Cominar/Canmarc

Overview

Cominar REIT through 10 Newco subsidiaries is offering cash or (at the Canmarc unitholder's option) Cominar units for Canmarc units, subject to the total number of Cominar units being capped at 16M but with no potential proration of the cash consideration. The Canmarc Units would be acquired through separate corporate subsidiaries as Cominar is a s. 108(2)(b) unit trust.

Offer

Cominar Acquisition Group offers to purchase solidarily (jointly and severally) all of the issued and outstanding Canmarc Units which Cominar does not directly or indirectly own, together with the associated unitholder rights plan (URP") rights including all Canmarc Units issued upon the conversion, exchange or exercise of the convertible securities for a consideration per Canmarc Unit, at the option of the Unitholder, of $15.30 cash or 0.7054 Cominar Units. The maximum aggregate number of Cominar Units available under the Offer and any Compulsory Acquisition or Subsequent Acquisition Transaction will be limited to 16 million Cominar Units. Unitholders who elect or are deemed to have elected the cash alternative will not be subject to proration.

Cominar

Cominar is an unincorporated close-ended Quebec REIT listed on the TSX.

Canmarc

Canmarc is an unincorporated open-ended Quebec RIET listed on the TSX. The Cominar Acquisition Group and Cominar currently own approximately 15.1% of the outstanding Canmarc Units.

U.S. Unitholders

U.S.-resident and other Ineligible Unitholders that would otherwise receive Cominar Units in exchange for their Canmarc Units shall have such Cominar Units issued to a selling agent, who shall sell such Cominar Units on their behalf through the facilities of the TSX and have the net proceeds of such sale, less any applicable brokerage commissions, other expenses and withholding taxes, delivered to such Unitholders.

Subsequent acquisition transaction

A subsequent acquisition transaction in respect of Canmarc may take the form of one or more amendments to the declaration of trust of Canmarc to provide for the acquisition and/or exchange and/or redemption of all outstanding Canmarc Units (other than those held by Cominar and the Cominar Acquisition Group), in either case for a price equal to, and payable in the same form as (including consideration elections, deemed consideration elections and pro-rationing), the consideration paid for Canmarc Units acquired under the Offer.

Canadian tax consequences

. Exchange. The exchange of Canmarc Units for cash or Cominar units will occur on a taxable basis.

REIT status

Management of Cominar believes that Cominar qualifies as a REIT.

Non-residents

A Non-Resident Holder whose Canmarc Units (or units of Canmarc which have been received in exchange for Canmarc Units) are redeemed by Canmarc pursuant to the Subsequent Acquisition Transaction will be subject to Canadian withholding tax at the rate of 25%, unless such rate is reduced under the provisions of an applicable tax treaty, on that portion of Canmarc's income (other than taxable capital gains designated by Canmarc in respect of the Non-Resident Holder) for the taxation year as is allocated and paid by Canmarc to the Non-Resident Holder in connection with the redemption of such units. There would be Canadian withholding tax at the rate of 25% on an amount which is allocated and paid by Canmarc to the Non-Resident Holder in connection with the redemption of the Non-Resident Holder's units if Canmarc has a "TCP Gains Balance" (as defined in the Tax Act) at that time, but only if Canmarc designates more than 5% of the related net taxable capital gains for the year to Canmarc unitholders that are either Non-resident persons or partnerships which are not "Canadian partnerships." Canadian Non-resident withholding tax of 15% is required under Part XIIL2 of the Tax Act on an amount not otherwise subject to tax which is paid or credited by Canmarc to a Non-Resident Holder or a partnership which is not a "Canadian partnerships"…

U.S. tax consequences

The exchange of Canmarc Units for cash or Cominar units will occur on a taxable basis. No conclusion re whether Canmarc or Cominar is a PFIC.