Securities Law & Instruments

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications - Relief from registration and prospectusrequirements granted for trades in connection with a statutoryarrangement involving exchangeable shares where exemptions notavailable for technical reasons. First trade of securities acquiredunder decision not subject to registration and prospectus requirementsprovided that certain conditions of Multilateral Instrument45-102 - Resale of Securities are satisfied.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as amended,s.25, 53 and ss. 74(1).

Applicable Ontario Rules

OSC Rule 45-501 - Exempt Distributions, s. 2.8.

Multilateral Instrument Cited

MI 45-102 - Resale of Securities, s. 2.6.

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA, BRITISH COLUMBIA,
MANITOBA, NEW BRUNSWICK,
NEWFOUNDLAND AND LABRADOR,
THE NORTHWEST TERRITORIES,
NOVA SCOTIA, NUNAVUT, ONTARIO,
PRINCE EDWARD ISLAND, QUÉBEC, SASKATCHEWAN AND
THE YUKON TERRITORY

AND

IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF
NORTHERN PROPERTY REAL ESTATE
INVESTMENT TRUST,
NORTHERN PROPERTY LIMITED PARTNERSHIP AND
NORTHERN PROPERTY TRUST

MRRS DECISION DOCUMENT

1. WHEREAS the Canadian securities regulatoryauthority or regulator (collectively, the "Decision Makers")in each of Alberta, British Columbia, Manitoba, New Brunswick,Newfoundland and Labrador, the Northwest Territories, Nova Scotia,Nunavut, Ontario, Prince Edward Island, Québec, Saskatchewanand the Yukon Territory (the "Jurisdictions") hasreceived an application from Northern Property Real Estate InvestmentTrust ("NPR"), Northern Property Limited Partnership(the "Partnership") and Northern Property Trust ("NPTrust") for a decision under the securities legislationof the Jurisdictions (the "Legislation") that therequirements under the Legislation to be registered to tradein a security (the "Registration Requirement") andto file and obtain a receipt for a preliminary prospectus anda prospectus (the "Prospectus Requirement"), shallnot apply to certain trades of securities to be made in connectionwith a reorganization of Urbco Inc. ("Urbco") undersection 193 of the Business Corporations Act (Alberta) (the"ABCA") involving Urbco and the holders of its commonshares (the "Arrangement");

2. AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System")the Alberta Securities Commission is the principal regulatorfor this application;

3. AND WHEREAS NPR, the Partnership,and NP Trust have represented to the Decision Makers that:

3.1 Urbco is a corporation incorporated underthe laws of Alberta;

3.2 the authorized capital of Urbco consistsof an unlimited number of common shares (the "Urbco CommonShares") and an unlimited number of preferred shares;

3.3 as at March 31, 2002, 10,348,191 Urbco CommonShares were issued and outstanding;

3.4 Urbco is a reporting issuer in British Columbia,Alberta and Ontario;

3.5 the Urbco Common Shares are presently listedon The Toronto Stock Exchange ("TSE ");

3.6 following the effective date of the Arrangement,the Urbco Common Shares will be delisted from the TSE and Urbcowill apply to cease to be a reporting issuer, where applicable;

3.7 NPR is an unincorporated open-ended trustgoverned by the laws of the Province of Alberta under a declarationof trust;

3.8 NPR is authorized to issue an unlimitednumber of units ("Units") and an unlimited numberof special voting units ("Special Voting Units");

3.9 each Unit is transferable and redeemableon demand by the holder, and represents an equal undivided beneficialinterest in distributions by NPR;

3.10 each Special Voting Unit entitles the holderto one vote at any meeting of Unit holders but does not entitlethe holder to any distributions by NPR;

3.11 Special Voting Units are redeemable atany time by the holder for nominal consideration and are nottransferable, except in certain limited circumstances and willonly be issued in connection with the issuance of class B limitedpartnership units ("Class B LP Units") or other convertiblesecurities of the Partnership;

3.12 NPR was created to directly and indirectlyacquire the portfolio of income producing properties of Urbcounder the Arrangement;

3.13 the objectives of NPR are to provide Unitholders with stable and growing cash distributions and to maximizeunit value through management of properties directly and indirectlyheld by it and to acquire additional residential and commercialrental properties or interests;

3.14 NPR has applied for and received conditionalapproval from the TSE for the listing on the TSE of Units issuablein connection with the Arrangement, or issuable from time totime in exchange for Class B LP Units, subject to, among otherthings, completion of the Arrangement;

3.15 the Partnership is a limited partnershipformed under the laws of Alberta;

3.16 the General Partner of the Partnershipis Northern Property Holdings Corp. ("Holdings"),a wholly-owned subsidiary of NPR;

3.17 the Partnership was formed to hold allof the Urbco Common Shares and to operate the real propertyinterests not directly held by NPR after completion of the Arrangement;

3.18 all partners of the Partnership must beresidents of Canada;

3.19 initially, the Partnership will have outstandingone or more general partnership units, held by Holdings, andclass A limited partnership units ("Class A LP Units"),held by NP Trust, a wholly-owned subsidiary of NPR;

3.20 the Partnership will issue Class B LP Unitsto persons who elect to receive Class B LP Units instead ofUnits under the Plan of Arrangement. The Partnership may issueadditional Class B LP Units in respect of other property acquisitionsmade by the Partnership from time to time;

3.21 the Class B LP Units:

3.21.1 are exchangeable by the holders for Unitsat any time;

3.21.2 are required to be exchanged for Unitsin certain circumstances;

3.21.3 entitle the holder to receive cash distributionsfrom the Partnership equal to cash distributions made by NPRon the Units;

3.21.4 entitle the holders to receive SpecialVoting Units to vote at meetings of holders of Units of NPR;

3.21.5 are transferable only in limited circumstances;and

3.21.6 are intended to be, to the greatest extentpracticable, the economic equivalent of Units;

3.22 the Partnership is not and does not intendto become a reporting issuer (or equivalent) in any of the Jurisdictions;

3.23 NP Trust is an unincorporated open-endedtrust established under the laws of the Province of Albertapursuant to a declaration of trust;

3.24 NP Trust is a limited purpose trust andinitially its activities will be restricted to holding securitiesof the Partnership;

3.25 all of the units of NP Trust will be ownedby NPR;

3.26 NP Trust is not and does not intend tobecome a reporting issuer (or equivalent) in any of the Jurisdictions;

3.27 the Arrangement will require:

3.27.1 the approval of two-thirds of the votescast by the holders of the Urbco Common Shares present in personor by proxy at a meeting of shareholders to be held on May 13,2002 (the "Meeting"); and

3.27.2 approval of the Court of Queen's Benchof Alberta (the "Court"), the application in respectof which is expected to be heard on or about May 16, 2002;

3.28 an information circular (the "Circular")has been prepared in conformity with the provisions of the ABCAand applicable securities laws and an interim order dated April12, 2002 has been obtained from the Court;

3.29 the Circular contains prospectus-leveldisclosure of the business and affairs of NPR, Urbco and thePartnership and a detailed description of the Arrangement;

3.30 the Circular has been mailed to the holdersof the Urbco Common Shares in connection with the Meeting;

3.31 upon the Plan of Arrangement becoming effective,in accordance with elections made or deemed to be made by theholders of Urbco Common Shares, the outstanding Urbco CommonShares will be exchanged for Units or Class B LP Units;

3.32 upon the completion of the Arrangement,NPR will own, directly and indirectly, the existing real propertyportfolio of Urbco and all of the issued and outstanding UrbcoCommon Shares will be held by the Partnership;

3.33 the limited partnership agreement governingthe Partnership (the "Limited Partnership Agreement")will provide that the Class B LP Units will be non-voting (exceptas required by the Limited Partnership Agreement or by applicablelaw) and each Class B LP Unit will entitle the holder to distributionsfrom the Partnership payable at the same time as, and equivalentto, each distribution paid by NPR on Units of NPR;

3.34 distributions on the Class B LP Units willbe derived from income on real property interests held by Urbcosubsequent to the Arrangement;

3.35 to the extent distributions per Class BLP Unit would be less than distributions per Unit derived fromthe real property interests held by NPR, the Partnership willsubscribe for a sufficient number of Units as may be requiredin order to cause distributions per Class B LP Unit to equaldistributions per Unit;

3.36 to the extent distributions per Unit wouldbe less than distributions per Class B LP Unit, the Partnershipwill distribute sufficient income through distributions on theClass A LP Units held indirectly by NPR to cause distributionson Units and Class B LP Units to be equal;

3.37 NPR has agreed that, to the extent furtherClass B LP Units are issued, it will issue a corresponding numberof Special Voting Units;

3.38 under the Arrangement, each holder of ClassB LP Units will receive one Special Voting Unit for each ClassB LP Unit such holder receives;

3.39 Special Voting Units issued to the holdersof Class B LP Units may be transferred only under the same circumstancesas the associated Class B LP Units, will be evidenced only bythe certificates representing such Class B LP Units and willbe automatically redeemed for nominal consideration upon theexchange of Class B LP Units for Units of NPR;

3.40 the Limited Partnership Agreement providesthe holders of the Class B LP Units with a put right (the "ExchangeRight") to require NPR to purchase from a holder of ClassB LP Units all or any part of his or her Class B LP Units. Thepurchase price for each Class B LP Unit purchased by NPR willbe an amount equal to the current market price of a Unit ofNPR, to be satisfied by the delivery to the holder of one Unitof NPR, together with an additional amount equivalent to thefull amount of all declared and unpaid distributions on suchClass B LP Unit;

3.41 the Limited Partnership Agreement providesthe Partnership with the right (the "Call Right")to acquire all outstanding Class B LP Units for Units of NPRon a one-for-one basis in certain circumstances, which includethe holder of Class B LP Units becoming a non-resident of Canada(within the meaning of the Income Tax Act (Canada)), the occurrenceof a transaction involving a change of control of NPR or inthe event that there are issued and outstanding, at any time,less than 10% of the number of Class B LP Units originally issuedunder the Arrangement;

3.42 the exchange mechanics under the ExchangeRight and the Call Right provide that where a holder of ClassB LP Units exercises the Exchange Right or the Partnership exercisesthe Call Right, the Partnership will purchase from NPR a numberof Units of NPR equal to the number of Class B LP Units forwhich the Exchange Right or Call Right, as the case may be,is exercised (the "Partnership Unit Purchase"). ThePartnership will then redeem such Class B LP Units in exchangefor the Units of NPR purchased from NPR (the "PartnershipUnit Distribution");

3.43 the Declaration of Trust provides thatupon the exercise of the Exchange Right or the Call Right, theSpecial Voting Units attaching to the Class B LP Units beingexchanged will be automatically redeemed by NPR;

3.44 in order to fund the Partnership Unit Purchasein connection with the exercise of the Exchange Right or theCall Right, as the case may be, NPR will subscribe for unsecuredsubordinated trust notes (the "Subordinated Trust Notes")issued by NP Trust (the "NP Trust Note Distribution")in an aggregate principal amount equal to the purchase pricefor the Units to be acquired by the Partnership. NP Trust willin turn subscribe for unsecured subordinated notes ("PartnershipNotes") issued by the Partnership (the "PartnershipNote Distribution") in the same principal amount. In thismanner, NPR will indirectly lend the Partnership sufficientfunds to effect the Partnership Unit Purchase;

3.45 the Partnership may effect PartnershipNote Distributions in order to fund the purchase of Units bythe Partnership for the purposes of maintaining the economicequivalency of Units and Class B LP Units as described above;

3.46 under the terms of a support agreementto be entered into between NPR, NP Trust, the Partnership, andthe limited partners of the Partnership, in certain circumstanceswhere the Partnership is unable to deliver Units of NPR to holdersof Class B LP Units upon exercise of the Exchange Right, suchas in the event of the insolvency of the Partnership, a holderof Class B LP Units will have the right (the "RetractionRight") to cause NP Trust to acquire, and for NPR to issue,Units of NPR to NP Trust for nominal consideration (the "NPTrust Unit Purchase"). NP Trust will then exchange, forno additional consideration, such Units for the Class B LP Unitsto which the exercise of the Retraction Right relates (the "NPTrust Unit Distribution");

3.47 upon exercise of the Retraction Right,the Special Voting Units attaching to the Class B LP Units beingexchanged will be automatically redeemed by NPR;

3.48 it is anticipated that the majority ofall future property interests to be acquired by NPR will beacquired directly by NPR. However, there may be circumstanceswhere it is in the best interests of Unit holders to acquireproperty interests indirectly through the Partnership, in exchangefor Class B LP Units;

3.49 to the extent Class B LP Units are issuedin connection with the indirect acquisition of property interestsby NPR, NPR will be required to issue, for no additional consideration,an equivalent number of Special Voting Units (such distributionof Special Voting Units, a "Property Acquisition Distribution");

3.50 concurrently with the completion of theArrangement, NPR expects to raise gross proceeds of $66 to $70million by way of a public offering of Units (the "Offering");

3.51 a preliminary prospectus in connectionwith the Offering was filed with the Decision Makers in eachof the Jurisdictions on April 15, 2002, and a final prospectusis expected to be filed on or about May 13, 2002;

3.52 upon receiving a receipt for a final prospectusunder the Offering, NPR will become a reporting issuer in theJurisdictions;

3.53 closing of the Offering will occur concurrentlywith, and is conditional upon completion of, the Arrangement;

3.54 subject to satisfying all closing conditionsand obtaining all applicable regulatory and shareholder approvals,it is anticipated that the Arrangement will be effected andthe Offering will close on or about May 22, 2002;
3.55 exemptions from the Registration Requirement and the ProspectusRequirement are not available in all the Jurisdictions for thefollowing trades (the "Trades"):

3.55.1 trades made in connection with the Arrangementinvolving non-corporate entities;

3.55.2 trades made in connection with a PartnershipUnit Purchase or an NP Trust Unit Purchase;

3.55.3 trades made in connection with a PartnershipUnit Distribution or an NP Trust Unit Distribution;

3.55.4 trades made in connection with a PartnershipNote Distribution where NP Trust acquires Partnership Noteswith an aggregate acquisition cost of less than a minimum prescribedamount;

3.55.5 trades made in connection with an NPTrust Note Distribution where NPR acquires Subordinated TrustNotes with an aggregate acquisition cost of less than a minimumprescribed amount;

3.55.6 the issuance of Special Voting Unitsby NPR in connection with a Property Acquisition Distributionwhere assets are acquired by the Partnership with a fair valueof not less than a prescribed amount;

4. AND WHEREAS under the System, thisMRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");

5. AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

6. THE DECISION of the Decision Makersunder the Legislation is that:

6.1 the Registration Requirement and the ProspectusRequirement will not apply to the Trades provided that the firsttrade in Units, Class B LP Units, Partnership Notes, SubordinatedTrust Notes, and Special Voting Units acquired under this Decisionare deemed to be a distribution or primary distribution to thepublic;

6.2 the Registration Requirement and the ProspectusRequirement will not apply to the first trade of Class B LPUnits and Special Voting Units and the Prospectus Requirementswill not apply to the first trade of Units acquired under thisDecision provided that:

6.2.1 except in Québec, NPR satisfiesthe conditions in subsections (3) or (4) of section 2.6 of MultilateralInstrument 45-102 Resale of Securities ("MI 45-102")and for the purposes of determining the period of time thatNPR has been a reporting issuer under section 2.6 of MI 45-102the period of time that Urbco was a reporting issuer immediatelybefore the Arrangement may be included; and

6.2.2 in Québec,

6.2.2.1 the issuer is and has been a reportingissuer in Québec for the twelve months immediately precedingthe trade;

6.2.2.2 no unusual effort is made to preparethe market or to create a demand for the securities that arethe subject of the trade;

6.2.2.3 no extraordinary commission or considerationis paid to a person or company in respect of the trade; and

6.2.2.4 if the selling shareholder is an insideror officer of the issuer, the selling shareholder has no reasonablegrounds to believe that the issuer is in default of securitieslegislation.

May 17, 2002.

"Eric T. Spink"      "Walter B. O'Donoghue"