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______, 2000
Shelbourne Properties III, Inc.
5 Cambridge Center
9th Floor
Cambridge, MA 02142
Re: Registration Statement
Gentlemen:
We have acted as your counsel in connection with the registration on the
Registration Statement on Form S-4 (the "Registration Statement") under the
Securities Act of 1933, as amended, of 1,173,998 shares of common stock of
Shelbourne Properties III, Inc. ("Shelbourne"), a recently formed Delaware
corporation, to be issued to the general partners and holders of units
(collectively "unitholders") in High Equity Partners L.P. - Series 88 (the
"Partnership"). The shares of Shelbourne common stock will be issued pursuant to
a transaction (the "conversion") in which the Partnership will be merged into
Shelbourne Properties III L.P. (the "operating partnership"), a limited
partnership wholly-owned by Shelbourne (directly and indirectly through a
"disregarded entity" of Shelbourne). As part of the merger, the interests of
unitholders in the Partnership will be converted into shares of Shelbourne
common stock, which shares will be listed for trading on the American Stock
Exchange. Shelbourne intends to elect to be treated for Federal income tax
purposes as a real estate investment trust for its taxable year ending December
31, 2000.
In rendering this opinion, we have examined (i) the Registration Statement, as
amended, (ii) the Agreement of Limited Partnership of the operating partnership,
(iii) the Agreement and Plan of Merger, and (iv) the certificate provided to us
by Shelbourne, dated the date hereof (the "Shelbourne Certificate", and together
with the documents in (i) through (iii), the "Operative Documents"), setting
forth various factual representations and statements upon which our opinion
relies. In addition, we have examined such other documents and materials that we
have deemed necessary or appropriate to review for purposes of our opinion, and
have made such investigations of law as we have deemed appropriate as a basis
for the opinions expressed below.
In our examination, we have assumed, without independent investigation: the
legal capacity of all individuals; the due and proper execution of all documents
referenced herein; the genuineness of all signatures; the enforceability of all
documents in accordance with their terms; the authenticity of all documents
submitted to us as originals; the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such copies; that the transactions will be
consummated in
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Shelbourne Properties III, Inc.
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accordance with the Operative Documents; the accuracy of all facts, statements,
representations and assumptions set forth below and in the documents referenced
herein; and that the parties to the conversion will report the Federal income
tax consequences thereof consistent with the Operative Documents and the
opinions expressed below.
Our opinion is based upon the U.S. Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations promulgated thereunder, and administrative
and judicial interpretations thereof, all as of the date hereof and all of which
are subject to change, possibly on a retroactive basis. In rendering this
opinion we are expressing our views only as to the Federal income tax laws of
the United States of America.
It is our opinion that, under current Federal income tax law and assuming that
Shelbourne and the operating partnership are operated in accordance with the
statements and representations set forth in the Registration Statement and the
Shelbourne Certificate and that the conversion and certain procedural steps
described in the Registration Statement, including Shelbourne's election to be
taxed as a real estate investment trust, are completed in a timely fashion in
accordance with the Operative Documents:
(1) The conversion will be treated as an exchange governed by Section 351 of the
Code in which the Partnership will be treated as transferring all of its assets
to Shelbourne in exchange for common stock and the assumption by Shelbourne of
the Partnership's liabilities, followed by the Partnership's distribution of
common stock to the unitholders in complete liquidation of the Partnership.
Accordingly, no gain or loss will be recognized for Federal income tax purposes
by the Partnership, the unitholders or Shelbourne as a result of the conversion.
(2) Commencing with its taxable year ending December 31, 2000, Shelbourne will
be organized in conformity with the requirements for qualification as a real
estate investment trust under the Code, and its proposed method of operation
will enable it to satisfy the requirements for qualification and taxation as a
real estate investment trust.
(3) The discussion relating to tax matters under the heading "Federal Income Tax
Consequences" in the Consent Solicitation Statement/Prospectus contained in the
Registration Statement, to the extent that such discussion contains descriptions
of applicable Federal income tax law, is correct in all material respects as of
the date hereof.
Shelbourne's qualification as a REIT will depend upon its continuing
satisfaction of the requirements of the Code relating to qualification for REIT
status, which requirements include those that are dependent upon actual
operating results, distribution levels, diversity of stock ownership, asset
composition, source of income and record keeping. No assurance can be given that
the actual results of Shelbourne's operations for any one taxable year will
satisfy all such requirements. We do not undertake to monitor whether Shelbourne
actually will satisfy the various REIT qualification tests, and we express no
opinion concerning whether Shelbourne actually will satisfy these various REIT
qualification tests.
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Shelbourne Properties III, Inc.
[______, 2000]
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We hereby consent to the filing with the Securities and Exchange Commission of
this letter as an exhibit to the Registration Statement and the reference to
this letter and to us therein under the heading "Federal Income Tax
Consequences" in the Consent Solicitation/Prospectus contained in the
Registration Statement. In giving such consent, we do not thereby admit that we
are within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended.
Very truly yours,
ROSENMAN & COLIN LLP
By:
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A Partner
