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RECORD 3: ACQUISITION AUDIT MEMORANDUM & RENT ROLL RECONCILIATION
PREPARED FOR: HORIZON CAPITAL REAL ESTATE FUND IV
SUBJECT: WESTLAKE RETAIL PLAZA DUE DILIGENCE AUDIT REPORT (CONFIDENTIAL)
DATE: AUGUST 14, 2026
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EXECUTIVE SUMMARY OF ACQUISITION DUE DILIGENCE FINDINGS

1. CAM Reconciliation Discrepancy & Uncapped Pass-Throughs
Our audit of the 2024 and 2025 CAM reconciliation statements disclosed that the seller 
(Westlake Retail Investors LP) billed Apex Entertainment (Suite 100) $48,200 for a 
rooftop chiller compressor replacement. Under Section 4.3 of the Anchor Lease, capital 
HVAC repairs exceeding $10,000 require 30-day prior written concurrence, which was 
never requested or granted. Apex Entertainment has formally disputed this charge and 
threatened a $62,400 CAM escrow withholding.

2. Cumulative vs. Non-Cumulative Controllable Cap Mismatch
The seller’s asset management model incorrectly applied a uniform 5% non-cumulative 
controllable cap across all leases. However, Apex Entertainment's lease specifies a 
4.0% cumulative, compounded cap linked to the 2020 Base Year ($312,400). Due to rapid 
inflation in local security and cleaning contracts in 2023, the cumulative cap understates 
recoverable CAM by $37,800 over the past 24 months.

3. Co-Tenancy Abatement Risk
Northgate Supermarket (Anchor Suite 200, 48,000 sq ft) has ceased 24-hour operations 
and dark-store sublease discussions are under review. If Northgate darkens for more 
than 45 days, Apex Entertainment's co-tenancy clause (Section 11.2) triggers a right to 
cease paying $42,500/month in base rent and switch to 2% gross sales (estimated at only 
$14,200/month), creating a 66% net income impairment on Suite 100.

4. Exclusive Use Conflict
A proposed lease with Artisan Bakery & Roastery (Suite 130) granting a 25% specialty tea 
and cold-brew coffee menu line violates Section 8.2 of the Harbor Coffee Roasters lease, 
exposing the buyer to an automatic 50% base rent abatement ($3,800/month) upon opening.