TransGlobe -- summary under Privatizations

Asset sale

It is contemplated that after the convening of a REIT meeting to approve the transactions, subsidiary LPs of the REIT (held by it through a newly-formed master LP) will transfer (on a non-rollover basis) a pool of assets to an LP of which a Canadian Apartment Properties REIT entity is the GP in consideration for debt assumption and the issuance of LP units (an arm's length transaction). The REIT subsidiary LPs then sell their LP interests in the CAPREIT LP to CAPREIT for $269 million cash. (CAPREIT presumably accesses the 5% de mininis Ontario land transfer tax exemption). Timbercreek Asset Management Inc. also acquires a pool of assets from the applicable REIT subsidiary partnerships - in consideration for debt assumption and cash consideration of $349 million.

Unit redemptions

The REIT makes a special cash distribution out of these sales proceeds to its unitholders of $4.82 per unit. PSPIB-RE Partners Inc. ("PSP Holdco") then subscribes $469 million in cash for REIT units, and all the REIT units held by the public are redeemed for cash of $9.43 per unit. PSP Holdco's REIT units then are redeemed through a distribution of an interest in the remaining real estate, so that the Drimmer group holds the sole remaining unit of the REIT.

Fees

Potential break-fee of $25 million (or $21 million if the Acquisition Agreement is terminated by the REIT to pursue a superior proposal before the end of the go-shop period (45 days after execution of the proposal letter.) The REIT covenants not to deduct any transaction expenses in computing 2012 income.

Canadian tax consequences

Distributions. All of the income of the REIT for 2012 will be treated as distributed on payment of the special cash distribution and previous ordinary monthly cash distributions - resulting in the tax deferral percentage of the previous monthly distributions being largely eliminated and in perhaps 5.8% of the special cash distribution being treated as a distribution of ordinary income, with most of the balance being a distribution of net capital gains (pp. 61-62) (The distributed net capital gains reduce the proceeds of disposition for the public's units; but not so for the distributed recapture of depreciation.) The income of the REIT will be increased by not having depreciable property at the end of its 2012 taxation year, as well as from the asset sales and transfers described above.

Withholding

The retroactive reduction in the tax-deferred percentage applicable to the previous 2012 monthly distributions also has the effect of retroactively subjecting those distributions to Part XIII tax (p. 64). Most of the special cash distribution paid to non-residents is subject to Part XIII tax, and the redemption proceeds are subject to Part XIII.2 withholding (p.63).