E Preferred Shares have interests that could conflict with those of our other shareholders.

• Series D Preferred Shares will rank junior to all of our indebtedness, liabilities, and our Series E Preferred Shares in the event of our bankruptcy, liquidation or winding up.

• We are subject to risks related to commercial real estate ownership that could reduce the value of our properties.• Our portfolio of properties is limited in diversification by tenants, property type, location and industry. Other than as described in the section entitled

“Investment Objectives and Policies – Real Property Investment” in this confidential private placement memorandum, we have not identified any specific properties for purchase. As a result, you will be unable to evaluate the economic merit of all of our future investments prior to your making an investment in our Series D Preferred Shares and prior to our making these investments.

• This investment has limited liquidity. No public market currently exists, and one may never exist, for our shares. There may be a substantial delay in receiving a return, if any, on your investment. If you are able to sell your shares, you would likely have to sell them at a substantial discount to their market value.

• You should consider an investment in our shares a long-term investment. If we do not successfully implement our exit strategy, you may suffer losses on your investment, or your shares may continue to have limited liquidity.

• The offering price for our shares is not intended to reflect the book value or net asset value of our investments, or our expected cash flow. Until such time as our shares are valued by our board of trustees, the price of our shares is not intended to reflect the net asset value of our shares.

• We may pay distributions from sources other than cash flow from operations, including borrowings and proceeds from the sale of our securities, including our shares, or asset sales, and we have no limits on the amounts we may pay from such other sources. Payments of distributions from sources other than cash flows from operations may reduce the amount of capital we ultimately invest in real estate and may negatively impact the value of your investment. As a result, the amount of distributions paid at any time may not reflect the current performance of our properties or our current operating cash flows.

• This is a “best efforts” offering. If we are not able to raise a substantial amount of capital in the near term, we may have difficulties investing in properties and our ability to achieve our investment objectives could be adversely affected.

• Although you will be provided with information about our investments after the investments have been made, you will be unable to evaluate the economic merit of future investments, including how the proceeds from this offering will be invested. This makes an investment in our shares speculative.

• Our board of trustees may change our investment objectives and certain investment policies without shareholder approval.• We expect to incur debt, including our existing lines of credit, which could hinder our ability to pay distributions to our shareholders or could adversely impact

the value of your investment in the event that income on, or the value of, the property securing the debt decreases or if we are forced to refinance the debt during adverse economic conditions.

• We may suffer from delays in locating suitable investments, which could adversely affect our ability to make investments, to pay distributions and the value of your investment.

• If we fail to continue to qualify as a REIT for federal tax purposes, cash available for distributions to be paid to you could decrease materially.• Our board of trustees has the authority to designate and issue one or more classes or series of preferred shares without shareholder approval, with rights

and preferences senior to the rights of holders of preferred shares and common shares, including rights to payment of distributions. If we issue any preferred shares, the amount of funds available for the payment of distributions on the Series D Preferred Shares could be reduced or eliminated.

• For qualified accounts, if an investment in our shares constitutes a prohibited transaction under ERISA, you may be subject to the imposition of significant excise taxes and penalties with respect to the amount invested.

• We could be adversely affected if we fail to have access to capital on favorable terms.• We may be unable to renew or re-lease expiring leases or lease vacant space on favorable terms or at all.• The amount of our distributions, if any, is uncertain.• We depend on key personnel, and the loss of any key personnel could adversely affect us.• Increasing interest rates could adversely affect us.• Our board of trustees may change our investment, financing or leverage strategies without shareholder consent.• Limitations on share ownership, and limitations on the ability of our shareholders to effect a change in control of us, restrict the transferability of our shares

and may prevent takeovers that are beneficial to our shareholders.• There is no existing market for our common shares, and the share price for our common shares may fluctuate significantly.• We would incur adverse tax consequences if we fail to qualify as a REIT.

To understand this offering fully, you should read the entire Confidential Private Placement Memorandum carefully, including the “Risk Factors” section, before making a decision to invest in our Series D Preferred Shares.

1901 Main Street, Lake Como, NJ 07719 www.fsctrust.com

[email protected] 877.449.8828

© 2019 FOUR SPRINGS CAPITAL TRUST

FOR DUE DILIGENCE USE ONLY

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