National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – relief from provisions in section 8.4 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) permitting the filer to include alternative financial disclosure in the business acquisition report pursuant to section 13.1 of NI 51-102 – filer acquired four properties for which it cannot obtain certain historical financial information – missing financial information is not material.
Applicable Legislative Provisions
National Instrument 51-102 Continuous Disclosure Obligations, ss. 8.4, 13.1.
July 9, 2018
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
BSR REAL ESTATE INVESTMENT TRUST
The principal regulator in the Jurisdiction has received an application from the Filer (the Application) for a decision (the Exemption Sought) under the securities legislation of the Jurisdiction (the Legislation) for relief pursuant to Part 13 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) from certain requirements in Item 3 of Form 51-102F4 and Part 8 of NI 51-102 in respect of a business acquisition report (the BAR) required to be filed by the Filer for the indirect acquisition (the Acquisition) of a portfolio of 48 multifamily properties located in the United States (the Initial Properties) in connection with the completion on May 18, 2018 of the initial public offering (the Offering) of 13,500,000 trust units of the Filer, and, so that the BAR is not required to include audited financial information in respect of the following four Initial Properties (collectively, the Exempt Properties):
- Westend Lodge Apartments, Beaumont, TX;
- Mountain Ranch Apartments, Fayetteville, AR;
- Windhaven Park, Dallas, TX (Windhaven); and
- Brandon Place, Oklahoma City, OK,
for certain periods prior to the date they were acquired by BSR Trust, LLC (BSR), an entity that is now a subsidiary of the Filer following the closing of the Offering.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for the 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, Newfoundland and Labrador, Nunavut, the Northwest Territories and Yukon Territory.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning in this decision, unless they are defined in this decision.
This decision is based on the following facts represented by the Filer:
1. The Filer is an open-ended real estate investment trust established under the laws of the Province of Ontario pursuant to a declaration of trust dated January 9, 2018, as amended and restated on May 18, 2018.
2. The Filer’s head office is located in Toronto, Ontario.
3. The Filer is a reporting issuer in each of the provinces and territories of Canada and is not in default of securities legislation in any jurisdiction of Canada.
4. The Filer’s trust units are listed and posted for trading on the Toronto Stock Exchange under the symbol “HOM.U”.
5. On May 18, 2018, the Filer completed the Offering of 13,500,000 trust units of the Filer pursuant to the prospectus dated May 11, 2018 (the Prospectus).
6. In connection with the closing of the Offering, the Filer, through BSR, indirectly acquired the Initial Properties.
7. Prior to the closing of the Offering, BSR indirectly owned all of the Initial Properties, including the Exempt Properties, other than Brandon Place. At the time of the closing of the Offering, Brandon Place was the subject of a binding purchase and sale agreement between BSR and a third party vendor and the acquisition of Brandon Place was completed on June 1, 2018.
8. The Exempt Properties were acquired by BSR in 2016, 2017 and 2018.
9. Windhaven was acquired by BSR on October 11, 2017, and standalone audited financial statements for Windhaven will be included in the BAR. As Windhaven was integrated into BSR’s business on and after October 11, 2017, it is not possible to prepare stand-alone financial statements for Windhaven as of and for the three month period ended December 31, 2017. Accordingly, the Filer proposes to include audited financial statements for Windhaven as of and for the period ended September 30, 2017, leaving an 11 day “gap” for which there is no audited financial information for Windhaven in 2017 (the Windhaven Gap Financial Statements).
10. Audited financial statements of the Exempt Properties (other than Windhaven) for periods prior to their acquisition by BSR, along with the Windhaven Gap Financial Statements (collectively, the Excluded Financial Statements) do not exist and the Filer is unable to produce such Excluded Financial Statements.
11. The Filer proposes to include (or incorporate by reference) the following financial statements in the BAR (collectively, the Proposed Financial Statements). All financial statements described below have been prepared in accordance with IFRS.
- Unaudited pro forma condensed consolidated financial statements as at and for the year ended December 31, 2017 and for the three months ended March 31, 2018.
- Initial Properties (other than the Excluded Financial Statements)
- Audited combined and carve-out financial statements as of December 31, 2017 and December 31, 2016 and for the years ended December 31, 2017 and December 31, 2016.
- Unaudited combined and carve-out financial statements as of March 31, 2018 for the three months ended March 31, 2018 and March 31, 2017.
- Audited carve-out financial statements as of September 30, 2017 and December 31, 2016 and for the nine months ended September 30, 2017 and the year ended December 31, 2016.
12. The Filer submits that the Excluded Financial Statements that are missing from the BAR are not material. The Exempt Properties represent an insignificant amount of the overall (a) number of apartment units, (b) aggregate fair market value, (c) revenue and (d) NOI, of the Initial Properties. The Exempt Properties will not be significant or otherwise material (individually or in the aggregate) to the Filer having regard to the overall size and value of the Filer’s proposed business and operations.
13. Prior to their acquisition by BSR, the Exempt Properties were owned and managed by four different arm’s length vendors. The Filer does not possess, does not have access to and is not entitled to obtain access to, sufficient financial information for the Exempt Properties for any period prior to the acquisition by BSR.
14. Audited historical financial statements of the Exempt Properties were not relevant to BSR’s decision to acquire the Exempt Properties in 2016, 2017 and 2018. Given that such audited financial statements were not considered relevant to the investment decision made to acquire the Exempt Properties, the Filer does not believe that such financial statements are material to the investment decision to be made by a potential investor in the Filer, particularly when considered in light of the other financial information the Filer intends to provide in the BAR. The financial information the Filer intends to provide in the BAR is the same as that provided in the Prospectus, for which the Filer obtained similar relief from Item 32 of Form 41-101F1 Information Required in a Prospectus.
15. The Filer will also incorporate by reference into the BAR the financial forecast included in the Prospectus for the 12 months ended March 31, 2019. The forecast includes information with respect to all of the Initial Properties and is accompanied by a signed auditor's report with respect to the examination of the forecast made by the Filer’s auditors.
16. The Filer believes that the Proposed Financial Statements will provide sufficient historical information for an investor to make an informed decision regarding the Initial Properties as a portfolio.
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, provided that the BAR for the Acquisition includes (or incorporates by reference) all of the following:
1. The Proposed Financial Statements as set out in paragraph 11.
2. The financial forecast included in the Prospectus as set out in paragraph 15.
Deputy Director, Corporate Finance
Ontario Securities Commission