National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- proposed acquisition of properties by an issuer by acquiring shares of the nominee companies holding such properties -- issuer unable to provide financial information for certain periods in respect of certain properties as such financial information was unavailable -- issuer represented that the missing financial information was immaterial -- issuer granted relief from having to provide the missing financial information in its management information circular and business acquisition report as required under securities laws.
Applicable Legislative Provisions
Form 51-102F5 Information Circular, item 14.2.
National Instrument 51-102 Continuous Disclosure Obligations, ss. 8.4, 13.1.
Citation: Re Northern Property Real Estate Investment Trust, 2015 ABASC 871
September 15, 2015
IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST (the Filer)
The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision (the Exemption Sought) under the securities legislation of the Jurisdictions (the Legislation) exempting the Filer from the requirements under section 14.2 of Form 51-102F5 Information Circular (51-102F5) and section 8.4 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) to include the Missing Financial Information (as defined below) in its information circular (Circular) and business acquisition report (BAR) to be filed in respect of the Proposed Acquisition (as defined below).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Alberta Securities Commission is the principal regulator for this application;
(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, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland & Labrador, Yukon, Northwest Territories and Nunavut; and
(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions, NI 51-102 or MI 11-102 have the same meaning if used in this decision, unless otherwise defined herein.
This decision is based on the following facts represented by the Filer:
1. The Filer is a mutual fund trust for Canadian federal income tax purposes and was created on January 2, 2002 pursuant to a declaration of trust (as amended and restated, from time to time), and is governed under the laws of the Province of Alberta.
2. The Filer's head office is located in Calgary, Alberta.
3. The Filer's principal business is to own and operate or lease residential and commercial property directly and through various subsidiaries, in British Columbia, Alberta, Saskatchewan, Québec, Northwest Territories, Nunavut, and Newfoundland and Labrador.
4. The authorized capital of the Filer consists of an unlimited number of participating units (the Ordinary Units) and an unlimited number of special voting units (the Special Voting Units). As of September 3, 2015, there were 31,694,190 Ordinary Units and 67,796 Special Voting Units issued and outstanding.
5. The Ordinary Units are listed and posted for trading on the Toronto Stock Exchange (the TSX) under the symbol "NPR.UN".
6. The Filer is a reporting issuer in each of the jurisdictions of Canada, and is not in default of securities legislation in any jurisdiction of Canada.
7. The Filer's business is operated through the following structure:
(a) the Filer holds all of the outstanding Class A limited partnership units of NPR Limited Partnership (NPR LP), the sole shareholder of a number of nominee companies (each an NPR Nominee);
(b) each NPR Nominee is the registered owner of real property beneficially owned by the Filer; and
(c) Class B limited partnership units of NPR LP are convertible into Ordinary Units and are held by persons or companies who formerly owned and subsequently sold real property to the Filer or an affiliate of the Filer.
8. True North Real Estate Investment Trust (True North REIT) is a reporting issuer in each of the jurisdictions of Canada, and to the knowledge of the Filer, is not in default of securities legislation in any jurisdiction of Canada.
9. The units of True North REIT are listed and posted for trading on the TSX under the symbol "TN.UN".
10. True North REIT's business is operated through the following structure:
(a) True North REIT holds all of the outstanding Class A limited partnership units of six limited partnerships (the True North LPs), the sole shareholders of a number of nominee companies (each a True North Nominee);
(b) each True North Nominee is the registered owner of real property beneficially owned by True North REIT (all such real property collectively the REIT Properties); and
(c) Class B limited partnership units of the True North LPs are convertible into trust units of True North REIT and are principally held by persons or companies who formerly owned and subsequently sold real property to True North REIT or an affiliate of True North REIT.
The Private Properties
11. Starlight Investments Ltd. (Starlight) alone or together with the Public Sector Pension Investment Board (PSP) indirectly owns and controls real property, including 33 properties (the Private Properties) to be indirectly acquired by the Filer. The registered owners of the Private Properties are 58 nominee companies (the Starlight/PSP Nominees), each controlled by one of seven private limited partnerships, in turn controlled by Starlight or Starlight and PSP.
The Proposed Acquisition
12. On or about October 31, 2015, the Filer plans to directly or indirectly acquire (the Proposed Acquisition) pursuant to a plan of arrangement under the Business Corporations Act (Alberta) (the Plan of Arrangement) the REIT Properties and the Private Properties (together, the Acquisition Properties).
13. Pursuant to the Plan of Arrangement:
(a) the Filer will acquire from True North REIT all of the Class A limited partnership units of the True North LPs in exchange for Ordinary Units;
(b) the True North LPs will remain the sole shareholders of the True North Nominees that own the REIT Properties;
(c) holders of Class B limited partnership units of the True North LPs will exchange those units, at their election, for either Ordinary Units or new redeemable limited partnership units of the relevant True North LP, which will be convertible into Ordinary Units;
(d) the Ordinary Units received in consideration for the Class A limited partnership units of the True North LPs will be distributed to unitholders of True North REIT, and True North REIT will be dissolved;
(e) the Filer will acquire from various limited partnerships all of the shares of the Starlight/PSP Nominees; and
(f) in exchange for all of the outstanding shares of the Starlight/PSP Nominees, Starlight and PSP will receive a combination of cash and Class B limited partnership units of new limited partnerships to be formed by the Filer in connection with the Plan of Arrangement, which will be convertible into Ordinary Units.
14. The Proposed Acquisition involves the exchange of the Filer's securities for the securities of the businesses being acquired, being True North REIT and each of the Private Properties. Accordingly, section 14.2 of 51-102F5 requires the Filer to include in the Circular disclosure regarding each of the Filer (if it has not filed all required documents pursuant to NI 51-102), True North REIT and the Private Properties, which disclosure must be the disclosure (including financial statements) prescribed under securities legislation and described in the form of prospectus respectively that True North REIT and each of the Private Properties would be eligible to use immediately prior to the sending and filing of the Circular. True North REIT is eligible to use Form 44-101F1 Short Form Prospectus. The other businesses being acquired, namely the Private Properties, are eligible to use Form 41-101F1 Information Required in a Prospectus. The Filer has filed all required documents pursuant to NI 51-102.
15. The Proposed Acquisition is a "significant acquisition" under Part 8 of NI 51-102, and as a result the Filer will be required to file the BAR within 75 days of the completion of the Proposed Acquisition pursuant to subsection 8.2(1) of NI 51-102.
16. Subsection 8.4(8) of NI 51-102 provides that if a reporting issuer is required to include financial statements for more than one business because the significant acquisition involves an acquisition of related businesses, the financial statements for each business must be presented separately, except for periods during which the businesses have been under common control or management, in which case the reporting issuer may present the financial statements of the acquired businesses on a combined basis. The acquisition of the REIT Properties and the Private Properties will be an acquisition of related businesses, as the acquisition of the REIT Properties and the Private Properties is conditional upon the acquisition of the other, respectively. The REIT Properties and the Private Properties are not under common control or management, so the financial statements of the REIT Properties must be presented separately from those of the Private Properties. Certain Private Properties were operated under common control or management by Starlight (the Starlight Portfolio) and can and will be presented on a combined basis. The remaining Private Properties were operated under common control or management by joint ventures owned by Starlight and PSP (the IMH Portfolio) and accordingly can and will be presented on a combined basis.
17. The Filer does not have in respect of the following Private Properties (the Subject Private Properties) financial statements for the following periods (the Missing Financial Information):
(a) for 120 Dundas St. E., Mississauga, Ontario, those prior to July 30, 2013;
(b) for 100 Dundas St. E., Mississauga, Ontario, those prior to December 9, 2013;
(c) for 700 Parkhill Pl., Peterborough, Ontario, those prior to May 29, 2014;
(d) for 1-4 Balmoral Pl., Brockville, Ontario, those prior to May 30, 2014; and
(e) for each of 53 Adelaide St N., Lindsay, Ontario, 1001 Talwood Dr., Peterborough, Ontario, 1189 Talwood Crt., Peterborough, Ontario and 1200 Talwood Dr., Peterborough, Ontario, those prior to June 16, 2014.
Reasons for the Exemption Sought
18. The Filer considers each of the Private Properties, not the Starlight/PSP Nominees or the limited partnerships that directly or indirectly own the Private Properties, to constitute a business. As the Missing Financial Information is information that would otherwise be in the financial statements required to be disclosed in the BAR and Circular in respect of the Subject Private Properties, the Filer requires the Exemption Sought.
19. The Subject Private Properties were originally acquired by Starlight and PSP from small, non-institutional persons or companies that were not reporting issuers, including family-owned privately held corporations, that did not maintain the historical accounting records necessary to present the Missing Financial Information.
20. Starlight has advised the Filer that at the time of the original purchases, it made every reasonable effort to obtain access to, or copies of, the Missing Financial Information, but such efforts were unsuccessful. Accordingly, the Missing Financial Information is unavailable to the Filer.
21. It is submitted that the Subject Private Properties, and therefore the Missing Financial Information, are relatively immaterial to the Filer and its portfolio of properties as a whole (including the Acquisition Properties), as demonstrated by the following:
(a) the aggregate purchase price for all of the Subject Private Properties is approximately $158.400 million, representing only 11.2% of the aggregate purchase price for all of the Acquisition Properties;
(b) the aggregate appraised value for all of the Subject Private Properties is $158.400 million, representing only 5.1% of the aggregate pro forma appraised value for all of the Filer's properties; and
(c) the estimated aggregate pro forma net operating income (NOI) for the Subject Private Properties is $7.945 million, representing only 4.7% of the aggregate pro forma NOI for all of the Filer's properties.
22. In respect of the REIT Properties, the following financial statements will be incorporated by reference in the Circular and BAR, respectively:
(a) audited annual financial statements of True North REIT for the years ended December 31, 2014 and 2013; and
(b) unaudited interim comparative financial statements of True North REIT for the three and six month period ended June 30, 2015.
23. In respect of the Private Properties, the following financial statements (the Existing Private Properties Financial Information) will be included in the Circular and BAR, respectively:
(a) audited consolidated annual carve-out financial statements of each of the Starlight Portfolio and the IMH Portfolio for the years ended December 31, 2014 and 2013, excluding the Missing Financial Information and shown on a combined basis, respectively; and
(b) unaudited consolidated carve-out interim comparative financial statements of each of the Starlight Portfolio and the IMH Portfolio for the three and six month period ended June 30, 2015, excluding the Missing Financial Information and shown on a combined basis, respectively.
24. The Filer will also include in the BAR and Circular, respectively, pro forma unaudited financial statements of the Filer for the year ended December 31, 2014 and the six month period ended June 30, 2015 with respect to the Proposed Acquisition (the Pro Forma Financial Information).
25. Management of the Filer has reviewed the available operating data provided by Starlight and PSP and considers the Private Properties, including the Subject Private Properties, to be stable properties, and therefore believes that the Existing Private Properties Financial Information is indicative of the results for the Private Properties.
The Decision of the Decision Makers under the Legislation is that the Exemption Sought is granted, provided that the Filer provides both the Existing Private Properties Financial Information and the Pro Forma Financial Information in each of the Circular and BAR.