We have acted as counsel to Highland Hospitality Corporation, a Maryland corporation (the
“Company”), in connection with the proposed issuance and sale of up to 7,300,000 shares of common stock, par value $.01 per share of the Company, pursuant to the prospectus supplement dated March 9, 2006 (the “Prospectus
Supplement”), supplementing the prospectus dated December 30, 2004 (together with the Prospectus Supplement, the “Prospectus”), that forms part of the Company’s registration statement on Form S-3, as amended (No. 333-121341)
filed with the Securities and Exchange Commission (the “SEC”) (together, the “Registration Statement”). In connection with the proposed issuance of common stock, we have been asked to provide to the Company legal opinions
regarding certain federal income tax matters related to the Company.
Bases for Opinions
The opinions set forth in this letter are based on relevant current provisions of the Internal Revenue Code of 1986, as amended (the “Code”),
Treasury Regulations thereunder (including proposed and temporary Treasury Regulations), and interpretations of the foregoing as expressed in court decisions, applicable legislative history, and the administrative rulings and practices of the
Internal Revenue Service (the “IRS”), including its practices and policies in issuing private letter rulings, which are not binding on the IRS except with respect to a taxpayer that receives such a ruling, all as of the date hereof. These
provisions and interpretations are subject to change by the IRS, Congress and the courts (as applicable), which may or may not be retroactive in effect and which might result in material modifications of our opinions. Our opinions do not foreclose
of a contrary determination by the IRS or a court of competent jurisdiction, or of a contrary position taken by the IRS
or the Treasury Department in regulations or rulings issued in the future. In this regard, an opinion of counsel with respect to an issue represents counsel’s best professional judgment with respect to the outcome on the merits with respect to
such issue, if such issue were to be litigated, but an opinion is not binding on the IRS or the courts, and is not a guarantee that the IRS will not assert a contrary position with respect to such issue or that a court will not sustain such a
position asserted by the IRS.
In rendering the following opinions, we have examined such statutes, regulations, records, agreements,
certificates and other documents as we have considered necessary or appropriate as a basis for the opinions, including the following:
the registration statement on Form S-11 (No. 333-108671), as filed with the SEC on September 10, 2003, and amendments thereto;
the Registration Statement, including documents incorporated by reference;
(3) the discussion under the caption “Material U.S.
Federal Income Tax Considerations” contained in the Current Report on Form 8-K filed with the SEC on March 8, 2006 (the “Tax Disclosure”);
(4) the Articles of Amendment and Restatement of the Company dated December 11, 2003 and filed with the State Department of Assessments and Taxation of Maryland, as amended through the date hereof (the
“Articles of Incorporation”), and the By Laws of the Company, as amended;
(5) the Second Amended and Restated Agreement of
Limited Partnership of Highland Hospitality, L.P. (the “OP”), as amended (the “Partnership Agreement”); and
certain lease agreements with respect to hotels in which the Company has a direct or indirect interest, pursuant to which the OP or a Partnership Subsidiary (as defined in the Management Representation Letter), as lessor or sub-lessor, leases such a
hotel to a lessee or sub-lessee, and amendments to certain of the leases, all in effect as of the date hereof.
The opinions set forth in
this letter also are premised on certain written factual representations of the Company and the OP, regarding, among others, the ownership, organization, ownership and operations (including the income, assets, businesses, liabilities, and
properties) of the Company, the OP, their subsidiaries and lessees contained in a letter to us dated as of the date of this letter (the “Representation Letter”).
For purposes of rendering our opinions, although we have knowledge as to certain of the facts set forth
in the above-referenced documents, we have not made an independent investigation or audit of the facts set forth in such documents, including the Registration Statement, the Tax Disclosure and the Representation Letter. We consequently have relied
upon the representations in the Representation Letter, and statements in the Registration Statement and the Tax Disclosure, and assumed that the information presented in such documents or otherwise furnished to us is accurate and complete in all
material respects. We are not aware, however, of any material facts or circumstances contrary to, or inconsistent with, the representations we have relied upon as described herein, or other assumptions set forth herein.
In this regard, we have assumed with your consent the following:
(i) that (A) all of the factual representations and statements set forth in the documents that we reviewed, including the Registration Statement, the Tax Disclosure and the Representation Letter (collectively,
the “Reviewed Documents”), are and, where appropriate, continue to be true, correct, and complete as of the date hereof, (B) any representation or statement made as a belief or made “to the knowledge of” or similarly
qualified is correct and accurate, and that such representation or statement will continue to be correct and accurate, without such qualification, (C) each of the Reviewed Documents that constitutes an agreement is valid and binding in
accordance with its terms, and (D) all of the obligations imposed by or described in the Reviewed Documents, including, without limitation, the obligations imposed under the Articles of Incorporation, have been and will continue to be performed
or satisfied in accordance with their terms;
(ii) the genuineness of all signatures, the proper execution of all documents, the
authenticity of all documents submitted to us as originals, the conformity to originals of documents submitted to us as copies, and the authenticity of the originals from which any copies were made; and
(iii) that any documents as to which we have reviewed only a form were or will be duly executed without material changes from the form reviewed by us.
Any material variation or difference in the facts from those set forth in the documents that we have reviewed and upon which we have
relied (including, in particular, the Registration Statement, the Tax Disclosure and the Representation Letter) may adversely affect the conclusions stated herein.
Based upon, subject to, and limited by the assumptions and qualifications set forth herein, we are of the opinion that:
Company was organized and has operated in conformity with the requirements for qualification and taxation as a real estate investment trust (“REIT”) under the Code, effective for its taxable years ended December 31, 2003,
December 31, 2004, and December 31, 2005 and the Company’s current organization, and current and proposed method of operation (as described in the Registration Statement, the Tax Disclosure and the Representation Letter) will enable
it to continue to meet the requirements for qualification and taxation as a REIT under the Code for taxable years ending December 31, 2006 and thereafter; and
(ii) The discussion in each Tax Disclosure, to the extent that it describes federal income tax law, is correct in all material respects.
* * * * *
The Company’s qualification and taxation as a REIT depend upon its ability to meet
on an ongoing basis (through actual annual operating results, distribution levels, diversity of share ownership and otherwise) the various qualification tests imposed under the Code, which are described in the Tax Disclosure. We will not review the
Company’s compliance with these requirements on a continuing basis. Accordingly, no assurance can be given that the actual results of the Company’s operations, the sources of its income, the nature of its assets, the level of its
distributions to shareholders and the diversity of its share ownership for any given taxable year will satisfy the requirements under the Code for qualification and taxation as a REIT.
This opinion letter addresses only the specific federal income tax matters set forth above and does not address any other federal, state, local or
foreign tax issues. This opinion letter has been prepared solely for your use in connection with the filing of the Registration Statement. This opinion letter should not be relied upon by any person other than you or for any other purpose. We assume
no obligation by reason of this opinion letter to advise you of any changes in our opinions subsequent to the delivery of this opinion letter but agree to do so from time to time upon specific request from you for an update or confirmation.
We consent to the filing of this opinion letter as Exhibit 8.1 to the Registration Statement and to the
reference to this firm under the caption “Legal Matters” in the Prospectus included therein. In giving this consent, we do not thereby admit that we are an “expert” within the meaning of the Securities Act of 1933, as amended.