NorthWest Healthcare/NWI

Overview

NWI (see summary) will be merged into NWH under s. 132.2, with the former NWI unitholders receiving 0.208 NWH units for each NWI unit. The affiliated entities holding a 65% economic interest in NWI will exchange their exchangeable units under ITA s. 97(2) in a subsidiary LP of NWI for units which are redeemable for NWH units.

NWI

A TSXV-listed Ontario unit trust holding all the Class A LP units of an Ontario LP ("NWI LP") which, in turn indirectly holds a portfolio of medical office buildings, hospitals and other real estate in the healthcare industry in Australia and New Zealand, Germany, Brazil and (through NWH, as described below) Canada. NorthWest Value Partners Inc. directly or through affiliates ("NWVP") has a 65% interest in NWI through the holding of 27.6% (i.e., 24M) of the NWI units (as well as holding special voting units) and the holding of all of the (exchangeable) Class B LP units of NWI LP (92.3M units).

NWH

A TSXV-listed Ontario units trust with 39M units outstanding and holding assets through an Ontario LP ("NWH LP"). NorthWest Operating Trust, an indirect subsidiary unit trust of NWI held 4.35M NWH units and 7.552M units of NWH LP representing a 16.5% interest therein.

NWI AM

. NWI Asset Management Inc., an Alberta corporation (presumably, an affiliate of NWVP).

Proposed transactions

Under an Alberta Plan of Arrangement:

1. NWI LP will subscribe $100 for 10 preferred shares of NWI AM.
2. NWH LP will make a distribution of partnership capital to NWH and in payment thereof issue to NWH a demand promissory note having a principal amount equal to the fair market value of the NWH units held by NWI LP.
3. NWH will redeem the NWH units held by NWI LP and in satisfaction thereof deliver the note in 2 above to NWI LP.
4. NorthWest Operating Trust will make payable to its beneficiaries its taxable income for the taxation year ending immediately before step 11 below net of prior s. 104(6) deductions and tax attributes, with such distribution to be satisfied if there is insufficient cash through the issuance of additional units.
5. Each of NWH and NWI will make payable to its beneficiaries its taxable income for the taxation year deemed to end by ITA s. 132.2(3)(b) net of prior s. 104(6) deductions and tax attributes, with such distribution to be satisfied if there is insufficient cash through the issuance of additional units.
6. Units of dissenting unitholders will be transferred to NWI.
7. Rights under the NWH unitholders' rights plan will be redeemed.
8. The NWI LPA will be amended to create a new class of LP units (the "Redeemable Units") that will be redeemable at the option of the holder for a number of NWH units based on the exchange ratio.
9. The holder of the NWI Class B LP units will exchange their units for Redeemable Units on a one-for-one basis under s. 97(2).
10. NWVP and any of its affiliates holding "NWI Rights" (board appointment, pre-emptive and other specified contractual rights) will transfer them to NWH in exchange for similar "NWH Rights."
11. NWH will acquire all of the assets of NWI in consideration for NWH units and the assumption of outstanding debentures of NWI, which will become convertible into NWH units.
12. NWH will subscribe in cash for one NWI unit.
13. NWI deferred units will be exchanged for NWH deferred units in accordance with ITA s. 7(1.4).
14. NWI will redeem each NWI unit (other than the one unit is step 12 above) in consideration for 0.208 of an NWH unit (with fractions rounded down).
15. NWI will redeem each NWI special voting unit in consideration for 0.208 of an NWH special voting unit (with fractions rounded down).
16. All of the issued and outstanding common shares of NWI AM will be transferred by NWI LP to Healthcare Properties LP, a Manitoba limited partnership.

Canadian tax consequences

S. 132.2 merger. Provided that a joint s. 132.2 election is made on a timely basis, there should be no resulting net income to NWI or tax liability to its unitholders as a result of the transaction, which will constitute a qualifying exchange – except that the transfer may be organized to realize income in NWI equal to unused attributes.

SIFT rules

NWH expects to qualify for the REIT exception, although it is noted that it is acquiring a non-controlling interest in some entities under the transaction. NWH LP and NWI LP are expected to qualify as excluded subsidiary entities.

FTCG rules

No assurance is given respecting the Foreign Tax Credit Generator rules.

AOC/year ends

Upon completion of the Arrangement, NWVP is expected to own approximately 34% of NWH, so the Arrangement is not expected to result in an acquisition of control of NWH. NWI and NWH are seeking CRA approval to change the fiscal year ends of certain respective subsidiaries in order to ensure that substantially all their income earned up to the effective date will be allocated to the respective NWI and NWH unitholders.