Securities Law & Instruments

Headnote

MI 11-102 and NP 11-203 -- relief from filing business acquisition report -- using income from the continuing operations of the filer to determine the significance of certain acquisitions leads to anomalous results -- filer permitted to exclude depreciation of income-producing properties from income when calculating significance under Part 8 of National Instrument 51-102 Continuous Disclosure Obligations.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, s. 8.3.

October 8, 2010

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

CANADIAN APARTMENT PROPERTIES REAL

ESTATE INVESTMENT TRUST (the FILER)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) granting relief to allow the exclusion of depreciation of income producing properties when applying the Income Test (as defined below) for the Filer's continuous disclosure obligations under Part 8 of National Instrument 51-102 -- Continuous Disclosure Obligations (NI 51-102) in respect of the July 29, 2010 acquisition of a portfolio consisting of eight properties totalling 307 suites referred to as BC Property Portfolio (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 (the Principal Regulator), 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, Québec, New Brunswick, Nova Scotia, Newfoundland and Labrador, Prince Edward Island, Northwest Territories, Nunavut and Yukon.

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 in this decision.

Representations

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

1. The Filer is an internally managed unincorporated open-ended real estate investment trust owning interests in multi-unit residential properties including apartment buildings and townhouses located in major urban centres across Canada and two manufactured home communities.

2. The Filer was established under the laws of the Province of Ontario by a declaration of trust and its head office is located in Toronto, Ontario.

3. The Filer is a reporting issuer under the securities legislation of each of the provinces and territories of Canada.

4. The units of the Filer are listed and posted for trading on the Toronto Stock Exchange under the trading symbol CAR.UN.

5. The Filer completed its initial public offering on May 21, 1997 pursuant to its final long form prospectus dated May 12, 1997.

6. As at July 29, 2010, the Filer had ownership interests in 27,228 residential suites well diversified by geographic location and asset class and two manufactured home communities comprising 1,316 land lease sites.

7. As at and for the year ended December 31, 2009 the Filer had assets in excess of $2.2 billion, income from continuing operations of approximately $6.2 million and depreciation of income producing properties of $78.6 million.

8. As at and for the year ended December 31, 2008 the Filer had assets of approximately $2.2 billion, loss from continuing operations of approximately $11.5 million and depreciation of income producing properties of $72.0 million.

9. Under Part 8 of NI 51-102, the Filer is required to file a business acquisition report (BAR) for any completed acquisition that is determined to be significant based on the acquisition satisfying any of the three significance tests set out in subsection 8.3 (2) of NI 51-102.

10. For the purposes of completing its quantitative analysis of the income test (the Income Test) prescribed under Part 8.3 of NI 51-102, the Filer is required to compare its income from continuing operations against the proportionate share of income from continuing operations of BC Property Portfolio.

11. Excluding depreciation of income producing properties when applying the Income Test more accurately reflects the significance of this acquisition from a business and commercial perspective and its results are generally consistent with the other tests of significance set out in subsection 8.3 (2) of NI 51-102.

12. The application of the Income Test with depreciation of income producing properties excluded results in BC Property Portfolio representing approximately 2.8% of the Filer's income from continuing operations for the fiscal year ended December 31, 2009. However, based on the application of the Income Test, pursuant to paragraph (1) of Part 8.2 of NI 51-102, the Filer is required to file a BAR with respect to its acquisition of BC Property Portfolio on or before October 12, 2010.

Decision

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

The decision of the Principal Regulator under the Legislation is that the Exemption Sought is granted.

"Michael Brown"
Assistant Manager, Corporate Finance
Ontario Securities Commission