Exhibit 8.1
September 13, 2002
ElderTrust
101 East State Street
Suite 100
Kennett Square, PA 19348
Ladies and Gentlemen:
We have acted as counsel to ElderTrust, a Maryland real estate
investment trust (the "Company"), in connection with the registration
statement on Form S-3 (the "Registration Statement") and the prospectus
included therein (the "Prospectus") filed by the Company with the
Securities and Exchange Commission and relating to the registration
and potential sale by certain shareholders of the Company, as listed in
the Prospectus (the "Selling Shareholders"), of up to 228,416 shares of
beneficial interest, par value $.01 per share (the "Shares"), of the
Company, as required under the terms of a registration rights agreement
between the Company and the Selling Shareholders. In connection with
the Registration Statement, we have been asked to provide you with our
opinion on certain federal income tax matters. Capitalized terms used
in this letter and not otherwise defined herein have the meanings set
forth in the Prospectus.
Bases for Opinions
The opinions set forth in this letter are based on relevant current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury Regulations thereunder (including proposed and temporary Treasury
Regulations), and interpretations of the foregoing as expressed in court
decisions, applicable legislative history and the administrative rulings
and practices of the Internal Revenue Service (the "IRS"), including its
practices and policies in issuing private letter rulings, which are not
binding on the IRS except with respect to a taxpayer that receives such a
ruling, all as of the date hereof. These provisions and interpretations
are subject to changes by the IRS, Congress and the courts (as applicable),
that might result in material modifications of our opinions. Such changes
may be retroactive in effect. Our opinions do not foreclose the possibility
of a contrary determination by the IRS or a court of competent jurisdiction,
or of a contrary position taken by the IRS or the Treasury Department in
regulations or rulings issued in the future. In this regard, an opinion
of counsel represents counsel's best professional judgment as to the outcome
on the merits with respect to a particular issue, if such issue were to be
litigated, but an opinion is not binding on the IRS or the courts and is
not a guarantee that the IRS will not assert a contrary position with
respect to such issue or that a court will not sustain such a position
asserted by the IRS.
ElderTrust
September 13, 2002
Page 2
In rendering the following opinions, we have examined such
statutes, regulations, records, certificates and other documents as
we have considered necessary or appropriate as a basis for such
opinions, including the following:
(1) the Registration Statement, including the Prospectus, and
the documents incorporated by reference therein;
(2) the Second Amended and Restated Agreement of Limited
Partnership of ElderTrust Operating Limited Partnership
("ET Partnership"), dated as of January 30, 1998, as
amended;
(3) the Declaration of Trust of the Company dated September 23,
1997, and the Bylaws of the Company, each as amended to the
date hereof;
(4) the partnership agreement of each partnership and the
operating agreement of each limited liability company in
which either the Company or ET Partnership has had or has
a direct or indirect interest (collectively, the "Partnership
Subsidiaries");
(5) the articles of incorporation, bylaws and stock ownership
records of ET Capital Corp. and ET Capital Corp. II, Inc.;
(6) the articles of incorporation of the wholly-owned corporate
subsidiaries of the Company other than ET Capital Corp. and
ET Capital Corp. II, Inc. (the "QRSs");
(7) all real estate leases of our healthcare facilities and office
properties, pursuant to which ET Partnership leases a
healthcare facility or space in an office building to a lessee,
the majority of which leases were entered into with Genesis
Health Ventures, Inc. or its affiliates (collectively, the
"Leases"); and
(8) other necessary documents.
The opinions set forth in this letter also are premised on certain
written representations of the Company regarding the organization,
ownership and operations (including the income, assets, businesses,
liabilities and properties) of the Company, ET Partnership, ET Capital
Corp., ET Capital Corp. II, Inc., the Partnership Subsidiaries and the
ElderTrust
September 13, 2002
Page 3
QRSs contained in a letter to us dated as of the date hereof (the
"Management Representation Letter"). Any variation or difference
in the facts from those set forth in the documents that we have
reviewed and upon which we have relied (including, in particular,
those set forth in the Management Representation Letter) may adversely
affect the conclusions stated herein.
We have made such factual and legal inquiries, including
examination of the documents set forth above, as we have deemed
necessary or appropriate for purposes of our opinions. For purposes
of rendering our opinions, however, we have not made an independent
investigation or audit of the facts set forth in the above referenced
documents, including the Management Representation Letter (collectively,
the "Reviewed Documents"). We consequently have relied upon
representations in the Management Representation Letter that the
information presented in such documents or otherwise furnished to us
accurately and completely describes all material facts relevant to our
opinions. We are not aware, however, of any material facts or
circumstances inconsistent with the representations we have relied
upon as described herein or other assumptions set forth herein.
Moreover, we have assumed that, insofar as relevant to the opinions
set forth herein:
(i) the Company, the Operating Partnership, ET Capital Corp., ET
Capital Corp. II, Inc., the QRSs, and the Partnership Subsidiaries have
been at all times since the later of the date of incorporation or
formation and January 30, 1998, and will be, operated in the manner
described in the relevant partnership agreement, limited liability
company operating agreement, declaration of trust, articles (or
certificate) of incorporation or other organizational documents and
in the Registration Statement and the Management Representation Letter;
(ii) as represented by the Company, there are no agreements or
understandings between the Company or ET Partnership, on the one hand,
and Mr. D. Lee McCreary, who owns 100% of the voting stock of ET Capital
Corp., or ET Capital Corp. itself, on the other hand, that are inconsistent
with Mr. McCreary's being considered to be both the record and beneficial
owner of more than 90% of the outstanding voting stock of ET Capital Corp.,
and there were no such agreements or understandings during the period that
Mr. Edward B. Romanov, Jr. owned any voting stock of ET Capital Corp.;
(iii) the Company is a validly organized and duly incorporated
real estate investment trust under the laws of the State of Maryland,
ET Partnership is a duly organized and validly existing limited
partnership under the laws of the State of Delaware, each of ET
Capital Corp. and ET Capital Corp. II, Inc. is a validly organized
ElderTrust
September 13, 2002
Page 4
and duly incorporated corporation under the laws of the State of
Delaware, and each of the Partnership Subsidiaries and QRSs is a duly
organized and validly existing partnership, limited liability company
or corporation, as the case may be, under the applicable laws of the
state in which it was purported to be organized;
(iv) that (A) all of the representations and statements set forth
in the Reviewed Documents, are true and correct and will continue to be
true and correct, (B) any representation or statement made as a belief
or made "to the knowledge of" or similarly qualified is correct and
accurate and will continue to be correct and accurate without such
qualification, (C) each of the Reviewed Documents that constitutes an
agreement is valid and binding in accordance with its terms, and (D)
all of the obligations imposed by the Reviewed Documents on the
parties thereto, including, without limitation, obligations under the
Declaration of Trust, have been and will continue to be performed or
satisfied in accordance with their terms;
(v) the genuineness of all signatures, the proper execution of
all documents, the authenticity of all documents submitted to us as
originals, the conformity to originals of documents submitted to us
as copies, and the authenticity of the originals from which any copies
were made; and
(vi) that any documents as to which we have reviewed only a form
were or will be duly executed without material changes from the form
reviewed by us.
Opinions
Based upon, subject to, and limited by the assumptions and
qualifications set forth herein, we are of the opinion that:
1. The Company was organized and has operated in conformity
with the requirements for qualification as a real estate
investment trust ("REIT") under the Code, effective for each
of its taxable years ended December 31, 1998 through and
including December 31, 2001, and the Company's current
organization and current and proposed method of operation,
as described in the Management Representation Letter and the
Registration Statement, will enable it to continue to meet
the requirements for qualification and taxation as a REIT under
the Code for taxable year 2002 and thereafter.
ElderTrust
September 13, 2002
Page 5
2. The discussion under the caption "Material Federal Income Tax
Considerations" in Exhibit 99.1 to the Company's Form 8-K
dated May 22, 2002 that is incorporated by reference into the
Prospectus accurately describes, in all material respects, the
federal income tax considerations anticipated to be material to
a purchaser of the Shares.
The Company's ability to qualify as a REIT depends in particular
upon whether each of the Leases is respected as a lease for federal
income tax purposes. If one or more Leases are not respected as leases
for federal income tax purposes, the Company may fail to qualify as a
REIT. The determination of whether the Leases are leases for federal
income tax purposes is highly dependent on specific facts and
circumstances. In addition, for the rents payable under a Lease to
qualify as "rents from real property" under the Code, the rental
provisions of the Leases and the other terms thereof must conform
with normal business practice and not be used as a means to base the
rent paid on the income or profits of the lessees. In delivering the
opinions set forth above that the Company's organization and method
of operation (as described in the Management Representation Letter and
the Registration Statement) have enabled the Company to meet the
requirements for qualification and taxation as a REIT effective for
each of its taxable years ended December 31, 1998 through and including
December 31, 2001, and that the Company's current organization and current
and proposed method of operation will enable the Company to meet such
requirements for the current taxable year and subsequent taxable years,
we expressly rely upon, among other things, the Company's representations
as to various factual matters with respect to the Leases, including
representations as to the commercial reasonableness of the economic
and other terms of the Leases at the time the Leases were originally
entered into (and taking into account for this purpose changes to the
economic and other terms of the Leases pursuant to any subsequent
amendments), the intent and economic expectations of the parties to the
Leases, the allocation of various economic risks between the parties to
the Leases, taking into account all surrounding facts and circumstances,
the conformity of the rental provisions and other terms of the Leases
with normal business practice, the conduct of the parties to the Leases,
and the conclusion that such terms are not being, and will not be, used
as a means to base the rent paid on the income or profits of the lessees.
We express no opinion as to any of the economic terms of the Leases, the
commercial reasonableness thereof, or whether the actual economic
relationships created thereby are such that the Leases will be respected
for federal income tax purposes or whether the rental and other terms of
the Leases conform with normal business practice (and are not being used
as a means to base the rent paid on the income or profits of the lessees
under the Leases).
ElderTrust
September 13, 2002
page 6
The Company's qualification and taxation as a REIT depend upon the
Company's ability to meet on an ongoing basis (through actual annual
operating results, distribution levels, diversity of share ownership and
otherwise) the various qualification tests imposed under the Code, which
are described in the Company's Form 8-K dated May 22, 2002 that is
incorporated by reference into the Prospectus. We have relied upon
representations of the Company and ET Partnership with respect to these
matters and will not review the Company's compliance with these
requirements on a continuing basis. Accordingly, no assurance can be
given that the actual results of the Company's operations, the sources
of its income, the nature of its assets, the level of its distributions
to shareholders and the diversity of its share ownership for any given
taxable year will satisfy the requirements under the Code for
qualification and taxation as a REIT.
For a discussion relating the law to the facts, and the legal
analysis underlying the opinions set forth in this letter, we incorporate
by reference the discussion of federal income tax issues under the caption
"Material Federal Income Tax Considerations" in Exhibit 99.1 to the
Company's Form 8-K dated May 22, 2002 that is incorporated by reference
into the Prospectus.
This opinion letter addresses only the specific federal income tax
matters set forth above and does not address any other federal, state,
local or foreign tax issues. This opinion letter has been prepared
solely for your use in connection with the filing of the Registration
Statement, and should not be quoted in whole or in part or otherwise be
referred to, nor be filed with or furnished to any governmental agency or
other person or entity, without the prior written consent of this firm.
We assume no obligation by reason of this opinion letter to advise you of
any changes in our opinions or of any new developments in the application
or interpretation of the federal income tax laws subsequent to the delivery
of this opinion letter.
We hereby consent to the filing of this opinion letter as Exhibit 8.1
to the Registration Statement and to the use of the name of the firm therein.
In giving the consent, we do not thereby admit that we are an "expert" within
the meaning of the Securities Act of 1933, as amended.
Very truly yours,
/s/ HOGAN & HARTSON L.L.P.
HOGAN & HARTSON L.L.P.