Question
From:(redacted)
Sent:Tuesday, May 29, 2007 9:05 AM
To:Verne, B. Michael
Subject:RE: Exempt Assets Related to Realty
Hi Mike.
I hope all is well.
Can we set up a time today to talk about thequestions below?
Thanks,
(redacted)
From(redacted)
Sent:Friday, May 18, 2007 3:39 PM To: Verne, B. Michael
Subject:Exempt Assets Related to Realty
Hi Mike.
I hope all is well. It has been some time since Ihave talked to you.
I do have a few questions for you. X is planning toacquire the voting securities of Y. Y holds exempt realty under 802.2. Y alsoholds the following.
(1) Y owns parking lots adjacent or near to itsexempt realty. I understand that to the extent the parking lots serve tenantsin the realty owned by Y, they would be exempt even if the tenants must pay aseparate rental fee to park their cars in the lots. Is that correct? (MV Yes)
Ialso understand that to the extent some of the parking lots owned by Y leasespaces to persons who are not tenants of the realty owned by Y, such parkinglots would be exempt so long as Y leases the lots to a third party to operate.Do you agree? (MV Yes)
If a third party operates the lots owned by Y under amanagement contract ther than pursuant to a lease), the lots would not beexempt, but only to the extent that some f the lots lease spaces to persons whoare not tenants of the realty owned by Y. Is that correct? (MV Yes) Whatif the non-tenants who lease the spaces from the parking lot operator areguests of the tenants of Y's buildings? Could we take the position that suchparking lots are exempt even if Y contracts (rather than leases) such lots to athird party to operate? (MV Yes)
Finally, if a third party parking lot operator (undera contract and not a lease from Y) leases spots primarily to Y's tenants, maywe conclude that such parking lots are exempt? (MV Yes) (I hopeI am not giving you a headache.)
(2)Y makes mezzanine loans to thirdparties. T the extent that such loans are secured 100% by realty, I understandthat they would be exempt. (MV Yes) What if the loans are secured by equityinterests in a real estate owner? Can we conclude that such loans are exempt orwould we have to determine whether the real estate owner also holds other typesof assets? (MV Yes)
Areloans that Y has m e to persons who hold an equity interest in Y or an entityunder common control with Y exempt o long as they are secured by the equityinterests in Y the commonly controlled Y entity? (MV Yes) What if theyare not secured at all? (MV not exempt if unsecured loans)
Would personal loans that Y 4as made toindividuals for relocation purposes be exempt even if unsecured? (MV notexempt)
(3) Y charges insurance rates to joint ventures in whichit owns less than 50% of the interests so that such joint ventures are coveredby Y's own insurance program. Would these activities be exempt? (MV notexempt)
(4) Yholds interest rate swaps, foreign currency hedges, and energy swaps (whichlock in energy prices for Y's realty for a period of time). I assume that allsuch swaps and hedges would be exempt. Do you agree? (MV Yes)
(5) Y also owns fitness centers which serve the tenantsof Y's buildings. I assume these would be exempt regardless of whether thetenants pay a separate membership fee. Is that correct? (MV Yes) Do weneed to confirm that non-tenants may not purchase membership to the fitnessfacilities? (MV No)