Conversions to REIT Status by Merger

In connection with a plan to reorganize the business operations of American Tower Corp.(NYSE: AMT) to allow the Delaware corporation to be taxed as a real estate investment trust, American Tower REIT, Inc. registered common shares valued at $21.89 billion on June 3 (Form S-4, SEC file no. 333-174684).  The REIT conversion will be implemented through a series of steps including, among other things, the merger of AMT into American Tower REIT, a recently-formed wholly-owned subsidiary.  For accounting purposes, the merger will be treated as a transfer of assets and exchange of shares between entities under common control. 

A REIT is not permitted to retain earnings and profits accumulated during years when the company or its predecessor was taxed as a C corporation.  To elect REIT status for the taxable year beginning January 1, 2012, AMT must distribute to its stockholders on or before December 31, 2012 previously undistributed earnings and profits attributable to the taxable period ending prior to January 1, 2012.  AMT plans to distribute these pre-REIT accumulated earnings and profits by paying a one-time special cash distribution to stockholders, estimated to be be no more than $200 million.  

Summit Hotel Properties, Inc. (NYSE: INN) converted to REIT status concurrently with its IPO on February 9, 2011 (Form S-11, 333-168686).  The issuer's predecessor, Summit Hotel Properties, LLC, formed Summit Hotel OP, LP to serve as the operating partnership of the REIT ("OP").  In connection with the merger of the LLC into the OP, the OP registered units of limited partnership interest valued at $149.9 million to be issued as merger consideration for the membership interests in the LLC (Form S-4, 333-168685). 

Prior to the merger of the LLC into the OP, the OP was treated as an entity disregarded for federal income tax purposes as separate from the REIT.  Although for state law purposes the OP was the surviving entity in the merger, the OP is treated as a continuation of the LLC for federal income tax purposes.  In the reorganization transactions, the REIT will be treated as contributing the cash proceeds of the IPO to the OP in exchange for OP units, except to the extent the payment of accrued and unpaid priority returns on the LLC membership interests as part of the reorganization transactions is recharacterized by the IRS as a “disguised sale” for federal income tax purposes.  The opinion of Hunton & Williams LLP that the payment of the accrued and unpaid priority returns should not be treated as a disguised sale for federal income tax purposes in included as Exhibit 8.1 to the Form S-4.