2203005 Informal Interpretation

Sheinberg, Samuel I.
From: 	HSRHelp
Sent: 	Thursday, March 10, 2022 3:43 PM
To: 	Walsh, Kathryn E.; Berg, Karen E.; Musick, Vesselina; Shaffer, Kristin; Sheinberg, Samuel I.; Six, Anne
Subject: 	FW: Question Regarding Application of 802.5
To:
Cc: HSRHelp <HSRHelp@ftc.gov>
From: Whitehead, Nora <nwhitehead@ftc.gov>
Sent: Thursday, March 10, 2022 3:42:47 PM (UTC-05:00) Eastern Time (US & Canada)
Subject: RE: Question Regarding Application of 802.5
We agree.
From: HSRHelp <HSRHelp@ftc.gov>
Sent: Thursday, March 10, 2022 1:50 PM
To: Walsh, Kathryn E. <kwalsh@ftc.gov>; Berg, Karen E. <KBERG@ftc.gov>; Musick, Vesselina <vmusick@ftc.gov>;
Shaffer, Kristin <kshaffer@ftc.gov>; Sheinberg, Samuel I. <SSHEINBERG@ftc.gov>; Six, Anne <asix@ftc.gov>; Whitehead,
Nora <nwhitehead@ftc.gov>
Subject: FW: Question Regarding Application of 802.5
From:
Sent: Thursday, March 10, 2022 1:49:27 PM (UTC-05:00) Eastern Time (US & Canada)
To: HSRHelp <HSRHelp@ftc.gov>
Cc:
Subject: Question Regarding Application of 802.5
Dear PNO Staff:
I am writing to confirm that 802.5 - Acquisitions of investment rental property assets applies to the following proposed
transaction.
X intends to acquire real property assets from Y (land, along with a commercial building and fixtures on the land).
Currently, a third party, A, leases these assets from X pursuant to a 100% triple net lease, which means that A pays for all
of the expenses of the property, including real estate taxes, building insurance, and maintenance. A operates a data
center business on the property.
By way of background, Y constructed the data center for A in accordance with the terms of the triple net lease, and A
then spent significant capital fitting out the space in order to meet its operational requirements for a data center. Under
the terms of the lease, Y neither participates in the operation of A’s business nor operates any other business on the
property, other than collecting fixed monthly rent from A, as a landlord. A operates the data center and maintains the
non-structural elements of the property, is responsible for all security at the property, and pays all costs of operating the
property, including costs of electricity, HVAC service and security costs.
Post-acquisition, X will continue to lease the property only to A (whose lease has more than 7 years of term left, and
over 17 years of term left if it exercises its extension options), and upon expiration of the lease to other third parties. X
will not acquire the data center business or assets, will not participate in the operation of the data center business, and
will not operate any business on the property, other than collecting rent as a landlord.
We think this transaction is clearly distinguishable from the facts presented in the Informal Staff Opinion 1609066,
where the party requesting guidance was operating a wholesale data center business, where it leased the property to
multiple third party customers, had multiple income streams, managed the HVAC and electrical systems at the property
and was responsible for ensuring the physical security of the data center. In the instant transaction, X will not be a data
center operator, will not manage the HVAC and electrical systems at the premises and will not be responsible for
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ensuring the physica l securi ty of the data center. In addi tion, X will have only one income stream follow ing the closing -
the fixed monthly rent payable under the tr iple net lease.
Based on this, we be li eve that this proposed transaction satisfies the requirements set forth in 16 C.F .R. § 802.5 -
Acquisi tions of investment rental property assets and thus is exempt from the HSR not ification fi li ng process. Do you
agree?
Regards,
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