Mutual Reliance Review System for Exemptive Relief Applications -- relief from dealer registration and prospectus requirements to allow a trust to issue trust units to existing holders of exchangeable limited partnership units (LP units) of a partnership pursuant to a distribution reinvestment plan (DRIP) of the trust. The trust controls the partnership. Distributions made in respect of exchangeable LP units to be applied to the purchase of trust units under the DRIP. Relief required since exemptions for DRIPs in National Instrument 45-106 Prospectus and Registration Exemptions and National Instrument 31-103 Registration Requirements and Exemptions are not available for use. Exchangeable LP units are intended to be, to the greatest extent possible, the economic equivalent of trust units. Holders of exchangeable LP units are entitled to receive distributions paid by the partnership that are equivalent to distributions paid by the trust on trust units. Exchangeable LP units are exchangeable into trust units at any time.
Relief also granted to allow DRIP participants that are holders of exchangeable LP units to make optional cash payments to purchase additional trust units if that feature is added to DRIP. First trade relief granted for trust units acquired under the decision, subject to certain conditions.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74(1).
August 27, 2010
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
NORTHWEST HEALTHCARE PROPERTIES
REAL ESTATE INVESTMENT TRUST
The 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 Jurisdiction (the "Legislation") for an exemption from the requirements contained in the Legislation to be registered to trade in a security (the "Registration Requirement") and to file a preliminary prospectus and a prospectus and obtain receipts therefor (the "Prospectus Requirement") in respect of any trade of trust units of the Filer ("REIT Units") by the Filer (or by a trustee, custodian or administrator acting for or on behalf of the Filer) to holders of Exchangeable LP Units (as defined below) of NHP Holdings Limited Partnership (the "Partnership") pursuant to a distribution reinvestment plan of the Filer (the "DRIP") under which distributions out of earnings, surplus, capital or other sources payable by the Partnership in respect of the Exchangeable LP Units are applied to the purchase of REIT Units (the "Requested Relief").
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:
(a) The Ontario Securities Commission is the principal regulator for the 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 British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon Territory and Nunavut.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Filer is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario. The Filer was established pursuant to a declaration of trust dated January 1, 2010, as amended.
2. The Filer's head office is located at 284 King Street East, Suite 100, Toronto, Ontario M5A 1K4.
3. The Filer is a reporting issuer (or the equivalent thereof) in each of the Jurisdictions and, to its knowledge, is currently not in default of any applicable requirements under the securities legislation thereunder.
4. The Filer is authorized to issue an unlimited number of REIT Units and an unlimited number of special voting units ("Special Voting Units"). As at July 16, 2010, the Filer had 18,750,000 REIT Units and 7,749,772 Special Voting Units issued and outstanding.
5. The REIT Units are listed and posted for trading on the Toronto Stock Exchange (the "TSX") under the trading symbol "NWH.UN".
6. The Partnership is a limited partnership formed under the laws of the Province of Ontario and is governed by the limited partnership agreement of the Partnership dated March 22, 2010 (the "LP Agreement"). The Partnership's head office is located at 284 King Street East, Suite 100, Toronto, Ontario M5A 1K4.
7. The Partnership is not a reporting issuer (or the equivalent thereof) in any jurisdiction and none of its securities are listed or posted for trading on any stock exchange or other market.
8. The Partnership is authorized to issue an unlimited number of Class A limited partnership units ("Class A Units"), of which 18,750,000 Class A Units are issued and outstanding and held by the Filer, and exchangeable Class B limited partnership units ("Exchangeable LP Units"). The Exchangeable LP Units were issued in connection with the Filer's initial public offering on March 25, 2010 (the "IPO") to NorthWest Operating Trust ("NW Trust"), the entity that indirectly sold the initial properties to the Filer in connection with the IPO. The Exchangeable LP Units are intended to be, to the greatest extent practicable, the economic equivalent of the REIT Units. Holders are entitled to receive distributions equal to those paid by the Filer to holders of REIT Units. The Exchangeable LP Units are not transferable but are exchangeable into REIT Units and each is accompanied by a Special Voting Unit that entitles the holder to receive notice of, attend and to vote together with the holders of REIT Units at all meetings of voting unitholders. As of the date hereof, there are 7,749,772 Exchangeable LP Units issued and outstanding.
9. The principal activity of the Partnership is to own income-producing real estate assets.
10. The Filer holds approximately 70% of the limited partnership units of the Partnership with the balance (the Exchangeable LP Units) held by NW Trust.
11. The Filer intends to make monthly cash distributions on the 15th day of a given month to persons who are holders of REIT Units ("Unitholders") at the close of business on the last business day of the immediately preceding calendar month. Similarly, the LP Agreement provides that the Partnership will make identical monthly cash distributions on the same terms and conditions to persons who are holders of Exchangeable LP Units.
12. The Filer proposes to establish the DRIP to permit Unitholders and holders of Exchangeable LP Units ("LP Unitholders"), other than such holders who are not eligible to participate under the laws of their jurisdiction of residency, at their discretion, to automatically reinvest cash distributions paid on their REIT Units into REIT Units or cash distributions paid on their Exchangeable LP Units into REIT Units as an alternative to receiving cash distributions.
13. Following enrolment in the DRIP by a Unitholder or LP Unitholder (a "DRIP Participant"), distributions in respect of REIT Units or Exchangeable LP Units enrolled in the DRIP will be automatically paid to the agent responsible for the administration of the DRIP (the "DRIP Agent") and applied to the purchase of REIT Units directly from the Filer.
14. The purchase price for a REIT Unit (or fraction thereof) acquired under the DRIP will be the weighted average of the daily closing prices of REIT Units on the TSX for the five (5) trading days immediately preceding the applicable distribution payment date. In addition, DRIP Participants will be entitled to receive a further distribution of REIT Units equal in value to 3% of each distribution that is reinvested under the DRIP.
15. No commissions, service charges or brokerage fees will be payable by DRIP Participants in connection with the issuance of REIT Units under the DRIP. The DRIP Agent's fees for administering the DRIP will be paid by the Filer out of its assets.
16. DRIP Participants may terminate their participation in the DRIP by providing written notice to the DRIP Agent no later than a specified time on the day that is five (5) business days prior to the applicable record date. If received after such time, such notice will have effect for the next following distribution. After such termination is processed, distributions by the Filer or the Partnership, as the case may be, will thereafter be payable to such Unitholder or LP Unitholder in cash or otherwise in the form declared by the Filer or the Partnership, as the case may be.
17. Pursuant to the terms of the DRIP, the Filer will reserve the right to amend, suspend or terminate the DRIP at any time in its sole discretion, subject to prior approval by the TSX. DRIP Participants will be sent written notice of an amendment, suspension or termination of the DRIP in accordance with its terms.
18. Though it is not presently contemplated that the DRIP will provide for an optional cash payment feature which allows holders of REIT Units or Exchangeable LP Units to purchase additional REIT Units by making optional cash payments within certain established limits (the "Cash Payment Option"), such a Cash Payment Option could be implemented in the future. If implemented as part of the DRIP in the future, such a Cash Payment Option will be of a customary nature and the Filer will retain the right to determine from time to time whether the Cash Payment Option will be available.
19. The Filer would be unable to rely on the exemptions from the Registration Requirement and the Prospectus Requirement contained in the Legislation with respect to reinvestment plans (the "DRIP Exemptions") for the purposes of distributing REIT Units under the DRIP to LP Unitholders enrolled in the DRIP since such exemptions permit distributions made in respect of an issuer's securities to be applied only to the purchase of the same issuer's securities. Furthermore, a person who acquires a REIT Unit under the DRIP other than in reliance on the DRIP Exemptions (or a prospectus) would not be able to rely on the exemption from the Prospectus Requirement contained in the Legislation with respect to the first trade or resale of such REIT Unit.
The Decision Maker 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 Maker is that the Requested Relief is granted provided that:
(a) at the time of the trade, the Partnership continues to be controlled by the Filer and the Filer is the beneficial owner of all the issued and outstanding voting securities of the Partnership;
(b) the ability to purchase REIT Units under the DRIP in respect of (a) distributions out of earnings, surplus, capital or other sources payable by the Partnership and (b) any Cash Payment Option, is available to every LP Unitholder in Canada;
(c) should the DRIP include a Cash Payment Option at any time, the Requested Relief will only apply if (a) the aggregate number of REIT Units purchased by DRIP Participants pursuant to the Cash Payment Option in any one financial year of the Filer does not exceed a maximum of 2% of the number of REIT Units issued and outstanding at the beginning of the financial year and (b) the REIT Units trade on a marketplace (as defined in National Instrument 21-101 Marketplace Operation); and
(d) the first trade of any REIT Units acquired under this decision in the Jurisdiction shall be deemed to be a distribution unless the conditions in subsection 2.6(3) of National Instrument 45-102 -- Resale of Securities are satisfied at the time of such first trade.