Question
(redacted)
January 9, 1996
VIA FAX AND MAIL
(redacted)
Re:(redacted) Acquisition
(redacted)
This is written to you in your capacity in representing the majority of the partners in interest (redacted) limited partnership (the Lessee) and owner of a leasehold (redacted) the (redacted) in connection with the acquisition by the Lessee of the leased fee interest (the fee title subject to and together with the ground lessors interest in the (redacted) from (redacted) corporation (the Ground Lessor). You have asked that I describe the business history of the Ground Lessor and the development of the (redacted) (as I understand it). This letter is written for that purpose.
Ground Lease
The Ground Lessor, in 1984, entered into a long-term ground lease with a lessee, (redacted) Partners, under which the (redacted) was developed and has been operated by the Lessee (the Ground Lease). The Lessee acquired its interest in 1992 from an assignee of the original lessee under the Ground Lease.
EXHIBIT A
Corporate History of Ground Lessor
The Ground Lessor has a complicated corporate history including four prior changes of name. It was formed on (redacted). This name was later changed to (redacted) and on (redacted) after the Ground Lessor was acquired by what was then (redacted) (now known as (redacted) and the Ground Lessors parent corporation. (redacted) (the Ground Lessor) was then involved in the development of a (redacted) in (redacted) known as the (redacted) was completed within two years thereafter. The leased-fee interest in the leasehold (redacted) was initially retained by the Ground Lessor and was later sold.
(redacted)
The parent company of the Ground Lessor, (redacted), (redacted) has been engaged in real estate activities in (redacted) over the past 20 years. The Ground Lessor is one of a number of subsidiaries acquired or established for the development and sale of (redacted). The ultimate parent company is (redacted) which has total assets based on current exchange rates or approximately (redacted) was founded (redacted) as a housing corporation and has expanded its operations to cover a (redacted) wide spectrum of activities including (redacted) related operations.
Land Acquisition
Upon completion and sale of the (redacted) project, the name of the Ground Lessor (to avoid confusion because of name changes) was changed to (redacted). Shortly after the (redacted) project was under way, another entity acquired by the Ground Lessors parent corporation (redacted) on (redacted) known as (redacted). This project was successful and the parent corporation in 1981 made arrangements to acquire an adjoining 7.573-acre parcel of (redacted) and for a similar project using the Ground Lessor as the corporate vehicle for this acquisition. Because of changed market conditions for (redacted) in the early -1980's, development of a (redacted) was not pursued and the Ground Lessor sought to sell the land to a (redacted) developer. In the interim, the Ground Lessor had acquired certain entitlements so that it was desirable that the Ground Lessor retain title to the land at least until the (redacted) was completed. A buyer for the property was found in the form of two experienced (redacted) developer partners, (redacted) and (redacted).
Ground Lease Terms
The buyer negotiated a complicated agreement under which the Ground Lessor would lease the land for 99-years to a limited partnership with a similar name (redacted) Partners) controlled by the two partners (redacted) and upon completion of the (redacted) by the new limited partnership, the lessee would have an option to purchase the leased-fee for the greater of a fixed price or fair market value, whichever was greater. This option to purchase would run for a seven-year period from completion of the (redacted). The Ground Lessor was forbidden from selling the leased-fee without the consent of the Lessee. The (redacted) was completed in (redacted) and has been since successfully operated by Lessee and the prior lessees under the Ground Lease.
Exercise of Option
The present Lessee acquired its interest under the Lease in 1992. The Ground Lessor sought to sell its interest in 1994 to an unrelated thirty party. The Lessee refused to consent to this transaction and the Ground Lessor was unable to sell its interest. The Lessee has now exercised its right to purchase as provided in the Ground Lease and the Ground Lessor is preparing to convey the leased-fee to the Lessee in accordance with the Ground Lease.
Present Business Activity of Ground Lessor
The Ground Lessors other activities are limited. The Ground Lessor serves as the local agent for related (redacted) parties which own (redacted) and (redacted) and it serves as the general partner of a partnership which owns and operates a (redacted). The Ground Lessor has only a nominal interest in that partnership.
The Ground Lessors parent company in (redacted) has developed (redacted) and (redacted) in (redacted). It has, directly and through its subsidiaries, sold the leased-fee interests in other (redacted) projects, including the (redacted) projects mentioned previously in this letter. The Ground Lessors business can be fairly characterized as the (redacted) including the sale of leased-fee interests in such real estate. The acquisition of the leased-fee by the Lessee is being made pursuant to the exercise of the option under the 1988 Ground Lease and is not a new, voluntary sale by the Ground Lessor.
I understand the information in this letter may be submitted to the Federal Trade Commission (FTC) in connection with notice of the pending conveyance pursuant to the exercise of the option under the Ground Lease. I further understand that the Lessee has determined that the pre-notification requirements of Hart-Scott-Rodin Antitrust Improvements Act of 1976 do not apply to the transaction but that notification of the transaction will be given to the FTC to permit it to make a further determination within a reasonable period of time should it disagree with this conclusion. I had several telephone conversations with Ms. Melea R. Epps, staff attorney with the FTCs Premerger Notification Office of the Bureau of Competition concerning the proposed acquisition of the leased-fee to the (redacted) by the Lessee. I did not furnish her all the information in this letter; however, based on selected information she indicated that the acquisition might be exempt from the requirement of a prenotification filing as a transaction in the ordinary course of business. You are further exploring the availability of this exemption.
If you need any further information, please do not hesitate to write or call.
Very truly yours,
(redacted)