ap capital reit - BC Securities Commission

Transcription

FORM45Ͳ106F1
OfferingMemorandumforNonͲQualifyingIssuers
APCAPITALREIT
Date:
TheIssuer
Name:
Headoffice:
Currentlylistedor
quoted?
September4,2015
APCapitalREIT(the“REIT”).
1601–128WestPenderStreet,Vancouver,BCV6B1R8
Phone#:
778Ͳ328Ͳ7401
EͲmailaddress:
[email protected]
Fax#:
(604)608Ͳ9070
No.Thesesecuritiesdonottradeonanyexchangeormarket.
Reportingissuer?
No.
SEDARfiler?
No.
TheOffering
Securitiesoffered:
Eight (8) classes of Trust Units (each, a “Unit” and together, the “Units”) are being offered under this
OfferingMemorandum,designatedaseitherClassB,ClassC1,ClassC2,ClassD1,ClassD2,ClassE,ClassF
orClassGTrustUnits(each,a“Class”).CertainClassesofUnitswillonlybeofferedatcertaintimesand
eachClassshallhavetheattributesandcharacteristicssetoutunderItem5Ͳ“SecuritiesOffered–Terms
ofUnits”.
Pricepersecurity:
$1,000perClassB,ClassC1andClassC2Unit
$1,050perClassD1andClassD2Unit
The subscription price for Class E and Class F Units will be determined by the REIT and set out in the
subscriptionagreement(s)tobeenteredintobetweenthesubscribersandtheREIT
Minimum/
MaximumOffering:
TheMinimumOfferingis500ClassBUnits.TheMaximumOfferingis40,000Units.Fundsavailableunder
theofferingmaynotbesufficienttoaccomplishourproposedobjectives.
MinimumSubscription:
10Units,exceptinthecaseofClassC2andD2Units,whichmustbepurchasedinaminimumsubscription
amountof$150,000.TheTrusteemayinitsdiscretion,onanindividualbasis,acceptsubscriptionsfrom
Subscribersforlessthan10Units.SeeItem 5 “SecuritiesOfferedͲ SubscriptionProcedure”
Paymentterms:
Bankdraft,certifiedchequeonclosingor,ifsubscribingthroughaDeferredPlan,anAuthorizationLetter
toafinancialinstitution.TheTrusteemay,initsdiscretion,acceptpaymentbyelectronicfundstransfer
viatheFundSERVnetwork(www.fundserve.com).
Proposedclosingdate(s):
Thisisacontinuousoffering.InitialclosingonJanuary1,2016orsuchotherdateasisestablishedbythe
Trustee from time to time. Subsequent closings may occur on such dates as established by the Trustee
fromtimetotime.TheTrusteemayterminatetheOfferingatanytime.
Taxconsequences:
There are important tax consequences to these securities. See Item6 “Income Taxes and Qualified
InvestmentStatus“.
Sellingagent?
Wherepermittedbyapplicablesecuritieslegislation,theTrusteeintendstopayasalesfeeofupto10%of
thegrossproceedsrealizedonthesaleofClassC1,ClassD1andClassEUnitsandasalesfeeofupto1%of
thegrossproceedsrealizedonthesaleofClassC2andClassD2Unitstoanyoneof,oracombinationof:
investmentdealers,ExemptMarketDealers,partiesrelatedtotheTrustee,employeesand/orcontractors
ofsuchparties,andofficersanddirectorsoftheTrustee.Inaddition,theTrusteewillpaysagentsselling
ClassC2andClassD2Unitsanannual“trailer”feeequalto1%ofthesubscriptionpriceofClassC2and
ClassD2UnitsheldbypersonsacquiringsuchUnitsthroughsuchagent.SeeItem7“CompensationPaid
toSellersandFinders”.
Resalerestrictions
Youwillberestrictedfromsellingyoursecuritiesforanindefiniteperiod.SeeItem10.However,theUnitsareredeemableincertain
circumstances.SeeItem5.1“TermsofUnits–Unitholders’RighttoRetract”.
Purchaser’srights
You have 2 business days to cancel your agreement to purchase these securities. If there is a misrepresentation in this Offering
Memorandum,youhavetherighttosueeitherfordamagesortocanceltheagreement.SeeItem11.
No securities regulatory authority has assessed the merits of these securities or reviewed this Offering Memorandum. Any
representationtothecontraryisanoffence.Thisisariskyinvestment.SeeItem8.
APCAPITALTRUSTCOPY–Pleaseinitialbelowandsubmitthispagewithyoursubscriptionagreement.
_____________
InvestorInitials
Thispageisintentionallyleftblankforformattingpurposes
CW7623442.10
FORM45Ͳ106F1
OfferingMemorandumforNonͲQualifyingIssuers
APCAPITALREIT
Date:
TheIssuer
Name:
Headoffice:
Currentlylistedor
quoted?
September4,2015
APCapitalREIT(the“REIT”).
1601–128WestPenderStreet,Vancouver,BCV6B1R8
Phone#:
778Ͳ328Ͳ7401
EͲmailaddress:
[email protected]
Fax#:
(604)608Ͳ9070
No.Thesesecuritiesdonottradeonanyexchangeormarket.
Reportingissuer?
No.
SEDARfiler?
No.
TheOffering
Securitiesoffered:
Eight(8)classesofTrustUnits(each,a“Unit”andtogether,the“Units”)arebeingofferedunderthis
OfferingMemorandum,designatedaseitherClassB,ClassC1,ClassC2,ClassD1,ClassD2,ClassE,Class
ForClassGTrustUnits(each,a“Class”).CertainClassesofUnitswillonlybeofferedatcertaintimes
andeachClassshallhavetheattributesandcharacteristicssetoutunderItem5Ͳ“SecuritiesOffered–
TermsofUnits”.
Pricepersecurity:
$1,000perClassB,ClassC1and,ClassC2Unit
$1,050perClassD1andClassD2Unit
ThesubscriptionpriceforClassEandClassFUnitswillbedeterminedbytheREITandsetoutinthe
subscriptionagreement(s)tobeenteredintobetweenthesubscribersandtheREIT
Minimum/
MaximumOffering:
TheMinimumOfferingis500ClassBUnits.TheMaximumOfferingis40,000Units.Fundsavailable
undertheofferingmaynotbesufficienttoaccomplishourproposedobjectives.
10Units,exceptinthecaseofClassC2andD2Units,whichmustbepurchasedinaminimum
subscriptionamountof$150,000.TheTrusteemayinitsdiscretion,onanindividualbasis,accept
subscriptionsfromSubscribersforlessthan10Units.SeeItem5“SecuritiesOfferedͲSubscription
Procedure”
Paymentterms:
Bank draft, certified cheque on closing or, if subscribing through a Deferred Plan, an Authorization
Lettertoafinancialinstitution.TheTrusteemay,initsdiscretion,acceptpaymentbyelectronicfunds
transferviatheFundSERVnetwork(www.fundserve.com).
Proposedclosingdate(s):
Thisisacontinuousoffering.InitialclosingonJanuary1,2016orsuchotherdateasisestablishedbythe
Trusteefromtimetotime.SubsequentclosingsmayoccuronsuchdatesasestablishedbytheTrustee
fromtimetotime.TheTrusteemayterminatetheOfferingatanytime.
Taxconsequences:
There are important tax consequences to these securities. See Item6 “Income Taxes and Qualified
InvestmentStatus“.
Sellingagent?
Wherepermittedbyapplicablesecuritieslegislation,theTrusteeintendstopayasalesfeeofupto10%
ofthegrossproceedsrealizedonthesaleofClassC1,ClassD1andClassEUnitsandasalesfeeofupto
1% of the gross proceeds realized on the sale of Class C2 and Class D2 Units to any one of, or a
combinationof:investmentdealers,ExemptMarketDealers,partiesrelatedtotheTrustee,employees
and/orcontractorsofsuchparties,andofficersanddirectorsoftheTrustee.Inaddition,theTrusteewill
paysagentssellingClassC2andClassD2Unitsanannual“trailer”feeequalto1%ofthesubscription
price of Class C2 and Class D2 Units held by persons acquiring such Units through such agent. See
Item7 “CompensationPaidtoSellersandFinders”.
Resalerestrictions
Youwillberestrictedfromsellingyoursecuritiesforanindefiniteperiod.SeeItem10.However,theUnitsareredeemableincertain
circumstances.SeeItem5.1“TermsofUnits–Unitholders’RighttoRetract”.
Purchaser’srights
You have 2 business days to cancel your agreement to purchase these securities. If there is a misrepresentation in this Offering
Memorandum,youhavetherighttosueeitherfordamagesortocanceltheagreement.SeeItem11.
No securities regulatory authority has assessed the merits of these securities or reviewed this Offering Memorandum. Any
representationtothecontraryisanoffence.Thisisariskyinvestment.SeeItem8.
CW7623442.10
Ͳ2Ͳ
TheREITconditionallyofferstheUnitsforsalebywayofprivateplacementtoqualifiedinvestorswhoareresidentsofthe
ProvincesofBritishColumbia,Alberta,Saskatchewan,Manitoba,Quebec,NovaScotia,NewBrunswick,PrinceEdwardIsland
andNewfoundlandandLabradorandinYukon,NunavutandtheNorthwestTerritories.Subscriptionswillbereceivedif,as
andwhenaccepted,subjecttosatisfactionoftheconditionssetforthunder“SubscriptionProcedure”andtotherightofthe
Trusteetoclosethesubscriptionbooksatanytimewithoutnotice.Closingswillbeheldfromtimetotimeasdeterminedby
theTrustee.SeeItem4“PriorSales”andItem5“SubscriptionProcedure”.
TheREITintendstoofferUnitsasfollows:
(a)
ClassBUnitswillbeofferedatapriceof$1,000perClassBUnittoqualifiedinvestorsuntiltheearlierof:(a)thedate
thattheREIThasraised$10,000,000insubscriptionproceedsfromClassBUnitsand(b)sixmonthsfromthedateof
thisOfferingMemorandum.Atsuchtime,theREITwillceaseofferingClassBUnits;
(b)
ClassC1andClassC2Unitswillbeofferedatapriceof$1,000perClassC1orClassC2Unittoqualifiedinvestors
untiltheearlierof:(a)thedatethattheREIThasraised$5,000,000insubscriptionproceedsfromClassC1andClass
C2Unitstogetherand(b)sixmonthsfromthedateofthisOfferingMemorandum.Atsuchtime,theREITwillcease
offeringClassC1andClassC2Units;
(c)
ClassD1andClassD2Unitswillbeofferedatapriceof$1,050perClassD1andClassD2Unittoqualifiedinvestors
untiltheearlierof:(a)thedatethattheREIThasraised$5,000,000insubscriptionproceedsfromClassD1andClass
D2Unitstogetherand(b)12monthsfromthedateofthisOfferingMemorandum.Atsuchtime,theREITwillcease
offeringClassD1andClassD2Units;
(d)
ClassEandClassFUnitswillbeofferedtoqualifiedinvestorsatasubscriptionpricetobedeterminedbytheREIT
andsetforthinthesubscriptionagreement(s)tobeenteredintobetweenthesubscribersandtheREIT.ClassEand
Class F Unitswill be offered upon theearlier of:(a) thedate that theREIThas raised $25,000,000 in subscription
proceedsfromallotherClassesofUnitstogetherand(b)12monthsfromthedateofthisOfferingMemorandum;
and
(e)
ClassGUnitswillbeissuedatapriceof$1,000perClassGUnit.
NoactionhasbeenorwillbetakentopermitapublicofferingoftheUnitsinanyjurisdictionwhereactionwouldberequired
tobetakenforsuchpurpose.Accordingly,thedistributionorcirculationofthisOfferingMemorandumandtheofferingand
saleoftheUnitsmayberestrictedbylawincertainjurisdictions.ThisOfferingMemorandumdoesnotconstitute,andmay
notbeusedfororinconjunctionwith,anofferorsolicitationbyanyoneinanyjurisdictionorinanycircumstancesinwhich
such offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.
PersonsintowhosepossessionthisOfferingMemorandummaycomearedirectedtoinformthemselvesofandobservesuch
restrictionsandalllegalrequirementsoftheirrespectivejurisdictionsofresidenceinrespectoftheacquisition,holdingand
dispositionoftheUnits.
Prospective investors should thoroughly review this Offering Memorandum and are advised to consult with their own
legal,investment,accounting,andtaxadvisorsconcerningthisinvestment.
TheUnitswillbeissuedonlyonthebasisofinformationcontainedinthisOfferingMemorandumandprovidedbytheREIT,
and no other information or representation has been authorized or may be relied upon as havingbeen authorized by the
REIT.AnysubscriptionfortheUnitsmadebyanypersononthebasisofstatementsorrepresentationsnotcontainedinthis
OfferingMemorandumorsoprovided,orinconsistentwiththeinformationcontainedhereinortherein,shallbesolelyatthe
risk of such person. Neitherthe delivery ofthis OfferingMemorandum at any timenor any sale ofanyof the Units made
hereunder shall, under any circumstances, constitute a representation or create any implication that there has been no
changeinthebusinessandaffairsoftheREITsincethedatehereoforthattheinformationcontainedhereiniscorrectasof
anytimesubsequenttothedatehereof.
ThisOfferingMemorandumisconfidentialandhasbeenpreparedsolelyfordeliverytoandreviewbyselectedprospective
purchasersoftheUnits.ThiscopyoftheOfferingMemorandumispersonaltothepersontowhomitisdeliveredanddoes
notconstituteanoffertoanyotherpersonortothepublicgenerallytosubscribefororotherwiseacquireanyoftheUnits.
DistributionofthisOfferingMemorandumtoanypersonotherthanthepersontowhomitisdeliveredandthosepersons,if
CW7623442.10
Ͳ3Ͳ
any,retainedtoadvisesuchpersonwithrespectheretoisunauthorized,andanydisclosureofanyofitscontentswithoutthe
prior written consent of the REIT is prohibited. Each prospective purchaser, by accepting delivery of this Offering
Memorandum,agreestotheforegoingandundertakestomakenophotocopiesofortootherwisereproduce,inwholeorin
part,thisOfferingMemorandumoranydocumentsrelatingtheretoand,ifsuchprospectivepurchaserdoesnotpurchaseany
oftheUnitsortheOfferingisterminated,toreturnpromptlythisOfferingMemorandumandallsuchdocumentstotheREIT,
ifsorequestedbytheREIT.
ThisisapartialblindpoolOffering.TheREITexpectsthattheavailablenetproceedsoftheOfferingwillbeappliedbythe
CDNLPandtheCDN/USLPinthepurchaseofoneormorePropertiesand/orMortgages.However,otherthantheFort
McMurrayPropertydescribedbelowinItem2.3“DevelopmentoftheBusinessoftheREIT–TheFortMcMurrayProperty”,
thespecificPropertiesandMortgagesinwhichtheCDNLPandtheCDN/USLPwillinvesthavenotyetbeendetermined.
NoteRegardingForwardͲLookingStatements
This Offering Memorandum contains forwardͲlooking statements. These statements relate to future events or the REIT’s
futureperformance.AllstatementsotherthanstatementsofhistoricalfactareforwardͲlookingstatements.ForwardͲlooking
statements are often, but not always, identified by the use of words such as “may”, “will”, “should”, “expect”, “plan”,
“anticipate”,“believe”,“estimate”,“predict”,“potential”,“targeting”,“intend”,“could”,“might”,“continue”,orthenegative
of these terms or other comparable terminology. These statements are only predictions. In addition, this Offering
MemorandummaycontainforwardͲlookingstatementsattributedtothirdpartyindustrysources.Unduerelianceshouldnot
beplacedontheseforwardͲlookingstatementsastherecanbenoassurancethattheplans,intentionsorexpectationsupon
which they are based will occur. By its nature, forwardͲlooking information involves numerous assumptions, known and
unknownrisksanduncertainties,bothgeneralandspecific,thatcontributetothepossibilitythatthepredictions,forecasts,
projectionsandotherforwardͲlookingstatementswillnotoccurandmaycauseactualresultsoreventstodiffermaterially
from those anticipated in such forwardͲlooking statements. The forwardͲlooking statements contained in this Offering
Memorandum are expressly qualified by this cautionary statement. The REIT is not under any duty to update any of the
forwardͲlookingstatementsafterthedateofthisOfferingMemorandumtoconformsuchstatementstoactualresultsorto
changesintheREIT’sexpectationsexceptasotherwiserequiredbyapplicablelegislation.
CW7623442.10
TABLEOFCONTENTS
ITEM1ͲUSEOFAVAILABLEFUNDS.....................................................................................................................9
1.1
AvailableFundsoftheREIT...............................................................................................................9
1.2
UseofAvailableFunds....................................................................................................................10
1.3
Reallocation....................................................................................................................................10
ITEM2ͲBUSINESSOFTHEREIT.........................................................................................................................10
2.1
Structure.........................................................................................................................................10
2.2
OurBusiness....................................................................................................................... .............13
2.3
DevelopmentoftheBusiness.........................................................................................................19
2.4
LongTermObjectives......................................................................................................................21
2.5
ShortTermObjectivesandHowtheREITIntendstoAchieveThem..............................................21
2.6
InsufficientFunds(notapplicable)..................................................................................................21
2.7
MaterialAgreements......................................................................................................................21
ITEM3ͲDIRECTORS,MANAGEMENT,PROMOTERSANDPRINCIPALHOLDERS...................................................23
3.1
CompensationandSecuritiesHeld.................................................................................................23
3.2
ManagementExperience................................................................................................................26
3.3
Penalties,SanctionsandBankruptcy..............................................................................................27
3.4
Loans...............................................................................................................................................27
ITEM4ͲCAPITALSTRUCTURE............................................................................................................................27
4.1
CapitalStructure.............................................................................................................................27
4.2
LongTermDebt...............................................................................................................................28
4.3
PriorSales.......................................................................................................................................29
ITEM5ͲSECURITIESOFFERED...........................................................................................................................29
5.1
TermsofUnits.................................................................................................................................29
5.2
SubscriptionProcedure...................................................................................................................43
ITEM6ͲINCOMETAXESANDRRSPELIGIBILITY..................................................................................................45
6.1
IncomeTaxConsequences..............................................................................................................45
6.2
RRSPEligibility.................................................................................................................................47
ITEM7ͲCOMPENSATIONPAIDTOSELLERSANDFINDERS.................................................................................49
ITEM8ͲRISKFACTORS......................................................................................................................................49
ITEM9ͲREPORTINGOBLIGATIONS...................................................................................................................51
ITEM10ͲRESALERESTRICTIONS.......................................................................................................................52
ITEM11ͲPURCHASERS’RIGHTS........................................................................................................................52
ITEM12ͲFINANCIALSTATEMENTS....................................................................................................................56
ITEM13ͲDATEANDCERTIFICATE.....................................................................................................................82
Schedule:
ScheduleA
CW7623442.10
Ͳ FormofSubscriptionAgreement
SUMMARY
ThefollowingisasummaryofcertaininformationcontainedinthisOfferingMemorandum,andreferenceshould
bemadetothemoredetailedandadditionalinformationcontainedelsewhereinthisOfferingMemorandum.
BusinessoftheREIT:
AP Capital REIT (the “REIT”) is a limited purpose, unincorporated openͲ
ended investment trust, governed by the terms and conditions of a
DeclarationofTrustdatedJune26,2015andbythegenerallawsoftrusts
andthelawsofBritishColumbia.
TheREIThasbeenestablishedto:
(a)
acquire limited partnership units of AP Capital REIT Limited
Partnership(the“CDNLP”);
(b)
acquire limited partnership units of AP Capital REIT (CDN/US)
LimitedPartnership(the“CDN/USLP”);and
(c)
temporarilyholdcashandinvestmentsforthepurposesofpaying
theexpensesandliabilitiesoftheREIT,makingotherinvestments
ascontemplatedbytheTrustDeclaration,payingamountspayable
by the REIT in connection with the redemption of any Units and
makingdistributionstoUnitholders.
TheprincipalbusinessoftheREITwillbetoissueUnitstosubscribersandto
investtheproceedsfromsuchissuanceinClassAlimitedpartnershipunits
oftheCDNLP(the“ClassACDNLPUnits”)andClassAlimitedpartnership
unitsoftheCDN/USLP(the“ClassACDN/USLPUnits”).
BusinessoftheCDNLP
APCapitalREIT(GP)Ltd.(the“GeneralPartner”)andtheCDNLPFounding
Limited Partner have established the CDN LP pursuant to the laws of the
ProvinceofBritishColumbiaforthepurposesof:
1. acquiring,owningandoperatingaportfolio(the“CanadianPortfolio”)
ofrevenueͲproducingrealestateproperties(“Properties”)inCanada;
2. developing or redeveloping a building or buildings on the Properties
and thereafter owning and operating such Properties on a longͲterm
basis;
3. subjecttotheavailabilityoffundsandthemarketconditionsinwhich
the CDN LP operates, providing shortͲterm, secured mortgages
(collectively “Short Term Mortgage Lending”) with respect to real
estatepropertiesownedortobeacquiredbythirdpartiesunrelatedto
the CDN LP (each a “Mortgage Borrower”) and subject to the
parameters set out below under the heading “Business of the REIT –
OurBusinessͲShortTermMortgageLendingFinancingTerms”;and
4. conductinganyotherbusinessoractivityincidental,ancillaryorrelated
thereto.
BusinessoftheCDN/USLP
The General Partner and the CDN/US LP Founding Limited Partner have
established AP Capital REIT (CDN/US) Limited Partnership pursuant to the
lawsoftheProvinceofBritishColumbiaforthepurposesof:
1. acquiringlimitedpartnershipunits(“USClassALPUnits”)ofAPCapital
REIT(USA)LP,anArizonalimitedpartnership(the“USLP”);
2. advancingfundstotheUSLPbywayofloan(the“USLPLoan”);and
CW7623442.10
ͲiiͲ
thereto.
BusinessoftheUSLP
APCapitalREITUS(GP)Ltd.(the“USGP”)andtheCDN/USLPwillestablish
theUSLPpursuanttothelawsofArizonaforthepurposesof:
1. acquiring, owning and operating a portfolio (the “US Portfolio”) of
revenueͲproducingrealestatepropertiesintheUnitedStates;
2. developing or redeveloping a building or buildings on the Properties
andthereafterholding,rentingandoperatingsuchProperties;
3. subjecttotheavailabilityoffundsandthemarketconditionsinwhich
the US LP operates, providing shortͲterm, secured mortgages
(collectively “Short Term Mortgage Lending”) with respect to real
estatepropertiesownedortobeacquiredbythirdpartiesunrelatedto
theUSLP(eacha“MortgageBorrower”)andsubjecttotheparameters
setoutbelowundertheheadingBusinessoftheREIT–OurBusinessͲ
ShortTermMortgageLendingFinancingTerms;and
thereto.
The US LP may accept subscriptions directly from qualified US investors,
andsuchfundswillbeusedinadditiontofundsreceivedfromtheCDN/US
LPforthepurposesenumeratedabove.
Offering:
ThisisacontinuousofferingoftheUnits.Theminimumofferingis500Class
B Units and the maximum offering is 40,000 Units. This Offering is being
madepursuanttoexemptionsfromtheprospectusand,whereapplicable,
registrationrequirementsofapplicablesecuritieslegislationinCanada.
See Item 5.2 “Subscription Procedure”. A subscriber whose subscription is
acceptedwillbecomeaUnitholderoftheREIT.
SubscriptionProcedure:
Subscribers may subscribe for Units by returning to the REIT a completed
Subscription Agreement, together with payment in the form of a certified
cheque, bank draft or Authorization Letter to the Subscriber’s financial
institution in the amount of the aggregate Subscription Price for the
Subscriber’s Units. A Subscriber whose subscription is accepted by the
TrusteewillbecomeaUnitholder.TheTrusteemayterminatetheOffering
atanytime.SeeItem5.2“SubscriptionProcedure”.
SubscriptionPriceandOffering
Thresholds:
ThesubscriptionpricesperUnitareasfollows:
CW7623442.10
(a)
ClassBUnitswillbeofferedatapriceof$1,000perClassBUnitto
qualified investors until the earlier of: (a) the date that the REIT
hasraised$10,000,000insubscriptionproceedsfromClassBUnits
and (b) six months from the date of this Offering Memorandum.
Atsuchtime,theREITwillceaseofferingClassBUnits;
(b)
Class C1 and Class C2 Units will be offered commencing on the
TrustceasingtoofferClassBUnits.ClassC1andClassC2Unitswill
be offered at a price of $1,000 per Class C1 or Class C2 Unit to
qualified investors until the earlier of: (a) the date that the REIT
hasraised$5,000,000insubscriptionproceedsfromClassC1and
Class C2 Units together and (b) six months from the date of this
OfferingMemorandum.Atsuchtime,theREITwillceaseoffering
ͲiiiͲ
Class C1 and Class C2 Units. Anyperson wishing to subscribe for
ClassC2Unitsmustpurchaseaminimumamountof$150,000;
(c)
Class D1 and Class D2 Units will be offered commencing on the
Trust ceasing to offer Class C1 and Class C2 Units. Class D1 and
ClassD2Unitswillbeofferedatapriceof$1,050perClassD1and
ClassD2Unittoqualifiedinvestorsuntiltheearlierof:(a)thedate
thattheREIThasraised$5,000,000insubscriptionproceedsfrom
ClassD1andClassD2Unitstogetherand(b)13monthsfromthe
date of this Offering Memorandum. At such time, the REIT will
ceaseofferingClassD1andClassD2Units.Anypersonwishingto
subscribeforClassD2Unitsmustpurchaseaminimumamountof
$150,000;
(d)
ClassEandClassFUnitswillbeofferedcommencingontheTrust
ceasing to offer Class D1 and Class D2 Units. Class E and Class F
Unitswillbeofferedtoqualifiedinvestorsatasubscriptionpriceto
be determined by the REIT and set forth in the subscription
agreement(s)tobeenteredintobetweenthesubscribersandthe
REIT.ClassEandClassFUnitswillbeofferedupontheearlierof:
(a) the date that the REIT has raised $20,000,000 in subscription
proceeds from all other Classes of Units together and (b) 12
monthsfromthedateofthisOfferingMemorandum;
(e)
ClassGUnitswillbeissuedatapriceof$1,000perClassGUnit.
The REIT reserves the right to commence or cease offering any of the
ClassesofUnitsattimesandinamountswhicharedifferentthanassetout
above.
10 Units. The Trustee may in its discretion, on an individual basis, accept
subscriptions from Subscribers for less than 10 Units. See Item 5.2
“SubscriptionProcedure”.
SalesFee:
Wherepermittedbyapplicablesecuritieslegislation,theTrusteeintendsto
payasalesfeeofupto10%ofthegrossproceedsrealizedonthesaleof
ClassC1,ClassD1andClassEUnitsandasalesfeeofupto1%ofthegross
proceedsrealizedonthesaleofClassC2andClassD2Unitstoanyoneof,
or a combination of: investment dealers, Exempt Market Dealers, parties
related to the Trustee, employees and/or contractors of such parties, and
officers and directors of the Trustee. In addition, the Trustee will pay s
agents selling Class C2 and Class D2 Units an annual “trailer” fee equal to
1%ofthesubscriptionpriceofClassC2andClassD2Unitsheldbypersons
acquiringsuchUnitsthroughsuchagent.SeeItem7“CompensationPaid
toSellersandFinders”.
TheREITwillbeobligatedtopayanyapplicableGSTorothertaxesonsuch
fees.
UseofProceeds:
The Net Subscription Proceeds will be used by the REIT to invest in the
acquisitionofClassACDNLPUnitsandClassACDN/USLPUnits.
TheCDNLPwillinvesttheproceedsoftheissuanceoftheClassACDNLP
Units to the REIT in the acquisition, ownership and operation of revenue
producingrealestatepropertiesinCanada(the“CanadianPortfolio”),the
acquisitionofaportfolioofMortgagesonrealpropertylocatedinCanada.
CW7623442.10
ͲivͲ
A portion of the proceeds received by the CDN LP on account of the
subscription by the REIT forClass A CDN LP Units will also beused topay
due diligence and documentation costs relating to such property and
mortgage acquisitions, sales commissions where applicable, completion
costsandotherfeesandexpensesrelatedtothePropertiesandMortgages.
The CDN/US LP will invest the proceeds of the issuance of the Class A
CDN/USLPUnitstotheREITinlimitedpartnershipunitsoftheUSLP,and
through such investment, indirectly in the acquisition, ownership and
operationofrevenueproducingrealestatepropertiesintheUnitedStates
(the“USPortfolio”)andtheacquisitionofaportfolioofMortgagesonreal
propertylocatedintheUnitedStates.Aportionoftheproceedsreceivedby
the CDN/US LP on account of the subscription by the REIT for Class A
CDN/USLPUnitswillalsobeusedtopayduediligenceanddocumentation
costs relating to such property and mortgage acquisitions, sales
commissions where applicable, completion costs and other fees and
expensesrelatedtothePropertiesandMortgages.
As a result, an investment in Units of the REIT represents an indirect
investment in the acquisition, ownership and operation of the Properties
owned by the CDN LP and the US LP and of the Mortgages, and the
distributionsandotherreturnsonandofcapitalpayableonaccountofthe
Class A CDN LP Units and Class A CDN/US LP Units will ultimately flow
throughtotheUnitholders.
PendinginvestmentinClassACDNLPUnitsandClassACDN/USLPUnits,
the Net Subscription Proceeds will be invested in cash and money market
investments.TheGeneralPartnerandtheUSGPwillusetheirbestefforts
tomakesuitableinvestmentsoftheNetSubscriptionProceedsassoonas
possiblefollowingeachClosing.
TheREIT’s
DistributionPolicy:
The REIT will distribute to each Unitholder on a monthly basis an amount
equaltotheTrustee’sestimateofthenetincomeandnetrealizedcapital
gainsoftheREIT,lessestimatednonͲcapitallossescarriedforward,ifany,
for each month. For each year ending December 31, the distribution will
equalanamountequalto100%oftheREIT’snetincomeandnetrealized
capitalgains,lessnonͲcapitallossescarriedforward,ifany,fortheyear,less
the amounts distributed for the previous 11 months. Such monthly
distributions will be paid in arrears on the 15th day of the next calendar
month immediately following the calendar month to which distribution
relates, except the December 31 distribution, which will be paid on the
immediately preceding Business Day or such other date determined from
timetotimebytheTrustee.
The REIT has the right but not the obligation to make distributions and
allocationsamongtheUnitholdersinsuchamannersoastoensurewhere
possible that the Unitholders are treated equitably taking into account
differencesthatmayariseasaresultoftheacquisitionofUnitsatdifferent
timesintheFiscalYearorindifferentfiscalcalendaryears.
TheREITintendstodistributeitsnetincomeandnetrealizedcapitalgains,
ifany,intheyeartheyareearnedorrealizedtoensurethatnoincometax
is payable by the REIT. If distributions to Unitholders are in excess of net
incomeandnetrealizedcapitalgains,ifany,oftheREITtheadjustedcost
base of the Unitholders’ Units will generally be reduced. See Item 5.1
“Terms of Units – Distributions” and Item6 “Income Taxes and Qualified
InvestmentStatus”.
CW7623442.10
ͲvͲ
Distributionsby
theCDNLP
Pursuantto the Limited PartnershipAgreement for theCDN LP(the “CDN
LP Agreement”), the CDN LP will distribute in each month the amount by
whichtheCDNLP’scashonhandortobereceivedinrespectofthatmonth
(excludinganyproceedsfromanyfinancing)exceedsunpaidadministration
expensesoftheCDNLP(excludingtheAssetManagementFee(asdefined
herein));amountsrequiredforthebusinessandoperationsoftheCDNLP,
including operating expenses and capital expenditures; all current
obligationsoftheCDNLP;andallprincipalandinterestpaymentsunderany
financing,andafterthecreationofareasonableworkingcapitalandcapital
improvementreserveasdeterminedbyGeneralPartner,asfollows:
(a)
first as 0.01% thereof, to the General Partner, to a maximum of
$100perannum;
(b)
second to Limited Partners holding Class A Units of the CDN LP
(each, a “Class A CDN LP Unit”), an amount equal to $70 per
annum per Class A CDN LP Unit (the “Class A Preferred Return”)
commencingasofthedateaUnitCertificaterepresentingaClassA
CDNLPUnitisissuedtosuchLimitedPartner;
(c)
thirdtoLimitedPartnersholdingClassBUnitsoftheCDNLP(each,
a “Class B CDN LP Unit”), an amount equal to 30/70th of the
differencebetween:
(d)
Distributionsby
theCDN/USLP
CW7623442.10
(i)
the amount paid to the Limited Partners holding Class A
CDN LP Units in respect of the Class A Preferred Return;
less
(ii)
the amount which would have been paid to the Limited
Partners holding Class A CDN LP Units in respect of the
Class A Preferred Return if such amount had been
calculatedonthebasisof$60perannumperClassACND
LPUnit;
thereafter, 70% to the limited partners holding Class A CDN LP
Unitsand30%tothelimitedpartnersholdingClassBCDNLPUnits.
Pursuant to the Limited Partnership Agreement for the CDN/US LP (the
“CDN/USLPAgreement”),theCDN/USLPwilldistributeineachmonththe
amountbywhichtheCDN/USLP’scashonhandortobereceivedinrespect
ofthatmonth(excludinganyproceedsfromanyfinancing)exceedsunpaid
administration expenses of the CDN/US LP (excluding the Asset
Management Fee (as defined herein)); amounts required for the business
and operations of the CDN LP, including operating expenses and capital
expenditures;allcurrentobligationsoftheCDN/USLP;andallprincipaland
interest payments under any financing, and after the creation of a
reasonableworkingcapitalandcapitalimprovementreserveasdetermined
byGeneralPartner,asfollows:
(a)
first as 0.01% thereof, to the General Partner, to a maximum of
$100perannum;
(b)
secondtoLimitedPartnersholdingClassAUnitsoftheCDN/USLP
(each, a “Class A CDN/US LP Unit”), an amount equal to $70 per
annum per Class A CDN/US LP Unit (the “Class A Preferred
Return”)commencingasofthedateaUnitCertificaterepresenting
aClassACDN/USLPUnitisissuedtosuchLimitedPartner;
ͲviͲ
(c)
(d)
third to Limited Partners holding Class B Units of the CDN/US LP
(each,a“ClassBCDN/USLPUnit”),anamountequalto30/70thof
thedifferencebetween:
(iii)
the amount paid to the Limited Partners holding Class A
CDN/US LP Units in respect of the Class A Preferred
Return;less
(iv)
the amount which would have been paid to the Limited
PartnersholdingClassACDN/USLPUnitsinrespectofthe
Class A Preferred Return if such amount had been
calculated on the basis of $60 per annum per Class A
CND/USLPUnit;
thereafter,70%tothelimitedpartnersholdingClassACDN/USLP
Units and 30% to the limited partners holding Class B CDN/US LP
Units.
Redemption:
Units will be redeemable at the request of the Unitholders, subject to
applicablelawandcertainotherconditionssetoutintheTrustDeclaration.
Different redemption rights apply to each Class of Units. See Item 5.1
“TermsofUnits–Unitholders’RighttoRedeem”.
ContinuousOfferingandClosings
ofSubscriptions:
Thisisacontinuousoffering.TheinitialclosingofsubscriptionsforUnitsis
anticipatedtooccuronJanuary1,2016.Subsequentclosingsmayoccuron
such dates as established by the Trustee from time to time and different
ClassesofUnitswillhavevariedofferingandclosingdates.SeeItem5.1–
“SecuritiesOfferedͲTermsofUnits”
TheTrusteemayterminatetheOfferingatanytime.
AdministrationAgreements:
Pursuant to Administration Agreements between the Manager and each of
the CDN LP and the CDN/US LP (the “Administration Agreements”), the
ManagerhasagreedtoprovidecertainservicesrelatingtothePropertiesand
theMortgages,includingstructuringthisOffering,structuringtheownership
ofeachoftheProperties,arrangingformortgageloans,ifany,inrespectof
theProperties,negotiatingandcompletingthesaleofaProperty,overseeing
and supervising property management of the Properties, and preparing
annualfinancialreportsontheProperties.
In consideration of providing such services, each of the CDN LP and the
CDN/USLPwillpaytotheManageranacquisitionfee(the“AcquisitionFee”),
in an amount equal to 1.5% of the gross purchase price of each Property,
plus GST if applicable, upon the completion of the purchase of each
Property, a disposition fee (the “Disposition Fee”), in an amount equal to
0.45%ofthegrosssellingpriceofaProperty,plusGSTifapplicable,upon
thecompletionofthesaleoftheProperty,andanannualmanagementfee
(the“AssetManagementFee”)equalto1.5%oftheAnnualPortfolioValue,
payable monthly on the last day of each month during the term of the
AdministrationAgreements.
SeeItem2.7Ͳ“MaterialAgreements–AdministrationAgreements”.
DistributiononTermination:
CW7623442.10
OntheterminationoftheREIT,theassetsoftheREITwillbeliquidatedand
the proceeds distributed to pay the liabilities of the REIT and to establish
reserves for the contingent liabilities of the REIT. Thereafter, the Trustee
willredeemtheUnitsfromtheUnitholdersonaproratabasis.
ͲviiͲ
SeeItem5.1“TermsofUnits–TerminationoftheREIT”.
ResidencyRequirement:
UnitholdersmustberesidentsofCanada.TheGeneralPartnermayforcea
transferorredemptionofUnitsifaUnitholderbecomesanonͲresident.See
Item5.1 “Terms of the REIT Units Ͳ Forced Redemption Upon NonͲ
Residency”
EligibilityforInvestment:
ProvidedthattheREITisamutualfundtrust,theUnitswillbeaqualified
investment for Deferred Plans. See Item6 “Income Taxes and Qualified
InvestmentStatus”.
TaxationoftheREITand
Unitholders:
TheREITwillnotpaytaxonthenetincomeandnetrealizedcapitalgains
that are distributed to Unitholders (as is required under the terms of the
Declaration of Trust), provided the REIT has no nonͲresident or other
Designated Beneficiaries. The Declaration of Trust prohibits the issue of
UnitstononͲresidentorotherDesignatedBeneficiaries.Lossesincurredby
the REIT cannot be allocated to Unitholders but may be deducted by the
REITinfutureyears.
Incomputingtheirtaxableincome,Unitholderswillberequiredtoinclude
theincomeandthetaxableportionofcapitalgainsdistributedtothemby
the REIT. Distributions not included in taxable income, other than the
untaxed oneͲhalf of capital gains, will generally reduce a Unitholder’s
adjustedcostbaseoftheUnitsheld.
OnaredemptionorotherdispositionofUnits,theUnitholderwillrealizea
capitalgainorlosstotheextentthattheproceedsofdispositionexceedor
areexceededbytheadjustedcostbaseoftheUnits,respectively.OneͲhalf
ofacapitalgainmustbeincludedinincomeasataxablecapitalgain.OneͲ
half of a capital loss is an allowable capital loss which may be applied
againsttaxablecapitalgainsrealizedintheyear,withanyexcess(adjusted
toreflecttheappropriateinclusionrate)availableforcarrybackthreeyears
orforwardindefinitelyandappliedagainsttaxablecapitalgainsrealizedin
thoseearlierorlateryears.
NoTransferability:
Unitswillnotbetransferable,exceptifrequiredasaresultofaUnitholder
becominganonͲresident.Unitswillnotbelistedonanystockexchange.As
well, securities requirements may prohibit or restrict transferability of
Units. See Item 5.1 “Terms of Units Ͳ Forced Redemption Upon
NonͲResidency”andItem10“ResaleRestrictions”.
RiskFactors:
AninvestmentinUnitsentailsanumberofrisks,includingthatthisOffering
is a partial blind pool offering; that there is no market for Units and a
marketforUnitsisnotexpectedtodevelop;thattherecanbenoassurance
that more than the minimum Offering will be sold; that an investment in
UnitsisanindirectinvestmentinthePropertiesacquiredbytheCDNLPand
the US LP, and have attached to them various risks of investing in real
estate; environmental risk; competition for real estate properties; risk
associated with changes in economic conditions; risks associated with
redemptionsandretractionsofUnits;thepossibilityofconflictsofinterest;
andrisksassociatedwithchangesinincometaxregulation.Theserisksare
morefullydescribedinItem8“RiskFactors”.
ThisOfferingisnotsuitableforinvestorswhocannotaffordtoassumeany
significantrisksinconnectionwiththeirinvestments.
CW7623442.10
GLOSSARY
ThefollowingtermsappearthroughoutthisOfferingMemorandum.Careshouldbetakentoreadeachterminthe
contextoftheparticularprovisionofthisOfferingMemoranduminwhichsuchtermisused.
“Affiliate”or“Affiliates”hasthesamemeaningasintheB.C.SecuritiesAct;
“AnnualPortfolioValue”meanstheaggregateofthefollowing,calculatedasatonthelastdayofeachfiscalyear
oftheCDNLPortheCDN/USLP,asapplicable:
(a)
theyearͲendvalueofthePortfolio,
(b)
theprincipalamountofallMortgageswhichtheapplicablepartnershipholds(includingindirectlythrough
theUSLP),and
(c)
theavailablecashoftheapplicablepartnership,
andforgreatercertainty,inthecaseoftheCDN/USLP,thevalueofthePortfolioandMortgagesoftheUSLPwill
betakenintoaccount;
“Acquisition Fee” means a fee payable by each of the CDN LP and the CDN/US LP to the Manager for services
relatedtotheacquisitionofProperties,inanamountequalto1.5%ofthegrosspurchasepriceofeachProperty,
plusGSTifapplicable,andpayabletotheGeneralPartneruponthecompletionofthepurchaseofeachProperty;
“Administration Agreements” means the agreements between the Manager and each of the CDN LP and the
CDN/US LP pursuant to which the Manager agrees to provide certain services to each of the CDN LP and the
CDN/US LP in consideration for the payment of the Asset Management Fee, the Acquisition Fee and the
DispositionFee;
“AssetManagementFee”meansanannualfeepayablebyeachoftheCDNLPandtheCDN/USLPtotheManager
equalto1.5%oftheAnnualPortfolioValue,payablemonthlyonthelastdayofeachmonthduringthetermofthe
AdministrationAgreements;
“AuthorizedInterimInvestments”meanssuchinvestmentsthatare“qualifiedinvestments”foratrustgoverned
by a Deferred Plan and may include shares, bonds, debentures, notes, marketable securities and cash, among
otherthings;
“B.C.SecuritiesAct”meanstheSecuritiesAct(BritishColumbia),withallamendmentstheretoinforcefromtime
totimeandanystatutesthatmaybepassedwhichhavetheeffectofsupplementingorsupersedingsuchstatute;
“BusinessDay”meansadayotherthanaSaturday,SundayoranydayonwhichtheprincipalofficeoftheREIT’s
bankerslocatedinVancouver,BritishColumbia,isnotopenforbusinessduringnormalbankinghours;
“Canada FiveͲYear Yield” means on any date the yield to maturity on such date (expressed as a percentage),
assuming semiͲannual compounding, which a nonͲcallable Government of Canada bond would carry if issued in
CanadiandollarsinCanadaat100%ofitsprincipalamountonsuchdatewithatermtomaturityofapproximately
fiveyears,whichCanadaFiveͲYearYieldshallbedeterminedbyamajorCanadianinvestmentdealerselectedby
theTrustee;
“CanadianPortfolio”meanstherevenueͲproducingPropertiesacquired,ownedandoperatedbytheCDNLP;
“CashFlow(Trust)”means,foranycalendarmonth:
CW7623442.10
Ͳ2Ͳ
(a)
thesumofallcashamountsreceivedbytheREITfororinrespectofsuchmonthPeriod,includingthe
amountsreceivedasalimitedpartnerholdingClassACDNLPUnitsandClassACDN/USLPUnitspursuant
tothetermsoftheCDNLPAgreementandtheCDN/USLPAgreement,returnsofcapitalandrepayments
ofindebtedness,aswellasallamountsreceivedbytheREITinanypriorcalendarmonthtotheextentnot
previouslydistributed;less
(b)
allcostsandexpensesoftheREITthat,intheopinionoftheTrustee,mayreasonablybeconsideredto
have accrued and become owing in respect of, or which relate to, such month or a prior month if not
accruedinsuchpriormonth;less
(c)
allamountspayableincashthatrelatetotheredemptionorrepurchaseofUnitsandthathavebecome
payablebytheREITinsuchmonthorpriormonth;andless
(d)
anyinterestexpenseincurredbytheREITbetweendistributions,
providedthatanyfundsborrowedbytheREITortheproceedsoftheissuanceofUnitsorothersecuritiesofthe
REITandrelatedtransactionsinconnectiontherewithwillnotbeincludedinthecalculationsofCashFlow(Trust)
inrespectofanymonth.
“CDNLP”meansmeansAPCapitalREITLimitedPartnership,aBritishColumbialimitedpartnershipestablishedby
the REIT and the General Partner pursuant to the laws of the Province of British Columbia and the CDN LP
Agreement;
“CDN LP Agreement” means the agreement establishing the CDN LP made as of June 25, 2015 between the
GeneralPartnerandtheREIT,assuchagreementmaybeamended,restated,modifiedorsupplementedfromtime
totime;
“CDNLPFoundingLimitedPartner”meansSteveFroese,businessmanandresidentofBritish;
“CDNLPLimitedPartner”meansapartneroftheCDNLPholdingClassACDNLPUnitsorClassBCDNLPUnitsof
theCDNLP;
“CDN/US LP” means AP Capital REIT (CDN/US) Limited Partnership, a British Columbia limited partnership
establishedbytheREITandtheGeneralPartnerpursuanttothelawsoftheProvinceofBritishColumbiaandthe
CDN/USLPAgreement;
“CDN/USLPAgreement”meanstheagreementestablishingtheCDN/USLPmadeasofJune25,2015betweenthe
GeneralPartnerandtheREIT,assuchagreementmaybeamended,restated,modifiedorsupplementedfromtime
totime;
“CDN/USLPFoundingLimitedPartner”meansSteveFroese,businessmanandresidentofBritishColumbia;
“CDN/US LP Limited Partner” means a partner of the CDN/US LP holding Class A CDN/US LP Units or Class B
CDN/USLPUnitsoftheCDN/USLP;
“Class A CDN LP Unit” means a Class A limited partnership unit of the CDN LP and includes the Class A limited
partnershipunitsoftheCDNLPacquiredbytheREITwiththegrossproceedsofthesaleofUnits;
“Class A CDN/US LP Unit” means a Class A limited partnership unit of the CDN/US LP and includes the Class A
limitedpartnershipunitsoftheCDN/USLPacquiredbytheREITwiththegrossproceedsofthesaleofUnits;
“ClassAPreferredReturn(CDN/USLP)”meansanannualamountequalto$70perUnit,payabletotheLimited
PartnersholdingClassACDN/USLPUnitsoftheCDN/USLP;
CW7623442.10
Ͳ3Ͳ
“ClassAProportionateShare(CDN/USLP)”ofanyamountatanytime,meansafractionequaltothenumberof
Class A CDN/US LP Units of which a Limited Partner is the registered holder at that time divided by the total
numberofissuedandoutstandingClassACDN/USLPUnitsatthattime;
“Class A Preferred Return (CDN LP)” means an annual amount equal to $70 per Unit, payable to the Limited
PartnersholdingClassACDNLPUnitsoftheCDNLP;
“ClassAProportionateShare(CDNLP)”ofanyamountatanytime,meansafractionequaltothenumberofClass
A CDN LP Units of which a Limited Partner is the registered holder at that time divided by the total number of
issuedandoutstandingClassACDNLPUnitsatthattime;
“ClassAUnit”meansaClassAtrustunitoftheREIT;
“ClassBLPUnit(CDN/USLP)”meansaClassBlimitedpartnershipunitoftheCDN/USLP;
“ClassBLPUnit(CDNLP)”meansaClassBlimitedpartnershipunitoftheCDNLP;
“ClassBProportionateShare(CDN/USLP)”ofanyamountatanytime,meansafractionequaltothenumberof
Class B CDN/US LP Units of which a Limited Partner is the registered holder at that time divided by the total
numberofissuedandoutstandingClassBCDN/USLPUnitsatthattime;
“ClassBProportionateShare(CDNLP)”ofanyamountatanytime,meansafractionequaltothenumberofClass
B CDN LP Units of which a Limited Partner is the registered holder at that time divided by the total number of
issuedandoutstandingClassBCDNLPUnitsatthattime;
“ClassBUnit”meansaClassBtrustunitoftheREIT;
“ClassC1Unit”meansaClassC1trustunitoftheREIT;
“ClassC2Unit”meansaClassC2trustunitoftheREIT;
“ClassD1Unit”meansaClassD1trustunitoftheREIT;
“ClassD2Unit”meansaClassD2trustunitoftheREIT;
“ClassEUnit”meansaClassEtrustunitoftheREIT;
“ClassFUnit”meansaClassFtrustunitoftheREIT;
“ClassGUnit”meansaClassGtrustunitoftheREIT;
“Closing”meansaclosingofthesaleofUnitsastheTrusteemaydeterminefromtimetotime;
“CostSharingandRecoveryAgreements”meanstheCostSharingandRecoveryAgreement(CDN/USLP)andthe
CostSharingandRecoveryAgreement(CDNLP),together;
“CostSharingandRecoveryAgreement(CDN/USLP)”meansanagreementdatedasofJune26,2015between
theREITandtheCDN/USLPpursuanttowhichtheCDN/USLPhasagreedtobearallofthecostsofthisOffering
incurredbytheREIT,asacostofissuingClassACDN/USLPUnits;
“CostSharingandRecoveryAgreement(CDNLP)”meansanagreementdatedasofJune26,2015betweenthe
REITandtheCDNLPpursuanttowhichtheCDNLPhasagreedtobearallofthecostsofthisOfferingincurredby
theREIT,asacostofissuingClassACDNLPUnits;
CW7623442.10
Ͳ4Ͳ
“DebtSecurities”meansdebtsecuritiesofanysubsidiaryoftheREITthatmaybecreatedandissuedfromtimeto
time,thataresubordinatedandunsecured,haveamaturityoffiveyearsorless,arepreͲpayableatanytimeatthe
option of the issuer prior to maturity, and pay an annual rate of interest equal to the Canada FiveͲYear Yield,
payablemonthlyinarrears;
“Declaration of Trust” means the Declaration of Trust dated June 26, 2015, as amended from time to time,
creatingtheREITunderthelawsoftheProvinceofBritishColumbia;
“DeferredPlan”meansatrustgovernedbya“registeredretirementsavingsplan”,“registeredretirementincome
fund”or“deferredprofitsharingplan”asthosetermsaredefinedintheTaxAct;
“DesignatedBeneficiary”hasthemeaninggiventoitinsection210oftheTaxActandproposedsubsection210(1)
oftheTaxAct;
“DispositionFee”meansafeepayabletotheGeneralPartnerforservicesrenderedinconnectionwiththesaleof
aProperty,includingidentifyingandengagingarealestatebroker,readyingthePropertyforsaleandoverseeing
the conduct and completion of the sale process, in an amount equal to 0.45% of the gross selling price of the
Property, plus GST if applicable, and payable to the General Partner upon the completion of the sale of the
Property;
“Distributable Cash (CDN/US LP)” means with respect to a particular period, the amount by which the CDN/US
LP’scashonhandortobereceivedinrespectofthatperiod(excludinganyproceedsfromanyFinancing)exceeds:
(a)
unpaidadministrationexpensesoftheCDN/USLPbutexcludingtheAssetManagementFee;
(b)
amounts required for the business and operations of the CDN/US LP, including operating
expensesandcapitalexpenditures;
(c)
amounts required in order to meet all debts, liabilities and obligations in respect of any
Financing,includingreservestoensurecompliancewithagreementstowhichtheCDN/USLPis
subject;and
(d)
any amounts which the General Partner in its discretion determines is necessary to satisfy the
CDN/US LP’s current and anticipated debts, liabilities and obligations and to comply with
applicablelaws;
“DistributableCash(CDNLP)”meanswithrespecttoaparticularperiod,theamountbywhichtheCDNLP’scash
onhandortobereceivedinrespectofthatperiod(excludinganyproceedsfromanyFinancing)exceeds:
(a)
unpaidadministrationexpensesoftheCDNLPbutexcludingtheAssetManagementFee;
(b)
amountsrequiredforthebusinessandoperationsoftheCDNLP,includingoperatingexpenses
andcapitalexpenditures;
(c)
amounts required in order to meet all debts, liabilities and obligations in respect of any
Financing, including reserves to ensure compliance with agreements to which the CDN LP is
subject;and
(d)
anyamountswhichtheGeneralPartnerinitsdiscretiondeterminesisnecessarytosatisfyCDN
LP’scurrentandanticipateddebts,liabilitiesandobligationsandtocomplywithapplicablelaws;
“DistributableCashFlow(Trust)”means,foranycalendarmonth,anamountequaltotheCashFlow(Trust)for
such month, less any amount that the Trustee may reasonably consider to be necessary to provide for the
paymentofanycostsorexpenses,includinganytaxliabilityoftheREIT,thathavebeenorarereasonablyexpected
CW7623442.10
Ͳ5Ͳ
to be incurred in the activities and operations of the REIT (to the extent that such costs or expenses have not
otherwisebeentakenintoaccountinthecalculationoftheCashFlow(Trust))andlesssuchreservesoramountsas
are,intheopinionoftheTrustee,necessaryordesirable;
“DistributionPaymentDate”inrespectofanycalendarmonth,meansadateonwhichtheTrusteeisrequiredto
makeadistributionofDistributableCashFlow(Trust),whichdateshallbeonorbeforethe15thdayofthenext
calendarmonthor,ifsuchdayisnotaBusinessDay,theimmediatelyfollowingBusinessDay,exceptinthecaseof
the distribution for the period ending December 31 in which case the Distribution Payment Date will be the
immediatelyprecedingBusinessDayorsuchotherdatedeterminedfromtimetotimebytheTrustee;
“Financing”meansanycreditfacilitygrantedorextendedtoorforthebenefitof,orinvestmentbywayofdebtin,
theCDNLPortheUSLPwherebyorpursuanttowhichmoney,creditorotherfinancialaccommodationhasbeen
ormaybeprovided,madeavailableorextendedtotheCDNLPorUSLPbywayofborrowedmoney,thepurchase
of debt instruments or securities, bankers acceptances, letters of credit, overdraft or other forms of credit and
financial accommodation, and includes any and all trust deeds, indentures, mortgages, bonds or debentures
(whether issued and delivered as security or sold to a purchaser), security agreements and other deeds,
instrumentsordocumentsinrespectthereof;
“FiscalYear”meanseachconsecutiveperiodoftwelve(12)monthscoincidingwiththecalendaryearandending
on December 31, provided that the first Fiscal Year of the REIT will commence on June 25, 2015 and end on
December31,2015;
“FortMcMurrayProperty”meansthelandsandpremisesacquiredbytheCDNLPlocatedat9914MorrisonStreet,
FortMcMurray,Alberta;
“GeneralPartner”meansAPCapitalREIT(GP)Ltd.;
“Lender”meansalenderandmortgageeofanyoftheMortgageLoans;
“Manager”meansAPCapitalREITServicesLtd.;
“Mortgage”meansamortgage,charge,pledge,hypothec,lien,securityinterestorotherencumbranceofanykind
ornaturewhatsoeverofrealpropertylocatedinCanada;
“NetAssetValue”means,onthedatethatsuchvaluationismade,theaggregatefairmarketvalueoftheassetsof
the REIT on such valuation day less the amount of the liabilities of the REIT at that time, as determined in
accordancewiththetermsoftheTrustDeclaration;
“NetAssetValuePerUnit”meansthequotientobtainedbydividingtheaggregateNetAssetValuebythenumber
ofUnitsissuedandoutstanding;
“NetSubscriptionProceeds”meansthegrossproceedstotheREITfromthesaleoftheUnitslessthecostsofthis
OfferingandtheSalesFee;
“NonͲresidents”meansnonͲresidentsofCanadawithinthemeaningoftheTaxActandincludespartnershipsthat
arenot“Canadianpartnerships”withinthemeaningoftheTaxAct;
“Offering”meansthisofferingofUnits;
“OrdinaryResolution”meansaresolutionapprovedbymorethan50%ofthevotescastbythoseUnitholderswho
voteandwhoareentitledtovoteinpersonorbyproxyatadulyconvenedmeetingofUnitholders,orawritten
resolution in one or more counterparts distributed to all Unitholders and signed by Unitholders holding in the
aggregatemorethan50%oftheaggregatenumberofvotesheldbythoseUnitholderswhoareentitledtovote;
CW7623442.10
Ͳ6Ͳ
“PartnershipCapitalContribution(CDNLP)”meansthetotalamountofmoneyorpropertypaidtotheCDNLPin
respectofUnitsheldbyaLimitedPartner;
“Partnership Capital Contribution (CDN/US LP)” means the total amount of money or property paid to the
CDN/USLPinrespectofUnitsheldbyaLimitedPartner;
“PermittedInvestments”means
(a)
debtobligationsoforguaranteedbytheGovernmentofCanadaoraprovinceofCanada;
(b)
commercialpaperobligationsofacorporationorotherpersonwhosecommercialpaperisrated
investment grade by Dominion Bond Rating Service Limited or its successors or assigns or by
Standard & Poor's Rating Services, a division of The McGrawͲHill Companies, Inc., or its
successorsorassigns;
(c)
interestͲbearingaccountsandshortterm(whichshallmeanhavingadateofmaturityorcallfor
paymentnotmorethan60daysfromthedateonwhichtheinvestmentismade)certificatesof
depositissuedorguaranteedbyaCanadiancharteredbankortrustcompany,provincialcredit
unionorregisteredbrokerdealers;
(d)
moneymarketmutualfunds;or
(e)
anycombinationthereof;
“Portfolio”means,collectively,theCanadianPortfolioandtheUSPortfolio;
“Properties”meanstherevenueͲproducingrealestatepropertiestobeacquired,ownedandoperatedbytheCDN
LPandtheUSLPand“Property”meansanyoneofthem;
“Redemption”meansaredemptionofUnitsbyaUnitholder;
“RedemptionPenaltyAmount”means:
(a)
CW7623442.10
withrespecttoaUnitholderholdingClassC1,D1orEUnitswhohasrequestedtheredemption
ofsuchUnitsbytheREITpursuanttothetermsandconditionsoftheTrustDeclaration:
(i)
10%oftheamountoftheSubscriptionPricepaidbytheUnitholderwithrespecttothe
ClassC1,D1orEUnitstoberedeemedwheretherequestforredemptionoccurswithin
12 months from the date that the subscription for such Class C1, D1 or E Units was
acceptedbytheTrusteeonbehalfoftheREIT;
(ii)
Class C1, D1 or E Units to be redeemed where the request for redemption occurs
between13monthsand24monthsfromthedatethatthesubscriptionforsuchClass
C1,D1orEUnitswasacceptedbytheTrusteeonbehalfoftheREIT;
(iii)
(iv)
Ͳ7Ͳ
(v)
Forgreaterclarity,therewillbenoRedemptionPenaltyAmountapplicabletoClassC1,D1orE
UnitsthathavebeenheldbyaUnitholderformorethansixty(60)months;
(b)
withrespecttoaUnitholderholdingClassC2orD2Unitswhohasrequestedtheredemptionof
suchUnitsbytheREITpursuanttothetermsandconditionsoftheTrustDeclaration:
(i)
ClassC2orD2Unitstoberedeemedwheretherequestforredemptionoccurswithin12
monthsfromthedatethatthesubscriptionforsuchClassC2orD2Unitswasaccepted
bytheTrusteeonbehalfoftheREIT;
(ii)
ClassC2orD2Unitstoberedeemedwheretherequestforredemptionoccursbetween
13monthsand24monthsfromthedatethatthesubscriptionforsuchClassC2orD2
UnitswasacceptedbytheTrusteeonbehalfoftheREIT;
For greater clarity, there will be no Redemption Penalty Amount applicable to Class C2 or D2
UnitsthathavebeenheldbyaUnitholderformorethantwentyͲfour(24)months;
(c)
withrespecttoaUnitholderholdingClassGwhohasrequestedtheredemptionofsuchUnitsby
theREITpursuanttothetermsandconditionsoftheTrustDeclaration:
(i)
$350perClassGUnittoberedeemedwheretherequestforredemptionoccurswithin
12monthsfromthedatethatthesubscriptionforsuchClassGUnitswasacceptedby
theTrusteeonbehalfoftheREIT;
Forgreaterclarity,therewillbenoRedemptionPenaltyAmountapplicabletoClassGUnitsthat
havebeenheldbyaUnitholderformorethantwelve(12)months;
“RESPs”meansregisterededucationsavingsplansasdefinedintheTaxAct;
“Sales Fee” means a fee which may be paid by the REIT to registered securities dealers and exempt market
dealers,orwherepermitted,nonͲregistrants,inanamountnottoexceed10%ofthesubscriptionmoniesobtained
bysuchpersons,payableatthetimeoftheinitial;
“Securities Authority” means the British Columbia Securities Commission and any other analogous securities
commissioninajurisdictioninwhichtheUnitsareofferedforsale;
“SpecialResolution”meansaresolutionapprovedbynotlessthan75%ofthevotescastbythoseUnitholderswho
vote and are entitled to vote in person or by proxy at a duly convened meeting of Unitholders or a written
resolution in one or more counterparts distributed to all Unitholders and signed by Unitholders holding in the
aggregatenotlessthan75%oftheaggregatenumberofvotesheldbythoseUnitholderswhoareentitledtovote;
“Subscriber”meansasubscriberforUnits;
CW7623442.10
Ͳ8Ͳ
“Subscription Form” means the subscription form to subscribe for Units in the form of ScheduleA attached
hereto;
“SubscriptionPrice”meanstheamountpaidbyaSubscriberforaUnit;
“TaxAct”meanstheIncomeTaxAct(Canada),R.S.C.1985(5thSupp.)c.1;
“TerminationDate”meansthedateonwhichtheREITisterminated;
“TFSAs”meanstaxͲfreesavingsaccountsasdefinedintheTaxAct;
“Trust”meansAPCapitalREIT,atrustcreatedpursuanttotheDeclarationofTrust;
“Trustee”meansAPCapitalREITOperationsLtd.,theTrusteenamedundertheDeclarationofTrust;
“Trust Notes” means promissory notes of the REIT that may be created and issued from time to time that are
subordinatedandunsecured,haveamaturityoffiveyearsorless,areprepayableatanytimeattheREIT’soption
prior to maturity, and pay an annual rate of interest equal to the Canada FiveͲYear Yield, payable monthly in
arrears;
“TrustProperty”meansthepropertiesandassetsheldfromtimetotimebytheREITorbytheTrusteeonbehalf
oftheREIT,including:
(a)
thecontributionintheamountof$10bythesettloroftheREIT;
(b)
allfundsorpropertyderivedfromtheissuanceorsaleofUnitsandTrustNotesorotherfundsor
propertyreceivedbytheREIT;
(c)
anyClassACDN/USLPUnitsandtheClassACDNLPUnitsorothersecuritiesoftheCDN/USLPor
theCDNLPorofanyotherpersonheldfromtimetotimebyoronbehalfoftheREIT;
(d)
anyPermittedInvestmentsheldfromtimetotimebyoronbehalfoftheREIT;
(e)
anyproceedsofdispositionofanyoftheforegoingpropertyorinrespectoftheinvestmentor
substitutionofthepropertiesandassetsoftheREIT;and
(f)
all proceeds, income, dividends, interest, profit, return of capital, gains and accretions and all
substituted assets, rights and benefits of any kind or nature whatsoever arising directly or
indirectlyfromorinconnectionwithoraccruingtosuchforegoingpropertyorsuchproceedsof
disposition;
“Unit”meansaunitofindividualbeneficialinterestintheREIT;
“Unitholders” means those investors whose subscriptions to purchase Units are accepted by the REIT and
thereafteratanyparticulartimethepersonsenteredintheregisterorregistersoftheREITasholdersofUnitsand
thesingularformmeansonesuchregisteredholder;
“USClassALPUnits”meanslimitedpartnershipunitsoftheUSLP;
“USGP”meansAPCapitalREITUS(GP)Ltd.,anArizonacorporation;
“USLP”meansAPCapitalREIT(USA)LP,anArizonalimitedpartnership;
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“USLPLoan”meansaloantobemadebytheCDN/USLPtotheUSLPandusedbytheUSLPforthepurposesof
acquiring,owningandoperatingPropertiescomprisingtheUSPortfolio;
“USPortfolio”meanstherevenueͲproducingrealestatepropertiesacquired,andownedandoperatedbytheUS
LPwiththeproceedsfromtheissuanceofUSClassALPUnitstotheCDN/USLP.
CANADIANCURRENCY
Alldollaramountsstatedherein,unlessotherwisestated,areexpressedinCanadiancurrency.
ITEM1ͲUSEOFAVAILABLEFUNDS
1.1
AvailableFundsoftheREIT
Assuming
Minimum
Offering
SourcesofFunds
A.
AmounttobeRaisedbythisOffering
(3)
Assuming
Maximum
Offering
$500,000
$40,000,000
$50,000
$4,000,000
$75,000
$75,000
$2,375,000
35,925,000
B.
SellingCommissionsandFees
C.
CostsoftheOffering(e.g.,legal,accounting,
audit)(4)
D.
AvailableFunds:D=A–(B+C)
E.
AdditionalSourcesofFundingRequired
N/A
N/A
F.
WorkingCapitalDeficiency
N/A
N/A
G.
Total:G=(D+E)ͲF
$2,375,000
35,925,000
H.
ReimbursementofCostsbytheCDNLPandthe
USLP(5)
($125,000)
($4,075,000)
UseofNetFundsByTrust
I.
InvestmentbyTrustinClassACDNLPUnitsand
ClassACDN/USLPUnits(6)
$2,500,000
$40,000,000
J.
$2,500,000
$40,000,000
Total
(1)
Theminimumofferingis500ClassBUnitsoftheREIT.
Themaximumofferingis40,000UnitsoftheREIT.SubscriptionpricesforUnitsvary,andsothevalueof“$40,000,000”is
usedforillustrativepurposesonly.
(3)
The REIT may pay a sales fee to registered securities dealers and exempt market dealers, or where permitted, nonͲ
registrants,inanamountnottoexceed10%ofthesubscriptionmonies.
(4)
Estimated Offering Costs include expenses of or incidental to the issue, sale and delivery of the Units pursuant to this
Offering,including,withoutlimitation,feesanddisbursementsoflegalcounselandaccountants,andthereasonableoutͲ
ofͲpocketexpenses(includingapplicabletaxes)oftheGeneralPartnerinconnectionwithsuchissue,saleanddelivery.
(5) Pursuant to the Cost Sharing and Recovery Agreements, the CDN LP and the CDN/US LP will reimburse the REIT for the
costsandexpensesincurredbytheREITinofferingtheUnitsandobtainingsubscriptionsforUnits,inconsiderationofthe
REITinvestingthesubscriptionproceedsintheacquisitionofClassACDNLPUnitsandClassACDN/USLPUnits.
(6 The net proceeds raised by the REIT from the issuance of theUnits will be invested in Class A CDN LP Units and Class A
CDN/USLPUnits.
(2)
CW7623442.10
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1.2
UseofAvailableFunds
TheREITintendstousetheNetSubscriptionProceedstoinvestinandacquiretheClassACDNLPUnitsandClassA
CDN/USLPUnits.Pendingsuchinvestment,theNetSubscriptionProceedswillbeinvestedinAuthorizedInterim
Investments.TheREITdoesnothaveanoperatinghistory.
TheCDNLPhasbeenestablishedbytheREITforthepurposesofestablishingtheCanadianPortfolioofProperties
andacquiringMortgages.TheCDN/USLPhasbeenestablishedbytheREITforthepurposesofinvestingintheUS
LP,whichwillestablishtheUSPortfolioofPropertiesandacquiringMortgagesintheUnitedStates.SeeItem2.2
“OurBusiness”,below,foramorecompletedescriptionofthebusinessoftheCDNLPandtheCDN/USLP.Neither
theCDNLPnortheCDN/USLPhasanoperatinghistory.PendinginvestmentinthePropertiesandMortgages,the
grossproceedsreceivedbyCDNLPandtheCDN/USLPonaccountofthesubscriptionbytheREITintheClassA
CDNLPUnitsandClassACDN/USLPUnitswillbeinvestedinAuthorizedInterimInvestments.TheGeneralPartner
willuseitsbesteffortstomakesuitableinvestmentsofsuchfundsassoonaspossiblefollowingeachClosing.
DescriptionofintendeduseofavailablefundsbytheCDNLP
andtheUSLPlistedinorderofpriority
Assumingmin.
offering
Assumingmax.
offering
PaymentofOfferingCosts
$75,000
$75,000
PaymentofSalesFees
$50,000
$4,000,000
Investment in Properties and Mortgages, including Properties
acquiredbytheUSLP
$2,375,000
35,925,000
Total: Equal to J in the “Available Funds of the REIT” table at
Item1.1above
$2,500,000
$40,000,000
AportionoftheNetSubscriptionProceedswillbeinvestedbytheCDN/USLPintheUSLP.TheUSLPhasbeen
established for the purposes of acquiring, owning and operating an asͲyet unidentified portfolio (the “US
Portfolio”)ofrevenueͲproducingrealestatepropertiesintheUnitedStates.
1.3
Reallocation
The REIT intends to spend the Net Subscription Proceeds as stated. Funds will be reallocated only for sound
businessreasons.
ITEM2ͲBUSINESSOFTHEREIT
2.1
Structure
TheREITͲͲTheREITisanopenͲendedunincorporatedinvestmenttrustgovernedbythelawsoftheProvinceof
British Columbia. The REIT was formed by a Declaration of Trust made June 26, 2015 between the Trustee and
James Speakman, as settlor. The principal office of the REIT is located at 1601 – 128 West Pender Street,
Vancouver,BCV6B1R8.
TheREITintendstoqualifyasamutualfundtrustforpurposesoftheTaxAct.ThebeneficialinterestintheREITis
divided into Units. There is no limit to the number of Units that may be issued by the REIT, subject to any
determinationtothecontrarymadebytheTrustee.
TheTrustee–TheTrusteeoftheREITisAPCapitalREITOperationsLtd.,whichwasincorporatedpursuanttothe
BusinessCorporationsAct(BritishColumbia)onDecember23,2014underincorporationnumberBC1023032.The
CW7623442.10
Ͳ11Ͳ
registered and records office of the Trustee is located at 800 – 885 West Georgia Street, Vancouver, British
ColumbiaV6C3H1.
The CDN LP – The CDN LP was formed by the REIT and the General Partner under the name “AP Capital REIT
LimitedPartnership”byaCertificateofLimitedPartnershipfiledpursuanttothePartnershipAct(BritishColumbia)
onJune25,2015underregistrationnumberLP664124.TheregisteredofficeoftheCDNLPislocatedat800–885
WestGeorgiaStreet,Vancouver,BritishColumbiaV6C3H1.
TheCDN/USLP–TheCDN/USLPwasformedbytheREITandtheGeneralPartnerunderthename“APCapital
REIT (CDN/US) Limited Partnership” by a Certificate of Limited Partnership filed pursuant to the Partnership Act
(BritishColumbia)onJune25,2015underregistrationnumberLP664121.TheregisteredofficeoftheCDN/USLPis
locatedat800–885WestGeorgiaStreet,Vancouver,BritishColumbiaV6C3H1.
TheGeneralPartner–ThegeneralpartneroftheCDNLPandtheCDN/USLPisAPCapitalREIT(GP)Ltd.,aBritish
ColumbiacompanyincorporatedundertheBusinessCorporationsAct(BritishColumbia)onNovember13,2014,
underincorporationnumberBC01018996.TheregisteredandrecordsofficeoftheGeneralPartnerislocatedat
800–885WestGeorgiaStreet,Vancouver,BritishColumbiaV6C3H1.
TheUSLP–TheUSLPwillbeformedbytheUSLPFoundingLimitedPartnerandtheUSGPunderthename“AP
CapitalREIT(USA)LP”byaCertificateofLimitedPartnershipfiledpursuanttothelawsoftheStateofArizona.The
registeredofficeoftheUSLPislocatedat2390EastCamelbackRoad,Phoenix,Arizona.
TheUSGP–ThegeneralpartneroftheUSLPwillbeAPCapitalREITUS(GP)Ltd.,acorporationtobeincorporated
underthelawsoftheStateofArizona.TheregisteredofficeoftheUSGPwillbelocatedat2390EastCamelback
Road,Phoenix,Arizona.
CW7623442.10
Ͳ12Ͳ
APCAPITALREIT
ORGANIZATIONAL
STRUCTURE
CW7623442.10
Ͳ13Ͳ
2.2
OurBusiness
TheREITͲTheREIThasbeenestablishedforthepurposeofinvestingintheClassACDNLPUnitsissuedbythe
CDNLPandtheClassACDN/USLPUnitsissuedbytheCDN/USLP.TheNetSubscriptionProceedsreceivedfrom
theissuanceoftheUnitswillbeinvestedinClassACDN/USLPUnitsandClassACDNLPUnits,insuchproportions
as the Trustee may determine. The REIT will also temporarily hold cash and money market investments for the
purposesofpayingtheexpensesandliabilitiesoftheREIT,payamountspayablebytheREITinconnectionwiththe
redemptionofanyUnits,andmakedistributionstoUnitholders.TheprincipalbusinessoftheREITwillbetoissue
UnitsandacquireandholdClassACDNLPUnitsandClassACDN/USLPUnits.TheREIT’slongͲtermobjectiveisto
earnincomebywayofdistributionsfromtheCDNLPandtheCDN/USLPtoholdersoftheClassACDNLPUnits
andtheClassACDN/USLPUnits,whichwilloriginatefromtheCDNLP’sportfolioofincomeͲproducingProperties
inCanadaandtheCDN/USLP’sinvestmentintheUSLP’sportfolioofincomeͲproducingrealestatePropertiesin
the United States and the portfolio of Mortgages held by each of theCDN LP and the US LP. An investment in
Units is intended to provide Subscribers with the opportunity to receive cash distributions originating from the
ongoingoperationofthePropertiesandtheownershipoftheMortgages.
TheCDNLPͲThegrossproceedsfromtheissuanceoftheUnitswillbeinvestedintheCDNLPandtheCDN/USLP
through the REIT’s investment in Class A CDN LP Units and Class A CDN/US LP Units, in such proportions as the
Trusteemaydetermine.TheCDNLPwillusethenetsubscriptionproceedsreceivedfromtheREITforthepurposes
of:
(a)
acquiring, owning and operating an asͲyet unidentified portfolio (the “Canadian Portfolio”) of
revenueͲproducingrealestateproperties(“Properties”)inCanada;
(b)
developing or redeveloping a building or buildings on the Property and thereafter owning and
operatingsuchPropertyonalongͲtermbasis;
(c)
subject to the availability of funds and the market conditions in which the CDN LP operates,
providing shortͲterm, secured mortgages (collectively “Short Term Mortgage Lending”) with
respecttorealestatepropertiesownedortobeacquiredbythirdpartiesunrelatedtotheCDN
LP (each a “Mortgage Borrower”) and subject to the parameters set out below under the
heading“ShortTermMortgageLendingFinancingTerms”,below;and
(d)
conductinganyotherbusinessoractivityincidental,ancillaryorrelatedthereto.
Todate,otherthantheFortMcMurrayPropertypreviouslyacquiredbytheCDNLP,theGeneralPartnerhasnot
identifiedanyPropertiesforpotentialacquisitionbytheCDNLP.
Incarryingonitsbusiness,theCDNLPmay:
(a)
acquire Properties from the officers and directors of the General Partner or from partnerships and or
corporationscontrolledbytheofficersanddirectorsoftheGeneralPartner.InacquiringPropertiesfrom
suchparties,thepurchasepriceofsuchPropertiesshallbeequaltotheaverageofthevalueestablished
byacertifiedappraisalobtainedfromanindependentappraiserwithrespecttothePropertyinquestion
andasinglemarketvaluationobtainedfromanindependentrealtorwithrespecttothePropertyorthe
most recent tax assessment with respect to the Property received from the municipality in which the
Propertyislocated;and
(b)
invest in short term investment opportunities with respect to undeveloped and developed parcels of
lands where the General Partner identifies an opportunity to increase the reͲsale value of a parcel
throughhavingaparcelreͲzonedorthroughobtainingachangeofusewithrespecttoaparceltoachieve
theoverall“highestandbestuse”ofaparcel.InvestmentsbytheCDNLPinthisrespectshallnotexceed
morethan20%oftheoverallanticipatedPortfoliovalueoftheCDNLP.
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Ͳ14Ͳ
SubscribersshouldnotethatneithertheynoranylimitedpartneroftheCDNLPwillacquireaninterestintheCDN
LP’sPropertiesorMortgages.
TheCDN/USLPͲThegrossproceedsfromtheissuanceoftheUnitswillbeinvestedintheCDNLPandtheCDN/US
LPthroughtheREIT’sinvestmentinClassACDNLPUnitsandClassACDN/USLPUnits,insuchproportionsasthe
Trustee may determine. The CDN/US LP will use the net subscription proceeds received from the REIT for the
purposesof:
(e)
acquiringlimitedpartnershipunits(“USClassALPUnits”)ofAPCapitalREIT(USA)LP,anArizona
limitedpartnership(the“USLP”);
(f)
advancingfundstotheUSLPbywayofloan(the“USLPLoan”);and
(g)
Todate,theCDN/USLPhasnotinvestedinanyUSClassALPUnitsoradvancedanyfundstotheUSLP.
SubscribersshouldnotethatneithertheynoranylimitedpartneroftheCDN/USLPwillacquireaninterestinthe
CDN/USLP’sPropertiesorMortgages.
TheUSLPͲTheNetSubscriptionProceedsreceivedbytheUSLPfromtheissuanceoftheUSClassALPUnitsto
theCDN/USLPandfromtheUSLPLoanwillbeusedforthepurposesof:
(a)
acquiring,owningandoperatingaportfolio(the"USPortfolio")ofrevenueͲproducingrealestate
propertiesintheUnitedStates;
(b)
developing or redeveloping a building or buildings on the Property and thereafter owning and
operatingsuchPropertyonalongͲtermbasis;
(c)
subject to the availability of funds and the market conditions in which the US LP operates,
providing shortͲterm, secured mortgages (collectively "Short Term Mortgage Lending") with
respecttorealestatepropertiesownedortobeacquiredbythirdpartiesunrelatedtotheUSLP
(eacha"MortgageBorrower")andsubjecttotheparameterssetoutbelowundertheheading
“ShortTermMortgageLendingFinancingTerms”,below;and
(d)
TheUSLPmayacceptsubscriptionsdirectlyfromqualifiedUSinvestors,andsuchfundswillbeusedinadditionto
fundsreceivedfromtheCDN/USLPforthepurposesenumeratedabove.
Todate,theUSGPhasnotidentifiedanyPropertiesforpotentialacquisitionbytheUSLP.
InvestmentPhilosophy
Each of the General Partner’s and US GP’s focus will be on purchasing Properties that are undervalued and
undermanaged in markets located in municipal centres within North America that show promising potential for
growth and where the asset values are sufficient to allow profitable operations over the subject term and the
continuedfinancingofadditionalProperties.Aswell,priortoPropertiesbeingidentifiedforpurchaseandwhen
fundsareotherwiseavailableforshortterminvestment,eachoftheGeneralPartnerandtheUSGPwillidentify
Mortgagesforinvestment.
TheGeneralPartnerandUSGPeachbelievesthatresearchcombinedwithprofessionalmanagementexpertiseis
thecornerstonetoasuperiorrealestateinvestmentprogram.TheGeneralPartnerandUSGPaimtocreatevalue
byinvestinginPropertiesthattheyhaveidentifiedashavingthepotentialtocreatevalue:
CW7623442.10
Ͳ15Ͳ
(a)
bypurchasingmismanaged,undervaluedorunderutilizedPropertiesfromvendors;
(b)
by performing strategic renovations and other capital improvements to the Properties, if
required,toimprovemarketability,rentalincomeandoccupancylevelstherebycausingforced
appreciation;
(c)
by refinancing Properties where appropriate to realize immediate market value gains and
reinvestfundstoacquireadditionalPropertiesforthePortfolio;and
(d)
by realizing value through capital appreciation of the Portfolio through the acquisition of
Propertiesbasedonsolideconomicfundamentalsandresearch.
TheGeneralPartnerandUSGPintendtooperateonthefollowingprinciples:
(a)
thatstrategicallyͲlocatedPropertiesinareaswithsolideconomicfundamentalshavehistorically
appreciatedinvalueovertime;
(b)
thatthecurrentlowinterestenvironmentenablesrealestateownerstoobtainhistoricallylow
mortgageratefinancing;
(c)
thatwhentotalincomefromaPropertymeetsorexceedsthePropertycarryingcosts,thereisan
opportunitytogainpositiveleveragewhichincreasestheoverallreturnonequityinvested;
(d)
thatthecurrentlowfinancingcostsprovideinvestmentopportunityinrealestatewithattractive
leveragedyieldsthatarenotavailablefrommanyotherinvestmentalternatives;and
(e)
that real estate investment is also likely to provide an opportunity for greater returns through
leveragedcapitalappreciation.
The General Partner and US GP also believe that Properties may be acquired at attractive prices as a result of
market inefficiencies, below market rents, poor management practices or an absence of sound investment
strategies by the current property owners. By providing experienced and proven management systems, the
GeneralPartnerandUSGPanticipatehigherreturnsfromthesePropertiesovertime.
TheGeneralPartnerandUSGPbelievethatincreasedvaluecanberealizedthroughavarietyoftechniquessuchas
strategicrenovations,restructuring,refinancing,reͲbranding,reͲleasing,reͲnegotiatingexistingleases,changeof
use,capitalimprovements,ormarketrepositioning.
InvestmentMandate
The General Partner and US GP will focus on acquiring Properties that can be purchased for less than what the
General Partner and US GP believe to be their intrinsic value. The General Partner and US GP will identify
investments in the market segment between that occupied by individual re al estate investors and by pension
funds,REITsandpublicrealestatecompanies.
TheGeneralPartnerandUSGPbelievethereisanopportunitytopurchasePropertiesinthisnicheeitherbefore
theycometomarket,atvaluationsbelowthosethatwouldbepaidinanopenbiddingprocess,orwhenanalysis
suggestsanundervaluation.
Targetrealestatemarketsarecontinuallyreviewedtoassessthepotentialfornewopportunities.
Economicfundamentalsarethekeydriverstotheselectionofareasandproperties.AstheCDNLP’sandtheUS
LP’savailablefundsgrow,thePortfoliowillbeexpandedtoincludePropertiesthatcanbenefitfromeconomiesof
scale,andalsofitwithintheinvestmentphilosophy.
CW7623442.10
Ͳ16Ͳ
InvestmentStrategy
The General Partner and US GP intend to make acquisitions that represent an opportunity to establish and
improvetheoverallqualityofthePortfolio,minimizeandmitigatetherisk(s)associatedwithanyinvestmentand
enhancethesustainabilityofthelongterminvestmentstrategyoftheCDNLPandtheUSLP.
TheGeneralPartnerandUSGPwillfocusonacquiringPropertieswhichtheybelievetobeoperatingbelowtheir
potential realizable value. The General Partner and US GP will focus on identifying Properties for possible
acquisition in growth markets and aggressively manage and reposition those Properties with the view to
preservingpartnershipcapital,andenhancingthepotentialforincreasedincomeandcapitalgains.
The General Partner and US GP will focus on acquiring Properties located in municipal centres within North
America.ThiswillallowtheCDNLPandUSLPtocapitalizeonoperationalefficienciesandfurtherincreasetheir
presenceandcriticalmassinthesemarkets.
The CDN LP and the US LP may also expand, renovate or take advantage of the development opportunities
presented bya Property toenhance the return on partnershipcapital while retaining a diversified Portfolio and
conservativeriskprofileasawhole.Consistentcashflowcreatestheabilitytopayinterestonthedebtincurredto
purchaseProperties.
ReͲmortgaginganexistingPropertyovertimewillprovidepoolsoffurtherinvestmentcapitalwhichcanbeusedto
reducethemortgageprincipalorreinvestinadditionalProperties,allofwhichservestoincreasethevalueofthe
Portfolio.
Excess cash flow will be reͲinvested into the Portfolio or utilized to pay down any mortgage debts on the
Properties.AdditionallytheGeneralPartnerandtheUSGPmayinvesttheseidlefundsintoMortgagesproviding
theCDNLPandtheUSLPwithadditionalinvestmentreturnsandpositivecashflow.
InvestmentProcess
TheCDNLPandtheUSLPintendtousetheaggregatenetproceedsrealizedfromthisOfferingtogetherwiththe
proceeds from periodic reͲmortgaging of their Properties and positive cash flow to acquire assets and
manage/operatethePortfolio.
TheCDNLPandtheUSLPwillpurchasePropertiesatpricesandontermsnegotiatedwitharm’slengththirdparty
vendors. In some cases the CDN LP and US LP might acquire a property under an agreement initiated by the
General Partner, US GP or parties associated with the General Partner or US GP, or their nominee, with arm’s
lengththirdpartyvendors,whichagreementwillbeassignedtotheCDNLPorUSLP,asthecasemaybe,which
will,uponassignment,reimburseanydepositsandduediligenceorotheroutͲofͲpocketexpensesincurredbythe
GeneralPartnerorUSGPbeforetheassignment.
Fromtimetotime,theremaybeafeechargedforpropertyassignmentsbytheGeneralPartnerand/orUSGP,as
applicable.
TheCDNLPandUSLPmaypurchasePropertiesfromtheofficersanddirectorsoftheGeneralPartnerorUSGP,as
thecasemaybe,orfromcorporationsassociatedwithsuchpartiesatapricebeloworequaltotheaverageofthe
valueestablishedbyacertifiedappraisalobtainedfromanindependentappraiserwithrespecttothePropertyin
questionandasinglemarketvaluationobtainedfromanindependentrealtorwithrespecttotheProperty.
TheGeneralPartnerandUSGPwillidentifyandevaluatepotentialacquisitions.WhentheGeneralPartnerandUS
GP decide that an acquisition is worth considering, then a strict due diligence process is followed. The General
PartnerandUSGPmayobtainindependentproperty,environmentalandstructuralreportsevenifnotrequiredby
lenders.
CW7623442.10
Ͳ17Ͳ
ThefollowingaresomeofthematerialconsiderationsthattheGeneralPartnerandUSGPwillexamineaspartof
theirduediligenceprocesswithrespecttoaproposedacquisitionofaProperty:
AppraisalͲWhatisthePropertyworthandhowwasitappraised(Directcomparison,IncomeorCost
Approach).
ZoningͲWhatisthePropertybeingusedfortoday?Isitthebestuse?Aretherelimitationsagainstfuture
improvements/additionstotheProperty?
FinancingͲHowisthisPropertygoingtobepurchased?Howwilllendersviewthispurchase?
EnvironmentalReportͲArethereanycurrentenvironmentalconcerns?Whatistheenvironmental
historyoftheProperty?
EngineeringReportͲWhatistheconditionoftheexistingbuildingorbuildingslocatedontheProperty?
Whatisthestructuralintegrityofanybuildings?
SiteSurveyRealPropertyReportͲArethereanyeasementsregisteredontheProperty?
MacroeconomicsͲRefertohighleveleconomicfundamentalsthatspeaktothefutureviabilitytoa
neighborhood,cityorprovince.ThesearebroadeconomicindicatorsthathelptheGeneralPartner
identifyareasofinterestbasedonseveralkeyfactors.
NetMigrationͲWhatarethepopulationtrendsinthearea?Aretheremorepeoplearrivingordeparting?
Thrivingareastendtoseepopulationincreasesoverthelongterm.Anincreaseisgenerallyapositive
indicatorforrealestatevaluesasmorepeoplearriveandthesupplyofavailableresidentialand
commercialpropertiestighten.
IndustryͲWhatarethemajorindustriesinthearea?Whoarethemajoremployersandhowmuchofthe
jobmarketdotheyrepresent?Whatarethefutureprospectsforcurrentmajoremployers?Whatother
businessesarelocating/relocatinginthearea?
TransportationͲHowaccessibleisthearea?Arethereanyinfrastructureexpansionplanspending?
GovernmentͲHoweasy/difficultisittodobusinessinthearea?Howdotaxesforbusinessescompareto
otherareas?
AfterthesuccessfulacquisitionofaProperty,theGeneralPartnerandUSGPwillimplementavalueenhancement
process that consists of valueͲincreasing and revenue augmentation activities, including strategic capital
improvementsandtheimplementationofvalueͲaddedtenantservices.
ThePropertieswillbemonitoredbytheGeneralPartnerandUSGPonaconstantbasistogaugetheeffectiveness
of the management process on cash flows and tenant satisfaction. Through analysis of market rental rates, the
GeneralPartnerandUSGPwilldeterminewherecapitalexpenditureswillpermitthelargestincreaseinrentsand
when a Property’s rate of return has been maximized. The General Partner and US GP may decide to sell a
particularpropertyandreinvestcapitalintoopportunitiesthatwillprovidesuperiorreturns.
DispositionGuidelines
The CDN LP and US LP may sell a Property when the General Partner and US GP determine that the associated
capital can be more efficiently deployed. This is an ongoing monitoring process, where economic, political and
demographictrendsaretakenintoaccount.
CW7623442.10
Ͳ18Ͳ
TheCDNLPandUSLPmayalsosellPropertiestotheofficersanddirectorsoftheGeneralPartnerorUSGPorto
corporations or limited partnerships associated with such parties at a price equal to the average of the values
established by a certified appraisal obtained from an independent appraiser with respect to the Property in
question and a single market valuation obtained from an independent realtor with respect to the Property.
Alternatively,thepricemaybebaseduponthethencurrentpropertytaxassessmentinrespectoftheProperty.
TheGeneralPartnerandUSGPmay,attheirdiscretionandwithoutnoticetothelimitedpartnersoftheCDNLPor
theUSLP,reallocatetheCDNLP’sand/ortheUSLP’sassetstoPropertiesasdeterminedbytheGeneralPartner
andUSGPintheirdiscretion,orallocatecashflowsfromtheCDNLP’sandUSLP’sassetstoalternativenearͲcash
shortͲterminvestmentvehicles.
DebtFinancing
The CDN LP and US LP may finance a part of the purchase price and the operating cost of their respective
Properties,andmayrefinanceanyacquisitionfinancingwheremorefavourablefinancingbecomesavailablefrom
thirdpartylenderssuchasbanks,trustcompanies,mortgagesyndicatesorotherprovidersofmortgagefunding.
TheGeneralPartnerandUSGPexpectthatamortgageloanchargingaPropertywilltypicallynotbemorethan
75% of the appraised value of the Property, although occasionally higher leverage may be desired or assumed.
Additional funds may be required for theproperty management reserve account which may be required by the
applicablelenders.
CashFlowPayments
TheCDNLPandUSLPwillapplycashflowtowardstheoperatingexpenses,provisionofreasonablereservesfor
working capital, renovations and upgrades to Properties, and the payment of interest and annual principal
paymentsonthemortgageloansoftheProperties.
PropertyManagement
UnlesstheGeneralPartnerorUSGPassumestheresponsibilityorcontractswithpartiesrelatedtotheCDNLPor
US LP to provide such services, the CDN LP and US LP will engage one or more licensed (where required) third
partypropertymanagementcompaniestoprovidepropertymanagementservicesinrespectoftheProperties.
Thepropertymanagementagreements,whethertheyarewiththeCanadianGP,theUSGP,entitiesaffiliatedwith
the Canadian LP or the US LP, or third party property management companies, will be on standard commercial
terms. Such terms will include, among other things, provisions relating to budgeting, collection of rents and
maintainingpropertybankaccounts,paymentofexpenses,themaintenanceoftheproperty,attendingtotenant
matters,leasingandenforcingleases,insurancemanagementandotherrelatedmatters.Suchagreementswillbe
fortermsnotexceedingfiveyearsandmaybeterminatedbytheCDNLPandUSLPonthesaleoftherelevant
Property,intheeventofadefaultbythepropertymanagemententityorupon90days’priorwrittennotice.
Thefeepaidtothepropertymanagementcompanieswillbeatmarketpricingandbasedonapercentageofthe
rentalrevenuefromeachPropertyandwill,forthemostpart,berecoverablefromthetenantsunderthetermsof
theirleases.
ShortTermMortgageLendingFinancingTerms
TheparametersunderwhichtheCDNLPandtheUSLPwillengageinShortTermMortgageLendingtransactions
areasfollows:
(i)
CW7623442.10
assumingthattheREITissuesaminimumof15,000Units,neithertheCDNLPnortheUSLPwill
commitmorethan50%oftheaggregateoffundsraisedbythemthroughtheissuanceofClassA
CDN LP Units and Class A CDN/US LP Units to the REIT, or any further issuance of limited
partnershipunitsbythem,toanyoneShortTermMortgageLendingtransaction;
Ͳ19Ͳ
(ii)
theCDNLPwillnotlendbeyondaloanͲtoͲvalueofcurrentappraisedmarketvalueofaproperty
ofmorethan75%,althoughoccasionallyhigherleveragemaybedesiredorassumed;
(iii)
the CDN LP and the US LP will only loan funds where their security is either a first or second
mortgageorwherethesecurityobtainedissimilarinnaturetoamortgageandregisteredonthe
titletothepropertytowhichtheloanrelates;
(iv)
neither the CDN LP nor the US LP will lend in any situation where they reasonably believe the
repaymentinfullofaShortTermMortgageLendingtransactionwillnotoccurwithina12month
periodfromthedateoffirstadvance.
Title to the Properties – The CDN LP intends to have title to each of the Properties comprising the Canadian
Portfolioregisteredinthenameofanomineecompany,whichwillownsuchtitleasbaretrusteefortheCDNLP.
Subject to legal, tax and accounting advice, the US LP intends to create one or more United States limited
partnershipsand/orlimitedliabilitycompaniesthroughwhichtheacquisitionofthePropertiescomprisingtheUS
Portfolio will occur. The US LP will hold a99%interestinanysuchUnitedStateslimitedpartnershipandorLLC
formedforthepurposeofacquiringPropertiesintheUnitedStates(collectivelythe“USEntities”).Theofficersand
directorsoftheGeneralPartnerorpartiesrelatedtothemwillbetheofficers,directorsandshareholdersofthe
GeneralPartnersofanyUnitedStatesregisteredlimitedpartnershiporLLC’s.Whereitisthebestinterestsofthe
USLPwithrespecttorisk,financing,taxandaccountingmatters,theUSLPmaylendfundstoanyoneorallofthe
USEntitiesinordertoallowsuchEntitiestoacquireaPropertyorProperties.
InvestmentFundManager
TheGeneralPartnermay,initsdiscretion,appointaninvestmentfundmanagertoactonbehalfoftheCDNLPand
theCDN/USLP.
2.3
DevelopmentoftheBusiness
TheREITisrecentlyestablishedandhasnotyetcompletedafiscalyear.Itdoesnothaveanoperatinghistory.
Todate,otherthanthepurchaseoftheFortMcMurrayPropertydescribedinthispart,neithertheGeneralPartner
northeUSGPhasidentifiedanyotherPropertiesforacquisitionorMortgagesforinvestmentbytheCDNLPorthe
USLP.
TheFortMcMurrayProperty
The Fort McMurray Property, also known as the Morrison Centre, is a 50,700 square foot three level multiͲ
tenantedofficebuildingwithretailonthegroundfloorcentreand80parkingstalls.Itisstrategicallylocatedin
downtownFortMcMurrayonthecornerofFranklinAvenueandMorrisonStreet,directlyacrossthestreetfrom
thesitewheretheproposed7,000Ͳseatdowntownarenawillbelocated.
FortMcMurray’sprimaryeconomicdriversareoilandgasextraction,mining,construction,pipelinemaintenance,
forestryandgovernance.Therecentdecreaseinoilpricinghascurtailedcertainplannedprojects,butbothfuture
andpresentproductionremainstrong.AccordingtotheCanadianAssociationofPetroleumProducers’June2015
Crude Oil Forecast, Markets, and Transportation, oil shipments by rail in 2014 grew by nearly 3 times from the
previous year, and total oil exports are expected to grow dramatically due to two new pipelines that began
operationsattheendof2014. Expansionoftheoilsandsprojectsintheregionisexpectedtocontinue;recent
forecastsdiscussedinanarticlebytheCanadianEnergyResearchInstitute(Nov.2014)calledCanadianEconomic
Impacts of New and Existing Oil Sands Development in Alberta (2014Ͳ2038) place total barrels per day of
productionat3.7millionby2020,morethandoublethatof2013.Accordingtoworkforcestatisticspublishedby
theMunicipalityofWoodBuffaloonitswebsite,capitalinvestmentintheoilsandsfor2015alonewilltotalover
$25billiondollars,almostallofthatdirectlywithintheMunicipalityofWoodBuffaloinwhichFortMcMurrayis
CW7623442.10
Ͳ20Ͳ
located Ͳ over ninety percent of future oil sands employment in Alberta will be within 100 kilometres of Fort
McMurray.
The city also boasts a new international airport terminal, recently completed in June of 2014, which improves
yearly capacity from 250,000 passengers yearly to 1.5 million. Its innovative design and environmental
sustainabilityͲfocused construction has won several awards, most notably the Canadian Architect Award of
Excellencefor2013.AccordingtoregionalstatisticspublishedbytheMunicipalityofWoodBuffaloonitswebsite,
averagehouseholdincomeis$189,500,whichisninetyͲfivepercenthigherthanthenationalaverage,andthecity
itself is expanding at a rate of 5.2% per year, with the population expected to more than double by 2025. The
amenitiesitoffersareexceptionalaswell;FortMcMurrayboaststhelargestrecreationalcentreandoutdoorgym
inthenation,theMacDonaldIslandRecCentre,andthedowntowncoreisthetargetofalongterm,twobillion
dollarrevitalizationprojectbythemunicipalitythatwillseehighͲdensitydevelopment,bikeͲfriendlystreets,high
risebuildings,andnewretailoptions.
TheCDNLPacquiredtheFortMcMurrayPropertyeffectiveJune30,2015forapriceof$25,000,000from1576697
Alberta Ltd., which is a company related to the REIT in that 50% of its shares are held by AP Capital Mortgage
InvestmentCorporationwhichisanentitythathasdirectorsincommonwiththeTrusteeandtheGeneralPartner.
The purchase price was paid by way of the shortͲterm assumption of the existing mortgage in favour of Servus
Credit Union (the “Servus Mortgage”) in the amount of $15,000,000, cash raised from the Offering of Units as
describedhereinandtheissuanceofClassAUnitsoftheCDNLP.TheServusMortgageisforatermof20years,
maturingon2032andbearsinterestatServus’primelendingrateplus0.75%.TheCDNLPexpectstoreplacethe
ServusMortgagewithanewloanfromServusinthecomingmonths.
ThenetincomeoftheFortMcMurrayPropertyis$1,825,000peryearwhichindicatesacapratereturnof7.3%at
acquisition.
Therearetwoappraisalsinplacewithrespecttotheproperty.IndependentPropertyAppraisalassessesthatthe
Fort McMurray Property has a value of $26,360,000 and R. Wyton Appraisal & Consulting Ltd.’s assessment is
slightlylowerat$26,000,000.
TheMorrisonCenterwasbuiltin1977,andconstructionmaterialsusedwereconcreteblockwithsteeltrussesand
concretefloors.ThegeneralbuildingconditionissoundwithnewHVACunitsinstalledonthereconditionedroof
withinthelast4years,andover70%ofthenetleasablespacehavingbeenrenovatedwithinthepast5years.
Therearenoenvironmentalissuesonthesiteandnolargebuildingimprovementsareforeseeninthenext5to7
years.
TheMorrisonCentrehasarentableareaof50,700squarefootandhasatenantmixconsistingofprimarilymedical
tenants.TheupperfloormixisfortyͲfivepercentmedical,withthebalanceavarietyofofficesrangingfromunion
to accounting companies. The main floor is made up of fourteen percent medicalͲrelated tenants, thirtyͲone
percent office retail including a mix of insurance and a wellͲestablished hair salon and spa (who in the last 12
monthsinvestedoverfiftythousanddollarsintenantimprovements).Thebalanceonthemainfloorismadeupof
tworestauranttenants,oneofwhichinvestedmillionsofdollarsintotheirestablishmentandhasenteredintoa
10 year lease with two 10 year options. The lower floor is comprised of a mix of retail, medical, office and
restaurant kitchen. The retail is made up of a dancewear store of 30 year presence in Fort McMurray, and the
officespaceisleasedbyalawfirm,aunionandamultiͲnationalsecuritycompany.Thebalanceistherestaurant
andamedicalbasedprofessionalhealthconsultingfirm.
APCapitalREITacquirespropertybasedonmanydifferentfactorsincludingbutnotlimitedby,upsidepotential
throughleasesorexpansion,buildingcondition,tenantmix,andlocation.ThisparticularpropertyislocatedinaB
market and has a B rated tenant mix that has a long term presence in the building. The property was acquired
becausetheacquisitionpriceisbelowmarketvaluewithanattractivecaprate.Thepropertyhasfurtherupside
due to 20% of the leases being below market rate plus the building has already undergone extensive capital
improvements over the last four years and is strategically located across the street of the newly planned
DowntownArena.Theshorttermgoalwillbetobringuptherenewingleasestocurrentmarketrates.Thelong
CW7623442.10
Ͳ21Ͳ
termstrategyistomaximizetheleaseincomeandexploreexpansion/redevelopmentideaswiththeCityinorder
tomeettheneedsthatwillcomeupwhentheArenaisbuilt.
2.4
LongTermObjectives
ThelongtermobjectivesoftheREITare:
(a)
toissuesufficientUnitstobeabletoacquiresufficientClassACDNLPUnitsandClassACDN/US
LPUnitstopermittheCDNLPandCDN/USLP(throughtheUSLP)tocarryouttheacquisitionsof
Propertiesonacommerciallyreasonablebasis;
(b)
toprovideUnitholderswithprofitsderivedfromtheREIT’sinvestmentinClassACDNLPUnits
andClassACDN/USLPUnitsandtheGeneralPartner’sandUSGP’soperationoftheProperties
andinvestmentinMortgages;and
(c)
todistributesuchprofitsasandwhenreceivedfromtheCDNLPandtheCDN/USLP.
Subjecttofutureevents,whichmayhaveanimpactonthetimingofsuchdecisions,itisthecurrentintentionof
theTrusteetocontinuetheREITforanindefiniteperiodoftime.
2.5
ShortTermObjectivesandHowtheREITIntendstoAchieveThem
ThebusinessobjectivesoftheREITforthenext12monthsaretocompletetheofferingofasufficientnumberof
Units pursuant to this Offering Memorandum to be able to acquire sufficient Class A CDN LP Units and Class A
CDN/USLPUnitsfortheCDNLPandCDN/USLPtocarryouttheacquisitionofPropertiesandtheiroperationona
commerciallyreasonablebasis.
Whattheissuermustdoandhowitmustdoit
Toissueaminimumof500Units,beingthe
MinimumOffering
2.6
InsufficientFunds(notapplicable)
2.7
MaterialAgreements
Targetcompletiondateorif
notknown,numberof
Costtocomplete
monthstocomplete
one
$75,000
Thefollowingisalistofagreements,whicharematerialtothisOfferingandtotheREIT,allofwhichareineffect:
(a)
the Declaration of Trust dated June 26, 2015 between the Trustee and the Settlor, and an
Amendment Agreement dated September 4, 2015, creating the REIT under the laws of the
ProvinceofBritishColumbia.TheDeclarationofTrustisdescribedbelowinItem5.1–“Termsof
Units”;
(b)
SubscriptionAgreements–theAgreementbywhichinvestorswillsubscribeforandacquireUnits
onthetermsandconditionsdescribedinthisOfferingMemorandum;
(c)
CDNLPAgreementdatedJune25,2015betweentheCDNLPFoundingLimitedPartnerandthe
GeneralPartner;
(d)
CDN/US LP Agreement dated June 25, 2015between the CDN/US LPFounding Limited Partner
andtheGeneralPartner;
CW7623442.10
Ͳ22Ͳ
(e)
CostSharingandRecoveryAgreementsdatedJune26,2015betweenCDNLPandtheREITand
theCDN/USLPandtheREITrelatingtothereimbursementbytheCDNLPortheCDN/USLP,as
applicable,totheREITofcostsincurredintheofferingoftheUnitsandobtainingsubscriptions
forUnits;and
(f)
AdministrationAgreementsdatedJune26,2015betweentheManagerandtheCDNLPandthe
CDN/USLP.
AdministrationAgreements
UndertheAdministrationAgreements,theManagerhasagreedtoprovidethefollowingservicestoeachofthe
CDNLPandtheCDN/USLP,forwhichitwillbepaidthefeessetoutbelowbyeachofthepartnerships:
(a)
structurethetheCDNLPandtheCDN/USLPandthisOffering,identifyPropertiesforacquisition,
negotiatethepurchasethereof,structuretheownershipofeachoftheProperties,conductdue
diligence,applyforandobtainmortgageloansandliaisewithlegalcounsel,brokersandothersin
connectionwithcompletingthepurchaseofProperties;
(b)
whennecessaryoradvisable,negotiateandcompletethesaleofaPropertyonsuchtermsand
conditionsandatsuchtimeastheManagermaydetermine,includingidentifyingandengaginga
real estate broker, readying the Property for sale and overseeing the conduct and completing
thesaleprocess,orprovidingadvicetotheGeneralPartnerandUSGPinrespectofsame;
(c)
overseeandsupervisepropertymanagementoftheProperties,establishappropriatelegaland
accounting systems for the CDN LP and the CDN/US LP, report to the CDN LP Limited Partners
andtheCDN/USLPLimitedPartnersonanongoingbasis,liaisewiththelendersanymortgage
loansinconnectionwiththeProperties,usebesteffortstoarrangearefinancingofthemortgage
loansattheexpirationoftheirtermsandanysubsequentrefinancings,conductongoinganalysis
of market conditions to monitor the CDN LP’s and the US LP’s investment in the Properties;
prepare annual financial reports on the Properties, provide overall management, financial and
business planning, perform such other administrative duties as a reasonably prudent
administrativemanagerwouldprovideinthesameorcomparablecircumstancesandsuchother
administrative duties as the CDN LP and the CDN/US LP may reasonably request from time to
timeand/orprovidingadvicetotheGeneralPartnerandUSGPinrespectofsame;and
(d)
oversee the preparation of this OfferingMemorandum, the offering and sale of Units, and the
completion of all matters related to the closing of subscriptions on behalf of the REIT. In
addition,theManagerwillbeentitledtobereimbursedforanydepositspaidandforalloutͲofͲ
pocketexpensesincurredbytheManagerincompletinganyoftheaboveduties,bothinrespect
of the purchase of a Property or the ongoing ownership, operation and management of a
Property.
Inconsiderationofsuchservices,theCDNLPandtheCDN/USLPwilleachpaytheManagerthefollowingfees:
(a)
the Acquisition Fee, in an amount equal to 1.5% of the gross purchase price of each Property,
plusGSTifapplicable,uponthecompletionofthepurchaseofeachProperty;
(b)
theAssetManagementfee,inanamountequalto1.5%oftheAnnualPortfolioValue,payable
monthlyonthelastdayofeachmonthduringthetermoftheAdministrationAgreements;and
(c)
theDispositionFeeinanamountequalto0.45%ofthegrosssellingpriceoftheProperty,plus
GSTifapplicable,uponthecompletionofthesaleoftheProperty.
CW7623442.10
Ͳ23Ͳ
Inaddition,theManagerwillbeentitledtobereimbursedforanydepositspaidandforalloutͲofͲpocketexpenses
incurredbytheManagerincompletinganyoftheaboveduties.
TheManagermayrequiretheCDNLPand/ortheCDN/USLPtopayalloranyportionoftheAcquisitionFee,the
DispositionFeeandtheAssetManagementFeetotheManagerbyissuingtotheManagerthatnumberofClassA
CDN LP Units and/or that number of Class A CDN/US LP Units at a price equal to 80% of the then current
SubscriptionPricehavinganaggregatepriceequaltopaytheAcquisitionFee,theDispositionFeeandtheAsset
ManagementFeethenpayable.
Beginningin2015,theAssetManagementFeeshallbepaidtotheManagermonthlyonanestimatedbasisonthe
firstdayofeachmonth.Theestimatedmonthlypaymentstobepaidineachsuchyearshallbedeterminedby
dividingthegreaterof$100,000andthe1.5%oftheAnnualPortfolioValuefortheyearimmediatelyprecedingthe
year in which the payments are to be made by 12. Once the Annual Portfolio Value for each calendar year is
determinedinaccordancewithsubͲparagraph(a)above,theCDNLPand/ortheUSLP,asapplicable,maymakea
balloonpaymentinfavouroftheManageriftheaggregateoftheestimatedAssetManagementFeepaidduringa
yearbasedonsuchformulawaslessthantheactualAssetManagementFeeamountdue.
Copiesofallcontractsreferredtoabovemaybeinspectedduringnormalbusinesshoursattheprincipalofficeof
theGeneralPartner,locatedat1601–128WestPenderStreet,Vancouver,BCV6B1R8.
ITEM3ͲDIRECTORS,MANAGEMENT,PROMOTERSANDPRINCIPALHOLDERS
AP Capital REIT Operations Ltd. is the Trustee of the REIT for the purposes and with the powers set out in the
DeclarationofTrust.TheheadofficeoftheTrusteeislocatedat1601–128WestPenderStreet,Vancouver,BC
V6B 1R8. The Trustee is a corporation formed under the laws of British Columbia. It has no material assets or
liabilities.ItcarriesonnobusinessactivitiesotherthanactingastrusteeoftheREIT.
APCapitalREIT(GP)Ltd.istheGeneralPartneroftheCDNLPpursuanttothetermsandconditionsoftheCDNLP
Agreement.TheheadofficeoftheGeneralPartnerislocatedat1601–128WestPenderStreet,Vancouver,BC
V6B 1R8. The General Partner is a corporation incorporated under the laws of British Columbia. The assets and
liabilitiesoftheGeneralPartnerarenominal.
APCapitalREIT(GP)Ltd.isalsotheGeneralPartneroftheCDN/USLPpursuanttothetermsandconditionsofthe
CDN/US LP Agreement. The head office of the General Partner is located at 1601 – 128 West Pender Street,
Vancouver,BCV6B1R8.TheGeneralPartnerisacorporationincorporatedunderthelawsofBritishColumbia.The
assetsandliabilitiesoftheGeneralPartnerarenominal.
APCapitalREITUS(GP)Ltd.willbethegeneralpartneroftheUSLPpursuanttothetermsandconditionsofthe
limitedpartnershipagreementfortheUSLP.TheheadofficeoftheUSGPwillbelocatedatSuite2222,19777N
St.,Scottsdale,AZ85255.TheUSGPwillbeacorporationincorporatedunderthelawsofArizona.Theassetsand
liabilitiesoftheUSGPwillbenominal.
3.1
CompensationandSecuritiesHeld
TheTrustee
Thefollowingtablesetsoutinformationabouteachdirector,officerandpromoteroftheTrusteeandeachperson
whodirectlyorindirectlybeneficiallyownsorcontrols10%ormoreofanyclassofvotingsecuritiesoftheTrustee
(a“principalholder”).
CW7623442.10
Ͳ24Ͳ
Nameand
municipalityof
principalresidence
Positionsheld(e.g.
Director,officer,
promoterand/or
principalholder)and
thedateofobtaining
thatposition
Compensationpaid
bytheREITinthe
mostrecently
completedfinancial
year(oriftheREIT
hasnotcompleteda
financialyear,since
inception)andthe
compensation
anticipatedtobe
paidinthecurrent
financialyear
Number,
Number,
percentageand percentageand
typeof
typeof
securitiesofthe securitiesofthe
Trusteeheld
Trusteeheld
aftercompletion aftercompletion
ofminimum
ofmaximum
offering
offering
SteveFroese
Directorandofficer
Nil
None
None
RoyWiebe
Directorandofficer
Nil
None
None
SandervanderVorm
Directorandofficer
Nil
None
None
BradUnrau
Directorandofficer
Nil
None
None
DanWeiss
Directorandofficer
Nil
None
None
ChesHagen
Directorandofficer
Nil
None
None
1018999B.C.Ltd.
Principalholder
Nil
25Common
shares
25Common
shares
1019374B.C.Ltd.
Principalholder
Nil
25Common
shares
25Common
shares
1019001BCLtd.
Principalholder
Nil
25Common
shares
25Common
shares
Principalholder
Nil
25Common
shares
25Common
shares
Principalholder
Nil
25Common
shares
25Common
shares
Principalholder
Nil
25Common
shares
25Common
shares
1901174AlbertaLtd.
0824016BCLtd.
541461AlbertaLtd.
Note:
OtherthanasisotherwisedisclosedinthisOfferingMemorandum,thedirectorsandofficersoftheTrusteedonot
presentlyreceivecompensationintheircapacityasdirectorsandofficers.
TheGeneralPartner
Thefollowingtablesetsoutinformationabouteachdirector,officerandpromoteroftheGeneralPartnerandeach
personwhodirectlyorindirectlybeneficiallyownsorcontrols10%ormoreofanyclassofvotingsecuritiesofthe
GeneralPartner(a“principalholder”).
CW7623442.10
Ͳ25Ͳ
Nameand
municipalityof
principalresidence
Positionsheld(e.g.
Director,officer,
promoterand/or
principalholder)and
thedateofobtaining
thatposition
Compensationpaid
bytheREITinthe
mostrecently
completedfinancial
year(oriftheREIT
hasnotcompleteda
financialyear,since
inception)andthe
compensation
anticipatedtobe
paidinthecurrent
financialyear
Number,
percentageand
typeof
securitiesofthe
REITheldafter
completionof
minimum
offering
Number,
percentageand
typeof
securitiesofthe
REITheldafter
completionof
maximum
offering
SteveFroese
Directorandofficer
Nil
None
None
RoyWiebe
Directorandofficer
Nil
None
None
SandervanderVorm
Directorandofficer
Nil
None
None
BradUnrau
Directorandofficer
Nil
None
None
DanWeiss
Directorandofficer
Nil
None
None
ChesHagen
Directorandofficer
Nil
None
None
1018999B.C.Ltd.
Principalholder
Nil
25Common
shares
25Common
shares
1019374B.C.Ltd.
Principalholder
Nil
25Common
shares
25Common
shares
1019001BCLtd.
Principalholder
Nil
25Common
shares
25Common
shares
Principalholder
Nil
25Common
shares
25Common
shares
Principalholder
Nil
25Common
shares
25Common
shares
Principalholder
Nil
25Common
shares
25Common
shares
1901174AlbertaLtd.
0824016BCLtd.
541461AlbertaLtd.
Note:
OtherthanasisotherwisedisclosedinthisOfferingMemorandum,thedirectorsandofficersoftheGeneralPartner
donotpresentlyreceivecompensationintheircapacityasdirectorsandofficers.
TheUSGP
Thefollowingtablesetsoutinformationabouteachdirector,officerandpromoteroftheUSGPandeachperson
whowilldirectlyorindirectlybeneficiallyownsorcontrols10%ormoreofanyclassofvotingsecuritiesoftheUS
GP(a“principalholder”).
CW7623442.10
Ͳ26Ͳ
Nameand
municipalityof
principalresidence
SteveFroese
Positionsheld(e.g.
Director,officer,
promoterand/or
principalholder)and
thedateofobtaining
thatposition
Directorandofficer
Compensationpaid
bytheREITinthe
mostrecently
completedfinancial
year(oriftheREIT
hasnotcompleteda
financialyear,since
inception)andthe
compensation
anticipatedtobe
paidinthecurrent
financialyear
Nil
Number,
percentageand
typeof
securitiesofthe
REITheldafter
completionof
minimum
offering
Number,
percentageand
typeof
securitiesofthe
REITheldafter
completionof
maximum
offering
100
Common
shares
100
Common
shares
Note:
Other than as is otherwise disclosed in this Offering Memorandum, the directors and officers of the US GP do not
presentlyreceivecompensationintheircapacityasdirectorsandofficers.
3.2
ManagementExperience
The following table discloses the principal occupations of the directors and senior officers of the Trustee, the
Manager,theGeneralPartnerandtheUSGPoverthepastfiveyears.
Nameandposition
PrincipalOccupationandRelatedExperience
SteveFroese
Director&President
[soledirectorofUSGP]
Mr. Froese has over 23 years of experience in commercial real estate. In the late
nineties Mr. Froese build out over seventeen commercial construction projects
throughouttheUnitedStates.
HeisthefounderofDominionPropertiesCorp.,acompanythatownedandmanaged
over 500,000square feet of mixed retail and office space. Mr. Froese is also the coͲ
founder of Tandem Assets, which administers over $25mln of properties in Western
Canada and Phoenix, Arizona including and not limited by shopping centres and
medicaloffices.
Mr.FroeseisalsoafoundingpartnerofAPCapitalMortgageInvestmentCorporation.
RoyWiebe
Director&ViceͲ
President
Mr. Wiebe has over 20 years of business ownership and management experience
which includes successfully building and exiting several multimillion dollar ventures
rangingfromagriculture,realestateandtheoilserviceindustry.
Mr. Wiebe has 15 years’ experience in the operations and ongoing management of
commercial and residential real estate. Mr. Wiebe specializes in streamlining
operationsinthebusiness,reducingexpensesanddrivingmorerevenuetothebottom
line.HecontinuestomanageandgrowhispersonalportfolioofownedandcoͲowned
propertiesinmanysegmentsoftherealestatemarketinboththeUnitedStatesand
WesternCanada.
SandervanderVorm
Director&ViceͲ
President
Mr. van der Vorm Sander has over fifteen years of business ownership and
managementexperiencewhichincludecorporaterestructuringatmultinationalfirms,
andcorporatefinanceforrealestateprojectsandlocalbusinessesinWesternCanada.
Withoveradecadeofexperienceinthecommercialrealestatedevelopmentmarket
hehasextensiveknowledgeinpropertyredevelopment,managementandincreasing
projectrevenues.
CW7623442.10
Ͳ27Ͳ
Nameandposition
PrincipalOccupationandRelatedExperience
BradUnrau
Director&ViceͲ
President
Mr Unrau is the founding partner of AP Capital Mortgage Investment Corporation, a
companythatmanagesamortgageportfolioofover$40mlninBritishColumbiaand
Alberta. In 2009 Mr. Unrau started Dominion Lending Centres Alta Pacific, a local
commercial and residential mortgage brokerage firm that does over $60mln in real
estatefinancingperannum.
Mr Unrau has over 20 years of experience in the acquisition, ownership and
management of commercial and residential real estate in Western Canada. Mr.
Unrau’s portfolio consists of owned and coͲowned properties in all segments of the
real estate market from cityͲcore commercial complexes, to single family Ͳand highͲ
densityresidentialproperties.
DanWeiss
Director&ViceͲ
President
For almost 30 years Mr. Weiss has been involved in the real estate industry as an
agent, investor, builder, developer, lender and property manager and specializes in
riskmanagement.Mr.WeisisafoundingpartnerinAPCapitalMortgageInvestment
Corporation and in Dominion Properties Corp. Mr. Weiss’s various holdings include
land, apartments, residential and commercial buildings, warehouses and shopping
malls and he has been involved in developing numerous projects such as medical
clinics,adultbungalows,townhouseprojectsandcommercialproperties.
ChesHagen
Mr.HagenisafoundingpartnerofAPCapitalMortgageInvestmentCorporation.In
addition to acting as a director of AP Capital Mortgage Investment Corporation, Mr.
Hagen is the coͲfounder of VendAsta Technologies Inc. VendAsta has operations in
Vancouver,BritishColumbiaandSaskatoon,Saskatchewan.
Mr. Hagen has over 10 years’ experience raising capital for private companies in
Canada through various channels includingconventional banks, venture capital firms
andexemptmarketdealers.
Educated at British Columbia Institute of Technology, Mr. Hagen holds a Diploma of
TechnologyinMarketingManagement.
3.3
Penalties,SanctionsandBankruptcy
Nopenaltyorsanctionhasbeenineffectduringthelast10years,noceasetradeorderhasbeenineffectfora
periodofmorethan30consecutivedaysduringthepast10years,andasidefromMr.vanderVorm’sreleasefrom
bankruptcy in 2014, no declaration of bankruptcy, voluntary assignment in bankruptcy, proposal under any
bankruptcy orinsolvency legislation,proceedings, arrangement orcompromise with creditors, appointment ofa
receiver, receiver manager or trustee to hold assets has been in effect during the last ten years against or with
regardtoany:
1.
2.
director,executiveofficerorcontrolpersonoftheREITortheGeneralPartner,or
anyissuerofwhichanypersonreferredtoinItem1abovewasadirector,seniorofficer,orcontrolperson
ofatthattime.
3.4
Loans
Therearenodebenturesorloansduetoorfromthedirectors,management,promotersorprincipalholdersofthe
TrusteeortheGeneralPartnerasatSeptember4,2015.
ITEM4ͲCAPITALSTRUCTURE
4.1
CapitalStructure
A.
ThefollowingarethedetailsoftheoutstandingsecuritiesoftheREITatSeptember4,2015:
CW7623442.10
Ͳ28Ͳ
Number
Authorizedtobe
Issued
Number
Outstandingas
atSeptember4,
2015
Number
outstandingafter
min.offering(1)
Numberoutstanding
aftermax.offering(1)
ClassAUnits
Unlimited
6
6
6
ClassBUnits
Unlimited
3,815
4,315(1)
8,815
ClassC1Units
Unlimited
Nil
Nil
2,500
ClassC2Units
Unlimited
Nil
Nil
2,500
ClassD1Units
Unlimited
Nil
Nil
2,381(2)
ClassD2Units
Unlimited
Nil
Nil
2,381(2)
ClassEUnits
Unlimited
Nil
Nil
11,084(2)
ClassFUnits
Unlimited
Nil
Nil
11,0842)
ClassGUnits
Unlimited
Nil
Nil
Nil
Descriptionof
Security
(1)
Theminimumofferingis500ClassBUnitsoftheREIT.Themaximumofferingis40,000UnitsoftheREIT.
(2)
Figuresusedforillustrativepurposesonly,basedonthemaximumofferingamount.
B.
ThefollowingarethedetailsoftheoutstandingsecuritiesoftheCDNLPatSeptember4,2015:
Number
Authorized
tobeIssued
Number
Outstandingas
atSeptember4,
2015
Number
outstandingafter
min.offering
Numberoutstanding
aftermax.offering
ClassACDNLPUnits
Unlimited
6,281(2)
6,281(1)(2)
46,281(1)(2)
ClassBCDNLPUnits
Unlimited
Nil
Nil
Nil
DescriptionofSecurity
(1)
(2)
UnitsissuedinpartialconsiderationfortheacquisitionoftheFortMcMurrayProperty.
C.
ThefollowingarethedetailsoftheoutstandingsecuritiesoftheCDN/USLPatSeptember4,2015:
DescriptionofSecurity
Number
Authorizedto
beIssued
Number
Outstandingas
atSeptember4,
2015
Number
outstandingafter
min.offering
Numberoutstanding
aftermax.offering
ClassACDN/USLPUnit
Unlimited
Nil
500(1)
40,000(1)
ClassBCDN/USLPUnit
Unlimited
Nil
Nil
Nil
(1)
4.2
LongTermDebt
TheREIThasnolongtermdebt.
CW7623442.10
Ͳ29Ͳ
4.3
PriorSales
Withinthelast12months,theREITenteredintothefollowingtransactionsrelatedtotheUnits:
Dateofissuance
Typeofsecurity
issued
September4,2015
Numberofsecurities
issued
ClassAUnits
6
Pricepersecurity
$1,000
Totalfundsreceived
$6,000
ITEM5ͲSECURITIESOFFERED
5.1
TermsofUnits
A.
Units
ClassesofUnits
TheREITisauthorizedtoissueanunlimitednumberofredeemableunitsofbeneficialinterest.EachUnitentitles
theUnitholdertothesamerightsandobligationsasanyotherUnitholderholdingthesameClassofUnitsandno
UnitholderofanyClassisentitledtoanyprivilege,priorityorpreferenceinrelationtoanyotherUnitholdersof
thatsameClass.
TheTrusteewillhavethepowerandauthority,fromtimetotime,forandonbehalfoftheREIT,tocreateoneor
more additional classes or series of units on such terms and conditions as may be determined by the Trustee,
providedthatsuchcreationdoesnotadverselyaffectthepecuniaryvalueoftheinterestofanyunitholderinthe
REIT.Eachclassorserieswillhavespecialrightsandrestrictions,whichmaydifferfromtherightsandrestrictions
ofotherclassorseriesofunits.Alloftheunitsinanyclassorserieswillhavethesamerights,benefitsandother
attributesandwillrankequallywitheveryotherunitinsuchclassorseriesandnounitinaclassorserieswillhave
anypreferenceorpriorityoveranyotherunitofsuchclassorseries.Eachunitwillentitletheholdertothesame
rightsandobligationsasaholderofanyotherunitofthesameclassorseriesandnounitholderwillbeentitledto
anyprivilege,priorityorpreferenceinrelationtoanyotherunitholdersholdingunitsofthesameclassorseries.
Eachunitholderisentitledtoonevoteforeachunitheldand,subjecttoanadjustmentinaunit'sproportionate
share as a result of thedate of first issue of a unit, is entitled to participate equallywith respect to any andall
distributionsmadebytheREITtotheunitholdersholdingunitsofthesameclassorseries,includingdistributions
ofnetincomeandnetrealizedcapitalgains,ifany.Ontermination,theunitholdersofrecordholdingoutstanding
unitsareentitledtoreceivealloftheassetsoftheREITdesignatedforsuchclassorseriesofUnitsremainingafter
paymentofalldebts,liabilitiesandliquidationexpensesoftheREIT.
TheREIThascurrentlycreatednineClassesofUnits,beingtheClassA,ClassB,ClassC1,ClassC2,ClassD1,Class
D2, Class E, Class F and Class G Units. All Units of each such Class, other than Class B Units, are entitled to
participateequallywithrespecttoanyandalldistributionsmadebytheREITtotheunitholdersholdingunitsof
suchotherClasses,includingdistributionsofnetincomeandnetrealizedcapitalgains,ifany.Ontermination,the
unitholders of record holding Units of all such Classes are entitled to receive, proportionately to the number of
Units held by them, all of the assets of the REIT remaining after payment of all debts, liabilities and liquidation
expensesoftheREIT.
ClassAUnits
TheREIThasissuedsixClassAUnitsatasubscriptionpriceof$1,000perClassAUnittoeachof1019374B.C.Ltd.
and1018999B.C.Ltd.,1019001BCLtd.,1901174AlbertaLtd.,0824016BCLtd.and541461AlbertaLtd.,whichare
companiesrelatedtotheprincipalsoftheTrustee.
TheREITintendstoissuetheUnitsasfollows:
CW7623442.10
Ͳ30Ͳ
ClassBUnits
TheREITwillofferClassBUnitsatapriceof$1,000perClassBUnittoqualifiedinvestorsuntiltheearlierof:(a)
thedatethattheREIThasraised$10,000,000insubscriptionproceedsfromClassBUnitsand(b)sixmonthsfrom
thedateofthisOfferingMemorandum.Atsuchtime,theREITwillceaseofferingClassBUnits.
ClassBUnitswillearnafixedannualreturnequalto$70perClassBUnit,payablemonthlyinarrears.TheREITwill
havetheoptiontoredeemtheClassBUnitsonorbeforethefirstanniversaryoftheissuethereof,uponpayment
totheunitholdersholdingClassBUnitsofthesumof$1,000perClassBUnitplusaredemptionbonusequalto
$60 per Class B Unit per annum, pro rated based on the number of days during which the Class B Units were
outstanding.TheREITwillhavetheoptiontoextendthedateforredemptionoftheClassBUnitsbyonetermof
sixmonths,duringwhichthefixedannualreturnwillcontinuetobepayable.
TheREITdoesnotintendtopayanysalescommissionorfeeortrailerfeeinrespectoftheClassBUnits.
ClassC1andClassC2Units
TheREITwillofferClassC1andClassC2UnitscommencingontheTrustceasingtoofferClassBUnits.ClassC1and
ClassC2Unitswillbeofferedatapriceof$1,000perClassC1orClassC2Unittoqualifiedinvestorsuntiltheearlier
of: (a) the date that the REIT has raised $5,000,000 in subscription proceeds from Class C1 and Class C2 Units
togetherand(b)sixmonthsfromthedateofthisOfferingMemorandum.Atsuchtime,theREITwillceaseoffering
ClassC1andClassC2Units.AnypersonwishingtosubscribeforClassC2Unitsmustpurchaseaminimumamount
of$150,000.
ClassC1andClassC2UnitswillparticipateequallywithrespecttoanyandalldistributionsmadebytheREITtothe
unitholders holding Class A, Class D1, Class D2, Class E, Class F and Class G Units, including distributions of net
incomeandnetrealizedcapitalgains,ifany.Ontermination,theunitholdersofrecordholdingUnitsofallsuch
Classesareentitledtoreceive,proportionatelytothenumberofUnitsheldbythem,alloftheassetsoftheREIT
remainingafterpaymentofalldebts,liabilitiesandliquidationexpensesoftheREIT.
TheREITintendstopayasalesfeeofupto10%ofthegrossproceedsrealizedonthesaleofClassC1Unitsanda
salesfeeofupto1%ofthegrossproceedsrealizedonthesaleofClassC2Units.Inaddition,theTrusteewillpay
agentssellingClassC2Unitsanannual“trailer”feeequalto1%ofthesubscriptionpriceofClassC2Unitsheldby
personsacquiringsuchUnitsthroughsuchagent.SeeItem7“CompensationPaidtoSellersandFinders”.
ClassD1andClassD2Units
The REIT will offer Class D1and Class D2Units commencing on the Trust ceasing tooffer Class C1 and Class C2
Units.ClassD1andClassD2Unitswillbeofferedatapriceof$1,050perClassD1andClassD2Unittoqualified
investorsuntiltheearlierof:(a)thedatethattheREIThasraised$5,000,000insubscriptionproceedsfromClass
D1andClassD2Unitstogetherand(b)13monthsfromthedateofthisOfferingMemorandum.Atsuchtime,the
REIT will cease offering Class D1 and Class D2 Units. Any person wishing to subscribe for Class D2 Units must
purchaseaminimumamountof$150,000.
ClassD1andClassD2UnitswillparticipateequallywithrespecttoanyandalldistributionsmadebytheREITtothe
unitholders holding Class A, Class C1, Class C2, Class E, Class F and Class G Units, including distributions of net
TheREITintendstopayasalesfeeofupto10%ofthegrossproceedsrealizedonthesaleofClassD1Unitsanda
salesfeeofupto1%ofthegrossproceedsrealizedonthesaleofClassD2Units.Inaddition,theTrusteewillpay
agentssellingClassD2Unitsanannual“trailer”feeequalto1%ofthesubscriptionpriceofClassD2Unitsheldby
CW7623442.10
Ͳ31Ͳ
ClassEandClassFUnits
TheREITwillofferClassEandClassFUnitscommencingontheTrustceasingtoofferClassD1andClassD2Units.
ClassEandClassFUnitswillbeofferedtoqualifiedinvestorsatasubscriptionpricetobedeterminedbytheREIT
andsetforthinthesubscriptionagreement(s)tobeenteredintobetweenthesubscribersandtheREIT.ClassE
and Class F Units will be offered upon the earlier of: (a) the date that the REIT has raised $20,000,000 in
subscription proceeds fromall other Classes of Units togetherand (b) 12 monthsfrom the date of this Offering
Memorandum.
ClassEandClassFUnitswillparticipateequallywithrespecttoanyandalldistributionsmadebytheREITtothe
unitholdersholdingClassA,ClassC1,ClassC2,ClassD1,ClassD2andClassGUnits,includingdistributionsofnet
TheREITintendstopayasalesfeeofupto10%ofthegrossproceedsrealizedonthesaleofClassEUnitsanda
salesfeeofupto1%ofthegrossproceedsrealizedonthesaleofClassFUnits.Inaddition,theTrusteewillpay
agentssellingClassFUnitsanannual“trailer”feeequalto1%ofthesubscriptionpriceofClassFUnitsheldby
ClassGUnits
TheREITwillinitiallyissueClassGUnitsto1576697AlbertaLtd.at$1,000perClassGUnitinpartialconsideration
forthepurchaseoftheFortMcMurrayProperty.
ClassGUnitswillparticipateequallywithrespecttoanyandalldistributionsmadebytheREITtotheunitholders
holding Class A, Class C1, Class C2, Class D1, Class D2, Class E and Class F Units, including distributions of net
TheREITdoesnotintendtopayanysalescommissionorfeeortrailerfeeinrespectoftheClassGUnits.
TheREITreservestherighttocommenceorceaseofferinganyoftheClassesofUnitsattimesandinamounts
whicharedifferentthanassetoutabove.
Voting
EachUnitholderisentitledtoonevoteforeachUnitheldand,subjecttoanadjustmentinaUnit’sproportionate
share as a result ofthe date of first issueof a Unit in the first Fiscal Year, is entitled toparticipate equally with
respecttoanyandalldistributionsmadebytheREITtotheUnitholdersholdingUnits,includingdistributionsofnet
incomeandnetrealizedcapitalgains,ifany,fromtheREIT’sproperty.Ontermination,theUnitholdersofrecord
holdingoutstandingUnitsareentitledtoreceivealloftheassetsoftheREITremainingafterpaymentofalldebts,
liabilitiesandliquidationexpensesoftheREIT.See“TerminationoftheREIT”below
Distributions
TheREITintendstodistributetoeachUnitholdercashflowrealizedfromtheREIT’sinvestmentinClassACDNLP
UnitsandClassACDN/USLPUnits(beingthedistributablecashflowreceivedgeneratedbythePropertiesowned
andoperatedthroughtheCDNLPandindirectlythroughtheCDN/USLPbyvirtueofitsinvestmentintheUSLP)
foreachmonthinwhichsuchamountsarerealized.SuchdistributionswillbemadetoUnitholdersofrecordonor
before the 15th day of the next calendar month immediately following the end of the each month for which a
distributionisdeclared,exceptthatthemonthendingDecember31willhaveadistributionpaymentdatethatis
thebusinessdayimmediatelyprecedingDecember31.
CW7623442.10
Ͳ32Ͳ
Each distribution declared pursuant to the Declaration of Trust constitutes a binding obligation of the REIT for
payment. Consequently, a Unitholder holding Units can demand a payment of a declared distribution and upon
receiptofsuchdemandtheREITmustpaythatamounttotheUnitholderforthwith.
Totheextentdistributionsarecalculatedinrespectofaperiodandpayableattheendofsuchperiod,ifforany
reason,includingtheterminationoftheREIT,suchperiodisnotcompletedorsuchamountsarenolongerpayable,
then the distribution will be proͲrated to the end of the shortened period and be payable at the end of such
shortened period. The Trustee will have the right but not the obligation to make distributions and allocations
amongUnitholdersinsuchamannersoastoensurewherepossiblethattheyaretreatedequitablytakinginto
account differences that may arise as a result of the acquisition of Units at different times in a fiscal year or in
differentfiscalcalendaryears.
The REIT intends to distribute all of the net income and net realized capital gains, if any, of the REIT from its
investmentinClassACDNLPUnitsClassACDN/USLPUnitstoUnitholders,sothattheREITwillnotbeliableto
pay income tax pursuant to the Tax Act during any year. If distributions to Unitholders are in excess of the net
incomeandnetrealizedcapitalgains,ifany,oftheREITfromitsinvestmentinClassACDNLPUnitsandClassA
CDN/USLPUnits,itwillgenerallyresultinareductionintheadjustedcostbaseoftheUnitstotheUnitholder.See
Item6“IncomeTaxesandQualifiedInvestmentStatus”.
WheretheTrusteedeterminestheREITdoesnothavecashinanamountsufficienttomakepaymentofthefull
amountofanydistributionthathasbeendeclaredpayable,orotherwisemadepayable,ontheduedateforsuch
paymentorforanyotherreasoncannotpaythedistributionincash,ortheTrusteeotherwiseelectsinrespectof
anysuchdistributioninitssoleandabsolutediscretion,thepaymentwillbedistributedtoUnitholdersintheform
ofadditionalUnits,orfractionsofUnits,havingavalueequaltothecashshortfall.SuchadditionalUnitswillbe
issuedproratainproportiontothenumberofUnitsheldbyUnitholdersofrecordonsuchdate.Suchadditional
Unitswillbeissuedpursuanttoapplicableexemptionsunderapplicablesecuritieslaws,discretionaryexemptions
grantedbyapplicablesecuritiesregulatoryauthoritiesoraprospectusorsimilarfiling.
DistributiononTerminationoftheREIT
On the termination of the REIT, the assets of the REIT shall be liquidated and the proceeds distributed in the
followingorder:
(a)
topaytheliabilitiesoftheREITandtoestablishreservesforthecontingentliabilitiesoftheREIT
relatingtotheREITproperty;
(b)
topayanyfeesowingrelatingtotheREITproperty;
(c)
topayunpaidfeesandexpensesoftheTrusteerelatingtotheREITproperty;and
(d)
toredeemfromtheREIT’spropertytheUnitsonaproratabasisfromtheUnitholders.
PowersandResponsibilitiesoftheTrustee
SubjectonlytotheexpresslimitationscontainedintheDeclarationofTrust,andinadditiontoanyotherpowers
and authorities conferred by the Declaration of Trust, the Administration Agreement, or which the Trustee may
havebyvirtueofanypresentorfuturestatuteorruleoflaw,theTrustee,withoutanyactionorconsentbythe
Unitholders,willhaveandmayexerciseatanytimeandfromtimetotimethefollowingpowersandauthorities,
whichmaybeexercisedbytheTrusteeinsuchmanneranduponsuchtermsandconditionsastheymayfromtime
totimedetermineproper:
(a)
CW7623442.10
tosupervisetheactivitiesandmanagetheinvestmentsandaffairsoftheREIT;
Ͳ33Ͳ
(e)
to hold the REIT property in safekeeping, retaining moneys, securities, property, assets or
investments,andinvestingmoneysfromtimetotimeformingpartoftheREITproperty;
(f)
to ensure that the Subscription Proceeds are invested in Class A CDN LP Units and Class A
CDN/USLPUnits;
(g)
toborrowmoneyasnecessarytopaydistributionstoUnitholders,andencumberingRealtyTrust
propertyinrespectthereof;
(h)
topayproperlyincurredexpensesoutofTrustproperty;
(i)
to open, operate and close bank accounts and other similar credit, deposit and banking
arrangements, to negotiate and sign banking and financing contracts and agreements and
depositmoniesfromtimetotimeformingpartoftheREITpropertyinsuchaccounts;
(j)
topossessandexerciserights,powersandprivilegesappertainingtoownershipoforinterestsin
Trustproperty;
(k)
toholdlegaltitletotheREITproperty;
(l)
toappointtheaccountantsoftheREIT;
(m)
toensurecompliancewithapplicablesecuritieslegislation;
(n)
toprepareandfileorcausetobepreparedandfiledallrequisitereturns,reportsandfilings;
(o)
toprovideallrequisiteofficeaccommodationandassociatedfacilities;
(p)
to provide or cause to be provided to the REIT all other administrative and other services and
facilitiesrequiredbytheREIT;
(q)
to maintain or cause to be maintained complete records of all transactions in respect of the
investmentportfoliooftheREIT;
(r)
toprescribeanyinstrumentprovidedfororcontemplatedbythisDeclarationofTrust;
(s)
toeffectpaymentofdistributionstotheUnitholders;
(t)
tocollect,sueforandreceiveallsumsofmoneyorotherpropertyoritemsthatarebelieveddue
totheREITandobtainsecurity,includingencumbrancesonassets,tosecurethefullpaymentof
monies owed to the REIT and the performance of all obligations in favour of the REIT, and to
exercisealloftherightsoftheREIT,andtoperformalloftheobligationsoftheREIT,undersuch
security;
(u)
topossessandexercisealltherights,powersandprivilegespertainingtotheownershipofallor
anypartoftheREITproperty,includingtheClassACDNLPUnitsandClassACDN/USLPUnits,to
thesameextentthatanypersonmight,unlessotherwiselimitedherein;
(v)
wherereasonablyrequired,toengage,employ,contractwithorretainonbehalfoftheREITany
persons as agents, representatives, employees or independent contractors in one or more
capacities;
(w)
exceptasprohibitedbylaw,todelegatefromtimetotimetotheREIT'semployees,consultants,
agentsandotherpersonsthedoingofsuchthingsandtheexerciseofsuchpowershereunderas
CW7623442.10
Ͳ34Ͳ
the Trustee may from time to time deem expedient, so long as any such delegation is not
inconsistentwithanyoftheprovisionsofthisDeclarationofTrustandsubjectatalltimestothe
generalcontrolandsupervisionoftheTrusteeasprovidedforherein;
(x)
toissueandredeemUnitspursuanttothetermsandconditionsoftheDeclarationofTrust;
(y)
where desirable to make or cause to be made application for the listing or quotation on any
stockexchangeormarketofUnits,andtodoallthingswhichintheopinionoftheTrusteemay
benecessaryordesirabletoeffectormaintainsuchlistingorquotation;
(z)
tousebesteffortstodoallsuchactsandthingsasarenecessarytoensurethattheREITqualifies
asa“mutualfundtrust”pursuanttosubsection132(6)oftheTaxAct;
(aa)
topayalltaxesorassessments,ofwhateverkindornature,whetherwithinoroutsideCanada,
imposed upon or against the Trustee in connection with the REIT property, undertaking or
income of the REIT, or imposed upon or against the REIT property in connection with the
undertakingorincomeoftheREIT,oranypartthereof,andtosettleorcompromisedisputedtax
liabilities,andfortheforegoingpurposestomakesuchreturns,takesuchdeductions,andmake
such designations, elections, allocations and determinations in respect of Trust Income, Net
Realized Capital Gains or any other amounts distributed, allocated and made payable to
Unitholders in a year and any other matter as shall be permitted under the Tax Act and
analogousprovisionsofanyprovincialincometaxlegislation,andtodoallsuchotheractsand
things as may be deemed by the Trustee in its sole discretion to be necessary, desirable or
convenient;
(bb)
to do all such acts and things, and to execute, deliver and perform the obligations of the REIT
underallsuchagreementsandinstrumentsasarenecessarytocompletetheOfferingorasare
contemplatedbythisOfferingMemorandum;and
(cc)
todoallsuchotheractsandthingsandexecuteallsuchagreementsandotherinstrumentsas
areincidentaltotheforegoing,andtoexerciseallpowersthatarenecessaryorusefultocarryon
thepurposeandactivitiesoftheREIT,topromoteoradvanceanyofthepurposesorobjectives
forwhichtheREITisformedandtocarryouttheprovisionsoftheDeclarationofTrustwhether
ornothereinspecificallymentioned.
TheTrusteeoranysuccessortrusteemayresignupon60days’noticetotheUnitholders,ormayberemovedbya
SpecialResolutionoftheUnitholdersbynoticetotheTrusteenotlessthansixty(60)dayspriortothedatethat
suchremovalistotakeeffect,providedasuccessortrusteeisappointedortheREITisterminated.Intheevent
thattheTrusteeresignsorisremovedorbecomesincapableofactingorifforanycauseavacancyshalloccurin
theofficeoftheTrustee,asuccessortrusteeshallforthwithbeappointedbytheUnitholdersbySpecialResolution
tofillsuchvacancy.ForthwithfollowingtheappointmentofasuccessorTrustee,theformerTrusteewillaccount
tothenewTrusteeforallTrustPropertywhichtheformerTrusteeholdsastrusteeandwillexecuteanddeliver
suchdocumentsasthenewTrusteemayrequirefortheconveyanceofanyTrustPropertyheldintheTrustee’s
name.
TheDeclarationofTrustprovidesthattheTrusteewillnotbeliableincarryingoutitsdutiesundertheDeclaration
ofTrustexceptincaseswheretheTrusteefailstoacthonestly,ingoodfaithandinthebestinterestsoftheREIT
and Unitholders or to exercise the degree of care, diligence and skill that a reasonably prudent trustee would
exercise in comparable circumstances, and shall be indemnified out of the REIT property unless there has been
wilful default or fraud by the Trustee. In addition, the Declaration of Trust contains other customary provisions
limiting the liability of the Trustee and indemnifying the Trustee in respect of certain liabilities incurred by it in
carryingoutitsduties.
CW7623442.10
Ͳ35Ͳ
TheTrusteewillnotreceivefeesfromtheREITforactingastrusteeoftheREIT,butwillbereimbursedbytheREIT
forallexpensesandliabilitieswhichareproperlyincurredbytheTrusteeinconnectionwiththeactivitiesofthe
REIT.
MeetingsofUnitholdersandResolutions
The Trustee may, at any time, convene a meeting of the Unitholders or of a Class of Unitholders and will be
requiredtoconveneameetingonreceiptofarequestinwritingofUnitholdersholding,inaggregate,50%ormore
of the Units outstanding. Any matter to be considered at a meeting of Unitholders, other than certain matters
requiringtheapprovalofUnitholdersbySpecialResolution,willrequiretheapprovalofUnitholdersbyanOrdinary
Resolution.AquorumforanymeetingconvenedtoconsidersuchmatterwillconsistoftwoormoreUnitholders
presentinpersonorbyproxyandrepresentingnotlessthan10%oftheUnitsthenoutstanding.Ifaquorumisnot
presentatameetingwithin30minutesafterthetimefixedforthemeeting,themeeting,ifconvenedpursuantto
arequestofUnitholders,willbecancelled,butotherwisewillbeadjournedtoanotherday,notlessthan10days
later,selectedbytheChairofthemeetingandnoticewillbegiventotheUnitholdersofsuchadjournedmeeting.
TheUnitholderspresentatanyadjournedmeetingwillconstituteaquorum.
EachUnitholderisentitledtoonevoteperUnitheld.
The following matters require approval by Ordinary Resolution and shall be deemed approved, consented to or
confirmed,asthecasemaybe,upontheadoptionofsuchOrdinaryResolution:
(a)
matters relating to the administration of the REIT for which the approval of the Unitholders is
required by policies of the securities regulatory authorities or other applicable laws and
regulations in effect from time to time, and such policies, laws or regulations do not require
approvalbySpecialResolution;
(b)
subject to the requirements for a Special Resolution, any matter or thing stated herein to be
requiredtobeconsentedtoorapprovedbytheUnitholders;and
(c)
any matter which the Trustee considers appropriate to present to the Unitholders for their
confirmationorapproval.
Each of the following actions requires approval by Special Resolution, the terms of which shall specify the date
uponwhichtheproposedactionshallbeundertakenandthepartywhoshallundertaketheaction:
ThefollowingpowersshallonlybeexercisablebySpecialResolutionpassedbytheUnitholders:
(a)
consentingtotheamendmentofthisDeclarationofTrustexceptasprovidedherein;
(b)
changestotheinvestmentobjectivesoftheREIT;
(c)
theremovaloftheTrustee;
(d)
theappointmentofanewtrustee;
(e)
theterminationoftheREIT;
(f)
areductionintheamountpayableonanyoutstandingUnitsuponliquidationoftheREIT;
(g)
anincreaseintheliabilityofanyUnitholders;or
(h)
thealterationoreliminationofanyvotingrightspertainingtoanyoutstandingUnits.
CW7623442.10
Ͳ36Ͳ
Notwithstandingtheaboveoranyotherprovisionherein,noconfirmation,consentorapprovalshallbesoughtor
haveanyeffectandnoUnitholdersshallbepermittedtoeffect,confirm,consenttoorapprove,inanymanner
whatsoever,wherethesameincreasestheobligationsoforreducesthecompensationpayabletoorprotection
providedtotheTrustee,exceptwiththepriorwrittenconsentoftheTrustee.
TerminationoftheREIT
TheTrusteemayatanytimeterminateanddissolvetheREITbygivingtoeachthenUnitholderwrittennoticeofits
intentiontoterminatetheREITatleastninety(90)daysbeforethedateonwhichtheREITistobeterminated.
Upontermination,thenetassetsoftheREITwillbedistributedtotheUnitholders.Priortotheterminationdate,
theTrusteewillconverttheassetsoftheREITtocash.
After paying, retiring or discharging or making provision for the payment, retirement or discharge of all known
liabilities and obligations of the REIT, providing for indemnity against any other outstanding liabilities and
obligationstherefor(actualandcontingent)andpayinganyunpaidfeesandexpensesoftheREIT,theTrusteewill
redeemtheUnitsfromtheREITpropertyonaproratabasis.
AmendmentstotheDeclarationofTrust
Subjecttotherestrictionsdescribedin“MeetingsofUnitholdersandResolutions”,anyprovisionoftheDeclaration
of Trust may be amended, deleted, expanded or varied by the Trustee, if the amendment is, in the opinion of
counsel,notamaterialchangewhichadverselyaffectsthepecuniaryvalueoftheinterestofanyUnitholderinthe
REITanddoesnotrelateto:
(a)
anymaterialchangeintheposition,authorityorresponsibilityoftheTrustee;
(b)
anychangeintheinvestmentpolicyoftheREIT;or
(c)
anychangeintheDeclarationofTrust,ifsuchchangeismaterialorisotherwiserequiredbythe
DeclarationofTrust.
InformationandReports
Aftertheendofeachcalendarquarter,theTrusteewilldistributeormakeavailableinaccordancewithapplicable
securitieslegislationtoeachUnitholdertheREIT’saccountantpreparedandreviewedfinancialstatements.Onor
beforeMarch31ineachyear,theTrusteewill:
(a)
deliver or make available to each Unitholder: the REIT’s audited financial statements for the
previous fiscal year and such other reports as are from time to time required by applicable
securitiesorotherlaws;and
(b)
delivertoeachpersonwhoreceivedadistributionatanytimeduringthepreviouscalendaryear,
taxreportinginformationinsuchamanneraswillenablesuchpersontoreporttheincometax
consequencesofinvestmentinUnitsintheirannualCanadianincometaxreturn.
Such financial statements will be prepared in accordance with IFRS; provided that such statements and the
obligations to deliver such statements may vary from such principles to the extent required to comply with
applicablesecuritieslawsorsecuritiesregulatoryrequirementsortotheextentpermittedbyapplicablesecurities
regulatoryauthorities.
Certificates
TheREITwillnotissueCertificatesforUnitstoUnitholders.
CW7623442.10
Ͳ37Ͳ
LiabilityofUnitholders
IncircumstanceswhereamaterialobligationoftheREITiscreated,itisprovidedintheDeclarationofTrustthat
the Trustee shall use its best efforts to have any such obligations modified so as to achieve disavowal of any
personalliabilityofUnitholders.Further,theTrusteewillcausetheoperationsoftheREITtobeconducted,with
theadviceofcounsel,insuchawayandinsuchjurisdictionsastoavoid,asfaraspossible,anymaterialriskof
liabilityontheUnitholdersforclaimsagainsttheREIT.
IncaseofclaimsmadeagainsttheREIT,whichdonotariseoutofcontracts,forexample,claimsfortaxesorclaims
in tort, personal liability may also arise against Unitholders. However, to the extent that a Unitholder is held
personally liable in respect of liabilities of the REIT, such Unitholder will be entitled to indemnity and
reimbursementoutoftheREITpropertytothefullextentofsuchliabilityandforallcostsofanylitigationorother
proceedingsinwhichsuchliabilityhasbeendetermined,including,withoutlimitation,allfeesandisbursementsof
counsel.
Unitholders’RightstoRedeem
AUnitholderwishingtoredeemthewholeoranypartofhisorherUnits(a“Redemption”)maydeliveranoticeof
such desire (the “Redemption Notice”) to the REIT, subject to the time frames and restrictions set out below.
UponreceiptbytheREIToftheRedemptionNotice,theUnitholdershallthereafterceasetohaveanyrightswith
respecttotheUnitstenderedforredemption(otherthantoreceivetheredemptionpaymenttherefor)including
therighttoreceiveanydistributionsthereonthataredeclaredpayabletotheUnitholdersofrecordinrespectof
theClassofUnitstheUnitholderhaspurportedtoredeemonadatethatissubsequenttothedayofreceiptbythe
REIToftheRedemptionNotice.UnitsshallbeconsideredtobetenderedforredemptiononthedatethattheREIT
has, to the satisfaction of the Trustee, received the Redemption Notice and further documents or evidence the
Trusteemayreasonablyrequirewithrespecttotheidentity,capacityorauthorityofthepersongivingsuchnotice.
Subject to applicable laws and the conditions listed below, the REIT will redeem the Units specified in such
RedemptionNotice.ThetotalamountpayablebytheREITbycashpaymentinrespectoftheredemptionofUnits
in any fiscal year of the REIT will not exceed the redemption price payable in respect of 10% of the issued and
outstandingUnits.TheTrusteemay,initssolediscretion,redeembycashpaymentUnitsinexcessof10%ofthe
issuedandoutstandingUnitsinafiscalyearoftheREIT,ifintheopinionoftheTrustee,doingsowillnotadversely
affecttheREIT.
The price per Unit to be redeemed by cash payment will be equal to the fair market value of the unit to be
redeemedcalculatedattheauditedyearendfinancialsimmediatelyprecedingtheredemptiondateplusthepro
rataportionofanyunpaiddistributionsthereonwhichhavebeendeclaredtounitholdersbutremainunpaidasat
the redemption date to the extent same are not otherwise included in the fair market value of the unit to be
redeemedless(i)anycostsincurredbytheREITinthesaleoftheUnit(s),(ii)anycostsoftheREITincurredwith
respect to the redemption as may be determined by the Trustee in its sole discretion and (iii) the applicable
RedemptionPenaltyAmount,ifany.
Forgreatercertainty,thereisnoRedemptionPenaltyapplicabletoClassBUnitsandholdersofClassBUnitswill
receive a redemption bonus equal to $60 per Class B Unit per annum, pro rated based on the number of days
duringwhichtheClassBUnitswereoutstanding.TheREITwillhavetheoptiontoextendthedateforredemption
oftheClassBUnitsbyonetermofsixmonths,duringwhichthefixedannualreturnwillcontinuetobepayable.
Notwithstandingtheforegoing,ClassBUnitholdersmaynotdeliverRedemptionNoticestotheTrusteeinrespect
ofanyoftheirClassBUnitsuntilthedatethatis12monthsfromthedatethatthesubscriptionforsuchClassB
Units was accepted by the Trustee on behalf of the REIT. Similarly, there is no Redemption Penalty payable in
respectoftheClassFUnits,andClassFUnitholdersmaydeliverRedemptionNoticestotheTrusteeatanytime.
TheREITwillpaytheredemptionpricepayableinrespectofanyUnitbywayofacashpaymentwithin90daysof
the receipt by the Trustee of a Redemption Notice. Payments made by the REIT of such redemption price is
conclusivelydeemedtohavebeenmadeuponthemailingofachequeinapostageprepaidenvelopeaddressedto
CW7623442.10
Ͳ38Ͳ
theformerUnitholderunlessthechequeisdishonoreduponpresentment.Uponthepaymentofsuchredemption
price,theREITwillbedischargedfromallliabilitytotheformerUnitholderinrespectoftheUnitssoredeemed.
If the REIT receives Redemption Notices for Units in excess of the number of Units to be redeemed by cash
payment,asprovidedabove,thepriceperUnitpayablebytheREITupontheredemptionofsuchexcessUnitswill
be equal to the amount of the unreturned Capital Contribution of each Unit to be redeemed as of the date of
receiptbytheTrusteeofadulycompletedRedemptionNoticeless(i)anycostsincurredbytheREITinthesaleof
theUnit(s),(ii)anycostsoftheREITincurredwithrespecttotheredemptionasmaybedeterminedbytheTrustee
initssolediscretionand(iii)theapplicableRedemptionPenaltyAmount,ifany.
ForsuchexcessUnits,theredemptionpriceperUnitmultipliedbythenumberofUnitstenderedforredemption
will be paid to a Unitholder and satisfied by way of either of the following methods to be selected at the sole
discretionoftheTrustee:
(a)
the issuance and delivery of a number of Trust Notes, each in the principal amount of $100,
having an aggregate principal amount, determined on the redemption date, equal to the
redemptionpriceperUnitmultipliedbythenumberofUnitstenderedforredemption;
(b)
a distribution in specie to the Unitholder of a number of Class A CDN LP Units and/or Class A
CDN/US LP Units having an aggregate value determined on the redemption date based on the
redemptionpriceoftheClassACDNLPUnitsand/orClassACDN/USLPUnitsundertheterms
andconditionsoftheCDNLPAgreementorCDN/USLPAgreement,asapplicable,equaltothe
redemptionpriceperUnitmultipliedbythenumberofUnitstenderedforredemption;or
(c)
a distribution to the Unitholder of a number of Debt Securities having an aggregate principal
amount,determinedontheredemptiondate,equaltotheredemptionpriceperUnitmultiplied
bythenumberofUnitstenderedforredemption.
Where the REIT makes a distribution in specie of a pro rata number of of Class A CDN LP Units and/or Class A
CDN/US LP Units on a redemption of Units pursuant to (a), (b) and (c) immediately above, the Trustee may
designate as payable to the particular redeeming Unitholders receiving of Class A CDN LP Units and/or Class A
CDN/USLPUnitsportionsoftheamountofthevalueofsuchofClassACDNLPUnitsand/orClassACDN/USLP
Units:
(a)
notexceedingtheamountofanycapitalgainoftheREITasaresultofthedistributionofsuch
propertyasanamountpayableoutoftheNetRealizedCapitalGainsoftheREIT;and
(b)
notexceedinganallocableshareofincomeinrespectoftheofClassACDNLPUnitsand/orClass
A CDN/US LP Units so distributed determined in accordance with the terms of the CDN LP
AgreementorCDN/USLPAgreement,asapplicable,
togetherwithanyotherincomerealizedbytheREITasaresultofadistributionofClassACDNLPUnitsand/or
ClassACDN/USLPUnits,asanamountpayableoutofTrustIncome.
UnitsinanygivenClasswillberedeemedaccordingtotheorderinwhichRedemptionNoticesinrespectofsuch
Classarereceived.
ForcedRedemptionUponNonͲResidency
AtnotimemayNonͲresidentsorDesignatedBeneficiariesbeUnitholders.IfaUnitholderbecomesaNonͲresident
orotherwisebecomesaDesignatedBeneficiary,theTrusteemayinitsdiscretion,eitherforthwithredeemallora
partoftheUnitsheldbysuchUnitholder,orbywrittennoticerequiretheUnitholderto,within30days,transfer
itsUnitstoatransfereewhoisnotaNonͲresidentorDesignatedBeneficiary.Theredemptionproceedspayablefor
eachUnittoberedeemedwillbeequalto85%ofthelesseroftheSubscriptionPriceandtheamountperUnit
CW7623442.10
Ͳ39Ͳ
determinedbytheTrusteeinaccordancewiththetermsoftheTrustDeclarationonthedayonwhichtheTrustee
issues the redemption notice. The amount so determined will be payable in cash subject to the limitations
providedforintheTrustDeclaration,inwhichcasetheredemptionproceedsmaybepaidinspecieinaccordance
withtheprovisionsoftheTrustDeclarationbydeliveryofClassACDNLPUnitsand/orClassACDN/USLPUnits,to
theextentpermittedbytheCDLPLPAgreementand/orCDN/USLPAgreementasapplicable,orbydeliveryofDebt
Securitiesinanyothercase.AnycapitalgainsorincomerealizedinayearbytheREITasaresultofanydisposition
ofpropertyinaccordancewiththeforegoingwillbedesignatedandtreatedashavingbeenpaidtotheredeemed
UnitholderinaccordancewiththeTrustDeclaration.
IssuanceofUnits
The REIT mayissue new Units from time to time. Unitholders holdingUnits do not have any preͲemptive rights
wherebyadditionalUnitsproposedtobeissuedarefirstofferedtoexistingUnitholdersholdingUnits.NewUnits
maybeissuedaspartofanongoingcontinuousofferingbywayofthisOfferingMemorandum,asadistribution,
for cash through rights offerings to existing Unitholders(i.e. in whichUnitholders receive rights to subscribe for
newUnitsinproportiontotheirexistingholdingsofUnits)orthroughprivateplacements(i.e.offeringstospecific
investorswhicharenotmadegenerallyavailabletothepublicorexistingUnitholders).Thepriceorthevalueof
the consideration for which Units may be issued will be the price determined by the Trustee based on the Net
AssetValue(asdefinedintheTrustDeclaration)oftheREIT.
TheforegoingisasummaryonlyofcertainofthematerialprovisionsoftheTrustDeclaration.Foracomplete
understanding of all of the provisions of the Trust Declaration, reference should be made to the Trust
Declarationitself,acopyofwhichisavailablefromtheTrustee.
B.
ClassACDNLPUnits
TherightsandobligationsoftheGeneralPartnerandtheLimitedPartnersaregovernedbytheCDNLPAgreement
made as of June 25, 2015 between the General Partner and Steve Froese as the founding limited partner. The
followingisasummaryofcertainmaterialprovisionsoftheCDNLPAgreement.Thissummarydoesnotpurportto
be complete and reference should be to the CDN LP Agreement itself, a copy of which is available from the
General Partner. Capitalized terms in this summary which are not defined in this Offering Memorandum are
definedintheCDNLPAgreement.
Capital in the CDN LP – Interests in the CDN LP consist of an unlimited number of Class A CDN LP Units, an
unlimitednumberofClassBunitsandtheinterestheldbytheGeneralPartner.TheGeneralPartnerhasmadea
capitalcontributionof$10totheCDNLP,andhasnofurtherobligationtocontributecapital.SteveFroese,asthe
CDN LP Founding Limited Partner, has also made a capital contribution of $10.00 to the CDN LP, which capital
contributionwillbereturnedtohimuponthecompletionoftheinitialsubscriptionforCDNLPlimitedpartnership
units.
Distributions–TheCDNLPwillpayanddistributeanamountequaltoallcashflowfromtheoperationoftheCDN
LP’s business after payment of all obligations relating to the Properties, including all principal and interest
payments under any financing, and after the creation of a reasonable working capital and capital improvement
reserveasdeterminedbytheGeneralPartner.Aswell,theGeneralPartnerwilldistributetheproceedsreceived
fromasaleorrefinancingofthePropertiesoranyoneofthem,orothercapitaltransactionsuchasthereceiptof
insurance or expropriation proceeds, after the creation of a reasonable reserve as determined by the General
Partner.Inanysuchcase,suchdistributionswillbeascashflowpermitsandwillbedistributedasfollows:
(c)
First,as0.01%thereof,totheGeneralPartner;
(d)
Second,toLimitedPartnersholdingClassAUnitsoftheCDNLP(each,a“ClassACDNLPUnit”),
an amount equal to $70 per annum per Class A CDN LP Unit (the “Class A Preferred Return”)
commencingasofthedateaUnitCertificaterepresentingaClassACDNLPUnitisissuedtosuch
LimitedPartner;
CW7623442.10
Ͳ40Ͳ
(e)
(f)
third,toLimitedPartnersholdingClassBUnitsoftheCDNLP(each,a“ClassBCDNLPUnit”),an
amountequalto30/70thofthedifferencebetween:
(i)
theamountpaidtotheLimitedPartnersholdingClassACDNLPUnitsinrespectofthe
ClassAPreferredReturn;less
(ii)
theamountwhichwouldhavebeenpaidtotheLimitedPartnersholdingClassACDNLP
UnitsinrespectoftheClassAPreferredReturnifsuchamounthadbeencalculatedon
thebasisof$60perannumperClassACNDLPUnit;
thereafter, 70% to the limited partners holding Class A CDN LP Units and 30% to the limited
partnersholdingClassBCDNLPUnitsoftheCDNLP.
DistributionsuponwindͲup,etc.ͲUpontheliquidation,dissolutionorwindͲupoftheCDNLP,allfundsrealizedby
the CDN LP from the disposition of its assets, after the payment or provision for the payment of the debts and
liabilitiesoftheCDNLPandliquidationexpenses,willbeappliedanddistributedasfollows:
(g)
first, to the Limited Partners holding Class A CDN LP Units, pro rata in accordance with their
respectiveproportionateshares,totheextentoftheirunreturnedinitialcapitalcontributions;
(h)
second,totheLimitedPartnersholdingClassACDNLPUnits,proratainaccordancewiththeir
respective proportionate shares, until each has received an amount which, when aggregated
withthedistributionspreviouslyreceivedbythem,isequalto(butnotinexcessof)thesumof
$70 per annum per Class A CDN LP Unit commencing as of the date a Unit Certificate
representingaClassACDNLPUnitisissuedtosuchLimitedPartner;
(i)
third, to the Limited Partners holding Class B CDN LP Units, pro rata in accordance with their
withthedistributionspreviouslyreceivedbythemisequalto30/70thsofthedifferencebetween:
(j)
(i)
theamountpaidtotheLimitedPartnersholdingClassACDN/USLPUnitsinrespectof
theClassAPreferredReturn;less
(ii)
the amount which would have been paid to the Limited Partners holding Class A
CDN/US LP Units in respect of the Class A Preferred Return if such amount had been
calculatedonthebasisof$60perannumperClassACND/USLPUnit;
thereafter, 70% to the limited partners holding Class A CDN LP Units and 30% to the limited
partnersholdingClassBCDNLPUnitsoftheCDNLP.
AllocationofIncomeandLossesforTaxandAccountingPurposesͲForincometaxandaccountingpurposes,allnet
incomeandlossesfromoperationsforeachfiscalyearoftheCDNLPwillbeallocatedinthemannerinwhichcash
is distributed, as set out above. The General Partner shall have the discretion, acting in good faith, to allocate
revenue and expenses on a daily, incremental basis to ensure a fair distribution amongst Limited Partners after
takingintoconsiderationanymattersthatmayberelevant.
Additional Capital Contributions Ͳ No Limited Partner is required to make additional capital contributions to the
CDNLPoverandabovethepurchasepricepaidforsuchLimitedPartner’sClassACDNLPUnits.
ManagementandControloftheCDNLPͲUnderthetermsoftheCDNLPAgreement,theGeneralPartnerisgiven
fullpowerandauthoritytomanage,control,administerandoperatethebusinessoftheCDNLP,exceptforcertain
matters being subject to votes of the Limited Partners. No Limited Partner is permitted to take part in the
managementofthebusinessoftheCDNLP.TheGeneralPartnerhasunlimitedliabilityforthedebts,liabilitiesand
obligations of the CDN LP to the extent required by the Partnership Act (British Columbia) and other applicable
CW7623442.10
Ͳ41Ͳ
legislation.ALimitedPartnerwillnotbeliableforanydebts,liabilitiesorobligationsoftheCDNLPinexcessof
suchLimitedPartner’spaidcapitalcontributionsandanyunpaidcapitalcontributionsagreedtobepaidinrespect
ofsuchLimitedPartner’sUnits,providedsuchLimitedPartnerdoesnottakepartinthecontrolormanagementof
thebusinessoftheCDNLP.
RemovaloftheGeneralPartner–Thelimitedpartnersmay,byspecialresolutionandupon60days’writtennotice
to the General Partner, remove the General Partner without cause, and may remove the General Partner for
cause, if such cause is not remedied after reasonable notice from the limited partners. In either such case, the
limitedpartnerswillappoint,concurrentlywiththeremoval,areplacementgeneralpartnertoassumeallofthe
responsibilitiesandobligationsoftheremovedGeneralPartner,andtheremovedGeneralPartnerwillbereleased
of its liabilities under the CDN LP Agreement and indemnified for any damages and expenses with respect to
eventswhichoccurinrelationtotheCDNLPaftertheappointmentofthenewGeneralPartner.
IntheeventoftheremovaloftheGeneralPartner,theCDNLPmayterminateanyagreementsmadebetweenthe
CDNLPandtheGeneralPartnerorarelatedparty,uponthepaymentbytheCDNLPtotheGeneralPartneror
such related party of the amount stated in such agreement to be payable upon termination or, in the absence
thereof,areasonableterminationcompensation.Aswell,theCDNLPwillpurchasefromtheGeneralPartnerits
interestintheCDNLPforapriceequaltothefairmarketvaluethereof.
TheremovalandreplacementoftheGeneralPartnerwillnotdissolvetheCDNLP,andthebusinessoftheCDNLP
willbecontinuedbythenewgeneralpartner.
NoTransferabilityͲLimitedPartnersmaynottransfer,assign,pledge,encumberordisposeofanyClassACDNLP
Units without the written consent of the General Partner. As well, Limited Partners may not sell, transfer or
disposeoflessthanalloftheirUnits.
CertificatesͲCertificatesforUnitswillbeissuedtoLimitedPartners.
C.
ClassACDN/USLPUnits
The rights and obligations of the General Partner and the Limited Partners are governed by the CDN/US LP
Agreement made as of June 25, 2015 between the General Partner and Steve Froese as the founding limited
partner. The following is a summary of certain material provisions of the CDN/US LP Agreement. This summary
doesnotpurporttobecompleteandreferenceshouldbetotheCDN/USLPAgreementitself,acopyofwhichis
available from the General Partner. Capitalized terms in this summary which are not defined in this Offering
MemorandumaredefinedintheCDN/USLPAgreement.
CapitalintheCDN/USLP–InterestsintheCDN/USLPconsistofanunlimitednumberofClassACDN/USLPUnits,
anunlimitednumberofClassBunitsandtheinterestheldbytheGeneralPartner.TheGeneralPartnerhasmadea
capitalcontributionof$10totheCDN/USLP,andhavenofurtherobligationtocontributecapital.SteveFroese,as
theCDN/USLPFoundingLimitedPartner,hasalsomadeacapitalcontributionof$10.00totheCDN/USLP,which
capital contribution will be returned to him upon the completion of the initial subscription for CDN LP limited
partnershipunits.
Distributions–TheCDN/USLPwillpayanddistributeanamountequaltoallcashflowfromtheoperationofthe
CDN/USLP’sbusinessafterpaymentofallobligationsrelatingtotheProperties,includingallprincipalandinterest
payments under any financing, and after the creation of a reasonable working capital and capital improvement
reserveasdeterminedbytheGeneralPartner.Aswell,theGeneralPartnerwilldistributetheproceedsreceived
fromasaleorrefinancingofthePropertiesoranyoneofthem,orothercapitaltransactionsuchasthereceiptof
insurance or expropriation proceeds, after the creation of a reasonable reserve as determined by the General
Partner.Inanysuchcase,suchdistributionswillbeascashflowpermitsandwillbedistributedasfollows:
(a)
CW7623442.10
first,as0.01%thereof,totheGeneralPartner;
Ͳ42Ͳ
(b)
second,toLimitedPartnersholdingClassAUnitsoftheCDN/USLP(each,a“ClassACDN/USLP
Unit”),anamountequalto$70perannumperClassACDN/USLPUnit(the“ClassAPreferred
Return”)commencingasofthedateaUnitCertificaterepresentingaClassACDN/USLPUnitis
issuedtosuchLimitedPartner;
(c)
third,to Limited Partnersholding ClassBUnits of the CDN/US LP(each, a “Class BCDN/USLP
Unit”),anamountequalto30/70thsofthedifferencebetween:
(d)
(i)
(ii)
calculatedonthebasisof$60perannumperClassACNDLPUnit;
thereafter,70%tothelimitedpartnersholdingClassACDN/USLPUnitsand30%tothelimited
partnersholdingClassBCDN/USLPUnitsoftheCDN/USLP.
DistributionsuponwindͲup,etc.ͲUpontheliquidation,dissolutionorwindͲupoftheCDN/USLP,allfundsrealized
bytheCDN/USLPfromthedispositionofitsassets,afterthepaymentorprovisionforthepaymentofthedebts
andliabilitiesoftheCDN/USLPandliquidationexpenses,willbeappliedanddistributedasfollows:
(a)
first,totheLimitedPartnersholdingClassACDN/USLPUnits,proratainaccordancewiththeir
respectiveproportionateshares,totheextentoftheirunreturnedinitialcapitalcontributions;
(b)
second, to the Limited Partners holding Class A CDN/US LP Units, pro rata in accordance with
their respective proportionate shares, until each has received an amount which, when
aggregatedwiththedistributionspreviouslyreceivedbythem,isequalto(butnotinexcessof)
the sum of $70 per annum per Class A CDN/US LP Unit commencing as of the date a Unit
CertificaterepresentingaClassACDN/USLPUnitisissuedtosuchLimitedPartner;
(c)
third,totheLimitedPartnersholdingClassBCDN/USLPUnits,proratainaccordancewiththeir
withthedistributionspreviouslyreceivedbythemisequalto30/70thsofthedifferencebetween:
(d)
(i)
(ii)
calculatedonthebasisof$60perannumperClassACND/USLPUnit;
thereafter,70%tothelimitedpartnersholdingClassACDN/USLPUnitsand30%tothelimited
partnersholdingClassBCDN/USLPUnitsoftheCDN/USLP.
AllocationofIncomeandLossesforTaxandAccountingPurposesͲForincometaxandaccountingpurposes,allnet
incomeandlossesfromoperationsforeachfiscalyearoftheCDN/USLPwillbeallocatedinthemannerinwhich
cashisdistributed,assetoutabove.TheGeneralPartnershallhavethediscretion,actingingoodfaith,toallocate
revenue and expenses on a daily, incremental basis to ensure a fair distribution amongst Limited Partners after
takingintoconsiderationanymattersthatmayberelevant.
Additional Capital Contributions Ͳ No Limited Partner is required to make additional capital contributions to the
CDN/USLPoverandabovethepurchasepricepaidforsuchLimitedPartner’sClassACDN/USLPUnits.
CW7623442.10
Ͳ43Ͳ
ManagementandControloftheCDN/USLPͲUnderthetermsoftheCDN/USLPAgreement,theGeneralPartneris
givenfullpowerandauthoritytomanage,control,administerandoperatethebusinessoftheCDN/USLP,except
forcertainmattersbeingsubjecttovotesoftheLimitedPartners.NoLimitedPartnerispermittedtotakepartin
the management of the business of the CDN/US LP. The General Partner has unlimited liability for the debts,
liabilitiesandobligationsoftheCDN/USLPtotheextentrequiredbythePartnershipAct(BritishColumbia)and
other applicable legislation. A Limited Partner will not be liable for any debts, liabilities or obligations of the
CDN/US LP in excess of such Limited Partner’s paid capital contributions and any unpaid capital contributions
agreedtobepaidinrespectofsuchLimitedPartner’sUnits,providedsuchLimitedPartnerdoesnottakepartin
thecontrolormanagementofthebusinessoftheCDN/USLP.
RemovaloftheGeneralPartner–Thelimitedpartnersmay,byspecialresolutionandupon60days’writtennotice
to the General Partner, remove the General Partner without cause, and may remove the General Partner for
cause, if such cause is not remedied after reasonable notice from the limited partners. In either such case, the
limitedpartnerswillappoint,concurrentlywiththeremoval,areplacementgeneralpartnertoassumeallofthe
responsibilitiesandobligationsoftheremovedGeneralPartner,andtheremovedGeneralPartnerwillbereleased
ofitsliabilitiesundertheCDN/USLPAgreementandindemnifiedforanydamagesandexpenseswithrespectto
eventswhichoccurinrelationtotheCDN/USLPaftertheappointmentofthenewGeneralPartner.
IntheeventoftheremovaloftheGeneralPartner,theCDN/USLPmayterminateanyagreementsmadebetween
theCDN/USLPandtheGeneralPartnerorarelatedparty,uponthepaymentbytheCDN/USLPtotheGeneral
Partnerorsuchrelatedpartyoftheamountstatedinsuchagreementtobepayableuponterminationor,inthe
absencethereof,areasonableterminationcompensation.Aswell,theCDN/USLPwillpurchasefromtheGeneral
PartneritsinterestintheCDNLPforapriceequaltothefairmarketvaluethereof.
The removal and replacement of the General Partner will not dissolve the CDN/US LP, and the business of the
CDN/USLPwillbecontinuedbythenewgeneralpartner.
NoTransferabilityͲLimitedPartnersmaynottransfer,assign,pledge,encumberordisposeofanyClassACDN/US
LP Units without the written consent of the General Partner. As well, Limited Partners may not sell, transfer or
disposeoflessthanalloftheirUnits.
CertificatesͲCertificatesforUnitswillbeissuedtoLimitedPartners.
5.2
SubscriptionProcedure
TheUnitsarebeingofferedforsaletoqualifiedinvestorswhoareresidentsoftheProvincesofBritishColumbia,
Alberta,Saskatchewan,Manitoba,Quebec,NovaScotia,NewBrunswick,PrinceEdwardIslandandNewfoundland
andLabradorandinYukon,NunavutandtheNorthwestTerritories.TheUnitsareconditionallyofferedif,asand
whenSubscriptionsareacceptedbytheREITandsubjecttopriorsale.SubscriptionsforUnitswillbereceivedby
the REIT subject to rejection or allotment in whole or inpart and the right is reserved to close the subscription
booksatanytimewithoutnotice.
ThisOfferingisbeingmadeinaccordancewithcertainstatutoryregistrationandprospectusexemptionscontained
insecuritieslegislation,rulesandregulationsinCanada.SuchexemptionsrelievetheREITfromprovisionsunder
suchstatutesrequiringtheREITtoutilizearegisteredsecuritiesdealertoselltheUnitsandfileaprospectus.As
such, investors will not receive the benefits associated with the involvement of such registrants or the benefits
associated with purchasing the Units pursuant to a filedprospectus, includingthe review of the material by the
securitiescommissionsorsimilarregulatoryauthorityinsuchjurisdictions.
The Units are being offered on a continuous basis pursuant to exemptions from the prospectus and, where
applicable,registrationrequirementsofapplicablesecuritieslegislation.InordertosubscribeforUnits,investors
mustbewithinoneofthefollowingcategories:
(a)
CW7623442.10
an“accreditedinvestor”assuchtermisdefinedinNationalInstrument45Ͳ106;or
Ͳ44Ͳ
(b)
oneofthefollowing:
(i)
adirector,officer,founder,employeeorcontrolpersonoftheTrusteeoranaffiliateof
theTrustee;
(ii)
a spouse, parent, grandparent, brother, sister or child of a director, executive officer,
founderorcontrolpersonoftheTrusteeoranaffiliateoftheTrustee;
(iii)
a parent, grandparent, brother, sister or child of a spouse of a director, executive
officer,founderorcontrolpersonoftheTrusteeoranaffiliateoftheTrustee;
(iv)
aclosepersonalfriendofadirector,executiveofficer,founderorcontrolpersonofthe
TrusteeoranaffiliateoftheTrustee;or
(v)
aclosebusinessassociateofadirector,executiveofficer,founderorcontrolpersonof
theTrusteeoranaffiliateoftheIssuer;
(vi)
afounderoftheTrusteeoraspouse,parent,grandparent,brother,sister,child,close
personalfriendorclosebusinessassociateofafounderoftheTrustee;
(vii)
aparent,grandparent,brother,sisterorchildofthespouseofafounderoftheTrustee;
(viii)
aperson,themajorityofthevotingsecuritiesofwhicharebeneficiallyownedby,ora
majorityofthedirectorsofwhichare,personsdescribedinparagraphs(i)to(vii);or
(ix)
a trust or estate of which all of the beneficiaries or a majority of the Trustees or
executorsofwhichofwhicharebeneficiallyownedbypersonsdescribedinparagraphs
(i)to(vii),
provided that no Sale Fee will be payable in respect of the distribution of Units to any such
person;or
(c)
resident in a province or territory other than Ontario, and acknowledges having received and
readacopyofthisOfferingMemorandum;or
(d)
isacorporationandisacquiringUnitsthathaveaSubscriptionPriceofnotlessthan$150,000.
InvestorsmaysubscribeforUnitsbyreturningtotheREITat1601–128WestPenderStreet,Vancouver,BCV6B
1R8thefollowing:
(a)
acompletedSubscriptionFormintheformofScheduleAtothisOfferingMemorandum;and
(b)
either:
(i)
a certified cheque or bank draft in the amount of the Subscription Price per Unit
subscribedfor,payableto“APCapitalREIT”;or
(ii)
anirrevocabledirectiontoafinancialinstitutiontopaytotheREITthesubscriptionprice
perUnit.
Each Investor will also be required to sign two copies of a Risk Acknowledgment (Form 45Ͳ106F4), attached as
AppendixAtotheSubscriptionFormbeforesigningtheSubscriptionForm,inaccordancewiththerequirementsof
NationalInstrument45Ͳ106.InaccordancewiththerequirementsofNationalInstrument45Ͳ106,theTrusteewill
CW7623442.10
Ͳ45Ͳ
hold the subscription monies advanced by each Investor in trust for the Investor until midnight on the second
businessdayaftertheSubscriptionFormissignedbytheInvestor.
SubscriptionsreceivedwillbesubjecttorejectionorallotmentbytheREITinwholeorinpartintheTrustee’ssole
discretion. The REIT is not obliged to accept any subscription. If any subscription is not accepted, the REIT will
promptly return to the subscriber the Subscription Form and the money comprising such subscription.
ConfirmationofacceptanceofasubscriptionwillbeforwardedtothesubscriberbytheREIT.TheREITreservesthe
righttoclosethesubscriptionbooksatanytimewithoutnotice.
TheUnitshavenotbeenandwillnotberegisteredundertheUnitedStatesSecuritiesActof1933,asamended,
andsubjecttocertainexceptions,maynotbeofferedorsoldintheUnitedStates.
Allsubscriptiondocumentsshouldbereviewedbyprospectivesubscribersandtheirprofessionaladvisersprior
tosubscribingforUnits.
ITEM6ͲINCOMETAXESANDQUALIFIEDINVESTMENTSTATUS
Youshouldconsultyourownprofessionaladviserstoobtainadviceontheincometaxconsequencesthatapplyto
you.
6.1
IncomeTaxConsequences
ThefollowingsummaryoutlinestheCanadianfederalincometaxconsequencestoasubscriberwhoatallrelevant
times,forthepurposesoftheTaxAct,isresidentinCanadaanddealsatarm’slengthwiththeREIT.Theincome
tax consequences will not be the same for all Subscribers but will vary depending on a number of factors,
including:(i)theprovinceinwhichtheSubscriberresidesorcarriesonbusiness;(ii)whethertheUnitsacquiredby
the Subscriber will be characterized as capital property; (iii) whether the Subscriber is an individual, trust or
corporation:(iv)thenatureandamountoftheSubscriber’sincomefromothersources;and(v)whethertheUnits
arepurchasedby,orcontributedorsoldbytheSubscriberto,theSubscriber’sregisteredretirementsavingsplan
(“RRSP”),registeredretirementincomefund(“RRIF”),registerededucationsavingsplan(“RESP”),deferredprofit
sharing plan (“DPSP”), or taxͲfree savings account (“TFSA”). The following discussion of the income tax
consequences of an investment in Units is, therefore, of a general nature only, is not intended to constitute an
exhaustiveanalysisofthoseincometaxconsequencesandshouldnotbeinterpretedaslegalortaxadvicetoany
particularSubscriber.
Eachprospectivesubscribershouldobtainindependenttaxadviceastoboththefederalandprovincialincome
taxconsequencesofaninvestmentinUnits.
ThissummarydoesnotaddressthetaxconsiderationsofandtoaSubscriberborrowingmoneytoacquireUnits.
All such unitholders should consult their own tax advisors to determine the tax consequences to them of the
acquisition, holding and disposition of the Units acquired pursuant to this Offering. This summary does not
address any tax consequences which could arise as a result of any potential application of the general antiͲ
avoidanceruleofsubsection245(2)oftheTaxActtoanyparticulartransactionorseriesoftransactions.
ThissummaryisbasedonthecurrentprovisionsoftheTaxAct,theregulationstotheTaxAct(the“Regulations”),
allspecificamendmentstotheTaxActproposedbyoronbehalfoftheMinisterofFinanceforCanadapriortothe
date hereof, and the current published administrative practices of the Canada Revenue Agency (“CRA”), and it
assumesthatthosespecificamendmentswillbeenactedsubstantiallyasproposed,althoughnoassuranceinthis
regard can be given. This summary does not otherwise take into account or anticipate any changes in laws
whether by judicial, governmental or legislative decision or action nor does it take into account provincial or
foreignincometaxlegislationorconsiderations.
CW7623442.10
Ͳ46Ͳ
Introduction
This summary focuses on the Tax Act’s requirements for investments in the REIT to be qualified for RRSP, RRIF,
RESP,DPSP,andTFSApurposes.ThedeterminationofwhetherornottheUnitswillqualifydependsonwhether
the REIT meets the definition of a “mutual fund trust” as defined in the Tax Act or would otherwise meet the
definitionofa“mutualfundtrust”ifcertainprescribedconditionswerenotmet.Hence,thecentralfocusofthe
summaryiswhetherthebasicrequirementstobecomeamutualfundtrusthavebeenmetandifso,whetherthe
Trust’s proposed investments will disqualify it from being held by RRSPs, RRIFs, RESPs, DPSPs and TFSAs
(collectively,“DeferredPlans”).
RequirementsforBecomingaMutualFundTrust
DefinitionofMutualFundTrust
InorderfortheREITtomeetthedefinitionofamutualfundtrust,thefollowingrequirementsmustbemet:
(a)
theREITmustbea“unittrust”residentinCanada;
(b)
theREIT’sonlyundertakingmustbe:
(i)
the investing of its funds in property (other than real property or an interest in real
property);
(ii)
theacquiring,holding,maintaining,improving,leasingormanagingofanyrealproperty
(orinterestinrealproperty)thatiscapitalpropertyoftheREIT;or
(iii)
anycombinationoftheactivitiesdescribedinsubparagraphs(i)and(ii);
(c)
the REIT must comply with prescribed conditions relating to the number of its unitholders,
dispersalofownershipofitsunitsandpublictradingofitsunits;and
(d)
theREITmustnotbemaintainedprimarilyforthebenefitofnonͲresidents.
UnittrustresidentinCanada
For a trust to qualify as a “unit trust” it must be an inter vivos trust, the interest of each unitholder must be
described by reference to units of the trust, and the trust must meet certain prescribed conditions regarding
redeemabilityofunits,whicharediscussedbelow.TheREITisanintervivostrustunderwhichtheinterestofeach
beneficiary is described by reference to units. The residence of a trust is a question of fact, as a trust resides
wherethecentralmanagementandcontrolofthetrustactuallytakesplace.TheREITiscontrolledandmanaged
bytheTrusteewhichisataxableCanadiancorporationresidentinCanadaforthepurposesoftheTaxAct.Eachof
thedirectorsoftheTrusteeisaresidentofCanadaforthepurposesoftheTaxAct.Providedthatthedirectorsof
theTrusteeinfactexercisecentralmanagementandcontrolovertheTrustandsuchmanagementandcontrolis
normallyexercisedinCanada,theREITshouldmeettherequirementofbeingresidentinCanada.
RedeemabilityofUnits
The units of a “unit trust” must meet certain prescribed conditions regarding redeemability. In the view of the
Trustee,theprovisionsoftheDeclarationofTrust(seeItem5.1“TermsofUnits–Redemption”)relatingtothe
redemptionofUnitscomplywiththeredemptionrequirementnecessaryfora“unittrust”.IftheREITfailstomeet
theredemptionondemandtestforaclosedendedunittrustandfailstomeettheinvestmentrestrictionsforan
openendedunittrust,theREITwouldnotmeetthedefinitionofa“unittrust”.
RestrictedActivitiesofMutualFundTrust
CW7623442.10
Ͳ47Ͳ
InorderfortheREITtomeetthedefinitionofa“mutualfundtrust”,theactivitiesoftheREITmustberestrictedto
(i)theinvestingofitsfundsinproperty,(ii)theacquiring,holding,maintaining,improving,leasingormanagingof
anyrealproperty(orinterestinrealproperty)thatiscapitalpropertyoftheREIT,or(iii)somecombinationofthe
foregoing. Hence, a mutual fund trust is permitted to invest its funds in shares, debt obligations, and limited
partnershipinterests,andinrealpropertyaslongastherealpropertyiscapitalpropertytotheREIT.Investment
inrealpropertyforthepurposesofdevelopmentandresaleisnotpermitted.However,theCRAhascommented
that,initsview,investmentinrealpropertythatwillbedevelopedandthereafterheldascapitalpropertywould
beacceptable.
TheDeclarationofTrustincludesprovisionswhichrestrictthetypeoftheREIT’sinvestmentsinsuchmannerthat
thisrequirementshouldbemet.
OwnershipofUnits
TheREITmustcomplywithprescribedconditionsrelatingtothenumberofitsUnitholders,dispersalofownership
ofitsunitsandpublictradingofitsunitsataparticulartimeinordertoqualifyasamutualfundtrust.Inessence,
in order for the REIT to qualify as a mutual fund trust at a particular time, the REIT must have at least 150
beneficiarieseachofwhomholdsablockofUnitswithanaggregatefairmarketvalueofnotlessthan$500,and
the Units must have been qualified for distribution to the public by way of a prospectus or similar disclosure
document,suchasanofferingmemorandum.
UpontheREITachievingatleast150UnitholderseachholdingablockofUnitswithanaggregatefairmarketvalue
of$500ormore,theREITcanqualifyasamutualfundtrust.
NonͲResidentOwnershipofUnits
ThefinalrequirementofatrustmaintainingitsmutualfundtruststatusisthattheREITnotbeprimarilyforthe
benefitofnonͲresidentpersons.Theterm“primarily”isgenerallyinterpretedtomeangreaterthan50%.Under
thetermsoftheREITAgreement,nononͲresidentpersonsarepermittedtoholdunitsoftheREIT.Accordingly,
thistestshouldbemet.
TaxationoftheREIT,CDNLPandCDN/USLPandUnitholders
TaxationoftheREIT
TheREITwillnotpaytaxonitsnetincomeandnetrealizedcapitalgainsdistributedtoUnitholders(pursuanttothe
terms of the Declaration of Trust), provided the REIT has no nonͲresident or other designated beneficiaries. The
DeclarationofTrustprohibitstheissueofUnitstononͲresidentorotherdesignatedbeneficiaries.Lossesincurredby
the REIT cannot be allocated to Unitholders but may, subject to certain limitations and in accordance with the
applicableprovisionsoftheTaxAct,bedeductedfromincomeorcapitalgainsrealizedbytheREITinfutureyears.
TaxationofCDNLPandCDN/USLP
CanadianTaxConsiderations
The CDN LP and the CDN/US LP are not subject to tax under the Tax Act. Each partner of the CDN LP and the
CDN/USLP(includingtheREIT)isrequiredtoincludeincomputingthepartner’sincomeforaparticulartaxation
year the partner’s share of the income or loss of the limited partnership for its fiscal year ending in or on the
partner’staxationyearͲend,whetherornotanyofthatincomeorlossisdistributedtothepartnerinthetaxation
year.Forthispurpose,theincomeorlossoftheCDNLPandtheCDN/USLPmustbecomputedforeachfiscalyear
asifeachpartnershipwasaseparatepersonresidentinCanada,andwillberequiredtobeallocatedtopartners
on the basis of their respective shares of that income or loss as provided for in the CDN LP Agreement or the
CDN/USLPAgreement,asapplicable,subjecttocertainprovisionsoftheTaxActinthatregard.
CW7623442.10
Ͳ48Ͳ
IftheCDNLPortheCDN/USLPincurslossesforpurposesoftheTaxAct,alimitedpartner,includingtheREIT,will
beentitledtodeductinthecomputationofitsincomeforpurposesoftheTaxActitsshareofanysuchlossesfor
any fiscal year to the extent of that limited partner’s “atͲrisk amount” in respect of the limited partnership. In
general,the“atͲriskamount”ofalimitedpartnerinrespectofalimitedpartnershipforanytaxationyearwillbe
theadjustedcostbaseofthelimitedpartner’spartnershipinterestattheendoftheyear,plusanyundistributed
incomeallocatedtothelimitedpartnerfortheyear,lessanyamountowingbythelimitedpartner(oraperson
withwhomthelimitedpartnerdoesnotdealatarm'slength)tothelimitedpartnership(orapersonwithwhomit
doesnotdealatarm'slength),andlesstheamountofanybenefitthatthelimitedpartner(orapersonwithwhom
thelimitedpartnerdoesnotdealatarm'slength)isentitledtoreceiveorobtainforthepurposeofreducing,in
wholeorinpart,anylossofthelimitedpartnerfromtheinvestment.
OnthesaleorotherdispositionofallorsomeoftheProperties,theCDNLPorCtheDN/USLP,asapplicable,must
allocate the net proceeds of disposition (gross proceeds less costs of disposition) on a reasonable basis among
eachseparateassetwhichcomprisesthepropertysold.OndispositionsofPropertiesthatarecapitalpropertiesfor
purposes of the Tax Act, a capital gain will be realized on the amount by which the net proceeds of disposition
allocated to a particular depreciable property exceed the capital cost of that property (no capital loss can be
realizedondepreciableproperty).Acapitalgain(orcapitalloss)willberealizedontheamountbywhichthenet
proceedsofdispositionallocatedtoanonͲdepreciablecapitalpropertyexceed(orarelessthan)itsadjustedcost
base.
UnitedStatesTaxConsiderations
ForU.S.taxpurposes,apartnershipisgenerallytreatedasalookͲthroughentityandassuchitisnotsubjecttoU.S.
incometaxitself.EachpartnershipisrequiredtofileannualinformationreturnswiththeInternalRevenueService
(“IRS”). The partners in a partnership account for the income, expenses and taxes derived or paid by the
partnership on a current basis and the character of these items is determined at the partnership level. The
ultimatepartnersofapartnershipwillbesubjecttoU.S.incometaxontheirrelevantproportionofincomederived
fromrealestateactivitiesintheU.S.
An election may be made by a partnership to be treated as a corporation for U.S. income tax purposes. This
electionhasbeenmadefortheCDN/USLP.Assuch,theultimatepartneroftheUSLPistheCDN/USLPwhichwill
beresponsibleforU.S.incometaxandU.S.taxfilingsinrespectoftheUSLP.
TaxationofUnitholders
AUnitholderwillgenerallyberequiredtoincludeincomputingincomeforaparticulartaxationyeartheportionof
thenetincomeoftheREITforthetaxationyearoftheREITendingonorbeforetheparticulartaxationyearendof
the Unitholder, including net taxable capital gains(determined forthepurposesof the Tax Act), that is paid or
payable, or deemed to be paid or payable, to the Unitholder in the particular taxation year, whether those
amountsarereceivedincashorotherwise.
Any amount in excess of the net income and net taxable capital gains of the REIT that is paid or payable, or
deemedtobepaidorpayable,bytheREITtoaUnitholderinataxationyear,willnotgenerallybeincludedinthe
Unitholder’sincomefortheyear.AUnitholderwillberequiredtoreducetheadjustedcostbaseofitsUnitsbythe
portion of any amount paid or payable to such Unitholder (other than proceeds of disposition in respect of the
redemption of Units and the nonͲtaxable portion of net capital gains) that was not included in computing the
Unitholder’s income and will realize a capital gain to the extent that the adjusted cost base of the Unitholder’s
Unitswouldotherwisebeanegativeamount.
OnthedispositionordeemeddispositionofaUnitbyaUnitholder,onredemptionorotherwise,theUnitholder
willrealizeacapitalgainorlosstotheextentthattheproceedsofdispositionexceedorareexceededbytheadjusted
costbaseoftheUnits,respectively.TheadjustedcostbaseofaUnittoaUnitholderwillincludetheamountpaid
bytheUnitholderfortheUnit,subjecttocertainadjustments.OneͲhalfofacapitalgainrealizedbyaUnitholderon
dispositionordeemeddispositionofUnitsmustgenerallybeincludedinaUnitholder’sincomeasataxablecapital
CW7623442.10
Ͳ49Ͳ
gaininthetaxationyearinwhichthedispositionoccurs.OneͲhalfofanycapitallossrealizedbyaUnitholderona
dispositionordeemeddispositionofUnitsgenerallymaybedeductedbytheUnitholderagainsttaxablecapitalgains
oftheUnitholderintheyearofdisposition,inthethreeprecedingtaxationyearsorinanysubsequenttaxationyear
inaccordancewiththeprovisionsoftheTaxAct.
Ingeneralterms,capitalgainsrealizedonthedispositionofUnits,andnetincomeoftheREITpaidorpayable,or
deemedtobepaidorpayable,toaUnitholderwhoisanindividualortrust(otherthancertainspecifiedtrusts)and
thatisdesignatedastaxabledividendsorasnettaxablecapitalgains,mayincreasetheUnitholder’sliabilityfor
alternativeminimumtax.
6.2
QualifiedInvestmentStatus
UndertheRegulations,aninvestmentinatrustthatmeetsthedefinitionofa“mutualfundtrust”isaqualified
investmentforaDeferredPlan.Accordingly,providedthatataparticulartimetheREITqualifiesasamutualfund
trustwithinthemeaningoftheTaxAct,asdiscussedabove,theUnitswillbeaqualifiedinvestmentforDeferred
Plans. If the REIT does not qualify or ceases to qualify as a mutual fund trust, the Units will not be qualified
investments for Deferred Plans at that time. Trust Notes, units of the CDN LP or the CDN/US LP or other trust
property that may be issued or distributed by the REIT to Unitholders on or in connection with redemption of
Units,maynotbequalifiedinvestmentsforDeferredPlans.
WhereaDeferredPlanacquiresorholdsaUnitthatisnotaqualifiedinvestmentatanytime,oracquiresorholds
aTrustNote,orothertrustpropertythatisnotaqualifiedinvestment,adversetaxconsequencesmayarisetothe
DeferredPlanandtheholderoforannuitantorbeneficiaryundertheDeferredPlan.Accordingly,DeferredPlans
that propose to invest in Units should consult their own tax advisors before deciding to purchase Units and
againbeforedecidingtoexercisetheredemptionrightsattachedtosuchUnits.
NotwithstandingthattheUnitsmaybequalifiedinvestmentsforDeferredPlansasdescribedabove,aholderofa
TFSAoranannuitantunderanRRSPorRRIF,asthecasemaybe,willbesubjecttoapenaltytaxiftheUnitsheldin
the TFSA,RRSP or RRIF area “prohibited investment”as defined in the Tax Act for the TFSA, RRSP or RRIF. The
Unitswillgenerallybea“prohibitedinvestment”fortrustsgovernedbyaTFSA,RRSPorRRIFiftheholderofthe
TFSAortheannuitantundertheRRSPorRRIF,asapplicable,doesnotdealatarm’slengthwiththeREITforthe
purposesoftheTaxAct,orhasa“significantinterest”,asdefinedintheTaxAct,intheREIT.Generally,aholderor
annuitant will have a significant interest in the REIT if the TFSA, RRSP or RRIF (as applicable), the annuitant or
holder (as applicable), and other persons not at arm’s length with the annuitant or holder together, directly or
indirectly,holdinterestsasabeneficiaryundertheREITthathaveafairmarketvalueof10%ormoreofthefair
marketvalueoftheinterestsofallbeneficiariesundertheREIT.
ITEM7ͲCOMPENSATIONPAIDTOSELLERSANDFINDERS
Where permitted by applicable securities legislation, the Trustee intends to pay a sales fee of up to 10% of the
grossproceedsrealizedonthesaleofClassC1,ClassD1andClassEUnitsandasalesfeeofupto1%ofthegross
proceedsrealizedonthesaleofClassC2andClassD2Unitstoanyoneof,oracombinationof:investmentdealers,
ExemptMarketDealers,partiesrelatedtotheTrustee,employeesand/orcontractorsofsuchparties,andofficers
anddirectorsoftheTrustee.Inaddition,theTrusteewillpaysagentssellingClassC2andClassD2Unitsanannual
“trailer”feeequalto1%ofthesubscriptionpriceofClassC2andClassD2Unitsheldbypersonsacquiringsuch
Unitsthroughsuchagent.
ITEM8ͲRISKFACTORS
The purchase of Units involves a number of risk factors. In addition to the factors set forth elsewhere in this
OfferingMemorandum,prospectiveinvestorsshouldconsiderthefollowingfactors.
PartialBlindPoolOffering
CW7623442.10
Ͳ50Ͳ
ThisisaPartialBlindPoolOffering.ThegrossproceedsoftheOfferingwillultimatelybeinvestedintheacquisition
of one or more Properties, after the deduction of the costs of the Offering. However, the specific Properties in
whichtheCDNLPandtheUSLPwillinvesthavenotyetbeendetermined.Dependingonthereturnoninvestment
achievedonthePropertiesthatmaybeacquiredbytheCDNLPandtheUSLP,theUnitholders’returnontheir
respectiveinvestmentsintheUnitswillvary.
NoMarketforUnits
There currently is no market whatsoever for the Units and it is not anticipated that any market will develop.
Consequently, holders of such securities may not be able to sell them readily, and Units may not be readily
acceptedascollateralforaloan.Subscribersshouldbepreparedtoholdthesesecuritiesindefinitelyandcannot
expecttobeabletoliquidatetheirinvestmenteveninthecaseofanemergency.Accordingly,aninvestmentin
UnitsissuitablesolelyforpersonsabletomakeandbeartheeconomicriskofalongͲterminvestment.
LessthanFullOffering
TherecanbenoassurancethatmorethantheminimumOfferingwillbesold.Inthatcase,lessthanthemaximum
proceedswillbeavailabletotheREITand,consequently,theirbusinessdevelopmentplansandprospectscouldbe
adverselyaffected,sincefewerPropertieswillbepurchased,ownedandoperatedbytheCDNLPandtheUSLP.
NatureofInvestmentsinprivateequities
Theinvestmentinsharesorotherequitiesordebtsofprivateentitiesisspeculative.Suchinvestmentsareilliquid
andtheREITmaynotbeinapositiontosellthemwhenrequiredbytheREIT.
LimitedRecourse
The Trustee, the General Partner and the General Partner are all companies without material assets. Should a
claimbemadeagainstanyofthem,itwilllikelybedifficulttorealizeuponanyjudgmentwhichmightbeobtained
againstit.
RisksofRealEstateInvestment
Investmentinrealestateissubjecttonumerousrisks,includingthehighlycompetitivenatureoftherealestate
industry,changesingeneralorlocalconditions,failureoftenantstopayrent,changesinneighbourhoodproperty
values, interest rates, availability of mortgage funds, increases in real estate tax rates and other operating
expenses,thepossibilityofcompetitiveoverbuildingandoftheinabilitytoobtainfulloccupancyoftheproperties,
governmentalrulesandfiscalpolicies,includingrentcontrollegislation,whichlimitpotentialrentincreases,and
othereventsandfactorswhicharebeyondthecontroloftheREITortheCDNLPortheUSLP.
ThereisnoassurancethattheCDNLPandtheUSLPwillbeabletoobtainsufficientmortgagefinancingtofinance
the acquisition of real estate investments, or on commercially acceptable terms, or that any such mortgage
financingwillbereneweduponmaturityor,ifrenewed,renewedonthesametermsandconditions(includingthe
rate of interest). The realestate properties may not generate sufficient funds to service the mortgage financing
takenoutinrespectofthem.Ifadefaultoccurs,apropertycouldbeforeclosedupon.indebtednesswithvariable
interestrateswillresultinfluctuationsintheCDNLP’sandtheUSLP’scostofborrowing.
PotentialLiabilityunderEnvironmentalProtectionLegislation
Environmentalandecologicallegislationandpolicieshavebecomeincreasinglyimportantinrecentyears.Under
variouslaws,astheownerofrealestatepropertiestheCDNLPandtheUSLPcouldbecomeliableforthecostsof
removal or remediation of certain hazardous or toxic substances released on, from or in one or more of the
properties.Thefailuretoremoveorremediatesuchsubstances,ifany,mayadverselyaffecttheCDNLP’sand/or
theUSLP’sabilitytosellsuchapropertyortoborrowusingapropertyascollateral.
CW7623442.10
Ͳ51Ͳ
PaymentofRetractionPricebyPromissoryNoteorinKind
The directors of the Trustee may determine that funds are not currently available for the payment of the
retractionpriceofanyUnitsinrespectofwhichtheUnitholderhasrequestedaRetraction,inwhichcasetheREIT
may elect to delay payment or pay the retraction price for such Units by way of promissory note or in kind.
Therefore, there can be no assurance that Unitholders will be able to retract any or all of their Units for cash
paymentwhentheywishtodoso.
MarketabilityofUnits
ThereiscurrentlynomarketfortheUnitsanditisnotanticipatedthatanymarketwilldevelop.TheUnitsarenot
transferable,exceptifrequiredasaresultofaUnitholderbecominganonͲresident.Insuchsituations,securities
requirements may prohibit or restrict transferability of Units. Consequently, holders of Units will not be able to
reselltheirUnits.SeeItem5.1“TermsoftheREITUnitsͲForcedRedemptionUponNonͲResidency”andItem10
“ResaleRestrictions”.
TaxMatters
ThereturnontheUnitholder’sinvestmentintheUnitsissubjecttochangesinCanadianfederalandprovincialtax
laws, tax proposals, other governmental policies or regulations and governmental, administrative or judicial
interpretationofthesame.Therecanbenoassurancethattaxlaws,taxproposals,policiesorregulations,orthe
interpretationthereof, will not bechanged in a mannerwhich will fundamentally alter the taxconsequences to
Unitholdersacquiring,holdingordisposingofUnits.
IftheREITceasestomeettherequirementsforamutualfundtrust,theUnitsoftheREITwillceasetobequalified
investmentsforDeferredPlans.ThiscouldresultinDeferredPlanswhichholdUnitsbecomingliableforapenalty
tax.
PersonalLiabilityofUnitholders
TheDeclarationofTrustprovidesthatnoUnitholdershallbeheldtohaveanypersonalliabilityassuch,andno
resortshallbehadtoaUnitholder’sprivateproperty,forsatisfactionofanyobligationinrespectoforclaimarising
outoforinconnectionwithanycontractorobligationoftheREIToroftheTrusteeoranyobligationinrespectof
whichaUnitholderwouldotherwisehavetoindemnifytheTrusteeforanyliabilityincurredbytheTrustee,but
rather only the REIT property is intended to be liable and subject to levy or execution for satisfaction of any
obligationorclaim.
ThereisariskthataUnitholdercouldbeheldpersonallyliable,notwithstandingtheforegoingstatementinthe
DeclarationofTrust,forobligationsinconnectionwiththeREIT(totheextentthatclaimsarenotsatisfiedbythe
REIT). It is intended that theREIT’s operations be conducted in such away as to minimize any such risk and, in
particularandwherepractical,tocauseeverywrittencontractorcommitmentoftheREITtocontainanexpress
statementthatliabilityundersuchcontractorcommitmentislimitedtothevalueoftheassetsoftheREIT.
Inanyevent,theREITconsidersthattheriskofanypersonalliabilityofUnitholdersisminimalinviewofthesizeof
the anticipated equity of the REIT, the nature of its activities and the requirement of the REIT that any written
contractorcommitmentoftheREIT(exceptwheresuchinclusionisnotreasonablypossible)includeanexpress
limitationofliability.IntheeventthataUnitholdershouldberequiredtosatisfyanyobligationoftheREIT,such
UnitholderwillbeentitledtoreimbursementfromanyavailableassetsoftheREIT.
ITEM9ͲREPORTINGOBLIGATIONS
AstheREITisnota“reportingissuer”asdefinedintheapplicablesecuritieslegislation,thecontinuousreporting
requirementsofthoseactsdonotgenerallyapplytotheREIT.TheREITwill,however,onorbeforeMarch31in
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eachcalendaryear,providetoeachUnitholderannualfinancialstatementsandallotherinformationrequiredto
fileCanadianincometaxreturns.
ITEM10ͲRESALERESTRICTIONS
TheUnitswillbesubjecttoanumberofresalerestrictions,includingarestrictionontrading.Untiltherestriction
ontradingexpires,InvestorswillnotbeabletotradetheUnitsunlesstheycomplywithanexemptionfromthe
prospectusandregistrationrequirementsundersecuritieslegislation.
ForInvestorsresidentinBritishColumbia,unlesspermittedundersecuritieslegislation,Investorscannottradethe
securitiesbeforethedatethatisfourmonthsandadayafterthedatetheREITbecomesareportingissuerinany
provinceorterritoryofCanada.
ITEM11ͲPURCHASERS’RIGHTS
If you purchase the Units you will have certain rights, some of which are described below. For complete
informationaboutyourrights,youshouldconsultalawyer.
11.1
TwoDayCancellationRightforaSubscriber
You cancancel youragreement to purchase the Units. To do so,youmust send anotice to the Trustee before
midnightonthesecondbusinessdayafteryousigntheSubscriptionAgreementinrespectoftheUnits.
11.2
RightsofActionintheEventofaMisrepresentation
Applicablesecuritieslawsintheofferingjurisdictionsprovideyouwitharemedytosuetocancelyouragreement
to buy these securities or for damages if this Offering Memorandum, or any amendment thereto, contains a
misrepresentation. Unlessotherwisenoted,inthissection,a“misrepresentation”meansanuntruestatementor
omissionofamaterialfactthatisrequiredtobestatedorthatisnecessaryinordertomakeastatementinthis
OfferingMemorandumnotmisleadinginlightofthecircumstancesinwhichitwasmade.
These remedies are available to you whether or not you relied on the misrepresentation. However, there are
various defences available to the Persons or companies that youhave a right to sue. In particular, they have a
defenceifyouknewofthemisrepresentationwhenyoupurchasedthesecurities.Inaddition,theseremedies,or
noticewithrespectthereto,mustbeexercisedordelivered,asthecasemaybe,byyouwithinthestricttimelimit
prescribedintheapplicablesecuritieslaws.
The applicable contractual and statutory rights are summarized below. By its execution of the Subscription
Agreement, the REIT will be deemed to have granted these rights to you. Subscribers should refer to the
applicablesecuritieslawsoftheirrespectiveOfferingJurisdictionfortheparticularsoftheserightsorconsultwith
professionaladvisors.
11.3
StatutoryRightsofActionforSubscribersintheProvincesofAlbertaandBritishColumbia
IfyouarearesidentinAlbertaorBritishColumbiaandthisOfferingMemorandum,togetherwithanyamendments
hereto,containsamisrepresentation,youhaveastatutoryrighttosue:
(a)
theREITtocancelyouragreementtobuytheUnits;or
(b)
fordamagesagainsttheREIT,everypersonwhowasadirectoroftheTrusteeatthedateofthe
OfferingMemorandum,andeverypersonorcompanywhosignedthisOfferingMemorandum.
Ifamisrepresentationiscontainedinarecordincorporatedbyreferencein,orisdeemedtobeincorporatedinto,
theOfferingMemorandum,themisrepresentationisdeemedtobecontainedintheOfferingMemorandum.
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Ͳ53Ͳ
Thisstatutoryrighttosueisavailabletoyouwhetherornotyoureliedonthemisrepresentation.However,there
arevariousdefencesavailabletothepersonsorcompaniesthatyouhavearighttosue.Inparticular,theyhavea
defenceifyouknewofthemisrepresentationwhenyoupurchasedtheUnits.Ifyouintendtorelyontherights
describedin(a)or(b)above,youmustdosowithinstricttimelimitations.
You must commence your action to cancel the agreement within 180 days after you signed the agreement to
purchasetheUnits.
Youmustcommenceyouractionfordamageswithintheearlierof:
(i)
180daysafterlearningofthemisrepresentation;or
(ii)
three(3)yearsafteryousignedtheagreementtopurchasetheUnits.
Youshouldrefertotheapplicableprovisionsofthesecuritieslegislationforparticularsoftherightsorconsult
withalawyer.
Youshouldconsultyourownlegaladviserswithrespecttoyourrightsandtheremediesavailabletoyou.The
rightsdiscussedaboveareinadditiontoandwithoutderogationfromanyotherrightsorremedies,whichyou
mayhaveatlaw.
11.4
StatutoryRightsofActionforSubscribersintheProvinceofManitoba
IfyouarearesidentinManitobaandthereisamisrepresentationinthisOfferingMemorandum,togetherwith
anyamendmenttoit,youhaveastatutoryrighttosue:
(a)
(b)
fordamagesagainsttheREIT,everypersonwhowasadirectoroftheTrusteeatthedateofthe
OfferingMemorandum,andeveryotherpersonwhosignedthisOfferingMemorandum.
Ifamisrepresentationiscontainedinarecordincorporatedbyreferencein,orisdeemedtobeincorporatedinto,
theOfferingMemorandum,themisrepresentationisdeemedtobecontainedintheOfferingMemorandum.
purchasetheUnits.
(i)
(ii)
two(2)yearsafteryousignedtheagreementtopurchasetheUnits.
withalawyer.
mayhaveatlaw.
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11.5
StatutoryRightsofActionforSubscribersintheProvinceofOntario
IfyouarearesidentofOntarioandthereisamisrepresentationinthisOfferingMemorandum,togetherwithany
amendmenttoit,youhaveastatutoryrighttosue:
(a)
theREITtocancelyouragreementtobuytheseUnits;or
(b)
fordamagesagainsttheREIT.
purchasetheUnits.
(i)
(ii)
three(3)yearsafteryousignedtheagreementtopurchasetheUnits.
withalawyer.
mayhaveatlaw.
11.6
StatutoryRightsofActionforSubscribersintheProvinceofSaskatchewan
If you are resident in Saskatchewan and this Offering Memorandum, together with any amendments hereto,
containsamisrepresentation,subjecttocertainlimitations,youhaveastatutoryrighttosue:
(a)
(b)
fordamagesagainst:
(i)
theREIT,everypersonwhowasadirectoroftheTrusteeorthepromoteroftheREITat
thedateoftheOfferingMemorandum,
(ii)
every person or company whose consent has been filed respecting the Offering, but
onlywithrespecttoreports,opinionsorstatementsthathavebeenmadebythem,
(iii)
everypersonwho,orcompanythat,inadditiontothepersonsorcompaniesmentioned
inclauses(i)and(ii),signedtheOfferingMemorandum,and
(iv)
every person who, or company that, sells the Units on behalf of the REIT under the
OfferingMemorandum.
CW7623442.10
Ͳ55Ͳ
purchasetheUnits.
(i)
oneyearafterlearningofthemisrepresentation;or
(ii)
six(6)yearsafteryousignedtheagreementtopurchasetheUnits.
Inaddition,subjecttocertainlimitations,whereanyadvertisingorsalesliterature(assuchtermsaredefinedin
the Saskatchewan securities legislation) disseminated in connection with the offering contains a
misrepresentation,apurchaserwhopurchasesUnitsreferredtointhatadvertisingorsalesliteraturehasarightof
actionagainsttheREIT,everypromoteroftheissueranddirectoroftheTrustee,asthecasemaybe,andevery
personwhoorcompanythatsellsUnitsundertheofferingwithrespecttowhichtheadvertisingorsalesliterature
wasdisseminated.Inaddition,subjecttocertainlimitations,whereanindividualmakesaverbalstatementtoa
prospectivepurchaser thatcontains a misrepresentationrelating to the Units and the verbal statement is made
eitherbeforeorcontemporaneouslywiththepurchaseofUnits,thepurchaserhasarightofactionfordamages
againsttheindividualwhomadetheverbalstatement.
withalawyer.
mayhaveatlaw.
THE SECURITIES LAWS OF ALBERTA, BRITISH COLUMBIA, MANITOBA, SASKATCHEWAN AND ONTARIO ARE
COMPLEX.THEFOREGOINGISASUMMARYONLYANDSUBJECTTOINTERPRETATION.REFERENCESHOULDBE
MADETOTHEAPPLICABLESECURITIESLEGISLATION,THEREGULATIONSANDTHERULESTHEREUNDERFORTHE
COMPLETE TEXT OF THE PROVISIONS UNDER WHICH THE FOREGOING RIGHTS ARE CONFERRED. THE
FOREGOINGSUMMARYISSUBJECTTOTHEEXPRESSPROVISIONSTHEREOF.
THERIGHTSDISCUSSEDABOVEAREINADDITIONTO,ANDWITHOUTDEROGATIONFROM,ANYOTHERRIGHTS
OR REMEDIES WHICH THE SUBSCRIBERS MAY HAVE AT LAW. SUBSCRIBERS SHOULD CONSULT THEIR OWN
LEGALADVISORSWITHRESPECTTOTHEIRRIGHTSANDTHEREMEDIESAVAILABLETOTHEM.
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ITEM12ͲFINANCIALSTATEMENTS
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ap capital reit - BC Securities Commission

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