Prohibited Transaction? Plan invests in LLC which leases property to EEs.

[JWRB]

I'm having a really hard time finding anything on my exact scenario, and I'm trying to avoid a PLR, so any help would be appreciated.

I have a plan which intends on investing/being a minority partner in an LLC which will manage property. They're starting with one parcel, so a QERP exemption is off the table. The investment in the LLC will be under 10% of assets.

The LLC, in turn, will lease a small portion, let's say under 20% of the building, back to employees of the Plan Sponsor.

I'm under the impression this is not a prohibited transaction. The LLC will manage the building, so the route I'm thinking is that this isn't a prohibited transaction because this doesn't constitute a plan asset under 29 CFR 2510.3-101 because the LLC will constitute a "real estate operating company." (takes breath)

This is one of those things where it just feels like they're removed enough to make this legal, but I just can't pinpoint why. Unless I just did, in which case I'm satisfied. I just feel like I'm missing something very simple regarding ownership percentage in an LLC, a de minimis exception, or something along those lines.

Thoughts? Thanks in advance!

[jpod]

Have you considered whether there are facts to suggest that the fiduciary who is responsible for the decision to invest in the LLC could be conflicted such that this is a self-dealing 406(b)(1) PT (and the equivalent under Section 4975 of the IRC)?

[JWRB]

Have you considered whether there are facts to suggest that the fiduciary who is responsible for the decision to invest in the LLC could be conflicted such that this is a self-dealing 406(b)(1) PT (and the equivalent under Section 4975 of the IRC)?

Yea we considered that. This operation is so sprawling and massive that we anticipate those who made the decision to invest are relatively removed from those who will lease. It's more of a good opportunity arose and EEs are already leasing the space. The leasing of the space is fairly coincidental.

We're also going to have the sponsor out of the negotiation of the lease, ensure FMV is charged, etc. I'm much less worried about that.

Thanks for your input by the way!