GOODWIN 47 filer. Schedule 13G is generally reserved for qualified institutional investors who acquire securities in the ordinary course of business and not with the purpose of changing or influencing control of the issuer; • that no member of the Excepted Holder group is currently part of a Section 13(d) “group” relating to the REIT’s shares nor will any member of the Excepted Holder group join such a “group” in the future; • if the waiver is being granted in reliance on the Excepted Holder group qualifying for “disaggregation” treatment under Section 13(d) of the Exchange Act, that it so qualifies and will continue to so qualify; and • that ownership of shares by any member of the Excepted Holder group does not and will not cause the REIT to constructively own 10% or more of the ownership interests of any of its tenants.27 Many REITs also require Excepted Holders to covenant that they will promptly notify the REIT in the event any representations fails to be true and to generally cooperate with requests for information by the REIT regarding the number of shares owned at any given time during the life of the waiver. Representations and covenants are typically made by the Excepted Holder either in a separate representation letter addressed to the REIT (sometimes referred to as an “Excepted Holder Certificate”) or in a separate section in the waiver document itself. In circumstances where there is a heightened risk of related party tenant income, the Excepted Holder Certificate may also include a series of covenants and other safeguards designed to monitor related party tenant issues.28 • Termination. Can the REIT unilaterally terminate the waiver at any time for any reason or for no reason? Every waiver must give the board the ability to immediately (and even retroactively) terminate the waiver if the board has determined that the REIT’s tax status may be in jeopardy. But there may be other circumstances in which the board of directors might determine that it no longer is in the REIT’s and its stockholders’ best interest to maintain a waiver for a particular investor or investor group, whether due to a related party tenant problem or otherwise. Waivers may give the board the ability to unilaterally terminate the waiver, provided that there will typically be a notice period (e.g., 30-90 days) during which time the Excepted Holder will have the ability to sell down or otherwise transfer its position to get below the standard ownership limit (though investors may still resist being required to sell stock at what may prove to be an inopportune time). Of course the granting of any sell-down period must be subject to the board’s determination that no actual REIT qualification concerns exist on account of the investor’s continued ownership. • Adjustments. The number of outstanding shares of the REIT is unlikely to stay static during the term of a waiver, which means the percentage ownership of the Excepted Holder will also go up and down, more typically down as the REIT issues additional shares in financing, acquisitions or other transactions. When the total outstanding shares of the REIT decrease, however, such as when the REIT repurchases its own shares under a stock repurchase program, the Excepted Holder may suddenly find that its percentage ownership has in fact increased and that it now holds shares in excess of the Excepted Holder Limit. To address this and other circumstances where the Excepted Holder Limit may inadvertently be breached, the parties can consider providing for a limited “sell down” window, say 30 days, during which the Excepted Holder will have the chance to sell shares to get back down below the Excepted Holder Limit before the charter’s automatic transfer provisions will be triggered. • Disclosure. Does the fact that the board has granted a waiver need to be publicly disclosed? The view of most practitioners is that waivers granted to dedicated institutional investors that invest in REITs in the ordinary course of their business is not generally a disclosable event, so neither a press release nor Form 8-K would typically be filed. While not required, some REITs sometimes add disclosure to their annual proxy statements stating that waivers have been granted by the board of directors to a given institutional investor in the ordinary course. Nevertheless, even in these cases, the waiver itself and/or a description of its specific terms are not generally disclosed. As noted above, however, whether or not a REIT publicly discloses a waiver, a casual glance at the beneficial ownership table included in its proxy statement will usually reveal whether an institutional investor or affiliated group has a position in the stock in excess of 27 See discussion below under “Related Party Tenant Ownership Limit”. 28 See discussion below in footnote 32 and accompanying text.