Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions and National Instrument 44-102 Shelf Distributions (NI 44-102) -- relief from subparagraph 2.2(3)(b)(i) of NI 44-102 -- due to their unique "stapled unit" structure, the filers have received relief from, among other things, certain financial disclosure requirements under NI 51-102 and related qualification requirements under National Instrument 44-101 Short Form Prospectus Distributions -- the exemption sought is necessary so as to allow the filers the flexibility to offer securities under a base shelf prospectus pursuant to NI 44-102 on equivalent terms as other qualified issuers.

Applicable Legislative Provisions

National Instrument 44-102 Shelf Distributions, ss. 2.2(3)(b)(ii), 11.1

April 28, 2015

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 H&R REAL ESTATE INVESTMENT TRUST (H&R REIT) AND H&R FINANCE TRUST (H&R Finance, and together with H&R REIT, the Filers)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filers under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for a decision that pursuant to section 11.1 of National Instrument 44-102 Shelf Distributions (NI 44-102), subparagraph 2.2(3)(b)(i) of NI 44-102 shall not apply to the Filers (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 Filers have 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, Quebec, Prince Edward Island, New Brunswick, Newfoundland and Labrador and Nova Scotia (collectively, together with Ontario, the Canadian 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 Filers:

1. At the time of this application the Filers are not in default of securities legislation in any of the Canadian Jurisdictions.

2. H&R REIT is an open-ended unincorporated real estate investment trust established under the laws of the Province of Ontario which owns a North American portfolio of office, industrial, residential and retail properties. The head office of H&R REIT is located in Toronto, Ontario.

3. H&R Finance is an open-ended limited purpose unit trust established under the laws of the Province of Ontario whose principal assets are notes of indebtedness issued by H&R U.S. Holdings Inc. (U.S. Holdco), an indirect wholly-owned subsidiary of H&R REIT. The head office of H&R Finance is located in Toronto, Ontario.

4. The Filers are reporting issuers or the equivalent under the securities legislation of each of the Canadian Jurisdictions.

5. As provided in the respective declarations of trust of H&R REIT and H&R Finance, each trust unit of H&R REIT (an H&R REIT Unit) is stapled to a trust unit of H&R Finance (an H&R Finance Unit) (and each H&R Finance Unit is stapled to an H&R REIT Unit), and an H&R REIT Unit, together with an H&R Finance Unit, trades as a "Stapled Unit" (the Stapled Units) on the Toronto Stock Exchange, until there is an "Event of Uncoupling".

6. An "Event of Uncoupling" shall occur only: (i) in the event that holders of H&R REIT Units vote in favour of the uncoupling of H&R Finance Units and H&R REIT Units such that the two securities will trade separately; or (ii) at the sole discretion of the trustees of H&R Finance, but only in the event of bankruptcy, insolvency, winding-up or reorganization (under an applicable law relating to insolvency) of H&R REIT or U.S. Holdco, or the taking of corporate action by H&R REIT or U.S. Holdco in furtherance of any such action or admitting in writing by H&R REIT or U.S. Holdco of its inability to pay its debts generally as they become due.

7. The economic interest of a holder of Stapled Units is in H&R REIT and H&R Finance together.

8. Pursuant to In the Matter of H&R Real Estate Investment Trust on its own behalf and on behalf of H&R Finance Trust dated August 8, 2008, as varied by In the Matter of H&R Real Estate Investment Trust on its own behalf and on behalf of H&R Finance Trust dated September 12, 2008: (i) H&R Finance has been granted relief from (a) the requirements contained in Parts 6 and 7 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102), and (b) the requirements contained in paragraphs 2.2(d)(ii) and 2.2(e) of National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101); and (ii) H&R REIT has been exempted from the requirement contained in paragraph 2.2(e) of NI 44-101, provided that, among other conditions, each H&R Finance Unit is stapled to an H&R REIT Unit and trades as a Stapled Unit.

9. Pursuant to In the Matter of H&R Finance Trust dated May 7, 2009 (the 2009 Decision), subject to certain conditions stipulated therein, H&R Finance has been granted, pursuant to section 11.1 of NI 44-102, an exemption from subparagraph 2.2(3)(b)(ii) of NI 44-102 such that subparagraph 2.2(3)(b)(ii) will not apply to H&R Finance.

10. Pursuant to In the Matter of H&R Real Estate Investment Trust and H&R Finance Trust dated October 24, 2013 (the 2013 Decision), subject to certain conditions stipulated therein: (i) H&R REIT has been granted, pursuant to section 13.1 of NI 51-102, an exemption from the obligations in Parts 4 and 5 of NI 51-102 relating to the filing of annual and interim financial statements, along with the accompanying annual or interim management's discussion and analysis (MD&A) on a stand-alone basis, and relating to the delivery of the same to the holders of H&R REIT Units (the H&R REIT Financial Disclosure Requirements); (ii) H&R Finance has been granted, pursuant to section 13.1 of NI 51-102, an exemption from the obligations in Parts 4 and 5 of NI 51-102 relating to the filing of annual and interim financial statements, along with the accompanying annual or interim M&DA, respectively, on a stand-alone basis, and relating to the delivery of the same to the holders of H&R Finance Units (the H&R Finance Financial Disclosure Requirements); (iii) the Filers have been granted, pursuant to section 13.1 of NI 51-102, an exemption from the requirements of Part 8 of NI 51-102 to (a) determine whether an acquisition or probable acquisition is a significant acquisition with reference to stand-alone financial statements, and (b) present stand-alone historical and pro forma financial statements in a business acquisition report; (iv) the Filers have been granted, pursuant to section 8.1 of NI 44-101, an exemption from certain of the basic qualification criteria contained in subparagraph (d)(i) of section 2.2(d) of NI 44-101 for eligibility to file a short form prospectus, in particular, the requirement that the Filers have current annual financial statements for any period for which the Filers file one set of financial statements prepared on a combined basis (the Short Form Criteria); and (v) the Filers have been granted, pursuant to section 8.6 of National Instrument 52-109 Certificate of Disclosure in Issuer's Annual and Interim Filings (NI 52-109), an exemption from the requirements of sections 4.2 and 5.2 of NI 52-109 in respect of filing the chief executive officer and chief financial officer certificates that H&R REIT and the Filers would normally have to file if they prepared annual and interim financial statements and MD&A on a stand-alone basis.

11. H&R REIT and H&R Finance have a current base shelf prospectus that is expected to expire on or about May 3, 2015, and filed a preliminary base shelf prospectus on April 14, 2015.

12. The Exemption Sought is necessary, as absent the granting of the Exemption Sought, pursuant to section 2.2(3) of NI 44-102, a receipt issued for a base shelf prospectus of H&R REIT and H&R Finance would expire immediately before entering into an agreement of purchase and sale for a security to be sold under the base shelf prospectus due to H&R REIT and H&R Finance not having their respective current annual financial statements at such time.

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, for so long as:

(a) the Filers continue to satisfy the conditions in respect of the H&R REIT Financial Disclosure Requirements relief and the H&R Finance Financial Disclosure Requirements relief as set out in paragraph 2(a) of the 2013 Decision under the heading "Decision"; and

(b) the Filers continue to satisfy the conditions in respect of the Short Form Criteria relief as set out in paragraph 2(d) of the 2013 Decision under the heading "Decision".

"Sonny Randhawa"
Manager, Corporate Finance Branch