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EXHIBIT 8.4
September 28, 1999
Health Care Property Investors, Inc.
4676 MacArthur Court
Newport Beach, CA 92660
Dear Sirs:
We acted as counsel to American Health Properties, Inc., a Delaware
corporation (the "Company"), in connection with its issuance of Psychiatric
Group Preferred Stock (the "Psychiatric Group Stock") to holders of record on
July 14, 1995 of its Common Stock, as more fully described in the Information
Statement dated June 29, 1995. In that transaction, each holder of Common Stock
of the Company received as a dividend one share of Psychiatric Group Stock for
every ten shares of Common Stock the holder owned. The Psychiatric Group Stock
was redeemed by the Company in May of 1999.
You have asked whether, in our opinion, the issuance of the Psychiatric
Group Stock and the payment of dividends thereon during the period it was
outstanding affected the qualification of the Company as a real estate
investment trust (a "REIT") within the meaning of Section 856 of the Internal
Revenue Code (the "Code"). In rendering this opinion, we have
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reviewed such documents and other factual matters and such matters of law as we
have considered necessary or appropriate and are relying upon a representation
from the Company that, while the Psychiatric Group Stock was outstanding, the
Company intended to pay, and did actually pay, dividends on the Psychiatric
Group Stock and Common Stock in accordance with the "Dividend Policy" as
specified in the Information Statement relating to the Psychiatric Group
Preferred Stock dated June 29, 1995.
In our opinion, the Psychiatric Group Stock was equity for federal
income tax purposes, because the holders of the Psychiatric Group Stock had no
creditor or other non-equity type rights against the Company and possessed all
three rights that are the cornerstone of an equity interest: (i) the right to
vote in the election of directors and other matters put to the shareholders of
the Company, (ii) the right to participate in the earnings of the Company
through the payment of dividends and (iii) the right to share in the net assets
of the Company upon its liquidation.
Although there is no authority bearing directly on the treatment of
"targeted stock" such as the Psychiatric Group Stock, in our opinion the
Psychiatric Group Stock was a class of equity of the Company for federal income
tax purposes because (i) as a matter of Delaware law, the Psychiatric Group
Stock was stock of the Company, (ii) the holders of such stock had rights only
against the Company and had no direct rights with respect to the Psychiatric
Group assets or subsidiaries, (iii) the holders of such stock had no voting
rights with respect to the Psychiatric Group subsidiaries and
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voted only on matters put to the shareholders of the Company, (iv) the economic
expectations of such holders represented only the intentions of the Board of
Directors of the Company, and not legally enforceable rights of the holders, (v)
the Psychiatric Group assets were available to satisfy creditors of the Company
and (vi) the Psychiatric Group assets were not isolated in a separate subsidiary
but were held in significant part directly by the Company.
Under Section 562(c) of the Code and Treasury Regulations Section
1.562-2(a), distributions by the Company with respect to its Psychiatric Group
Stock or Common Stock were not "preferential dividends" as long as the
distributions (i) were without preference among shares in any given class and
(ii) were without preference among shares of different classes except to the
extent a class is entitled to a preference.
In our opinion, the Psychiatric Group Stock and Common Stock were
separate classes of stock of the Company for purposes of Section 562(c) because
(i) the Psychiatric Group Stock and the Common Stock were separate classes of
stock for corporate law purposes, (ii) the economic expectations of the holders
of each class were different and (iii) the voting and liquidation rights of the
holders of each class were different.
Although there is no authority bearing directly on the application of
preferential dividends under Section 562(c) of the Code to "targeted stock" such
as the Psychiatric Group Stock, in our opinion dividends paid on the Psychiatric
Group Stock and Common Stock were not "preferential" under Section
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562(c) of the Code because (i) the dividends paid by the Company did not deprive
either class of a dividend to which that class was entitled and neither class
received a dividend to which it was not entitled and (ii) concluding that the
dividends paid on the Psychiatric Group Stock and Common Stock of the Company
were not preferential is consistent with the purpose of Section 562(c) and not
inconsistent with any policy underlying the REIT distribution, income, asset or
shareholder tests.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-4 filed by Health Care Property Investors
("HCPI") with the Securities and Exchange Commission on September 28, 1999, in
which the joint proxy statement/prospectus of the Company and HCPI is included,
and to the reference to our firm name therein under the captions "Material
United States Federal Income Tax Consequences - Tax Consequences of the Merger",
"Material United States Federal Income Tax Consequences - Tax liabilities and
attributes inherited from AHP" and "Legal Matters". In giving such consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act.
Very truly yours,
SULLIVAN & CROMWELL