Northview Apartment REIT intends to effect a tax-deferred spin-off using the s. 107.4 rollover [corrected]
It is proposed that the unitholders of Northview Apartment REIT receive mostly cash from Starlight and KingSett funds for their REIT units. However, the purchasing funds will not end up with all the assets of the REIT. The two purchasers will acquire a portion of the assets after they have been suitably packaged into partnerships, with the REIT intending to push out the resulting capital gains (presumably with an eye on avoiding issues under s. 132(5.3)) using the capital gains refund mechanism.
Furthermore, some of the real estate will have first been packaged into a “High Yield Fund,” that is intended to qualify as a REIT and that effectively will be distributed to those unitholders who are interested in receiving units of that fund in lieu of full cash proceeds for their units. This will be accomplished by the REIT settling the new unit trust (the High Yield Fund) with $1,000 in cash, distributing $1,000 of cash to the REIT unitholders, selling its units of the High Yield Fund to the REIT unitholders for $1,000 in cash, and then effecting a s. 107.4 transfer of a holding LP for the real estate in question from it to the High Yield Fund. Those unitholders who have elected to receive only cash then will have their High Yield Fund units redeemed for $7.06875 per unit, in addition to having their REIT units redeemed for $29.18125 per unit. Those who want to retain the High Yield Fund units will not have those units redeemed, so that they only receive cash for their REIT units – and in effect receive their High Yield Fund units on a tax-deferred basis.
The High Yield Fund will need cash to accomplish the above. It is expected to complete the Offering, of up to $430,000,000 of units concurrently with the completion of the (Alberta) Arrangement.
Full Pt. XIII.2 tax will be withheld from the redemption proceeds paid to non-resident unitholders.
Neal Armstrong. Summary of Northview Apartment REIT Circular under Mergers & Acquisitions – REIT/Income Fund /LP Acquisitions – LP Acquisitions of Trusts.