Question
VIA HAND DELIVERY
Mr. Patrick Sharpe
Compliance Specialist
Federal Trade Commission
Pre-Merger Notification Office
6th and Pennsylvania Avenues, N.W.
Room 301
Washington, D.C. 20580
Dear Patrick:
This is to confirm our telephone conversation earlier today in which you agreed that the purchase of (redacted) 1 for a total purchase price of $165 million by a company subject to the requirements of the Real Estate Investment Trust Act of 1960, as amended, would be exempt from the reporting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 under 15 U.S.C. § 18a(c)(1) since it is an acquisition of realty in the ordinary course of business. This exemption applies to REITs even though the property they are purchasing is income producing.
Please let me know immediately if I have in any way misunderstood the FTC’s position on this issue.
Sincerely,
(redacted)
The (redacted) are currently owned by different ultimate parent entities. (Redacted) areeach currently owned by a (redacted) whose general partners include one individual with less thana controlling interest. Accordingly, each (redacted) has a different limited partnership as itsultimate parent entity and for H-S-R purposes, we understand that we would treat each (redacted)separately for determining whether the $15 million threshold is reached. Two of the remaining(redacted) are owned by (redacted) general partnerships, with one individual having a 50%interest in the partnership. Thus, for these (redacted) the individual will be the ultimate parententity, and for H-S-R purposes, the consideration of (redacted) must be combined. For theremaining (redacted) the REIT will have transferred to it the leasehold interest, which is held by a(redacted) limited partnership which is its own ultimate parent entity, and a fee simple ownershipinterest, which is owned by another (redacted) partnership. Each (redacted) has a differentultimate parent entity, and, therefore, need not be combined for valuation purposes. Theallocation of the purchase price will be determined by dividing the net operating income for theimproved (redacted) by the applicable capitalization rate. The allocation has yet to be determined. It is expected that some, but not all, of the (redacted) will have values attributed to them in excessof $15 million. However, since the acquiring ultimate parent entity is a REIT, the preciseallocation is not important here.