The unitholders of a U.S. LLC (BSR) are proposing an IPO though a TSX-listed holding MFT that will be a REIT for Code purposes

A closely-held Delaware LLC with a portfolio of apartment buildings in the southern U.S. appraised at U.S.$890M (“BSR”) is proposing to effectively do an IPO in Canada. This would occur as follows:

• a newly-formed Ontario s. 108(2)(a) unit trust (the “REIT”) will complete a relatively modest IPO in Canada (for about U.S.$135M) with a view to trading on the TSX
• the REIT will use those proceeds to fund a newly-formed Delaware “C Corp” subsidiary of the REIT (“US Holdco”) which, in turn will fund a new wholly-owned Delaware LLC subsidiary (“MergerSub”)
• MergerSub will be merged into BSR with BSR as the survivor
• on the merger, US Holdco will be issued Class A units of BSR, and the existing BSR unitholders will receive Class B exchangeable units of BSR (valued at around U.S.$270M)

Although the REIT will be deemed by the U.S. anti-inversion rules in Code s. 7874 to be a U.S. corporation, it is expected to qualify as a REIT for Code purposes. The disclosure does not discuss whether it will also qualify as a REIT for ITA purposes, but states that it is not expected to be subject to SIFT tax by virtue of not holding any non-portfolio property.

Neal Armstrong. Summary of BSR REIT preliminary prospectus under Offerings – REIT and LP Offerings - Cross-Border REITs.