Nareit, the worldwide representative voice for REITs and real estate companies with an interest in U.S. real estate, has issued a public comment on the Federal Trade Commission (FTC) proposed rule entitled “Premerger Notification: Reporting and Waiting Period Requirements.” The advance notice of proposed rulemaking (ANPRM) related to reporting under the Hart-Scott-Rodino Antitrust Improvements Act (HSR) is under the Clayton Act with respect to real estate investment trusts. The comment was written on January 29, 2021, and posted on February 1, 2021.
Tony M. Edwards, senior executive vice president of Nareit, responded for the group. He said the current treatment of REITs under HSR remains appropriate and is consistent with the role of REITs in the economy as well as with how the REIT marketplace has evolved over the past sixty years.
“Buying and selling investment real estate has always been an important part of a REIT’s ordinary course of business,” Edwards said in his letter to the FTC. “A change to the current treatment of REITs would not only be unwarranted but would likely result in thousands of unnecessary HSR filings while simultaneously imposing significant new burdens on REITs in ordinary course of business transactions that are unlikely to negatively impact competition. Therefore, a change to HSR reporting practices is neither necessary nor appropriate in connection with REIT acquisitions of real estate and REIT acquisitions of other REITs. Such acquisitions should continue to qualify for the statutory ordinary course of business exemption.”
Edwards said unlike other types of acquirers, REITs acquire real estate only to rent or lease it to third parties.
“Similarly, with respect to space in warehouses or shopping malls, REITs have an incentive to lease to as many tenants as possible to increase revenues. If a tenant owned the relevant real estate asset, however, it would potentially have an incentive to exclude or discriminate against its competitors. If a retailer owned a mall, it may have less incentive to lease space to other retailers who compete with its store. Or, if that cell tower were owned by a particular cell phone service provider,” Edwards said, “the provider could have an incentive to exclude rivals, reducing competition. Since a REIT is agnostic among lessees and has an incentive to diversify, it does not have an incentive to exclude any competitors. Given that REITs own property for investment purposes, only to lease it to third parties, REITs’ acquisitions of real estate or other REITs are unlikely to negatively impact competition.”
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