CFTC Staff Letter 17-68: Interpretative relief from the definition of commodity pool for certain real estate holding companies

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-6700
Facsimile: (202) 418-5407
EFlaherty@cftc.gov
Division of Swap Dealer and
Intermediary Oversight
Eileen T. Flaherty
Director
CFTC Letter No. 17-68
No-Action
September 22, 2017
Division of Swap Dealer and Intermediary Oversight Re: Interpretation of the term Commodity Pool with respect to “A” Mr. :
This letter is in response to your request dated July 26, 2017 to the Division of Swap Dealer and Intermediary Oversight (“Division”) of the Commodity Futures Trading Commission (“Commission”) on behalf of “A”, requesting the Division issue an interpretative letter, stating that neither “A”, nor certain of the holding companies within the “A” family, (each a “Holding Company” and collectively, the “Holding Companies,” or, with “A”) fall within the definition of a commodity pool, as that term is defined by Section 1a(10) of the Commodity Exchange Act (“CEA”),1 and Commission regulation 4.10(d)(1).2 Background You represent the facts as follows. “A” is a global asset manager, with holdings across multiple sectors, including real estate, infrastructure, renewable power, and private equity. Specific to this request, “A” owns and operates a large portfolio of real estate assets across multiple countries. “A”, through multiple sub-structures, purchases, improves, and manages these real estate assets, generating income from traditional real-estate sources, such as rent payments, hospitality fees, real estate development, and lease terminations. “A” typically holds such assets for a period of five to seven years and often utilizes a special purpose vehicle (“SPV”) to hold each real estate asset. In turn, these SPVs are owned, either in whole or in part, by a Holding Company of which “A” is the ultimate parent. Because the real estate assets are often acquired through the use of financing, and are located in jurisdictions whose home currencies are not the US dollar, the Holding Companies use swaps for the limited purpose of mitigating exposure to changes in interest rates or fluctuations in non-US denominated currencies associated with asset financing and purchases. 3