Question
February 4, 2005
VIA FACSIMILE AND HAND DELIVERY
B. Michael Verne
Premerger Notification Office
Bureau of Competition
Room 303
Federal Trade Commission
6th & Pennsylvania Ave., NW
Washington, DC 20580
Re: Application of HSRRule 802.5 Investment Rental Property Exemption
Dear Mike:
I am writing tomemorialize the advice you were kind enough give me during some recent telephoneconversations regarding a proposed sale of partnership assets involving realestate. In this transaction, the Sellers are a group of separately-controlled Maryland limited partnerships that collectively own and operateseveral skilled nursing facilities located in Maryland,New Jersey, and North Carolina. Buyer (a Delaware limited liability company) is acquiringall of the Sellers' interest in the real estate, improvements, and assetsrelating to the nursing home businesses operated on the acquired properties.The purchase price is expected to be in the neighborhood of $50 million.
In fact, all ofthe nursing home facilities in question are operated by a third-party nursinghome care provider to whom Sellers have contracted out the business of operatingthe facilities on these properties. Buyer's unrelated third-party tenant willcontinue to contract out the business to the same third party nursing home careprovider. Thus, both Buyer and Seller conceptualize this transaction primarilyas a transfer of real estate interests, and the reality is that the transactionwill have no direct effect upon competition within the business of providingnursing home services.
You agreed thatbased on these facts, the transaction as described properly falls within thereal estate exemptions of the HSR Act. I believe the applicable provisionwould be HSR Rule 802.5, which exempts certainacquisitions of investment rental property assets. Given that the portion ofthe purchase price attributable to the real property and its improvements isexempt under that section, the value of the non-exempt assets being acquired inthe transaction is far less than $50 million, and the transaction does not meetthe notification threshold of the HSR Act.
I would beobliged if you could confirm that this letter is a correct statement of youranalysis of this transaction, or notify me as soon as possible in case youdisagree. As always, many thanks for your patient attention to this matter.