Sent: Thursday,July 28, 2011 11:23 AM
To: Verne,B. Michael
Subject: Exemption under Rule 802.5for Acquisitions of Investment Rental Property
Thisemail is to confirm the conclusion of myself and (redacted) that atransaction to which our clients may be parties would not be reportable. Thetransaction is a stock deal, and you should assume that it exceeds thesize-of-transaction and size-of-parties thresholds.
Asa result of the transaction, the Buyer would acquire a business whose assetsconsist primarily of currently-existing ground easements, ground leases, and,in some cases, fee simple title to real estate (such as land, rooftops, andother structures) that either supports telecommunications towers or directlyhosts telecommunications antennae. The Seller currently leases this realproperty to third parties -either (i) telecommunications tower owners (which inturn lease space on the towers to wireless service providers such as AT&T,T-Mobile, Verizon Wireless, and others, for their antennae) or (ii) wirelessservice providers where no tower is involved (e.g., rooftops or otherstructures).
TheBuyer owns and operates telecommunication towers. The Seller leases most of itstower sites to tower operators other than the Buyer. The Seller does, however,lease a small number of its tower sites to Buyer. Buyer, in turn, essentiallyre-Ieases the Seller's real property (space on the tower) to third-partywireless service providers. After the transaction, the Buyer will acquirerights to the underlying real property and likely will cancel the intermediatelease between itself and what would become its controlled entity, leaving inplace the leases with the third-party wireless service providers.
GENERALAPPLICATION OF RULE 802.5
Rule802.5 exempts from HSR reporting the acquisition of real property assets thatwill not be rented to entities included within the acquiring person except forthe sole purpose of maintaining, managing or supervising the operation of thereal property, and will be held solely for rental or investment purposes. Weunderstand that cell phone towers and the land beneath them are considered tobe real property by the PNO for purposes of the Rule 802.5 exemption. See,e.g., Informal Staff Opinion 0904001 (dated Apr. 2, 2009) (towers); InformalStaff Opinion 0608007 (dated Aug. 10,2006) (towers and underlying real estate);Informal Staff Opinion 9903010 (dated Mar. 19, 1999) (same, including groundequipment supporting tower operation). We also understand from priorconversations with PNO staff that the acquisition of ground easements andleases (as opposed to fee simple title) would be exempt under Rule 802.5 wherea transfer of the real estate underlying those easements and leases would havebeen exempt under Rule 802.5.
SPECIFICAPPLICATION OF RULE 802.5 TO THIS TRANSACTION (THROUGH RULE 802.4)
Thereal property being acquired by the Buyer in this transaction (groundeasements, ground leases, and fee simple title) is currently rented or held forrent to third parties. The Buyer intends to lease the real estate either tothird-party wireless service providers or to third-party tower operators who,in turn, will lease space on the towers to the wireless service providers.Consequently, since the real property assets to be acquired will be rented outto third parties not included within the Buyer, we concluded that thetransaction would be exempt under Rule 802.5.
Thefact that the Buyer currently leases tower sites from the Seller should notaffect the applicability of the exemption. After the transaction, these leaseswill be between controlled entities of the Buyer and may be cancelled, leavingin place the leases with the third-party wireless service providers for spaceon the towers. As such, the real property to be acquired should qualify asinvestment rental property under Rule 802.5.
Asa result of the transaction, the Buyer would also acquire certain non-exemptassets. The Buyer's Board of Directors (or its designee) will do a fair marketvaluation of those non-exempt assets, but we expect that FMV to come in at lessthan $66 million.