Section 856(b) of the Code provides that conditions (1) through (4) must be
met during the entire taxable year and that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. We believe that we have met
conditions (1) through (7) during each of the requisite periods ending on or before the close of our most recently completed taxable year, and that we will continue to meet these conditions in our current and future taxable years. There
can, however, be no assurance in this regard.
To help comply with condition (6), our Certificate of Incorporation
restricts transfers of our stock that would otherwise result in concentrated ownership positions. In addition, if we comply with applicable Treasury regulations to ascertain the ownership of our outstanding stock and do not know, or by exercising
reasonable diligence would not have known, that we failed condition (6), then we will be treated as having met condition (6). Accordingly, we have complied and will continue to comply with these regulations, including by requesting
annually from record holders of significant percentages of our stock information regarding the ownership of our stock. A stockholder who fails or refuses to comply with the request is required by Treasury regulations to submit a statement with its
federal income tax return disclosing its actual ownership of our stock and other information.
The Code provides that we will
not automatically fail to qualify for taxation as a REIT if we do not meet conditions (1) through (6), provided we can establish that such failure was due to reasonable cause and not due to willful neglect. Each such excused failure will result
in the imposition of a $50,000 penalty instead of REIT disqualification. This relief provision applies to any failure of the applicable conditions, even if the failure first occurred in a prior taxable year.
Our Wholly Owned Subsidiaries and Our Investments Through Partnerships. Except in respect of a TRS, as described below,
Section 856(i) of the Code provides that any corporation, 100% of whose stock is held by a REIT and its disregarded subsidiaries, is a qualified REIT subsidiary and shall not be treated as a separate corporation for U.S. federal income tax
purposes. The assets, liabilities and items of income, deduction and credit of a qualified REIT subsidiary are treated as the REITs. We believe that each of our direct and indirect wholly owned subsidiaries, other than the TRSs described below
(and entities owned in whole or in part by the TRSs), will be a qualified REIT subsidiary or other disregarded entity for U.S. federal income tax purposes (either such entity referred to as a QRS). Thus, in applying all of the federal
income tax REIT qualification requirements described in this summary, all assets, liabilities and items of income, deduction and credit of our QRSs are treated as ours, and our investment in the stock and other securities of such subsidiaries will
We have invested and may invest in real estate through one or more entities that are treated as partnerships
for federal income tax purposes, including limited or general partnerships, limited liability companies or foreign entities. In the case of a REIT that is a partner in a partnership, Treasury regulations under the Code provide that, for purposes of
the income and asset tests described below, the REIT is generally deemed to own its proportionate share, based on respective capital interests, of the income and assets of the partnership. In addition, for these purposes, the character of the assets
and items of gross income of the partnership generally remains the same in the hands of the REIT. In contrast, for purposes of the distribution requirement described below, we must take into account as a partner our share of the partnerships
income as determined under the general federal income tax rules for partnerships.
Subsidiary REITs. We have invested
and may invest in real estate through one or more entities that are intended to qualify for taxation as REITs, including a subsidiary REIT in which we were invested from the fourth quarter of 2013 until the third quarter of 2015. Our subsidiary
REITs generally have been and will be subject to the various REIT qualification requirements and other limitations described in this summary that are applicable to us. If one of our subsidiary REITs were to fail to qualify for taxation as a REIT,
then (a) the subsidiary REIT would become subject to regular U.S. corporate income tax as a C corporation, as described above, and (b) our ownership of shares in the subsidiary REIT would cease to be a qualifying real estate asset for
purposes of the tests described under Asset Tests below. If a subsidiary REIT were to fail to qualify for taxation as a REIT,