Granite REIT Holdings Limited Partnership (Re), 2024 CanLII 116304

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

November 5, 2024

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 REIT HOLDINGS LIMITED PARTNERSHIP

(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision (the Requested Relief) under the securities legislation of the Jurisdiction (the Legislation) that:

(i) pursuant to section 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102), the Filer be exempted from the requirements of NI 51-102 (the Continuous Disclosure Requirements);

(ii) pursuant to section 8.6 of National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109), the Filer be exempted from the requirements of NI 52-109 (the Certificate Form Requirements);

(iii) pursuant to section 8.1 of National Instrument 52-110 Audit Committees (NI 52-110), the Filer be exempted from the requirements of NI 52-110 (the Audit Committee Requirements);

(iv) pursuant to section 3.1 of National Instrument 58-101 Disclosure of Corporate Governance Practices (NI 58-101), the Filer be exempted from the corporate governance disclosure requirements of NI 58-101 (the Corporate Governance Disclosure Requirements);

(v) pursuant to subsection 121(2) of the Securities Act (Ontario) (the Act) and pursuant to section 10.1 of NI 55-104 Insider Reporting Requirements and Exemptions (NI 55-104), certain reporting insiders of the Filer be exempt from the insider reporting requirements (as defined in National Instrument 14-101 Definitions) (the Insider Reporting Requirements);

(vi) pursuant to section 8.1 of National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101), the Filer be exempted from the requirement set out in section 2.1 of NI 44-101 that an issuer shall not file a prospectus in the form of Form 44-101F1 Short Form Prospectus (Form 44-101F1) unless the issuer is qualified under any of sections 2.2 to 2.6 of NI 44-101 (the Short Form Eligibility Requirements); and

(vii) pursuant to section 11.1 of National Instrument 44-102 Shelf Distributions (NI 44-102), the Filer be exempted from the requirement set out in section 2.1 of NI 44-102 that an issuer shall not file a short form prospectus that is a base shelf prospectus unless the issuer is qualified to do so under NI 44-102 (the Shelf Eligibility Requirements).

in each case provided that certain conditions are satisfied.

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 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 British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, the Northwest Territories, Yukon and Nunavut (collectively and together with Ontario, the Jurisdictions).

Interpretation

Terms defined in NI 14-101 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. Granite REIT is a Canadian-based real estate investment trust formed under the laws of the Province of Ontario and engaged, directly and through its subsidiaries, primarily in the acquisition, development, construction, leasing, management and ownership of a predominantly industrial rental portfolio of properties in North America and Europe.

2. Granite REIT Inc. (Granite GP) is a corporation formed under the Business Corporations Act (British Columbia).

3. The Filer is a limited partnership formed under the laws of the Province of Québec.

4. All of the limited partnership units of the Filer (which represent approximately 99.999% of the economic entitlement in the Filer) are held by Granite REIT, with the general partnership interest (which represents approximately 0.001% of the economic entitlement in the Filer) held by Granite GP.

5. The only material assets of Granite REIT are the limited partnership interests in the Filer, and the only material asset of Granite GP is its relatively nominal general partner interest in the Filer. As a result of the Reorganization (as defined below), Granite REIT owns 100% of the equity securities of Granite GP.

6. The Filer is a reporting issuer or the equivalent under the securities legislation of each Jurisdiction and, to its knowledge, on the date hereof the Filer is not in default of applicable Legislation of each Jurisdiction or the rules and regulations made pursuant thereto.

7. Prior to the Reorganization, each trust unit of Granite REIT (a REIT Unit) was stapled to a common share of Granite GP (a Common Share) (and each Common Share was stapled to a REIT Unit) to form a “stapled unit” (a Stapled Unit), and a REIT Unit, together with a Common Share, traded together as Stapled Units (the Stapled Structure).

8. Pursuant to a decision document dated December 21, 2012 In the Matter of Granite Real Estate Inc. (the Filer) on its Own Behalf and on Behalf of Granite REIT Holdings Limited Partnership (Granite LP) and Granite Europe Limited Partnership (Finance LP) Formed or to be Formed as Part of a Conversion of the Filer to a Real Estate Investment Trust Structure (the 2012 LP Decision), subject to certain conditions stipulated therein, the Filer had been granted an exemption from: (i) the Continuous Disclosure Requirements; (ii) the Certificate Form Requirements; (iii) the Audit Committee Requirements; and (iv) the Corporate Governance Disclosure Requirements, and reporting insiders of the Filer had been granted an exemption from the Insider Reporting Requirements.

9. Pursuant to the 2012 LP Decision, the Filer obtained relief similar to the Requested Relief in connection with the Continuous Disclosure Requirements, the Certificate Form Requirements, the Audit Committee Requirements, the Corporate Governance Disclosure Requirements and the Insider Reporting Requirements (the 2012 LP Relief).

10. Pursuant to a decision document dated August 23, 2013 In the Matter of Granite REIT Holdings Limited Partnership (the Filer) (the 2013 LP Decision), subject to certain conditions stipulated therein, the Filer had been granted an exemption from: (i) the Short Form Eligibility Requirements; and (ii) the Shelf Eligibility Requirements.

11. Pursuant to the 2013 LP Decision, the Filer obtained relief similar to the Requested Relief in connection with the Short Form Eligibility Requirements and the Shelf Eligibility Requirements (the 2013 LP Relief, together with the 2012 LP Relief, the Prior LP Relief).

12. One of the conditions to the Prior LP Relief was that the REIT Units and the Common Shares remained stapled. As a result of the Reorganization and termination of the Stapled Structure, the Prior LP Relief terminated in accordance with its terms.

13. On October 1, 2024, Granite REIT and Granite GP implemented a reorganization of the Stapled Structure (the Reorganization). The Reorganization was described in the joint management information circular/proxy statement of Granite REIT and Granite GP dated April 10, 2024. Joint annual general and special meetings of unitholders of Granite REIT and shareholders of Granite GP were held on June 6, 2024 to approve the Reorganization. The voting unitholders of Granite REIT and the voting shareholders of Granite GP each approved the Reorganization by the requisite majority, with approximately 99% of the votes cast by each of the voting unitholders of Granite REIT and the voting shareholders of Granite GP, respectively, voting in favour of the Reorganization. On June 10, 2024, Granite REIT and Granite GP announced receipt of a final order from the Supreme Court of British Columbia approving the Reorganization.

14. The Reorganization was effected by way of plan of arrangement involving Granite REIT and Granite GP that resulted in, among other things, (i) the occurrence of an “Event of Uncoupling”, (ii) each Common Share was transferred from each holder of Common Shares to Granite REIT, in exchange for the issuance of fractional REIT Units by Granite REIT to each such holder, (iii) the issued and outstanding REIT Units were consolidated such that each holder of REIT Units held the same number of REIT Units after the consolidation as the holder held prior to the Reorganization; (iv) Granite GP became a wholly-owned subsidiary of Granite REIT; and (v) the Stapled Structure was terminated. Granite REIT continues to exist and is a reporting issuer and holders of REIT Units continue to hold those units. As a result of the Reorganization, none of the Common Shares are held by the public and Granite GP ceased to be a reporting issuer pursuant to a decision of the Principal Regulator dated November 4, 2024. The REIT Units currently trade on the Toronto Stock Exchange under the ticker symbol “GRT.UN” and on the New York Stock Exchange under the ticker symbol “GRP.U”. As a consequence of the Reorganization, the REIT Units and the Common Shares were “unstapled” and Stapled Units no longer trade on those exchanges.

15. The Filer’s non-convertible debt securities (the Debt Securities) have been guaranteed by each of Granite REIT and Granite GP and such guarantees have continued after completion of the Reorganization.

16. Each of Granite REIT and Granite GP is a “credit supporter” (as defined in Part 13.4 of NI 51-102) of the Debt Securities of the Filer.

17. It is proposed that the Filer may distribute Debt Securities from time to time pursuant to a base shelf prospectus (together with any amendment, collectively, a Base Shelf Prospectus) filed or to be filed in each of the Jurisdictions, as supplemented by one or more prospectus supplements (collectively, each a Prospectus Supplement and, together with the Base Shelf Prospectus, a Prospectus) to be filed in each of the Jurisdictions. Any Prospectus will be prepared pursuant to the short form procedures contained in NI 44-101 and the shelf procedures contained in NI 44-102 and will comply with the requirements set out in Form 44-101F1 that would apply to a credit support issuer as provided by Items 12 and 13 of Form 44-101F1. Each of Granite REIT and Granite GP will provide a full and unconditional guarantee of the payments to be made by the Filer in respect of any Debt Securities distributed pursuant to a Prospectus, and the holders of such securities will be entitled to receive payment from each of Granite REIT and Granite GP within 15 days of any failure by the Filer to make a payment, as contemplated by paragraph (d) of the definition of “designated credit support security” in NI 51-102.

18. Pursuant to a decision document of the Principal Regulator dated September 26, 2024, subject to certain conditions stipulated therein, Granite REIT has, among other things, been granted relief (the 2024 Granite Relief) from certain of the continuous disclosure requirements of the securities laws in the Jurisdictions including, in particular, those requirements in NI 51-102 relating to financial statement and management’s discussion and analysis (MD&A) disclosure to permit Granite REIT to prepare, file and deliver one set of financial statements prepared 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 Jurisdictions, and related MD&A, to reflect the financial position and results of Granite REIT and Granite GP on a combined basis (which include consolidation of the Filer (and all of the Filer’s assets and liabilities)), instead of Granite REIT preparing, filing and delivering its own stand-alone financial statements and accompanying MD&A, for the period from the effective date of the Reorganization until Granite REIT can file its own stand-alone financial statements and accompanying MD&A pursuant to NI 51-102 (expected to be by March 31, 2025) (the Transitional Period).

19. The definitions of “subsidiary” and “beneficial ownership of securities” that apply under the Act only refer to the ownership or control of companies, as opposed to partnerships, and do not clearly capture the relationship that exists among the Filer, Granite REIT and Granite GP. Therefore, Granite REIT may not technically satisfy the definition of “parent credit supporter” (as defined in Part 13.4 of NI 51-102). The Debt Securities will satisfy the definition of “designated credit support securities” (as defined in Part 13.4 of NI 51-102), but for the fact that Granite REIT may not directly satisfy the definition of “parent credit supporter” (as defined in Part 13.4 of NI 51-102). However, Granite GP acts as the general partner of the Filer, holding a 100% general partnership interest in the Filer, and therefore controls the Filer directly. Further, Granite REIT holds all of the limited partnership units of the Filer and owns 100% of the equity securities of Granite GP, and therefore indirectly controls the Filer. As a result, following the Transitional Period, Granite REIT will consolidate Granite GP and the Filer (and all of the Filer’s assets and liabilities) in its financial statements.

20. The Filer may not meet the test set forth in section 13.4(2)(a) of NI 51-102 as Granite REIT may not directly satisfy the definition of “parent credit supporter” (as defined in Part 13.4 of NI 51-102). Therefore, the Requested Relief is required in order for the provisions of section 13.4 of NI 51-102 to apply to the Filer and the relationship between the Filer, Granite REIT and Granite GP.

21. If the Requested Relief is granted, the Filer will: (a) treat Granite REIT as a “parent credit supporter” and Granite GP as a “subsidiary credit supporter” during the Transitional Period; (b) comply with the conditions in subsection 13.4(2.1) of NI 51-102, as applicable, that apply to credit support issuers, in accordance with the terms and conditions of this decision; and (c) treat the Debt Securities as “designated credit support securities” and comply with the conditions in subsection 13.4(2.1) of NI 51-102, as applicable, that apply to designated credit support securities, in accordance with the terms and conditions of this decision.

22. If the Filer qualified for the exemption for certain credit support issuers from the Continuous Disclosure Requirements pursuant to subsection 13.4(2.1) of NI 51-102 as described in paragraph 21 above, the Filer would also qualify for the exemptions from the Certificate Form Requirements pursuant to section 8.5 of NI 51-109, the Audit Committee Requirements pursuant to subparagraph 1.2(g) of NI 52-110 and the Corporate Governance Disclosure Requirements pursuant to subparagraph 1.3(c) of NI 58-101, and the Insider Reporting Requirements would not apply to insiders of the Filer pursuant to subparagraph 13.4(3)(a) of NI 51-102.

23. Section 2.4 of NI 44-101 provides alternative qualification criteria for issuers of guaranteed non-convertible debt securities to allow such issuers to use a short form prospectus if (i) a credit supporter has provided full and unconditional credit support for the securities being distributed; (ii) the credit supporter satisfies the basic qualification criteria set out in paragraphs (a), (b), (c) and (d) of section 2.2 of NI 44-101; and (iii) the credit supporter satisfies the criteria in paragraph (e) of section 2.2 of NI 44-101. But for the fact that Granite REIT, as credit supporter, will rely on the 2024 Granite Relief from filing its own stand-alone annual financial statements, as required by subparagraph 2.2(d)(i) of NI 44-101, during the Transitional Period, the Filer would meet the criteria set out in section 2.4 of NI 44-101.

24. Similarly, section 2.1 of NI 44-102 provides that an issuer shall not file a short form prospectus that is a base shelf prospectus unless the issuer is qualified to do so under section 2.2 of NI 44-101. In order to be qualified under NI 44-102, the issuer must satisfy the qualification criteria set out under one of sections 2.2, 2.3, 2.4, 2.5 or 2.6 of NI 44-101. But for the fact that Granite REIT, as credit supporter, will rely on the 2024 Granite Relief from filing its own stand-alone annual financial statements, as required by subparagraph 2.2(d)(i) of NI 44-101, during the Transitional Period, the Filer would meet the criteria set out in section 2.4 of NI 44-102.

Decision

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

2. The decision of the principal regulator under the Legislation is that the Requested Relief is granted for the Transitional Period, provided that the Reorganization was implemented in substantially the manner contemplated by the representations above and provided that the conditions set out below are satisfied:

(a) In respect of the Continuous Disclosure Requirements, the Filer satisfies the conditions set out in subsections 13.4(2) and 13.4(2.1) of NI 51-102, as applicable, except as modified in this decision and as follows:

(i) any reference to parent credit supporter in section 13.4 of NI 51-102 shall be deemed to include Granite REIT,

(ii) any reference to subsidiary credit supporter in section 13.4 of NI 51-102 shall be deemed to include Granite GP, and

(iii) Granite REIT, as parent credit supporter, does not have to comply with the conditions of section 13.4(2)(b)(ii) to file its own stand-alone financial statements and accompanying MD&A for any completed fiscal period prior to the implementation of the Reorganization in accordance with the terms and conditions of the 2024 Granite Relief;

(b) The unaudited summary financial information referred to in section 13.4(2.1)(c) of NI 51-102 will be reconciled to the Combined Financial Statements of Granite REIT and Granite GP during the Transitional Period, except that the column presentation for Granite REIT and Granite GP, as credit supporters, may be shown on a combined basis;

(c) In respect of the Certificate Form Requirements, the Audit Committee Requirements, the Corporate Governance Disclosure Requirements and the Insider Reporting Requirements, the Filer satisfies the conditions set out in paragraph 2(a) above;

(d) In respect of the Insider Reporting Requirements, the insider complies with the conditions in sections 13.4(3)(b) and (c) of NI 51-102;

(e) In respect of the Short Form Eligibility Requirements and the Shelf Eligibility Requirements, in connection with an offering of Debt Securities under a prospectus and/or prospectus supplement:

(i) the prospectus is prepared in accordance with the short form prospectus requirements of NI 44-101, and except as permitted by the legislation, and

(ii) the Filer satisfies every qualification criteria set out in section 2.4 of NI 44-101, other than the qualification criteria set out in paragraph 2.4(1)(b) of NI 44-101,

(iii) the Filer satisfies the conditions set out in paragraph 2(a) above; and

(f) In respect of the Requested Relief, Granite REIT is in compliance with the conditions of the 2024 Granite Relief.

“Marie-France Bourret”

_____________________________

Marie-France Bourret

Manager, Corporate Finance

Ontario Securities Commission

OSC File # : 2024/0493