2021 Ruling 2021-0894161R3 - Qualifying Disposition - REIT spinout

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: A. None of the Proposed Transactions will, in and of themselves, adversely affect the qualification of the REIT as a mutual fund trust within the meaning of subsection 132(6). B. The REIT Qualifying Disposition will constitute a “qualifying disposition” within the meaning of subsection 107.4(1), such that the rules in subsection 107.4(3) will apply to the REIT, New XXXXXXXXXX REIT and the Unitholders in respect of the REIT Qualifying Disposition.

C. Subsection 245(2) will not apply to redetermine the tax consequences described in the foregoing rulings.

Position: A. Yes. B. Yes. C. Yes.

Reasons: 1. Meets all of the requirements. 2. Meets all of the requirements. 3. There is no misuse or abuse of the Act.

XXXXXXXXXX									2021-089416

XXXXXXXXXX, 2021

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling
XXXXXXXXXX

This is in reply to your letter of XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the above-noted taxpayer. We also acknowledge the additional information provided in your email correspondence, as well as the information provided during our telephone conversations.

You have advised us that, to the best of your knowledge and that of the taxpayers involved, none of the Proposed Transactions or issues involved in this ruling request are the same as or substantially similar to transactions or issues that are:

i. in a previously filed tax return of the taxpayer or a related person and:

A. being considered by the CRA in connection with such return;
B. under objection by the taxpayer or a related person; or
C. the subject of a current or completed court process involving the taxpayer or a related person; or

ii. the subject of a ruling request previously considered by the Income Tax Rulings Directorate.

This document is based solely on the facts, Subject Transactions and Proposed Transactions described below. The documentation submitted with your request does not form part of the facts, Subject Transactions and Proposed Transactions except as expressly referred to herein, and any references thereto are otherwise provided solely for the convenience of the reader.

Unless otherwise stated, all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended (the “Act”) or the Income Tax Regulations C.R.C., c.945 (the “Regulations”), as appropriate, and all terms and conditions used herein that are defined in the Act have the meaning given in such definitions unless otherwise indicated. Unless otherwise indicated, all references herein to monetary amounts are in Canadian dollars.

Definitions

The following terms and taxpayers referred to throughout this document will have the following meanings unless otherwise indicated:

(a) XXXXXXXXXX;

(b) “ACB” means adjusted cost base, as that term is defined in section 54;

(c) “Canadian partnership” has the meaning assigned by subsection 102(1);

(d) “XXXXXXXXXX Segment” means certain properties held directly or indirectly by the REIT representing its interest in XXXXXXXXXX and, as of immediately before the REIT Qualifying Disposition, will be the properties held through the XXXXXXXXXX Properties;

(e) “Certificate” means the certificate(s) or other confirmation(s) of filing to be issued by the Registrar pursuant to XXXXXXXXXX of the XXXXXXXXXX giving effect to the Plan of Arrangement;

(f) “Class B Unit Exchange Agreements” means the exchange and support agreements described in paragraph 8a in the section titled “Background” below, which set out the specific terms, conditions and procedures applicable to the exchange rights provided for under the terms and conditions of the XXXXXXXXXX Class B Units under the partnership agreements governing XXXXXXXXXX and Portfolio LP;

(g) “CRA” means the Canada Revenue Agency;

(h) “Depositary” means XXXXXXXXXX, in its capacity as depositary for the Plan of Arrangement, or such other person chosen by the REIT to act as depositary;

(i) “Effective Date” means the date shown on the Certificate issued by the Registrar under the XXXXXXXXXX giving effect to the Plan of Arrangement;

(j) “Effective Time” means XXXXXXXXXX on the Effective Date;

(k) “Exchangeable Units” means the XXXXXXXXXX Class B Units and the XXXXXXXXXX Class B Units;

(l) “GAAR” means the general anti-avoidance rule provided for in section 245;

(m) “XXXXXXXXXX Trust” means XXXXXXXXXX Trust, a unit trust formed under the laws of the Province of XXXXXXXXXX;

(n) “XXXXXXXXXX Option” means a right, which will be exercisable by the REIT Trustees in their discretion pursuant to the “economic equivalence” provisions of the Class B Unit Exchange Agreements described below, to irrevocably elect that on an exchange of each XXXXXXXXXX Class B Unit, (i) the holder will receive such number of REIT Units as would have been deliverable on an exchange of such XXXXXXXXXX Class B Unit immediately before the exercise of the XXXXXXXXXX Option plus an additional number of REIT Units which the REIT Trustees determine on or before the Effective Date, in accordance with the terms and conditions of the XXXXXXXXXX Class B Units, to be economically equivalent to the New XXXXXXXXXX REIT Units which would have been deliverable on an exchange of such XXXXXXXXXX Class B Unit immediately before the exercise of the XXXXXXXXXX Option, and (ii) the holder will receive no New XXXXXXXXXX REIT Units, and that the distribution rights under the XXXXXXXXXX Class B Units will be adjusted accordingly. For greater certainty, no amendments to the partnership agreements governing XXXXXXXXXX and Portfolio LP or the Class B Unit Exchange Agreements are required in order to provide for the XXXXXXXXXX Option;

(o) “XXXXXXXXXX Class B Units” means the XXXXXXXXXX Class B Units and the Portfolio LP Class B Units;

(p) XXXXXXXXXX;

(q) XXXXXXXXXX;

(r) “Incentive Units” means incentive units granted under the XXXXXXXXXX which are to be settled, upon vesting, in cash, REIT Units, or any combination thereof;

(s) “Initial XXXXXXXXXX Subscription Amount” has the meaning set out in Step 1 of the Subject Transactions;

(t) “Initial XXXXXXXXXX Subscription Note” has the meaning set out in Step 1 of the Subject Transactions;

(u) “Initial XXXXXXXXXX Unit” has the meaning set out in Step 1 of the Subject Transactions;

(v) “Investor” means XXXXXXXXXX that is exempt from the payment of Part I tax under the Act, including its subsidiaries that own the Investor Properties;

(w) “Investor Property Purchase Agreement” means an agreement to be entered into between the REIT and the Investor pursuant to which New XXXXXXXXXX REIT will acquire the Investor Properties from the Investor in consideration for the Investor Units;

(x) “Investor Properties” means a portfolio of XXXXXXXXXX properties owned by the Investor, which will be transferred to New XXXXXXXXXX REIT in exchange for New XXXXXXXXXX REIT Units following completion of the Plan of Arrangement as described in the Proposed Transactions;

(y) “Investor XXXXXXXXXX LP” means a limited partnership to be formed by the Investor under the laws of XXXXXXXXXX in connection with the Proposed Transactions;

(z) “Investor XXXXXXXXXX LP Note” means a promissory note to be issued by Investor XXXXXXXXXX LP to the Investor as partial consideration for the Investor Properties as described in Step 35 of the Proposed Transactions;

(aa) “Investor Units” means the units of New XXXXXXXXXX REIT to be issued to the Investor as consideration for the indirect transfer of the Investor Properties to New XXXXXXXXXX REIT as set out in Step 36 of the Proposed Transactions. The Investor Units will consist of “Series A” New XXXXXXXXXX REIT Units, which will be the ordinary voting units of New XXXXXXXXXX REIT which are expected to be listed on the XXXXXXXXXX, “Non-Voting Series B” New XXXXXXXXXX REIT Units, which will be non-voting units of New XXXXXXXXXX REIT which will be economically equivalent to and exchangeable for “Series A” New XXXXXXXXXX REIT Units, or a combination of the two;

(bb) “Legacy XXXXXXXXXX Transferred Properties” means certain XXXXXXXXXX properties currently held directly by the REIT which the REIT Trustees determine will be transferred to New XXXXXXXXXX REIT in the Proposed Transactions;

(cc) “Legacy XXXXXXXXXX Limited Partnerships” means the limited partnerships in which XXXXXXXXXX Trust holds a substantial interest immediately before the REIT Qualifying Disposition, and in which the REIT also directly holds a nominal limited partner interest;

(dd) “mutual fund trust” has the meaning assigned by subsection 132(6);

(ee) “New Master GP Trust” has the meaning set out in Step 2 of the Proposed Transactions;

(ff) “New Master LP” has the meaning set out in Step 3 of the Proposed Transactions;

(gg) “New Master LP Exchangeable Units” means Class B exchangeable units of New Master LP entitling holders to cash distributions from New Master LP determined by reference to the cash distributions on a New XXXXXXXXXX REIT Unit and which are exchangeable in accordance with their terms for New XXXXXXXXXX REIT Units;

(hh) “New Master LP Note” means a non-interest bearing, demand promissory note, issued by New Master LP in Step 21 of the Proposed Transactions and having a principal amount equal to the fair market value of the New Master LP Exchangeable Units to be issued to the REIT in Step 31of the Proposed Transactions;

(ii) “New XXXXXXXXXX Credit Facility” has the meaning set out in Step 7 of the Proposed Transactions;

(jj) “New XXXXXXXXXX GP Trust” has the meaning set out in Step 4 of the Proposed Transactions;

(kk) “New XXXXXXXXXX LP” has the meaning set out in Step 5 of the Proposed Transactions;

(ll) “New XXXXXXXXXX REIT” means an unincorporated open-ended unit trust to be established under the laws of the Province of XXXXXXXXXX;

(mm) “New XXXXXXXXXX REIT Declaration of Trust” means the declaration of trust to be made by the trustees of New XXXXXXXXXX REIT to hold in trust all property of New XXXXXXXXXX REIT for the benefit of the New XXXXXXXXXX REIT Unitholders;

(nn) “New XXXXXXXXXX REIT Incentive Unit Plan” means an incentive unit plan to be adopted by New XXXXXXXXXX REIT providing for the granting of New XXXXXXXXXX REIT Incentive Units;

(oo) “New XXXXXXXXXX REIT Incentive Units” means incentive units to be granted under the New XXXXXXXXXX REIT Incentive Unit Plan which are to be settled, subject to vesting, in cash, New XXXXXXXXXX REIT Units, or any combination thereof;

(pp) “New XXXXXXXXXX REIT Option Plan” means a unit option plan to be adopted by New XXXXXXXXXX REIT providing for the granting of options exercisable for New XXXXXXXXXX REIT Units;

(qq) “New XXXXXXXXXX REIT Options” means options to be issued by New XXXXXXXXXX REIT under the New XXXXXXXXXX REIT Option Plan which will be exercisable for New XXXXXXXXXX REIT Units;

(rr) “New XXXXXXXXXX REIT Spinout Steps” means the transactions described in the steps under the heading “New XXXXXXXXXX REIT Spinout Steps” (Steps 22 to 32 of the Proposed Transactions);

(ss) “New XXXXXXXXXX REIT Trustees” means the individuals who will act as trustees of New XXXXXXXXXX REIT in accordance with and subject to the provisions of the New XXXXXXXXXX REIT Declaration of Trust;

(tt) “New XXXXXXXXXX REIT Unitholder” means a holder of a New XXXXXXXXXX REIT Unit;

(uu) “New XXXXXXXXXX REIT Units” means units of participating interest in New XXXXXXXXXX REIT (being “Series A units” and “Non-Voting Series B units”), each such unit representing an equal undivided beneficial interest in New XXXXXXXXXX REIT, but for the avoidance of doubt, does not include XXXXXXXXXX Special Voting Units;

(vv) “New Trusteeco” has the meaning set out in Step 6 of the Proposed Transactions;

(ww) “Nominee Corporations” means the corporations that own bare legal title to the properties included in the XXXXXXXXXX Segment;

(xx) “XXXXXXXXXX Special Voting Units” means non-participating special voting units of New XXXXXXXXXX REIT, which do not entitle the holder to any distribution from, or property of, New XXXXXXXXXX REIT and which may be created in accordance with the provisions of the New XXXXXXXXXX REIT Declaration of Trust;

(yy) “Plan of Arrangement” means the plan of arrangement under XXXXXXXXXX of the XXXXXXXXXX to effect certain of the Proposed Transactions described herein;

(zz) “Portfolio LP” means XXXXXXXXXX, a limited partnership formed under the laws of the Province of XXXXXXXXXX and a subsidiary partnership of Portfolio LP Trust;

(aaa) “Portfolio LP Class B Units” means Class B exchangeable units of Portfolio LP entitling holders to cash distributions from Portfolio LP determined by reference to the cash distributions on a REIT Unit and which are exchangeable in accordance with their terms for REIT Units (as well as a nominal amount of cash);

(bbb) “Portfolio LP Trust” means XXXXXXXXXX, a unit trust formed under the laws of the Province of XXXXXXXXXX and a subsidiary trust of the REIT;

(ccc) “XXXXXXXXXX Class B Units” means the Class B exchangeable units of XXXXXXXXXX entitling holders to cash distributions from XXXXXXXXXX by reference to the cash distributions on a REIT Unit and which are exchangeable in accordance with their terms for REIT Units (as well as a nominal amount of cash);

(ddd) “XXXXXXXXXX GP Trust” means XXXXXXXXXX Master GP Trust, an inter vivos personal trust, established under the laws of the Province of XXXXXXXXXX;

(eee) “XXXXXXXXXX Master LP” means XXXXXXXXXX Master Limited partnership, a limited partnership formed under the laws of the Province of XXXXXXXXXX;

(fff) “Proposed Transactions” means the transactions described in Steps 2 to 40 of this letter under the heading “Proposed Transactions”;

(ggg) “XXXXXXXXXX” means XXXXXXXXXX., a corporation incorporated under the laws of the Province of XXXXXXXXXX;

(hhh) “XXXXXXXXXX Trust” means XXXXXXXXXX Trust, a unit trust formed under the laws of the Province of XXXXXXXXXX;

(iii) “XXXXXXXXXX Trust Payables” means certain intercompany debts owing by the REIT to XXXXXXXXXX Trust;

(jjj) “XXXXXXXXXX Trust Receivables” means certain intercompany debts owing by XXXXXXXXXX Trust to the REIT;

(kkk) “REIT” means, as set out in the introduction to this letter, XXXXXXXXXX, an open-ended unit trust which qualifies as a mutual fund trust, established under the laws of the Province of XXXXXXXXXX;

(lll) “REIT Declaration of Trust” means the declaration of trust dated XXXXXXXXXX, governed by the laws of the Province of XXXXXXXXXX, pursuant to which the REIT was created, as further amended, supplemented or amended and restated from time to time;

(mmm) “REIT Option Plan” means the unit option plan of the REIT providing for the granting of options exercisable for REIT Units;

(nnn) “REIT Options” means options issued by the REIT under the REIT Option Plan which are exercisable for REIT Units;

(ooo) “REIT Qualifying Disposition” has the meaning set out in Step 26 of the Proposed Transactions;

(ppp) “REIT Trustees” means the individuals who act as trustees of the REIT in accordance with and subject to the provisions of the REIT Declaration of Trust;

(qqq) “REIT Units” means units of participating interest in the REIT, each such unit representing an equal undivided beneficial interest in the REIT, but for the avoidance of doubt, does not include a Special Voting Unit;

(rrr) “REIT Unitholder” means a holder of a REIT Unit;

(sss) “XXXXXXXXXX Property” means the following property held by the REIT immediately before the REIT Qualifying Disposition:

1. the REIT’s limited partnership interest in New Master LP;
2. the units of New Master GP Trust;
3. the REIT’s remaining limited partnership interest in New XXXXXXXXXX LP;
4. the units of XXXXXXXXXX Trust;
5. the REIT’s remaining limited partnership interests in the Legacy XXXXXXXXXX Limited Partnerships in which the REIT has a direct interest;
6. the shares of XXXXXXXXXX.;
7. the shares of New Trusteeco; and
8. the shares of any Nominee Corporations held by the REIT immediately before the REIT Qualifying Disposition;

(ttt) “Second XXXXXXXXXX Subscription Amount” has the meaning set out in Step 22 of the Proposed Transactions;

(uuu) “Second XXXXXXXXXX Subscription Note” has the meaning set out in Step 22 of the Proposed Transactions;

(vvv) “Special Voting Units” means non-participating special voting units of the REIT, which do not entitle the holder to any distribution from, or property of, the REIT and which were created in accordance with the provisions of the REIT Declaration of Trust and includes a fraction of a Special Voting Unit;

(www) “Subject Transactions” means the transactions described in Step 1 of this letter under the heading “Subject Transactions”;

(xxx) “SVU Voting Agreement” means the agreement whereby the REIT will agree to vote a portion of its XXXXXXXXXX Special Voting Units as directed by the holder(s) of the XXXXXXXXXX Class B Units described in Step 31 of the Proposed Transactions;

(yyy) “taxable Canadian corporation” has the meaning assigned by subsection 89(1);

(zzz) XXXXXXXXXX; and

(aaaa) “Unitholder” means, from and after Step 25 of the Proposed Transactions, a holder of both REIT Units and New XXXXXXXXXX REIT Units.

Facts

Background

1. The REIT is XXXXXXXXXX with consolidated total assets of approximately $XXXXXXXXXX. The REIT has ownership interests in a XXXXXXXXXX.

2. The REIT invests in XXXXXXXXXX, and holds properties in XXXXXXXXXX. Each of the operating segments is a distinguishable component of the business of the REIT which provides related products or services that are subject to risk and rewards that are different from those of the other operating segments.

3. The REIT is organized as an open-ended unit trust which qualifies as a “mutual fund trust” for purposes of the Act. The REIT is operated so as to qualify as a “real estate investment trust” and is therefore not a “SIFT trust” under the Act.

4. The interests of beneficiaries of the REIT are represented by REIT Units. (footnote 1) Each REIT Unit represents an equal undivided beneficial interest in the property of the REIT, all distributions made by the REIT and, in the event of winding-up of the REIT, in the net assets of the REIT remaining after satisfaction of all liabilities. Each REIT Unit entitles the holder thereof to one vote at all meetings of REIT Unitholders for each REIT Unit held.

5. REIT Units are widely held by the public and, to the knowledge of the REIT’s management, there is no direct or indirect beneficial owner of, nor any person who exercises control or direction over, REIT Units carrying more than XXXXXXXXXX% of the votes and value of outstanding REIT Units. The weighted average number of REIT Units for the year ended XXXXXXXXXX was XXXXXXXXXX.

6. The REIT is governed by the REIT Trustees, who conduct and manage the affairs of the REIT in accordance with and subject to the terms of the REIT Declaration of Trust. As of the date hereof, the REIT Trustees consist of XXXXXXXXXX individuals, XXXXXXXXXX of whom are residents of Canada.

7. The REIT is registered as a “registered investment” for deferred income plans pursuant to subsection 204.4(1).

8. In addition to the REIT Units, the capital structure of the REIT includes the following securities and interests that are convertible into, exchangeable for, or exercisable for REIT Units:

a. Certain subsidiary partnerships of the REIT have issued and outstanding Exchangeable Units, each entitling the holders to cash distributions from the subsidiary partnership determined by reference to the cash distributions on a REIT Unit. Each Exchangeable Unit is exchangeable by the holder thereof for REIT Units in accordance with the terms of the relevant partnership agreement and the associated Class B Unit Exchange Agreement. As at XXXXXXXXXX, there were XXXXXXXXXX Exchangeable Units outstanding. On or about XXXXXXXXXX, the XXXXXXXXXX Class B Units were redeemed for REIT Units (as well as a nominal amount of cash) in accordance with their terms.

b. The REIT has issued and outstanding REIT Options which are exercisable for REIT Units. As at XXXXXXXXXX, there were XXXXXXXXXX granted and outstanding REIT Options.

c. The REIT has issued and outstanding Incentive Units. Incentive Units will, upon vesting, be settled in cash, REIT Units, or any combination thereof at the option of the holder. Vesting of Incentive Units occurs either after the attainment of certain performance conditions (in the case of performance units) or after a continuous period of employment within the meaning of the Incentive Unit Plan (in the case of restricted units). As at XXXXXXXXXX, there were XXXXXXXXXX Incentive Units outstanding.

9. The terms and conditions of the Class B Unit Exchange Agreements provide that the REIT is not permitted to issue or distribute various securities, rights or other properties to the holders of REIT Units unless the economic equivalent (as determined by the REIT Trustees) is simultaneously issued or distributed to the holders of the XXXXXXXXXX Class B Units. The Exchange Agreements give the REIT Trustees broad discretion, acting reasonably, to determine economic equivalence for purposes of these provisions.

10. XXXXXXXXXX GP Trust is an inter vivos trust formed under the laws of the Province of XXXXXXXXXX. The sole beneficiary of XXXXXXXXXX GP Trust is the REIT. XXXXXXXXXX GP Trust is resident in Canada. The sole trustee of XXXXXXXXXX GP Trust is XXXXXXXXXX.

11. XXXXXXXXXX Master LP is a limited partnership formed under the laws of the Province of XXXXXXXXXX. The interests in XXXXXXXXXX Master LP are divided into general partnership interests and limited partnership interests. The sole general partner of XXXXXXXXXX Master LP is XXXXXXXXXX GP Trust and the sole limited partner of XXXXXXXXXX Master LP is the REIT. XXXXXXXXXX Master LP is a Canadian partnership.

12. XXXXXXXXXX is a corporation formed under the laws of the Province of XXXXXXXXXX. All of the issued shares of XXXXXXXXXX are owned by the REIT. XXXXXXXXXX is a taxable Canadian corporation.

13. XXXXXXXXXX Trust is an open-ended unit trust established under the laws of the Province of XXXXXXXXXX. All of the units of XXXXXXXXXX Trust are held by XXXXXXXXXX Master LP, except for a nominal number of units which are held by the REIT. The sole trustee of XXXXXXXXXX Trust is XXXXXXXXXX. XXXXXXXXXX Trust directly and indirectly (through subsidiary partnerships) holds XXXXXXXXXX rental properties forming part of the XXXXXXXXXX Segment. XXXXXXXXXX Trust is resident in Canada.

14. XXXXXXXXXX is a corporation formed under the laws of the Province of XXXXXXXXXX. All of the issued shares of XXXXXXXXXX are owned by the REIT. XXXXXXXXXX. XXXXXXXXXX is a taxable Canadian corporation.

Subject Transactions

The following Subject Transactions were completed after the request for the advance income tax ruling was submitted and before the date hereof:

Step 1. Shortly following execution of the Investor Property Purchase Agreement, the REIT settled New XXXXXXXXXX REIT in accordance with the laws of the Province of XXXXXXXXXX. The REIT subscribed for XXXXXXXXXX New XXXXXXXXXX REIT Unit (the “Initial XXXXXXXXXX Unit”) for a subscription price of $XXXXXXXXXX (the “Initial XXXXXXXXXX Subscription Amount”). The REIT issued a demand promissory note (the “Initial XXXXXXXXXX Subscription Note”) to New XXXXXXXXXX REIT in a principal amount equal to the Initial XXXXXXXXXX Subscription Amount in satisfaction of the subscription price.

The initial trustee of New XXXXXXXXXX REIT is XXXXXXXXXX, who is a resident of Canada. New XXXXXXXXXX REIT is resident in Canada. The New XXXXXXXXXX REIT Declaration of Trust will provide that the REIT is entitled to appoint a majority of the trustees of New XXXXXXXXXX REIT, and otherwise direct the actions of New XXXXXXXXXX REIT (including the voting of any securities held by New XXXXXXXXXX REIT) until the new board of trustees is put into place on the final step of the Plan of Arrangement, at which time such rights will be terminated.

On XXXXXXXXXX, New XXXXXXXXXX REIT became a party to the Investor Property Purchase Agreement.

Proposed Transactions

The following transactions are proposed to occur on the Effective Date (other than the transactions described under the headings “Pre-Effective Date Steps” and “Post-Effective Date Steps”). Where feasible, and except where otherwise stated below, the Effective Date transactions are intended to occur under the court-approved Plan of Arrangement with each plan step occurring at XXXXXXXXXX intervals unless otherwise specified.

A. Pre-Effective Date Steps

Formation of New Entities

Step 2. The REIT will settle a new subsidiary unit trust (“New Master GP Trust”) under the laws of XXXXXXXXXX, and will subscribe for New Master GP Trust units. The trustees of New Master GP Trust will be one or more individuals resident in Canada who are currently employed by the REIT and its subsidiaries. New Master GP Trust will be resident in Canada.

Step 3. The REIT and New Master GP Trust will form a new subsidiary limited partnership (“New Master LP”) under the laws of XXXXXXXXXX, with the REIT as the sole limited partner and New Master GP Trust as the sole general partner. The limited partnership agreement of New Master LP will provide for two classes of limited partner interests: “common” limited partner interests and New Master LP Exchangeable Units. New Master LP will be a Canadian partnership.

Step 4. The REIT will settle a new subsidiary unit trust (“New XXXXXXXXXX GP Trust”) under the laws of XXXXXXXXXX, and will subscribe for New XXXXXXXXXX GP Trust units. The trustees of New XXXXXXXXXX GP Trust will be one or more individuals resident in Canada who are currently employed by the REIT and its subsidiaries. New XXXXXXXXXX GP Trust will be resident in Canada.

Step 5. The REIT and New XXXXXXXXXX GP Trust will form a new subsidiary limited partnership (“New XXXXXXXXXX LP”) under the laws of XXXXXXXXXX, with the REIT as the sole limited partner and New XXXXXXXXXX GP Trust as the sole general partner. New XXXXXXXXXX LP will be a Canadian partnership.

Step 6. The REIT will form a new subsidiary corporation (“New Trusteeco”) under the laws of XXXXXXXXXX, with the REIT as the sole shareholder. New Trusteeco will be a taxable Canadian corporation.

Additional Pre-Effective Date Steps

Step 7. XXXXXXXXXX Trust and certain of its affiliates will enter into a new credit facility with an arm’s length lender (the “New XXXXXXXXXX Credit Facility”).

Step 8. XXXXXXXXXX Trust will draw down on the New XXXXXXXXXX Credit Facility and use the proceeds to repay a portion of the XXXXXXXXXX Trust Receivables.

Step 9. The initial declaration of trust of New XXXXXXXXXX REIT will be amended and restated to include all the terms and conditions of the New XXXXXXXXXX REIT Declaration of Trust. Under the New XXXXXXXXXX REIT Declaration of Trust, New XXXXXXXXXX REIT will be structured substantially similarly to the REIT. In particular: (a) New XXXXXXXXXX REIT will be structured to comply with the restricted undertakings, prescribed conditions, and public distribution requirements of a mutual fund trust and will elect to be a mutual fund trust from the date of its inception; (b) New XXXXXXXXXX REIT will be operated so as to qualify as a “real estate investment trust” for purposes of Act and therefore will not be a “SIFT trust” under the Act; and (c) the New XXXXXXXXXX REIT Unitholders will have the right to redeem their New XXXXXXXXXX REIT Units on substantially the same terms as currently apply to the REIT Units. However, the New XXXXXXXXXX REIT Declaration of Trust will provide for two separate series of New XXXXXXXXXX REIT Units, “Series A” units which will be the common voting units which are expected to be listed on the XXXXXXXXXX and “Non-Voting Series B” units which will be non-voting, but which will be economically equivalent to and exchangeable for “Series A” units. The New XXXXXXXXXX REIT Declaration of Trust will also provide for an unlimited number of XXXXXXXXXX Special Voting Units.

Step 10. On the day before the Effective Date, XXXXXXXXXX Trust will pay a distribution to XXXXXXXXXX Trust in an amount equal to XXXXXXXXXX Trust’s undistributed taxable income for its taxation year that will end at the end of the day on the day before the Effective Date as a consequence of subsections 249(4) and 251.2(6). The distribution will be satisfied by the issuance of additional units of XXXXXXXXXX Trust, which will be immediately consolidated such that the number of XXXXXXXXXX Trust units outstanding immediately following completion of this step will be the same as the number of XXXXXXXXXX Trust units outstanding immediately prior to this step.

Step 11. On the day before the Effective Date, XXXXXXXXXX Trust will pay a distribution to its unitholders in an amount equal to XXXXXXXXXX Trust’s undistributed taxable income for its taxation year that will end at the end of the day on the day before the Effective Date as a consequence of subsections 249(4) and 251.2(6). The distribution will be satisfied by the issuance of additional units of XXXXXXXXXX Trust, which will be immediately consolidated such that the number of XXXXXXXXXX Trust units outstanding immediately following completion of this step will be the same as the number of XXXXXXXXXX Trust units outstanding immediately prior to this step.

B. Effective Date Steps – Plan of Arrangement

Step 12. The REIT Declaration of Trust and the constating documents of the REIT’s subsidiaries, including XXXXXXXXXX Trust, will be amended to the extent necessary to facilitate the Plan of Arrangement steps.

Dissolution of XXXXXXXXXX Master LP

Step 13. The liabilities of XXXXXXXXXX Master LP (if any) will be assumed by the REIT as a contribution to the capital of XXXXXXXXXX Master LP.

Step 14. XXXXXXXXXX Master LP will be liquidated and will distribute an undivided interest in each of its properties pro rata to its partners, being the REIT and XXXXXXXXXX GP Trust. The REIT and XXXXXXXXXX GP Trust will jointly elect under subsection 98(3) for such liquidation to occur on a tax-deferred basis.

Step 15. XXXXXXXXXX GP Trust will be dissolved and distribute all of its property (being the assets received upon the dissolution of XXXXXXXXXX Master LP) to the REIT.

Effective Date Subsidiary Trust Distributions

Step 16. XXXXXXXXXX Trust will pay a distribution to XXXXXXXXXX Trust in an amount equal to XXXXXXXXXX Trust’s undistributed taxable income for the period up to and including the Effective Date. The distribution will be satisfied by the issuance of additional units of XXXXXXXXXX Trust, which will be immediately consolidated such that the number of XXXXXXXXXX Trust units outstanding immediately following completion of this step will be the same as the number of XXXXXXXXXX Trust units outstanding immediately prior to this step.

Step 17. XXXXXXXXXX Trust will pay a distribution to the REIT in an amount equal to XXXXXXXXXX Trust’s undistributed taxable income for the period up to and including the Effective Date. The distribution will be satisfied by the issuance of additional units of XXXXXXXXXX Trust, which will be immediately consolidated such that the number of XXXXXXXXXX Trust units outstanding immediately following completion of this step will be the same as the number of XXXXXXXXXX Trust units outstanding immediately prior to this step.

Dissolution of XXXXXXXXXX

Step 18. Pursuant to and in accordance with the declaration of trust of XXXXXXXXXX Trust, as amended pursuant to Step 12 above, New Trusteeco will replace XXXXXXXXXX as the sole trustee of XXXXXXXXXX Trust.

Step 19. XXXXXXXXXX will be liquidated and the remaining property and liabilities of XXXXXXXXXX will be distributed to, and assumed by, the REIT, the sole shareholder of XXXXXXXXXX, on the liquidation of XXXXXXXXXX and, upon filing of articles of dissolution and issuance of a certificate of dissolution by the Registrar under the XXXXXXXXXX (which, for greater certainty, may occur on a date after the Effective Date), XXXXXXXXXX will be dissolved.

Reorganization of XXXXXXXXXX Assets in New Master LP

Step 20. The REIT will transfer the Legacy XXXXXXXXXX Transferred Properties, if any, to New XXXXXXXXXX LP in consideration for the assumption of liabilities associated with the Legacy XXXXXXXXXX Transferred Properties and additional limited partnership interests in New XXXXXXXXXX LP. The REIT and New XXXXXXXXXX GP Trust, as general partner of New XXXXXXXXXX LP, will jointly elect under subsection 97(2), in prescribed form and within the time referred to in subsection 96(4), for such transfer to occur on a tax deferred basis.

Step 21. The REIT will transfer the following properties to New Master LP in consideration for (a) the assumption by New Master LP of the XXXXXXXXXX Trust Payables, (b) the New Master LP Note, and (c) additional limited partnership interests in New Master LP:

i. all of the limited partnership units of New XXXXXXXXXX LP, other than a nominal interest;

ii. all of the units of New XXXXXXXXXX GP Trust; and

iii. the XXXXXXXXXX Trust Receivables.

The REIT and New Master GP Trust, as general partner of New Master LP, will jointly elect under subsection 97(2), in prescribed form and within the time referred to in subsection 96(4), for such transfer to occur on a tax-deferred basis. Under the transfer agreement, New Master LP will agree to indemnify the REIT and its affiliates in respect of certain guarantees provided by the REIT and its affiliates in respect of the XXXXXXXXXX Segment properties and the REIT will agree to indemnify New Master LP and its affiliates in respect of certain guarantees provided by XXXXXXXXXX Trust and its subsidiaries in respect of properties that will continue to be held directly or indirectly by the REIT following completion of the Proposed Transactions, in each case to the extent that such guarantees are not released in connection with the Proposed Transactions.

New XXXXXXXXXX REIT Spinout Steps

Step 22. The REIT will subscribe for additional New XXXXXXXXXX REIT Units for an aggregate subscription price of approximately $XXXXXXXXXX (the “Second XXXXXXXXXX Subscription Amount”), representing a per unit price of approximately $XXXXXXXXXX per unit. The REIT will issue a demand promissory note (the “Second XXXXXXXXXX Subscription Note”) to New XXXXXXXXXX REIT in a principal amount equal to the Second XXXXXXXXXX Subscription Amount in satisfaction of the subscription price. The Initial XXXXXXXXXX Unit will be redeemed by New XXXXXXXXXX REIT for a cash redemption price of $XXXXXXXXXX, which will be set-off against the amount owing under the Initial XXXXXXXXXX Subscription Note, and the Initial XXXXXXXXXX Subscription Note will be cancelled. The number of New XXXXXXXXXX REIT Units issued by New XXXXXXXXXX REIT immediately following this step will be equal to the then-outstanding number of REIT Units.

Step 23. New XXXXXXXXXX REIT will adopt the New XXXXXXXXXX REIT Option Plan providing for the issuance of options to purchase units of New XXXXXXXXXX REIT and the New XXXXXXXXXX REIT Incentive Unit Plan providing for the grant of New XXXXXXXXXX REIT Incentive Units. The terms and conditions of the New XXXXXXXXXX REIT Option Plan and the New XXXXXXXXXX REIT Incentive Unit Plan will otherwise be substantially similar to the terms and conditions of the REIT Option Plan and the Incentive Unit Plan, respectively.

The terms of the Incentive Units will be adjusted, amended or amended and restated as necessary to provide for the settlement, upon vesting, in cash, a combination of REIT Units and New XXXXXXXXXX REIT Units (“unit consideration”), or any combination of cash and unit consideration.

Step 24. The REIT will make a cash distribution to its unitholders in an aggregate amount equal to the Second XXXXXXXXXX Subscription Amount as a distribution of capital. The full amount of such distribution will be paid by the REIT to the Depositary to be held for the benefit of the REIT Unitholders. The REIT will separately remit to the Receiver General, on behalf of each REIT Unitholder that is a non-resident, an amount equal to the amount required to be withheld on behalf of that REIT Unitholder in respect of such distribution pursuant to subsection 218.3(2).

Step 25. The REIT will sell New XXXXXXXXXX REIT Units to the REIT Unitholders for an aggregate purchase price equal to the Second XXXXXXXXXX Subscription Amount. Each REIT Unitholder will purchase a number of New XXXXXXXXXX REIT Units equal to their respective number of REIT Units, such that, following this step, each Unitholder holds the same number of REIT Units and New XXXXXXXXXX REIT Units. The purchase price payable by each REIT Unitholder will be equal to such REIT Unitholder’s share of the distribution paid in Step 24 and will be satisfied using the funds held by the Depositary. At the time of this sale, the only property of New XXXXXXXXXX REIT will be the Second XXXXXXXXXX Subscription Note and its rights under the Investor Property Purchase Agreement.

At the time of this step, pursuant to and in accordance with the terms and conditions of the XXXXXXXXXX Class B Units, the exchange rights under the XXXXXXXXXX Class B Units will be adjusted to provide that on an exchange of such units, in addition to the REIT Units (and nominal amount of cash) for which such units are exchangeable, the holder will be entitled to receive an equivalent number of New XXXXXXXXXX REIT Units and the distribution rights under the XXXXXXXXXX Class B Units will be adjusted accordingly, subject to the XXXXXXXXXX Option.

Step 26. The REIT will transfer its interest in the XXXXXXXXXX Segment to New XXXXXXXXXX REIT by transferring each XXXXXXXXXX Property to New XXXXXXXXXX REIT for no consideration (the “REIT Qualifying Disposition”). The REIT will not file an election described in subparagraph 107.4(3)(a)(i) in respect of the REIT Qualifying Disposition.

The value of the XXXXXXXXXX Segment, and of the assets retained by the REIT, will be such that each of the REIT and New XXXXXXXXXX REIT will have at least 150 unitholders, each holding units of the applicable trust with a fair market value of at least $500 and constituting a “block of units” within the meaning of Regulation 4803(1).

Concurrently with the REIT Qualifying Disposition, each outstanding REIT Option (an “existing REIT Option”) will be exchanged for one REIT Option (a “new REIT Option”) and one New XXXXXXXXXX REIT Option. The aggregate exercise price of the new REIT Option and the New XXXXXXXXXX REIT Option immediately after the exchange will be equal to the exercise price of the existing REIT Option immediately before the exchange. The exercise price of the existing REIT Option will be apportioned between the new REIT Option and the New XXXXXXXXXX REIT Option pro rata based on the post-REIT Qualifying Disposition fair market values of the REIT Units and the New XXXXXXXXXX REIT Units, as determined by the REIT Trustees.

Step 27. Each REIT Option held by an employee of New XXXXXXXXXX REIT (or its subsidiaries) will be exchanged for New XXXXXXXXXX REIT Options having equivalent in-the-money value to the exchanged REIT Options.

Step 28. Each New XXXXXXXXXX REIT Option held by an employee of the REIT (and its subsidiaries) will be exchanged for REIT Options having equivalent in-the-money value to the exchanged New XXXXXXXXXX REIT Options.

Step 29. Each Incentive Unit held by an employee of New XXXXXXXXXX REIT (or its subsidiaries) will be exchanged for a New XXXXXXXXXX REIT Incentive Unit which will provide for the settlement, upon vesting, in cash, New XXXXXXXXXX REIT Units, or any combination thereof and which will otherwise have substantially the same terms and conditions as the exchanged Incentive Unit.

Step 30. The terms of the Incentive Units held by employees of the REIT (or its subsidiaries) will be further adjusted, amended or amended and restated as necessary to provide for the settlement, upon vesting, in cash, REIT Units, or any combination thereof.

Step 31. The REIT will subscribe for a number of New Master LP Exchangeable Units equal to the number of New XXXXXXXXXX REIT Units which would be required to be delivered to the holders of XXXXXXXXXX Class B Units on the exchange of such units for REIT Units and New XXXXXXXXXX REIT Units. The subscription price payable by the REIT for such units shall be set-off against the amount owing to the REIT by New Master LP under the New Master LP Note, in full and final satisfaction of each such obligation. New XXXXXXXXXX REIT will simultaneously issue an equal number of XXXXXXXXXX Special Voting Units to the REIT for no additional consideration. In order to provide the holder of the XXXXXXXXXX Class B Units with voting rights in respect of the New XXXXXXXXXX REIT Units for which such XXXXXXXXXX Class B Units are exchangeable equivalent to the voting rights attributable to the Special Voting Units held in connection with the XXXXXXXXXX Class B Units, the REIT will agree with the holder of the XXXXXXXXXX Class B Units to vote a number of its XXXXXXXXXX Special Voting Units equal to the number of New XXXXXXXXXX REIT Units into which such units are exchangeable as directed by the holder of the XXXXXXXXXX Class B Units.

Step 32. The New XXXXXXXXXX REIT Units may be consolidated (or split) to the extent necessary to result in a post-consolidation (or split) per New XXXXXXXXXX REIT Unit initial price determined by the New XXXXXXXXXX REIT Trustees to be an appropriate price. Any fractional New XXXXXXXXXX REIT Units resulting from such a consolidation will be cancelled by New XXXXXXXXXX REIT.

Other Plan of Arrangement Steps

Step 33. The REIT will pay the amount owing under the Second XXXXXXXXXX Subscription Note and the Second XXXXXXXXXX Subscription Note will be cancelled.

Step 34. XXXXXXXXXX will be removed as the sole trustee of New XXXXXXXXXX REIT and replaced with the desired board of individual trustees, all or a majority of whom will be residents of Canada, following which the REIT’s rights to select trustees of New XXXXXXXXXX REIT or to otherwise direct New XXXXXXXXXX REIT’s actions will be terminated.

C. Effective Date Steps - Post-Plan Steps

Step 35. The Investor will transfer its beneficial interest in the Investor Properties to Investor XXXXXXXXXX LP in consideration for the assumption of associated liabilities, the Investor XXXXXXXXXX LP Note and additional limited partnership units of Investor XXXXXXXXXX LP. Bare legal title to the Investor Properties will be transferred to one or more nominee corporations owned by Investor XXXXXXXXXX LP in connection with the Proposed Transactions (which transfers may occur either shortly before or shortly after the Plan of Arrangement). The Investor and Investor XXXXXXXXXX LP will not file an election under subsection 97(2) in respect of the transfer.

Step 36. The Investor will transfer its interest as limited partner in Investor XXXXXXXXXX LP and its interest in the general partner of Investor XXXXXXXXXX LP to New XXXXXXXXXX REIT in consideration for the Investor Units. The Investor may also be required to make a cash payment to New XXXXXXXXXX REIT, or New XXXXXXXXXX REIT may be required to make a cash payment to the Investor, under the purchase price adjustment provisions of the Investor Property Purchase Agreement.

Step 37. New XXXXXXXXXX REIT will transfer its limited partnership interest in Investor XXXXXXXXXX LP, other than a nominal limited partner interest, and its interest in the general partner of Investor XXXXXXXXXX LP, to New Master LP in consideration for additional limited partnership units of New Master LP.

D. Post-Effective Date Matters

Step 38. Shortly following the Effective Date, Investor XXXXXXXXXX LP shall repay the Investor XXXXXXXXXX LP Note to the Investor using the proceeds from one or more secured and/or unsecured financings of the Investor Properties as contemplated by the Investor Property Purchase Agreement.

Step 39. When filing its first tax return under the Act, New XXXXXXXXXX REIT will elect under subsection 132(6.1) to have been a mutual fund trust since inception.

Step 40. Any adjustment to the purchase price payable by New XXXXXXXXXX REIT for the indirect acquisition of the Investor Properties will be settled in cash between New XXXXXXXXXX REIT and the Investor in accordance with the Investor Property Purchase Agreement. If such adjustment provisions result in a cash payment to New XXXXXXXXXX REIT, New XXXXXXXXXX REIT will not use the cash received to fund distributions.

Additional Information

1. Neither the REIT nor any of its affiliates will receive any fees for certain guarantees in respect of the XXXXXXXXXX Segment properties which will remain in place as set out in Step 21. The REIT does not receive fees for any guarantees and is not in the business of providing guarantees. The continuing guarantees will not change as part of the Proposed Transactions.

2. The XXXXXXXXXX Option may be exercised, at the discretion of the REIT Trustees, shortly after the completion of the Plan of Arrangement. In the event of such an exercise, the number of votes attached to the Special Voting Units held by the holder(s) of the XXXXXXXXXX Class B Units will be automatically increased in accordance with the REIT Declaration of Trust by a number of votes equal to the number of additional REIT Units for which the XXXXXXXXXX Class B Units will be exchangeable as a consequence of the exercise of the XXXXXXXXXX Option and, for greater certainty, the SVU Voting Agreement will terminate.

3. The property received by New XXXXXXXXXX REIT as part of the series of transactions or events that includes the Subject Transactions and the Proposed Transactions as consideration for the acquisition of a capital interest in New XXXXXXXXXX REIT will not be used to fund a distribution (other than a distribution that is proceeds of disposition of a capital interest in New XXXXXXXXXX REIT).

Purpose of the Subject Transactions and Proposed Transactions

The overall purpose of the Subject Transactions and Proposed Transactions, particularly the New XXXXXXXXXX REIT Spinout Steps, is to restructure the REIT’s holdings such that the XXXXXXXXXX Segment is held in a separate publicly-traded real estate investment trust. The separation of the XXXXXXXXXX Segment into a separate real estate investment trust is expected to maximize unitholder value by permitting the REIT and New XXXXXXXXXX REIT to pursue independent objectives, strategies, and financings. New XXXXXXXXXX REIT’s growth strategy as a separate public entity will include the Investor’s investment in New XXXXXXXXXX REIT by way of the indirect transfer of the Investor Properties to New XXXXXXXXXX REIT in consideration for the Investor Units.

Rulings Given

Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, transactions, additional information, and the purpose of the Subject Transactions and Proposed Transactions, and that the Subject Transactions have been and the Proposed Transactions are completed in the manner described above, and that there are no other transactions that may be relevant to the rulings given, our rulings are as follows:

A. None of the Subject Transactions or Proposed Transactions will, in and of themselves, adversely affect the qualification of the REIT as a mutual fund trust within the meaning of subsection 132(6).

B. The REIT Qualifying Disposition will constitute a “qualifying disposition” within the meaning of subsection 107.4(1), such that the rules in subsection 107.4(3) will apply to the REIT, New XXXXXXXXXX REIT and the Unitholders in respect of such disposition.

C. Subsection 245(2) will not apply to redetermine the tax consequences described in the foregoing rulings.

Comments

Nothing in this advance income tax ruling should be construed as implying that we are ruling on any tax consequences relating to the facts, Subject Transactions, and Proposed Transactions described herein other than those specifically described in the rulings given above, or acceptance, approval or confirmation of any other income tax implications of the facts, Subject Transactions, Proposed Transactions, or the additional information described herein. In particular, but without affecting the generality of the foregoing,

1. we express no opinion with respect to whether any entity described herein is a mutual fund trust within the meaning of subsection 132(6) at any particular time;

2. we express no opinion with respect to whether any entity described herein is a “real estate investment trust” within the meaning of subsection 122.1(1) at any particular time;

3. we express no opinion with respect to whether subsection 97(2) will apply in respect of the Proposed Transactions described in Steps 20 and 21 above;

4. we express no opinion with respect to whether subsection 98(3) will apply in respect of the Proposed Transactions described in Step 14 above;

5. we express no opinion with respect to the equivalent in-the-money value described in Steps 27 and 28; and

6. we express no opinion with respect to the tax status of any entity described herein.

None of the rulings given in this letter are intended to apply to, or in the event of, the operation of a price adjustment clause, since such adjustment will be due to circumstances that do not constitute proposed transactions that are seriously contemplated. The general position of the CRA with respect to price adjustment clauses is stated in Income Tax Folio S4-F3-C1, Price Adjustment Clauses, updated to November 26, 2015.

The above advance income tax rulings, which are based on the Act and Regulations in their present form and do not take into account any proposed amendments thereto, are given subject to the general limitations and qualifications set out in Information Circular 70-6R11 Advance Income Tax Rulings and Technical Interpretations, dated April 1, 2021, and are binding on the CRA provided that the Proposed Transactions are completed within six months of the date of this letter.

Yours truly,

XXXXXXXXXX
For Division Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 The REIT also has issued “Special Voting Units” which are owned exclusively by holders of exchangeable partnership interests issued by subsidiary partnerships of the REIT in connection with certain completed acquisitions, and which entitle the holders thereof to vote together with the holders of REIT Units. The Special Voting Units do not entitle the holder to any distributions from, or property of, the REIT.