Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 51-102 Continuous Disclosure Obligations -- Application for relief from requirement in Section 8.4 of NI 51-102 to include financial statement disclosure in business acquisition report -- Filer completed the acquisition of the acquisition properties -- Filer has made every reasonable effort to obtain access to, or copies of, the historical accounting records in respect of the acquisition properties necessary to prepare and audit the acquisition properties financial statements, but such efforts were unsuccessful in respect of two of the properties -- Filer filed a prospectus on April 3, 2013 -- Prior to filing the prospectus, the Filer submitted a pre-filing requesting an interpretation that the prospectus would include satisfactory financial statements or other information as an alternative to the financial statements or other information that will be required to be included in, or incorporated by reference into, a BAR filed under Part 8 of NI 51-102 -- Prospectus included the prospectus financials -- Relief granted subject to conditions including provision of the acquisition financials.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, s. 8.4.

May 14, 2013


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 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 principal regulator (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 to include the financial statement disclosure prescribed under section 8.4 of NI 51-102 and Item 3 of Form NI 51-102F4 Business Acquisition Report relating to financial statement disclosure for significant acquisitions, so that the Filer does not need to include financial statements of the Bridgemoor (as defined herein) and Towne Lake (as defined herein) properties for the period prior to their respective dates of acquisition by the Vendors (as defined herein) in the business acquisition report (BAR) of the Filer relating to the Acquisition (as defined herein) (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, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador (collectively, 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 principal, registered and head office of the Filer is located at 401 The West Mall, Suite 1100, Toronto, Ontario, M9C 5J5.

2. The Filer is a limited partnership established on February 12, 2013 under, and governed by, the laws of the Province of Ontario, pursuant to a limited partnership agreement dated February 12, 2013, as amended and/or restated from time to time.

3. The Filer is a reporting issuer, or the equivalent thereof, in each Province of Canada.

4. The interests in the Filer are divided into five classes of limited partnership units (Units): Class A Units, Class U Units, Class I Units, Class F Units and Class C Units. The Filer is authorized to issue an unlimited number of Units of each class. As at the date hereof, there are 4,550,000 Units outstanding.

5. The Class A Units and Class U Units of the Filer are listed and posted for trading on the TSX Venture Exchange under the symbols "UMF.A" and "UMF.U" respectively.

6. The Filer was formed to own multi-family real estate properties located in the U.S., including an initial portfolio of three properties (the Acquisition Properties) consisting of (i) The Falls at Copper Lake Apartments in Houston, Texas (Copper Lake), (ii) Bridgemoor Apartments in Denton, Texas (Bridgemoor) and (iii) Villages of Towne Lake in Pearland, Texas (Towne Lake).

7. On April 3, 2013, the Principal Regulator issued a receipt (the Receipt) in respect of a final prospectus of the Filer (the Prospectus) relating to the initial public offering of the Units (the IPO) qualifying for distribution up to US$75 million of Units (as well as further Units issuable pursuant to an over-allotment option granted to the agents of the IPO).

8. The Receipt evidenced the granting by the Principal Regulator of relief requested relating to financial statement presentation in the Prospectus (the Prospectus Relief), exempting the Filer from, among other things, the requirements of National Instrument 41-101 General Prospectus Requirements to include historical financial statements of the Acquisition Properties, for the period prior to the acquisition of the Acquisition Properties by the vendors thereof (the Vendors).

9. On April 18, 2013, the Filer completed its IPO of approximately US$44.41 million of Units, and on April 23, 2013, the Filer completed its acquisition of the Acquisition Properties for an aggregate purchase price of approximately US$80.58 million, satisfied, in part, by way of approximately US$29.15 million in cash from the proceeds of the IPO (the Acquisition).

10. Prior to the Acquisition, Bridgemoor was owned by an affiliate of Interwest Capital Corporation (the Bridgemoor Vendor). The Bridgemoor Vendor initially purchased, in December 2010, two construction loans secured by Bridgemoor and ultimately acquired Bridgemoor pursuant to a foreclosure on such loans in February 2011.

11. At the time of the Bridgemoor Vendor's acquisition of Bridgemoor, the property was under its initial construction, with a limited number of completed rental suites being tenanted, and was, therefore, mostly vacant.

12. Other than summary internal financial information (which was incomplete and unsuitable for the purposes of preparing audited financial statements) obtained as part of its due diligence process in connection with the loan acquisition, the Bridgemoor Vendor did not possess, nor have access to, and was not entitled to obtain access to, financial information in respect of Bridgemoor for any period prior to acquisition by the Bridgemoor Vendor.

13. Starlight Investments Ltd., the promoter of the Filer for the IPO and the manager of the Filer (the Manager) had, without success, made (including with the assistance of the Bridgemoor Vendor) every reasonable effort to obtain access to, or copies of, historical accounting records in respect of Bridgemoor for the period prior to its acquisition by the Bridgemoor Vendor.

14. Prior to the Acquisition, Towne Lake was owned by an affiliate of Interwest Capital Corporation (the Towne Lake Vendor). The Towne Lake Vendor purchased, in July 2011, a construction loan secured by Towne Lake and acquired Towne Lake simultaneously with the purchase of the loan by receiving a deed in lieu of foreclosure on such loan.

15. At the time of the Towne Lake Vendor's acquisition of Towne Lake, the property was transitioning from initial lease-up and was only 60-65% occupied.

16. Other than summary internal financial information (which was incomplete and unsuitable for the purposes of preparing audited financial statements) obtained as part of its due diligence process in connection with the loan acquisition, the Towne Lake Vendor did not possess, nor have access to, and was not entitled to obtain access to, financial information in respect of Towne Lake for any period prior to acquisition by the Towne Lake Vendor.

17. The Manager had, without success, made (including with the assistance of the Towne Lake Vendor) every reasonable effort to obtain access to, or copies of, historical accounting records in respect of Towne Lake for the period prior to its acquisition by the Towne Lake Vendor.

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

19. 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).

20. In respect of Copper Lake, the BAR will include audited statements of income and comprehensive income, changes in owners' equity and cash flows for the years ended December 31, 2011 and December 31, 2012, together with statements of financial position as at December 31, 2011 and December 31, 2012 (and accompanying notes thereto). No relief is requested for these financial statements as the acquisition of Copper Lake by the vendor of Copper Lake was completed in 2010.

21. The Filer will file the BAR within 60 days of March 31, 2013, being the most recently completed interim period of the Acquisition Properties, in which case, pursuant to paragraphs 8.4(4)(a), 8.4(4)(c)(i)(B) and subsection 8.4(6) of NI 51-102, the Filer is exempted from the requirement to include in the BAR Financials financial statements and pro forma financial statements concerning or including the most recently completed interim period (being the period ended March 31, 2013).

22. The Filer will satisfy the requirements in respect of the BAR Financials by including in the BAR the following financial statements (each prepared in accordance with International Financial Reporting Standards):

(a) In respect of Bridgemoor, audited statements of income and comprehensive income, changes in owners' equity and cash flows for the years ended December 31, 2011 and December 31, 2012, together with statements of financial position as at December 31, 2011 and December 31, 2012 (and accompanying notes thereto), subject to the foregoing presentation only including financial information for the period after acquisition by the Vendor of Bridgemoor in February 2011.

(b) In respect of Towne Lake, audited statements of income and comprehensive income, changes in owners' equity and cash flows for the years ended December 31, 2011 and December 31, 2012, together with statements of financial position as at December 31, 2011 and December 31, 2012 (and accompanying notes thereto), subject to the foregoing presentation only including financial information for the period after acquisition by the Vendor of Towne Lake in July 2011.

(c) In respect of Copper Lake, audited statements of income and comprehensive income, changes in owners' equity and cash flows for the years ended December 31, 2011 and December 31, 2012, together with statements of financial position as at December 31, 2011 and December 31, 2012 (and accompanying notes thereto).

(d) Unaudited pro forma statements of income and comprehensive income of the Filer for the year ended December 31, 2012, an unaudited pro forma condensed consolidated statement of financial position of the Filer as at December 31, 2012 (in each case giving effect to the IPO including the acquisition of the Acquisition Properties by the Filer as if such events occurred at the commencement of the applicable reporting periods), together with accompanying notes, prepared using the same accounting policies of the statements described above, and pro forma earnings per share based on the foregoing pro forma statements of income and comprehensive income of the Filer.

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 Filer must file the BAR within 60 days of March 31, 2013, being the most recently completed interim period of the Acquisition Properties, in which case pursuant to paragraphs 8.4(4)(a), 8.4(4)(c)(i)(B) and subsection 8.4(6) of NI 51-102, the Filer is exempted from the requirements to include in the BAR financial statements and pro-forma financial statements concerning the most recently completed interim period being March 31, 2013.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted with respect to the BAR provided that the Filer includes in the BAR the following financial statements required to be filed by the Filer in connection with a significant acquisition completed by the Filer on April 23, 2013 (each prepared in accordance with International Financial Reporting Standards):

(a) In respect of Bridgemoor, audited statements of income and comprehensive income, changes in owners' equity and cash flows for the years ended December 31, 2011 and December 31, 2012, together with statements of financial position as at December 31, 2011 and December 31, 2012 (and accompanying notes thereto), subject to the foregoing presentation only including financial information for the period after acquisition by the Vendor of Bridgemoor in February 2011.

(b) In respect of Towne Lake, audited statements of income and comprehensive income, changes in owners' equity and cash flows for the years ended December 31, 2011 and December 31, 2012, together with statements of financial position as at December 31, 2011 and December 31, 2012 (and accompanying notes thereto), subject to the foregoing presentation only including financial information for the period after acquisition by the Vendor of Towne Lake in July 2011.

(c) In respect of Copper Lake, audited statements of income and comprehensive income, changes in owners' equity and cash flows for the years ended December 31, 2011 and December 31, 2012, together with statements of financial position as at December 31, 2011 and December 31, 2012 (and accompanying notes thereto).

(d) Unaudited pro forma statements of income and comprehensive income of the Filer for the year ended December 31, 2012, an unaudited pro forma condensed consolidated statement of financial position of the Filer as at December 31, 2012 (in each case giving effect to the IPO including the acquisition of the Acquisition Properties by the Filer as if such events occurred at the commencement of the applicable reporting periods), together with accompanying notes, prepared using the same accounting policies of the statements described above, and pro forma earnings per share based on the foregoing pro forma statements of income and comprehensive income of the Filer.

"Sonny Randhawa"
Manager, Corporate Finance
Ontario Securities Commission