FAM REIT offering uses note and exchangeable units structure

Huntingdon is launching FAM REIT by transferring the initial properties to a subsidiary LP (FAM LP) in exchange for Class A and B units and a promissory note, and then selling the Class A units and the promissory note to the new REIT for a portion of the public offering proceeds.  The retained Class B units then becoming exchangeable units; and the REIT converts the note into Class A units.

In light of a CRA position that a partner can have only one interest in a partnership, the purpose of the note appears to be to hive cost base away from the retained Class B units.  This should work if the promissory note qualifies as debt rather than as part of Huntingdon's interest in FAM LP.

Neal Armstrong.  Summary of FAM REIT preliminary prospectus under Domestic REIT Offerings.