Question
From:(redacted)
Sent:Tuesday, May 23, 2006 11:36 AM
To:Verne, B. Michael
Cc:(redacted)
Subject:HSR Compliance Question regarding Section 7A(c)(i) and the REIT Exemption
Mike,
This HSR compliance question concerns theapplicability of the exemption for realty acquired in the ordinary course ofbusiness under Section 7A(c)(1) of the Hart-Scott-Rodino Antitrust ImprovementsAct of 1976, as amended (the "Act"). It is my understanding basedupon a review of various Informal Staff Opinions of the Premerger NotificationOffice, including, without limitation, Informal Staff Opinion 9503024, andSection 197 of the ABA Section of Antitrust Law's Premerger NotificationPractice Manual (3d. Ed. 2003) that the acquisition by one entity presentlyqualified as a real estate investment trust under Section 856 of the InternalRevenue Code (a "REIT") of the voting securities of another REIT isexempt from the requirements of the Act.
I have not, however, found any guidance regarding thefollowing question. A REIT contemplates the acquisition of the votingsecurities and non-corporate interests of various corporations andunincorporated entities that hold nothing but real estate assts. Is theacquisition by a REIT of the voting securities and non-corporate interests ofcorporations and unincorporated entities that hold nothing but real propertyassets exempt from the Act pursuant to Section 7A(c)(i)?
In particular, I was wondering if such an acquisitionis exempt pursuant to Section 7A(c)(i) and 16 C.F.R. Section 802.4(a). It is myunderstanding that the acquisition of real property by a REIT is exemptpursuant to Section 7A(c)(1) because REITs acquire and sell real property inthe ordinary course of their businesses. Furthermore, 16 C.F.R. Section802.4(a) provides in relevant part that, "An acquisition of votingsecurities of an issuer or non-corporate interests in an unincorporated entitywhose assets together with those of all entities it controls consist or willconsist of assets whose acquisition is exempt from the requirements of the Actpursuant to Section 7A(c)(i) of the Act, this part 802, or pursuant to[Section] 801.21 of this chapter, is exempt from the reporting requirement ifthe acquired issuer or unincorporated entity and all entities it controls donot hold non-exempt assets with an aggregate fair market value of more than $50million (as adjusted)" (bold added for emphasis). It accordingly appearsthat Section 802.4(a) exempts from the HSR Act any acquisition by a REIT ofvoting securities in corporations and non-corporate interests in unincorporatedentities that hold $56.7 million or less of non-exempt assets, including anynon-realty assets, because a REIT's acquisition of real property by is itselfexempt pursuant to Section 7A(c)(1).
Any guidance that youmay be able to offer would be appreciated.