Primaris REIT merger will stream taxable and rollover results at choice of individual unitholders

Primaris Retail REIT subsidiaries are selling $1.9 billion of real estate to the KingSett Consortium (KingSett, OPB and RioCan), with Primaris then pushing out all of the gain (including perhaps $3.00 per unit of recapture) to its unitholders on a cash redemption of approximately 45% of its units.   Primaris will then be merged into H&R REIT on a s. 132.2 merger (subject to the complication that H&R REIT is stapled to H&R Finance Trust, so that there will also be a taxable exchange of 4% of the Primaris units for H&R Finance Trust units).

Likely all of the cash redemption proceeds paid to non-residents will be subject to Part XIII or XIII.2 withholding.  Primaris unitholders will be able to elect before the unitholders’ meeting whether they will receive cash or H&R units, subject to the aggregate allocation being locked in.

If CRA does not consent to permitting some of the Primaris subsidiary LPs to have short taxation years ending immediately after the real estate sale and before the merger, all the Primaris unitholders will participate in the merger into H&R REIT, and only then will the sale close with the gain being pushed out through the cash redemption of H&R units.

Neal Armstrong.  Summary of Primaris Circular under REIT and Income Fund Acquisitions – S. 132.2 Mergers.