Six parcels as qualifying employer real property

P/OPINION 75-111


                                                                 407

                       September 26, 1975

Dear           :

This is in reply to your letter of May 23, 1975, in which
you inquire whether certain parcels of real property owned
by the defined benefit plans sponsored by          Industries,
Inc.               constitute "qualifying employer real
property" under section 407(d)(4) of the Employee Retirement
Income Security Act of 1974 (the Act).

In order for parcels of "employer real property" (as defined
under section 407(d)(2) of the Act) to be considered to be
"qualifying employer real property" within the meaning of
section 407 (d)(4) of the Act, the following substantive
requirements must be met: (1) a substantial number of the
parcels must be dispersed geographically; (2) each parcel
of real property and the improvements thereon must be suitable
(or adaptable without excessive cost) for more than one use;
and (3) the acquisition and retention of such property must
comply with the provisions of Part 4 of Title I of the Act
(other than section 404(a)(1)(B) to the extent it requires
diversification, and sections 404(a)(1)(C), 406 and 407(a).

With respect to the geographical dispersion requirement
of section 407(d)(4)(A) of the Act, your letter indicates that
the six parcels of employer real property leased by the plans
to          are located in California, Indiana, Kentucky and
Pennsylvania and the closest parcels are approximately 80
miles apart. Accordingly, the parcels of employer real
property owned by the plan are sufficiently dispersed
geographically to satisfy the requirements of section
407(d)(4)(A) of the Act.

With respect to the requirements of section 407(d)(4)(B)
of the Act that each parcel of employer real property
and the improvements thereon must be suitable, or adaptable
without excessive cost, for more than one use, your letter
represents that five of the six parcels contain simple,
one-story structures which, except for a limited amount
of office space, are little more than heated, lighted,
and ventilated shells; that machinery and manufacturing
equipment could be removed from the plants at minimal
cost without affecting the structures of the buildings;
that the sixth parcel contains a building with offices
and open space for laboratories and machines, and that
while a relatively small amount of space has been devoted
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P/OPINION 75-111


to special research facilities, such as dust-free
rooms and test cells, that were constructed at
substantial cost, the building on the sixth parcel could
be used for scientific research, light industry, high
technology work or as an office building. On the basis
of these representations, each of the parcels, including
the research and design facility, meets the requirements
of section 407(d)(4)(B) of the Act.

Accordingly, if, as your letter indicates, the requirements
of section 407(d)(4)(D) are met, the six parcels of employer
real property which you have described would meet the
definition of "qualifying employer real property" under
section 407(d)(4) of the Act.

We express no opinion as to whether the plans may continue
to hold such qualifying employer real property in compliance
with the provisions of section 407(a) of the Act. In this
connection, we note that section 407(a)(3)(A) prohibits
the holding by a plan of qualifying employer real property
and qualifying employer securities to the extent that the
aggregate fair market value of such property and securities
exceeds 10% of the fair market value of the assets of the plan
(as determined on a given date or choice of dates, pursuant
to sections 407(a)(3)(A) or 407 (c)).

It should also be noted that section 414 (c)(2) of the Act
sets forth a transitional exemption from the prohibited
transactions provisions which may be applicable to the lease
of the six parcels of real property by the plan to         .

Sincerely,