REIT/Income Fund/LP Acquisitions

Overview

It is proposed that an LLC (the “Purchaser”) that is an affiliate of a third party (Cortland) acquire for cash all the (listed) Class A units and (unlisted but convertible) Class B units of Pure Multi-Family REIT LP (“Pure Multi-Family”). The US rental portfolio of Pure Multi-Family is held through a US private REIT.

The LPA for Pure Multi-Family REIT LP will be amended to provide for a special allocation of income to the unitholders under s. 96(1.01). However, there is no mention of there being any foreign accrual income from the US REIT being allocated for s. 96(1.01) purposes to Pure Multi-Family REIT LP under the stub period accrual rule in s. 91(1.2) (there presumably is none).

Canadian unitholders will not be subject to FIRPTA tax assuming that they comply with the 5%/regularly traded exemption. Closing is conditional on an opinion that the US REIT qualifies as such.

Pure Multi-Family

A limited partnership formed under the Limited Partnership Act (Ontario), whose principal asset is the US REIT. The Pure Multi-Family Class A units trade on the TSX and are listed for quotation on the OTCQX International Marketplace. There are 77,667,465 Class A Units and 200,000 Class B Units outstanding. The issued and outstanding Class A Units and Class B Units represent 96.68% and 3.32% respectively, of the outstanding beneficial interests and voting rights in Pure Multi-Family.

Purchaser

A Delaware LLC and an affiliate of Cortland, a leading multi-family real estate investment, development and management company headquartered in Atlanta, Georgia.

Pure Multi-Family REIT (GP) Inc.

The Governing GP of Pure Multi-Family is a B.C. corporation and the general partner of the REIT LP, with the sole responsibility and authority for the governance of the REIT LP. The Governing GP's board of directors consists of seven members, the majority of whom are independent.

Pure Multifamily Management Limited Partnership

The Managing LP of Pure Multi-Family is a B.C. limited partnership, which was the managing general partner of Pure Multi-Family from the date of formation until May 24, 2018, at which time the unitholders approved the removal of the Managing LP as the general partner.

Pure Multi-Family Management Limited

Pure Multi-Family Management Limited is a B.C. corporation, whose sole shareholder is the US REIT.

Pure US Apartment REIT Inc.

The US REIT is a Maryland corporation, that owns and operates the Properties through separate underlying limited partnerships, and also has a Nevada subsidiary as a TRS. In order to qualify as US REIT, it has preferred shareholders.

The Properties

Multi-family rental properties in the U.S.

Consideration

US$7.61 per Class A Unit (and US$101.4350 per Class B Unit, being the equivalent price for the Class B Units as per the limited partnership agreement of Pure Multi-Family)…

Steps under Plan of Arrangement

1. The Purchaser will advance by way of a loan to Pure Multi-Family an amount equal to the aggregate amount of cash required to be paid by Pure Multi-Family for the cancellation of the Pure Deferred Units, the Pure RUs and the Pure Performance Units under the Plan of Arrangement and Pure Multi-Family will deliver to the Purchaser a demand interest-free promissory note.
2. The LP Agreement will be amended to provide for the allocation to the unitholders of the Net Income for the Fiscal Year in which the Closing Date occurs.
3. The Unitholder Rights Plan will be terminated.
4. Each Pure Deferred Pure Unit, RU and Pure Performance Unit will be cancelled in exchange for a Payment.
5. Each of the Units held by a Dissenting Holder will be deemed to have been transferred to the Purchaser in consideration for a debt claim against the Purchaser.
6. Concurrently with 5, each other Unit outstanding shall be deemed to be assigned in exchange for the Consideration.
7. All Pure Debentures will be deemed to be assigned to the Purchaser in exchange for the Debenture consideration.
8. All of the rights and obligations of the Governing GP under the LP Agreement shall be assigned by it to a transferee to be designated by the Purchaser.

Canadian tax consequences

S. 96(1.01) income allocation

The Arrangement requires that for the fiscal period of Pure Multi-Family in which the Effective Date of the Arrangement occurs, Pure Multi-Family compute its income or loss for the period from January 1 to the Effective Date and that Pure Multi-Family allocate such income or loss to the Unitholders (including Dissenting Holders). The amount of such income (loss) so allocated to a Unitholder will be added to (deducted from) the adjusted cost base of the Class A Units owned by the Unitholder for the purpose of the computation of the Unitholder’s capital gain or loss on the disposition of Class A Units to the Purchaser.

Gains on sale

The sale of Class A Units by a Resident Unitholder (including a Dissenting Holder) to the Purchaser will result in a disposition of such Class A Units by the Resident Unitholder for purposes of the Tax Act. The Resident Unitholder will realize a capital gain (or capital loss) equal to the amount, if any, by which the proceeds of disposition of the Class A Units, less any reasonable costs of disposition, exceed (or are less than) the adjusted cost base of such Class A Units to the Resident Unitholder.

Foreign tax credit

Where Resident Unitholder are not entitled to all benefits under the Canada-U.S. Convention…the proceeds receivable on a disposition of Class A Units may not qualify as U.S. source income for purposes of the Tax Act (including for Canadian foreign tax credit purposes), and, where such Resident Unitholders are trusts, their beneficiaries may not be considered to have paid such tax for purposes of the Tax Act and, accordingly, may not be entitled to a foreign tax credit in respect of such U.S. tax for Canadian tax purposes.

No TCP

A Non-Resident Unitholder generally will not be subject to tax under Part I of the Tax Act on any capital gain realized by the Non-Resident Unitholder on the disposition of Class A Units.

US tax consequences

US tax opinion

The Purchaser is not required to complete the Arrangement unless the Purchaser has received a tax opinion that will be rendered by KPMG LLP providing that US REIT has been organized and operated in conformity with the requirements for qualification and taxation as a Real Estate Investment Trust under the Code.

Treatment as partnership

Management of Pure Multi-Family expects that the type and amount of Pure Multi-Family’s gross income allows Pure Multi-Family to be treated as a partnership for U.S. federal income tax purposes since formation through the Closing Date. However, no assurances can be given that Pure Multi-Family will be treated as a partnership for U.S. federal income tax purposes in its current year.

Debentures as debt

Holders of Pure Debentures should consult with their tax advisors regarding the consequences to them of the possible recharacterization of the Pure Debentures as equity…

Sale of Units

A non-U.S. Holder’s exchange of Class A Units for the Consideration will be a taxable transaction for U.S. federal income tax purposes, subject to the Unit 5 Percent Exception (below). Under a “look-through” rule, a non-U.S. person’s gain from disposition of an interest in an entity treated as a partnership for U.S. federal income tax purposes, wherever organized, is treated as gain from disposition of an interest in a USRPI to the extent gain on the disposition of the partnership interest is attributable to USRPIs, such as the US REIT stock owned by Pure Multi-Family. Therefore, subject to the Unit 5 Percent Exception described below, gain on the exchange of the Class A Units by a non-U.S. Holder under the Arrangement generally will be treated as ECI…

Unit 5 Percent Exception

A non-U.S. Holder of Class A Units generally will not be subject to U.S. federal income tax and should not generally have a U.S. federal income tax filing requirement on the exchange of the Class A Units under the Arrangement as long as the Class A Units are “regularly traded on an established securities market” and the holder does not hold, actually or constructively, more than 5 percent of the outstanding Class A Units at any time during the shorter of the five-year period ending on the date of disposition, or the period that such Class A Units were held (the “Unit 5 Percent Exception”)..

“Regularly traded” exception

Class A Units are currently listed on both the TSX and the OTCQX. The U.S. Treasury Regulations consider interests in a partnership traded on a non-U.S. exchange like the TSX to be regularly traded in a particular quarter if each of four tests is met (the “TSX Publicly Traded Exception”).

Where the Class A Units are regularly traded on both the TSX and a U.S. established securities market, such as the OTCQX, during a calendar year, the aforementioned four tests generally should not need to be met for such calendar year if trading activity on the U.S. established securities market satisfies different a set of requirements (the “U.S. Publicly Traded Exception”).

Due to the lack of guidance, non-U.S. Holders of Class A Units are cautioned that there can be no assurance that the IRS will concur that the U.S. Publicly Traded Exception is satisfied by Pure Multi- Family at any time.

Management of Pure Multi-Family has represented that it believes the Class A Units have satisfied the regularly traded standards of the U.S. Treasury Regulations in previous calendar quarters. Management has also represented that it has and will continue to have procedures in place to monitor the “regularly traded” standards of the U.S. Treasury Regulations.

Purchaser’s Withholding Obligations

A purchaser is generally required to withhold 15 percent U.S. tax upon the purchase of Class A Units from a non-U.S. Holder. However, a purchaser of Class A Units is not required to withhold such tax if the Class A Units are considered “regularly traded on an established securities market,” regardless of whether the selling non-U.S. Holder meets the Unit 5 Percent Exception discussed above. For this withholding purpose, a class of interests is presumed to be regularly traded during a calendar quarter if such interests were regularly traded on an established securities market during the previous calendar quarter.

If the Class A Units are not considered “regularly traded on an established securities market” for withholding purposes, a purchaser of Class A Units will be required to withhold tax at the rate of 15 percent of the amount realized from the sale and to report and remit such tax to the IRS. Such withheld amount would not be an additional tax but would be a credit against the selling non-U.S. Holder’s U.S. federal income tax liability arising from the sale.

Under the Arrangement Agreement, no withholding agent is permitted to make any such withholding (or withholding under Section 1446 of the Code) unless the Purchaser notifies Pure Multi-Family in writing of its determination to withhold and the reasons therefor at least 10 business days prior to the Meeting, in which event the parties agree to use commercially reasonable efforts to reduce or eliminate such proposed withholding, including but not limited to providing and accepting any certifications or representations that are reasonably available or appropriate to reduce or eliminate the withholding requirement.

Overview

Under a CBCA Plan of Arrangement, the shareholders of the Corporation (a recently-formed TSXV-listed capital pool company which has not yet made its qualifying acquisition - see TSX-V Policy 2.4 - Capital Pool Companies) will transfer their shares to a subsidiary Ontario LP of the REIT (Maplewood LP ) on a taxable basis in exchange for REIT Units on an 8-for-1 basis (the "Exchange Ratio") - or, if they wish to and elect to transfer on a s. 97(2) rollover basis, they will transfer their shares to Maplewood LP for (exchangeable) Class B LP Units of Maplewood LP in accordance with the Exchange Ratio together with an equal number of special voting units of the REIT. An indirect Netherlands subsidiary of Maplewood LP ("B.V.") will then make the qualifying acquisition of the legal title to a Netherlands property (the "Initial Property"), with its immediate parent (Maplewood Operating LP) acquiring the beneficial ownership. Following the completion of the Arrangement, the REIT and its affiliates will focus on acquiring further Dutch real estate.

Structure

The REIT is a Ontario unit trust. It will hold the Class A LP Units of Maplewood LP, along with the shares of the Ontario General Partner, with some of the former shareholders of the Corporation holding the (exchangeable) Class B LP Units of Maplewood LP. Maplewood LP will hold all of the LP units of Maplewood Operating LP and the shares of the general partner, and also all the shares (being Class A Shares) of the Corporation, which will have nominal value. Maplewood Operating LP will own all the securities of B.V.

Corporation

It is a CBCA corporation which was formed as a capital pool company on January 15, 2013, issued "seed shares" for gross proceeds of $500,000 on February 7, 2013, issued private placement shares for gross proceeds of $2,650,000 on February 8, 2013, and completed an IPO on April 5, 2013 for gross proceeds of $400,000. Its shares are listed on the TSXV. On August 13, 2013 it filed a non-offering prospectus dated August 8 indicating that it has no assets other than cash and that the Arrangement together with the acquisition of the Initial Property by the REIT as a successor to the Corporation will represent its qualifying transaction for CPC purposes.

Initial Property

The Corporation has identified the "Initial Property" (a large scale industrial complex in the Netherlands) as an appropriate initial property for the REIT to acquire. Conemporaneously with the completion of the Arrangement, the REIT will indirectly purchase the Initial Property for a purchase price of $9.1 million (€6.75 million) financed in part with a new mortgage of $5.4 milllion.

Plan of Arrangement

• Shares held by dissenting Shareholders will be deemed to have been transferred to Maplewood LP and cancelled so that their only right is to receive the shares' fair value
• in exchange for Class A LP Units of Maplewood LP, the REIT will contribute to Maplewood LP the number of REIT Units that it will be required to exchange for Shares two bullet points below
• Shares of Shareholders who are not Excluded Shareholders (see below) and have elected to receive exchangeable Class B LP Units will (subject to the applicable pro rata cap) be transferred to Maplewood LP in consideration for the issuance of Class B LP Units and "Ancillary Rights" (i.e., Exchange Rights and Special Voting Units of the REIT) in accordance with the Exchange Ratio
• The remaining Shares will be transferred to Maplewood LP in consideration for REIT Units in accordance with the Exchange Ratio
• The options under the Corporation's stock option plan will be exchanged for identical options on REIT Units, subject to adjustments based on the Exchange Ratio
• The REIT Unit initially issued to the Corporation for $10 will be redeemed for $10
• The issued and outstanding Shares of the Corporation will be exchanged for an equal number of Class A Common Shares and Preferred Shares, with the Preferred Shares then being redeemed for cash

Post-Arrangement steps

• Maplewood LP will make a joint s. 97(2) election with Shareholders who have transferred their Shares for Maplewood Class B LP Units provided they furnish it with the election forms within 60 days of the effective date of the Arrangement.
• A private placement units comprising REIT Units and warrants will be closed with insider private placement purchasers for gross proceeds of $2 million

Excluded Shareholders

These are defined as:

• A Shareholder which is not: a taxable Canadian resident or a Canadian partnership; or
• A person or partnership an interest in which is a tax shelter investment (or who acquires Class B LP Units as a tax shelter investment)

Canadian tax consequences

Exemption from SIFT tax. The REIT will not be considered to be a SIFT trust provided that (as stipulated in the investment guidelines) it does not own any non-portfolio property. Because the REIT does not own taxable Canadian property it is not subject to non-resident ownership restrictions.

FTGP rules

No assurance can be given that the foreign tax credit generator rules will not apply in respect of business-income tax or non-business income tax paid by Maplewood Operating LP and allocated to holders of Maplewood LP units, including the REIT.

Exchange of Shares

The Canadian tax consequences of a disposition of Shares to Maplewood LP for Class B LP Units are not discussed. An exchange for REIT Units is taxable.

Netherlands tax consequences

B.V. and Maplewood Operating LP are considered domestic and foreign tax residents, respectively. The financial statements state that Maplewood LP will be treated as a corporation for Dutch tax purposes. Discussion of fiscal unity rules without discussion of their specific application. B.V. will hold the legal ownership of the Initial Property, whereas beneficial ownership will be held by Maplewood Operating LP, which will be considered to have a Dutch branch business.

Overview

Under a CBCA Plan of Arrangement, the shareholders of the Corporation will transfer their shares to a subsidiary Quebec LP of the REIT (BLF LP ) on a taxable basis under a three-corner exchange arrangement, for REIT Units on a 40-for-1 basis (the "Exchange Ratio") - or, if they wish to and elect to transfer on a s. 97(2) rollover basis and their status is consistent with BLF LP qualifying as an excluded subsidiary entity (e.g., they are not individuals), they will transfer their shares to BLF LP for exchangeable LP units of BLF LP (the "Exchangeable LP Units") in accordance with the Exchange Ratio together with an equal number of special voting units of the REIT. The REIT is a Quebec unit trust.

Corporation

It is a CBCA corporation which started operations in 2007 as a capital pool corporation. As at the time of its annual management information circular, it held seven multi-family residential properties in Montreal, Dorval and Québec City representing 694 apartments, and it had two private company shareholders holding 19.99% and 15.5% of its shares. On March 15, 2013 it acquired a further three properties at a cost of $57M, financed in part through a private placement for $23.5M, and announced a further property acquisition in June 2013. It trades on the TSX Venture exchange with a market cap of $33M. (132M shares at $0.25 - so that the Exchange Ratio is targeting a REIT Unit value in the neighbourhood of $10).

Preliminary asset transfer

The Corporation will transfer essentially all its assets to BLF LP in consideration for: the assumption of liabilities; the issuance of promissory note; and the issuance of Class C LP units.

Plan of Arrangement

• Shares held by dissenting Shareholders will be deemed to have been transferred to the Corporation and cancelled so that their only right is to receive the shares' fair value
• Shares of Shareholders who are not Excluded Shareholders (see below) and have elected to receive Exchangeable LP Units (a.k.a. Class B LP Units) will (subject to a potential cap imposed by the general partner in its discretion) be transferred to BLF LP in consideration for the issuance of Exchangeable LP Units and Special Voting Units of the REIT in accordance with the Exchange Ratio
• The remaining Shares will be transferred to BLF LP in consideration for REIT Units in accordance with the Exchange Ratio, which will be issued by the REIT in consideration for the issuance to it by BLF LP of Class A LP Units
• The options under the Corporation's stock option plan will be exchanged for identical options on REIT Units, subject to adjustments based on the Exchange Ratio
• The REIT Unit initially issued to the Corporation for $10 will be redeemed for $10

Post-Arrangement steps

• BLF LP will make a joint s. 97(2) election (and the provincial equivalent) with Shareholders who have transferred their Shares for BLF LP Units provided they furnish it with the election forms within 60 days of the effective date of the Arrangement.
• The Corporation (whose shares will be delisted) will elect to cease to be a public corporation for purposes of the Act
• The Corporation will make a capital distribution, of all the notes owing to it by BLF LP, to its sole shareholder (BLF LP)

Excluded Shareholders

These are defined as any of:

• A non-resident (or a non-Canadian partnership)
• A financial institution
• A person or partnership an interest in which is a tax shelter investment (or who acquires an interest in BLF LP as a tax shelter investment)
• A person or partnership which is not a real estate investment trust, a taxable Canadian corporation, a SIFT trust or an excluded subsidiary entity (all as defined in the Act)

Canadian tax consequences

REIT qualification. Based on external advice, management expects the REIT to qualify as a REIT for 2013 and subsequent taxation years, and has implemented internal controls to ensure that BLF LP satisfies the necessary tests.

BLF LP

Is expected to qualify as an excluded subsidiary entity.

Exchange of Shares

The Canadian tax consequences of a disposition of Shares to BLF LP for Exchangeable LP Units are not discussed. An exchange for REIT Units is taxable.

Overview

BPY, which "beneficially owns" approximately 49% of the common shares of BPO, and two of its indirect subsidiaries ("Brookfield Office Properties Exchange LP, or "Exchange LP;" and Brookfield Property Split Corp., or "BOP Split"), are making an "any or all" offering for the remaining common shares of BPO, in consideration for BPY units or cash subject to the overall mix of consideration being fixed at around 67% units and 33% cash. Canadian taxable shareholders of BPO (including individuals) can elect to receive their units consideration in the form of exchangeable LP units ("Exchange LP Units") of "Exchange LP," i.e., such units will be retractable for BPY units subject to an overall call right of BPY, but there will be no direct exchange right against BPY. The acquired BPO common shares which are not acquired by Exchange LP will be held by BOP Split, which is a B.C. subsidiary of an indirect Canadian subsidiary of BPY (i.e., CanHoldco described below) and the limited partner of Exchange LP. Exchange LP will qualify as a Canadian partnership due to its Canadian direct ownership.

The Offer

Each shareholder of BPO may elect to receive for each BPO Common Share tendered by such shareholder, one BPY Unit or $20.34 in cash, subject to pro-ration (which is stated to be likely). The total number of BPY Units that may be issued under the Offer and any Compulsory Acquisition or Subsequent Acquisition Transaction shall not exceed 186,230,125 and the total amount of cash available under the Offer and any Compulsory Acquisition or Subsequent Acquisition Transaction shall not exceed $1,865,692,297, which equates to approximately 67% and 33%, respectively, of the total number BPO Common Shares to be acquired under the Offer and any Compulsory Acquisition or Subsequent Acquisition Transaction. Shareholders who tender to the Offer but do not make an election between BPY Units and cash will be deemed to have elected to receive BPY Units. Canadian Shareholders can elect to receive, in lieu of BPY Units, Exchange LP Units.

Brookfield Property Partners ("BPY")

BPY is a TSX and NYSE listed Bermuda exempted limited partnership which has a 19% interest (in the form of Managing GP Units) in another Bermuda partnership (Brookfield Property L.P., or "Property Partnership"). The public hold 58.6% of the LP units of BPY and Brookfield Asset Management Inc. ("Brookfield Asset Management") holds 41.3% of the BPY LP units (for a total of 102M units). Brookfield Asset Management also has an 80.1% LP interest in Property Partnership in the form of 432M Redemption-Exchange Units. BPY "beneficially owns" [i.e., indirectly holds after treating the Redemption-Exchange Units of Brookfield Asset Management in Property Partnership as if they had been exchanged for BPY units, and ignoring preferred shares described below] 49.2% of the common shares of BPO (249M shares), its largest asset, and has an aggregate voting interest in BPO of 50.5%.

Property Partnership/CanHoldco

Property Partnership owns, directly or indirectly, all of the common shares or equity interests, as applicable, of the "Holding Entities" including Brookfield BPY Holdings Inc. ("CanHoldco"). Brookfield Asset Management holds $1.25 billion of redeemable preferred shares of CanHoldco, which it received as partial consideration for causing Property Partnership to directly acquire substantially all of Brookfield Asset Management's commercial property operations. In addition, Brookfield has subscribed for $5 million of voting preferred shares of each of CanHoldco and four wholly-owned subsidiaries of other Holding Entities.

BPO

BPO is a CBCA corporation which is listed on the TSX and NYSE and is focused on premier office properties in the U.S., Canada, Australia and the U.K. BPO owns an approximately 83.3% aggregate equity interest in Brookfield Canada Office Properties, a Canadian real estate investment trust that is listed on the TSX and the NYSE, and an approximately 84.3% interest in the U.S. Office Fund, which consists of a consortium of institutional investors and which is led and managed by Brookfield Office Properties.

BOP Split

BOP Split, a B.C. corporation, was incorporated on December 9, 2013 as a wholly-owned subsidiary of CanHoldco for the purpose of being an issuer of preferred shares and owning the Offerors' additional investment in BPO Common Shares.

Exchange LP

Exchange LP, an Ontario LP, was established on December 16, 2013 by BOP Split, as limited partner, and BOP Exchange GP ULC (‘‘GP ULC''), as general partner, for the sole purpose of the Offer. GP ULC is an indirect subsidiaries of BPY.

Exchange LP Units

Holders:

1. Exchange right. Will be entitled at any time to retract any Exchange LP Units held by them and to receive in exchange one BPY Unit, plus all unpaid distributions.
2. Overriding BPY call right. However, BPY will have the right to purchase all but not less than all of the units covered by the retraction request.
3. Liquidation right (LP redemption right). Have a comparable liquidation right (and are subject to a right of Exchange LP to redeem after seven years, or earlier in certain circumstances), subject also to an overriding BPY call right.
4. Voting. Generally have no voting rights.
5. Preference. Will be entitled to a preference over holders of limited partnership units of Exchange LP respecting distributions including liquidating distributions.
6. Distributions. Will be entitled to receive distributions economically equivalent to the distributions on BPY Units.

Exchange LP Support Agreement

BPY will covenant that it will:

1. not declare or pay any distribution on the BPY Units unless: (i) on the same day Exchange LP declares or pays, as the case may be, an equivalent distribution on the Exchange LP Units; and (ii) Exchange LP has sufficient assets available to enable the timely payment of an equivalent distribution on the Exchange LP Units;
2. advise Exchange LP sufficiently in advance of the declaration of any distribution on the BPY Units; and
3. take all actions reasonably necessary to enable Exchange LP to pay the liquidation amount or retraction price, as applicable, of the Exchange LP Units.

BPO Preferred Shares

Brookfield Property Partners is not currently intending to make a concurrent offer for any of the BPO Preferred Shares, which will be unaffected by the Offer. If Brookfield Property Partners acquires 100% of the BPO Common Shares, it is Brookfield Property Partners' current intention to (i) provide holders of the outstanding convertible BPO Preferred Shares with the right to convert their shares for BPY Units rather than BPO Common Shares, (ii) make an offer (full or partial) to such holders to exchange up to $100 million of their shares for equivalent shares of another subsidiary of Brookfield Property Partners, or (iii) pursue other alternatives. The non-convertible BPO Preferred Shares will remain outstanding following the Offer and any Compulsory Acquisition or Subsequent Acquisition Transaction.

Options and Other Share Based Compensation Awards

If Brookfield Property Partners acquires 100% of the BPO Common Shares, it is intended that:

(a) Vested in-the-money Options then remaining be redeemed for a cash payment equal to the in-the-money value.

(b) Unvested in-the-money Options then remaining be exchanged for unvested BPY Options on a basis that preserves the in-the-money value at the time of the exchange with the BPY Options having expiry dates and vesting terms consistent with the unvested Options exchanged.

(c) Each outstanding out-of-the-money Option (whether vested or unvested) be exchanged for a BPY Option with a strike price equal to the value of a BPY Unit at the time of the exchange and expiry dates and vesting terms consistent with the Options to be exchanged.

(d) DSUs and BPO restricted shares (‘‘RSs'') be exchanged for awards in respect of BPY such that the fair market value is the same immediately before and after such exchange and other terms and conditions be substantially the same before and after such exchange.

Second stage transaction

If the Offerors take up and pay for a number of BPO Common Shares that constitute at least a majority of the BPO Common Shares that can be included for the purposes of ‘‘minority approval'' under MI 61-101, the Offerors will undertake a Compulsory Acquisition or Subsequent Acquisition Transaction to acquire any BPO Common Shares not deposited under the Offer for the same consideration as was paid by the Offerors under the Offer, subject to pro-ration.

Canadian tax consequences

S. 97(2) rollover. For BOP Canadian Shareholders who elect to receive Exchange LP Units, GP ULC, the general partner of Exchange LP, will make the necessary s. 97(2) elections with such Canadian Shareholders. The electing holder must provide the relevant information to GP ULC at http://www.brookfieldpropertypartners.com/bpotaxelection on or before the day that is 85 days following the date on which the exchange occurs. The resident holder will be solely responsible for executing its portion of the election and submitting it to CRA. An exchange for BPY units will occur on a non-rollover basis.

Exchange LP SIFT tax

GP ULC expects that Exchange LP will be a ‘‘SIFT partnership'' for each of its taxation years but it does not expect that Exchange LP will be liable for any material amount of SIFT Tax for any taxation year based on taxable dividends on Exchange LP's BPO common shares being essentially its only source of income.

Subsequent acquisition transaction

It currently is expected that on a Subsequent Acquisition Transaction, a BPO shareholder would receive a deemed dividend based on the paid-up capital per BPO share of C$8.91.

Non-residents

Non-residents who do not dispose of their BPO Common Shares pursuant to the Offer are cautioned that BPO Common Shares that are not listed on a ‘‘designated stock exchange'' at the time of their disposition will be considered ‘‘taxable Canadian property'' if at any time within the 60-month period immediately preceding the disposition, more than 50% of the fair market value of the BPO Common Shares was derived directly or indirectly from Canadian real property etc.

Qualified

investments. Exchange LP Units will not be qualified investments for RRSPs etc.

U.S. tax consequences

S. 721(a) exchange. An exchange by a BPO Shareholder of BPO Common Shares for BPY Units pursuant to the Offer is expected to qualify as an exchange to which Code s. 721(a) applies, i.e., a tax-free exchange in which no gain or loss is recognized. In particular, Torys considers that, under s. 7704, BPY (which has elected to be classified as a partnership) is not a publicly traded partnership that should be treated as a corporation and BPY should not be treated (under s. 721(b)) as a partnership that would be an ‘‘investment company'' if it were incorporated.

It is uncertain whether a U.S. Holder who receives a combination of cash and BPY Units in exchange for its BPO Common Shares pursuant to the Offer will be permitted to specifically identify the BPO Common Shares that are treated as sold for cash and the BPO Common Shares that are treated as transferred to Brookfield Property Partners in exchange for BPY Units. If such specific identification is ineffective, such U.S. Holder will be treated as having sold a single undivided portion of each BPO Common Share exchanged by such Shareholder pursuant to the Offer (equal to the percentage that the amount of the cash consideration received by such shareholder in exchange for its BPO Common Shares pursuant to the Offer bears to the fair market value of the total consideration (that is, cash plus the fair market value of BPY Units) received by such holder in exchange for its BPO Common Shares pursuant to the Offer), and to have contributed to Brookfield Property Partners in exchange for BPY Units the remaining single undivided portion of each BPO Common Share exchanged by such shareholder pursuant to the Offer.

Built-in gain

A former BPO Shareholder that is a U.S. taxpayer could be required under s. 704(c)(1) or 737 to recognize part or all of the ‘‘built-in gain'' in such Shareholder's BPO Common Shares exchanged for BPY Units pursuant to the Offer if BPY (i) sells or otherwise disposes of, in a taxable transaction at any time following the Offer, such BPO Common Shares, (ii) distributes such BPO Common Shares acquired from such Shareholder to another BPY Unitholder within seven years following the Offer, (iii) distributes any BPY property (other than money or BPO Common Shares acquired from such Shareholder) to such BPY Unitholder within seven years of the Offer, or (under s. 707(a)) (iv) makes any distribution (other than an ‘‘operating cash flow distribution'') to such former Shareholder within two years following the Offer. The BPY General Partner intends to use commercially reasonable efforts to ensure that a Shareholder that is a U.S. taxpayer is not required to recognize part or all of the ‘‘built-in gain'' in such Shareholder's BPO Common Shares deferred as a result of the Offer, in the event that Brookfield Property Partners undertakes any of the foregoing transactions.

BPY UBTI

The BPY General Partner intends to use commercially reasonable efforts to structure the activities of BPY and Property Partnership to avoid generating income connected with the conduct of a trade or business (which income generally would constitute unrelated business taxable income (‘‘UBTI'') to the extent allocated to a tax-exempt organization).

Overview

The existing unitholders of the Starlight Funds Nos. 1 to 4 will transfer their units into a new fund (the Starlight No. 5 fund) under Alberta Plans of Arrangement, with eligible Canadian residents able to do so on a s. 97(2) rollover basis. (Combining the multiple funds is attended with significant complexity.) The new Fund will have a multiple unit structure similar to that of the old funds and hold its indirect US apartment buildings under a similar structure. Ontario LPs beneath it will have elected to be corporations for U.S. tax purposes, and the underlying properties (or, to be more precise, the US LLCs holding each property) generally will be held by Maryland corporations which are intended to qualify as US private REITs. Recognition of FAPI is targeted to be avoided through reliance on the more-than-five full time employee exception and the s. 95(2)(a)(i) rule. The Fund is anticipated to have a lifetime of three years, subject to extension. The Fund will enter into FX derivatives, having a term of three years, so that the return of one of the Classes of units will be generated in Canadian dollars (e.g., if the U.S. dollar weakens over the three-year term, this will not adversely affect the return on those units).

See detailed summary under Tax Topics - Public Transactions - Offerings - REIT and LP Offerings - Foreign Asset Income Funds and LPs.

Overview

After the purchase of a portion of the assets of the REIT (a closed-end unit trust and mutual fund trust holding mostly Quebec real estate directly and through subsidiaries (mostly LPs)) by Group Mach and Blackstone purchasers, the REIT declared a special in-kind distribution to push out all the gains (which was expected to not include more than $43M of net recapture income) resulting from such sales and a s. 111(4)(e) designation, with such special distribution paid by way of issuing units (followed immediately by a unit consolidation). The Purchaser (a limited partnership) then subscribed for REIT units in consideration for cash and “Subscription Notes” issued by it to the REIT. The cash was then used to redeem the units of the public unitholders.

The other unitholders (being entities associated with the consortium owning the Purchaser) had their REIT units redeemed for notes which were set-off against notes that they owed for their subscription for units of the Purchaser once such subscription notes were assigned by the Purchaser to the REIT in repayment of Subscription Notes owing, in turn, by it to the REIT.

The REIT

A closed-end unit trust described in s. 108(2)(b) that was formed pursuant to a trust contract and holds a portfolio of office, retail and industrial rental properties and flex space in Quebec.

Purchaser

Iris Acquisition II LP, an entity created by the Consortium.

Consortium

Canderel (Canderel Real Estate Property Inc.), FrontFour (FrontFourCapital Group LLC), the Sandpiper Partnerships (Sandpiper Opportunity Fund 7 LP, Sandpiper Real Estate Fund 2 LP and Sandpiper Real Estate Fund 4 LP), Artis (Artis Real Estate Investment Trust) and KREI (Koch Real Estate Investments LLC).

Rollover Unitholders

Holders of Rollover Units of the REIT, being Canderel, Iris Fund III L.P. (a fund managed by FrontFour), the Sandpiper Partnerships and Artis.

Asset Purchasers

Group Mach (Group Mach Acquisition Inc.), for which the guarantor is Mach Capital (Mach Capital Inc.) and Blackstone (BP Cognac Canada Owner Limited Partnership).

Plan of Arrangement

The following steps will occur under a CBCA Plan of Arrangement:

1. The Unitholder Rights Plan will terminate.
2. Units of dissenting Unitholders will be deemed to be transferred to the REIT in consideration for a debt claim.
3. Each Asset Purchaser will purchase the agreed portfolio assets from the Portfolio Sellers (being the REIT or subsidiary entities) for cash consideration.
4. Each Portfolio Seller that is a subsidiary partnership will be wound up and dissolved.
5. Each Portfolio Seller that is a subsidiary trust or corporation will distribute or advance its sale proceeds to its beneficiary or shareholder.
6. Any subsidiary of the REIT receiving proceeds as a result of 3 or 5 above will distribute those proceeds to the REIT.
7. A stub distribution will be made by the REIT to the extent that the Effective Time of the Arrangement occurs after January 15, 2022.
8. The Purchaser will make the Purchaser Loan (a non-interest bearing demand loan) to ArrangementCo (13217396 Canada Inc.)
9. Options, deferred units, Restricted Units and Performance Units will be cash settled.
10. Rollover Unitholders (and Subscribing Unitholders, being affiliated persons to Rollover Unitholders) will subscribe for Purchaser Units (i.e., REIT units), in consideration for Subscription Notes (non-interest-bearing demand notes payable by them to the Purchaser).
11. Immediately before the next step, the REIT will concurrently declare to be payable the Special Distribution on all its units (excluding the Subscription Units issued in 14 below) in an amount equal to the net amount of its realized capital gains for the stub taxation year that includes the Effective Time (of the first step) resulting from the acquisition and its other net income for that year and each subsidiary of the REIT will declare a special distribution on its units equaling the comparable amounts realized by it for its taxation year that includes the Effective Time.
12. At the time immediately before the next step, and concurrently, the REIT will pay the Special Distribution by issuing Units and the subsidiaries will pay their special distributions by issuing promissory notes, and each direct non-resident unitholder (not holding its units through an intermediary) will be deemed to have issued a promissory note (a "Non-Resident Tax Note") to the REIT in an amount equal to its liability for withholding tax on the Special Distribution.
13. Immediately before the next step, the units will be consolidated.
14. The Purchaser will subscribe for units (Subscription Units) for cash equaling the aggregate cash redemption amount to be paid in 15 below plus a Trust Subscription Note of the Purchaser equaling the $11.70 for each unit of Rollover Unitholders ("Rollover Units") to be paid by note in 16 below.
15. The REIT will redeem all the issued and outstanding Units other than Subscription and Rollover Units in a cash amount corresponding to the consideration of $11.70 per Unit (minus the aggregate Non-Resident Tax Notes).

16. Concurrently with the above step, the REIT will redeem each Rollover Unit by issuing a “Redemption Note" of $11.70 per unit

17. The Purchaser will transfer the Subscription Notes received by it in 10 to the REIT in repayment of the Trust Subscription Note, each Related Rollover Unitholder of a Subscribing Unitholder will transfer its Redemption Note to such Subscribing Unitholder, and each Rollover Unitholder’s or Subscribing Unitholder’s Subscription Note will be set off against such Rollover Unitholder’s Redemption Note or any Redemption Note transferred to a Subscribing Unitholder, as applicable, and the Subscription Notes and the Redemption Notes will be set-off and cancelled.

18. Any Purchaser Loan will be capitalized by being exchanged for Units.

19. The existing trustees will resign, and the replacements will become the trustee(s) simultaneously.

Canadian tax considerations

Dispositions and deemed dispositions

The sale of the portfolio together with a step-up under a s. 111(4)(e) designation will give rise to net taxable capital gains and recapture income (net of terminal losses). However, the latter are not expected to exceed 2.1% of the aggregate consideration.

Special (in-kind) distribution

The taxable capital gains and recapture will be distributed in kind through the issuance of units (promptly followed by a unit consolidation), with a s. 104(21) designation to be made such that the distribution of the capital gains does not reduce unitholders’ ACB having regard to ss. 53(2)(h)(i.1)(A) and (B)(I). The units so distributed will have a full deemed cost under s. 248(25.3).

Redemption

On the subsequent redemption by the REIT of the public unitholders' units for cash of $12.75 per unit, the unitholder will realize a gain or loss taking into account the ACB increase described above.

Non-residents

All distributions (i.e., both the special distribution and the unit redemption transaction) will be subject to withholding tax under Part XII (regarding distributed recapture income and, under s. 132(5.1), the full amount of distributed capital gains, also included in the special distribution) and under Part XIII.2 (regarding the redemption proceeds). For those with their units in street name, the applicable broker dealers or other intermediaries are expected to handle the remittance obligations and make appropriate arrangements with their account holders.

Overview

It is proposed that the unitholders of the REIT will 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.

The REIT

The REIT is an Alberta trust that became a public real estate investment trust in May 2002, holding multi-residential and commercial rental real estate through subsidiary LPs, some of which have exchangeable LP units. At the time of the Initial Offer, Mr. Drimmer owned, directly and indirectly (principally through Starlight), 2,344,396 REIT Units, 1,736,306 class B limited partnership units of Subsidiaries of the REIT and 12,388,267 redeemable limited partnership units of Subsidiaries of the REIT. Mr. Drimmer has also been a trustee of the REIT.

KingSett

KingSett Real Estate Growth LP No. 7 and KingSett Canadian Real Estate Income Fund.

Purchasers

Purchaser A and Purchaser B, being Galaxy Real Estate Core Fund LP and Galaxy Value Add Fund LP, respectively.

High Yield Fund

Northview Canadian High Yield Residential Fund, a new multi-residential fund that will acquire a geographically diverse portfolio of the REIT’s properties under the Plan of Arrangement and the sole unitholder of which as of the Effective Time will be the REIT. The High Yield Fund is expected to complete the Offering, of up to $430,000,000 of Listed High Yield Fund Units (being Class A Units listed on an exchange) and Class F High Yield Fund Units, concurrently with the completion of the Arrangement. The High Yield Fund will target an annual pre-tax distribution yield of 10.5% across all unit classes on gross subscription proceeds received by the High Yield Fund. The High Yield Fund will be externally managed by a wholly-owned subsidiary of Starlight.

High Yield Fund Partnerships

REIT Subsidiaries designated as “High Yield Fund Partnerships” in the Pre-Closing Notice

Pre-Closing Notice

A notice to be delivered by the Purchasers to the REIT three business days prior to the Effective Date specifying certain amounts and other actions required to be taken in furtherance of the Arrangement.

REIT Redemption Price

$29.18125, assuming no special distribution.

DD Unitholders

Unitholders, holding the DD Units, affiliated with D.D. Acquisitions Partnership as specified in the Pre-Closing Notice

High Yield Fund Subscription Election

Unitholders will have the option of investing alongside Starlight and KingSett by electing to receive 0.5655 High Yield Fund Units on a tax deferred basis and the remaining $29.18 of the Consideration of $36.25 per REIT Unit on a taxable basis in cash, High Yield Fund Units or a combination of cash and High Yield Fund Units (other than Unitholders resident in or otherwise located in the United States, who will receive cash), subject to proration. In particular, each Unitholder will be entitled to receive, for each REIT Unit held (or in the case of a holder of an Exchangeable LP Unit, for each REIT Unit into which such Exchangeable LP Unit is exchangeable on the Effective Date), at such Unitholder’s election, either (i) $36.25 in cash pursuant to the All-Cash Election on a taxable basis, or (ii) 0.5655 High Yield Fund Units on a tax deferred basis and the remainder of the Consideration of $29.18 on a taxable basis in cash, High Yield Fund Units or a combination of cash and High Yield Fund Units elected by the Unitholder (other than Unitholders resident in or otherwise located in the United States, that will receive cash), subject to proration, pursuant to the High Yield Fund Subscription Election.

Plan of Arrangement

1. The current Trustees will resign and simultaneously Trusteeco (a corporation specified prior to closing) will become the sole Trustee of the REIT.
2. Each Dissenting Unit will be transferred to the REIT for a debt claim against the REIT.
3. Each Exchangeable LP Unit will be redeemed by the issuance of REIT Units.
4. The Unitholder Rights Plan will be terminated.
5. Each participant under the Deferred Unit Plan, and each holder of a Performance Award or Restricted Award, will surrender their rights in exchange for a cash payment.
6. The REIT will pay out in cash any special distribution required to reduce its taxable income.
7. The REIT will subscribe $1,000 for a number of additional High Yield Fund Units, so as to result in the same number thereof as its issued and outstanding REIT Units.
8. The REIT will pay out, as a special distribution on the REIT Units, a cash distribution of $1,000.
9. The REIT will transfer to each holder of REIT Units, on a pro rata basis in proportion to their respective holdings of REIT Units, all of the High Yield Fund Units held by the REIT for an aggregate purchase price of $1,000, such that each Unitholder will hold one High Yield Fund Unit for each REIT Unit held.
10. In accordance with ITA s. 107.4, the REIT will transfer all of its limited partnership interests in the High Yield Fund Partnerships and the shares or units of the general partners thereof to the High Yield Fund for no consideration by way of a “qualifying disposition” (as defined in s. 107.4(1).)
11. At 2:01 a.m. on the day immediately following the Effective Date, refinancing distribution steps will be completed in the order and in the manner specified in the Pre-Closing Notice.
12. Pursuant to and in accordance with the Portfolio A (and B) Purchase Agreement, Purchaser A (and Purchaser B) will purchase all of the Portfolio A (and B) Interests (as designated in the Pre-Closing Notice) from the Portfolio A (and B) Sellers for an aggregate purchase price equal to the Portfolio A (and B) Purchase Price specified in the Pre-Closing Notice, satisfied in cash and for the Portfolio A (and B) Purchase Notes.
13. Benco (being a corporation specified in the Pre-Closing Notice) will subscribe for one REIT Unit for a subscription price equal to the REIT Redemption Price (of $29.18125, assuming no special distribution).
14. The proceeds of the sale of the Portfolio A Interests or Portfolio B Interests will be distributed up the chain to the REIT.
15. The REIT will redeem the DD Units for a redemption price per REIT Unit equal to the REIT Redemption Price and will satisfy the redemption price by transferring to the DD Unitholders, the Portfolio A Purchase Notes, the Portfolio B Purchase Notes and an amount of cash equal to the remainder of the redemption price payable.
16. The REIT will redeem all of the issued and outstanding REIT Units not redeemed in the step above (other than the one REIT Unit held by Benco) for a cash redemption price per REIT Unit equal to the REIT Redemption Price. Following this redemption, Benco will be the sole unitholder of the REIT.
17. The Additional High Yield Fund Subscribers will subscribe for units of the High Yield Fund for the aggregate subscription price and in the manner specified in the Pre-Closing Notice and in accordance with their election for a subscription price of $7.06875 per unit.
18. Each High Yield Fund Unit purchased pursuant to 9 with the proceeds from the $1,000 "Nominal Cash Distribution" held by those who have made the All-Cash Election will be redeemed by the High Yield Fund for a cash redemption price equal to the High Yield Fund Redemption Price (of $7.06875).
19. The High Yield Fund Units (including any Additional High Yield Fund Units issued in 17 above) shall be consolidated based on the Consolidation Ratio (of 1:1.7683) (the “Consolidation”)

Canadian tax consequences

Pre-Acquisition Reorganization

In the transaction steps to be proposed by the Purchasers for the direct or indirect transfer of Properties, which may include their transfer to separate limited partnerships and the dissolution of REIT Subsidiaries (the “Pre-Acquisition Reorganization”), the REIT will realize capital gains (or losses) and may also realize recapture of depreciation. However, s. 97(2) elections will be filed consistently with the mutual intention of the REIT and Purchasers that the Pre-Acquisition Reorganization together with any transactions undertaken after the Effective Date which may have tax consequences for the Stub Year (ending on the Arrangement date shall not result in the REIT realizing any ordinary income (including recapture) if such amounts would increase the REIT’s taxable income (other than taxable capital gains) that is distributed to Unitholders in 2020 as a monthly distribution or Stub Distribution by more than 20% of the aggregate amount of such distributions.

Transfers of Portfolio A and B

The REIT intends to offset (or receive a refund in respect of) its liability for tax on any net realized taxable capital gains arising from the transfer of the Portfolio A Interests and Portfolio B Interests pursuant to ITA s. 132.

S. 107.4 disposition of NV Holdings LP

The REIT’s disposition of its limited partnership interests in the High Yield Fund Partnerships and shares or units of the general partners is intended to be a s. 107.4 “qualifying disposition,” so that the REIT will be deemed to dispose of such shares or units for their adjusted cost base.

Stub Year and stub partnership income

The current taxation year of the REIT will be deemed to end at the end of the Effective Date (the “Stub Year”) and the REIT will not elect for such deeming provision to not apply. The REIT has agreed to seek approval of the CRA to change the fiscal periods of the Subsidiary Partnerships in order to ensure, to the extent possible, that substantially all of the income and net taxable capital gains earned by each Subsidiary Partnership on or before the Effective Date will be allocated to the REIT in the Stub Year.

Acquisition of High Yield Fund Units and Transfer of Properties by the REIT to the High Yield Fund

Each Resident Holder will acquire one High Yield Fund Unit from the REIT for each REIT Unit held at a nominal cost. A Resident Holder will not realize any taxable income or gain solely as a result of the Qualifying Disposition. Immediately after the Qualifying Disposition, the adjusted cost base of a Resident Holder’s REIT Units will be decreased by an amount corresponding to the proportionate reduction in the fair market value of a REIT Unit, and the adjusted cost base of a Resident Holder’s High Yield Fund Units will be increased by the same amount.

Redemption of REIT Units

All REIT Units, other than those held by Dissenting Unitholders and Benco, will be redeemed in cash for the REIT Redemption Price, thereby generally resulting in a capital gain (or a capital loss) to the Resident Holder.

All-Cash Election

A Resident Holder making the All-Cash Election for the Resident Holder’s High Yield Fund Units to be redeemed for a cash redemption price equal to the High Yield Fund Redemption Price (of $7.06875), will thereby realize a capital gain based on the excess over the nominal ACB of such units.

High Yield Fund Subscription Election

A Resident Holder who validly makes a High Yield Fund Subscription Election to retain the Resident Holder’s High Yield Fund Units acquired from the REIT and, if applicable, subscribe for additional High Yield Fund Units will retain the High Yield Fund Units acquired from the REIT, and generally acquire each additional High Yield Fund Unit at a cost equal to the amount that the Resident Holder pays to acquire it, being the High Yield Fund Subscription Price (of $7.06875).

Consolidation

A Resident Holder will not realize any taxable income or gain solely as a result of the Consolidation.

High Yield Fund as REIT

It is assumed that the High Yield Fund will qualify for the REIT Exception from the SIFT rules. The High Yield Fund will acquire its interest in in its holding partnership (NV Holdings LP) in a transaction intended to qualify as a “qualifying disposition,” so that it will have an ACB for that interest less than its FMV.

Non-resident holders and Pt. XIII.2 tax

The REIT will treat each REIT Unit as a “Canadian property mutual fund investment” and withhold Pt. XIII.2 tax of 15% from the redemption proceeds of the REIT Units and (where the All-Cash Election was made) High Yield Fund Units of non-residents. The REIT will withhold on account of the Mutual Fund Withholding Tax on the entire amount paid to a Non-Resident Holder in connection with the redemption. A Non-Resident Holder may be able to obtain a refund of such tax to the extent that (i) the Non-Resident Holder has “Canadian property mutual fund losses”, which generally would include any losses realized by the Non-Resident Holder on the disposition of its REIT Unit on the redemption thereof or (ii) (in the case of REIT Units) they are determined not to be Canadian property mutual fund investments.

Overview

It is proposed that an Ontario LP within the Elad group (the “Purchaser”) will acquire all the units of Agellan REIT for cash under a plan of arrangement. The REIT holds U.S.-dollar notes of a U.S. subsidiary with an accrued FX gain. In order for this gain to be realized in the hands of the current unitholders, the Purchaser will lend the requisite funds to Agellan U.S. subsidiaries, with the funds being used by them to repay the USD debt owing to the REIT, with the REIT then lending the money back to the Purchaser. The resulting FX capital gain to the REIT will then be distributed to the REIT unitholders through a special distribution, that will be paid in kind though the issuance of REIT units. There is no prejudice to the resident (as contrasted to the non-resident) unitholders in this, as this distributed capital gain reduces the capital gain realized by them on the immediately following sale to the Purchaser.

In order to produce greater precision and control respecting the application of the rules associated with a loss restriction event, one of the plan of arrangement steps entails the issuance by the Canadian holding company (through which the REIT holds the U.S. structure) of a super special voting share to the Purchaser.

The REIT sold its last major Canadian real estate asset earlier in 2018, and distributed the resulting gain to its unitholders on December 31, 2018 through the issuance of further REIT units, immediately followed by a unit consolidation. The non-resident withholding tax will be handled in a manner that results in the non-resident unitholders holding fewer REIT units than they would had they been residents. The 2018 sale of the Canadian property is expected to result in the REIT not qualifying as a REIT for ITA purposes in 2019, but this is not expected to be problematic as at that point virtually all of its property will be non-portfolio property.

The REIT

The REIT is an unincorporated, open-ended Ontario real estate investment trust holding an interest in 46 properties located primarily in the United States under the structure described below. The Trust Units are listed on the TSX. The REIT currently pays monthly distributions of $0.810 per Unit. On December 6, 2018, there were 32,981,664 Trust Units, 871,080 Special Voting Units, 20,542 Deferred Units and 871,080 Class B LP Units. 7,965,032 Units (representing approximately 23.5% of the issued and outstanding Units, and including 6,239,246 of the Purchaser) were held, in aggregate, by the Purchaser, Management Unitholders and their respective related parties and joint actors.

Current structure

In addition to holding Canadian properties and the general partner of and Class A LP units of Agellan Management Limited Partnership (in which there are also Class B exchangeable LP units), the REIT directly holds interest-bearing U.S.-dollar notes of a Delaware holding company (“Agellan US Inc.”) with an accrued FX gain and indirectly holds all the shares of Agellan US Inc. through a wholly-owned Ontario subsidiary (“Agellan Canada”). Agellan US Inc. holds the general partner and the Class A units of a Delaware holding LP which, in turn, holds various U.S. property-specific entities, including the Agellan Participating US Subsidiaries

Agellan Participating US Subsidiaries

Comprising eight subsidiary Delaware LPs and a Texas LLC subsidiary of the Delaware holding LP.

Purchaser

The Purchaser is Elad Genesis Limited Partnership, a Ontario LP. The Purchaser is an indirect wholly-owned subsidiary of Elad Canada Inc. Established in 1997, Elad Canada Inc. entered the Canadian market by owning and providing asset management services for a significant real estate portfolio of varied asset classes that included approximately six million square feet of commercial space and over 17,000 residential units. More recently, Elad Canada Inc. has focused its activities on mid- and high-rise condominium development, master planned communities and asset management. Elad Canada Inc. is part of the ELAD Group real estate conglomerate.

Background to Parkway Place Sale

As first announced by the REIT on January 14, 2015, the REIT’s long-term business plan has been to seek to dispose of all or substantially all of its existing Canadian real estate assets, including all or a portion of the REIT’s approximate 824,000 square-foot office property and approximate 42,000 square-foot retail space and parking garage located on Consumers Road in Toronto, Ontario (“Parkway Place”), and to reinvest the net proceeds in U.S. real estate. Parkway Place represented the REIT’s largest single asset and one of its last remaining Canadian properties.

Parkway Place sale

On May 31, 2018, the REIT announced the closing of the sale of Parkway Place, which is expected to result in recapture of depreciation of $15 million and a capital gain of $49 million. Accordingly, the REIT expects that it will declare a special distribution on or prior to December 31, 2018. The special distribution will be comprised entirely of newly issued Trust Units. Immediately thereafter, the REIT will consolidate the number of outstanding Trust Units so that each Unitholder will hold exactly the same number of Trust Units as before, except that a non-resident Unitholder (subject to withholding tax) will hold a lesser number of Trust Units.

Plan of Arrangement

1. The proceeds of the Purchaser Debt Financing will be lent to the Agellan Participating US Subsidiaries in such amounts as specified by the Purchaser prior to the Effective Date.
2. Each Agellan Participating US Subsidiary will transfer to Agellan US Inc., by way of a non-interest bearing loan, the amount by which the proceeds received in 1 exceed the amount of all outstanding loans of such Agellan Participating US Subsidiary (the “Excess Funds”).
3. Agellan US Inc. will transfer any Excess Funds to the REIT as a repayment of all the notes owing by Agellan US Inc. to the REIT and, to the extent of any balance, make a non-interest bearing loan to the REIT.
4. The REIT will transfer any Excess Funds to the Purchaser by way of a non-interest bearing loan.
5. The Unitholder Rights Plan shall be terminated.
6. The Declaration of Trust (and Exchange Agreement respecting the Class B LP units of Agellan Management Limited Partnership) shall be amended to the extent necessary to facilitate the Transaction.
7. The REIT shall pay a special distribution to the Trust Unitholders of the amount of the estimated aggregate of (i) its undistributed taxable income for the portion of the taxation year of the REIT ending on the Effective Date and (ii) the non-taxable portion of any capital gain realized by the REIT in such period. Such income of the REIT shall include any foreign exchange gain realized by the REIT as a result of the repayment of the notes by Agellan US Inc. Such amount will be paid by the issuance of Trust Units valued based on their closing price on the TSX on the last trading day immediately prior to Effective Date.
8. The Trust Units will be consolidated to ensure that their number after the special distribution in 7 is the same as before - except so as to reflect the withholding of tax on the portion of the special distribution made to non-residents..
9. Each Class B LP Unit of Agellan Management Limited Partnership shall be exchanged for one Trust Unit.
10. Each Deferred Unit shall be cancelled in exchange for a cash payment from the REIT of an amount equal to the Consideration less applicable withholdings.
11. Each Unit Option shall be transferred by such holder to the REIT in exchange for a cash payment from the REIT equal to the amount (if any) by which the Consideration in respect of each Trust Unit underlying such Unit Option exceeds the exercise price of such Unit Option, less applicable withholdings.
12. Agellan Canada will issue one Agellan Canada Super Voting Share to the Purchaser for aggregate consideration of $10.00 in cash.
13. Concurrently with 12, each Dissenting Unit shall be transferred to the Purchaser.
14. Concurrently with 12, each Trust Unit (other than Dissenting Units and Trust Units held by the Purchaser or any of its affiliates) shall be transferred to the Purchaser (free and clear of any Liens) in exchange for the Consideration.
15. The specified resignations shall become effective.

Guarantee

The Purchaser will be required to fund approximately $394 million in cash to satisfy its obligations. El-Ad Group, Ltd., a Bermuda company and a significant member of the ELAD Group, has provided a guarantee of the obligations of the Purchaser under the Arrangement Agreement.

Canadian tax consequences

SIFT rules

It is expected that the REIT will qualify as a “mutual fund trust” and a “real estate investment trust” until the end of 2018. For its taxation year commencing on January 1, 2019, the REIT does not expect to qualify as a REIT and may be considered a “SIFT trust.” If the REIT is considered a “SIFT trust” for its taxation year commencing on January 1, 2019, the REIT does not expect to have material “non-portfolio earnings.”

Disposition to Purchaser

The Resident Unitholder will realize a capital gain (or capital loss) equal to the amount, if any, by which the Resident Unitholder’s proceeds of disposition exceed (or are exceeded by) the aggregate of the Trust Unitholder’s adjusted cost base of the Trust Units.

Special in-kind distributions

The REIT will pay the amount of any special distribution to Resident Unitholders in additional Trust Units. The cost to a Resident Unitholder of the additional Trust Units received by that Resident Unitholder generally will be equal to the fair market value of those Trust Units on the date they are acquired. REIT distributions (including distributions already received by Resident Unitholders) that might otherwise have been treated as returns of capital to a Resident Unitholder would instead be deducted by the REIT if necessary to ensure that the REIT does not have any income subject to tax under Part I of the Tax Act for its taxation year deemed to have ended as a result of the Transaction.

Overview

Developments, a TSX-listed company, has a 55.4% effective interest in the REIT as a result of holding exchangeable Class B units in the subsidiary limited partnership of the REIT (the LP) and special voting units (SVUs) of the REIT, and is the REIT’s external manager.

Under a proposed Alberta plan of arrangement, there was to be special distribution to the REIT unitholders, payable through the issuance of units, to reflect gains that were expected to have been realized in the year from asset sales, followed by a sale by the REIT of its LP units to Developments and the distribution of those cash proceeds as redemption proceeds for the REIT units. Developments would then convert its SVUs to ordinary units, so that the REIT shell would be wholly-owned by Developments.

This manner of proceeding would permit the allocation to the REIT pursuant to s. 96(1.01) of all the partnership income realized up to the time of the sale of the REIT’s partnership interest, and that income allocation would in turn fall into the taxation year of the REIT ending as a result of the redemption of its units (causing Developments to become a majority-interest beneficiary), given that the REIT would make an election for s. 251.2(6) not to apply.

Amendment to Arrangement Agreement

In a November 25, 2024 News Release, the REIT announced:

• The REIT and Developments had entered into an amended Arrangement Agreement, which ‎increased the per-Unit consideration from $4.95 to $5.50; and
• The special unitholder meeting scheduled for November 26, 2024 was cancelled and the REIT was engaging in a new 90-day extended “go-shop” period.

The REIT

An Alberta mutual fund trust whose units trade on the TSX. It was formed through a spin-off from the Purchaser.

The Purchaser

The Purchaser is an Alberta company trading on the TSX, and is a diversified real estate development and asset management company that develops and manages mixed-use residential communities, business and industrial parks, office buildings, retail commercial centers and golf courses, in Alberta, Saskatchewan, British Columbia, Arizona and Colorado.

The Purchaser holds an approximate 55.4% effective interest in the REIT through ownership of all Class B LP Units of the Limited Partnership through an affiliate and a corresponding number of special voting units (SVUs) of the REIT, being all the SVUs. The Class B LP Units are economically equivalent to and are exchangeable for (REIT) Units.

The REIT is externally managed by the Purchaser.

Limited Partnership (or LP)

Melcor REIT Limited Partnership. Its general partner (GP) is a wholly-owned Alberta subsidiary of the REIT, its Class A LP units are held by the REIT and its Class B (exchangeable) LP units and Class C LP units (back-to-back to retained debt of the Purchaser) are held by the Purchaser.

Telsec Property

Telsec Property Corporation and its joint actors jointly own and have control over 27.3% of Units and 12.2% Voting Units (i.e., Units or SVUs), assuming the issuance of 56,180 Units which are issuable on conversion of $500,000 principal amount of Debentures of the REIT held by one of the joint actors.

Plan of Arrangement

1. The constating documents of the REIT, GP and Limited Partnership will be amended to the extent necessary to facilitate the Arrangement including to accommodate a s. 96(1.01) allocation to the REIT of a proportionate share of LP income for the current taxation year up to the “Effective Time” of the Arrangement.
2. The REIT will be deemed to have distributed the “Special Distribution” (equal to its estimated undistributed taxable income) to Unitholders (including Dissenting Holders) of record immediately before the Effective Time in the form of additional Units having a fair market value equal to the amount of the Special Distribution. Immediately following such distribution, all the Units will be consolidated so that each Unitholder will thereafter hold the same number of Units as those held before the Special Distribution (except, in the case of non-residents, any reduction to reflect the withholding of Units from the Special Distribution on account of withholding tax).
3. The deposit by the Purchaser, to the depositary for the convertible debentures owing by the REIT, of an amount equal to the principal of those debentures, will be deemed to effect a loan of that amount by the Purchaser to the LP and the repayment of the loan in that amount owing by the LP to the REIT.
4. The shares of the GP will be sold to the Purchaser for nominal consideration.
5. The Class A LP Units will be transferred by the REIT to the Purchaser for cash consideration equal to $4.95 per (REIT) Unit minus any cash distributions declared by the REIT between the date of the Arrangement Agreement and the Effective Time (being the amount of the “Consideration”).
6. The Units held by dissenting holders will be deemed to be redeemed.
7. The (REIT) Units will be redeemed for the Consideration.
8. The SVUs will be converted into (REIT) Units on a one-for-one basis.

Canadian tax considerations

Taxation of REIT

The REIT is expected to make an election for s. 251.2(6) not to apply to the loss restriction event (LRE) that will arise as a result of the Arrangement, such that the REIT will be subject to the LRE at the time of the Unit Redemption.

In light of asset sales that are expected to have closed by the Effective Time, the Special Distribution is expected to be in the range of $0.10 to $0.29 per Unit, except that if the due diligence conditions for further asset sales are waived, such distribution is estimated to be in the range of $0.37 to $0.63 per Unit.

The disposition by the REIT of its Class A LP Units of the Limited Partnership is expected to give rise to a capital loss.

Taxation of Unitholders

The cost to the Unitholders of the Units issued on the Special Distribution will equal the amount of the distribution. No gain will be realized on the consolidation.

The proceeds received on the Units redemption will exclude any amounts paid on the Special Distribution.

Non-residents

The Special Distribution will accomplish a distribution of ordinary income that will be subject to Part XIII tax, as well as will amounts determined in accordance with the TCP gains balance rules if more than 5% of the amounts designated by the REIT for the year as net taxable capital gains are designated in respect of Unitholders that are either "non-resident persons" or partnerships which are not "Canadian partnerships".

The redemption of the Units will not be subject to capital gains tax provided that they are not taxable Canadian property.

Overview

Brookfield Property Partners LP (BPY) has an 83% economic interest in BOX (a Canadian REIT), by virtue of holding 40.3% of the BOX units and holding exchangeable units of a subsidiary LP of BOX (BOPC LP), mostly through a grandchild subsidiary (BOP Split). BOX is proposing to redeem the units of the public in cash. BOP Split will also exchange all its exchangeable units. The general partner of BPY already controls BOX given that the exchangeable LP units of BOPC LP are coupled with voting units of BOX. However, the exchange will trigger a loss restriction event (whose definition is grounded in the concept of majority interest beneficiary), thereby triggering a BOX year end. In the case of non-residents, the redemption proceeds will be subject to Part XIII.2 withholding of 15%. Brookfield had thought about but rejected structuring the transaction so that the non-residents could sell their units under a Plan of Arrangement, thereby avoiding the Part XIII.2 tax.

Redemption Transaction

BOX will redeem all of its Trust Units not already owned by BPY and its subsidiaries in cash for $32.50 per unit (the “Redemption,” or the “Transaction”). Amendments to the BOX declaration of trust will be approved to provide for the Redemption. It is contemplated that BPY and a grandchild subsidiary of BPY (BOP Split) will exchange their exchangeable units of a subsidiary LP of BOX (BOPC LP ) for BOX units immediately before the Redemption.

BOX

A closed-ended real estate investment trust governed by Ontario law that, in its AIF, states that it expects to qualify as a REIT for ITA purposes. BOX's portfolio is comprised of interests in 26 premier office properties totaling 20.3 million square feet in the downtown cores of Toronto, Calgary and Ottawa, including Brookfield Place in Toronto and Bankers Hall in Calgary. Its units trade on the TSX and NYSE. As of March 31, 2017, 93,520,745 Trust Units were issued and outstanding on a fully exchanged basis including Class B LP Units of BOPC LP. The Greenhill valuation determined an implied value per Trust Unit ranging from $29.75 to $35.93.

BPY

Brookfield Property Partners LP was established on January 3, 2013 as a Bermuda exempted limited partnership registered under the Bermuda Limited Partnership Act of 1883 and the Bermuda Exempted Partnerships Act 1992. Its head office is in Hamilton, Bermuda. BPY was established by Brookfield Asset Management Inc. as its flagship public commercial property entity and the primary vehicle through which it invests in real estate on a global basis.

BPY and BOP Split interests in BOX and BOPC LP

BPY owns 40.3% of the units of BOX (with the public holding the balance of 59.7%) and also holds 13.7% of the Class B (exchangeable) LP units of a subsidiary LP of BOX (Brookfield Office Properties Canada LP, or “BOPC LP”) all of whose Class A LP units are held by BOX. 86.3% of the Class B LP units of BOPC LP are held by a grandchild subsidiary of BPY (BPO Properties Ltd., or “BOP Split”). By virtue of this structure, BPY has an effective aggregate equity interest in BOX of approximately 83%. Holders of Class B LP Units hold one special voting unit of BOX for each Class B LP Unit held.

Discussions on structure

Goodmans (for the Special Committee) raised with Torys alternative transaction structures, which would have a different tax impact for non-resident Trust Unitholders. However, during this discussion Torys stated that BPY had considered structuring the transaction as a plan of arrangement or a tender offer but that, because a redemption provided BPY with the flexibility to best organize the activities of the Trust consistent with the operations and ownership of BPY's other core office assets, BPY was not prepared to proceed with the Transaction under such alternative transaction structures.

Trust distributions

Trust Unitholders will continue to receive monthly distributions through to the Closing Date at the current rate of $0.1092 per Trust Unit. The last monthly distribution will be pro-rated to the Closing Date.

Canadian tax consequences

Taxable exchange

A Resident Trust Unitholder whose Trust Units constitute "capital property" generally will realize a capital gain (or a capital loss) to the extent that such Resident Trust Unitholder's proceeds of disposition, net of any reasonable costs of disposition, exceed (or are exceeded by) the adjusted cost base of the Trust Units to the Resident Trust Unitholder.

Non-resident unitholders

A Non-Resident Trust Unitholder will not be subject to tax under the Tax Act on any capital gain realized on the disposition of Trust Units under the Redemption, unless (i) the Trust Units disposed of are "taxable Canadian property" (as defined in the Tax Act) of the Non-Resident Trust Unitholder at the time of the disposition, and (ii) the Non-Resident Trust Unitholder is not exempt from taxation in Canada on the disposition of such shares pursuant to an applicable income tax treaty or convention. In addition, a Non-Resident Trust Unitholder will generally be subject to a withholding tax of 15% under Part XIII.2 of the Tax Act on any distribution in respect of a Trust Unit that is not otherwise subject to tax under Part I or Part XIII of the Tax Act. The payment of the Redemption Price to a Non-Resident Trust Unitholder pursuant to the Redemption, will be subject to Canadian non-resident withholding tax of 15%. Non-Resident Trust Unitholders will want to consider disposing of their Trust Units on the TSX or the NYSE with a settlement date that is prior to the Closing Date.

Trust and partnership year ends

The current taxation year of BOX will be deemed to end on the day immediately before the day on which the exchange by BOP Split of Class B LP Units of BOPC LP into Trust Units occurs, giving rise to a short taxation year for BOX. BOX is seeking approval of the CRA to change the fiscal and taxation year end of certain of its subsidiary entities to ensure that substantially all of the income and net taxable capital gains earned by such subsidiary entities up to and including the date of such exchange will be allocated to Trust Unitholders who receive the Special Distribution. The disclosure assumes that this approval will be received. Since the current taxation year of BOX will be deemed to end as a result of the exchange by BOP Split of Class B LP Units of BOPC LP into Trust Units, Resident Trust Unitholders with taxation years ending before December 31, 2017 may be required to report income from the Trust earlier than they would otherwise have been required.

Special distribution

If, based on bona fide estimates, BOX determines that its undistributed taxable income for its short taxation year exceeds prior distributions made to the Trust Unitholders in that period, BOX will pay a special distribution to the Trust Unitholders in advance of the Redemption, to ensure that BOX will not be liable for tax under Part I of the Tax Act for this short taxation year.

U.S. tax consequences

Redemption Transaction

A Trust Unitholder who is taxable in the U.S. and who exchanges Trust Units for cash pursuant to the Redemption transaction generally will recognize taxable gain or loss for U.S. federal income tax purposes measured by the difference, if any, between the amount realized and such Trust Unitholder's adjusted tax basis in such Trust Units immediately prior to the exchange, assuming BOX is classified as a partnership for U.S. federal income tax purposes. The amount realized generally will equal the U.S. dollar value of the Canadian dollars to which such Trust Unitholder becomes entitled pursuant to the Transaction (without reduction for any Canadian tax withheld), increased by the amount of any reduction in such Trust Unitholder's allocable share of BOX's liabilities, as determined for Code purposes.

BOX classification as a partnership

BOX intends to manage its affairs so that it would not need to be registered as an investment company were it a U.S. corporation and so that BOX will satisfy the 90% Income Test for the taxable year that includes the Transaction, so that BOX can qualify as a partnership for Code purposes.

Asset sale

It is contemplated that after the convening of a REIT meeting to approve the transactions, subsidiary LPs of the REIT (held by it through a newly-formed master LP) will transfer (on a non-rollover basis) a pool of assets to an LP of which a Canadian Apartment Properties REIT entity is the GP in consideration for debt assumption and the issuance of LP units (an arm's length transaction). The REIT subsidiary LPs then sell their LP interests in the CAPREIT LP to CAPREIT for $269 million cash. (CAPREIT presumably accesses the 5% de mininis Ontario land transfer tax exemption). Timbercreek Asset Management Inc. also acquires a pool of assets from the applicable REIT subsidiary partnerships - in consideration for debt assumption and cash consideration of $349 million.

Unit redemptions

The REIT makes a special cash distribution out of these sales proceeds to its unitholders of $4.82 per unit. PSPIB-RE Partners Inc. ("PSP Holdco") then subscribes $469 million in cash for REIT units, and all the REIT units held by the public are redeemed for cash of $9.43 per unit. PSP Holdco's REIT units then are redeemed through a distribution of an interest in the remaining real estate, so that the Drimmer group holds the sole remaining unit of the REIT.

Fees

Potential break-fee of $25 million (or $21 million if the Acquisition Agreement is terminated by the REIT to pursue a superior proposal before the end of the go-shop period (45 days after execution of the proposal letter.) The REIT covenants not to deduct any transaction expenses in computing 2012 income.

Canadian tax consequences

Distributions. All of the income of the REIT for 2012 will be treated as distributed on payment of the special cash distribution and previous ordinary monthly cash distributions - resulting in the tax deferral percentage of the previous monthly distributions being largely eliminated and in perhaps 5.8% of the special cash distribution being treated as a distribution of ordinary income, with most of the balance being a distribution of net capital gains (pp. 61-62) (The distributed net capital gains reduce the proceeds of disposition for the public's units; but not so for the distributed recapture of depreciation.) The income of the REIT will be increased by not having depreciable property at the end of its 2012 taxation year, as well as from the asset sales and transfers described above.

Withholding

The retroactive reduction in the tax-deferred percentage applicable to the previous 2012 monthly distributions also has the effect of retroactively subjecting those distributions to Part XIII tax (p. 64). Most of the special cash distribution paid to non-residents is subject to Part XIII tax, and the redemption proceeds are subject to Part XIII.2 withholding (p.63).

Overview

The proposed acquisition of the REIT (which is a closed-end REIT holding most of its properties directly or through subsidiary LPs) by Choice Properties - which is an Ontario REIT holding a partial interest in a property-holding LP (Choice Properties LP) - would occur for aggregate consideration of approximately $1.7B in cash and Choice Properties units valued at around $2.1B. REIT unitholders would have a choice between receiving cash or Choice Properties units, subject to proration. Those unitholders whose election for units was accepted would participate in a s. 132.2 merger of the REIT into Choice Properties.

Resident REIT unitholders whose units will be redeemed for cash by the REIT (funded with a loan from Choice Properties LP) will be indifferent to the quantum of capital gains distributions allocated to their cash redemption proceeds. Accordingly, the REIT will engage in transactions at the commencement of the Plan of Arrangement to deliberately trigger gains on units in subsidiary partnerships or perhaps land, in order to achieve a basis step-up. As with other such merger transactions, the REIT is seeking CRA permission to have short fiscal periods for the LPs transferred by it, so that those pre-merger gains realized at lower levels can still effectively be allocated to the cash-redeemed unitholders. The LP to which properties will be dropped down by the REIT was not formed until after January 1, so that there will be some overall loss of CCA.

Another preliminary step is to amend the REIT declaration of trust to make its units redeemable, having regard to the subsequent redemptions of its units for cash and on the s. 132.2 merger.

REIT

A TSX-listed Ontario unit trust that was a closed-end (s. 108(2)(b)) units trust and REIT. It holds its Canadian assets through nominee corporations or LP structures. Two management subsidiaries manage most of its assets. In addition to retail, industrial and office properties, it invests in mortgages though mezzanine and co-owner financing structures. Oak Brook Holdings indirectly owns and operates a retail property in Chicago (representing about 1% of the REIT’s total leasable area and being the only non-Canadian property.) On March 8, 2018, there were issued and outstanding 73,409,979 of its units (the “Units”), $125,000,000, $100,000,000, $100,000,000 and $125,000,000 of principal amount of Series A, B, C and D Debentures, respectively. It has $1.7B in mortgage debt.

Choice Properties and Choice Properties LP

Choice is an Ontario unit trust listed on the TSX that holds the Class A LP units of Choice Properties LP. Subsidiaries of Loblaw Companies Limited hold exchangeable Class B LP units of the LP and Class C LP units. At the time of preparing this summary, its units (the “Choice Properties Units”) traded at $11.60 per unit.

REIT LP subsidiary

CPH Master LP, an Ontario LP established by the REIT for the purposes of participating in the transactions.

CREIT GP

CREIT Eastern GP Inc., an Ontario corporation.

Oak Brook Holdings

Oak Brook Place Shops Inc., an Illinois corporation and a wholly-owned subsidiary of the REIT that holds Oak Brook LP through two LLC subsidiaries (Oak Brook LLC I and II).

Oak Brook LP

The Shops at Oak Brook Place Limited Partnership, an Illinois limited partnership.

Distributions

Choice Properties’ current intention is to maintain its current distribution of $0.74 per Choice Properties Unit on an annual basis. To the extent Unitholders receive Choice Properties Units under the transaction, the annual distribution on the 4.2835 Choice Properties Units received for each Unit would represent an increase of approximately 70% over the current annual distribution on a Unit.

Proration of consideration

Under the Transaction, the aggregate Consideration will be comprised of approximately 58% in Choice Properties Units and 42% in cash. The maximum amount of cash, which will be funded by Choice Properties, payable to Unitholders by the REIT on the Cash Redemption will be $1,651,532,198. In addition, the REIT expects that approximately 183 million Choice Properties Units will be delivered by the REIT to Unitholders, based on the fully diluted number of Units outstanding as of the date of the Arrangement Agreement. If Unitholders elect, in the aggregate, to receive cash that is more or less than the Aggregate Cash Consideration, the actual amount of cash to be paid, and the actual number of Choice Properties Units to be issued, to each Unitholder will be subject to proration. The May 4, 2018 Press Release announcing the completion of the CREIT/Choice merger stated:

Unitholders that elected to receive Choice Properties units will not be subject to proration. Unitholders that elected to receive cash, or were deemed to have elected to receive cash, will receive Choice Properties units in respect of approximately 49% of their CREIT units as a result of proration.

Debentures

On completion of the Transaction, the Debentures will remain outstanding and become debentures of Choice Properties, ranking equally with existing Choice Properties unsecured debentures.

Plan of Arrangement

1. At 10:00 p.m. on the Business Day immediately preceding the date of the Arrangement (the “Effective Date”), the REIT shall cause Oak Brook LP to sell the Oak Brook Property to a U.S. direct or indirect subsidiary of Purchaser.
2. Thereafter, the REIT shall cause Oak Brook LP to repay an internal mortgage loan in full to Oak Brook Holdings.
3. Commencing at the effective time of the Plan of Arrangement (the “Effective Time”) a succession of steps shall occur, the first of which is the cancellation of the REIT’s Unitholder Rights Plan,
4. The Declaration of Trust shall be amended to permit the redemption of Units as contemplated in the steps in 18, 19, 21 and 22 below and the allocation of income on the cash redemptions in 18 and 19 below.
5. The REIT shall transfer to a direct or indirect subsidiary of the Purchaser (“Eastern GP Parentco”) all of the issued and outstanding shares in the capital of CREIT GP in exchange for the issuance by Eastern GP Parentco of one common share in its capital.
6. The REIT shall cause Oak Brook LP to be liquidated, and its net assets to be distributed to Oak Brook LLC I and Oak Brook LLC II who, in turn, will be liquidated into Oak Brook Holdings, with Oak Brook Holdings repaying a loan owing to the REIT.
7. The REIT shall transfer to Choice Properties LP the shares of Oak Brook Holdings for a cash payment and a note.
8. The REIT shall transfer to REIT LP Subsidiary the REIT Investments (i.e., LP interests and other securities in subsidiaries designated in a Pre-Closing Notice) for a demand non-interest bearing promissory note and the issuance to the REIT of a number of REIT LP Subsidiary units.
9. The REIT shall transfer to Choice Properties LP its mezzanine loan receivables for a cash payment.
10. The REIT shall repay in full third-party debt designated in the Pre-Closing Notice.
11. Choice Properties shall pay out, if applicable, a special distribution on the Choice Properties Units, an amount (paid in cash and Choice Properties Units) equal to its bona fide best estimate, as set forth in the Pre-Closing Notice, of the amount, if any, of its taxable income (as reduced by s. 104(6)) for the short year resulting under s. 132.2.
12. The REIT shall pay out as applicable a similarly determined special distribution on its Units.
13. Choice Properties LP shall make a loan to REIT LP Subsidiary having a principal amount equal to the Aggregate Cash Consideration.
14. REIT LP Subsidiary shall repay in full to the REIT the note issued in 8 and other internal debt.
15. REIT LP Subsidiary shall use the remaining amount of the cash proceeds from 13 to purchase a number of REIT LP Subsidiary Units for cancellation.
16. The REIT shall transfer, to Choice Properties LP, REIT LP Subsidiary Units with a value equaling the amount owing by the REIT under the Debentures in consideration for promissory notes of Choice Properties LP.
17. Choice Properties, or a Person designated by Choice Properties shall subscribe for one (REIT) Unit for a subscription price equal to the Cash Consideration.
18. Each Dissenting Unit shall be redeemed by the REIT in exchange for a debt claim.
19. Each Unit in respect of which a Unitholder is entitled to receive Cash Consideration shall be redeemed. A portion of the cash payment shall be designated by the REIT as being paid from the Taxable Income of the REIT for that taxation year.
20. Pursuant to s. 132.2, the REIT shall transfer to Choice Properties all of its property excluding the cash subscription proceeds received in 17 above in exchange for the issuance of Choice Properties Units, and the assumption by Choice Properties of all liabilities and obligations of the REIT including the Debentures.
21. The REIT shall redeem each Unit then outstanding for the Non-Cash Consideration of 4.2835 Choice Property Units per Unit.
22. The REIT shall redeem each Restricted Unit for such Non-Cash Consideration.
23. CREIT GP will be wound-up into Eastern GP Parentco.

Canadian tax consequences

MFT/REIT status

Each of the REIT and Choice Properties has represented in the Arrangement Agreement that it has qualified as a “mutual fund trust” and a “real estate investment trust”.

REIT Asset Transfer

The Arrangement Agreement contemplates that, prior to the Effective Date, the REIT will transfer, pursuant to one or more purchase and sale agreements, certain property to REIT LP Subsidiary in consideration for the assumption of certain liabilities and the issuance of one or more promissory notes by REIT LP Subsidiary, and limited partnership units of REIT LP Subsidiary (the “REIT Asset Transfer”). The REIT will realize a resulting capital gain (or capital loss). Although the REIT Asset Transfer may result in recapture of capital cost allowance, the REIT and Choice Properties have agreed that it is their mutual intention that no recapture of depreciation or other amounts treated as ordinary income will be realized by virtue of the REIT Asset Transfer, except to the extent of available losses.

Any capital gains realized by the REIT as a consequence of the REIT Asset Transfer will be included in the income allocated on the Cash Redemptions and will be allocated to Unitholders who receive the Cash Consideration, and Dissenting Unitholders entitled to receive fair value for their Dissenting Units, under the Plan of Arrangement.

Capital gains on internal drop-down transactions

The Arrangement Agreement provides that the REIT may (or may cause its Subsidiaries to) undertake such further pre-closing reorganization transactions as may be agreed between the REIT and Choice Properties. Such transactions may include transfers of properties by one or more of the REIT’s Subsidiary partnerships to a newly formed limited partnership for additional limited partnership interests in such limited partnership. Assuming CRA approval for shortened fiscal periods for such Subsidiary partnerships, any income or capital gains realized by such Subsidiary partnerships will be allocated to the REIT for its current taxation year. The parties have agreed not to recognize recapture of depreciation from such transactions.

FAPI on pre-merger transactions

The U.S. Property Transactions and each of the other pre s. 132.2 merger transactions may give rise to income or capital gains to the REIT. In particular, the REIT will be required to take into account in computing its income (a) any “foreign accrual property income” net of any “foreign accrual tax” deduction and (b) any capital gain (or capital loss) in respect of each capital property transferred or disposed of by the REIT in connection with such transactions. However, no income is expected to be allocated to Unitholders as a result as it is expected that these amounts will be offset by available losses and other deductions or attributes.

S. 132.2 exchange and redemption

The REIT and Choice Properties have agreed in the Arrangement Agreement that the s. 132.2 election will be completed with a view to minimizing tax payable by the REIT and the Unitholders, and that it is intended that gain on the transfer of the transferred assets in step 20 will be realized only to the extent of available losses or other deductions available to shelter such gain. The REIT will not realize a gain or loss on the transfer of Choice Properties Units to Unitholders on the “QE Redemption” (step 21) or “RU Redemption” (step 22).

CRA approval of short LP fiscal periods

The REIT and Choice Properties are seeking approval of the CRA to change the fiscal period and taxation year end of certain subsidiary LPs in order to ensure, to the extent possible, that substantially all of the income and net taxable capital gains earned by them up to and including the Effective Date will be allocated to Unitholders in the current taxation year of the REIT, as part of the income allocation respecting the cash redemption in steps 18 and 19.

TSX sale

A disposition of a Unit on the TSX will generally result in a capital gain (or a capital loss) to a Resident Holder.

Special distribution

The tax treatment to Resident Holders of the special distribution in step 12 will be determined in a manner similar to the tax treatment that applies to other distributions that have been paid or payable by the REIT to Resident Holders.

Loss of CCA due to short REIT LP Subsidiary fiscal period

The REIT will not be entitled to claim any CCA on properties disposed of on the REIT Asset Transfer (step 8). The CCA claimable by the REIT LP Subsidiary on such properties is expected to be materially less than the amount of CCA which could have been claimed by the REIT but for the proposed transactions.

Cash redemption

A Resident Holder receiving the Cash Consideration for Units will generally be required to include the income which is allocated and paid on the redemption. Provided that appropriate designations are made by the REIT, that portion of the REIT’s net taxable capital gains that is paid to such a Resident Holder will effectively retain its character. The non-taxable portion of any net capital gains of the REIT that is paid to such a Resident Holder will not be included in computing the holder’s income for the year.

Rollover on s. 132.2 redemption

The exchange of Units for 4.2835 Choice Property Units in step 21 will occur on a rollover basis.

Non-residents

Taxable capital gains allocated to non-resident holders will be subject to the TCP gains balance rules (subject to the 5% exception) in s. 132. In addition, a non-resident holder will generally be subject to Part XIII.2 tax of 15% on any distribution that is not otherwise subject to Part XIII (or I) tax. Thus, in effect, the entire amount will generally be subject to Canadian withholding tax. TSX sales of Units that are not taxable Canadian property will not be subject to tax.

Overview

OneREIT is proposing to sell a substantial portion of its rental assets (held through subsidiary LPs) in a taxable sale to a third party (Strathallen) and then, as part of the same Plan of Arrangement, to be merged into SmartREIT (which is an Alberta unit trust and REIT) under s. 132.2. Those OneREIT unitholders who elect to receive cash for their units, will have their units redeemed immediately after the closing of the Strathallen sale, with all the recapture of depreciation of around $0.15 per unit (as well as capital gains) from that sale being allocated to them. Those electing to receive their consideration as SmartREIT units, will have this result effected through the usual s. 132.2 mechanics. The projected value of the SmartREIT units to be received is estimated to be somewhat lower than for the cash alternative ($4.20 v. $4.275 per unit). All the properties of OneREIT are held through subsidiary LPs. Applications are being made to CRA for approval of a stub fiscal period in order that the LPs can allocate their capital gains and recapture from the Strathallen sale, and other income to date, to OneREIT for allocation, in turn, to its current unitholders. Unitholders can avoid this allocation by selling on the TSX. Since the cash part of the transaction is structured as a redemption, non-residents will be subject to Part XIII.2 and XIII withholding on the full proceeds if they elect to receive cash. There are no corporate steps in the Ontario Plan of Arrangement other than an amalgamation of, and $10 unit subscription by, the corporate trustee for the general partner of a subsidiary LP.

The REIT

The REIT is a TSX-listed open-ended real estate investment trust that is governed by Ontario law and owns 56 income-producing properties comprising approximately 6.8 million square feet located in B.C. (3), Alberta (3), Saskatchewan (6), Ontario (28), Quebec (7), New Brunswick (3), Nova Scotia (3), and one property in each of the Yukon Territory, Manitoba, and Newfoundland. There were issued and outstanding 77.6M REIT Units (“Units”), 19.2M Special Voting Units (of which 8.2M Special Voting Units were issued in 2008 in order to increase the voting rights of Mr. Mitchell Goldhar to 25% of the total and are not related to Class B LP Units of ONR LP and ONR LP1), 98,079 Deferred Units, and $40M and $36.3M of 2011 and 2013 Debentures. Mr. Mitchell Goldhar directly or indirectly through Class B exchangeable units owns or exercises control over approximately 18% of the outstanding Units and, as noted, has the right to exercise 25% of the aggregate votes. He also directly or indirectly owns approximately 22% of the Units of SmartREIT on a diluted basis.

SmartREIT

SmartREIT is a TSX-listed REIT governed by Alberta law. It holds its rental proeprties directly and through two subsidiary Alberta limited partnerships in which there are other partners.

Strathallen

Strathallen is a wholly-owned acquisition entity of Strathallen Capital Corporation. Strathallen Capital Corporation is a fully integrated Canadian real estate management company.

ONR LP

ONR LP, an Ontario limited partnership, owns and holds directly, and indirectly through ONR LP I, all of the properties and property interests owned or held by the REIT. The general partner of ONR LP ("GP Trust"), is an Ontario trust (having a 0.01% partnership interest) whose sole beneficiary is 1090992 Alberta Inc., an Alberta corporation that is wholly owned by the REIT. The sole trustee of GP Trust is 1606906 Ontario Inc. (“GP Trustee”), which is wholly owned by the REIT. All the Class A units, which hold 99.99% of the votes and are fully participating, are held by the REIT. The Class B LP Units of ONR LP are exchangeable into REIT Units (“Units”) on a 1:1 basis pursuant to an Exchange Agreement, and each is accompanied by a Special Voting Unit of the REIT.

ONR LP1

ONR LP I, an Ontario limited partnership, owns four properties acquired from Walmart Canada Realty Inc. and SmartCentres in 2013 and 2014. Its Class A and B LP Units have essentially the same attributes as for ONR LP. Its Class C LP units are convertible into Class B units on the occurrence of a specified earnout event.

History of REIT

The REIT’s IPO was in 2004. In 2008 it closed the acquisition of SmartCentres properties for $55 million from a vendor group lead by Mitchell Goldhar of Penguin Investments, as a result of which six limited partnerships having Mitchell Goldhar as the president of each general partner (the “SC/MRR Group”) acquired a 38% effective interest in the REIT using Class B LP Units. In 2014 it acquired two Walmart-anchored properties from Walmart Canada Realty Inc. and SmartCentres Realty for approximately $67.9 million, and in 2014, it acquired seven retail properties from SmartREIT for approximately $111.1 million.

Sale to Strathallen

Strathallen or its assigns will purchase 44 properties and assume related property debt and liabilities from subsidiaries of the REIT for a purchase price of $703.5 million, as adjusted., The purchase price for the Strathallen Sale Transaction will be satisfied by the payment by Strathallen and its assigns in cash of approximately $319 million and by the assumption by Strathallen and its assigns of the debt related to the Strathallen Properties.

Consideration for Units

Under the Arrangement, Unitholders may elect, subject to certain proration provisions described below, to receive for each Unit:

(a) $4.275 in cash (the "Cash Consideration");

(b) between approximately 0.1283 and 0.1376 of a SmartREIT Unit, as determined by an exchange ratio based on the five-day VWAP of the SmartREIT Units (as described below) (the "Non-Cash Consideration"); or

(c) a combination of Cash Consideration and Non-Cash Consideration,

The exchange ratio will be calculated by dividing $4.20 by the VWAP of the SmartREIT Units on the TSX for the five trading days immediately preceding the date which is three Business Days prior to the meeting to approve the transaction, subject to a minimum of $30.51 and maximum of $32.73 and resulting in an exchange ratio ceiling of approximately 0.1376 and a floor of approximately 0.1283.

Consideration for Class B LP Units of ONR LP and ONR LP1 (the “Class B Units”)

Each holder thereof will have the opportunity to elect to receive the Cash Consideration for each of its Class B LP Units…LP Unitholders who do not make a valid election prior to the Election Deadline, will be deemed to have elected to retain their Class B LP Units….those Class B LP Units will become exchangeable into the number of SmartREIT Units the holder would otherwise have received under the Transaction had those Class B LP Units been exchanged for the underlying Units prior to the closing of the Transaction…

Debenture holders

Each holder of Debentures will have the opportunity to participate in the Transaction as a Unitholder by validly exercising its conversion rights on a timely basis.

Plan of Arrangement

1. The governing documents for the REIT and its subsidiaries including partnerships (“Subsidiaries”) will be amended to provide inter alia for the allocation to the REIT and the Unitholders of the taxable income arising from the Strathallen sale.
2. The Partnership Agreements for ONR LP and ONR LP1 and the Exchange Agreement for the Class B LP Units will be amended inter alia to provide that the Class B LP Units will become exchangeable into SmartREIT Units and the terms of the Class C LP Units will be adjusted as necessary to reflect this.
3. The Strathallen sale transaction will become effective.
4. The vesting of all Deferred Units and of all amounts owing by a holder in respect of any outstanding LTIP Units will be accelerated.
5. Each trust or partnership REIT Subsidiary will allocate and make payable to its beneficiary, or allocate to its partners, all taxable income other than from the Strathallen sale and then do likewise with the taxable income from the Strathallen sale.
6. Cash will be distributed by the REIT Subsidiaries in successive steps.
7. If the amount of taxable income allocated and made payable by each REIT Subsidiary that is a trust to its beneficiary exceeds the amount of cash distributed by such trust, it will satisfy its obligation to pay to its beneficiary the balance of the taxable income so allocated by issuing units to its beneficiary.
8. To the extent that the Plan of Arrangement requires an exchange of Class B LP Units or an LP Unitholder has elected to receive Cash Consideration pursuant to the Plan of Arrangement, such Class B LP Units of such LP Unitholder will be exchanged for Units in accordance with the terms of the applicable Exchange Agreement.
9. SmartREIT, and then the REIT, will make a special distribution equalling its bona fide best estimate of the amount of its taxable income for its taxation year deemed to end by s. 132.2.
10. The previously-announced monthly distribution will be cancelled and the REIT will pay a special distribution of $0.025 per Unit per month (pro-rated for part months) from October 1, 2017 through to the date of filing of the Articles of Arrangement.
11. Dissenting Units will be transferred to the REIT in consideration for debt claims against the REIT.
12. Each Unit entitled to receive Cash Consideration will be redeemed by the REIT.
13. The 2011 and 2013 Debentures and their Indentures will be amended so that the Debentures will be convertible into SmartREIT Units.
14. The REIT will transfer to SmartREIT all of its remaining property in exchange for: (A) SmartREIT Units whose number equals the Non-Cash Consideration multiplied by the number of outstanding Units; (B) SmartREIT Special Voting Units whose number equals the Exchange Ratio multiplied by the number of all liabilities of the REIT.
15. The REIT will redeem all of the outstanding Units for consideration per outstanding Unit consisting solely of the Non-Cash Consideration.
16. The REIT will redeem all of the outstanding Special Voting Units in consideration for its SmartREIT Special Voting Units.
17. SmartREIT Sub (a numbered Ontario corporation) and GP Trustee will amalgamate.
18. Amalco will subscribe for one Unit for consideration of $10 and will cause its nominees to become Trustees of the REIT.

Canadian tax consequence

Income from Strathallen sale

The income of the REIT (including recapture of depreciation) and net taxable capital gains arising from the Strathallen sale will be allocated to Unitholders receiving Cash Consideration on the Cash Redemption and to Dissenting Unitholders. Such income and the capital gains will be excluded from the determination of their proceeds of disposition on redemption. CCA in respect of properties disposed of on the Strathallen Sale Transaction will not be available in the related fiscal period of the ONR LP and ONR LP1.

Qualifying s. 132.2 exchange

Provided that the REIT and SmartREIT file a timely election under s. 132.2, the transfer of the assets to SmartREIT will be part of a "qualifying exchange," as a result of which they will be transferred to SmartREIT for proceeds of disposition equal to the greater of their and the assumed debt. Taking into account the potential application of loss carryforwards, there should be no taxable income to the REIT arising from the transfer. On the same basis, a Unitholder’s proceeds of Units and its cost of SmartREIT units should equal the ACB of its Units.

CRA approval for stub partnership years

The REIT and SmartREIT are seeking approval of the CRA to change the fiscal and taxation year end of certain Subsidiaries in order to ensure that substantially all of their income for the period up to and including the effective date of the Arrangement (the “Effective Date”), including from the Strathallen sale will be allocated to those whose units are redeemed on the Cash Redemption and to Dissenting Unitholders.

Capital gains treatment on pre-Arrangement dispositions

Resident Holders who dispose of Units on the TSX with a settlement date prior to the Effective Date will not receive any distributions or other payments under the Plan of Arrangement and should not be allocated any income from the REIT in respect thereof.

SmartREIT status

SmartREIT has represented in the Arrangement Agreement that SmartREIT has, at all relevant times, qualified as a "real estate investment trust" for ITA purposes and that each partnership and trust in which it has a direct or indirect interest is an excluded subsidiary entity.

Redemption of non-residents

A Non-Resident Holder who disposes of a Unit to the REIT for Cash Consideration will be subject to Part XIII tax of 25% on the recapture of depreciation (currently expected to be $0.15 per Unit) or other income that is paid on the redemption, and to Part XIII tax of 25% on the TCP gains distribution received on the redemption (subject to the 5% de minimis rule), subject in either case to Treaty-reduction. In addition, a Non-Resident Holder will generally be subject to Canadian withholding tax under Part XIII.2 at a rate of 15% on the full amount of the redemption proceeds that is not subject to Part XIII tax.

Sales by non-residents

A Non-Resident Holder will not be subject to capital gains tax on a sale of Units (or SmartREIT units) unless they are TCP.

Overview

NPR proposes to add approximately 14,000 multi-family residential suites through a series of transactions with True North, affiliates of Starlight and affiliates of the Public Sector Pension Investment Board (''PSP''). NPR will acquire all of True North's assets pursuant to a plan of arrangement under the Business Corporations Act (Alberta) (the ''Arrangement'') in a merger described in s. 132.2 of the ITA, with each unitholder of True North receiving 0.3908 trust units of NPR (''NPR Ordinary Units'') for each True North "Ordinary Unit" held. Holders of exchangeable units in six subsidiary LPs of True North are given the choice of exchanging their LP units for NPR units or for new redeemable units of the same partnerships, i.e., LP units which are redeemable for NPR units. The tax disclosure treats an exchange for such new redeemable LP units as being eligible for a s. 97(2) rollover. On closing, former True North Ordinary Unitholders will own approximately 25.0% of Northview on a fully-diluted basis (i.e., including the redeemable units of the subsidiary LPs). NPR has also agreed to acquire 33 additional apartment properties from a joint venture between affiliates of Starlight and PSP, as well as from affiliates of Starlight directly, for consideration including units of subsidiary LPs. These transactions take the form of vendor LPs transferring the beneficial ownership of real estate (including Ontario properties) to new Ontario LPs for notes and Class B units, then NPR subscribing for Class A units, with such proceeds used to redeem the notes.

True North

Is an Ontario unit trust listed on the TSX with a portfolio of 83 residential rental properties, all of which are held through six subsidiary Ontario LPs (the "Ture North Partnerships"), in which it holds Class A LP units and others hold Class B exchangeable LP units, with a wholly-owned Ontario corporate subsidiary ("True North GP") being the GP. Daniel Drimmer and affiliates holds the equivalent of a 41.2% interest in the trust, mostly in the form of Class B LP units.

NPR

Is an Alberta unit trust listed on the TSX holding a portfolio of multi-suite residential rental properties. Its most significant subsidiary is NPR Limited Partnership, an Alberta LP.

Institutional (Starlight and IMH) Portfolio

NPR will acquire the Institutional Portfolio for $535 million at a ''going-in'' capitalization rate of 5.5%. The Institutional Portfolio comprises 33 properties with a total of 4,650 multi-family suites located in Ontario, New Brunswick and Nova Scotia. The purchase price for the Institutional Portfolio will be satisfied by a combination of $316 million in cash, approximately $49 million of assumed mortgages, the issuance to the Vendors of approximately 5.1 million NPR Ordinary Units valued at a $23.03 per NPR Ordinary Unit, and the issuance to the Vendors of approximately 2.3 million of Class B LP Units valued at $23.03 per Class B LP Unit. The Institutional Portfolio comprises seven apartment properties held by Starlight through subsidiary LPs (the "Starlight Portfolio") and 26 apartment properties held through subsidiary LPs by a joint venture between Starlight and PSP (the "IMH Portfolio").

Plan of Arrangement

1. True North will subscribe for 10 redeemable retractable preferred shares of True North GP;
2. True North and NPR will pay, as a special distribution on their Ordinary Units, the amount of any undistributed taxable income for their taxation years that will be deemed to end under s. 132.2;
3. each Dissenting Units will be transferred to True North for a debt claim to be paid fair value;
4. the conversion price for True North convertible debentures will be amended;
5. the limited partnership agreement of each of the True North Partnerships will be amended to create the Redeemable Units, each of which will be redeemable for 0.3908 NPR Ordinary Units ;
6. the holders of True North Partnerships Class B Units will exchange their Units for either (i) 0.3908 NPR Ordinary Units for each True North Partnerships Class B Unit; or (ii) (if so elected in the case of non-U.S. residents) Redeemable Units of the applicable True North Partnership;
7. True North will transfer all its property to NPR in exchange for NPR Ordinary Units and the assumption by NPR of certain obligations;
8. True North Special Voting Units will be redeemed and NPR will issue NPR Special Voting Units to holders of True North Partnerships Class B Units;
9. True North will redeem each outstanding True North Ordinary Unit in exchange for 0.3908 NPR Ordinary Units;
10. the True North Deferred Units, RURs; and Unit Options will be redeemed;
11. Red-Starlight LP will transfer the real property interests of the Red-Starlight LP portion of the Starlight Portfolio to New1 LP (as well as shares of a (nominee?) subsidiary to a new Ontario LP ("New1 LP") and New1 LP will issue to Red-Starlight LP 194,896 Class B limited partnership units of New1 LP and a non-interest bearing demand promissory note having a principal amount of $10,711,533 (the "Red LP Note");
12. NPR shall subscribe for 194,896 Class A limited partnership units of New1 LP and New1 LP shall repay the Red LP Note;
13. after the acquisition of various nominee corporations by a new Ontario LP ("New2 LP), D. D. Acquisitions Partnership will transfer the real property interests of the D.D. Acquisitions Partnership portion of the Starlight Portfolio to New2 LP and New2 LP willl: (i) assume $16,307,372 in debt, (ii) issue to D.D. Acquisitions Partnership 684,157 Class B limited partnership units of New2 LP, and (iii) issue to D.D. Acquisitions Partnership a non-interest bearing demand promissory note having a principal amount of $58,036,472 (the "New DDA Note");
14. NPR will subscribe for 684,157 Class A limited partnership units of New2 LP and New2 LP will repay the New DDA Note;
15. similar transactions to 12 to 15 above will be engaged in to acquire the IMH portfolio; and
16. True North will be formally dissolved.

Canadian tax consequences

S. 132.2 exchange. Provided True North and NPR file the election under section 132.2 of the Tax Act as described above, the Contemplated Transactions will constitute a ''qualifying exchange." True North and NPR have indicated their mutual intention that the amount of taxable gains on the asset transfer to NPR will be reduced to the greatest degree possible and it is currently the view of management that True North should not realize any net income (including taxable capital gains) as a result of such transfer. Accordingly, NPR will generally be deemed under section 132.2 of the Tax Act to acquire True North's assets at a cost that is expected to be materially lower than the fair market value of the True North assets so acquired. The cost of the assets held by True North's Subsidiaries which will be indirectly acquired by NPR under the Plan of Arrangement will generally not be affected.

S. 97(2) exchange

Holders of True North Partnerships Class B Units who exchange their Units for Redeemable Units of the applicable partnership and who jointly elect under s. 97(2) will be considered to have disposed of their units for an elected amount which complies with s. 97(2). An electing Unitholder must provide the election form with the necessary information within 90 days of the Effective Date.

Fiscal year end changes

NPR and True North are seeking CRA approval to change the fiscal and taxation year end of certain Subsidiaries (which includes NPR LP and the True North Partnerships) in order to ensure that substantially all of the income and net taxable capital gains earned by such Subsidiaries up to and including the Effective Date of the Arrangement will be allocated to NPR Unitholders and to holders of NPR Class B LP Units, or to True North Unitholders and True North Class B LP Unitholders, as the case may be.

REIT exception for NPR

Based on a review of NPR's assets and revenues, including the assets to be acquired by NPR as a consequence of the Contemplated Transactions and the revenues expected to be derived therefrom, management expects that NPR will satisfy the tests to qualify for the REIT Exception for its taxation year that will be deemed to end as a result of the consummation of the Contemplated Transactions and for its taxation year that will be deemed to begin immediately after such year-end, in each case both under the REIT Exception. In addition, management of NPR intends to conduct the affairs of NPR so that NPR will continue to qualify for the REIT Exception at all future times….

Overview

NWI (see summary) will be merged into NWH under s. 132.2, with the former NWI unitholders receiving 0.208 NWH units for each NWI unit. The affiliated entities holding a 65% economic interest in NWI will exchange their exchangeable units under ITA s. 97(2) in a subsidiary LP of NWI for units which are redeemable for NWH units.

NWI

A TSXV-listed Ontario unit trust holding all the Class A LP units of an Ontario LP ("NWI LP") which, in turn indirectly holds a portfolio of medical office buildings, hospitals and other real estate in the healthcare industry in Australia and New Zealand, Germany, Brazil and (through NWH, as described below) Canada. NorthWest Value Partners Inc. directly or through affiliates ("NWVP") has a 65% interest in NWI through the holding of 27.6% (i.e., 24M) of the NWI units (as well as holding special voting units) and the holding of all of the (exchangeable) Class B LP units of NWI LP (92.3M units).

NWH

A TSXV-listed Ontario units trust with 39M units outstanding and holding assets through an Ontario LP ("NWH LP"). NorthWest Operating Trust, an indirect subsidiary unit trust of NWI held 4.35M NWH units and 7.552M units of NWH LP representing a 16.5% interest therein.

NWI AM

. NWI Asset Management Inc., an Alberta corporation (presumably, an affiliate of NWVP).

Proposed transactions

Under an Alberta Plan of Arrangement:

1. NWI LP will subscribe $100 for 10 preferred shares of NWI AM.
2. NWH LP will make a distribution of partnership capital to NWH and in payment thereof issue to NWH a demand promissory note having a principal amount equal to the fair market value of the NWH units held by NWI LP.
3. NWH will redeem the NWH units held by NWI LP and in satisfaction thereof deliver the note in 2 above to NWI LP.
4. NorthWest Operating Trust will make payable to its beneficiaries its taxable income for the taxation year ending immediately before step 11 below net of prior s. 104(6) deductions and tax attributes, with such distribution to be satisfied if there is insufficient cash through the issuance of additional units.
5. Each of NWH and NWI will make payable to its beneficiaries its taxable income for the taxation year deemed to end by ITA s. 132.2(3)(b) net of prior s. 104(6) deductions and tax attributes, with such distribution to be satisfied if there is insufficient cash through the issuance of additional units.
6. Units of dissenting unitholders will be transferred to NWI.
7. Rights under the NWH unitholders' rights plan will be redeemed.
8. The NWI LPA will be amended to create a new class of LP units (the "Redeemable Units") that will be redeemable at the option of the holder for a number of NWH units based on the exchange ratio.
9. The holder of the NWI Class B LP units will exchange their units for Redeemable Units on a one-for-one basis under s. 97(2).
10. NWVP and any of its affiliates holding "NWI Rights" (board appointment, pre-emptive and other specified contractual rights) will transfer them to NWH in exchange for similar "NWH Rights."
11. NWH will acquire all of the assets of NWI in consideration for NWH units and the assumption of outstanding debentures of NWI, which will become convertible into NWH units.
12. NWH will subscribe in cash for one NWI unit.
13. NWI deferred units will be exchanged for NWH deferred units in accordance with ITA s. 7(1.4).
14. NWI will redeem each NWI unit (other than the one unit is step 12 above) in consideration for 0.208 of an NWH unit (with fractions rounded down).
15. NWI will redeem each NWI special voting unit in consideration for 0.208 of an NWH special voting unit (with fractions rounded down).
16. All of the issued and outstanding common shares of NWI AM will be transferred by NWI LP to Healthcare Properties LP, a Manitoba limited partnership.

Canadian tax consequences

S. 132.2 merger. Provided that a joint s. 132.2 election is made on a timely basis, there should be no resulting net income to NWI or tax liability to its unitholders as a result of the transaction, which will constitute a qualifying exchange – except that the transfer may be organized to realize income in NWI equal to unused attributes.

SIFT rules

NWH expects to qualify for the REIT exception, although it is noted that it is acquiring a non-controlling interest in some entities under the transaction. NWH LP and NWI LP are expected to qualify as excluded subsidiary entities.

FTCG rules

No assurance is given respecting the Foreign Tax Credit Generator rules.

AOC/year ends

Upon completion of the Arrangement, NWVP is expected to own approximately 34% of NWH, so the Arrangement is not expected to result in an acquisition of control of NWH. NWI and NWH are seeking CRA approval to change the fiscal year ends of certain respective subsidiaries in order to ensure that substantially all their income earned up to the effective date will be allocated to the respective NWI and NWH unitholders.

Overview

SUSO 3 will be merged into the REIT under s. 132.2, with the former SUSO 3 unitholders receiving 7.5M Class U Units of the REIT and with U.S. holders of 207K exchangeable Class B units of its indirect Delaware holding partnership (Slate U.S. Opportunity (No. 3) Holdings L.P.) receiving exchangeable LP units of the corresponding Delaware holding LP for the REIT or its subsidiary Delaware LP. The number of units so received in each case is subject to a potential working capital adjustment. The number of class U units received will correspond to the relative net subscription prices for the various SUSO 3 units issued at the time of its September 2013 IPO. The REIT and LP units to be issued collectively represent approximately 30.72% of the outstanding REIT Units before the transaction on a non-diluted basis but including the outstanding Class B LP2 units (being exchangeable units in an indirect REIT LP.)

SUSO 3

An unlisted mutual fund trust holding a portfolio of U.S. grocery-anchored retail rental properties through an Ontario LP which, in turn, holds a Delaware holding LP (Slate U.S. Opportunity (No. 3) Holdings L.P.).

SLAM

. Slate Asset Management, the Toronto-based manager of SUSO 3 and the REIT.

Slate Retail Unit Classes

The Class A Units of the REIT were offered in Canadian dollars solely for the convenience of Unitholders wishing to pay the subscription price in Canadian dollars and receive distributions in Canadian dollars representing the equivalent of the U.S. dollar distributions on the other units. The Class U and Class I Units were offered in U.S. dollars and distributions paid in U.S. dollars. Class A and Class U Units were offered through a public offering, while Class I Units were offered through a private placement. Rights and characteristics of each Class I Unit are identical to those for each Class A Unit and Class U Unit, except that each Class I Unit was not required to pay agents' fees. Only the Class U units are listed on the TSX.

Current REIT structure

The REIT holds notes and units of an Ontario LP ("Investment LP1") which is a foreign corporation for Code purposes, which holds all the units (Class A LP1 Units") of a Delaware LP ("Limited Partnership 1"), which hold units ("Class A LP2 Units") of another Delaware LP ("Limited Partnership 2"). Some U.S. unitholders hold exchangeable units of Limited Partnership 2 ("Class B LP2 Units"). Unitholders of an Ontario LP ("GAR B") hold GAR B Exchangeable Units. GAR B holds LP Units of GAR Holdings (a Delaware LP directly or indirectly holding retail properties) and Class C LP2 Units of Limited Partnership 2. Each Class C LP2 Unit, taken together with the units of GAR Holdings held by GAR B, will, in all material respects, be economically equivalent to ownership of Class U Units of the REIT, subject to adjustment in respect of U.S. corporate income taxes paid by REIT and/or certain subsidiaries of the REIT.

Proposed transactions

In connection with the implementation of the Transaction:

1. SUSO 3 will acquire the shares of the GP of its immediate Ontario subsidiary LP from SLAM.
2. SUSO 3 will distribute any remaining cash as a distribution of taxable income or capital as determined by it.
3. Any remaining taxable income of SUSO 3 for its deemed s. 132.2(3)(b) year end will be paid through the issuance, at least one business day prior to closing, of Vendor Units of the appropriate class.
4. The Vendor will amend its Declaration of Trust to accommodate the redemption of the Vendor Units.
5. SUSO 3 will arrange for the transfer of the LP interest in the SUSO 3 GP from the current holders thereof to an affiliate of the REIT in consideration for Class B Units of Limited Partnership 1 or 2 and agree to file any elections which could cause this to occur on a tax deferred basis.
6. The REIT will acquire all of the assets of SUSO 3 in consideration for Class U units.
7. SUSO 3 will redeem all SUSO 3 Units (except for any SUSO 3 Units acquired by the REIT) by delivering Class U units to SUSO 3 Unitholders.
8. A reorganization will rationalize the resulting structure.

The number of units to be issued by the REIT and Limited Partnership 1 will be adjusted based on any changes in SUSO 3 working capital five days before closing as compared to the current estimate.

Canadian tax consequences

S. 132.2 merger. Provided that a joint s. 132.2 election is made on a timely basis, there should be no resulting net income to SUSO 3 or tax liability to its unitholders as a result of the transaction, which will constitute a qualifying exchange.

SIFT rules

The REIT and its subsidiary partnerships currently do not own any non-portfolio properties.

FTCG rules

No assurance is given respecting the Foreign Tax Credit Generator rules.

U.S. tax consequences

ECI taxation. The REIT, Investment LP1 and GAR B have elected to be corporations under the Code and they each will be considered to have a permanent establishment in the U.S. Accordingly, Investment LP1 and GAR B (as foreign corporations) will be subject to U.S. corporate income taxation on the net rental income which they derive (through subsidiary Holdings LP) from a U.S. trade or business and on gains from the sale of U.S. real properties that are allocable to them or on the sale of subsidiary investments. Income or gains of subsidiary LPs allocable to them generally will be subject under Code s. 1446 to withholding at a 35% rate, which generally will also apply in lieu of any FIRPTA withholding requirements, with such withholding being allowed as a credit on their U.S. federal income tax returns. Investment LP and GAR B also will be liable for a 5% branch profits tax (subject to the $500,000 Treaty exemption) on their after-tax earnings.

Interest

The REIT and Investment LP1 intend to treat the Investment LP1 Notes held by the REIT as debt. The earnings stripping rules (Code s. 163(j)) may apply. Interest received by the REIT on the Investment LP1 Notes will be subject to 0% withholding by virtue of the Canada-U.S. Treaty.

Overview

SUSO 2 will be merged into SUSO 1 under s. 132.2. SUSO 1 will also acquire two of the GAR LPs (GAR A and C), with the GAR A and C unitholders receiving, at their option, units of SUSO 1 or exchangeable units of a subsidiary Delaware LP. A more complex exchangeable units structure will govern the acquisition of a third GAR partnership (GAR B), which will give unitholders who remain unitholders of GAR B the economic equivalence of ownership of SUSO 1 Units. The relative equity values going into the transaction are estimated to be SUSO 1 (38.2%), SUSO 2 (47.5%) and GAR (14.3%). The "Combination Transaction" is conditional on the SUSO 1 class U units (referred to as Class U Units of the "REIT" once the Combination Transaction is completed) being approved for listing on the TSX.

SUSO 1 and SUSO 2

Separate unlisted mutual fund trusts, each holding a portfolio of U.S. grocery-anchored retail rental properties through an Ontario LP which, in turn, holds a Delaware holding LP.

GAR

LPs which raised equity by private placement to invest in U.S. anchored retail properties.

SUSO 1 Unit Classes

The Class A Units of SUSO 1 were offered in Canadian dollars solely for the convenience of Unitholders wishing to pay the subscription price in Canadian dollars and receive distributions in Canadian dollars representing the equivalent of the U.S. dollar distributions on the other units. The Class U and Class I Units were offered in U.S. dollars and distributions paid in U.S. dollars. Class A and Class U Units were offered through a public offering, while Class I Units were offered through a private placement. Rights and characteristics of each Class I Unit are identical to those for each Class A Unit and Class U Unit, except that each Class I Unit was not required to pay agents' fees.

Resulting structure

The resulting "REIT" will hold notes and units ("Investment LP1 Units") of an Ontario LP ("Investment LP1") which is a foreign corporation for Code purposes, which will hold all the units (Class A LP1 Units") of a Delaware LP ("Limited Partnership 1"), which will hold units ("Class A LP2 Units") of another Delaware LP ("Limited Partnership 2"). Some of the former GAR A and GAR C unitholders will hold exchangeable units of Limited Partnership 2 ("Class B LP2 Units").

GAR B structure

The unitholders of GAR B will hold GAR B Exchangeable Units. GAR B will hold LP Units of GAR Holdings (a Delaware LP directly or indirectly holding retail properties) and Class C LP2 Units of Limited Partnership 2. "Each Class C LP2 Unit, taken together with the units of GAR Holdings held by GAR B, will, in all material respects, be economically equivalent to ownership of Class U Units, subject to adjustment in respect of U.S. corporate income taxes paid by REIT and/or certain subsidiaries of the REIT." "GAR B also will be authorized to issue class A limited partnership units, which generally will be issued to the REIT in connection with a redemption of GAR B Exchangeable Units." The holders of GAR B Exchangeable Units will have the right to cause GAR B to redeem all or a portion of such GAR B Exchangeable Units for Class U Units (of the REIT) or cash, at the option of the GAR B general partner.

Proposed transactions

In connection with the implementation of the Combination Transaction:

1. The SUSO 1 declaration of trust will be amended to make the SUSO 1 class I units convertible into SUSO 1 class U units (a.k.a., Class U Units) and to rename SUSO 1 as Slate Retail REIT (the "REIT").
2. The SUSO 2 declaration of trust will be amended to add a right of SUSO 2 to redeem SUSO 2 Units by delivering SUSO 1 class U units.
3. SUSO 1 will acquire all of the assets of SUSO 2 in consideration for SUSO 1 class U units.
4. SUSO 2 will redeem all SUSO 2 Units (except for any SUSO 2 Units acquired by SUSO 1) by delivering SUSO 1 class U units to SUSO 2 Unitholders.
5. In consideration for their units of GAR A or GAR C, the limited partners of such partnerships will receive, at their election, either SUSO 1 class U units or Class B LP2 Units.
6. The unitholders of GAR B may exchange their units for SUSO 1 class U units or GAR B Exchangeable Units, and will be issued one Special Voting Unit (of the REIT) for each GAR B Exchangeable Unit held. Each GAR B Exchangeable Unit will be redeemable for one Class U Unit or cash, as determined by GAR B.
7. The indirect holders of the general partner interests of Holding LP1 (the principal holding subsidiary of SUSO 1), Holding LP2 (the principal holding subsidiary of SUSO 2) and GAR Holdings (the principal holding subsidiary of GAR) will transfer their interests to Limited Partnership 2 in consideration for Class B LP2 Units, thereby resulting in a crystallization of the general partner interests.
8. The SUSO entities and GAR will effect a reorganization to rationalize the resulting structure.

The Combination Transaction will be effected based on the relative values of the Holding Partnerships, as compared to the total value of the REIT.

Canadian tax consequences

Conversions It is unclear if the conversion of SUSO 1 class A or class I Units into Class U Units would be a disposition.

S. 132.2 merger

Provided that a joint s. 132.2 election is made on a timely basis, there should be no resulting net income to SUSO 2 or tax liability to its unitholders as a result of the Combination Transaction, which will constitute a qualifying exchange.

FTCG rules

No assurance is given respecting the Foreign Tax Credit Generator rules.

U.S. tax consequences

ECI taxation. The REIT, Investment LP1 and GAR B will elect to be corporations under the Code and they each will be considered to have a permanent establishment in the U.S. Accordingly, Investment LP1 and GAR B (as foreign corporations) will be subject to U.S. corporate income taxation on the net rental income which they derive (through subsidiary Holdings LP) from a U.S. trade or business and on gains from the sale of U.S. real properties that are allocable to them or on the sale of subsidiary investments. Income or gains of subsidiary LPs allocable to them generally will be subject under Code s. 1446 to withholding at a 35% rate, which generally will also apply in lieu of any FIRPTA withholding requirements, with such withholding being allowed as a credit on their U.S. federal income tax returns. Investment LP and GAR B also will be liable for a 5% branch profits tax (subject to the $500,000 Treaty exemption) on their after-tax earnings.

Interest

The REIT and Investment LP1 intend to treat the Investment LP1 Notes held by the REIT as debt. The earnings stripping rules (Code s. 163(j)) may apply. Interest received by the REIT on the Investment LP1 Notes will be subject to 0% withholding by virtue of the Canada-U.S. Treaty.

Overview

Upon the sale of properties indirectly held by TSX-listed Primaris (having an aggregate value of approximately $1.9B) to the KingSett Consortium, unitholders of Primaris (who hold 98.486M units) will be given the option of having their units redeemed for cash consideration of $28.00 per units ($1.28B in the aggregate), or exchanging their units with H&R under an Alberta Plan of Arrangement on the basis of 1.166 stapled H&R units for each Primaris units in accordance with the ITA s. 132.2 merger rules (respecting the H&R REIT unit component of the stapled units). However, the cash and H&R stapled units consideration will be fixed in the aggregate, so that if all the Primaris unitholders elected to receive cash or elected to receive H&R stapled units, each would receive 0.642 H&R stapled units and $12.58 cash per Primaris unit.

H&R

H&R comprises H&R REIT and H&R Finance Trust. Their units trade on the TSX on a stapled basis (with the H&R Finance Trust unit estimated to represent less than 4% of the value of the stapled unit - p. 34). H&R Finance Trust holds a US$162.5M interest-bearing note receivable of a US subsidiary of H&R REIT.

KingSett Consortium

The KingSett Consortium comprises (i) KS Acquisition II LP (an LP whose LP interests are owned equally by a KingSett Capital Inc. affiliate and an Ontario Pension Board affiliate ("OPB Trust"), (ii) RioCan Real Estate Investment Trust ("RioCan"), (iii) Kingsett Canadian Real Estate Income Fund LP ("CREIF LP"), (iv) Kingsett Real Estate Growth LP No. 4 ("KS LP No. 4") and (v) OPB Trust.

Preliminary transactions

Options granted by Primaris pursuant to its equity incentive plan, including unvested options, may be surrendered (at the option of the holders) to Primaris for their in-the-money value (based on the five-day Primaris unit VWAP ending on the third business day prior to the Effective Date of the Plan of Arrangement. Exchangeable units of Primaris subsidiary LPs are to be exchanged for 2.122M Primaris units (subject to discussions to "to identify and, if applicable implement" transactions that are "more tax efficient."

Plan of Arrangement

Under the Plan of Arrangement

• All rights under the Primaris Unitholders Rights Plan will be cancelled
• The Primaris Declaration of Trust will be amended to provided that any taxable income arising to Primaris as a result of the sales to the KingSett Consortium (including income allocated to it by Primaris subsidiaries participating in such sales) will be allocated to Primaris unitholders (including dissenters) whose Primaris units are redeemed for cash as described below
• The sales to the KingSett Consortium will be completed
• Each Primaris trust subsidiary will allocate and make payable to its beneficiary its taxable income "for its taxation year ending immediately prior to the commencement of the steps set out [immediately below]; and each Primaris corporate subsidiary will increase the stated capital of its shares by such amount as is specified by it prior to the Effective Time" of the Plan of Arrangement
• Each Primaris subsidiary will distribute the cash proceeds arising directly or indirectly from the sales to the KingSett Consortium
• To the extent that the taxable income allocated, as described above, by a trust subsidiary, exceeds the distributed cash, it will satisfy its obligation to distributed such taxable income by issuing units
• The special voting units of Primaris will be redeemed for their paid-up amount
• H&R REIT, H&R Finance Trust and Primaris will pay special distributions of any amounts which are determined, prior to the Effective Time, to be equal to any taxable income arising under ITA s. 132.2 for their taxation years that are deemed to end under s. 132.2
• Units of dissenters will be transferred to Primaris in consideration for a Primaris debt claim equal to their fair value
• Primaris unitholders are required to elect to receive cash or H&R units by two busines days before the Primaris unitholders' meeting - failing which, they will be deemed to have elected for H&R units. The number of Primaris units in respect of which the holders will be entitled to receive cash redemption proceeds will be reduced (or increased) to the extent that Primaris otherwise would be obligated to pay aggregate cash redemption proceeds exceeding (or less than) $1,278,443,575. The Primaris units which (on this basis) have an entitlement to receive cash redemption proceeds are redeemed for $28.00 cash per unit
• In the case of the other Primaris units (i.e., for which there is an entitlement to receive H&R units), the "FT Percentage" of each such unit (corresponding to the relative fair market value of a H&R Finance Trust relative to that of an H&R stapled unit - apparently under 4% per p. 34) will be transferred by such unitholder to H&R REIT in consideration for 1.166 H&R Finance Trust units (together with certain ancillary rights under certain plans)
• The conversion features of various Primaris convertible debentures will be amended respecting their conversion now into H&R stapled units
• Restricted units issued under the Primaris equity incentive plan will be transferred by the holders to Primaris in consideration for replacement units issued by H&R REIT
• As contemplated in ITA s. 132.2, Primaris will transfer its property (other than $1,000 of cash) to H&R REIT in consideration for (i) H&R REIT units equal to the number of Primaris units (including those held by H&R REIT, but excluding one "Designated Unit" held by H&R REIT), multiplied by 1.166, multiplied by the inverse of the FT Percentage, and (ii) the assumption by H&R REIT of liabilities including the Primaris convertible debentures
• Also as contemplated in ITA s. 132.2, Primaris will then redeem all its units (other than the Designated Unit) by distributing its H&R REIT units (with the H&R REIT units so distributed to H&R REIT being cancelled by H&R REIT)
• Options granted by Primaris pursuant to its equity incentive plan will be surrendered for consideration consisting solely of replacement H&R REIT options in accordance with s. 7(1.4)
• "Separately, and not as consideration arising in connection with the exchange referred to in the immediately preceding step," each holder of a replacement H&R REIT option will be granted by H&R REIT a corresponding option to acquire an equivalent number of H&R Finance Trust units at an exercise price equal to the fair market value of such H&R Finance Trust units at the time of exercise

Break fee

$100M ($70M to H&R REIT and $30M to H&R REIT (U.S.) Holdings Inc. - but with a right of KS Acquisition II LP to receive 41.36% under a cooperation agreement.

Securities law matters

H&R will apply to local provincial regulators for exemptive relief respecting the distribution of stapled units pursuant to the exercise of various convertible securities. The H&R stapled units will be issued under the Plan of Arrangement in reliance on the s. 3(a)(10) exemption.

Canadian tax consequences

Sale transactions. Primaris will include in its income substantially all of the income (including recapture of depreciation) and net taxable capital gains arising from the sales to the KingSett Consortium. Such income will be allocated to the Primaris unitholders receiving the cash redemption proceeds, and to the dissenting unitholders.

S. 132.2 merger

The transfer of the Primaris assets to H&R REIT will be part of a qualifying exchange, so that it can occur on a rollover basis or, alternatively, at an elected gain to utilize any deductions available to Primaris.

Special distribution

If Primaris determines that its undistributed taxable income for its short taxation year arising under s. 132.2 (determined without regard to the sales to the KingSett Consortium) exceeds prior distributions in that period, Primaris will make an advance special distribution to distribute such taxable income.

Allocation of sale income, and access to CCA deduction

CRA approval is being sought to change the taxation year end of certain Primaris subsidiaries so as to end immediately before the sales transactions, so as to ensure that substantially all the income and net taxable capital gains earned by such subsidiaries up to the Effective Date (but ignoring the sales transactions) will be allocated to the Primaris unitholders who receive the special distribution, and so that the income and net taxable capital transactions arising from the sales transactions will be allocated to the Primaris unitholders whose units are redeemed for cash. Such year end change would also permit capital cost allowance claims on the sold assets.

If such CRA approval is not obtained by March 25, 2013, then the transactions in the Plan of Arrangement will be amended inter alia so that all the Primaris units will be exchanged for H&R Finance Trust units as described above, the balance of Primaris units will be exchanged for H&R REIT units under the s. 132.2 merger procedure also described above, and only then will the sale to the KingSett Consortium close, with the cash proceeds being use to redeem the H&R units of those whose units are to be redeemed for cash (p. 45).

Cash redemption

A resident unitholder whose units are redeemed for cash will be required to include in income the portion of the redemption proceeds which is taxable income (including recapture of depreciation – not expected to exceed $3.01 per redeemed unit) arising from the sales transactions. The unitholder's proceeds of disposition will not include the income and taxable capital gains so allocated to the unitholder and the non-taxable portion of such capital gains (assuming s. 104(21) designations are made).

Exchange of FT Percentage of Primaris units for

H&R Finance Trust units. Occurs on taxable basis – fmv cost for H&R Finance Trust units. The ancillary rights received are considered to have a nil fmv.

H&R REIT and H&R Finance Trust status

H&R REIT currently is an open-end (s. 108(2)(a)) unit trust, but "it is expected" that it will cease to so qualify if it completes an offering of preferred units. However, based in part on a CRA opinion, it is expected to qualify as a closed-end (s. 108(2)(b)) unit trust on such conversion.

H&R REIT is intended to be managed so that it qualifies as a REIT. H&R REIT has represented in the amended Arrangement Agreement that H&R Finance Trust is not a SIFT trust based on it not carrying on a business in Canada (and that H&R REIT's various subsidiaries are excluded subsidiary entities.) The stapled security proposals will not have a material adverse effect.

Non-resident consequences of cash redemption of Primaris units

Part XIII tax will apply to the portion of the cash redemption proceeds that represents a distribution of recapture of depreciation (or other ordinary income) or distributions out of the Primaris TCP gains balance (assuming that the 5% distribution-measured ownership threshold in s. 132(5.2) is exceeded). The balance of the redemption proceeds will be subject to Part XIII.2 withholding where the Primaris units are not taxable Canadian property.

Redemption of Non-residents' units for H&R REIT units

Part XIII.2 tax will not apply to the distribution of H&R REIT units on the s. 132.2 merger transaction.

Primaris unit market sales

A non-resident generally will not be subject to capital gains tax on a TSX sale of Primaris units "with a settlement date that is prior to the Effective Date."

US tax consequences

Characterization. Assuming that the stapled units are viewed as comprising separate financial instruments and that H&R Finance Trust qualifies as a fixed investment trust, a H&R Finance Trust unit will be treated as direct ownership in the underlying assets, so that the portfolio interest exemption potentially is available. If H&R Finance Trust were instead treated as a partnership or corporation, this could reduce interest deductions under Code s. 163(j). If the notes held by H&R Finance Trust were successfully recharacterized as equity, such notes would generally be treated as US real property interests.

Exchange

The exchange by US holders of their Primaris units for units of H&R REIT and H&R Finance Trust and cash will occur on a non-rollover basis.

PFIC rules

Primaris does not believe it currently is a PFIC. H&R REIT expects to be a PFIC for the current year, and likely will be a PFIC for subsequent years. Discussion of Code s. 1291 rules, and QEF and mark-to-market elections.

Tender

Offer of Dundee REIT to acquire all the units of Whiterock REIT for $16.25 cash per Whiterock unit (subject to an aggregate cap of $360 million) or the issuance of units of Dundee REIT. Whiterock unitholders can tender their units in exchange for Dundee units on a taxable basis, or receive Dundee units on a rollover basis pursuant to draft s. 132.2(3)(g). Dundee does not take up the Whiterock units under its bid until if has received approval for the subsequent "Acquisition" transaction described below - with its offer containing a proxy to approve the Acquisition that can be checked off both by tendering and non-tendering unitholders.

S. 132.2 merger

Immediately after the take-up of the tendered units, Whiterock REIT transfers its assets into a limited partnership on a rollover basis, transfers its interest in the partnership to Dundee REIT in consideration for Dundee REIT units, the assumption of convertible debenture obligations and some cash and then (following a consolidation of its units to align with the number of Dundee REIT units held by it) distributes those Dundee units to its unitholders in redemption of the units of Whiterock. However, Whiterock unitholders who are non-residents of Canada instead receive cash proceeds of sale (net of withholding tax) of "their" share of the Dundee units.

Canadian tax consequences

Tax disclosure of consequences of taxable sale of Whiterock units or of participating in s. 132.2 merger transaction.

Overview

CAP REIT proposes to acquire units of ResREIT for cash or CAP REIT units, with ResREIT unitholders who wish rollover treatment for the CAP REIT units to be received by them receiving such units on a s. 132.2 merger of ResREIT into CAP REIT. With a view to interest deductibility by CAP REIT for the related cash borrowed by it, the direct use by it of such cash is to acquire assets from ResREIT on the first stage of the merger, with ResREIT using such cash proceeds to pay-off a note which it had issued to CAP REIT in consideration for a CAP REIT note (which disappears by operation of law on the merger). The "cleansed" cash so paid to CAP REIT is used to satisfy its obligation for the ResREIT units which were tendered for cash consideration.

ResREIT

A closed-end Ontario TSX-listed REIT with 27.2M units outstanding and holding 10,890 apartment suites, 8,753 of them in Ontario. At the time of its IPO in 1998 it acquired 8 of 23 apartment buildings as the lessee under long-term (35 year) leases under which the rents were prepaid by it for $175M and with the option to purchase at lease maturity. It added 7 additional pre-paid leasehold properties between 1998 and 2004. See summary under Offerings – Domestic REITs.

CAP REIT

A closed-end TSX-listed Ontario REIT holding 13,438 apartment suites.

Special distribution

Immediately prior to the expiry time for the offer ResREIT and CAP REIT will each pay a special distribution of undistributed income.

Offer

Offer of CAP REIT to purchase ResREIT units for 1.216 CAP REIT units for each ResREIT unit or $18.60 cash for each ResREIT unit. However, the maximum cash is limited to $175M, so that pro-ration may apply. It is intended that take-up of ResREIT units under the Offer will occur after approval of the Merger and prior to effecting the Merger. Those ResREIT unitholders who do not elect to receive CAP REIT units on a taxable basis will receive CAP REIT units under the s. 132.2 merger.

Merger

1. ResREIT unitholders, who have the right to tender for cash, tender their units to CAP REIT for the right to receive the agreed cash consideration of up to $175M worth in 7 below. Those who are entitled to receive CAP REIT units and who have elected not to receive rollover treatment tender their ResREIT units for CAP REIT units.
2. ResREIT issues a $175M promissory note to CAP REIT (ResNote).
3. CAP REIT pays for the ResNote with a $175M note of its own (CapNote).
4. Presumably, CAP REIT borrows $175M cash from a third party.
5. ResREIT sells all of its real estate and other assets to CAP REIT for $175M cash plus the assumption of ResREIT liabilities (other than the ResNote which remains outstanding) plus the "Payment Units" of CAP REIT (so that one of the ResREIT assets transferred is the CapNote, which when acquired by CAP REIT is cancelled by operation of law).
6. ResREIT pays off the $175M owing to CAP REIT on the ResNote with the $175M cash so received by it.
7. CAP REIT uses this $175M cash to pay for the ResREIT units who deposited in 1 above. Presumably the $175M third party debt owing by CAP REIT remains in place, which is considered to have been borrowed to acquire the ResREIT assets which CAP REIT still owns after the transaction.
8. ResREIT causes all of the outstanding ResREIT units (other than certain units held by CAP REIT) to be redeemed or retracted in exchange for the distribution of the Payment Units. Payment Units received by CAP REIT will be cancelled.

CAP REIT and ResREIT intend to jointly elect under s. 132.2 In the event that less than $175M in cash in paid out in connection with the Offer, CAP REIT intends to use the balance to make a special post-Merger distribution to all CAP REIT unitholders (including former ResREIT unitholders) or apply it to a special issuer bid. A 31 May 2004 amendment (SEDAR filing on 1 June 2004) to the 29 March 2004 Combination Agreement (SEDAR filing on 6 April 2004) continued to contemplate that ResREIT would transfer all its assets to CAP REIT but provided that CAP REIT would not assume a mortgage on a B.C. property of ResREIT and reduced the number of Payment Units issued by Cap REIT to ResREIT by 1.56M units multiplied by the Exchange Ratio.

Non-resident unitholders

They are excluded from the Offer. Upon the conclusion of the Merger, CAP REIT units which they otherwise would be entitled to receive will be issued to a Depositary which shall, as their agent, sell such CAP REIT units through the TSX and distribute the net proceeds.

Canadian tax consequences

The merger will be a qualifying exchange which should not result in any net income to ResREIT. The receipt of CAP REIT units on the merger will occur on a s. 132.2 rollover basis, whereas an exchange of ResREIT units for CAP REIT units (or cash) under the Offer will occur on a taxable basis The special distributions will ensure that the REITs are not subject to taxation for their short taxation years ending with the Merger.

See full summary under Declaration of Trust Amendment - Cash or Shares.

Overview

Return on Innovation Advisors Ltd. ("ROI Capital") agreed with DREAM Asset Management Corporation ("DREAM"), a subsidiary of DREAM Unlimited Corp. (TSX:DRM), that DREAM would acquire the rights to manage the ROI Public Funds and the privately held ROI IPP. There will be a reorganization of the Distributing ROI Funds and their relevant underlying "Reference Funds" involving the transfer of assets of each Distributing ROI Fund to the newly-formed Trust (an Ontario open-end unit trust with conventional retraction terms and targeted to be a mutual fund trust) in exchange for units of the Trust. As a result of the transaction, all the assets of the Distributing ROI Funds (including those of the relevant underlying reference funds) will be combined in the Trust on a taxable basis, and on the termination of the Distributing ROI Funds, unitholders of the Distributing ROI Funds will receive units of the Trust pro rata based on the relative net asset values of the Distributing ROI Funds. "The Trust benefits from a flexible structure: it is not restricted or limited by the SIFT Legislation that applies to REITs, nor is it required to comply with the regulations governing mortgage investment corporations."

Existing Structure

Each ROI Public Fund has made an election under subsection 39(4) of the Tax Act so that all of its Canadian securities (including securities in its Canadian Securities Portfolio) will be deemed to be capital property to the ROI Public Fund and has entered into forward agreements with the "Counterparty" (a Canadian chartered bank) to sell those Canadian securities for prices based on the value of assets held in the corresponding Reference Funds held by the Counterparty. A significant portion of the Distributing ROI Funds' assets (i.e., the "Co-owned Properties") are already managed by DREAM as they are co-owned by one or more of the Funds and Dream Office REIT, which is managed by DREAM.

Post-closing assets

The Trust will have approximately $725 million of (mostly Canadian) net assets, including approximately: (a) $240 million of (principally Ontario) commercial income-producing properties as co-owner with Dream Office REIT ("Co-owned Properties"); (b) $220 million of real estate loans with fixed interest payments and terms; (c) $15 million of limited partnership equity investments in retail real estate properties; (d) $160 million of equity and participating mortgage and co-ownership investments in retail and residential development projects that do not currently produce any cash income; and (e) $90 million of short-term investments. The Trust, which will be TSX-listed, will focus on investing in Canadian real estate, real estate loans and infrastructure including renewable power.

Distributions

The Trust expects to pay a monthly distribution of $0.033 per Unit on each Distribution Date. This equates to an implied cash flow yield of 4.0% per annum, based on an initial price per Unit of $10.00.

Reorganization Steps

1. Various newly-formed subsidiary LPs ("New Real Estate LPs") of Dream Alternative Master LP (the subsidiary LP of the Trust) will acquire real estate assets held indirectly by the Reference Funds through their "Property LPs" in consideration for assuming liabilities and issuing limited partnership units ("New Real Estate LP Units") to the respective Property LPs.
2. Each ROI Public Fund will pre-settle the Forward Agreement to which it is a party, by delivering its Canadian securities to the Counterparty for cash.
3. Each ROI Public Fund will use such cash to subscribe for units of the Trust.
4. The Trust will contribute such cash to Dream Alternatives Master LP.
5. Dream Alternatives Master LP will then acquire from each Property LP all the New Real Estate LP Units it holds and the applicable New Real Estate LP will acquire remaining assets held by each Reference Fund (mezzanine loans, mortgages, debentures, limited partnership interests and referenced cash).
6. Each Reference Fund will then distribute all of its cash to its unitholders (being the Counterparty and other Reference Funds) as the redemption price for its units, and will be terminated.
7. Certain of the New Real Estate LPs will acquire the assets held indirectly by the ROI Public Funds through the Property LPs in consideration for assuming liabilities and issuing New Real Estate LP Units to the transferor of the applicable assets.
8. New Real Estate LPs will purchase from the ROI Public Funds, in exchange for additional New Real Estate LP Units, all the remaining assets that are held by such ROI Public Fund, including cash, mezzanine loans, mortgages, debentures and limited partnership interests (but excluding the cash necessary to fund the Special Distribution described in 14, units of other ROI Public Funds and New Real Estate LP Units held by such ROI Public Fund).
9. New Real Estate LPs will purchase from IPP LP all of the assets held by IPP LP, including cash, mezzanine loans, mortgages, debentures and limited partnership interests (but excluding units of other ROI Public Funds) in consideration for New Real Estate LP Units, following which, IPP LP will distribute all its assets, being the New Real Estate LP Units, to its sole limited partner, ROI IPP.
10. New Real Estate LPs will purchase from ROI IPP all the remaining assets that are held by ROI IPP other than the cash necessary to fund the Special Distribution, units of other ROI Public Funds and New Real Estate LP Units received above.
11. Each ROI Investor Fund will enter into an asset transfer agreement pursuant to which it will transfer all the New Real Estate LP Units held by such Fund to the Trust and the Trust will assume all liabilities of such Fund in exchange for Trust Units. The Trust will transfer its New Real Estate LP Units to Dream Alternatives Master LP.
12. The Distributing ROI Funds will then distribute the after-tax amount, if any, of any income or gains realized as a result of the above transactions to its Unitholders by the issuance of additional units of the applicable ROI Investor Fund. These units will automatically consolidate. In the case of each ROI Public Fund, such distribution will include the net capital gain, if any, realized by the ROI Public Funds as a result of its pre-settlement of its Forward Agreement.
13. The appointment of DREAM as the new manager will occur.
14. Upon termination, each of the ROI Public Funds and IPP will distribute all of such Fund's remaining trust property, being the cash Special Distribution of $80.7M (based on 10% of NAV of the applicable Fund) and Trust Units held by such Fund, to such Fund's Unitholders. Unitholders of the Distributing ROI Funds will receive the 72,617,739 Units pro rata based on the relative net asset values of the Distributing ROI Funds.
15. The ROI Public Funds and ROI IPP, which now have no units or assets, will be terminated.

Canadian tax consequences

Trust. The Trust will be a taxable SIFT trust. Renewable power and real estate assets generate tax depreciation often sufficient to shelter their income. Of the monthly cash distributions to be made by the Trust to Unitholders, approximately 75% in 2014 and approximately 90% in 2015 will be tax deferred.

SIFT tax under Reorganization

"Each ROI Public Fund is a SIFT Trust and will therefore be subject to the SIFT Rules. However, the Manager does not expect ROI Canadian Mortgage Income Fund and ROI Canadian Real Estate Fund to have a tax liability determined in accordance with the SIFT Rules solely by virtue of the Reorganization. The Manager expects that ROI Canadian High Income Mortgage Fund may have a nominal amount of tax liability determined in accordance with the SIFT Rules by virtue of the Reorganization, which is expected to be less than $100,000 or 0.03% of ROI Canadian High Income Mortgage Fund's NAV.…."

Excluded subsidiary entity

Dream Alternatives Master LP expects to qualify at all times as an "excluded subsidiary entity."

Character conversion rules

"[T]he Manager believes that the Grandfathering Rules should apply to the Forward Agreements and should continue to apply to each Forward Agreement until the time that each ROI Public Fund pre-settles the Forward Agreement to which it is a party pursuant to the Reorganization."

Distribution

[E]ach investor Fund generally will be able to claim a deduction from its income under Part I of the Tax Act in the taxation year of the Reorganization for the amount distributed to Holders in respect of such income or gains except for, in the case of the ROI Public Funds, any income or gain that is SIFT Income. Each ROI Public Fund may realize SIFT Income as a result of the Reorganization but the amount of such income is not expected to be material….

Overview

The 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.

Its purchase 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) (and, in light of a concurrent change in the trustees, a concurrent year end under s. 128.1(4)(a).) Given inter alia that much of the gains were realized as capital gains (i.e., gains realized by 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.

See full summary under Mergers & Acquisitions›Cross-Border Acquisitions›Inbound›REIT Acquisitions.

Overview

It is proposed that all the units of the Trust will be acquired for cash by Purchaser under a B.C. Plan of Arrangement. All but the units of the 175 smallest unitholders (holding at least 100 units) will be acquired in the first tranche – and then, 60 seconds later, the units of the remaining 175 unitholders will be acquired. This is to clarify that, for purposes of the Ontario land transfer tax exemption for mutual fund trust unit transfers, the REIT will still satisfy the relevant Ontario MFT tests at the time of the take up of most of the REIT units.

Roughly ¼ of the REIT’s properties are U.S. properties which are held in a U.S. private REIT subsidiary of a B.C. holding company (“CanCo SPV”) that, in turn, is held by the REIT. The Trust has covenanted that it will not do anything that “could reasonably be expected to have the effect of preventing Purchaser or a wholly-owned subsidiary of Purchaser, from obtaining the benefit of a ‘full tax cost bump’ pursuant to the Tax Act” respecting the shares of the U.S. REIT. Opinions will be delivered at closing to a REIT sub and Blackstone sub that the U.S. REIT has qualified as such for Code purposes.

The only corporate step in this corporate plan of arrangement is a transaction in which a B.C. subsidiary of Purchaser, immediately before the acquisition of the REIT units, subscribes $805 for 80.5M CanCo SPV preferred shares with undisclosed attributes.

As this is a purchase rather than redemption transaction, there are no Part XIII.2 withholding issues.

The Trust

A TSX-listed B.C. unit trust that owns and operates a diversified portfolio of income-producing industrial properties in leading markets across Canada and key distribution and logistics markets in the United States. Most of its properties are income-producing and, as to gross leasable area, are held as to approximately 11%, 20% 37% and 24% in B.C. Alberta, Ontario and the U.S., with the U.S. assets held in the U.S. Trust Subsidiary. 25% of its revenue comes from FedEx. No person has been identified as beneficially owning, directly or indirectly, or exercising control or direction over, the Trust Units.

Blackstone

The Blackstone Group L.P is an American multinational private equity, alternative asset management and financial services firm based in New York City. Its real estate business has approximately US$115B of assets under management.

Purchaser

An unlimited liability company organized under B.C. law, that was formed on December 19, 2017 by Blackstone solely for the purpose of engaging in the proposed transactions.

New CanCo

BPP Pristine Acquisition ULC, a B.C. unlimited liability company wholly owned by Purchaser.

CanCo SPV

PIRET Holdings (Canada) Ltd., a B.C. corporation and wholly-owned by the Trust. It holds all the common equity in U.S. Trust Subsidiary.

U.S. Trust Subsidiary

PIRET USA Inc., a Delaware corporation, which is wholly-owned by CanCo SPV (with the exception presumably of preferred shares required for U.S. REIT status) and is intended to qualify as a REIT for Code purposes.

Distributions

The Trust will continue to declare its regular monthly distribution of $0.026 per Unit on each regularly scheduled record date that occurs prior to the Effective Date of the Arrangement, and will pay all such distributions to Unitholders of record on each such record date in the ordinary course.

Plan of Arrangement

1. All rights under the Rights Plan shall be cancelled;
2. Each Unit Option, Deferred Unit, Restricted Unit and Performance Unit shall be transferred by its holder to the Trust for cash, less applicable withholding;
3. The Trust shall pay out, as a special distribution on the Units, the amount, if any, that is determined by it prior to the Effective Time to be equal to its bona fide best estimate of the amount, if any, of its taxable income for the taxation year of the Trust that ends on the Effective Date of the Arrangement (such amount to be reduced to take into account any deductions under subsection 104(6) of the Tax Act in respect of prior distributions during that period);
4. The articles of CanCo SPV shall be amended to create the CanCo SPV Preferred Shares (whose attributes have been removed from the Circular Copy of the Plan of Arrangement);
5. New Canco shall subscribe for 80,556,000 CanCo SPV Preferred Shares, at a subscription price of $0.00001 per share, or $805.56 in aggregate;
6. The existing Trustees of the Trust shall resign and a B.C. corporation formed by Purchaser shall become the sole trustee of the Trust;
7. Each Dissent Unit shall be transferred to Purchaser;
8. Each Unit (other than the Secondary Purchased Units and any Dissent Units) shall be transferred and assigned in exchange for the “Consideration” of $8.10 in cash per Unit;
9. Each Unit of a Secondary Purchased Unitholder shall be transferred and assigned, without any further act or formality on its part, to Purchaser (free and clear of any Liens) in exchange for the Consideration; the “Secondary Purchased Unitholders” means the first 175 Unitholders that would be named on a list of Unitholders made in reverse rank order of number of Units held each of which holds, immediately prior to Step 8 not less than 100 Units (and whose Units have an aggregate fair market value of not less than $500).

Break fee

Is capped at the amount that would not cause the Trust to breach the 10% gross REIT revenue test.

Bump covenant

The Trust will not knowingly undertake transactions (other than a Restructuring Transaction directed by Purchaser) that could reasonably be expected to have the effect of preventing Purchaser or a wholly-owned subsidiary of Purchaser, from obtaining the benefit of a “full tax cost bump” pursuant to the Tax Act in respect of non-depreciable capital property owned by CanCo SPV.

U.S. REIT status opinion

Each of BPP Pristine U.S. LLC and the U.S. Trust Subsidiary shall have received a tax opinion dated as of the Effective Date in the specified form, which opinion concludes (subject to customary assumptions, qualifications and representations, including representations made by the U.S. Trust Subsidiary and its subsidiaries) that the U.S. Trust Subsidiary has been organized and operated in conformity with the requirements for qualification and taxation as a U.S. REIT under the Internal Revenue Code of 1986 (U.S.) for all taxable periods commencing with the U.S. Trust Subsidiary’s taxable year ended December 31, 2014 through to and including the Effective Date.

Canadian tax consequences

Residents

A Resident Unitholder will realize a capital gain (or capital loss) equal to the amount, if any, by which the Resident Unitholder’s proceeds of disposition exceed (or are less than) the aggregate of the Resident Unitholder’s adjusted cost base of the Units immediately prior to the disposition and any reasonable costs of disposition.

Non-Residents

A Non-Resident Unitholder will not be subject to tax under the Tax Act on any capital gain realized on the sale of Units to Purchaser provided that, at the time of disposition, the Units are not taxable Canadian property of the Non-Resident Unitholder or are treaty-protected property of the Non-Resident Unitholder. A Non-Resident Unitholder will not be subject to tax under the Tax Act on any capital gain realized on the disposition of Units on the TSX with a settlement date prior to the Effective Date provided that, at the time of disposition, the Units are not taxable Canadian property of the Non-Resident Unitholder or are treaty-protected property of the Non-Resident Unitholder.

Overview

Offer by Plazacorp for units of KEYreit. The consideration is a combination of cash and Plazacorp shares (with the ability to make an s 85 election), with such consideration being at the election of the KEYreit unitholder but with the overall cash and share proportions fixed at 50-50. The consideration (valued at $8.35 per KEYreit unit) represents a 35% premium over the closing price when the rival Huntingdon offer was announced. (The Huntingdon offer was varied and extended, most recently, on April 1, 2013.)

Plazacorp

Plazacorp is a retail property owner and developer which intends to graduate from the TSX-V to the TSX, was incorporated in B.C. and owns a portfolio of 119 properties, and additional lands held for development. Although it is a mutual fund corportion for income tax purposes,

on March 25, 2013, Plazacorp received a positive ruling from the CRA in respect of converting from a mutual fund corporation to a REIT structure on a tax-deferred basis. Completion of this conversion is expected to occur in 2013….

KEYreit

KEYreit is listed on the TSX, and was formerly Scott's REIT. It has stated that it believes it will continue to qualify as a REIT for Canadian income tax purposes. It has 14.9M units outstanding, plus debentures convertible into a further 6.47M units.

Offer

Plazacorp is offering to purchase each outstanding KEYreit (incluidng those resulting from conversion of debentures or other securities) for

• $8.35 per unit in cash
• 1.7041 Plazacorp shares, or
• any combination thereof

provided that the aggregate cash consideration is limited to $62.15M and the maximum share consideration is limited to the equivalent of ½ the outstanding KEYreit units (after giving effect to debenture conversions). Conditions for the offer include the deposit of units (without withdrawal) representing (i) (together with any units of Plazacorp) at least 66 2/3% of the outstanding KEYreit units and (ii) at least a majority of the outstanding units the votes of which would be included in any minority approval of a Subsequent Acquisition Transaction pursuant to MI 61-101. The offer price is adjusted for defined distributions by KEYreit.

U.S. Securities Laws

The offer is being made in the U.S. with respect to units of a foreign private issuer. The Plazacorp shares are being offered pursuant to the Rule 802 exemption. Ineligble U.S. Unitholders that would otherwise receive Plazacorp shares may have those shares issued on their behalf to a selling agent, which will remit the net proceeds of sale on the TSX-V to such Ineligble U.S. Unitholders.

Subsequent Acquisition Transaction

If a Compulsory Acquisition Transaction (based on 90% of the units being taken up) is not available (or availed of), Plazacorp will use commercially reasonable efforts to implement a Subsequent Acquisition Transaction, and intends units acxquired under the offer to be voted in favour of any such transaction. A Subsequent Acquisition Transaction may take the form of an amendment to the Declaration of Trust to provide for the redemption by KEYreit of all outstanding (non- Plazacorp) units or the purchase therof by Plazacorp.

Canadian tax consequences

Residents. In the absence of an s. 85 election, the exchange will occur on a non-rollover basis. The deadline for providing an s. 85(1) election form to Plazacorp is 45 days after the take-up of units (failing which, the joint election will not be made). Capital gains/loss treatment will apply to dissenters except re interest.

Non-residents

Non-resident unitholders whose units are redeemed by KEYreit in a Subsequent Acquisition Transaction will be subject to Part XIII.2 (and/or Part XIII) withholding on the full proceeds. Standard taxable Canadian property disclosure.

Plazacorp

Standard mutual fund corporation disclosure.

Offeror

The Offeror is a real estate operating company which is listed on the TSX, was incorporated in B.C. and owns a portfolio of 36 industrial, office, retail and aviation-related properties in Canada, and a 30% interest in FAM REIT, whose portfolio it manages. It is a successor to Huntingdon REIT as a result of the conversion of Huntingdon REIT from an income fund to a corporation by way of a B.C. plan of arrangement which was effective December 31, 2012.

KEYreit

KEYreit is listed on the TSX, and was formerly Scott's REIT. It has stated that it believes it will continue to qualify as a REIT for Canadian income tax purposes.

Offer

Unsolicited offer for up to 6,628,940 units of KEYreit for cash consideration of $7.00 per unit (representing a 13.3% premium), conditional on KEYreit units being tendered which, together with any KEYreit units owned directly or indirectly by the Offeror, represent at least 50% of the units then outstanding. Convertible securities must first convert before tendering.

Purpose of Offer

The Offeror currently owns 5.4% of the KEYreit units. The purpose of the offer is to acquire approximately 45% of the outstanding units with a view to restructuring the investment.

Canadian tax consequnces

An acquisition of the KEYreit units of a Canadian resident by the Offeror generally will give rise to capital gains or loss treatment. Standard taxable Canadian property disclosure for non-residents.

Overview

The Trust is to acquire all of the outstanding shares of VKY (a.k.a.,VisionSky) under an Alberta Plan of Arrangement, on the basis of 0.125 of a Trust unit for each share, so as to result in VKY shareholders holding approximately 12.3% of the Trust units. The newly-formed Trust completed a private placement of Trust units in November 2012 for proceeds of $7.4M in order to acquire U.S. oil exploration assets, utilizing the structure described below.

Structure of Trust

The Trust is a recently-formed Alberta unit trust which is not currently a reporting issuer for Canadian purposes and is a "foreign private issuer" for purposes of the U.S. Securities Act of 1933. Its asset is an Alberta holding company ("Dixie Canada"), which does not have a Canadian business, and holds as essentially its only asset an investment in a Delaware "C-Corp." (Dixie US") Dixie US carries on a U.S. oil and gas exploration business through LLC subsidiaries.

VKY

VKY, an Alberta company listed on the CNSX, sold its ATM servicing business on June 1, 2010, and currently holds the remaining net cash proceeds of that sale of $480,000 as its only significant asset.

Plan of Arrangement/Listing

The following transactions will occur under the Plan of Arrangement:

• VKY shares held by dissenting shareholders will be transferred to VKY for their fair value
• VKY options and warrants will be exchanged for options to purchase Trust units, with the number of covered units and the exercise price reflecting the exchange ratio
• each VKY voting common share held by VKY shareholders will be exchanged with VKY for a pro rata portion of all the cash (and cash equivalents) of VKY and for one VKY non-voting common share (a "VKY Class B share")
• each VKY Class B share will be transferred to the administrator of the Trust (treated for purposes of the diagram above as an agent for the Trust) in exchange for a share of a new-incorporated subsidiary of the Trust ("NewCo")
• the former VKY shareholders will transfer each NewCo share and a pro rata portion of the cash so received by them to the Trust in consideration for the issuance of 0.125 of a Trust unit
• the Trust will transfer its shares of NewCo to its wholly-owned Canadian subsidiary ("Dixie Canada") in consideration for Dixie Canada shares
• NewCo will be wound-up into Dixie Canada
• Application will be made to list the Trust units on the CNSX.

Canadian tax consequences

S. 86 reorganization. The exchange of the VKY common shares for the VKY cash and the VKY Class B shares (presumably having a nominal value) is considered as qualifying as a reorganization of the capital of VKY under s. 86. Accordingly, a resident holder will realize a capital gain only if the cash exceeds the adjusted cost base of its VKY common shares; and the VKY Class B shares will be acquired at a cost equal to the excess, if any, of such adjusted cost base over the cash.

No deemed dividend

The VKY common shares have a high paid-up capital so that no deemed dividend is anticipated.

Exchange of VKY Class B shares for NewCo shares

The VKY Class B shares will be deemed to have been disposed of for the fair market value of the NewCo shares received in exchange therefor; and a resident holder will acquire a NewCo share at a cost equal to the fair market value of the Class B share so exchanged. Neither the VKY Class B shares nor the NewCo shares are considered by management to be taxable Canadian property.

Exchange of NewCo shares and cash for Trust units

Will occur on a taxable basis.

The Trust

The existing structure is not considered to result in the Trust holding non-portfolio property.

Dixie Canada

Management of Dixie Canada anticipates that payments received by Dixie Canada from Dixie US will qualify as being paid out of either exempt surpou or pre-acquisition surplus.

US tax consequences of Trust structure

Dixie Canada expects to be treated as a resident of Canada for Treaty purpose which does not have a US trade or business. As the US oil and gas assets are generally treated as real property situated in the US, Dixie Canada is expected to be subject to withholding and income taxation under the Code upon any disposition of the stock of Dixie US. Standard disclosure re distributions from Dixie US.

Overview

Cominar REIT through 10 Newco subsidiaries is offering cash or (at the Canmarc unitholder's option) Cominar units for Canmarc units, subject to the total number of Cominar units being capped at 16M but with no potential proration of the cash consideration. The Canmarc Units would be acquired through separate corporate subsidiaries as Cominar is a s. 108(2)(b) unit trust.

Offer

Cominar Acquisition Group offers to purchase solidarily (jointly and severally) all of the issued and outstanding Canmarc Units which Cominar does not directly or indirectly own, together with the associated unitholder rights plan (URP") rights including all Canmarc Units issued upon the conversion, exchange or exercise of the convertible securities for a consideration per Canmarc Unit, at the option of the Unitholder, of $15.30 cash or 0.7054 Cominar Units. The maximum aggregate number of Cominar Units available under the Offer and any Compulsory Acquisition or Subsequent Acquisition Transaction will be limited to 16 million Cominar Units. Unitholders who elect or are deemed to have elected the cash alternative will not be subject to proration.

Cominar

Cominar is an unincorporated close-ended Quebec REIT listed on the TSX.

Canmarc

Canmarc is an unincorporated open-ended Quebec RIET listed on the TSX. The Cominar Acquisition Group and Cominar currently own approximately 15.1% of the outstanding Canmarc Units.

U.S. Unitholders

U.S.-resident and other Ineligible Unitholders that would otherwise receive Cominar Units in exchange for their Canmarc Units shall have such Cominar Units issued to a selling agent, who shall sell such Cominar Units on their behalf through the facilities of the TSX and have the net proceeds of such sale, less any applicable brokerage commissions, other expenses and withholding taxes, delivered to such Unitholders.

Subsequent acquisition transaction

A subsequent acquisition transaction in respect of Canmarc may take the form of one or more amendments to the declaration of trust of Canmarc to provide for the acquisition and/or exchange and/or redemption of all outstanding Canmarc Units (other than those held by Cominar and the Cominar Acquisition Group), in either case for a price equal to, and payable in the same form as (including consideration elections, deemed consideration elections and pro-rationing), the consideration paid for Canmarc Units acquired under the Offer.

Canadian tax consequences

. Exchange. The exchange of Canmarc Units for cash or Cominar units will occur on a taxable basis.

REIT status

Management of Cominar believes that Cominar qualifies as a REIT.

Non-residents

A Non-Resident Holder whose Canmarc Units (or units of Canmarc which have been received in exchange for Canmarc Units) are redeemed by Canmarc pursuant to the Subsequent Acquisition Transaction will be subject to Canadian withholding tax at the rate of 25%, unless such rate is reduced under the provisions of an applicable tax treaty, on that portion of Canmarc's income (other than taxable capital gains designated by Canmarc in respect of the Non-Resident Holder) for the taxation year as is allocated and paid by Canmarc to the Non-Resident Holder in connection with the redemption of such units. There would be Canadian withholding tax at the rate of 25% on an amount which is allocated and paid by Canmarc to the Non-Resident Holder in connection with the redemption of the Non-Resident Holder's units if Canmarc has a "TCP Gains Balance" (as defined in the Tax Act) at that time, but only if Canmarc designates more than 5% of the related net taxable capital gains for the year to Canmarc unitholders that are either Non-resident persons or partnerships which are not "Canadian partnerships." Canadian Non-resident withholding tax of 15% is required under Part XIIL2 of the Tax Act on an amount not otherwise subject to tax which is paid or credited by Canmarc to a Non-Resident Holder or a partnership which is not a "Canadian partnerships"…

U.S. tax consequences

The exchange of Canmarc Units for cash or Cominar units will occur on a taxable basis. No conclusion re whether Canmarc or Cominar is a PFIC.

Overview

The REIT will sell its assets (essentially only the shares of a U.S. LLC (“U.S. Holdco”) indirectly holding its U.S. apartment portfolio) to a Starwood-affiliated purchasing LP (the “Purchaser”). The sale will not be subject to FIRPTA withholding given that Milestone is a U.S. corporation (and U.S. REIT) for Code purposes. In the case of the REIT’s unitholders, their pro rata portion of the capital gain will be distributed to them and their units will be redeemed with the balance of their share of the net proceeds (i.e., US$16.15 per unit, minus the portion distributed as a capital gain). U.S. investors hold Class B exchangeable units of a subsidiary Delaware LP of U.S. Holdco (“MMI LP”). MMI LP will be merged into a subsidiary LP of the Purchaser (the “Partnership Merger Sub”) with MMI LP as the surviving entity and with each exchangeable unit being converted into the right to receive US$16.15 in cash. Non-U.S. holders owning less than 10% of the REIT units (actually or constructively) will not be subject to U.S. FIRPTA withholding on the transaction.

Offeror

The Offeror is an Ontario LP whose LP units are owned equally by an affiliate of KingSett Capital, and OPB Trust, an associate of OPB. A majority of the shares of the GP of the Offeror are owned by KingSett Capital, with the balance by OPB Trust.

Offer

Unsolicited offer of 100% cash consideration for the units of Primaris ($26.00 per unit representing a 12.8% premium), conditional on 66 2/3% of the fully diluted Primaris units being tendered. Convertible securities must first convert before tendering. Unitholders who have deposited their Units will be deemed to have deposited the associated Unitholder Rights Plan rights.

Subsequent acquisition transaction

In order to effect a compulsory acquisition or subsequent acquisition transaction, the Offeror intends to amend the Primaris Declaration of Trust in order to (i) provide that a compulsory acquisition of the remaining units (at the same consideration per unit) may occur if the Offeror, and its affiliates, hold more than 66 2/3% of the units after the take-up and payment for units under the offer, or (ii) or to reclassify the units not held by the Offeror and its affiliates as Special Units so that immediately after the issuance of the Special Units, their holders are deemed to have transferred their units to the Offeror for the same cash consideration.. The execution of the letters of transmittal for tendering to the bid in respect of 66 2/3% of the outstanding units constitutes approval of the related special resolution. As the consideration offered for the remaining units under a Compulsory Acquisition or Subsequent Acquisition Transaction would be identical to that under the Offer, the Offeror intends to treat the units acquired under the Offer as "minority" units for purposes of the majority-of-minority approval requirement in MI 61-101.

Subsequent sale transactions

The Offeror and RioCan REIT have agreed for the sale of specified assets of Primaris for a purchase price of $1.133 billion. RioCan will advance a short-term loan of $635M to the Offeror at the time of take-up. The Offeror also has entered into an agreement with certain members of the KingSett/OPB group to sell Primaris assets for $1.49 billion.

Canadian tax consequnces

An acquisition of the Primaris units of a Canadian resident by the Offeror (including under a Compulsory Acquisition or Subsequent Acquisition Transaction) generally will give rise to capital gains or loss treatment. If a Subsequent Acquisition Transaction entails a redemption of the remaining units, the redeemed unitholder will be required to include an allocated portion of Primaris' income for the year, including any designated net taxable capital gains. In the case of a non-resident, it would be subject to withholding tax on the full amount of any ordinary income or the full amount of capital gains paid out of the TCP Gains Balance of Primaris, and generally would be subject to Part XIII.2 tax on any capital payments made by Primaris.

US tax consequences

If Primaris has made an election to be classified as a partnership for Code purposes, non-resident holders receving distributions from Primaris that are subject to Canadian withholding tax may be denied the benefit of reduced rates under the Canada-US Convention as a result of Art. IV(7)(b) of the Convention.

Subject to the PFIC rules, a US unitholder will realized a capital gain or loss on a disposition of units pursuant to the Offer based on the difference the US-dollar value of the Canadian dollars received pursuant to the Offer and the adjusted tax basis of the units. The consequences of a Subsequent Acquisition Transaction will depend on the manner in which it is carried out.

Offer by Liquor Stores for all the units of Liquor Barns on the basis of .53 of a Liquor Store unit for each Liquor Barn unit. Those Canadian Liquor Barn unitholders who wish rollover treatment make a "Merger Election" at the time they deposit their units to the Offer. The offer relies on the right under the Liquor Barn declaration of trust to proceed on the basis of a written resolution of 2/3 of the Liquor Barn unitholders (the "Special Resolution") approving a merger of Liquor Barns into Liquor Stores as described in s. 132.2 rather than through a meeting, so that (subject to approval of the OSC and Quebec) the cooperation of Liquor Barn management is not required in order to proceed with the merger. One Liquor Barn unit is to be retained by Liquor Stores following the merger.

It is contemplated that Liquor Barns will make a special distribution immediately before the merger to distribute undistributed taxable income (as well as Liquor Store, if it has any).

Cash offer by Bidco of Brookfield, CPPIB and ARCA Investments for all the units of O&Y REIT. A subsequent transaction is proposed under which, following the take-up of the tendered units, the declaration of trust for the REIT would be amended to make the units redeemable for the offer price, to be paid for out of the sales proceeds of the REIT assets to the acquisition group. Tendered units of minority unitholders count towards satisfying the requirement that there be approval by a majority of the votes cast by minority unitholders at the meeting to approve this subsequent transaction.

Canadian taxation

Recapture of depreciation (between $2.55 and $2.70 per unit) and net capital gains realized on such asset sale will be allocated on the redeemed units. These amounts reduce those unitholders' proceeds for their redeemed units, so that the allocated capital gains (but not the recapture) are in effect tax-neutral for resident Canadians. Non-residents whose units are redeemed are subject to Part XIII tax on these allocated amounts.