Re Granite Real Estate Investment Trust, 2024 CanLII 91555

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

September 26, 2024

(the Jurisdiction)

AND

(the Filer)

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:

Financial Disclosure Requirements

(i) pursuant to section 13.1 of National Instrument 51-102 – Continuous Disclosure Obligations (NI 51-102), the Filer be exempted from the obligations in Parts 4 and 5 of NI 51-102 relating to the filing of annual and interim financial statements, along with the accompanying annual or interim management’s discussion and analysis (MD&A), on a stand-alone basis, and relating to the delivery of the same to the holders of trust units (REIT Units) of the Filer (the Financial Disclosure Requirements);

(ii) pursuant to section 13.1 of NI 51-102, the Filer be exempted from the requirements (the BAR Requirements) of Part 8 of NI 51-102 to (i) determine whether an acquisition or probable acquisition is a significant acquisition with reference to stand-alone financial statements of the Filer, and (ii) present stand-alone historical and pro forma financial statements in a business acquisition report (a BAR);

(iii) 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 sections 4.2 and 5.2 of NI 52-109 in respect of filing the chief executive officer and chief financial officer certificates that the Filer would normally have to file if it prepared annual and interim financial statements and MD&A on a stand-alone basis (the Certificate Form Requirements);

Short Form / Shelf Qualification

(iv) pursuant to section 8.1 of National Instrument 44-101 – Short Form Prospectus Distributions (NI 44-101), the Filer be exempted from the requirements contained in subparagraph 2.2(d)(i) of NI 44-101 for eligibility to file a short form prospectus, in particular the requirement that the Filer have current annual financial statements for any period for which the Filer previously filed Combined Financial Statements (as defined below) (the Short Form Criteria); and

(v) pursuant to section 11.1 of National Instrument 44-102 – Shelf Distributions (NI 44-102), subsection 2.2(1) of NI 44-102, with respect to the requirement that the Filer have current annual financial statements for any period for which the Filer previously filed Combined Financial Statements, and subparagraph 2.2(3)(b)(i) of NI 44-102, shall not apply to the Filer (the Shelf Criteria),

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 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:

The Filer is a trust formed under the laws of the Province of Ontario. The Filer is a Canadian-based real estate investment trust 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.
Granite REIT Inc. (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 under the laws of the Province of Québec. The Filer is the sole limited partner of Granite LP.
Each of the Filer and Granite GP is a reporting issuer or the equivalent under the securities legislation of each Jurisdiction and, to their knowledge, on the date hereof neither of the Filer and Granite GP is in default of applicable Legislation of each Jurisdiction or the rules and regulations made pursuant thereto.
As provided in the Amended and Restated Declaration of Trust of Granite REIT dated June 9, 2022 and the articles of Granite GP, each REIT Unit is stapled to a common share of Granite GP (a Common Share) (and each Common Share is stapled to a REIT Unit) to form a “stapled unit” (a Stapled Unit), and a REIT Unit, together with a Common Share, trade together as Stapled Units (the Stapled Structure) until there is an “Event of Uncoupling”.
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 Real Estate Investment Trust (Granite REIT) and Granite REIT Inc. (Granite GP) (the 2012 Decision) as modified by a decision document dated May 16, 2014 In the Matter of Granite Real Estate Investment Trust and Granite REIT Inc. (the 2014 Decision, and together with the 2012 Decision, the 2012 and 2014 Decisions), subject to certain conditions stipulated therein: (i) the Filer has been granted an exemption from the Financial Disclosure Requirements; (ii) Granite GP has been granted, pursuant to section 13.1 of NI 51-102, an exemption from the obligations in Parts 4 and 5 of NI 51-102 relating to the filing of annual and interim financial statements, along with the accompanying annual or interim MD&A, on a stand-alone basis, and relating to the delivery of the same to the holders of Common Shares; (iii) each of the Filer and Granite GP has been granted an exemption from the BAR Requirements; (iv) each of the Filer and Granite GP has been granted an exemption from the Short Form Criteria, in particular, the requirement that each of the Filer and Granite GP has current annual financial statements for any period for which the Filer files one set of financial statements for the Filer and Granite GP prepared on a combined basis (Combined Financial Statements); and (v) each of the Filer and Granite GP has been granted an exemption from the Certificate Form Requirements.
Pursuant to the 2012 and 2014 Decisions, the Filer and Granite GP obtained relief similar to the Requested Relief in connection with the Financial Disclosure Requirements, the BAR Requirements, the Certificate Form Requirements and the Short Form Criteria (the 2012 and 2014 Relief).
Pursuant to a decision document dated June 6, 2019 In the Matter of Granite Real Estate Investment Trust and Granite REIT Inc. (the 2019 Decision) each of the Filer and Granite GP has been granted an exemption from subsection 2.2(3)(b)(i) of NI 44-102.
Pursuant to the 2019 Decision, each of the Filer and Granite GP obtained relief similar to the Requested Relief in connection with the Shelf Criteria (the 2019 Relief, together with the 2012 and 2014 Relief, the Prior Relief).
One of the conditions to the Prior Relief is that the REIT Units and the Common Shares remain stapled.
On April 15, 2024, the Filer and Granite GP announced a proposed reorganization of the Stapled Structure (the Reorganization). The Reorganization was described in the joint management information circular/proxy statement of the Filer and Granite GP dated April 10, 2024. Joint annual general and special meetings of unitholders of the Filer and shareholders of Granite GP were held on June 6, 2024 to approve the Reorganization. The voting unitholders of the Filer 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 the Filer and the voting shareholders of Granite GP, respectively, voting in favour of the Reorganization. On June 10, 2024, the Filer and Granite GP announced receipt of a final order from the Supreme Court of British Columbia approving the Reorganization.
The Reorganization will be effected by way of plan of arrangement involving the Filer and Granite GP resulting in, among other things, (i) the occurrence of an “Event of Uncoupling”, (ii) each Common Share will be transferred from each holder of Common Shares to the Filer, in exchange for the issuance of fractional REIT Units by the Filer to each such holder, (iii) the issued and outstanding REIT Units will be consolidated such that each holder of REIT Units will hold the same number of REIT Units after the consolidation as the holder held prior to the Reorganization; (iv) Granite GP will become a wholly-owned subsidiary of Granite REIT; and (v) termination of the Stapled Structure. The Filer will continue to exist and be a reporting issuer and holders of REIT Units will continue to hold those units. As a result of the Reorganization, none of the Common Shares will be held by the public and Granite GP will separately apply to the Principal Regulator for Granite GP to cease to be a reporting issuer. The REIT Units are expected to 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 will be “unstapled” and Stapled Units will no longer trade on those exchanges.
The Reorganization remains subject to customary closing conditions and is expected to be implemented in the fourth quarter of 2024.
If the Filer relies on the Requested Relief from the Short Form Criteria or Shelf Criteria, each short form prospectus, prospectus supplement or pricing supplement to a short form base shelf prospectus, or other similar public offering document filed by the Filer qualifying the distribution of securities of the Filer (a Prospectus), will incorporate by reference at least the following documents (the Prospectus Documents):

(a) the Filer’s then current annual information form (the Filer’s Current AIF);

(b) the most recently filed audited annual Combined Financial Statements, along with the corresponding MD&A, until such time as the Filer files its next audited annual financial statements in accordance with NI 51-102 (expected to be by March 31, 2025);

(c) (i) if, at the date of the Prospectus, the Filer has filed or has been required to file interim financial statements for its most recently completed interim period and Combined Financial Statements of the Filer and Granite GP relating to the applicable interim period have been filed, such Combined Financial Statements of the Filer and Granite GP relating to such interim period, along with the corresponding interim MD&A, or (ii) if, at the date of the Prospectus, the Filer has filed or has been required to file interim financial statements for a period subsequent to the then most recent financial year-end of the Filer in respect of which annual financial statements have been filed, and such interim financial statements are stand-alone financial statements of the Filer, such stand-alone interim financial statements relating to such interim period, along with the corresponding interim MD&A;

(d) the content of any news release or other public communication that is publicly disseminated by, or on behalf of, the Filer prior to the filing of the Prospectus through news release or otherwise and that contains historical financial information about the Filer and Granite GP, or the Filer on a stand-alone basis, as applicable 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;

(e) any material change report, other than a confidential material change report, filed by the Filer under Part 7 of NI 51-102 since the end of the financial year in respect of which the Filer’s Current AIF is filed;

(f) any BAR filed by the Filer for acquisitions completed since the beginning of the financial year in respect of which the Filer’s Current AIF is filed, unless:

(i) the BAR is incorporated by reference in the Filer’s Current AIF; or

(ii) at least nine months of the relevant business operations are reflected in annual financial statements required under paragraph (b) above;

(g) any information circular filed by the Filer since the beginning of the financial year in respect of which the Filer’s Current AIF is filed, other than an information circular prepared in connection with an annual general meeting of the Filer if the Filer has filed and incorporated by reference in the Prospectus an information circular for a subsequent annual general meeting; and

(h) any other disclosure document which the Filer 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 the Filer’s Current AIF is filed.

As a result of the 2012 and 2014 Decisions, prior to the effective date of the Reorganization, the Filer is exempt from the requirement to file financial statements and MD&A in accordance with NI 51-102 subject to certain conditions, including that the Filer files Combined Financial Statements and related MD&A and that each REIT Unit remains stapled to a Common Share and trades together as a Stapled Unit. Accordingly, following the effective date of the Reorganization, at the time the Filer files a short form prospectus pursuant to NI 44-101, or a short form base shelf prospectus pursuant to NI 44-102, it will not be able to satisfy the Short Form Criteria or Shelf Criteria, respectively, as it will not have current annual financial statements, as it has only prepared and filed Combined Financial Statements since the 2012 and 2014 Decisions, and the Prior Relief will no longer be effective as the Stapled Units will have become “unstapled”.
The Filer has satisfied, and is currently satisfying, each of the conditions to the Prior Relief.
For the period from the effective date of the Reorganization until the Filer has filed its own stand-alone annual financial statements pursuant to NI 51-102 (expected to be by March 31, 2025), the Filer would not be able to satisfy the Short Form Criteria or Shelf Criteria, absent the Requested Relief.
If the Reorganization is implemented following the end of an interim period or fiscal year but prior to the time the Filer files Combined Financial Statements and accompanying MD&A for such interim period or fiscal year, the Filer will not be able to rely on the 2012 and 2014 Relief when filing the financial statements and MD&A for such interim period or fiscal year because the REIT Units and Common Shares will become “unstapled” as part of the Reorganization and will no longer trade together as Stapled Units. For such an interim period or fiscal year, the Filer will file Combined Financial Statements and accompanying MD&A for that interim period or fiscal year in accordance with the Requested Relief. The Requested Relief in this regard will be conditional upon, among other things, (i) the Stapled Structure having been in existence at the end of the applicable interim period or fiscal year, and (ii) the Reorganization having been implemented prior to the Filer having filed Combined Financial Statements and accompanying MD&A for such interim period or fiscal year. In such circumstances, following the completion of the fiscal period in which the Reorganization is implemented, the Filer will file stand-alone financial statements and accompanying MD&A in accordance with NI 51-102.

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 Requested Relief is granted effective on completion of the Reorganization, provided that the Reorganization is 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 Financial Disclosure Requirements:

(i) the Filer files, under its SEDAR+ profile, Combined Financial Statements using International Financial Reporting Standards (IFRS) to reflect the financial position and results of the Filer and Granite GP on a combined basis for any completed fiscal period prior to implementation of the Reorganization;

(ii) any Combined Financial Statements filed by the Filer include the components specified in subsections 4.1(1) of NI 51-102 (for annual financial reporting periods) and 4.3(2) of NI 51-102 (for interim financial reporting periods);

(iii) the annual Combined Financial Statements filed by the Filer are audited;

(iv) the annual Combined Financial Statements filed by the Filer are accompanied by the fee, if any, applicable to filings of annual financial statements;

(v) the MD&A of the Filer is prepared with reference to the Combined Financial Statements for any completed fiscal period prior to implementation of the Reorganization;

(vi) the Filer and Granite GP satisfied or were exempt from the requirements set out in National Instrument 52-110 – Audit Committees prior to implementation of the Reorganization;

(vii) the audit committee of the Filer is responsible for:

(A) overseeing the work of the external auditors engaged for the purposes of auditing or reviewing the Combined Financial Statements under IFRS for any completed fiscal period prior to implementation of the Reorganization; and

(B) resolving disputes between the external auditors and management of the Filer regarding financial reporting;

(viii) the Filer 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, the Filer shall only be required to send to holders of REIT Units copies of the Combined Financial Statements and related MD&A;

(ix) the auditors of the Filer are the same as the auditors of Granite GP prior to implementation of the Reorganization;

(x) prior to the implementation of the Reorganization, except for distributions of REIT Units that were immediately followed by a consolidation of outstanding REIT Units such that an equal number of REIT Units and Common Shares are outstanding immediately following such consolidation, (A) the Filer did not issue any REIT Units that were not stapled to Common Shares, (B) each REIT Unit was stapled to a Common Share and traded as a Stapled Unit, and (C) each Common Share was stapled to a REIT Unit and traded as a Stapled Unit;

(xi) prior to the implementation of the Reorganization, except for distributions of Common Shares that were immediately followed by a consolidation of outstanding Common Shares such that an equal number of Common Shares and REIT Units were outstanding immediately following such consolidation, (A) Granite GP did not issue any Common Shares that were not stapled to REIT Units, (B) each Common Share was stapled to a REIT Unit and traded as a Stapled Unit, and (C) each REIT Unit was stapled to a Common Share and traded as a Stapled Unit; and

(xii) each Stapled Unit was listed and posted for trading on the TSX prior to the implementation of the Reorganization.

(b) In respect of the BAR Requirements:

(i) the Filer satisfied each of the conditions set out in paragraph 2(a) above that were to be satisfied prior to implementation of the Reorganization, and satisfies each of the conditions set out in paragraph 2(a) above that are to be satisfied following implementation of the Reorganization;

(ii) the Filer applies the significance tests under subsection 8.3(2) of NI 51-102 with reference to the most recent annual Combined Financial Statements until such time as the Filer files its next audited annual financial statements in accordance with NI 51-102 (expected to be by March 31, 2025);

(iii) the Filer applies the optional significant tests under Section 8.3(4) of NI 51-102 with reference to the most recently filed interim financial statements that are Combined Financial Statements until such time as the Filer files its next financial statements for an interim period or fiscal year that are not Combined Financial Statements;

(iv) if a BAR is required to be filed, the BAR includes, with respect to the Filer, pro forma combined and/or stand-alone financial statements for the applicable periods and as at the applicable statement of financial position date.

(ii) the certificates filed by the Filer in accordance with section 4.1 of NI 52-109, in connection with the filing of Combined Financial Statements prepared under IFRS for each completed annual financial reporting period prior to the implementation of the Reorganization, are substantially in the form required by section 4.2 of NI 52-109, except that the certificates refer to and certify matters in respect of the filing of the Filer’s annual information form and the Combined Financial Statements and related MD&A; and

(iii) the certificates filed by the Filer in accordance with section 5.1 of NI 52-109, in connection with the filing of Combined Financial Statements prepared under IFRS for each completed interim financial reporting period prior to implementation of the Reorganization, are substantially in the form required by section 5.2 of NI 52-109, except that the certificates refer to and certify matters in respect of the filing of Combined Financial Statements and related MD&A.

(d) In respect of the Short Form Criteria:

(ii) the Filer satisfies the criteria in section 2.2 of NI 44-101 except for the requirement in subparagraph 2.2(d)(i);

(iii) each REIT Unit is listed and posted for trading on a short form eligible exchange (as defined in NI 44-101); and

(iv) each Prospectus filed by the Filer incorporates by reference the Prospectus Documents.

(e) In respect of the Shelf Criteria, the Filer continues to satisfy the conditions set out in paragraph 2(d) above.

“Marie-France Bourret”

Marie-France Bourret Manager, Corporate Finance Ontario Securities Commission

OSC File#: 2024/0454