Brookfield Canada Office Properties is proposing to redeem all its public units for cash outside a Plan of Arrangement

Brookfield Property Partners LP (BPY) has an 83% economic interest in Brookfield Canada Office Properties (BOX - a Canadian REIT), by virtue of holding 40.3% of the BOX units and holding exchangeable units of a subsidiary LP of BOX (BOPC LP), mostly through a grandchild subsidiary (BOP Split). BOX is proposing to redeem the units of the public in cash.

BOP Split will also exchange all its exchangeable units. The general partner of BPY already controls BOX given that the exchangeable LP units of BOPC LP are coupled with voting units of BOX. However, the exchange will trigger a loss restriction event (whose definition is grounded in the concept of majority interest beneficiary). The resulting year end will provide a convenient cut-off for the results of the public and private trust. However, in any event, it is likely that the regular monthly distributions have been enough to push out all of BOX’s income to date, so that no special distribution will be required, and all of the redemption proceeds will be proceeds of disposition.

In the case of non-residents, these proceeds will be subject to Part XIII.2 withholding of 15%. Brookfield had thought about but rejected structuring the transaction so that the non-residents could sell their units under a Plan of Arrangement, thereby avoiding the Part XIII.2 tax.

Neal Armstrong. Summary of BOX Circular under Mergers & Acquisitions – REIT/Income Fund/LP Acquisitions – Privatizations.