Securities Law & Instruments

Headnote

National Policy 11-206 Process for Cease to be a Reporting Issuer Applications -- application for an order that the issuer is not a reporting issuer under applicable securities laws -- issuer converted to a publicly traded real estate investment trust named First Capital Real Estate Investment Trust by way of a plan of arrangement -- following the plan of arrangement the issuer is and has outstanding debentures that are held by more than 51 securityholders in Canada -- issuer has no other securities outstanding apart from shares that are wholly owned by First Capital Real Estate Investment Trust and First Capital REIT Limited Partnership -- issuer remaining as a co-borrower under debentures to avoid potential tax consequences to debentureholders -- the REIT is a reporting issuer in all jurisdictions where the issuer was a reporting issuer.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., s. 1(10)(a)(ii).

January 2, 2020

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (THE JURISDICTION) AND IN THE MATTER OF THE PROCESS FOR CEASE TO BE A REPORTING ISSUER APPLICATIONS AND IN THE MATTER OF FIRST CAPITAL REALTY INC. (THE FILER)

ORDER

Background

The principal regulator in the Jurisdiction has received an application from the Filer for an order under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that the Filer has ceased to be a reporting issuer in all jurisdictions in Canada in which it is a reporting issuer (the Order Sought).

Under the Process for Cease to be a Reporting Issuer Applications (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) the Filer has provided notice that subsection 4C.5(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this order, unless otherwise defined.

Representations

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

1. The Filer was incorporated under the Business Corporations Act (Ontario) (the OBCA) on November 10, 1993. The registered office of the Filer is located at King Liberty Village, 85 Hanna Avenue, Suite 400, Toronto, Ontario, M6K 3S3.

2. First Capital Real Estate Investment Trust (the REIT) is an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. The registered and head office of the REIT is located at King Liberty Village, 85 Hanna Avenue, Suite 400, Toronto, Ontario, M6K 3S3.

3. A proposed conversion of the Filer to a publicly traded real estate investment trust named First Capital Real Estate Investment Trust by way of a plan of arrangement (the Arrangement) between the Filer, the REIT, First Capital REIT GP Inc. (the General Partner), First Capital REIT Limited Partnership (FCR LP) and First Capital Realty Acquisition Inc. under section 182 of the OBCA was approved by the holders (the Shareholders) of the common shares of the Filer (the Common Shares) at a special meeting of Shareholders that was held on December 10, 2019.

4. The Arrangement was completed on December 30, 2019 and resulted in, among other things, Shareholders transferring their Common Shares to the REIT for an equivalent number of units of the REIT (REIT Units) and/or, in the case of electing Shareholders, exchangeable Class B limited partnership units (Class B LP Units) in the capital of FCR LP. Class B LP Units are exchangeable for REIT Units at the option of the holder on a one-for-one basis.

5. As part of the completion of the Arrangement, a series of transactions involving the Filer were effected which resulted in, among other things, the following:

(a) former Shareholders collectively owned all of the issued and outstanding REIT Units and Class B LP Units;

(b) the REIT owned all of the issued and outstanding shares of the General Partner, a corporation established in connection with the Arrangement;

(c) the REIT owned all of the issued and outstanding class A limited partnership units in the capital of FCR LP;

(d) the General Partner owned the general partner interest in FCR LP;

(e) the REIT and FCR LP together owned all of the issued and outstanding shares of the Filer; and

(f) the REIT's continuous disclosure documents being available on SEDAR.

6. Immediately following the completion of the Arrangement, the REIT became bound by the terms of the trust indenture dated as of June 21, 2005 between the Filer and Computershare Trust Company of Canada (Computershare) (including the supplemental indentures thereto) (collectively, the Indenture) and its outstanding Series M debentures, Series N debentures, Series O debentures, Series P debentures, Series Q debentures, Series R debentures, Series S debentures, Series T debentures, Series U debentures and Series V debentures (collectively, the Debentures) as a co-principal debtor, with the Filer remaining as a co-principal debtor, and the amounts payable under the Indenture and the Debentures were guaranteed by all applicable guarantor entities required by the terms of the Indenture and the Debentures, including FCR LP and the General Partner. The outstanding Debentures of the Filer are as follows:

(a) $175,000,000 principal amount of 5.60% senior unsecured debentures (Series M) due April 30, 2020 issued pursuant to the sixteenth supplemental indenture to the Indenture;

(b) $175,000,000 principal amount of 4.50% senior unsecured debentures (Series N) due March 1, 2021 issued pursuant to the seventeenth supplemental indenture to the Indenture;

(c) $200,000,000 principal amount of 4.43% senior unsecured debentures (Series O) due January 31, 2022 issued pursuant to the eighteenth supplemental indenture to the Indenture;

(d) $250,000,000 principal amount of 3.95% senior unsecured debentures (Series P) due December 5, 2022 issued pursuant to the nineteenth supplemental indenture to the Indenture;

(e) $300,000,000 principal amount of 3.90% senior unsecured debentures (Series Q) due October 30, 2023 issued pursuant to the twenty-second supplemental indenture to the Indenture;

(f) $300,000,000 principal amount of 4.79% senior unsecured debentures (Series R) due August 30, 2024 issued pursuant to the twenty-third supplemental indenture to the Indenture;

(g) $300,000,000 principal amount of 4.32% senior unsecured debentures (Series S) due July 31, 2025 issued pursuant to the twenty-fourth supplemental indenture to the Indenture;

(h) $300,000,000 principal amount of 3.60% senior unsecured debentures (Series T) due May 6, 2026 issued pursuant to the twenty-fifth supplemental indenture to the Indenture;

(i) $300,000,000 principal amount of 3.75% senior unsecured debentures (Series U) due July 12, 2027 issued pursuant to the twenty-sixth supplemental indenture to the Indenture; and

(j) $200,000,000 principal amount of 3.456% senior unsecured debentures (Series V) due January 22, 2027 issued pursuant to the twenty-eighth supplemental indenture to the Indenture.

7. The sole registered holder of all of the Debentures is CDS Clearing & Depository Services Inc. Computershare, the indenture trustee for the Debentures, has advised the Filer that, based on a report provided by Broadridge as at October 2, 2019, the Debentures were beneficially held as set forth below:

DEBENTURES

NUMBER OF BENEFICIAL HOLDERS WORLDWIDE

NUMBER OF BENEFICIAL HOLDERS RESIDENT IN CANADA

Series M

465

104

Series N

286

107

Series O

549

154

Series P

839

190

Series Q

2,374

598

Series R

342

73

Series S

439

78

Series T

809

207

Series U

783

138

Series V

187

7

8. The Common Shares, which were listed on the TSX under the symbol "FCR", were delisted from the TSX on December 30, 2019 shortly following the completion of the Arrangement.

9. The terms of the Indenture provide that the Filer was entitled, upon the Arrangement becoming effective, to be released from its obligations under the Indenture and the Debentures. However, the Filer agreed to continue to be bound as a co-principal debtor under the Indenture and the Debentures together with the REIT to avoid potentially adverse tax consequences for the holders of the Debentures.

10. Although the Filer will remain as a co-principal debtor under the Indenture, it was released from certain covenants under the Indenture, including debt restriction and interest coverage covenants, equity maintenance covenants, unencumbered assets covenants, the requirement to provide financial information to holders of Debentures and change of control, amalgamation, arrangement, merger, reorganization and asset sale restrictions. Upon completion of the Arrangement, such covenants and all other obligations under the Indenture and the Debentures were assumed by the REIT, as co-principal debtor thereunder. As part of the Arrangement, the Filer, the REIT and Computershare, as indenture trustee under the Indenture, entered into a supplemental indenture to the Indenture to give effect to the foregoing.

11. The Indenture does not contain a provision requiring the Filer to maintain its status as a reporting issuer.

12. The Filer has no intention of accessing the capital markets in the future by issuing further securities to the public.

13. By virtue of the REIT Units being listed and posted for trading on the TSX at the opening of markets on December 30, 2019, the REIT became a reporting issuer in all the provinces of Canada and is not in default of securities legislation in any jurisdiction. The REIT Units are listed on the TSX under symbol "FCR.UN".

14. As both the REIT and the Filer became co-principal debtors under the Indenture upon completion of the Arrangement, each of the REIT and the Filer would qualify as a "credit support issuer" under section 13.4 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) as the Debentures are guaranteed by numerous subsidiaries of the REIT and/or the Filer. However, the credit support issuer exemption contemplated under section 13.4 of NI 51-102 is not available to the Filer as such exemption does not contemplate a co-principal debtor structure.

15. Upon completion of the Arrangement, the Filer met the criteria set forth in sections 19(a), (c) and (d) of National Policy 11-206 Process for Cease to be a Reporting Issuer Applications (NP 11-206) as follows:

(a) the Filer is not an OTC reporting issuer under Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets;

(c) the Filer's securities, including debt securities, are not traded in Canada or another country on a marketplace (as defined in National Instrument 21-101 Marketplace Operation) or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported; and

(d) the Filer is not in default of securities legislation in any jurisdiction.

16. The Filer does not satisfy the criteria in section 19(b) of NP 11-206 because, as noted in paragraph 7, the Debentures are not beneficially owned, directly or indirectly, by fewer than 15 securityholders in each of the jurisdictions of Canada and fewer than 51 securityholders in total worldwide.

17. Upon the grant of the Order Sought, the Filer will no longer be a reporting issuer in any jurisdiction in Canada.

Order

The principal regulator is satisfied that the order meets the test set out in the Legislation for the principal regulator to make the order.

The decision of the principal regulator under the Legislation is that the Order Sought is granted.

"Lawrence Haber"
Commissioner
Ontario Securities Commission
"Raymond Kindiak"
Commissioner
Ontario Securities Commission