Canadian Tire REIT will be a closed-end fund

The new Canadian Tire REIT (called CT REIT) will be a closed-end (s. 108(2)(b)) rather than an open-end (s. 108(2)(a)) fund in order to accommodate the potential future issuance of preferred units.

Similarly to Melcor and Choice Properties (the Loblaw REIT), Canadian Tire will have a substantial (i.e., $1.8 billion) holding of Class C LP units (effectively like cumulative preferred shares) in the subsidiary real estate limited partnership of the REIT (presumably in order to service debt retained by Canadian Tire) along with around $900 million of exchangeable units of that LP, and around $600 million of units directly in the REIT.  As only around $265 million is being raised on the IPO, the REIT will be substantially owned, directly or through the subsidiary LP, by Canadian Tire.

Also similarly to Choice Properties, the appropriate position also likely is implicitly being taken that the new character conversion rules do not apply to the exchangeable LP units.

Notes will be issued as part consideration for the transfer of the properties to the LP, before being immediately converted into LP units.  This pseudo note consideration has the effect of guaranteeing a minimum cost to the LP for those properties.

Neal Armstrong.  Summary of Preliminary Prospectus for CT REIT under Offerings – REIT and LP Offerings – Domestic REITs.