FCR is converting to a REIT using an exchangeable unit structure

The shareholders have approved a conversion of First Capital Realty Inc. into a REIT to occur on December 30, 2019 under a Plan of Arrangement. The shareholders will transfer their shares of FCR on a taxable basis in exchange for units of a newly-formed Ontario unit trust (the REIT) – except that those who legitimately seek rollover treatment can elect to receive exchangeable units of a newly-formed subsidiary Ontario LP of the REIT (FCR LP). The number of exchangeable LP units that may be issued is capped at 20% of the currently outstanding number of FCR common shares. The REIT and FCR LP then transfer (under s. 85(2) in the case of FCR LP) their common shares of FCR to a Newco in consideration for notes and shares of Newco. In addition to other tidying-up steps, Newco then amalgamates with FCR.

The final structure portrayed in the Circular is of the REIT holding Amalco directly and through FCR LP. The exchangeable units of FCR LP must be exchanged by December 23, 2023.

As part of the steps, the REIT will become bound by the terms of the FCR’s Debenture Indenture, with FCR (then Amalco) remaining as a co-principal debtor, but being released from numerous covenants. The common shares held by FCR LP and the REIT in Amalco will be retractable.

Neal Armstrong. Summary of First Capital Realty Circular under Offerings – REIT and LP Offerings – Domestic REITs.