DREAM Global REIT was acquired through unit redemptions funded with asset sales and unit subscriptions
Dream Global REIT, a TSX-listed mutual fund trust with no non-portfolio property, held a portfolio of German and Netherlands rental properties through a wholly-owned Bermuda LP which, in turn, held some direct and indirect Netherlands subsidiaries but held the majority of such assets through a Dutch Co-op which, in turn, held a Luxembourg holding company for various property subsidiaries.
The REIT’s purchase (without the benefit of a Plan of Arrangement) was accomplished, in the main, by Luxembourg and Caymans subsidiaries of three non-resident Blackstone-managed funds acquiring the Dutch Co-op for cash and note consideration, winding-up the Bermuda LP (in order to ensure that such gains fell into the right taxation year of the REIT and so that the proceeds were received in the hands of the REIT), and with the cash portion of such proceeds and the subscription by the purchasers for Class B units of the REIT being used to fund a previously declared special distribution on, and then redeem, all the (Class A) Units, thereby giving rise to a deemed year end under ss. 249(4) and 256(9). Given inter alia that much of the gains were realized as capital gains (i.e., gains realized by the Bermuda LP) rather than as gains giving rise to FAPI, management did not anticipate that the special distribution included any ordinary income – so that it was expected that the unitholders received the same treatment as if they had sold their Units for cash.
Neal Armstrong. Summary of Dream Global REIT Circular under Mergers & Acquisitions – Cross-Border Acquisitions – Inbound – REIT Targets.