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EagleRidge Realty Trust is a Real Estate Investment Trust (REIT) for federal income tax purposes. In general, a REIT is a company that combines the capital of many investors to acquire real estate and/or real estate related assets and meets certain other qualifications. The benefits of a REIT may include the following:

• Diversified real estate portfolio under professional management;

• Not subject to federal corporate income taxes on its income that it distributes to its stockholders, which substantially eliminates “double taxation” (i.e., taxation at both the corporate and stockholder levels); and

• Is required to distribute to its stockholders at least 90% of its annual taxable income.

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We operate as an Umbrella Partnership Real Estate Investment Trust, which is a REIT that holds all or substantially all of its assets through a partnership which the REIT controls as general partner. Therefore, we hold all or substantially all of our assets through our operating partnership, EagleRidge Properties, LLLP, which we control as the general partner. The operating partnership was formed as a North Dakota limited liability limited partnership on February 4, 2015. This operating partnership owns our assets, directly or indirectly, generally through special purpose entities.

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We have decided to use an Umbrella Partnership Real Estate Investment Trust structure to facilitate acquisitions of real estate properties. A sale of property directly to a REIT is generally a taxable transaction to the property seller. However, in an Umbrella Partnership Real Estate Investment Trust structure, if a property seller exchanges the property with our operating partnership in exchange for LLLP units, the seller may defer taxation of gain in such exchange until the seller resells its LLLP units or exchanges its LLLP units for the Company’s common stock. Before a seller may resell its LLLP units or exchange its LLLP units for the Company’s common stock, such seller must hold such LLLP units for a period of at least one year. The Company currently anticipates that exchanges of Company common stock for LLLP units in the operating partnership will occur on a one-to-one basis. By offering the ability to defer taxation, we may gain a competitive advantage in acquiring desired properties over other buyers who cannot offer this benefit. Exchanges of LLLP units for common stock of the Company will be a taxable event.

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In addition, investing in our operating partnership, rather than directly in the Company, may be more attractive to certain institutional or other investors due to their business or tax structure. If an investor is interested in making a substantial investment in our operating partnership, we may agree to terms for such investments that are different from the terms of this offering, such as lower fees payable by such investors in consideration of the size of its investment. Our structure provides us the flexibility to accommodate such different terms, while applicable tax laws generally restrict a REIT from charging different fee rates among its stockholders.