Real Estate Asset Liquidity Trust - MRRS Decision

Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Issuer of mortgage pass-through certificates previously granted an exemption from the requirements to file annual and interim financial statements, subject to certain conditions. Issuer granted an exemption from the requirements in Multilateral Instrument 52-109 to file interim and annual certificates, subject to certain conditions, including the requirement to file alternative forms of annual and interim certificates.

Ontario Rules

Multilateral Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings.

May 31, 2005

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA, SASKATCHEWAN, MANITOBA, ONTARIO,

NOVA SCOTIA, NEW BRUNSWICK AND

NEWFOUNDLAND AND LABRADOR

(the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

REAL ESTATE ASSET LIQUIDITY TRUST

(the "Filer")

 

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the "Legislation") for an exemption from the requirements in Multilateral Instrument 52-109 -- Certification of Disclosure in Issuers' Annual and Interim Filings to file interim certificates and annual certificates, subject to certain conditions (the "Requested Relief").

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 -- Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a special purpose trust that was established by Montreal Trust Company of Canada under the laws of the Province of Ontario pursuant to a declaration of trust dated September 13, 2004, as amended by an amended and restated declaration of trust dated as of October 7, 2004 (the "Declaration of Trust"), the beneficiary of which is a registered charity. Currently, Montreal Trust Company of Canada is the issuer trustee (the "Issuer Trustee") of the Filer.

2. Royal Bank of Canada ("RBC") is the administrative agent of the Filer pursuant to an administration agreement between RBC and the Issuer Trustee dated as of September 13, 2004.

3. The Issuer Trustee is located in Toronto, Ontario and the executive office of RBC is located in Toronto, Ontario.

4. The financial year-end of the Filer is December 31.

5. The Filer is a "reporting issuer", or the equivalent, in each Jurisdiction and British Columbia, Quebec and Prince Edward Island (collectively, the "Filing Jurisdictions"). The Filer became a reporting issuer, or the equivalent, in each Filing Jurisdiction on October 20, 2004, the date the Filer received a MRRS decision document in respect of its short form prospectus dated October 20, 2004 (the "Series 2004-1 Prospectus").

6. The Declaration of Trust restricts the activities of the Filer to the acquisition of various categories of commercial and multi-family residential mortgages, hypothecs or other charges on real or immovable property situated in Canada and originated by parties other than the Filer (the "Custodial Property"). The Filer funds the acquisition of the Custodial Property by issuing asset-backed securities, namely mortgage pass-through certificates that evidence an undivided co-ownership interest in the Custodial Property (the "Certificates"). The only security holders of the Filer are and will be the holders of the Certificates (the "Certificate holders").

7. The Filer has issued (i) $381,434,000 aggregate amount of Commercial Mortgage Pass-Through Certificates, Series 2004-1, designated as Classes A-1, A-2, B, C, D-1 and E-1, each with an Approved Rating by an Approved Rating Organization (as such terms are defined in National Instrument 44-101 -- Short Form Prospectus Distributions), pursuant to the Series 2004-1 Prospectus, (ii) $19,091,747 aggregate amount of Commercial Mortgage Pass-Through Certificates, Series 2004-1, designated as Classes D-2, E-2, F, G, H, J, K, L, M and X, on a private placement basis in Canada, (iii) $333,206,000 aggregate amount of Commercial Mortgage Pass-Through Certificates, Series 2005-1, designated as Classes A-1, A-2, XP-1, XC-1, B, C, D-1 and E-1, each with an Approved Rating by an Approved Rating Organization, pursuant to a short form prospectus dated April 5, 2005, and (iv) $14,332,868 aggregate amount of Commercial Mortgage Pass-Through Certificates, Series 2005-1, designated as Classes XP-2, XC-2, D-2, E-2, F, G, H, J, K, L and M, on a private placement basis in Canada (collectively, the "Issued Certificates").

8. The Filer is a "venture issuer" as defined in National Instrument 51-102 -- Continuous Disclosure Obligations ("NI 51-102").

9. As a special purpose vehicle, the Filer will not carry on any activities other than activities related to issuing asset-backed securities in respect of Custodial Property acquired by the Filer.

10. The Filer currently has, and will continue to have, no material assets or liabilities other than its rights and obligations arising from acquiring Custodial Property and issuing asset-backed securities. Certificate holders will only have recourse to the Custodial Property and will not have any recourse to the Filer.

11. Pursuant to an MRRS decision document dated May 2, 2005 (the "Previous Decision"), the Filer is exempted, on certain terms and conditions, from the requirements of the securities legislation in the Jurisdictions and British Columbia and Quebec (the local securities regulatory authority or regulator in each such jurisdiction, collectively, the "Previous Decision Makers") concerning the preparation, filing and delivery of interim financial statements and audited annual financial statements ("Financial Statements").

12. For each offering of the Issued Certificates, the Filer entered into, and for each future offering of Certificates, the Filer will enter into, a pooling and servicing agreement (the "Pooling and Servicing Agreement") with a reporting agent (the "Reporting Agent"), a Canadian trust company, as custodian on behalf of the Certificate holders, and one or more servicers (each, a "Servicer"), among others, providing for, among other things, the issuance of Certificates and governing the rights of Certificate holders.

13. The Pooling and Servicing Agreement in respect of the Issued Certificates provides, and the Pooling and Servicing Agreement in respect of future series of Certificates will provide, for the fulfillment of certain administrative functions relating to such Certificates, such as maintaining a register of Certificate holders and the preparation by the Servicer and the Reporting Agent of periodic reports to Certificate holders containing financial and other information in respect of the Custodial Property.

14. The Reporting Agent provides, and will continue to provide, on a website to be identified in the relevant short form prospectus of the Filer, the financial and other information prescribed therein to be made available to Certificate holders on a monthly basis, such information to include information relating to distributions made in that month, Certificate balances, administration and other fees, and certain aspects of the performance and composition of the Custodial Property. In accordance with the Previous Decision, the Filer has contemporaneously filed, and will continue to contemporaneously file or cause to be reasonably contemporaneously filed, the monthly reports commonly known as distribution date statements or their equivalent on the System for Electronic Document Analysis and Retrieval ("SEDAR"). No material information will be disclosed on the Reporting Agent's website unless it is also filed contemporaneously via SEDAR with the Decision Makers for posting on www.sedar.com.

15. In accordance with the Previous Decision, within 60 days of the end of each interim period of the Filer (or within 45 days of the end of an interim period if the Filer is not a venture issuer at the end of such interim period), the Reporting Agent or the Filer or its duly appointed representative or agent will post on the applicable website and file on SEDAR, and mail to Certificate holders who so request, interim management discussion and analysis for that interim period with respect to the Custodial Property pools acquired with the proceeds of the Certificates and a quarterly report which shall include the amount of distributions of principal and interest on the Certificates, administration and other fees, and other information on the Certificates for the interim period.

16. In accordance with the Previous Decision, within 120 days of the end of each financial year of the Filer (or within 90 days of the end of a financial year of the Filer if the Filer is not a venture issuer at the end of such financial year), the Reporting Agent or the Filer or its duly appointed representative or agent will post on the applicable website and file on SEDAR, and mail to Certificate holders who so request:

(a) annual management discussion and analysis for that financial year with respect to the Custodial Property pools acquired with the proceeds of the Certificates and an annual report which shall include the amount of distributions of principal and interest on the Certificates, administration and other fees, and other information on the Certificates for the financial year;

(b) an annual statement of compliance signed by a senior officer of each applicable Servicer or other party acting in a similar capacity for the applicable Custodial Property pool certifying that the Servicer or such other party acting in a similar capacity has fulfilled all of its obligations under the applicable Pooling and Servicing Agreement during the year, or, if there has been a material default, specifying each such default and the nature and status thereof; and

(c) an annual accountants' report prepared by a firm of independent public or chartered accountants respecting compliance by each Servicer or such other party acting in a similar capacity with the Uniform Single Attestation Program for Mortgage Bankers, or such other servicing standard acceptable to the Previous Decision Makers, during the year.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted, provided that:

(a) the Filer is not required to prepare, file and deliver Financial Statements under the Legislation, whether pursuant to exemptive relief or otherwise;

(b) for each financial year of the Filer, within 120 days of the end of the financial year (or within 90 days of the end of the financial year if the Filer is not a venture issuer at the end of such financial year), the Filer or its duly appointed representative or agent will file through SEDAR an annual certificate in the form out in Schedule "A" of this MRRS decision document and personally signed by a person who, at the time of filing of the annual certificate, is a senior officer of the Filer, a Servicer or an administrative agent of the Filer;

(c) if the Filer voluntarily files an AIF for a financial year after it has filed the annual certificate referred to in paragraph (b) above for the financial year, the Filer will file through SEDAR a second annual certificate that:

(i) is in the form set out in Schedule "A" of this MRRS decision document;

(ii) is personally signed by a person who, at the time of filing of the second annual certificate, is a senior officer of the same person or company of which the senior officer who signed the annual certificate referred to in paragraph (b) is an officer; and

(iii) certifies the AIF in addition to the other documents identified in the annual certificate;

(d) for each interim period of the Filer, within 60 days of the end of the interim period (or within 45 days of the end of the interim period if the Filer is not a venture issuer at the end of such interim period), the Filer or its duly appointed representative or agent will file through SEDAR an interim certificate in the form set out in Schedule "B" of this MRRS decision document and personally signed by a person who, at the time of filing of the interim certificate, is a senior officer of the Filer, a Servicer or an administrative agent of the Filer; and

(e) the Requested Relief will cease to be effective in a Jurisdiction on the earlier of:

(i) June 1, 2008; and

(ii) the date on which a rule regarding the continuous disclosure requirements for issuers of asset-backed securities comes into force in a Jurisdiction.

"Erez Blumberger"
Assistant Manager, Corporate Finance
Ontario Securities Commission

 

SCHEDULE "A"

Certification of annual filings for issuers of asset-backed securities

I, <identify (i) the certifying individual, (ii) his or her position in relation to the issuer and (iii) the name of the issuer>, certify that:

1. I have reviewed the following documents of <identify issuer> (the issuer):

(a) the servicer reports for each month in the financial year ended <insert financial year end> (the servicer reports);

(b) annual MD&A in respect of the issuer's pool(s) of assets for the financial year ended <insert the relevant date> (the annual MD&A);

(c) AIF for the financial year ended <insert the relevant date> (the AIF); [if applicable] and

(d) each annual statement of compliance regarding fulfillment of the obligations of the servicer(s) under the related servicing agreement(s) for the financial year ended <insert the relevant date> (the annual compliance certificate(s)),

(the servicer reports, the annual MD&A, the AIF [if applicable] and the annual compliance certificate(s) are together the annual filings);

2. Based on my knowledge, the annual filings, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make the statements not misleading in light of the circumstances under which they were made, with respect to the periods covered by the annual filings;

3. Based on my knowledge, all of the distribution, servicing and other information and all of the reports on assessment of compliance with servicing criteria for asset-backed securities and the annual accountant's report respecting compliance by the servicer(s) with servicing criteria for asset-backed securities required to be filed under the decision(s) <identify the decision(s)> as of the date of this certificate, other than material change reports and press releases, have been filed with the securities regulatory authorities through SEDAR;

4. Option #1 <use this alternative if a servicer is providing the certificate>

I am responsible for reviewing the activities performed by the servicer(s) and based on my knowledge and the compliance review(s) conducted in preparing the annual compliance certificate(s), and except as disclosed in the annual filings, the servicer(s) [has/have] fulfilled [its/their] obligations under the servicing agreement(s); and

Option #2 <use this alternative if the Issuer or the administrative agent is providing the certificate>

Based on my knowledge and the annual compliance certificate(s), and except as disclosed in the annual filings, the servicer(s) [has/have] fulfilled [its/their] obligations under the servicing agreement(s); and

5. The annual filings disclose all material instances of noncompliance with the servicing criteria based on the [servicer's/servicers'] an assessment of compliance with such criteria.

[In giving the certifications above, I have reasonably relied on information provided to me by the following unaffiliated parties <insert name of issuer, servicer, sub-servicer, co-servicer, administrative agent, reporting agent or trustee>.]

Date: <insert date of filing>

____________________
[Signature]
[Title]
<indicate the capacity in which the certifying officer is providing the certificate>

 

SCHEDULE "B"

Certification of interim filings for issuers of asset-backed securities

I, <identify (i) the certifying individual, (ii) his or her position in relation to the issuer and (iii) the name of the issuer>, certify that:

1. I have reviewed the following documents of <identify issuer> (the issuer):

(a) the servicer reports for each month in the interim period ended <insert relevant date> (the servicer reports); and

(b) interim MD&A in respect of the issuer's pool(s) of assets for the interim period ended <insert the relevant date> (the interim MD&A),

(the servicer reports and the interim MD&A are together the interim filings);

2. Based on my knowledge, the interim filings, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make the statements not misleading in light of the circumstances under which they were made, with respect to the periods covered by the interim filings; and

3. Based on my knowledge, all of the distribution, servicing and other information required to be filed under the decision(s) <identify the decision(s)> as of the date of this certificate, other than material change reports and press releases, have been filed with the securities regulatory authorities through SEDAR.

[In giving the certifications above, I have reasonably relied on information provided to me by the following unaffiliated parties <insert name of issuer, servicer, sub-servicer, co-servicer, administrative agent, reporting agent or trustee>.]

Date: <insert date of filing>

____________________
[Signature]
[Title]
<indicate the capacity in which the certifying officer is providing the certificate>