Retrocom Mid-Market Real Estate Investment Trust (Re), 2008 CanLII 27826

Headnote

NP 11-203 - relief from Item 14.2 of National Instrument 51-102F5 and permission for Filer to file alternative financial disclosure in the information circular and business acquisition report pursuant to section 13.1 of National Instrument 51-102. - Filer acquiring 4 shopping malls from six vendors and separate audited financials statements never prepared for properties except for one. Alternative financial and other disclosure was provided.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations

June 4, 2008

In the Matter of the Securities Legislation of ONTARIO (the “Jurisdiction”)

AND

IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF RETROCOM MID-MARKET REAL ESTATE INVESTMENT TRUST (the “Filer”)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the “Legislation”) for an order under Section 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (“NI 51-102”) exempting the Filer from the requirements of Item 14.2 of Form 51-102F5 Information Circular (“Form 51-102F5”), to include financial statements for a proposed significant acquisition (the “Proposed Acquisition”) in the prescribed form and to include pro forma financial statements of the Filer giving effect to the Proposed Acquisition in the prescribed form provided that the Filer includes in the information circular to be delivered to its unitholders (the “Information Circular”) alternative financial statements in an acceptable form, and for an order under Section 13.1 of NI 51-102 permitting the Filer to file a business acquisition report (“BAR”) for the Proposed Acquisition that includes the same alternative financial statements that are included in the Information Circular instead of financial statements in the prescribed form (together, the “Exemption Sought”).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:

(i) the Ontario Securities Commission is the principal regulator for this application; and

(ii) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (“MI 11-102”) is intended to be relied upon in each of the other Provinces and Territories of Canada (together with Ontario, the “Jurisdictions”).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is an unincorporated open-end real estate investment trust established under the laws of the Province of Ontario by a first amended and restated declaration of trust dated March 22, 2004, as amended by amendment no. 1 thereto dated November 30, 2005, amendment no. 2 thereto dated June 27, 2006 and amendment no. 3 thereto dated June 19, 2007.

2. The Filer’s head office is located at 4025 Yonge Street, Suite 214, P.O. Box 204, Toronto, Ontario, M2P 2E3.

3. The Filer is a reporting issuer, or the equivalent, in each of the Jurisdictions and is currently not in default of any applicable requirements under the securities legislation thereunder.

4. The units of the Filer (“Units”) are listed and posted on the Toronto Stock Exchange under the symbol RMM-UN. As at April 30, 2008, the Filer had 18,517,927 Units issued and outstanding.

5. On April 30, 2008, the Filer announced that it had entered into a definitive purchase and support agreement with six vendors (the “Vendor Group”) pursuant to which the Filer will acquire four shopping malls (the “Properties”) for a purchase price of approximately $55 million. The transaction is expected to close in early July 2008.

6. The Filer intends to finance the Proposed Acquisition through a combination of assumed mortgage debt and the issuance to the Vendor Group of securities of Retrocom Limited Partnership, an indirect wholly-owned subsidiary of the Filer, and securities of the Filer.

7. The Proposed Acquisition of the Properties collectively may be considered an “acquisition of related businesses” pursuant to section 8.1 of NI 51-102 and, therefore, constitutes a “significant acquisition” of the Filer for the purposes of NI 51-102, as determined in accordance with the income test prescribed by section 8.3 of NI 51-102.

8. Pursuant to Item 14.2 of Form 51-102F5 mandated by Part 9 of NI 51-102, the Information Circular must include disclosure, including financial statement disclosure, for each entity that would result from the proposed significant acquisition, prescribed by the form of prospectus that the Filer would be eligible to use for a distribution of its securities, being a short form prospectus pursuant to National Instrument 44-101 Short Form Prospectus Distributions in the case of the Filer (a “Prospectus”).

9. Pursuant to Items 10.1(2) and 10.1(3) of Form 44-101F1, a Prospectus must be accompanied by certain financial statements for certain prescribed periods for the proposed significant acquisition that the Filer proposes to complete during the current financial year of the Filer, as determined by reference to Part 8 of NI 51-102 (the “Prospectus Acquisition Requirements”).

10. For the Filer, the Prospectus Acquisition Requirements apply to the Proposed Acquisition and the Information Circular to be delivered to its unitholders in connection therewith (the “Information Circular Acquisition Requirements”).

11. The Proposed Acquisition constitutes a “significant acquisition” of the Filer for the purposes of NI 51-102, requiring the Filer to file a BAR within 75 days of the completion of the Proposed Acquisition pursuant to Section 8.2 of NI 51-102, with such BAR to include the Prospectus Financial Statement Requirements (as defined below) (the “BAR Requirement”).

12. The Prospectus Acquisition Requirements for the Proposed Acquisition require the Filer to include: (i) audited financial statements (i.e. an income statement, a statement of retained earnings, a cash flow statement and a balance sheet) for the most recently completed financial year of the business acquired; (ii) unaudited financial statements for the financial year immediately preceding the most recently completed financial year of the business acquired; (iii) unaudited interim financial statements for the most recently completed interim period prior to acquisition of the business acquired together with a comparative interim financial statement for the comparative period in the preceding year of the business acquired; (iv) a pro forma balance sheet of the Filer as at the date of the most recent balance sheet of the Filer giving effect to the Proposed Acquisition as if it had taken place at the date of the pro forma balance sheet; and (v) a pro forma income statement and earnings per unit of the Filer for the most recently completed financial year of the Filer for which financial statements are required to have been issued and the most recently completed interim period of the Filer for which financial statements are required to have been issued giving effect to the Proposed Acquisition as if it had taken place at the beginning of the most recently completed financial year (the “Prospectus Financial Statement Requirements”).

13. Each of the Properties represents just one of the properties in a portfolio of real estate properties owned by the various owners that comprise the Vendor Group and, accordingly, separate audited financial statements have never been prepared for the Properties, other than with respect to one Property (the “Dundas Property”).

14. Annual audited financial statements and unaudited interim financial statements for the Properties in the format required by the Prospectus Acquisition Requirements do not exist and the information to produce such statements is not accessible to the Filer.

15. Furthermore, the Filer is unable to prepare a historical balance sheet for the Properties that can be audited as the historical financial statements are unavailable.

16. Completion of the Proposed Acquisition requires the prior approval of the unitholders of the Filer. As such, the Filer anticipates holding a special meeting of its unitholders on June 27, 2008 and mailing the Information Circular in respect thereof to its unitholders on or before June 6, 2008.

17. Subject to the approval of the Decision Makers, the Filer proposes that in place of each of the Information Circular Acquisition Requirements and the BAR Requirement, the Filer:

(a) include in the Information Circular: (i) audited statements of net operations for the aggregate Properties for their most recently completed financial year; (ii) unaudited statements of net operations for the aggregate Properties for their financial year immediately preceding their most recently completed financial year; and (iii) unaudited interim statements of net operations for the aggregate Properties for their most recently completed interim period prior to acquisition together with comparative interim statements of net operations for the comparative period in the preceding year (the “Proposed Acquisition Operating Statements”);

(b) include in the Information Circular pro forma financial statements of the Filer based on the Proposed Acquisition Operating Statements (the relief referred to in sections (a) and (b) of this paragraph collectively referred to herein as the “Information Circular Requested Relief”); and

(c) include in the BAR, in addition to the audited financial statements for the Dundas Property, the same financial statements that are included in the Information Circular pursuant to the Information Circular Requested Relief (the “BAR Requested Relief”).

18. Given that the Information Circular is anticipated to be dated and mailed after the date that the interim financial statements of the Filer for the interim period ended March 31, 2008 have been released, it is anticipated that the most recent period reflected in the Proposed Acquisition Operating Statements will be for the period ended March 31, 2008, being the most recent interim period of the Filer for which financial statements will have been released.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

(a) the Filer includes in the Information Circular the Proposed Acquisition Operating Statements and all other information otherwise required in the Information Circular pursuant to Item 14.2 of Form 51-102F5; and

(b) the Filer includes in the BAR, in addition to the audited financial statements for the Dundas Property, the Proposed Acquisition Operating Statements and all other information otherwise required in the BAR pursuant to Form 51-102F4.

“Lisa Enright”

Assistant Manager, Corporate Finance

Ontario Securities Commission