Starlight LP-on-U.S.-REIT structure will use a hybrid blocker

Like the American Hotel Income Properties REIT LP offering, the Starlight U.S. Multi-Family Core Fund (also an Ontario LP) will invest in U.S. real estate through a private U.S. REIT.  However, in the Starlight offering, an Ontario subsidiary LP (which will be a corporation for Code purposes) and a Delaware LP will be sandwiched between the public LP and the U.S. private REIT.  This will insulate the public unitholders and their fund more thoroughly from potential FIRPTA issues and the U.S. public partnership rules - while at the same time the structure will still be treated as transparent (under Art. IV.6) for the purposes of U.S. withholding on dividends paid by the U.S. private REIT.  For example, there will be 0% U.S. withholding on dividends indirectly paid to RRSP unitholders of the Starlight fund.

The American Hotel fund is seeking to avoid FAPI treatment by relying on the proposition that hotels generate services rather than property income, whereas the Starlight structure will rely on the six employee and mother ship tests.

Neal Armstrong.   Summary of Starlight U.S. Multi-Family Core Fund Circular under Foreign Asset Income Funds and LPs.