Federal Register / Vol. 62, No. 244 / Friday, December 19, 1997 / Notices 66685

he desires that the transaction be

consummated.

Notice to Interested Persons

Because the only Plan assets involved

in the proposed transaction are those in

the Account of Dr. Light and he is the

only participant affected by the

proposed transaction, there is no need

to distribute the notice of the proposed

transaction to interested persons.

Comments and requests for a hearing are

due 30 days from the date of publication

of this proposed exemption in the

Federal Register.

FOR FURTHER INFORMATION CONTACT: Mr.

C.E. Beaver of the Department,

telephone (202) 219–8881. (This is not

a toll-free number.)

General Information

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and/or section

4975(c)(2) of the Code does not relieve

a fiduciary or other party in interest of

disqualified person from certain other

provisions of the Act and/or the Code,

including any prohibited transaction

provisions to which the exemption does

not apply and the general fiduciary

responsibility provisions of section 404

of the Act, which among other things

require a fiduciary to discharge his

duties respecting the plan solely in the

interest of the participants and

beneficiaries of the plan and in a

prudent fashion in accordance with

section 404(a)(1)(b) of the act; nor does

it affect the requirement of section

401(a) of the Code that the plan must

operate for the exclusive benefit of the

employees of the employer maintaining

the plan and their beneficiaries;

(2) Before an exemption may be

granted under section 408(a) of the Act

and/or section 4975(c)(2) of the Code,

the Department must find that the

exemption is administratively feasible,

in the interests of the plan and of its

participants and beneficiaries and

protective of the rights of participants

and beneficiaries of the plan;

(3) The proposed exemptions, if

granted, will be supplemental to, and

not in derogation of, any other

provisions of the Act and/or the Code,

including statutory or administrative

exemptions and transitional rules.

Furthermore, the fact that a transaction

is subject to an administrative or

statutory exemption is not dispositive of

whether the transaction is in fact a

prohibited transaction; and

(4) The proposed exemptions, if

granted, will be subject to the express

condition that the material facts and

representations contained in each

application are true and complete, and

that each application accurately

describes all material terms of the

transaction which is the subject of the

exemption.

Signed at Washington, DC, this 16th day of

December 1997.

Ivan Strasfeld,

Director of Exemption Determinations

Pension and Welfare Benefits Administration,

Department of Labor.

[FR Doc. 97–33179 Filed 12–18–97; 8:45 am]

BILLING CODE 4510–29–P

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Application Nos. D–10461, D–10462 and D–

10463]

Notice of Proposed Amendment to

Prohibited Transaction Exemption

(PTE) 93–8 Involving the Fortunoff

Pension Plans (the Plans) Located in

Westbury, NY

AGENCY: Pension and Welfare Benefits

Administration, U.S. Department of

Labor.

ACTION: Notice of proposed amendment

to PTE 93–8.

SUMMARY: This document contains a

notice of pendency before the

Department of Labor (the Department) of

a proposed individual exemption

which, if granted, would amend PTE

93–8 (58 FR 7258, February 5, 1993), a

purchase, leaseback and license

exemption involving Plans sponsored

by Fortunoff Fine Jewelry and

Silverware, Inc. (FFJ) and M. Fortunoff

of Westbury Corporation (M. Fortunoff)

and parties in interest. These

transactions are described in a notice of

pendency that was published in the

Federal Register on May 8, 1992 at 57

FR 19951. The proposed exemption, if

granted, would affect participants and

beneficiaries of, and fiduciaries with

respect to the Plans.

EFFECTIVE DATE: If granted, this proposed

exemption would be effective as of the

date the notice granting the exemption

is published in the Federal Register.

DATES: Written comments and requests

for a public hearing must be received by

the Department on or before February 2,

1998.

ADDRESSES: All written comments and

requests for a public hearing (preferably,

three copies) should be sent to the

Office of Exemption Determinations,

Pension and Welfare Benefits

Administration, Room N–5649, U.S.

Department of Labor, 200 Constitution

Avenue, NW., Washington, DC 20210,

Attention: Application Nos. D–10461,

D–10462 and D–10463. The application

pertaining to the proposed exemption

and the comments received will be

available for public inspection in the

Public Documents Room of the Pension

and Welfare Benefits Administration,

U.S. Department of Labor, Room N–

5507, 200 Constitution Avenue, NW.,

Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT:

Ms. Jan D. Broady, Office of Exemption

Determinations, Pension and Welfare

Benefits Administration, U.S.

Department of Labor, Washington, DC

20210, telephone (202) 219–8881. (This

is not a toll-free number.)

SUPPLEMENTARY INFORMATION: Notice is

hereby given of the pendency before the

Department of proposed exemption that

would amend PTE 93–8. PTE 93–8

provides an exemption from certain

prohibited transaction restrictions of

section 406 of the Employee Retirement

Income Security Act of 1974 (the Act)

and from the sanctions resulting from

the application of section 4975 of the

Internal Revenue Code of 1986 (the

Code), as amended, by reason of section

4975(c)(1) of the Code. The proposed

exemption was requested in an

application filed on behalf of M.

Fortunoff and FFJ (collectively), the

Applicants) pursuant to section 408(a)

of the Act and section 4975(c)(2) of the

Code, and in accordance with the

procedures set forth in 29 CFR part

2570, subpart B (55 FR 32836, August

10, 1990). Effective December 31, 1978,

section 102 of Reorganization Plan No.

4 of 1978 (43 FR 47713, October 17,

1978) transferred the authority of the

Secretary of the Treasury to issue

exemptions of the type requested to the

Secretary of Labor. Accordingly, this

proposed exemption is being issued

solely by the Department.

I. Background

PTE 93–8 provides prospective

exemptive relief from the restrictions of

sections 406(a), 406(b)(1) and (b)(2) of

the Act and the sanctions resulting from

the application of section 4975 of the

Code, by reason of section 4975(c)(1)(A)

through (E) of the Code with respect to

(1) the purchase by the Fortunoff

Pension Plan—Employer Group A Plan

(the Employer Group A Plan), the

Fortunoff Pension Plan—Employer

Group B Plan (the Employer Group B

Plan) and the Fortunoff Fine Jewelry

and Silverware, Inc. Profit Sharing Plan

(the Profit Sharing Plan) of undivided

interests in certain improved real

property (the Property), for the total
66686 Federal Register / Vol. 62, No. 244 / Friday, December 19, 1997 / Notices

cash consideration of $6 million, from

M. Fortunoff, the sponsor of the Group

B Plan and a retailer of rugs, furniture

and household items; (2) the leasing of

the Property by the Plans, under the

provisions of an amended lease (the

Amended Lease), to FFJ, the sponsor of

the Group A Plan and the Profit Sharing

Plan as well as retailer of fine jewelry,

silverware, glassware and crystal; and

(3) the use of space in the Property by

Fortunoff Information Services (FIS), a

partnership providing data processing

services to FFJ and M. Fortunoff

pursuant to the terms of a license

agreement (the License) between FFJ

and FIS.

As noted in the Summary of Facts and

Representations underlying PTE 93–8,

the subject Property, which is located at

One MH Plaza, Axinn Avenue, Garden

City East, Nassau County, New York has

the following legal description:

All that certain plot, piece or parcel of

land, situate, lying and being near Westbury,

Town of Hempstead, County of Nassau and

State of New York, being the northerly 367.04

feet more or less of Lot 44 Block 73 on the

Nassau County land and tax map as same

existed on the date hereof.

The Property consists of a one story

office and warehouse building

containing approximately 116,000

square feet of gross building area on a

site of approximately 4.0663 acres of

land. There is also a parking area. The

Property was originally leased by M.

Fortunoff to FFJ for its warehouse and

data processing services under the

provisions of a written, triple net lease

(the Lease) that commenced on March 1,

1989. The annual rental under the Lease

was $554,232 and was payable in

monthly installments of $46,186. In

addition to the Lease, FFJ granted its

affiliate, FIS, an exclusive right to use,

for $3,850 per month, approximately

8,041 square feet in the building area for

FIS’s information systems and data

processing operations. The term of the

License coincided with the term of the

Lease.

Upon the granting of PTE 93–8, the

Plans purchased the Property, which

was unencumbered by a mortgage, from

M. Fortunoff for the total cash

consideration of $6 million. The

purchase price was less than the

independently appraised value of the

Property. The Property was then

allocated among the Plans such that the

Group A Plan and the Group B each

acquired 40 percent interests in the

Property with each Plan paying $2.4

million. The Profit Sharing Plan

acquired the remaining 20 percent

interest in the Property for $1.2 million.

At the time of acquisition, the Property

represented approximately 19 percent of

the Group A Plan’s assets, 22 percent of

the Group B Plan’s assets and 13 percent

of the assets of the Profit Sharing Plan.

With the exception of mandatory title

insurance charges, no Plan paid any real

estate fees or commissions in

connection with its acquisition of an

interest in the Property.

Following the purchase transaction,

the Lease and License were assigned to

the Plans. As modified by the Lease

Assignment and Assumption

Agreement, the Amended Lease

between the Plans and FFJ, has a twelve

year term that will expire on February

29, 2004. The annual rental under the

Amended Lease, which is the same as

that paid under the Lease, is $554,232

(the Base Rent). The Base Rent is

payable in monthly installments of

$46,186. Commencing on March 1, 1993

and including the year ending February

29, 2004, FFJ is required to pay, in

addition to the Base Rent, and annual

Escalation Amount based upon the fair

market rental value of the Property as

determined by a qualified, independent

appraiser. Effective October 1, 1997, FFJ

has commenced paying an annual

Escalation Amount of $35,048 on a

monthly basis in equal installments of

$2,920.67. Therefore, the total rental

amount being paid is $589,280 annually

of $49,107 monthly. In the event that

the fair market rental value of the

Property should decline to an amount

which is less than the Base Rent, the

Amended Lease provides that the Plans

will be paid the Base Rent. As with the

Lease, the Amended Lease is also a

triple net lease.

The License between FFJ and FIS,

which was similarly modified by the

Lease Assignment and Assumption

Agreement, required FIS to pay its

proportionate share of utilities as well

as repair and maintain that portion of

apace that it occupied, also on triple net

basis. Although the License had a term

that was commensurate with that of the

Amended Lease and required that FIS

pay FFJ a base fee that was proportional

to the amount that FFJ paid the Plans

under the Amended Lease, it was

terminated on or about January 1, 1995

after FIS vacated the Property.

Currently, FFJ occupies that space.

To secure its obligations under the

Amended Lease, FFJ obtained a one

year, irrevocable letter of credit (the

Letter of Credit) in favor of the Plans.

The Letter of Credit, which was in the

face amount of $550,000, provided that

Sanford Browde, the independent

fiduciary for the Plans with respect to

the transactions, could draw upon

amounts available thereunder the FFJ

ever defaulted in its rental payments

under the Amended Lease and the

default continued for more than ten

days after notice of the default had been

given. On February 25, 1994, the Letter

of Credit expired.

To further secure FFJ’s obligations to

the Plans under the Amended Lease, M.

Fortunoff entered into an escrow

agreement (the Escrow Agreement) with

the Plans whereby at least one year’s

rental under the Amended Lease would

be maintained through the sixth

anniversary date of the Property’s

assignment to the Plans. In this regard,

M. Fortunoff established a $1.65 million

special escrow account (the Escrow

Account) over which it would have no

withdrawing power or authority. If, at

any time the Escrow Account were

depleted, M. Fortunoff would be

required to make up the shortfall.

Funds in the Escrow Account would

not be disbursed if there had been a

default under the Amended Lease

during the initial six year term of the

Escrow Agreement. Instead, the Escrow

Agreement would continue until the

end of the term of the Amended Lease.

Assuming there were no defaults after

this period, the balance of the Escrow

Account would be delivered to M.

Fortunoff after 1999.

As noted above, the transactions

described in PTE 93–8 are being

monitored by Mr. Browde, the

independent fiduciary for the Plans.

Further, as additional safeguards, the

exemption contains a number of specific

conditions. For example, (1) the terms of

the transactions must be at least as

favorable to the Plans as those

obtainable in arm’s length transactions

with an unrelated party; (2) the

independent fiduciary must (a)

determine that the transactions are in

the best interests of the Plans, (b)

monitor and enforce compliance with

the terms and the conditions of the

transactions and exemption at all times,

and (c) appoint one or more

independent fiduciaries to resolve any

conflicts of interest which may develop

between the Plans with respect to the

Amended Lease, the Escrow Agreement,

the Property, or each Plan’s interest

therein; (3) the value of the

proportionate interests in the Property

that are acquired by each Plan must not

exceed 25 percent of each Plan’s assets;

and (4) the Base Rent must be adjusted

annually by the independent fiduciary

based upon an independent appraisal of

the Property.

II. Proposed Modification to PTE 93–8

According to the Applicants, the

subject Property is irregularly-shaped

and resembles a flagpole or a flag lot.

Corporate Property Investors (CPI),

which is not affiliated with either the
Federal Register / Vol. 62, No. 244 / Friday, December 19, 1997 / Notices 66687

1The Substitute Property that will be acquired by

the Plans measures approximately 358 feet by 47

feet and 70 feet by 43 feet for a total of 19,836

square feet. The approximate dimensions of the

Exchange Property are 50 feet by 367 feet or a total

of 18,350 square feet.

Applicants or Mr. Browde, is the owner

of two neighboring lots to the immediate

east and west of the ‘‘pole’’ area of the

Property which has been designated by

the Applicants for employee parking.

The Property currently separates the

two parcels owned by CPI.

By eliminating the pole portion of the

Property, the Applicants represent that

the Property will become regular in

shape and more suitable for expansion.

If reconfigured, the Property will also

provide additional parking for

employees of FFJ and for others using

the warehouse facility.

Therefore, the applicants propose to

modify PTE 93–8 by having the Plans

exchange the pole portion of the

Property (the Exchange Property) for

nearly equivalent portions of the two

lots that are owned by CPI (the

Substitute Property).1 The Substitute

Property is contiguous with the existing

northern border of the flag portion of the

Property and is subject to a ground lease

that is currently held by CPI as ground

lessor. The Substitute Property is used

by CPI for parking purposes and has the

following legal description:

All that certain plot, piece or parcel of

land, situate, lying and being near Westbury,

Town of Hempstead, County of Nassau and

State of New York, being the southerly 47.50

feet, more or less, of Lots 23 and 25 in section

44 Block 73 on the Nassau County Land and

Tax Map as same existed on the date hereof.

The proposed exchange will be

conducted on the basis of a tax free

exchange of like-kind property under

section 1031 of the Code. The Substitute

Property will be acquired by the Plans

in fee simple and will not be subject to

the ground lease. At the time of closing,

CPI will transfer the Substitute Property

to the Plans free of the rights of any

person or entity under the ground lease.

After the land exchange, the total area

of the Property will be essentially the

same as at present but the land will be

more regular in shape. As for CPI, the

proposed exchange will allow it to own

one continuous parcel of land, thus

enhancing the utility of its land

holdings.

The Plans propose to effect the real

property exchange with CPI under the

terms of a Real Estate Exchange

Agreement. The proposed exchange is

also contingent upon the Department’s

approval of the arrangement and

requires that the parties warrant or

adhere to environmental laws and

regulations affecting the respective

Properties. It is represented that the

exchange will not affect the present use

of the Property, the Amended Lease, or

M. Fortunoff’s obligations under the

Escrow Agreement.

Because of the nature of the

modification discussed above, the

Department has determined that the

exemptive relief provided under PTE

93–8 is no longer available. Therefore,

the Department has decided to publish

a new exemption which, if granted,

would amend PTE 93–8 by allowing the

Plans to lease the Substitute Property to

FFJ along with the remaining Property

under the provisions of the Amended

Lease. In effect, the new proposed

exemption will incorporate by reference

many of the facts, representations and

continuing conditions that are

contained in PTE 93–8. However, the

proposed exemption will not cover FIS’s

use of space in the Property pursuant to

the terms of the License as such

arrangement has been terminated.

III. Independent Appraisal

Bernard Goodman, MAI, CRE, and

Matthew J. Guzowski, MAI,

independent appraisers (the Appraiser),

who are affiliated with the appraisal

firm of Goodman-Marks Associates, Inc.,

located in Mineola, New York, have

addressed the economic impact of the

Exchange Property and the Substitute

Property in an appraisal report dated

September 9, 1997. The Appraisers note

that the Exchange Property and the

Substitute Property are currently part of

larger parcels of real property that are

zoned for industrial use. The Appraisers

state that it is rare that parcels of such

size are marketed in industrial-zoned

areas and that their utility can only be

realized by the adjoining land users.

Further, because there are no

comparable sales of similarly-sized

parcels of real property in the area to

formulate the basis for determining the

fair market values of the Substitute

Property and the Exchange Property, as

‘‘standalone parcels,’’ the Appraisers

state that neither parcel would have any

marketable value and that to determine

such values would be very speculative.

However, because both parcels are of

virtually the same size and are located

in the same immediate area, the

Appraisers conclude that they are of

equal value.

In addition to opining on the

respective fair market values of the

Exchange Property and the Substitute

Property, the Appraisers have

determined that as of September 6,

1997, the Property would have a fair

market value of $6.2 million. Moreover,

as of that date, the Appraisers have

estimated the fair market rental value of

the Property at $8.50, gross, per square

foot of building area, or $5.08 net rent

per square foot of building area.

Thus, as a result of the

unmarketability of the Substitute

Property as a stand alone strip of real

property and its size in relation to the

Property, the Appraisers have

determined that the acquisition by the

Plans of the Substitute Property will

have a minimal effect on the fair market

value or the fair market rental value of

the Property. The Appraisers note that

the benefit to be derived by the Plans

from the exchange will be the

availability of additional parking spaces

which will be in closer proximity to the

warehouse facility. The squaring off of

the Property will create a more

convenient use for those accessing the

warehouse.

IV. Views of the Independent Fiduciary

Mr. Browde represents that he has

investigated real estate and economic

considerations relating to the proposed

exchange transaction and has concluded

that it will benefit the Plans by

enhancing the value of the Property. In

this regard, Mr. Browde notes that the

Substitute Property and the Exchange

Property are of nearly the same size.

After the land exchange, the total land

area of the Property essentially will be

the same but will result in a net increase

of approximately 2,300 square feet of

space. By eliminating the pole, the

Property will become regular in shape

and more suitable for use.

Mr. Browde also states that a regularshaped parcel of real estate has more

value than one that is oddly-shaped. In

this regard, he states that the Substitute

Property would allow two rows of

parking in the same space which

formerly accommodated only one row of

parallel parking, thereby increasing the

number of legal parking spaces at the

Property by 26. This additional benefit

would be a desirable consequence of the

exchange.

Further, Mr. Browde represents that

the warehouse on the Property could be

expanded to a greater extent than at

present because the land exchange

would now provide a greater distance

between the new property line and the

exterior walls of the building’s north

side. He also notes that the land

exchange would be without cost to the

Plans, other than transaction costs

which are not expected to exceed

$3,000.

Finally, Mr. Browde notes that since

the granting of PTE 93–8, all of the

terms and conditions of the Amended

Lease, the Letter of Credit and the

Escrow Agreement have been complied

with by the parties. Mr. Browde also
66688 Federal Register / Vol. 62, No. 244 / Friday, December 19, 1997 / Notices

2Based upon these valuations, it should be noted

that the property, valued at $6.2 million by the

Appraisers as of September 6, 1997, represents

12.41 percent of the assets of the Group A Plan,

23.22 percent of the assets of the Group B Plan and

11.84 percent of the assets of the Profit Sharing

Plan.

represents that there have been no

defaults or delinquencies under the

Amended Lease.

V. Other Modifications

A. Plan Information

In addition to the above, the

Applicants have provided updated

information concerning the Plans. In

this regard, the Applicants note that the

Group A Plan had 1,328 participants as

of December 31, 1996 and total assets

having a fair market value of

$19,983,124 as of August 31, 1997. In

addition, the Applicants represent that

the Group B had 1,302 participants as of

December 31, 1996 and total assets

having a fair market value of

$10,680,155 as of August 31, 1997.

Further, the Applicants state that the

Profit Sharing Plan had 1,098

participants as of January 31, 1997 and

total assets having a fair market value of

approximately $10,471,276 as of August

31, 1997.2

B. Stock Ownership

The Applicants state that subsequent

to the granting of PTE 93–8, FFJ

underwent a stock reclassification to

create two classes of stock—Class A

voting stock and Class B non-voting

stock. On June 24, 1994, a stock

dividend of 408 Class B shares was

declared to holders of Class A shares.

Mr. Fortunoff gifted 236 of these shares

to the Alan Fortunoff Grantor Retained

Annuity Trust and sold seven shares to

each of his six children. Mrs. Fortunoff

gifted 88 Class B shares to the Helene

Fortunoff Grantor Retained Annuity

Trust and sold seven shares to each of

the Fortunoff children. The Fortunoff

children are beneficiaries under both

trusts.

At present, the Applicants note that

all of the Class A voting shares are

owned by Alan and Helene Fortunoff.

The FFJ Class B non-voting shares are

distributed as follows: Alan Fortunoff

Grantor Retained Annuity Trust, 236

shares; Helene Fortunoff Grantor

Retained Annuity Trust, 88 shares; and

each of the Fortunoff children, 14

shares. Leonard Leibman is the sole

trustee of each of the trusts.

Also since PTE 93–8 was granted, the

Applicants point out that M. Fortunoff

has had a change in stock ownership.

Although Mr. Fortunoff does not hold

any elective offices with M. Fortunoff

and does not directly own any shares of

its capital stock, the Applicants explain

that he is one of three co-executors of

the Estate of Marjorie Mayrock, which

owns 49.6 percent of M. Fortunoff’s

capital stock. The Applicants further

explain that both Mr. and Mrs. Fortunoff

are co-trustees under three trusts which

each hold 52⁄3 shares of Mr. Fortunoff’s

capital stock for the benefit of the

Mayrock children. On July 31, 1996, a

distribution of 4.25 shares was made

from the Estate of Marjorie Mayrock to

each of the Mayrock children for a total

distribution of 12.75 shares.

Notice to Interested Persons

Notice of the proposed exemption

will be sent by first class mail to each

participant in the Plans within 15 days

of the publication of the pending

exemption in the Federal Register. The

notice will contain a copy of the

proposed exemption as published in the

Federal Register and a supplemental

statement, as required pursuant to 29

CFR 2570.43(b)(2). The supplemental

statement will inform interested persons

of their right to comment on and/or to

request a hearing with respect to the

pending exemption. Comments and

hearing requests regarding the proposed

exemption will be due 45 days from the

publication of the notice of proposed

exemption in the Federal Register.

General Information

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and section 4975(c)(2)

of the Code does not relieve a fiduciary

or other party in interest or disqualified

person from certain other provisions of

the Act and the Code, including any

prohibited transaction provisions to

which the exemption does not apply

and the general fiduciary responsibility

provisions of section 404 of the Act,

which require, among other things, a

fiduciary to discharge his or her duties

respecting the plan solely in the interest

of the participants and beneficiaries of

the plan and in a prudent fashion in

accordance with section 404(a)(1)(B) of

the Act; nor does it affect the

requirements of section 401(a) of the

Code that the plan operate for the

exclusive benefit of the employees of

the employer maintaining the plan and

their beneficiaries;

(2) The proposed exemption, if

granted, will not extend to transactions

prohibited under section 406(b)(3) of the

Act and section 4975(c)(1)(F) of the

Code;

(3) Before an exemption can be

granted under section 408(a) of the Act

and section 4975(c)(2) of the Code, the

Department must find that the

exemption is administratively feasible,

in the interest of the plan and of its

participants and beneficiaries and

protective of the rights of participants

and beneficiaries of the plan;

(4) This proposed exemption, if

granted, will be supplemental to, and

not in derogation of, any other

provisions of the Act and the Code,

including statutory or administrative

exemptions. Furthermore, the fact that a

transaction is subject to an

administrative or statutory exemption is

not dispositive of whether the

transaction is in fact a prohibited

transaction; and

(5) This proposed exemption, if

granted, is subject to the express

condition that the Summary of Facts

and Representations set forth in the

notice of proposed exemption relating to

PTE 93–8, as amended by this notice,

accurately describe, where relevant, the

material terms of the transactions

consummated pursuant to that

exemption.

Written Comments and Hearing

Requests

All interested persons are invited to

submit written comments or requests for

a hearing on the pending exemption to

the address above, within 15 days after

the publication of this proposed

exemption in the Federal Register. All

comments will be made a part of the

record. Comments received will be

available for public inspection with the

referenced applications at the address

set forth above.

Proposed Exemption

Based on the facts and representations

set forth in the application, the

Department is considering granting the

requested exemption under the

authority of section 408(a) of the Act

and section 4975(c)(2) of the Code and

in accordance with the procedures set

forth in 29 CFR Part 2570, Subpart B (55

FR 32836, August 19, 1990).

If the proposed exemption is granted,

restrictions of sections 406(a), 406 (b)(1)

and (b)(2) of the Act and the sanctions

resulting from the application of section

4975 of the Code, by reason of section

4975(c)(1) (A) through (E) of the Code,

shall not apply to the leasing by the

Plans to FFJ, under the provisions of the

Amended Lease described in PTE 93–8,

of certain Substitute Property, acquired

by the Plans through a third party

exchange, as well as all remaining real

estate which constitutes the Property,

provided the following conditions are

met:

(a) The terms of the Amended Lease

remain at least as favorable to the Plans
Federal Register / Vol. 62, No. 244 / Friday, December 19, 1997 / Notices 66689

1For purposes of this exemption, references to

specific provisions of Title I of the Act, unless

otherwise specified, refer also to the corresponding

provisions of the Code.

2FMG, any division or U.S. affiliate of State Street

that becomes a successor to the activities of FMG,

and the Affiliated Broker Dealers are collectively

referred to, herein, as the SSB Group.

as those obtainable in an arm’s length

transaction with an unrelated party.

(b) The independent fiduciary—

(i) Determines that the acquisition and

subsequent leasing of the Substitute

Property by the Plans under the

Amended Lease are in the best interest

of the Plans and their participants and

beneficiaries;

(ii) Monitors and enforces compliance

with the terms and conditions of the

Amended Lease, the Escrow Agreement

and the new exemption, at all times;

and

(iii) Appoints one or more

independent fiduciaries to resolve any

conflicts of interest which may develop

among the Plans with respect to the

Amended Lease, the Escrow Agreement,

the Property, or the Plans’ respective

interests therein.

(c) The fair market value of the

proportionate interests held by each

Plan in the Property as a whole

following the exchange transaction does

not exceed 25 percent of each Plan’s

assets.

(d) The Property, the Exchange

Property and the Substitute Property are

all appraised by qualified, independent

appraisers prior to the consummation of

the exchange transaction.

(e) The Base Rent for the Property is

adjusted annually by the independent

fiduciary based upon an independent

appraisal of such Property.

(f) FFJ incurs all real estate taxes and

other costs which are incident to the

Amended Lease.

(g) The Escrow Agreement is

maintained by M. Fortunoff, in favor of

the Plans, as security for FFJ’s rental

obligations under the Amended Lease.

The availability of this proposed

exemption is subject to the express

condition that the material facts and

representations contained in the

application for exemption are true and

complete and accurately describe all

material terms of the transactions. In the

case of continuing transactions, if any of

the material facts or representations

described in the application change, the

exemption will cease to apply as of the

date of such change. In the event of any

such change, an application for a new

exemption must be made to the

Department.

For a more complete statement of the

facts and representations supporting the

Department’s decision to grant PTE 93–

8, refer to the proposed exemption,

grant notice and technical correction

notice which are cited above.

Signed at Washington, D.C., this 16th day

of December 1997.

Ivan L. Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 97–33180 Filed 12–18–97; 8:45 am]

BILLING CODE 4510–29–M

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

Prohibited Transaction Exemption 97–

63; Exemption Application No.

D–10159, et al.; Grant of Individual

Exemptions; State Street Bank

AGENCY: Pension and Welfare Benefits

Administration, Labor.

ACTION: Grant of individual exemptions.

SUMMARY: This document contains

exemptions issued by the Department of

Labor (the Department) from certain of

the prohibited transaction restrictions of

the Employee Retirement Income

Security Act of 1974 (the Act) and/or

the Internal Revenue Code of 1986 (the

Code).

Notices were published in the Federal

Register of the pendency before the

Department of proposals to grant such

exemptions. The notices set forth a

summary of facts and representations

contained in each application for

exemption and referred interested

persons to the respective applications

for a complete statement of the facts and

representations. The applications have

been available for public inspection at

the Department in Washington, D.C. The

notices also invited interested persons

to submit comments on the requested

exemptions to the Department. In

addition the notices stated that any

interested person might submit a

written request that a public hearing be

held (where appropriate). The

applicants have represented that they

have compiled with the requirements of

the notification to interested persons.

No public comments and no requests for

a hearing, unless otherwise stated, were

received by the Department.

The notices of proposed exemption

were issued and the exemptions are

being granted solely by the Department

because, effective December 31, 1978,

section 102 of Reorganization Plan No.

4 of 1978 (43 FR 47713, October 17,

1978) transferred the authority of the

Secretary of the Treasury to issue

exemptions of the type proposed to the

Secretary of Labor.

Statutory Findings

In accordance with section 408(a) of

the Act and/or section 4975 of the Code,

by reason of section 4975(c)(2) of the

Code and the procedures set forth in 29

CFR Part 2570, Subpart B (55 FR 32836,

32847, August 10, 1990) and based upon

the entire record, the Department makes

the following findings:

(a) The exemptions are

administratively feasible;

(b) They are in the interests of the

plans and their participants and

beneficiaries; and

(c) They are protective of the rights of

the participants and beneficiaries of the

plans.

State Street Bank and Trust Company

Located in Boston, Massachusetts

[Prohibited Transaction Exemption 97–63;

Application No. D–10159

Exemption

The restrictions of sections

406(a)(1)(A) through (D) and 406(b)(1)

and (b)(2) of the Act and the sanctions

resulting from the application of section

4975(c)(1)(A) through (E) of the Code,1

shall not apply to the lending of

securities to State Street Bank and Trust

Company (State Street), acting through

its Financial Markets Group (FMG)

(formerly the Money Market Division of

the Capital Markets Area) or acting

through any other division or U.S.

affiliate of State Street that is a

successor to the activities of FMG; and

shall not apply to the lending of

securities to any U.S. registered brokerdealers affiliated with State Street (the

Affiliated Broker Dealers) 2 by employee

benefit plans (the Client Plans or the

Client Plan), including commingled

investment funds holding plan assets for

which State Street, through its Master

Trust Services Division (the Trust

Division) acts as directed trustee or

custodian, and for which State Street,

through its Global Securities Lending

Division or any other similar division of

State Street or U.S. affiliate of State

Street or of its parent (collectively, GSL)

acts as securities lending agent (or subagent); and shall not apply to the receipt

of compensation by GSL in connection

with the transactions; provided that the

following conditions are met:

a. Neither State Street, the SSB Group,

GSL, nor any other division or affiliate

of State Street has or exercises