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 certain financial statement disclosure in a business acquisition report required to be filed in connection with a significant acquisition -- Vendor not in possession of, and unable to, access or obtain certain financial statements for the period prior to the acquisition of the property -- Filer completed the acquisition of the subject properties -- Filer has made every reasonable effort to obtain access to, or copies of, the historical accounting records in respect of the acquired subject properties but such efforts were unsuccessful -- Certain financial statements are not material since the subject properties are not material in the context of the combined operations of the filers and its portfolio of properties as a whole -- Prospectus includes satisfactory alternative financial statements or other information required to be included in, or incorporated by reference into, a business acquisition report filed under Part 8 of NI 51-102- Relief granted subject to conditions.

Applicable Legislative Provisions

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

June 27, 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
MORGUARD NORTH AMERICAN RESIDENTIAL
REAL ESTATE INVESTMENT TRUST
(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 relief pursuant to Part 13 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102), from the requirement in section 8.4 of NI 51-102 to include certain financial statements in a business acquisition report (BAR) required to be filed by the Filer in connection with a significant acquisition completed by the Filer in April and May 2013.(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 of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Quebec, Saskatchewan 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.

Representations

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

1. The Filer is an unincorporated, open-ended real estate investment trust governed by a declaration of trust. Its principal, registered and head office is located at 55 City Centre Drive, Suite 1000, Mississauga, Ontario, L5B 1M3.

2. The Filer owns multi-unit residential properties in Canada and the United States which consist of interests in 11,160 residential suites that are located in Ontario, Alberta, Colorado, Florida, Georgia, Louisiana, North Carolina and Texas including the Acquisition Properties (as defined below).

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

4. The Filer's units are listed and posted for trading on the Toronto Stock Exchange under the symbol MRG.

5. On December 21, 2012, the Filer entered into an agreement to acquire a portfolio of 12 multi-unit residential properties (the Acquisition Properties) from subsidiaries of Pearlmark Real Estate Partners, L.L.C. (the Pearlmark Vendors), entities at arm's length to the Filer, for an aggregate purchase price of US$458.5 million, including estimated transaction costs of Cdn$7.7 million (the Acquisition).

6. The Filer completed the purchase of six of the Acquisition Properties on April 17, 2013, one of the Acquisition Properties May 17, 2013 and the remaining five Acquisition Properties on May 22, 2013.

7. The Acquisition is a "significant acquisition" for the Filer pursuant to 8.3 of NI 51-102.

8. Pursuant to Section 8.3 of NI 51-102 and Section 8.1(4) of Companion Policy 51-102CP -- Continuous Disclosure Obligations, the Filer is required to file a BAR within 75 days of completion of the Acquisition containing the financial information required by Section 8.4 of NI 51-102 which requires:

a. unaudited pro forma combined financial statements for the year ended December 31, 2012 of the Filer including the Acquisition Properties, and

b. audited combined financial statements for the years ended December 31, 2012 and December 31, 2011 of the Acquisition Properties (collectively, the BAR Disclosure Requirements).

9. The Filer does not have the necessary financial statements for the year-ended December 31, 2011 to meet the BAR Disclosure Requirements for certain Acquisition Properties identified as 4408 John F. Kennedy Parkway, Fort Collins, Colorado (Settlers Creek) , 2055 Barrett Lakes Blvd NW, Kennesaw, Georgia (Barrett Walk), and 3235 Trimblestone Lane, Raleigh, North Carolina (Perry Point and together with Settlers Creek and Barrett Walk, the Subject Properties) for the following periods:

a. Settlers Creek prior to April 21, 2011;

b. Barrett Walk prior to July 20, 2011; and

c. Perry Point prior to July 21, 2011(collectively, the Missing Financial Information).

10. The Missing Financial Information includes periods prior to the acquisition date of each of the Subject Properties by the Filer.

11. The Filer requested the Missing Financial Information from the applicable Pearlmark Vendor and was advised by the Pearlmark Vendor that the respective Pearlmark Vendor are not in possession of the Missing Financial Information and are not able to access or obtain such information, as it relates to a period prior to the time that the Subject Properties were acquired.

12. The Filer has made every reasonable effort to obtain access to, or copies of, the Missing Financial Information, but such efforts were unsuccessful.

13. But for the Missing Financial Information, the Filer is able to satisfy the BAR Disclosure Requirements for the Acquisition Properties and otherwise satisfy the requirements to prepare and file a BAR in accordance with NI 51-102.

14. The Filer submits that the Missing Financial Information is not material since the Subject Properties are not material in the context of the combined operations of the Filer and its portfolio of properties, as a whole including the Acquisition Properties.

15. The Acquisition Properties Historical Financial Statements were not relied upon by the Filer in making its investment decision to acquire the Acquisition Properties.

16. In lieu of the BAR Disclosure Requirements, the Filer will include in the BAR the following financial statements:

a. unaudited pro forma combined financial statements for the year ended December 31, 2012 of the Filer which include the Acquisition Properties (the Pro Forma Financial Statements); and

b. audited combined financial statements (U.S. GAAP) for the years ended December 31, 2012 and December 31, 2011 of the Acquisition Properties (other than with respect to the Subject Properties, the financial statements for the year-ended December 31, 2011 exclude the following periods (which periods were prior to the respective acquisition dates by the vendor of the applicable Acquisition Property): (i) Settlers Creek prior to April 21, 2011, (ii) Barrett Walk prior to July 20, 2011 and (iii) Perry Point prior to July 21, 2011, (collectively, the Acquisition Properties Historical Financial Statements).

17. The Pro Forma Financial Statements will include information regarding all of the Acquisition Properties (including the Subject Properties). The Pro Forma Financial Statements will be reviewed by the Filer's auditors.

18. Full financial information relating to the Subject Properties will be included in the Acquisition Properties Historical Financial Statements for the year ended December 31, 2012 and over five months of financial information for the year ended December 31, 2011 for two of the Subject Properties and over eight months of financial information for the year ended December 31, 2011 for one of the Subject Properties. Accordingly, the Acquisition Properties Historical Financial Information will be missing less than four months of financial information for Settlers Creek and less than eight months of financial information for each of Barrett Walk and Perry Point.

19. Management of the Filer considers the Acquisition Properties (including the Subject Properties) to be stable properties which are not subject to seasonality, and therefore is of the view that the Acquisition Properties Historical Financial Statements for the year ended December 31, 2012 are indicative of the results for the comparative period ended December 31, 2011.

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 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 in April and May 2013.:

a. the Pro Forma Financial Statements; and

b. the Acquisition Properties Historical Financial Statements.

"Sonny Randhawa"
Manager, Corporate Finance