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EXHIBIT 8.1
March 5, 1998
Essex Property Trust, Inc.
777 California Avenue
Palo Alto, California 94304
Ladies and Gentlemen:
We have acted as counsel to Essex Property Trust, Inc., a Maryland corporation
(the "Company"), in connection with the shelf registration by (A) the Company
of (i) shares of its common stock, par value $0.0001 per share (the "Common
Stock"), (ii) shares or fractional shares of its preferred stock, par value
$0.0001 per share (the "Preferred Stock"), (iii) shares of Preferred Stock
represented by Depositary Shares, (iv) warrants to purchase the Preferred Stock
or the Common Stock (the "Warrants"), and (v) unconditional guarantees (the
"Guarantees") of the Debt Securities (defined below), with an aggregate public
offering price of $100,000,000, and (B) Essex Portfolio, L.P. a California
limited partnership (the "Operating Partnership"), of unsecured non-convertible
investment grade debt securities (the "Debt Securities"), with an aggregate
public offering price of $250,000,000. The Common Stock, Preferred Stock,
Depositary Shares, Warrants, Guarantees and Debt Securities are the subject of
a Registration Statement (File No. 333-44467)(the "Registration Statement")
filed by the Company and the Operating Partnership on Form S-3 with the
Securities and Exchange Commission (the "SEC") on January 16, 1998, under the
Securities Act of 1933 (the "Act"), as amended by Amendment No. 1 to the
Registration Statement, filed with the SEC on March 5, 1998. Capitalized terms
not defined herein shall have the meanings ascribed to them (or incorporated by
reference) in the Registration Statement.
We have been requested to provide you with our opinion as to
whether the Company currently and for each of the past three years has operated
in a manner to qualify it as a real estate investment trust ("REIT"), within the
meaning of Section 856(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
For purposes of the opinion set forth below, we have relied,
with your consent, as to factual matters only upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained in the
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Essex Property Trust, Inc.
March 5, 1998
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certificate of the Company dated January 16, 1998 (the "Certificate"). We have
also relied upon the accuracy of the Registration Statement.
Based upon such statements and representations, and subject
to, the succeeding paragraphs, we are of the opinion that, as of the date hereof
and for its taxable years ended December 31, 1994, December 31, 1995, December
31, 1996 and December 31, 1997, the Company has operated in a manner to qualify
it as a REIT under the Code, and assuming the Company continues to operate in
the same manner, it will continue to so qualify.
Our opinion is based upon the documents referred to above and
the current provisions of the Code, Treasury Regulations promulgated thereunder,
published pronouncements of the IRS and case law, any of which may be changed at
any time, possibly with retroactive effect. You should also be aware that
opinions of counsel are not binding upon the IRS or the courts. Any change in
applicable law, or any inaccuracy in the statements, representations and
assumptions on which we have relied may affect the continuing validity of the
opinion set forth herein.
This opinion addresses only the operation of the Company in a
manner to qualify it as a REIT as of the effective date of the Registration
Statement and during each of the past four taxable years. We undertake no
obligation to update this opinion, or to ascertain after the date hereof whether
circumstances occurring after such date may affect the conclusions set forth
herein.
We hereby consent to this opinion being filed as an exhibit
to the Registration Statement, to the reproduction in the prospectus of the
discussion under the heading "Federal Income Tax Consequences" to the reference
to our firm name and to this opinion in the Registration Statement and the
prospectus contained therein. In giving such consent, however, we do not admit
and we hereby disclaim that we come within the category of persons whose consent
is required under Section 7 of the Act or the rules and regulations of the SEC
promulgated thereunder, nor do we thereby admit that we are experts with respect
to any part of the Registration Statement within the meaning of the term
"experts" as used in the Act or the rules and regulations of the SEC promulgated
thereunder.
Very truly yours,
/s/ Morrison & Foerster LLP
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CERTIFICATE
OF
ESSEX PROPERTY TRUST, INC.
The undersigned, Michael J. Schall hereby certifies that he is the Chief
Financial Officer of Essex Property Trust, Inc., a real estate investment trust
("REIT") organized as a Maryland corporation (the "Company"). This Certificate
is being delivered to Morrison & Foerster LLP for the issuance of their opinion,
dated as of January 14, 1998 (the "Letter"), in connection with the shelf
registration by (A) the Company of (i) shares of its common stock, par value
$0.0001 per share (the "Common Stock"), (ii) shares or fractional shares of its
preferred stock, par value $0.0001 per share (the "Preferred Stock"), (iii)
shares of Preferred Stock represented by Depositary Shares, (iv) warrants to
purchase the Preferred Stock or the Common Stock (the "Warrants"), and (v)
unconditional guarantees (the "Guarantees") of the Debt Securities (defined
below), with an aggregate public offering price of $200,000,000, and (B) Essex
Portfolio, L.P. a California limited partnership (the "Operating Partnership"),
of unsecured non-convertible investment grade debt securities (the "Debt
Securities"), with an aggregate public offering price of $350,000,000. The
Common Stock, Preferred Stock, Depositary Shares, Warrants, Guarantees and Debt
Securities are the subject of a Registration Statement (the "Registration
Statement") filed by the Company and the Operating Partnership on Form S-3 with
the Securities and Exchange Commission ("SEC") on January 14, 1998, under the
Securities Act of 1933. This Certificate, which is rendered on behalf of the
Company, is intended as a statement of facts upon which Morrison & Foerster LLP
may rely in rendering the opinion set forth in the Letter with respect to the
Company's status as a "real estate investment trust" ("REIT") under the Internal
Revenue Code of 1986, as amended (the "Code"). The undersigned acknowledges
that, with the exception of the preparation of this Certificate, Morrison &
Foerster LLP has not undertaken any independent inquiry into or verification of
the matters addressed herein. All terms not defined herein shall have the
meanings ascribed to them (or incorporated by reference) in the Registration
Statement.
The undersigned, for and on behalf of the Company, hereby certifies to
Morrison & Foerster LLP as follows:
1. The Company is organized as a Maryland corporation and maintains its
books and records on the calendar year for federal income tax purposes.
2. The Company elected to be taxed as a REIT beginning with its taxable
year ended December 31, 1994.
3. The Company's election to be taxed as a REIT has never been revoked
or terminated.
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4. At the end of each taxable year since and including 1994, the Company
did not have any earnings and profits attributable to any corporation for any
year in which such corporation was not a REIT.
5. The Company has never been a bank (within the meaning of Section 581
of the Code), a financial institution described in Section 591 of the Code, a
small business investment company operating under the Small Business Act of
1958, a business development corporation (within the meaning of Section
582(c)(2)(B) of the Code) or an insurance company subject to Subpart L of the
Code.
6. The Company has always been managed by a board of directors.
7. The beneficial ownership of the Company has always been evidenced by
shares of Common Stock and unregistered shares of preferred stock, which shares,
subject to applicable federal and state securities laws, have always been freely
transferable.
8. The beneficial ownership of the Company's capital stock has been held
by at least 100 persons for at least 335 days of each taxable year of 12 months
(or during a proportionate part of a taxable year of less than 12 months) since
1994.
9. No more than 50% of the value of the Company's capital stock is or
has been held at any time during the last half of any taxable year since 1994
directly or indirectly (taking into account the constructive ownership rules of
Section 856(h) of the Code) by or for five or fewer individuals, within the
meaning of Section 542(a)(2) of the Code.
10. For each taxable year since and including 1994, the Company, the
Operating Partnership and any "qualified REIT subsidiary" (within the meaning of
Section 856(i) of the Code as in effect at the relevant period) of the Company
("QRS") (i) has held all of its real property for purposes of obtaining rental
income and long term appreciation and (ii) has not held any of its properties as
inventory or primarily for sale to customers in the ordinary course of a trade
or business.
11. At the end of each quarter of each taxable year since and including
1994, (i) at least 75% of the value of the Company's, the Operating
Partnership's and any QRS's total assets has consisted of Real Estate Assets (as
defined below), cash and cash items (i.e., receivables arising in the ordinary
course of the Company's operations, certificates of deposit), obligations
secured by mortgages on real property, shares in other REITs, or government
securities, and (ii) the Company's total assets has not consisted of securities
(other than obligations secured by mortgages on real property, shares in other
REITs, government securities or shares in QRSs) of any one issuer that
represented either more than 5% of the value of the Company's total assets (as
determined in accordance with Section 1.856-2(d)(2) of the Treasury Regulations
and taking into account the Company's proportionate share of assets held in the
Operating Partnership and
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any QRS) or more than 10% of the outstanding voting securities of such issuer
(within the meaning of Section 856(c)(5)(B) of the Code and Section 1.856-3(e)
of the Treasury Regulations promulgated thereunder). For purposes of this
Certificate, the term "Real Estate Assets" means real property (including fee
ownership, co-ownership, leaseholds, and options to acquire such interests),
mortgages on real property, and shares in another REIT.
12. At least 75% of the Company's, the Operating Partnership's and any
QRS's gross income for each taxable year since and including 1994 has been
derived from: (i) "rents from real property" (as defined in Section 856(d) of
the Code); (ii) interest on obligations secured by mortgages on real property or
interests in real property (excluding amounts described in Section 856(f) of the
Code); (iii) gain from the sale or other disposition of real property held
neither as inventory nor primarily for sale to customers in the ordinary course
of a trade or business; (iv) dividends or other distributions on, and gain from
the sale or other disposition of, transferable shares in other REITs; (v)
abatements and refunds of taxes on real property; (vi) income from foreclosure
property (as defined in Section 856(e) of the Code); (vii) amounts received or
accrued as consideration for entering into agreements to make loans secured by
mortgages on real property or on interests in real property or to purchase or
lease real property (including interests in real property and interests in
mortgages on real property); (viii) gain from the sale or disposition of a real
estate asset which is not a prohibited transaction solely by reason of Section
857(b)(6) of the Code; and (ix) any income which (A) is attributable to stock or
a debt instrument, (B) is attributable to the temporary investment of new
capital, and (C) is received or accrued during the one-year period beginning on
the date the Company received the capital.
13. At least 95% of the Company's, the Operating Partnership's and any
QRS's gross income for each taxable year since and including 1994 has been
derived from sources described in paragraph 12 above plus dividends, interest on
obligations other than mortgages, and gain from the sale or other disposition of
stock and securities held neither as inventory nor primarily for sale to
customers in the ordinary course of a trade or business.
14. No amounts payable to the Company, the Operating Partnership or any
QRS in connection with the rental of any property depends in whole or in part on
income or profits derived by any tenant (or sub-tenant) from such property
(except that such amounts may be based on a fixed percentage or percentages of
receipts or sales).
15. At all times since and including 1994, less than 15% of the adjusted
bases of any of the Company's, the Operating Partnership's and any QRS's
properties which are subject to leases has been attributable to personal
property and all personal property leased by the Company, the Operating
Partnership and any QRS has been under or in connection with a lease of real
property.
16. For each taxable year since and including 1994 until and including
1997, less than 30% of the Company's, the Operating Partnership's and any QRS's
gross income was derived from the sale or disposition of stock or securities
held for less than one year, property (other than
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foreclosure property within the meaning of Section 856(e) of the Code) held as
inventory or primarily for sale to customers in the ordinary course of a trade
or business, and real property, other than property compulsorily or
involuntarily converted (within the meaning of Section 1033 of the Code) and
foreclosure property (within the meaning of Section 856(e) of the Code), held
for less than four years.
17. For each taxable year since and including 1994, the Company, the
Operating Partnership and any QRS has never rendered, furnished or provided to
tenants any services, unless such services are customarily furnished or rendered
in connection with the rental of real property (as determined by the geographic
market in which the property is located and by services customarily provided to
tenants in properties of a similar class), and (A) such services are furnished
or rendered through an "independent contractor," as defined by Section 856(d)(3)
of the Code from whom neither the Company, the Operating Partnership nor any QRS
derives any income, (B) such services are not rendered primarily for the
convenience of the tenant and are usually or customarily rendered in connection
with the rental of space for occupancy only, or (C) for taxable years beginning
on or after January 1, 1998, income derived from services not described in
subparagraphs (A) and (B) hereof with respect to a property does not exceed 1%
of all amounts received or accrued during a taxable year with respect to such
property. For purposes of the 1% threshold described in this paragraph, the
amount derived by the Company, the Operating Partnership or any QRS for any
service shall be deemed to be not less than 150% of the direct cost incurred by
the Company, the Operating Partnership or the QRS, respectively, in furnishing
or rendering the service.
18. The Company has complied with the record keeping requirements set
forth in Sections 1.857-8 and 1.857-9 of the Treasury Regulations (relating to
the records to be maintained concerning stock ownership and information required
to be requested from shareholders) for each of its taxable years.
19. The Company has distributed at least 95% of its "real estate
investment trust taxable income" (as defined in Section 857(b) of the Code),
excluding any deduction for dividends paid (as defined by Section 561 of the
Code) and its net capital gain, for each taxable year since and including 1994.
20. Essex Management Corporation operates as a separate entity from the
Company, maintains separate books and records, and has primarily separate
officers, directors and employee functions.
21. The Company is not aware of any facts, circumstances, or events
which are contrary to or inconsistent with any of the foregoing statements or
any of the statements in the Letter. In any audit of the Company's or the
Operating Partnership's federal income tax returns for taxable years since and
including 1994, the IRS has not (i) challenged the status of the Company as a
REIT, or (ii) proposed adjustments that, if allowed, would have resulted in the
Company not
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continuing to qualify as a REIT. The Company expects that, and it will take all
measures within its control to ensure that, the foregoing representations
continue to be true for 1998.
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IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
January 14, 1998.
ESSEX PROPERTY TRUST, INC.
By: /s/ MICHAEL J. SCHALL
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Michael J. Schall
Chief Financial Officer
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