Blackstone acquisition of Pure Industrial REIT entails a take-up of units in two tranches and contemplates a bump of a U.S. private REIT

It is proposed that all the units of Pure Industrial REIT will be acquired for cash by a B.C. ULC subsidiary of Blackstone (“Purchaser”) under a B.C. Plan of Arrangement. All but the units of the 175 smallest unitholders (holding at least 100 units) will be acquired in the first tranche – and then, 60 seconds later, the units of the remaining 175 unitholders will be acquired. This is to clarify that, for purposes of the Ontario land transfer tax exemption for mutual fund trust unit transfers, the REIT will still satisfy the relevant Ontario MFT tests at the time of the take up of most of the REIT units.

Roughly ¼ of the REIT’s properties are U.S. properties which are held in a U.S. private REIT subsidiary of a B.C. holding company (“CanCo SPV”) that, in turn, is held by the REIT. The Trust has covenanted that it will not do anything that “could reasonably be expected to have the effect of preventing Purchaser or a wholly-owned subsidiary of Purchaser, from obtaining the benefit of a ‘full tax cost bump’ pursuant to the Tax Act” respecting the shares of the U.S. REIT. Opinions will be delivered at closing to a REIT sub and Blackstone sub that the U.S. REIT has qualified as such for Code purposes.

The only corporate step in this corporate plan of arrangement is a transaction in which a B.C. subsidiary of Purchaser, immediately before the acquisition of the REIT units, subscribes $805 for 80.5M CanCo SPV preferred shares with undisclosed attributes.

As this is a purchase rather than redemption transaction, there are no Part XIII.2 withholding issues.

Neal Armstrong. Summary of Pure Industrial REIT Circular under Mergers & Acquisitions – REIT/Income Fund/LP Acquisitions – Trust Acquisitions by Corporations.