Question
From: (redacted)
Sent: Tuesday, February 14, 2006 9:24 AM
To: Verne, B. Michael
Subject:RE: REIT Question
Hi Mike.
Ihave learned that the REIT whose voting securities are to be acquired holds notonly loans it originates and that are secured by realty but also the following.
(1)Senior secured and non-secured bank loans that it purchases in the secondarymarket and the mezzanine layer of certain CLO obligations that it purchases.Real property may secure some or all these purchased instruments, but realproperty may not be the only assets securing such loans. If realty secures any portionof a loan, is such loan exempt or is it necessary to determine that realtysecures 50% or more of each loan before we can conclude that such loan isexempt?
(MVcomments: unless the loans are completely secured by real property they arenot exempt under 7A(c)(2))
(2)The REIT also holds accounts receivable or payable that relate to residentialmortgage backed securities. I assume that these are exempt. Please advise ifthey are not.
(MVcomments: Agree these are exempt.)
(3)Finally, the REIT holds derivative contracts including interest rate swaps andinterest rate swap forwards to hedge interest rate exposure. Would suchcontracts be considered assets, and if so, would they be exempt?
(MVcomments: not sure I understand. Contracts are assets. Are these cashequivalents?)