Starlight U.S. Multi-Family (No. 4) Core Fund

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief from provisions of section 8.4 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) permitting filer to include alternative financial disclosure in business acquisition report pursuant to section 13.1 of NI 51-102 -- filer acquired properties for which it cannot obtain historical financial information for the three month period ended December 31, 2014 -- filer made every reasonable effort, without success, to obtain copies of, or reconstruct the historical accounting records necessary to prepare the requisite financial statements for the acquired properties for the three month period ended December 31, 2014 -- recent audited interim financial statements for the period ended March 31, 2015 will be provided.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, ss. 8.4, 13.1.

July 6, 2015

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF STARLIGHT U.S. MULTI-FAMILY (NO. 4) CORE FUND (the Filer)

DECISION

Background

The principal regulator in the Jurisdiction (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the Decision Maker (the Legislation) for a decision pursuant to Section 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) that the Filer be exempt from the requirement under section 8.4 of NI 51-102 and Item 3 of Form 51-102F4 Business Acquisition Report to include financial statement disclosure for significant acquisitions, provided that the Filer include or incorporate by reference the Alternative Acquisition Financial Disclosures (as defined herein) of the Filer relating to the Acquisition Transaction (as defined herein) in the business acquisition report (BAR) (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

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

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, Québec, Prince Edward Island, New Brunswick, Nova Scotia and Newfoundland and Labrador (collectively, together with Ontario, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

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

1. The head and registered office of the Filer is located at 3300 Bloor Street West, West Tower, Suite 1801, Toronto, Ontario M8X 2X2.

2. The Filer is a limited partnership established under the laws of the Province of Ontario pursuant to a limited partnership agreement dated December 1, 2014, as amended and/or restated from time to time thereafter (the LPA).

3. The Filer is a reporting issuer or the equivalent thereof in each Jurisdiction and is not in default of any requirement of Canadian securities legislation, other than the requirement to file the BAR relating to the Acquisition Transaction, which was due on June 25, 2015.

4. The Filer was formed for the primary purpose of indirectly acquiring, owning and operating a portfolio comprised primarily of recently constructed, Class "A" stabilized, income-producing multi-family real estate properties in Florida, Arizona, Texas, Tennessee, North Carolina, Georgia and Colorado, including an initial portfolio of three properties located in Florida (the Acquisition Properties) consisting of (i) a 100% interest in Verano Apartment Homes (Verano), (ii) a 100% interest in Grand Cypress (Grand Cypress) and (iii) a 100% interest in Pure Living Heathrow (Pure).

5. The Filer is asset managed by Starlight Investments Ltd. (the Manager), which has been engaged by the Filer in the identification, acquisition, ownership, operation and disposition of income-producing multi-family real estate properties.

6. The interests in the Filer are divided into seven classes of limited partnership units (Units): class A limited partnership units (Class A Units), class U limited partnership units (Class U Units), class C limited partnership units, class D limited partnership units, class E limited partnership units, class F limited partnership units and class H limited partnership units.

7. The Filer is authorized to issue an unlimited number of Units of each class and, as at the date hereof, there are 6,139,388 Units outstanding. However, as a "closed-end" issuer, subsequent to its IPO (as defined below), the Filer is prohibited from issuing any new Units to the public (other than upon conversion of outstanding Units, in accordance with the LPA).

8. The Class A Units and Class U Units are listed on the TSX Venture Exchange under the symbols "SUF.A" and "SUF.U", respectively.

9. Since April 10, 2015 (the IPO Closing Date) to May 31, 2015, an aggregate of 19,785 Units have traded across 29 trades on the TSX Venture Exchange, representing approximately 0.32% of the total outstanding Units.

10. On March 27, 2015, the Principal Regulator issued a receipt in respect of the final prospectus of the Filer (the Prospectus) relating to the initial public offering (the IPO) of the Units, qualifying for distribution up to US$75 million of Units.

11. On the IPO Closing Date, the Filer completed its IPO of approximately C$64.7 million of Units.

12. On the IPO Closing Date, the Filer also completed its acquisition of Verano and Grand Cypress from an indirect subsidiary of the Manager and, on May 7, 2015, the Filer completed its acquisition of Pure from an arm's-length third-party (collectively, the Acquisition Transaction) and, in each case, the purchase price was satisfied, in part, by cash from the net proceeds of the IPO.

13. In order for the Filer to be in a position to acquire Verano and Grand Cypress on the IPO Closing Date, it was necessary for an indirect subsidiary of the Manager to acquire Verano (on December 4, 2014) and Grand Cypress (on December 29, 2014) in advance of the IPO Closing Date and hold such Acquisition Properties for resale to the Filer, since such Acquisition Properties may not have otherwise been commercially available to the Filer on the IPO Closing Date.

14. The fiscal year end for each of the Acquisition Properties is December 31.

15. The Acquisition Transaction is a "significant acquisition" for purposes of NI 51-102 and the Filer must file a BAR in respect of the Acquisition Transaction.

16. Unless otherwise exempted pursuant to section 13.1 of NI 51-102, the BAR must include or incorporate by reference the financial statements set out in section 8.4 of NI 51-102 relating to the Acquisition Properties (the BAR Financials), which are as follows:

(a) in respect of the Filer: (i) unaudited pro forma condensed consolidated statement of income (loss) and comprehensive income (loss) for the three month period ended March 31, 2015; (ii) unaudited pro forma condensed consolidated statement of income (loss) and comprehensive income (loss) for the period from December 1, 2014 (date of formation) to December 31, 2014; and (iii) unaudited pro forma condensed consolidated statement of financial position of the Filer as at March 31, 2015, each in accordance with International Financial Reporting Standards (IFRS);

(b) separate financial statements for the Acquisition Properties as follows (prepared in accordance with IFRS):

i. in respect of Verano: (A) audited carve-out statements of income (loss) and comprehensive income (loss), changes in owners' equity and cash flows for the twelve month period ended December 31, 2014, including unaudited comparatives for the twelve month period ended December 31, 2013; and (B) audited carve-out statement of financial position as at December 31, 2014, including unaudited comparative statement of financial position as at December 31, 2013;

ii. in respect of Grand Cypress: (A) audited statements of income (loss) and comprehensive income (loss), changes in owners' equity and cash flows for the twelve month period ended December 31, 2014, including unaudited comparatives for the twelve month period ended December 31, 2013; and (B) audited statement of financial position as at December 31, 2014, including unaudited comparative statement of financial position as at December 31, 2013; and

iii. in respect of Pure: (A) audited carve-out statements of income (loss) and comprehensive income (loss), changes in owners' equity and cash flows for the twelve month period ended December 31, 2014, including unaudited comparatives for the twelve month period ended December 31, 2013; and (B) audited carve-out statement of financial position as at December 31, 2014, including unaudited comparative statement of financial position as at December 31, 2013; and

(c) separate financial statements for the Acquisition Properties for the three month period ended March 31, 2015 as follows (prepared in accordance with IFRS):

i. in respect of Verano: (A) unaudited carve-out statements of income and comprehensive income, changes in owners' equity and cash flows for the three month period ended March 31, 2015, including unaudited comparatives for the three month period ended March 31, 2014; and (B) unaudited carve-out statement of financial position as at March 31, 2015 including audited comparative statement of financial position as at December 31, 2014;

ii. in respect of Grand Cypress: (A) unaudited statements of income (loss) and comprehensive income (loss), changes in owners' equity and cash flows for the three month period ended March 31, 2015, including unaudited comparatives for the three month period ended March 31, 2014; and (B) unaudited statement of financial position as at March 31, 2015, including audited comparative statement of financial position as at December 31, 2014; and

iii. in respect of Pure: (A) unaudited carve-out statements of income and comprehensive income, changes in owners' equity and cash flows for the three month period ended March 31, 2015, including unaudited comparatives for the three month period ended March 31, 2014; and (B) unaudited carve-out statement of financial position as at March 31, 2015 including audited comparative statement of financial position as at December 31, 2014.

17. Given the recent past experience of the Manager in respect of the initial public offerings and related business acquisition reports filed by Starlight U.S. Multi-Family Core Fund, Starlight U.S. Multi-Family (No. 2) Core Fund and Starlight U.S. Multi-Family (No. 3) Core Fund, the Manager and the Filer had expected to be able to rely on exemptions in NI 51-102 and thereby satisfy the requirements for financials statements in the BAR by including only the financial statements for the Acquisition Properties included in the Prospectus. Accordingly, in advance of acquiring Verano and Grand Cypress, the Manager did not request to be provided with the historical accounting records necessary to prepare the financial statements covering the three month period ended December 31, 2014, as required for the BAR Financials.

18. The Filer has made every reasonable effort, including the following efforts, to obtain copies of, or reconstruct the historical accounting records necessary to prepare the requisite financial statements for the Acquisition Properties, to form part of the BAR Financials, for the three month period ended December 31, 2014, but such efforts were unsuccessful: the Filer contacted, by phone, the owner of each Acquisition Property during the applicable period, to request the requisite records; receiving no subsequent response from each such property owner, the Filer followed-up by e-mail approximately one week later; after several further follow-up phone calls, each property owner informed the Filer that it was under no obligation to provide the requisite records and, accordingly, would not do so.

19. The Filer is unable to rely on section 8.4(4) of NI 51-102 to include in the BAR, the financial statements for the Acquisition Properties included in the Prospectus, since while such section could provide, in applicable circumstances, an exemption from the requirement to include financial statements for the Acquisition Properties for one interim financial period, it does not provide an exemption from the requirement to include financial statements for the Acquisition Properties for the twelve month period ended December 31, 2014.

20. Consequently, in lieu of the BAR Financials, the Filer intends to include in the BAR the following financial information (collectively, the Alternative Acquisition Financial Disclosures):

(a in respect of the Filer: (i) unaudited pro forma condensed consolidated statement of income (loss) and comprehensive income (loss) for the nine month period ended September 30, 2014; (ii) unaudited pro forma condensed consolidated statement of financial position of the Filer as at September 30, 2014; (iii) unaudited pro forma condensed consolidated statement of income (loss) and comprehensive income (loss) for the three month period ended March 31, 2015; and (iv) unaudited pro forma condensed consolidated statement of financial position of the Filer as at March 31, 2015, each in accordance with IFRS;

(b) separate financial statements for the Acquisition Properties as follows (prepared in accordance with IFRS):

i. in respect of Verano: (A) audited carve-out statements of income and comprehensive income, changes in owners' equity and cash flows for the nine month period ended September 30, 2014, including unaudited comparatives for the nine month period ended September 30, 2013; and (B) audited carve-out statement of financial position as at September 30, 2014, including audited comparative statement of financial position as at December 31, 2013;

ii. in respect of Grand Cypress: (A) audited statements of income (loss) and comprehensive income (loss), changes in owners' equity and cash flows for the nine month period ended September 30, 2014, including unaudited comparatives for the nine month period ended September 30, 2013; and (B) audited statement of financial position as at September 30, 2014, including audited comparative statement of financial position as at December 31, 2013; and

iii. in respect of Pure: (A) audited carve-out statements of income and comprehensive income, changes in owners' equity and cash flows for the nine month period ended September 30, 2014, including unaudited comparatives for the nine month period ended September 30, 2013; and (B) audited carve-out statement of financial position as at September 30, 2014, including audited comparative statement of financial position as at December 31, 2013;

(c) separate financial statements for the Acquisition Properties for the three month period ended March 31, 2015 as follows (prepared in accordance with IFRS):

i. in respect of Verano: (A) audited carve-out statements of income and comprehensive income, changes in owners' equity and cash flows for the three month period ended March 31, 2015, including unaudited comparatives for the three month period ended March 31, 2014; and (B) audited carve-out statement of financial position as at March 31, 2015 including audited comparative statement of financial position as at December 31, 2014;

ii. in respect of Grand Cypress: (A) audited statements of income (loss) and comprehensive income (loss), changes in owners' equity and cash flows for the three month period ended March 31, 2015, including unaudited comparatives for the three month period ended March 31, 2014; and (B) audited statement of financial position as at March 31, 2015, including audited comparative statement of financial position as at December 31, 2014; and

iii. in respect of Pure: (A) audited carve-out statements of income and comprehensive income, changes in owners' equity and cash flows for the three month period ended March 31, 2015, including unaudited comparatives for the three month period ended March 31, 2014; and (B) audited carve-out statement of financial position as at March 31, 2015 including audited comparative statement of financial position as at December 31, 2014;

(d) an audited consolidated financial forecast of the Filer, consisting of the consolidated statements of forecasted net income for each of the three month periods ending June 30, 2015, September 30, 2015, December 31, 2015 and March 31, 2016 and the twelve month period ending March 31, 2016, prepared by management of the Filer using assumptions with an effective date of March 27, 2015; and

(e) summary information of independent appraisals of the fair market value of each of the Acquisition Properties.

Decision

The Decision Maker is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Maker under the Legislation is that the Exemption Sought is granted with respect to the BAR provided that the Filer includes the Alternative Acquisition Financial Disclosures in the BAR in respect of the Acquisition Transaction.

"Sonny Randhawa"

Manager, Corporate Finance

Ontario Securities Commission