Ontario Commission des 22nd Floor 22e étage
Securities valeurs mobilières 20 Queen Street West 20, rue Queen ouest
Commission de l’Ontario Toronto ON M5H 3S8 Toronto ON M5H 3S8
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 GRANITE REAL ESTATE INVESTMENT TRUST AND GRANITE REIT INC.
DECISION
Background
The principal regulator (the Decision Maker) in the Jurisdiction has received an application (the Application) from Granite Real Estate Investment Trust (Granite REIT) and Granite REIT Inc. (Granite GP) (Granite REIT and Granite GP each a Filer and, collectively, the Filers), for a decision (the Exemption Sought) by the Decision Maker under the securities legislation of the Jurisdiction (the Legislation) that:
(a) pursuant to section 11.1 of National Instrument 44-102 – Shelf Distributions (NI 44-102), sections 2.2(3)(b)(i) and (iii) shall not apply to Granite REIT; and
(b) pursuant to section 11.1 of NI 44-102, sections 2.2(3)(b)(i), (ii) and (iii) shall not apply to Granite GP.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for the Application; and
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 - Passport System (MI 11-102) is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, the Northwest Territories and Nunavut (the Other Jurisdictions).
Interpretation
Defined terms contained in National Instrument 14-101 – Definitions have the same meaning in this decision unless they are defined in this decision or the Varied Decision Document (as defined below).
Representations
This decision is based on the following facts represented by the Filers:
Granite REIT is a Canadian-based real estate investment trust engaged, directly and through Granite LP (as defined below) and its subsidiaries, in the acquisition, development, management and ownership of industrial, warehouse and logistics properties in North America and Europe.
Granite GP is a corporation formed under the Business Corporations Act (British Columbia). Granite GP acts as the general partner of Granite REIT Holdings Limited Partnership (Granite LP), a limited partnership formed under the laws of Quebec. Granite REIT is the sole limited partner of Granite LP.
Each of Granite REIT and Granite GP is a reporting issuer in the Jurisdiction and the Other Jurisdictions and on the date hereof neither of the Filers is in default of applicable securities legislation or the rules and regulations made pursuant thereto in the Jurisdiction or any of the Other Jurisdictions.
Each trust unit of Granite REIT (a Granite REIT Unit) is stapled to a common share of Granite GP (a Granite GP Common Share) to form a “stapled unit” (a Stapled Unit), and the two securities trade together (the Stapled Structure). The Stapled Units are currently listed and trade on the Toronto Stock Exchange and the New York Stock Exchange.
The Granite REIT Units and Granite GP Common Shares forming the Stapled Units are separately listed, but not separately posted for trading, on the Toronto Stock Exchange.
Granite REIT and Granite GP are party to a support agreement (as amended, the Support Agreement) which facilitates the Stapled Structure. Among other things, the Support Agreement requires each to issue its component part of a Stapled Unit simultaneously with the other, and to cooperate to facilitate the other in fulfilling its obligations to issue Granite REIT Units or Granite GP Common Shares, as applicable, to form Stapled Units.
The Granite REIT Units and the Granite GP Common Shares will only become unstapled (a) in the event that holders of Granite REIT Units vote in favour of the unstapling of Granite REIT Units and Granite GP Common Shares, such that the two securities will trade separately, or (b) at the sole discretion of the trustees of Granite REIT or the directors of Granite GP upon an event of bankruptcy or insolvency of either Granite REIT or Granite GP.
In connection with the formation of the Filers’ Stapled Structure in 2013, the Filers obtained exemptive relief from certain continuous disclosure and other requirements of applicable securities laws in the Jurisdiction and the Other Jurisdictions in a Decision by the Ontario Securities Commission, as principal regulator, dated December 21, 2012 (In the Matter of Granite Real Estate Inc., on its own behalf and on behalf of Granite Real Estate Investment Trust and Granite REIT Inc.) (the 2012 Decision), which Decision was subsequently varied by a Decision by the Ontario Securities Commission, as principal regulator, dated May 16, 2014 (In the Matter of Granite Real Estate Investment Trust and Granite REIT Inc.) (the 2012 Decision, as so varied, the Varied Decision Document).
The Varied Decision Document provides for exemptive relief from a number of the continuous disclosure requirements of the securities laws in the Jurisdiction and the Other Jurisdictions including, in particular, those relating to (i) financial statements disclosure to permit Granite REIT and Granite GP to prepare, file and deliver one set of combined financial statements prepared by the Filers on a combined basis (Combined Financial Statements) using the accounting principles applicable to Granite REIT and Granite GP pursuant to the securities legislation of the Jurisdiction, and related management’s discussion and analysis (MD&A), to reflect the financial position and results of Granite REIT and Granite GP on a combined basis, instead of each of them preparing, filing and delivering its own stand-alone financial statements and MD&A, and (ii) annual information form (AIF) disclosure by Granite GP, so long as the AIF filed by Granite REIT contains all information that would be required in an AIF filed by Granite GP for the same reporting period, in each case while the Stapled Structure is in place.
The Varied Decision Document provides exemptive relief for Granite REIT from certain of the basic qualification criteria contained in sections 2.2(d)(i) and 2.2(e) of National Instrument 44-101 – Short Form Prospectus Distributions (NI 44-101) for eligibility to file a short form prospectus, in particular the requirements that Granite REIT have current annual financial statements for any period for which Granite REIT files Combined Financial Statements, and that Granite REIT have equity securities listed and posted for trading on a short form eligible exchange.
The Varied Decision Document provides exemptive relief for Granite GP from certain of the basic qualification criteria contained in sections 2.2(d) and 2.2(e) of NI 44-101 for eligibility to file a short form prospectus, in particular the requirements that Granite GP have current annual financial statements for any period for which Granite REIT files Combined Financial Statements, a current AIF and equity securities listed and posted for trading on a short form eligible exchange.
The Filers are each eligible to file a short form prospectus pursuant to section 2.2 of NI 44-101 and the Varied Decision Document.
The Filers have determined that they may wish to offer securities pursuant to a short form base shelf prospectus and applicable prospectus supplements.
If Granite REIT and Granite GP rely on the Varied Decision Document and the Exemption Sought with respect to the filing of a short form base shelf prospectus and applicable prospectus supplements to distribute Stapled Units or other securities, they will file a single shelf prospectus and applicable prospectus supplement for such a distribution, qualifying the distribution of securities of each issuer (a Joint Prospectus), which will incorporate by reference the following documents:
(a) Granite REIT’s then current AIF (Granite REIT's Current AIF);
(b) the then most recent audited annual Combined Financial Statements, together with the related MD&A;
(c) if, at the date of the Joint Prospectus, Granite REIT or Granite GP have filed or have been required to file interim Combined Financial Statements for a period subsequent to the then most recent financial year-end, such interim financial statements together with the related interim MD&A;
(d) any applicable segmented financial information referred to in Section 2(c)(iv), below;
(e) the content of any news release or other public communication that is disseminated by Granite REIT or Granite GP prior to the filing of the Joint Prospectus and that contains historical financial information about one or both of Granite REIT and Granite GP for a period more recent than the end of the most recent period for which financial statements are required under paragraphs (b) and (c) above;
(f) any material change report of Granite REIT or Granite GP, other than a confidential material change report, filed by Granite REIT under Part 7 of National Instrument 51-102 – Continuous Disclosure Obligations (NI 51-102) or by Granite GP in accordance with the Varied Decision Document since the end of the financial year in respect of which Granite REIT's Current AIF is filed;
(g) any business acquisition report filed by Granite REIT or Granite GP under Part 8 of NI 51-102 and in accordance with the Varied Decision Document for acquisitions completed since the beginning of the financial year in respect of which Granite REIT's Current AIF is filed, unless:
(i) the business acquisition report is incorporated by reference in an AIF that is itself incorporated by reference in the Joint Prospectus; or
(ii) at least nine months of the relevant business operations are reflected in annual financial statements that are incorporated by reference in the Joint Prospectus;
(h) any information circular filed by Granite REIT under Part 9 of NI 51-102, or by Granite GP in accordance with the Varied Decision Document, since the beginning of the financial year in respect of which Granite REIT's Current AIF is filed, other than an information circular prepared in connection with an annual general meeting of either Granite REIT or Granite GP if it has filed and incorporated by reference in the Joint Prospectus an information circular for a later annual general meeting; and
(i) any other disclosure document which Granite REIT or Granite GP has filed pursuant to an undertaking to a provincial and territorial securities regulatory authority, or pursuant to an exemption from any requirement of securities legislation of a Canadian jurisdiction, since the beginning of the financial year in respect of which Granite REIT's Current AIF is filed.
Decision
The Decision Maker is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Maker under the Legislation is that the Exemption Sought is granted, provided that:
(a) each Granite GP Common Share is stapled to a Granite REIT Unit and they trade together as a Stapled Unit;
(b) each Stapled Unit is listed and posted for trading on a short form eligible exchange, as defined in NI 44-101;
(c) Granite REIT and Granite GP continue to satisfy the conditions set out in paragraph (a) of section 2 of the Varied Decision Document (with item (vi) varied as set forth below), namely:
(i) Granite REIT and Granite GP continue to satisfy the conditions set out in paragraph (b) of section 2 of the Varied Decision Document, as reproduced in paragraph (d), below;
(ii) Granite REIT files, under its profile on the System for Electronic Document Analysis and Retrieval (SEDAR), one set of Combined Financial Statements using the accounting principles applicable to Granite REIT and Granite GP pursuant to the securities legislation of the Jurisdiction (Applicable Accounting Principles) to reflect the financial position and results of Granite REIT and Granite GP on a combined basis;
(iii) any Combined Financial Statements filed by Granite REIT include the components specified in sections 4.1(1) of 51-102 (for annual financial reporting periods) and 4.3(2) of NI 51-102 (for interim financial reporting periods);
(iv) the Combined Financial Statements filed by Granite REIT provide in the notes thereto segmented financial information for each of Granite GP and Granite REIT if and to the extent required under Applicable Accounting Principles;
(v) the annual Combined Financial Statements filed by Granite REIT are audited;
(vi) prior to filing its unaudited Combined Financial Statements for each interim period Granite REIT and its auditor have concluded that the preparation of Combined Financial Statements is acceptable under Applicable Accounting Principles;
(vii) the Combined Financial Statements filed by Granite REIT are accompanied by the fee, if any, applicable to filings of annual financial statements;
(viii) the MD&A of Granite REIT is prepared with reference to the Combined Financial Statements;
(ix) Granite GP files a notice under its SEDAR profile indicating that it is relying on the financial statements and related MD&A filed by Granite REIT and directing readers to refer to Granite REIT's SEDAR profile;
(x) Granite REIT and Granite GP continue to satisfy the requirements set out in National Instrument 52-110 – Audit Committees;
(xi) the audit committee of Granite REIT and Granite GP is responsible for:
(A) overseeing the work of the external auditors engaged for the purposes of auditing the Combined Financial Statements under Applicable Accounting Principles; and
(B) resolving disputes between the external auditors and management of both Granite REIT and Granite GP regarding financial reporting; and
(xii) Granite REIT continues to satisfy the requirements of section 4.6 of NI 51-102, except that for each financial reporting period in respect of which Combined Financial Statements are prepared, Granite REIT shall only be required to send to holders of Granite REIT Units copies of the Combined Financial Statements and related MD&A;
(d) Granite REIT and Granite GP continue to satisfy the conditions set out in paragraph (b) of section 2 of the Varied Decision Document, namely:
(i) Granite REIT is a reporting issuer in a designated Canadian jurisdiction (as defined in section 13.4 of NI 51-102), complies with NI 51-102 or the conditions of any exemptions therefrom and is an electronic filer under National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR) that has filed all documents it is required to file under NI 51-102 or under the conditions of any exemptions therefrom;
(ii) Granite GP does not issue, and has no outstanding, securities other than (A) the Granite GP Common Shares, (B) subscription receipts, warrants, rights or other securities that are convertible into or exercisable or exchangeable for Granite GP Common Shares that will form Stapled Units, (C) debt securities that are stapled to debt securities of Granite REIT, (D) securities issued to or held by directors, trustees, officers, employees or consultants (or former directors, trustees, officers, employees or consultants) of Granite GP, Granite REIT or a related entity (as defined under National Instrument 45-106 – Prospectus Exemptions (NI 45-106)) or a permitted assign (as defined under NI 45-106), including options, rights or other securities under equity compensation plans that are convertible into or exercisable or exchangeable for Granite GP Common Shares and/or Granite REIT Units that will form Stapled Units, and (E) the securities listed in sections 13.4(2)(c)(iii) and (iv) of NI 51-102;
(iii) an AIF, management information circular or statement of executive compensation filed by Granite REIT contains all information that would be required in an AIF, management information circular or statement of executive compensation, as applicable, filed by Granite GP for the same reporting period;
(iv) Granite GP files a notice under its SEDAR profile indicating that it is relying on the AIF, management information circular, material change reports and statements of executive compensation (if applicable) filed by Granite REIT and directing readers to refer to Granite REIT's SEDAR profile;
(v) Granite GP issues a news release and files a material change report in accordance with Part 7 of NI 51-102 for all material changes in respect of the affairs of Granite GP that is not also a material change in the affairs of Granite REIT;
(vi) Granite REIT continues to satisfy the requirements set out in National Instrument 58-101 – Disclosure of Corporate Governance Practices;
(vii) each Granite GP Common Share is stapled to a Granite REIT Unit and they trade together as a Stapled Unit; and
(viii) if the Granite GP Common Shares and the Granite REIT Units become unstapled and trade separately, Granite GP will comply with the requirements of sections 9.1(1) and 9.1(2)(a) of NI 51-102 in respect of any meeting for which it gives notice to any registered holder of securities of Granite GP;
(e) each Joint Prospectus filed by Granite REIT and Granite GP incorporates by reference any applicable documents listed in paragraph 14, above; and
(f) if the Granite GP Common Shares and the Granite REIT Units become unstapled and trade separately, neither Granite REIT nor Granite GP will thereafter continue to use any base shelf prospectus that was filed while the Stapled Structure was in place to distribute securities (if a receipt for such a base shelf prospectus is determined to be still effective based on section 2.2(3)(b) of NI 44-102).
“Winnie Sanjoto”
Winnie Sanjoto, Manager, Corporate Finance
DATED this 6th day of June, 2019.