2204001 Informal Interpretation

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Sheinberg, Samuel I.
From: 	HSRHelp
Sent: 	Thursday, April 14, 2022 3:48 PM
To: 	Walsh, Kathryn E.; Berg, Karen E.; Musick, Vesselina; Sheinberg, Samuel I.; Six, Anne; Whitehead, Nora
Subject: 	FW: CONFIDENTIAL
To:
Subject: RE: CONFIDENTIAL
From: Shaffer, Kristin <kshaffer@ftc.gov>
Sent: Thursday, April 14, 2022 3:47:44 PM (UTC-05:00) Eastern Time (US & Canada)
So long as Company B is not involved in the operation or management of the data center business, we agree that the
acquisition of the building is exempt. If Company B acquires the business of the data center operation, that acquisition
may be separately reportable.
Best regards,
Kristin
Kristin Shaffer
Attorney
Premerger Notification Office
Federal Trade Commission
202-326-2388 | kshaffer@ftc.gov
From:
Sent: Thursday, April 14, 2022 10:06 AM
To: HSRHelp <HSRHelp@ftc.gov>
Subject: CONFIDENTIAL
Dear PNO staff,
A number of years ago, DC Operator built two data centers for its own use. Soon after building the sites, DC Operator
sold them to Company A in a sale-leaseback transaction. Following that transaction and continuing to this day, Company
A became the landlord and DC Operator became the tenant/operator at the two sites, with DC Operator continuing to
use the data centers for DC Operator’s own account. Pursuant to triple-net leases on each site, Company A has no
obligations whatsoever with respect to any maintenance, repair, or operating expenses at the sites and does not, in fact,
take on any of those responsibilities. Company A’s only function with respect to the sites is to collect rents from DC
Operator and maintain commercial general liability insurance, although this does not replace DC Operator’s obligation to
be fully insured as well with respect to the operation of the sites.
Company A now contemplates selling its interest in the sites to Company B. Assume that the jurisdictional thresholds are
satisfied. Pursuant to the contemplated transaction, Company B would step into the shoes of Company A as the landlord
under the existing triple-net leases, which are scheduled to expire in the year 2031. The leases give DC Operator multiple
consecutive options to renew the leases, at its own exclusive discretion, for 5-year terms at a time. Other than in the
event of DC Operator’s default under a lease, the landlord must accept a renewal (assuming timely notice) and cannot
simply terminate the lease. If and when the leases were terminated, DC Operator would have the right to take with it all
personal property currently used by DC Operator for the operation of a data center at both sites (these include
proprietary operating systems, signage, demountable walls, audio visual equipment, Primus lock cores, data and
telephone networking equipment, software, all information technology equipment, any special equipment used for
imaging, printing/inserting/mailing or payment remittance, and any other items of personal property used by DC
Operator in its operation, management or maintenance of the sites as data services centers).
Following the contemplated transaction, Company B’s intention is to continue collecting rent on the sites from DC
Operator, just as Company A has done to date. Just like Company A, Company B would have no obligations of any kind
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wi th respect to the ma intenance, repair, or operating expenses at the propert ies and w ou ld not, in fact, take on any of
those responsibil it i es. A ll Company B plans to do wi th respect to the properties is co ll ect rent from DC Operator.
Recognizing that the PNO has genera ll y view ed the investment real property exemption under 802.5 as inapplicable to
data centers (see 1609006), w e be li eve the exempt ion applies to the part icular facts of th is case. Company A has nei ther
built nor outfitted the data centers and does not carry out an y funct ions relating to the operat ion, maintenance, or
repair of the data centers. All Company A does is co ll ect rent from DC Operator pursuant to tr iple-net leases, and it now
effect ively w ants to se ll i ts right to coll ect those rents to Company B. Company B w ou ld continue to rent the properties
to DC Operator, w ho is ent irely independent and not wi th in the same " person" as Company B ( or Company A).
Your thoughts, as a lways, w ould be w elcome.
Best regards,
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